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, M.D. - BioMarin Pharmaceutical, Inc. Robert A. Baffi - BioMarin Pharmaceutical, Inc..

Phil Nadeau - Cowen & Co. LLC Cory W. Kasimov - JPMorgan Securities LLC Christopher Raymond - Raymond James & Associates, Inc. Andrew Peters - Deutsche Bank Securities, Inc. Alethia Young - Credit Suisse Securities (USA) LLC Matthew K. Harrison - Morgan Stanley & Co. LLC Ying Huang - Bank of America Merrill Lynch Joseph P.

Schwartz - Leerink Partners LLC Geoffrey Meacham - Barclays Capital, Inc. Jing He - Gabelli & Company Martin Auster - UBS Securities LLC Vincent Chen - Sanford C. Bernstein & Co. LLC Christopher N. Marai - Nomura M. Ian Somaiya - BMO Capital Markets (United States).

Welcome to the BioMarin Second Quarter 2017 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Traci..

Thank you, operator, and thank you all for joining us today.

To remind you 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 products, programs, actions of regulatory authority, 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 report.

On the call from BioMarin management today are J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President of Global Research and Development; Dan Spiegelman, EVP and Chief Financial Officer; Jeff Ajer, EVP, Chief Commercial Officer; and Robert Baffi, EVP of Technical Operations.

Now I'd like to turn the call over to BioMarin's Chairman and CEO, J.J. Bienaimé..

Thank you, Traci. Good afternoon and thank you for joining us on today's call. So in the first half of this year, we made significant progress, achieving our financial goals, progressing our development pipeline and getting our sixth commercial product approved in both the U.S. and Europe.

In the second quarter, specifically we achieved record revenues, received approval for Brineura in both the U.S. and the EU, earlier than anticipated and we submitted our application for approval of pegvaliase in the U.S. and in July shared unprecedented data for our BMN 270 gene therapy product for hemophilia A.

Also announced today, we are very encouraged by the maturing 4e13 vg/kg dose data and therefore intend to start two separate Phase 3 studies to explore both the 6e13 vg/kg and the 4e13 vg/kg dose as soon as possible.

As we shared with you at ISTH, 6e13 vg/kg is the preferred dose of investigators and KOLs that we've been talking to given its demonstrated ability to transform severe hemophilia patients to the normal range or Factor VIII activity and as Hank will explain a little later there is (02:42) many centers around the world to treat patients with this dose.

However, for the most recent data of the 4e13 vg/kg dose with an additional eight weeks of observation, supports further exploration. Factor VIII levels continue to rise at week 24 and beyond for our furthest along patients as noted in the table 1 of our program update press release issued earlier today.

And we anticipate that the most recently dosed patients will continue to follow the trend.

With this new data in hand, we are more confident that the clinical benefit of steady-state Factor VIII levels in the normal range or physiological range will provide complete coverage for patients thereby eliminating all sorts of leads and the requirements for all recombinant Factor VIII infusions.

Furthermore based on data from both the 6e13 vg/kg and the 4e13 vg/kg dose cohorts, we believe that we have the opportunity to potentially disrupt the current treatment paradigm for severe hemophilia A patients.

As such we plan to invest our resources, manufacturing capabilities and commercial development knowhow to maximize the BMN 270 development program and progress both doses as quickly as possible. In addition to our dose development strategy, given the low level of pre-existing immunity of antibodies to AAV 5 which is a vector we use for BMN 270.

We expect that approximately 90% of hemophilia A patients will be treatment candidates for BMN 270 based on this criteria. Moving to top line results in the second quarter, BioMarin generated record total BioMarin revenues of $317 million.

We continue to see strong patient demand for our legacy products, and now look forward to adding contributions from Brineura as we execute the rollout globally. The commercial launch of Brineura is doing very well and the initial stages are centered on awareness, early diagnosis and people readiness as Jeff will describe in more detail momentarily.

Other regulatory accomplishments in the quarter includes the submission of the pegvaliase BLA in the U.S.

and we expect to hear from the FDA on the filing of our submission as well as the Prescription Drug User Fee Act or PDUFA action date within 60 to 74 days from when we filed the application, so early September is when we expect to hear from the FDA. We also intend to submit an application for registration in the European Union by year-end.

We are committed to pegvaliase, as we believe it offers an important new treatment option over the adult patients with PKU unable to manage their condition with existing treatments.

Phase 3 pegvaliase data demonstrated significant Phe lowering which many treating physicians in the community believe plays an important role in improving neurocognitive function in PKU patients.

We continue to believe that there is a path forward based on the Phe lowering, and we look forward to keeping you apprised of regulatory development as we move forward. In conclusion, we are very pleased with our accomplishments in the first half of this year.

We delivered (06:18) a tremendous amount across the financial, regulatory and development areas of the business. And while we expect to incur a GAAP net loss for 2017, we remain on track as you saw in our release to achieve non-GAAP profitability for the full year 2017.

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

Thank you, J.J. I'm extremely pleased with the commercial team's execution in the second quarter and first half of 2017, generating a 15% increase in total BioMarin revenues year-to-date. Before reviewing specifics product revenues, I would like to provide an update on the Brineura launch in the U.S.

and Europe, following approvals in the second quarter. The early launch dynamics reflects a high level of interest from physicians, institutions and families. Following approval in the U.S. in April, and commercial product availability in mid-June, we were pleased to have achieved sales in two countries in the second quarter, the U.S. and Argentina.

Since the end of the quarter, we've already recorded our first sales in Europe serving patients in both France and Germany. Briefly, our commercial strategy is focused on three distinct components; disease awareness and early diagnosis, site readiness and reimbursement.

Our efforts to facilitate earlier diagnosis includes disease awareness and education campaign highlighting the symptoms that may signal the need for early testing for CLN2 disease, including unprovoked seizure, preceded by language delay. These education programs are multi-pronged in that they target physicians and families respectively.

We will also have a presence at major international and regional pediatric neurology, epilepsy and genetic congresses, in order to get in front of physicians who will be diagnosing CLN2 and prescribing Brineura.

