BioMarin Pharmaceutical Inc (BMRN) 2007 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth-quarter and full-year 2007 BioMarin Pharmaceutical Inc. earnings conference call. My name is Chantillay and I will be your facilitator for today's call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Miss Eugenia Shen, Senior Manager of investor relations. Please proceed, ma'am.

Thank you. On the call today is Jean-Jacques 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 nonconfidential 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. And 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 for the fourth quarter and the full year 2007 and then Steve will provide more detail on the equipment launch and Emil will provide an update on our ongoing R&D programs. Eugenia will then review the list of investor conferences where we will be presenting the coming months before we ask the operator to open the call for questions.

So first, the commercial launch of Kuvan is proceeding as planned and is off to a good start. The interest levels from the [PKU] community is very high and we are very busy guiding many patients, physicians and payors through the reimbursement process.

Basically seven weeks into the launch there are just under 500 patients in various stages of the reimbursement process and approximately 162 of those patients are on commercial therapy as of last Friday. At this early stage in the launch we are initially providing these detailed patient numbers but in the future we will begin to report only revenue as we do with our other commercial products.

As you may recall we had approximately 400 patients in day the (inaudible) access program and approval and of those about 230 or 58% have decided to remain on therapy. The majority of those patients chose to remain on drug and did not begin the reimbursement process until late January or even earlier this month when they ran out of free Kuvan supply during the [AP] program.

It has taken some time to get patients, physicians and payors acclimated to the clinical evaluation and reimbursement process for Kuvan. One challenge that we observed in the launch is working the patients through the evaluation and reimbursement process managed by (inaudible) the BioMarin patient and physician support program.

As Steve will explain later we believe the number of patients getting on commercial therapy will accelerate in the next few weeks because of significant reduction in timelines for [BCTS] processing that we have observed since the beginning of this month. Importantly, the efficacy and safety profile of the drug so far is at least as good as what we expected. Over the long-term, we expect approximately half of the patients to respond.

To date, the average dose at 18 milligram per kilogram per day and the average patient weight are both somewhat higher than we originally estimated. So overall based on the enthusiasm we're seeing from patients and physicians and on the strong efficacy and safety profile for Kuvan, we are even more optimistic about the long-term potential of Kuvan in PKU than we were before launch.

For the near-term it is still too early in the launch to dramatically alter our 2008 guidance and we expect to have more information when we report Q1 sales in May. We have, however, increased the lower end of our Kuvan guidance and it's very unlikely given the encouraging signs in these first few weeks of the launch that we would need to (inaudible) sales lower than $40 million.

And as we think about the long-term value of Kuvan since it is now very likely to be a very significant contributor to bottom-line revenues we are aggressively pursuing ways to maximize our IP position around the product. We're looking at strategies that could significantly extend the exclusivity beyond our patent protection of 7.5 years in the US and 10 years in Europe.

Currently, we do not have any issued patents specifically related to the use of BH4 in PKU but we continue to build our patent portfolio with 87 applications in prosecution which if issued will expire between 2023 and 2028. One patent in particular which we believe will prove very significant is an application for once-daily dosing for which we hope to receive notice of allowance in late 2008 or early 2009. If this patent does issue as we expect it would offer protection until 2024.

To further support our advances in the treatment of PKU and our IP position we are also developing a prodrug with superior bioavailability and also a 400 milligram formulation of Kuvan to help manage (inaudible) burden and maximize long-term compliance.

Next, Naglazyme continues to perform well in the US, Europe and international markets. 2007 net revenues for Naglazyme surpass the upper end of our guidance and we expect ongoing momentum in 2008 to be driven by continued geographic expansion and the initiation of new patients on commercial therapy. Countries such as Brazil and Turkey for example have been identified as having higher (inaudible) patient populations than we initially recognized at launch and they continue to increase the number of patients on therapy.

Aldurazyme for MPS I, commercialization continues to go well. We recently restructured our joint venture with Genzyme which we believe will result in increased clarity in our income statement as well as improved efficiency of operations for both parties and Jeff Cooper will review those details in a moment.

Moving on to PEG-PAL and enzyme therapy for PKU patients who either do not adequately respond to Kuvan or wish to reduce their (inaudible) levels beyond what is possible with Kuvan, the IND filed in late November is now active and we expect the first patient to be dosed in the Phase I trial in late first quarter or early second quarter. Emil will review additional details on PEG-PAL and our R&D program a little later.

Now, I will would like to turn the call over to Jeff Cooper who will review the financial results for the first quarter and full year 2007.

