Traci McCarty - BioMarin Pharmaceutical, Inc. Jean-Jacques Bienaimé - BioMarin Pharmaceutical, Inc. Daniel K. Spiegelman - BioMarin Pharmaceutical, Inc. Henry J. Fuchs, M.D. - BioMarin Pharmaceutical, Inc. Jeffrey Robert Ajer - BioMarin Pharmaceutical, Inc. Robert A. Baffi - BioMarin Pharmaceutical, Inc..

Salveen Richter - Goldman Sachs & Co. LLC Cory W. Kasimov - JPMorgan Securities LLC Ying Huang - Bank of America Merrill Lynch David N. Lebowitz - Morgan Stanley & Co. LLC Christopher J. Raymond - Piper Jaffray & Co. Martin Auster - Credit Suisse Securities (USA) LLC Andrew Peters - Deutsche Bank Securities, Inc. Joseph P.

Schwartz - Leerink Partners LLC Kennen MacKay - RBC Capital Markets LLC Phil Nadeau - Cowen & Company Ashiq Mubarack - William Blair & Co. LLC Laura Chico - Raymond James & Associates, Inc..

Good afternoon and welcome to the first quarter financial results conference call. My name is John and I'll be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

At this time I would like to turn this call over to Ms. Traci McCarty. The floor is yours..

Thank you, operator, and thank you, everyone, for joining BioMarin today on our first quarterly conference call for 2018.

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 of different areas of therapeutic research and development.

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

On the call today from BioMarin management are J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President of Global R&D; Dan Spiegelman, Executive Vice President and CFO; Jeff Ajer, Executive Vice President and Chief Commercial Officer; and Robert Baffi, Executive VP of Technical Operations.

Based on feedback from our last quarterly results conference call, and out of respect for your time, we plan to wrap this call up with the goal of 5:30. If we end the call and you still have follow-up questions, please feel free to send me an e-mail or call, and we'll get right back to you.

In order to keep this timeline, we request that you limit yourself to one question during the Q&A portion of the call, so we can get to everyone. Thank you for your cooperation. 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 we are pleased to report solid financial results for the first quarter of 2018, operational progress across the development pipeline, and continued optimism about a potential U.S. approval of pegvaliase ahead of the upcoming PDUFA action date of May 25th.

In addition, we have two exciting business updates. Our first, the nomination of our gene therapy product for the treatment of PKU as our next IND candidate after our Friedreich's ataxia program likely to enter the clinic in 2019.

Further extending the breadth of our growing gene therapy and PKU franchise, we are very encouraged by our pre-clinical results, demonstrating sustained normalized Phe levels of out to 53 weeks at the last observation. This new program is really perfect strategic stance for BioMarin, engaging our sweet spot in three ways.

We are the leaders in PKU therapies. We are the leader in systemic gene therapy, and we are the leader in gene therapy manufacturing. It would be difficult to find another program that could leverage our abilities in a better way and generate more synergies within BioMarin.

Second, we are pleased to let you know that our gene therapy manufacturing plant is coming online as planned. And that any day now, patients in our registrational studies will receive their single dose of valrox, with commercial-scale material from our new facility.

Reducing commercial gene therapy material from our own facility not only ensures predictable and consistent supply of valrox to support our global registrational programs, but reduces the development risks, and speeds time to market.

I wish to extend a special thanks to our technical operations team at BioMarin led by Robert Baffi, who is going to be available for Q&A, for executing seamless build-out of our gene therapy facility in record time. Now turning to pegvaliase, our seventh potential product with a May 25th PDUFA action date.

Significantly, we believe pegvaliase could ultimately reach $1 billion in peak sales based on the substantial market opportunity, as there are an estimated 33,000 adult PKU patients in our commercial territories, including India and China; and the vast majority of them are not treated with Kuvan today.

As we have communicated, we believe our understanding of how to effectively titrate patients to their optimal maintenance dose will result in the majority of pegvaliase patients achieving significant Phe reductions, as was demonstrated in our Phase III PRISM study.

We believe the dramatic Phe reductions demonstrated in our pivotal study will drive significant uptake of pegvaliase resulting in substantial and sustainable long-term revenues. As one of our KOLs recently shared with us, his patients' biggest fear is that their pegvaliase will be taken away from them.

As Jeff will describe in a moment, our commercial organization is ready to hit the ground running in anticipation of an approval next month. We anticipate entering a market that is primed for a treatment option that is highly effective at restoring Phe levels in adult PKU patients who have uncontrolled blood Phe despite the current treatment options.

Turning to our outlook for the remainder of 2018, we look forward to approximately $1.5 billion in revenues for the full year, driving an approximately 60% increase in non-GAAP income, and also, advancing all of our development pipeline programs, and potentially receiving U.S. approval and launching our seventh commercial product, pegvaliase.

Now, I was planning on turning the call over to Jeff Ajer, our Head of Commercial Operations, but Jeff has a problem with his voice. He's got laryngitis. So, Dan has graciously offered to cover for Jeff's prepared remarks. So you will hear Dan's voice talking for Jeff. But Jeff will be – he's saving his voice to be able to go for Q&A later on the call.

So, Dan?.

Thank you, Jeff. I will do my best Jeff impersonation. Okay. The commercial organization is also hitting its stride as it prepares for a second potential product approval in just two years. For pegvaliase, though we won't be in a position to provide all the launch plan details until after an approval, we can discuss some key elements of our plan now.

For example, with respect to pricing, we expect to price pegvaliase at a moderate premium to the average price of an adult Kuvan patient, which is currently about $150,000 a year annually.

