BioMarin Pharmaceutical Inc. (BMRN) Q2 2019 Earnings Report, Transcript and Summary

Good afternoon and welcome to the BioMarin Second Quarter Investor Update. My name is [indiscernible], and I will be facilitating the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would now like to turn the show over to Traci, Vice President of Investor Relations.

Thank you, [indiscernible]. Thank you everyone for joining us today. To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin's financial performance, its 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 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 report. On the call from BioMarin's management team today are J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Worldwide Research and Development; Dan Spiegelman, Executive Vice President and Chief Financial Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; and Robert Baffi, President of Global Manufacturing and Technical Operations. Based on positive feedback from our last quarterly call, we intend to keep this call to an hour in length. If you do not get your question, please send me an e-mail or give me a call and we'll get right back to you. Thank you for your understanding. Now, I'd like to turn the call over to BioMarin's Chairman and CEO, J.J. Bienaimé. J.J. Bienaimé: Thank you, Traci. Good afternoon. And thank you for joining us todays on the call. We delivered another solid quarter and first half results, net product revenues for products marketed by BioMarin, which is excludes Aldurazyme were up 9% in the quarter and 12% in the first half of 2019, driven in part by a 21% growth of our PKU franchise, which is a combination of KUVAN and Palynziq. For the remainder of 2019, we are confident in our ability to achieve full-year guidance based on the number of very positive dynamics that Jeff will review momentarily. Beyond the strength of our base business and unparalleled commercial manufacturing capabilities, the potential returns on our investment in valrox and vosoritide are on the horizon. Both products represent very large market opportunities and growth drivers for BioMarin, which we expect will be transformational for the company over the next 18 months. Currently the base business is expected to produce about $1.7 billion in top line results this year and we are very confident it will be followed by $2 billion in commercial revenues in 2020. These estimates are based on projected growth of our existing commercial and substantial acceleration of Palynziq revenues. In the U.S. enrollment in Palynziq are expected to grow at a steady-state, while more and more patients reach maintenance dosing. In Europe, we are beginning our typical country-by-country launch process that will culminate in meaningful revenues in 2020. Specific to our new product opportunities, we plan to submit marketing applications for valrox in the fourth quarter of this year with potential approval and launch next year. The valrox opportunity represents the largest market we have entered today. Over 30,000 people living with severe Brineura and [indiscernible]. On the heels of the valrox submission, we look forward to the results from our global Phase 3 study with vosoritide in children with achondroplasia vosoritide represents another blockbuster opportunity and addresses these therapeutic needs of over 25,000 children with the disorder in our commercial territories. As these two potential new therapies move through regulatory and possible approval phases, we tend to leverage our manufacturing and commercial capabilities to facilitate rapid and substantial losses. Finally, we look forward to hosting U.S., our annual R&D day in New York on November 14, where we will shed a light on the next potential growth drives beyond valrox and vosoritide. We look forward to share details of our next potential geographic product and BMN 307 for the treatment of PKU. We will also have an interesting line-up of pre-clinical candidates to share with you as we consider which programs to proceed to the development pipeline next. So, we hope you would join us there. Now, I would like to turn the call over to Jeff, who will provide more details on the commercial business in the quarter and our expectations for the remainder of the year. Jeff?

