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..

Joseph P. Schwartz - Leerink Partners LLC Salveen Richter - Goldman Sachs & Co. LLC Christopher J. Raymond - Piper Jaffray & Co. Carmen Augustine - JPMorgan Securities LLC Srikripa Devarakonda - Citigroup Global Markets, Inc. Martin Auster - Credit Suisse Securities (USA) LLC Aspen Mori - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Eliana Merle - Cantor Fitzgerald Paul Matteis - Stifel Financial Corp. Kennen Mackay - RBC Capital Markets LLC Gena Wang - Barclays Capital, Inc. Vincent Chen - Sanford C. Bernstein & Co. LLC Myles Minter - William Blair Joseph Thome - Cowen & Co. LLC.

Welcome to the BioMarin Third Quarter 2018 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Traci..

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

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

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

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

Thank you, Traci. Good afternoon and thank you for joining us on today's call. The first three quarters of 2018 have been extremely productive and have positioned us for increased top line results, for DQ data results, for potential regulatory filings and a new IND in 2019.

So our commercial team has delivered record revenue in this quarter with the addition of Palynziq. We expect to continue this trend. $392 million in this third quarter and $1.14 billion in the first three quarters of the year are both record top line results.

And we remain on track for approximately $1.5 billion in full year revenues this year and $2 billion in 2020. Starting with U.S. Palynziq launch in July after approval in May, the initial launch during the third quarter went extremely well and we had 124 reimbursed commercial Palynziq patients at the end of the quarter.

We expect to add new patients in Q4 and beyond as PKU clinics drive patient referrals and starts at a risk case. And we expect between 250 and 300 adult PKU patients to be on reimbursed, commercial Palynziq by year end.

We are very pleased with the level of interest in Palynziq since approval in May and Jeff will walk us through additional launch details in a moment. For Palynziq outside of the U.S., we expect a CHMP opinion on our Marketing Authorization Application in Europe in the first half of 2019.

And if that opinion is positive, we expect EC Commission action followed by the potential launch of Palynziq in the EU in the second half of 2019. As we look forward, the next important drivers of growth are our late-stage products, valrox for hemophilia and vosoritide for achondroplasia are both tracking to plan in their Phase 3 studies.

Results from the full 52 week data results of vosoritide is targeted in the second half of 2019 and with valrox 6e13 dose in mid 2020 with potential regulatory filings for approval to follow. Moreover, we're excited by the prospects of potentially filing for accelerated approval of valrox in the second half of next year.

Looking beyond our excellent late-stage clinical projects, we plan to leverage our valrox experience to develop other gene therapy products, the next one being phenylketonuria.

We plan to provide a deep dive into our gene therapy's capabilities, our extensive clinical data on our PKU gene therapy products and how we are thinking about the development landscape with this platform at our upcoming R&D Day in New York on November 7, and we look forward to seeing you there.

So in conclusion, we are very pleased with our accomplishments to-date in 2018. We're excited about our prospects for 2019 and beyond. I will now turn it over to Jeff who will share details of the U.S. Palynziq launch as well as update on our other commercial products.

Jeff?.

Thank you, J.J. Due to some inquiries received from a few of you this morning, I'd like to acknowledge the President speech today on proposed Medicare and drug pricing plans. Given the global and innovative scope of our business, we generally maintain a tight pricing corridor across our commercial products.

To remind you, revenue from Medicare Part B is less than 1% of our global book of business. We will continue to monitor closely potential changes in policy that might impact BioMarin, but it is too early to say more until additional details are available. Moving now to the U.S.

launch of Palynziq and then to a walk-through of third quarter results for our base business. With over 11,000 adult PKU patients in the U.S., one-third of them are actively being treated in a PKU clinic. Palynziq represents the largest U.S. patient population of all our approved products. Recall that only 12% of all adult PKU patients in the U.S.

are being treated with Kuvan, so we have a tremendous opportunity ahead. During this launch period, we are focused on a number of key metrics that are lead indicators of future revenue growth. The following were all measured as of the end of the third quarter. First, there were 124 patients receiving reimbursed commercial treatment with Palynziq.

Of these, 81 were from the clinical studies and 43 were formerly naïve to Palynziq treatment. In addition at quarter end, there were an additional 68 naïve patients enrolled in our RareConnections system who have signed all authorization forms, then prescribed Palynziq, then REMS enroll and are now waiting for their first injection to be shipped.

By year end, we expect between 250 and 300 adult PKU patients to be on reimbursed commercial Palynziq. Second, at the end of the third quarter, 50 clinics had one or more active Palynziq patients. In addition, there were a total of 76 clinics that had at least one healthcare provider REMS certified.

This is a key indicator of intent to prescribe Palynziq, and is complementary to our significant efforts to in-service clinics and provide education on the use of Palynziq. An encouraging observation in the quarter for the PKU franchise was the enthusiasm that adult Kuvan patients have shown for treatment with Palynziq.

