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..

Salveen Richter - Goldman Sachs & Co. LLC Cory W. Kasimov - JPMorgan Securities LLC Christopher J. Raymond - Piper Jaffray & Co. Phil Nadeau - Cowen and Company Aspen Mori - Merrill Lynch, Pierce, Fenner & Smith, Inc. M. Ian Somaiya - BMO Capital Markets (United States) Stephen D. Willey - Stifel, Nicolaus & Co., Inc.

Jing He - Gabelli & Company Vincent Chen - Sanford C. Bernstein & Co. LLC Kennen Mackay - RBC Capital Markets LLC Gena Wang - Barclays Capital, Inc..

Good afternoon. My name is Kathleen and I will be your conference operator today. At this time I would like to welcome everyone to the Investor Update Fourth Quarter and Full Year 2017 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.

Thank you. Traci McCarty, Investor Relations at BioMarin, you may begin your conference..

Thank you, Kathleen.

Today I'd like to remind you that this is a non-confidential presentation containing forward-looking statements about the business prospects of BioMarin Pharmaceuticals, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development.

Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and development by competitors, and those factors detailed in BioMarin filings with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K reports.

With me today are Jean-Jacques Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Worldwide Research and Development; Dan Spiegelman, Chief Financial Officer; Jeff Ajer, Chief Commercial Officer; and Robert Baffi, Head of Technical Operations. Now I'd like to turn the call over to our Chairman and CEO, J. J. Bienaimé..

Thank you, Traci. Good afternoon and thank you for joining us today. So 2017 was a momentous year for BioMarin driven by significant financial, regulatory and clinical achievements. For the full year 2017, the revenues topped $1.3 billion, which is an increase of 18% compared to 2016. We received U.S.

and EU approval for Brineura for the treatment of CLN2, in less than four years from the first patient being treated with our product. As a result of that approval, we received a Pediatric Priority Review Voucher, which we sold for more than half of Brineura's development costs.

Encouraging safety and efficacy data from our Phase 1/2 study with gene therapy product valoctocogene roxaparvovec or valrox for the treatment of severe hemophilia A resulted in the launch of two separate Phase 3 studies, one of which started last December and the other one will start early this year.

Not only are health authorities supporting of the program, we received both PRIME and breakthrough designations.

The patient community is very enthusiastic about valrox, the notionally potentially one-and-done treatment option for a patient community who dealt in the past with frequent joint bleeds and the need to always have access to a few medications even in the face of taking multiple, weekly infusions of recombinant Factor VIII was inconceivable before gene therapy.

Momentum is definitely building in this area of development in hemophilia, and we are thrilled to be at the forefront. Hank will provide additional updates on valrox and our earlier stage programs shortly. Turning to our other late stage development program pegvaliase and vosoritide, both of which progressed as expected over the year.

At R&D Day last October, we shared data with vosoritide in achondroplasia demonstrating consistent durability and safety over 30 months in our Phase 1/2 subjects. The global Phase 3 program continues to enroll as plan and we anticipate completion mid-year.

The BLA for our next potential commercial product, pegvaliase, was filed last June, and we look forward to the PDUFA outcome in late May. The PKU markets represent a significant opportunity as we have seen with KUVAN. And Jeff will walk us through these plans and our plans for launch execution of commercial pegvaliase in the U.S. in a moment.

Looking forward to 2018, double-digit growth of revenues should continue with total revenue expected to be between $1.7 billion to $1.53 billion, representing growth between 15% to 19% compared to 2017 results. In 2017, we reached non-GAAP income of $74 million for the year.

And in 2018, we expect to improve upon those results to a range of $100 million to $140 million in non-GAAP income, a 62% improvement from the midpoint. In the years to come, we intend to steadily increase bottom line results while continuing to invest in our pipeline.

In summary, 2017 was not only our 20th anniversary year, but also one of our most productive to-date. As I have just reviewed our accomplishments in 2017, I have laid the foundation for even greater productivity and execution in 2018 across the clinical, regulatory and commercial pipelines.

I will now turn the call over to Jeff who will review the commercial business in more details.

Jeff?.

Thank you, J.J. We delivered record results of sales in 2017, and I'm very pleased with total BioMarin revenues for full year of 2017 exceeding the previous year by 18% and breaking the $1.3 billion mark for the first time.

Starting with VIMIZIM, patients on commercial therapy grew 20% in 2017 as well as the continued rise in identified patients increasing to over 2,000 worldwide.

With only roughly half of the currently identified patients on commercial therapy and the fact that we continue to identify new patients, there is opportunity for significant continued growth from here.

VIMIZIM net product revenues were $114 million in the fourth quarter and $413 million for the full year increases of 22% and 17% respectively compared to the same periods in 2016. Last quarter, we had communicated risks associated with order patterns in Brazil.

I am glad to report that the fourth quarter reflected positive ordering in Brazil, but we remain cautious on Brazil quarter-to-quarter in 2018 due to anticipated uneven buying patterns. Other areas of strength in the fourth quarter included EUMEA region with Turkey in particular, Colombia and Latin America and North America.

Looking towards full year 2018 VIMIZIM guidance, we expect continued revenue growth to between $460 million and $500 million in full year revenues. Moving on to NAGLAZYME, net product revenues were $94 million in the quarter and $332 million for the full year, increases of 25% and 12% respectively compared to the same periods in 2016.

Significantly, the number of commercial patients increased by 6% in 2017, an indicator of the continued growth in underlying demand for NAGLAZYME. Consistent with VIMIZIM results, NAGLAZYME sales benefited from an uptick in Brazilian orders in the fourth quarter.

As a result, we remain cautiously optimistic that sales in Brazil will be steady in 2018 but also anticipate uneven buying patterns quarter to quarter. Our NAGLAZYME guidance for full-year 2018 net product revenues is between $325 million and $355 million. Now on to KUVAN.

2017 represented the second full year of global sales of KUVAN by BioMarin since the acquisition of the PKU franchise in international markets for Merck Serono and we are very pleased with the results. KUVAN net product revenue contributed over $107 million for the top line in the fourth quarter, an increase of 19% year-over-year.

For the full year, KUVAN net product revenue was $408 million, a 17% increase over 2016. North American sales were paced by an increase of 7% in commercial patients year-over-year.

The combination of strong results in North America, combined with solid uptake internationally, gives us confidence in providing full year 2018 guidance of between $440 million and $480 million, an increase of about 13% over 2017 results. Turning now to Brineura, which was approved in both the U.S. and EU in 2017.

As we said when we got approval, the commercial strategy for Brineura is different than for our typical ERT products. Our primary focus is on raising awareness among physicians to facilitate early diagnosis.

The goal is to have patients screened and diagnosed early while they retain good function and are good candidates for treatment, and that will continue to be our focus going forward. The initial Brineura launch is rolling out as anticipated. We are seeing a gradual steady ramp of new countries and additional sites prepared to provide treatment.

And as a result, patients are being transitioned to receive commercial Brineura. At the end of the fourth quarter of 2017, we had over 40 commercial patients worldwide spanning 7 countries and 22 treatment sites. We continue to expect to have about 40 sites equipped to provide treatment with Brineura by mid this year.

