BioMarin Pharmaceutical Inc (BMRN) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter BioMarin Pharmaceutical, Inc. earnings conference call. I will be your operator for today. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mrs. Eugenia Shen, Senior Manager of Investor Relations. Please proceed.

Thank you. On the call today is J. J. Bienaime, BioMarin's Chief Executive Officer, Jeff Cooper, Chief Financial Officer, Hank Fuchs, Chief Medical Officer, and Steve Aselage, Chief Business Officer. 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 would 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 remarks before Jeff reviews the financials and Steve will then provide more detail on commercial activities and Hank will provide an update on our ongoing R&D programs before we open the call for questions. We are very pleased to report the third quarter 2009 results. Increase in total BioMarin revenues of 11% and an increase in net product revenue of 16% as compared to the third quarter 2008. During the quarter the continued growth of our commercial products, along with careful managed -- carefully managed expenses drove a strong bottom line and also improved net income guidance for 2009. Importantly, during the quarter, we generated a record $29.1 million of cash from operations compared to $1.9 million in the third quarter of last year. Naglazyme continues to be strong with an increasing net sales of 26% as compared to the third quarter 2008, and despite some seasonality and ordering patterns in third quarter we continue to make steady progress in both new and more established international markets and remain confident that Naglazyme represents a $300 million plus market opportunity for BioMarin.

Next, net third party sales of Aldurazyme by Genzyme increased 5.5% in third quarter 2009 as compared to the third quarter of 2008. Although negatively impacted $1.5 million by foreign currency, number of patients on therapy continues to increase, and as for Genzyme, Aldurazyme unit volume in the third quarter 2009 increased 11.6% compared to third quarter 2008. Finally, Kuvan generated record revenues of $21.7 million in the third quarter compared to $16.9 million in the second quarter of this year, and $13.8 million in the third quarter of last year. In the third quarter of 2009, the number of commercial tablets dispensed increased 8.5% over the second quarter of 2009.

We are encouraged to see positive data starting to emerge from the numerous [investigator sponsored] trial which, along with registry program and the long-term neurocognitive study, if positive, should offer a strong value proposition for the use of Kuvan. We are planning to initiate a large multi-center Kuvan neurocognitive outcome study in the second quarter of next year. The objective of this study is to hopefully demonstrate improvement in the executive functions when PKU patients take Kuvan that could lead to a new product label in the future and increase Kuvan sales potential.

Regarding our IP position, we recently received claims covering the food effects and we have been issued patents covering stable tablet formulation and the once daily dosing regimen for Kuvan. Together these patents offer an additional 10 years of patent protection (inaudible)protection.

Moving on to our clinical programs, we issued the Phase II trial of PEG-PAL for PKU in September and expect to report initial results in mid-2010. As for the Phase I/II trial of GALNS for MPS IVA enrollment was complete in July and we expect to report results in the first half of 2010. Assuming a successful phase I/II study, we expect to initiate Phase III study in late 2010 or 2011. We are excited about both of these programs, and Hank will review additional details on our overall R&D program later.

As we have mentioned previously in order to support the projected commercial needs for Naglazyme, Aldurazyme, GALNS and PEG-PAL through at least 2016, we are making significant investments to double our manufacturing capacity. Construction will be complete this quarter and we expect the commission of the facility will be complete in the second quarter 2010. We believe our manufacturing capabilities are a valuable asset and our investment in this area reflects a commitment to long-term growth.

Also as we announced on Monday we acquired Huxley Pharmaceutical which is developing its proprietary form of diaminopyridine for the rare autoimmune disease Lambert Eaton Myasthenic Syndrome, or LEMS. A positive opinion was issued by the European regulatory authorities last week and we expect to launch this product in the EU near the end of the first quarter next year. In terms of IP, diaminopyridine will benefit from a 10-year orphan drug exclusivity and a 10-year data exclusivity in Europe upon approval. This relatively low-risk deal that de-leverages our commercial infrastructure, it fits our orphan drug strategy with specialist oriented and potentially high-priced therapeutic and has the potential for near-term value creation.

Looking ahead, diaminopyridine has many other possible indications including multiple sclerosis and we will actively evaluate the best overall development plan for this product beyond LEMS. We look forward to updating you on this program. Now I would like to turn the call over to Jeff Cooper who will review the financial results for the third quarter 2009 in more detail.

Thanks, J.J. I will start by reviewing product revenues of Naglazyme, Aldurazyme, and Kuvan for the third quarter ended 2009. I will then follow a more in-depth look at our operating expenses and financial results before reviewing expectations for 2009. Beginning with Naglazyme, net product revenue for third quarter 2009 was $42.1 million, an increase of 26% over net product revenue of $33.3 million in the third quarter 2008. Net product revenue for the nine months ended September 30, 2009, was $124.3 million compared to $96.2 million for the nine months ended September 30, 2008. Naglazyme net product revenue growth is attributable to geographic expansion internationally, the initiation of therapy by previously identified or newly diagnosed patients and weight gain as patients grow. Changes in foreign currency rates net of hedges caused a negative impact of Naglazyme sales of $1.3 million and $5 million in the three and nine months ended September 30, 2009, respectively.

Net sales of Aldurazyme by Genzyme $40.3 million for third quarter 2009 increased 5.5% compared to net sales of the third quarter of 2008. Net sales of Aldurazyme by Genzyme for the nine months ended September 30, 2009, was $116.4 million compared to $113.7 million for the nine months ended September 30, 2008. Foreign currency exchange rates had a $1.5 million and $8.7 million negative impact on Aldurazyme sales by Genzyme in the three and nine months ended September 30, 2009, respectively. However in the third quarter 2009 the Aldurazyme unit volume increased 11.6% compared to third quarter 2008 as the number of patients on therapy worldwide continues to grow.

Net product revenue to BioMarin related to Aldurazyme was $14.6 million for the third quarter 2009 compared to net product revenue to BioMarin of $20.7 million for the third quarter 2008. The reduction in net product revenue at BioMarin in the third quarter 2009 was due to the timing of inventory transfers to Genzyme resulting in a net $1.3 million decrease, reduction to the royalty payable by Genzyme. During the third quarter 2008 BioMarin recorded net incremental inventory transfer revenue of a positive $5.6 million.

