Good afternoon, ladies and gentlemen, and welcome to the BioMarin Pharmaceutical, Inc. conference call to discuss second quarter 2016 financial results. At this time, all participants are in listen-only mode. Following the prepared comments, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded.

I'd now like to introduce your host for today's conference, Traci McCarty, Head of Investor Relations at BioMarin. Please go ahead, Traci..

JJ Bienaimé, Chairman and Chief Executive Officer; Dan Spiegelman, Chief Financial Officer; Hank Fuchs, Chief Medical Officer; Jeff Ajer, Chief Commercial Officer; and Robert Baffi, Executive Vice President of Technical Operations. Now I'd like to turn the call over to BioMarin's Chairman and CEO, JJ Bienaimé..

Thank you, Traci. Good afternoon and thank you for joining us on today's call. We made tremendous progress in the first half of 2016 both commercially and across the development pipeline. And since we spoke to you last quarter, we achieved record revenues. We filed for approval in the U.S.

and the EU with our next commercial opportunity, Brineura, formerly known as cerliponase alfa, and we shared proof-of-concept for BMN 270, the first in-man Factor VIII gene therapy product for hemophilia.

Starting with our top line results, a record level of contributions from both Vimizim and Kuvan drove $300.1 million in total BioMarin revenue in the second quarter, which is an increase of 20% compared to the second quarter last year.

And based on the strong demand we are seeing across our commercial portfolio, we are increasing full-year guidance for Kuvan and Vimizim as well as total BioMarin revenue guidance to between $1.1 billion and $1.15 billion for full year 2016. Jeff will provide more detail in a moment.

Turning to bottom line results, while the termination of the Kyndrisa program resulted in a large GAAP loss in the quarter that Dan will discuss momentarily, we were non-GAAP positive for the quarter. And while we increased our GAAP loss guidance to reflect the one-time write-off, we also reduced our non-GAAP loss guidance for the full year.

As a result, we continue to be on track to meet our 2017 bottom line financial guidance. Moving on to the pipeline, we made substantial progress with our late-stage development products, including the U.S. and EU regulatory filings for Brineura for CLN2, a form of Batten disease.

As we announced last week, we are encouraged by the interactions we have had with the FDA that have resulted in Breakthrough Therapy Designation and Priority BLA review for Brineura. We have a PDUFA action date of January 27, 2017, which if approved will lead to a Q1 2017 launch.

We have also filed for Marketing Authorization Application in Europe with Brineura, and we expect to hear soon on the status of this application.

Turning now to our gene therapy program with BMN 270 for hemophilia A, we are very pleased to have announced last week at the World Federation of Hemophilia Congress that we achieved proof-of-concept in the Phase 1 study. We exceeded our own expectations in terms of efficacy and safety.

And as a result, our focus will now turn to the design and execution of a Phase 2b study, further evaluating doses for potential accelerated approval. Hank will have some additional updates on this and other programs in a moment.

In conclusion, we look forward to the second half of 2016 having met or exceeded the milestones we anticipated in the first half of the year. Positive study results for pegvaliase, Brineura, vosoritide, and BMN 270 gene therapy for hemophilia A have all been released and next steps in those programs are being planned or have been initiated.

Our four pillars of growth remain solidly in place and include our strong existing commercial business that we now expect will deliver over $1.1 billion of revenue this year. Recent regulatory filings in the U.S.

and EU with Brineura, upcoming regulatory filings with pegvaliase, proof-of-concept data with the first in-man gene therapy product for hemophilia A, and vosoritide for achondroplasia, those are potential $1 billion opportunities; and finally, turning the corner towards non-GAAP breakeven or better in 2017.

Now I will turn the call over to Jeff, who will review the commercial business in more detail..

Thank you, JJ. We're extremely pleased with the continued robust commercial uptake of Vimizim, and very happy to report Vimizim revenue in the first half of 2016 was $179.4 million, a 71.7% increase over the first half of 2015. In the second quarter, Vimizim revenue increased to $106.8 million, or 98.1% increase compared to the second quarter of 2015.

These results were impacted favorably by robust patient growth and in part by the timing of large orders from Brazil and the Middle East. We are pleased to share that we added South Korea and Mexico as customers in the quarter, bringing the number of Vimizim markets to 38 in total.

As a result of the strong demand we are seeing for Vimizim, we are increasing full-year 2016 guidance to between $340 million and $360 million, driven by increased patient penetration as well as contributions from new smaller markets.

Due to the unevenness of order timing, we recommend that you follow full-year guidance as the best measure of anticipated performance for Vimizim.

Now turning to our other commercial products, Naglazyme revenues in the quarter were $78.4 million, a decrease from the second quarter 2015, but an increase over the first quarter revenue of $65.4 million this year. The unevenness in Naglazyme revenue was primarily due to inconsistent Brazil central government order patterns.

Recall that in 2015, the timing of large orders from Brazil, particularly in Q2 2015, had the impact of creating big swings in quarterly revenues, and the effect is still evident in Q2 of this year. Nevertheless, the underlying base of business as measured by commercial patients remains strong.

Over the prior year, commercial patient counts increased by 9.2% in its 11th year on the market. The purchase process for Naglazyme in Brazil is underway, and we expect to receive additional orders in this, the third quarter of 2016.

As always, we recommend full-year revenue guidance as the best measure of commercial performance for Naglazyme, and we are maintaining our prior guidance.

