BioMarin Pharmaceutical Inc. (BMRN) Q4 2013 Earnings Report, Transcript and Summary

Good morning. My name is Ashley, and I'll be your facilitator for BioMarin Conference Call to discuss the FDA Approval of VIMIZIM, Preliminary 2013 Results and 2014 Financial Guidance. [Operator Instructions] As a reminder, this conference call is being recorded. I'll now introduce your host for today, Traci McCarty, Director of Investor Relations of BioMarin. Ms. McCarty, you may begin.

Thank you, operator. With me today from BioMarin are J.J. Bienaimé, CEO; Dan Spiegelman, CFO; Hank Fuchs, CMO; Jeff Ajer, Chief Commercial Officer; Robert Baffi, Executive Vice President of Technical Operation. Please keep in mind that this is a nonconfidential presentation that contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., 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 program, actions of regulatory authority, 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. Now I would like to turn the call over to J.J. Bienaimé, our CEO. Go ahead, J.J. Jean-Jacques Bienaimé: Yes, sorry. Good morning, everyone. Thank you, Traci. Thank you for joining us to discuss FDA approval of VIMIZIM and our preliminary 2013 results and 2014 financial guidance. We are obviously thrilled to have received FDA approval of VIMIZIM for the treatment of patients with Morquio A syndrome or MPS IVA. For these patients, the approval of VIMIZIM is in the United States with a broad level and mix available, the first and only therapy that addresses therapy at the cellular level. For BioMarin, this achievement underscores our leadership in the open drug market and represents the next significant step in the expansion of our commercial portfolio. I want to acknowledge the many contributors and investors that have made this day possible. I want to thank the scientists who developed VIMIZIM, the investigators who participated in the -- at the [indiscernible] sites, the FDA who partnered with us for our development of VIMIZIM and, most importantly, the patients and their families. I also want to thank the team here at BioMarin, who came together and delivered on all facets of the development program, including research and clinical developments, regulatory affairs, medical affairs, quality and manufacturing, among others. Thanks to their efforts and contributions, VIMIZIM's clinical development took less than 5 years from the time it was first to chosen even to Friday's approval. This development efficiency will allow us to take full advantage of our strong patent position, which runs through 2030. The financial significance of today's approval on BioMarin's long-term prospects for developing new drugs and also providing returns to our shareholders should not be understated. We expect sales of VIMIZIM to drive BioMarin to more than $1 billion in total revenue for the next few years. As we have stated before and want to reiterate today, we believe that the successful commercialization of VIMIZIM can be the basis for BioMarin achieving operating profitability. Thereafter, as VIMIZIM's sales continue to grow and our new products from our robust pipeline are introduced, we expect substantial revenue growth and increase in profitability. With U.S. VIMIZIM approval in hand, I'm confident about our long-term growth prospects. We now have 5 approved commercial products, with the next one spec-ed out potentially only 24 months behind. Our increasing commercial strengths continue to drive the expansion of our people [ph] pipeline. In 2013, we made significant progress, of course, all our development programs. We have 5 product candidates in the clinics. We [indiscernible] delivered there between the end of this year and the second half of next year. [indiscernible] the amendment 190 [indiscernible]. In addition, we just selected BMN 270 and BMN 250 to move forward for the treatment of hemophilia A and the MPS IIIB for Sanfilippo syndrome type B, respectively. These programs will make the next 24 monthly data a risk period for BioMarin. Now I would like to hand the call over to Hank to provide more details on VIMIZIM's approval. Hank?

