BioMarin Pharmaceutical Inc (BMRN) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2011 BioMarin Pharmaceutical Incorporated earnings conference call. My name is Jennifer and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I, now, would like to turn the presentation over to your host for today's conference, Ms. Eugenia Shen, Investor Relations at BioMarin. 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. And now I would like to turn the call over to J-J, BioMarin's CEO.

Thank you, Eugenia. Good afternoon, and thank you for joining us on today's call. I have, as usual, a few introductory comments before Jeff reviews the financials for third quarter of this year. Steve provides more details on commercial activities, and then Hank will provide an update on a few of our ongoing R&D programs before we open the call for questions.

We are pleased with the progress we've made so far this year. Starting with our commercial portfolio in the third quarter of 2011, there was a year-over-year increase in BioMarin's net product revenues of 17% to $113 million. Our cash balance was $370 million at the end of the quarter, down from $412 million at the end of the second quarter. The primary reason for the decline was the $48.5 million spent on our new manufacturing facility in Ireland, which was completed during the third quarter. Excluding this, our cash balance increased quarter over quarter.

As for our clinical and pre-clinical programs, we have made important progress on advancing our pipeline. We have several major clinical milestones expected in the next year or so, including results for the Phase II trial for PEG-PAL, the pivotal Phase III trial for GALNS, the Phase I/II trial for BMN-701 for Pompe, the Phase I/II trial for BMN-673 for genetically defined cancers, and the neurocognitive trial for Kuvan. The positive outcome in one of these trials or more of these trials could have significant implications for the future of the Company and, with this in mind, the successful execution of our pipeline, which is a top priority for the Company. We plan to host an R&D day in New York on December 8 to discuss our pipeline progress in more detail.

Moving on to the investigator-sponsored trial of Kuvan in autism. The data from this small single-center Phase II study was presented in a poster presentation at the American Academy of Child and Adolescent Psychology on October 20. The study did not meet its primary or secondary end points. However, 3 subscale secondary measurements we did it to -- social awareness, autism mannerisms, and language -- reached statistical significance. Since the open-label portion of the trial is ongoing, it is premature right now to speculate on additional study outcomes or any next potential steps for BioMarin.

We do not believe that the results from the autism trial will be predictive of our ongoing neurocognitive study for Kuvan in PKU, as it is likely that the mechanism of actions defers in these 2 indications. Kuvan's ability to lower Phe levels in some patients and the correlation between high Phe levels and neurocognitive deficits in PKU patients has been well documented through different meta-analyses, whereas the cause of autism is still unknown.

In terms of guidance, we have made a few adjustments. We increased the bottom end of our Kuvan expectation from a range of $112 million to $120 million, to a range of $115 million to $120 million. We also raised our expectations for our R&D spend from a range of $200 million to $205 million, to a range of $205 million to $210 million. The highest spend is attributable to our increased efforts for the successful execution of our pipeline programs, which resulted in better-than-anticipated enrollment in our clinical studies. Our new non-GAAP adjusted EBITDA is in a range of $45 million to $55 million. Now, I would like to turn the call over to Jeff Cooper who will review the financial results for the third quarter of 2011.

Thanks, J-J. I will start by reviewing product revenues for the third quarter of 2011 and then follow with a more in-depth look at our operating expenses and financial results.

Beginning with Naglazyme, net product revenue was $55.9 million for the third quarter of 2011, an increase of 8.1% as compared to $51.7 million in the third quarter of 2010. Changes in foreign currency rates net of hedges had a negative $0.5 million impact in the third quarter of 2011. Net sales of Aldurazyme by Genzyme were $46.3 million for the third quarter of 2011, an increase of 13.5% as compared to net sales of $40.8 million for the third quarter of 2010. Foreign currency exchange rates caused an increase of Aldurazyme sales of $2 million in the third quarter of 2011.

Net product revenue BioMarin-related Aldurazyme was $23 million for the third quarter of 2011, compared to net product revenue to BioMarin of $16.5 million for the third quarter of 2010. During the third quarter of 2011 there was a positive $4 million impact from inventory transfer revenue, compared to immaterial impact in the third quarter of 2010. Net product revenue for Kuvan of $30.5 million for the third quarter of 2011 increased 16.4% as compared to $26.2 million in the third quarter of 2010. Finally, net product revenue for Firdapse was $3.5 million for the third quarter of 2011 as compared to $2.2 million in the third quarter of 2010.

