Traci McCarty - BioMarin Pharmaceutical, Inc. Jean-Jacques Bienaimé - BioMarin Pharmaceutical, Inc. Jeffrey Robert Ajer - BioMarin Pharmaceutical, Inc. Daniel K. Spiegelman - BioMarin Pharmaceutical, Inc. Henry J. Fuchs - BioMarin Pharmaceutical, Inc. Robert A. Baffi - BioMarin Pharmaceutical, Inc. Salveen Richter - Goldman Sachs & Co..

Whitney G. Ijem - JPMorgan Securities LLC Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Ying Huang - Bank of America Merrill Lynch Christopher Raymond - Raymond James & Associates, Inc. John Scotti - Evercore Group LLC Andrew Tsai - RBC Capital Markets LLC Phil Nadeau - Cowen & Co. LLC Tim Lugo - William Blair & Co.

LLC Evan Seigerman - Barclays Capital, Inc. Dae Gon Ha - Leerink Partners LLC.

Good afternoon, ladies and gentlemen, and welcome to the BioMarin Pharmaceutical, Inc. Conference Call to discuss Third Quarter 2016 Financial Results. At this time, all participants are in a 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 would now like to introduce your host for today's conference, Traci McCarty, Senior Director of Investor Relations at BioMarin. Please go ahead, Traci..

Thank you, operator. On the call today from BioMarin management are 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.

To remind you all, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, Inc. including expectations regarding BioMarin's financial performance, commercial products, and potential future products in different areas of therapeutic research and development.

Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors.

And those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K, and 8-K reports. 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. So we made a tremendous progress in the first three quarters of 2016 both commercially and across the development pipeline. Year-over-year total BioMarin revenues was up 34%.

And we are well on our way to achieving full year total BioMarin revenues of between $1.1 billion and $1.15 billion this year. Dan will provide further details on our quarterly financials in a moment.

So we received a number of our development goals over the last few months including the approval from the UK Health Authority to expand the investigation of a lower dose of BMN 270 without steroids, given the dramatic factor A expression activity and safety already observed in hemophilia A.

Building on the proof-of-concept data released July 27 at the World Hemophilia Meeting, this endorsement allow us to maintain our lead with the only gene therapy product in human clinical trials in this indication.

Next step in the programming include dosing up to six additional patients in the ongoing study, providing an update on current patients in the Phase 1/2 study in December, and moving forward with initiating or potentially registration enabling Phase 2b study next year.

Given the strategic importance of having our own manufacturing facility and distribution capabilities in this platform, in a moment our Head of Technical Operations, Robert Baffi will say a few words on how BioMarin is leveraging our knowhow and experience making complex biological products in this rapidly developing field.

Turning to Brineura for the treatment of Batten disease, in the quarter both the U.S. and EU regulatory applications were filed and validated, the FDA extended the PDUFA action date by three months to April 27, 2017, in order to review a favorable update of our extension data.

So, assuming the review process remains on the current timeline, we would expect a potential commercial launch in the U.S. in the second quarter of next year, and in Europe we expect a potential approval in Q3 of next year to be followed by the commercial launch before year-end.

With vosoritide just last week we announced during the American Society of Human Genetics 2016 meeting in Vancouver, additional results from our Phase 2 study for the treatment of achondroplasia and plans for the start of Phase 3 by the end of the year.

While the high dose was very well tolerated, we will move to the lowest efficacious dose of 15 microgram per kilogram forward with the first patient treated expected by year-end.

And finally on pegvaliase, we have been working during the quarter to provide the FDA with additional data on the assays used in the pivotal study and we continue to expect to file our BLA in the first quarter of next year.

In conclusion, looking back over the last nine months of the year, we have accomplished a remarkable amount commercially and on the development and regulatory fronts.

We reported highly statistically significant results from each of our clinical studies with pegvaliase, Brineura, vosoritide and proof-of-concept results with BMN 270 for gene therapy hemophilia A. We have had our regulatory filings accepted by both the U.S. and the EU for Brineura.

Our BMN 270 gene therapy program approved for continued enrollment and we announced plans for the start of our Phase 3 study with vosoritide by year-end.

Our commercial team is driving record results for the year 2016 and as you will hear from Jeff in a few minutes, we anticipate sales to keep growing in 2017 as we move towards non-GAAP breakeven or better next year. Now, I will turn the call over to Jeff who will review the commercial business in more detail.

Jeff?.

Thank you, JJ. We delivered strong sales results and demand generation in the third quarter, and I am very pleased with total net product revenues in the first three quarters of 2016 exceeding the previous year by 23%.

Interpretation of sales results should take into consideration some significant unevenness in orders that we have experienced, particularly in Brazil and the Middle East, where political and economic instability have had an impact on results.

Specifically, recession and political instability in Brazil made business conditions difficult in that key market this year while the attempted military coup in Turkey in July has disrupted our business somewhat in Q3 and into Q4.

Therefore, while maintaining our full year guidance of total BioMarin revenues between $1.1 billion to $1.15 billion, we anticipate coming in at the lower end of this range.

With respect to the performance of the brand and starting with Vimizim, net product revenues in the third quarter of Vimizim were $81 million or 25% higher than third quarter revenue of $65 million last year.

Though Vimizim sales in the quarter are down from the record high recorded in the second quarter, the Vimizim franchise continues to be benefit from robust underlying patient demand and growth of 46% year-over-year. Recall that Q2 results included significant forward purchases in Brazil and the Middle East which were not repeated in Q3.

We were pleased to share that we added Switzerland as a new customer in quarter, bringing the number of Vimizim markets to 39 in total.

For the remainder of the year, we are maintaining previously provided full year Vimizim guidance of net product revenues between $340 million to $360 million and continue to expect strong growth in revenues into 2017. Now moving to Naglazyme.