Thanks, J.J. This is an important day indeed for everyone involved, starting with the label. The approved indication for VIMIZIM is all patients with Mucopolysaccharidosis type IVA or Morquio A syndrome. We are very pleased to receive the broadest possible label. The recommended dose is 2 milligrams per kilogram given intravenously over a minimum range of 3.5 to 4.5 hours based on infusion volume and will be administered once every week. As with most approved enzyme replacement therapy, the label does include a boxed warning citing the risk of anaphylaxis and hypersensitivity. In premarketing clinical trials, 18 of 235 patients or 7.7% of patients treated with VIMIZIM experienced signs and symptoms consistent with anaphylaxis. These 18 patients experienced 26 anaphylactic reactions during infusion. In the trials, hypersensitivity reactions occurred in 44 of 235 or 18.7% of patients and included anaphylactic reactions, pedicuria, peripheral edema, cough, dyspnea and flushing, not uncommon reactions with administering a biological agent. Due to potential anaphylaxis or hypersensitivity reactions, it is recommended that pretreatment with antihistamines with or without antipyretics be administered 30 to 60 minutes prior to the start of the infusion. This is consistent with the administration of VIMIZIM during our pivotal Phase III trial. Turning now to postmarketing requirements, BioMarin has agreed to conduct a postapproval registry in order to further understand VIMIZIM's long-term safety and effectiveness. Investigators will follow-up patients for a period of 10 years. This registry is voluntary, but patients who aren't treated with VIMIZIM in a commercial setting will be encouraged to participate. We have experience with these types of programs, as evidenced by our Naglazyme registry that has been tracking natural history of MPS VI patients for about 8 years. Data from the Naglazyme registry, combined with that from our clinical trial program, have provided important efficacy and safety information on the effects of long-term treatment with Naglazyme in MPS VI patients. For example, we have observed improved growth outcomes associated with longer treatment with Naglazyme. We consider VIMIZIM registry to be optimal means to achieve the goal of long-term follow-up. We obtained the leverage to this registry and addressed other post-marketing requirements to continue assessing patients enrolled in our ongoing Phase III extension study, MOR-005, and our ongoing Phase II pediatric trial, MOR-007. We have also agreed to evaluate immunogenicity and the potential to modify outcomes in immune responses. We have a few additional CMC-related postmarketing commitments, which we consider to be reasonable and very manageable. We are also pleased to have received, as part of the VIMIZIM approval, the first ever rare pediatric disease priority review voucher. This voucher is an incentive to encourage the development of new drugs and biologics for the prevention and treatment of rare diseases, for the treatment of rare pediatric disorders, like VIMIZIM does. BioMarin can use this voucher to receive priority review on one of our own future market applications that would otherwise be a standard review, or we can transfer the voucher to another company. As you may know, we are on schedule for this week's meeting with the Committee for Medicinal Products for Human Use, or CHMP. We expect the CHMP's opinion to be available on their website this Friday. At Friday -- a positive opinion from the CHMP this week would lead to a potential European Commission approval approximately 60 days later. We will share the outcome of the CHMP opinion once we have it. In conclusion, it is hard to believe that in less than 5 years, the BioMarin team has successfully developed the first and only drug therapy approved to treat Morquio A patients. With this accomplishment in hand, we look forward to our next development opportunity. We are well positioned to apply our deep experience and successful track record of commercializing important therapeutics that help patients who have few or no treatment options, and we look forward to writing the next chapter in our story. Now I'd like to turn the call over to Jeff, who will review our preparedness for commercial launch. Jeff?

Thanks, Hank. Let me begin by sharing the U.S. commercial organization's excitement and enthusiasm following Friday's FDA approval of VIMIZIM. Our existing U.S. organization, which currently sells Naglazyme for MPS VI, has been scaled up, trained, has the necessary launch materials and is ready for a strong product launch. Commercial-label VIMIZIM is in our distribution center, released and available to ship to hospitals immediately. As a reminder, we have identified approximately 1,500 Morquio A patients globally to date, about 15% of which are in the United States, and expect to continue to identify new patients going forward. During the initial launch, commercial goals are twofold: first, switch early access program, EAP, and clinical trial patients to commercial drug; and second, get new naive-to-treatment patients on therapy. We have a number of strategies in place to achieve both. For EAP patients, the first step is to begin case managing each patient to obtain reimbursement approval. We expect that some payors will approve reimbursement in a matter of days, while it will take months for others. For new patients, we will leverage our established Naglazyme and MPS VI commercial organization that has working relationships with many of the physicians treating Morquio A patients. Clinics not experienced with the use of VIMIZIM through the clinical trials or EAP will be called on by our team, who will provide materials and tools for infusion training. We will also leverage the BioMarin Patient and Physician Services, BPPS, program for Naglazyme and Kuvan to include VIMIZIM in Morquio A patients. BPPS is immediately available to both patients and clinics to guide them through reimbursement approval and treatment with VIMIZIM. In addition, as of January 1, the National Organization for Rare Diseases or NORD has financial assistance programs in place for qualifying patients. To further facilitate reimbursement approval for VIMIZIM, several additional steps will be taken. Medicaid and DA agreements are in place and simply require VIMIZIM to be added to the list of approved products. All commercial payors will receive notification of VIMIZIM approval and initial information required to allow a reimbursement approval. The top 50 plans are targeted for face-to-face meetings to present VIMIZIM in the first 90 days. We have a very successful track record in obtaining reimbursement for both Naglazyme and Kuvan and expect similar results for VIMIZIM. For physicians, BioMarin has already been actively promoting awareness of Morquio A and providing education on the serious and multi-systemic nature of the disease. In addition to that, educating geneticists, these efforts have targeted orthopedists, skeletal dysplasia specialists and other specialists who treat or diagnosis Morquio A patients. With the VIMIZIM approval in hand, we will expand our efforts and will become active at medical meetings and through targeted direct calls on physicians. Websites with important information are also live: VIMIZIM.com for product information, Morquioanswers.com for physicians seeking disease information and Morquiosity.com with information for patients. VIMIZIM is priced at a level that reflects the investment required to bring an innovative, first-in-class biologic treatment for an ultra rare disease. The list price per vial of VIMIZIM is $1,068, and the typical 22.5-kilogram patient will require 9 vials for weekly infusion. Based on this list price, the average annual cost of therapy for a typical patient on VIMIZIM is expected to be approximately $380,000 per patient per year, consistent with the other enzyme replacement therapies to treat ultra-rare disorders. This average estimated cost takes into account discounts, expected compliance and an estimated weight of 22.5 kilograms for the typical patient. While we are extremely excited about the U.S. launch of VIMIZIM, keep in mind that it only represents about 15% of the potential market. The next key region we are planning for is Europe. As J.J. and Hank both mentioned, we are on the CHMP agenda this week and expect another opinion Friday. Assuming we receive a positive CHMP opinion, we expect European Commission approval approximately 60 days afterward. Once approved in the EU, we will pursue reimbursement on a country-by-country basis. The timetable for this process varies greatly, as I have addressed previously. The U.S. approval allows the named patient sales process to begin in certain markets, including Turkey and Brazil. To remind you, we are already selling VIMIZIM in France under the French ATU program. We will keep you apprised of registration and market developments quarterly. Now I'd like to turn the call over to Dan to review preliminary 2013 results and financial guidance for 2014.