Net product revenue for Kuvan was $21.7 million for third quarter 2009 compared to $16.9 million for the second quarter 2009 and $13.8 million for the third quarter of 2008. In the third quarter 2009 of the $21.7 million in Kuvan net product revenue, $21 million was from US sales and the remaining $700,000 was mostly Merck Serono related. Product revenue for Kuvan for the nine months ended September 30, 2009, was $54.1 million compared to $31.6 million for the nine months ended September 30, 2008. Net product growth is primarily due to patients initiating therapy with Kuvan.

Now I will review gross margins, operating expenses and nonoperating items in more detail. Gross margins for Naglazyme were 79% during third quarter of 2009 compared to 81% in third quarter of 2008. The decline in Naglazyme gross margins in the third quarter 2009 is primarily related to the impact of foreign currency exchange rate fluctuations. Aldurazyme gross margins will continue to fluctuate from quarter to quarter depending upon the timing of product transferred to Genzyme which is the basis for cost of goods sold recognized at BioMarin. In the third quarter of 2009, Aldurazyme gross margins were 82% which reflects both the royalty and net product transfer revenue from Genzyme to BioMarin. Kuvan gross margins during the third quarter were 84% which reflects an 11% royalty payable on net sales. Excluding the impact of Merck Serono related revenue which reflects product transfer and cost, US Kuvan margins were 85.5% for the third quarter.

Research and development expenses increased $800,000 to $27 million in the third quarter 2009 from $26.2 million in the third quarter of 2008. The R&D expense from the quarter increased primarily due to increased GALNS development spending offset by decreased spending on 6R-BH4 for our cardiovascular related programs. Of the total R&D spend of $27 million in third quarter 2009, $3.4 million was for stock-based compensation expense. While we continue to manage our spending closely, we do expect R&D spending to increase from current levels in the fourth quarter due to advancements of our development program.

Selling, general and administrative expenses decreased by $300,000 to $28.7 million in the third quarter 2009 from $29 million in the third quarter 2008. This is largely due to decreased corporate and administrative costs. Of the total $28.7 million of SG&A spend in the third quarter 2009, $4.34 million was for stock-based compensation expense.

Interest income decreased by $2.4 million to $1 million in the third quarter 2009 from $3.4 million in the third quarter 2008 due to the decline in market interest rates. Current yields of invested funds are less than 1% which are driving down interest income on our investment portfolio. Interest expense was $2.9 million in the third quarter 2009 compared to $4.1 million in the third quarter 2008. Interest expense which consists primarily of our interest on our convertible debt declined in Q3 2009 due to the reduction of imputed interest expense associated with the final payment on the Medicis debt.

Now we'll review the GAAP and non-GAAP bottom line results. Our GAAP net income for the third quarter 2009 was $6.6 million or $0.06 per diluted share compared to net income of $800,000 or $0.01 per diluted share for the third quarter 2008. GAAP net loss for nine months ended September 30, 2009, was $5.2 million or $0.05 per diluted share compared to GAAP net income of $6.3 million or $0.06 per diluted share for nine months ended September 30, 2008. Non-GAAP net income for the third quarter 2009 was $15.5 million or $0.13 per diluted share compared to non-GAAP net income of $8.2 million or $0.08 per diluted share for the third quarter 2008. Non-GAAP net income for the nine months ended September 30, 2009, was $33.9 million or $0.33 per diluted share compared to non-GAAP net income of $21.9 million or $0.21 per diluted share for the nine months ended September 30, 2008.

From a cash perspective, we ended the third quarter of 2009 with $491.8 million of cash and short and long-term investments. During the third quarter of 2009 we generated $29.1 million of cash from operations compared to $1.9 million from the third quarter 2008. With regard to 2009 guidance, we are narrowing our previously provided ranges on a few items to reflect increased visibility into the year. Naglazyme net product revenue is expected to be in the range of $165 million to $170 million from a previous range of $165 million to $175 million. Kuvan net product revenue is expected to be in the range of $72 million to $76 million from a previous range of $70 million to $80 million. This includes approximately $2 million in net product revenue related to Kuvan royalties on European sales and product transfer revenue to our partner, Merck Serono. For Aldurazyme we still expect net product revenue to BioMarin to be in the range of $69 million to $74 million.

Turning to expenses, we expect cost of sales in the range of 19% to 20% as a percent of sales from a previous range of 19% to 21%. R&D in the range of $117 million to $121 million from a previous range of $118 to $128 million including $8.8 million associated with the upfront payment for the Riquent transaction and SG&A in a range of $120 million to $125 million from a previous range of $120 million to $130 million. For the 2009 bottom line we now expect our GAAP net results to be in a range of a loss of $8 million to a loss of $4 million from a previous range of a loss of $12 million to a loss of $6 million. Non-GAAP net income for 2009 is estimated to be in the range of $39.8 million to $43.8 million from a previous range of $35.4 million to $41.4 million. Regarding cash flows for 2009, we plan to spend over $80 million in capital expenditures to complete expansion of our Nevado manufacturing facility and corporate campus. As of September 30, 2009, we have spent $67.2 million for capital expenditures. Now I'd like to turn the call over to Steve who will provide an update on commercial activities.

Thanks, Jeff. First we continue to closely monitor the impact of worldwide economic slowdown and proposed healthcare legislation on our business. We have seen isolated instances where pricing or reimbursement pressures have impacted sales but overall reimbursement environment remains positive. We monitor a number of indicators and the volume of a patient assistance request, patient compliance and reimbursement by payors would all suggest solid continued reimbursement for our products.

Turning to Naglazyme, we continue to make significant progress in international markets and saw continued solid growth in new patient starts in Q3. Vacations taken in late summer caused the number of missed infusions which somewhat offset the growth we saw in the patient numbers. We are very encouraged by progress made in new geographic regions and also by the further penetration in to existing markets. We believe there remains significant potential in international regions which is the largest contributor to Naglazyme growth and encouraged by the fact that we continue to find new patients in markets where we are already well established. We received approval in Russia in mid-2009 and hope to have patients on therapy by the end of the year or early Q1 2010. Not only is this a significant market itself but, importantly, it influences many other countries in Eastern Europe. We're also pleased to announce we received approval in Mexico earlier this week. We remain confident with our current peak sales estimate of Naglazyme of around $300 million which is double our expectation at the time of launch. It is worth reminding you that we are seeing and expect to continue to see some choppiness in ordering patterns due to government entities purchasing less frequently but in larger quantities. This can obviously influence quarter to quarter comparisons.