Our efforts to raise awareness of Brineura and the importance of early diagnosis is progressing nicely. The number of physicians experienced in Brineura is expanding and driving interest in the community.

We have learned a few things over the first two quarters of launch including that new site readiness can take longer than expected due to the complexity of multidisciplinary preparation within hospitals.

However, we view this as part of the process given the uniqueness of Brineura, and believe we are on track to manage any challenges related to the complexity of planning for surgery and infusions. The early diagnosis programs we have put in place are gaining momentum. 100 institutions across the U.S.

have participated to-date in our Behind the Seizure program, resulting in several children with CLN2 being diagnosed through that program. In Europe where we are navigating through country by country reimbursement, we are on track and expect steady progress throughout 2018.

We're very pleased with the pace of the launch today and expect growing awareness of Brineura in the physician and CLN2 community. As a result, we expect solid revenue growth in 2018 resulting in full year guidance of between $35 million and $55 million. Finally, now turning to pegvaliase for which we expect to learn the U.S.

approval status of late May. We are cautiously optimistic that a U.S. commercial launch will be underway in the second half of this year. As we have communicated, upon the potential approval of pegvaliase, we will take a slow and go approach to this commercial launch.

We have learned over the course of developing pegvaliase that patients respond at varying rates, so we plan to take additional time upfront during the induction and titration phase of treatment to get it right and keep patients on therapy up to and through the maintenance phase of treatment.

The feedback we have gotten from the over 200 patients currently in our clinical studies is that working through the first phase of treatment is worth the time and effort to get to maintenance therapy.

We appreciate that many of you are interested in knowing more about how we're thinking about pricing pegvaliase, so I would like to share the following.

The specifics of pricing will be available upon approval, but we do expect to price pegvaliase at a modest premium to the average price of an adult KUVAN patient, currently about $150,000 annually net.

Further, during the initial induction and titration phase of treatment, we would expect revenue to be fractional and then transition to full pricing once maintenance dosing has been achieved. We're very excited about the opportunity with pegvaliase as it will be a significant component of our PKU franchise.

In the U.S., we expect pegvaliase will be the approved treatment of choice for adults complementing KUVAN, which is and will continue to be treatment of choice for children. Pegvaliase has proven to be highly efficacious in severe PKU adults, resulting in significant reductions of phenylalanine.

We believe the market is excited about the approval of pegvaliase and that there is a lot of interest in gaining access once it is approved. We have years of experience working directly with the 35 clinical trial sites in the U.S. of the 125 total PKU clinics in the U.S., and therefore anticipate hitting the ground running in product approval.

As was the case with Brineura, we do not provide revenue guidance in an approval of launch year, so we look forward to keeping you apprised of our progress with pegvaliase following the outcome of our late May PDUFA. And now, I'd like to turn the call over to Dan to provide more detail on the fourth quarter and full year financial results.

Dan?.

Thanks, Jeff. Please see today's press release summarizing our financial results for the fourth quarter and the full year 2017. Since Jeff already reviewed 2017 revenue results and provided detailed 2018 revenue guidance, I will cover other 2017 result items and then provide our 2018 and longer term financial guidance. Two key Q4 items to point out.

First is the sale of the priority review voucher for $125 million. The proceeds are classified as a gain on sale of an intangible asset in operating expenses on the consolidated statement of operations. Associated with the sale, there is also a provision for tax expense of approximately $25 million in the fourth quarter.

Fourth quarter results were also impacted by charges associated with the Tax Reform Act. First is a $42 million charge directly related to revaluation of our deferred tax assets due to the reduction in the federal rate from 35% to 21%, and due to additional limitations on tax deductible compensation.

In addition, the company established a $41 million valuation allowance related to State of California tax credits.

Based on increased incentives in the Tax Reform Act to conduct R&D in the United States, we now project that for the foreseeable future we will generate more State of California tax credits than we will utilize on an annual basis, and hence the need for a valuation allowance and expense in this quarter against our existing California credits.

From the bottom line standpoint, results for the full year of 2017, GAAP net loss for the year was $117 million and non-GAAP income for the full year with $74 million. We ended the year with $1.78 billion in cash, cash equivalents and investments.

Major inflows for the year included $482 million from the issuance of convertible notes and $125 million from the sale of the PRV.

Major uses of cash included gross capital expenditures for the year of just under $200 million, driven by the construction of our new gene therapy manufacturing facility, finished buildout of our manufacturing facility in Shanbally to support commercial supply of VIMIZIM, plus some office facilities in Novato and San Rafael.

In addition, investment in inventory increased by $125 million due to the new approval of Brineura and increased VIMIZIM and KUVAN revenues Before reviewing 2018 guidance, let me remind you of the long-term guidance and financial plan that we laid out at the end of 2016.

Specifically, we've previously said and reiterate today that starting in 2017 and through the end of the decade, we expect revenues from our approved products plus pegvaliase to grow 15% per year, and then for revenue growth to accelerate above that level with vosoritide and valrox.

With respect to operating expenses, we have guided that they will generally grow on an absolute dollar basis, but at a lower rate than revenue growth, creating incremental operating margin and bottom line expansion through the end of the decade and then acceleration of profit growth after that.

In addition to reiterating our long-term guidance, our 2018 guidance today is consistent with that plan. So turning now to 2018. 2018 total revenue guidance is between $1.47 billion and $1.53 billion.

To help analyze this compared to 2017 total revenues excluding the one-time Sarepta upfront payment, our 2018 revenue guidance represents revenue growth of between 15% and 19%. I would note that this 2018 revenue forecast assumes that key currencies remain at the current exchange rates through the year.

In addition, our revenue guidance does assume the launch of pegvaliase in the United States in the second half of 2018, but we believe we can achieve revenues in this guidance range even without pegvaliase.

From a bottom line perspective, our GAAP net loss guidance for 2018 is $115 million to $165 million and our benchmark non-GAAP income guidance is $100 million to $140 million, an improvement at the midpoint over 2017 non-GAAP results of 62%.

Our R&D spend guidance for 2018 is between $645 million and $685 million, is driven by both vosoritide and valrox Phase 3 being in full swing in 2018 compared to a relatively light clinical spend year in 2017.

SG&A guidance for 2018 of between $575 million and $615 million is driven by the planned launch of pegvaliase, the continued launch of Brineura and continued efforts on the growth of VIMIZIM and KUVAN. With our global infrastructure in place, straight G&A spending is basically unchanged year-over-year.

In total, 2018 SG&A and R&D expense guidance shows an increase of between 5% and 11.5% compared to 2018 revenue growth of between 15% and 19%. One area of margin contraction in 2018 is cost of sales with guidance of between 20% to 21% of revenues, about 200 basis points higher than last year's result.

The main drivers of the 2018 cost to sales rate increase are related to additional production capacity from the Shanbally facility coming online. More specifically, the Shanbally, Ireland facility approval results in some non-recurring charges being recognized in 2018, but more importantly increased per unit production costs at current volumes.