Thanks, Jeff. While our complete financial results will be available shortly [indiscernible] audited financials, we thought it would be helpful to provide revenue results for 2013, confirmation of 2013 expense and bottom line guidance and then provide financial guidance for 2014. To begin with, total revenue grow over 11.4% to $146.9 million in the fourth quarter of 2013 compared to the fourth quarter of 2012. For the full year, total BioMarin revenue increased to $548.5 million, a 9.5% increase compared to full year revenue in 2012. Naglazyme net product revenue in the fourth quarter was $68.7 million, a 9% increase compared to the same period last year; and was $271.2 million for the full year, a 5.5% increase over the prior year. Kuvan continued to demonstrate double-digit growth, growing to $45.3 million or a 13.3% increase in the fourth quarter and growing to $167.4 million for the full year, a 17% increase over the prior year. Kuvan is an important focus for our overall business, as we intend to expand our PKU franchise with PEG-PAL, for which we expect to have pivotal data in the fourth quarter of this year. As noted in the press release issued this morning, we are reaffirming all of our full year 2013 guidance, including non-GAAP net loss and GAAP net loss. Recall that we expect non-GAAP net loss to be between $40 million and $65 million. We believe non-GAAP net loss is the best measure of our operating results because it excludes noncash accounting expenses, such as stock compensation and interest expense. In 2013, we had a little over $70 million of these expense items that are noncash and noncash for all time. In 2014, we expect to have over $100 million of these charges in our GAAP results, further emphasizing our internal focus on this profit-loss measure. For completeness, we also continue to expect GAAP net loss to be between $185 million and $160 million for the full year. Turning now to guidance for full year 2014. This will be an exciting year for BioMarin as we launch what we expect to be our largest revenue product to date and see the expansion of our development portfolio. On the revenue front, we look forward to total revenues in the $650 million to $680 million range, a more than 20% increase over 2013. For our established commercial products, we expect total revenues of approximately $600 million. This includes continued growth in Naglazyme to between $290 million and $310 million. And in Kuvan, the total net product revenues are between $180 million and $200 million. As noted before, with PEG-PAL Phase III dated at the end of this year, continued growth in the Kuvan franchise is an encouraging indicator of the market opportunity for what could be our next product. Based on Friday's FDA approval of VIMIZIM and our current understanding of the timing of EU approval, we are reiterating our revenue guidance for VIMIZIM for 2014 within a range of $60 million to $70 million. Of course, first-year revenue numbers can move substantially depending on which month patients initiate commercial therapy. To help you better evaluate launch progress in 2014, during our initial launch here, we intend to provide information on a key internal metric, total number of patients on commercial therapy. Our goal for 2014 is to be at 350 or more patients on drug by the end of the year, which would set us up for a substantial revenue year in 2015. Turning now to operating expenses. As previously discussed, R&D expenses are expanding to support the 7 programs in clinical and preclinical development. And as a result, we expect that R&D expenses for 2014 will be in the range of $500 million to $530 million. Looking beyond 2014, we continue to expect that this will be our peak year in terms of R&D as a percentage of revenues, and we expect that ratio will fall next year and in the years beyond that. Also, in absolute terms, we expect any increase in R&D over the next couple of years to be materially smaller in magnitude than the increase in 2014. Following is some additional detail on where we are investing in 2014. Fully 55% of the R&D is going to our 5 clinical programs, with an additional 15% also going to VIMIZIM as we keep patients in studies and on drug until we obtain additional regulatory approvals around the world. Included in our clinical spend is over $80 million in clinical drug supply for VIMIZIM and the other clinical programs. In addition to our clinical programs, there's 20% for research preclinical programs, such as Naglazyme therapy, and general R&D. In addition, there's 10% for regulatory and other support of our existing commercial products. 2014 SG&A expenses are expected to be in the range of $265 million to $285 million, with the majority of the increase due to the commercial and administrative support required to launch VIMIZIM and continue to grow Naglazyme and Kuvan. This increase is consistent with our prior guidance that there would be a 25% increase in SG&A to support VIMIZIM, with most of it coming in 2014. That 25% increase still seems right in total, with the balance coming in 2015. During this year of initial revenues from VIMIZIM, full R&D expenses and launch-year commercial expenses, our operating loss as measured by non-GAAP net loss will expand somewhat to a net loss of $100 million to $130 million. As VIMIZIM revenues increase, we will drive the company first to breakeven and then to profitability. Our multi-year plan is still to transition to operating profitability at around $1 billion in revenues. Our final guidance item, GAAP loss in 2014, is projected to be between $255 million and $285 million. Now I'd like to hand the call back over to J.J. for closing remarks. J.J.? Jean-Jacques Bienaimé: Yes, thank you, Dan. So before we open the call for questions, I want to conclude by reminding everybody that BioMarin is committed to making a big impact on small patient populations with serious unmet medical needs. I think Friday's approval is another example of our execution and leadership in rare diseases and our deep knowledge and expertise in developing enzyme replacement therapies. I am very proud of the team, and again, I want to thank everyone at BioMarin for their contribution to Friday's approval of VIMIZIM. At this time, we will open the call to your questions. Operator?

