BioMarin Pharmaceutical Inc (BMRN) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 BioMarin Pharmaceutical earnings conference call. My name is Jeremy and I'll 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)

I would now like to turn the conference over to your host for today, Ms. Eugenia Shen with Investor Relations. Please proceed.

Thank you. On the call today is JJ 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 prospect of BioMarin Pharmaceutical, including expectations including 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-Qs, 10-K and 8-K reports. Now I'd like to turn over to JJ, BioMarin's CEO.

Thank you, Eugenia, good afternoon, and thank you for joining us on today's call. I have a few introductory comments before Jeff reviews the financials for the fourth quarter and full year 2011, and then Hank will provide an update on our R&D program, and Steve will then provide more details on our commercial portfolio before we open the call for questions.

We are pleased with the progress we have made in 2011 and are off to a good start in 2012. Starting with our commercial portfolio in 2011, there was a year-over-year increase in BioMarin product revenues of 18% to $438 million. Our cash flow was $290 million at the end of the year, down from $370 million at the end of the third quarter of 2011. The decline in the cash balance is due to a payment of $81 million for the purchase of the Naglazyme royalty rights from the Adelaide Health Authority in the fourth quarter of last year. Our R&D pipeline remains our top priority for 2012. We continue to be focused on developing therapies that make a meaningful impact in the lives of patients with conditions that are often under served or ignored.

This year we have several major [people without] including results for the (inaudible) Phase III trial for GALNS [and MPS IV,] the Phase II trial for PKU, and the Phase I/II trial for BMN-701 for Pompe disease, and the Phase I/II trial for BMN-673 for [solid] tumors. Looking out beyond 2012, we believe that we are well positioned for long-term growth. We have four growing commercial products with no visible competition in the short term. They are funding the majority of our R&D expenses and we have (inaudible) pipeline including three (inaudible) for our next Phase III program for GALNS, strong manufacturing capabilities, a global commercial infrastructure to support future product launches and no need to raise money.

We have sufficient funds [to get GALNS] into the market and we expect to start turning the quarter to achieving sustainable profitability sometime in 2014 if GALNS if successful. Now I would like to turn the call over to Jeff Cooper who will read you the financial results for the fourth quarter and the full year 2011.

Thanks, JJ. I will start by reviewing product revenues for the fourth 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 $48.1 million for the fourth quarter of 2011, an increase of 6.7% as compared to $45.1 million in the fourth quarter of 2010. Changes in foreign currency rates net of hedges had a negative $1.3 million impact in the fourth quarter of 2011. Net sales of Aldurazyme by Genzyme were $48.8 million for the fourth quarter of 2011, an increase of 14.8% as compared to net sales of $42.5 million for the fourth quarter of 2010.

Foreign currency exchange rates caused a decrease to total Aldurazyme sales of $600,000 for the fourth quarter of 2011. Net product revenue to BioMarin related to Aldurazyme was $23.8 million for the fourth quarter of 2011 compared to net product revenue to BioMarin of $23.1 million for the fourth quarter of 2010. During the fourth quarter of 2011 there was a positive $2.8 million impact from inventory transfer revenue compared to a positive $5.3 million impact in the fourth quarter of 2010. Net product revenue for Kuvan of $30.8 million for the fourth quarter of 2011 increased 12.8% as compared to $27.3 million in the fourth quarter of 2010. Finally, net product revenue for Firdapse was $3.3 million for the fourth quarter of 2011 as compared to $3 million in the fourth quarter of 2010.

Now I'll review gross margins, operating expenses and other details -- and other items in more detail. For the three months ended December 31, 2011, gross margins for Naglazyme were 83%, Aldurazyme gross margins were 66%, Kuvan gross margins were 85%, and gross margins for Firdapse were 80%. Research and development expenses increased by $15.7 million to $57.9 million in the fourth quarter of 2011, from $42.2 million in the fourth quarter of 2010. The higher costs in the quarter were driven by increased clinical costs of the GALNS Phase III trial due to enrollment in that trial, the Phase I/II trial for BMN-701 for Pompe disease, the PEG-PAL Phase II trial, preclinical development for BMN-111 and increased stock compensation expense.