Moving on to Kuvan. In the third quarter 2009 the quantity of commercial tablets dispensed to patients which we believe is the best metric to track true end user demand increased 8.5% as compared to the second quarter of 2009. We're also pleased to see data merging from investigator sponsored trials to help build the value proposition for Kuvan. These trials assess a range of measures including improvement in behavioral symptoms, depression, anxiety, short-term memory, executive function, and changes in bone mineral density and nutrition. They will evaluate various measurements in patient populations not included in our previous clinical trials and along with the registry and post marketing studies if positive should offer a stronger argument for the use of Kuvan.

In September, nine different abstracts or poster presentations were presented at the Inborn Errors of Metabolism meeting in San Diego. This included data from the first cohort of patients from a trial looking at the impact of Kuvan on executive function. Also, we hope to have results from a small study on the effect of Kuvan on institutionalized patients in time for the American of College of Medical Genetics meeting next spring. As you know, institutionalized patients are currently not factored into PKU market estimates and could potentially offer upside down the road. We remain hopeful about the long-term potential of the market and our ability to successfully execute this program. We look forward to keeping you updated on the progress of both Kuvan and Naglazyme. Now I would like to turn the call over to Hank who will provide an update on our R&D pipeline.

Thanks, Steve. Starting with the GALNS program for MPS IVA, enrollment was completed in mid July and we expect to report initial results in the first half 2010. This study, together with our MorCAP assessment study are important studies to determine the clinical end points and eligibility criteria of a pivotal phase III trial. Measurements in the Phase I/II study include measures of keratan sulfate levels, pulmonary function tests and walk distances. Assuming successful Phase I/II trial results, we expect to initiate the pivotal Phase III trial in late 2010 or early 2011.

Moving on to the PEG-PAL program. As J. J. mentioned earlier, we initiated the Phase II trial in late September. The Phase II study will evaluate the safety and efficacy of weekly injections for eight weeks followed by dose and regimen optimization in an extension period. The flexible Phase II protocol provides multiple opportunities to arrive at a tolerable dose and dosing frequency and we continue to believe that if approved PEG-PAL may offer significant benefit for many PKU patients. In terms of other preclinical programs, BMN 195 is the small molecular inducer of utrophin, a protein that can potentially substitute for the defective dystrophin protein in patients with Duchenne multiple dystrophy. After completing formulation work and toxicology studies, we aim to enter this program into the clinic in the first quarter of next year.

Moving on to the handheld blood Phe monitor, we have successfully completed early proof of concept laboratory studies and are proceeding with prototype development. Near-term plans include user studies as well as engineering scale up and finalization of commercial product design with expected availability in early 2011. We are also working on several preclinical programs and expect that at least one new program will be announced by the first half of 2010 as we begin IND-enabling work.

Turning to BMN-102 for Pompe disease, we believe our highly phosphorylated enzyme could result in more efficient uptake in cells and potentially lead to improve glycogen reduction in key affected muscle groups not affected with current therapy. We continue to evaluate several partnering options for this program, although we have not excluded the possibility of developing this product ourselves.

Finally, in terms of the BH-4 cardiovascular program we announced in late September that we're putting the BH program on hold pending discussion with potential partners. Although the early data was promising, we decided that the additional investment in time and resources required to pursue this program is better allocated to other early pipeline candidates as well as the Kuvan outcome studies that J.J. mentioned earlier. We'll keep you updated on our progress on this and other programs as they advance. With that, Operator, we would now like to open up the call for questions.

(Operator Instructions) Your first question is from the line of Chris Raymond from Robert Baird. Please proceed.

Thanks. Two questions if I may. First on Naglazyme, can you talk about what the difference is now? I know you mentioned that there is some FX issues impacting the quarter, but I think this is -- this drug kind of stood out in that you didn't necessarily narrow it as much as lower the upper end. Are there patients perhaps coming off therapy, for example, on that drug or is there some other dynamic going on?

We've seen a significant increase in net patient growth every quarter for the last several years including Q3 of this year. We had several things impact revenues in Q3 of this year that tend to be one-time events. We had, for instance, in Latin America, a number of missed infusions, we had some swine flu issues and a number of the major centers where they closed clinics and patients simply couldn't get in to get their infusions, and we had what is an annual problems in parts of the world in late summer when patients go on vacation they tend to miss infusions as well. So there were a number of missed in fusions in Q3, which I think to some extent slowed the growth of Naglazyme. The revenue growth, despite the patient number, is increasing. We work pretty hard to try to minimize missed infusions and are pretty good at getting temporary infusion sites set up if patients, for instance if a patient in Paris is going to vacation in Nice we can get them their infusions when they are off, but if we have a patient in London who is going to spend a month in Islamabad, that's beyond our capability to get drug out and reimbursed. So we minimize it but every Q3 we have a problem with this. If you think back to last year, Q3 was actually down compared to Q2 in the previous year. So we're actually pretty happy. We think we're doing a little bit better and showed flat to even slightly upward revenue trends Q3 over Q2 this year.

Okay. Just to be clear you're not seeing a discernible or trend of patients coming off therapy, right?

No, we aren't. There's some mortality in this patient group. It has been minimal for our patients on therapy. We've lost a couple patients due to that. I think we had one country in Eastern Europe create a funding problem for two patients who are temporarily off therapy and that's really the only negatives I can think of relative to patients coming off therapy.

Okay. Quickly on Kuvan, you had a couple quarters prior to this one where I think total of number of pills dispensed seemed to have outpaced revenue growth quarter on quarter. This seems to be the first one where we're seeing the trend reverse. Should we sort of look at this as the revenue catching up to that trend over the last couple quarters or is there something we should think about for the impact on Q4?

I think the thing to recognize is that the revenue relative to the tablets dispensed varies by the change by specialty pharmacy inventories and we have seen some significant swings in inventory levels on a month to month basis. There is no discernible pattern that we are seeing. If you go back and think about what we said at the end of Q2, at the end of Q2 we saw the lowest specialty pharmacy inventory levels we've seen since launch. So part of what happened in Q3 was specialty pharmacy going back to more normal inventory levels which had the net effect of increasing revenues beyond what you would expect just from the tablet dispensed numbers.

Thank you.

Your next question comes from the line of Salveen Kochnover from Collins Stewart. Please proceed.

Thanks for taking my questions. Steve, maybe at this point what are the main reasons for PKU patients, what are they giving for not having started Kuvan? Are they waiting for certain data, cognitive benefit data?