As revenues increased and new products get approved, we more fully utilized that capacity, and as that capacity gets utilized we expect the cost of sales line to return to historical levels.

Looking further out, both vosoritide and valrox could have substantially improved gross margins, which could drive down our long-term cost of sales level below our historic levels.

In terms of capital spending, we expect overall capital investment in 2018 to be similar to 2017 and between $160 million and $180 million, primarily in manufacturing and laboratory facilities.

In addition, there will be an approximately $70 million to $90 million in investment and additional inventory to support new product launches and revenue growth.

Finally, please recall that per our prior guidance, we intend to repay the $375 million principal amount of our maturing 2018 bonds in cash regardless of whether they mature in the money or not.

Even with these capital and cash outlays, we continue to believe that our existing financial resources mean we won't need to do additional equity or equity-linked financings except in the three circumstances we've previously mentioned, potential M&A, refinancing our 2020 or 2024 converts for a major product setback.

Now I'd like to turn the call over to Hank to provide an update on our development program.

Hank?.

Thank you, Dan. On the occasion of our year-end results call, I take a moment to reflect on what has been achieved over the last 12 months. I'm proud of the innovativeness and productivity at BioMarin, and it's all about alleviating suffering and helping others to live their life to their full potential.

So before I walk through the numerous accomplishments of the past year, I'd like to thank the entire R&D team and the rest of my colleagues at BioMarin for their continued execution of our mission to get new treatments approved for the people who have come to rely on our good work.

Starting with valrox, it is remarkable to reflect on where the program was only a year ago. You may recall when we started our program we were hoping to convert patients from severe to mild hemophilia.

Last year, we were talking to you about the proof-of-concept results observed in 2016 and which we were going well beyond achieving a milder state of hemophilia.

We augmented our plans with the addition of the 4e13 vector genomes per kilo dose, and here we are today having demonstrated positive efficacy and safety data on our Phase 1/2 program that led to the launch of Phase 3 GENEr8-1 and GENEr8-2 studies, both of which are open for enrollment.

Importantly, with the start of these pivotal studies, we're seeing an increase in the level of enthusiasm for valrox from the patient and physician communities. At our most recent data update at ASH last December, we were very excited to update results after treatment of patients with the 6e13 vector genomes per kilo dose.

Most patients have achieved and maintained Factor VIII levels within the normal range in severe hemophilia A. Further, median annualized bleeding rates and factor use continue to be zero for both metrics at that time point.

We also shared up to one year results with the 4e13 vector genomes per kilogram dose for three patients with the longest follow-up with factor VIII levels in or near the normal range.

As a whole, the 4e13 vector genomes per kilo dose results at that time point demonstrated sustained Factor VIII levels approaching or within the lower end of the normal range for most patients. The 4e13 vector genome per kilo dose subjects also had median annualized bleeding rates and factor use of zero as of that time point.

Concurrent with ASH, the New England Journal of Medicine published preliminary results of the ongoing Phase 1/2 study of valrox.

The accompanying editorial titled A Cure for Hemophilia within Reach highlighted the tremendous need for better therapy for patients because of the residual risk of bleeding, the high cost of prophylactic therapy and the demanding nature of interment and factor replacement.

The editorial also established an important roadmap to enable access to an ever larger circle of hemophilia patients, possibly including treatment at earlier ages, patients with previous liver disease or immunity to the transfer in capsid, and even potentially in patients with inhibitors.

As a leader in this field, we're committed to enabling valrox to do as much as possible for patients. Of immediate consequence, the next steps for the program are to continue enrollment in the Phase 3 studies and provide an update on the Phase 1/2 study around mid-year, so stay tuned. Enthusiasm for participation by sites and patients is very high.

We don't think patient interest will, in any way, limit enrollment in the two studies, the 6e13 dose by year-end and the 4e13 dose shortly thereafter. Turning to our gene therapy facility, it's completely built out and we expect to have commercial scale material ready for use in the pivotal study at the end of April.

It has the capacity to supply between 2,000 and 3,000 6e13 vector genomes per kilo patients annually. We believe this capability further increases BioMarin's lead in the field compared to any other company developing in gene therapy product for severe hemophilia A. Moving on to vosoritide for children with Achondroplasia.

At R&D Day last October, we showed durable growth velocity sustained throughout 20, set throughout 30 months of treatment using the 15 microgram per kilo dose.

In addition, we shared data supporting expectations for continued growth based on lead indicators and for potential improvement in other complications from the condition such as spinal cord compression, foramen magnum compression, sleep apnea, disproportionality and daily activities that many of us take for granted.

Specifically, over the 30-month observation periods, patients experience mean absolute growth increase of approximately 4 centimeters over what their baseline growth velocity would have predicted.

In addition, treatment with vosoritide demonstrated continued improvement over time and proportionality as measured by a ratio of upper and lower body measurements for the UL ratio as part of the 30-month update.

Our feeder study, which establishes baseline growth rate prior to treatment, is now fully enrolled reflecting a high degree of interest in the patient community internationally and in the U.S. in particular. The treatment study continues to enroll with anticipated completion in mid-2018 and topline data in the second half of 2019.

As we also announced in the first half of this year, we anticipate enrollment to commence in our infant/toddler study supporting our belief that in this indication in particular, the earlier treatment begins the more benefit patients are expected to derive.

We also let you know in January that we expected the FDA to hold a meeting to discuss Achondroplasia given the unmet need for those who are interested in treatment and the fact that no approved therapy exists in this pediatric indication.

The meeting has been noticed on the Federal Register and is planned for March 22 of this year, where those of us in the developing community, as well as patients, key opinion leaders and advocates will have the opportunity to collaborate on establishing standards for drug development in Achondroplasia.

We look forward to participating in this meeting with the goal of establishing high standards for clinical study design and endpoints just to name a couple of key matters.

Turning now to our most recently updated data for our newest program BMN 250 enzyme replacement therapy for the treatment of MPS IIIB, a rapid and progressive neurodegenerative disease of young children.

At the WORLD Medical Meeting two weeks ago, we updated results from both the dose escalation portion of the study Part 1 and from Part 2 which included patients that rolled over from the dose escalation part.

We're pleased to share the subjects of both parts of the study demonstrated cerebrospinal fluid glycosaminoglycan levels in the normal range, as well as spleen and liver size reductions. In subjects who were rolled over the Part 2 of the study, Development Quotient or DQ is trending in the right direction.

We're very excited about the early results of this program, especially in light of the success we've experienced with intracerebroventricular delivery modality based on our Brineura patients.

We expect to complete the (00:30:42) portion of the study where we track Development Quotient for the first 12 months of enrollment and close enrollment in this quarter of 2018. We expect to have one year DQ baseline data in the first quarter of 2019 so stay tuned for additional updates as the program progresses. And finally, as J.J.

mentioned, we look forward to the Prescription Drug User Fee Act action date at the end of May for pegvaliase. We're confident in the Phe lowering properties of pegvaliase, so hopeful that the immune response data are acceptable for an approval. Our current clinical trial patients are thrilled with the benefits they have experienced in pegvaliase.