Now I will review gross margins, operating expenses, and other items in more detail. For the 3 months ended September 30, 2011, gross margins for Naglazyme were 83%, Aldurazyme gross margins were 68%, Kuvan gross margins were 83% and, finally, gross margins for Firdapse were also 83%.

Research and development expenses increased by $19.2 million, to $58.6 million in the third quarter of 2011 from $39.4 million in the third quarter of 2010. The higher costs in the quarter were driven by increased clinical costs for the GALNS Phase III trial, the PEG-PAL Phase II trial, PKU-016 and neurocognitive study for Kuvan, the Phase I/II trial for BMN-701, and pre-clinical development of BMN-111.

We do not expect cost of these development programs to recur at the same levels in the fourth quarter 2011 due to the timing of clinical material purchases and certain costs associated with pre-clinical activities that occurred in third quarter. Selling, general and administrative expenses increased by $6.5 million, to $44.9 million in the third quarter of 2011 from $38.3 million in the third quarter of 2010. Major drivers for the SG&A increase include, during the third quarter of 2011, our increased corporate expenditures including IT, legal, administration, and foreign exchange, as well as increased Naglazyme sales and marketing expenses. This is partially offset by the absence of certain acquisition costs for ZyStor Therapeutics, which occurred in the third quarter of 2010. Additionally, in the third quarter of 2011, we incurred $1.9 million in costs related to the conversion of a portion of our 2013 debt into equity.

Now I will review the GAAP and non-GAAP bottom-line results. Our GAAP net loss for the third quarter of 2011 was $17.7 million, or $0.16 point per diluted share, compared to a net income of $217.3 million, or $1.68 per diluted share, to the third quarter of 2010. During the third quarter 2010 we reversed our deferred tax asset valuation allowance and recorded a one-time benefit of $223.1 million.

Non-GAAP adjusted EBITDA for the third quarter of 2011 was $4.6 million, or $0.04 per diluted share, compared to non-GAAP adjusted EBITDA of $18.1 million, or $0.15 per diluted share, for the third quarter of 2010. From a cash perspective, we ended the third quarter of 2011 with $370 million of cash in short- and long-term investments, down from $412.1 million at the end of the second quarter of 2011. During the third quarter of 2011 we recorded $48.5 million for the acquisition of the new manufacturing plant in Ireland. Excluding this impact, our cash balance increased during the quarter.

Turning to 2011 guidance, we now expect total revenues in the range of $439 million to $465 million. We still expect Naglazyme net product revenue in the range of $225 million to $240 million and Aldurazyme net product revenue to BioMarin in the range of $79 million to $83 million. We are slightly raising the bottom end of our Kuvan expectations, from a range of $112 million to $120 million, to a range of $115 million to $120 million. We continue to expect Firdapse net product revenue in the range of $13 million to $15 million.

As for expense guidance, we continue to expect cost of sales in the range of 18% to 20% of total revenue, and SG&A expense in the range of $164 million to $174 million. We now expect R&D expense in the range of $205 million to $210 million, from a previous range of $200 million to $205 million. For the bottom line, we still expect GAAP net loss in the range of $43 million to $33 million. We now expect non-GAAP adjusted EBITDA in the range of $45 million to $55 million, from a range of $49 million to $59 million.

As a reminder, non-GAAP adjusted EBITDA excludes depreciation and amortization, contingent consideration expense, interest income and expense, income taxes, stock compensation, and material nonrecurring items such as the debt conversion costs. Consequently, the change in non-GAAP adjusted EBITDA guidance is primarily due to the higher R&D spending. Now, I would like to turn the call over to Steve Aselage who will provide an update on our commercial business.