And now to Kuvan, Q2 2016 represents the second quarter of global sales since the acquisition of the PKU franchise in international markets from Merck Serono last quarter, and we are very pleased with the results. Kuvan net product revenue contributed $90.2 million to the top line in the quarter, an increase of 50.1% year over year.

In Q2 2016, North American sales continued to benefit from growth in new patients coupled with high levels of adherence. North American sales of $68.2 million were up approximately 13.4% over Q2 last year and were paced by an increase of 14.9% in commercial patients.

In international markets, we have successfully navigated through the transition process and are now receiving orders directly from the majority of top markets worldwide.

As a result of the strong demand we are seeing for Kuvan, we are increasing full-year 2016 guidance to between $340 million and $360 million, driven by new patient additions as well as contributions from international markets.

In closing, the commercial team delivered strong results in the second quarter of 2016, with total BioMarin revenue 20% higher than the same quarter last year. I'm very pleased with the level of demand we are seeing for Vimizim and Kuvan worldwide.

The transition of Kuvan global markets is nearly complete, and we look forward to building out our presence in these new regions as we prepare for potential approval, commercialization, and launch of pegvaliase. In addition, we are ramping up our preparations for the potential global commercial launch of Brineura in 2017.

Now I'd like to turn the call over to Dan to provide more detail on the financial results in the second quarter.

Dan?.

Thank you, Jeff. Earlier today, we issued a press release summarizing our financial results for the second quarter, and I refer you to that release for full details.

Starting with top line results, since JJ and Jeff have already mentioned our Q2 revenues, I'll highlight that total BioMarin revenues for the first half of 2016 were a record $536.9 million, an increase of 18.5% year over year, driven by both strong Vimizim and Kuvan sales.

These results have driven increased net sales guidance for both Vimizim and Kuvan, and our expectation for total BioMarin revenue is now increased to between $1.1 billion and $1.15 billion for the full year.

As a side note, since the euro have largely stabilized compared to last year's volatility, we did not see any material impact of year-over-year FX rate changes on Q2 revenues or on our full-year forecast.

In terms of operating expenses, R&D expenses increased slightly to $167 million in the second quarter of 2016 compared to $157.9 million in the second quarter of 2015.

The year-over-year increase was primarily due to increased spending on the later stages of the recently completed Brineura trial, increased enrollment in our BMN 270 hemophilia A program and initiation of NAGLU for Sanfilippo B.

Consistent with the guidance we provided at the beginning of the year, the determination of the Kyndrisa program and continued cost control, we are lowering full-year R&D expense guidance to $670 million to $690 million. SG&A expenses increased slightly in the second quarter to $109.6 million compared to $101.5 million in the second quarter of 2015.

The year-over-year increase primarily reflected the continued expansion of Vimizim as well as increased expenses related to the acquisition of ROW Kuvan rights in support of our global PKU franchise.

In the second half of the year, we will start to see a slight increase in SG&A expense as we prepare for the Q1 2017 launch of Brineura, leading to unchanged full-year SG&A guidance of $470 million to $490 million.

Turning to bottom line operating results, GAAP net loss in the second quarter was impacted by a $599.1 million impairment charge, the vast majority of which was related to the write-down of the remaining value of Kyndrisa following the withdrawal of the MAA in the EU in May and our decision not to pursue further development of Kyndrisa.

A small portion of the impairment charge is related to adjustments made following the discontinuation of the reveglucosidase alfa program in the second quarter. These impairment and related charges are described in detail on page three of today's press release.

The result of the impairment charge has a net impact of $380.7 million once the appropriate reversal of contingent consideration expenses and income taxes are included.

As a result of this one-time net write-off in the second quarter, GAAP net loss in the quarter was $423.6 million compared to a GAAP net loss of $82 million in the second quarter of 2015. Excluding the one-time GAAP impairment charge, GAAP net loss would have been $42.9 million in Q2 2016 versus $82 million in 2017.

Due to the Q2 impairment charges, GAAP net loss guidance for the full year is now between $620 million and $650 million.

It's worth noting, however, that excluding this net charge of $380 million, our GAAP loss guidance would have been lowered to a loss of $240 million to $270 million versus the original $355 million to $385 million set at the beginning of the year reflecting increased revenues and reduced operating expenses.

We also measure our performance on a non-GAAP basis, which is based on EBITDA and excludes earnings, taxes, depreciation and amortization and also excludes non-cash stock compensation and contingent consideration expenses as well as unusual one-time items.

Our non-GAAP income in the second quarter was $16.1 million compared to a non-GAAP loss of $5.8 million in the second quarter of 2015. We are also decreasing our non-GAAP loss guidance for full-year 2016 to a loss of $30 million to $50 million as a result of continued strong top-line growth and operating expense discipline.

For 2017, our bottom-line guidance for improving profitability remains. Specifically, while we continue to expect to record a GAAP loss, we expect non-GAAP results to be breakeven or better. In terms of cash, cash equivalents, and investments, as of June 30, 2016 we had $704.9 million as compared to $1.0183 billion on December 31, 2015.

In closing, BioMarin delivered another excellent quarter and first half of 2016, with strong Vimizim and Kuvan sales and controlled operating expenses all supporting our updated top-line and bottom-line guidance for the year and our continued progress towards non-GAAP breakeven or better next year. Now I would like to turn the call over to Hank.