I think you've got a number of factors in play. We have some physicians that are not convinced yet that there are substantial benefits to the therapy so we are generating additional data that we think will improve our ability to move physicians in to a more aggressive prescribing mode and there are certainly groups of patients who are very eager to go on therapy, but some other groups are much more hesitant. If you think about what PKU families have been told for really the last 40 years, mothers have been told that as long as their child stays on diet they're going to be perfectly fine. Well, that's not accurate, but it's what they believe because it's what they've been told and changing that mindset requires data and it requires time. And as we generate more data, such as what was presented at ICIM last fall, I think we're going to be more and more successful in moving people into seeing real benefits of the therapy.

Great. And then just, I guess, J.J., given the recent acquisition, how should we think about your end licensing or acquisition strategy going forward? Do you think BioMarin is still looking at small products that fit the pipeline in terms of a European marketing perspective or how should we think about this?

Yes, as we explained a couple days ago when we talked about the Huxley acquisition, this is a small acquisition which has very limited impact on our cash balance. Actually, as you've seen this quarter, we generated $29 million of operating income. So outside of capital expense, we are cash flow positive now. Yes, we have the ability to do additional deals. There are several other deals are in the works right now somewhat bigger than this one. We believe that we look at them because some of them represent very exciting opportunities, and this first one indeed was in the very short term to try to leverage our commercial operations in Europe because they were under utilized and actually going to allow us to, as soon as next quarter, have better utilization of that marketing organization, but we are looking at more worldwide deals or deals that can include different parts of the world, but our criteria has not changed. We are only looking at orphan products that are either first in their therapeutic area or provide a very significant improvement in clinical benefits versus what's already existing. They're likely high value products and highly scientific products requiring scientific support, medical affair support, reimbursement support which is what we're good at. And also some of them are proteins or biological products and they could leverage our very significant manufacturing abilities and process development abilities in the field of proteins engineering. And as I said during my introduction, we have basically doubled or more than doubled our manufacturing capacity for proteins and we intend to leverage this asset as best as possible. So we are continuing to look at business development opportunities.

Thank you.

Your next question is from the line of Joseph Schwartz from Leerink Swann. Please proceed.

Hi, thank you. I was wondering if you could tell us how much inventory transfer to track Aldurazyme in quarter?

1.3 million.

And could you repeat what you were saying about the manufacturing -- the backup manufacturing for that, and how would that be expected to impact inventory if there's any special consideration once that comes online.

I'm not sure we understand your question here but let me state a few general statements about our inventory policy. The fill finish -- I presume your question is related to Aldurazyme?

Yes. So in the backup is it fill finish, it's not the actual API?

There is no backup in inventory. We have over a year of inventory of Aldurazyme.

I'm sorry, the alternative supply.

So let me step back. Aldurazyme we manufacture the substance here in California at BioMarin and we have several fill finish suppliers, one of them used to be Genzyme but the last time we had a fill finish of Aldurazyme at Allston Landing done by Genzyme was at the end of last year. We have not done any this year and we are not planning to do any in the future. So clearly Genzyme's problems at Allston Landing have had absolutely zero impact in our ability to supply Aldurazyme and will zero impact on our future ability to supply Aldurazyme to the market. So this inventory -- what happened in terms of Aldurazyme's revenue recognition by BioMarin has absolutely nothing to do with inventory issues, it is more patterns of ordering by Genzyme versus what they sell to the patients.

That's right. The whole issue of the recognition of the transfer revenue, it's really a timing issue of when we ship the product to Genzyme for ultimate sale and it's really an issue of how much we ship to them versus how much they sell in a particular quarter. So if we ship more to them than they sell in a particular quarter where their inventory levels go up, then we recognize positive transfer revenue. If we ship less to them than they sell in a particular quarter, that results in negative transfer revenue and that's what happened in the third quarter 2009.

Okay. Just quickly on the handheld device for the Phe monitor, is that a novel device? Are you working with anybody? Or are you just modifying an existing blood spot device monitor?

We're modifying the technology that's been in existence for blood glucose monitoring for a number of years. It's obviously a different chemical reaction, requires a different strip, and our team has been working on that; I think has really done a phenomenal job of moving that forward very rapidly. We should be in the field testing the device in 2010. We hope to have it available broadly in early 2011 and anticipate that it's going to be a major benefit to PKU patients in removing logistical barriers to getting on Kuvan as well as managing their disease overall.

The regulatory pathway is that a 510k or a PMA? What is it?

It's a device.

Yes, that's (inaudible) but we don't anticipate any issues. Just a question of time to get that done. So we are pretty confident we should have this available the beginning of 2011.

Thanks.

Which, if I may, will be major advantage to make it easier for patients to get started on Kuvan and also potentially improve compliance on Kuvan, and assuming PEG-PAL makes it to the market also will be very critical for the launch of PEG-PAL.

If I could add one thing, I think it relates to Salveen's question early on as to why some patients don't get started and the logistical barriers of getting weekly Phe levels done if they have to drive in to a center to get a blood draw to have that done is not something that some families can overcome. At least in some states the requirement of payors for post-Kuvan therapy blood draws again is more than some families are willing to deal with. So a much less painful user friendly type of ability to get real-time Phe levels is going to be a major benefit for the patients, and we think a significant boost for Kuvan as well.

Your next question is from the line of Phil Nadeau from Cowen and Company.

Thanks for taking my questions. First a couple on the pipeline. Why is there six months or so between the Phase II data for GALNS and the Phase III start? What do you have to do in the interim?

Phil, just ticking and tying the protocol through health authorities to make sure protocol satisfies requirements for registration. As you know, it's a little harder to get an orphan drug developed and registered, so we just want to make sure that we take enough time with health authorities, and the other thing is I would say there is a tremendous amount of interest in this program around the world and I think one of the things we want to try to take advantage of is that interest and be able to include as many different countries in the pivotal clinical trial. It's a great opportunity to engage people all around the world in bringing on a new therapy.

We're getting requests from countries like Korea, Japan, countries that we're not involved whatsoever in the development of Aldurazyme and Naglazyme.

Okay, fair enough. On the end points for the Phase III, Hank, in your prepared remarks you mentioned a couple that were being looked at in the PHase II trial. Are there any leading contenders for what you think are likely primary end points for Phase III?

