BioMarin Pharmaceutical Inc (BMRN) 2006 Q4 法說會逐字稿

Thank you for your patience, ladies and gentlemen, and welcome to the Fourth Quarter 2006 Financial Results and Phase 2 Hypertension Study conference call. My name is Candace, and I'll be your coordinator for today.

[OPERATOR INSTRUCTIONS]

I would now like to turn the presentation over to your host for today's conference, Senior Director of Business and Corporate Development, Mr. Joshua Grass. Please proceed, sir.

Thank you, and good morning. On the call today is J.J. Bienaime, BioMarin's Chief Executive Officer, Jeff Cooper, Chief Financial Officer, and Emil Kakkis, Chief Medical Officer.

I'd like to remind everybody that this call will contain non-confidential information and forward-looking statements about the business prospects of BioMarin Inc., including expectations regarding BioMarin's commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially, depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K reports.

Now I'd like to turn the call over to J.J.

Thanks, Josh, and good morning, and thank you for joining us on today's call.

So the first item on my agenda for this call is to review the top-line results for the Phase 2a study of 6R-BH4 in poorly controlled hypertension that we announced this morning. Unfortunately, there is not much to discuss. The results are clear in that there is really no significant effect of BH4 on systolic or diastolic blood pressure or any measure of diabetes when evaluated in conjunction with standard of care hypertension background therapy. The placebo group and the group receiving BH4 both demonstrated a drop in systolic blood pressure of 6.4 and 4.4 mm Hg, respectively, and there was no statistically significant difference between the two groups.

While we are disappointed with this outcome, we take some comfort from the fact that these results are unequivocal and that, based on these results, we are unlikely to conduct Phase 2b studies in hypertension in the near term. As to why we obtained these results, we are not absolutely sure, as we have not yet looked at the data in any granular detail. One possibility is that in prior studies patients may not have been compliant with their [standard] medication, and there are some differences in the background therapies when compared with this study. But at some point, the reason why the study was negative becomes academic, as the background therapy in the hypertension [001] study is typical for hypertension management. This study was designed to test a hypothesis, and we generated a clear result.

As to what this means for other programs in cardiovascular, we at this point do not have any plans to change the course of our clinical programs either in peripheral arterial disease or sickle cell disease. The pathogenesis and severity of endothelial dysfunction is different in PAD and sickle cell disease compared to hypertension. However, if upon further review of the data and discussion internally and with our cardiovascular advisory board we determine that significant changes to the protocols, study design or overall strategy are appropriate, we will communicate those changes to you in a timely manner.

We also want to make it clear that these results have no effect on our PKU program. We observed no significant adverse safety or tolerability effects in this study, and the mechanism of BH4 and relevant metabolic pathways in PKU are different than those in cardiovascular disease. Excitement for Phenoptin among PKU professionals is growing, and we are basically on track to file the NDA in the U.S. next quarter and launch by the end of the year.

Now, turning to the financial results, we have a few introductory comments before Jeff provides details for the fourth quarter and full year 2006 and financial guidance for 2007.

Josh then will cover the investor and medical conferences and we will be presenting -- that we will be presenting at in the coming month before we ask the operator to open the call for questions.

In 2006, we continued to improve our financial position and also made tremendous progress in the growth of our approved products as well as the development of the Phenoptin and Phenylase program for PKU. First, the launch of Naglazyme in the United States, Europe and certain international markets is going very well. Sales have exceeded our expectations throughout the year, and we expect ongoing momentum in 2007 to be driven by geographic expansion and the initiation of new patients on commercial therapies. The successful launch of Naglazyme in the U.S. and Europe demonstrates our ability to penetrate small patient populations and command premium pricing and positions BioMarin as a commercial partner of choice.

We are pleased to announce that Naglazyme was recently approved in Australia by the Therapeutic Goods Administration, and this is a significant achievement for BioMarin, as it was the first ex-U.S., ex-EU regulatory approval and one that should eventually allow MPS VI patients in Australia access to Naglazyme once reimbursement approval is received. In addition, patients in several countries without approval are receiving already treatment on a named patient basis.