Hank?.

Thank you, Dan. As JJ described in his introductory comments, we achieved a number of important catalysts during the first half of 2016. Last Wednesday was a big news day for BioMarin. We announced both the U.S.

and EU filings for Brineura for CLN2 disease as well as proof-of-concept data from our late-breaker oral presentation at the World Federation of Hemophilia Congress with BMN 270 gene therapy for hemophilia A. Starting with Brineura. As we announced, the FDA has filed our BLA submission and provided a PDUFA approval decision date of January 27, 2017.

We have not yet been informed of FDA plans for an Advisory Committee Meeting as yet, as that decision gets communicated as part of the Day 74 submission response letter. The Market Authorization Application in the European Medicines Agency has also been submitted, and we await word on validation of the filing and CHMP opinion timing.

Needless to say, we're so thrilled with the speed with which this program is progressed. As we've described many times, getting children with CLN2 on therapy as early as possible is tremendously impactful, as demonstrated in our Phase 1, 2 study in March.

We are very hopeful that children will have access to Brineura as soon as humanly possible, initially under an expanded access program and soon more widely, assuming approval. And we look forward to providing an update when we know more. Turning now to BMN 270 gene therapy for hemophilia A.

Last week we provided a high-level summary of the interim results of the Phase 1, 2 study. The study demonstrated significant Factor VIII expression with a good safety profile.

Last week at the World Federation of Hemophilia Congress, we announced that as of July 6, six of seven patients receiving the high dose of BMN 270 had Factor VIII levels above 50%, and the seventh patient was above 10%.

While the one patient who was above 10% and below 50% now appears to have Factor VIII levels above 5%, the important point is that all high-dose patients continue to be in the mild or greater hemophilia A range.

With these interim results having established proof of concept for BMN 270, our next step remains the design and start of a Phase 2b study, which could lead to a potential accelerated approval if successful.

Considerations important in the design of that study include optimal dose, further evaluation of factors that determine the degree of response and the need for corticosteroid therapy, all as discussed at the World Federations Congress.

Turning now to another significant catalyst in the first half of the year, in March we shared pivotal data from our Phase 3 pegvaliase study that demonstrated a dramatic effect on Phe lowering, having achieved the primary endpoint of a mean change in blood phenylalanine with a P-value of less than 0.0001.

Approximately 60% of patients maintained Phe levels at or below the American College of Medical Genetics guidelines, and 40% of these patients had Phe values below the upper limit of normal over the long-term extension study.

This was the first placebo-controlled study demonstrating the ability to improve phenylalanine levels in phenylketonuric patients where baseline are not able to adhere to the strict Phe intake reductions that doctors presently recommend.

Typically, such a Phe-restricted medical food program does not allow for any protein intake outside of medical food. In contrast, patients in our study were estimated to be eating about 75% of the daily recommended allowance for dietary protein intake for a healthy adult.

And so therefore, this is a very important result and we couldn't be more pleased about the potential for pegvaliase to enable blood Phe control when patients cannot restrict their phenylalanine intake. On the secondary endpoint, we were disappointed in the eight-week placebo controlled portion of the 302 study.

No benefit in inattention or mood scores were observed. However, longer-term results demonstrated support of evidence to the effect of blood Phe reduction on improvement in inattentiveness using the ADHD-RS assessment scale.

In addition, exploratory endpoints, including both the CANTAB and the Global Clinical Impression scale during the randomized trial, showed trends of improvement favoring pegvaliase.

Overall, we're pleased with the tolerability of pegvaliase, with over 551 patient years of exposure, including the longest duration of exposure seen in four years in 26 patients.

The most common drug-related findings consist of hypersensitivity-type reactions, which generally appear at a higher rate early in the course of induction and titration and then lower rates thereafter. These reactions are generally self-limited, and the majority of patients having these reactions can be retreated without further consequence.

Now to the status of our pegvaliase filing, leading up to our pre-BLA meeting planned for later this year, health authorities have requested a little more information on the assays used in the study to measure laboratory correlates of hypersensitivity-type reactions.

Given the unique nature of pegvaliase being a non-human biologic, we want to provide the Food & Drug Administration with key data in advance of the BLA filing to assure timely acceptance of the application and review.

We remain of the belief that the dramatic reduction in blood Phe is a significant innovation for PKU patients, and we look forward to completing the steps toward filing for approval in either Q4 of this year or in first quarter of next year.

Moving on to vosoritide for achondroplasia, in the second quarter we completed the 30-microgram per kilo fourth cohort arm of the Phase 2 study with vosoritide in achondroplasia, and we remain confident about the safety. We intend to share those results in the second half of the year at a medical meeting.

Based on our evaluation of Cohort 4 efficacy data, we are in the last stages of designing our Phase 3 study, with the goal of initiating the study by year end. That concludes our updates on the development pipeline. So I'll now turn the call over to the operator for your questions.

Operator?.

Thank you. Our first question comes from Salveen Richter of Goldman Sachs. Your line is open..

Thanks for taking my questions. Just regard to the quarter, for Naglazyme sales, is there anything else impacting you outside of the timing of Brazil central government orders, and should we expect a whole order in 3Q, or could some of that can pushed out to 4Q? And then I just wanted to follow up on hemophilia A.