Further, during the initial induction titration phase of treatment, we would expect to generate revenues during this phase but at a fraction of the full commercial rate, which reflects the fact that during most of the induction titration period, patients are dosed either once or twice a week instead of every day during the maintenance commercial phase.

We are very enthusiastic about the opportunity with pegvaliase, as it will be a significant new component of our PKU franchise. Pegvaliase will offer PKU clinics and their adult patients a new and more powerful tool to achieve desired Phe lowering.

In recent years, there has been an increased appreciation of the benefits to patients of lowering Phe, particularly for the approximately 50% of adult patients that are not able to achieve controlled levels with diet alone, or in conjunction with Kuvan.

An even greater proportion, two-thirds of adult patients cannot achieve the ACMG target Phe levels of less than 360 nanomolar. Our investigators have shared with us their excitement in having pegvaliase as an approved treatment option. A number have shared anecdotally that they have particular patients who have expressed an interest in pegvaliase.

And these patients would be targeted upon approval for placement onto the drug. We also know there is a high level of awareness and interest from PKU clinics that have not been investigators in the trial. Two-thirds – 32, rather, of the 125 PKU clinics in the U.S.

have experience with pegvaliase through the clinical trials, and account for approximately 50% of in-clinic adult patients.

After approval, our first priority will be to work with the experienced clinics to transition the majority of clinical trial patients to commercial drug, and to identify new patients that can begin the induction and titration process.

We have robust plans to rapidly provide information and education to a target of approximately 30 large clinics without experience in the pegvaliase clinical trials, which count for approximately 35% of in-clinic adult patients.

This effort will include direct communications from BioMarin as well as peer-to-peer education from clinical trial investigators. This strategy will give us rapid access to approximately 85% of the U.S. target market by leveraging our established relationships built over the last decade through Kuvan.

Now, turning back to results in the quarter, the company delivered $373 million in total revenue, representing an increase of 23% year-over-year.

Some of that growth is attributable to Aldurazyme and, since some of the Aldurazyme revenue increase is due to new revenue recognition accounting standards, I will cover it as me when we do the financial portion in a moment.

Across our established commercial brands, we remain on track and are reaffirming our full year guidance for each of the products individually and for total BioMarin revenues. Turning briefly to Brineura for the treatment of CLN2, which was approved in both the U.S.

and EU in 2017; as we said upon launch, 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.

Disease education and support of targeted diagnostic screening programs are working well, and will continue to be a focus worldwide as early diagnosis is critical in this condition. The Brineura launch is still in its global rollout, and we are seeing a gradual, steady ramp of new countries and additional sites prepared to provide treatment.

As a result, there's been a steady increase in the number of commercial patients treated with Brineura. We continue to expect to have about 40 sites equipped to provide treatment with Brineura by midyear this year. Importantly, we are seeing a high level of interest from physicians and families impacted by CLN2.

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

Hank?.

Thank you, Dan as Jeff. The FDA is wrapping up their review of pegvaliase and the anticipated follow-up process is unfolding as expected, including discussions on potential post-marketing commitments, labeling, and safety management. (12:15) and we remain optimistic about an approval. But, of course, it ain't over till it's over.

And that's exactly what we meant when we said we were cautiously optimistic during last quarter's results calls. We're also very pleased that our marketing authorization application for pegvaliase accepted by the European Medicines Agency in late March.

We look forward to working with European health authorities over the coming months with an eye towards making pegvaliase available to patients and families in that region upon potential approval in the European Union. On a related note, as J.J.

mentioned, we're very excited to share that another important component of our PKU franchise, our gene therapy product to treat PKU, is expected to enter the clinic in 2019. We are very encouraged by the data observed to date, demonstrating sustained normalization of Phe levels in pre-clinical models out to 53 weeks as of the last observation.

We look forward to sharing pre-clinical data and other details about our new gene therapy program in R&D Day later this year, which will be held in New York on November 7. Moving now to other development updates and starting with our gene therapy product for hemophilia A or valrox.

As you know, we opened enrollment on our global Phase III program last year after demonstrating positive efficacy and safety in both the 6e13 and 4e13 doses in subjects with severe hemophilia A.

As previously planned and confirmed today in the very near term, we intend to begin using material from our own commercial facility at commercial scale in the ongoing global Phase III program. We're thrilled with the level of enthusiasm in our clinical trial sites for our GENEr8 studies with patients showing a greater preference for the 6e13 dose.

This demand underscores, in line with our discussions with investigators and patients, the belief that severe hemophilia A patients have a keen interest in restoration of clotting function with the ultimate goal of eliminating bleeds and factor use.

At our last update, both the 6e13 and 4e13 dose demonstrated median annualized bleeding rates and factor use of zero.

Demand for participation in our GENEr8-1 studies supports our expectation of enrollment completion by the year's end, followed by anticipated completion of enrollment in the GENEr8-2 study, using the 4e13 dose in the first half of 2019.

At the beginning of this year, we indicated that our next data update for the ongoing Phase II program would be midyear and would consist of two-year data from the 6e13 dose cohort and one year data from the 4e13 dose cohort.

And consistent with that commitment, our Phase II program update for valrox will be presented at the World Federation of Hemophilia 2018 World Congress next month in Glasgow.

Next steps for the broader development program include the start later this quarter of a study in patients with pre-existing antibodies to AAV5 to better understand our ability to treat those patients with valrox.

Turning to vosoritide, our Phase III product for children with achondroplasia, our Phase III program, our feeder study which establishes based on growth rates to treat to – prior to treatment is now fully enrolled for subjects 5 years of age and older, 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 top-line data in the second half of 2019.