[Operator Instructions] Our first question will be from Salveen Richter of Canaccord.

I think in January you mentioned about over 270 patients that are currently on drug. Can you just comment on how many -- what portion of those are in the U.S. and those in named patient markets like Turkey and Brazil and how long it should take those patients to switch over to paying customers?

A great question, Salveen. Those patients are spread around the world, so we have a number of patients that have been in the clinical trial programs in the United States. We also have patients coming out of the early access program in the United States. I don't have the level of detail that would be able to fully accommodate an answer to your question. Previously, I've guided that mid double digits of patients are in the early access program, and low-to-mid double digits of patients in the United States in the clinical trial program. Those patients are obviously a priority for transition to commercial drug. The named patient sales markets, including Turkey and Brazil, both have meaningful numbers of patients, and we will begin working on that transition. As a reminder, the named patient sales programs take some time to move patients through. And also, in certain markets, we will need a full approval to transition those patients out of the clinical trial and on the commercial drug.

And just a quick follow-up, can you just maybe -- is there any chance we can find out what the pricing is in France for the ATU? And where does the VIMIZIM at home administration trials span currently?

Sure. So the French ATU prices has not been disclosed. But we think that the euro-based price in France will be consistent with our net, meaning after discount pricing, in Europe and is consistent with the U.S. price. And again, expecting a net after-discount price. And let's see, the -- at home, yes, the Phase II clinical program that's being run in the U.K. includes a home infusion component. That home infusion component is undergoing presently. We're gathering data, and we will have some experience to publish on for the global market. Jean-Jacques Bienaimé: [indiscernible] because I think it will follow what happened with Naglazyme. I mean, what it -- approximately how many -- the percent of Naglazyme patient now that are receiving from infusions.

The number varies by market, but essentially, the United States and the U.K. are the 2 key markets where we expect home infusion to be prevalent for VIMIZIM patients. Greater than half of our MPS VI patients are infused in the home setting. A reminder that many physicians will take a decision to move patients to a home infusion setting after they have substantial experience being infused on the drug. Some physicians consider that something like a year on therapy is an appropriate period of time before moving the patient to home infusion.

Our next question comes from Navdeep Singh of Goldman Sachs.

This is Lisa in for Navdeep. Given FDA approval of VIMIZIM, should we expect full launch in Brazil and Turkey? Or does fully broad use of VIMIZIM in those territories acquire -- require approval? And would you say it's fair that you will have full access to the 45% of MPS IV patients with approval in the U.S?

Yes, so Brazil and Turkey are 2 of a number of markets where named patient sales are possible following a U.S. approval, and we will seek to gain access through that -- those programs in applicable markets. Because we don't have a full registration, we're not in a position to promote our drug. What we can do in those markets is provide education and support the appropriate use of VIMIZIM through named patient sales channels, and we will do that. So in short, I would say we will not be vigorously promoting in those markets, but we will be supporting the uptake and use of VIMIZIM. And as for access to the full 45%, a reminder that BioMarin's geographic region that we refer to as the EMEA region includes the EU, Europe outside of the EU borders, the Middle East, North Africa and Turkey. So some of those markets, including the Middle East and Turkey, become accessible to us now with the U.S. approval, and some of those markets -- or most of those markets become accessible to us once we have an EU approval, which we would expect and hope in the following 60-plus days. And some of those markets, including EU countries outside of the EU borders, require further registration efforts.

Okay. And just one quick follow-up. When do you expect the Ireland Shanbally plant to come online? And how will this impact your tax rate? And furthermore, what percentage of your VIMIZIM production do you expect to come from the plant in the long term?

This is Robert Baffi. The Shanbally plant in Ireland is scheduled to produce the qualification lots in late 2015 and to be approved approximately 2017. And the percentage of production that will occur there will depend primarily on the commercial demand with the ability to move product from our California plant to Ireland. Jean-Jacques Bienaimé: Daniel, our intent long-term is to source the vast majority of VIMIZIM activity from this plant.