A meaningful number of adult Kuvan patients still seek to optimize their outcomes with greater Phe control when it's been unachievable in the past with Kuvan alone. To date, almost 40% of naïve patient enrollments have constituted active Kuvan patients.

Long-term and in the context of the expected loss of exclusivity for Kuvan in two years, this is a very positive dynamic. An important consideration for understanding the Palynziq market is the time it takes from that first injection to driving meaningful revenue.

To simplify, in the early weeks, and in some cases months, when a patient is working through the induction/titration phase of treatment, their revenue contribution is fractional, approximately 10% to 20% of maintenance revenue.

Once daily dosing has been achieved, more meaningful revenue contributions of approximately 70% of our expected commercial level of $192,000 per patient per year will be recognized.

Once patients are on their maintenance dose, assuming half are on 20 milligrams and half are on 40 milligrams daily, we still project net revenue per patient at the $192,000 per patient per year level.

Given the anticipated conversion of clinical trial patients to reimbursed commercial patients and the predicted modest revenue contribution during the initial months of Palynziq treatment for naïve patients, we believe Palynziq full year revenue in 2018 will be between $10 million and $14 million. In summary, we are very pleased with the U.S.

Palynziq launch and the progress made to transition clinical trial patients to reimbursed commercial product. Palynziq has been well received by the PKU community and we believe this is only the beginning of another successful long-term contributor to our growth story.

Now turning to our other commercial products, which drove almost 20% growth year-to-date compared to last year.

Starting with Vimizim, which benefited from a large Brazilian Ministry of Health order in the quarter, strong net product revenue growth of 37% in the quarter and 23% year-to-date compared to the same periods last year resulted in record year-to-date revenue for the brand.

We continue to experience uneven ordering patterns from certain markets, which has the impact of uneven quarterly revenue patterns. As always, we encourage you to refer to the annual revenue guidance for both Vimizim and Naglazyme, which we reaffirm.

Similar market dynamics were in place for Naglazyme in the third quarter and year-to-date, with net product revenue increasing 43% and 13%, respectively, compared to the same periods last year. Moving now to Brineura for the treatment of CLN2, which is just in its first fourth full quarter of commercial sales since being approved in the U.S.

and EU mid-2017. In the third quarter of 2018, we continued to add new commercial patients, resulting in net revenue of $9.9 million. We are making progress against our twin goals of identifying new patients from our disease awareness and diagnostics screening programs and national reimbursement approvals.

We are optimistic of slow but steady growth of Brineura going forward and expect that it will develop into a more material revenue contributor. In closing, the commercial team delivered strong net product revenues in the third quarter of 29% and 23% year-to-date.

The launch of Palynziq, our seventh commercial product, is exceeding our expectations in terms of patient and clinician interest. And we are confident we are laying the groundwork for a significant revenue contributor in the coming quarters.

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

Dan?.

Thank you, Jeff. Earlier today, we issued a press release summarizing our financial results for the third quarter and I refer you to that release for full details. Starting with top line results, as J.J.

and Jeff mentioned, we are pleased to report that total revenues for the first three quarters of 2018 were a record $1.14 billion, an increase of 19% year-over-year, driven by strong contributions from all of our marketed products.

Looking beyond 2018 and keeping with what we have said previously, we expect top line growth over the next couple of years to be around 15%, that 2020 total revenues should be approximately $2 billion from our current products.

And we expect to track for that revenue percentage growth goal until the contribution from vosoritide and valrox paces above that level hopefully at the start of the next decade.

Moving to operating expenses, R&D expenses increased to $161.4 million in the third quarter of 2018 and $520.9 million year-to-date 2018 compared to $154.1 million and $442.1 million in those respective periods of 2017.

The year-to-date increase in R&D is primarily due to increased valrox production and clinical trial expenses in support of the ongoing Phase 3 programs.

Vosoritide clinical expenses, as the Phase 3 head towards full enrollment in October, the trial is back, formerly referred to as BMN 250, which is what I was still hoping it be called production expenses.

Looking forward to Q4, R&D expenses should continue to expand relative to Q3, consistent with the progress of our major clinical programs, while remaining within prior guidance for the full year.

SG&A expenses increased to $148.6 million in the third quarter of 2018 and $440.2 million year-to-date compared to $130.5 million and $394.1 million for the respective period of 2017. The increase was primarily due to increased sales and marketing expenses associated with Kuvan, Brineura and Palynziq commercial efforts.

The year-to-date increases were primarily driven by Palynziq and Brineura product launch campaigns and preliminary valrox commercialization efforts. SG&A expenses for the balance of the year and into early next year will increase slightly over prior quarters, driven by the U.S.

Palynziq launch, a credential EU launch, though these expenses are expected to remain within full year guidance for 2018. Turning to bottom line results, GAAP net loss in the third quarter 2018 was essentially flat compared to the same period last year at $12.6 million in 2018 compared to $12.5 million in the third quarter of 2017.

Year-to-date, GAAP net loss in 2018 increased marginally to $73.6 million compared to $65.7 million in 2017.