Selling, general and administrative expenses increased by $6.4 million to $48.5 million in the fourth quarter of 2011, from $42.1 million in the fourth quarter of 2010. The major drivers for the SG&A increase during the fourth quarter of 2011 are increased Naglazyme and Kuvan sales and marketing expenditures, corporate expenditures, as well as increased stock compensation expense. Now I'll review the GAAP and non-GAAP bottom line results. Our GAAP net loss for the fourth quarter of 2011 was $26.7 million, or $0.23 per diluted share, compared to a net loss of $12.2 million, or $0.11 per diluted share, for the fourth quarter of 2010. Non-GAAP adjusted EBITDA for the fourth quarter of 2011 was a loss of $3 million compared to a non-GAAP adjusted EBITDA of positive $11 million for the fourth quarter of 2010.

From a cash perspective, we ended 2011 with $290 million of cash and short- and long-term investments, down from $370 million at the end of the third quarter of 2011. The decline in the cash balance is due to a payment of $81 million for the purchase of Naglazyme royalties from the Adelaide Health Authority in the fourth quarter of 2011. For the full year 2011, we used approximately $113 million in cash. However, when excluding the cash impact of the Naglazyme royalty buyback and the purchase of the Shanbally plant we generated approximately $17 million in cash during 2011.

Turning to 2012 guidance, we now expect total revenues in the range of $465 million to $510 million. We expect Naglazyme net product revenue in the range of $240 million to $265 million and Aldurazyme net product revenue to BioMarin in the range of $81 million to $87 million. We expect Kuvan net product revenue in the range of $126 million to $136 million, and Firdapse's net product revenue in the range of $13 million to $17 million. As for our expense guidance, we expect cost of sales in the range of 17% to 18% of total revenue, SG&A expense in the range of $195 million to $205 million, and R&D expense in the range of $255 million to $265 million, approximately $45 million of which is for the production of drug supply for our clinical studies.

Additionally, we are expecting non-cash amortization and continued consideration expense of approximately $19 million related to progress towards achieving development milestones for our acquired product. The bottom line, we expect GAAP net loss in the range of $82 million to $92 million and non-GAAP adjusted EBITDA in the range of a positive $15 million to $25 million. In 2012, we expect cash usage in the range of $30 million to $40 million and to end the year with $250 million to $260 million in cash, cash equivalents and short- and long-term investments. Now I'd like turn the call over to Hank, who will provide an update on our R&D pipeline.

Thanks, Jeff. As JJ noted earlier, the successful execution of our pipeline remains a top priority for the Company. We made significant progress in advancing our R&D programs during 2011 and are looking forward to several key clinical milestones this year. At the WORLD Symposium in San Diego last week, there was a total of 10 posters and four presentations on Naglazyme, Morquio, Pompe and Batten disease. While there was not much in terms of new data presented, there was a high level of interest and enthusiasm from the physician community in our ongoing programs.

Starting with GALNS for MPS IV-A, enrollment for the pivotal Phase III trial is accelerating and we expect to cross 160 patients by mid-March. We have completed the identification of all patients to be enrolled in the trial. It's now a matter of weeks before the patients are screened, randomized and dosed. Due to an overwhelming demand from investigators to enroll their patients in the trial, we will likely keep enrollment open for a few more weeks to accommodate more patients. But we are absolutely committed to reporting top line results in the fourth quarter of 2012 and filing the first market authorization application in the first quarter of 2013. We are confident in the robust design of our Phase II trial and are encouraged by the Phase I/II extension study results. Endurance benefits in the six-minute walk test, three-minute stair climb, and pulmonary function tests are sustained, urinary KS level drops are sustained and the safety profile remains consistent with that of other anti-replacement therapies.

Turning to PEG-PAL, as we announced at her R&D day in December of last year, we are launching a Part D of the Phase II program to find the shortest and safest [conduction] regimen to an efficacious maintenance dosage. We know that PEG-PAL is extremely potent and is generally well tolerated with an attractive long-term safety profile. It has the potential to address patients with the severe end of the PKU spectrum who need a therapeutic option the most. And we believe it is important to take the extra time now to optimize dosing before proceeding to a pivotal Phase III trial. We are committed to making a go/no go decision on this program in the third quarter of 2012. We are encouraged by the recent progress we have made and still feel confident that we will be able to identify an optimal dosing regimen by that time.