Well, I think if you scan across all the Mucopolysaccharidoses what you see is 6-minute walk and some measure of lung function and combinations thereof as being the usual suspects for improvement. The one thing I would add is because Morquio syndrome, a prominent feature of it is the skeletal morphology that improvement of height would be an important measure in that patient population. Just to remind you, in treatment of MPS 6 with Naglazyme, recent data presented indicated Naglazyme actually quadrupled the growth rate in patients treated with Naglazyme compared to control growth rates. So that was a very large effect by patient population so I'd say pulmonary function, walk distance and height, and or some combination thereof.

Okay, great. And switching over to PEG-PAL, I think we all appreciate that immunogenicity and hypersensitivity reactions are one of the major risks to the program. In your conversations now with the investigators as they get more and more familiar with the compound, can you give us some idea of what level of immunogenicity or hypersensitivity reactions would be acceptable for a product like this?

I think one thing is also what's involved in managing when it occurs, so I think any kind of anaphylactic reactions occurring the double digit percentage rate would be problematic for this patient population, but I think lesser reactions like the (inaudible) hypersensitivity reactions could be more readily tolerated by this patient population, especially if there's alternative means to manage the problem. So, for example, if you can reduce the dose. If a patient has a mild rash that occurs and you can reduce the dose and the rash goes away, I think that would probably be acceptable to people as well.

Okay. And in the past you've given us kind of interim updates as the trials were progressing. Any sense how the Phase II is going?

It's going as expected. I'd say talk about in the past and in the future, we're moving to bigger studies with it being more important to collect more data from alternative dosing schedule so I think it's really important that we not try to cherry-pick in time a few patients here and a few patients there. The story is going to be told in the aggregate of the data and weeks to months of experience. So I'd focus everybody on an outcome of data in the mid half -- the mid part of next year, and it will take us a little while to do the dose escalation, frequency adjustments to get a good profile of the drug. So mid next year I'd say is the real meaningful update on that.

One last question on Kuvan. I think in your answer to I think it was Chris' question, you mentioned that inventories trended back towards normal in the quarter and that was the discrepancy between the 8.5% patient demand growth and the sales growth. It's not clear to me where inventories are today. So are inventories now at normal or are they still below normal, so we could see a continuation of that trend in Q4? Could you give us some idea?

Inventories are near the mid range of the range that we see. One of the reasons why we've left guidance for year-end still as wide as it is, is because we can't control exactly where inventories are going to be at the end of the quarter. At this point I would say they're roughly in the middle of the range we've seen over the course of the last four quarters.

Okay. Is there any effort to put an inventory management agreement in place or is this product simply too small, that doesn't make sense to get those with the specialty pharmacy?

We're not trying to do that. Philosophically I've always tried to avoid trying to manage distributors' inventories. That's kind of a slippery slope once you start going down that one. So in general, the specialty pharmacies are handling this, and I think a very professional way. No issues. There's just some fluctuations in ordering patterns that we need to live with.

Great, thanks for taking my question.

Sure.

Your next question is from the line of John Sonnier with William Blair. Please proceed.

Thanks for taking the question. Steve, you've talked on a number of occasions about the need to put clinical outcome data in the hands of the PKU physicians. I know you have a number of initiatives that are starting. But what do you think, if you could point to two or three outcomes that you think would be compelling to really drive sales growth and accelerate sales growth? What do you have starting and what are the time lines around what you view as the important initiatives?

I think there are several investigator sponsored trials that are important. The first very small cohort of patients from the neurocognitive study being done at Washington University in St. Louis was presented at ICIM. The focus there was on executive function and, in particular, on information processing, short-term memory, the ability particularly for children to do better in school, and certainly being able to process information and remember information better would lead to that. For adults, better working memory, better ability to concentrate, focus can lead to better job situation and a better quality of life. So those cognitive functions are extremely important. I would put them at the top of my list of outcomes that we need to generate and which our ISTs are now focused on and starting to generate.

Additionally, we only had the newborn screening come in for PKU a little over 40 years ago, so we don't have the age group in the PKU patients in the clinic in their 50s and 60s and 70s. Where you start seeing some of the diseases mature adults, hypercholesterolemia, heart disease, the diet of some of these patients who have been basically eating out of a can for their whole life, it can put them at higher risk of some of the diseases that tend to show up later in life and we do have a fairly large IST that should report results in 2011 that looks at overall nutrition, things like bone mineral density, which is a big issue for PKU patients. I think that overall nutritional component that we think patients are lacking when they're strictly on a PKU diet is going to be important information to add to the body of knowledge as well.

Does the institutionalized study have clinical outcomes in it or is it fee production?

It actually has two different sets of clinical outcomes. It uses the Vineland test which is a standardized test to assess a variety of cognitive measures in patients who have significant impairment, and there's also a PKU-specific checklist of 15 different cognitive, psychological, and social parameters that tend to be impacted in these institutionalized patients, and that's also being assessed. They have reached the six-month data point on that 10-patient cohort and we hope to have that data presented at ACMG in the spring.

Thanks a lot.

As I said in my introduction, we have now decided to embark into a large-scale multicenter neurocognitive study starting Q2 of next year which should try to corroborate what is being observed in the smaller IST studies.

That's in children?

Young adults and older. This is a new study separate from the post marketing requirement study of the seven-year neurocognitive study in children which is a requirement of the FDA. This is a new study that will take place in a shorter time, probably within two years I would say. So to provide data relatively quickly to allow us to accelerate.

Okay, thank you.

Your next question is from the line of Brian Abrahams with Oppenheimer & Company. Please proceed.

Thanks for taking my question. I was wondering if you could give us an update on the status of the MorCAP registry. And I noticed also on GALNS that you had slightly pushed back the time line for initiating the Phase III. That related to the global initiatives that you mentioned or were there other reasons in terms of processing the data from the Phase I/II?

It's mainly to take advantage of the global interest in the program. We enrolled the Phase I study, 20 patients entirely in one country, and didn't come anywhere close to tapping the full number of patients required. So we could easily do the Phase III clinical trial in a few countries in a relatively short amount of time, but there's been such great interest in the program from the Naglazyme customers, Aldurazyme customers as well as from other treating physicians that I think a little bit of extra time in the front end will serve us well in the development program overall.

From the Naglazyme side, I can say there isn't anyplace where we go in the world where the clinicians aren't really tuned into what's going on with Morquio and very, very anxious to make sure their country is included in the clinical trials.

That's really interesting. Have there been any dropouts in the Phase I/II GALNS study yet?

I don't want to go in to specific operating details of studies. I think the important message is the study is proceeding as expected. We'll provide the expectations, data in the first half of 2010, and we'll provide a comprehensive update at that point.