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

In Q3 2018 and for the fourth consecutive quarter, we recorded non-GAAP income, which increased to $60.7 million in 2018 compared to $7.8 million in the third quarter of 2017.

Looking ahead to the fourth quarter of 2018, due to receipt in Q3 of a large Brazil MOH order for both Naglazyme and Vimizim, we expect that Q4 revenues will be lower than Q3 revenues, though still within full-year guidance. In addition, as noted above, R&D and SG&A expenses will also increase in Q4, but also still within full-year guidance.

In total, our GAAP and non-GAAP guidance remains unchanged. In terms of cash, cash equivalents and investments, as of September 30, 2018, we had $1.7 billion as compared to $1.8 billion at the end of 2017. In October of this year, we utilized approximately $375 million to repay the principal on the net convertible notes that matured.

With this conversion, we also issued 190,220 shares of our common stock and also received back 95,127 shares from cash call counterparties. These shares have subsequently been retired.

In closing, BioMarin delivered a strong quarter and year-to-date results in 2018 with robust contributions from Vimizim and Naglazyme, steady Kuvan net product revenues, controlled operating expenses and our continued progress towards increasing non-GAAP profitability for the full year 2018 compared to 2017.

Now, I would like to turn the call over to Hank..

Thanks, Dan. Since J.J. has already provided an overview of development and regulatory accomplishments so far this year and because we have R&D Day in November 7, where we'll provide many new updates, I'll just take a minute or two to touch on a few items.

For Palynziq Europe, the market authorization application is under review and tracking the unexpected with a CHMP decision expected in the first half of 2019. Given the enthusiasm we're seeing for Palynziq in the U.S., we're optimistic that the dramatic Phe lowering demonstrated in our clinical studies will translate well into demand in the ex-U.S.

regions. Briefly on valrox, we believe the recent draft FDA guidance for the development of gene therapy products are supportive of our valrox study design and approval pathway.

The recommendation for factor activity – factor read activity in the normal range to file with the FDA for an accelerated approval raises the bar for results below that range and gives us an important competitive advantage. Recent discussions with health authorities increases our confidence in our plans to potentially expedite registration.

In addition to aligning well with U.S. health authorities, we are very encouraged by our ongoing conversation and development planning with European health authorities. And finally to remind you of what to expect at our upcoming R&D Day in November 7 in New York, we look forward to a number of exciting updates from the research group.

In addition to review of all the development products, we plan to provide key updates, including 42 months with vosoritide for children with achondroplasia as well as extensive pre-clinical data for our PKU gene therapy product.

Given the relevance of recent key regulatory advances, we're excited to have one of our talented colleagues from Regulatory Policy and Patient Engagement share insights into how BioMarin leverages the policy approaches to get products and treat rare diseases approved.

And finally, our Chief Scientific Officer, Lon Cardon, will share his perspective on the future of BioMarin's pipeline and how he thinks about leveraging scientific innovation in genomics to achieve our next stage of growth and beyond. It should be an interesting and informative event, so please plan to attend in person or tune in via the webcast.

As always, thank you for your continued support and I'll now open the call to your questions.

And our first question is from Joseph Schwartz with Leerink Partners..

Hi. Great. Thanks very much. So I know you don't have much Medicare exposure with your current products.

But given HHS' new international reference pricing proposal and how that could impact factor replacement therapy in hemophilia, I was wondering if you think this could impact your pricing strategy for valrox by extension since there could be lower potential cost offset associated with your gene therapy to save the health system spending on factor replacement therapy..

I think – yes, I mean, I'll start and just give this comments. As you know, we have not priced Factor VIII, obviously, valrox, because it is not approved yet, so we haven't priced it in the U.S., we haven't priced in Europe.

So obviously, this will be an important consideration if indeed this does happen, but I think we have time and flexibility to come up with a best pricing strategies on both sides of Atlantic here, if indeed this becomes a regulation because there are lot of details here that need to be covered and also Medicaid already is getting a lot of discounts in the U.S.

So I don't know if this is going to make a huge difference for us and Jeff can give you more details, but our average European price that compare to the U.S. government price is not that different for our current products..

Yeah. Thanks, J.J. Not much to add to that. I think we've got plenty of time to be working out the details. And as it relates to pricing and reimbursement for gene therapy and other advanced products, there may be developments within CMS that would facilitate novel reimbursement models refer you to Seema Verma's recent remarks on the subject..

Okay, great. That's helpful. And then, in your recent data update at SSIEM, it looked like some patients on BMN 250 stabilized, but it wasn't like Brineura where all patients did I think.

So do you think that there is any chance that you can get BMN 250 to market on the existing data? What do you think is the most likely regulatory path for BMN 250 and when do you expect to clarity from regulators?.

Hi, Jeff. So the tralesinidase data was presented at SSIEM demonstrated dramatic reductions in heparan sulfate levels in brain fluids, normalization of liver size in patients who have hepatomegaly and stabilization in Development Quotient, and it's something like five out of seven patients. DQ is a tough endpoint.