We have also implemented a genetic testing program in the United States named Behind the Seizure, that provides free epilepsy gene panel testing, in order to shorten the diagnostic journey for families. Similar programs have been implemented in Latin America, and will soon be activated in Europe.

Touching briefly on site readiness, due to the complexity of coordinating institutions' preparedness for surgery and biweekly intraventricular infusion, one of our key launch metrics is the number of institutions ready to treat and service CLN2 patients. Recall, our global target for the first year during commercial launch is 50 target institutions.

So we are well on our way. I am pleased to share that as of today, 26 target institutions are treatment ready. This means, they are interested and able to serve CLN2 patients, properly resourced and in service.

Turning for a moment to reimbursement, we are extremely pleased with how well the various stakeholders are aligning and navigating these complexities to provide treatment and reimbursement for patients with CLN2.

Payers understand the urgency to treat, given the rapid progression and devastating consequences of CLN2, and we're happy to report that in the U.S., payer authorizations have been proceeding, and we have no denials pending.

To-date, coverage policies are facilitating access to all CLN2 patients based on our studied population, and in alignment with our label. Outside of the United States, we have received named patient approvals for a number of patients.

We have begun the sequence of submitting reimbursement dossiers as a first step in the process in securing permanent pricing and reimbursement in European markets. While it is still early days and the complexities of coordination approach is involved, we believe we are uniquely qualified and well equipped to successfully launch Brineura worldwide.

I would now like to turn to second quarter results for our other approved products, all of which contributed to record revenues in the quarter. Starting with Vimizim, commercial uptake continues to be robust, despite some uneven order patterns, which we highlighted for you last quarter.

Vimizim delivered $103 million of revenue in the quarter, solid patient growth continued in the second quarter, resulting in 24% growth in commercial patients year-over-year. In just over three years since first launch, we are now selling Vimizim in 43 markets.

That compares to sales of Naglazyme in 55 markets after 12 years, and indicates significant leverage, gaining rapid access to markets. Turning now to Naglazyme, we are very pleased to report a 16% increase in revenue year-to-date. Naglazyme delivered $86 million in revenue for the second quarter, up 9% compared to the same period last year.

Also contributing to Naglazyme results was continued steady growth of the underlying base of business as measured by commercial patients. Over the prior year, commercial patient counts increased by 7% in its 12th year on the market.

Finally on to Kuvan, strong revenue in the quarter and first half of 2017 resulted in 13% and 16% in gross (12:10) in those periods, respectively. Robust Kuvan sales were driven by strong growth in North America and continuing development of the ex-U.S. markets.

In closing, the commercial team delivered record revenue in the second quarter of 2017, despite continued uneven order patterns for Naglazyme and Vimizim.

I'm very pleased with the continued level of demand we are seeing for all of our products worldwide, and we are extremely pleased with the rollout of the commercial program with Brineura and believe we are laying the ground work for future commercial success. We look forward to keeping you apprised of our progress over the coming quarters.

Now, I'd like to turn the call over to Dan to provide more detail on the financial results from 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, as J.J.

and Jeff have already mentioned, our second quarter revenues, I'll highlight the total BioMarin revenues for the first half of 2017 were a record $621 million, an increase of 16% year-over-year, driven by strong contributions from all of our marketed products.

As we have said previously, we expect top line growth over the next few years to be around 15%, and we expect to track toward that goal until the contribution from new product launches takes us above that level. Looking at full-year revenue guidance, we remain on track to meet our full-year goals for each of our products.

In addition, in July 2017, we received a $35 million one-time payment from Sarepta Therapeutics related to the license and settlement agreements resolving the exon-skipping patent litigation.

This amount will be recognized as revenue under royalty and other revenues in the third quarter and will therefore increase our top line, full-year guidance by $35 million on both sides of the range. Our updated total BioMarin revenue guidance is now between $1.285 million and $1.335 million for full year 2017.

In terms of operating expenses R&D expenses decreased to $143 million in the second quarter of 2017, compared to $167 million in the second quarter of 2016. The year-over-year decrease was primarily due to decreased spending on the Brineura program as well as termination of the Kyndrisa program.

For the second half of the year, we expect R&D expenses to increase due to acceleration of the BMN 270 and vosoritide Phase 3 program. SG&A expenses increased to $144 million in the second quarter of 2017, compared to $110 million in the second quarter of 2016.

The year-over-year increase primarily reflects increased expenses related to the acquisition of ROW Kuvan rights in support of our global PKU franchise. Costs associated with the Brineura launch and legal expenses related to disputes with Par Pharma and Sarepta, both of which have now been settled.

In addition, there was an increase in non-cash SG&A stock compensation as compared to a decrease in R&D stock compensation for the second quarter. While our expectation for full-year operating expense is unchanged, we are reallocating $10 million of expected full-year expenses from R&D to SG&A.

Consequently, we now expect full-year SG&A guidance of between $530 million and $560 million and also reducing full-year R&D guidance to between $610 million and $640 million.

Putting the full-year plan to operating expense for R&D and SG&A in context, it is worth noting that at the midpoint of the guidance, our total operating expense for R&D plus SG&A of $1.17 billion would represent an increase of 3%, compared to prior-year R&D and SG&A, and even at the high end of guidance a 5% increase.

This is in contrast to the expected increase in revenues of 17% at the midpoint of guidance and 20% at the high end.

The revenue growth rate and lower OpEx growth rate is consistent with our stated goals for this year and for the rest of the decade of growing revenues at 15% a year and operating expenses at a lower rate in order to generate increasing bottom-line results year-over-year.

Turning to current year bottom line results, GAAP net loss from the second quarter was $37 million, as compared to a GAAP net loss of $419 million in the second quarter of 2016.

The GAAP net loss in the second quarter of 2016 was impacted – driven in fact by a $599 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 2016.

For 2017, we are adjusting full-year GAAP net loss guidance by $25 million due to the anticipated after-tax impact of the $35 million payment from Sarepta. And hence, we now expect full-year GAAP net loss of between $115 million and $155 million.

As noted previously, we also measure our performance on a non-GAAP basis, which is based on EBITDA excluding interest, taxes, depreciation and amortization, and also excludes stock compensation, contingent consideration and certain other specified items.