The Phase I/II trial of BMN-701 for late onset Pompe disease is progressing on schedule. We have completed enrollment of the 5-milligram per kilo and the 10-milligram per kilo cohorts and dosed the first 20-milligram per kilo patient in early January. As announced at R&D day last December, the initial results from the first cohort at a quarter of the approved Myozyme dose were encouraging. While we have not completed dosing of the second cohort, we remain encouraged by initial findings in the small number of patients treated half of the approved dose. However, since our objective is to maximize efficacy, our goal is to dose approximately15 to 20 patients at 20 milligrams per kilogram. We expect to report top line results in the fourth quarter of 2012.

We also have two ongoing trials for our PARP inhibitor, BMN-673, a Phase I/II open label trial of BMN-673 in patients with advanced or recurrent solid tumors, and a two-armed open label dose escalation Phase I trial in patients with hematologic malignancies. As reported at R&D day, preliminary data from the solid tumor study are encouraging in terms of safety and efficacy. We expect to report top line results for the solid tumor hematologic malignancy studies in the second half of 2012 and first quarter of 2013, respectively.

As for BMN-111, the CMP analog for achondroplasia, we initiated the Phase I trial in healthy volunteers and expect results by the third quarter. Finally, we plan to file the IND for BMN-190 for Batten disease in the first quarter of 2013. So in 2012, we will have seven programs in the clinic, the most ever in the history of the Company. In the second half of the year, we expect key data read-outs from several programs including three Phase II programs which will determine our next Phase III program. We will keep you updated on the progress of our programs as they advance. And now I'd like to turn the call over to Steve who will provide an update on our commercial programs.

Thanks, Hank. Overall revenues from product sales in 2011 were $438 million. This represented 18% growth over 2010. In Q4, we saw the effect of order timing fluctuations that we talk about on each call. The major order from Brazil did not arrive in time to book in Q4. The first of those orders issued on the morning of January 3. This has happened in back-to-back years which give the appearance of a concerted attempt in Brasilia to hold orders until the new year, something we will take into account as we forecast in 2012.

Naglazyme showed very good 17% growth year-over-year, but the delay in Brazil orders caused us to miss the low end of the forecast that we previously revised upward in mid-year. We continue to see positive growth in patient numbers, however, and continue to have a very positive outlook for continued growth of Naglazyme. We have a Moscow office now open and operating and have expanded our presence in both Turkey and the Middle East, geographies with significant upside opportunity for Naglazyme. Recently, we have seen a great deal of interest in our exposure to Europe given concerns about the current fiscal problems in that region. When we dig into the health of our European operations, we continue to see a very positive picture. We saw overall growth in Europe of just under 10% in 2011. Our EU operation is also responsible for Africa, the Middle East, Turkey and Russia, and when we include this entire sphere of operation revenues were up by approximately 13%.

We also track accounts receivable closely and feel comfortable with our current position. For example, in Italy the pharma industry survey published in Q3 of '11 showed 262 days was the average industry days sales outstanding. In our situation, the average DSO is approximately half of that. Additionally, in Greece we have only two patients on therapy, with net exposure of approximately 300,000 euros. So while the last quarter was challenging for Naglazyme, our core business is strong, continues to grow and we look forward to sustained progress in 2012.

Kuvan also continued to grow with an 18% increase in net product revenue in 2011 over 2010. We have expanded our clinical case manager group and their efforts are making a meaningful impact on patient adherence. We have recently completed a pilot clinical trial with the Phe monitor. You may recall we had a previous delay due to issues with accuracy at the low end of the Phe concentration range. Our best efforts have not been able to correct that problem and, in fact, the inaccuracies extended beyond even the range that we anticipated to be problematic. It is unfortunate, but we have come to the conclusion that the enzyme strip technology that we have tried to develop simply cannot achieve the accuracy that is needed to ensure safe and reliable readouts to PKU patients.

This technology worked for blood glucose but the levels being measured are dramatically higher than the blood Phe levels we have attempted to measure. The approach has proven not to be transferable to the home Phe monitor effort. We have now brought this program to a halt. There are other early-stage technologies being developed that may be adaptable to a Phe monitor and we will monitor progress on those efforts, but at least for now work on developing the monitor will stop.

