BioMarin Pharmaceutical Inc. (BMRN) Q4 2007 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter And Full Year 2007 BioMarin Pharmaceutical, Inc. Earnings Conference Call. My name is Shandalay and I will be your facilitator for today's call. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call Ms. Eugenia Shen, Senior Manager of Investor Relations. Please proceed ma'am.

Thank you. On the call today is J.J. Bienaimé, BioMarin's Chief Executive Officer; Jeff Cooper; Chief Financial Officer; Emil Kakkis, Chief Medical Officer; and Steve Aselage, Senior Vice President of Global Commercial Development. I'd like to remind everyone that this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory 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. And now I would like to turn the call over to J.J., BioMarin's CEO. Jean-Jacques Bienaimé - Chief Executive Officer: Thank you, Eugenia. And good afternoon and thank you for joining us on today's call. I have a few introductory comments before Jeff reviews the financial details for the first quarter and the full year 2007. And then Steve will provide more detail on the Kuvan launch, then Emil will provide an update on our ongoing R&D programs. Eugenia will then review a list of investor conferences where we will be presenting in the coming months, before we ask the operator to open the call for questions. So, first, the commercial launch of Kuvan is proceeding as planned and is off to a good start. The interest level from the PKU community is very high and we are very busy guiding many patients, physicians and payors through the reimbursement process. Basically seven weeks into the launch, there are just under 500 patients in various stages of reimbursement process and approximately 162 of those patients are on commercial therapy as of last Friday. At this early phase in the launch, we are initially providing the details on patient numbers, but in the future we will begin to report only revenue as we do with our other commercial products. As you may recall, we had approximately 400 patients in the Expanded Access program at approval and of those about 230 or 58% have decided to remain on therapy. The majority of those patients chose to remain on drug and did not begin the reimbursement process until late January or even earlier this month when we ran out of free Kuvan supply during the EAP program. It had taken some time to get patients, physicians and payors accumulated to the clinical evaluation and reimbursement process for Kuvan. One channel that we have observed in the launch is working the patients through the evaluation and reimbursement processes managed by BPPS, The BioMarin Patient and Physician Support program. As Steve will explain later, we believe the number of patients waiting on commercial therapy will accelerate in the next few weeks, because of significant reduction in timelines for BPPS processing that we have observed since the beginning of this month. Importantly, the efficacy and safety profile of the drug so far is at least as good as what we expected. Over the long term we expect approximately half of the patients to respond. To-date the average dose at 18 milligram per kilogram per day and the average patient weight are both somewhat higher than we originally estimated. So overall, based on the enthusiasm we are seeing from patients and the physicians, and on the strong efficacy and safety profile for Kuvan, we are even more optimistic about the long term potential of Kuvan in PKU than we were before launch. For the near term, it is still too early in the launch to dramatically alter our 2008 guidance and we expect to have more information when we report Q1 sales in May. We have, however, increased the lower end of our Kuvan guidance and is very unlikely given the encouraging signs in this first few weeks of the launch that we would see 2008 sales lower than $40 million. And as we think about the long-term value of Kuvan and since it is now very likely to be a very significant contributor to BioMarin revenues, we are aggressively pursuing ways to maximize our IP position around the product. We are looking at strategies that could significantly extend the exclusivity beyond our patent protection of 7.5 years in the U.S. and 10 years in Europe. Currently, we do not have any issued patents specifically related to the use of BH4 in PKU, but we continue to build our patent portfolio with 87 applications in prosecutions, which is issued will expire between 2023 and 2028. One present in particular, which we believe improve very significant is an application for once daily dosing for which we hope to receive notice of allowance in late 2008 or early 2009. If patent does issue as we expect, it will offer protection until 2024. To further support our advances in the treatment of PKU and our IP position, we are also developing a pro drug with superior bioavailability and also a 400 milligram formulation of Kuvan to help manage pure burden and maximize long-term compliance. Next, Naglazyme continues to perform well in the U.S., Europe and international market. 2007 net revenue for Naglazyme surpassed the upper end of our guidance and we expect ongoing momentum in 2008 to be driven by continued geographic expansion and the initiation of new patients on commercial therapy. Countries such as Brazil and Turkey, for example, have been identified as having higher MPS VI patient populations than we initially recognized at launch, and they continue to increase the number of patients on therapy. As far Aldurazyme for MPS I, commercialization continues to go well. We recently restructured our joint venture with Genzyme, which we believe will result in increased clarity in our income statement, as well as improved efficiency of operations for both parties, and Jeff Cooper will review using details in a moment. Moving on to PEG-PAL, an enzyme therapy for PKU patients who either do not adequately respond to Kuvan or wish to reduce their blood Phe levels beyond what is possible with Kuvan, the IND filed in late November is now active and we expect the first patient to be dosed in the Phase I trial in late first quarter or early second quarter. Emil will review additional details on PEG-PAL and R&D program a little later. Now, I would like to turn the call over to Jeff Cooper who will review the financial results for the first quarter and full year 2007.