As for Aldurazyme for NPS1, commercialization through the BioMarin/Genzyme joint venture continues to go well, and Jeff will go over the details in a moment.

Moving on to the Phenoptin program, we have submitted a proposed name change for Phenoptin to the FDA and expect to receive a response in July 2007. The proposed new name for Phenoptin is Kuvan, spelled K-U-V-A-N, and we decided that a new name was necessary after market research indicated that the name Phenoptin was prone to misprescription errors, and from this point on we will refer to Phenoptin as Kuvan.

In mid-December, we announced positive results from the Phase 3 extension study, which demonstrated the long-term safety and tolerability of Kuvan. In mid-January, we also announced positive results from the Phase 3 study, which demonstrated a significant increase in Phe tolerance as well as a reduction in blood [phenylals] in 4 to 12-years-old patients. With the completion of the diet study, we have essentially finished the clinical portion of the Kuvan program to support our filing.

Our team is working diligently to process all the information and format it to the NDA, which we are on track to file next quarter. As you may recall, the FDA has granted Kuvan Fast Track status, and we are optimistic that, once submitted, the application will be granted priority review, which would mean a six-month review cycle instead of the standard ten-month cycle. And, assuming this occurs, we believe an approval in late 2007 is still a very good possibility.

We are also continuing development of Phenylase, a subcutaneously administered enzyme therapy for more severe PKU patients who do not adequately respond to Kuvan. Based on our progress, we are still planning the IND-enabling toxicology study with the goal of filing an IND by the end of this year. As you may recall, Merck-Sorono has been --- is our corporate partner for both the PKU program, basically Kuvan, and Phenylase.

And with that I will now turn the call over to Jeff Cooper, who will review the financial results for the fourth quarter and full year 2006.

Thanks, J.J.

I'm going to start by review product revenues of Naglazyme and Aldurazyme for the fourth quarter and the year ended December 31, 2006, and follow with royalty and license revenue for the same periods. I will then review our net loss for the quarter and follow with a more in-depth look at our financial results. Lastly, I will provide financial guidance relating to projected net product sales and net loss for 2007.

Beginning with Naglazyme, net product sales for the fourth quarter of 2006 were $16.3 million, and $46.5 million for the year ended December 31, 2006. Naglazyme was approved by the FDA and the European Commission in late May 2005 and in late January 2006, respectively, and the sales growth to date is nearly all related to initiation of therapy by previously identified or newly diagnosed patients.

Net products sales of Aldurazyme by the BioMarin/Genzyme LLC were $26.5 million for the fourth quarter and $96.3 million for the year ended December 31, 2006, representing increases of 25% and 26%, respectively, over the same periods of the previous year. BioMarin's share of the profit of the BioMarin/Genzyme LLC was $5.7 million for the fourth quarter of 2006, compared to a profit of $3.1 million for the fourth quarter of 2005. BioMarin's share of the profit from the BioMarin/Genzyme LLC for the year ended December 31, 2006 was $19.3 million, compared to $11.8 million for the year ended December 31, 2005, an increase of 63.6%.

With regard to royalty and license revenues, BioMarin recorded $800,000 in the fourth quarter and $15.9 million for the year ended December 31, 2006. These revenues primarily relate to the Orapred licensing and acquisition agreement we entered into with Alliant Pharmaceuticals in mid-March of this year, and include royalties on net product sales of the Orapred product line. As for collaborative agreement revenues associated with our partnership with Merck-Sorono, BioMarin recorded $4.9 million in the fourth quarter of 2006 and $18.7 million for the year ended December 31, 2006.

Our net loss was $10.4 million, or $0.11 per share, in the fourth quarter of 2006, compared to a net loss of $15 million, or $0.20 per share, for the fourth quarter of 2005. The net loss was $28.5 million, or $0.34 per share, for the year ended December 31, 2006, compared to a net loss of $74.3 million, or $1.08 per share, for the year ended December 31, 2005, a reduction of 61.6%. The reduced net loss for the fourth quarter and year ended December 31, 2006 was due primarily to an increase in Naglazyme revenue, improved performance of the BioMarin/Genzyme LLC and improved operating performance.