Our non-GAAP income in the second quarter of 2017 was $27 million, compared to non-GAAP income of $17 million in the second quarter of 2016.

As noted above, we expect R&D expenses to increase from the second half of the year for BMN 270 and vosoritide, and therefore we expect lower non-GAAP income in the second half of 2017 compared to the first half of 2017. However, our bottom line guidance for improving profitability remains on track.

Specifically, we continue to expect a GAAP net loss but non-GAAP profitability for the full year. In terms of cash, cash equivalents and investments as of June 30, we had $1.2 billion.

In closing, BioMarin delivered another solid quarter and excellent first half of 2017 with strong Vimizim, Naglazyme, and Kuvan sales, controlled operating expenses, and our continued progress towards non-GAAP profitability this year. Now I would like to turn the call over to Hank.

Hank?.

Thank you, Dan. As J.J. has already described, we achieved a number of important milestones during the first half of 2017, many of them in regulatory and clinical development. In the quarter, we were thrilled to establish and support of health authorities in both the U.S. and Europe through the approval of Brineura on an expedited timeline.

That outcome demonstrates the understanding both agencies have of the challenges of development of medicines for patients with ultra rare disorders, and we and CLN2 families are grateful for their support.

Before I turn to our exciting update on the BMN 270 program, I'd like to provide a brief – of our other programs and also to remind you to plan to join us at R&D Day where we will provide an update on all of our pipeline products.

Starting with vosoritide for the treatment of achondroplasia, we are pleased to share that enrollment in the feeder study is going extremely well, demonstrating a consistent and high level of interest in the program.

We're also happy to learn in the quarter that Japan's Health Ministry has expressed an interest in participating in our global Phase 3 study, which is nicely aligned with the rest of our global plans.

At R&D Day in October, we look forward to providing an update on the most recent data available from the Phase 2 study including growth related parameters such as velocity, high T-scores, proportionality, and other outcomes such as cyclic GMP and other biomarkers.

We are pleased with the progress we're making in the study and looking forward to sharing more with you on October. Turning to pegvaliase, we're happy to have met our goal of submitting the BLA in the second quarter.

The dramatic effect that pegvaliase has on lowering phenylalanine having achieved the primary endpoint of mean change in blood Phe with a Phe value of less than 0.0001 gives us confidence that we have a path forward in the U.S. with this application.

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

And this is very important because it is highly motivating for patients seeking to control blood phenylalanine when medical nutritional therapy is no longer an option. We look forward to learning on the status of our BLA submission over the coming weeks and keeping you apprised of next steps in the process.

Now turning to BMN 270 gene therapy for hemophilia A, we saw a number of you at the ISTH meeting in Berlin, where we provided unprecedented data from the program. And to remind you, we announced at that time that all patients of the 6e13 vectors per kilogram dose had reached 52 weeks of post-treatment follow-up.

Median and mean Factor VIII levels from week 20 through week 52 for the full 6e13 vg/kg dose cohort have been consistently within the normal levels post-treatment as a percentage calculated based on the numbers of International Units per deciliter of plasma.

At one year of dosing, median and mean Factor VIII levels of the 6e13 vg/kg cohort continue to be above 50% and in fact cover around 100%. As we announced today, the maturing 4e13 vectors per kilo data is proving to be an important option in our development plans, having met our internal target for advancement.

With an additional eight weeks of observation since the data cut we used at the ISTH, the 4e13 vg/kg dose has demonstrated robust results, supporting continued advancement in the Phase 3 studies.

To remind you, for the three patients who were given the 4e13 vg/kg dose in December at week 32, all are in or near the normal range of Factor VIII activity levels with both median and mean Factor VIII levels at about 51% with an extremely tight range between 48% and 54%.

For the cohort of three patients who were given the 4e13 vectors per kilo dose in March-April timeframe of 2017, their most recent readings are available from week 20, and their Factor VIII activity levels have all moved into the mild range, and two of the three are continuing to trend upward.

For all six patients in this 4e13 vg/kg dose cohort at week 20, median Factor VIII levels were 34%, mean was 31% at week 20. And in fact with the exception of that single patient who is lagging, values for these remaining five patients tightly arranged between 20 and 45 for all patients in the 4e13 vg/kg cohort at week20.

With the additional eight weeks of data from BMN 270 at the 4e13 vg/kg dose, we now plan to move forward as rapidly as possible with two separate Phase 3 studies, one with 4e13 vg/kg dose and the other with the 6e13 vg/kg dose.

These studies are expected to begin in the first quarter and we're very encouraged by the high level of interest in the program and look forward to starting soon. What has been accomplished today beyond the groundbreaking efficacy and safety results gives us increasing confidence that BMN 270 is a validated treatment option for hemophilia A patients.

A few key other attributes of BMN 270 that have been demonstrated to-date include the safe delivery of the gene to the target organ, durable transgene expression, clear dose response, no cytotoxic response to the capsid, no need for long-term steroid use, and importantly, a low level of preexisting immunity to the AAV 5 capsid, which we expect will enable approximately 90% of hemophilia A patients to be treated human candidates for BMN 270.

Needless to say, we are thrilled with the results of our gene therapy program that demonstrated clinical benefit of steady-state Factor VIII levels in a normal range, achieving a 6e13 vg/kg dose and the maturing results with the 4e13 vg/kg dose are unparalleled scientific treatment achievements for the treatment of hemophilia A.

We're fortunately able to be in a position to take both doses forward in the Phase 3 study, and we believe this will be another advantage as we approach the market ultimately with a greater and more rapid adoption by the widest range of adult patients.

We look forward to providing the next BMN 270 program update at R&D Day in October, as well as thereafter at ASH in December. So that concludes our updates on the development pipeline, and I'll turn the call over to the operator for your questions..

Your first question comes from the line of Phil Nadeau of Cowen..

Thanks for the update and congratulations on all the progress. Hank, one question to you to follow up on the remarks that you just made.

On that one patient who looks like the 7% in normal – one BMN 270 patient who's 7% in normal at week 20, what do you know about what's different about that patient? Is there any signs of reaction to the capsid or other issues? Or at this point is it kind of a mystery why they're down there?.