Thanks, J.J. I will start by reviewing product revenue for Naglazyme, Aldurazyme and Kuvan for the fourth quarter and year ended December 31, 2007 and follow with collaborative agreement revenue for the same periods. I will then review our bottom-line for the quarter and year ended December 31, 2007 and follow with more in-depth look at our financial results.

Beginning with Naglazyme, net product sales for the fourth quarter 2007 were $25.5 million an increase of 56.4% over product sales of $16.3 million in the fourth quarter 2006. Net product sales of Naglazyme for the year ended December 31, 2007 and December 31, 2006 were $86.2 million and $46.5 million respectively. Net sales growth is primarily attributable to geographic expansion internationally and the initiation of therapy by previously identified or newly diagnosed patients.

Net product sales of Aldurazyme by (inaudible) Genzyme LLC were $35.4 million and $123.7 million for the fourth quarter and year ended December 31, 2007 representing increases of 33.6% and 28.5% over sales of $26.5 million and $96.3 million for the fourth quarter and year ended December 31 2006.

BioMarin's share of the profit of BioMarin Genzyme LLC was $9.4 million and $30.5 million for the fourth quarter and year ended December 31, 2007 compared to a profit of $5.7 million and $19.3 million for the fourth quarter and year ended December 31, 2006. As a result, profitability of the joint venture during 2007 grew at a faster rate than sales with increases of 64.9% and 58%, respectively compared to the fourth quarter and full year of 2006.

Beginning January 1, 2008 as a result of the restructuring of the joint venture with Genzyme, BioMarin will begin to report topline revenues on the income statement related to Aldurazyme. During 2008, Aldurazyme product revenues will consist of two components.

First the most significant portion of our product revenue will be the 39.5% to 50% royalty on worldwide net product sales of Aldurazyme. Second as a result of the terms of the agreement, BioMarin will also record revenues related to the onetime buildup of finished good inventory which is being transferred to Genzyme throughout 2008 and to meet future demand.

To the extent that Genzyme Aldurazyme inventory quantities on hand remain flat beyond 2008, the total BioMarin Aldurazyme revenues thereafter will approximate the 39.5% to 50% royalty of worldwide net product sales by Genzyme with no additional revenues from inventory transfers.

If Aldurazyme inventory quantities on hand at Genzyme grow beyond 2008 due to increased product demand, BioMarin will record a small amount of revenue related to the incremental inventory transfers in addition to the royalties.

BioMarin will also report cost of goods sold associated with manufacturing costs of products shipped to Genzyme, a modest amount of operating spending related to certain ongoing US regulatory and administrative costs and finally our share of the remaining R&D activity in the joint venture. We expect that profitability associated with Aldurazyme will continue to grow during 2008 as a result of growing worldwide product revenue.

As for collaborative agreement revenues associated with our partnership with Merck Serono BioMarin recorded $17.5 million and $28.3 million for the fourth quarter and year ended December 31 2007 compared to $4.9 million and $18.7 million for the fourth quarter and year ended December 31, 2006. The fourth quarter and full year 2007 results include the receipt of a $15 million milestone payment from Merck Serono for the filing of the MAA for Kuvan.

Excluding the receipt of the $15 million milestone payment collaborative agreement revenues decreased in 2007 compared to 2006. This reduction of collaborative revenue agreement revenues was due to lower overall R&D expense for Kuvan in 2007.

Net income was $2.6 million or $0.03 per share for the fourth quarter of 2007 compared to a net loss of $10.4 million or $0.11 per share for the fourth quarter of 2006. The net income during the fourth quarter 2007 includes $5.5 million of non-cash stock compensation expense compared to $3.1 million of non-cash stock compensation expense during the fourth quarter of 2006. Net loss for the year ended December 31, 2007 was $15.8 million or $0.16 per share compared to a net loss of $28.5 million or $0.34 per share for year ended December 31, 2006.

Now I'll review the operating expenses and nonoperating interest income in more detail. Research and development expenses increased 3.4 million to $24 million in the fourth quarter of 2007 from $20.6 million in the fourth quarter 2006. This is attributed primarily to increased R&D development costs for the PEG-PAL program, increased manufacturing cost for Kuvan pre-approval and non-cash stock based compensation expense.

We expect to increase our R&D spending in 2008 as compared to 2007 to support the ongoing 6R-BH4 program for cardiovascular and sickle cell indication, PEG-PAL clinical studies, expansion of our early stage development programs and non-cash stock compensation expense.