Thanks J.J. I will start by reviewing product revenues for Naglazyme, Aldurazyme and Kuvan for the fourth quarter and year ended December 31, 2007, and follow a collaborative agreement revenue for the same period. I will then review our bottom line for the quarter and year ended December 31, 2007 and follow with a more in-depth look at our financial results. Beginning with Naglazyme, net product sales for the fourth quarter of 2007 were $25.5 million, an increase of 56.4% over product sales of $16.3 million in the fourth quarter of 2006. Net product sales in Naglazyme for the year ended December 31, 2007 and December 31, 2006 were $86.2 million and $46.5 million respectively. Net sales growth is primarily attributable to geographic expansion internationally and the initiation of therapy by previously identified or newly diagnosed patients. Net product sales of Aldurazyme by the BioMarin/Genzyme LLC were $35.4 million and $123.7 million for the fourth quarter and year ended December 31, 2007, representing increases of 33.6% and 28.5% over the sales of $26.5 million and $96.3 million for the fourth quarter and year ended December 31, 2006. BioMarin share of the of profit of the BioMarin/Genzyme LLC was $9.4 million and $30.5 million for the fourth quarter and year ended December 31, 2007, compared to a profit of $5.7 million and $19.3 million for the fourth quarter and year ended December 31, 2006. As a result, profitability of the joint venture during 2007 grew at a faster rate than sales with increases of 64.9% and 58% respectively compared to the fourth quarter and full year of 2006. Beginning January 1, 2008, as a result of the restructuring of the joint venture with Genzyme, BioMarin will begin to report top line revenues on the income statement related to Aldurazyme. During 2008, Aldurazyme product revenues will consist of two components. First and most significant portion of our product revenue will be the 39.5% to 50% royalty on worldwide net product sales of Aldurazyme. Second, as a result of the terms of the agreement, BioMarin will also record revenues related to the one-time build up of finished good inventory, which is being transferred to Genzyme throughout 2008 to meet future demand. To the extent that Genzyme Aldurazyme inventory quantities on hand remains floppy on 2008, the total BioMarin Aldurazyme revenues thereafter will approximate to 39.5% to 50% royalties of worldwide net product sales by Genzyme with no additional revenues from the inventory transfers. If Aldurazyme inventory quantities on hand at Genzyme grow beyond 2008 due to increased product demand, BioMarin would record a small amount of revenue related to the incremental inventory transfers in addition to the royalty. BioMarin will also record cost to goods sold associated with the manufacturing cost of product shipped to Genzyme, a modest amount of operating spending related to certain ongoing U.S regulatory and administrative costs, and finally, our share of the remaining R&D activities in the joint venture. We expect that profitability associated with Aldurazyme will continue to grow during 2008 as a result of growing worldwide product revenue. As for collaborate agreement revenues associated with our partnership with Merck Serono, BioMarin recorded $17.5 million and $28.3 million for the fourth quarter and year ended December 31, 2007, compared to $4.9 million and $18.7 million for the fourth quarter and year ended December 31, 2006. The fourth quarter and full year 2007 results include the receipt of the $15 million milestone payment from Merck Serono for the filing of the MAA for Kuvan. Excluding the receipt of the $15 million milestone payment, collaborative agreement revenues decreased in 2007 compared to 2006. This reduction of collaborative revenue is due to the lower overall R&D expense for Kuvan in 2007. Net income was $2.6 million or $0.03 per share for the fourth quarter of 2007 compared to a net loss of $10.4 million or $0.11 per share for the fourth quarter of 2006. The net income during the fourth quarter of 2007 includes $5.5 million of non-cash stock compensation expense compared to $3.1 million of non-cash stock compensation expense during the fourth quarter of 2006. Net loss for the year ended December 31, 2007 was $15.8 million or $0.16 per share compared to a net loss of $28.5 million or $0.34 per share for the year ended December 31, 2006. Now review the operating expenses and non-operating interest income in more detail. Research and development expenses increased $3.4 million to $24 million in the fourth quarter of 2007 from $20.6 million in the fourth quarter of 2006. This is attributed primarily to increased R&D development cost for the PEG-PAL program, increased manufacturing cost for Kuvan pre-approval, and non-cash stock-based compensation expense. We expect to increase our R&D spending in 2008 as compared to 2007 to support the ongoing 6R-BH4 program for cardiovascular and sickle cell indications, PEG-PAL clinical studies, expansion of our early-stage development program, and non-cash stock compensation expense. Selling, general and administrative expenses increased by $10.2 million to $23.9 million in the fourth quarter of 2007 from $13.7 million in the fourth quarter of 2006. This is largely due to increased pre-launch commercialization activities related to Kuvan, continued international expansion of Naglazyme, and growth in corporate expenses including non-cash stock-based compensation expense. SG&A spending is expected to continue to increase in 2008 due to the full year impact of sales and marketing expenses for Kuvan in the U.S., commercialization of Naglazyme in Europe, Latin America and other parts of the world, and non-cash stock compensation expense. Non-operating interest income increased by $3.4 million to $7.4 million in the fourth quarter of 2007 from $4 million in the fourth quarter of 2006. This is primarily due to the additional cash on hand as a result of the April 2007 financing. Looking forward to 2008, we expect to earn less interest income on our cash balances as compared to 2007, primarily due to the decline in interest rates. From a cash perspective, we ended the fourth quarter with $585.6 million of cash, cash equivalents and short-term investments. With regard to 2008 guidance, we expect Naglazyme net sales to be in the range of $105 million to $116 million. As for Aldurazyme, BioMarin and Genzyme expect total net sales by Genzyme for 2008 to be in the range of $135 million to $145 million. BioMarin's revenue from Genzyme related to Aldurazyme is estimated to be between $68 million and $78 million, which includes both the royalty earned on net sales by Genzyme and additional product revenue related to the build-up of finished good inventory, which is being transferred to Genzyme to meet future product demand. We are updating our guidance for 2008 Kuvan sales, which we expect to be in the range of $40 million to $70 million. Net income for 2008 is expected to be in the range of $20 million to $40 million, which assumes that $30 million milestone for EU Kuvan approval we earned in 2008. The estimate of 2008 net income includes approximately $27 million in non-cash stock compensation expense. Non-GAAP net income, excluding the impact of non-cash stock compensation, is estimated to be in the range of $47 million to $67 million. Regarding cash flows, we plan to increase our capital spending during 2008 to approximately $75 million. The planned increase includes a major expansion of our Nevada manufacturing facility and increased spending on our corporate campus, including a recent $12 million purchase of a new administrative and lab facility. The increase in capital expenditures will be substantially offset by increased cash generated from operating activities and a $19 million cash distribution received this month primarily related to restructuring of the BioMarin/Genzyme LLC. And finally a few words about income taxes. Looking forward, we expect that our income taxes payable remain relatively low, given our current net operating loss carry-forwards totaling $475 million and R&D tax credits totaling approximately $109 million. We expect that these NOLs and R&D credits as well as other tax benefits will substantially offset potential income tax liabilities for BioMarin for the next several years depending upon the rate of profitability growth. And now I would like to turn over the call to Steve who will provide an update on the Kuvan launch.

