BioMarin Pharmaceutical Inc (BMRN) 2007 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the Third Quarter 2007 BioMarin Pharmaceuticals Inc. Earnings Conference Call.

My name is Lauren and I'll be your coordinator for today. At this time all participants are in a listen-only mode. If at any time during the call you require assistance you may do so by pressing *0 to ask questions.

I'd now like to turn the presentation over to your host for today, Ms. Eugenia Shen, Manager of Investor Relations.

Thank you. On the call today is J.J. Bienaime, BioMarin's Chief Executive Officer, Jeff Cooper, Chief Financial Officer, Emil Kakkis, Chief Medical Officer, and Steve Aselage, Senior Vice President of Global Commercial Development.

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

Now I'd like to turn the call over to J.J., BioMarin's CEO.

Thank you Eugenia and good afternoon and thank you for joining us on today's call. I have a few introductory comments before Jeff reviews the financial details of the third quarter of 2007 and then Steve will provide an update on Kuvan launch preparations and Emil will provide an update on our ongoing R&D program and then Eugenia will review the list of Investor conferences that we'll be presenting at in the coming month before we ask the Operator to open the call for questions.

The first commercial progress of Naglazyme in the United States, Europe and international market continues to go very well. We expect ongoing momentum in 2007 to be driven by continued geographic expansion and the initiation of new patients on commercial therapy.

Sales today, including a very strong October, have been significantly better than our forecast and consequently we are revising our full year 2007 guidance upwards. And for Aldurazyme, [inaudible] NTS-1 commercialization through the BioMarin/Genzyme joint venture continues to go well and our share of the JV's profit keeps growing as Aldurazyme sales increase and Jeff will go over those details in a moment.

Moving on to Kuvan, as outlined in the press release we issued this afternoon, on Tuesday, October 30th, a couple of days ago, the FDA notified us that solely due to an unanticipated staffing constraint at the FDA and not due to any identified issues in the NDA, the action date has been moved to December 14th.

Legal discussions with the FDA were initiated last week and we continue without interruption. We do not expect this minor change in the timeline to significantly impact our target launch date of mid December. Steve will provide more details on Kuvan pre-launch activities in a moment and I have to say that this communication on the study of Kuvan finally has been reviewed and approved by the FDA.

In anticipation of our contract, manufacturing facilities are nearing completion and everyone at BioMarin is excited about the anticipated launch of Kuvan in the U.S. before the end of the year.

We're also making progress on the development of Phenylase, an enzyme therapy for PKU patients who either do not adequately respond to Kuvan or wish to reuse their blood Phe levels beyond what is possible with Kuvan.

We're still on track to file an IND for Phenylase by the end of this year and expect to be testing PKU patients in early 2008. Regarding the MAA filing by Merck Serano for Kuvan, we believe that the EMEA's acknowledgment of receipt of the filing is imminent and we anticipate receiving the $15 million milestone payment sometime this quarter following formal acceptance of the MAA filing.

Now I would like to turn the call over to Jeff Cooper who will review the financial results for the third quarter of 2007.

Thanks J.J. I will start by reviewing product revenues of Naglazyme and Aldurazyme for the third quarter and nine months ended September 30, 2007 and follow with royalty and license revenue for the same period. I will then review our net loss for the quarter and nine months ended September 30, 2007 and follow with a more in depth look at our financial results.

Beginning with Naglazyme, net product sales for the third quarter of 2007 were $21.3 million, an increase of 65.1% over product sales of $12.9 million in the third quarter of 2006. Net product sales of Naglazyme for the nine months ended September 30, 2007 and September 30, 2006 were $60.6 million and $30.2 million, respectively. Net sales growth was attributable to geographic expansion and the initiation of therapy by previously identified or newly diagnosed patients.

Net product sales of Aldurazyme by the BioMarin/Genzyme LLC were $32.3 million and $88.3 million for the third quarter and nine months ended September 30, 2007 representing increases of 29.2% and 26.3% over sales of $25 million and $69.9 million for the third quarter and nine months ended September 30, 2006.

