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..

Alethia Young - Credit Suisse Securities (USA) LLC Carlos Solorzano - Deutsche Bank Securities, Inc. Kerry Tang - Goldman Sachs & Co. LLC Joseph P. Schwartz - Leerink Partners LLC Christopher Raymond - Piper Jaffray Aspen Mori - Bank of America Merrill Lynch Tim Lugo - William Blair & Co. LLC Jeff Chen - Cowen & Co. LLC Gena Wang - Barclays Capital, Inc.

Vincent Chen - Sanford C. Bernstein & Co. LLC.

Good afternoon, my name is Sarah and I will be your conference operator, today. At this time I would like to welcome everyone to the BioMarin Pharmaceutical's Third Quarter 2017 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session.

I would like to introduce your speaker for today, Ms. Traci McCarty, Vice President of Investor Relations. Ms. McCarty, the floor is yours..

Thank you, operator, and thank you all for joining us today. With me on today's call is J.J.

Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Worldwide Research and Development; Dan Spiegelman, Executive Vice President and Chief Financial Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; and Robert Baffi, Executive Vice President of Technical Operations.

To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, 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 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.

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

Thank you, Traci. Good afternoon, and thank you for joining us on today's call. So in the first three quarters of 2017, we made significant progress towards achieving our financial goals, progressing our development pipeline, and getting our six commercial products approved and launched in both the U.S. and Europe.

In addition, we are pleased to let you know that since R&D Day, the Brazilian Ministry of Health has initiated their purchasing process, which is expected to result in revenue this quarter and – as was originally expected in the third quarter.

So based on this update, we can reaffirm that the total revenues for the full year 2017 are expected to be within current guidance.

With the confirmation of top line guidance and continued expense controls, we are also pleased to report that we have increased non-GAAP income guidance for the full year, now sitting at between $60 million and $80 million, and Dan will provide more details and other updated guidance in a moment.

So we want to thank those of you who were able to attend or listen to our R&D Day last week, and I would like to provide a brief overview of key updates for those who were unable to be there.

So the depth of our research and development capabilities were on display with each presentation, from the announcement of our next IND candidate to the details of our global Phase 3 program with BMN 270, now known as valrox, now that we have the green light from both the U.S.

and the UK health authorities to initiate enrollment this quarter, definitely before the end of the year. So going forward, we will be referring to BMN 270 as valrox, the nickname for our International Nonproprietary Name, or INN, valoctocogene roxaparvovec. So you understand why we want to use a nickname.

So to summarize the updates provided last week, and starting with pegvaliase, as we said, with almost 700 patient years of therapy, we have learned how to effectively dose titrate PKU patients for maximum benefit. The level of experience we have with pegvaliase provide us with important background as we move through the regulatory process with U.S.

health authorities. Importantly, based on guidelines in the 21st Century Cures Act that was signed into law last December, patient engagement has taken on a very prominent role in the FDA review process for orphan drug applications.

Specifically, sections in the legislations encourage the collection of patient 60 years (4:31) data to support the filing. As many of you saw in our patient ad board video at R&D day, patient satisfaction for those who achieve meaningful Phe lowering with pegvaliase is significant and unquestionable.

This is an important part of our pegvaliase review during our patient engagement meeting with the FDA later this quarter. We look forward to a potential approval of pegvaliase in the first half of 2018, as well as filing the EU MAA in the first quarter of 2018.

Pegvaliase represent a very large opportunity, given our deep experience with the PKU market and treating physicians. Turning to vosoritide for achondroplasia, we showed durable growth velocity throughout 30 months of treatment with a 50 microgram dose, as well as data supporting expectations for continued growth.

Specifically, over this period of time, patients experienced mean absolute growth increase of approximately 4 centimeters over what their baseline growth velocity would have been predicted.

In addition, treatment with vosoritide demonstrate a continued improvement over time in proportionality, as measured by a ratio of the upper and lower body measurements, or U/L ratio, as part of the 30 months update.

The pivotal study continues to enroll, with anticipated completion in mid-2018, and top line data and that's new information we provide, anticipated in the second half of 2019.

As we announced last week in the first half of next year, we anticipate enrollment to begin in our infant/toddler study supporting our belief that this is – in this indication in particular, the earlier treatment begins, the more likely it is that patients' (6:27) will increase.

Vosoritide represent a significant market opportunity with potential to drive (6:34) sales based on patient numbers of approximately 25,000 in our territories. For valrox, we now have clearance from both U.S. and UK health authorities to proceed to Phase 3 studies by year end.

As demonstrated with both the 6e13 and the 4e13 dose, valrox is normalizing Factor VIII levels and maintaining a good safety profile. Each study, one with the 6e13 and one with the 4e13 dose, will be 52 weeks long, and we expect to submit for approval based on the result from this study.

We plan to begin the Phase 3 study with the 6e13 dose by year end in the U.S. and UK, and thereafter adding at least 20 additional sites around the globe.

With manufacturing, we are producing valrox at commercial scale, and our recently commissioned manufacturing facility will be capable of supporting at launch up to 10,000 patients annually at the 6e13 dose. We look forward to keeping you apprised of the Phase 3 study start, planning again to begin by year-end.