Now I'll review the financial results in more detail.

Research and development expenses increased $7.9 million to $20.6 million in the fourth quarter of 2006, from $12.7 million in the fourth quarter of 2005. The increase in R&D spending is attributed primarily to increased Kuvan clinical study and manufacturing activities, increased development costs of our other programs, including 6R-BH4 for cardiovascular indications and Phenylase, and stock-based compensation expense that was not required to be recognized as expense in 2005. Looking ahead, we expect to increase our R&D spending into 2007 to support the 6R-BH4 program for cardiovascular and sickle cell indications, Kuvan regulatory manufacturing activities and Phenylase preclinical work.

Selling, general and administrative expenses increased by $2.9 million, to $14 million in the fourth quarter of 2006, from $11.1 million in the fourth quarter of 2005. This increase was largely due to increased commercial expenses related to the European commercial launch of Naglazyme and increased U.S. commercial activities, as well as noncash stock-based compensation expense. SG&A spending is expected to increase into 2007 due to continued commercialization of Naglazyme in Europe, Latin America and other parts of the world, as well as prelaunch commercialization activities for Kuvan in the United States.

From a cash perspective, we ended the fourth quarter with $288.8 million of cash, cash equivalents and short-term investments.

And now, as J.J. mentioned earlier in the call, I will provide the 2007 financial guidance.

With regard to Naglazyme, we expect our 2007 net product sales to be in a range of $74 to $78 million. As for Aldurazyme, BioMarin and Genzyme expect estimated sales through the joint venture for 2007 to be in a range of $115 million to $125 million. And, finally, we expect our net loss for 2007 to be in the range of $20 to $25 million, which factors in $16 to $18 million in noncash stock compensation expense. Our 2007 guidance also includes a $4 million milestone payment in June for the one-year anniversary of the FDA approval of Orapred ODT and the milestone payment from Merck-Sorono for the acceptance of the MAA filing for Kuvan.

That concludes my prepared remarks. I will now turn the call over to Josh for some comments regarding upcoming events.

Thanks, Jeff.

Before we open up the call for questions, I'd like to note that we will be presenting at a few investor and medical conferences in the coming months. First, on March 13, BioMarin will be presenting at the Cowen and Company 27th Annual Health Care Conference in New York City, and the following week we'll be presenting at the Lehman Brothers Tenth Annual Global Healthcare Conference in Miami.

Data on the use of Kuvan to treat PKU will be presented at the American College of Medical Genetics meeting in Nashville, Tennessee, March 22 to 24. And immediately following ACMG we'll be presenting Kuvan pharmaceutical development at the Society of Inherited Metabolic Disorders meeting, also in Nashville.

You can access the investor presentations live through our website at www.bmrn.com.

And, with that, operator, I think we're ready to open up the call for questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Our first question will come from the line of Chris Raymond, of Robert W. Baird & Co.

Hi. Thanks for taking the question. With regard to BH4, I know, J.J., in your prepared comments, you said that PAD is different from hypertension. I think you mentioned different endothelial function and maybe some other differences. But I wonder if you could maybe talk a little bit about -- maybe expand on that as to why, or why not, we should expect a different outcome here in PAD, and maybe also remind us if this trial population might be different. I know there were a lot of diabetics in your poorly controlled hypertension study. That'd be great.

Yes, maybe I'll just say a few words on that and hand the question to Emil. Yes, indeed, again, we, as I said in my introductory comments, we have not analyzed yet the data in detail to figure out exactly why it is that we ended up with results substantially different from what Dr. Quyyumi had in his small study at Emory University. We have some ideas as to what issues that could have been different, or variables that could have been impacting the study, but we don't know for sure yet. It's just too early. We just got that data.

But regarding PAD, clearly, based on what we know, generally, the severity of endothelial dysfunction is more substantial in PAD than it is in moderate hypertensive patients. That could be one reason we didn't see anything here in moderate hypertensive patients. And, consequently, we believe that, based on all the existing data on BH4 and the impact, positive impact, of BH4 on endothelial dysfunction that we still have a good chance of showing efficacy in PAD. But I'm going to ask Emil to maybe elaborate a bit further on that.