We haven't identified a precise reason for some patients to vary in general and we think that there is a good chance that that's just an intrinsic biological property of variability of humans. We note that variability for us both preclinically and clinically is a function of both dose and expression.

So the higher the dose and expression, the higher the variability. As we demonstrated lower dose and expression, lower variability, but we don't guarantee that there won't be any variability when treating larger number of patients. As of yet, low patient in the 4e13 vg/kg group and low patient in the 6e13 vg/kg group is not precisely explained..

Got it. Okay.

And then second on your regulatory interactions on BMN 270, can you talk a little bit more about where you are in that process? Is it mostly finalized, but just a few details remaining, or is there still a substantial back and forth with the regulators over the design?.

Now I'd like say about the regulatory discussions that they're not done until they're done, and we're aiming to start a study by the end of the year, and so our anticipation is that they won't be done until closer to the end of the year.

We're very pleased there's quite a bit of availability in dialogue that we've had with health authorities, and as I indicated at ISTH, we have substantial agreement on most of the key elements of the program, and so we're really in the final stages of aligning U.S. and EU regulators..

Great. Thanks for the update and congratulations again on the progress..

Thank you..

And your next question comes from the line of Cory Kasimov of JPMorgan..

Good afternoon, guys, and thanks for taking my question. So, Hank, I wanted to take this dosing discussion one step further.

I'm honestly not sure if this is a good question or a really naïve one, but is there any thought to also exploring, say, a middle dose, if you will, at 5e13 vg/kg in that ongoing pilot study? It's something that I've been asked about, and basically trying to split the difference between the 4e13 vg/kg and 6e13 vg/kg doses?.

Well, we thought about it. And as the data are maturing, we'll continue to think about it. In the moment, where we see it plateau at 6e13 vg/kg dose, that has a great opportunity to get patients mostly into the normal range. The 4e13 vg/kg dose has the feature of getting patients closer to the bottom end of the normal range.

And from what we've heard from our physician investigators, they like that option. That is some patients may want to be at a much higher range so they increase their activity levels and some patients may not need to or want to be at that higher range.

So for the time being, we plan on carrying 4e13 vg/kg and 6e13 vg/kg forward, having thought about to split the difference option..

Okay.

And then what do you believe is enable – what about the product might be enabling the sustained rise in Factor VIII levels that you're seeing all the way to and potentially through 32 weeks? Are you not seeing some sort of earlier plateau than that?.

Well, that is still too early to make any definitive statements about what explains that. We just noticed it, I mean, and we'll be investigating it, and beyond that I can't really say..

Okay. Thanks. I'll hop back in queue..

And your next question comes from the line of Chris Raymond of Raymond James..

Hey. Thanks. Yeah, this is another BMN 270 question, if you don't mind. So I apologize if this is maybe a dumb question, but just kind of explain – I assume once you get the readout for both doses, you'll make a decision on one and commercialize one.

Is that a fair assumption that you wouldn't commercialize two doses I guess first and foremost?.

Well, I think before we get to the issue of commercialize, we have to register, and before we get to register, we have to see the data. And so we're going to conduct the studies and the study data will drive the registration and ultimately the commercialization decision.

And I think it's probably worth noting that we are aware that there – and having in the two studies going on that one could finish before the other based on what physician opinion leaders have told us, the 6e13 vg/kg dose level will have the highest demand and likely will finish earliest. I don't think that J.J.

would let me (32:38) slow down application for registration if those data support a registration decision, so we'll obviously have to cross that bridge when we get closer to having the final data..

And this is maybe a hard question to answer, but I would imagine the standard answer, Hank, when I ask which dose would you go forward with when you want to see the data and you have to see the data.

There's obviously a safety efficacy tradeoff but can you put some brackets around what would make that decision to go with one or the other?.

Well, I think we've covered this to some large extent at ISTH, but just to remind you, the advantage of being around 100% is that you can increase your activity with relative impunity without having you worry about minor trauma-induced bleeds, whereas if you're in the mild range, relatively minor trauma can cause potentially very large problems.

So there is a very significant reason to be in the normal range as opposed to in the mild range. Additionally, mortality may be higher for mild hemophiliacs, tumor (33:58) vascular hemorrhages may be higher for mild hemophiliacs, and I think that's a big reason that clinicians are driving towards being at the higher range.

We've noted there's a theoretical risk of complications of being in the higher range. To-date we haven't observed that. We remind people that that theoretical risk is relatively small in magnitude – I'm sorry, it's absolutely small in magnitude and it's also relatively easily managed.

So there's a lot to say good about the 6e13 vg/kg dosing getting in the normal range, and there's something to be set forth having the option to get patients into the low end of the normal range..

Okay. One more question if you don't mind. So finally you have a competitor that had some data today, and I'm just curious if you're getting any feedback from physicians, your product contemplates many multiples of vector genomes over theirs in terms of the dose.

Any perspective from physicians you can share with respect to that difference of what's actually being injected?.

Well, I might start with, first of all, congratulating the competitor. They're the first group to corroborate (35:25) Factor IX data, and now they're the first group to demonstrate corroboration of gene therapy in hemophilia A. And those are pretty substantial accomplishments.

Our clinicians are trying their best to get started and that's why we're moving so quickly into Phase 3. There's a very significant amount of demand for the program.

And I think that overall statement of the physician community we get exposed to is they're just thrilled that the opportunity to make a major difference in the lives of hemophilia patients is upon us. They're beyond thrilled to be talking about normalizing Factor VIII levels. And this is the holy grail for this community for a long time..

Okay. Thank you..

And your next question comes from the line of Andrew Peters of Deutsche Bank..

Hi. Thanks for taking my questions and congrats on the progress. Just wanted to ask another one on hemophilia. I guess wanted to understand, I guess, how well-known or appreciated is the risk profile for Factor overexpression, kind of the KOL conversations that you've had so far.

I know in the past you've talked about the differences between relative and absolute risk and maybe some of the other genetic conditions that can somewhat mimic the risk profile.