And I think partly in recognition of the challenge of documenting improvement in cognition in these kinds of diseases, the FDA issued a draft guidance document on the development of therapies for slowly progressive diseases, which we think comes pretty close to checking all the boxes for tralesinidase.

So the next step for us would be to have a conversation with Food and Drug Administration about how those guidance documents apply and whether that presents an opportunity to expedite regulatory path.

Suffice to say, we have a fair amount on our plate right now, so I don't want to comment to a particular timeframe around which we report back to you on that conversation..

Okay, great. That's super helpful. Thanks for taking my questions..

And your next question is from Salveen Richter with Goldman Sachs..

Thanks for taking my question. So with regard to valrox, it looks like you're pursuing the accelerated approval pathway. And apart from the data from the Phase 3 study, there do seem to be other factors that will play a role in your decision on this approach.

And so I was just wondering, when it comes to the assay and the discrepancy between the chromogenic and the one-stage assay, can you help us understand why there appears to be a discrepancy there and the work that you have to do around that for the filing, or in order to pursue a filing.

And then secondly, with regard to the continuous data set from the ongoing Phase 2 study and that profile being intact, are you still expecting stabilization there based on remaining circulating versus non-circulating episomal DNA? Just wondering if that thesis is still intact in your mind..

Yeah. Hi, Salveen. So the issue of the assay discrepancy that was raised in the guidance document is to some extent a bit more of a general phenomenon in factory products in that. These kinds of discrepancies have been observed for other products.

And what the FDA wants to make sure is that there is no potential for underdosing or overdosing for that matter of recombinant replacement products on the basis of a incorrectly interpreted assay result. And so they asked sponsors of gene therapy products to look into that to the extent that that might inform their decisions.

And where they're coming from in the context of gene therapy is that the transgene products may be biologically different than the recombinant factor products with which the FDA has a lot more familiarity.

So to the point of establishing a Factor VIII level, which is reasonably likely to represent a clinical benefit of bleed reduction, the Agency has asked for two pieces of information, either resolve or present data which indicate why you believe that the Factor VIII levels that you're observing are reasonably likely.

And the FDA went on further to say that the only value of Factor VIII that they would consider for accelerated approval under these kinds of – in this context would be Factor VIII levels that achieve the normal range.

So, I think that's sort of regulatory context for why this is an important question and how they operationalized it in terms of their guidance documents.

And for the second part of your question, the more we look at the literature on persistent forms of DNA in, in vivo and in animals who have received the transgene, the more convinced we are that the settling phenomena is real, reliable, reproducible and reasonably likely to apply to BMN 270.

And of course, out in the – let's call it of the outer years after gene transfer that we will observe clinically relevant and persistent expression. Proof is obviously in pudding and we look forward to providing you an update on where things stand in the middle of next year..

And so I think we're going to cover this. The VDR to circular conversion, we are going to cover in detail at our R&D Day. And also, based on some interaction we've had with regulatory authorities, we don't believe that this assay discrepancy is going to be a significant issue for us..

Thank you..

Thank you. And your next question comes from Chris Raymond with Piper Jaffray..

Hey, thanks for taking the question. So maybe just on Palynziq, you guys are now five months into launching. I know it's still kind of early days, but with the 43 treatment-naïve patients you've gotten through, arguably a decent number of these folks have gotten to that sort of critical 8-week or so timeframe.

I think, Hank, that you've described as sort of period when you can might run into the biggest chance for anaphylaxis? Can you maybe describe are you running into anything unexpected during that timeframe for some of those folks who are far enough along? And have you seen any discontinuations and maybe describe what some of those look like? And then maybe a part two to this question, any Kuvan patients a part of that 43? Thank you..

So this is Jeff. Great questions, Chris, for me. Let me see if I can cover them. So first thing to note is, those numbers that we were quoting were as of the end of September and so we've got – going on another month of practical experience with the launch.

The vast majority of reactions that have been reported, adverse events are injection site reactions, which were completely expected for Palynziq. We haven't seen other types of adverse events reported, arthralgia or anaphylaxis to date.

The caveat on that is because of the time that it has taken to get new patients through the case management, reimbursement and start process, we don't really have very many patients that have gotten up to that daily dosing with 20 milligrams and beyond, which is the point at which we would expect to start seeing the more serious adverse events beyond just the injection site reactions.

So I think might be a good question to ask for three months from now. In terms of Kuvan patients, approaching 40% of our naïve patient enrollments have been active Kuvan patients.

So there is a fair amount of active switching going on, which we think is a really positive thing for the PKU franchise overall to get those patients – adult patients onto Palynziq and onto a maintenance dosing well ahead of loss of exclusivity..

There was a question on patient discontinuation..

Discontinuation..

Yeah..

So far we haven't seen any discontinuations from naïve patients. But again, we're just getting started with patients in that induction and titration phase..

Okay. Thank you very much..

And your next questions comes from Cory Kasimov with JPMorgan..