Later this quarter, we look forward to beginning enrollment 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 drive.

Finally, as you may have seen today, the Food and Drug Administration announced it has rescheduled the Pediatric Advisory Committee, which was originally scheduled for March 22nd, but delayed due to snow. The meeting will now be held in May 11th.

The meeting supports commissioner Gottlieb's recent comments to congress about the importance of developing guidance documents for rare diseases.

Specifically he said, collectively, guidance documents form part of an effort by the Food and Drug Administration to help companies develop drugs against rare, serious diseases that pose distinct challenges to R&D teams. Applying general research strategies and clinical designs for these indications can lead sponsors down the wrong path.

We at BioMarin are very keen that the FDA is working to streamline drug development guidelines for rare diseases and expect these types of meetings will become more commonplace as the agency seeks to improve chronic review programs for the benefit of patients.

We've been very encouraged by the overwhelmingly positive commentary posted on the Federal Register docket from the achondroplasia community, sharing their interest and support of a treatment option for this condition.

Given the importance of the patient voice in today's Food and Drug Administration's deliberations, we're so pleased the community has stepped up ahead of the meeting and we believe they'll do the same thing on May 11th.

The BMN 250 for MPS IIIB is progressing nicely, having recently completed enrollment in the first part of the study, designed to collect baseline development portion (17:09). Following that arm of the program, subjects will be transitioned into the 48-week treatment portion of the interventional study in the first quarter of 2019.

To remind you why we're so excited about this program, in the February WORLD meeting, we shared that six of six BMN 250-treated subjects demonstrated normalization of heparan sulfate levels, a biomarker in the cerebrospinal fluid.

Normalization of liver size in three of three BMN 250 patients from the dose escalation on the – arm of the study was observed. These data suggest that BMN 250, which is administered by intracerebroventricular device infusion reaches the peripheral circulation and has activity in the somatic organs.

Development Quotient, a measure of cognitive function normalized to age, is the primary endpoint measure for the study. In the three of three treated patients from the dose escalation arm of the study, preliminary data suggest stabilization of cognitive Development Quotient at the highest dose of BMN 250 in all treated subjects.

Patients with untreated Sanfilippo B syndrome usually show progressive decline in Development Quotient. Also expected later this year IND filing for BMN 290, our product for the treatment of Friedreich's ataxia.

Based on what we've observed so far in preclinical models, including increases in frataxin message expression in brain tissues more than two-fold, we're excited to move BMN 290 forward later this year.

Currently, there are no approved disease-modifying therapies for Friedreich's ataxia, so we're hoping to develop a product to outpatients in need of an effective treatment option in this extremely debilitating condition.

In summary, we're extremely pleased with the productivity coming out of the worldwide R&D development organization, highlighted by, just this week, the publication in the New England Journal of Medicine of our findings from the Brineura development program, our second in the Journal of Medicine paper in the last six months.

We've learned so much over the past years on how to best focus our development programs to enable rapid and effective drug development at BioMarin and anticipating a continuing flow of new development candidates from our research organization.

As we prepare for the highly anticipated potential approval of pegvaliase in the U.S., my team and I are more inspired than ever to continue our good work for the benefit of patients with rare and ultra-rare disorders. Thank you so much for your support. And now, I'd like to turn over the call to real Dan to review financial results in more detail.

Real Dan?.

Thank you, real Hank. I'll refer you to today's press release for full details summarizing our financial results for the first quarter. To start the review, we reiterate all of our 2013 full year guidance elements, revenues, expenses, and bottom line results.

This allows us to stay on track for year-over-year total revenue growth of approximately 15% and non-GAAP income growth of over 60%. Now, turning to key items in the quarterly results.

Unique to the first quarter of 2018 is $66 million in Aldurazyme net product revenues, the largest quarterly result ever reported, and an increase of $47 million compared to the same period last year. $27 million of the increase is due to the mandatory adoption of the new revenue accounting standard, ASC 606.

While this new standard will not have any effect on revenue recognition for the products we currently sell ourselves, this standard does impact when our Aldurazyme revenues will be recognized.

In short, under the new standard, we will recognize the full revenue we expect from Genzyme's sale of Aldurazyme at the time they accept the product we ship them. Under the old standard, we only recognized $100 per vial when product was shipped to them and recognized the majority of our share of the revenues when Genzyme had sold the product.

While this new standard will not affect our total Aldurazyme revenues over the life of the contract, it will affect the timing and it will make quarterly Aldurazyme revenues more volatile, as the revenue recognition timing is now based almost solely on when product is sold to Genzyme and is disconnected from the timing of the sale to patients.

The other driver of Aldurazyme revenues in Q1 2018 had to do with the higher volume of product sales to Genzyme in the quarter. In 2017, Genzyme sold considerably more inventory than we shipped to them in 2017. And in Q1 2018, they largely made up this shortfall, and this triggered that $20 million of additional Aldurazyme revenue in the quarter.

Looking forward and to help you model quarterly revenues for the rest of the year, we currently estimate that additional product shipments to Genzyme will result in $60 million of additional revenue in the next three quarters of the year, bringing total Aldurazyme revenues for the year to $125 million.

The second item of note for the quarter is the cost of sales as a percent of revenues at 22% in the first quarter is above our full-year guidance. The higher Q1 cost of sales percentage relative to the full year guidance can be largely attributed to the unusually large contribution of Aldurazyme revenues to total revenues in this quarter.

Since we bear the full cost of producing Aldurazyme, but receive only a portion of the revenues, our cost of sales percentage for Aldurazyme is roughly double that for the products we sell ourselves. Excluding Aldurazyme, our cost of sales as a percent of revenues for the quarter would have been 19.7%.

