BioMarin Pharmaceutical Inc. (BMRN) Q2 2008 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the Second Quarter 2008 BioMarin Pharmaceutical Inc. Earnings Conference Call. My name is Amy and I'll be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question and answer session towards the end of today's this conference. [Operator Instructions] I would now like to turn the presentation over to your host for today's conference Ms. Eugenia Shen, Senior Manager of Investor Relations. Please proceed.

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. This non-confidential presentation contains forward-looking statement about the business prospects of BioMarin Pharmaceutical including the expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and development by competitors and those factors detailed in BioMarin's filing with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K report. Now I would like to turn the call over to J.J. BioMarin's CEO. Jean-Jacques Bienaimé - Chief Executive Officer: Thank you Eugene and good afternoon and thank you for joining us on today's call. I have a few introductory remarks before Jeffery gives the financial details of the second quarter and also the first half of the year. Steve will then provide more details on the progress on our Kuvan launch, and Emil will provide an update on our ongoing R&D programs. And Eugenia will then review the some investor conferences and I will be... where we will be presenting in the coming months before we ask the operator to open the call for questions. So, we are very pleased with our second quarter results with an increase of 122% in total BioMarin revenue as compared to the second quarter of 2007, Naglazyme, Aldurazyme and Kuvan generating strong top line revenues, which increased profitability for the third consecutive quarter. And we are well on our way to achieving our first profitable year. Aldurazyme with a 68% increase in net sales as compared to the second quarter of 2007 continued to perform exceedingly well, surpassing our internal expectation. As a result, we are once again raising our expectations for 2008 from initial guidance in the range of $105 million to $116 million at the beginning of the year to a range of $130 million to $140 million. Notable milestones in the second quarter included increased progress in several key international markets. We filed and received product review of Naglazyme in Brazil and received formal ratification of government funding in Australia; two very challenging and important achievements. Also, as you may remember, Naglazyme received approval in Japan at the end of the first quarter and we are also making tremendous progress in other international markets. And we continue to aggressively pursue further growth opportunities and initiation of new patients on commercial therapy. Next, as a result of strong third party sales of Aldurazyme during the first half of the year with 32% increase in the sales of a single quarter of 2008 as compared to the second quarter of 2007, we are raising the lower end of our 2008 guidance for revenue to BioMarin. While Genzyme did not reach guidance for the total sales of Aldurazyme, the annual rate for the first half of the year is over $150 million, and we have no reason to expect a slowdown in the business in the second half of the year. Also this marks the second quarter following this restructure joint venture with Genzyme which we believe has resulted in improved efficiencies of operations of both parties and clearly increased sales. Finally, the Kuvan launch is progressing well with net revenues of $12 million in the second quarter which is more than double that of the first quarter. So far the launch is on track although screening of patients by some PKU centers has been slower than anticipated by some, we are pleased with the progress made during the first half of the year. We also remain extremely optimistic about the long term potential of Kuvan. The drug continues to maintain an excellent safety profile and efficacy profile and a percentage of patients will remain on therapy is higher than we expected at launch with a very loaded continuation rate seen so far. Although due to order cycle, it is still too early to make predictions about long term response rates and long term compliance rates. We feel very confident about long term future of the product, and obviously made [ph] Kuvan sales are still the same as they were at approval in December of last year. Steve will elaborate on the details of the Kuvan launch a little later. So with respect to Kuvan's regulatory studies outside of the United States, our partner, Asubio recently received approval from the Ministry of Health, Labor and Welfare for Biotin which contains the same active ingredients as Kuvan for the treatment of PKU. And as you know now Biotin has been sold in Japan for many years by Asubio for BH4 deficiency and ulterior disorder. In Europe, BioMarin is working closely with Merck Serono and EMEA throughout the review process. And we remain on track for a decision and potential positive opinion and approve in Europe by the end of this year. As a reminder, BioMarin will receive net single digit royalty sales... of royalty on Southern Europe. And in Japan we will receive substantially higher double digit royalties, which will partially offset royalties we pay to Asubio on your U.S. sales of Kuvan. Also to recognize our IT position around Kuvan, we are developing strategies that will significantly extend exclusively beyond our patent protection of 7.5 years in the U.S. and 10 years in Europe. We are aggressively building our patent portfolio with 87 applications in active persecution, one in particular, which we believe improve very significantly in the application for one daily dosing. If this patent is issued as we expect, it will offer protection until 2.4, and to further support our advances in the treatment PKU and our IT position, we are developing a pro-drug with superior bio-availability. And we are making very good progress with the development of this pro-drug. Moving on to PEG trial, the first patient in the Phase I trial in was dosed in mid May and while it is still too early to speculate on efficacy, initial indications are quite encouraging. This is a very exciting program and Emil will review additional details on this, when he reviews the R&D program a little later. Finally, as announced two weeks ago, we entered into an exclusive worldwide licensing agreement with Summit regarding a novel, preclinical candidate SMT C1100 which is being developed to treat duchenne muscular dystrophy or DMD. And the DMD indications lies very well with our growing project development pipeline, as it is a genetic disorder, with not approved treatment and a very high un-medical need. We expect to be in the clinics with SMT C1100 in the first half of 2009. We look forward to keeping you updated on this and our other clinical and preclinical programs. And now, I would like to turn the call over to Jeff Cooper, who will review the financial results for the first quarter of 2008 and give a detailed financial guidance.