Hi. This is Carmen on for Cory. Thanks for taking our question. So your guidance for Palynziq for full year 2018, you mentioned you're expecting 250 to 300 commercial patients on drug, which implies, if I am counting this correctly, another 50 or so new patient starts at the low end of the guidance.

So that's kind of in line with what you saw on the first quarter of launch. I'm wondering how you're thinking about the pace of new patients starts as we get into 2019 compared to this? And what you think will catalyze kind of an uptick in new patient starts? Thanks..

Hi. So let's see. Let's get back to those numbers. We reported that....

124..

124..

She is assuming that the balance of the clinical patients are the first ones in and that's about 70. And therefore, another 50 would get you to kind of 250 at the lowest end of our guidance. So I think that's what she said..

Carmen, is that what your – how your math worked?.

Yes, that's how I calculated it..

And so the question is, is what are we looking for uptick in that rate of new patients going forward into next year..

So it has been – the rate of new patient enrollment has been picking up throughout the third quarter and we would expect that to continue as more of our target clinics become active. Recall that we reported that 50 clinics are now active.

Recall that at launch we said that our Tier-1 clinics, 32 of them that are coming out of the clinical trial account for about 50% of adult patients and additional 30 clinics are Tier-2 clinics that account for 35% of adult patients. So as more clinics become active, the rate of enrollment should pick up.

Also, what we've experienced is a lot of the clinical trial sites focused their initial efforts as they should have in the third quarter in transitioning their clinical trial patients. And with most of those patients now on commercially-labeled drug, if not fully-reimbursed drug, that should facilitate those clinics to start enrolling new patients..

Okay..

And your next question comes from Robyn Karnauskas with Citi..

Hey guys. This is Kripa on for Robyn. Thank you so much for taking my question.

Given that the interest that you indicated in Kuvan patients to get on to Palynziq, how should you think in terms of conversion of – switching of Kuvan patients to Palynziq in the long-term? Is there a percentage of patients that you expect to convert or do you think majority or all of them will convert? Is there any color you can provide for us? Thank you..

Well, we've stated that it's in explicit objective of ours to have as many Kuvan adult patients converted to Palynziq treatment as possible by the time we lose exclusivity for Kuvan in the United States. And that's expected to be at the end of Q3 2020. Now, the numbers so far of new patient referrals are small.

So on that small and 40% are Kuvan active patients. The numbers are too small and the experience is too early to project what percent next year to expect from Kuvan patients. Overall, a positive dynamic, may have some material effect on Kuvan revenue by late next year, possible..

But I think this is really encouraging that as we go forward, because currently, we're not promoting Palynziq to Kuvan patients. We're not trying to actually promote the switch.

And naturally, we've got a lot of patients that are interested, which is a good sign which means that – I mean, there is a pretty good chance that by the time generics hit the U.S. market, we'll have the substantial number of Kuvan patient convert.

The good news and something you need to take into account in your modeling is that even if a Kuvan patient get into a generic, they are not entirely lost to Palynziq, we could still later on get them on Palynziq even if they are switched to a generic.

So, the window is actually a little longer, it's actually pretty long, we don't need to convert all the current Kuvan patients to Palynziq to capture a significant number of these patients. We can do that after the generics hit the market..

Okay, great. Thank you. And one more quick question.

Can you provide any sort of detail on what we can expect to see under PKU gene therapy program at the R&D Day?.

Information about vector design, safety considerations, efficacy considerations, durability considerations, biological marker considerations, dosing in man considerations, manufacturing considerations, I don't know, is there anything else that I missed?.

I don't think we're going to figure (00:38:25).

Okay, great. Thank you so much..

And your next question is with Martin Auster with Credit Suisse..

Hey, guys. Thanks for taking the question. I had one about the vosoritide Phase 3. I notice in the press release that trial's continuing to enroll.

I want to clarify, have you found all of the 110 patients you're looking for into the kind of running six-month type velocity measured before dosing, or are you still looking for patients to enter that phase? And if you could maybe update us on when we might expect to see top line data? Thanks..

Yeah. We're still on track for top line data at the end of the year in 2019. And that's because close of the enrollment is expected to occur imminently. In fact, we are well able to project that.

And we're really – as we have said on our previous calls, all we're doing is making sure that the last remaining KOLs, that were those slowest site activators have an opportunity to put their patients in. So we expect enrollment close announcement to occur imminently..

Okay. Thanks for clarifying that. And just on the valrox Phase 3, you're continuing to expect to complete that dosing in Q2 of next year.

And is that the right conclusion we can make and then you'll have that trial fully enrolled for the running patients by the end of this year then, by the end of 2018?.

Yes, that's the target..

Excellent. Thanks..

And your next question is with Ying Huang of Bank of America..

Hi. It's Aspen on for Ying. Thanks for taking the questions. A couple of quick question – quick ones. Can you give us a revenue breakdown ex-U.S. and ex-EU? And if we're seeing any kind of currency impact there? And then, what kind of data can we expect from the 42-month update on vosoritide, anything beyond growth velocity? Thanks..

