BioMarin Pharmaceutical Inc (BMRN) 2012 Q1 法說會逐字稿

Hello and very good day to you ladies and gentlemen. And welcome to your Q1 2012 BioMarin Pharmaceutical Incorporation Earnings Conference Call hosted by Eugenia Shen, Investor Relations, amongst other presenters. My name is Chris, and I'll be your conference coordinator for today. During today's presentation your lines will remain on listen only. (Operator Instructions) I would just like to remind all parties this conference is being recorded for replay purposes today. Thank you. At this time, I would like to turn the call over to Eugenia to start. Please go ahead.

Thank you. On the call today is JJ Bienaime, BioMarin's CEO; Jeff Cooper, CFO; 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, action 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 10Q, 10K, and 8K reports. I'd now like to turn the call over to JJ, BioMarin's CEO.

Thank you, Eugenia. Good afternoon and thank you for joining us on today's call. So I have, as usual, a few introductory comments before Jeff reviews the financials for the first quarter and Hank provides an update on our research and development programs. And then Steve will provide more detail on our commercial portfolio before we open the call for questions. So we are very pleased with the progress we have made in the first quarter and we believe we are off to a strong start in 2012. Starting with our commercial portfolio, we exceeded $100 million in quarterly revenues for BioMarin marketed products for the first time in Q1 of this year. This was driven by a year-over-year increase in Naglazyme net product revenue of 13%, that despite a weaker Euro than last year. And a year-over-year increase in Kuvan net product revenues of 20%.

As we have communicated previously, in early January we booked an order from Brazil that was delayed from Q4 2011. But even without this order, Q1 would have been our strongest Naglazyme quarter since launch. As Jeff will explain, net product transfer revenue had a negative $6.4 million impact on net Aldurazyme revenue to BioMarin. And despite the negative effect of product transfer revenue, we will receive $18.4 million of royalty in cash from Genzyme for this quarter. And had product transfer revenue been neutral in Q1, total BioMarin revenue would have been $123 million. Net Aldurazyme product revenue is expected to be neutral or positive in Q2 and positive in the second half of the year.

More importantly, the total number of Aldurazyme treated patients keeps growing with a 9.1% increase in the first quarter of 2012 as compared to the first quarter of 2011. Also the number of patients treated with Naglazyme continues to increase steadily during the same period, and we are on a trajectory to reach top sales well above $300 million. Following this record quarter in both Naglazyme sales and the number of patients treated, we decided to increase the lower end of our Naglazyme revenue guidance by $10 million for the whole 2012 year. Our cash balance was $288 million at the end of the first quarter, down slightly from $290 million at the end of 2011.

Our R&D pipeline remains our top priority for 2012. We are on track for five significant clinical readouts by the end the year, including the Phase III trial for GALNS, the Phase II trial for PEG-PAL, the Phase I/II trial for BMN-701 for Pompe's disease, the Phase I/II trial for BMN-673 for solid tumors, and the Phase I trial in healthy volunteers for BMN-111 for achondroplasia. Positive results for one or more of these patients-based trials could be transformative for the Company. Our increased R&D spend in the first quarter is linked primarily to clinical manufacturing costs and enrollments of an additional 16 patients in the GALNS Phase III trial as compared to our initial objective because of the overwhelming enthusiasm for this study in the Morquio community.

Also, please keep in mind that almost 20% of our projected R&D spend of $265 million to $275 million in 2012 is for clinical drug supply. If Phase III GALNS is approved, approximately $7 million of expenses from the manufacturing campaign in 2012 would support named patient and commercial sales in the future so the spend -- some of the spend is actually an investment in working capital. So despite the expectations for higher R&D spend, our projected net income remains unchanged.

Looking out beyond 2012, we believe we are well positioned for the 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 with a full pipeline, strong manufacturing capabilities, a global commercial infrastructure to support future product launches and sufficient capital to get GALNS to the market. If GALNS is successful, we expect to turn the corner towards achieving profitability in the second half of 2014, and to maintain profitability from that point forward.

Now I would like to turn the call over to Jeff Cooper to review the financial results for the first quarter of 2012.