We are very pleased to see that we have passed the 100-patient mark for enrollment in PKU-016, the study designed to show neurocognitive improvements with Kuvan. We believe the outcomes of this study will be the key to accelerating product adoption in the marketplace. Commercial efforts continue to support Firdapse, but Naglazyme growth and patient mapping for GALNS are our priorities moving forward. And with that, operator, we would like to now open the call up for questions.

(Operator instructions)

Robyn Karnauskas with Deutsche Bank.

Two quick ones -- number one, at R&D day you mentioned that you're doing checks to make sure that the six-minute walk test in the are occurring across all sites in a consistent way; and I was trying to get an update as far as what you're seeing there? GALNS study

And the second question -- giving, now that you've enrolled more patients in the Pompe program, do you have any better sense as to what data you need to see to progress on your own into Phase III? Like, what kind of -- do we need to see solid six-minute walk improvements that look better than Myozyme, or could we see consistent improvements over Myozyme across trials for a [fourth final] capacity? Thanks.

Hello, Robyn. This is Hank.

As far as the ongoing monitoring of the study -- as I reported at R&D day, we can look at a lot of parameters while preserving the integrity of the trial in real time to make sure that we are effective in minimizing variability and optimizing compliance. And we look at these data on a fairly regular basis, and our most recent regular look at this indicated to us that we continue to operate in a very comfortable zone in terms of study quality.

So, as enrollment has increased in rate, investigators doing a great job in keeping up with the demands of performing a high quality study. So as regards to performance of the Phase III GALNS trial -- if anything I'm encouraged even relative to R&D day. As far as Pompe -- the basis for progressing would be the completed clinical trial that was reported in the New England Journal of Medicine on Alglucosidase Alfa. As you know, the co-primary end points of that study were walking and vital capacity; and it's a little premature to speculate on what the exact criteria might be, but certainly we will use the information from that trial on a historical basis to evaluate our data with 701. And just to remind you, the goal of the 701 program is to determine whether 701 represents a meaningful important advance in the treatment of Pompe's disease, because we believe the Pompe's market is terribly underserved.

Robyn, it's JJ. Let me ask a couple of things.

Beyond the critical issues is, obviously, your fundamental here. As you know, in our protein development and commercialization world, manufacturing is very important, because maybe some people might not have understood why it is if we have like the current Phase II data late this year, why do we wait until the second half of next year to start the Phase III? And most of it has to do with the fact that we are scaling up the manufacturing process because we want to implement the Phase III study with the scaled up commercial process, and that takes a little while.

When we acquired ZyStor and we acquired the product [Z], manufacturing subcontractor was manufacturing 701 with a 1,400-liter scale. We now move to the 12,000-liter scale. It's a big jump, so that process needs to be fine tuned.

We're making great progress. Also, we have identified a new cell line that is potentially 2 to 2.5 times as productive as the current cell line. So we might look into (inaudible) cell line. We can do all this between now and the middle of next year, so as to be able to initiate potentially the Phase III in the second half of next year.

Next question?

Cory Kasimov with JPMorgan.

First, on GALNS -- it's good to see the accrual in the Phase III trial accelerate as much as it has. Do you think that's now exceeding expectations simply because sites are coming on faster than you thought, or are you finding additional patients you didn't know were out there before?

Hi, Cory. It's a little hard to sort that out.

I think the main thing that I got from our meetings with investigators with the WORLD Conference last week, is just how enthusiastic physicians and patients are to participate in the clinical trial. And that's really coming through very strongly in terms of physicians aggressively scheduling screenings, patients being willing to travel to clinical trial sites, interrupt their school work, if necessary. So that's the main thing that I think that comes through in interacting with the sites.

Okay. And then on Kuvan -- correct me if I'm wrong, but I thought the outcome study was initially expected to report out in the second half of this year. And if that's case, what's the cause for the slip to mid-2013?

No, I don't think that we had -- maybe we misunderstood something. I think we were talking about enrollment completing at the end of this year, and then the data being early part of next year.

Yes. I don't think recently we have communicated it would be the second half of this year. But as Steve said -- and Steve can elaborate further, or Hank -- we are half way done into the enrollment (inaudible) about 200 patients. We passed the 100 patients mark; it's accelerating into the enrollment. It was a little slow to start, as usual, but we are getting some enthusiasm about enrollment right now; and we should be done enrolling by the end of this year, and it's basically six months or so end point, so that's why we're talking about mid-'13.