I'd have to give you bunch of numbers on that U.S.-ex breakdown. I don't have that right in front of me. I can tell you, currency impact net for the year relative to what we had budgeted and expected is near zero, it's a couple of million dollars.

And similarly, on a net basis relative to last year's rates, taking into account FX rate changes, it's nearly unchanged. And the U.S., ex-U.S. breakout will be out in the 10-Q tomorrow..

And then the second part of your question, to remind you, the question about 42 months is really a question about evidence of durability. And let me just remind you about the discussion at the FDA advisory committee had about the issue of durability.

Durability is a bigger consideration in context in which biology suggests that durability may be a problem.

So, a couple of things, so we'll re-review for you at R&D Day, what's the preclinical biology that causes us to believe that the effect of vosoritide on achondroplasia joints, growth plates is going to be durable, what's the preclinical biology. We'll present some novel biomarker data that speaks to the potential for durability.

We'll present you the annualized growth velocity of patient treated out to 42 months with the 2D market it does for the product. And we'll present some ancillary datas on, for example, proportionality and safety.

I think the main thing to pay attention to that will be new at R&D Day will be the biomarker data and the actual annualized growth velocity in patients who have been treated through 42 months therapy..

And maybe just one more sort of data point I'll add you might have been asking. In the U.S., our sales continue to be about 50% in U.S. dollars, the balance is obviously in other currencies, and within our other currencies, the euro represents about a third..

That was not in the appendix, (00:42:32).

That was the completion of the prior questions..

Thanks..

And your next question is from Ellie Merle with Cantor Fitzgerald..

Hi, guys. Thanks so much for taking the question. Just back to sort of gene therapy and durability. You've talked about the importance of the circular DNA and thinking about long-term durability.

Just curious what you think sort of the key determinants are in terms of like whether a vector turned into circular DNA or not? And like, I guess, long-term, do you think there are aspects of how gene therapy products are designed that can make them more or less likely to lead the circular DNA? Thank you..

That is a question that has been a subject of intense research, but it concluded about 20 years ago.

So, we're going to – we can summarize some of that for you at R&D Day to remind you about things like ITRs and that how the vectors were packaged and how we assure there aren't petrological truncations with the genome, which could affect circularization. So I'd say, come to R&D Day and those will be good things to pay attention to..

Got it. Thanks..

And your next question is from Paul Matteis with Stifel..

Great. Thanks so much for taking the question.

Just on the Palynziq launch in the U.S., I'm wondering what you're seeing in terms of the bandwidth for an individual physician and how many patients an experience doctor could get through the titration period at once versus a less experienced physician, and how do you think that plays out over the coming quarters.

And then just on the European Palynziq process, wondering if you've seen anything so far through the review and your interactions that would suggest there is any risk of dis-coordinated result from the FDA's approval? Thanks so much..

So maybe I'll take the first question about the Palynziq in the United States, clinic bandwidth and the patient capacity by experience level.

So, in the past and on the launch call, we guided to an expectation that we think that clinics will be handling patients in the induction/titration phase in small groups or severalish and speculated that we thought the clinical trial – experienced clinicians would probably be able to handle more patients initially than their non-experienced clinic peers.

So empirically what we've seen to-date is small number of pretty aggressive clinics that have put forth more than a few patients, new patients, naïve patients referrals, small number. Most of the clinics that have referred naïve to treatment patients have referred one to several patients so far.

We haven't seen a separation in those numbers from the Tier 1 clinical trial experience than Tier 2 clinics.

But one of the dynamics that may be impacting that is the focus of the clinical trial clinics in the third quarter to manage the transition of their clinical trial patients on to commercial-labeled products and also to support the effort of gaining reimbursement, which will likely largely be done in the fourth quarter.

So I think we still need a little bit more time to see how that goes. And another interesting dynamic is, most of the clinics that have referred patients have kind of referred one in at a time.

There are a small number of clinics that have reported that they want to start patients in groups and manage them through the induction/titration to maintenance phase in groups. So that's another one that we'll be watching. Probably too early to draw full conclusions. Maybe we'll have more color on that next quarter..

And then the European regulatory, I think the biggest difference between the EU regulatory seen and the FDA is just a simple fact that we didn't have the benefit of having a lot of ongoing dialogue and experience with EU regulators during the development phase simply because of the licensing arrangement that we had at the time that we were in the development.

But I think that that is substantially offset in this case by the fact that the diagnosis of phenylketonuria is a global diagnosis. It's not like there are two different PKUs. The management of PKU on a worldwide basis is more similar than it is different.

The mainstay of that management would be the reduction of protein intake and the possible use additionally of Kuvan in patients who respond to Kuvan.

I think that in Europe, there is a pretty substantial perception of an unmet need both for the Kuvan non-responders but also for the Kuvan-treated patients who have relatively modest delevering that require still restriction on their diet.

And I think a very positive thing that's going in our favor in Europe compared to the United States is that EU regulators have recognized the problem of restricting protein intake.