Selling, general and administrative expenses increased by $10.2 million to $23.9 million in the fourth quarter of 2007 from $13.7 million in the fourth quarter of 2006. This is largely due to increased prelaunch commercialization activities related to Kuvan, continued international expansion of Naglazyme and growth in corporate expenses including non-cash stock based compensation expense. SG&A spending is expected to continue to increase in 2008 due to the full year impact of sales and marketing expenses from Kuvan in the US, commercialization of Naglazyme in Europe, Latin America and other parts of the world and non-cash stock compensation expense.

Nonoperating interest income increased by $3.4 million to $7.4 million for the fourth quarter of 2007 from $4 million in the fourth quarter of 2006. This is primarily due to the additional cash on hand as a result of the April 2007 financing. Looking forward to 2008, we expect to earn less interest income on our cash balances as compared to 2007 primarily due to the decline in interest rates.

From a cash perspective, we ended the fourth quarter with $585.6 million a cash, cash equivalents and short-term investments. With regard to 2008 guidance, we expect Naglazyme net sales to be in the range of $105 million to $116 million.

As for Aldurazyme, BioMarin and Genzyme expect total net sales by Genzyme for 2008 to be in the range of $135 million to $145 million. BioMarin's revenue from Genzyme related to Aldurazyme is estimated to be between $68 million and $78 million which includes both the royalty earned on net sales by Genzyme and additional product revenue related to the buildup of finish good inventory which is being transferred to Genzyme to meet future product demand. We are updating our guidance for 2008 Kuvan sales which expect to be in range of $40 million to $70 million.

Net income for 2008 is expected to be in the range of 20 to $40 million which assumes that $30 million milestone for EU Kuvan approval will be earned in 2008. The estimate of 2008 net income include approximately $27 million in non-cash stock compensation expense. Non-GAAP net income excluding the impact of non-cash stock compensation is estimated to be in the range of $47 million to $67 million.

Regarding cash flows we plan to increase our capital spending during 2008 to approximately $75 million. The planned increase includes a major expansion of our [Nevado] manufacturing facility and increased spending on our corporate campus including a recent $12 million purchase of a new administrative and lab facility. The increase in capital expenditures will be substantially offset by increased cash generated from operating activities and a $19 million cash distribution received this month primarily related to the restructuring of the BioMarin Genzyme LLC.

And finally, a few words about income taxes. Looking forward we expect our income tax (inaudible) remain relatively low given our current net operating loss carryforwards totaling $475 million and R&D tax credits totaling approximately $109 million. We expect that these NOLs and R&D credits as well as other tax benefits will substantially offset potential income tax liabilities for BioMarin for the next several years depending upon the rate of profitability and growth. Now I'd like to turn over the call Steve who will provide an update on the Kuvan launch.

For the last two weeks of 2007, immediately following approval we generated $0.4 million in revenue in the fourth quarter of 2007. That reflects the initial shipment of product to the specialty pharmacies distributing Kuvan.

As J.J. mentioned some dynamics we've assessed from the first two months of the commercial launch are that patients are slightly heavier than the estimated 45 kilograms and are being dosed at a higher average dose than the estimated 15 milligrams per kilogram per day. Our current observed average dose is approximately 18 milligrams per kilogram per day and the average weight is approximately 46.5 kilograms. We do not have enough information to assess compliance at this time.

As of February 22, a total of 487 patients have been referred to BPPS to have therapy initiated. Of this 487, 238 are new, non-EAP patients. Of all patients referred to BPPS, 162 are currently on commercial drug and the remainder are going through the clearance process.

During the latter half of January and most of February an average of approximately 10 patients were being referred to BPPS each working day. Over 80 of the approximately 130 PKU clinics have referred patients for therapy which is a very positive indication for the product.

It is important to keep in mind that it does take time for the clinics to schedule appointments and complete the necessary paperwork for reimbursement and that most did not start this process until after the first of the year. As the clinics process more patients for evaluation and get more experience with the process we expect it will become more routine and take less time for each patient.

Overall the response from payors has been encouraging. To date, there have been very few denials from payors mostly due to administrative errors which have already been reversed.

The timeline for processing patients through the insurance verification authorization averaged 24 days for the overall time period since approval. By February the average time had decreased to approximately 10 days. Patients applying for patient assistance can experience an additional one to two week delay while that application is reviewed by (inaudible).

We have seen significant improvements in timelines already and expect the payor decisions and overall process to become even more streamlined once the product has permanent placement in the formularies and plans gain additional experience with Kuvan.