BioMarin's share of the profit of BioMarin/Genzyme LLC was $8.4 million and $21.2 million for the third quarter and nine months ended September 30, 2007 compared to a profit of $5.1 million and $13.6 million for the third quarter and nine months ended September 30, 2006. As a result, profitability of the joint venture during 2007 is growing at a faster rate than sales with increases of 64.7% and 55.9%, respectively, compared to the third quarter and first nine months of 2006.

With regard to royalty and license revenues, BioMarin reported $600,000.00 in the third quarter of 2007 compared to $5.4 million in the third quarter of 2006. These revenues relate to the Orapred licensing and acquisition agreement we entered into with Alliant Pharmaceutical, now Sciele Pharma, in mid March of 2006 and include royalties on net product sales of the Orapred product line. Royalty and license revenues for the nine months ended September 30, 2007 were $5.4 million and include a $4 million milestone payment related to the one year anniversary of FDA approval of the marketing application for Orapred ODT. Royalty and license revenue of $15 million for the nine months ended September 30, 2006 include the $7.5 million milestone payment related to FDA approval of Orapred ODT and a $4 million milestone payment related to the commercial launch of Orapred ODT.

As for collaborative agreement revenues associated with or partnership with Merck Serano, BioMarin recorded $3.1 million and $10.8 million for the third quarter and nine months ended September 30, 2007 compared to $4.9 million and $13.9 million for the third quarter and nine months ended September 30, 2006. The reduction in collaborative agreement revenues is due to lower overall R&D expense for Kuvan in 2007.

Net loss was $5.2 million or $0.05 per share for the third quarter of 2007 compared to a net loss of $7 million or $0.08 per share for the third quarter of 2006. The net loss during the third quarter of 2007 includes $5 million of non-cash stock compensation expense compared to $2.7 million of non-cash stock compensation expense during the third quarter of 2006. Net loss for the nine months ended September 30, 2007 was $18.4 million or $0.19 per share compared to a net loss of $18.1 million or $0.22 per share for the nine months ended September 30, 2006.

Now I'll review the operating expenses in more detail. Research and development expenses decreased by $900,000.00 to $17.2 million in the third quarter of 2007 from $18.1 million in the third quarter of 2006. The decrease in R&D spending is attributed primarily to decreased development costs for Kuvan which was partially offset by increased development costs for the Phenylase program and non-cash stock based compensation expense. We expect to increase our R&D spending in the fourth quarter of 2007 to support the 6R-BH4 program for cardiovascular and sickle cell indications, Kuvan manufacturing activities, and Phenylase preclinical work.

Selling, General, and Administrative expenses increased by $7.4 million to $19.7 million in the third quarter of 2007 from $12.3 million in the third quarter of 2006. This increase is largely due to continued international expansion of Naglazyme, increased pre-launch activities related to Kuvan as well as non-cash stock based compensation expense. SG&A spending is expected to increase in the fourth quarter of 2007 due to the continued commercialization of Naglazyme in Europe, Latin America, and other parts of the world as well as pre-launch and launch commercialization activities for Kuvan in the U.S.

From a cash perspective, we ended the third quarter with $586.7 million of cash, cash equivalents, and short term investments. With regard to 2007 guidance, we are updating our expectations for Naglazyme revenue and net loss and maintaining our expectation for Aldurazyme revenue. We now expect Naglazyme net sales to be in the range of 82 to $84 million from previous range of 76 to $82 million. As for Aldurazyme, BioMarin and Genzyme continue to expect sales for the joint venture for 2007 to be in the range of $115 million to $125 million and we are currently tracking around the middle of the range.

And finally, we now expect net loss for 2007 to be in a range of $13 million to $18 million from a previous range of $18 million to $23 million which factors in $18 million in non-cash stock compensation expense. Our 2007 guidance also includes two milestone transactions in the fourth quarter of 2007, a $15 million milestone receipt from Merck Serano for the acceptance of the Kuvan MMA filing partially offset by a $2.2 million milestone payment to the Asubio Pharma Company upon approval of the Kuvan MMA filing in the U.S.