Operating expenses have been trending up since Q1 2017 as our valrox, vosoritide, and BMN 250 clinical program have been advancing, and as Brineura was launched, and preparations for a potential pegvaliase launch have been underway.

In fact, Q1 of 2017, the comparable point in our press release, was a low point for these expenses compared to both 2016 and the balance of 2017. Consequently, the growth in Q1 2018 R&D plus SG&A expenses versus Q1 2017 was $57 million when there was a slight $7 million decline versus the prior quarter.

Moreover, Q1 2018 operating expenses are in line with our expectations and are consistent with our full year guidance for both those elements.

Turning to bottom line results, we reported a $44 million GAAP net loss and $21 million non-GAAP net income for the first quarter 2018 compared to a GAAP net loss of $16 million and non-GAAP income of $34 million in the first quarter of 2017.

We remain on track for full year GAAP loss of between $115 million and $165 million and non-GAAP income of $100 million to $140 million. In closing, BioMarin delivered solid results from Vimizim, Naglazyme, Brineura, and Kuvan, resulting in non-GAAP income in the quarter.

For the full year 2018 and through the end of the decade, we are driving for year-over-year revenue growth, controlled operating expenses, which increased less than revenues, and allows expanding operating margins and increase bottom line results. Now, I would like to open the call for questions and we'll ask the operator to open the line.

Please remember that, as Traci mentioned at the start of the call, based on your feedback, and out of respect for your time, our goal is to wrap up this call by 5:30 PM, Eastern Time. If we end the call, and you still have follow-up questions, please feel free to contact us, and we will get right back to you.

In order to keep to this timeline, we request that you limit yourself to a single, hopefully, one-part question.

Operator?.

Okay. And your first question comes from the line of Salveen Richter from Goldman Sachs. Your line is now open..

Thanks for taking my question. So J.J., you have a quote on the front page of your press release where you state that BioMarin is unique in the industry, and you're only beginning to unlock the value of the base business and development pipeline.

So my question here is, do you see a disconnect in your current valuation and drug pipeline value and why do you think that is the case? And part of that, when you look to the pipeline reads for 2019, I'm just curious, are the two pivotals on track for year-end? And how early could we see Friedreich's ataxia data? Thank you..

That was one question? I mean hard it is to comment on the valuation. I think, indeed, I've heard meeting with some investors in the past couple of years, we've been growing into our market cap.

So, hopefully, I think we are getting to a point where the progress we're making into our operations it's going to start being reflected in our stock because we have, indeed, made tremendous progress in 2017. And we're off to a pretty good start in 2018. Indeed, I think some investors are potentially underestimating the value of pegvaliase.

Of course, it needs to be approved, but assuming it gets approved, I think it's going to be a very successful product. And indeed, as of today, we are on track for a top line read (27:22) for our vosoritide Phase III program at the end of 2019, and for our 6e – valrox 6e, the high dose of valrox Phase III readout at the end of 2019.

So that's a little over a year-and-a-half away. So, indeed, we have lots of potential catalysts here in the next few quarters. So, regarding 2019, maybe I'll let – I think you had a question as to when are we going to get data on Friedreich's ataxia? That's a little premature because we haven't treated our first patient yet there..

I think let's stay where we are. At R&D Day, we can talk about IND filing status, program design, endpoints, timelines, potentially. So, stay tuned on Friedreich's..

Next question?.

Your next question comes from the line of Cory Kasimov from JPMorgan. Your line is now open..

Hey, guys. Thanks for taking the question.

Wanted to ask about PKU, more specifically on pegvaliase, and whether you can talk about the potential adoption curve you would expect to see upon approval? I guess I'm wondering how you expect your established presence within the PKU clinics, and the overall physician enthusiasm that we're hearing out there for the drug to be offset by the product's dosing profile and tolerability to getting patients to initiate therapy.

And on these lines, do you expect to see a near-term change in demand for Kuvan or for this to evolve as pegvaliase becomes available? Thanks..

Jeff is going to try to answer the question..

I'm going to do my best, Cory. I want to say there's nobody in this organization more bullish on pegvaliase than I am, and for – well, maybe J.J., but I think for very good reason. And it starts with the clinical benefits that have been seen in the clinical trials to date against the risk and safety profile which we believe is manageable.

And this is feedback that we're getting in very strong doses from our clinical trial investigators. And I want to reinforce, there's huge amount of interest and awareness in the PKU community outside of the clinical trial investigators. They're really anxious to get their hands on pegvaliase and treat some patients.

Upon approval, we've got established relationships with every PKU clinic in the U.S. Our team has appointments already booked going forward, and they have a ready opportunity to get in and talk about pegvaliase. Upon approval, we've got close to 200 patients that could be eligible for transition to commercial product.

We've demonstrated that we can affect that change from clinical trial to commercial rapidly and efficiently. We've got a total of 62 clinics that account for 85% of in-clinic adult patients, the larger portion of which have experience with pegvaliase.

So we expect those 32 clinical trial experienced clinics to move patients from a queue into the induction titration phase. I guided previously, I think several-ish – groups of several-ish patients at a time.

Several-ish times 32 clinics, that's easy math, right? And we will rapidly get to an additional 30 clinics that account for 35% of in-clinics in all patients. Get them ready to treat their first batch of patients.

So, I'm really bullish that we can be getting, in total, big numbers of patients in the induction titration queue up the initial induction titration curve with more groups of patients coming behind them and so on. So, I hope that addresses your question about what kind of pace of new patient introduction will be..