Thank you J.J. I’m very pleased with the commercial teams’ execution in the second quarter and the first half of 2019. Following a brief review of our results in the quarter I will share our outlook for the remainder of the year. Starting with our PKU franchise, we are pleased to see 21% growth year-over-year from a combination of strong and deep update in U.S. and continued organic growth of Kuvan, specifically with Palynziq, we are very pleased with U.S. launched progress in the second quarter. Q2 revenue contributions of $18.8 million and year-to-date revenues of $31.1 million [indiscernible]. Turning to the key metrics and starting with commercial reimbursed patients, as of the end of the second quarter, we have a total of 551 U.S. patients on reimbursed R&D. Of those 141 patients transition from our clinical studies and 410 are formerly naïved Palynziq. 37% of whom are Kuvan patient conversions. At quarter-end, there were an additional 158 naïve patients with complete enrollments and pending shipment of the first injection representing a consistently strong pipeline quarter-over-quarter. Taking together, that totals over 700 enrolled Palynziq patients as of the end of the quarter representing approximately 130 million in annual revenues. This puts us well on track for a $7,100 million full-year guidance for Palynziq. In addition to robust patient update in the U.S., we are now entering the beginning phase of the launch in the key region awaiting first orders in [indiscernible]. We anticipate meaningful revenue contributions from Palynziq in Europe beginning in 2020 as we make progress on the country-by-country reimbursement launch process. Turning to the other contributors through our PKU franchise Kuvan, revenues were $113.3 million in the quarter and $220.2 million for the first half of the year. To remind you of Kuvan, we typically see a seasonal pattern where first half sales [indiscernible] some patients switched insurance coverage early in the year and must navigate new prior authorizations early in the calendar year. For the remainder of the year with Kuvan, we expect to see an increase in second half U.S. revenues consistent with dynamics previously described. Based on these expectations, we reaffirm full-year Kuvan guidance of between $420 million to $460 million. Turning now to Vimizim, quarterly revenue of the $122.7 million was impacted by the limited ordering from Brazil that was partially offset by other organic growth. Importantly, patients from therapy ahead of the quarter were approximately 10% higher than a year ago. Naglazyme delivered $98.2 million on revenue for the second quarter, an 8% increase compared to the second quarter last year and 13% over the previous quarter. Notably, patient [indiscernible] for this 14-year-old brand were approximately 8% higher than a year ago when in particular by patient [indiscernible] Saudi Arabia and Turkey. For the remainder of the year, we are very confident in the prospects for both Vimizim and Nagalzyme where we expect significant growth over the first half for both brands. In addition, the continued organic growth across global markets, significant contributions from the Brazilian Minster of Health support our bullish outlook. Specifically, the Ministry of Health has recently published their intended to purchase approximately $95 million of Nagalzyme combined with Vimizim over the next 12 months. The majority of which we anticipate to record in the second half of 2019. In comparison, we recognized about $13 million revenue from the Brazilian Ministry of Health in the first half of the year. Not only does this development provided increased predictability for contributions from Brazil it bodes us well for patients there. Finally, moving on to Brineura for the treatment of CLN2, which contributed $14.8 million in the second quarter, we continue to see strong and diversified patient growth resulting in significant quarter-to-quarter revenue growth and we expect this growth will continue in the foreseeable future. Moving out activities related to the potential launch of valrox in 2020, the [indiscernible] great strides preparing for entry into this very dynamic marketplace. We have been through some of these key areas in preparation, including engagement with peers, healthcare providers, and advocacy groups introducing BioMarin and valrox to the hemophilia community and providing opportunities for stakeholders to learn about gene therapy. We have built-out our commercial team to include seasoned industry leadership with direct experience in the hemophilia market. We are excited about the opportunity to answer new therapy option with the potential to change the way severe hemophilia A is treated. Thank you, and I’d now like to turn the call over to Hank.

Thank you, Jeff. Following our positive valrox update in late May, we’ve met with global health authorities where we shared three years of bleeding control data from the Phase 2 study and a safety and efficacy results from planned Phase 3 interim analysis. We’ve announced on July 8, the outcome of those meetings in the U.S. and Europe to support our plans to submit marketing applications to both the U.S. Food and Drug Administration and European medicine agency in the fourth quarter of 2019 for valrox for adults with severe hemophilia A. Those submissions are expected to represent the first time a gene therapy product for any type of hemophilia will be reviewed for marketing authorization by health authorities. Based on the clinical progress with the 6e13 vg/kg dose, the safety results from Phase 2 201 and Phase 3 GENEr8-1 studies with the 6e13 dose and relatively low interest in the 4e13 dose, we announce today that we will see development of the 4e13 vg/kg dose of valrox. Our patients want the most efficacious dose of 6e13 vg/kg dose, so we made this decision with them in mind. The next update you can expect from the valrox program will be completion of the enrollment in the Phase 3 GENEr8-1 study in early Q4, followed by submission of our marketing applications to U.S. and new health authorities, potentially followed by an announcement of the U.S. PDUFA 40 and validation with the file in the European Union. Now that we will be in regulatory review, you should expect the next material data readout will be the 52-week annualized lead results for the 130 patients global Phase 3 study at the end of 2020 or at the earlier 2021. To remind you, generate 1 study is powered to demonstrate superiority over current standard of care perfect therapy. [Indiscernible] progress on our late stage program vosoritide for the treatment of achondroplasia. We are nearing the finish line with our global Phase 3 program and anticipate sharing results from that study at the end of this year and beginning of next year. The study has enrolled 110 children divided as two randomized groups. One placebo group and one treatment arm receiving 15 milligrams per kilo of vosoritide per day. To remind you, on the Phase 2 study, the mean change from baseline and annualized growth velocity or AGV for cohorts and 3 and 4 at six months was approximately 2 cm per year. The Phase 3 trial has been designed under the assumption that at least 1.75 cm for your change from baseline and meanings will be observed at one year or at vosoritide and that the placebo subjects will have no or slightly negative change in AGV. Under these assumptions, the Phase 3 301 trial enrolled the sufficient number of subjects to achieve 90% power to detect the statistically significant difference between the true-to-treatment arms for the primary endpoint. Needless to say, we look forward to the pending readout of the Phase 3 study and sharing these results with you. In our most recent study of vosoritide, 0 to 5-year-old patients, enrollment continues to go very well. The first cohort of 2-year to 5-year-olds has finished enrolling is in now cohort 2, 6 months to 2 years of age is enrolling. We expect cohort to complete enrolment my years end, at which time we will begin screening subjects for cohort 3 enrolment, which will include newborn newborns to 6-month-old. Enthusiasm from families continuous to be strong across vosoritide program, based on robust enrollment progress just described. We look forward to providing an update on the vosoritide program, as well as the BMN 307 implicated gene therapy at R&D day planned for November 14 in New York. And finally, as announced in our press release today, we have chosen to cease development of BMN 290 for the Friedreich's Ataxia. After my preclinical research and testing, we have determined this in the best interest of our R&D organization to put our resources towards products that have demonstrated a clear path forward. To take decisions very seriously, we will continue to take a disciplined approach when determining which portfolio assets align with our stage of growth and in the best interest of our shareholders and patients. Thank you for your continued support, and I’ll now turn the call over to Dan for a review of the financials during the quarter. Dan?