But how well is this appreciated in the clinical community, and is this something that you can begin to kind of educate the broader clinical community about what this absolute risk actually represents kind of as the studies are enrolling, et cetera, just to kind of frame what the supratherapeutic levels actually are? Thank you..

Yeah. Thanks, Andrew. That's an interesting question. And I was talking to a colleague of mine yesterday about – (37:24) – reminding me that during the developments in the long-acting Factors, they got a lot of feedback about, jeez, we want avoid levels above 50% because the potential for thrombosis with the level swinging around like that.

And the message point that was given was that hemophilia doctors are not fully up to speed on Factor VIII on thrombophilia, the other side of the equation. And a lot of our clinicians take care of both the clotting as well as the thrombosis side. But that may not be true for all hemophilia treatment providers.

And I think that does give us therefore an opportunity to do more education and involvement about what's known about the thrombophilia disorders and their management.

What we have been using are – in terms of framing a discussion – there have been publications, several different ones, over the years that quantify the apparent isolated contribution of elevated Factor VIII levels to thrombotic risk. And obviously remains to be seen how thrombosis risk in hemophilia patients who are corrected turns out.

They could be more vulnerable, they could be less vulnerable, and, of course, that's an important aspect of our 4e13 vg/kg dose arm..

And did you hear, that has to do – there is a recent publications of the significant risk the (39:06) mortality risk, as Hank alluded to, for non-severe hemophilia patients that have a hemorrhagic stroke risk because that's 3.5 times the normal.

So I would say if you are a player in the field shooting for transforming moderate hemophilia to mild hemophilia, which is what our competitor seems to be shooting for, it might obviously not be the end-all and the be-all..

Great. Thank you.

And then just a quick follow-up, have you had a similar amount of discussion with regulators regarding the mid dose plans to move forward with the Phase 3, or do you plan to, I guess, speak with them shortly following the decision today?.

So that's a pretty recent update. We certainly shared with health authorities our plans to investigate both 6e13 vg/kg and 4e13 vg/kg, as we've communicated several times before, and we've shared with them our dose selection strategy. And as I've said before, it has no comment on our strategy for selecting dose.

So our anticipation is that we're substantially in the clear for both of those doses. Now, as I said before, obviously it's not done – not just talking – the regulatory process isn't final until it's final..

Great. Thank you, and congrats again on the progress..

Yeah..

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

Hey, guys. Thanks for taking my question, and congrats on all the progress with hemophilia in the quarter. I guess I'm going to not ask a hemophilia question and move on to another product.

With PEG-PAL I guess, I'm just wondering like how we should kind of think about how the regulators are looking at kind of the data related to neurocog in your filing. And then also as it relates to EU versus the U.S., are there kind of differences or nuances in how the regulators look at the filings? Thanks..

I don't think there's really much new report as to U.S.

regulatory feedback on neurocog but just some of the greatest hits to remind and being everybody on to the same page, we have substantial reduction in blood phenylalanine levels, which was the primary and really the sole basis of approval of Kuvan in phenylketonuria, and that was over a wide range of both children and adults with phenylketonuria.

We have an even more substantial reduction in a much higher proportion of patients treated with pegvaliase, and we've demonstrated that we can safely sustain those substantial reductions in blood Phe levels on pegvaliase.

We've communicated here that we attempted to look at the neurocognitive outcomes of patients whose blood Phes are controlled by pegvaliase in two different ways, one with a nested randomized trial which wasn't successful, and the other with the long-term open-label extension which demonstrated pretty significant improvements in neurocognitive ability.

Our interactions with the Food and Drug Administration have indicated that there is a path to approval on the basis of the Phe data and the ancillary data that we've talked about, and as to which path to approval that's dosed down, that's going to be a subject of review discussion, which we hope to be in shortly. As far as U.S.

and EU, it's really too early to talk about the EU process, we've indicated a timeline of anticipating or expecting or setting a goal to file by the end of the year, and we're on track for that goal. But it's a little too early to give any kind of color on the differences between U.S. and Europe regulatory-wise..

And then just a quick one on achondroplasia. I think you said it was tracking well. I guess have you been surprised by anything that's going to happen as the enrollment kind of proceeds? I think your guidance, it'd be completed by the middle of 2018. Do you feel like you could possibly kind of get ahead of that? Or just general thoughts there..

Well, the general thought there is that we set up this feeder study both to collect longitudinal prospective macrohistory data on growth velocity but also to pre-identify patients for inclusion in the Phase 3 trial on a global basis.

As I said in my prepared remarks, we're pretty pleased with how that feeder study has gotten, it's essentially completed the enrollment in the study overall. The caveat there is that we'd like for this to be a global multinational trial.

We've started a program in Australia, but it would be important to give clinicians around the world hands-on experience during the Phase 3 clinical trial.

As we did with Vimizim, whereas we could have enrolled everybody on day one, we chose to have an enrollment that's a little longer than the already pent-up demand simply to enable global opinion leaders to participate in the program.

And so I'm encouraged by the feeder study, not surprised by it because that's what we expected demand to be like, and staying on track for our normal target..

Great. Thanks..

Your next question comes from the line of Matthew Harrison of Morgan Stanley..

Great. Thanks very much for taking the questions. I think two, if I may, from me. So first one on BMS 270 and then one on BMN 250. So you made a comment about your view of immunogenicity and that you thought you'd only see about 10% of immunogenicity.

Can you comment on what you see is the immunogenicity levels for the other vectors in the field and if you think you're differentiated on in that respect? And then I'll follow up on BMN 250..

Yeah. So just to be clear, that 10% is what we think of as the zero prevalence of the pre-existing immunity, the capsid. And that's where our AAV 5. A little difficult to get our hands on competitor data about this, but in general, the AAV-Factor VIII-based capsid types tend to run around 40%.

Just to remind you that AAV-Factor VIIIs are derived from more closely to human-related viruses, whereas the AAV 5 is a virus that hasn't been implicated in humans. And therefore that's why we believe the zero prevalence to be lower.

This is an important topic and an important potential competitive advantage for BMN 270 and something that I would point you to ASH as a substantially interesting area to dig deeper into..

Okay. Perfect. And then on BMN 250, I think you said, you now have the highest dose and you're going to be following patients to sort of see what happens with the neurodegenerative aspect of the disease.