We're hoping that their voice will be heard as our application is reviewed for potential approval, and we look forward to keeping you apprised with progress in the U.S. and our plan to submit with the European Union marketing authorization application later in the first quarter of this year for potential European approval in 2019.

And with that, operator, we would now like to open the call for questions..

Your first question comes from the line of Salveen Richter from Goldman Sachs. Go ahead, please. Your line is open..

Thanks for taking my questions. So just wanted to clarify your 2018 revenue guidance.

You mentioned you can achieve guidance or you'll be in the range without pegvaliase revenue, but just wondering what you've attributed to pegvaliase in 2018? And then secondly, with regard to the pipeline, can you just comment on how enrollment is progressing in the valrox pivotal trials? Thanks..

Yeah. This is Dan. So I'll take the honor of not answering your question. So consistent with our prior practice, we don't give first year revenue guidance specific to newly launched products and we're going to continue that practice in 2018.

And enrollment?.

Similar context, as I said in my prepared remarks, the patient interest is phenomenal in this and we more or less have essentially identified a sufficiently abundant pool of patients to enroll.

The gating factor of site activation contracts, IRBs, et cetera, that's progressing smoothly as predicted in our projection as that will complete enrollment in the first of the two studies by the end of the year with the second study coming in after that.

So although it's early, we're quite pleased with the track record of enrollment and patient identification..

Thank you..

Your next question comes from the line of Cory Kasimov from JPMorgan. Go ahead, please. Your line is open..

Hey. Good afternoon, guys. Thanks for taking my questions. A pipeline and a commercial one for me. So on the pipeline one, Hank, I wanted to ask about BMN 250 and how much follow-up you think you need there before potentially moving to the pivotal program.

Is that a one year DQ data you've just mentioned? And then I guess on that front, what do you hope to see on that side to move forward? Is stabilization of DQ enough or do you need improvement, too? And then I have a follow-up for commercial..

Yeah. It's a little early to talk about the pivot to a subsequent study. I think what I – the context they put on things now is that just a reminder that Brineura got approved in the United States on the basis of 96-week data, and in Europe on the basis to 72-week data, and fillings was triggered actually on the basis of 48-week data.

A big credit goes to the health authorities for being able to include more updated data in the package inserts on the basis of relatively rapid real time review. So in the context of Brineura, 48 weeks by itself was enough.

We don't know about the efficacy of the full cohort of patients to 48 weeks so that's why it's premature to speculate, but what I'd say is that based on Brineura, we have made substantial improvements in the BMN 250 programs, specifically we're using the same exact tool to measure outcome in a natural history context as in the treatment context.

We're measuring those Development Quotient improvements in the same patients not different patients. Those were – that was a big part of the Brineura review and we've eliminated that as a concern for the BMN 250 application. In addition, unlike Brineura in the case of BMN 250, there's a very good biomarker for biological activity of the product.

And finally, unlike with Brineura, where there were no systemic manifestations of the disease to follow, we've already demonstrated normalization of liver size, which I'll remind you has been a basis of approval for other enzyme replacement therapies.

So we're cautiously optimistic about the progress we've made with BMN 250, things that were ahead of where we were at a similar time in the case of Brineura. And as to kind of what magnitude of improvement would trigger either another study or an application, I think it's a matter of stay tuned..

Okay, that's helpful.

And then on the commercial front, assuming that pegvaliase is indeed approved in May, I can appreciate the slow and steady initial launch curve, but how should we be thinking about some of the headwinds and tailwinds for this product? I mean, what do you see is the biggest needle movers there that we should be thinking about?.

Yeah. So Cory, I think the first thing I would say is the picture is simplified by the fact that we're only anticipating launching in the United States next year.

We have over 200 clinical trials patients, the majority of which we would expect to be able to transition to commercial during the course of the year, assuming an approval they are around our PDUFA, so that's a tailwind. For naïve to treatment patients, we have to get through the induction and titration phase.

That would be something like a 12- to 24-week period on average, but also noting that some patients have taken longer than 24 weeks to reach a maintenance phase. During that period of time, patients will be taking a variety of doses of three pre-filled syringe SKUs, we would anticipate a 2.5 microgram, a 10 microgram and a 20 microgram dose.

And so depending on the dosing schedule, there would be fractional revenue during the induction titration phase, starting out at one syringe per week slowly in the induction and titration phase, so only fractional revenue during induction and titration.

And that would eat up the majority of the calendar year 2018 for naïve to treatment patients, so you could consider that to be a bit of a headwind.

In terms of new patient enrollment, 35 of the 125 PKE (00:38:45) clinics in the United States have experienced using pegvaliase through the clinical trial program, so that gives us a good base of experience to start off from, and we know that those investigators are interested in trialing new patients when pegvaliase is approved.

We also know that they've guided – that they would start patients in relatively small batches, I think several or several-ish, work them up through the initial induction and titration phase to something approaching maintenance dosing and then starting the next batch of patients and so on.

So that'll be kind of a measured pace of new patient introduction of the pegvaliase. And then for the – for the – about 90 PKU clinics in the United States that don't have experience through the clinical trial program, we have the usual education process to get through.

Before we would anticipate they would trial patients, we would anticipate and in fact guide those clinics to start with several-ish patients, be very deliberate about having good initial experiences with pegvaliase and then starting additional patients. So it'll be a measured start throughout 2018..

All right..

But Jeff, you might to add that the vast majority of the 200 patients that are currently on therapy, they will not need titration. They can go into full commercial use in the second half of this year..

Okay. Very helpful. Thanks, guys..

Yeah..

Your next question comes from the line of Chris Raymond from Piper Jaffray. Go ahead, please. Your line is open..

Hey, thanks. I've got actually two questions on pegvaliase if that's okay. Just first, I'm curious on the decision to wait on starting a pediatric program until there's an approval in adults. I think you guys have said that for a while.

Can you maybe clarify, is this driven by FDA's direction or is this your decision? And I guess the reason I'm asking, it's just kind of striking with today's announcement that you're starting an infant study for vosoritide, sort of why not apply maybe the same logic to pegvaliase? And then, maybe on the commercial side, I was struck by your comments that revenue for titration patients would be fractional.

I thought I heard you guys say earlier that you would not be pricing this on a per milligram basis and rather by SKUs. Can you maybe give a little bit more color? Should we think about it in terms of the amount of drug or is there some other measure? Thanks..

Hank, you want to go to pediatric?.

Sure. Thanks, Chris. The considerations with pegvaliase has all along been as a foreign protein that's pegylated with an elicited immune response.

We really wanted to build a good safety database before going into children, and that is an especially important consideration in the context in which there is an alternative form of therapy for children, namely medical and nutritional therapy. And that's different from – that's one aspect that's different from our other indications.

And another – and therefore sort of the ongoing accrual of damage is blunted in PKU as compared with our other enzyme replacement therapy business.