So the patient that was typically at a lower level, the seventh patient that was above 10% and is now above 5%, can you help us understand the underlying characteristics for this patient? And then I'm just curious.

As you think about – as you work towards actually dose optimizing, does it make sense to work on that prior going through the potential registrational Phase 2b, or are you going to have an arm or an initial run-in period into the Phase 2b and then follow up with the correct dose in the registrational portion? Thanks..

Hi, Salveen. It's Jeff. I'll take the first part of your question. I think your question was related to Q2 Naglazyme sales this year, and relative to the prior-year period, Q2 2015, was there anything else in that comparison that we need to know about. If have that right, the answer is no.

We had Brazil orders in both quarters, but the order in Q2 of 2015 was very large and carried that supply all the way into Q2 of this year, so nothing else to know about that one. Relative to the third quarter, the purchase process for Brazil is already underway.

We're highly confident that we'll see an appropriate order from Brazil in the quarter, and we think that there should be further orders from Brazil before the end of the year..

So regarding discerning the characteristics of patients which might determine whether their Factor VIII expression is high or low, that work is still ongoing, and I'd say stay tuned. At present, we are not offering a specific explanation for the range of results that we've seen.

As to whether we will do additional dose-finding work prior to or only in the context of the Phase 2b, we plan to be – the important thing is that we plan to do a Phase 2b study, which could include more than one dose. We will seek to treat additional patients opportunistically in the open study, but that is ancillary to starting the Phase 2b study.

I think the important thing is that we prove the concept that we can get a therapeutic – or we can get into the desired range of Factor VIII expression without meaningful liver toxicity, and that has propelled us to move into what could be a registration-enabling trial if successful..

Thank you..

Thank you. Our next question comes from Phil Nadeau of Cowen. Your line is open..

Good afternoon, thanks for taking my questions. First a similar question on Vimizim, you did point out two factors in the quarter that made the sales particularly strong.

Can you give us some idea of the magnitude of those factors and therefore how we should model Q3 specifically, but just H2 more generally?.

Yes, so Jeff here, Phil. We estimate that approximately $15 million of Q2 sales represents demand for future quarters, and so you can use that to model your second half revenues of Vimizim. And we would point you to our updated guidance of $340 million to $360 million for the full year..

Okay, great, that's very helpful.

Then second on the achondroplasia Phase 3, Hank, can you give us some idea what you need to do in order to get that trial started? What are the remaining steps?.

At this point, we're down to finalizing protocol design. And we continue to believe that average growth velocity change could support registration. So we think the endpoint and duration are solidifying, but we're really in the last stages of design prior to starting the trial..

Okay, thanks. And then last question for me is on the request from the regulatory authorities for some of the data about your hypersensitivity assays. Did you do anything unique with your hypersensitivity assays in the pegvaliase trials, or did you run standard assays? I guess it sounds like a unique request, and I'm curious what prompted it..

Pegvaliase is a heterologous protein. It's not of human origin. I think that it's – I've commented before that it's really quite remarkable that the overall clinical hypersensitivity rate as a result of pegvaliase treatment is quite similar to that for recombinant human enzymes.

But because of the nature of the underlying protein, the agency is being very careful to make sure that the full range of assays that needs to be done are being done. And I don't think there's any unusual, it's just there's a lot of back and forth here..

Okay.

And in your opinion, the full range of assays were conducted?.

In my opinion, the full range of assays have been conducted. But the agency likes to make sure they understand what's been conducted prior to signaling that they're ready to receive an application, so they make sure they know what's in the dossier..

Got it, thanks for taking my questions and congratulations on the quarter..

Thanks..

Thank you. Our next question comes from Chris Raymond of Raymond James. Your line is open..

Hey, thanks, just a quick one here on the Vimizim guidance. So, Jeff, I think I heard you on the $15 million number in your answer to Phil.

But even if you took that number and I guess threw that into the second half, the implication is for half over half, second half over first half, just about 12% growth by my math, so that would imply a pretty decent slowdown there.

Can you just maybe talk? Is there something else going on that's precipitating this dynamic with your guidance, or is this just being conservative here?.

We're starting to see Vimizim revenues that are a little choppy, and we've been living with that for a number of years with Naglazyme. Our best estimate is that there was about $15 million in forward buying in the quarter. In the meantime, underlying patient growth has been strong. The growth dynamics continue to be strong.

So we're not expecting – I'm not expecting a significant tailing off or flattening out of growth. It's just the way we modeled what we expect for revenues..

Okay. And then quickly – I'm sorry if you guys have already covered this.

But BMN 270, can you just clarify, Hank? What exactly is the disposition of those final three patients in the UK? Are you not going to treat them? Can you just update please?.

The study was originally planned to enroll up to 12 patients. We've now determined that we've proven the concept and don't need to go up to 12 patients. We are moving to a Phase 2b study.

We don't need to go to as high a degree of Factor VIII expression as we have, so we're considering whether a second dose level would be a wise thing to incorporate into that Phase 2b trial. We might opportunistically enroll a few extra patients in the ongoing study, provided that we can do that without slowing down our Phase 2b study.

It's really as simple as we're moving forward because we've proved the concept, and we may or may not enroll additional patients in the ongoing study..

Got it, thanks..

Thank you. Our next question comes from Joseph Schwartz of Leerink Partners. Your line is open..

Thanks a lot for taking my questions. I have one on BMN 270 and one on Brineura.