Thanks, Jeff. In the last two weeks of 2007, immediately following approvals, we generated $0.4 million in revenue in the fourth quarter of 2007. That reflects the initial shipment of product to the specialty pharmacies distributing Kuvan. As J.J. mentioned, some dynamics we have assessed from the first two months of the commercial launch are the patients who are slightly heavier than the estimated 45 kilograms are being dosed at a higher average dose than the estimated 15 mg per kg per day. Our current observed average dose is approximately 18 mgs per kg per day. And the average weight is approximately 46.5 kilograms. We do not have enough information to assess compliance at this time. As of February 22, a total of 487 patients have been referred to BPPS to have therapy initiated. Of this 487, 238 are new non-EAP patients. Of all patients referred to BPPS, 162 are currently on commercial drugs and the remainder are going through the clearance process. During the latter half of January and most of February, an average of approximately 10 patients were being referred to BPPS each working day. Over 80 of the approximately 130 PKU clinics have referred patients for therapy, which is a very positive indication for the product. It is important to keep in mind that it does take time for the clinics to schedule appointments and complete the necessary paper work for reimbursement, and that most did not start this process until after the first of the year. As the clinics process more patients for evaluation and get more experience with the process, we expect it will become more routine and take less time for each patient. Overall, the response from payors has been encouraging. To-date there have been very few denials from payors, mostly due to administrative errors which have already been reversed. Timeline for processing patients through the insurance verification and authorization average 24 days for the overall time period since approval. By February, the average time has decreased to approximately 10 minutes. Patients applying for patient assistance can experience an additional one to two week delay while that application is reviewed by Nordic [ph]. We have seen significant improvements in timelines already and expect the payor decisions and overall process to become even more streamlined once the product has permanent placement in the formularies and plans gain additional experience with Kuvan. In summary, we are encouraged by the high level of enthusiasm among patients and physicians. The positive response from payors and the large pipeline of patients being process through BPSS, we are working to improve on the amount of time it takes patients to go from referral to initiation of treatment and we look forward to keeping you updated as the launch progresses. And I now I'd like to turn the call over to Emil who will update you on the R&D pipeline.