So we expect to complete enrollments of the first Phase 3 study with the 6e13 dose by year-end 2018, and provide top line data by year-end 2019.

The next update on this program would be at key medical meetings, beginning with ASH later this year, December, and then the one year update of the 4e13 dose and the two-year update of the 6e13 dose in mid-2019. We are also delighted to share news issued earlier today, that we have been granted FDA Breakthrough Therapy Designation for valrox.

And this, coupled with the EU prime designation granted earlier this year by the EMA, demonstrates a strong support of Global Health Authority for our product and its expedited development and registration pathway. We were also very happy to announce our next IND candidate, BMN 290, a chromatin modulation therapy for Friedreich's Ataxia.

BMN 290 will be the first disease modifying therapy in this indication and could potentially address the approximately 15,000 patients worldwide who suffer from this debilitating neurologic and cardiac disorder.

We are confident in our epigenetic approach, and enter this competitive space posed to lead and define the pathway for therapies in Friedreich's Ataxia. We intend to submit the IND and commence clinical studies with BMN 290 in the second half of next year.

In BMN 250 for MPS IIIB, we share preliminary results from the Phase 1/2 trial that demonstrated reduced heparan sulfate levels, a biomarker in the cerebrospinal fluid, or CSF, in the brain of affected children.

In the completed dose escalation portion of this study, which was primarily designed to determine safety and pharmacodynamic activity of BMN 250, three patients received escalating dose 30 milligram, 100 milligram and 300 milligram of BMN 250 over 9 to12 months.

CSF heparan sulfate levels, which were markedly elevated baseline, were reduced to a non-affected or normal range in all three patients. Whether assessed as total or disease specific heparan sulphate, Sanfilippo B patients are missing one of four enzymes for heparan sulfate degradation so we are very encouraged by these preliminary results.

In the nearer term, we anticipate that our current commercial products plus pegvaliase will drive our top line revenues to increase at a 15% compounded rate through 2020, with operating expenses increasing at a lower level. After that, valrox and vosoritide, which are both billion dollars opportunities, can drive accelerated growth.

With the current size and scale of our business we are now in a position to leverage our strong R&D engine to move the next commercial products forward, stabilize development expenses and drive towards increasing non-GAAP profitability and ultimately, GAAP profitability.

Turning now to third quarter results, we generated total revenue of $334 million a 19% increase over the third quarter of last year, and a 17% increase compared to the first three quarters of last year.

We continue to see strong patient demand for our legacy products and are happy to report $3 million in network revenues for Brineura as we gradually add patients during the initial global rollouts. In conclusion, we are very pleased with our accomplishment to-date in 2017.

Our gene therapy program with valrox is moving into Phase 3 studies globally, now that we have the go-ahead in both the UK and the U.S. We expect to submit for approval based on these results – on result from this study. The pegvaliase BLA redo is doing well and we hope to learn the approval status in the first half of next year.

Our vosoritide BMN 250 program will continue to progress with physicians' and patients' support while we complete the submission of our next IND with BMN 290 for Freidriech's Ataxia. So with six commercial products on the market and five in the pipeline, we believe our rare diseases portfolio is unmatched in the industry.

Importantly, we now expect to drive between $1.29 billion and $1.32 billion in total revenues this year. And now I will turn the call over to Jeff who will review the commercial business in more detail.

Jeff?.

the U.S., Germany, France, Italy and Argentina. As planned, our commercial efforts remain focused on site readiness, disease awareness, and reimbursement. Recall that our global target for the first year during commercial launches is the target institution's experience or ready to treat, so we are well in our way.

I'm pleased to share that as of the end of the third quarter, there are 16 experienced treatment sites around the world. Additional sites are in the process of preparing to treat, including centers in the United States, Latin America, and the Middle East.

While it is still early days, the worldwide launch of Brineura is in-line with our expectations, delivering $3 million in net product revenues in the third quarter. As we have said previously, the complexity involved with patient starts with for Brineura is unique relative to our other products.

Also, outside the U.S., the process of obtaining full reimbursement approvals takes time and it is worth noting that patients being treated in the international markets at this stage in the launch are undernamed patient-like reimbursement approvals.

Our experienced commercial team is successfully navigating the challenges and doing a good job of introducing Brineura as the only approved treatment option for children with CLN2. Now I would like to turn to Brazilian ordering patterns that J.J. touched on earlier.

The Brazilian Ministry of Health has initiated their purchasing process, which is expected to result in revenues this quarter that was originally expected in the third quarter. With these orders in hand, we expect total revenues for full-year 2017 to be within the range provided today.

I'd like to share also our perspective on Brazil as a contributor to BioMarin revenues. Brazil has been a key market particularly for Naglazyme due to the high prevalence of MPS VI in Brazil. As BioMarin's base of sales has diversified beyond Naglazyme, the percentage of sales from Brazil has also decreased.

Specifically, over the last five years, sales concentration in Brazil relative to our global sales has declined by 50% from 15% of sales to 7% of sales, and we expect this trend to continue as we expand the global reach of our commercial portfolio.

Consequently, while Brazil will always be an important market, we expect revenue from Brazil would continue to be a smaller percentage of our total revenues going forward. Turning now to specific net product revenues in the quarter.