First on BMN 270, can you talk about your process to analyze the data to determine the optimal doses to take forward any? For example, do you think there's a threshold effect with the AAV 5 drug? And what kind of data are you looking at in order to determine where that might be? Because we've heard from specialists that there's not that much of a difference between two times 10 to the 13th power and six times 10 to the 13th power.

So I'm wondering how you're thinking about determining what the best doses are going forward..

We treated one patient at two times 10 to the 13th power and saw that patient have a Factor VIII expression of 2%. Now, by the way, that patient has had pretty substantially reduced bleeding frequency. So we think there's a pretty good clinical effect in that mid-dose level, but it really is only a single patient.

As to the process of looking at the data, that's going to involve a bunch of laboratory work, a bunch of clinical evaluation of patient demographics and other patient factors. I don't know that I want to give away too much of the contents of what we're going to be doing and finding for competitive reasons.

But I think the wisdom of this is anticipating that patients want to achieve a very good measure of Factor VIII expression, but they don't want to take any risk of toxicity and they don't want to take any risk of having too low an effect.

And in those circumstances, it just makes sense to consider evaluating more than one dose level in a pivotal trial. And I'll remind you that the pivotal trial for Vimizim also included more than one active dose arm. So it's a fairly common strategy in drug development to maximize the chance for success and mitigate the risk of undesired findings..

Great. Okay. Thanks.

And then on Brineura, can you talk about your patient identification efforts at this stage, either in terms of how many patients you've identified so far or what your goals are by the time it reaches the market?.

Sure, Joe. This is Jeff. I'll field that part. Of course we went through the exercise leading up to Vimizim launch of patient mapping and very carefully identifying patients and counting them. So you may have an expectation that the same logic would hold true for Brineura.

But there's a significantly different situation we're dealing with with CLN2 patients.

Starting with the fact that the delay in diagnosis means that some of the patients are significantly advanced when they're diagnosed and they rapidly progress, means that the patients that we've identified over the last year in clinics, some of them may be suitable for treatment, but probably not all of them.

And these patients would be expected to progress over the period of six months or a year or a year and a half. So the notion of having patients mapped very carefully in clinics doesn't really work here. What does work and what we are doing is the following.

We want to know who are the clinicians that are screening, diagnosing and treating these patients on the logic that future patients will likely also be seen by these clinicians. We have a very good handle on that.

Second is we want to be promoting disease awareness and the availability of diagnostic tools to ensure that patients are getting diagnosed as rapidly as possible. Optimally and ultimately, we would like to have patients diagnosed earlier and at an earlier stage of progression than they have been historically, so we're working really hard on that.

We think we're making good progress and I think we will be well prepared, particularly in the United States, by the time of our PDUFA date the end of January..

Thank you..

Thank you. Our next question comes from Michael Yee of RBC Capital Markets. Your line is open..

Hi. Thanks for the questions.

On BMN 270, Hank, can you just remind us in regards to liver function tests? Since the July cutoff, how many patients have come off steroids? What can you say about confidence on that? And hypothetically speaking, how long would people need to be off of the steroids before you feel pretty good that there shouldn't be any unbeknownst issues once they come off? And then my follow-up to that is, you've once alluded that you have a serious gene therapy engine developing there, the Ferrari of gene therapy engines.

So what is the next program? Can you talk about perhaps what you're working on next? That would be pretty exciting. Thanks so much..

So as regards the steroid regimen, no further updates of material significance since the July 6 cutoff. What we have said is, as of July 6, those two patients have come off of steroids and they're doing fine. As to the optimal dose and regimen of corticosteroids, we haven't settled on what that is yet. I think we need a little bit more follow-up.

So stay tuned..

I just meant to imply how long after they're off the steroids before you'd feel good that there shouldn't be any liver issues? Because if you think about the immune system, if you've gone off it for a while, if it's been months, is that a point where you'd feel pretty good?.

That question has a lot of variables. The answer has a lot of variables in it and some of which we're still working on and discerning. So I don't know that I can give you a concrete answer as to today exactly when do you discern that you're out of the woods in regard to potential liver risk.

What's really compelling, though, about the data is we get to a pretty high level of Factor VIII expression, so it would take pretty massive liver injury to overwhelm the existing Factor VIII expression. And by no means have we seen that degree of liver inflammatory response.

In fact, the highest our liver function tests have gone in any patients are less than two times the upper limit of normal, which doesn't meet anybody's criteria for drug-related toxicity. So that's why we're so confident about the statement of we proved the concept. We can get great Factor VIII expression levels with negligible insult to the injury.

As to what's next, there's obviously a lot of curiosity about BioMarin's next IND and what it's going to be. We have a good track record of rolling out INDs. I think, JJ, when I started, JJ said let's do one every 18 months. And I think we've done something like one every nine months. So we'll have it, it will come.

And when we're ready to announce what it is, we'll announce what it is. There's a lot of really good ideas inside..

Got it. Thank you..

Thank you. Our next question comes from Geoff Meacham of Barclays. Your line is open..

Hey, guys. This is Evan on for Geoff. Thanks for taking my questions and congrats on the quarter. Nice progress with the top-line growth.

So just going back to the BLA for pegvaliase, what are some of the potential gating factors beyond the additional assays that they have required? And have you gotten confirmation that the blood Phe lowering is sufficient for at least an accelerated approval and potentially a full approval? And I just have a follow-up after that one..