Michael Yee with RBC Capital Markets.

Two questions; one on GALNS. The first question is, when you mentioned that you're looking at the integrity of the study, is it safe to say when you're looking at the checks from the six-minute walk that you do have blinded rates of six-minute walk, and you're looking at those periodically on a blinded basis?

And then second question is on 701 -- obviously, you continue to dose escalate, I understand you want to have the data on 20 milligrams. Is there a chance that we can get either extension 5-milligram data? And also, why not just tell us 10-milligram data? I assume there may be a dose response, so maybe we could get that data?

So, in regard to your first question, we have a pretty complicated system set up that's intended to protect the integrity of the trial. So I don't really want to get into the details of who is looking at what, but suffice it to say, the lights are green in regard to the progress of the GALNS [civil] clinical trial; and we have a study steering committee and a study data monitoring committee to work really hard to protect the integrity of the ongoing trial so that only people who need to have access to the appropriate information have that access.

As far as the Pompe study goes -- as I mentioned in my prepared remarks, we are encouraged. The main message here is that we really think the most useful data to get are going to be the data from 15 to 20 patients treated at the same equivalent dose as the marketed product, and we are really encouraging people to wait until the end of the year to have those data to interpret the findings of the study.

Okay. Thank you.

Phil Nadeau with Cowen and Company.

Just a couple on 2012 guidance -- first, on the SG&A line, there's a reasonably healthy increase in SG&A going from 2011 to 2012 despite the fact that you're not launching any new products. Can you talk about what's driving that increase, and is there any chance for expense savings on that line?

Yes, I can address that. Basically, the increase in the SG&A is occurring due to -- we are still spending additional funds on Naglazyme with the global expansion, but we are also beginning to spend more money on market research and launch planning for GALNS. So we spent very little in 2011. We are starting to ramp that up to some extent to ensure that we are ready well in advance of a potential GALNS launch.

There's also some additional costs associated with our new facility in San Rafael that much of the Company will be moving into later this year. There's some additional depreciation costs, non-cash depreciation, and higher IT costs that are really driving the increase. So it's really a combination of a number of different things, both on the selling and marketing side, but also on the G&A side as we expand to support all of the new products that we are bringing through.

Okay. Great.

We signed a lease for the new facility in San Rafael because we are running out of space here in Novato. We are occupying -- I don't know -- eight buildings now. We need to put everybody together in buildings that are close to each other. But for the first six months of the year or so -- maybe it will be more -- we're actually going to be dual; we are going to have to pay for basically almost two headquarters, because we are going to have to pay for the lease for the San Rafael facility that we are building up to accommodate our people, and we have to pay for the lease for the current facilities in Novato. That's one thing.

And although it has increases, that's kind of [an exciting] increase. The other thing, I did a quick look at companies with more or less similar revenues to us, and I look at Onyx Pharmaceuticals -- this past year they had a run rate of $200 million in SG&A, so they spent more than we did last year. And they haven't issued guidance for this year, so we will see. And our spend last year was similar to BioPharma and they haven't reported, either. And we have aligned with companies with similar stages of development and revenues.

Okay. As we think about the trend line in SG&A going forward, is it safe to assume that the growth in SG&A is going to decelerate, or do you imagine a consistent growth in SG&A expense similar to what is going on from 2011 to 2012?

I think the percentage increase in growth should moderate over time; obviously, with the exception of a product launch in which you will have a one-time incremental growth in spend. But the absolute amount could possibly increase, but the percentage growth should be less. And as our revenues grow, particularly for GALNS, the SG&A as a percent of sales will surely go down.

Okay. And on the Naglazyme line, it looks like the sales that you were guiding to are a little bit below what we were expecting. Can you talk about the growth drivers for 2012? And maybe if any have moderated in recent quarters, versus maybe where you thought before?

They really haven't moderated. The shortfall in Q4, as I said, was specifically the result of timing fluctuations. We have -- we use Brazil as the example a lot, because they tend to order very large quantities through their federal Ministry of Health; and those order timing aren't particularly predictable. We've had quarters where they have been disproportionately high, and quarters where they have been disproportionately low. Q4 was very disproportionately low, as I mentioned. That order was held; it came in literally the morning of January 3.