Year-over-year, Vimizim net product revenues increased 12% and year-to-date increased 15%, driven by solid growth in the EUMEA region. A good indicator of demand is commercial patients on treatment, and we are pleased to see a 23% increase in Vimizim commercial patients year-over-year across 44 active markets.

We are now refining and reaffirming Vimizim full-year guidance to between $400 million and $420 million. Turning now to Naglazyme, we're pleased to report an 8% increase in year-to-date net product revenue, compared to the same period in 2016. These results were supported by a 7% increase in commercial patients year-over-year.

This is an impressive result considering that Naglazyme is in its 13th year on the market. We are also tightening Naglazyme full-year 2017 guidance as we near the end of the year to between $310 million and $330 million. Finally on the Kuvan.

Strong net product revenue in the quarter and the first three quarters of 2017 resulted in 16% growth in both periods, respectively. Robust Kuvan net product revenues were driven by strong growth in North America and continuing development of the ex-U.S. market.

Commercial patient growth continues to be robust with a 9% increase year-over-year in the U.S., and sales across 61 active markets. Given the trajectory we are seeing with Kuvan global sales, we are increasing full-year 2017 guidance to between $400 million and $420 million.

In closing, the commercial team delivered solid net product revenues in the third quarter of 2017 despite the impact of order coming from Brazil for both Naglazyme and Vimizim. The continued growth of Kuvan and its 10th year on the market is both gratifying and an indicator of the attractiveness of the PKU market.

We are extremely pleased with the global launch of Brineura and believe we are laying the groundwork for future commercial success of this brand. 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 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, J.J.

and Jeff have already mentioned our third quarter revenues, so I'll highlight the total revenues for the first three quarter of 2017 were a record $955.3 million, an increase of 17% 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 contributions from the vosoritide and valrox takes us above that level starting the next decade.

One specific, in July 2017, we received a $35 million onetime upfront payment from Sarepta Therapeutics related to the license and settlement agreements resolving the exon-skipping patent litigation. This amount, net of a 10% payment to a third party, has been recognized as revenue under royalty and other revenues in the third quarter.

In terms of net product revenues, revenues based on commercial results described by Jeff, we are confirming total revenue guidance to be between $1.29 million to $1.32 billion for full year 2017, an increase over 2016 of between 15.5% and 18.2%, consistent with our multiyear target of 15% annual revenue (20:12).

In terms of operating expenses, R&D expenses decreased to $154.1 million in the third quarter of 2017, compared to $160.8 million in the third quarter of 2016.

The year-over-year decrease was primarily due to decreased spending on Brineura due to its recent approval, savings from two terminated programs last year, partially offset by increased spending on BMN 270 and pegvaliase.

Sequential quarter R&D expenses increased slightly due to the ramp-up on the increased clinical spend on BMN 250, NAGLU, for MPS IIIB.

Given our visibility into what is needed to support the R&D organization for the remainder of 2017 and expense controls earlier in the year, we are adjusting down full-year guidance to between $600 million and $620 million. SG&A expenses increase to $130.5 million in the third quarter of 2017, compared to $118.8 million in third 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, as well as stock compensation expenses due to higher head count.

SG&A expenses for the balance of the year and into early next year will be driven by the Brineura launch, expansion of our Kuvan efforts in Europe, and preparation for a potential pegvaliase launch in the first half of 2018. We now expect full-year SG&A guidance of between $530 million and $550 million.

Turning to bottom line results, GAAP net loss in the third quarter was $12.5 million, as compared to GAAP net loss of $37.4 million in the third quarter of 2016.

Based on confirmation of revenue guidance and reductions in planned spending, we have reduced our GAAP net loss guidance and now except full-year net loss of between $110 million and $130 million.

As you know we also measure our performance on a non-GAAP basis which is based on EBITDA and excludes interest, taxes, depreciation and amortization, and also excludes stock compensation, contingent consideration and certain other specified items, such as in the third quarter, the exclusion of a $35 million Sarepta royalty payment.

For the third consecutive quarter, we reported non-GAAP income, with non-GAAP income in the third quarter 2017 of $7.8 million, compared to non-GAAP income of $2.9 million in the third quarter of 2016.

As we've previously described, non-GAAP income is trending lower in the second half of 2017, compared to the first half of 2017, as R&D expenses increase for valrox in preparation for Phase 3 studies and the continued ramp-up of the Phase 3 program with vosoritide. However, our bottom line guidance for improving profitability remains.

Full-year non-GAAP income is now expected to be between $60 million and $80 million. In terms of cash, cash equivalents, and investments, as of September 30, 2017, we have $1.7 billion, as compared to $1.4 billion on December 31, 2016.

In closing, BioMarin delivered another solid quarter and year-to-date results in 2017, with solid contributions from Vimizim, Naglazyme, and robust Kuvan net product revenues, controlled operating expenses, and our continued progress towards sustainable non-GAAP profitability for 2017 and beyond. Now I would like to open the call to Q&A.

Operator?.

Thank you. Your first question comes from Alethia Young with Credit Suisse..

Hey, guys. Thanks for taking my question, and congrats on getting that order in. I guess I just want to talk a little bit more about LatAm in general.