So I think those two things combined, the nature of the product and wanting to build a really strong safety database, as well as the availability of medical/nutritional, the compliance with medical nutritional therapy which is higher in children than it is in adults suggests to us to take a more measured approach into children.

Now, upon regulatory action, clearly that can be revisited..

And, Chris, on the subject of why fractional revenue during the induction and titration phase, thinking about pegvaliase patients in a maintenance setting where they would likely be receiving either 20 milligram or 40 milligram per day maintenance dosing, we would be pricing principally on expectations of how to price for maintenance dosing.

I mentioned earlier that we're anticipating that we would have three different pre-filled syringe SKUs, 2.5 milligram syringe, 10 milligram syringe, and 20 milligram syringe. In the United States, the most likely method of pricing pegvaliase would be either pricing on a per milligram basis or pricing on a per syringe basis.

In the maintenance phase dose setting, imagine a 20 milligram per day patient receiving one 20 milligram syringe per day; in an induction and titration phase, same patient would be starting out at one 2.5 milligram syringe once a week, and the frequency of that syringe use increasing getting to the point of switching to a 10 milligram syringe and then all the way up to a daily dose of 20 milligrams (00:44:50) in this case.

So whether we price on a per syringe basis or a per milligram basis, during the induction and titration phase patients would be getting a fractional price essentially during that period, and that fractional piece would be shifting from very low in the range initially to higher in the range as they get further through the induction – the titration process..

Thank you..

Your next question comes from the line of Robyn Karnauskas from Citi. Go ahead, please. Your line is open..

Hey, guys. This is Krippa (00:45:36) on for Robyn. Congratulations on all the progress. I too had actually a couple of pegvaliase questions. One question is about training the centers that did not participate in the clinical trials.

Do you have a plan in place for how you expect to train them, and can you talk about maybe a timeline for when you expect these centers to go online? And just to clarify, you said that the centers that are already online will treat several-ish patients in the beginning, so do you expect them to take on these patients and then take them through the induction titration period before they start the maintenance trial and then only take on new patients?.

Maybe I'll start and Jeff can chime in. As far as the broadening from the 35 to the 125, clearly the 35 centers who have had a lot of hands-on experience with pegvaliase have learned a lot. And we've captured a lot of that learning and we intend to apply that learning to the other 90 that we need to bring online.

And yes, we have quite detailed plans, but in the current moment what I want to say about that is we can't really speak about what those detailed plans are until the label for the product is final.

So I think the context to leave you with in the moment is you better believe we've got serious and detailed plans for how to extend the learnings from the 35 to the 125. And that's how the commercial team is going to operationalize and build on that. And maybe Jeff wants to take over..

Yeah. I think – thank you, Hank. A couple of the things that I think will be impactful in year one for the naïve to experienced clinics are, one, what we would anticipate is kind of a guidelines document to be published shortly after pegvaliase approval. We receive it the end of May. That would be one piece.

And then the second piece would be to find kind of peer-to-peer opportunities to leverage the experience of the clinical trial investigators to share with their non-experienced peers some tips and guidance on working through their initial patients.

In terms of the induction and titration phase, the maintenance and the notion of starting several patients – several-ish patients, getting them through the induction and titration phase before starting additional patients, what we've heard the clinical trial investigators say is that it's exactly the 12 to 24 week period that is normal for induction and titration that is the most intensive period for them to be managing dose adjustments, potential adverse events, that sort of thing.

Once they get through those dose adjustments, and that's the period where adverse events are most likely to occur, then the workload on those patients goes down significantly. And it's exactly at that point that we would anticipate clinics would be receptive to starting additional patients into the induction and titration phase again..

Okay, great. Thank you. And if I can sneak in one more question.

Have you seen any interest from patients currently on KUVAN, adult patients, in pegvaliase?.

We have not entirely polled existing patients for their interest in pegvaliase. Recall that we can't go out and speak promotionally about pegvaliase until it's approved. So I would anticipate there would be some interest, but I can't speak more specifically to that..

Great. Thank you so much for taking my question..

Your next question comes from the line of Philip Nadeau from Cowen and Company. Go ahead, please. Your line is open..

Good afternoon. Thanks for taking my questions, one also on pegvaliase and then one on BMN 250. The pegvaliase comments in your prepared remarks, you mentioned cautious optimism and you specifically mentioned (00:50:18) comfortable with immune reactions.

It seemed like your comments are a bit more cautious today than maybe what we've heard in the past, and I'm just curious what was the reason for that.

Is that coming from your interactions with the FDA or are you simply erring on the side of conservatism?.

The latter. Just we're three months away from a PDUFA date and it isn't over until it's over. But I think it's worth providing a little more color on kind of the review process. The tone of interaction is really positive. This is a review division that we've worked closely with a lot.

We had a patient-oriented drug development meeting that they requested where they got a chance to hear from patients for real on their own in terms of what the benefit of Phe lowering is, what the disadvantages of current therapy – Medical Nutritional Therapy are.

The agency had an opportunity to dig in, in detail about what are the adverse experiences like, what is management of the adverse experiences like, what are you looking for patients in the long haul. And I think the interaction is very positive and people came away enthusiastic.

As you know from public disclosures of the FDA process, the FDA undertakes many activities in parallel during the late stages in review, which include consideration of post-approval requirements, risk management planning, labeling process control validation, specification setting. All of these activities are on track proceeding quite nicely.

And so really, no change from where we've been and the message is that the process is not final until the process is final..

Got it. That's very helpful. And then second question on BMN 250. At the R&D Day that you held last year, I think Dr. (00:52:17) presented natural history data on about 20 patients.

I'm curious, was that the full natural history database that you have access to or is it larger? It seems like that the robust natural history data that you had was important in getting Brineura approved so I'm curious how robust is the package that you have in MPS IIIB?.

The package is going to be substantially more robust.

And the reasons for that are – and if you're – if you go back to the Brineura review talking about where is the FDA's focus, and we've said comparability of endpoints and comparability of patients, and that was driven by the fact that the patients in the control setting were different patients from the patients in treatment setting.

And those control patients were assessed using a set of tools that were developed by an academic, whereas the tools that we use were more drug industry appropriate tools, similar conceptually but not literally the same. In contrast, we are generating a roughly comparably sized natural history dataset.

But in this case with BMN 250, we're using the same tools for natural history for treatment, and the tools will be – the evaluations will be in the same patients before treatment and after treatment.

So we think that the actual natural history database that we're building – and again, it depends on the magnitude of treatment benefit, will be actually quite robust for interpretation of treatment benefit signals..

Got it. Thanks for taking my questions..

Your next question comes from the line of Andrew Peters from Deutsche Bank. Go ahead please. Your line is open..

Yes. Hello, and thank you for taking our questions. And let me add my congratulations on all the progress. This is Carlos in for Andrew. Following up on BMN 250, some of the early data has begun to emerge for gene therapy in some of these enzyme replacement therapies.

So how would you think about the competitive landscape going forward? And how can you position your current portfolio as well as reposition the R&D franchise to compete in this direction?.

Yeah. So I mean, it's worth taking a little bit of step back in terms of competition. The mucopolysaccharidosis in general have obviously been a relatively fertile area for drug development.