And now I'd like to turn the call over to Steve who will review our preparations for the Kuvan launch.

Thank you Jeff. Launch preparations for Kuvan have made significant progress. The sales force has been fully staffed out. Most have already received Kuvan training. The remainder will be in-house next week to receive their training.

Regarding the expanded access program, over 32 sites are now participating in the EAP program with more coming on each week. The sites are actively enrolling patients with over 50% of patients on therapy and EAP program for over a month still on therapy as of the end of October.

National accounts contact is currently underway to provide the larger insurers and pharmacy benefit managers with information on PKU and to introduce BioMarin. Educational and promotional materials have been developed and we anticipate submission to [inaudible] as soon as we have confidence in final label language.

Moving on to manufacturing and distribution, as J.J. mentioned earlier, inspection of our contract manufacturing facilities is nearing completion and we are confident that we will be able to meet demand for the foreseeable future. Distribution will take place largely through specialty pharmacies and we have worked out both system and contracts with our preferred partners in this area.

Finally, the patient and physician support program we currently use for Naglazyme has been expanded to include Kuvan and we are structured to provide patients with the same type of full support we provide for our current Naglazyme patients. We expect to begin shipping Kuvan in mid December and look forward to making this important new treatment available to the PKU community at that time.

Now I'd like to turn the call over to Emil who will provide an update on our R&D pipeline.

Thanks Steve. We are working on several early stage project to supplement our R&D pipeline and in general, we've only talked publicly about programs in clinical development.

Starting with Phenylase as J.J. mentioned earlier, we are on track to file an IND in the fourth quarter and move directly into the clinic by the first quarter of 2008. We have met with the FDA in a pre-IND meeting and have clear insight into the clinical plan starting with PKU patients. We are hopeful that our positive preclinical data showing staying decreases in Phe blood levels in both PKU mice and primates will be replicated in humans. Preclinical toxicology work for the IND is completed and clinical stage manufacturing is moving forward well. We see no barrier at this time to completing the IND filing this quarter.

Our clinical plan will propose a Phase 1 study in 35 PKU patients that will study the safety and pharmacokinetics of single injections of Phenylase in a series of escalating dose cohort. These patients would later be offered continuation into a Phase 2 study that will evaluate the safety and efficacy of weekly injections for eight weeks followed by a dose titration period.

Beyond Phenylase, we have enhanced our early stage development strategy to drive our pipeline growth in the coming few years. Currently we have a number of ongoing preclinical programs with potentially interesting drug candidates, two of which may become candidates for IND filing. We expect to make decisions on whether or not to pursue IND filings on these candidates within six to 18 months and we will keep you updated on our progress.

We also have added a new program to develop small molecule treatment for cystic fibrosis, partnering with Dr. Bergman at USCF. BH4 and cardiovascular disease is still a significant part of our development effort and as we previously indicated, we continue to believe that BH4 has a role in the treatment of endothelial dysfunction and to that end we are performing several Phase 2 and [inaudible] studies to better understand this including a study in peripheral arterial disease, sickle cell disease, endothelial dysfunction in coronary artery disease patients, pulmonary arterial hypertension, endothelial dysfunction in isolated hypertension patients, and also looking at the effect of vitamin C on BH4 pharmacokinetics and activity.

We're adding a small Investigator initiated study in patients with proteinuria based on some preclinical and clinical data and continue to get new proposals from investigators on other possible uses of BH4 in cardiovascular medicine and neurology.

In summary, these Phase 2 and [inaudible] studies will help us better understand how BH4 regulates endothelial function to provide us more information on how to guide development in cardiovascular disease. We expect to have data from all of these things by the second half of 2008 and the collective results will help us determine the future of the cardiovascular program.

All together we have several programs ranging from early stage preclinical development to Phase 2 that should provide BioMarin additional drug candidates going forward along with any new late day products we might analyze. Our ultimate goal is to file one IND per year.

Now I'd like to turn the call over to Eugenia for some comments regarding upcoming events.