Gating factors. It's a big complicated program with these immunologically-based reactions. We've generated a lot of data about that, so we have a lot of data, an unusually large amount of data. I think with our last submission or two, we've given you the number of gigabytes that we submitted.

My expectation is this will be one of the largest filings that we have undertaken to date, a lot of safety events to write up because of the hypersensitivity reactions or events of special interest. So it really is just a big package to write up and we want to do a good job writing it up, and it's important that we get this through the first time.

The second part of your question was....

Just with the endpoint and the neurocog, the potential for neurocog, neurocognition....

No real news there..

Okay..

Just to recap the journey, when we first met with the agency, we said is blood Phe acceptable. They said yes. Then we met with them at the end of Phase 2 meeting.

They expressed some concern that the Kuvan approval, which was the predicate of their yes, was more substantially driven by evidence in children that the neurological abnormalities of phenylketonuria were reversible. And so they said at a minimum, then blood Phe could support an accelerated approval.

And so you either establish a neurocognitive benefit or demonstrate that the neurocognitive abnormality in adult PKU is not irreversible. And so we then took our shot at the pivotal clinical trial in a randomized mode. We were unable to demonstrate a significant benefit.

It raises the question of whether it's the tools that we use or the timeframe, as no one that's really in a drug development program comprehensively attempted to demonstrate improvements in neurocognition in PKU patients. But what we did show was that the brain disease of PKU is not fixed, it's not irreversible.

And that's why we've mentioned that long-term data, albeit in an open-label control, demonstrates that patients who are on pegvaliase do experience improvement in their neurocognition. So that's a recap of the past. And since the unblending of pegvaliase, we haven't had substantial discourse with the agency on the endpoints for approval..

Okay. And then just one housekeeping question on the former BMN 701 program.

Is that totally dead? Are you planning on out-licensing that? When can we expect an update? I know that that's been written down and no longer being continued by you internally, but what are the plans with that asset?.

So the program is on hold internally right now or about to be on hold. So we did have some discussions with some third parties on potentially out-licensing. This probably can take a little while. We'll update you on the progress as we go. But internally....

Okay..

...we don't have much activity anymore..

So internally it's done, but you are planning on passing it off to someone else, correct?.

Yes, yes..

Okay..

And we have some interest, but we think it will take a while..

Is it a year-end thing or into 2017?.

It's hard to tell..

Okay, fair enough. Thanks for taking the questions. I really appreciate it..

You're welcome..

Thank you. Our next question comes from Stephen Willey of Stifel. Your line is open..

Thanks for taking the questions. Just to follow up I guess on BMN 270, I guess we are, as was previously referenced, about a month from the cutoff date as of last week's presentation. I'm just wondering if there's any color you can provide around the stabilization of Factor VIII expression levels that you've seen in patients.

And then on the one patient that declined from 10% to 5%, I'm just wondering if that is one of the two patients who has come off steroids altogether. Thanks..

So no material updates to offer beyond the comments that we've already given, that the patient who was above 10% remains in the mild zone, albeit above 5%, above 5%, not at 5%. And as to the steroid doses or uses in individual patients, we haven't commented on that, and I'm going to continue to not comment on that.

But rather than focus on that in particular, I did want to just remind that the results of the study, they didn't just prove the concept, they – and I'm going to quote the inventor, Dr. [Amit] Nathwani, who characterized the results as miles better than I had ever expected or even dreamt of.

And so we're encouraged, and on behalf of hemophilia patients we're moving quickly to Phase 2b..

Okay, fair enough. Thanks..

Thank you. Our next question comes from Cory Kasimov of JPMorgan. Your line is open..

Hey, good afternoon. This is Morgan on for Cory, just two quick questions. So on the hemophilia program, we recently spoke with a KOL, who emphasized that some of the liver abnormalities in the BMN 270 trial could be in part driven by baseline liver disease in patients who have had HCV.

Do you have any plans to look at patients with no history of HCV to see if there's a safety profile there, and given the majority of younger patients who won't have had HCV?.

We have included some patients, and I think that was based on demographics. We haven't given you a breakout of response according to baseline HCV status. I think your expert did poke at some very insightful things to probe into as to whether those are in fact predictors of benefit.

And as I said earlier, for competitive reasons, we're going to think a lot about that. But as to whether we give an ongoing narrative of disclosure of what we're finding, we probably won't do that.

Instead, what we're going to do is provide updates on our progress towards designing and implementing the key study that's next, which is the Phase 2b study..

Okay, great. Thanks.

And then on Brineura, can you just talk a little bit about the launch and the urgency to treat given the age of patients and severity of disease? How should we think about that?.

Hi, Morgan. This is Jeff. I'll try to field that one. So I think you're right. There is a high degree of urgency to treat kids that have a diagnosis of CLN2 disease. And I think that will work towards having demand that is revved up right at the time of approval, possibly even before.

The counter to that is that we want to make sure that we're very careful and very deliberate. We want to have well trained clinics that are doing this ICD administration. We want to make sure that all the kids that get treated are having positive, not negative, experiences.

And so we'll be moving deliberately, starting with our base of experienced treating clinics coming out of the clinical trial, coming out of any new sites that might treat through an expanded access program and moving deliberately to train and in-service to ensure that all the kids who get started on this drug have a positive experience.