Thanks, Jeff. We are very pleased with the performance of the commercial portfolio so far this year. Naglazyme continues to do well, with continued geographic expansion as well as additional patients being added in our relatively immature markets. We're pleasantly surprised with the extent of our progress in Russia, and have recently opened an office in Moscow. We see Russia as a significant opportunity for both Naglazyme and several of our pipeline products. We have made significant regulatory progress in Iran and continue to believe that, despite a somewhat slower-than-anticipated pathway to approval, that there is near-term opportunity there.

We continue to find new patients in more established markets like the US and western Europe. Q3 continues to be a challenging quarter relative to compliance, as vacation time in many parts of the world caused missed infusions and resulting loss of revenue. We continue to see steady growth in the number of patients on therapy and remain positive about prospects for continued growth of Naglazyme in the future. As I say every quarter, it is important to keep in mind that quarter-to-quarter sales are subject to significant fluctuations due to the timing of large orders by government entities, and we expect to continue seeing this going forward.

Kuvan is still growing steadily, with a 15% year-over-year increase in commercial tablets dispensed. It marks a bit of a milestone that, for the first time, over 1 million tablets were dispensed in Q3. We continue our efforts in managing patient adherence and getting previously discontinued patients back on therapy.

The neurocognitive study J-J mentioned earlier, PKU-016, is gaining momentum and picking up enrollment. As expected, the study has had a slightly negative impact on commercial new patient starts; however, the potential long-term impact greatly outweighs any temporary setbacks, and Kuvan is still showing significant growth. The investigator-sponsored trial in autism was presented on October 20 and, while there were improvements in several core components of the disorder, the primary endpoints were not hit. While this is disappointing, it is important to realize that results in autism bear no relationship to clinical efforts currently underway treating PKU patients.

Firdapse efforts continue in the EU and have shown modest quarter-over-quarter growth this year. Pricing negotiations are underway in several additional countries and we hope to see contributions from those markets by the end of the year. Now, I would like to turn the call over to Hank who will provide an update on our R&D pipeline.

Thanks, Dave. As J-J noted earlier, the successful execution of our pipeline remains a top priority for the Company, and we have made significant progress in advancing our R&D programs during the quarter. At our upcoming R&D day on December 8, we, along with a group of experts, will provide detailed updates on our ongoing clinical and pre-clinical programs. For now, I will just provide a brief overview of this quarter's progress. Starting with GALNS for MPS-4A, enrollment for the pivotal Phase III trial is accelerating. We are on track to report top-line results in the third or fourth quarter of 2012 and to file by either the end of 2012 or the beginning of 2013.

Turning to PEG-PAL, thus far we know that PEG-PAL is extremely potent and efficacious in almost all patients tested to date. More importantly, as an acceptable long-term safety profile, it is well tolerated. We are currently exploring different induction dosing regimens to minimize the initial safety reactions that we see in the majority of patients. We believe it is worth taking the extra time now to optimizing the dosing before proceeding to the Phase III trial.

The Phase I/II trial of BMN-701 for late onset Pompe's disease is progressing on schedule. We have the finished the 5-mg/kg dosing cohort and passed the safety review. We completed the enrollment of patients in the 10-mg cohort and expect to dose our first 20-mg/kg patients by the end of the year. We remain on track to report top-line results in the second half of 2012.

We also have 2 ongoing trials for PARP inhibitor, BMN-673 -- a Phase I/II open-label trial of BMN-673 in patients with advanced or recurrent solid tumors; and the 2-arm open-label dose escalation Phase I trial in patients with hematologic malignancies. We expect to report top-line results from both studies in the second half of 2012.

Finally, we are also making progress with BMN-111, the CMP analog for achondroplasia. We remain on track to file the IND by the end of the year and expect to initiate a Phase I trial in the first quarter of 2012. So, as you can see, we have a very full, diversified pipeline ranging from pre-clinical programs to GALNS and a Phase III pivotal study. We'll keep you updated on the progress of our programs as they advance. And with that, Operator, we would like now to open the call up for questions.

(Operator Instructions). Your first question comes from Salveen Richter from Collins Stewart. Please proceed.

Hi. Good afternoon. It's Laura Ekas on behalf of Salveen. I guess with the delay of the phase III PEG-PAL study, how much of that is related to identifying the best induction therapy versus sorting out the formulation questions, and where do you stand with the formulation and I guess how confident are you that you will be able to start the phase III in the second half of the year?