So they obviously wanted to put that expenditure into the following year. We see basic solid underlying growth really across the board. We are still seeing high single-digit growth in Europe, which is reasonably well-penetrated. We actually had a very good year in North America last year; had double-digit growth there. We anticipate high single-digit growth there for the foreseeable future; and significant growth in some of the areas that where we are establishing operations or have established operations but haven't penetrated nearly as deeply as we know we can. And those areas would include North Africa, the Middle East, Turkey, Russia, and we still think there's significant upside in Latin America, as well.

We are adding some resources in Asia this year. I'm currently out with our partners doing training with our business partners in Asia right now. We think we have got upside there. So our core business is good; it's going to continue to grow, and you're going to continue to see some significant fluctuations on a quarter-to-quarter basis.

Great. That's very helpful.

Tim Lugo with William Blair.

Regarding the GALNS enrollment ramp -- was this from a specific geography? And are you seeing key EU countries enroll more patients rather than others? I know that you now have less sites than you originally planned, so can you just rectify the two?

It's not coming from any particular geography. It's an across-the-board, every site is really pulling out the stops and expressing a lot of interest to put patients in the trial. As you mentioned, we have had some delays with some health authorities that are not necessarily specific to our product -- well, they are not specific to our product -- so we will end up with a fewer number of overall sites in the program than what we had originally planned, we think. Even saying that, physician investigators are working very hard with their regional health authorities to make sure that everything is being done to include their sites in the trial. But the main thing is, is that the enthusiasm for participation at the physician investigator, as well as at the patient level, is just extraordinarily high.

And will you begin focusing more on patient identification again later on in the year?

Steve?

We are continuing to focus on patient identification. As Jeff mentioned, some of the additional spend on the sales side is related to market research we are doing. A lot of that market research is related to patient mapping. We are active; we are continuing to add patients into our database; and Hank and his group can obviously tap into that database to target centers with significant numbers of patients if they need to, although right now it looks like they have got more patients than they need.

Okay. And one last question -- should we expect a strong Naglazyme quarter in Q1 due to the Brazilian order? And then maybe some lumpiness throughout the year?

I think a good Q1 is a fair expectation.

Thank you.

Salveen Richter with Collins Stewart.

It's Laura Ekas on behalf of Salveen.

Just wanted to ask a question about Firdapse. Just curious about what's happening with the trends in the EU? Your fiscal year '12 guidance suggests not very much year-over-year growth. And then, also, what your plans are for the US, given the slower than expected sales in the EU?

I can comment on the EU and then maybe I could turf it back to JJ for US plans.

What we have seen in the EU is some difficulty in moving compounded product out of utilization. And we have seen some greater dispersion of patients; the diagnosis is done in a relatively small number of centers, but then the patients tend to go back to their hometown neurologists for follow-up therapy. We haven't been willing to put the numbers -- the size of the headcount required to follow up on all those patients. It is simply a situation where the amount of resources it would take to drive the business substantially, exceeds the amount of business that would be available from that effort. So we have tried to be conservative with our spending over there.

We are taking what business we can; we are supporting development of some of the scientific data that supports Firdapse. We're continuing to work with pricing authorities to try to get compounded drug moved out. But I think we are trying to be realistic with our forecast. We have struggled getting any type of real traction where we see significant growth. And unless we get some fundamental changes in the marketplace, some breakthroughs on the payer side, it's going to be difficult for us to show really substantial growth. And when we look at opportunity with Firdapse relative to opportunity with Naglazyme, or the future opportunity with GALNS, it's hard to throw resources at Firdapse that can be better utilized elsewhere.

Sure.

Yes, and regarding the US -- we believe that there is a larger opportunity -- I mean by the difficulties we are facing in Europe, there is a larger opportunity in the US, because we believe that we know that the FDA is much more stringent than different countries in Europe in going after compounding pharmacies. In the US, I think we have said, in past two years or so that we intend to partner the product. And it's not that much related to the opportunity, which we believe is still pretty strong; it's more related to the fact that we would need to build a [self-call] calling on a neurologist, which we are not calling on right now; and that would be the only product we would have to call on those docs for. And I don't think it would be cost effective to do it ourselves. We actually are in advanced -- a late stage negotiations -- in terms of partnering Firdapse in the US.

Great. Thank you.

Chris Raymond with Robert W. Baird.