Thanks Emil. Before we open up the call for questions I would like to note that we'll be presenting at a few Investor conferences in the next few weeks. On November 7th, we'll be presenting at the Rodman and Renshaw 9th Annual Healthcare Conference in New York. On November 12th, we'll be presenting at the City Biotech Day also in New York and on November 13th we'll be presenting at the Credit Suisse Healthcare Conference in Phoenix. You can access these presentations live through our Web site at www.bmrn.com and with that, we would now like to open up the call for questions.

Lauren?

Yes. Ladies and gentlemen if you wish to ask a question please press *1. If your question has been answered or you wish to withdraw your question press *2. Please press *1 to begin.

And your first question comes from the line of Chris Raymond with Robert Baird and Company.

Thanks, just a couple questions. J.J., just wanted to clarify, in your prepared remarks, and I apologize if I didn't catch this right but I thought I heard you say that the FDA agreed to the language in your press release relative to the way you characterized the delay. Is that right?

That is correct, yes.

Okay so they are absolutely on board with characterizing it the way you have.

Absolutely.

Okay.

We had the paragraph that's in the press release, that was used, was approved by the FDA so they're fully on board with what we're saying.

Thank you and then I also wanted to -- there was a comment that was made about the EAP that 50% of the patients, I think, who had been on it for more than a month were still on therapy at the end of October. Is that something that we should think about in terms of response rate or is that, you put that out there. Is that for a reason to think that way or is there some other thing we should be thinking about?

It's just an observation of what's been happening in the program. I think it's very encouraging that indeed the majority of the patients, and their conditions, have decided to stay on therapy after being on the drug for more than a month. It bodes well for the future of the drug but again, that's just an observation at this time.

This is Steve. If I could jump in, we're a little bit surprised and very encouraged by that. I think thereabouts is probably to say that this may not be representative of what we'll see once the product is approved and we're in the general population. We're in centers that were certainly very eager to get access to the drug and at least some of the patients coming in were patients who were had been tested for the clinical trials and had shown at least some response but not sufficient to get into the clinical trial. So we may have a little bit more responsive patient group than the general at large patients that we'll see after launch but it's still very encouraging and we're really pleased to see it.

And can you tell us how many patients? I know you said how many sites, but how many patients are involved right now?

No, we've decided not to communicate that at this time until we have approval from the FDA to enroll up to 500 patients and we have 32 centers enrolled to date and new centers coming every other day or so as Steve stated, so we feel pretty good about the value of this program right now.

Okay and then one final question if you don't mind, Naglazyme, you've mentioned before the number of paying patients in Brazil which I think you've mentioned is a big growth area. I think in the summer you had like, 16 or so. Can you give an update as to where that stands?

We generally haven't broken out specific patient numbers, at least not to the best of my knowledge. We have seen significant growth in Brazil. We've seen significant growth in some other international areas as well, particularly in Turkey. We have seen pretty much growth as anticipated in the U.S. and in Europe and the international arena has been the area that's probably been the biggest bright spot for us this year, has come on board quite a bit quicker than we anticipated it would.

Okay thanks very much. I'll get back in queue.

And your next question comes from the line of Phil Nadeau with Cowen & Company.

Good afternoon, thanks for taking my questions. I think many of mine are actually follow ups to the ones that Chris just asked but first, on the language that was approved by the FDA, was that the language simply saying that the action date has been moved or does that include the language where you talked about label discussions continuing without interruption and targeted launch of mid December?

It includes everything but we have here in the room also Amy Waterhouse who is our VP of Regulatory Affairs. Amy communicated directly through the FDA on that so she can further elaborate and confirm what I just said.

Sure. Yes, both paragraphs were reviewed by the FDA and included those final statements you mentioned.

Okay so it's safe to say that you're very confident in a mid December approval.

Very confident. Again, there is no absolute guarantee until we have the approval but all the signals we are receiving so far as pretty positive.

Okay and then second question is on the early access program. In the past you've said that it was essentially your goal to have 500 PKU patients in that program on drug at the time of launch. Is that still your goal? Do you still expect to have about 500 on December 14th in the program?