Thank you, J.J. Please refer to today's press release summarizing our financial results for full details on second quarter. I will highlight a few items in the quarter and full-year expectations. First, with respect to revenues, we reported total product revenues in the quarter of 388 million and remained on track for full-year of 2019 revenues of between 1.68 billion and 1.75 billion. We are currently talking to the middle of this range for the full-year. One revenue item of note this quarter that Jeff didn't already discuss was our Vimizim net product revenues for which we recorded $5.8 million of revenues in the quarter, an unusually low reported number. As discussed earlier in last year, under the new revenue recognition rules Aldurazyme net product revenue is now recognized based on timing of Genzyme acceptance of product shipments from us, and is now disconnected from underlying sales sort of products by Genzyme. Genzyme previously received, reviewed, and accepted products from us at a UK location, but is part of their aggressive plan they relocated the receipt location resulting in a processing delay last quarter. Approximately 23 million of Aldurazyme revenue that was shipped in the second quarter is now expected to be recognized in the third quarter. Total Aldurazyme revenues reported to us by Genzyme remains strong with 9% growth in the first six months of the year to 136 million from 125 million in the first six months last year, and consequently we continue to expect full-year total Aldurazyme revenues recorded by us to be consistent with prior years and in the $100 million to $120 million Another item of note in the quarter is a $15 million milestone payment in Pfizer figured by the European Medicines Agency approval of TALZENNA, formerly talazoparib. The payment is being accounted for a gain on the sale of an intangible asset in operating expenses. We are also entitled to up to 100 million in additional sales milestones, as well as mid-single digit royalties on sales of TALZENNA. Moving to operating expenses, both R&D and SG&A expenses remain consistent with our initially provided full-year guidance. For the second half of the year, we expect our R&D expenses to be similar to first half levels as they complete enrolment of additional payments in the global Phase 3 GENEr8-1 study in the children in 0 to 5-year study with vosoritide. SG&A expenses for the second half of the year also expected to be largely consistent with the first half where sales and marketing will expand slightly as we launched Palynziq in Europe and continue to prepare for valrox and vosoritide approvals of launch. Turning to bottom line results, GAAP net loss for the second quarter was $37 million as compared to a GAAP net loss of 17 million in the second quarter of 2018. The increase in GAAP net loss year-over-year was due to higher R&D expense for the expansion of all our late stage clinical programs, and higher marketing and sales expenses in support of the commercial launches of Palynziq and Brineura. We remain on track for a small GAAP loss of between 45 million and 85 million. We also measure our performance on a non-GAAP basis, which is based on EBITDA and excludes interest taxes depreciation and amortization, and also excludes stock compensation, contingent consideration, and certain other specific items. Our non-GAAP income in the second quarter was 17 million, compared to non-GAAP income of 20 million in the second quarter of last year. We remain on track for full-year non-GAAP income of between 130 million and 170 million. And we are currently tracking to the middle of that range. In terms of cash, cash equivalents and investments, as of June 30, 2019 we had 1.1 billion as compared to 1.2 billion at the end of the prior quarter. In the second quarter, we had an $83 million milestone payment, which was made to Merck for the EU approval of Palynziq. In closing. BioMarin’s current commercial business remains on track to deliver roughly 1.7 billion of revenues this year and 2 billion next year with increasing non-GAAP bottom line profitability. Over the next 18 months, we also expect to accelerate into the next phase of higher revenue and bottom-line growth through potential approvals of valrox and vosoritide, which could lead to approvals in revenue contributions starting before the end of next year. Thanks for your support, and I will now open it to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Cory Kasimov from JP Morgan.

Hi guys. Good afternoon. Thanks for taking the question. Wanted to ask one on vosoritide and what you anticipate you're going to need to get to 0 to 5-year-old patients onto the label. So, assuming your pending Phase 3 and all the patients goes well, do you think the Phase 2 study in younger children will suffice for future supplemental regulatory submission or would you need to run Phase 3 studies for that to? And I just have one commercial follow-up. J.J. Bienaimé: Hi Cory. Very much depends on the results of the pivotal trial and the data is available [indiscernible] review. Our game plan is that we have at least safety data from the first couple of cohorts, and it’s obviously premature again on labeling discussion, but there is quite a bit of awareness in the genetics community of the importance of starting therapy earlier, and previously with our products, the potentially label restrictions that there are and it hasn't been really meaningful barriers to product use given the safety of the product in earlier population. So, stay tuned.