Net product revenues were $78 million in the quarter and the underlying base of business as measured by commercial patients remains solid. Over the prior year commercial patient counts increased by 10% in Naglazyme's 11th year on the market.

Quarterly volatility continued and the prior year comparison to Q3 was impacted by a large order to Brazil in Q2 2015. The Brazil government has appeared to move away from the large stocking orders that we had seen in prior years with sales to Brazil approximately matching demand resuming in the second quarter of this year.

When looking at year-over-year results and the year-to-date results, recall that the comparison is impacted by a large order to Brazil in Q2 of last year. Based on strong global demand for Naglazyme, we continue to expect full year revenues to meet our original guidance.

However, we believe economic and political conditions in Brazil and Turkey result in Naglazyme full year net product revenues coming in at the low end of previously provided guidance of between $290 million and $320 million. Looking ahead to 2017, we expect Naglazyme to get back to year-to-year revenue growth.

Now onto Kuvan, Q3 2016 represents the third quarter of global sales since the acquisition of the PKU franchise in international markets from Merck Serono and we delivered strong results. Kuvan net product revenue contributed $91 million to the top-line in the quarter, an increase of 42% year-over-year.

North American sales of $71 million were up approximately 14% over Q3 2015 and were paced by an increase of 15% in commercial patients year-over-year. In international markets, we have successfully navigated through the transition process and are now receiving orders directly from the majority of top markets worldwide.

The combination of strong results in North America combined with solid uptake internationally gives us confidence in affirming previously provided full year guidance of between $340 million and $360 million, which would be an approximately 45% increase over Kuvan revenues in 2015.

Looking forward to 2017, we see continued growth opportunities in Kuvan both in North America and in the international markets. In closing, the commercial team delivered strong results in the third quarter of 2016 with total BioMarin revenue 34% higher than the same quarter of last year.

I'm very pleased with the level of underlying demand we're seeing for both Vimizim and Kuvan worldwide. The transition of Kuvan global markets is now essentially complete, and we look forward to focus on achieving increased penetration in these international markets. For 2017, we look forward to the potential U.S.

approval and launch of Brineura in the first half of the year, followed by the potential approval in Europe in the third quarter and launch thereafter. We will provide details for our commercialization plan as we get closer to those milestones.

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

Dan?.

Thank you, Jeff. Earlier today, we issued a press release summarizing our financial results for the third quarter, and I refer you to that release for full details. Starting with top-line results, total revenues for the third quarter were $280 million, a 34% year-over-year increase.

Total revenues for the first nine months of 2016 were $817 million and we remain solidly on track to generate between $1.1 billion and $1.15 billion in total revenues for calendar year 2016.

In terms of operating results, R&D expenses for the quarter of $161 million were relatively flat in the third quarter of 2016 compared to $159 million in the third quarter of 2015.

R&D expenses in the quarter reflect the spending on the later stages of the recently completed Brineura trial, BLA prep for pegvaliase, increased enrollment in our BMN 270 hemophilia A program and initiation of NAGLU for Sanfilippo B. Third quarter R&D also included program wind down expenses for Kyndrisa and reveglucosidase alfa.

With continued expense control combined with determination of the Pompe and DMD program, we're lowering full year R&D expense guidance to between $650 million and $670 million. SG&A expenses were $119 million in the third quarter of 2016 compared to $94 million in the third quarter of 2015.

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

However, with the slight delays in planned Brineura and pegvaliase launches we've delayed some commercial spending and consequently we are lowering full year SG&A expense guidance to between $460 million and $480 million.

Turning to bottom line operating results, GAAP net loss in the third quarter was $43 million compared to a GAAP net loss of $91 million in the third quarter of 2015.

Given continued cost controls in both R&D and SG&A expenses, coupled with strong top-line growth, we are lowering our GAAP net loss full year guidance by $20 million to a loss of between $600 million and $630 million.

Recall that our full year GAAP net loss includes a net impairment charge of $380 million recorded in Q2 related to the termination of our DMD program.

We also measure our performance on a non-GAAP basis, which is based on EBITDA or GAAP earnings before interest, taxes, depreciation and amortization, and further adjusted to exclude stock-based compensation, contingent consideration and certain other items. We consider this essentially a cash basis measure of our current period operating results.

Our non-GAAP income in the third quarter of 2016 was $3 million compared to non-GAAP loss of $41 million in the third quarter of 2015.

Our improving non-GAAP results are reflective of continued strong top-line growth and operating expense discipline and as a result, we are lowering our non-GAAP net loss guidance for the full year to a loss of between $10 million and $30 million.

Looking forward to 2017, we expect improving non-GAAP profitability and look towards a GAAP loss, but non-GAAP breakeven or better. In terms of our balance sheet, we ended the third quarter with cash, cash equivalents and investments of $1.4 billion.

During the quarter we completed an equity offering for net proceeds of $713 million and otherwise saw cash and investments decline in the quarter by $20 million.

As Robert will describe more fully in a moment, we are leveraging our strong balance sheet to begin constructing our own gene therapy manufacturing facility that would allow us to move seamlessly to supply commercial demand if BMN 270 is approved.

In closing, BioMarin delivered strong results in the third quarter and first nine months of 2016 with robust Vimizim and Kuvan sales driving us towards in excess of $1.1 billion in total revenues this year combined with controlled operating expenses all supporting our continued progress towards non-GAAP breakeven or better next year.

Now we would like to turn the call over to Hank..

Thank you, Dan. Starting with BMN 270 gene therapy for hemophilia A, in July at the World Federation of Hemophilia Congress we shared proof-of-concept data in the Phase 1/2 study in patients with severe hemophilia A.