And just a reminder also that in order to provide access to this drug, we'll have to move through price and reimbursement processes, which you're experiencing with other companies and other therapeutics don't always move at a rapid pace. So we'll have to navigate that landscape as well..

Okay, that makes sense. Thank you..

Thank you. Our next question comes from Mark Schoenebaum of Evercore ISI. Your line is open..

Hey, good afternoon. It's John on for Mark today. I guess I had a couple questions on 2017.

So given that you raised revenue guidance, you lowered R&D expense guidance, you also stopped development on the Pompe asset and DMD assets, and you are already non-GAAP profitable this quarter, so I guess as we think about 2017 and your breakeven or profitability should it be so, a couple questions.

Should we think about 2017 as perhaps lower on an absolute basis relative to 2016? I know you're not giving guidance right now, but any qualitative color would be helpful.

And then two, is it fair to assume that there's some uplift I guess on the profitability side as opposed to the breakeven side, given that your products are performing very well and you less expenses?.

So this is Dan. So John wants us to update our guidance....

For 2017..

For 2017..

I think six months ahead of time..

You're just a little bit early.

I think JJ and I also characterize the results this year in terms of the increased revenue guidance, the fact that we were non-GAAP positive in Q2, that we have lowered the level of loss that we – non-GAAP loss that we expect for the year as all being very supportive of being breakeven or better, which has been our guidance.

And I'd say we continue to be confident..

We have increased confidence in our ability to meet our targets..

Got it. I know, I appreciate that..

What was the second part of your question?.

That essentially was my question..

Okay..

And then just a quick one on BMN 270 then. Can you clarify that given that the 10% patient went to 5%, are we seeing any....

We didn't say he went to 5%. We said he went above 5%..

Above 5%, sorry.

Are we seeing any sequential loss in Factor VIII expression in those other six high-dose patients, or is this single high-dose patient the only patient that has lost Factor VIII expression rather than gained it as time has increased?.

The patient results vary week to week. Nobody has measured Factor VIII as much and as frequently as we have in our clinical trial. And so we're learning quite a bit about the variability of Factor VIII expression in patients – and a measure, I should say.

Nothing material has happened in the other patients and really nothing that material has happened in this seventh patient.

The only reason that we provided an update on this seventh patient was because he was the guy that was closest to the lower end of the mild range, and at this point he inched a little closer to the lower end of the mild range, and we thought that was important to share with you transparently.

As to – we reported interim results, and this question has been asked of us before. How long do you need to see durability of the expression to know that it's durable? And the only comment that we could offer there is preclinical data in Factor VIII lifetime of dogs, human clinical data in Factor IX, now 3.5 years – 4.5 years.

So we're encouraged, but we're still relatively early in the program..

Okay, sorry.

Just when you said nothing material, does that mean that there are no patients that went from 60 to 50 at week 16 to week 20?.

Nothing material means that I'm not commenting on individual patient's results..

Okay. Thanks so much for taking my questions..

Again, we have not seen a trend that's materially different from where we (55:17)..

Thank you. Our next question comes from Alethia Young of Credit Suisse. Your line is open. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Hey, guys. Thanks for taking my question.

I guess as it relates to 270, the Phase 2b, are you guys looking to have that as a global study or a multi-center study? Can you give us any clarity on that? And then as far as the dosing for vosoritide in Phase 3, are we looking at one dose moving forward or would you consider doing the 30 (55:45), or is it a TBD? And then I have one question after that..

So it's definitely multi-center and likely global. As far as doses, you just heard me give an answer in which I espoused the virtue of multiple doses in a pivotal registrational trial, so I wouldn't be surprised if it turns out to be multiple doses. But we haven't finished the design of that, so I don't want to get ahead of myself.

Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Great.

And then just as far as pegvaliase goes, when you look at CANTAB, has there been something that's a little bit more quantitative but new? Do you think there's an acceptance by regulators of this approach?.

I think that CANTAB has been incorporated in clinical trials in other disease settings as a supportive endpoint. I don't know that it's been used as a primary endpoint.

We've been very interested and active in the field of quantifying the impact on brain function of high phenylalanine levels, both in terms of attentiveness and mood as well as other parameters, for example metabolic activity in the brain.

And we started that even in the Kuvan post-approval life with a randomized trial that demonstrated that Kuvan improves inattentiveness in Kuvan-responsive patients.

And we will no doubt continue that as part of providing comprehensive and high-caliber support to the PKU community so they know what's wrong and they can have confidence about what problems the drug is addressing. And I don't imagine that pegvaliase will be any different. Regardless of what action the agency would take on pegvaliase.

We'd be interested in documenting the health benefits of pegvaliase going forward. So that will include no doubt further endpoint exploration and development work. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Great. Thanks..

Thank you. Our next question comes from Ying Huang of Bank of America. Your line is open..

Hi. Thanks for taking my questions. I have a few quick ones, maybe first one for Jeff. You talked about Brazil. I was wondering if you guys are seeing any impact at all from the macroeconomic situation in both Brazil and Argentina. And then maybe for Hank a couple quick ones.

One is can you confirm when you plan to have the pre-BLA meeting with the FDA for pegvaliase? And also specifically for BMN 270, are you going to transfer the IND into the States for Phase 2b? Thank you..