Okay. And then just quick commercial follow-up just on the heels as some of the lumpy ordering patterns, which is really nothing new, but your level of confidence going forward these all corrected, it sounded based on your prepared remarks like you are very much confident, but in that you reiterated your guidance, just making sure there is no other underlying issues behind this lumpiness and things are on track for 2H?

Highly confident Cory. Brazil has been unusually uneven the last couple of years and then in Brazil when we see publication of intent to purchase in the [official gazette] that has always been followed by the start of the purchase process and the purchase, which has now begun, but adding $95 million in purchases and intended to cover demand for the coming 12 months or through Q2 of 2020 gives us a high degree of confidence in that figure. Other markets are uneven too, but they tend to kind of balance each other out over time in a way that we’re building capacity.

Okay. Very helpful. Thanks for taking the questions. J.J. Bienaimé: [Indiscernible] That’s just a major, major reason why we're confident because as Jeff pointed out, we only recognize about $13 million of revenue from Brazil MOH in the first half of the year, but the other one is related to the sales dynamics behind Palynziq. Jeff pointed out that we now have between the patients on commercial Palynziq and the patients that have completed the enrolment to get started on commercial Palynziq over 700 patients now. And what happens is that some other [indiscernible] 4 to 6 months for most of the patients to get to steady state maintenance regimen, which is the one that generates some significant revenues in around $200,000 per patient per year. And now, we’re getting to our state where a lot of patients that we enrolled in Q4 of last year, Q1 of this year targeting their steady state and are going to start generating some pretty significant revenues for the balance of the year. This is just pure mathematical or mechanical, but you're going to see a significant increase in finding sales in the second half of this year and also next year of course.

Alright. Very helpful. Thank you.

And our next question comes from the line of Salveen Richter from Goldman Sachs.

Yes, hi. It’s [indiscernible] for Salveen. I have a question on a kind of pollution competitive landscape and were vosoritide fit in? Thank you.

Vosoritide, well it fits in competitive landscape. The emerging competitive landscape and I guess with the Phase 3 data around the corner and I think our next nearest competitor has just announced plans to start a Phase 2 study, 12 patients per arm, doze ranging, so they are just getting started in their efficacy program having only completed a single dose healthy volunteer study. Earlier than that there is a [indiscernible] program, a small molecule program. I think you saw highlights the importance of [indiscernible] therapeutic target, but it also highlights just how far ahead we are of all the competitors. Maybe I will say that’s where it is now.

Got it. Thank you. Are there any plans for different dosing schedules for the drop? J.J. Bienaimé: We [indiscernible] investigating through the life-cycle and in the present time we have some product improvement in our mind. The power ability of the product, the compliance with the product, it is really sort of outstanding. We are not really being driven to a better product offering. If anything, actually you think about central application [indiscernible] for other indications, but obviously all of this is going to be informed by the results of our Phase 3 trial at the end of the year beginning in the next year. And that's a really important milestone in the whole achondroplasia in growth disorder landscape, because this will be the first pivotal trial to complete. And as I said before, we're years and years and years ahead of anybody else.

Thank you very much.

And our next question comes from the line of Chris Raymond from Piper Jaffray.

Hi, thanks. I have a couple of questions. So, first, I wanted to ask maybe, Hank, on vosoritide. So, Hank, I just want to make sure I understand some of the language you guys have had in the past on these hypotension events. I think when you guys first started talking about these events in 2017, you mentioned, I think, five events out of 23,000 injections. And then last year, when you were going through that, you – I think, you were only talking about one event. So, can you maybe just talk were the prior four events just classified or was there some other sort of driver behind that?

Chris, you got me there on that degree of specificity. And I think one of the most important things is whether it's 523,000 or 103,000, vanishingly low. I think off the top of my head, the difference was – the difference between recorded [indiscernible] But honestly, I'd have to look back into that what's the five and the one. I don't think we're reporting anything differently without changing on this call. Any – there's not any new information about the lack of hypotension with vosoritide. I think you accept the point essentially simply is, how rare it is to occur and how much we do not even believe that it's related to vosoritide therapy.

Yes. Yes, yes, okay. Yes, it is vanishing. It is very small. I guess, I was just – was curious and maybe they were reclassified as having an orthostatic hypotensive event or is there something like that. But – yes, okay?

Some specific language difference in that with [indiscernible].

Okay. And then maybe a question for Jeff on Palynziq. I think last quarter, you said the discontinuation rate was closer to the 3%. You guys disclosed in the Q4 – on the Q4 call. Can – is that number still around that same number, or is it – have you seen any change in that? Is there any variability maybe between clinics that you can tell us about?

I don’t think we quoted a figure, but we did say, it was materially lower than our experience in the clinical trial. We also said it's too early to conclude mission accomplished on that dimension, because so many patients are early in their course of therapy. But for sure, what we have experienced so far is materially less than the rate of discontinuation in the clinical trial.

And we must consider taking this season trial, with this continuation was around 11%.

Yes. I think you said it was closer to the 3% you gave than 11%. I didn't mean to characterize it as 3%, but…

[Multiple Speakers] around 11%.