Thanks, Steve. Starting with PEG-PAL, as J.J. mentioned earlier, the IND was filed in the fourth quarter and is now active, and we are able to proceed. The first patient in the Phase I trial is expected to be dosed in the late first quarter or early second quarter, and we are hopeful that our positive preclinical data showing sustained decreases in blood Phe levels will be replicated in humans. The Phase I study will asses the safety and pharmacokinetics of single injections of PEG-PAL in 35 PKU patients in a series of up to seven escalating dose cohorts of five patients each. These patients would later be offered continuation into a Phase II study that will evaluate the safety and efficacy of weekly injections for eight weeks followed by dose optimization in an extension period. Beyond PEG-PAL, we have enhanced our early-stage development strategy to revive our pipeline growth in the coming few years. Currently we have a number of ongoing preclinical programs with potentially interesting drug candidates, one of which is another lysosomal storage disorder for which we are targeting to file an IND in early 2009. Regarding the BH4 cardiovascular program, we are performing several Phase II and exploratory studies, including a study in peripheral arterial disease, sickle cell disease, endothelial dysfunction in coronary artery disease, pulmonary arterial hypertension, endothelial dysfunction in isolated hypertension, and proteinuria in patients with chronic kidney disease, and finally the effect of vitamin C on BH4 pharmacokinetics. We expect to have data from sponsor study for sickle cell disease by late Q3 to Q4 and for peripheral arterial disease by Q4. The remainder of the study should complete by Q4 2008, up to early 2009, depending on enrollment in some of the investigator-initiated studies. The collective results will help us determine future of the 6R-BH4 cardiovascular program. Our other early-stage preclinical development program should provide BioMarin additional drug candidates going forward, along with any new late-stage products we might in-license. The hiring of Gordon Vehar, a successful ex-Genentech research veteran, as our VP of Research should help us drive our development goal to file one IND per year. We are on track to do that now, but we will not let up on the pressure to push forward on new product ideas and build our development... build on our development success to-date. Now I would like to turn the call back over to Eugenia for some comments regarding upcoming events.

Thanks, Emil. Before we open up the call for questions, I would like to note that we will be presenting at a few investor conferences in March. On March 18th, we will be presenting at the Cowen Healthcare Conference in Boston, and also at the Citi Small and Mid Cap Conference in Las Vegas. And on March 19th, we will be presenting at the Lehman Brothers Global Healthcare Conference in Miami. You can access these presentations live through our website at www.bmrn.com. In addition, we are also planning an R&D day for June 5th in New York City. And with that, we would like to open up the call for questions. Shandalay? Question And Answer

[Operator Instructions]. And your first question comes from the line of Salveen Kochnover of Jefferies. Please proceed. Salveen Kochnover - Jefferies & Company: Hi, thank you for taking my questions. Jeff, could you provide us with some expense line guidance for '08?

We are not providing specific expense line guidance. What we have said is that we do expect our R&D and our SG&A spending to increase in 2008 versus 2007 mostly because of a full year related to our Kuvan commercialization activities, as well as additional spending for PEG-PAL, additional spending related to our early research program and so on, but we are not providing specific details on line item guidance for the operating expenses. Salveen Kochnover - Jefferies & Company: Great. And then in terms of turning profitable is your guidance for that second half of '08?

Well, we have said that we expect to be profitable for the full year of 2008, the majority of that would be reflected in the second half of 2008. Salveen Kochnover - Jefferies & Company: Great. And in terms of Kuvan, when do you think that we will have all the 120 to 130 PKU centers on board with enrolling patients into the BBPS and how long are physicians currently screening patients for Kuvan responsiveness?

Right now we have a 81 of 130 PKU clinics that have referred patients into BPPS to start therapy. I can't give you a specific on when all 130 will have patients and certainly most of those who have not referred in are planning on sending patients in the short-term future. As far as screening, it's a little bit difficult to say, it's still pretty early. Certainly during the EAP pre-launch or pre-approval portion, we saw physicians screening for two weeks to four weeks as a matter of routine. Whether that continues routinely with commercial product is hard to project, but the initial scripts we are seeing are for at least 30 days, which makes us feel that it's likely that they will screen for 30 days. Again, I have to emphasize it's very early and I can't say that for certain. Salveen Kochnover - Jefferies & Company: Great. And then one last question. Could you comment on your experience of getting coverage for Naglazyme ex-U.S., primarily in Brazil and Turkey and the Middle East?

Sure. We have been, I think, very fortunate with all the countries you mentioned. Well, certainly Brazil and Turkey have processes in place whereby non-approved drugs can be provided for citizens of that country under a named patient basis. Specifics of the process vary in different countries, but both Brazil and Turkey with significant patient populations have been very accommodating to the patient groups in those countries. We have been seeing significant numbers of patients going commercial therapy in both countries. In the Middle East, there is significant variance from country to country, but within the Gulf states, we have had patients initiated and reimbursed for in a number of the countries, most recently Saudi Arabia, which we think could be a significant market for us. Salveen Kochnover - Jefferies & Company: And have you had any significant push back in any of these countries?

Well, there are some countries that simply do not pay for expensive enzymes replacement therapy. So I think may be the best example is in Australia, you need line item funding. We anticipate getting line item funding for Naglazyme later this year, probably in July. In New Zealand, which you would think would have a similar program, enzyme replacement is not paid for for any of the products at all. So it's really a country by country situation. Our strategy has been to evaluate each country on a standalone basis and if both the patient numbers and the reimbursement system, the healthcare system provides for reimbursement, then we move into that country as we see appropriate. Salveen Kochnover - Jefferies & Company: Perfect, thank you.