What Kuvan didn't offer was complete freedom from protein intake and – restrictions in protein intake and our Palynziq data demonstrates how powerful it is in reducing Phe even in the face of relatively normal protein intake. Final difference between the U.S.

and Europe is that in Europe, they're a little bit more clear about what they call anaphylaxis and it being tied to IgE particularly, which we documented it for the U.S. submission doesn't – there's not evidence that that points to the hypersensitivity type reactions being needed by IgE.

So in spite of that lack of experience in dialogue, we feel pretty good about the prospects. And we're expecting a CHNP opinion in second quarter of this year.

And just to remind you about the EU process, full approval doesn't actually happen until that opinion is referred to the European commission for legal authorization, which would then lead to adjusting being able to commercialize beginning in H2 of next year..

Got it. Great. Thanks, Hank..

Yeah..

And your next question comes from Kennen MacKay with RBC Capital Markets..

Hi, thanks for taking the question. Maybe just wanted to go back to one of your prior responses.

I was wondering a little bit more if you could help us understand how we should be thinking about the negotiated stage rates of Kuvan generic entry or if there are any sort of comps relating to step generization that we should be thinking about there? And then lastly, but still on the PKU market, I guess, pending success from your other gene therapies in the space I was wondering from your market research, where you saw these fitting and if this would overlap more with sort of the Kuvan patients or the Palynziq patients? Thank you very much and congrats on the quarter..

Go ahead..

Yeah. So, Kennen, let me see if I understand your question. Regarding the loss of exclusivity of Kuvan in the United States, I think you were asking if there was any kind of analogs that would guide expectations for the pace of conversion of branded to generic business.

So if I guess that about right?.

I thought it was a staged generization from some of the negotiations that you had or some of the settlements that you had come to. I was wondering more if there are any comps around that staging or if it was just unfortunate..

That staging is – the staging of one entry and then other entry six months later, which is what we have is actually, I believe, sort of the standard in the industry because in the generic business, one of the – a large part of the profits actually from a generic business comes out of being the first and only generic for six months.

So that is pretty standard. The thing for which there is lack of benchmark comparisons is our sort of highly personalized specialty high-priced medicine. That's where there is a lack. We expect generic erosion.

We have lots of efforts in place to attempt to modulate that, but there are not great analogs that you can look to with a high degree of confidence..

Got you. Thank you for the color. I wasn't sure if there were volume limitations..

Sorry.

What was your second question?.

Oh, no. I appreciate the color. I wasn't sure if – from those settlements, if there were any sort of volume limitations or anything like that. So I appreciate the color there..

No, there aren't..

But as (00:52:23) reinforces we don't – although there will be some erosion, I think that this is the U.S. issue in, I think, 2020 only, in Europe with protection until 2024. So, again, we don't believe that the erosion model will be the same as much you see for a generic that someone can buy in the retail pharmacy around the corner.

This is a product that's entirely distributed through specialty pharmacies and we're providing you a lot of support to be picking your patients when they receive Kuvan. So we believe the erosion will be somewhat lower than your traditional erosion. But there is no real model available, it should be an interesting case study for the future..

Got you. Thanks for the color..

And your next question is from Gena Wang with Barclays..

Thank you for taking my question. So I just have one regarding the valrox accelerated approval. I would assume you will be looking for Factor VIII level over 50%. So, just wondering how would Phase 1, 2, 3 year longer follow-up data, which will likely be first half next year.

Would that impact FDA accelerated approval decision, specifically say in the case of – if there is somewhat further declining for the Factor VIII?.

Well, the guidance document doesn't get very clear on durability considerations. And our view is that the initial registration is going to be predicated mainly on the Factor VIII levels from the ongoing pivotal trial using the to-be-commercialized material.

But that support for durable expression of Factor VIII will come from the earlier Phase 1, 2 trial.

And from what we can tell from the FDA's guidance document, and I mentioned subsequent interactions that we've had with the FDA, the primary decision on approval is going to be based on net benefits and risks in the principal Phase 3 population that we're using this for registration.

So that longer term data will be coloring, but not essential to the initial decision..

Okay, that's very helpful. Thank you..

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

Great. Thank you very much for taking the question. I guess taking a step back, I'd like to ask one on your broader strategy with respect to gene therapy. So we've seen a number of other companies really flocking to strike deals in the gene therapy space.

And the argument seems to almost that the science of gene therapy is more or less proven out, the regulatory environment is pretty favorable.

So a company that's got a robust gene therapy manufacturing capability and rare disease expertise is a bit of a natural owner for gene therapies able to readily in-license assets, bringing the market to quickly build out a broad portfolio.

So it seems to me that BioMarin would be really ideally situated for this strategy, given your expertise and your established manufacturing platform was quite impressive, but you certainly been a bit quieter at least in terms of disclosed deals.

First, am I thinking about this the right way? And two, I guess how are you thinking about your strategy in gene therapy, for example, areas of focus, the role that gene therapy plays in the broader business portfolio and the use of a LNA versus internal developments?.