In summary, we are encouraged by the high level of enthusiasm among patients and physicians, the positive response from payors and the large pipeline of patients being processed through BPPS. We are working to improve on the amount of time it takes patients to go from referral to initiation of treatment and we look forward to keeping you updated as the launch progresses. And now I'd like to turn the call over to Emil who will update you on the R&D pipeline.

Thanks, Steve. Starting with PEG-PAL as (inaudible) mentioned earlier the IND was filed in the fourth quarter and is now active and we are able to proceed. The first patients in the Phase I trial is expected to be dosed in the late first quarter or early second quarter and we're hopeful that our positive preclinical data showing sustained decreases in blood Phe levels will be replicated in humans.

The Phase I study will assess the safety and pharmacokinetics of single injections of PEG-PAL in 35 PKU patients in a series of up to seven escalating dose cohorts of five patients each. These patients would later be offered continuation into a Phase II to study that will evaluate the safety and efficacy of weekly injections for eight weeks followed by dose optimization in an extension period.

Beyond PEG-PAL, we have enhanced our early stage development strategy to revive our pipeline growth in the coming few years. Currently we have a number of ongoing preclinical programs with potentially interesting drug candidates one of which is another lysosomal storage disorder for which we are targeting the filing IND in early 2009.

Regarding the BH4 cardiovascular program we are performing several Phase II and exploratory studies including a study in peripheral arterial disease, sickle cell disease, endothelial dysfunction and coronary artery disease, pulmonary arterial hypertension, endothelial dysfunction in isolated hypertension and (inaudible) in patients with chronic kidney disease and finally the effect of vitamin C on BH4 pharmacokinetics.

We expect to have data from the (inaudible) study for sickle cell disease by the late Q3 to Q4 and for peripheral arterial disease by Q4. The remainder of the study should complete by Q4 2008 up to early 2009 depending on enrollment in some of the investigator initiated studies. The collective results will help us determine future of the 6R-BH4 cardiovascular program.

Our other early stage preclinical development programs should provide BioMarin additional drug candidates going forward along with any new late stage products we might enlicense. The hiring of Gordon Vehr, a successful ex-Genentech research veteran as our VP of research should help us drive our development goal to file one IND per year. We are on track to do that now but we will not let up on the pressure to push forward new the product ideas and build on our development success to date. Now I would like to turn the call back over to Eugenia for some comments regarding upcoming events.

Before we open up the call for questions I would like to note we will be presenting at a few investor conferences in March. On March 18, we will be presenting at the Cowen Healthcare Conference in Boston and also at the Citi Small MidCap Conference in Las Vegas. And on March 19 will be presenting at the Lehman Brothers Global Healthcare Conference in Miami. You can access these presentations live throughour website at www.BMRN.com. In addition we're also planning an R&D day for June 5 in New York City. And with that, we would like to open up the call for questions.

(OPERATOR INSTRUCTIONS) Salveen Kochnover, Jefferies & Company, Inc.

Thank you for taking my questions. Jeff could you provide us with some expense line guidance for '08?

You know, we're not providing specific expense line guidance. What we have said is that we do expect our R&D and our SG&A spending to increase in 2008 versus 2007 mostly because of full year related to our Kuvan commercialization activities as well as additional spending for PEG-PAL, additional spending related to our early research program and so on that we're not providing specific details on line item guidance for the (inaudible) expenses.

Great and then in terms of -- turning profitable is your guidance for that second half of '08?

We've said we expect to be profitable for the full year of 2008. The majority of that would be reflected in the second half of 2008.

Great, in terms of Kuvan, when do you think we will have all the 120 to 130 PKU centers on board with enrolling patients into the BPPS and how long are physicians currently screening patients for Kuvan responsiveness?

Right now we have 81 of 130 PKU clinics that have rereferred patients into BPPS to start therapy. I can't give you a specific on when all 130 will have patients and certainly most of those have not referred in are planning on sending patients in in the short-term future.

As far as screening, it's a little bit difficult to say. It's still pretty early. Certainly during the EAP prelaunch or preapproval portion, we saw physicians screening for two weeks to four weeks as a matter of routine. Whether that continues routinely with commercial product it's hard to project. The initial scripts we are seeing are for at least 30 days which makes us feel that it's likely they will screen for 30 days. Again I have to emphasize it's very early and I can't say that for certain.

One last question -- could you comment on your experience with getting coverage for Naglazyme ex US primarily in Brazil and Turkey and the Middle East?