Thanks J.J. I will start by reviewing product revenues of Naglazyme, Aldurazyme and Kuvan for the quarter and six months ended June 30, 2008, followed up with collaborative agreement revenue for the same period. I will then review our bottom line for the quarter ended June 30, 2008 and follow with a more in-depth look at our financial results. Beginning with Naglazyme, net product revenue for the second quarter of 2008 was $35.1 million, an increase of 67.9% of over net product revenue 20.9 million in the second quarter of 2007. Net product revenue for the six months ended June 30, 2008 was $62.8 million compared to net product revenue of $39.3 million for the six months ended June 30, 2007. Net product revenue growth is attributable to geographic expansion internationally, the initiation of therapy by previously identified or newly diagnosed patients and weight gain as patients grow. Net sales of Aldurazyme by Genzyme was $38.7 million for the second quarter ended June 30, 2008 representing an increase of 33% over net sales of $29.1 million for the second quarter ended June 30, 2007. Net product revenue to BioMarin under the restructure agreement with Genzyme was $13.4 million for the second quarter of 2008. This reflects a reduction in net product revenue from the amount payable by Genzyme due to the timing of inventory transfers to Genzyme which was less than units shipped to third party customers. Net third party sales of Aldurazyme by Genzyme for the six months ended June 30, 2008 were $75.4 million compared to net sales of $55.9 million for the six months ended June 30, 2007. As noted previously, beginning January 1st 2008 as a result of the restructuring of the joint venture with Genzyme, BioMarin received the royalty of 39.5% with 50% of worldwide net sales. In addition, BioMarin recognized its products transfer revenue when product is shipped to Genzyme. This amount will eventfully be deducted from royalties earned when the product is sold by Genzyme. Because of the timing of shipments to Genzyme in the second quarter, this resulted in a reduction in the royalty revenue recorded. Net product revenue for Kuvan, during the second quarter ended June 30, 2008 was $12 million more than double of first quarter sales of $5.8 million. Net product growth is due to an increasing numbers of patients, initiating therapy with Kuvan. As for collaborative agreement, revenues associated with our partnership with Merck-Serono, BioMarin reported $2.5 million for the second quarter of 2008, compared to $3.5 million for the second quarter of 2007. Collaborative agreement revenues for the six months ended June 30, 2008 were $5 million compared to $7.7 million for the six months ended June 30, 2007. This reduction of collaborative agreement revenues was due to lower reimbursable Kuvan development expenses from clinical trial and manufacturing activities in the second quarter and first half of 2008. Net income was $3.8 million or $0.04 per share for the second quarter of 2008, compared to a net loss of $3.9 million or $0.04 per share for the second quarter of 2007. The net income during the second quarter of 2008 includes $5.9 million of non-cash stock compensation expense compared to $4.3 million of non-cash stock compensation expense during the second quarter 2007. Non-GAAP, net income which excludes stock compensation expense was $9.9 million or $0.10 per share for the second quarter of 2008, compared to non-GAAP net income of $400,000 or $0.00 per share for the second quarter of 2007. Net income for the six months ended June 30, 2008 was $5.5 million or $0.06 per share compared to a net loss of $13.2 million or $0.14 per share for the six months ended June 30, 2007. Non-GAAP net income was $15.9 million or $0.16 per share for the six months ended June 30, 2008 compared to non-GAAP net loss of $5.4 million or $0.06 per share for the six months ended June 30, 2007. Non-cash stock compensation expense for the six months ended June 30, 2008 and June 30, 2007 was $10.4 million and $7.8 million respectively. Now I'll review the operating expenses and non-operating interest income in more detail. Gross margins for Naglazyme were 81% during the second quarter of 2008, compared to 79% through the second quarter of 2007, due to improved yields and the impact foreign currency exchange gains. Aldurazyme gross margins will continue to fluctuate from quarter-to-quarter depending upon the timing of product transfer of Genzyme, which is the basis for cost of goods sold recognized by BioMarin. During Q2, 2008, Aldurazyme gross margins were higher 89%, due to fewer inventory transfers to Genzyme that occurred during the second quarter. For the first half of the year, Aldurazyme gross margins were approximately 67% which is closer to the mid-60% range that we would expect over time. Kuvan gross margins during the quarter were 88%, which primarily reflects an 11% royalty on net sales. Once the inventory that was previously expenses R&D is used out, we expect that U.S. Kuvan margins including 11% royalty to be in the low 80% range. Research and development expense increased $4.6 million to $23.8 million in the second quarter of 2008, from $19.2 million in the second quarter of 2007. This is attributed primarily to increased costs for the PEG-PAL program, early-stage development programs including the BMN110 for MPS IVA and non-cash stock-based compensation. We expect to further increase our R&D spending as 2008 progresses to expand early-stage development program, to support the PEG-PAL clinical studies, BMN110 for MPS IVA, our recently acquired program Duchenne muscular dystrophy, ongoing VI BH4 program for cardiovascular and sickle cell indication and non-cash stock compensation expense. Selling general and administrative expenses increased by $7.9 million to $25.2 million in the second quarter of 2008, from $17.3 million in the second quarter of 2007. This is largely due to increased 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 selling and market activities 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. Now our operating interest income decreased by $2.8 million to $4.1 million in the second quarter of 2008, from $6.9 million in the second quarter of 2007. Through the remainder of 2008, we expect to earn less interest income out of cash balances as compared to 2007, primarily due to the decline in market interest rates. From a cash perspective, we ended the second quarter with $575.7 million of cash, cash equivalents and short-term investments. Our inventory levels grew to $61.8 million as a result of the Aldurazyme inventory distribution of primary [ph] restructure to the JV. And growth in Naglazyme and Kuvan inventory requirements to meet future demand. Accounts receivable grew to $52.2 million, primarily a result of the increased account receivable from Genzyme through the JV restructure as well as the increased receivables for Naglazyme and Kuvan. With regard to 2008 guidance, Naglazyme net product revenue is now expected to be in the range of $130 million to $140 million from our previous range of $115 million to $125 million. As for Aldurazyme, Genzyme maintained expectations of total net sales in the range of $135 million to $145 million. We have adjusted our expectations for net product revenue to BioMarin to a range of $72 million to $80 million from our previous range of $70 million $80 million. Kuvan net product revenue is now expected to be in the range of $45 million to $65 million revised from a range of $45 million to $70 million. Interest income is expected to be in a range of $15 million to $18 million, a result of reduced yields on investments, due to declining market interest rates. As for net income for 2008, we have raised our expectations for an updated range of $30 million to $42 million from a previous range of $28 million to $40 million which includes the impact of the recently announced licensing deal Summit and assumes that the $30 million milestone for EU Kuvan approval will be earned in 2008. The estimated 2008 net income includes approximately $24 million to $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 $54 million to $69 million from a previous range of $52 million to $67 million. And now, I would like to turn the call over to Steve, who will provide an update on the Kuvan launch.