Yes.

And so far in the commercial and this is emerging data, it is around 5%. So, you definitely got more than single trial in the second [indiscernible]. And importantly, I can tell you what the rate of discontinuation to Palynziq was in the last quarter, zero. You heard that?

I heard that. Wrote it down, too. Thank you.

Our next question comes from the line of Martin Auster from Credit Suisse.

Hi, guys, thanks for taking the question. I've got a couple on valrox. So, I guess, first, I was interested if you’ve gained any additional insights into the small number of valrox patients that were reported on in the interim analysis that failed to kind of muster an efficacious response? Curious if you've been able to kind of divide anything from margin analysis, blending analysis of patients undergoing trial or anything like that? And then secondly, curious if you've got a sense for your preclinical programs, what percent of liver cells get transfused with valrox at the commercial 6e13 dose that you're studying? And also wondering if you have any sense of kind of variability around percentage of liver cells transfused? Thanks. J.J. Bienaimé: Additional insights about the transducers, not so much, pretty much as reported. But I also put the emphasis here on the phenomenal reduction in bleeding that occurred in the interim analysis cohort. And how important that was in driving our confidence and health authority’s confidence, our confidence in driving towards the submission and their – our confidence and their willingness to accept this submission. And really the – those patients were not even very much of the subject of discussion. As regards to ongoing trial analysis, I think it's really important to pave right now an expectation that we will not be reporting results of the ongoing clinical trial. The next data readout will be the 52-week ABR and 130 patient prospective primary endpoint, Phase 3 clinical trial that we report. Everything else is immaterial relative to that. And then, in terms of preclinical studies on the percent of transduction and variability of transduction, off the top of my head with the dose that we use, the promoter that we use, you're getting a much higher proportion of liver transducers at lower doses. I want to say, the whole liver is transduced. Now, whether the whole liver expresses protein is a different story, they do appear to be zones in which there is more or less protein expression. So, there is some variability of protein expression and the preclinical studies that we've reported, which is not dissimilar, where – which is similar to the variability of expression that we observe in human clinical trials. But taking all together and tuning back to the top of valrox, we're really thrilled that we hit the [indiscernible] interim analysis to the tune that was going to satisfy health authorities for initial submission. And we're really thrilled with the durability of valrox three years down and counting, demonstrating both the huge, not just economic value at this point, the economics of valrox are so self-evident that it's not an easy story to tell. What shouldn't get lost, here is the value of patients and we've heard such transforming stories from patients about the impact that this has in their lives. I would be pleased to talk about that all day, every day. So, because we feel complex and people sometimes look, they lose the big picture. I just want to remind people that the Phase 2 and the Phase 3 trials, we're not comparing gene therapy to no treatment. We're not comparing gene therapy to placebo. We were comparing gene therapy to standard of care treatment, and we saw a dramatic reduction in leading antidote.

Well, the standard of care of was withdrawn. J.J. Bienaimé: [Indiscernible] So I mean, so we took set up here. We drew it – gave off and this how we are reporting the results and the patients did better. This is somewhat different from other gene therapy products.

Thanks for that reply. One quick follow-up. So, the question I was asking about the, maybe the percent of liver cells and the preclinical models that were transfused, that were expressing protein. Both wanted to understand better, what you know about what's going on with valrox, but also as potential read through for other gene therapy programs you might be using with AV5, for example, the PKU program, just to get a sense of how kind of diffuse throughout the liver, you're getting transduction and then protein expression? Thanks for the color you provided. Is there's anything further from that, would be great to know to?

There's a lot of learning from valrox to PKU gene therapy program. We’ll go into this a little bit more detail at our R&D Day. But the short version is that, we won't really know what effective dose in humans is until we get to human clinical trials, and we know what the amount of liver transaction is influenced by the amount of dosing you give. So, a lot of this is [TVD].

Okay. Thank you.

And our next question comes from the line of Matthew Harrison. from Morgan Stanley.

Great. Good afternoon. Thanks for taking my questions. I guess two from me. So, first, I guess the one question is, on the few patients in the interim analysis for valrox, where you weren't able to report whether or not that the 40% threshold or not, do you think you'll report on them, or when might you report on them? And then the second question is, Jeff, can you just sort of comment for us around how we should think about the roll out of Palynziq in Europe in terms of – what contributions we might see this year versus next year, and if there will be any patients transitioning from clinical supply to commercial supply? J.J. Bienaimé: So, on the first question, additional reporting on the [indiscernible] interim analysis [indiscernible], we’re in the process of writing up a manuscript for journal submission, and I think that will dictate a lot about what and how it gets reported. And I'd say, stay tuned. As I said, there are not going to be any further data updates until the 52-week data on 130 patients with perspective endpoint of bleeding. So, for the most part, information that’s to be had is out there. And I don't expect that publication will meaningfully change what's been in the public domain. We've obviously crawled through the data to patient-by-patient level and so are the health authorities and we provided expectation details to the health authorities already. And so far, the conclusions remain as we represented them that setting them as predefined interim analysis criteria adequate for regulatory filing, engages us tremendous amount of investigator interest in patients’ interest in participating the studies and gives us kind of a sufficient enrollment in the federal clinical trial. And as J.J. mentioned just a second ago, gives us a huge amount of confidence that we're going to win when it comes to superiority against prophylactic standard of care when that standard of care is withdrawn. So…

I mean, [indiscernible] “normal” activity level that is bleeding?