However, the MPS III family of disorders has been a little bit more challenging because the disease is principally a brain disease, or some of the most important manifestations are in the CNS, and given the blood-brain barrier it's been a difficult nut to crack.

As you know, companies have tried sort of similar approaches like lumbar intrathecal delivery of relatively low doses, and unfortunately Shire have been in the program in MPS IIIA with that approach after having gone on clinical hold for device-related complications. Also, if you know Synageva then Alexion had a program of IV delivery.

It had initially demonstrated some potential evidence of biological activity in the central nervous system after intravenous delivery, but unfortunately at the most recent world conference those effects just didn't appear to hold up or be real.

And so I think the take home messages there are blood-brain barrier challenges are significant and not easily navigated. Now we come to more recent undertakings and another company is taking an intravenous delivery approach using gene therapy to address the blood-brain barrier as some initial signals of activity and reduction in CSF GAGs.

We have published that you really need to correct to normal the accumulation of the pathological species of GAGs, and it remains to be seen whether that can be achieved from the blood slide of the blood-brain barrier. Our strategy has been the disease is a central nervous system disease.

We can make enough proteins to deliver it directly into the central nervous system right into the – where the action is in the brain. And that approach has actually proved successful already. So we like our chances. We're aware of the competition. We think there are some big challenges to the competitors but time will tell..

And Hank, correct me if I'm wrong, but I think we are the only company that has shown normalization of heparan sulfate levels I mean, all the other companies report reduction in heparan sulfate levels, but none of them so far have been able to prove a normalization..

Yeah. Thanks, J.J. And this is especially important because we showed that subtotal reductions in (00:57:33) species do not actually collect for rats the histopathological phenotypes of the disease in experimental animals. So we really think you have to knock the pathology all the way down to normal, and nobody's done that yet except for us..

Okay. Thank you. And if I may, just a follow up on the pipeline on the BMN 290 program. At the R&D Day you guys discussed how BMN 290 is selective for HDAC3 over 1 and 2 if we understood the data correctly, and how this could overcome some of the side effects that have been seen with other Class 1 HDAC inhibitors.

So my question would be where's HDAC expressed in the body and specifically in the brain, and what side effects might you expect with BMN 290?.

Well, histone deacetylases are used commonly throughout every cell of the body, and you're right to point out that there are different classes of – different isoforms of HDACs.

From our preclinical studies, it appears that myelosuppression appears to be the most relevant dose limiting toxicity, but because of the design of BMN 290, we're able to achieve tissue concentrations of BMN 290 which are inducing frataxin up regulation to a substantial degree and at levels which are lower than the doses that cause myelosuppression.

Now obviously, that's all pre-clinical work and the essential clinical question will be whether we can establish a positive therapeutic index, that is to say frataxin up regulation without accompanying myelosuppression.

We're cautiously optimistic based on our pre-clinical data that we can do that, but human clinical experiments will be required to demonstrate that.

Now one of the other important points to make here is that because the up regulation of frataxin is specific to the disease allele, this can only be done in diseased patients and the initial target population of our investigations will be patients, so we'll get an answer very quickly..

Okay. Thank you..

Your next question comes from the line of Ying Huang from Bank of America Merrill Lynch. Go ahead, please. Your line is open..

Hi. It's Aspen on for Ying. Thanks for taking our questions. Real quick on BMN 250, what do you guys think are the gating factors to moving into pivotal development, maybe a little color there would be nice. And where are you guys on securing reimbursement for Brineura ex-U.S.? What are some of the getting factors there to expanding ex-U.S.? Thanks..

I think the key gating factor is going to be an evaluation of the effectiveness data from the first cohort of patients that have been treated per year, which I said probably won't be until about 2020, so stay tuned for further updates there.

Just to remind you, we're going to complete enrollment in the natural history cohort in the first quarter of 2018. Those patients will be followed for a year through 2019. They'll roll over onto a treatment starting in the first quarter of – the end of enrollment and the treatment phase will be in the first quarter of 2019.

Those patients will take a year of treatment and that's why I got to 2020 for the first signal – the sort of the first comprehensive signal of activity data from the initial treatment cohort. So stay tuned..

Relative to your question about Brineura ex-U.S. reimbursement, I think we've noted before that of the 40 or so... [Technical Difficulty] (01:01:32).

Of the 40 or more patients on commercial therapy at the end of 2017, many of those were located in approximately six ex-U.S. commercial markets, two in Latin America, four in Europe.

And the reimbursements for those patients is on a named patient or named patient like basis while we navigate the whole reimbursement and price approval process that we have to get through in most markets. The commercial patients in Europe would be coming from each of Germany, France, Italy and the UK.

And in each of those markets, there's very prescribed set of activities that sponsors need to get through to obtain reimbursement approvals and a price level. We are in the midst of navigating that system right now and we anticipate getting through that process in those key markets and other markets during the course of 2018.

And we think that having navigated that system and attaining full price and reimbursement status in certain markets will allow patients easier access to commercial Brineura therapy relative to the named patient or named patient-like approvals that have been attained so far..

Thanks for taking my questions..

Your next question comes from the line of Laura Chico from Raymond James. Go ahead, please. Your line is open..

Hi. This is Hamza (01:03:27) on for Laura Chico. Thanks for taking our question. One on pricing strategy in gene therapy. As you're thinking about various gene therapy pricing strategies, are there certain payment models that make more sense than others within the hemophilia space? Thank you..

Jeff?.

J.J., did you want to take that one?.

Yeah. Yeah. Yeah, Jeff. Why don't you -- yeah, go for it..

Okay. Yeah. So payment models are a key variable for gene therapies. We're seeing how that's playing out already with the initial approvals in the U.S. and Europe of that initial product.

In the United States, some of the models that have been discussed which might include payment over time, payment for positive results, something like a rebate for patients that don't respond adequately. Those models are going to be challenging to implement until the problem of how to account for government price calculations is solved for.

There may be solutions for that but that's a barrier to implementing those kind of programs in the United States. Outside of the United States in a single payer-like model, those kind of reimbursement models are probably easier to navigate and impossible to implement.

And from BioMarin's perspective, I think our principal interest in pricing reimbursement models is to be able to capture as much value as possible as valrox may provide, number one on a clinical value basis, number two on the quality of life value basis, and number three in terms of cost offsets through what is a very expensive lifelong treatment regimen today.

So we want to capture as much value as possible across all three of those dimensions, and we're open to different reimbursement models that will allow us to capture that value..

Okay. Thank you. That was helpful..

Your next question comes from the line of Ian Somaiya from BMO Capital. Go ahead please. Your line is open..

Thank you for taking my questions, I have two. First on valrox and vosoritide, two products which you've spoken excitedly about or enthusiastically about in the past.

Just curious given the uniqueness of those products in the marketplace, what type of investments are going to be required, if you can speak to sort of the commercial investments, whether there are structural changes that might be required or from a manufacturing standpoint? And the second question was just on business development.