Thanks Jeff. Let me start with Naglazyme; we had a very encouraging quarter with Naglazyme. Besides record revenues Naglazyme received approval in Japan. Government funding was approved for Naglazyme in Australia and the registration pact was filed in Brazil. Naglazyme has already received priority reviews status in Brazil subsequent to that filed. In South Korea, where approval was received in Q1, we anticipate government funding around the year-end. We continue to find significant numbers of new patients, particularly in Latin America and new leased in Turkey. Naglazyme is now being sold commercially in 32 countries around the world with several additional countries, likely to begin purchase by the end of the year. The growing patient base in our established markets, combined with continued geographic expansion made for an exceptional quarter and bodes very well for the future. With regard to Kuvan six months into the launch, we continue to make solid progress. As J.J. mentioned while we absorbed thus far it's very encouraging. And we are still very optimistic on the long-term potential of Kuvan. The percentage of patients being kept on therapy is higher than we anticipated and there has been a low percentage of discontinuations, once response has been established. In addition to blood Phe level reductions, as many patients have noted qualitative benefits such as better concentration plus suppression, improved sleep and generally just feeling better overall. There are also some accounts of patients being able to increase the amount of natural protein in their diets or keeping blood Phe levels under control. And our view outcome such as feeling better physically and the ability to increase natural protein intake, will help with compliance. In addition for our BPPS system we have the ability to monitor compliance and encourage patients to remain on track with regular therapy. We do not have to adapt to be able to accurately predict long-term compliance. But data from the Kuvan extension study gives us some insights into what we might reasonably expect to see. Of the 49 U.S. patients in the extension study, approximately 73% or 36 patients have continued on therapy and transition to commercial drug when they reached the two-year mark. Of the 36 patients that we refer to BPPS since started commercial Kuvan, all 36 remain on therapy as of today. All of those patients have been on Kuvan for over two years at this point, with the longest-term patient at the two and a half year mark. Also as of June 30, 2008 of all the commercial patients on Kuvan for ninety days or more, 88% remain on therapy and are current with referrals. This data is the best indication we have regarding the percentage of responders who will remain on therapy and bodes well for the long-term prospect for Kuvan. We have seen a summer slowdown in referrals which is not completely unexpected. We have a number of patient information days already scheduled for the fall and anticipate that we will see referral numbers go back up once we get through the vacation period. It maybe worth noting that patient information days are what we sometimes call townhall meetings or clinic sponsored programs designed specifically to educate patients about Kuvan in a group setting where patients have access to the clinicians and often other patients currently on Kuvan, specialist and insurance and reimbursement and sometimes, sometimes outside experts. Additional initial investigators meeting was held for the Kudos registry. Initial enrolment for that registry should begin in Q3. All US PKU clinics have been invited to participate in this program which will build a data set around Kuvan and document its use in PKU populations including patients under the age of 4 maternal PKU patients and hyper fee patients. Today roughly half of the US PKU centers have expressed interest and participated. Overall the response from pairs continues to be encouraging today we have seen very few denials from pares mostly due to administrative areas which we have been able to reverse. We do not anticipate reimbursement to be a limiting factor going forward. Processing times for patients that do not require financial aid or prior authorization have improved significantly in both BPPS and with our specialty pharmacy partnership. Our current observed average dose is still approximately 18 milligrams per kilogram, per day and the average weight is approximately 50 kilograms. We do not have enough information yet to assess compliance, assuming 80% compliance yields an average price of approximately $76,000 per year, before factoring in mandatory government discounts. At this time 112 of the approximately 130 PKU flags have referred patients for therapy and these referring clinics generally represent the larger clinics, which account for the majority of the PKU patient population. In summary, we are encouraged by the momentum generated thus far. The positive response from patients and the high percentage of patients remain on therapy after their initial exposure. We remain dedicated to the successful execution of this program and look forward to keeping you updated as the launch progresses. Now, I will turn the call over to Emil who will provide an update on our R&D pipeline.

Thanks Steve. Staring with PEG-PAL the first patient in the phase I trial was dosed mid May, while the first few patient showed a drop in blood Phe levels with a dose of just 0.001 milligram per kilo, ten times lower than the expected minimum effective dose level. We remain cautious regarding the safety and efficacy of the drug, until we have additional data. The Phase I study will assess safety and PK of single injections of PEG-PAL and 35 PKU patients, in the series of up to seven escalating dose cohorts of 5 patients each. The study is expected to conclude by the end of 2008 or at the beginning of 2009. The early hint of high blood Phe suggests that we may not complete all the cohorts for the study which will allow to end earlier. Phase I studies would later to be offered continuation in to a Phase II study that will allow safety and efficacy of weekly injection for 8 weeks, followed by dose optimization in the extension period. This will the true proof of concept study for the drug and thus the efficacy of repeat dosing, the precedent to any immune response has the key question to answer for PEG-PAL. Based on the FDA's additional regulatory requirements for initiating multi-dose therapy we expect to indicate Phase II in the first quarter of 2009, regardless of when the Phase I study ends. Beyond PEG-PAL we announced at our R&D Day in June, our GALNS program for MPS VI or Morquio A Syndrome which is expected to enter the clinic in the first quarter of 2009. This indication fits our trends well and we hope to provide the first treatment option for this disease with our proven track record of expeditiously bringing products to market. In addition our pre-clinical phase program called Pompe disease is moving along nicely in our second Pompe disease mild study treatment we've provided weekly over a four week period, replicating the study published by Genzyme. In this study, the glycerin store [ph] measure in the skeletal muscle was further reduced after a longer treatment period with EMA & 103. A glycerin store reduction is compared to Myozyme in all muscles. This is significant as muscles are difficult to treat with enzyme replacement therapy, and one of the challenge of developing a successful therapy for Pompe. We are still considering our options for the program, and we will keep you updated on our progress. Regarding the BH4 cardiovascular program we are performing several Phase II and exploratory studies with the sickle cell G study being the closest to our result, with the others following through the end of 2008 to early 2009. We expect to have data from the sponsor study for sickle cell disease by early Q4 and for PAD by early Q1 of 2009. The remainder of the study should complete by Q4 2008 up to mid 2009 depending on enrollment in some of the investigator initiated studies. The collective results will help us to determine the future of the success of BH4 cardiovascular program. Also, as J.J. mentioned earlier, we entered into an exclusive worldwide licensing agreement for Summit's novel pre-clinical candidate SMT C1100, which is being developed to treat Duchenne muscular dystrophy. SMTC 1100 is an oral small molecule Nutropin up regulator, which have shown promise in the middle model of DMD and may have the potential for treating the entire spectrum of DMD patients, not just those with a type of mutation. Nutropin is an endogenous protein that substitutes for the defective dystrophy in DMD patients. The DMD indication aligns well with our growing product development pipeline as it is a genetic disease with no proven treatment. IND enabling studies with SMTC1100 are under way. We plan on entering the clinic in 2009. Now I would like to turn the call 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 the coming months. In September we'll be presenting at the Morgan Stanley Global healthcare conference in New York City, the Merrill Lynch global healthcare conference in London, the UBS healthcare conference in New York City and the Biotech in Europe, Investor Forum in Zurich. You can access these presentations live to our website at www.bmrn.com and with that we would now like to open up the call for questions. Emily? Question And Answer