Let me just summarize (32:06). So, we are very enthusiastic about the long-term potential of the product. As I said in my prepared remarks, 33,000 adult PKU patients in our territories, 12,000 of them in the U.S. So that's a very significant market.

I mean, considering that we said we're going to price this product moderately above the Kuvan price for adults, which is above $150,000 a year, you can do the math; this is a very special market.

At the same time, we want to be predicating that because of the need to titrate the product and the fact that it will take four to six months to get full revenues for each patient, the ramp-up will not be superfast as compared to if there wasn't a titration period..

Okay. That's very helpful. Sorry to make the real Jeff speak up, but that was very helpful. Thanks..

Thanks..

Your next question comes from the line of Ying Huang from Bank of America Merrill Lynch. Your line is now open..

Hi. Thanks for taking my question. I was wondering if you can disclose which AAV vector you're using for the PKU gene therapy. And then, second part, maybe quickly, how many times did these patients have your (33:18) so far since the introduction of Brineura? Thank you..

So, the particulars of the caps of the AAV type, why don't we wait for R&D Day and we'll – because we want to keep things proprietary as long as we can.

And then, on the Brineura question, real Jeff?.

Yeah, thanks. So, for CLN2, we're identifying CLN2 patients around the world. And we've identified more than several hundred patients. The issue for CLN2 is what stage of progression these patients are and do we have access to the market either through registration and reimbursement or through in-patient sales.

So, we're making a lot of progress identifying patients..

Got it. Thank you, Jeff..

Next question..

Yes. Your next question comes from the line of Matthew Harrington from Morgan Stanley. Your line is now open..

Hello. This is David Lebowitz in for Matthew Harrison. Thank you very much for taking the question.

Would you be able to talk about the hemophilia trial and what DMC safety looks there are in the study, as well as how close you'll be monitoring the factor levels?.

Sadly, we won't be able to talk about any of that. It's an ongoing trial and it's pivotal for registration. We have a pretty careful data access plan and won't be communicating interval results or any, really, of the machinations that go on, like, when is the DMC meeting, what are they looking at, whatnot.

So I think the only update we can give you is really the progress towards enrollment in guiding towards completion of enrollment at the end of the year, for the high dose 6e13 study..

Thanks for taking the question..

And just to reiterate also, what Hank had said last time, in addition to not communicating it to you, management won't have it either..

Good point..

Your next question comes from the line of Chris Raymond from Piper Jaffray. Your line is now open..

Hey. Thanks. As long as we're asking multi-part questions here, just on the PKU gene therapy program, Hank, just looking at the literature, I guess there's been some question about the PAH gene and sort of being able to affect sort of a durable expression and I think there's also some differences in male and female mice.

I know you guys have probably taken the science a lot further than what's published, but can you sort of maybe talk about what you've done to sort of solve that issue? And then maybe the second part of the question, if you can talk about how this product ultimately might fit in with your current pegvaliase-Kuvan offering? Is this something we should expect initial uptick in adults or peds? Or is this something you'd position with folks that have failed either the two drugs? Just some color on that would be great.

Thanks..

Well, durability, we've been able to evaluate in pre-clinical models. And we'll go through some of that data at R&D Day. And I don't really want to spoil it too much, I think. And I mentioned that we've seen durable expression out to 53 weeks. Yes, there are reported gender differences in pre-clinical. We can talk about that as well.

It's probably qualitative, not quantitative, the differences. And as far as the development strategy, again, it's a little early to talk about that. I'd say stay tuned..

Do you want to try, Jeff, on the question of the potential Kuvan-pegvaliase gene therapy?.

Yeah..

(37:23)..

So for starters, I would say PKU is a very attractive indication with a large amount of patients around the world. Kuvan, as our first therapy was – has been effective at allowing us to reach a material but a small proportion of that overall market opportunity. Pegvaliase adds a substantially new element to that.

So I think of pegvaliase as being largely incremental to our ability from Kuvan. Kuvan is effective in 50%-or-so patients that respond. It's not particularly powerful. It's got a really nice safety and dose profile. And so it's very, very good for children.

Pegvaliase, being substantially more powerful with a different safety profile being indicated for adults, so more powerful option for adults, really expands our reach into this great PKU indication opportunity. Gene therapy could really round out that picture nicely. Eventually, we lose exclusivity for Kuvan in different markets.

Gene therapy, if it was studied and approved in children, could be an additional way to reach that important market segment and replace what we're doing, and what we have been doing with Kuvan for children and could be a really nice alternative for adult patients as well.

So I think it really expands our reach into the overall opportunity that PKU allows..

And if I may put some numbers around what Jeff talked about. The vast majority, as I said earlier, of adult PKU patients that are identified – again, the patients are identified at birth. So it's pretty clear what the market size is. The vast majority are on Kuvan. So there are only basically less than 2,000 adult patients are on Kuvan today.

Adult PKU patients add up 33,000 patients. So there's a vast reservoir of untreated adult PKU patients that we can go after with pegvaliase. I would say pegvaliase is likely to have a major impact on the adult patients that are not on Kuvan. But in the clinics, that are regularly going to the clinic, and if you add the U.S.

and Europe, that's about 7,500 patients. But even after – so that's the pegvaliase target. But why do we need gene therapy? It's because I think there are also – first of all, we might not be able to get all the 7,500 patients on pegvaliase; and two, there are, let's say, 17,000 patients that are out of the clinic.

And some of them we might be able to get them on pegvaliase. But I think a proposition of the once-and-done potentially gene therapy products would – is likely to attract those patients. And that's just the adult population..

Got it..

Does that answer your question?.

Yep. Thanks..