Thanks JJ. I will start by reviewing product revenues for the first quarter of 2012, and then follow with a more in depth look at our operating expense and financial results. Beginning with Naglazyme, net product revenue was $68.6 million for the first quarter of 2012, an increase of 13.2% as compared to $60.6 million in the first quarter of 2001. Changes in foreign currency rates net of hedges had a negative $0.2 million impact in the first quarter of 2012. If there were no hedges in place, the impact on foreign currency rates would have been a negative $1.2 million in the first quarter of 2012. Net sales of Aldurazyme by Genzyme were $45.9 million for the first quarter of 2012, an increase of 7.2% as compared to net sales of $42.8 million for the first quarter of 2011. Net product revenue at BioMarin related to Aldurazyme was $12 million for the first quarter of 2012, compared to net product revenue to BioMarin of $18.7 million for the first quarter of 2011.

The reduction in net product revenue to BioMarin during the first quarter of 2012 was due to a negative $6.4 million impact from inventory transfer revenue compared to a positive $1.8 million impact in the first quarter of 2011. The negative inventory transfer revenue during the first quarter of 2012 was due to the timing of product shipment to Genzyme. Net product transfer revenue is expected to be neutral or positive in the second quarter, and positive in the second half of 2012 as inventory transfers to Genzyme resume. Net product revenue for Kuvan of $32 million for the first quarter of 2012 increased 19.9% as compared to $26.7 million in the first quarter of 2011. Finally, net product revenue for Firdapse was $3.6 million for the first quarter of 2012 as compared to $3.1 million in the first quarter of 2011.

Now, I'll review gross margins, operating expenses, and other items in more detail. For the three months ended March 31, 2012, gross margins for Naglazyme were 86%. Aldurazyme gross margins were 93%. Kuvan gross margins were 82%, and gross margins for Firdapse were 82%. Research and development expenses increased by $28.8 million to $73.8 million in the first quarter of 2012 from $45 million in the first quarter 2011. The higher costs in the quarter reflect increased GALNS, clinical and manufacturing activities. We expect that our GALNS manufacturing activities will be mostly complete by July 2012 resulting in a lower GALNS development spend in the second half of the year.

R&D expense for the quarter was also driven by the Phase I/II trial for BMN-701 for Pompe disease, the PEG-PAL Phase II trial, pre-clinical development for BMN-111, and increased stock compensation expense. Selling, general, and administrative expenses increased by $4.2 million to $45.2 million in the first quarter of 2012 from $41 million in the first quarter of 2011. Major drivers for the SG&A increased during the first quarter of 2012, are increased Naglazyme sales and marketing expenses and corporate costs.

Now I'll review the GAAP and non-GAAP bottom line results. Our GAAP net loss for the first quarter of 2012 was $24 million or $0.21 per diluted share compared to a net loss of $4.4 million or $0.04 per diluted share for the first quarter of 2011. Non-GAAP adjusted EBITDA for the first quarter of 2012 was a loss of $100,000 compared to non-GAAP adjusted EBITDA of positive $17.3 million for the first quarter of 2011. From a cash perspective, we ended the quarter with $288 million of cash and short and long term investments down slightly from $290 million at the end of 2011.

Turning to 2012 guidance, we now expect total revenues in the range of $475 million to $510 million from a previous range of $465 million to $510 million. We expect Naglazyme net product revenue in the range of $250 million to $265 million from a previous range of $240 million to $265 million. We continue to expect Aldurazyme net product revenue to BioMarin in the range of $81 million to $87 million. Kuvan net product revenues 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 expense guidance, we continue to expect cost of sales in the range of 17% to 18% of total revenue, and SG&A expense in the range of $195 million to $205 million. We now expect R&D expense in the range of $265 million to $275 million from a previous range of $255 million to $265 million. The increase in the R&D guidance range is primarily attributable to the increased GALNS clinical expenses and higher costs of clinical drug supply for BMN-701 for Pompeii disease. A higher GALNS expense is driven by increased numbers of patients in the study and an expansion of our MOR-008 study in which we aim to document the additional benefits of GALNS which Hank will elaborate on later.

Approximately $52 million of the $265 million to $275 million for R&D expense in 2012 is for the production of drug supply for our clinical studies. Additionally, we are expecting non-cash amortization and contingent consideration expense of approximately $19 million related to progress towards achieving development milestones for acquired products. For the bottom line, we expect a GAAP net loss in the range of $82 million to $92 million and non-GAAP adjusted EBITDA in the range of 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 to 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 as we look forward to several key clinical milestones later this year. Starting with GALNS for MPS IVA, enrollment for the pivotal Phase III trial was completed in early March. Due to an overwhelming level of enthusiasm for the program from the physician and patient community, we enrolled and randomized 176 patients ahead of schedule, compared to our target of 162 patients. We are on track to report top line results in the fourth quarter of 2012. We filed the first market authorization application in the first quarter of 2013. We have now turned our attention to enrolling the ancillary studies of which there are three.