Yes. It's interesting that in general, bleeding was lower with no rare exceptions. And actually, one of the exceptions was somebody who's factory levels just the connection was a little bit slower in an individual set and their prophylactic we tried it before and they didn’t get [indiscernible] levels into a therapeutic [indiscernible] when you can see a few weeks later. And so that's why they had a little bit more bleeding on, which actually validates the point that J.J. was making about some amazing resulting withdraw standard of care and in spite of that people stopped bleeding. So, the amalgam of the picture, both at the individual patient level, as well as the total group level is that [indiscernible] effect on bleeding in patients who have withdrawn, prophylactic therapy. And like I said, that's been driving a lot of the interest at the patient level, the physician level and at the regulatory level.

Okay. And over Matt your question about valrox in Europe [indiscernible]…

[Indiscernible].

Okay, but I'm anxious. Okay, how is [indiscernible] Europe and maybe I do a little compare and contrast. In the United States, we had really a running start. We had number – a number of our best clinics that were experienced and founded through the clinical trial program. We had a material number of patients that we were able to transition pretty rapidly from a maintenance dose in the clinical trial to commercial maintenance dose to immediately grow revenue. We have the ability to get really rapid reimbursement approvals on a patient-by-patient basis in the United States and, in fact, that's what we've experienced. And then we have what we've described accurately as a slow start for patients when they begin the induction titration process roughly a quarter before they begin generating meaningful revenue. And then once they do, the evidence so far is they are pretty compliant and very persistent with therapy. So, that has resulted in the quarter-to-quarter step up in revenues. But I'm just thrilled about and the arithmetic on that if they follow $12 million to $19 million last quarter to this quarter, that kind of rate continues into the future and we're getting into big revenue numbers pretty quickly. In Europe, we've got a different situation. We don't have that running starts. We don't have clinical trial patients to transition. We don't have clinics that are experienced with R&D. And we have, as you know, pretty slow reimbursement processes to navigate before we can start commercial sales. That said, there are some really positive things going on in Europe because it needs to be really bearish about the prospects starting next year. One of which is, there's just a larger adult PKU patient population in Europe, and they are relatively well-managed in centralized centers of care relative to the fragmentation of patients in the United States. So, is why we're guiding the say, it will start seeing material revenues in Europe next year? We've got a lot of work to do to get through reimbursement processes to get sites trained, experienced with their first patients, first patients to get through induction titration before they start generating material revenue. I’d say, look, for Europe to start showing up materially next year and then being a growth driver for Palynziq early in the following years as we look to tap into that bigger patient population.

Our next question comes from the line of Joseph Schwartz from SVB Leerink.

Great. Thanks very much. I was wondering if you could update us on your plans to study a higher dose and/or propylax with corticosteroids in order to optimize responsiveness to valrox. Previously, it sounded like you wanted to start this kind of a study before valrox approval, but now it seems like you'll likely wait until after?

I don't know – hi, Joe. I don't know that we've given any kind of granularity about the start time. So, I think the interest would be to have the data soon available after launching, I mean, I think it as opposed to approval optimization. But when the study starts, I don't think we've given really clear feedback about. And I think the other thing about that is that, I think it's great that we're getting a head start on product optimization, let's not lose track of product introduction as the next year is key milestone. And walking around at ISTH and – but it is the cynics and whatnot, who are talking about, wow, what a profound effect this has. And wow, you guys are really out there in terms of the commitment you've made to the manufacturing capability, the fact that we could have certainly about the product going forward. We don't have to worry about are you going to change the recipe or the results going to change from here on out, impressive stories about the impact of lead reduction, the impact of just eliminating factor considerations from people replacing factor, considerations in our lives. It's really – it was really a great team to be at and a key reminder of the big picture about valrox. Patients are having their lives transformed and we're just excited as we could be to bring that product to patients. We’re always aspired to do better. Sure. But for – in the first instance, the immediate goal is valrox is available as quickly as we can on a global basis.

Great. Thank you.

Sure.

And our next question comes from the line of Akash Tewari of Wolfe Research.

Hi, guys, thanks so much for the question. Can you walk us through your statistical assumptions for your Phase 3 valrox trial in order to show superiority over prophylactic factor therapy? I know [indiscernible] showed an ABR reduction of about 4.8 to 1.5. And given your Phase 3 data, do you remain confident you'd be able to hit that? And how important is that kind of commercially? And then on vosoritide, there were about 20% of patients who had antidrug antibodies at the end of the dose fighting trial. Did you notice any reduce efficacy in those patients? And was there any correlation between the percent of these ADAs and treatment duration? Thanks so much.