Can you give us any sense for how long you think you need to follow these patients or what kind of follow-up data you need before you can talk about what your next trial plan might be?.

Well, to some extent, that's a function of how big the effect is and how much deterioration in the natural history there is.

If BMN 250 is similar to BMN 190, now known as Brineura, then the separation of treated patients from their otherwise expected untreated natural history could be evident as early as 48 weeks in some patients, but it may take longer to document that in other patients.

Now, two other things to mention about BMN 250, observations of effectiveness, why is that with BMN 250 but not with Brineura we have a biological marker that we can track in the cerebrospinal fluid, namely heparan sulfate levels. And second, in the case of BMN 250, there is somatic involvement namely enlargement of liver and spleen.

So we have two additional ways of discerning whether there is relevant clinical activity on BMN 250 that weren't available to us for Brineura. So while it's early in terms of to say when we'll have significant neurodegenerative types of data, we could be seeing encouraging signs once we get a decent number of patients treated per year..

Thanks very much..

Your next question comes from the line of Ying Huang of Bank of America, Merrill Lynch..

Hey. Thanks for taking my questions and congrats on the 4e13 vg/kg data. I just have two quick ones on this. One is, Hank, you guys mentioned that it will be fewer than 100 patients for Phase 3, now you're advancing the 4e13 vg/kg dose as of the 6e13 vg/kg dose.

Is it still the case or are you going to look at maybe bigger patient number for Phase 3? Secondly, why are you deciding on two separate Phase 3 trials instead of just one Phase 3 with, I guess, two different dose cohorts?.

Yeah. So as we've said, one trial wouldn't require fewer than 100 patients. We're planning on that 4e13 vg/kg trial being able to support registration, so plan on it requiring also up to 100 patients So as we sit here today, the application should be that we plan to enroll up to 200 patients in the program as a whole.

Now, just to remind you, we have ample manufacturing capacity to be able to do that, and as a robust company, there's not going to be any effort to cut corners, in terms of the sample size.

As to why we chose to do this with two separate trials or one trial, just you have to remember that, there are very active, stronger clinicians and patient advocates that are very keen to see the 6e13 vg/kg group get enrolled and finish and through registration.

And if that information turns out to be what guides enrollment, then there's a very real possibility that 6e13 vg/kg will finish much faster than 4e13 vg/kg. So we didn't want to slowdown the application if 4e13 vg/kg was going to end up going slower that's why we just reduced studies..

And....

Thank you..

Also, I just want to see expand a little more on what Hank said on the manufacturing capacity. We have Robert Baffi, our Head of Technical Operations, also available on the phone here, but we have what we anticipate would be ample capacity.

The manufacturing facility here in Novato, California is finished, so the marginal cost during an additional dose and up to an additional 100 patients is going to limit it (50:59) for us.

So, Robert, you want to say a few words about where we stand on our manufacturing?.

Sure. Thanks, J.J. We've made a tremendous progress on building the facility, commissioning it, producing the initial batches from the facility.

I'm very encouraged by the overall comparability we've seen from the material used to generate clinical results and are working closely with Hank's team to coordinate availability of materials to support these two Phase 3 studies to begin by the end of this year..

Thank you for the color..

Yeah. This facility, it's a 2,000 liter scale, which is we anticipate our commercial scale and I see some current estimates that initially this facility should be able to supply around 2,000 patients per year of products.

Next question?.

And your next question comes from the line of Joseph Schwartz of Leerink Partners..

Great. Thanks very much and congratulations as well. So we've noticed that you have only been studying patients with severe hemophilia versus your competitor, who is studying patients with moderate or severe hemophilia A.

So should this distinction impact our interpretation of the results in any way? Do you think that the data that we are seeing is baseline dependent at all?.

Well, it could in the sense that the inclusion of a more moderate population might cause one to overestimate the reduction in bleeding that one observes.

But I would say in general, it's more likely that this is a distinction without a difference that we – down to that lower level if you're a severe hemophiliac, and you're on prophylactic therapy that you really need to be on gene therapy instead..

Okay. And then, I guess this is like a manufacturing or tech ops question, but also a clinical question.

How precisely are you able to define the dose of drug that is actually being administered? In other words, how much variability is there around the dose levels that we keep referring to? Is there any reference, standard, for the measurements that you and others are invoking or are different parties quantifying the amount of drug that's being administered independently? For example, would it even be possible to target a dose of 5e13 vg/kg versus 4e13 vg/kg or 6e13 vg/kg with any confidence?.

Robert, do you want to initiate the answer to this question?.

Yeah. Sure, J.J. So first of all, when we produce a product, the quality of the product is a very critical component of it, in terms of potency and strength that gets put into the vial to be able to accurately dose the patients. There are really two contributors to variability.

One is the manufacturing process itself and what the product that is produced and we've worked very diligently to generate a robust manufacturing process that delivers consistent quality through the production.

The second aspect of variability has to do with the number and types of assays that are used and we use a very wide orthogonal approach, so we look at the molecule from many different perspectives. And each of those assays has its own variability associated with accuracy and precision.

There's a number of ways to reduce that precision to a very detailed level and that may be by using specific methods that are known to have less variability and maybe to repeat methods multiple times on unique samples and create a larger database to accurately predict the strength and potency of the material.

And we employ all of those strategies when we do that and we have high confidence that when we're talking about a 4e13 vg/kg dose or a 6e13 vg/kg dose that what we're dosing the patients with comes with an accurate and precise determination. Our analytical chemistry group and our quality groups are very proficient at that.

We hone that through the development of our other biological products and all that information comes to bear as we decide to label the product for this specific dose. So we think we can do that with a high degree of confidence..

Great. Thanks..

Your next question comes from the line of Ian Somaiya of Bank of Montreal. Mr. Somaiya, your line is open..

I think we should move to the next question. We might come back to this..

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

Hey, guys. Thanks for the questions. Hank, for vosoritide, I'm just curious whether the additional efficacy measurements are official secondary endpoints and whether they have any regulatory consequence if they're not going all in the same direction.