I'll let Emil elaborate. We don't know exactly how many we'll get. Actually, that little delay now is going to give us a better chance to reach this, to get to this goal, close to this goal. The product is doing very well. We started in the middle of the summer and we had to go through R&D. We did slow down initial enrollment but things are doing very well right now.

Do you want to add something?

I think it's unlikely that we're going to hit 500 by December 14th but it has been encouraging, similar to a clinical trial approval. They tend to start slow in the flow and then build up and build up. Last week we had more patients come on and more centers come in than any week since the roll out of the program. So it's a little bit hard to project just because it does seem to be a little bit backloaded in terms of patient entry into the EAP but as J.J. mentioned, it's progressing. People seem to be very happy with the program. We've got more and more sites coming on and more and more patients coming on. We're pretty happy.

Can you give us some quantitative idea of approximately how many patients will be on drug at the time of launch?

I hate to take a guess at that. As I said, the patient enrollment is accelerating and the week to week numbers have fluctuated significantly enough that I just would not feel comfortable taking a guess.

Okay fair enough. The last question is on Phenylase. You mentioned that there's a Phase 1, a single dose part of the program there beginning and then a Phase 2 eight week study. I assume that you're going to get good data on PKU reductions from the Phase 2 eight week portion. When might we see that data?

Because the Phase 1 single injection data is also in PKU patients, we will certainly get an idea that the dose is potent and can reduce Phe levels in PKU patients. It depends a little on the timing of enrollment because this is not a Phase 1 unit type study. This is going [inaudible] so for the Phase 1 part, I expect to have the data in the latter half of next year.

The multi dose part will begin and that takes eight weeks and then will probably involved a period of dose titration and that study will likely be running starting somewhere in the middle of the year toward the second half but I'm not sure if we will have data by the end of the year. We might have some data by the end of the year but it depends a little bit on enrollment which I'm not able to predict right now.

Okay great, thanks for taking my questions.

Your next question comes from the line of Michelle Ha with Ferris, Baker Watts.

Hi and good afternoon.

Hello.

First, just a housekeeping question, can you break out the stock based compensation between R&D, SG&A, and COGS?

Sure, in the third quarter $100,000.00 was cost of goods sold, $1.9 million R&D and $3 million SG&A.

Okay, great. In going to back to the EAP [inaudible], can you give us any color on how patients might be responding with the dose physicians are administering to their patients, etcetera?

We've seen only anecdotal data presented. The American Society of Human Genetics meeting took place last week in San Diego. There was some very anecdotal data presented at the SHG meeting. There was I think, encouraging information from the small number of patients that we saw and I think probably the most surprisingly thing we saw was that patients who had responded in a moderate way in the first one to two weeks of the BH4 challenge period continued, at least some continued to have further reductions in their Phe levels in weeks three, four, and even out to week six so the effects, the overall impact of the BH4 at least in a subgroup of patients was more significant than we had expected based on the results that we saw at a week or at two weeks. So again, I think overall the response has been very positive. People are excited about what we've seen but it is early. It's anecdotal and I think we have to be really cautious about putting too much weight on anything at this point.

Okay and one last question. Can you give us any pricing updates?

We anticipate announcing pricing at approval. We'll do a press release at approval, have a call either that same day or shortly after that and we'll have pricing at that time.

Great, thank you. I'll get back in the queue.

And your next question comes from the line of Carol Werther with Summer Street Research.

Hi, thanks for taking my question. Would you talk a little bit about the reimbursement work you've been doing and how patients will get the drug, if they have to be pre approved by their insurance companies and whether or not you have to go state by state to get approval.

In terms of the work we've been doing -- let's start with that one. We've done a fair amount of market research on the payer side really over the last year. We've met with HMOs, traditional insurers, pharmacy benefit managers. Within those organizations we've met with both pharmacy directors and benefits directors. We've established I think pretty good understanding of what needs to be done both pre-launch and at launch. We obviously have limitations prior to the approval so at this point we are embarking on some efforts to help with disease education. PKU is an orphan disease, relatively small numbers of patients. Most of the payers aren't very familiar with it. The only familiarity they have is relative to medical formulas which is somewhat of a foreign operation to them. They're not very comfortable there so we're trying to help with education. We have done obviously some pricing research in the midst of that to find out what price sensitivities there are.