Is there a way to kind of put provisions in place where there's less volatility or arrangements with the government? Is that even a possibility? And then maybe, can you just talk a little bit about like any potential opportunities you see to kind of improve the treatment around the Kuvan population? I'm just kind of thinking about it in terms of the PEG-PAL coming up, and the launch you have there.

Thanks..

So maybe I'll take the first one, Alethia, on Latin America and smoothing out the volatility there. Yeah, our principal markets in Latin America, Brazil, Colombia, Argentina, Chile, and Mexico, they all have different ordering systems. The biggest volatility is driven by Brazil, and a lot of that volatility has happened historically.

So the timing and the size of what are now, and have been for the last several years, consolidated purchases from the Federal Ministry of Health, so sometimes they order three months of supply, sometimes they order five months of supply, and then we then miss a quarter of orders.

And the situation has then become more acute this year, as the Brazilian economy is in its third year of recession and the budget crisis for the government has kind of hit new highs. So we're looking at alternative pathways within the government, but really what we're trying to do is manage to continued supply of product for our patients.

And just to highlight, as we noted in the prepared remarks, our sales concentration, or percent of revenues in Brazil, has really decreased over the last five years and will probably going forward. So Brazil will be less of an actor in our global portfolio of markets. Maybe I would turn the second question of Kuvan and PKU management.

Was that a clinical a question or a commercial question No idea (27:19)?.

Well, it's kind of both, one with Kuvan, just if there's ways to improve for the younger populations going forward.

Do you have any kind of clinical thoughts? And then commercially with PEG-PAL, maybe framing kind of the launch and the transition, or is there any kind of the opportunities there, will it be a kind of a slow launch or will take time as people kind of ramp up things?.

Okay. Maybe I'll start with that one, and if Hank has anything to layer on afterwards. So, with exclusivity of Kuvan in the U.S. through 2020 and in Europe in 2024, we really see the opportunity to have two differentiated therapeutic options for PKU patients.

As you can tell, our Kuvan sales continue to grow at a fairly rapid pace, even though it's been on the market for a long time. So we've really had some success in terms of penetrating the PKU market and more importantly, changing the way clinicians are viewing the treatment of PKU and including adults.

So we're really – I'm really bullish about the opportunity of having a more powerful therapeutic agent that's targeted towards adults, and it happens that it's exactly the adult population that is the least penetrated with Kuvan.

So, through those exclusivity loss periods, I think we have a great opportunity to really transform the treatment of PKU with multiple therapeutic options from BioMarin.

Hank, would you add anything to that?.

No. If I understand the question, I think the two other things that could really help young patients with PKU beyond Kuvan would be potentially pegvaliase.

Once we get through the regulatory process in adults, we can start to think about how to introduce pegvaliase into a progressively younger population, where that stronger efficacy that Jeff noted could be very important, especially in a context in which medical nutritional therapy is not required because of how, well, naturally active (29:26) pegvaliase is.

And I'd say the Holy Grail for the whole field is a one-and-done kind of therapy, and we showed a little bit of data about how to achieve that using a gene delivered to the liver at R&D Day, although we're not ready to say that that's a coming IND.

But clearly, the substantial correction of the genetic defect would be a profound benefit for PKU patients..

Great. Thanks..

Your next question comes from Robyn Karnauskas with Citigroup..

Hey, guys. This is Kripal (30:09) on for Robyn. Thank you so much for taking my question, and congrats on all the progress. So I had a question about the gene therapy manufacturing capabilities.

Can you remind us what your peak capacity right now is? And since you'd hinted on your R&D Day that you could have a new gene therapy target, can you talk about how you expect to expand your capabilities if you were to develop a new target? Thank you so much..

Robert, you want to answer that question? Maybe I'll give my insights, too..

Yes. Yes. So the facility that we've commissioned then we started GMP production in now for valrox would be capable of producing 2,000 patient use (30:57) of material per year, and that would be at the highest dose of 6e13 vg/kg dose.

We alluded to at R&D Day that we also have a facility in Shanbally and an opportunity to expand on that site, and the planning for that at least from a design perspective is already under way. We've not made any commitments to build that and that will depend on clinical success and commercial demand..

Okay. Great. Thank you so much..

Yeah. So, I mean, obviously, we already are looking at plans to expand capacity, not only to be able to treat more than 2,000 patients per year with hemophilia A but also be able to provide clinical supplies and then commercial supplies for other potential gene therapy candidates.

And Hank mentioned PKU, that might be one of them down the road, but there are other potential ones. So that's something we'll be watching closely. And actually even the current facility, and correct me if I'm wrong, Robert, and I think we could probably expand it a little bit and go a little bit beyond 2,000 patients.

But if we only try to beat (32:21) $1 million per year, that's $2 billion of (32:22) revenues per year on that facility..

Great.

And if I can sneak in one more quick question, since you mentioned the next gene therapy candidates, can you give us a little bit more clarity on when we might hear about what it is?.

We said that Friedriech's Ataxia is our next IND that we intend to file and we've said that we plan to try to roll out an IND every year or so, so I'd say probably a year..

Okay. Great. Thank you..