And this is Dan. And on the tax side, we'll be able to take advantage of the tax deferrals associated with the plant, certainly by 2017 and potentially earlier, and we'll be able to maintain a effective tax rate on earnings of VIMIZIM of about 12.5%. And in fact, we'll be able to utilize this for several of our future products, which is why we've previously guided to a long-term tax rate in the 20% range.

Our next question comes Cory Kasimov of JP Morgan.

First of all, I just wanted to clarify something with the price. Is the $380,000 the anticipated net price for VIMIZIM? Or should we still apply a gross-to-net adjustment to that?

The estimated annual cost of therapy that we've pegged at $380,000 is a net. So that includes a gross-to-net adjustment and also an estimate of compliance, which will be less than 100%.

Okay. That's what I thought, just wanted to make sure. And then secondly, on R&D, I'm just trying to better understand the components here given the magnitude of this jump. Is there one product in particular that's really driving the incremental uptick that we're seeing? And then based on the percent distribution, Dan, that you provided, there is at least $100 million being allocated to early-stage research. Is that roughly in line with what you've invested there in the past? Or are you further accelerating efforts in this area?

Yes. So there is no one product that particularly drives it. The 3 Phase III programs, 673, PEG-PAL and 701, make up about 75% of that 55%, with the 2 earlier-stage programs, the Batten's and CNP program, about 25%. And in terms of the research number, the research number is a little heavier this year than it has been in the past because we have 2 IND candidates working their way through the system this year, as you know, the NAGLU Sanfilippo B program that we talked about at WORLD and our gene therapy program.

And maybe just one other thing to add, Cory, is that, don't forget that the research team also supports the products in development, so that there is still some ongoing expense for products even after an IND is filed. Jean-Jacques Bienaimé: Then also -- also, again, I mean, we mentioned that earlier, but a lot of the R&D expenses are actually manufacturing the expenses of products in development, and since most of our products in development are proteins, large molecules, these are significant expenses. So we do mention that about $80 million of these R&D expanses are just product supply for people trials and the expansion of trials. But there is a lot of important R&D in-process technological development here that's included in the amounts.

Our next question comes from Philip Nadeau of Cowen and Company.

First one on the label. The label does specifically mention that the safety and effectiveness have not been established for children under 5. Do you expect that to have any implications for how you can promote VIMIZIM or your ability to get reimbursement for the young kids?

Phil, let me start and then I will turn it over to Jeff. So the indication is broad for patients with MPS IVA. There is, as you note, that declarative statement in the pediatric use section, which really pertains to the fact that the under-5 trial was ongoing at the time of the U.S. submission, and we elected not to delay the product's approval while we finished that trial. And I think, in large measure, that was driven by physician keenness to have a product in their hands and relatively low physician doubt about the importance of starting treatment early. But let me turn it over to Jeff for commercial reflection.

Yes. The general expectation on the part of our geneticist prescribers is that enzyme replacement therapies work best when patients are treated earlier. So there is a natural tendency to want to treat as early as possible. In -- that said, it will be helpful to have clinical trial experience demonstrating the relative safety and effectiveness in 0- to 4-year-olds. As a reminder, we have the MOR-007 trial that is in process and will be concluding shortly and that we'll be able to publish from. So I don't anticipate a barrier with 0- to 4-year olds, and certainly, we'll have the data to fully address that part of it... Jean-Jacques Bienaimé: And just -- and based on our Naglazyme experience, we had the same issue at the [indiscernible] product. That didn't seem to be a major problem for use in patients under 4 or 5.

Sorry, and when do you think you could have the 007 data in front of the FDA?

I don't think we can give a specific time right now. And I think the thing to remember is, we're years ahead of producing these data compared to Naglazyme. So I think our view about this is that it's likely to be favorable.

Second is on patient numbers. In the past, you've suggested there's about 3,000 patients worldwide. Actually, I think you said in this weekend's press release that 15% of them are in the U.S., which corresponds to about 450 patients in the U.S. In the FDA's press release, they mentioned an 800-patient number in the U.S. Why is there a discrepancy? What's the FDA seeing that you are not, or conversely, are you just more accurate than the FDA?

I think the 800 number figure for the United States is probably based on a maximum theoretical epidemiology figure. So if one were to calculate 2.X patients per million births and multiply that out by a population of 330 million, you'd get to 800 patients in the United States. So that would be based on epidemiology that is not firmly established and not considering early mortality of Morquio A patients. Our experience to date is finding 200 or 200-plus patients in the United States. We expect to continue to find patients in the United States going forward. But we do not expect anytime soon to be in the 800-patient range in the U.S.

And Phil, if I could just add, that number is not an FDA number. That number was in our Advisory Committee presentation. We use the larger end of the range for illustrative purposes, basically to underscore the fact that even if you use the most conservative number that you could imagine, there were still substantially fewer patients available than could be trialed for additional purposes. What we didn't want is we didn't want an argument about underestimating the number of patients in front of the FDA. But it's just that nobody is more incented to get the patient count numbers right than Jeff and his team, and that's probably a more relevant number.