As announced at that meeting, as of each high dose patient's most recent reading at the time, six of seven patients had Factor VIII levels above 50% as a percentage calculated based on the number of international units per deciliter of plasma. And the seventh patient was about 10%.

We also announced enough (17:09) clinically relevant sustained rises in ALT levels or other markers of liver toxicity had been observed and that some patients had been successfully tapered off of steroids with no adverse impact on Factor VIII expression levels.

We look forward to providing an update on these nine patients in December either at ASH or another forum that month. Turning to the most recent update on the BMN 270 program, two weeks ago we announced the United Kingdom's health authority had approved the continued enrollment of our Phase 1/2 study, including some important new protocol amendments.

To remind you, we were given the go-ahead to resume enrollment of up to six additional patients at a new dose of 4e13 vg/kg for our highest dose cohort of 6e13 vg/kg with no requirement for prophylactic corticosteroids, and an increase in the threshold for starting therapeutic corticosteroids.

We are very excited to begin dosing in this ongoing Phase 1/2 study, which we expect to start next month. The opportunity to test the new dose of 4 x 10-13 vg/kg prior to the start of our potentially registration enabling Phase 2b study next year will further augment our thinking about what dose or doses to take forward in that trial.

To-date, the BMN 270 program has exceeded our expectations on many levels. Most importantly, the life-changing impact on our patients. In most cases for the first time, these patients are able to safely pursue rigorous physical activity without the burden of weekly recombinant Factor VIII infusions or the fear of a bleeding event.

We've heard an anecdote from one of our investigators that one of our patients feels as though he won the lottery after being treated with BMN 270. These are transformative results.

BioMarin's focus now is to continue the enrollment of up to six new patients in the ongoing Phase 1/2 study, design and execute our potentially registration enabling Phase 2b study to start next year and complete the build-out of our gene therapy manufacturing plant.

Now, a few words on Brineura for the treatment of children with CLN2 or Batten disease. In the quarter, during FDA's initial review of our BLA, they requested an updated efficacy data cut from the ongoing extension study, which we happily provided.

After 81 weeks, patients treated with Brineura continue to have motor and language scores representing substantial attenuation to disease progression compared to natural history. These data are consistent with the data at 48 weeks submitted with the original biologics application and demonstrate durable treatment response now maintained for 81 weeks.

After 81 weeks, the primary analysis, which is a responder analysis of patients whose decline in CLN2 score over the prior 48 weeks was less than 2 points, that remained at 87%, actually a better result than reported in the originally BLA.

Natural history of this disease shows an approximately – an average of approximately two units of decline over 48 weeks in untreated patients filed longitudinally. Natural history of the disease shows an average 2.1 unit decline over 48 weeks in 41 untreated patients filed longitudinally.

The FDA designated this submission as a major amendment to the application thus extending the PDUFA action date by three months to April 27, 2017. The agency advised that they plan to hold an Advisory Committee Meeting at a date to be confirmed per their usual practice of notification in the Federal Register.

Based on the updated PDUFA date, we hope to receive a U.S. approval in that timeframe and subsequent launch in the first half of next year and an EU opinion in the third quarter of next year.

Turning to pegvaliase, as we said last quarter, health authorities have requested information on the assays used in the study to measure laboratory correlates of hypersensitivity-type reactions.

We've provided the FDA with key data and continue to hold communications with the agency in advance of the BLA filing to assure timely acceptance of the application and review.

We continue to believe that the dramatic reduction in blood Phe is a significant innovation for hemophilia patients, particularly those who cannot sustain meaningful control using available measures as recommended by the American College of Medical Genetics guidelines.

We look forward to completing the steps toward filing for approval in the first quarter of next year. Moving on to vosoritide for achondroplasia, last week at the American Society of Human Genetics Meeting, we shared six month data from Cohort 4 of our Phase 2 study using the 30-microgram per kilogram daily dose.

The eight children in Cohort 4 who completed six months of daily dosing in 30 micrograms per kilo per day experienced a 46% or 2.1 centimeter per year increase in mean annualized growth velocity from baseline with a P-value of 0.03. These data are comparable to those observed with a lower dose of 15 micrograms per kilo per day in Cohort 3.

Based on these data, we intend to initiate a one year randomized placebo-controlled Phase 3 study in children with achondroplasia patients whose ages are between five and 14 and a subsequent open-label extension treatment of that study.

Children in the study will complete a minimum six-month natural history study to determine their respective baseline growth velocity prior to entering to the Phase 3 study. We anticipate first patient in by the year end.

And finally, a couple of words on BMN 250 for MPS3B, we've completed initial – enrollment of the initial pilot dose cohort and expect to see GAG reduction data in first quarter of 2017.

That concludes our update on the development pipeline, so I'd like to turn the call over to Robert Baffi, our Head of Technical Operations to say a few words about our gene therapy manufacturing buildout..

Thanks, Hank. As many of you know, BioMarin has a long and successful history, manufacturing and distributing complex biological products, now available commercially in over 69 markets worldwide.

We operate biological manufacturing facilities in California and Ireland that have been successfully inspected over 30 times by regulatory agencies from the U.S., EU, Brazil, Turkey, Japan and Canada.

Experienced and robust manufacturing capabilities are a core competency of BioMarin and one that we are leveraging as we build our own commercial scale gene therapy facility. We believe this is a particularly valuable strategic advantage since third-party commercial scale gene therapy manufacturing is not currently available.

The gene therapy facility currently under construction allows us to support the Phase 2b study with a 2b commercialized manufacturing process, leading to a seamless transition to meet commercial demand once approved.

We believe this is the right strategy, allowing us to extend our manufacturing expertise to gene therapy and provides maximum scheduling flexibility, enabling rapid clinical development.

Significantly, this dramatically reduces future regulatory and manufacturing risk compared to utilizing one contract source for clinical material and another for commercial.