Your next question comes from Andrew Peters with Deutsche Bank..

Yes, hello. This is Carlos in for Andrew. Thank you for taking our question and congrats on the progress. My question is regarding BMN 290, the new candidate, and we're just curious from a process perspective how you think about you know which of the early-stage programs to bring forward.

And, for example, is BMN 290 for this long (33:25) from a development perspective or are you thinking more like about the opportunity attracting (33:32) so the opportunity versus other alternatives? Thank you..

Yeah. Yeah. And we have a governance process here that looks at the science side of the equation, as well as the business side of the equation, really driven first and foremost by the science. It's a terrible disease for which there's no current therapy, and there really isn't very much on the horizon.

You understand the molecular basis of the disease with some degree of precision. We have a pharmacological agent that is targeted at exactly the root cause of the disease. We've done a lot of optimization of that pharmacological agent to ensure that it penetrates into all the issues that are relevant.

So, yeah, pretty complex, fulsome scientific checklist that the asset had to hit. And then in addition at BioMarin, we take into consideration competitive considerations, business considerations, IP considerations. And we say we want to make an IND every year that doesn't mean there's a – that when the year passes, that we'll take anything we got.

The asset has to pass through all of the strains (34:46) that I described both scientifically and business-wise before it gets nominated as a potential IND candidate..

But it's indeed (34:54) – we are successful in developing the product and then bidding it on the market, this is a – I'd say there's a huge unmet medical need. There is no acute (35:03) therapy, effective therapy. So if we (35:06) today and there are 15,000 patients or so in the world. Strategically, it's a perfect indication for BioMarin..

Okay. Thank you. That's helpful. And maybe if I could sneak another one in. From your market research for vosoritide, how important do you think the proportionality benefit is.

And also given that you'll start a program in younger children now, what do you think is the degree of asymptomatic hypertension that you think is acceptable from a benefit risk perspective? Thank you..

Well, the level of asymptomatic hypertension that's been observed in the trial overall is in four patients – five episodes in four patients out of 1,000 doses or whatever that number is. So that level is clearly acceptable. We have IRB approvals, regulatory approvals. And so that probably....

Yeah. And we did not even see that they were drug-related..

And it's not included that they're drug-related because as you were hearing, you know that two occurred during micturition (36:12) and two occurred during needle placement. So I don't think the hypertension thing is a real important consideration.

And then in terms of proportionality or – we're headed in the right direction based on the studies of the prevalent studies that we've done in an average age group of eight.

We think to get the full impact on normalizing proportionality really requires starting earlier, when patients are still gaining quite a bit of height, and you can add height more proportionately to a smaller base of height.

And with those infant/toddler studies starting in the first half of the coming year, we hope to have some data in that direction as part of the original application of not seeing (37:04) thereafter.

How important is it to the patient community? I think patient community cares first and foremost about functional outcomes, which are to a large extent driven by stature limitations and potentially secondarily driven by proportionality considerations..

Okay. Your next question comes from Salveen Richter with Goldman Sachs..

Hi. This actually Kerry on the line for Salveen. Thanks for taking my questions and congrats on all the commercial and pipeline progress. I have two questions.

First, now that Brazil has announced that they will be placing the order in the fourth quarter, would it be fair to say that this pattern fits in the usual choppiness seen in the last two years? And also, where would this put BioMarin in terms of a full-year 2017 guidance? I think you mentioned on the R&D Day that missing that order would put you in the low end now.

Does that put you in the midrange now? And just one follow-up question on the MPS IIIB program. When should we expect to see the next clinical update? And do you expect to run a pivotal study? Thank you..

Maybe I would address the pattern of orders from Brazil MOH, which have been all over the place. So to Alethia's question, I responded sometimes the Ministry of Health orders for three months, sometimes for five months or even longer, and there doesn't seem to be any predictable pattern on that.

And so I would expect going in to 2018, and with this order in process, we should expect to see continued lack of a pattern of ordering. In terms of the revenue guidance, maybe I'll turn that over to Dan..

Yeah. Sure.

So with the order we have, and, of course, we don't know what the rest of the quarter is look like from Brazil, but with that order in hand and our expected revenues, that's why we were able to sort of frame up slightly the lower end of the total range from $1.285 billion to $1.290 billion (39:24), and so we will be within that, and how the rest of the quarter goes in terms of Brazil and, of course, other countries from where we end up finally..

Thank you. And answer the question on the when more data on it....

Yeah.

So just to remind me, just take a little bit of a step back, we showed it at R&D Day in the first three patients that we've normalized heparan sulfate levels, normalized liver volume, which has increased pathologically in MPS IIIB but under treatment normalizes, and we shared two out of three patients had stable or improving cognitive function as measured by the Development Quotient.

We're completing enrollment in the feeder study called 901 (40:10). We expect completed enrollment in feeder study at the first quarter of this year which would mean that all patients would then roll over into a treatment study that will take another year.

So I think the next key announcement will be completion of enrollment in the feeder study, completion of enrollment in the treatment study in the early part of 2019, and probably the data update from that will be shortly after that..

Your next question comes from Joseph Schwartz with Leerink Partners..

Great. Thanks very much.