Your next question comes from the line of Phil Nadeau of Cowen & Company. Please proceed. Phil Nadeau - Cowen & Co.: Good afternoon, thanks for taking my questions. My first question is on the rolling of patients from the EAP to commercial therapy. It does seem like the timelines for completing that transition have slipped just a little bit, may be from early to mid February initially to now kind of mid-March to have the process completed. Could you talk a little bit about what has led to that change in timelines?

Sure. To be very candid with you, it's taken us longer to get patients through the insurance clearance process than we thought it would. A couple of factors have played into that. First of all, we anticipated that we would be able to get EAP patients started in the process really shortly after the product was approved. It turned out many of the EAP centers and patients were not particularly interested in moving forward until they got closer to the end of their EAP supply of product. So we weren't able to move things forward as quickly as we wanted to. When we did get patients into the process, what we found was that it was taking us substantially longer to get both verification and then the authorization. Part of that is due to the fact that health plans weren't familiar with the product. It wasn't downloaded into all the systems yet. Part of it was the centers weren't familiar with dealing with a fairly expensive product like this and that was a learning curve for them, getting the right information pulled together to allow BPPS to even start the process. The net effect of a number of different time-consuming components was that the BPPS program really got overloaded a little bit and we weren't able to respond as quickly as we could with some of the service we wanted to provide. So, it's really a combination of things. We have addressed those I think pretty aggressively. We have added some staff to our BPPS group so that we can do a better job of supporting the centers. The centers have been quick studies in terms of figuring out what they need to do to get the right information in and as a result of that, we are seeing timeline short, which you are exactly right. It has taken us longer to get the EAP patients on to commercial drug than we anticipated it would. Jean-Jacques Bienaimé - Chief Executive Officer: It's J.J. I mean, I think it has to do with the fact also that we did not anticipate that the patients would like to stay on free drug as long as possible and actually some of them even extended a little bit beyond the deadline we gave them of mid-February. But I think that's okay. But the good news is that we have significantly improved in terms of the processing of the insurance authorization. And as Steve said, we went from about 24 days to about 10 days in average now, which is a very significant improvement. And two, this slight delay has absolutely nothing to do with intrinsic value of the product. It's not like the patients don't want to be on the product, actually they want to be on the product. Many of them just wanted to be on free product instead of paying products, but it has nothing to do with the success of the launch or the value of Kuvan long term. Phil Nadeau - Cowen & Co.: Sure, sure. And --

Actually if it would be helpful, we can provide you some visibility on the EAP transition as well. We have roughly 400 patients enrolled in EAP. Of those 400, approximately 230 are still active within the BPPS system. Of that 230, we now have 108 on commercial therapy, and we anticipate the remainder of those patients having insurance cleared over the next 2 to 4 weeks. Phil Nadeau - Cowen & Co.: Okay. And of the 122 patients who are active in the BPPS but not on commercial therapy, has there been a disruption to their treatment and receipt of Kuvan or are they still on?

No, we wouldn't let that happen. We ship compassionate use product for a patient assistance pharmacy to those patients so that they could maintain therapy until their insurance clears. Phil Nadeau - Cowen & Co.: Okay. And then my second question is on looking at the launch going forward, you said today and I think you said at recent meetings in the past that you are getting about 10 patients per day into the reimbursement assistance program. How high could that go before your BPPS facilities are overloaded again and what do you perceive as the rate limiting factor to getting a patient that's out there into the BPPS program?

I think there are two different questions there. Let me start with the BPPS and I think the lesson we have learned in the first six weeks of this launch is to have the flexibility to add staff more quickly. And if we see referral numbers increasing beyond what our current capacity can handle, we will staff, I think with a much quicker response than we did first time through. I don't think we were slow to first time through, but I think we are really surprised by how much time and how many phone calls were coming in. So I can put in perspective, BPPS handled in the month of January over 6000 phone calls, and I think that speaks to, one, the interest in the product, but also in the amount of work that went into clearing each individual patient. As far as other rate limiting steps, I think what we've said from well before launch, so we think the real rate limiting step will be how fast centers can get patients scheduled into clinics and evaluated, and scripts and the statement of medical necessities written to get patients started on Kuvan. If centers are busy, they have significant workloads and trying to schedule additional appointments to pull patients in, it is not something that's an easy task for them. And I think they have done an incredible job. In fact, we have 81 of 130 patients through already, I think is actually pretty amazing. We are very happy with that and again, as centers get more experienced, get more comfortable, we think they will streamline their processes and get more efficient on it. Phil Nadeau - Cowen & Co.: Do you have some quantitative idea of how many patients per week all 130 centers could possibly process today?