Hi, Ying, Jeff here. I'll field the first part of that question. So Brazil and Argentina, on the face of it, both of those markets are experiencing different but material macroeconomic challenges. In terms of the environment that we deal with for our business, yes, the environment is difficult.

Our job is to navigate through that challenging environment. And we're reporting our results and you can judge for yourself. We're not having any material downturns that are showing up in the results, I would say..

Again, obviously this has been impacted last year there by deteriorating currencies. And I would say this year so far, actually the Brazilian real has been improving in terms of its value as compared to the U.S. dollar, which has been helping it. So we expect there is some stabilization on the currency front..

And on your second two questions, Ying, you identified some questions that are really critically important to our teams that are working here. But I think I'm going to continue the tradition from the point of view of speaking with the public and not provide very granular updates on matters like timing of pre-BLA meeting.

We're going to stick with the practice of hitting the high points like filed or submitted or validated application, Advisory Committee approval.

And as regards what countries we're going to go into, what sites we're going to go into in clinical trials, we're going to continue the practice of advising that through the standard process of ClinicalTrials.gov rather than necessarily giving tactical details in the context of conference calls..

All right. Thanks..

Thank you. And our final question comes from Ian Somaiya of BMO Capital Markets. Your line is open..

Thanks for taking my question. Maybe just two quick ones.

Hank and JJ, maybe can you speak to just your appetite for BD and where you might choose to focus, whether it's age or disease? And then pipeline prioritization, are we done with that, or is there room for additional pipeline review opportunities in the future?.

So regarding BD, we constantly look at opportunities because we are being called upon. I would say we're not very hungry for a deal at this time. But we are, as usual, if we see the right asset at the right price, we might make a move. We're likely to do some very early-stage small deals that are barely material.

Some of them we'll report to you, some of them we don't when they're not. In terms of the space, obviously with the good data we've seen with Factor VIII gene therapy, that's an area that we are, I would say, likely to continue to focus on in the future. But it will also in that case very likely be early stage.

We're not looking at this time at a late-stage big gene therapy opportunity acquisition. And I forgot, the second part of your question was related to....

Just really pipeline prioritization. You've gone through a bit of it this year..

I think the bulk of what had to be done is basically done. So I don't think you should expect some significant moves in this respect in the next few months. Some of it will be driven by development milestones and regulatory milestones, but not by a decision to further rationalize the portfolio.

And if anything, we probably will announce a new IND in the first half of next year, a new IND candidate..

Thank you, JJ..

Thank you. And our next question comes from Tim Lugo of William Blair. Your line is open..

Hey, guys. Thanks for taking the question. This is Raju in for Tim. I got kicked off the call earlier, but if this has been asked, then I apologize. But any macro impact from Turkey? I believe that was a big market for Naglazyme previously..

So we had Argentina and Brazil, but Turkey is a first question.

So, Jeff?.

Turkey is another important market that has some economic and political instability. And like Argentina and Brazil, that's the reality that we're dealing with, nothing material to report. And again, you can judge from our results as to how we're doing..

Obviously, we're watching the situation. So far it looks like things are under control or slightly improving..

No impact in this quarter..

No impact on Q2, and we hope there won't be any impact on the second half of the year..

Great.

And then just given the expediency with how the agency has gotten back to you and bestowed Priority Review, are you internally expecting an add comp (1:04:03) for CLN2?.

Again, it's entirely speculative, so stay tuned..

We should know relatively soon..

Okay, great, and then just one quick last one. For the Phase 2b, what gives you confidence that it could be potentially regulatory? I'm just thinking about the ACE910 Phase 3 program. Given that they're just breakthrough status, I think both Phase 3s are above 100 patients of enrollment.

Is that something that maybe you guys are expecting?.

Which product are you on now?.

I'm talking about BMN 270 in relation to emicizumab Phase 3..

We've been fairly generic in describing – the plan being a trial which if successful could lead to an accelerated approval. And part of the reason we say that, accelerated approval, is simply because Factor VIII levels, which by the way can't be achieved with ACE910.

It works on a different mechanism, are so clearly documented to be correlated with a clinical outcome, and there's a lot of regulatory guidance on factor replacement therapy.

So given the validity of the surrogate, given the large effect that we have, given the relative safety profile, and given the importance of the benefit to patients to control bleeding and eschew the need for replacement factor therapy, we think that has the potential to fit in the health authorities' process to meeting criteria for accelerated approval and conditional marketing authorization in Europe.

But it's still early, we just got the data, and that gives you a signal about where we're pushing towards..

Great, that makes sense. Thanks for sneaking me in..

Thank you. I'm not showing any further questions in queue at this time. I'd like to turn the call back over to the CEO for any further remarks..

Thank you, operator. So halfway through the year 2016, we believe BioMarin is in a strong position. We've been delivering record results and 20% growth in total revenue year over year and a multitude of positive data results across our development portfolio, including proof-of-concept with our gene therapy product for hemophilia A.

So BioMarin is poised to achieve the next stage of development, we believe supported by our robust commercial business, broad late-stage pipeline of products, all of which we believe have a high likelihood of approval and commercialization.

So taken together, we expect this strong foundation will drive us towards non-GAAP breakeven or better next year. We thank you for your continued support and for joining us on today's call..

Ladies and gentlemen, thank you for participating in today's conference. This conclude today's program. You may all disconnect, everyone, have a wonderful day..