Sure. We've been I think very fortunate that all the countries you mentioned -- well certainly Brazil and Turkey -- have processes in place whereby non-approved drugs can be provided for citizens of that country under a named patient basis. Specifics of the process vary in different countries but both Brazil and Turkey with significant patient populations have been very accommodating to the patient groups in those countries and we have been seeing significant numbers of patients going into commercial therapy in both countries.

In the Middle East, there's significant variance from country to country. But within the Gulf states we have had patients initiated and reimbursed in a number of the countries, most recently Saudi Arabia which we think could be a significant market for us.

Have you had any significant push-back in any of these countries?

There are some countries that simply do not pay for expensive enzyme replacement therapies. I think maybe the best example is in Australia you need line item funding. We anticipate getting line item funding for Naglazyme later this year probably in July.

In New Zealand which you think would have a similar program enzyme replacement is not paid for for any of the products at all. So it's really a country by country situation. Our strategy has been to evaluate each country on a stand-alone basis and if both the patient numbers and reimbursement system the healthcare system provides for reimbursement then we move into that country as we see appropriate.

Phil Nadeau, Cowen and Company.

My first question is on the rolling of patients from the EAP to commercial therapy. It does seem like the timelines for completing that transition have slipped just a little bit maybe from early to mid-February initially to now kind of mid-March to have the process completed. Could you talk a little bit about what has lead to that change in timelines?

Sure, to be very candid with you it has taken us longer to get patients through the insurance clearance process than we thought it would. A couple of factors have played into that.

First of all we anticipated that we would be able to get EAP patients started in the process really shortly after the product was approved. It turned out many of the EAP centers and patients were not particularly interested in moving forward until they got closer to the end of their EAP supply of product. So we were not able to move things forward as quickly as we wanted to.

When we did get patients into the process, what we found was that it was taking us substantially longer to get both verification and then the authorization. Part of that is due to the fact that health plans weren't familiar with the product, it wasn't downloaded into all the systems yet. Part of it was the centers were not familiar with dealing with a fairly expensive product like this and there was a learning curve for them getting the right information pulled together to allow BPPS to even start the process.

The net effect a number of different time consuming components was that our BPPS program really got overloaded a little bit and we weren't able to respond as quickly as we could with some of the services we wanted to provide. So it was really a combination of things. We have addressed those I think pretty aggressively and we have added some staff to our BPPS group so that we can do better job of supporting the centers. The centers have been quick studies in terms of figuring out what they need to do to get the right information in. As a result of that we are seeing timelines shortened. But you are exactly right -- it has taken us longer to get the EAP patients onto commercial drug than we anticipated it would.

I think it has to do the fact also that we did not anticipate that patients would like to stay on free drug as long as possible and actually some of them even extended a little bit beyond the deadline we gave them of mid-February but I think that's okay. The good news is that we have significantly improved in terms of the processing of the new insurance authorization.

As Steve said we went from about 24 days to about 10 days on average now which is a very significant improvement. And two, this slight delay has absolutely nothing to do with the intrinsic value of the product. It's not that the patients don't want to be on the product (inaudible) product. Many of them just wanted to be on free product instead of paying product but nothing to do with the success of the launch or the value of Kuvan long-term.

Actually if it would be helpful we can provide you some visibility on the EAP transition as well. We have roughly 400 patients enrolled in EAP. Of those 400 approximately 230 are still active within the BPPS system. Of that 230 we now have 108 on commercial therapy and we anticipate the remainder of those patients having insurance cleared over the next two to four weeks.

Of the 122 patients who are active in the BPPS but not on commercial therapy has there been a disruption to their treatment and receipt of Kuvan or are they still on --

No, we would not let that happen. We ship compassionate use product through a patient assistance pharmacy to those patients so that they can maintain therapy until their insurance clears.

My second question is on looking at the launch going forward, you said today and I think you said at recent meetings in the past you're getting about 10 patients per day into the reimbursement assistance program. How high could that go before your BPPS facilities are overloaded again and what do you perceive as the rate limiting factor to getting a patient that's out there into the BPPS program?

I think there are two questions there. Let me start with the BPPS. And I think the lesson we have learned in the first six weeks of this launch is to have the flexibility to add staff more quickly. And if we see referral numbers increasing beyond what our current capacity can handle we will add staff.

I think with a much quicker response than we did first time through. I don't think we were slow the first time through but I think we were really surprised by how much time and how many phone calls were coming in. If I could put in perspective BPPS handled in the month of January over 6000 phone calls and I think that speaks to one, the interest in the product but also in the amount of work that went into clearing each individual patient.