Given the complexity of manufacturing and distributing biological products, we believe this important strategic investment in manufacturing will help BioMarin remain in the lead as the only company currently conducting human clinical trials with Factor VIII gene therapy in hemophilia A.

BioMarin's knowledge and experience in manufacturing and distribution of complex biological products provides tremendous benefit for rapid clinical development and the consistent supply of commercial product. Extending this capability to gene therapy production leverages one of the strongest and often underappreciated assets within BioMarin.

With that, I'd like to turn the call back over to the operator to open the call for questions and answers..

Thank you. Our first question comes from the line of Cory Kasimov of JPMorgan..

Hi, guys. This is Whitney, on for Cory. Thanks for taking the question.

First one, just on the gene therapy manufacturing facility, can you maybe just talk about the timelines and kind of steps to getting that facility up and running, and tested and validated? And is that a rate limiting factor for the Phase 2b start?.

Robert?.

Yeah. So, the facility is under design and construction. Now, we anticipate the facility being GMP commissioned by the middle of next year and producing material through the second half of next year, available in the beginning of 2018 for use in clinical studies.

It's not limiting to our commercial studies now as alluded to we currently produce product using a contractor and that has supplied us with appropriate supplies of materials for studies anticipated until the facility is operational..

Robert, you might want to explain that the process used by our supplier is the same as the one embedded in our facility..

Yes. So, we are basically running the identical process at both the contractor and our facility once constructed and it brings all of our analytical capability to assure the comparability of that material as we go forward, and introduce it into clinical study..

Got it.

And then are there any updated thoughts on the variability of response you saw with BMN 270, and I guess can you take us through how you got to choosing the dose you're going to move forward within in the ongoing study?.

So, in regards to better understanding the variability of results we haven't – we don't have any updates to provide you in that regard. We're certainly looking into that very carefully. I'd just remind that variability in outcome is actually a pretty usual occurrence in drug studies, not everybody responds the same way.

And how we picked the intermediate dose was admittedly based on a relatively small sample size of a single patient treated at 2 x 10-13 vg/kg and that patient had Factor VIII reconstitution but only at a level of 2%.

Now that one could argue to that that 2% level is clinically meaningful, because that patient has had substantially lower bleeding in Factor VIII replacement therapy, nonetheless, we want to do a little better than that. We don't need to go as high as was achieved in the 6 x 10-13 vg/kg dose level.

So we chose a dose that was in between 2 and 6 which is 4 x 10-13 vg/kg of (28:41)..

Great. Thanks for taking the questions..

Our next question comes from the line of Alethia Young, Credit Suisse..

Hey, guys. Thanks for taking my questions. Two.

One, just can we talk a little bit more about in Latin America, it sounded like 2017 you should get back on track but just wanted to understand a little bit more if it's like systemic economic issues that are going on or kind of more similar to what Alexion saw this year? And then the second question is, just on PEG-PAL, just wondering around with the FDA has anything incremental come up in the kind of these conversations that you feel like are being newly introduced into the back and forth that you typically have with the agency? Thanks..

Okay. Hi Alethia, this is Jeff. I will field the first question about Latin America. So in the earnings calls to date this year, we have noted that there is political and economic instability in Latin America that business conditions are a little bit difficult there because of that.

And we've generally guided that we've been navigating through those conditions. So what has changed, nothing fundamentally has changed. Our expected results for Naglazyme are weighed down a little bit by what we expect between now and the end of the year for Brazil.

Some of those economic and political conditions have evolved a little bit this year, so in Brazil, there is a new administration, looks promising. In Argentina, there is a new administration that is doing promising and good work. So yes, we have an expectation that things should straighten out a little bit going into 2017..

Do you want to say a few words about Turkey also, like the coup in Turkey?.

Yeah. So we did mention the disruption to our business from the July failed military coup in Turkey. That country is an important market to BioMarin.

And life in Turkey for patients and physicians and the ordering and supply of pharmaceuticals has been disrupted a little bit, not fundamentally knocked down, mind you, but disrupted a little bit and enough that it's impacting our results starting in Q3, extending into Q4.

And there again, we're expecting that things will straighten out and essentially get back to normal as we head into 2017..

And in regard to that FDA's requests for the additional principally laboratory information, laboratory analysis on PEG-PAL, that's really not uncovering anything substantially new. In fact in some cases, it's actually the agency responding to submissions we had previously made several years ago.

As they anticipate the filing happening, they are staging their work, because of resource and timeline constraints that they have once the file is accepted. So we kind of regard this as fairly routine activities by the agency, preparatory work to enabling a submission, that it is able to be reviewed in the appropriate timeframe..

Great. Thanks..

And our next question comes from the line of Ying Huang of Bank of America..

Hello all, good afternoon. Thank you for taking my questions as well. Just a couple of quick ones from me. First of all, the UK agency lifted the hold for BMN 270 in hemophilia.

So maybe Hank, can you tell us a little bit more about the liver enzyme issues, whether that's transient for all patients? And also how many patients have been able to wean off oral steroid? And then the second one question I have is, exactly what are you going to present on BMN 270 at ASH? And then a financial question for me, on the increased gross margin for a few products you reported, is that sustainable going forward? Thank you..

Okay. So, what I can't give you is an interim update on the status of patients on the study currently. And so, I won't be able to answer your questions about the temporal course of the LFPL (33:28) patients or the current status of patients off of steroids.

What I can tell you is that we provided the UK, the most recent data that we could and their action to permit us to withhold prophylactic corticosteroids, their willingness to raise the threshold for instituting corticosteroid therapy, and their willingness to let us use a dose of 4 x 10-13 vg/kg and a dose of 6 x 10-13 vg/kg if we choose to, is all based on their most recent evaluation of the data.