Okay. Your next question comes from the line of Martin Auster from Credit Suisse. Your line is now open..

Hey, guys. Thanks for taking the question. I think, J.J., you recently commented that the overwhelming majority of the patients in the valrox Phase III will come from the commercial BioMarin GMP product.

I guess I was curious if you guys could comment on both the kind of proportion of sites that are kind of currently active and whether there's been some warehousing of patients waiting for the new facility product to come online, to go? If you could maybe give us – shed a little light on that for us. Thanks..

And I'll have Hank – that is correct what you're saying, but I'll have Hank answer that question..

Yeah, there is warehousing of patients. I don't know that it's entirely about waiting for the commercial facility product. It's more about just the paperwork of activating sites and getting on a global basis.

KOLs are involved in the program in a way that they can learn about the product, be advocates of health authorities and reimbursers when the time comes for the introduction of the product. But as you point out, we're also very excited that the material from the soon-to-be-commercialized facility is available and will be in-patient soon.

And, basically, the Phase III trial is going to be run with almost entirely the to-be-commercialized material..

Yeah. There will be very few patients that we have already treated that will be the product coming from our supplier instead of our commercial facility.

The vast majority will be from the commercial facility, which is very important here because, I mean, assuming that the data is good and eventually the product gets approved, we don't need to worry about having to do any kind of bridging study to compare patients treated with the non-commercial product with the commercial product..

Has FDA suggested or provided any guidance on a proportion of patients that they want to see from the new product? And it sounds like you're comfortably there but curious have they provided any specifics?.

The details of that are going to remain confidential..

Okay. Great. Thanks for taking the question again..

Uh-huh..

Your next question comes from the line of Andrew Peters from Deutsche Bank. Your line is now open..

All right. Thanks for taking the question. I guess another one on the hemophilia side. Hank, you mentioned kind of the clinical sites coming online. Just wanted to see if I could get some color on the sort of discussions that have gone on around the two different doses.

What have the investigators really focused on? Do you get questions around variability or super therapeutic factor levels? Really want to understand, in essence, of the physicians that are enrolling patients, do issues like that even come up? Thank you..

Issues about variability come up relatively shortly after a KOL speaks to somebody on Wall Street. Of their own, investigators hardly ever ask about variability of factor VIII expression.

On their own, physician scientists are quite comfortable with a normal range of factor VIII, the fact that it varies quite a lot with in-patients, and they don't – they're not particularly bothered by variations in factor VIII expression with in-patients and between patients.

And what they continue to reflect to us is that the more the better at this stage. You've got to remember, when we started the program, everybody's mindset was can we get a reasonable fraction of patients up to the 5% level because that was the junction between moderate hemophilia and mild hemophilia.

And what I keep hearing from investigators frequently is now that BioMarin has shown what's possible beyond 5%, nobody's interested in anything that gets you into the relatively mild range of hemophilia. And as you can tell from our comments, people are not even that interested in 4e dose relative to the 6e dose.

So this is, from our perspective, we're delivering an option for patients that they're really interested in and the physicians are really interested in and excited in. And just stay tuned for more progress updates and more data reports..

Okay, thanks..

Your next question comes from the line of Joseph Schwartz from Leerink Partners. Your line is now open..

Great. Thanks very much. So, no one has asked anything about Brazil yet and, I'm sorry, Jeff, but maybe this is directed towards you.

Could you just talk a little bit about whether or not you're detecting any greater reluctance in Brazil or any other territories in terms of their willingness to reimburse for rare disease therapies that are highly priced? I know one of your peers has run into some issues in Brazil lately..

Hi, Joe. Thanks for asking about Brazil. As we mentioned in the last quarter's remarks, we had gotten orders in Q4 in Brazil and that was a good thing for patients in Brazil and good for the Q4 revenues. And we had guided that we were watching with concern the quarterly order pattern going into 2018 and noted that Brazil has been a difficult market.

Our objective in Brazil these days is really to try to manage the base of patients that we've got and help them stay on therapy, trying to get some new patients approved through the system there while we evaluate potential alternatives that might kind of allow us to get out of the system that worked for a lot of years but has been more difficult to navigate completely..

Yeah. So I think that in the future I think Brazil will continue to use and order orphan drugs. I don't think there is a significant issue at this time.

It's just, as Jeff said, I think the market there is moving away from the system of new patients fighting lawsuits and eventually getting reimbursement to system with an official price and an official reimbursement price and we're actively working on that.

But it's true that in the interim, it's probably going to be – it has always been – our revenues in Brazil have been very variable from quarter-to-quarter, it's unlikely to change in the short-term.

At the same time, I think we have communicated previously that in 2017 Brazil represented around 7% of our revenues and it's going down from that in 2018 and likely to go down in future years the reason being that there was an overweight of Brazil in our revenues a few years ago because of the very large number of MPS VI patients in Brazil relative to the size of the country.

That is not quite the case for MPS IV. Fortunately, it won't be the case for our future product, and consequently the share of Brazil, whatever happens there, is likely to decline..

That reminds me that despite the quarter-to-quarter variability for each of Naglazyme and Vimizim on an annual basis, our revenues there over the past years have been stable in total despite the quarterly volatility..

Thanks very much..

Your next question comes from the line of Kennen Mackay from RBC Capital Markets. Your line is now open..

Hey. Thanks for taking the question. One maybe for Hank or for J.J. here. I was wondering if you could just tell us a little bit about some of the hiring going on in your gene therapy R&D department here specifically focused on R&D and discoveries here as opposed to commercial and how you're thinking about building out that R&D platform. Thank you..