As far as other rate limiting steps, I think what we have said from well before launch we think the real rate limiting step will be how fast centers can get patients scheduled into clinics and evaluated and scripts and statement of medical necessities written to get patients started on Kuvan. These centers are busy. They have significant workloads in trying to schedule additional appointments to pull patients in.

It's not something that's an easy task for them. I think they've done an incredible job. In fact we have 81 of 130 with patients through already I think is actually pretty amazing. We're very happy with that. And again as the centers get more experienced to get more comfortable, we think they will streamline their processes and get more efficient at it.

Do you have some quantitative idea of how many patients per week all 130 centers could possibly process today?

No. I wish I could give you better answer than that but I really don't.

Chris Raymond, Robert W. Baird and Company.

Just a couple of sort of non-Kuvan questions if I can. Can you guys quantify how much of the Aldurazyme revenue guidance is driven by these inventory buildups in '08?

Sure, so as I noted earlier we're projecting that the (inaudible) will record between $68 million and $78 million in Aldurazyme revenue. Of that amount about 53 to $58 million represents the royalty income to BioMarin which is based upon Genzyme's third party sales projected at 135 to $145 million. The remaining portion of the BioMarin revenue relates to onetime Genzyme inventory buildup which we are estimating at between 15 and $20 million.

Okay and sorry if you already mentioned (inaudible) if you already broke that out. But so for '09, if we don't see a significant uptick in Aldurazyme revenue, is it possible that you see that line item sort of flat to maybe even slightly down?

In terms of the total revenue or the revenue related to inventory transfers?

No, the total revenue from Aldurazyme.

Well it's difficult to say. We would expect to see that our royalty revenue would continue to increase as thid-party Aldurazyme sales increased. But with regard to the revenue related to the inventory transfer, we would expect to see that decline. We would expect the majority of the inventory transfer revenue to occur during 2008 with the buildup of the inventory. There may be a couple of million dollars of incremental revenue that we would see in 2009 based upon continuing inventory build by Genzyme but the majority of the inventory transfer revenue will occur during 2008.

Okay, and then on your income guidance, I think this is the first time you guys have given GAAP and non-GAAP. Obviously it's the first sort of major income year for you guys at least in a while. It's unclear to me if folks are -- is it kind of your signal that folks should be looking at non-GAAP or GAAP? How would you try to explain that to the Thomson, one and the folks who tabulate that? What is your sort of expectation there?

Obviously, we wanted to be able to provide the street with additional information and as you know stock compensation expense is becoming an increasing material portion of our overall expense growing to $27 million in 2008. So we thought that it would be helpful for the street to identify that amount of our expense that is non-cash related and we have been asked the question before by others as to whether we would provide non-GAAP net income. And now that we are looking towards profitability, we feel that it would be helpful to provide that. That's really what is driving -- providing both the GAAP as well as the non-GAAP net income.

It's the fact that most other larger biotech companies that are profitable do report GAAP and non-GAAP (multiple speakers) we are kind of following the trend.

And consensus goes around non-GAAP. Just wanted to clarify that. Okay, thanks.

Liana Moussatos, Pacific Growth Equities.

What percent of Naglazyme sales in 2007 were US versus international?

Our US sales in 2007 were slightly over 20%. International -- we break international into two groups -- Europe and then rest of world. Europe was roughly 60% and the rest of the world was roughly 20%. It's the ROW component of our overall Naglazyme business that is showing the fastest growth right now though and I think you'll see international pass the US by a fairly substantial margin in 2008.

The rest of world growth, are the rest of world in 2007 -- that's 20%. What proportion of that was Brazil and Turkey?

I don't think we've broken it out by specific countries but Brazil and Turkey were both significant contributors to the 20%.

We are now getting usage also in Latin America beyond Brazil. Some other countries are starting to pick up. Brazil will definitely be the largest country but Latin America revenues are not only limited to Brazil anymore.

Matthew Renna, Soleil Securities.

Just a follow-up on the Aldurazyme inventory transfer. Should we expect that to be spread out pretty evenly throughout 2008 or should we expect that to be weighted more in the first half of the year?

My expectation is about two-thirds of it will occur in the first half of the year and about one-third in the second half. Obviously the timing of shipments could vary somewhat but that's what our estimates are right now.

Just a follow-up question on Kuvan, do you guys have access to what the actual response rates are for patients? Maybe I should rephrase that. Just in terms of what you're seeing with the reduction in fee are physicians keeping patients on the product if the reduction is less than the 30% benchmark you guys used in your trial?