Okay, great. And then one last question on the R&D expense guidance. Dan, in the past, I think you've also highlighted the amount of manufacturing that was included in R&D. Can you remind us what that figure was for 2013? It doesn't seem like it's increasing that much. So it kind of brings the longer-term question, if you're doing $500 million of R&D in that $1 billion in sales, you're still going to have R&D at 50% of revenues. So is there ever going to be a point where BioMarin gets that down into a more normal range for a biotech company, something in the 25% to 40% range?

So a bunch of questions in there. I actually don't have the 2013 number right in front of me, but I believe you're right. I don't think it's materially different. Off the top of my head, it's in the 60s, but I don't recall the exact number. But we expect that to be fairly stable over the next few years, given the stage of development the programs are in. And in terms of -- and we've said that R&D as a percent of revenues will max out this year. It will decline next year. The math that $500 million at $1 billion is 50% is clearly right, but at higher numbers, it gets absolutely down to that sort of, if you will, more typical biotech range of 25% to 30%, and that is our long-term target. Jean-Jacques Bienaimé: Dan, I mean, maybe I would just add a few other comments on this. In order for us to get to $1 billion of revenues, I mean, we don't actually -- this does not assume that VIMIZIM is doing big sales. I think, based on our current products -- projections, I think we can get to around $1 billion with just around $300 million of VIMIZIM sales. So there is still room to grow this with VIMIZIM to then allow the R&D ratio to revenues to go down after that, even if we do not cycle for all products.

You sort of touched on this in your prepared remarks, but then can we assume that R&D as an absolute number is kind of, say, relatively flat for the next couple of years? I know you said the percentage increases won't be the same, but it is a 50% year-over-year increase, so there's a wide range of percentages that could still happen in the future.

So we have said that any increase -- if there were increases over the next several years, we would expect the magnitude to be materially smaller than the increase this year.

And then just to put that in perspective, we went from last year -- 2 years ago, 1 product in a Phase III trial; last year, 1 product in registration and 1 in a Phase III trial. And this year we're going to have 3 products in Phase III trials. So there's a -- quite a big step-up in the amount of late stage investment. And maybe it is also worth just spending a minute on the -- how much we spend to get drugs approved. Because there is sort of this focus on what we're spending on an annual basis. But VIMIZIM will get approved for 300 -- essentially $300 million. The plan we're on now for PEG-PAL, it will be $300 million or less. 701 is in the same zip code. 673 for metastatic breast is in the same area as well. And so while the total number on an annual basis is admittedly over $500 million, a significant number, the amount BioMarin spends to get a drug approved is, we think, industry-leading efficient. Jean-Jacques Bienaimé: And also the time is industry-leading. As we know, we got VIMIZIM approved in less than 5 years. Naglazyme was 5 years. [indiscernible]

[Operator Instructions] Our next question comes from Robyn Karnauskas of Deutsche Bank.

This is Alethia for Robin. But just wanted to ask some questions around if you had thoughts on BMN-111 for achondroplasia. One, just kind of how the enrollment is going in the last conversations with the FDA? And around the Phase II, what would give you comfort that you might be able to avoid surgeries? And kind of any later-stage thoughts on designing a pivotal study here.

Yes. So 111 is going really well. No further information from an FDA perspective. Once we had a good conversation with them, they were able to agree with our plan, which originally was to increase the duration of dosing and the magnitude of dosing based on critical criteria and instead of requiring a separate short-term sequential dose escalation trial in achondroplastic patients. And so now we're in the process of enrolling that longer-term trial with escalating doses. The good news is we had, had a natural history study up and running prior to that Phase II treatment study, and our expectation is that actually identifying patients won't be very limiting for the conduct of that trial. And lastly, we expect that there will be growth data more than for general surgery data that drives the registration and likely adoption of BMN-111 in achondroplasia. Like with VIMIZIM, where we observed the impact of reversing skeletal dysplasia on surgical rates, that was really only at a trend perspective. And we don't expect that we'll be required to show significant reduction in surgical ways necessarily for registration, although, in time, that's likely to occur.

Our next question comes from Kim Lee of Janney capital.

Just a quick question on -- can you elaborate on the CMC postmarketing requirements. I know you said reasonable, manageable, but can you give some specifics?

Yes. This is Robert Baffi again. The requirements in general are around assay optimization. There are a number of methods in the control system that FDA has specific requests for us to tune up, if you will, and we are well on the way to evaluating those methods, and we'll report our progress to the FDA accordingly.

Our next question comes from Matt Roden of UBS.

This is Andrew Peters in for Matt. A quick question for Jeff. In terms of, I guess, the named patient sales, the first is, do you expect those to be a meaningful contributor to the $60 million to $70 million in VIMIZIM sales this year? And in terms of your experience with Naglazyme, does the ability not to promote intact uptake? Or is kind of patient awareness in this disease setting enough to drive meaningful initial uptake?