Just trying to separate out I guess which data would be helpful for you guys for the launch and which is more of a formal endpoint and I have one follow-up..

Well, endpoints like proportionality can be secondary endpoints. But endpoints of evaluation for example, functional impairment and its relationship to final adult height or the distribution of expected final adult heights or the relationship between growth velocity and final adult height won't just come from the pivotal trial.

So they won't be in the way you'd ordinarily think of secondary endpoints. If secondary endpoints have a study (57:37), they'll be additional endpoints of ancillary – of a composite of ancillary studies..

Okay. That makes sense. And I know early days for Brineura, but maybe if you can help us with any initial commercial feedback. What successes you guys have had in either access or identification beyond those in the studies? Thanks..

Jeff, this question is for you..

Early successes in Brineura. Early successes in Brineura. Well, we're really happy with what we're seeing in Brineura so far. A reminder that different dynamics go into our expectations of uptake of commercial patients on Brineura will be slower than for example to Vimizim.

So, more complexity in patient selection, more complexity around preparing the patient and the institution for treatment, and more complexity in doing intraventricular infusions relative to IV infusions for the other enzymes which are very standard. Also gating factor here are reimbursement decisions.

Fortunately, our first approval came in the United States which is the most favorable environment for reimbursement decisions then, as we've seen patients navigate through those complexities that I just described, we've been seeing payer reimbursement approvals that are pointing to good reimbursement environment for the United States.

Outside of the U.S. we've gotten some early name patient sales approvals which are really encouraging, but where we have an additional approval in Europe, you know that we have to go to through the formal steps of – or the steps of getting formal reimbursement.

We're in the midst of all of that right now, but those reimbursement steps take some time and we haven't seen anything come out the other end yet in terms of formal reimbursement approvals in Europe. They're in motion, we're expecting the best..

Okay. Thank you..

Your next question comes from the line of Jing He of Gabelli..

Okay. Thanks for taking my question. So, just one on BMN 270 and I have a few follow-up. It's understandable that you want to get 6e13 vg/kg out as soon as possible and 4e13 vg/kg as a additional option for doctors.

But is it possible to add let's say a mid dose later as a part of label expansions?.

There's always an option. As Robert said before, the precision of characterizing 5e13 vg/kg versus 4e13 vg/kg or 6e13 vg/kg may also be an additional challenge.

But we don't want to take anything off the table, but I would not want to confuse matters and say that the Phase 3 program that we're launching is one in 6e13 vg/kg – one set at (01:00:50) 6e13 vg/kg and one set at (01:00:51) 4e13 vg/kg..

And also I'm wondering, could you comment on what percentage of your business is under 340B, and what would be the impact from the recent changes in that program?.

Yeah.

And so, more specifically you say, our business, do you mean our base business or are you thinking about future hemophilia business?.

I would say base and also I'm thinking about your Brineura comment as well..

So the first thing I would say is our U.S. business as a percentage of our total base is about 20%. And there are a number of 340B eligible treatment centers that treat our Naglazyme and Vimizim patients. But the changes of the 340B program really have had minimal to no impact on additional discounts or exposure to discount.

So the changes that the 340B program may be material to other companies with other types of business and a large concentration of their business in the U.S. are really non-starters for us..

I remember – if I remember it correctly, I think during your Brineura call, you were saying that the growth from that that you expected is due to a large number of patients in 340B?.

Okay. So for Brineura, which is so far a small part of our business, yes, it is true that we expect that patients in the United States will be treated in 340B eligible institutions or otherwise eligible for Medicaid rebate, and that's what's driving our guidance on gross to net for U.S. sales of Brineura, fair enough..

Got it. And just a quick one lastly.

Do you plan to announce another gene therapy candidate on your R&D Day?.

Stay tuned..

Okay. Thanks..

Your next question comes from the line of Tim Lugo of William Blair..

Tim?.

Mr. Lugo, your line is open. Your next question comes from the line of Martin Auster of UBS..

Thanks for taking the question and congratulations on the strong results and the strong 4e13 vg/kg update. Maybe just a couple of small questions on vosoritide, Hank.

For the update planned at the R&D Day on October, can you just confirm again that will we be seeing follow-ups on growth velocity from the open-label extension? And then secondly, would you expect to have any update – I know you talked before on these calls about the importance of treating the achondroplasia patients as soon as possible to produce the greatest outcome.

Any updates, are you planning on the status for dosing infants or toddlers with vosoritide? Thanks..

So on your first question, yeah, we'll be updating based on the open-label extension and not sure exactly what update we'll have on the infant and toddler program at that particular point. We're in the final stages of finalizing that program, aligning with health authorities. So, stay tuned..

Okay. Super. Thanks..

Your next question comes from the line of Vincent Chen of Bernstein..

Congratulations on the progress and thank you for fitting me in. A couple more on hemophilia A, first on consistency. Your competitors have pointed to careful patient selection, manufacturing consistency and efforts to tighten measurements of drug product titles (1:05:01) as drivers of improved consistency in their trials.

What steps have you taken whether on these I mentioned or others to improve the consistency of treatment response? I do know that the variability to 4e13 vg/kg dose would be somewhat less than the 6e13 vg/kg.

Are there changes you implemented during the course of the study to drive this, or is it more just a matter of the lower dose and some luck of the draw in patient selection?.

Yeah. I mean I think, just to sort of zero in on the heart of the matter and answer the question, I think, the higher expression level you aspire to achieve, the higher variability is going to be realized. We see this in our preclinical studies, and it mirrors what we see clinically, and others have documented this in their preclinical studies.

And I think, a reasonable expectation to have is, that as expression levels and dose rise, variability will rise..

Got it.

And is there any emerging sense for what types of patients might achieve lower level of factors? Or for example, I guess, is there an effort to exclude these patients from the study, or to assess through the course of the development program, what patients might fall into the category to guide future use therapy?.

That in general proves to be a very tough – I mean, value – a tough proposition to achieve. I think everybody would love to concentrate administering their drug only to those in whom it works the best and exclude patients that are going to dilute the demonstration of efficacy.

In general, that's difficult to do and no reason to believe that, that will be possible to do in hemophilia gene therapy. As I said, this is – and it appears to be an intrinsic property of the delivery of the gene.