Hi. So the primary driver of where we are with PEG-PAL is our desire to get a safe induction regimen. We are very excited about the long-term safety and efficacy profile that we see and we continue to see. So we -- with that we believe it is still important to invest in getting patients on therapy in the quickest and safest and most convenient way possible. So that is the primary driver for what we're focused on with PEG-PAL now.

So, to answer your questions. The delay is not related to a formulation issue. We're pretty much set on the formulation we're going to use on a go-forward basis.

Great thanks.

Your next question comes from Christopher Raymond with Robert Baird. Please proceed.

Thanks. Just a question on BMN-701. I could've sworn you guys had a 15 mg/kg dose that was between the 10 and the 20. Could you talk to if that was true or if there is something -- some decision that was made to go right into the 20?

Hi Chris, it is Hank. No, there was never a 15. It was always 5, 10, and 20. Sorry if there was any confusion.

Okay. Are you still three patients per dose cohort?

Yes.

Great and then a question on the Phe monitor. I noticed in your Press Release you talk about 2013 having availability but I understand there has been some developmental sort of snags with that. Can you maybe talk about where things stand in terms of I think there was a sensitivity issue?

Do you want me to take that one?

Sure.

The Phe monitor we talked about on the previous quarter's earnings we had good sensitivity at the higher Phe concentrations but when we got down to the lower concentrations we lost of some sensitivity. We believe that is largely due to background noise. We're working through some possible fixes on that doing some additional testing. At this point it looks like we should have a reasonable chance of getting the product out to market as stated in the text but it is a work in progress and the best I can tell you right now for sure is that we will keep you posted as we make progress.

Can you just confirm the PEG-PAL phase III does not need the Phe monitor, is that correct?

Yes.

I'm sorry, the -- yes, PEG-PAL.

Yes, that is our current understanding as well.

Great. Thanks.

Our next question comes from the line of Joseph Schwartz with Leerink Swann. Please proceed.

Thank you. I was wondering if you could talk about the new markets for Naglazyme in terms of the process for gaining regulatory access and generating sales. What is the revenue opportunity in your mind?

We think, mentioned Russia and Iran in the text. To be really candid, we don't know what the opportunity is in Russia. We have visibility that there are a significant number of patients but there are large portions of Russia where we don't have visibility to any patients. We believe there are significant numbers, particularly in the southern portions, but we don't have people on the ground there. We don't have the ability to penetrate through the entire country. We're starting in the Moscow and St. Petersburg areas. We know there are significant opportunity there and believe that as we expand out beyond that it could be a very meaningful market for us. I would hate to give a specific patient number guess, but I would say we are taking it as a very serious opportunity. That's why we have opened an office there. We felt it was important to get our own people on to the ground in Russia to move that market forward as quickly as we can.

In Iran, the process has been very time-consuming first with getting the (inaudible) authorization from the state department and then filing a request for an authorization that has come through now. It has gone through initial committee for funding. There were 30 drugs presented at that first committee meeting and three of them were approved for importation. Naglazyme was one of the three successful. We have got another meeting that we have to go through to get final approval. We hope to have that done either by the end of this year or early next year and, again, we know it is a meaningful market but we don't have visibility down at a granular level that we see exactly how many patients, but similar to other countries across the Middle East and North Africa there appear to be significant opportunities, significant numbers of MPS-6 patients there.

In terms of the seasonality for Naglazyme, it is a big driver and has as a pretty wide 2011 guidance range. There is just one month left. If you look at those numbers it looks like sales could be down in the next quarter if you occupy the majority of that range or maybe get back to the $60 million or so level that you were at the last couple quarters for the top end of the range. Based on what you are seeing so far in the fourth quarter would you hazard to guess as to whether you are more likely to come in at the bottom or at the top of that range?

One of the things I mention every quarter is that we get larger orders from specific governments on somewhat irregular basis, specifically Brazil. There are small entities that order in Brazil on a routine basis but the federal ministry of health orders every two, three or four months and whenever those orders come in they are very large and the extent of that order size can be roughly the extent of the gap between the low end of the high end of our range. So you can read between the lines or I guess you don't have to because I'm saying it out loud. The Brazil order comes in we'll likely to be at the high end. If it doesn't, we're likely to be at the low end.