No. Phil Nadeau - Cowen & Co.: Okay, fair enough.

Yes,I wish I could give you a better answer than that, but I really don't. Phil Nadeau - Cowen & Co.: Okay, thank you.

Sure.

Your next question comes from the line of Chris Raymond of Robert W. Baird and Company. Please proceed sir.

Hi, thanks for the question. Just a couple of sort of non-Kuvan questions if I can. Can you guys quantify how much of the Aldurazyme revenue guidance is driven by these inventory buildups in '08?

Sure. So, as I noted earlier, we are projecting that BioMarin will record between $68 million to $78 million in Aldurazyme revenue. Of that amount, about $53 million to $58 million represents the royalty income to BioMarin, which is based upon Genzyme's third-party sales projected at $135 million to $145 million. The remaining portion of the BioMarin revenue relates the one-time Genzyme inventory buildup, which we are estimating between $15 million and $20 million.

Got you. Okay, I am sorry if you already mentioned it, if you already broke that out. But so, for '09, if we don't see a significant uptick in Aldurazyme revenue, is it possible that you see that line item sort of flat to may be even fairly down?

In terms of the total revenue or the revenue related to inventory transfers?

No, the total revenue from Aldurazyme.

Well, it's difficult to say. We would expect to see that our royalty revenue would continue to increase as third-party Aldurazyme sales increase, but with regard to the revenue related to the inventory transfer, we would expect to see that decline. We would expect the majority of the inventory transfer revenue to occur during 2008 with the buildup of the inventory. There may be a couple of million dollars of incremental revenue that we would see in 2009 based upon continuing inventory builds by Genzyme, but the majority of the inventory transfer revenue will occur during 2008.

Okay, okay. And then on your income guidance, I think this is the first time you guys have given a GAAP and non-GAAP, obviously, it's first sort of major income year for your guys in a while, but it's unclear to me if folks... are you... I mean, is it kind of your signal that the folks should be looking at non-GAAP or GAAP? I mean, how would you try to explain that to the Thomson one and the folks who tabulate that? What would you... what is your sort of expectation there?

Well, obviously we wanted to be able to provide the Street with additional information and as you know, stock compensation expense is becoming an increasing material portion of our overall expense, growing to $27 million in 2008. So we thought that it would be helpful for the Street to identify that amount of our expense that is non-cash related. And we have been asked the question before by others as to whether we would provide non-GAAP net income and now that we are looking towards profitability, we feel that it would be helpful to provide that. So that's really what's driving providing both the GAAP as well as the non-GAAP net income. Jean-Jacques Bienaimé - Chief Executive Officer: It's the fact that most other larger biotech companies that are profitable do report GAAP and non-GAAP numbers.

That's correct. Jean-Jacques Bienaimé - Chief Executive Officer: We are kind of following the trend.

Right.

Right. And consensus goes around non-GAAP. So, I just wanted to clarify that. Okay, thanks.

Your next question comes from the line of Liana Moussatos of Pacific Growth Equities. Please proceed.

Thank you. What percent of Naglazyme sales in 2007 were U.S. versus international?

U.S. sales in 2007 were slightly over 20%. International, we break international into two groups; Europe and then rest of world. Europe was roughly 60% and the rest of world was roughly 20%. It's the ROW component of our overall Naglazyme business that are showing the fastest growth right now though, and I think you will see international pass the U.S. by a fairly substantial margin in 2008.

And the rest of world growth or the rest of the world in 2007, that's 20%, what proportion of that was Brazil and Turkey?

I don't think we have broken it out by specific countries, but Brazil and Turkey were both significant contributors to that 20%.

All right, thank you very much. Jean-Jacques Bienaimé - Chief Executive Officer: But if I may, we are now getting usage also in Latin America beyond Brazil, some other countries are starting to pick up. I mean, Brazil would definitely be the largest country, but Latin America revenues are not only limited to Brazil anymore.

Thank you.

Your next question comes from the line of Matt Renna of Soleil Securities, Please proceed

Hi, thanks for taking the questions. Just a follow-up on the Aldurazyme inventory transfer, should we expect that to be spread out pretty evenly throughout 2008 or should we expect it to be weighted more in the first half of the year?

My expectation is about two-thirds of it will occur in the first half of the year and about one-third in the second half. Obviously, the timing of shipments could be vary somewhat, but that's what our estimates are right now.

Great. And then just a follow-up question on Kuvan. Do you guys have access to what the actual response rates are for patients? Well, may be I should rephrase that just in terms of what you are seeing with the reduction in Phe, are physician keeping patients on the products if the reduction is less than the 30% benchmark you guys used in your trial?

We don't have visibility to the lab results right now. Anecdotally we have seen variability from center to center as far as what they consider response that's significant enough to justify continuation of therapy. I can say that 30% does not appear to be a benchmark that is being widely adhered to.