Yes. So I think the named patient sales will be a material contributor to the $60 million to $70 million that Dan referred to. I might reflect that the -- that Dan also mentioned 350 or more patients that we anticipate having on therapy by the end of the year. I think that the latter figure, number of patients on therapy at the end of the year, is probably a more meaningful measure of the medium- to long-term revenue prospects for VIMIZIM. So expect there to be a material number of those patients coming from named patient sales markets. In terms of being able to promote robustly, as I mentioned, we can't do that without a registration. What we can do is provide education and support for the appropriate use of VIMIZIM. So our experience has been that named patient sales will -- we will experience some patient uptake through named patient sales. When we get to a point where we're able to fully promote, that will accelerate that uptake.

Our next question comes from Joseph Schwartz of Leerink.

I wanted to ask about the European approval process and, in particular, the agenda for the CHMP meeting this -- and vote this week. References a list of questions adopted in September of '13 and a list of outstanding issues adopted in December '13. So is there any color that you can provide us in terms of that review and how it's been going according to your expectations and relative to the successful U.S. decision?

Yes. It's a very procedural process, and we've been following that procedure fairly accurately. And so our expectation is reasonably good going into this week's discussion of the opinion. I think, 210, we don't see any real red flags, obviously. You don't have it in hand until you have it in hand, and we would go out to an update towards the end of the week as to what the outcome of the opinion meeting is.

Our next question comes from Tim Lugo of William Blair.

I guess a question for Jeff. How lumpy will the revenues from Brazil and Turkey and some of these other named patient sales countries be over the course of the year? I know Naglazyme has been lumpy. Do we -- should we continue to expect that for VIMIZIM during this launch period?

Yes, the Naglazyme revenues are lumpy in part because we have a big base of patients on therapy, and so there are big orders that come up and go every so often. We try to get them in quarterly, but it doesn't always work out that way. For VIMIZIM, the revenues from those markets will be less lumpy because we're starting essentially from a base of 0. So expect the revenues to start out pretty small and to accelerate as we go through each quarter of this year.

Our next question comes from Yaron Werber of Citi.

A couple of questions. One, just hoping you'd give us a sense -- you've given us a lot of clarity on R&D and kind of how to think about it in the future. Looking at SG&A, and there's obviously more of a step-up in investment here this year relating to VIMIZIM. How does that look next year? How much of -- are you sort of prepaying for Europe too? And then secondly, just on the clarifying the price for Jeff, the pricing in Europe for VIMIZIM, should we think of it as USD 380,000 equivalent, which is around EUR 300,000? Or should we think of it as EUR 380,000?

Okay. So I'll tackle the pricing question and then turn the expense question over to Dan. So the guidance of $380,000 per patient per year for a typical patient, that is our global target based on our target global pricing. So when we have a EU approval, expect the same kind of pricing and the same kind of gross-to-net and compliance factors that are baked into that $380,000 per patient per year figure. So that would be less in euro terms, and we'll favorably convert that to dollars. Dan?

Yes. And on an SG&A-centered view, as you posited and also as I commented in my remarks, we've said that the launch of VIMIZIM will take about a 25% increase in SG&A. Most of that has happened in 2014. If you will, roughly the balance will happen in 2015. Looking longer term, we expect sales and marketing as a percentage of revenues to be in the 20% range when a product matures, and our absolute G&A expenses as a percent of revenues will decline over time.

Our next question comes from Rachel McMinn of Bank of America.

Yes, 2 quick questions. Just Kuvan guidance, it looks like you're not really expecting much growth there. I'm just curious if you see that as a conservative metric or if there's something we should be thinking about. And then on the 350 patients that you've mentioned a couple of times now in the call, how many of those are actually U.S.? Or can you give us a sense, of the $60 million to $70 million, how much of that is U.S.?

Okay. So first on the Kuvan guidance, so we're disclosing revenue in 2013 of $167 million and guidance in 2014 of $180 million to $200 million. So I think that we're signaling continued or expected continued growth in the Kuvan franchises we've been experiencing, so we're bullish on Kuvan for 2014. Relative to the 350 patients, we haven't split that up between U.S. patients and Europe and other markets. That's a composite figure from all markets that we'll have access to during the course of the year. What I would say is the U.S. is our -- really our first approval and our first opportunity to start patients on therapy. So probably the revenues from the United States would be larger this year -- or a larger impact this year than the number of patients on therapy from the U.S. We'll have more of the year as revenue basis.

Our next question comes from Ian Somaiya of Nomura.