Fair enough. And then just lastly, do you have a sense of when we might see any additional data from the investigator-sponsored neurocognitive study for Kuvan that's going on? Obviously we saw just a sliver of the data at the meeting earlier this year. I was wondering if you have a sense of when we might see more, or if you guys have seen some additional data that might guide your decision, or that guided your decision to do a multicenter study yourself?

I would say that we would anticipate additional information being made public at ACMG in March.

Okay, thanks very much.

Sure.

Your next question is from the line of Michael Aberman with Credit Suisse. Please proceed.

Thanks, guys. I appreciate it. First question is housekeeping. In terms of your R&D guidance it suggests a pretty decent increase in fourth quarter over third quarter. Can you walk me through that? How much of that is the amortization of expense associated with the recent acquisition, and to what extent do you anticipate ramping R&D spending for 3,4-DAP for looking at these other indications?

Well, first, we won't recognize any of the amortization on 3, 4-DAP until the product is actually approved. So there won't be any amortization in the fourth quarter related to that. We will have perhaps maybe half a million dollars, maybe a little bit more of operating expenses that could go across our commercial organization in the fourth quarter of this year. With regard to R&D, the expectations of spend will be a bit higher in the fourth quarter, mainly because of several different things. First, PEG-PAL, now that we're enrolling in the Phase II trial, we're now incurring the cost of patients and treatment that we weren't incurring so much in the third quarter. There's also some material purchases that we'll be making related to the program that will result in some additional costs. For Morquio, that program continues. As we increase enrollment in the MorCAP program that will result in additional costs. On the DMD program we're now preparing for a Phase I program so there could be some increase in spending in the fourth quarter for that program. Those are a summary of the drivers behind some expected increases in R&D in the fourth quarter.

And then presumably we should think about that run rate for next year given all those programs should advance for 2010, is that correct?

It's difficult to use fourth quarter as a precise run rate. It's really going to be a mix of all of the programs that we work on. So there could be some level of increase in spending just based upon the increased enrollment for PEG-PAL and the continuation of Morquio but I don't have any precise numbers for you at this point.

In terms of think about looking at Kuvan growth, you had a decrease in the growth rate of the pill from 14.5% down to 8% in third quarter. What can you tell us about? Is it seasonality? What are you seeing in the community in terms of demand?

We're seeing continued steady growth. I mean, there is going to be change from quarter to quarter in the exact percentage increases, but we see continued net increases in new patients on monthly basis. We have some of the same issues with Kuvan that we have with Naglazyme. Late summer is a time when a lot of people go on vacation. We also had -- and when somebody's on vacation in a PKU clinic patients don't get started. If the geneticist goes out, if the dietitian goes out, in some cases if the secretary goes out, things slow down or go on hold. We also saw a ramp-up of the [O15] study, the long-term neurocognitive study in the summer, and we had some patients drain off of commercial and go into the study, which is to be expected. That's a relatively small study and it isn't going to be a long-term impact on Kuvan, but it had a little bit of impact on Q3. So overall we continue to be reasonably happy with the growth rate. We aren't satisfied with where it is, but we think the real change in the adoption ramp for Kuvan is going to come when we have credible outcomes data that we can gout and really impact the market in a major way with.

Is the starter program -- what kind of changes have you seen in the starter program as opposed to the commercial?

We have seen the US market go to almost entirely utilization of the starter program, probably 90%. I'd have to check and make sure my number is accurate, but I believe it's roughly 90% of all patients starting on Kuvan now use the 90-day supply of starter to see if they will be a responder. So that's been very well received by both the customers, prescriber customers and the patients, and we anticipate continuing that program in the future.

And lastly, before I get back in the queue, if I could just get the end points again for the GALNS trial, what should our expectation be there? Remind of us the timing of how long they will be on drug, what we should expect to see in terms of what we might hope to see in terms of pulmonary function test, walk distance?

The design of the study is 20 patients were enrolled, and it's an intra-patient dose escalation, so all 20 patients are treated at 0.1 mg per kilo per week by intravenous infusion. After 12 weeks all 20 patients are then escalated to 1 mg per kilo per week treated for an additional 12 weeks. After that is completed, all 20 patients who are enrolled are eligible to increase to 2 mgs per kilo for an additional 12 weeks. The end point is pulmonary function, walk distance, and obviously height are measured at frequent intervals during the 12-week period. So to have all of that data pull together will take the enrollment period plus 36 weeks of treatment observation. So the last patient enrolled July 22, something like that, so 36 weeks from then, and then give us a little bit of time to process the blood samples for keratan sulfate, urine samples for keratan sulfate, blood for PK and antibody analysis and that's how we get to H1 2010 for when we expect to be able to communicate the findings of the study.

I guess I'm trying to get a confidence level, the 36 weeks, given the different dosing is enough time to see difference in some of these clinical measures or you may not see it at that time point.

Just to remind you, with Naglazyme, the primary outcome there was observed in, I think it was a 24-week study, and with 1 mg per kilo. So we're going to be a 1 mg for twelve weeks and 2 mg per kilo for 12 weeks. That gives us some confidence that observation period we have is sufficient to observe fairly big effects. Remind you the pivotal trial for Naglazyme for registration was greater than 80 patients for a placebo-controlled trial. Here we have 20 patients all treated with active drug so that's another reason to be -- it's a fairly chunky Phase I/II study for this patient population, so that's another reason to have some optimism.

In Naglazyme improvement in pulmonary function was observed in like three to four months. Going back to some comments that Hank made earlier, we are very open minded right now as to what should be the primary end point for Phase III because we need to complete the Phase II to figure it out, but one new end point we didn't think about when Naglazyme was developed indeed, as Hank said, is growth velocity, growth rate could actually be an end point because -- and I'm not saying it's going to be the end point, but it's a possibility here. Again, in early September at the ICIEM meeting there was very exciting data new data, for new analysis presented on Naglazyme when they looked at that time growth rate two years after Naglazyme initiation of therapy versus three years before, and the growth velocity went from 0.6 centimeters per year to 2.4 centimeters per year, so it's a quadrupling of the growth velocity which is very dramatic, way better than you can see with growth hormone in growth hormone deficiency. We know that study is an FDA approvable end point. If you talk to MPS experts, they will tell you there is no reason whatsoever why, MPS VI with Naglazyme, we couldn't see that again in MPS IV with GALNS. If anything, GALNS is a smaller enzyme so it should target the bone structure and bone growth plate even better than Naglazyme. If you talk to MPS experts, not Gaucher experts as some of you have done recently, you will get that information.