Emil?

Yes, thanks, J.J.

I think one other aspect that is different is that in hypertension, we're talking about steady state control of blood pressure in the context of many other systems that do control blood pressure. In an intermittent claudication we're talking about vasodilation response to ischemic signal, which is, we believe, one of the contributors to intermittent claudication, and, therefore, that sort of function, that is, vasodilation that's NO-dependent in response to ischemic signal is much more like what's measured in endothelial dysfunction, or the FMB-type tests.

And so we feel that in the situation of inducing [inaudible] response to ischemia, that PAD is very different from hypertension in how the body is responding to that particular signal. And so that's one of the reasons why we set up this whole program, which was to study in Phase 2, small Phase 2 cost-effective studies, several indications where we thought this might be a benefit. So I believe PAD is quite different.

But that doesn't satisfy the concern or question of whether what we're learning in this hypertension study is something we need to address. And so we are going to be drilling down into the data to understand it better. And we will focus on what are the differences between what Quyyumi did. Dr. Quyyumi did very good research, and I don't think this says his research was not right. I think what it says is that there may be differences in the exact experiment we did compared to what he did that would explain it. It could be that it was small, his study. It could be that he did have some differences in background medications. He did have some diabetics in his study, as we did. We've analyzed their data both ways. That did not appear to be a factor.

So we will be, in the next few weeks, looking through all of that to try to establish what the differences were that might explain what happened in our study. But I do believe, in the end, that the pathophysiology is different on these other indications, and that is why we originally planned in small Phase 2 studies to explore these other places. We will not leave any stone unturned in terms of determining whether there's any factor which could be pervasive and might affect the other programs that we haven't addressed. So we will be spending some time to find out what those factors might be.

Great. And is it okay to ask a follow-up question?

Sure.

On Naglazyme, I'm just curious, your guidance for 2007 sort of implies a pretty good step-up in your quarterly run rate from what you did in the fourth quarter in light of the fact that you got, obviously, Australian approval. Is there -- can you maybe talk about the contributors to that? Is it patient weight? Is it just new patients? Is it new geographies, or a combination of all?

It really is a combination of all, I mean, clearly. I mean, in terms of the reason why the sales have been better in '06 than we anticipated is -- some of it has been related to the patient weight in Europe. That is, they were higher than we anticipated. And a penetration of the market in Europe that has been faster than we anticipated. Because we were somewhat conservative, because you might need to remember that in -- we were still hooking up the telephone in our head -- European headquarters in London in January, and we launched the drug at the very end of January, early February. So we were basically building the commercial organization in Europe as we were launching the product, which is always a risky proposition. Well, it turned out to be very successful.

Now, regarding '07, yes, I mean, there's been -- there will be a continuation of penetration of the European market itself, the U.S. market itself, which is far from being fully penetrated at this time, and geographic expansion in different countries. You know, we don't have approval in Brazil, but we have established a subsidiary now in Brazil, and we are starting to get some sales on a named patient basisin Brazil, and actually, we had even one in Colombia last week.

And the Middle East is really not penetrated at all. Today we're just signing up some distributors there. We believe there is a very large patient population in the Middle East. This is related to genetics. It looks like MPS VI is really rooted in the Mediterranean area, and this is why, actually, the Brazilian market, being so big, because lots of Brazilian patients have a Portuguese heritage. So, again, there is -- we have major room for geographic expansion and penetration of the existing market and also we have signed up a partner in Japan in Q4, and we have not filed yet in Japan, but we're going to work diligently to prepare the filing, and there will be, consequently, several years of anticipated double-digit growth for Naglazyme and also still potentially for Aldurazyme.

Great. Thank you.

Our next question will come from the line of Phil Nadeau, of Cowen & Co. Please proceed.

Good morning. Thanks for taking my questions. First, just a couple of questions on BH4. Have you disclosed when you expect to release the PAD data?