We don't have visibility to the lab results right now. Anecdotally we have seen variability from center to center as far as what they consider response that's significant enough to justify continuation of therapy. I can say that the 30% does not appear to be a benchmark that is being widely adhered to.

Another way to look at it in terms of -- irrespective of the fee levels drop in terms of proxy for definition of patients who believe there is a benefit that's good enough to stay on therapy -- again about 57% of EAP patients decided to stay on therapy.

If I could just ask one more question, with regards to the next phase of the Kuvan launch, can you comment maybe on your ability to get some of the older patients back into the clinic and then maybe how you think that might impact the average weight going forward?

Certainly the older patients coming in pushes weight upwards. As it stands right now we have pretty full capacity getting known patients who are currently in the clinics evaluated, prescribed and processed through the insurance clearance process. We do not have plans to initiate any type of a patient finding or pulling more patients into the clinics program for at least the next several quarters. We will take care of the patients that we know about, focus on those, do as good a job as we can with them and then move onto attempting to pull more patients in.

If I may, I don't know what's behind your question but we do get --we already have some adult patients who are being on commercial therapy and I think Steve has some data on that if you want to go over it.

Sure, we've actually had -- a surprisingly large percentage of our initial patients are adults. 20% of patients are over the age of 30. About 31% of patients are age 19 or older and very surprising to us the oldest patient on therapy to date is 55 years old. The youngest patient is six months. So we've got really a full spectrum of ages represented in the current patient base.

Carol Werther, Summer Street Research Partners.

Could you give us an update on the plans for Kuvan in Japan?

When we first obtained the rights we obtained them from Daiichi Suntory now called Asubio Pharma a subsidiary of Daiichi Sankyo. So they retain the rights to their [process] for Japan and we not too long ago announced the licensing of our data back to Japan to Asubio and so they will be -- they have filed for approval in Japan and we expect to hear sometime this year about approval in Japan. With that deal we do get substantial royalty revenue from sales in Japan.

So we anticipate approval this year and the royalty (inaudible) varies according to sales but it's borth of 20% and the price of (inaudible) Kuvan over (inaudible) but BH4 has been on the market in Japan for several years for the treatment of BH4 deficiency at a pretty substantial price and there probably will be some kind of price reduction once they get approval for PKU. But the current price in Japan is about $200,000 per year for a 10 mg per kilogram dose.

Thank you. That's helpful. In terms of the PEG-PAL when exactly should we expect to hear the results from the Phase IIa?

Well let me start with the Phase I, Phase I study is because the first in man study is a very staged startup with a series of cohorts starting one by one over time so it's going to take a period of at least six months just to get that study enrolled through those stages. So we would expect toward the latter half of the year to have some data on the single injection Phase I study.

In the third quarter we would expect to start some of the cohorts on the Phase II study but we're not expecting to have Phase II data completed this year. It's going to be sometime in 2009. It depends a little on how the enrollment proceeds. But it is also going to be staged so it will take some time to get the (inaudible) data out.

Tom McGahren, Merrill Lynch.

Just a couple of Kuvan questions. Maybe could you give the gross margin you've been seeing so far on Kuvan? And also the compliance for the patients I believe in the past you mentioned it is about 80% and then I have one other.

I'll answer the gross margin question. Our expectation is that over time the margins including the royalty that we paid for Kuvan will probably be in the mid 80% range. Initially, the manufacturing cost should be minimal because of the inventory that was built preapproval which had already been expensed as R&D. We'll see minimal manufacturing costs for a while. Primarily what will see is the royalty that we pay out. But longer-term probably in the mid 80% range including the royalty.

And on the compliance side, I mean we have our estimates but they're only estimates and we don't -- it's just too early for us to know for sure what compliance is going to look like.

Is it higher or lower than the original 80% that J.J. was talking about?

I think that's a good estimate that this point.

(multiple speakers) going to launch to measure long-term compliance. When patients have been on the drug for less than a month it's really impossible to know what's going to be the right estimate. But we feel pretty comfortable with 80% right now. It might change over time, might get better. The good news again is that thanks to BPPS we pretty much know we can access the patients through the specialty pharmacies and specialty pharmacies will be monitoring compliance and we will have some programs in place to maximize compliance if we see the patients are not becoming compliant over time.

Okay and then just finally in Europe, any update on the filing in Europe? Any comments there? And does your total revenue guidance include any royalties near the end of the year from Europe? Thanks.