As you know, we have started to enroll a clinical trial for patients under five years of age. The study is important because it satisfies European health authority requirements for registration and will document the safety and potential benefits of beginning GALNS therapy early. The trial will enroll several patients who are siblings either within the study or between this and other studies. Given the historical importance of comparing outcomes in siblings who started treatment early, we are looking forward to continuing to create evidence of the effects of enzyme replacement therapy when begun early.

At the other end of the disease spectrum, we plan to initiate enrollment in patients whose ambulation is limited due to progressive disease. The vast majority of patients with Morquio syndrome relying on a systems devices for mobility, and in some cases lose the ability to walk independently. Given prior results in trials, our belief is that we will demonstrate a dramatic improvement in ambulation, strength and well-being as substrate and enzyme function is restored and residual enzyme tested substrate is reduced. Finally, patient screening has started for our MOR-008 study to more completely document the health benefits of GALNS by evaluating stress exercise capability, sleep and well-being systematically. We are grateful to the investigator community which pushed us to keep enrolling patients in trials to study the diverse benefits of GALNS in patients.

Turning to PEG-PAL, discontinuation due to adverse events remains at a low rate. The tension in the studies continues at a high rate and virtually all patients who are active in the study and who have reached therapeutic dosing have experienced Phe lowering to the target range of 600 micromoles per liter or lower. We know that PEG-PAL is extremely potent and is generally well tolerated with an attractive long-term safety profile. We are encouraged by the recent progress we made and still feel confident that will be able to identify an optimal dosing regimen by the third quarter of this year to move into Phase III by the first quarter of 2013.

The Phase I/II trial of BMN-701 related to Pompe's disease is progressing on schedule. The manufacturing of BMN-701 has been scaled up and we have continued dosing patients in the 20 milligrams per kilo cohort with this new material. We have more than a dozen patients identified for the trial and are on track to report results in the fourth quarter. Since our goal is to maximize superiority, we would like to have at least 15 patients dosed at 20 milligrams per kilo to have a reasonable basis of comparison against Myozyme. We remain excited about this program, which like other enzyme replacement therapies, could have an abbreviated development timeline.

As we have communicated previously, although we may make the decision to progress to a Phase III trial for 701 sooner, we do not anticipate starting the trial until Q4 of 2013 as we optimize the scale up process and evaluate whether the Phase III trial will proceed from material from this new cell line. We also have two ongoing trials for our PARP inhibitor BMN-673. A Phase I/II open label study of BMN-673 in patients with advanced or recurring solid tumors and a two-arm open label dose escalation Phase I trial in patients with hematologic malignancies. In the solid tumor study, patients have been enrolled in the 900 microgram cohort which is nine times the dose where we first observed activity and we are still pushing toward a potentially higher maximally tolerated dose.

We are reaching consensus on experts with tumors to target in the expansion phase of the solid tumors study. This consensus is being driven by laboratory evidence of susceptibility to PARP inhibitors and more detailed molecular characterization of the basis of the tumor susceptibility. We expect to report top line results for solid tumor heme malignancy studies in the second half of 2012 and first quarter of 2013 respectively. As for BMN-111, the CNP analog for achondroplasia we initiated the Phase I trial on healthy volunteers and expect results by the third quarter. If all goes well, we expect to start the Phase II study in patients later this year or early next year.

Finally, we plan to file the IND for BMN-190 for Batten disease in the first quarter of 2013 and we've scheduled all necessary health authority meetings to support the filing. We 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'll 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.

Thank you, Hank. As JJ noted, overall revenues from product sales in the first quarter were $116 million. This is the first quarter the revenues from BioMarin marketed products surpassed the $100 million mark. Naglazyme sales were strong this quarter with a 13% increase year-over-year. This revenue level was due to organic growth and was helped by a relatively large order from Latin America that just missed being booked in Q4 of last year. Even without that order, however, Q1 would've been our strongest Naglazyme quarter since launch.

We've been encouraged by growth even more rapid than we expected in Russia and are ramping up our activities there. We've also seen very encouraging progress in Turkey and the Middle East. Latin America has continued to generate new patients and we're now seeing meaningful revenues from Mexico. Overall patient numbers on therapy continue to grow at a steady rate. We've had no meaningful problems with reimbursement and the overall situation has made us feel comfortable in raising the lower end of guidance by $10 million for 2012.