Thank you madam. [Operator Instructions]. And your first question comes from the line of Brian Abrahams [ph] with Oppenheimer. Please proceed.

Hi guys, Thanks for taking my questions Just a question on the Kuvan launch, you mentioned that... it sounds like a vast majority of the patients on both commercial therapy and those that are on the long term extensions studies are remaining on treatment. I was just wondering, if you could give us a sense of some of the reasons why the patients to drop out, did drop out, if there are any...if there is any clear pattern to some of the issues there, whether it be compliance or side effects or reimbursement that you might be able to address going forward?

I think, there is a couple of different ways to answer the question. Maybe a good place to start would be the patients who dropped out during the study itself. And then I will ask Emil to add to what I say, but my understanding there were some of the patients because the study was set up for just to test those with one day and eight days. Our response tests, we ended up having some patients and who initially looked like responders, but who were not true responders. So it was fairly predictable that they would drop off with longer therapy, became clear that they weren't really responders. We've had very few patients drop offs, relative to side effects, we've had hand a handful, that I have heard about. They have had headaches or some type of GI disturbance that have made them go off therapy, some of those have come back on, some of those have not back on. What we do see is in the initial period in the first 90 days of therapy, we see patients going on and off therapy on a more regular basis. It seems like once they have been on for three months or so, they've stabilized. They understand what the drug's going to do, the diets become more standard, it's not shifting. There are fewer complications in their life and they basically seem to be pretty stable. But in that first initial period, we have patients who want to change there diets without the physicians approval. We have physicians looking at the patient response in different ways and it tends to be a little more unstable in those first couple of months on the therapy. Let me caution [ph] and see if Emil would like to add anything to that.

I think that's true Steve, I think the perhaps some color on the Phase III patient to the U.S. there were 25 patients. And of the five that didn't go on, four of the five were of the type that were not really true responders. And one was compliance issue, so it was, I think one of the factors with the U.S. market where the patient could go on from that phase III program. Those are the patients who have been on the drug the longest. So I think that some patients were not really responders from there end, so that was, I think one of the big drivers.

I think what you are pointing out is patients dropping because of insurance? I was just wondering if reimbursement was any issue.

We haven't heard about patients dropping as result of insurance. I think it's fair to say, we are still in process of helping our clinicians understand that the list price of a drug, really has no impact on patient cost or ability to give reimbursement from insurance. This is a new kind of a product for which analysts to be dealing with and we have and are still going thorough bit of learning curve on that. But we have not had significant issues, with insurance, we had isolated issues. We have routine Medicaid coverage. We are going through some wrestling right now with one program in one state, out of 50. The other 40... well actually 51 states when you include District of Columbia and Puerto Rico are going very smoothly. So overall the reimbursement and insurance environment have been very positive for Kuvan.

Great and then of the 49 patients from the extension study. Are any of those still on the extension study or have all those I guess, are going to roll over to commercial therapy, already rolled over.

I think Emil and I can both respond to that to some extent. The patients are eligible to come off the extension study, when they hit the two-year mark. So they have come off in a staggered fashion. And what we were trying to do is coordinates, so that their two years are up, they are referred over to BPPS to go on to commercial therapy. In most cases, that's worked pretty smoothly. Off the top of my head, I can't tell you, how many are still in the extension study, at the moment I do not have the number.

It's still a handful amount.

Okay, we are through most of those patients, and I think the last one is scheduled to hit two years in October or November, sometime in Q4.

Got you and just one more question on PEG-PAL and then I will hop back in queue; you mentioned in the past that you have seen 40% to 50% lowering with the 0.001 cohort. As you are getting through additional cohorts, I believe you are probably on the second cohort now. Just wondering, what's your level of comfort that you are in the right dosing range here? Do you think about potentially going lower, maybe that... at times a little bit more potent in human, then you may have expected from the pre-clinical studies?

Well I think the data, were surprising. I don't think we would necessarily go lower, unless we were interested in setting out a safety issue. We are looking at that, whether that would be needed to go lower than that. We are in the second cohort we confirm the data that have been reported in a analyst report by some patients online. But we are not going to confirm what the data are on a patient-by-patient basis going forward. But we are in the second cohort now and things are moving along well. So I would say I don't think there is at this point great need to go lower. We may look at it for a purpose of safety but 46 efficacy is good, but these are patients with pretty high fee levels. And so in terms of hitting control criteria someone still had some way to go. So we want to look at all the data, get some more efficacy information and higher doses and plus I would also point out to you that when we get to repeat dosing things will change too and so it is a little hard to predict both dose and how it is going to play out in the presence of continued repeat dosing and need response those some other variables to consider. Else plan out to a Phe level drop and the efficacy enzyme falls, which helps create a soft landing in Phe levels but the challenge of it is as you go higher in dose, the efficacy will go down somewhat. So this will be factored that will also play into how dose move forward. But we're... through Phase I study we're learning as we go and we'll certainly keep you updated. The only turning point coming up would be DSMB study, which might be in October for the first three cohorts which a number of investors asked about. So that might be another point at which information would be put on our program.