No, we have not disclosed that yet, because, as you know, the study has just started a few weeks ago. There are very few patients yet enrolled. And what we have said is that we [inaudible] first half of 2008, which we believe at this time we should be able to meet. But until we see -- we get a better feel for the enrollment rate, it's kind of difficult to fine-tune this estimate, so it could be Q1 or Q2 2008 at this time. If things accelerate, we will communicate this in due time.

Okay, great. And, Emil, a question for you. Is BH4 known -- are BH4 levels known to be different in PAD patients than in normal patients? Is there any evidence of a BH4 deficiency?

BH4 has rarely been measured in any patient directly, but we know in patients with intermittent claudication that they do have severe endothelial dysfunction. And so severe endothelial dysfunction has, in many of the patient type populations that have been studied, been dependent, to some degree, on BH4. But no one's mentioned it directly in intermittent claudication.

Okay, great. And just a few housekeeping financial questions. What was the noncash compensation cost for Q4?

Oh, for Q4, the noncash compensation cost was a total of $3.1 million.

Okay. And how was that broken down R&D versus SG&A?

It's almost 50/50, a little bit more from SG&A.

Okay. Now that you're getting close to profitability on a non-GAAP basis, are you going to begin breaking out the noncash comp numbers in future quarters?

Well, we've broken out the noncash compensation as it relates to stock option expenses on a quarterly basis. We've done that so far in all of our reporting and will continue to do so.

Okay, great. And one last question, you mentioned during the prepared remarks that there was a milestone for Kuvan expected during 2007, and I didn't catch exactly what that was. Was that for -- did you say U.S. acceptance of the filing, or for the European filing by Sorrento and Merck KgA?

Yes, that's for the European MAA filing.

Okay.

Yes, and, you know, we've communicated before that we will be receiving $45 million from Merck-Sorono between -- there will be two payments, one at the filing of the MAA, one at the approval of the MAA. We have not disclosed exactly the breakdown of the $45 million, but the first payment will be lower than the second one. So we anticipate this to happen, the first payment, likely, this year, and the second payment, hopefully, in 2008.

Okay, great. Thank you.

Our next question will come from the line of Joseph Schwartz, of Leerink Swann. Please proceed.

Hi. Thanks for taking my question. I was wondering, since the GAAP net loss guidance was a little bit higher than what we had expected, at least, I was wondering if you could provide us some color in terms of the operating expenses and where you see -- just a rough breakout of where you see that ticking up would be helpful.

Well, there's a few reasons for that. First of all, as noted, the increase in our stock price, the number of options outstanding, our stock compensation expense, which, as I mentioned, is a noncash charge, is increasing from about $9.6 million in 2006 to a range of $16 to $18 million, so that's an increase of $6.5 to $8.5 million for stock comp alone.

Secondly, our selling and marketing spending will continue to grow due to geographic expansion for Naglazyme. And then, of course, the prelaunch spending for Kuvan, including the building of a sales force, those are expenses that we didn't incur in 2006.

Third, our overall R&D spending will continue to grow, which includes the spending for the sickle cell and PAD indications for BH4, as well as increasing our spending for Phenylase as we move towards an IND filing. Our spending for the Kuvan program will include increased regulatory spending and then preapproval manufacturing costs as we build [here] for inventory builds which are expensed.

And then, finally, the Naglazyme sales and profit contribution will continue to grow in 2007 due to strong growth in sales. Our gross margins as a percent of sales will be at more normalized levels in 2007, since we've now sold through most of the inventory that was approved -- that was produced prior to approval. Those are among the factors that tie into the guidance that we've provided.

That's very helpful color. Thanks. If I could just ask one follow-up question in the clinical area, in terms of what protocol and/or design changes to the ongoing BH4 trials you might contemplate, could you provide us with some -- just some background thoughts? Would it involve dose or perhaps a run-in at the head end of the trial, different types of patients, size of trials? Do any of those things seem to make sense, or are you thinking of other areas in particular that you might decide to tweak now?

Emil, do you want to address that question?

Sure. I don't think we want to [inaudible] right now to what the detailed plans might be, whether any protocol amendments might occur. We are looking at some of the factors you've outlined. The hypertension study we just did have a run-in period, by the way, so we did control for a period of time before they actually began their baseline.