It's Matthew on for Ian. I just wanted to switch gears and ask about PEG-PAL. It sounds like there's been a little bit more of a bullish tone in your recent commentary, and I was wondering if you could expand a little bit or talk about what's driven that confidence. Jean-Jacques Bienaimé: I mean, I -- so I think -- well, there are 2 things. I mean, one is that we're getting closer to the finish line here since we should have the top line things we did at the end of the year. It's also that now we have patients that have been on drug for 4 years, and they're still doing fine and they want to stay on the drug. Also that we don't have any significant or any dropout of the patients in the Phase III program so far. So this is pretty positive. And then the other important one is the -- earlier this year, the beginning of the year, the new ACMG guidelines that recommends treatments -- therapeutic treatment of PKU patients for life, which is very good news for PEG-PAL, which is a [indiscernible] which is targeting adult patients. So all these combined makes us pretty excited, and also the fact that, if you look at the numbers in the U.S., there is a pretty significant opportunity here since there are about 1,000 PAL patients in the U.S. and -- sorry, 10,000 PAL patients in the U.S. and only 1,000 on Kuvan today. So there's a pool of 9,000 patients, and we believe that out of the 9,000, our target is probably around 5,000. So if we can get about 5,000 on therapy at $200,000 a year, it's a $1 billion opportunity.

Our next question comes from Lee Kalowski of Crédit Suisse.

I guess now that you're through the 180 day and approaching the 210 day in Europe, I'm wondering, based on the feedback and the ongoing discussion in Europe, is your expectation that the European label will -- is likely to look similar to what it would look like in the U.S.? Or is there anything else that has come up that we haven't seen in the U.S. label?

No, I think that's a reasonable expectation to have, that there'll be reasonable harmony. I mean, they are looking at the same clinical trial data. They have reasonably similar precedence of action in Europe as regards to breadth of label. And I think the other thing that I could have reminded -- will remind now before is that -- and the FDA reminds -- and the EMA reminds people about this all the time. They caucus regularly with each other about their intended actions. They have a monthly conference call to review items in submission and under review. And so I'd expect more similar than different in the European action. Again, we'll know a lot more specifically at the end of the week to give you more concrete knowledge about what the outcome is.

Our next question comes from Ying Huang of Barclays.

Firstly, if you are lumping all the patients in the expanded access program and also trials, as well as the named patients you can get from Brazil and Turkey, can you give us a rough count on those patients? And then secondly, I guess for Dan, just housekeeping question. Net R&D guidance, I guess that does not include options expense, right? And then lastly, you have [indiscernible] in the achondroplasia trial for BMN-111. Would you wait until [indiscernible] are also done and release the data in 2015?

I'll take easiest one first. The guidance I gave you is a GAAP number, so it does include option expense. The only place we exclude that is in the bottom line number.

Okay. I'll field the question about the patient numbers. So about 235 patients coming out of the clinical trials globally, and mid double-digit figures of patients in the early access program in the United States. We haven't broken out, market by market, where those patients come from and how they add up to the 350 patients that we intend to have on therapy by the end of the year. But you can figure that both the U.S., based on our present approval; key EU markets, based on an expectation of having an approval there in the second quarter; and key named patient sales markets, including Turkey and Brazil, all of those will be meaningful contributors to patients on therapy by the end of the year.

On 111, we've said expect data in the middle part of next year. It could be faster if growth velocity increases happen in the lower-dose range or if toxicity happens in the lower-dose range. It could take longer if we have to go through more cohorts to get to growth velocity-increasing doses. Probably won't release data until we're reasonably sure where we stand in regard to dose and response, and so the expectation that we've been giving and have no reason to change at this point is that, that data will be available around the second quarter of next year.

Our next question comes from Michael Yee of RBC Capital Markets.

A long-term question for you. Based on your experience with other products such as, Naglazyme, Aldurazyme, et cetera, how fast does it take for you to go from your identified patient number to identifying sort of where you think the prevalence number is? And the second part of that question, more importantly, is, in your experience with your current drugs, what type of peak penetration do you typically hit or have you been hitting for your identified patients? And then, of course, with that prevalence number, you try to figure out where VIMIZIM might come out relative to your other drugs.

And so I think the experience is most relevant from Naglazyme, which is another enzyme-replacement therapy and a global product. The difference is, with Naglazyme, recall that we were launching that product and putting in place capabilities literally country by country as we were going. And so we spent something on the order of 7 to 8 years getting into 50 markets. This time, we have a commercial organization present in all of those markets, and we've been able to identify patients -- meaningful numbers of patients early. So we think that we're way ahead on the curve with VIMIZIM and Morquio A relative to our experience with Naglazyme. And previously, I think we've guided that if it took 7 to 8 years to do that for Naglazyme, that we're targeting something on the order of 4 years to get the same kind of penetration, which is about 80% of identified patients in those 40 to 50 markets with VIMIZIM.

Thank you. That's all the time we have for questions for today. I'd like to turn the call back over to management for any further remarks.

J.J., do you want to say anything to wrap up? Jean-Jacques Bienaimé: No, I mean, I just -- again, this is a significant milestone, this approval, especially for BioMarin. We are -- we believe that we are in a great position to maximize value by continuing to invest in R&D and accelerating time to market, optimizing adoption and reimbursement for our products. We believe that we still have industry-leading efficiency in our R&D engine, and we believe that leveraging that engine is in the best interests of shareholders. And we're very excited about this launch, and thank you for being on the call today and thank you for your support.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.