Thanks Emil. Thanks for taking my questions and thanks for the added information.

Your next question comes from the line of Chris Raymond with Robert Baird & Company. Please proceed. Christopher Raymond - Robert W. Baird & Company: Hi, thanks for taking the question. Just another sort of Kuvan question. So I know you guys have said in the past that you, you'd rather not talk about specific patient numbers and other stuff. But can you maybe give some sort of flavor for where... what the percentage of total patients are that are still on the drug that have started?

I think it's really hard to do that because at any given time, you've got a significant percentage of patients who are going through their 30 or sometimes 30 days or sometimes longer test period. What we can say is the patients who have gone through the test period have shown to be responders and then have stabilized at 90 days. Roughly 90%, I think it is 88% of those patients remain on therapy afterwards. Christopher Raymond - Robert W. Baird & Company: Okay great.

If I may, I think that your question is like on Kuvan to estimate to how many... before a launch which we anticipated and I think although I guess with the caveat that Steve said when we have the data is hard to analyze, when we have so little history clearly it's not. But I mean it's clearly in that range very likely north of 50%. Those are few things one of the patients that try to drive, how many decided to have therapy, it is north of a 50%. Christopher Raymond - Robert W. Baird & Company: Yes can you may be say, if you have any info like what's the average amount of time that physicians are giving patients to respond? My sense...

It was close to 30 days. We have a very small number of centers who are adamant to two weeks of test period and they don't want to go for month and we have a few centers who are continuing out beyond 30 days. But the vast majority of centers are making evaluation up to 30-day mark. If it's at the latest, they are making an evaluation up to 30-day mark. Christopher Raymond - Robert W. Baird & Company: Okay and can you maybe also just finally give an update on Canada and where things going there for Kuvan?

Yes sure, Canada we do have set up through Health Canada access for the... through the special access programs to be able to supply Kuvan in Canada and the extension study patients that we referred to before in U.S., we have several of those in Canada as well, those patients have been hold over to Kuvan at this point in Canada that is pretty good. Kuvan we have no commercial sales in Canada at this point, I don't know how much detail we want to go into, but we do plan for filling in Canada, anticipate that will have some time in the first half of 2009. Christopher Raymond - Robert W. Baird & Company: Thank you.

We... maybe it's worth mentioning, we are investigating actively the ability to use special access program to consult Kuvan into Canada over the remainder of this year, it's unlikely that there would turn into a significant revenues strength in 2008. Christopher Raymond - Robert W. Baird & Company: Okay, thanks

Your next question comes from the line of Joseph Schwartz of Leerink Swann. Please proceed.

Hi, thank you. I was wondering if you could quantify for us how much of the deceleration throughout the quarter you saw. I know that you gave us patient numbers of third of the way through the second quarter, when you reported your first quarter and, at that point it seemed like that there might have even been an acceleration. But apparently June must have been, much slower, than the first two months.

I think June is the beginning of the summer month.

Joe we don't want to get into trying to quantify numbers. I think we'd probably did a little bit too much for that early on in effect, in an effort to be transparent and my own read was that the more specific we got with numbers, the further things tended to get twisted out of shape. We saw a significant deceleration in the summer months. If it wasn't significant, we would not have reported it. Don't want to get into what percentage there was relative to previous months, but it has been slow through the summer. We anticipate referrals are going to continue to be slow through August. I think, I've said previously most of you're aware that we work very hard with centers to try to set up patient information days. To me that's one of the real keys to getting patients referred into BPPS. Just to give patients an opportunity to get not five minutes in a waiting room but a couple hours with the experts to really get all their questions answered about Kuvan, learn about the product line, about its impact on the disease, and the experts available relative to reimbursement had other patients on the drug be able to tell them their stories. So that if we can get those set up, we tend to set significant numbers of referrals. Those have not happened during the course of July and June to any significant degree. We have a lot of events, walks and runs and awareness-type events. So there has been, I think, an improvement in the overall knowledge about Kuvan. But they weren't the type of events that generated specific referrals. And we are not going to get many or any of those events sort of until staffing gets back to normal, patients come off and physicians and care-givers come off vacation. And that's going to happen really the first week of September. We got significant numbers of events like that already set-up in September but it's really going to be the start of the school year before we can get those going.

Okay great that's helpful. And then this longer term as far as other missionary selling activities, helping physicians, mine their databases do you have any plans to expand beyond the patients that have been identified and are treated already?

Sure we're... we focus right now on the patients in the clinic and that's always been the plan as to help to clinicians work through their current base of patients. Until they get through them, it really doesn't make any sense to try to pull in additional patient. We've got actually two centers now that have... and I think quicker than most in working through their patient bases and we are doing programs with both of them pilot programs to reach out into the community and pull in patients that have been lost to follow up. Several different approaches to doing that, we hope that by the time most centers are ready to do that, we will have tried tested and viable mechanisms that will work for them and not require them to reinvent a wheel in terms of pulling lost patients back in. And I think there was a press release already from Children's Memorial in Chicago that was the first of those centers that embarked on that type of a program.

Okay. I will get back in the queue, thank you.

Your next question comes from the line of Phil Nadeau with Cowen. Please proceed. Philip Nadeau - Cowen & Co.: Good afternoon and thanks for taking my question. Just a couple of follow-up questions to Jeff [ph]. You mentioned a couple of times that there is summer slowdown in June and July. And I just wanted to push you a little bit on that, how do you know it's so summer slowdown in assets, the low hanging fruit at most clinics gas already been maintained. Where do you think you are in screening most of those patients that are already in physician offices?