Great. And then Jean-Jacques Bienaimé - Chief Executive Officer: And another way to look at it in terms of... irrespective of the Phe levels drop is that in terms of proxy for definition of patients who believe there is a benefit that's good enough to stay on therapy, again about 57% of the EAP patients decided to stay on therapy.

Great. If I could just ask one more question, with regards to the next phase of the Kuvan launch, can you comment may be on your ability to get some of the older patients back into the clinic and then may be how you think that might impact weight... the average weight going forward?

Certainly the older patients coming in pushes weight upwards. As it stands right now, we have pretty full capacity getting known patients who are currently in the clinics, evaluated, prescribed, and processed for the insurance clearance process. We do not have plans to initiate any type of a patient finding or a pulling more patients into the clinics program for at least the next several quarters. We will take care of the patients that we know about, focus on those, do as good a job as we can with them and then move on to attempting to put more patients there.

Thanks for taking the questions guys. Jean-Jacques Bienaimé - Chief Executive Officer: But if I may, I don't know what's your question, but we do get, we already have some adult patients that are being on commercial therapy and I think Steve has some data on that, if you want to go over it.

Sure. We have actually... surprisingly large percentage of our initial patients are adults. 20% of the patients are over the age of 30; 31% of patients are aged 19 or older; and very surprising to us to us, the oldest patient on therapy to-date is 55 years old. The youngest patient is six months. So we have got really a full spectrum of ages represented in the current patient base.

Your next question comes from the line of Ms. Carol Werther of Summer Street Research. Please proceed.

Could you give us an update on the plans for Kuvan in Japan?

Yes, this is Emil. When we first obtained the rights, we obtained them from Daiichi Suntory, now called the Asubio Pharma, a subsidiary of Daiichi Sankyo. And so they retained the rights to their profit for Japan and we not too long ago announced the licensing of our data back to Japan to Asubio, and so they will be... they have filed for approval in Japan and we expect to hear some time this year about approval in Japan. With that deal, we do get substantial royalty revenue from sales in Japan. Jean-Jacques Bienaimé - Chief Executive Officer: We anticipate approval this year and the royalty rates is varied according to sales, but it's north of 20%. And in terms of BH4, it's something Kuvan [indiscernible] BH4, it's been on the market in Japan for several years for the treatment of the BH4 deficiency at a pretty substantial price and there probably will be some kind of price reduction once we get approval for PKU, but the current price in Japan is about $200,000 per year for 10 mg per kg dose.

Okay, thank you, that's helpful. And then in terms of the PEG-PAL, when exactly should we expect to hear the results from the Phase IIa?

Well, let me start with the Phase I. Phase I study is because of the first-in-man study is a very staged startup with a series of cohorts starting one by one over time. So it's going to take a period at least six months to us to get that study enrolled through the stages. So we would expect towards latter half of the year to have some data on the single injection Phase I study. In the third quarter, we would expect to start some of the cohorts on the Phase II study, but we are not expecting to have Phase II data completed this year, it's going to be some time in 2009. It depends a little on how the enrollment proceeds, but it is also going to be staged. So it will take some time to get the repeat dose data out.

Okay, great, thanks very much.

Your next question comes from the line of Tom McGahren of Merrill Lynch. Please proceed

Hi, thanks. Just a couple of Kuvan questions. May be could get the gross margin that you have been seeing so far on Kuvan and also the compliance for the patients, I believe, in the past you've mentioned it was about 80%? And then I have one other.

Sure, this is Jeff Cooper, I will answer the gross margin question. Our expectation is that over time the margins including the royalty that we paid for Kuvan would probably be in the mid-80% range. Initially, the manufacturing cost should be minimal because of the inventory that was built pre-approval, which had already been expensed as R&D. So we will see minimal manufacturing costs for a while, primarily what we'll see is the royalty that we pay out. But longer term, probably in the mid-80% range including the royalty.

And on the compliance side, I mean, we have our estimates, but they are only estimates, and we don't... it's just too early for us to know for sure what compliance is going to look like.

Is it higher or lower than sort of the original 80% that J.J. was talking about?

No, I think that's a good estimate at this point.

Okay and then just -- Jean-Jacques Bienaimé - Chief Executive Officer: [indiscernible] to measure long-term compliance when patients have been on the drug for less than a month. So it's really meaning... it's impossible to know what is going to be the right answer or guesstimate. But we feel pretty comfortable with 80% right now. It might change a bit, might get better. The good news again is that thanks to BPPS, we are pretty much know we can access the patients through the specialty pharmacies and specialty pharmacies will be monitoring compliance, and we'll have some programs in place to maximize compliance if we see the patients are not becoming compliant over time.

Okay. And then just finally in Europe, any updates on the filing in Europe, any comments there, and does your total revenue guidance include any royalties near the end of the year from Europe? Thanks.

The guidance, as I mentioned, includes the milestone payments, the $30 million milestone assuming approval by the end of the year. There really would be no significant royalties reflected in that.

Okay, thanks a lot. Jean-Jacques Bienaimé - Chief Executive Officer: Depending on the... I guess your question was related to the filings, the way the filing was going?