I know this was actually already asked, but I guess I didn't really understand the answer. And it's on BMN-701. And so, I think you guys indicated the next data set will be after all the patients, the 15 to 20 patients that you'll have at the 20-mg per kilogram dose. But it is an open label study, and you've been fairly liberal in the past about giving us realtime updates. What is the logic to essentially go silent until we get the full data?

Well, I'm sorry. When we had R&D day, so when we had R&D day, we wanted to give a full update on where we were at that time (inaudible), of course. At that time, we had basically six-month data for 5 milligrams. Actually, as of today, we don't have six-month data on all the (inaudible) milligram patients, and we don't believe it is good management to give data patient by patient. We don't want to commit to that. And as Hank said, actually we are probably going to have another R&D day this year, and that would be a good opportunity to provide you with an update of the data that we include in a long-term 5 milligrams, some 10-milligram data, on whatever number of patients we have on the 20-milligram at that time.

Great. So we might get something before the full data?

Well, depending -- no. The R&D data is probably going to be late in the year, so it's probably going to be in Q4. I don't want to commit today that we will be giving you some data before Q4 of this year.

Great. Thanks a lot.

Ian Somaiya with Piper Jaffray.

Question on the pipeline -- as you realize success in many of your later stage products, what impact is it having on some of the earlier stage assets? Is it raising the bar at all in terms of what you would consider to be successful Phase II data, to move some of these products or invest in some of these products? Or given the revenue opportunity, is it, in effect, lowering the bar? Just curious to get your thoughts?

Maybe I'll start and JJ can add.

I would say we have been pretty productive with our R&D profile. I think JJ had hoped that we would be able to do an IND per year over the last several years, and we seem to be able to match that hope. And, in fact, with TBP for BMN-190 for Batten disease coming into filing an IND at the beginning of next year, we will continue that trend.

I think the core basis of progressing assets has been and probably will continue to be the extent to which there's a major unmet need, the extent to which the biology is clear and compelling, and the extent to which we can get readouts in a very efficient manner and determine if the product really represents an important medical advance for patients with devastating conditions.

I don't know, JJ, if you --

I don't really have much to add. Again, we believe that, as we said I think earlier, that beyond GALNS, which is where we are going to have the data this year, I think the three other programs with PEG-PAL, 701, or 673 -- all of them have a pretty good chance to move to Phase III. And I think it's whatever -- if the studies we are exhibiting for the three molecules this year are positive, we have a good chance to move forward with one, two, or three of them.

Okay. So the criteria hasn't changed for a go decision on PEG-PAL?

The criteria for PEG-PAL -- I'm not sure what's your question -- hasn't really changed. We could be in Phase III for PEG-PAL right it is not a regulatory issue. We have decided to delay the Phase III, again, not for regulatory purposes. It's for commercial purposes. We believe that we didn't have enough information to -- we did not have optimized, the induction and the dose escalation regimen. We believe we pretty much good on the study as to what the product regimen and dose will be, but not the induction regimen. And we want to have an induction regimen that is as fast as possible, and that minimizes side effects, maximizes the potential commercial value of the product. But we are pretty confident we have a product in our hands right now.

Okay. And just one question on 701 -- we can all appreciate wanting to see the 20-mg per kilogram data, just apples-to-apples comparisons with Myozyme or Lumizyme. Can you give us -- how should we think about potential for maybe a higher dose? Would your manufacturing support evaluation of a higher dose just to further differentiate the product on a clinical basis?

Well, I think on a protein basis there would be some reluctance to go to a higher dose, simply because the data from Myozyme is that 40 milligrams per kilo was not as well tolerated. Maybe that's less likely with 701, but we think that at 20 mgs per kilo our potency should be about five times as great as the marketed product; and the capacity of individual cells to take up GAA is greater with 701. So that really should enable us to test the hypothesis that the limitation and effectiveness of GAA today is inefficient delivery.

As Hank said, based on what we know today, whether it's preclinical data or the (inaudible) data, we don't believe we are going to need to go beyond 20 milligrams. So it's not only cost of goods issue, we probably could tolerate more than 20-milligram in terms of cost of goods or manufacturing capacity; but it's more the protein load issue, potentially increasing in infusion side reactions when you go beyond 20 milligrams. And if you don't get the Pompe (inaudible) data in terms of ability to clear glycogen from the muscles. As Hank said, we should be about five times as potent as Myozyme, and we have data showing that 20-milligram per kilogram of 701 is actually [a peer to] in terms of (inaudible) to 60 milligrams of Myozyme.