So looking ahead to the pegvaliase launch, I was wondering if you could highlight what the key learnings were from the early Kuvan experience, and are there any that are relevant to pegvaliase, and how do you expect the trajectory of pegvaliase to compare?.

Hi, Joe. The first thing I would mention is the Kuvan launch is now many years ago. We're in our 10th year. So probably not a lot of learnings from the early Kuvan launch. What we can tell today is that we're continuing to have an effect on how PKU is viewed and managed by clinicians.

And the biggest force at work there is the negative impact of elevated Phe levels on the brain, which manifests itself in cognitive and other problems. So we're really making progress on that.

And I would see pegvaliase as a more powerful therapeutic agent than Kuvan, initially for adults is being a very powerful commercial tool in the hands of clinicians in kind of the context of really believing that lower Phe is better for all PKU patients including adults these days.

I would highlight the fact that a couple of years ago the ACMG updated guidelines in the United States called for treatment for life including adults and target Phe levels of less than 360 umol/L.

Earlier this year, the Europeans just issued European treatment guidelines for PKU also calling for treatment for life and target Phe levels in Europe of less than 600 umol/L. All of which is really consistent with all of the work we've been doing trying to impact the way PKU is treated.

As for trajectory, one of the things that will impact trajectory for pegvaliase is the important process of both induction and titration. So it takes a little while to get inducted and titrated to a maintenance dose, patients in the clinical trial have indicated very, very powerfully that the time spent and the effort spent was well worth the effect.

We know that our clinical trial investigators both believe that and are realistic about how many patients they can move through that induction and titration period, the maintenance dosing at one time.

So there was a lesson there and an expectation it would be, but the trajectory will be gated by clinics' ability to manage patients through that induction and titration to maintenance dose process..

But I think through the – the Kuvan is 10 years old now, but I would say now the PKU medical community has learned to live with therapeutic intervention for the treatment of PKU. When Kuvan was launched, it was a purely – it was a disease that was purely managed by dietitians within the PKU clinic. So I think this is definitely a different world now.

And, I mean, thanks to the commercialization of Kuvan, in this respect, I think the prescribers will be responsive to a new therapeutic intervention..

Especially when it's not indicated as an adjunct to medical nutritional therapy..

Exactly. And that is why we believe it's a product, if approved, there will be significant demand for the product even if the first three to four months of therapy are a little complex and the titration just take time.

I think eventually, based on what we're hearing from patients that have been on the drug for several years now, I think there's going to be a lot of interest in this product..

Your next question comes from Chris Raymond with Piper Jaffray..

Hey, thanks. Just another pegvaliase question, if you don't mind.

So I'm just curious, what would be the barriers to starting a pediatric trial now, or at least a pilot now, versus waiting for approval in adults? Is this driven by FDA's direction or is this a company-driven decision? And I guess, along the same line, I'm sure you guys have thought about an induction and titration sort of pathway in a pediatric setting.

Could you maybe describe what the differences might be versus adults? Thanks..

Company-driven decision, and given that we have a PDUFA date that's not too many months in front of us.

Might as well (46:00) get to that to make the next decision about further development of pegvaliase, and haven't really gotten into the granular specifics of how induction titration might or might not differ for young children as opposed to young adults..

But I mean, that is definitely an area that you're achieving. Again, we get green light for approval, that is definitely something we're going to be investing in. And maybe we're not – we're going to do it by stage, probably, like we're planning to do it for hemophilia, for instance.

We might not go all the way to very young children with our first trial. We might probably start with teenagers and go down, and then learn. That's kind of the way we're going to learn how to best address them, going slowly younger and younger in age, how to best address the much – the younger population..

Your next question comes from Ying Huang with Bank of America..

Hi. It's Aspen on for Ying. Thanks for taking our questions.

First off, can you give us more detail on the one BMN 270 patient on 4e13 who's showing weaker Factor VIII expression, and what might be keeping him or her from realizing the results achieved by some of the other patients on trial? And then, can you discuss some of the data, preclinical or otherwise, that you've seen that gives you confidence in the vosoritide taller (47:33) study showing better proportionality data? Thanks..

Yeah. So, to the best of our ability to identify the difference between the patient who was the lowest Factor VIII expression in the 4e13 dose cohort versus the 6e13 cohort is really dose. We haven't put our finger on the pulse of a specific patient characteristic.

It doesn't appear to be preexisting immunity, it doesn't appear to be related to a immune response to the capsid, and so they probably are in factors that are intrinsic to individual patients that we just don't fully understand that explain variability in response.

But to remind you, we see variability in response, not just in our own studies in humans, but also in our preclinical studies and in the preclinical and clinical studies of other gene therapies in the hemophilia space. So, we expect that this is really a patient characteristic that we just don't fully understand. And as far as....

Let me – and just want to remind you where we were 18 months ago or so when we started this program. We were hoping to get to 5% Factor VIII expression, and here we had a majority of the patients that are basically within normal Factor VIII range here, and we have one patient that went from severe hemophilia, at less than 1%, to over 5%.

So, transformed that patient from severe hemophiliac into a mild hemophiliac, which is already a major – even for a patient who is not really responding, so a major improvement for this patient. So that's just a perspective on the data. Right, Hank..