As regards the next communication, what I said in my prepared remarks was we're guiding to a communication in the December timeframe either at ASH or an investor forum nearby. And we know there is a lot of interest in issues like steroids and durability of response, and status of ALT elevations.

And so, we'll provide an update on as much of that as we have current information to be able to share with you..

As regards cost of sales, nothing material was different in the third quarter, and we stay on track with our guidance of 18% to 19%..

Great. Thanks..

Our next question comes from the line of Chris Raymond of Raymond James..

Hey. Thanks for taking the question. Just two actually. First on the DMD opportunity or business in drisapersen, JJ, you've talked a little bit, I think publicly about possibly, at least keeping the door open to maybe go back to the FDA and revisit the application, and we've noticed actually some of the IP prosecution continues.

Can you maybe frame for us exactly, how we should think about this going forward in terms of – looks like there is at least some residual effort going on, and is this something we should just write off entirely or how do we think about this? And then the second question on Kuvan, just – I know you guys have only had a few quarters here of experience, but just I notice Q3 was down sequentially versus Q2.

Is that just the typical EU summer seasonality or was there something else going on whatever color your can provide there? Thanks..

Why don't we start with maybe the – on the...Jeff?.

The European Kuvan sales? Sure. So, hi Chris, this is Jeff. I'll field the Kuvan question. Actually, Kuvan sales that we just reported for the third quarter were $90 million – $91 million in total, comparing to $90.2 million for the second quarter. So, we're flat to slightly up overall in the quarter.

We also gave a little bit of detail what portion of that was coming from North America versus the newly acquired territories, so there was a little bit of mix, up in North America, down in the international markets. But, nothing substantial there.

Overall, we're happy with how the acquisition of the newly acquired territories has gone, and we're pretty bullish on the opportunities in those markets now and going forward..

Yeah, Jeff, I was just referring to ex-U.S..

Yeah, so the ex-U.S. revenues in Q2 were $21.9 million and in Q3 were $19.9 million..

Yeah. And it's likely to be indeed the summer effect, patients and physicians in Europe specifically go on vacation. We actually have seen a little bit of that in the U.S. too in the past.

So, again, the patient demand is still growing, the dynamics are very good, as expressed by Jeff, and we anticipate continuing growth beyond 2017 for the Kuvan business worldwide..

Got it..

On the DMD, so, yeah, we are continuing to explore the possibility of an appeal in the U.S. or in the decision of the idea to (38:07), so that is ongoing. We haven't made a final decision, but that's definitely a – that's a possibility. And regarding, yes, there is still activity on the patent front.

I mean, finally the Europe, we're still – the situation has not changed. The methods of use patent in Europe for exon 51 has issues and is enforceable today. There is an appeal procedure that's being initiated by Sarepta a couple of years ago, it's still pending. But our patent in Europe is today issued and enforceable.

Regarding the U.S., we anticipate – we had a PTAB decision in September 2015 on the method of use patent that was favorable to BioMarin. And again, our competitor has filed an appeal.

We anticipate a final ruling from the Federal Circuit of Appeals on this PTAB decision related to the method of use patent in late 2017 or early 2018, and if we are successful in this appeal process, then Sarepta's product eteplirsen would be infringing as to the method of use patent at that time..

Thank you..

Our next question comes from Salveen Richter of Goldman Sachs..

Thanks for taking my questions.

With regard to BMN 270, can you just comment on the sensitivity of your assays with regard to determining patients with existing antibodies and how this may play a role in the variability of outcomes that you're seeing? And then secondly, if you do want to test other doses outside of 4 x 10-13, could you do that in another – would you test that prior to going to the Phase 2b or in the Phase 2b study? And then with regard to the gene therapy manufacturing facility, what is the CapEx that's going to be associated with that build? Thanks..

Hi, Salveen. In regard to assay sensitivity, you are correct in pointing out that we screen patients who are AAV5 seropositive out of the study. And is it – so I guess the fundamental question is, is it possible that there's some masked seropositivity as an explanation of variability in outcome. And I suppose it's theoretically possible.

I mean, we have a – we use a very sensitive assay and we get seroprevalence numbers in our evaluated cohorts that are fairly comparable to what's been published in the literature.

So, we think that we have a sufficiently sensitive assay and that preexisting antibody doesn't explain the wide range in therapeutic outcomes, although we continue to investigate this, as I mentioned before, but have not yet come to any conclusions.

In terms of other doses to investigate, I think it's a little premature to speculate on what other doses or how we would investigate it.

I think that the plan is to get this next group of patients enrolled, take about a couple of quarters to get a data readout on that, and we believe that that can be accomplished in a timeframe that doesn't derail the start of the pivotal registration trial, but stay tuned..

And so, again, this is Dan on the capital for the new manufacturing facility. We haven't given a specific callout for that one plant, but it will fit within the roughly $150 million annual capital budget that we have for this year and next year..

Thank you..

Our next question comes from the line of John Scotti of Evercore ISI..

Hey, guys, thanks for taking my question. I have a couple. I also want to ask about manufacturing. So, I was wondering if you could talk about the advantages and disadvantages of manufacturing AAV with baculovirus versus mammalian cells such as HELA or HEK293 in terms of yield, purity, cost, et cetera.

And then I guess for JJ, I was hoping to get your thoughts on the regulatory environment for biotech right now.

Do you think it will change after the election? And also specifically, do you see BioMarin as an orphan company as potentially differentiated in biopharma relative to your larger peers in terms of potential regulatory environment risk? And then finally just briefly on Kuvan, is it possible to give the current Kuvan penetration in international markets? And if so, how does that compare to current penetration in the U.S., what's the feeling? Thank you..

Hank and Robert will talk about the baculo versus the mammalian for 230 (43:28)..

Maybe I'll start..

Go ahead, Robert..