So valrox [indiscernible] I should say, with 130 subjects overall has the power to detect a reduction in bleedings from up top of my head, I want to say, 3.5 ABR’s to 1.5 ABRs, both of those numbers are relatively conservative in the following sense. As you correctly pointed out, [indiscernible] control arm raises in the high force. And they showed actually – when they presented their [indiscernible] data, they showed range of studies that were in the upper threes, fours, and low-fives, giving us a lot of confidence that, that 3.5 actually conservative is resulting conservative estimate in the – is a high bar in terms of prophylaxis. And bleeding rate 1.5 on valrox, as you know out to your three in our 201 study, I believe it’s 0.7, it's very low in the first six months of treatment in the interim analysis cohort. So, I walk away from this with confidence that we have every bit of 90% power that we plan to have, if not better.

Got it. And could you just talk about vosoritide?

Yes. Could you repeat that question, again? I was thinking about the answer to the first question when you were asking the second question.

Yes, no worries. So just – we noticed that there were about 20% of patients who had ADAs at the end of the dose finding trial. We just wanted to know if there was any reduced efficacy in the subset of those patients? And was there any correlation between the patients who develop these ADAs and overall treatment duration? Thanks.

Yes. No correlation between the presence of antidrug, antibodies and clinical outcomes. And fairly consistent with that, what we observed across all our programs, you develop antibodies with Vimizim, Naglazyme, Aldurazyme and the dose that you give is higher than the antibodies [indiscernible] to bleed in. And it's very difficult to demonstrate clinical significance of the antidrug, antibody there, obviously the [indiscernible] et cetera, to the induction severity, induction reactions to [indiscernible]. But in general, with vosoritide, together with vosoritide, no correlation of antidrug, antibodies in adverse outcomes.

That's super helpful. Thank you so much.

Yes.

Any our next question comes from the line of Josh Schimmer from Evercore.

Yes. Thanks for taking the questions. Just a few quick ones on valrox. First, what is the gating stuff for the VLA filings? Second, do you expect not just approve, but also commercial launch prior to the Phase 3 data generation? And then third, how many patients were enrolled in the low-dose cohort? And when do you expect to report results from that study since its being terminated?

Hi, Josh, good to hear from you. And I should mention that we're going to organize a little bit of follow-up on some of the vosoritide type things for you, because we want to make sure that you have the most correct information on vosoritide. But to get to your question on the VLA, it's mainly about writing the final reports. Believe it or not, in spite of the facts, there are mainly two studies going in. There are actually a fair number of reports that – from preclinical my shop, Robert’s got a ton of reports to write up in terms of validation and PPQ campaign results and stability. So, it's just a lot of reports to write. And that's what we're busy in the process of – and the agencies are pretty specific about what they want to see in those reports. They want them all stand final feel validated. And that undertakes a fair amount of quality control to make sure that the results are the accurate, reliable, verifiable that we're inspection ready, et cetera. So, and we've been down this road many, many, many times before and a lot recently because there were lot of inspections, GOP inspections, PD inspections, GMP inspections. So, we want to make sure those reports are ticked and tied, so that the inspectors should come out and see what they've seen before, which is not. And, Jeff, do you want to comment on?

I think the question was, what about commercial launch timing relative to the completion of the Phase 3 and presumably data available?

Yes. So, it's too early to kind of PDUFA date. But submitting in the fourth quarter kind of implies, if it's a priority review in the U.S. sort of in the third quarter, early fourth quarter kind of an application review the data from the ongoing 301 study will – the last patient out will be a year from the last patient in, because 52-week study last patient in will be, as we said on the call, early fourth quarter. So, the last patient out will be in the early fourth quarter of 2020, which is likely to be around or just after the PDUFA date in the U.S. and essentially even in the EMA Action Day in Europe depending on process and the data readout will be after that. So, the data will be available from the – the bleeding data will be available from that portion of the studies shortly after our initial product launch.

Okay. And number of patients enrolled in the liver’s cohort [indiscernible]?

Negligible low and probably won't even get reported separately except as a formal update to health authority and no practical consequences at this stage. Nobody's interested in that study that does. It’s just for people who can deliver higher doses.

And our next question comes from the line of Paul Matteis.

Hi, guys, thanks for taking the question. This is Nate on for Paul Maybe just one on Palynziq. How – you mentioned taking like a quarter to see meaningful revenue from patients? How variable is that titration protocol been across clinics to get on to maintenance dosing? And then are you seeing maybe repeat clinics to get faster as they gain experience of Palynziq? J.J. Bienaimé: Great question. The experience to date with a pretty big body of new to treat the patients is that the patients are adhering very closely to the titration schedule in the label. There are some patients that go a little slower than the label step-up, which we've anticipated, because we know in our guiding clinicians to say, look, if you see reactions slowdown, you'll get there eventually, not very much evidence of patients are going faster. So, remarkably close to the label schedule for that.