Yes.

The filing process is going fine and we don't see any issues at the moment with it. The exact timing for turnaround and positive opinion, we can't comment on at this point, but we were hoping to be able to get through that process, and reach approval by the end of the year, but it depends a little on how fast the things get turned around, but so far we are not seeing any issues.

Okay, thanks a lot.

[Operator Instructions] And your next question comes from the line of Alan Leong of Biotech Stock Research. Please proceed.

Hi, thanks for taking my question. I like the idea of BH4 being aimed at... Jean-Jacques Bienaimé - Chief Executive Officer: We have a heard time to hear you.

How is this? Jean-Jacques Bienaimé - Chief Executive Officer: Yes, it's better.

It's better.

Okay. I like how you are thinking of using BH4 for proteinuria. I wonder if you could for our subscribers characterize the market and the current way of treating it?

All right. Well, proteinuria can have a large number of cause and I am not sure I want to give you a dissertation on it, it's certainly not my area of expertise. But let me speak to it from the standpoint what BH4 has been shown to do in proteinuria and why we are studying it. In animal models, BH4 does improve endothelial functions in the glomerulus part of the kidney, the part of the kidney that tends to leak protein in patients with proteinuria and BH4 has been showing the improved endothelial function and reduced proteinuria in a couple of different animal models. In additional, we have some signal in our hypertension study in which patients who did have proteinuria had an improvement or a decrease in proteinuria. So we decided to file the stuff we also had in fact enquiries from a major center in the U.S. who wanted to study it. The type of patients that may be in that study will have a diverse set of causes, some of them could be diabetic nephropathy, some of them could have other aspects of cardiovascular disease, or primary kidney disease. There maybe a variety of types of patients. Our interest was in patients who have endothelial dysfunction and proteinuria and determine whether improvements in endothelial function that might be brought on by BH4 administration would be correlated with the reduction in proteinuria. But today, the types of drugs patients are on for proteinuria includes ACE inhibitors or ARBs or perhaps there is a new the Raymond [ph] inhibitors and other new drugs that's approved for proteinuria. These are drugs in general that have known effects in endothelial function. So it's a mechanism of action and effect on endothelial function would be predicted to be beneficial in proteinuria. For patients who are in more advanced stage of the cancer study, they can't tolerate ACE or ARB inhibitors. So therefore there may be a role in BH4 patients who are unable to tolerate the current drugs in treating proteinuria, but the study we are doing is 30-patient there any patients open label, looking at 24-hour protein excretion and other markers, and trying to determine if you treat patients who have proteinuria from brighter cause do we see a consistent reduction in proteinuria. If we do, this is a very large market numbering in the millions of patients in the U.S. and would be, I think, a very important and highly valuable use of the drug because while associated decreasing proteinuria improves the time to renal dialysis or renal failure and anything that can reduce or prevent renal failure in dialysis has particularly good economic value of the treatment. So that's what we are going to evaluate this year. And we hope by the end of the year to have some data on how BH4 works in that indication and we will hopefully replicate what we've seen, both in the animal models and also in some of the patients from our first hypertension study.

Thanks.

Your next question comes from the line of Aaron Reames of Wachovia. Please proceed.

Thank you for taking my question. I was wondering if you could give us a little bit more insight on the reasons why the 170 patients were in the EAP were not referred into the BPPS? Was it price or just a treatment effect, can you just provide some more additional granularity there?

Those are primarily non-responders. If you think about it, we had 400 patients go into the EAP. We anticipated 40% to 50% response. At this point, we still have roughly 58% of those patients on therapy. So it would make sense that the patients who have dropped out at this point have primarily dropped out because they are non-responders.

Okay, thank you.

There is only one patient I am aware of that was a not a non-responder and that was a patient who was non-compliant and had some problems that made him an inappropriate candidate for therapy.

Okay, thank you

At this time there are no further questions in queue and I would like to turn the call back over to Mr. J.J. Bienaimé. Please proceed, sir. Jean-Jacques Bienaimé - Chief Executive Officer: Thank you. So 2007 was a very successful year for BioMarin. We achieved many significant milestones including the FDA approval of Kuvan and the filing of the IND for PEG-PAL. In addition, the sales of Naglazyme and Aldurazyme continued to grow, which contributed to the improving bottom line. So looking ahead into 2008, we are focused on the successful launch of Kuvan, the continued geographic expansion of Naglazyme and the advancement of R&D pipeline, including the PEG-PAL program and a number of a pre-clinical program and possible in licensing or acquisition opportunities. We are currently focused on pursuing opportunities to augment our clinical stage pipeline and ensure the continuation of double-digit revenue growth in the coming years. So BioMarin has developed into a fully integrated biotech company with anticipated total revenue this year of $255 million to $306 million. So we look forward to keeping you up-to-date on our progress and we thank you for your continued support. Thank you for joining us on the call today and good bye.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.