All right. Go ahead, Hank..

Okay. Sorry, we are in separate locations and weren't able to eyeball each other.

We compared material made from a variety of manufacturing systems and we picked the baculo system because it provided what we thought was the most intrinsic scalability, best cost of goods, greatest activity and there's regulatory precedent for approval of baculo systems, at least in Europe.

As to commenting on the specific batches (44:01), I'll turn it over to Robert, but I'm going to doubt that he's going to answer concrete specific questions about in process results..

Yeah. Certainly, the choice of manufacturing systems has a lot of different variabilities that go into that relative to the productivity, the quality you can get out of that material.

And so, we looked at, as Hank alluded to, those characteristics and chose the baculovirus system as being robust, scalable, and allowing us to get the purity that we desired for the clinical studies.

And so those combination of factors go in, into the analysis, and from our feel, there is clearly a benefit to being in the baculovirus system and that's why we chose it..

Again, (45:01) but we did produce 230 (45:06) in both baculo and mammalian prepared (45:07) and there was no difference in potency or any meaningful characteristic, so that's very important. However, as Robert said (45:15), the scalability is definitely better for baculovirus.

And also it's the first gene therapy product ever approved in Europe for use in Europe was in the baculovirus system. Now, you have other questions on the regulatory environment, I don't know if you mean regulatory or pricing environment in the U.S.

I guess I mean Hank also can step in here, but I don't think we anticipate any significant change in the regulatory, the pure regulatory approval process in the U.S. post-election, maybe there is a different opinion there, but....

Sorry I was referring more to the pricing environment, not the FDA regulatory environment?.

Yeah, it's okay. So, the pricing, I think as we've stated before, we've seen basically great results we're seeing in our U.S. business, all the pricing rhetoric so far in the past year or so during the election campaign has had zero impact on our business on our actual revenues in the U.S.

I would say again when you listen and try to listen carefully to the different candidates now, I would say more specifically Hillary Clinton considering she is ahead in the polls that she is likely to be elected, I don't think she has ever communicated that she had any issue with high-value, high-price, but actually she has communicated that she was in favor of high-value, high-price products.

I think most of the discussion has been around egregious unjustified price increases or repeated price increases without creation of value, I think she had an issue with that. I think it's somewhat of a bipartisan issue (47:02) issue with that. Indeed, this has – this is not our business model.

If there were any kind of regulation or policy around limiting the number or the amount of price increase one can implement every year or so, that would have zero impact on our business today because that's not what we've been doing. The few price increases that we've had on our U.S. products has been basically around inflation.

So, in this respect, back to your last question, we believe we're somewhat differentiated in this respect and probably less vulnerable to pricing risk than other big pharma or big biotech or big specialty companies, specifically the ones dealing in very competitive environments, when there is a big managed care component, the PDM components and the rebate game and that's not something we are doing whatsoever.

So, in this respect, we believe that we have a lower pricing mix.

Was there, there was a Kuvan question?.

Kuvan question..

Sorry?.

The Kuvan question, patients in international markets..

Yeah..

Do you want to field that?.

Yeah. Yeah. Hi, John Jeff here. So, your question was about our ability to measure patients on Kuvan in international markets, and to deduce what that means about penetration. In fact, we do have a unique ability in the United States to acquire information about patient utilization that we don't generally have in other markets.

So, a level of visibility is not as precise as it is in the United States in those markets. However, I would say as it relates to our expectations about penetration, and the penetration feeling, the populations that we're talking in these ex-U.S.

markets, and what we know about the epidemiology of PKU would suggest that, in most of these markets, there is plenty of penetration upside left, leads us to be bullish on the opportunities for Kuvan in those markets now and going forward..

I mean really in Latina America, there is very little penetration Kuvan business, if any, at this time..

And relative to our purchase price it's all upside, I mean we're generating $20 million a quarter internationally, currently is basically what we've projected, when we bought product the first time everything from here would be upside..

Thanks a lot..

May I add, actually when we did the valuation of the deal with the restructuring of the agreement we had with Merck Serono on the reacquisition of ex-U.S. rights for Kuvan and pegvaliase, we were kind of ahead of our expectations there. So definitely so far it was a good decision..

Thank you. Our next question comes from the line of Michael Yee of RBC Capital Markets..

Hi. This is Andrew Tsai on for Michael Yee. I just had one quick question, and we just wanted to know your thoughts on the non-gene therapy competition, or just thinking about the specific antibody that may have data in Q4.

I was just curious what happens if traditional drugs like this antibody has more competitive data and also how do we think about which patients would use antibodies and which would be using gene therapy. Thanks..

If you're referring to the Roche....

ACE910 emicizumab..

Yeah, that's correct..

Hemophilia. Okay..

Yeah..

That will be a very interesting product for patients particularly for patients that have inhibitors and clearly that's something in a gene therapy would be – in the space of gene therapy would be competitive in because with gene therapy what you are going to do is you're going to make Factor VIII.

So, if you have a Factor VIII inhibitor programming your liver to make Factor VIII is not going to the help the fact we have Factor VIII inhibitor. So that's where emicizumab is really an important medical advance.

On that basis, you can imagine that it could work in non-inhibitor patients and there are registration trials going on for to evaluate weekly administration of emicizumab. People speculate that emicizumab could be given less frequently although those trials that haven't been undertaken.

I guess what we hear from clinicians is experiencing a steady state around the clock one treatment and done for a lot of years is vastly preferable to even a relatively infrequent even subcu administration of an antibody, but it's a little bit early to tell how that's going to play out since we're rounding the corner of Phase I heading into registration trials.

But I think that the biggest excitement for emicizumab in summary is really in inhibitor populations, which is not really directly relevant to gene therapy..

Thank you..

Our next question comes from the line of Phil Nadeau of Cowen and Company..