Appreciate it.

Your next question is from the line of Eun Yang with Jefferies. Please proceed.

Thanks very much. You mentioned Naglazyme you anticipate that sales could reach $300 million. How about Kuvan? What is your internal projection of what Kuvan sales could potentially be?

Kuvan, the peak sales, I guess you're talking US only, because that's kind of where we stand directly, it's very variable. It's going to depend on whether first we can address the institutionalized patient market which is like 2,000 plus patients, and they're all adult patients. That's $100,000 plus on average. So that's a lot of patients just there. A large market. It will depend on the neurocognitive study if indeed -- if we are going to plan to do the study if this study is positive a couple years from now, so 2-1/2 years we'll have some data that will reinforce the need to use the product very substantially, and that could significantly increase the potential for the product. So we already on a pretty good run rate, and we will continue -- pretty confident the product will continue to go next year, but the peak sales are hard to determine until we have some of that institutionalized patient data on hand, neurocognitive data.

The third factor that comes into play when you think about long-term peak sales is PEG-PAL. When PEG-PAL hits the market at that point patients may have some options which therapy to go on. That could impact Kuvan as well.

That's fair. Yes, and then you -- if I missed it, I apologize, but you mentioned that you have this stable couple of formulation patents. Does that last through 2028?

Is that what?

Does that last until 2028, the patent expiry?

We have two issued patents, one on the stable formulation, one on the once a day use. One is 2024, 2025, I never remember which one. Around mid-2020.

My last question is on Pompe disease product one of three. You guys mentioned in the past you are considering strategic options with this product. Could you give us an update on where you are and also in the event that you decide to keep the product, do you have enough materials to start clinical study, and when would that be?

At this time we don't have enough material to start clinical studies. We would need to manufacture this material and this is one of the reasons why we're delaying it because it will be a substantial amount of product, several million dollars just to do toxicity studies. So the studies of the negotiations, we are talking to a few potential partners, one of them actually was very advanced in Q2 and then fell apart and might actually be reinitiated so you have to be patient.

Okay, thanks very much.

Your next question is from the line of Liana Moussatos of Wedbush. Please proceed.

Thank you. What was the geographic breakdown of Naglazyme sales in Q3?

US was $6.3 million. Europe, $18.4 million. International, $17.4 million.

Thank you very much.

Your next question is from the line of Andrew Vaino from RGH Capital. Please proceed.

Quick question. I saw that you guys had putting the PAHQ on hold. Any scoop what you are going to do with sickle cell disease?

Sickle cell we did announce when we reported Q2 or in Q2 we did announce at this time we have no intention to pursue the development of the [H4] in sickle cell disease.

Secondly, on the phenylalanine device, can you just remind is that electrochemical cell or is it colorimetric sector?

It's not colorimetric. It uses chemical reaction to generate an electrical impulse which is then measured and read out in a digital format.

It is really very similar to the -- the typical blood glucose monitor. It would be functionality allowing patients who have Internet access, which is the vast majority of patients right now, to download some of their device readings to download them on the Internet so that it can be read by the centers.

You will be able to dump the data directly into an Excel spreadsheet which can then be communicated to a center.

My more advanced level question is so glucose monitors typically use glucose oxidase cells as the functional unit. Do you know what reaction this uses?

Yes, it's phenylalanine hydroxylase reaction.

Okay. Thank you.

Your next question is from the line of Shiv Kapoor from Morgan Joseph. Please proceed.

Thanks for taking my questions. I've got two. You mentioned isolated incidences of pricing pressures/reimbursement. Could you expand on that? Is this a reason for higher concern now than maybe a few months ago?

No, I don't think anything has changed in the last few months. I don't think it's news to anyone that governments are certainly under pressure. Tax revenues are down as the economy has suffered. So governments are careful. Certainly in most of the world the government is the payer for healthcare, including drugs like Naglazyme. So at no point in Naglazyme's history has it been easy to walk into a country and get full price for the product. There's always negotiation. There's always pressure. There is today as there was last year, and as I said in the comments earlier for the vast majority of the world, reimbursement is still very positive for Naglazyme. We have had one isolated small eastern block country which has given us some significant problems over the last quarter. Actually, it goes back further than that. It goes back to the spring. But that's an exception, not a rule, and we remain very, very confident with our Naglazyme future forecast and our continued growth of the product over coming quarters.

Okay, great. One other question I have. In response to your continued interest in acquisition, should we continue to expect that you will be sensitive to what you might pay for an acquisition as you have been in the past?

Yes, I think we've shown that we are pretty sensitive to that. We are very fiscally responsible, and even if we lack an act -- like an asset, if the price gets out of control, we generally stop bidding, and we have done that in the past by the way. We've let other of our competitors create some pretty significant prices for some assets that we are pretty happy that they did.

Thanks, J.J.

Your next question is from the line of Aaron Reames with Wells Fargo.

Thanks for taking my question. The first question I had just on the growth velocity with Naglazyme, you said is it quadrupled over two years. What magnitude of benefit do you think you would need to show in a clinical study and is that evident in, let's say, a year do you think would be sufficient of studying the drug to pick up that difference for the GALNS program?

It's a little hard to estimate. I think that's the purpose of the study that we're doing. What we saw with Naglazyme I think is a decent barometer. J.J. mentioned growth velocity changes, those were observed at the 18-month mark. With more patients you could probably observe it faster. We have the benefit of there being tremendous amount of interest of patients in GALNS, so we do imagine that we could do larger clinical trials with Morquio and GALNS than we did with Naglazyme in MPS VI. On the shorter end of the spectrum, J. J. mentioned some of the earlier end points, differences were evident earlier in the treatment, course at three months or at six months, and so depending on the magnitude of change observed from the early trial, those could be done faster. I think all of this information we're going to put together in a big pot and ask ourselves the question, what information will do patients the most good and really drive adoption and use of the product as well as registration, and try to come up with something that makes the most sense for the patient and ultimately the shareholders.

The Naglazyme study this was a combination of different studies, but there was very significant P value between the up to two years, before two years. I don't have the data in front of me but for growth hormone I'm pretty sure I remember growth hormone got approved with much less improvement in growth velocity than this. Not a quadrupling. It think it was barely double.

I'm not even sure it was that.