And then, what evidence is there that proportionality could be corrected pre-clinically and clinically, so pre-clinically, if you take a Achondroplastic dwarf mouse and mate it with an acromegalic CNP over-expressing mouse, the F1 of that cross is normal typically, meaning they'll have a statural abnormality or the portionality abnormalities.

So that in itself says that you can correct proportionality defects if you start from day one of embryogenesis. And then, human clinical data indicates that CNP over-expression is associated with an overgrowth phenotype, and presumably the earlier you apply CNP to the Achondroplasia situation, the better your proportionality outcomes will be.

And then finally, in 8 year old patients who've been treated for two and a half years, we see a trend in favor of improved proportionality, which is about as good as we could expect to see, based on preexisting abnormality and proportionality.

So I think all the lines of evidence point to, we're going to improve proportionality and really, it's a matter of when and how, and that's going to be driven as a function of how early you can start treatment..

Your next question comes from Tim Lugo with William Blair..

Thanks for the question. I remember back when Kuvan was initially launched, there was a lot of the – PKU patients weren't necessarily captured front in the healthcare system, and weren't complying with any food regimen or diet, even though they weren't on any effective therapies.

Could you maybe contrast what the community is – the current status of the community ahead of this pegvaliase launch, versus what we saw with Kuvan a couple of years ago?.

Great question, Tim. So I might refine your characterization a little bit and say that most of pediatric patients, then and now, are pretty actively managed in the clinic. You could round that off and say essentially, all pediatric patients are.

And where you see the disconnect of loss to follow up or out of control PKU patients that are not actively managing their PKU, maybe not actively seeing a PKU clinic, are the adult population.

So we've been working for years to try to address that situation, both because Kuvan is a good therapeutic option for adults, as well as pediatric patients to respond to Kuvan, and also knowing that a more powerful therapeutic option is potentially active, and all adult the patients was coming through the pipeline.

And so what I would say is there's been incremental progress made during these last several years in both hanging on to pediatric patients as they transition into adulthood, doing a better job of not losing them to clinic follow-ups.

And also, we've been very active in working with clinics to try to recapture adult patients that have been lost to follow-up for some time and we've seen some success with that. Maybe the most important thing is the kind of acknowledgement or awareness of the PKU clinicians that it is important to be following PKU patients well into adulthood.

So that kind of shift in mindset has been really positive. So I think that we're really well-positioned with pegvaliase now under review in the U.S. to have a very robust adult PKU population to launch into..

Your next question comes from Jeff Chen with Cowen & Company..

Hi, good afternoon. Thank you for taking my question.

Just coming back to Brazil, can I confirm with you that was the Brazil order all catch-up in what was expected in Q3 for both Naglazyme and Vimizim, or were there any forward buying?.

Not seeing any forward buying. So we were expecting an order from the Brazil Ministry of Health in the third quarter that didn't materialize. That order is now firmly in motion.

And as I stated earlier, Brazil Ministry of Health places consolidated orders, sometimes those orders are for several months, sometimes for longer periods of time variability around that..

But this order specially was not a multi-quarter order..

Go ahead. Yeah.

If that was your question..

Okay. Your next question comes from Kennen MacKay with RBC Capital..

Hi, this is Paul (54:37) for Kennen. Thanks for taking the questions. So basically, I'm just wondering about that Brazil or Latin American situation.

Early this morning, Alexion's call saying that they're seeing those growth countries, I think Latin American are no longer become growth countries and I'm just wondering have you seen a similar trend in your franchise?.

Just let me confirm the question was Alexion reported that they're believing that Latin American countries that they've previously considered growth markets they now no longer consider them growth markets, have I got that correct?.

Yes, that's correct..

Yeah. So I mean, Latin American markets have been and will continue to be important markets for BioMarin. I mentioned earlier our major markets in Latin America Brazil, Argentina, Chile, Colombia and Mexico, they will continue to be important.

I also mentioned earlier this due to the high prevalence of MPS VI in Brazil – Brazil was historically a bigger percent of our sales than it is today and that we expect that drop in sales concentration to continue to decrease. So remember earlier we said five years ago it was 15%, today it's 7% and probably continuing to decline.

But Brazil will be an important market and we still expect revenue growth going forward in Brazil and other Latin American markets..

And as you – we're seeing significant growth in this year even in Latin American countries outside of Brazil like Columbia, Chile, Argentina and even Mexico. So this (56:27) patent issue is really a Brazil issue, not a Latin America issue, at least for us at this time..

Your next question comes from Gena Wang with Barclays..

Thank you for taking my questions. I have two sets of questions. First one is for the PKU franchise. So for patient currently on Kuvan, what is the breakdown of pediatric patients and adult patients, and how do you see generic Kuvan affect your PKU franchise? My second question is regarding the BMN 290.

So BMN 290, can you help us understand mechanistically how BMN 290 can reacetylate histone that specifically lead to for toxin (57:16) expression.

Did you check genome-wide overall mRNA level changes with BMN 290?.

Okay. So maybe starting with the PKU suite of questions. I don't know that we have previously disclosed the mix of....

Pediatric..