Good afternoon and thanks for taking my questions. Couple of R&D questions then on commercial. First, Hank, for you on the Phase 3 in achondroplasia, you mentioned that patients have to finish the natural – six months of natural history study before entering the trial.

How many patients have you already enrolled in the natural history study and therefore are tracking, should we think of this requirement as not a big deal, because you already have a big pool of patients who fit the requirement or does this truly add to six months to the study?.

The way I think about it is that the rate of enrollment is more likely to be determined by getting sites estimated in contracting, than it is by accumulating patients in the natural history study, and the reason I say the former is that and we experienced this with Vimizim as well that there is a high degree of interest on a worldwide basis in the product we have worldwide rights, there is value in having investigators participate in the Phase 3 trial to facilitate health authority review and ultimately facile (54:07) adoption and I think the facts that we could maybe go faster in certain countries overall is offset by what our ultimate desired outcome is just to go as fast as possible once we have a registration and launch to deliver the product to as many patients as quickly as we can around the world.

I think that's the kind of success story for Vimizim, it is growing quite nicely. I think that was a great collaboration between Jeff's team and our team to make sure that clinicians around the world had a good solid experience with the product during development to facilitate commercialization.

So, we think it's worth taking the extra time to get the drug in the hands of clinicians around the world and we think that's substantially more important than the running phase..

But we have started running national history..

Yes..

Already..

Yes..

And if the natural history started, does it have sites around the world today or do you have to?.

Yes..

It does. Okay. And then second on gene therapy, what's you sense for how many patients need to be followed for what duration of time to satisfy the regulators of safety with gene therapy agent for hemophilia.

Have you – have any sense for that? Have you had any opportunity to talk to regulators about what that patient experience may need to be?.

The sense that we have is principally driven off of guidance documents and their considerations for other products that have been in development.

And you really don't have a good sense of that, not at the beginning or in the middle of the discussions with them about the Phase 3 trials and the registrations for a pathway but, closer to the end and I'd say stay tuned for us to be able to represent to you what's going to be required for registration either under an accelerated pathway or for a full approval pathway..

Okay, great. And then one last question on commercial. I think on the last conference call, when you guys were asked about Brazil and Turkey, you – if I remember correctly, you said that Brazil orders were picking up during Q3, and then Turkey, you hadn't seen any noticeable change through kind of mid Q3, because of the coup attempt.

Just now we're kind of hearing something different on this call, so I'm sort of wondering first, was it just a late quarter effect of those two things? And then second, how much confidence do you have in your visibility into 2017? I know you said things should return to normal but I guess what's that based on?.

I'd like Jeff to give you some more specifics. But when we did the Q2 call, the crew in Brazil as it is in Turkey as it happened though, we had very little ability to evaluate what's happening. So, we just have more time on the Turkish front.

Jeff?.

Yeah. Thanks, JJ, exactly correct. And with respect to Brazil, as we've noted, we had this big very large order in Q2 2015 which essentially served close to 12 months of demand.

So, as the reorders restarted earlier this year, approximating what we think patient demand is, that we saw an order in Q2, we saw an order in Q3, and we've been following this process along. We think based on what we see that we're going to be at the lower end of what we expected for the full year.

And we are expecting that things will straighten out into 2017. But as – yeah as we're – sorry, we're expecting things to straighten out in 2017, but the future is uncertain. Still the overall impact on Brazil is small. We're retaining our guidance on revenues for all products and then total, just guiding towards the lower end of the range here..

Good. Okay. Thanks for taking my questions..

Thank you. Our next question comes from Tim Lugo of William Blair..

Thanks for taking my question. And maybe just one for Hank. For the Sanfilippo data in early 2017, can you remind us about the quality of natural history data out there? And you mentioned that GAG data is possible.

Will we also get some neurocognitive data from this program and if it's strong, could this be any sort of a basis for an accelerated approval?.

But for sure you will see the key biomarker in this disease which is a CSF, so cerebrospinal fluid GAG level..

Okay. And maybe a broader question for you, JJ. We haven't seen much BD from the company since BMD.

Can you just update us on your focus for BD given your broad pipeline, balance sheet and potentially becoming profitable soon?.

Yeah. I mean, we have no – in the short-term, we're not looking at any major acquisition. We are on an ongoing basis evaluating products, opportunities or early stage molecules that do – could be strategically fitting within our portfolio.

And we just look at our long-range plan very recently and the current pipeline and the current products definitely will allow us to continue double-digit top-line growth until the 2023-2024 timeframe. So of course we want to continue to grow beyond 2023, 2024 and then that means we need new products.

Now, we have an active in-house discovery research activities that should be some new molecules that we could put in the clinic in the next couple of years, but we always look at the outside and prepare the opportunity and the cost of acquiring another early stage molecule outside versus internal, and so that could happen, but I would say a large acquisition is not in the cards in the short-term..

Okay. Thanks for the question, and I'll update my model through 2023 then. Thanks a lot..

Our next question comes from the line of Geoff Meacham of Barclays..

Hi, guys. This is Evan on for Geoff. Thanks for taking the question. Going to vosoritide and some of the thoughts behind the Phase 3 pivotal, would you be looking at effect on proportionality for one year timeframe (1:02:23)....

You're breaking up a little bit. Do you want to get close to the phone..

Sorry.

Can you hear me now?.

Yeah..

There we go..

Much better..

Perfect. Sorry about that.

So, just on the Phase 3 pivotal trial for vosoritide, will you be looking at the impact on proportionality as an endpoint or is the one year timeframe simply too short of a time period to really see something there? And I guess what interaction with regulators have you had regarding the design of this trial? And is this an endpoint that they are really onboard with to approve the drug?.

You mean the growth velocity?.

Exactly..