The guidance as I mentioned includes the milestone payments, the $30 million milestone assuming approval by the end of the year. There really would be no significant royalties reflected in that.

(inaudible) I guess your question was related to the filing, the filing we're doing? (multiple speakers)

The filing process is going fine. We don't see any issues at the moment with it. The exact timing for turnaround and positive (inaudible) we can't comment on at this point. But we were hoping to be able to get through that process and reach approval by the end of the year. But it depends a little on how fast things get turned around but so far we're not seeing any issues.

(OPERATOR INSTRUCTIONS) Alan Leong, Biotech Stock Research.

I like the idea of BH4 being aimed at.

We have a hard time to hear you.

How's this?

Better.

I like how you're thinking of using BH4 for proteinuria . I wonder if you could as far as subscribers characterize the market and the current way of treating

Proteinuria can have a large number of causes and I'm not sure I want to give a dissertation. It's certainly not my area of expertise. But let me speak to it from the standpoint of what BH4 has been shown to do in proteinuria and why we're studying it.

In animal models, BH4 does improve endothelial function in the glomerular part of the kidney, the part of a kidney that tends to leak protein in patients with proteinuria. And BH4 has been shown to improve endothelial function and reduce proteinuria in a couple of different animal models.

In addition we have some signal in our hypertension study in which patients who did have proteinuria had an improvement or a decrease in proteinuria. So we decided to follow this up. We also had in fact inquiries from a major center in the US who wanted to study it.

Now the type of patients that may be in that study will have a diverse set of causes. Some of them could be diabetic necropathy. Some of them could have other aspects of cardiovascular disease or primary kidney disease or maybe a variety of types of patients. Our interest with the patients who have endothelial dysfunction and proteinuria and to determine whether improvement in endothelial function that might be brought on by BH4 administration would be correlated with reduction in proteinuria.

Today the types of drug patients are on for proteinuria include ACE inhibitors or ARBs or perhaps there's the new renin inhibitors and other new drugs that are approved for proteinuria. These are drugs in general that have known effects on endothelial function so it's a mechanism of action and effect on endothelial function would be predicted to be beneficial in proteinuria.

For patients who are in far advanced stages of [cancer] they can't tolerate ACE or ARBs inhibitors so therefore there may be a role in BH4 patients who are not able to tolerate the current drugs in treating proteinuria. But the study we're doing is 30 patients, open label, looking at 24 hour protein excretion and other markers and trying to determine if you treat patients who have proteinuria from a variety of causes do we see a consistent reduction in proteinuria.

If we do, this a very large market numbering in the millions of patients in the US and it would be I think a very important and highly valuable use of the drug because (inaudible) associated that decrease in proteinuria improves the time to renal dialysis or renal failure and anything that can reduce or prevent renal failure and dialysis has particularly good economic value as a treatment.

So that's what we are going to evaluate this year. And we hope by the end of the year to have some data on how BH4 works in that indication and we will hopefully replicate what we have seen both in the animal models and also in some of the patients from our first hypertension study.

Aaron Reames, Wachovia Securities.

Thank you for taking my question. I was wondering if you could give all us a little bit more insight on the reasons why the 170 patients that were in the EAP were not referred into the BPPS? Was it price or just a treatment effect? Can you just provide some additional granularity there?

Those are primarily non-responders. If you think about it we had 400 patients go into (inaudible) We anticipated 40 to 50% response. At this point we still have roughly 58% of those patients on therapy. So it would make sense that the patients who have dropped out at this point have primarily dropped out because they're non-responders. There's only one patient I'm aware of that was a non-responder and that was a patient who was noncompliant and had some problems that made him an inappropriate candidate for therapy.

At this time there no further questions in queue and I would like to turn the call back over to Mr. J.J. Bienaime. Please proceed, sir.

Thank you. So 2007 was a very successful year for BioMarin. We achieved many significant milestones including the FDA approval of Kuvan and the filing of the IND for PEG-PAL. In addition the sales of Naglazyme and Aldurazymr continued to grow which contributed to the improving bottom line.

So, looking ahead into 2008, we're focused on the successful launch of Kuvan, the continued geographic expansion of Naglazyme and the advancement of R&D pipeline including the PEG-PAL program and a number of preclinical program and possible enlicensing or acquisition opportunities. We're currently focused on pursuing opportunities to advance our clinical stage pipeline and ensure that the continuation of double-digit revenue growth in the coming years.

So BioMarin has developed into a fully-integrated biotech company with anticipated total revenue this year of 255 to $360 million. So 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. Good bye.

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