We think we have a relatively small percentage of the patients who are actively being followed probably somewhere in 15% range, you mean that some amount of fairly wide confidence as far as around that number but the majority of patients who are actively being followed have not yet been screened for Kuvan. Philip Nadeau - Cowen & Co.: Okay. Jean-Jacques Bienaimé - Chief Executive Officer: And we get questions here on the summer slowdown. I think we know from... we put from the rest and let Steve elaborate on that, doesn't it, lot of docs, nurses are on vacation and that the PKU centers are not going at full speed right now in the U.S.

We have said from the beginning that one of the real challenge is with this launch has been that the PKU clinics tend to be short staffed, are only opened one or two afternoons a week or mornings a week. This isn't the lot of access capacity to put in the extra time to get Kuvan patients started. And if you take a situation where the centers are already short staffed and under-resourced and then have nurses, genetic counselors, dietitians and physicians taken vacations. You just have things come to significant slowdown and that's what we've seen. Jean-Jacques Bienaimé - Chief Executive Officer: Yes. So this is the reason what we think I mean that we are observing that. And we have some new programs that are being lined up for rate obviously early September, we're on the vacation there. The other one is the easy implementation of the registry. But that's going to make a big difference in actually providing resources that are lacking to the centers right now. It's been these centers lacking of nurses, and not allowed to hire nurses for them, that would be carefully all sort of regulations. But who are the registry which is a study approved by FDA we're going to be able to provide in some of these of useful resources. Philip Nadeau - Cowen & Co.: Okay. Jean-Jacques Bienaimé - Chief Executive Officer: we think will accelerate enrollment.

Yes, I mean what I would say that make me feel pretty strongly that summer is having a major impact as we've got at a minimum 12 patient day setup in September right now, locked a lot of dates in place, speakers arranged, to the best of my knowledge we have zero setup for August. Philip Nadeau - Cowen & Co.: Okay. Jean-Jacques Bienaimé - Chief Executive Officer: fact that we can get that many done in September or we are getting done that in August makes me feel that in summer that's having a significant impact on our ability to drive the market. Philip Nadeau - Cowen & Co.: Okay. And what percentage of patients who are actually in the clinic do you think you'll ultimately be able screen and has that changed at all since early March?

I don't think I want to take a guess at that one. What we feel comfortable with is that we going to continue to see additional patients come in. We are going to see significant numbers of those down therapy after they're tested for responsiveness and that we are going to continue to build base of business between now and end of the year that will get us firmly within our current guidance. Philip Nadeau - Cowen & Co.: Okay. Great thank you.

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

Hi, everyone, couple of quick questions on Kuvan and then on Naglazyme, maybe you could expand a little bit on the clinical improvements you've been saying Kuvan patients, maybe in terms of their age distribution older versus the younger. Then secondly have you seen any Kuvan inventory issues, I know it's really. And then lastly if you could break down the distribution of the Naglazyme sales. I know previously you've done it for U.S versus EU and rest of world. Thanks.

I think the first question related more to qualitative clinical outcomes with Kuvan patients. We aren't at least until we get registry implemented and data being collected, we aren't being able to collect that, in our coordinated fashion, what we get is anecdotal information. And the anecdotal information crosses a range of different types of discussions ranging from parents reporting that their children are sleeping through the night for the first time, their children have done better in school, are better behaved, have better attention. They feel better just a qualitative feeling of well being, until at least some of you, the story we had a patient who was a college student, who was doing actually pretty well without Kuvan. He said after he went on Kuvan it was like the fog was lifted all of a sudden, everything was real clear to him. So it's difficult to generalize because it seems to have a different impact on different patients in different ways. But we hear a spectrum of changes in well being of the patient that is routinely positive and which is one of the reasons why we feel so encouraged of the long-term potential of the product. In terms of... Jean-Jacques Bienaimé - Chief Executive Officer: between older and younger patients?

Yes, just maybe patients who are lost to treatment or over 40, they go back into the clinic, they go see a doctor again. Are they seeing an improvement. Are they different than the younger patient?

I don't have data, that we would lead me to believe that it's different. It's not data we have been able to collect in any kind of an organized way that I can give you information on that but I would feel very good about. Jean-Jacques Bienaimé - Chief Executive Officer: once we have registry I guess we will be able to explore obviously on that

Yes Jean-Jacques Bienaimé - Chief Executive Officer: we have no... these days we have not observed anything dramatic that would lead us to believe that there is a successful difference in the call by age. I don't think that would be any scientific reason for that. I mean,

I don't think so we are supporting some investigator initiated studies that will qualify that data to in addition of the registry. And I think that will be able to provide us more information on neuro cognitive function and how that might affect.

I agree with you. Jean-Jacques Bienaimé - Chief Executive Officer: Your question on inventory...

On inventory we actually... because we have a limited distribution network we tracked that really closely. We correlate our bottle sold to bottle dispensed and they correlate on those bottle for bottle on a monthly basis. We have consistently run between two tenths and four tenths of a month inventory and our specialty pharmacies and we have not seeing that change since launch.

Okay. And then lastly Naglazyme?

Naglazyme sales for the EU during the second quarter was $16.7 million, for international up by the EU $13.2 million and in United States $5.2 million.

Thanks a lot.

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

Thanks for taking my call and congratulations on the Naglazyme sales. They were awesome. Was there any increase in, would you just answer on a did you have any in inventory in Q2 of Naglazyme that was responsible for the $35 million being higher then what we estimated and then we will take it longer then a quarter to recoup the dip in recognized Aldurazyme revenue and can you repeat your comments on gross margin for both products? And when you are going to start the registry?

Steve will go on and Jeff will get on the other ...

I can do two of those four and then I will hand it over to Jeff. Start with the last one first we anticipate first patients into the Kuvan registry in September. Regarding Naglazyme inventory, we have no additional inventory that's been put in place. I believe you knowledge, most of the Naglazyme sales are either direct from BioMarin to hospitals or to government agencies that are supplying patients depending on the country and it's system. So there is no inventory build up with Naglazyme that's had anything to do with the Q2 numbers. I will turn it to Jeff.