So we are going to be looking at some changes, potentially, but we don't think there is a fundamental issue there right now, but we are looking at doing some small studies to try to elucidate the basis for the difference, in addition to drilling down in the data in greater detail. But we are -- our key goal is to make sure there's not something that might be pervasively affecting what's happening in the studies, and, if that's true, then we need to make protocol changes. To the extent that they are hypertension-specific issues, specific background medication issues and those type of things, then they'd have less general impact on the program. But I can't give you exact color now on what those other things are. We're still working through the issue.

Great. Thanks very much.

Our next question will come from the line of Allen Leong, of Biotech Stock Research. Please proceed.

Thanks for taking my questions. I want to address future inlicensing deals. What might we expect in 2007? And, if so, are you still focused on pediatric orphan targets?

J.J. here. We have an ongoing effort to look into potential inlicensing opportunities. I would say that now, thanks to our report today of our full 2006, full-year 2006 sales for Naglazyme, I think we have built very significant credibility as a commercial partner in the U.S. and in Europe for high-priced products that address highly unmet medical needs in small patient population indications. And actually we are, as we've been growing the sales over the year, we are starting to get some calls from different biotechnology companies that need to launch a product in Europe, and sometimes in the U.S. So we have nothing that is in very advanced stage.

We are basically not looking only -- definitely not looking only at pediatric products. I don't think that's our specialty. Our specialty is to sell high-priced complex products for small patient populations. So we're looking in many different areas, including cardiovascular area. And, whatever happened today, I assume we will still be looking for potential cardiovascular inlicense products, but not only cardiovascular products. But, basically, the bottom line is that we are improving our credibility and image as a very attractive potential partner for commercializations of high-priced, low-population products.

One other question, can I get a sickle cell update?

Sorry?

Oh, can I get an update on the sickle cell program?

We have not initiated the trial. But we are still planning on moving forward, and we should announce initiation in the coming weeks. Do you want to add something to that, Emil?

No, no. We have a protocol finalized, and we are working through a number of sites to get the study started.

Okay. Thank you.

Our next question will come from the line of Carol Werther, of Summer Street Research. Please proceed.

Hello.

Yes?

Oh, yes, I was wondering if you could tell us how many patients might be in the sickle cell trial, and if you're going to use the same -- what doses you might be testing?

Emil?

So, the design of the study is -- it's about 40 patients expected. And it's a dose escalation-type study. It's actually going to be open label. It's going to measure endothelial dysfunction using a special test that looks at that, as well as monitor the patients for other factors that are known to relate to endothelial function in sickle cell disease. Patients will escalate through a range of doses, and we'll monitor these parameters at different doses. And we will be going all the way up to 20 milligrams per kilo in that study. So, because of the nature of the study, we'll be able to learn more about the sort of dose resresponsiveness effect of the drug in that patient population and also have a physiologic measure, as well, to give us an indicator of whether we are affecting the physiology or not in patients with sickle cell disease.

And will this be acute, treating acute patients, or --

No, this is chronic treatment, not patients in sickle cell crisis.

Okay.

These are patients who have sickle cell disease, they have had a history of crises, but are essentially not currently having a crisis, who will go in the study. They may have a crisis during the study, but these are not patients who present with sickle cell crisis. They are patients who have a known diagnosis of sickle cell disease and who have endothelial dysfunction.

Okay, thank you, and I'd like to ask another question if I may. I was wondering if you'd talk about the -- how you're getting ready for the launch later this year in the U.S. in terms of when you might be hiring the salespeople and what you're doing to smooth along reimbursement.

Yes, so, as you know, we already have a sales force in the U.S. that is actively promoting Naglazyme to geneticists and genetic centers. The good news is that the key decision makers for the prescription of Kuvan will also be geneticists. So these are people we are already calling on. But since this is a larger patient population, and there were ancillary health care providers involved in the treatment of PKU patients, like dieticians, for instance, we probably will be increasing our commercial operations in terms of size by about around 20 people in the U.S. We are planning to initiate the hiring of those people basically mid-year, once the NDA will have been accepted by the FDA.