...pediatric to adult patients. Maybe we have in a public forum, so confirming that's roughly 80/20 pediatric to adult patients. Remember that our drug is based – dosed on weight. So even though the 80/20 in terms of numbers of patients, it's undoubtedly less than 80/20 in terms of revenue between those populations.

And then in terms of generics, what's the impact of generics? Well, we have exclusivity through late 2017 in the U.S for....

2020..

2020.

Sorry, 2020 in the U.S., 2024 in EU. So we have some period of time before we have to face generic situations. We don't know exactly what that's going to look like. There are no good analogs to model this after so there are no good examples of highly specialized drugs that have very controlled distribution networks going generic.

So roughly we anticipate there will be some material impact from generics, but probably less than cataclysmic loss of market share. And beyond that we don't really know..

And then on BMN 290 what we reviewed at R&D Day and in the R&D day slides is that nuclear genetics material exists in two states in open chromatin state and closed chromatin state, and there is reversibility or bidirectional movement between those two states. In the triplet repeat disorder Friedreich's Ataxia.

For reasons that aren't particularly crystal clear, there's a preponderance of nuclear material that appears in the condensed chromatin state that is a reflection of a relative excess of histone deacetylase activity relative to histone acetyltransferase activity.

And so the concept is to augment that reversal to the open chromatin state driven by histone acetyltransferase by blocking the enzyme which takes open chromatin to closed chromatin, and that enzyme being histone deacetylase. So the molecular basis for increase in frataxin regulation is to open the chromatin and allow normal transcription to ensue.

And as far as relative selectivity of the approach, we've demonstrated that for example the activity of the inhibitor has allelic preference, meaning it hits the Friedreich's alleles that leaves the normal frataxin locus intact.

And that suggests that it's widespread – no, that it will not have very much widespread activity in regard to blocking (1:00:48) that regulate other genes.

In pilot non-clinical animal studies, the principle does limiting toxicities that we observed principally myelosuppression occur at exposure levels that are more than 10 times higher than the concentration that's required in brain tissue to double frataxin expression.

So there may be off target effects that we don't yet know about until we go into humans, but we do feel that the major effect that's not intended will occur at a dose of approximately 10-fold higher, and of course that's the clinical – that's the basic investment thesis is can we identify a dose of BMB 290 which increases frataxin expression but doesn't cause myelosuppression or other unintended side effects..

Okay. And your next question comes from Vincent Chen with Bernstein..

Thank you very much for taking my question. Two more on gene therapy. First, the question on COGs. We hosted a recent gene therapy manufacturing seminar and our experts emphasized that gene therapy production is extraordinarily expensive, well into the six figures for higher dosed systemic gene therapies made in mammalian cells.

I understand baculovirus should be less costly per vector genome, but how should we think about potential COGs for valrox? And then I have a quick follow up afterward..

I mean, you – I'll make a few comments. Right now, our – (1:02:25) of course we have not set the price yet for our product, and I would say I think what you're hearing might – have heard might be – I don't know what is the source of your information might be a little compared to what we know how to do with baculovirus.

But obviously, based on our preliminary estimates, we believe that our cost of goods will be in the 10% to 15%..

Okay..

Do you want to add anything? Maybe Robert you want to add a few more comments to this..

Yeah. There's a – when we decided to go with the baculovirus system, as you alluded to one, of the advantages is it is less costly than using mammalian human cell lines. As a variety of other advances just being able to scale up to 2,000-liter scale which we're already at, it could even go larger than that on a lenius side.

So I think as we get more experience with this as we've done with our other products we can develop robust manufacturing processes, purity levels and cost of goods and have all those come together in our production systems..

And again, I would say that we believe – and as Robert said, we selected the baculovirus specifically for – one of the reasons why we selected it is it is easier to scale up than in mammalian system. So I would say maybe the comments you made are more appropriate for our competitors than for us..

This concludes the Q&A portion of today's call. I would like to turn the call over to Mr. J.J. Bienaimé. Please go ahead..

Thank you, operator. So we certainly achieved a tremendous amount in the first three quarters of this year, and I want to thank all BioMarin employees whose hard work and dedication has contributed to significant progress in 2017 so far.

We are currently launching our sixth commercial product with Brineura, our Phase 1/2 with BMN 270, and for BMN 250 for MPS IIIB and preparing to start clinical studies for Friedreich's ataxia in the second half of next year.

So as we look forward to the remainder of 2017 and the start of 2018, we are energized to be preparing to begin enrollment in our Phase 3 program with valrox for the potential one-time treatment of severe hemophilia A.

And with pegvaliase, our next potential product approval is just around the corner with the anticipated FDA action expected in the first half of next year, and the submission of our filing in EU for approval in the first quarter of 2018.

So as we shared today, we anticipate a major data readout in 2019 with both valrox for hemophilia A, and vosoritide for achondroplasia, both potential billion dollars opportunities. The R&D organization continues to execute on parallel level while we are moving towards profitability, which is a significant accomplishment for a company our size.

I'm very proud of my management team and all BioMarin employees for their contribution. I want to thank you for your continued support and for joining us on today's call, and we look forward to providing updates on the many programs moving forward over the coming months. Goodbye..

This does conclude today's conference call. You may now disconnect..