So with regard to the shipments of product to Genzyme, I should know that the timing shipments varies from quarter-to-quarter depending upon both shipping casuals and timing of lot release so what we expect to the transfer product into Genzyme during Q3 will be much higher as a number of lots are originally planned for Q2 are released in the Q3. So we should see that the net transfer revenue increased during the third quarter. As it relates to the gross margin I think you just had a general question on the gross margins.

And also for the two products. Can you just give us... how is gross margin effected like for what happened with Aldurazyme and then Kuvan?

So, with regard to Kuvan the gross margins were 88% and as I noted the majority of that relates to the 11% royalty that we pay to partners. So we just had a minor amount of manufacturing costs that was recognized for Kuvan for the quarter end. We'll see relatively high margins for Kuvan throughout the rest of this year and you begin to see that deep down in 2009. Eventually down in the low 80% range including the royalty that we pay out. With regards to Aldurazyme, the gross margins for Aldurazyme in the second quarter were higher at 89%. So keep in mind that we recognize cost of goods sold for Aldurazyme based upon the quantity of product that we shipments to Genzyme not the quantity of product that Genzyme ships to its third party. For Q2 even though our net Aldurazyme revenues are lower we have roughly few shipment of Genzyme. And as a result a very low cost of goods sold. So when applying a low absolute cost of goods sold even to reduce net revenue total that still resulted in a relatively high gross profit margin at 89%. If you compare that with the first quarter, we had roughly higher quantity of shipments inventory in the Genzyme which increase the absolute cost of goods sold. So although BioMarin's net Aldurazyme product sales were higher during Q1, a significant amount of low margin product was transferred to Genzyme. So this resulted in a higher absolute cost of goods sold in the first quarter, and that brought the overall margins down at 55%. So as I noted earlier if you look the margin on year-to-date basis for the first half of the year the average out is about 67% which is closer to the mid-60% range that we would expect over longer period of time. Does that answer you question?

Yes. Thank you.

The next question comes from the line of Carol Werther with Summer Street Research. Please proceed.

Thanks for taking my question. Could you just describe how these centers are deciding if the patient is responding or not, are they are using that 30% reduction in fee level or how are they determining that?

It varies from center to center. I think most centers use 30% as just kind of starting point. But they also take into account, clinical changes in patient behavior cognition. If you see a 30% drop and or maybe a 40% dropped and no ability to take, incremental natural protein, no improvement in cognition, no, improvement in emotional or social well being. It's not nearly as exciting to them is 15% to 20% drop for the patients behaviors changes substantially for the better. So the 30% is a lab value and it's important and it's used but it's really just a starting point and the combined the blood Phe drop with the clinical outcome to really make a decision on whether the products were continuing or not.

Andthey can do that like in 30 days?

Yes, normally the only time it should take longer than 30 days is if you got a patient that's having something unusual going on, the patient is sick or has a fever or the tech labs and the samples are contaminated there are exceptional situations whether go longer but for the most part you know in 30 days if got a patient is having a significant response.

And do you have a sense how many patients have been able to either come off formula.

I think very few patients have come completely off any type of the low Phe formula. We have had anecdotal reports that some have but we really encourage patients and clinicians to look at Kuvan not as drug just used to liberalize diet it's really a drug that protects the brain. Phe factors kills the brain and if Kuvan can be use to protect a patients ability to function, good emotional well being, good social skills to be able of process information or retain information that's significantly more important and be enable to ... in the course of a week.

Okay and then just lastly are you... do you have any sense of the number of patients under four years old or over 40 that had been exposed to Kuvan or doctors are holding off on that.?

We actually has a surprising number of patients under the age of five that have gone on to Kuvan almost 10% of our patients. That is actually large numbers I have just 8.2% of our patients are 0 to 4s. We don't track over the age of 40. It really don't make any difference if there over the age of 40 or if they are 39 or 35 as long as they were born post new launch training implementation or the diseases was caught early and that were put on the Phe restricted diet. Than they have avoided severe mental or retardation and would be good candidates for Kuvan. We have heard anecdotal reports of institutionalized patients getting Kuvan, with not many and I don't think we will seem any institutionalized patients get Kuvan until we generate from data. We do have an approved investigator sponsors trial that has opened now and we hope to have some data over the course of next year on those patients.

Thank you very much.

Your next question comes from the line of Vernon Bernardino with Rodman & Renshaw. Please proceed. Vernon Bernardino - Rodman & Renshaw: Hi thanks for taking my question. You had mentioned the average weight of PKU patients on therapy it was 50 kilograms. Approximately what percent of patients are being treated with Kuvan are under 40 kilograms in weight and what is the average age of patients being treated with Kuvan and currently how many PKU patients are in the BPPS and approximately what percentage do you believe are now being treated with commercial Kuvan overall?

Let me start with the easy part of the question. We are not going to continue to give specific patient numbers. We have decided that we said that a couple of times. So, we are not going to go there, I can tell you that the average age of patients right now is 15.7, the single largest group of patients being treated or patients in the 5 year to 12 year old age group. And if you include 5 to 18 that constitutes almost two-thirds of the patients that are currently on therapy. So I don't think particularly surprising but its school age from really kindergarten through higher school that has got most of the attention early on form the PKU clients. And I can talk about specific patient number, but it seem you have one additional question in there that I am blanking on right now. Was there something I didn't answer but I can. Vernon Bernardino - Rodman & Renshaw: No, but just a follow up what approximately what percentage of patients are refilling their Kuvan prescription.

If you go past 90 days, 88% of patients are refilling in our current. If you say within the 30 day to 60 day range. It's a very difficult percentage to give you because it fluctuates. We have seen patients go on Kuvan come of Kuvan, go back off Kuvan. There is a fluctuation during the early weeks and months on Kuvan that makes it very difficult to get accurate numbers on exactly who staying on and whose going off at any given time. Vernon Bernardino - Rodman & Renshaw: And I am sorry if I missed this, what is the status of the MAA filing for Kuvan in the EU and the status of MN110?