On the state by state Medicaid question that you asked, yes, we are currently calling on all 50 state Medicaids and will be following up with them immediately after approval to give them specific product information that they can put into their system. As it stands right now, our best understanding is that Medicaids across the board should pay for the drug as a prescription benefit. Medicaids traditionally are a little bit slower getting new products into their system so it remains to be seen how quickly we'll be able to get Kuvan into the systems but we feel very comfortable that ultimately the Medicaids will be good payers in terms of providing for reimbursement for Kuvan for PKU.

And do we know what proportion of patients are covered by Medicaid versus private insurance?

The patients in the clinic right now, we've done surveys of the PKU clinics and of the patients in the clinic, roughly 30% are covered by Medicaid.

Okay thanks --

So a little bit higher than the general population.

Okay and can you comment at all about co-pay?

Sure. On the co-pay side, there shouldn't be a co-pay with the Medicaids or at least not any significant co-pay. On the private insurers most of us have told us they would position this product as a tier 3. Some have said it is the first treatment for PKU and as such they will position it down to a tier 2. Co-pays we anticipate in the private sector could range to as low as $10.00 per month prescription to as high as $50.00 per month prescription.

Okay great, thank you very much.

Sure.

And your next question comes from the line of Matt Renna with Soleil.

Hi, good afternoon guys. Just a quick question on the EAP, can you remind us of the timeline that you expect to convert patients in the EAP to paying prescriptions once Kuvan is approved?

We've got the program set up to allow a 60 day transition period. At the approval, the patients will need to get prior authorization from their insurer. They'll have to arrange specialty pharmacy connections to ship product to the patient's home and we want to make sure that therapy is not interrupted between the end of the EAP and the ability to get commercial shipments to the patient so we've created this arbitrary 60 day period for a transition period. In an ideal world, and we certainly hope we'll be able to transition patients quicker than that, but we feel we'll be able to get 90 plus percent of those patients transitioned within 60 days.

Great and then if I can ask a follow up question on the balance sheet, you guys obviously have a fairly sizable cash balance now. Can you update us maybe on your most recent thoughts on how to deploy that cash? Are you still looking at the early stage programs or is there anything that you're looking at on the later stage side?

We keep looking at different opportunities whether it's early or late stage. We have [inaudible] commercialization capacity [inaudible] in Europe for instance because our sales reps over there are only selling Naglazyme and [inaudible] and they will not be apparently involved in also Kuvan so maybe we can really effectively be a commercial partner for another biotech company in Europe for instance but we are not only looking at opportunities in Europe. We are looking for opportunities on a worldwide basis. We are very technical in some of those [inaudible] areas that we are looking at products are consistent with out strategy which is to bring to market significant products that meet high end medical needs, address a limited patient population, are potentially high priced and require reimbursement support. This is what we are good at and this is the kind of area we're in at this time. We are doing a bottom line approach. We are looking really at product opportunities first and not at company acquisitions. If we do like a product and the only way to access this product is to acquire a company we might do that but we really are looking at products.

Great, thanks guys.

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

Hi, thanks. I don't expect you to tell us what level you expect to price Kuvan, or maybe you will but what kind of a pricing structure do you anticipate using in order to take advantage of some of the pediatric adjust mix and dosing multipliers that I suspect are out there and is there a population that we should think about as a good reference population and then obviously there is weight based dosing and if you can help us think about some of those dynamics, that would be helpful.

Maybe the most helpful thing I could give you is that the, again going back to the survey of PKU clinics that we did, we know that the average patient and I hate using that term because there is no average patient, but if you just look at the weights and average it all out, on average it's a 45 to 50 kilogram patient. It's an adolescent patient that is the median age. 45 to 50 kilogram patient is the median weight. So if you use those it gives you kind of a starting point for how large the patient is going to be.