Well, we have a pretty topflight group in the R&D organization that works in Vector Biology. It's led by Barrie Carter who really started the AAV deal. It's good to talk to Barrie about this because, back in the day when he was working on AAV, nobody cared about it.

But it was really Barry who conceptualized the idea that AAV could be a delivery vessel for transgenes. And Barrie did a lot of the original IP on vectors. He hired as his lab chief, a fellow named Peter Colosi. Peter's one of the first scientists at Avigen, a brilliant designer of genes.

And more recently, spent the last several years at the NIH at the Eye Institute working on gene therapy candidates for eye diseases. We have a number of clinicians who have both scientific and clinical interest in developing gene therapy projects.

And so we're rounding out the group of scientists who are going to be responsible and accountable for the development of valrox and PKU gene therapy and beyond. It obviously goes without saying that we're also pretty good at drug development in phenylketonuria.

So it'll be a nice opportunity to bring our leadership teams in the phenylketonuria program together with our leadership teams in the gene therapy program and see the synergies that come about from those teams working together..

Actually, Jeff will say a few words. We actually are also building up a team on the commercial front, although we're not planning on launching next year, but maybe potentially late 2020. So we are already building up a team there. And we just had a significant new hire in hemophilia.

Jeff, you want to say a few words about that?.

Thanks, J.J. We're well behind the R&D organization in building a talent base with deep experience in hemophilia. But we do have a new executive addition to the commercial team. Jess Swann has joined as Vice President and Head of Commercial Business Unit for Hemophilia.

She'll lead our planning and building out a dedicated sales and marketing effort for hemophilia. Jess was most recently with Roche in Basel and was the Global Lead for the Hemlibra program. So we're super excited to have Jess on board. And she's super excited, I can tell you, to be here..

J.J., if I might add to that....

Robert, yes? Robert, you want....

Yeah. I would just add to that that in between Hank's group and Jeff's group, we've leveraged our biologics experience and producing material and building the plants, and being able to commercialize that as we do with our other six products..

Thank you very much for taking the question. I can only imagine what went on in the R&D front, and the first hints of that PKU gene therapy at the R&D Day last year to getting this into the clinic next year to that announcement. So, thanks again..

You're welcome..

Your next question comes from the line of Phil Nadeau from Cowen & Company. Your line is now open..

Good afternoon. Thanks for taking my question. Just two follow-up questions to subjects that were brought up earlier. In follow-up to Joe's question on Brazil, I think some of the press reports specifically said Brazil was looking to invalidate patents of other agents.

Has any risk to your exclusivity or patents in Brazil been communicated to you? And then second, on pegvaliase, you gave a very encouraging regulatory update back in March.

I'm curious whether you've had any other interactions with the FDA you'd like to share and, specifically, are you in labeling discussions?.

Yeah. Hi, Phil. So we don't know we should comment the detail on our intellectual property positions.

But I would say that given the complexity and the costs of making a potential biosimilar to any of our biologics, it is highly unlikely that another entity, including a government, that they would attempt to reproduce our products, specifically considering the sales levels of Naglazyme, for instance, in Brazil, which it would be pretty hard to justify that investment irrespective of the IP issue.

So then you had a question on interaction with the FDA on pegvaliase, and whether we are in labeling discussion, Hank?.

Yeah. There's a desk reference guide to approvals and it lays out the schedule. And we're right square in the middle of where we're supposed to be a month ahead of the action date. So we're into advance labeling discussions, advanced discussions on post-approval commitments, on safety management.

There have been no surprises, no untoward developments in the review process. So it being several months after the last time we talked about this, the fact that time has gone by and we're making the progress that we're making, and we're reporting that there have been no untoward rises is what continues to engage our optimism.

We're a little keen to not have anybody try to calibrate the level of optimism and compare today's 89 to last week's 88 in the optimism scale. We want to just remind people that it ain't over until it's over.

But we filed – we submitted pegvaliase on the belief that the benefit outweighed the risk; the FDA filed it saying that the application was complete. The FDA did not need an advisory committee to make its decisions on the basis of opportunity to hear from patients in different ways. We've talked about that.

The agency is busy doing what it's supposed to be doing in terms of review and thinking about how the data generated should inform the label, should inform safety measures, should inform post-approval studies and they are on it, as usual. And we're looking forward to May 25..

Perfect. Congratulations on the progress. Thanks for taking my question..

Your next question comes from the line of Tim Lugo from William Blair your line is now open..

Hi, guys. This is Ashiq Mubarack on for Tim. Thanks for taking my question.

I'm wondering if self- or at home injection for pegvaliase is something that's still on the table regarding your labeling discussions? And then also from the thousand foot perspective on PKU, how do you kind of see a gene therapy product fitting in? And is the physician feedback sort of solid, or are they looking for – are they looking to see more long-term safety from some of the more existing – from some of the currently existing gene therapy assets out there? Thanks..

Yeah, the at home versus self, I mean, it's only in the trials, it's only ever at-home and self past maybe the first or second injection. Once the patient can set aside the physician investigator, they know how to administer the treatment, then they're able to self-administer at home or wherever they want to administer it.

I don't think we've had any particular problems with going to at-home administration. So, I have no reason to believe that anything other than at-home administration would be envisioned. Credit to the team for studying the product and its intended use.

And the only other thing I'd say about gene therapy for PKU, beyond what we said, is just a reminder that up until relatively recently the only option for the management of phenylketonuria was through medical food, which is the use of supplements that are depleted of intact protein and phenylalanine in particular.