The MAA for Kuvan in is under review and we are expecting to hear about an opinion in the probably Q4 and potential approval this year, some where in that time frame. So we are working as we talked about in this script with the our partner on that. For the MN110 we have said that we will be probably expect to file our regulatory filing, it hope to do by the end of the year and we intend to start the study Q1 of next year. Jean-Jacques Bienaimé - Chief Executive Officer: So we've been anticipating increase again from BMRN 10 on more acute syndrome in Q1 of next year. Vernon Bernardino - Rodman & Renshaw: Thank you for taking my question.

Your next question comes from the line of Andrew Vaino, Roth Capital please proceed.

Thanks for taking my call. You mentioned earlier that patients were able to add more protein to the diet and where as you can comment on how much proteins for example could they going to be in a further couple of times a week or just once a week?

Well yes it's variable to an extreme from our patient to patient situation. I can't generalize on of our last team to maybe, I will ask Emil to maybe take a look at it from a more medical perspective.

Yes we have done study that question I think did study to physically measure in... I don't think we have that kind of ability to how much proteins you were taking perhaps they could have might start getting some of that. What we found in our PKU '06 study was that there was patient tower had in average about 20 mg per kilo increase in feed tolerance above the base line that was around 16 to 20 mix per kilo, so we ended up with around 40 mg per kilo for the average feed tolerance about a third of the patients had 30 to 50 mix per kilo increase in tolerant. Okay so the average I gave was 20 but about the third head 30 to 50 which is substantial increase that work is that is manuscript from prepared is under review and that will hopefully come published it has been presented there with scientific meetings.

Okay. Great thank you.

your next question comes from the line of Lucy Lou of Citi. Please proceed.

Great, thank you with respect to with respect to the to converts I wanted to understand better basically with net income crossing over to the above $40 million range can you just talk about how we should thinks about total diluted share account with respect to the two converts? Thank you.

Well the two converts have about equivalent of $26.4 million shares outstanding about we don't refer that in diluted earnings per share at lower levels of net income because of the feature what you add back in the interest expense. So we got some data that's based upon are current shares outstanding that the convertible debt there is two sets of convertible debt that they would become diluted somewhere in the low to higher $40 million range of annual net income. So that range that we would expect that you will begin to dilute the earnings with the additional shares on the convertible debt.

If your one convertible debt you count first or that both at the same time?

No you start with one and then the other. In this case we would likely start with the larger convertible debt that has 16 million shares outstanding and then the smaller one at 10.4 million shares. Jean-Jacques Bienaimé - Chief Executive Officer: You see there will be more dilution of course because of more shares but that just will be a reduction in... reduction of interest ex-patent in the calculation?

The calculation you basically add back the interest expense to your net income to do the calculation.

Great thank you.

Your next question comes from the line of [indiscernible] with Biotech. Please proceed.

Thanks congratulations on the quarter. I appreciate how the portfolio is being built. You in-licensed couple of three early stage programs. We continue to inlicense a few programs a year. My comments are you looking for more early or late stage programs, income might be you swallow something big. Jean-Jacques Bienaimé - Chief Executive Officer: Thanks for your question. I mean you know we were studying to throughout the pre substantial really to meet, because we've commented to get up four molecule and in the first half of next year but they all like Phase I Phase II. So indeed I think we don't have much of a need for additional, or additional or does any more, if you find what you setting we might deals but if we do and I would say more late stage molecule, although again it seems we've a pretty nice pipeline and we are top line revenues growing at a healthy double digit so that we're dead right and there is no guarantee we will find some there.

I have to ask you about Genzyme. You got the outdoor Genzyme relationship and now you have a of them as potential competitor with Myozine and a couple other indication. How's the condition Aldurazyme relationship if at all and it has interested discussion than ongoing between the two companies? Jean-Jacques Bienaimé - Chief Executive Officer: I mean now Genzyme is very positive regarding Aldurazyme the processing and now there is no other in charge of commercialization. Or charge of manufacturing, and I think that prevents a lot of new non way productivity in the management discussion. So our relationship is very good, beyond the now issue of potential direct competition with them indeed, BM134 [ph] Pompe and as seen... as we communicated that the R&D day when we first talked about the project. Our intention our preference to partner Genzyme and we are you now in discussion with them. So I don't know where that's going to go. If that doesn't go anywhere again that doesn't mean we will not develop a product our self or potentially with another partner.

I think you talked about Duchenne too. Jean-Jacques Bienaimé - Chief Executive Officer: You were talking about Duchenne or what... because of the dual agenda here with PTC therapeutics and the one we did I think.. again this is... we are very long stage, relative early stage to analyze maybe analyze some more on that. But I understand your PTC mutation that we are going after is less than 10% Duchenne population. And so in some respect we are going to exactly after the same patient population. And there is room probably for more than player here because it's a pretty large orphan... indication that's pretty large indication compared to stories like some of the stories, we are not t talking about 3 or 4000, Duchenne in the world here.

I think close with all when there is many patients to work with and I think it's going to be to comes up with better products, I think our future bit of regulation as an positive advantage to being able to treat everybody but could be that the non sense of pressure strategy is being taken for a few patients, it might worked really well or better, so channelizing is the expectable mechanism could work and coexist and both companies could do well.

Thank you, fantastic, I would like to say it again, I liked your portfolio.

Thanks.

I will now like to turn the call over to J.J Bienaimé for closing remarks. Jean-Jacques Bienaimé - Chief Executive Officer: Thank you all. And in conclusion, we had a significantly good second quarter with strong sales of Naglazyme, Aldurazyme double of Kuvan sales. So this is our third consecutive profitable quarter, we are encouraged by the first six months of the Kuvan launch. We remain very optimistic, I other long term potential of the drug and we obviously dedicated to the successful execution of the program. In addition to Kuvan, we continue to focus on, the geographic expansion of Naglazyme international is turning into a major opportunity, way bigger than we anticipated before launch, and it's also emerging that a very significant product for BioMarin also bigger that we anticipated before launch. So we're still committed to advancement of R&D pipeline we talked about it putting [indiscernible] and the complement to Kuvan PKU, GALNS for 4Q for a BM-1034, Pompe and possibly issuing licensing for acquisition opportunities recently we did Sonet. [Call Ends Abruptly]