We will be looking at the proportionality as an endpoint. One year could be too short to see a meaningful difference drug versus placebo. We just don't know yet. We've showed at R&D day that there was a trend in the right direction, but we also noted that there was no control arm. So, and that proportionality generally improves as patients age.

So, we aren't sure how to interpret that, and clearly the controlled clinical trial will be required to get our first look at what the effect of the drug is on proportionality at one year. It's not the primary endpoint.

The primary endpoint, adjusted growth velocity, we have had enough interaction with health authorities around the world to feel reasonably confident that that could support as the primary endpoint for registration.

But as you know, health authorities look at all the data you collect in clinical trials including secondary endpoints, exploratory endpoints and safety data. So, and we don't have enough information yet to know how that's all going to turn out.

What we do feel very confident about is that we can safely increase growth velocity to essentially a normal level with a dose that appears to be well tolerated, and now we're poised to test that and -well, actually to confirm that in a randomized and controlled clinical trial..

And can you just remind me of the plans to look at the drug in younger patients?.

Well, our studies that we have done so far have been in 5-year-old to 14-year-olds and we plan to study the drug in 5-year-old to 14-year-olds for pivotal registration purposes. And as with almost I think every BioMarin skeletal dysplasia program for sure, we've had an evaluation in of the safety and activity of the drug in younger patients.

And I'd like to point out that like with Naglazyme, we did that as a post-approval study in a very small number of patients. With Vimizim, we did that as a pre-approval study in a larger number of patients. And similarly, we'll be working on gathering safety and initial activity data to be available at the time of registration.

We don't believe that this is essential to the registration dossier, but rather we're doing it early because we know that clinicians recognize these genetic conditions as having early onset and that early intervention is warranted to optimize long-term outcomes, so we intend to provide at least the safety and hopefully some activity data as soon after the registration as possible through these ancillary studies..

And this would go down to patients as young as just newborns, or would it be like one, two?.

Yeah, stay tuned for final design considerations..

Okay. Okay, thanks so much for the questions, appreciate it..

Yeah. These patients are diagnosed before birth, so we could theoretically (1:06:13)....

So, could you go while the mother is pregnant with the child?.

That crossed our mind, but that would be the next step..

Okay. Fair enough..

Thank you. Our next question comes from the line of Joseph Schwartz of Leerink Partners..

Hi, guys. This is Dae Gon in for Joe. Thanks for taking the question. I had just a couple of questions on Brineura.

So I guess having attended that Batten disease conference recently, I was just wondering, have you received any additional feedback from either regulators or KOLs about the four domain score that you presented as part of the amendment and how the two additional, the seizure and the vision impairment, might factor into the entire evaluation? And then just the follow-ups, two actually, do you have any plans of expanding your EAPs for Brineura? And lastly, what is your current plan for the Brineura sister study that's set to enroll five patients? Thanks..

The feedback that we received on motor and language and total score is generally very, very supportive.

First of all, let me just say, remind again that motor and language disability represents substantial domains of impairment for patients and so when we design the study to have motor and language as a primary endpoint, we clearly ask clinicians and health authorities if we saw improvements in motor and language and no improvements in vision and seizures, would that constitute a relevant treatment benefit and the answer was definitely yes.

Now at the same time, having seen preservation of function that in the total score, which implies preservation of function in the motor and language domains, that's only to the better.

So, the feedback that we have received so far as we said, the data in total as well as the agreed upon primary endpoint for analysis are supportive of the registration application that we've made. As regards EAP and expansion, we presently have an EAP study in the field on a global basis.

They're limited in the amount of supply that we could provide to patients on a global basis. And we don't imagine being able to evolve that supply constraint ahead of registration for this year anyway.

And I'd say stay tuned in terms of how Robert's team is doing terms of manufacturing and preparing for launch material and whether there is in time in a timely fashion of extra availability for expanded access. And the sibling study as far as I know is on track.

I don't have any other updates to offer on the – what you call the sister, I call the sibling study..

Just quickly on the EAPs.

I guess, once the registration or I guess, once the approval comes through, how much or how long of a duration do you anticipate before actually recognizing the revenues?.

Now we'll be relatively fast. I mean, similar to what we had with Vimizim on product. Vimizim was probably six weeks to two months..

Yeah. I think the issue is, how fast can we get patients transitioned from an early access program to commercial supply in what we anticipate to be our first market, the United States. And as JJ said, that happens in a matter of four weeks or six weeks when things go right, that would be our expectation..

Yeah. I guess your question was related to the transitioning of EAP patient to commercial, but when we launch, we will also put some de novo patient on the drug. I mean, we're not going to start only with EAP patient transfer to commercial (1:10:31)..

Great. Thanks so much for the color, guys..

And actually, we may also go with the European filing but also we're planning also for a potential early access program in France where one can charge for the drug even before approval, we've done that for Vimizim too..

Great. Thank you..

And I'm showing no further questions in the queue at this time. I'd like to turn the call back to CEO JJ Bienaimé..

Thank you. So in conclusion our four pillars of growth remain solidly in place, and include our strong existing commercial business that we expect will deliver this year over $1.1 billion in revenues and the acceptance of the regulatory filings, U.S.

and EU for Brineura, upcoming regulatory filing with pegvaliase, continuation of our Phase 1/2 study exploring a lower dose with a first-in-human gene therapy for us for (1:11:35) hemophilia A and then initiating our potential registration and enabling the Phase 2b and our Phase 3 study with vosoritide in achondroplasia.

So with that products, each representing we believe potential $1 billion of revenues in terms of opportunities, we're looking forward to the next few years at BioMarin. So taken together, we expect this strong foundation will drive us towards continued revenue growth and non-GAAP breakeven or better next year.

So 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 does conclude the call and you may all disconnect. Everyone, have a wonderful day..