And it's artificial and it doesn't taste good and it's virtually impossible to comply with. And when Kuvan got approved, it got approved as an adjunct to medical food. So, as we sit here today, the only treatment option available for phenylketonuria patients involves medical food. Pegvaliase will be the first to break that.

So, a little bit, it can be impossible for physician scientists to imagine what's going to come next, because for the last 40 or 50 years, the only thing they've been thinking about is how do I get my patients to take on medical food? And for the first time, hopefully in a month or so, Jeff and his team will be able to talk to doctors and patients about a different option.

And I think that will then reset everybody, and that will take a little bit of time for everybody to get reset and I think gene therapy will be a perfect opportunity. Some patients will say I want to get off of medical food. An injectable is not so bad of a price to pay for being free of the obligation to take medical food.

And over time, we expect some of those patients to say, hey, get me off this injection. I want a simpler, easier option for me. So, I'm really excited about the PKU gene therapy opportunity because it really builds nicely. It speaks to what patients have wanted for decades, what physicians have wanted for decades.

And I'm very pleased that we're making that progress..

Okay.

As a follow-on, is there a scenario in which all three potential products in your portfolio could exist regarding PKU or is there possibly that it could cannibal – a gene therapy could cannibalize the entire space?.

I'll start and Jeff can give his perspective. But first of all, I mean in terms of timing, pegvaliase could be on the markets in a few weeks. Unlikely, that's going to be the case for gene therapy. So there's a timing issue.

Gene therapy, at least initially, is unlikely to be used in younger patients so I think there would be a room for Kuvan in this respect for a while. But even, as I made comments earlier, this is a very large market.

(59:55-01:00:00) territories like 50,000 patients plus in the entire world if you include patients under the age of 18 so it is a very, very large market that's largely untapped despite the success of Kuvan. There's only 1,900 adult patients or so on Kuvan today.

So I think that this – the issue between pegvaliase and gene therapy, I think it will depend on how good the efficacy and safety data is for gene therapy as we move forward. And it's likely that gene therapy will be taking the lion's share of the market several years from now.

But we'd rather be – so we already know more about this market than anybody else and we'd rather keep being the masters of this franchise.

Jeff, you want to add anything?.

Well-stated, J.J. Gene therapy just gives us another opportunity to penetrate this large market for PKU and we'll take advantage of several different options, if we can get that far..

The last question comes from the line of Laura Chico from Raymond James. Your line is now open..

Hey. Thanks very much for fitting me in here. I appreciate it. So, I guess, kind of circling back on some of your earlier comments.

I'm just wondering if you could opine a little bit on – trying on thinking around the valrox pricing? And based on some of the comments you mentioned between the 6e and 4e dose, there was also an interesting op-ed that posted recently from the Executive Director of the New England Hemophilia Association talking about the impact of co-pay accumulators on hemophiliacs.

So, I guess, as we're seeing more and more initiatives kind of targeting orphan medications, how are you thinking about the value proposition here for valrox?.

Again, since Jeff has a broken voice, I'll start. I say we still are a few quarters away from making a decision on pricing. But I would say, right now, the hemophilia A market is an $8.5 billion market around the world. It's been growing for many years. If you look just at the U.S.

market, the cost of the recombinant factor VIII prophylaxis for severe hemophilia patients is up to $700,000 or so. I understand Hemlibra is likely to get onto the non-inhibitor market. But if you look at Hemlibra price for adults, it's around $700,000 or $750,000 per year, at least on the current price.

So, here, we're talking about a therapy that potentially can be effective for many, many years. We don't know exactly how many years yet. But the plan for us, whatever happens here, is to make sure that the healthcare system save some money over time.

And we believe we can price the product profitably whereby it will be a significant revenue producer for BioMarin. But at the same time, save some significant dollars to the healthcare system. And here, I'm not talking only about the cost of recombinant factor VIII of Hemlibra.

I'm talking about also the ancillary costs resulting from the fact that patients that are being treated and still have major issues, emergency room visits, need for repeat knee surgeries, for instance, the cost of intravenous infusion, all those things combined, we believe that gene therapy can be not only a major improvement in the quality of life for those patients, but a major improvement in reducing the cost of treating those patients..

So I think this was the last question. So, I'd like to talk about my concluding remarks here. So, as you have heard and seen from our press release, we start 2018 from a position of strength. We've been delivering a record quarter of $373 million in total revenues.

We do remain optimistic about the approval of pegvaliase in the U.S., which is anticipated by the end of next month. And so we are preparing for a potential U.S. commercial launch in the second half of this year. And, if approved in the EU, we expect to launch in the EU in the second half of 2019, next year.

So we were also very pleased to announce the nomination of our next gene therapy products, second one now. And this one will be for the treatment of PKU, which is expected to be our new R&D in 2019. This is extending further the reach and breadth of our PKU and gene therapy franchises.

So, with valoctocogene roxaparvovec or valrox for hemophilia A, we are pleased that soon patients in our global registrational studies will be receiving their kilo dose of valrox with the commercial scale material from our new gene therapy facility that we built in California.

And with our valrox program in full swing globally and potential pegvaliase approval on the horizon, the continued enrollment of our vosoritide and valrox and also BMN 250 program, and the IND filing of BMN 290 for Friedreich's ataxia, we're making great progress here and all supported by roughly $1.5 billion in revenues anticipated this year.

I would say that BioMarin, since I've joined the company over 12 years ago now, has never been in a stronger position to deliver significant value to our shareholders. I also can add that we've done, recently, a thorough review of our critical projects, which some of them you will discover at R&D Day in November.

And I would say we've never had a critical portfolio as strong as the one we have today. So, we're excited about the future here and want to thank you for your continued support and for joining us on today's call..

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