Got it. That's helpful. And then maybe quick one on the achondroplasia Phase 3. Just back of the envelope math, it seems like that powering, that 90% powering, maybe it's conservative? Are you thinking there's going to be a step-up in variability just based on the expanded age criteria or somebody else? J.J. Bienaimé: Well, our statisticians like the people at the deli counter, they add a little bit on their side. And yes, it is a little conservative, because the growth rate that we have observed in the first year after vosoritide was probably a little bit north of what the target for powering is. And the other thing you should understand is that the target for powering, which I was – in my comments, I said, it was 1.75 centimeters. If you actually observe 1.75 centimeters, your P value wouldn't be .05, it'd be .001. So, a different thing to talk about, let’s say, the critical threshold for significance, and that's much lower than 1.75. So, we have a lot of insurance [linked to ours et of] physicians built in. And intrinsically, there's a lot of insurance from the fact that patients are serving as their own control. We have that running period that people might have forgotten about that. But we ran in patients through a perspective observational period. So that we change – we compare the individuals change from their own individual-based on ADP to a post-treatment and then sum that across all the drug group and compare that with some across all the placebo group. So, the study was [indiscernible] robust design in always.

Really helpful. Thanks for taking the questions. J.J. Bienaimé: Yep.

And our next question comes from the line of [indiscernible] from Cowen and Company

Hi there, and thank you for taking my questions. The first one on Palynziq? I guess, are you seeing patients that are currently on Kuvan that do not want to switch over to Palynziq, and maybe what's the reason behind that? Are they happy with their current therapy, or want to see more safety follow-up data, or what are you hearing from that? And then second, on maybe more of a broader picture question. What are your thoughts behind additional investment in gene therapy versus other treatment modalities? And maybe how does BD fit into that? J.J. Bienaimé: Okay. I’ll take the first question about Kuvan patience and Palynziq. There is substantial data of Kuvan patients transitioning to Palynziq. So, fully 37% of our naive patients were referrals or active Kuvan patients that are choosing to switch over to Palynziq. And there is another body of patients that have previously trialed and not been successful on Kuvan that are choosing the sort of Palynziq. So, the evidence would be that patients that are in – adult patients that are in clinic are highly motivated to switch over to Palynziq. What we have not done yet is gone out to survey the market and learned the attitudes and reasons why patients that are on Kuvan haven't trialed Palynziq are waiting. We’ll do that, but I don't have data on that question yet.

If I may elaborate on this, we don't have the exact answers to your question. Again, I think as we gather more and more experience with R&D if it is going to become [indiscernible] powerful this product is and how much it is transforming the lives of the patients, which actually could even figure through the adult [indiscernible] for R&D as more and more experiences gathers. Because again [indiscernible] nine months experience with the driving on the market, we keenly have very small percent of these configurations, 5% versus 10% in the trials, most of them unrelated to actually side effects. We have patients like freely impressed with the impact of the drug on their [indiscernible]. So, I think the product is doing [indiscernible] anything we anticipate as in this respect and so it looks like it is behind us as we report over 700 patients already on commercial product or ready to go at the end of June, obviously since then we have included more patients and it is going very, very well for the growth of the product in the U.S. and down the road in the rest of the world. And you asked a question on additional roxaparvovec gene therapy… J.J. Bienaimé: [Indiscernible] come to R&D they first of all – we have our sites that if not our next IND or probably our next two or three INDs, so we’re feeling really good about pre-clinical pipeline and especially if you are really good about pivot to medium [indiscernible] and their team have done just a fantastic job of putting the pedal to the metal. We look at things all the time and we have done since we have last looked into some smaller earlier safety. We like these earlier stage things, like – thinks like valrox, for example, [indiscernible] forgets, we licensed our [indiscernible] preclinical asset in 2013 or new in clinical trials in 2015 started [indiscernible] 2017 will be filing for global approval in 2019. So, while we talk about them as early with the molecular specificity in the BioMarin track record, we can motor through those things. So, there are a few early stage license that were pretty higher feedback, you know if we had our reasons ready to talk about, what we will be able to talk about or some gene therapy ideas and non-gene therapy ideas and we have some really, really happy times for early pipeline of BioMarin. Looking forward to sharing more details.

Great. Thank you. And congrats on the progress.

In the interest of team on the schedule, that concludes the Q&A portion of the call. I will now turn the call back over to the BioMarin, Chairman and CEO, J.J. Bienaimé. J.J. Bienaimé: Thank you, operator, and thank you for participating on our call today. So, as you just heard the coming 18 months, we’ll open up many new opportunities for the company, which we expect to drive significant growth beyond our existing commercial business. And as far as you can expand and accelerate in two new markets, we will pursue [indiscernible] valrox followed by the same path forward with vosoritide should the data be supported. Our manufacturing capabilities give us an important edge across our product pipeline, including gene therapy and we intend to leverage our gene therapy and expertise to rapidly develop our next gene therapy product BMN 307 for PKU. Taking together, finally a thought for significant commercial expansion over the next quarters and we are preparing for success. Thank you for your continuous support and we hope to see you at R&D day in November. Good bye.