I think you're right..

We're perfectly poised..

We're perfectly poised and we are looking at – I think the reason why we haven't done that many deals is because we are ensuring capabilities to come up with candidates. That's one reason.

And we just did that with PKU gene therapy, and also maybe we have a different approach than some of the players whereby we are looking at gene therapy opportunities that have economic viability, and we don't believe going after ultra orphan diseases is economically viable. So that is our position thought.

So doing a lot of little ultra-orphan gene therapy deals is great for press releases, we are not sure it's going to be great for the bottom line..

And how do you think about -.

(00:56:55) larger indications. Sorry..

And how do you think about the attractive indications in gene therapy because I do tend to agree that in many ways the gene therapy science look great, but in terms of finding truly attractive opportunities, that can be a little bit more challenging to find things where you've got those confluence of something that's readily addressed by gene therapy and something where the opportunity is really there.

How do you think about finding those?.

Well, actually, now – in your second question explain the challenge of finding the right opportunities, we believe there are some and we're exploring some.

But in a sense what we are using is that we believe that you need an opportunity that is large enough to not only a prevalent market, which has existing patients, but as it's somewhat significant incidence market that allows your gene therapy product to be – have the long-term economic viability..

And the good news is we have our R&D Day coming up in a couple of weeks and sort of our long-term thoughts and strategy on how to build the pipeline is part of what we're going to talk about there. So, hopefully, we can provide more answers to you at that time..

And needless to say that we are because of our emerging manufacturing expertise and capability in gene therapy, we are approached on a regular basis by gene therapy companies. So it's likely that there could some deals in the future..

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

Hi. Myles Minter on for Tim Lugo. Thanks very much for taking the question. Mine just pertains to the ongoing valrox trial in patients with sera positive A5. I am just wondering whether you can provide an update on enrollment, any sort of safety concerns that you hopefully aren't seeing and when we can expect top line data.

And the second part of the question would be, in the case that valrox is approved, how is the field sort of looking about potential supplementary label extensions, which I'd imagine putting something on the label like sera positive to A5 could fit in that category? Thanks..

Yes, so no safety things to report. We don't usually give detail, blow-by-blow enrollment updates. Just to remind you, it's a bit of a slow study because it's a safety study. It's the first time anybody has purposely tried to put the gene in, knowing that there is a positive antibody titer. So we haven't given guidance to a completion date.

And as far as post approval supplements it, it's an area that we're looking at very carefully and we have some ideas about what the relative order of priority might be, but to some extent that's going to be informed by our first label and how clinicians and payers are looking at that data that we've gotten and where more data is going to be required to secure reimbursement.

And it's still a little early to be mapping out the lifecycle play for valrox and we think about it, but beyond the sera positives, we haven't really taken a concrete specific action about – to broaden the initial indication..

Okay..

And your next question comes from Joseph Thome with Cowen & Company..

Hi there. Thank you for taking my questions. Just one on Brineura's launch. You indicated in the prepared remarks that you're kind of going after two aims, getting broad reimbursement and identification of patients.

Are either one of these more gating than the other? And when we look at the launch we assume more of a steady grind up or could you guide to more of an inflection in sales. How you're thinking about that? Thank you..

Probably it's a combination of both issues. I think we've guided from the time of launch that there wasn't kind of a big warehouse of prevalent patient population that we could go after. Such as is the case for other like some of disorders, including Vimizim for Morquio A when we launched that.

So we guided that it was going to be a commercial effort of incidence, not prevalence. The incidence of CLN2 is pretty rare. We estimate 1 in 200,000. So we are putting the pieces out in the field, including disease awareness efforts and targeted screening programs to be able to pick these patients up and we're making progress on that.

At the same time, we need to be working through reimbursement processes. That's time consuming. We're utilizing named patients sales approvals in markets where it's appropriate. That's been successful, but time consuming as well. So the combination of those factors are part of – and the rarity of CLN2 is really the picture of slow revenue ramp.

Having said that, we expect, as was noted in the prepared remarks, that we'll make slow but steady progress on revenue and that Brineura will be a more meaningful revenue contributor going forward..

This concludes the Q&A session. I will now turn the call back over to Mr. J.J. Bienaimé..

Thank you. operator, and thank you all for participating on our call today. So we delivered another strong quarter, growing year-to-date revenues 19% compared to last year and continuing on a path to deliver $1.5 billion in full year revenues this year. With Palynziq in the U.S.

and on track for EU opinion the first half of 2019, we believe we can generate approximately $2 billion in revenues in 2020 with the currently commercialized products alone. So we are very pleased with the U.S. launch of Palynziq.

And even though it is early days, we expect our decade plus of Kuvan experience that will help us drive significant contributions from Palynziq over the coming quarters. So we look forward to providing a thorough overview of the pipeline and other relevant topics at R&D Day on November 7.

So we hope to see you there and thank you for your continued support and good-bye..

This concludes today's conference call..