In that case if we are at the low end in Q4, Q1 will be pretty strong then.

That is fair to say. Did I answer your question?

I'm sorry, I already removed him. The next question comes from the line of [Robin Karneska] with Deutsche Bank. Please proceed.

Hi, guys. It is [Nadeep] filling in for Robin. I just had a question on PEG-PAL. What exactly are you doing to identify the induction regimen and how long is that going to take?

What we're doing is we're collecting a lot of immunology and clinical safety data and we are trying different schedules and regimens and it is a little bit difficult to predict how long it is going to take. What we are striving for is the fastest, safest and most convenient regimen.

Induction and titration regimen.

Once we get patients on therapy what we have shown is that they can stay on therapy for quite a long time. So we want to have that induction on to therapy like I said as fast, as safe and convenient as possible and we don't have a precise timeframe for how long that takes.

Okay and just a follow up. On BMN-701 is there any way we will get an interim data before the top line?

It's always possible. I would say make sure you come to research and development day December 8 in New York City.

Sounds good thank you.

Your next question comes from Liana Moussatos with Wedbush. Please proceed.

Thank you for taking my question. Can you give us a geographic breakdown of Naglazyme sales?

Sure. US is $7.7 million, Europe $19.3 million and international $28.9 million.

Thank you.

Your next question comes from the line of Cory Kasimov with JPMorgan. Please proceed.

Hi. Good afternoon, guys. Thanks for taking the question. That was a good teaser for the R&D day. On 701 for Pompe, what are the hurdles that need to be cleared to proceed to each subsequent does? Is it simply a safety check or are their efficacy things in place as well?

Hi, Cory. Just safety.

Just safety. Okay. And then going through earnings season it seems like drug pricing has been a big topic of conversation on just about every earnings call this quarter. Can you guys talk a little bit bigger picture about the pricing environment for orphan drugs and maybe some of the regional differences or trends you're seeing there?

The pricing is under pressure. The global economic problems that you read about in the paper every day have everybody tightening their belt. Good pricing, good reimbursement is still possible as long as you have a product that provides significant value for the price that you are charging for it and good clinical data to support that benefit. We are fortunate with Naglazyme to have a product that both provides significant value and has a clinical data to back up that value. We do see a number of things taking place, including more frequent reauthorizations, in some countries higher co-pays, and places more frequent reviews to maintain or determine that efficacy is being maintained, but to date we have been able to work through the pricing pressures relatively unscathed with the only two major setbacks, the German price cut that took place about a year ago that mandatory 10% and the US Medicaid rebate increase that also took place last year.

And to further elaborate on Steve's answer, we haven't seen so far any policy regarding [reference] in pricing that specifically targets orphan disease products. So when there was a cut in Germany summer of last year it was across the board for all pharmaceutical products and we were not exonerated but it was not something that was targeting orphan products.

Maybe to add to that as well. We have looked at some of the proposed changes in the US including expansion of the 340-B criteria hospitals and it is a relatively meaningless change in our overall revenue stream if any of those changes are put in place this year. If you can go to the next question.

Your next question comes from Eun Yang from Jefferies. Please proceed.

Thanks very much. At the recent medical conference in some of the [documentation] that when they put their patients on Kuvan about 20% to 30% of their patients have not been able to offer restricted diet. Is that what you are hearing in the medical community?

The impact of the Kuvan varies by patient. You need residual pH enzyme activity which Kuvan helps regulates as a co-factor. In some patients that up regulation provides a dramatic drop in Phe levels and in those patients the physicians tend to liberalize the patient's diet. In some patients there is no residual activity of the enzyme and there is no impact at all and the patient immediately comes off Kuvan. Another bucket of patients, if you will, are patients who do have a drop in Phe levels that is beneficial to the patient but not a drop in a significant enough to allow diet liberalization. Our best market research would indicate that roughly 70% of patients do have some liberalization of their diet after going on Kuvan but certainly there are certain patients who benefit only from the drop in Phe and do not have a corresponding increase in protein intake.