In terms of trying to take advantage of different ways to approach pricing, we have looked at a lot of different ways and there really is no way for us to do it other than on a straight milligram basis. We'll have a certain cost per milligram or if you will, a certain cost per tablet and if a patient takes more tablets it will simply be a higher cost on a proportional basis.

Okay and is there just a 100 milligram pill or do you have plans for commercializing larger ones as well?

It is a 100 milligram tablet. That's the only size that will be available at launch. Our technical operations folks are working on a larger tablet size, hopefully a 400 milligram tablet size to be a little more convenient in the future but that is not going to be available in the near term.

Great, thanks for the added information.

Sure.

And your next question comes from the line of Liana Moussatos from Pacific Growth Equities.

Can you repeat what your Q4 milestone payments are and then can you, when you were talking about 50% of the patients still being on after a month versus the PKU 006 study where there were 56% responders. Can you talk about in the EAP program how the Docs are screening patients for response to Kuvan?

I can address the milestone. The first one is a $15 million milestone receipt that we receive upon acceptance of the MAA from Merck Serano that they would receive from EMEA. The second is a $2 million payment out that we would make to Asubio Pharma related to the U.S. approval of Kuvan.

Okay.

On the screening, the vast majority of the centers are using 20 milligrams per kilogram dose once a day. Most of the centers, again, are carrying that screening out to four weeks time. Some of the data that's been generated from that, again it's very early but it argues for a longer screening period, picking up a greater percentage of the patients and most come fairly quickly to the realization that giving the product on a full stomach, giving it with a meal is an easier way for the patients to take the product and we've seen fewer GI type side effects once people started using food at the administration of the product. So we've learned a few things in the EAP that have been very helpful.

Would you expect that 50% rate to increase as people learn to tell their patients to take it with food and screen longer?

I would not want to take a guess at that.

The rate is not 50%. It's over 50%.

Okay, thank you very much.

Okay.

And your next question comes from the line of Navdeep Jaikaria with Rodman & Renshaw.

Hi J.J. Thank you very much for taking my call. I have a question. It's about the EAP. You said that you have more than 50% of the patients stay on for more than one month and I would [inaudible], about 30% to 50% of patients with moderate to mild PKU can benefit from this so when you screen for patients, you just get all the patients with moderate to mild to get into your EAP or there is some other characteristics in the screening --

That's a tough one. Each center has set up their own criteria for advertising who they bring in. We do have a few centers that have used the criteria mild to moderate. That's the first patients that have been screened. For the most part, I think we've seen centers bring in patients who they've had difficulty getting Phe levels into target ranges. In other words, patients who were on some type of a diet but they haven't been able to maintain the diet or the diet hasn't been sufficient to get their Phe level into target ranges. So there's no one approach that all the centers have used and I can't comment as to whether or not they're pulling in patients who are more likely to respond. We just don't have that type of information. One thing I think I mentioned previously but I would emphasize, we do a number of the centers in EAP were also participants in some of our clinical trials and we know some patients that tested with both 20% or 25% Phe drop, it wasn't sufficient to get them into a clinical trial. Those patients have been eagerly awaiting EAP and some of those have come on early. So it's not clear that the population we're seeing in EAP is representative of the population we'll see after they improve.

Is it fair to say most of your patients that you're treating in the trials, they saw some response with EAP or they are now in a separate program?

What is the question?

I'm just saying you have multiple trials. Are the patients in the trials, if they responded well do you include them in the EAP in that case or is it separate?

No, they're not in EAP. They're in an extension study.

Emil, do you want to comment on that?

All the patients in our Phase 3 studies have been rolled into an extension study and they're not eligible to be in EAP.

Maybe you've already commented on this but what are the reasons for the patients to leave the EAP?

What are the? I missed the middle part. What are the something to leave the EAP?

What are the reasons cited by the patients, or the reasons for the patients, to leave the EAP?

Sure. The patients who have come out of EAP have almost always come out because after four weeks they have not shown any significant response to BH4.

Thanks.

And your next question comes from the line of Tom McGahren with Merrill Lynch.