In terms of reimbursement, we have already done, last year, some reimbursement research with potential payers to be able to put together best -- not only the best price, but also the best reimbursement support system at BioMarin. We already have some expertise in the field with Naglazyme, which, as you know, is a very expensive drug, and more expensive than what Kuvan is going to be priced at. So we are very actively preparing. Of course, our efforts will be intensifying as soon as the NDA has been accepted by the FDA this year.

Thanks a lot.

Our next question will come from the line of Liana Moussatos, of Pacific Growth Equities. Please proceed.

Hi. I have a question for Emil. BiDil, a drug by NitroMed, has similar, in a general sense, mechanistic activities as BH4 as far as increasing nitric oxide and having an antioxidant effect. BiDil's effect on hypertension was very minor, but it had a profound effect on heart failure in African Americans. Can you talk a little bit about the mechanism of action difference between hypertension and endothelial dysfunction in terms of this, and is this a surprise to you? Do you see BH4 following along the same lines, potentially?

Well, yes, I think there are potentially similarities in that hypertension is a body system that's controlled by many different other systems, not just NO. Right? There's the angiotensin system. There's a number of other -- the volume control, etc. So there's several things that control blood pressure at the steady state. But blood flow to ischemic tissues is a very different state, which is much more NO-dependent. And when you talk about patients in heart failure, there's also evidence that there's significant endothelial function and destruction of BH4 in heart failure, as well. So it's very possible that those indications are where NO is a more critical factor than in hypertension, and this is why, Liana, in the full program, we balanced out the risk-return of the various indications and picked some of these others.

Now, we haven't started a study in heart failure. However, I think many of you will -- I think you may have attended the American Heart Association meeting last year in November where Dr. Kass and his colleagues presented data showing that BH4 had profound effects on heart failure in a mouse model of heart failure, and that those effects involved also a reversal of heart failure. And so there is some potential that BH4 would have a function in those disease states where NO is particularly important, and maybe more confounded or more challenged in indications where there are multiple systems that regulate the body, such as in blood pressure. So that is definitely what we've been doing in the program, and hypertension was just one of several possibilities.

And I think PAD is in some ways similar in terms of its ischemia, sickle cell a little bit different. We're also doing a study in patients with coronary artery disease, for which there is significant endothelial dysfunction and BH4-related data. And heart failure is still at the preclinical stage, but there is -- we get calls and interest in doing BH4 and heart failure, because -- specifically because of the issue you mentioned, that there is evidence of NO having some particular impact on heart failure.

Thank you very much.

Our next question will come from the line of Navdeep Jaikaria, of Rodman & Renshaw. Please proceed.

Hi. Good morning, J.J.

Hi, Navdeep.

A quick question, when do you think we are likely to hear about a price point for Kuvan?

Again, we continue to evaluate the best pricing strategy for the product. You will hear the price point when we launch the product. We don't really need to make a decision until that time, so, which hopefully will be at the end of this year.

Okay. Can you talk a little bit also about your Phenylase program going forward and how quickly can that be realized to market?

Well, I'll start on that and let Emil elaborate, but, again, we are -- this year, we're doing all the preclinical studies, toxicology studies, to be able to file, to be in a position, if everything goes well, to file an IND by the end of this year. So we hope, if everything goes well, to be treating our first patients in early 2008. Then, of course, it will depend on the results of the data, but we believe Phenylase will likely, if everything goes well, be on the market significantly before the orphan drug status of Kuvan expires in the U.S. Emil, do you want to elaborate a little bit on this?

Sure. I think the Phenylase program will benefit from what we've learned in the Kuvan program; that is, that phenylalanine control is clearly the main driver, but because it's a subcutaneous, injectable protein, we will have to probably have some studies with longer follow-up to assure that there is -- the immunological response is under control and that there is no adverse effect of it. But we would expect to build on the very successful program we've had in Kuvan, looking at phenylalanine as our primary endpoint in standard safety. And I think that should allow us to accelerate through the program as long as we can demonstrate safety in long-term administration. So we expect a relatively rapid program, compared to most drugs, because we can use phenylalanine, we believe, as the primary endpoint.