It's true in so many of the constructs that we've tested preclinically, and it's something that we've seen from other groups both academic and industrial who investigate different levels of expression achievable. The more expression, the more variability of expression..

Great. Thank you very much, and congratulations again..

Thanks..

Your next question comes from the line of Christopher Marai of Nomura..

Hi, thanks for taking the question. Just it sounds like in terms of manufacturing capacity, you're well on your way with respect to BMN 270. I was wondering just thinking about backfilling that and talking about the next program you might update us on in October.

How do we think about that next program? Is that a program that might be already in the clinic in some sort of BD M&A that might take place, or is it more of a sort of licensing transaction that we've seen from others? Thank you..

Yes. I think as Hank said, we have not committed to announce the next program at R&D Day, and we have not disclosed whether if we announce it, when we announce it, whether this a gene therapy program or not a gene therapy program. So I think it's premature to answer this question. Right now the facility is dedicated to BMN 270.

It can, down the road, be used for other products and actually other vectors, but actually this at this time the facility is entirely dedicated to BMN 270..

Next question..

Your next question comes from the line of Ian Somaiya of BMO Capital..

It's like a second chance. Question for you on BMN 270.

If we ignore that one patient that was an outlier or had less of a response, can you just speak to the range of Factor VIII expression that was seen in the remaining five patients?.

We have..

Again those on the call, so I'll remind. The range was between at week 20 for the five patients, who have experienced a week 20 visit it's between 28 and 45. So, reasonably tight the expression in the group of five patients who were not outliers..

Is there any thought amongst the clinician community on what range of expression is acceptable? I know we're obviously looking at a paradigm shift in how these patients are treated.

But given potential two options that might be available to patients, is this degree of variability something they're comfortable with, is there something less that – I mean I just – I guess – we as investors are quite sensitive to the variability.

I'm just curious, what the level of sensitivity is with the payer roles (01:09:55) or the regulatory body..

Well, I kind of think if the U.S. doctors draw on a magic board what their preference would be, they would say 100 plus or minus zero (01:10:06). In a practical context, no drug is without variability, it's just natural biological human response that we don't fully understand.

And the opportunity to get patients into the normal range has distinct incremental advantages in the hemophilia context. For the purpose of this call, I'll repeat a little bit of an anecdote that I mentioned in Berlin.

One of the clinicians we were talking to when we were talking about, would you prefer a milder dose that gets you to the low end of the range or would you prefer to go for the dose that gets you to the 100% range.

And the story she told me was the patient had – about a patient who had mild hemophilia, who was going to get married and go on a bicycle tour. And she encouraged the patient to take Factor with him and he was reluctant. I don't want to be burdened on my vacation with my fiancé with having to carry Factor.

And she said well, I'll explain how to use it to your fiancé, so you don't have to bear the burden of it. And he said no I don't want to burden her with how to learn how to administer Factor concentrate.

So they left on their holiday without Factor, and wouldn't you know it, he takes a header and goes over a guardrail on California Highway 1 and is being airlifted back to her hospital. That's what a life of a mild hemophilia patient is, and that's why doctors want to avoid being in the mild range if they can possibly avoid.

The beauty of 6e13 vg/kg is it gives you the best chance of ending up in that place and if you don't end up in that place as a 6e13 vg/kg patient, then you will certainly go from being a severe hemophilia patient to being a mild hemophilia patient.

That's been substantially what's driven us to move 6e13 vg/kg aggressively and it's what we've heard mostly from our community of physicians and we don't hear a lot of pushback. And I know was telling an anecdote earlier that basically said if we were going to hear it, we would've heard it and we haven't heard it..

Okay. And just one last question..

And we definitely don't hear any pushback about being around 50%..

I can't imagine you would. But one last question on the regulatory interactions you've had regarding again BMN 270 with this two trial strategy.

Are they onboard with filing off the first study that reads out, in this case hopefully 6e13 vg/kg or do you think they'll want to wait for the 4e13 vg/kg data?.

Well, I mean first of all that's a question that's a little hard to answer in the abstract of not having the data at hand or knowing what the timing is between them. You could certainly imagine a situation, where a 4e13 vg/kg study enrolls well and there's a couple of weeks behind the 6e13 vg/kg and then waiting makes sense.

On the other hand if the 6e13 vg/kg study enrolls dramatically faster than the 4e13 vg/kg, let's say they're a year apart, you could imagine nobody really wants to withhold the availability of a novel therapy. So, it really is very much driven by specific data and specific timing..

But this is a trial which you plan to conduct at the same sites, or are you going to try to have some kind of variability with sites and as a result allow both trials to enroll rapidly?.

We're just getting into that in terms of operational details, today is the announcement of the decision to have a 4e13 vg/kg study, so stay tuned for further details on sites..

Okay. Thank you..

And your next question comes from the line of Nathan Markowitz of Barclays (01:13:58)..

How are you guys? Congratulations on the success in BMN 270.

As an investor and more importantly as a patient, I was wondering if you could speak to the strength of the product, would this product allow for offspring to not have a carrier status or not – or get rid of the chances of the hemophilia patient to not give it offspring?.

Thank you for your question. The AAV system that we use does not integrate into the germ line, so it will help us treat a patient but not the offspring of that same patient..

All right. Very good. Congratulations on the success of BMN 270. I appreciate it..

Thank you..

And that concludes the portion of the Q&A. I would now like to turn the call back over to Mr. J.J. Bienaimé for closing remarks..

Thank you, operator. So in conclusion, we've achieved a tremendous amount of accomplishments in the first half of the year and I want to thank the hard work and dedication of all BioMarin employees. Each of whom has contributed to our significant progress so far this year.

And to be launching our sixth commercial product, moving our next few (01:15:33) products through the regulatory channel, developing what could change the way that hemophilia A is treated, all while moving towards profitability on a non-GAAP basis is unparallel for a company of our size.

I'm very proud of our management team and the continued strong execution of our strategy to be the premier open drug development company in our industry. I want t thank you for your continuous support and for joining us on today's call..

And that concludes today's call. All participants may now disconnect..