Hi everyone. If you could help us with the labeling discussions and what would be an ideal label for you, whether it's BH4 responsive PKU and what kind of discussions you are having with the FDA along those lines.

Amy?

We're early in our negotiations and I think it's kind of premature to make any general pronouncements here. I think we're very pleased with how those conversations are going and we're pleased with the progress we're making.

Would the ideal label for you be BH4 responsive and then just let the data speak for itself in the label? Is that kind of the goal?

I understand your question. You're asking if the labeling is going to have a specific criteria --

Correct.

-- Phe has to drop for a patient to be considered a responder?

Correct.

We would certainly prefer that the clinician be allowed to use his judgment as to what constitutes meaningful response.

Okay thanks a lot.

As a reminder ladies and gentlemen, to ask a question please press *1.

And your next question comes from the line of Adam Long with Biotech Stock Research.

Hi. One, thanks for taking my question. I think this is really directed towards Emil. It has to do with the cystic fibrosis therapy from the UCSF and it's more of a general question. Are you looking to potentially deepen capabilities toward protein repair therapies and along those lines, are you looking to, are you examining something like an Aldurazyme indication or is that indication even worth the investment?

Maybe I don't quite get the question. The molecules we in-license from UCSF are designed to help fold and activate the CFTR protein that's being created in cystic fibrosis. They have distinct leads and these small molecules have a role in activating that mutant protein. There's no real replacement of protein going on so maybe you can clarify further.

I was thinking repair therapy, not protein replacement.

It's -- I don't know if I'd call it repair. Repair suggests that you changed the mutation which we're not really fixing. What we're doing is when this mutation exists in that common CF patient, the protein tends to fall apart and get degraded and these compounds tend to help them stabilize and get transported out so that they reach their site of action at which they can now start functioning to some degree as a chlorite channel in the presence of one of those compounds. So it is not really repair. I'd think of it more as helping it stabilize and stay around long enough to be useful as a channel.

Fair enough. Are you looking to actually leverage that and other indications? Is it even worth thinking about it for the Aldurazyme indication?

I see. Well, the concept if you're thinking about this as like a general chaperone, I think BH4 probably has some similar activities. It's a small molecule that stabilizes mutant enzyme that helps PKU patients so that's really the first example. The CF compounds are really specific to CF and right now we're working specifically in that program. We are not looking to create a new platform for ourselves but we will always consider small molecules that are brought forth by Investigators that show an activity that would be an important treatment for disease area but we are not developing a platform program at this point.

Fair enough. Thanks Emil.

Thank you.

And your next question comes from the line of Oliver Marti with Columbus Circle Investors.

Great, thanks. Could you remind me from all the trials that you guys had ongoing how many are currently enrolled in follow on?

You mean of all the Kuvan trials?

Yes.

-- Kuvan enrolled in --?

It's around 120 patients are in the extension '08 study.

Are there any others in other trials?

All the 003, 04 patients, that group of patients all rolled into that study and the 06 all rolled in that study so that is the ongoing extension study for PKU.

And just remind me, how does that break down U.S., O.U.S.?

For patients in the study?

The 120.

Emil Kakkis; I don't have that off the top of my head. It's a similar fraction I think in both halves but I don't have the exact number, probably a little bit more weighted toward the U.S.

Okay, thank you.

Operator; There are no further questions on the call. I'd now like to turn the call back over to Mr. J.J. Bienaime for final remarks.

Okay, thank you. So in summary, we have growing Naglazyme and Aldurazyme sales that are driving pretty solid financial results in 2007 so far including bottom line. In looking at it, we anticipate an FDA decision on the Kuvan NDA in mid December and hope to launch this product commercially in the U.S. by the end of the year. So to maintain growth at current levels we are also working on several preclinical programs including Phenylase for which we do expect to file and IND in the current quarter and our cash position gives us financial flexibility to pursue new growth opportunities to supplement our pipeline and we are currently evaluating a number of both earlier stage and later stage licensing possibilities and we look forward to keeping you up to date on our progress and we thank you for your continued support. Thank you for joining us on the call today and goodbye.

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