Great. Thank you.

(OPERATOR INSTRUCTIONS) Our next question will come from the line of Tom McGahren, of Merrill Lynch. Please proceed.

Hi, thanks. I just wanted to quickly circle back on the BH4 Phase 2 data and then a quick question on Naglazyme. Just on the data, were you more surprised by the placebo effect versus the effect of BH4, or both, and, secondly, just thinking ahead, how should we think about the program? I think you mentioned that you would likely do some small studies, but timing is uncertain. And then the question on Naglazyme is just an estimate as to how many patients are currently on Naglazyme.

I'll start with the Naglazyme question and then have Emil answer the other one. But Naglazyme, you know, when we launched the product, we said the product is on the market now, so we will be reporting sales. We're not going to be reporting in terms of number of patients treated. But based on existing sales, I mean, you can figure out that the market is far from being penetrated, if you take an average price of over $300,000 per patient, and based on the epidemiology studies, there should be about 1,100 patients in the developed world with MPA6. So we're talking about a $330, $350 million market. We're not quite there yet. So we feel the product is still in its infancy. It's only -- we just passed one year anniversary in Europe, and we've been on the market in U.S. for -- it will be two years in June. So obviously, this is still early, and we have very, very significant room for growth here. Anyway, so I'll pass it on to Emil regarding answers on the BH4 results.

Yes, well, from a standpoint of placebo, we were expecting a 3 to 5 millimeter decrease, because that's generally what's seen in a lot of placebo-control hypertension studies, so it's a little bit larger. We did have a run-in period in which the point of which was to assure that patients were going to become more compliant on their baseline medications. They would do that during the run-in period. And therefore our baseline blood pressure would hopefully reflect a well-controlled, stable use of their drugs. But obviously there's some continued benefit to just sticking to their regimen during the study.

And so, while that, perhaps, confounds the study to some degree, I don't think that that's the main factor leading to the result we obtained. We are looking at other factors in the study and trying to compare them to what was done in the prior study and to understand whether some of these things that we see that are different, are they sufficiently different to be a contributor to the outcome we saw. And that includes background therapy, types of patients, and a few other things of that kind, which there were some differences. So not obviously dramatic things. So we will look at those to try to understand them.

And the studies we were talking about are what I would call sort of short-term studies where we would look at the endothelial function and blood pressure in some patients who are, for example, without other [inaudible], and the purpose of which is to try to understand whether we see the effect in that kind of environment. We haven't decided whether we're doing those or not, but we want to make sure that if there is a factor in how BH4 is being used, background therapy or other things, that we understand it well and understand its implications for the whole program. And so we are looking at all those things. We'll be consulting our advisors and pulling all the information we have out on the data from this study to help us guide a program to evaluate the outcome and make sure that we're doing the best possible studies in our other aspects of our BH4 and cardiovascular program.

Okay. Thanks a lot.

Ladies and gentlemen, this concludes the question and answer portion of today's conference. I will turn it back to the speakers for any closing remarks.

Thank you.

So, in summary, we are very proud of our many achievements in 2006, which include the very successful launch of Naglazyme and the completion of clinical trials that demonstrated very positive data for Kuvan in PKU, and we are looking forward to reaching additional milestones in the coming year. And, while we are disappointed with the results of the Phase 2 study of BH4 in poorly controlled hypertension announced today, BioMarin's core genetic business is growing rapidly.

In 2007, Aldurazyme and Naglazyme alone are forecasted to generate approximately $200 million in sales, which is a more than 40% increase over 2006 sales, and we are planning to launch Kuvan in the U.S. by the end of the year. So, given our track record in clinical development, and our commercial operations with niche high-value first-to-market products, we are well positioned as development and commercial partners for therapeutics with similar profiles. So we look forward to keeping you up to date on our progress, and we thank you for your continued support. So thank you for joining us on the call today. Goodbye.

Thank you for your participation, ladies and gentlemen. Have a great day.