It was not even double from what we remember. So we know it's an FDA approvable end point in general. So even a doubling or a tripling over 18 months, I think we've got a pretty good chance to get this product approved.

Okay, that's helpful. Then in thinking about expenditures for next year, there are some programs that have been discontinued. There's some additional programs coming on board. We have the initiation of the neurocognitive outcome study. When we think about the GAAP net income guidance of 35 to 45, can you kind of guide us a little bit on how to think about R&D expenditures next year and just that guidance that was set forth earlier in the year?

Well, again, we'll provide formal guidance top and bottom line in February for 2010. But our R&D expenditures are expected to rise as we continue to make progress in our programs. We bring DMD into the clinic and move some of our other programs forward. So, again, we'll continue to watch our spending closely, but there will be some level of increased spending as these programs continue to advance.

To elaborate a bit on that, I think that's a good question. It's not our intent to give detailed 2010 guidance today, as Jeff said, but we have said that the Huxley acquisition is dilutive in 2010 so clearly that number is going to have to go down just based on the Huxley acquisition. Also the R&D program, we are going to have three new molecules in the clinic next year. GALNS, PEG-PAL, and our product for Duchenne muscular dystrophy. So it is very unlikely R&D spending is going to go down but I think we are creating significant value. The last thing impacting versus when we gave some kind of broad guidance at the beginning of this year for 2011 is the fact that interest income is lower than anticipated. Because, you know, as everyone knows, interest on cash balances is close to zero right now. So that has a pretty significant negative impact on us. So I think the net income is going to be next year lower than the $25,000 to $30,000 we gave at the beginning of this year.

That's helpful.

But we are pretty confident on the top line.

Okay. And then just -- the neurocognitive outcome study, how large is that? You mentioned a two-year study. Is that a lot of individuals? And is that cost intensive or is it relatively easy and modestly cost effective trial to run?

Yes, we haven't finalized the design of that, so I think stay tuned, and provide details when that study starts as J.J. indicated and I indicated that will be in the first half of next year. But just to sort of rough it out, with drugs that are approved to demonstrate psychiatric benefit, these are studies that are in the low hundreds of patients. So they're relatively concise. They typically demonstrate benefit in three months or so. And they will be done, as J.J. and Steve indicated, to really be definitive, so it will be -- they will be run as development studies, so the three products that J.J. mentioned, probably add that to a fourth of the studies for 2010 that will be important undertakings for the company. As Steve earlier mentioned, the value proposition here is that we hear from clinicians and patients that take Kuvan that these aren't really benefits. They have been told, stay in your diet, everything will be fine. Everything is not fine. The purpose of the study of the document is that Kuvan does, in fact, help people feel a lot better. In more specific quantitative terms, early next year I think we'll be able to provide some more details about the study timing, length, and cost.

But this study is not going to cost tens of millions of dollars. We're talking about 200, 300 patients max. So a maximum of $10 million ballpark, completion of the study. I'm not talking 2010, but --

Okay. No, perfect, that's helpful.

And that's another thing impacting next year's income. We were not planning on doing that study at that time beginning of this year.

Thank you so much for taking my questions.

Your next question is from the line of Lucy Lu from Citigroup. Please proceed.

Great, thank you. Just wondering what is the pricing for (inaudible) in Europe today and whether or not you have room to price it as an orphan drug? Then the second question is, what is the cost of goods sold on that product? Thank you.

The 3,4-DAP that is provided in Europe is provided mostly through compounding pharmacies, and it varies from pharmacy to pharmacy. We haven't paid a lot of attention to it because we don't think it's particularly relevant to pricing of pharmaceutical grade approved product that we would take to the market ourselves. What we know from prior assessment of the compounded products is that there's significant variation in the potency of the capsules and this is a drug with a narrow therapeutic index where variability in potency can have significant safety issues for the patients being treated. We're going to put a product on the market that addresses an orphan population that has pharmaceutical-grade quality, dependability, and consistency of potency, and we think it provides significant added value and we will price it, as you would expect an orphan to be priced and that would be significantly into the five-figure range, and we anticipate it will be somewhat lower than Kuvan, but well into the orphan category. Beyond that, I can't be any more specific. We will announce specific pricing Q1 of next year.

There is some kind of example of another product that went from compounding to some kind of -- not ultra orphan to orphan pricing, which is [saladimide]. Very significant price increase in Europe as compared to the average compounding cost. The other good news is that this pharmacy doing compounding, these are not profit centers for the hospitals. They do it just as a service to the patient. Also, this is going to be an outpatient product. Once it's on the market, once it's reimbursed, Europe reimbursement is basically 100%. There will be very little incentive for anyone to try to get a compounded product where reimbursement is going to be much more complex, if available. In Europe, in some countries, once there is an approved product that is reimbursed, I don't think they're going to pay for compounding product.

Okay, that's great.

What's your second question?

Cost of goods.

Steve. Cost of goods -- our cost of goods, we'll communicate that when we communicate the 2010 guidance.

Okay. And then --

It should be similar to pharmaceutical margin.

Anticipated margins are going to be typical pharmaceutical margins.

Okay. And then real quickly, the 103 Pompe disease drug, if BioMarin were to decide to take it into the clinic, how long will it take for you to go through the entire clinical trial process and how does that compare to GALNS? Thank you.

This would take several years. We did -- again, we did Naglazyme five years from IND filing this would take probably about the same time from IND filing. We're not ready to file the IND at this time.

Okay, thank you.

Thank you. I would now like to turn the call over to Mr. Bienaime for any closing remarks.

Thank you. In summary, we are very pleased with our performance year to date, and we're confident in our ability to meet our stated financial objectives for this years. Our ability to carefully manage expenses have been driving a strong bottom line for the quarter. As a result, improved net income guidance for the year. So we now have three growing commercial products and we are gearing up to launch our fourth commercial product in the first quarter of next year. So this opportunity as we outlined at the beginning of this week is a good strategic fit for BioMarin. It allows us to diverge our European commercial infrastructure, diversify our portfolio, and we have a solid pipeline of products advancing in development, GALNS, PEG-PAL, and several advancing products in the clinic for our DMD product in Q1.

In terms of future growth, we see very active negotiating to acquire additional assets despite the recent [Huxley] deal, so we continue to carefully evaluate both our internal program asking as well as external opportunities to ensure continued double-digit revenue growth in the come years and maximize long-term value to BioMarin and our shareholders. So we look forward to keeping you up to date on our progress, And thank you, again, for your continued support and for joining us on today's call.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.