Okay. And question on PEG-PAL. Phase III initiation study timeline has been pushed out at [your quarter conference call] and, Hank, you mentioned that it is difficult to predict how long to take to actually figure out the induction and optimum schedule and dosing. Are you comfortable with second half of next year phase III initiation for PEG-PAL?

That is our view as we sit here today and we have more dosing work to do, but it is complicated and I think we think it is important to get right, so what I said in my prepared remarks that given the important and sustained benefits that we see in PKU patients treated with PEG-PAL, we think it's worth spending the extra time now to get the induction dosing regimen right. And as far as more details again, I will just throw in another advertisement for R&D day where we can talk about this in quite a bit more detail.

But we have a specific plan in place as to what we are testing right now and what we are planning to test in the next six months or so.

Thank you.

Your next question comes from the line of Tim Lugo with William Blair. Please proceed.

Thanks for taking my question. Since it looks like the PEG-PAL pivotal trial will be around the same time as the Kuvan outcome study, will the outcome study inform end points for the PEG-PAL pivotal trial?

Well, it's certainly good to have knowledge. We think that from a regulatory perspective blood (inaudible) level can serve as the primary basis for approval. We are learning quite a bit about neuro cognitive effects of the lowering and there could be some value in including additional measures of executive function of the pivotal trial. We don't think we'll be obliged to do that and as to whether we choose to do that I think we have to wait and gather a little bit more data possibly from the 016 trial but also just from assembling more experience in the PKU community and then putting it together the final design of the phase III trial.

To remind you in this past summer we did have a meeting with the FDA on PEG-PAL potential phase III primary end point and at that meeting the FDA told us that Phe lowering for PEG-PAL would be an okay primary end point.

And can you remind us on the IP surrounding Kuvan and your expectations for paragraph 4 and do you have a hard line whether there will be a settlement or some sort of legal battle and what the timing would be of that?

Well again I hate to say that again but we were planning on giving you a thorough presentation on the IP situation with Kuvan at the R&D day but the first paragraph 4 filing could occur as early as December 13 of this year. However, whatever the timing of this filing, the worst case scenario is since we have orphan drug protection and we have pediatric claim so at the very, very early -- if [IP] protection fails the very earliest time that a generic would come in would be mid 2015 but you will see at R&D day we have been gearing up for big legal battle. We anticipate a legal battle and have been preparing for it for over a year. We have several issued patents now, including the once a day patent, which was [received ] very strong. Again, we will give an update on December 8.

Thanks very much.

Your next question comes from Brian Abrahams with Wells Fargo Securities. Please proceed.

Hi. This is [Shen] calling in for Brian. I have a question on BMN-701 and Pompe disease. You talked about a goal of showing security over Myozyme and Lumizyme. I know the study is still kind of early, in early phase of the study but it'd be helpful if you could talk about how large the study has to be in order to show superiority particularly as to a 6-minute walk test and/or FEC.

Hi. So I think it is important to remember that the present study, the dose escalation study followed by a cohort expansion is single arm non-comparative trial. So the interpretation of the trial will be based on a comparison to what amount the historical control group which will be the published data on Myozyme Lumizyme that was the basis for its approval in late onset Pompe.

I think we're focused on two things there. One was the group mean improvement and 6-minute walk test in the Myozyme group which was around 28 meters and -- but maybe more importantly if you look at the individual patient data from that study out of 60 patients randomized to receive Myozyme or Lumizyme only 4 of the patients had really very large improvements in their 6-minute walk test. So I think our principal interpretive frame of reference using that historical control group is whether we're better than, 4 out of 60 or roughly 1 out of 15, and we think that in the cohort expansion group that if we see a response rate which is substantially in excess of that 1 out of 15 rate we would be very encouraged to take that into a pivotal clinical trial.

To expand on this beyond your question, obviously we haven't run out of time to finalize the design of the phase III trial but as where we stand today we don't believe it will be necessary to do a side-by-side comparative trial to Myozyme Lumizyme. Probably we will do a placebo control trial phase III and then likely we will do a switch trial where we would take patients that are currently on Myozyme and Lumizyme and switch them to 701 and see what happens, but we don't believe there is a need for a side-by-side controlled trial comparing our product side by side to Myozyme.