You're clearly at a sort of a period of stable growth with visibility into high growth associated with both of these products, how does that influence your BD decisions and the type of assets and opportunities you might pursue?.

So this is Dan, maybe I'll take a stab at the cost structure question, and then maybe J.J., you want to do the BD question. Cost structure wise, frankly, neither vosoritide nor valrox would be materially different than what we've dealt with in the past.

As you know, from a manufacturing standpoint, actually the initial commercial scale manufacturing plant is done. We've talked about being able to handle 2,000 to 3,000 patients a year out of that facility. There are things we could potentially do to even expand that, and for additional demand we can construct capacity either here or elsewhere.

Commercial structures and resources would be similar to what we've utilized in the past, be a different call point and a different sales force, but all the infrastructure is in place and same for vosoritide. So nothing dramatically or materially different that we're not ready and lined up for.

J.J., you want to take business development?.

Yeah.

I mean, on the business development front, as you know we always are, on an ongoing basis, analyze potential opportunities I would say considering this very significant pipeline that we have and the fact that it's likely we will add new projects, we're probably going to announce one or two new projects before the end of the year, which would be pretty significant projects.

I would say our appetite for a large transformational deal is relatively low at this time (01:08:57). But however, we are always interested in earlier stage opportunities that would be strategically coherent with our overall strategy of continuing to develop first-in-class or best-in-class products for rare genetic disorders.

I mean, obviously, because of the size of the company now, we are shooting for (01:09:26) $1.5 billion revenue this year, I would say unlikely we will move much or continue to – or develop products for ultra or ultra-orphan or very, very small patient population. But we, at this time, are planning to stick within the orphan space.

In the orphan space, there are plenty of opportunities and it will be a combination of large molecules, peptides, small molecules, and of course, gene therapy. So that's kind of where we stand today..

And, J.J., just based on your comments regarding the additional programs you plan to unveil, what is the trigger for that? Can you speak to what therapeutic areas they are likely to address or target or the mortality?.

I think we have – I mean, I don't want to say too much, but I mean, one of them I think we said at the last R&D day that we are doing some critical work on a gene therapy for PKU. I mean, that could be one of them. But there is another – at least one other potential project that we probably will feel comfortable to announce before the end of the year.

So what's the trigger for us is that when we have done all the work and all the preclinical analysis, that makes us comfortable that we are willing to move towards pre-IND activities and move towards initiating later clinical trials..

Okay..

And we're getting to a point it's likely that it will happen for one or two of them between now and the end of the year. They will not be 2018 INDs, but likely going to be 2019 INDs or early 2020, so stay tuned on that..

Sure. Thanks for the additional color, J.J. and Dan..

Your next question comes from the line of Tim Lugo from William Blair & Company. Go ahead, please. Your line is open..

Hi. (01:11:38) on the line for Tim Lugo. Very nice to see the full BMN 250 dataset at WORLD, and very reassuring that you were able to fix the dose delivery issues with (01:11:51) a larger filter in the core (01:11:53).

One concern that we did have, though, was a potential rumor that the Sanfilippo study was on a clinical hold or once was, can you just confirm or deny that straight out?.

Hank, do you want to talk about this?.

Yeah, sure. Global study, we do a lot of work with regulators around the world. In the moment we have no regulatory impediments to enrollment anywhere, so we're pleased about steaming ahead..

Beautiful. Thanks. It's good to deny it.

The second question, just in terms of pegvaliase and the dosing, are you looking to pursue an at-home dosing regimen versus an in-office dosing? And if you are, how do you think that would determine what you envisage peg sales estimates for the product would be?.

Well, let me just say that the study that was conducted was an at-home study, and so we absolutely anticipated that that would be a critical aspect of uptake of pegvaliase. And so there is really no option for anything other than at-home because that's the study that we did..

Beautiful. Thanks very much for the questions, and great year..

The next question comes from the line of Stephen Willey from Stifel. Go ahead, please. Your line is open..

Yeah. Thanks for squeezing me in. I was just wondering if you could comment on the distribution of maintenance pegvaliase doses amongst the 200 trial patients that are receiving the drug under expanded access, and I guess maybe more specifically what proportion of those patients are on either the 20 mg versus the 40 mg dose? Thanks..

Jeff?.

What I say is that, first of all, we're not going to give the confidential information of the distribution other than to say the vast majority of patients are satisfied by 20 milligrams and 40 milligrams.

And as far as projecting how the trial is going to read on the marketplace, I'd just remind you that a really important piece of this is the actual product label. And until we finalize that with the FDA, it would be speculative to give you any more information.

I think the time of the approval of the product when we have the actual label in hand, we can be a little bit more concrete..

Appreciate it. Thanks..

Your next question comes from the line of Jing He from Gabelli. Go ahead, please. Your line is open..

Okay. Thank you for taking my questions. First on BMN 250, I'm just wondering the trend in brain volume and ventricle volume are less obvious than liver size decrease and stabilizing cognitive function.

So I guess how important are these measures clinically, and also do you think 300 mg is enough?.

Well, let me start with the second part. 300 milligrams totally normalize CSF GAG, so I suppose you could ask the question of whether 300 milligrams might be a little too much. But we don't want to make the mistake that others have made by underdosing and therefore receiving too little efficacy.

And then as far other surrogate parameters reading on main efficacy parameters, the more important of the parameters clearly are the clinical efficacy parameters.

We saw in the case of Brineura, for example, quite dramatic effects on stabilization of loss of ambulation and progression of loss of ambulation, for example, and maybe a little less dramatic effects on CSF brain volume.

So the good news is that the clinical outcome variable were the important ones they carry today, and that's what we're hoping to observe in our BMN 250 program when the cohort is fully mature..

Also, could you help us understand your Brineura guidance? What would it take to achieve your low end versus high end of your 2018 guidance? Is the driver mainly diagnosis in the U.S. or launch in ex-U.S.

countries?.

It's really a combination of those variables. We have approval in the United States and across the EU now, so we have regulatory access to a number of markets. We're pursuing additional registrations at this time.

And then inside of those markets as I've noted outside of the United States, we're navigating price and reimbursement systems and we're also pursuing early identification of treatment. So it's really a multivariate model and we're in the midst of it..

Great. Thank you so much..

Your next question comes from the line is Vincent Chen from Bernstein. Go ahead, please. Your line is open..

Thank you for taking my questions. A couple of follow-ups on pricing and reimbursement. The first is, as you alluded to earlier, one key aspect of the value you can capture for gene therapy would be a potential for longer-term multi-year value-based pricing.

You're arguably further ahead when it comes to bringing a gene therapy to market for a relatively large indication. What's your level of optimism with respect to being able to achieve some of these more creative pricing structures in the U.S.

and what is the path to get there from where we are today?.

Yeah. So as I noted earlier, I think that we in general – and outside of the United States, we're highly interested and motivated to pursue creative strategies that allows us to capture the value that's provided by valrox.

Value is typically thought of on the basis of cost offsets, but there's so much more potentially value that this program offers in terms of quality of life and better clinical outcomes. So we want to capture value across all three of those dimensions.