Okay. Thank you very much.

Liana Moussatos with Wedbush Securities. Please proceed.

What was the geographic breakdown of Naglazyme sales?

Sure, US was $7.3 million; EU was $21.4 million; international $19.4 million.

Thank you.

Carol Werther with Summer Street.

I have a couple of questions -- I wasn't sure with the Firdapse discussion. Are you planning to partner it and let the partner file in the US? Or are you going to still plan to file in the US this year?

No. We are not going to file in the US this year. The plan would be, assuming we have a partnership done this year, and the plan would be for the partner to do to the filing.

Okay. And then have you had any price increases on any of your products?

Yes, we have. Steve, you want to comment on that?

Yes, we plan to take a more or less cost-of-living type increase on Naglazyme this year, and we don't announce the dates on those simply to avoid any kind of changes in ordering patterns where accounts might anticipate one.

That's only in the US, though.

It's the US, but the US pricing also impacts all of Latin America. So the US price increase would also carry over into Mexico and South America.

But not Europe?

No, it would have no impact on Europe or Asia.

Okay. And then I wanted to ask a long-term kind of question. When I look at my model, I'm trying to figure out when you will be sustainably profitable. Is that linked to GALNS at this point?

Yes, I think I said that in our opening remarks. It is definitely linked to GALNS, so we anticipate everything goes well, and that we would file GALNS in the US in Q1 of next year, and then launch in late '13, early '14. So we believe that by mid-'14 we would be break-even and should be profitable in the second half of '14.

Thank you.

And we should, then we should remain profitable for the foreseeable future on a sustainable basis.

Thanks so much.

Brian Abrahams with Wells Fargo Securities.

Another question on 701 -- just relating to some of your earlier comments, could you walk us through the process of scale-up? And I recognize that you've mentioned that, because the enzyme relies on the [gyl] PEG, there might be less potential for variability to affect things. But how complex is it to change cell lines? What needs to be done? How complicated is it to scale up from a process that another company had started? Do you need to do any bridging work, and will any of the patients at the 20-mg dose towards the end of the study be getting material from the 12,000-liter process? Thanks.

That's a lot of questions. (laughter)

Well, it's one question with several parts, I guess.

(Inaudible) We already have been scaling up. When we acquired the (inaudible) company, ZyStor, they were using another vendor at 1,400-liter scale. We already -- we scaling up with a different vendor, and that does require some work. You do first runs and then you fine tune the process, so it's an intuitive process that takes a little while. So we do have to do some kind of bridging work from the previous process to the current one.

Actually, the existing patients are being treated with 1,400-liter scale, including the first 20-mg patient; but some of the 20-mg patients on a going-forward basis will be treated with the 12.000-liter scale, but with the current cell line. (Inaudible) I'm trying to remember all of them. So then we would be doing some work starting this year, potentially, again, on a new cell line. But we feel pretty confident there would be a new cell line using the new 12,000-liter scale; but we feel pretty confident that by the middle of next year or so we will have all the data that we need to start the Phase III trial in the second half of next year with a new cell line at the 12,000-liter scale.

And the reason why we are doing all this is because, again, we want to avoid having do some major bridging studies like Genzyme had to do when they went from Myozyme to Lumizyme after the product had been in pivotal Phase III. So we want to do the pivotal Phase III with the process and the scale that we anticipate to use for commercial.

Makes sense, and I think you covered everything. Thanks again.

And at this time there are no questions. I'd like to hand it back to Mr. Bienaime.

Well, thank you, again, for being with us today. We believe are off to a strong start this year. We are focused on our [preclinical] advancing pipeline, and we are on track to report [technical] results from several programs this year in the second half of the year, including, again, the much discussed (inaudible) for GALNS, the Phase II for PEG-PAL which is still very important, and the Phase I/II for 701 for Pompe, and the Phase I/II for 673 in cancer.

The success of one of more of these trials could have a very significant impact on the future of the Company. So we look forward to keeping you updated on our progress and we'll have multiple opportunities to communicate this year. Thank you for your continued support and for joining us on today's call. Goodbye.

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