Got it. Thank you.

Your next question comes from Nicholas Bishop with Cowen and Company. Please proceed.

Hi. Good evening. I have a couple of questions about what you have learned so far about the rash that is associated with the induction phase on PEG-PAL. Those questions are what kind of data about what underlies that phenotype can we expect to see at the R&D day and, second, will we see any of the results of your titration study at the R&D day? And, finally, based on what you know so far, is there hope that, that rash in most patients could be reduced or eliminated in the future?

Yes. So the kind of data you will see in R&D day pertains to the clinical safety profile as well as the laboratory measurements that have been made in the trial, particularly around inflammatory and immune parameters. And as to exactly what's going to be presented, I think it's a little early still to talk about exactly what's going to be presented, but I think it will be a fairly comprehensive presentation of where we are with PEG-PAL and where we are going.

Okay. And are you hopeful that if you optimize the titration schedule you could avoid the rash phenotype in most patients?

We have seen varying frequencies of the rash, according to different regimens, and we're pretty confident that we can find something that is acceptable in terms of frequency and we are just trying to optimize. As I said before, the frequency of that side effect, the time it takes to get patients on therapy and the simplicity and the convenience of that regiment.

Okay and one quick other one Firdapse. Maybe I missed it. I didn't see it in the release when the data from the US trial might be available.

Probably in the second half of next year.

Okay. Thanks a lot.

Your next question comes from Alan Leong with Biotech Research. Please proceed.

Thanks for taking my question. I wonder if you can update us on the infrastructure expansion?

Are you asking about the manufacturing acquisition in Ireland?

Yes, both the acquisition and the domestic exemption.

Is your question centered around manufacturing?

Yes.

So as you know we close on the acquisition of the facility in Ireland at the end of August, so this facility is not ours. As we have communicated, we have decided to become a moth ball facility until we get the results of GALNS phase III trial so we only have about 12 people in the facility at this time down from about 70 or 75. And our plan is to as soon as we get what we anticipate will be positive results for the phase III trial, we will rehire a substantial number of people over there so that we can start activities regarding preparing the facility for GALNS manufacturing because the rationale behind the acquisition was related to the fact that between --with the two plants we now have in Novato and California, we have enough capacity to get started with GALNS in addition to the other products we have on the market or in development, but assuming GALNS is as successful as we anticipate, we would need additional facility. But by the time we get to a level where we need that capacity, the Shanbally facility will be probably hopefully evaluated and approved.

Regarding the extension or the second facility in Novato, we are in the final stages of the getting that facility qualified and we anticipate that at this time that the facility should be qualified for and approved for manufacturing for Naglazyme probably by the end of next quarter and then we are starting the qualification activity for GALNS and we anticipate this facility to be approved for GALNS manufacturing right before GALNS approval anticipating in late 2013.

That's great to hear. In the announcement you mentioned that there are other candidates that haven't been announced yet. When will the next candidate -- when do you plan for the next candidate to be announced then? If you can, is there any way you can characterize the type of candidate you have in the background?

We don't want to tell you much information but what we can tell you that BioMarin remains focused on orphan disorders and so this will be -- the next candidate will likely be a product for another orphan disorder and we always try to look at disorders that have no approved products at this time for the indication that would be significant improvement in terms of advocacy and safety as compared to whatever is available on the market. As to the timing of when we are going to disclose that, I don't really want to say much about that yet.

Okay. Fair enough. Thank you.

You have no more questions at this time. I would now like to turn the call over to Mr. Bienaime for closing remarks.

Okay. Thank you. In summary, our commercial portfolio continues to generate sufficient cash to fund the development of R&D pipeline. This year has been an important building year for the company. As we look forward to data read outs in 2012 and before the end of next year we will have results for the phase III trial for GALNS, the phase I/II trial for 701 for Pompe, the neuro cognitive trial for Kuvan, and the phase I/II trial for BMN-673 for genetically defined cancer. So all this could have very important implications for the future of the company so we look forward to keeping you updated on our progress and thank you for your continued support and joining us on today's call and goodbye.

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