And you're absolutely right, pricing over time based on durability of effect, for example, could be an excellent vehicle for allowing us to do that.

In the United States, there are some practical implications to Medicaid pricing reports that manufacturers must do and that needs to be solved for before some of these more creative programs can be implemented in the United States.

A potential solution would be CMS approving so-called demonstration projects or programs that would be submitted by a sponsor like a BioMarin. That could potentially happen.

There could be legislative fixes for this on the logic that the original Medicaid legislation that put all these pricing calculations in play in the first place was based on a healthcare system that based on (01:19:17) 30 years ago but that has been overtaken by innovative advancements like gene therapy today.

So I think we're cautiously optimistic, but there needs to be some things that happen to allow us to solve for that, and they probably won't happen overnight..

And how about the portability issue with folks moving between plans? It sounds like that's something that would take legislative change.

What's the path forward there?.

I can tell you some of the feedbacks that we have gotten from payers on that subject. So subject to the ability to control for a free rider problem, free rider problem being, for example, as we have four major payers cover for valrox or another gene therapy and one doesn't, creating a free rider problem.

The initial view of the insurers that I heard is that they would expect the flux in of patients to be relatively the same of flux out of patients, and so the portability problem has got a primary problem for them.

It's something that they're interested and they're in then they're thinking about but it's not their primary barrier to wanting to proceed with the payment over time model – or sorry, a pay upfront model..

I see. I see. And then, I guess, just getting a little closer – like a second question on pegvaliase..

Excuse me.

Can you get to the back in the line and let others ask questions, if you don't mind?.

Yeah. Yeah, I do..

Thank you..

Your next question comes from the line of Kennen Mackay from RBC. Go ahead please. Your line is open..

Hi. Thanks for taking the question. One for Hank on the safety. I wanted to get your perspective on the recent article from Dr.

Westin's (01:21:21) lab with concerns surrounding the safety of high-dose AAV vectors, specifically whether this is sort of unique to the AAV IX that you had used in the study or perhaps unique to the pigs and monkeys, again, that you had used in this preclinical study.

And then one for Jeff, again on pegvaliase long term, is this something we should be thinking about growing the market here in the U.S.

sort of beyond the 7% year-over-year growth that we saw for KUVAN over the last year, or should we be anticipating that growth is really going to come from transferring a KUVAN patient to pegvaliase and the pricing premium there that you had mentioned? Thank you..

Yeah. So as hard as it is to compare across clinical trials in humans of similar agents, it's, I would say, impossible to compare across different vectors, capsids and species.

For (01:22:28) muscular atrophy, there may be some relevance of the findings, I don't know, not an area that we're – and in our area, we have human clinical data on the safety of the doses that we're using, and I think that human safety data are the important consideration for our product..

Thank you..

And relative to your question about....

Your next question comes from the line....

We're not finished.

Jeff?.

Relative to your question about pegvaliase potential over time, in the United States there's approximately 4,000 adult PKU patients that are being treated in clinics today, one third of which are presently on KUVAN. At launch, our focus will be that two-thirds of adult PKU patients that are not presently on KUVAN.

So we will be focusing very hard on getting incremental access to a bigger portion of the PKU market, and we think that that would be delivering more than incremental PKU revenue in total.

Beyond launch, we have a motivation to help KUVAN adult patients that are not adequately controlled on KUVAN or not as well controlled as they would like to be to trial pegvaliase on the logic that we will likely face limitations on our KUVAN exclusivity in a couple of years..

Thank you..

Your next question comes from the line of Gena Wang from Barclays. Go ahead, please. Your line is open..

Thank you for taking my questions. I would just ask the two quick questions.

So one, just wanted to confirm with you that 2018 revenue guidance of the $1.47 billion to $1.53 billion did not include any pegvaliase assumptions?.

No. No. I think we try to express, it does include our assumptions about pegvaliase but what we said is we think we can still be within the range of – obviously lower, but within the range without pegvaliase, so peg is in there..

Okay, sounds good. And then another question is regarding the rox for hemophilia A.

So for the Phase 3 trial, will patient only receive the new GMP product?.

So to remind you, the trial was started with material made by a contractor using the 2b commercialized process. The bulk of the trial will include patients who are treated using that same 2b commercialized process but manufactured in our Novato facility at the to be commercialized scale of manufacture.

We believe that sufficient comparability of the data from the contractor to the BioMarin facility at scale will enable us to pool the patients from the smaller first part of the study to the larger second part of the study. If that turns out not to be the case, we can simply expand the size of the larger portion of the trial for pivotal purposes..

Okay. And then the....

Your next question comes from the line of Vincent Chen. Go ahead, please. Your line is open..

One quick question on pegvaliase.

As you look towards launch and speak to payers, what are you hearing about the likely coverage guidelines for pegvaliase and how this could potentially vary by pricing? From what you've heard, are there some payers that might require patients to potentially fail a diet (01:26:25) or a KUVAN if pegvaliase is indeed more costly?.

Yes. So we have conducted payer research not surprisingly in the run up to our PDUFA date, and we've gotten a mix of feedback from payers. Generally speaking, I would say the payers are comfortable with the notion of lowering phenylalanine levels as an adequate measure of managing PKU, so that's very good for pegvaliase.

And payers are very comfortable obviously with their reimbursement of KUVAN. So that sets a good baseline also going into the potential approval of a next generation therapy.

Beyond that, in terms of coverage policies, we've gotten a variety of feedbacks but nothing that would be suggestive of kind of hard and strict policies across the board of step therapy or failures on KUVAN or that sort of thing. It's possible, but we could see some of that creep in, in initial coverage policies, however..

Great. Thank you very much..

There are no further questions at this time..

Okay. We'd like to turn the call over to J.J. to make his final comments, and then we'll say goodbye for the day. Thank you..

Thank you. So thank you, operator. Thank you, Traci. So in summary, 2017 was a defining year for BioMarin as we firmly established our leadership position among rare disease companies. Not only did our development pipeline progress across every program, our commercial business to a record revenues to over $1.3 billion.

In 2018, we expect top line revenue growth of 15% to 19%, our full year revenue guidance between $1.47 billion to $1.53 billion. In 2018, in late-stage development, we will see continued enrollment of valrox and vosoritide paving the way for anticipated data results in 2019. In late May at the scheduled PDUFA, we hope to receive a U.S.

pegvaliase approval. We are all well equipped to executing a successful launch given the 10 years of direct experience working with the PKU committee either directly with KUVAN patients and care providers, or those who have participated in our pegvaliase clinical trials.

On the research side of the business, our team is working diligently to bring forth our next R&D candidates, any of which could be announced later this year.

The confluence of execution across the commercial, development, research and manufacturing organization at BioMarin are set up for steady growth in the very near term, followed by accelerated growth upon approvals of our late-stage programs like valrox and vosoritide. We're tremendously energized by the opportunities that lay ahead of BioMarin.

Thank you for your continued support, and we look forward to keeping you apprised over the coming quarters..

This concludes today's conference call. You may now disconnect..