Kuvan also had a very strong quarter with 20% growth year-over-year. Q1 is normally our weakest quarter due to the number of patients that have to deal with changes in insurance and co-pays. We've been able to improve how we manage that situation and have also seen steady growth in patient numbers. Our field -based clinical coordinators have also made a positive difference in patient starts and in adherence. We've enrolled roughly two thirds of the targeted 200 patients in the PKU-016 study which is designed to show neuro-cognitive improvements with Kuvan. We expect results in mid 2013 and believe the outcomes of this study will be the key to accelerating product adoption in the marketplace.

That study as well as a number of other recent publications has increased awareness of the issues many PKU patients continue to deal with despite diet and this increasing focus on trying to optimize outcomes for patients has a positive impact on both patient care and on Kuvan. Commercial efforts to support Firdapse continue and we've seen some marginal improvement in sales but Naglazyme growth and patient mapping for GALNS are the priorities moving forward.

And with that, operator, we would now like to open up the call questions.

Thank you very much indeed. So ladies and gentlemen your question-and-answer session will now begin. (Operator Instructions) Yaron Werber from Citigroup.

Hello it's [Bran Juan] for Yaron Werber, thanks for taking my questions. Just a quick question on the GALNS study, I think you publicly disclosed that the study was powered 90% [detag] 4-meter improvement. And he also said the study has sufficient power to detect a 20 meter improvement. Can you tell us what is the power for 20-meter improvement?

The power for detection of a 20 meter improvements is probably like 20 to 25 is 50%. That's just sort of the math. The point of that is that if the trial observes the 20-miter improvement it will be statistically significant. But only just.

Okay. Thank you.

Cory Kasimov from J.P. Morgan.

Hello good afternoon thanks for taking the question. Wanted to also ask on the GALNS study and back at the R&D day in your Q4 report you talked a little bit about your ongoing monitoring. And I'm just wondering if you can update us with regard to the variability in compliance in the trial that you've witnessed. Thanks.

Hello Cory. All of that monitoring is going great. The monitoring systems are working well. Doing exactly what we want them to do. And the clinical trial sites are doing great. I think I said in R&D day no alarm bells sounding, and that remains the case today. No alarm bells sounding so I think all of our advanced training, all of our prep work has delivered in terms of minimizing variability, maximizing adherence to the protocol, the measures, compliance with the medication, inclusion of the right patients, et cetera. So we're really thrilled so far about the progress of the study.

All right. Great. Thank you.

Robin Canouscas from Deutsche Bank.

Hello guys it's [Inum Deep] substituting in for Robin. Thanks for taking my questions. I had a couple of questions. So, I think prior to this quarter, the strongest Naglazyme quarter ever seen so far has been roughly about $60 million in sales. Is it safe to say that we shouldn't see quarterly sales drop below this level? And a question maybe for Hank, can you please update us on the Pompe trial? How many patients have you started on the 20 milligram per kilogram dose? And do you plan to provide any data maybe on some of the lower doses prior to the full of results? Thanks.

I can take the first question first. What we say every quarter is that we see significant fluctuations in ordering patterns. So I would never guarantee you that you can't see a quarter below $60 million in the future. But we feel very comfortable with our forecast for this year in which the low end is $250 million, so we should certainly be averaging over $60 million per quarter for the rest of the year.

And as far as Pompe, to answer your second question which partially includes your first question, first, we don't plan to give any interval updates during the course of the year on the progress of the patients in the study. Our emphasis has been on collecting data from about -- from 15 patients treated at the high dose. We have begun using that high dose material as I said in my talk, at the 20 milligram per kilo dose level. So, we're reasonably confident about regulatory acceptance of that dose as well as in our ability to use it safely. It's a caveat that we're really just at the beginning of using it.

All right. Thanks so much.

For clarification in terms of timings here. There was a hiatus between the last or the first 20 milligram patient and the second one because we had to file an IND supplement -- amendment to be able to start using the 12 (inaudible) material which we got clearance for at the beginning of April. Which is good news because just as a reminder, when we acquired 71 from ZyStor is was many factors by suppliers that it was supplying there was many factoring and it's somewhat lower scales around 1,400 meter scale and we eventually increased that scale tenfold. We still have to do some fine tuning around that but this is why it took a little while to start enrolling beyond the first patient the 20 milligram cohort. But now, we are moving forward. And as Hank said we have several patients in the wing and that's why we seem pretty confident that we will have 15 patients enrolled and some data on 15 patients at 20 milligram by the end of the year.

Salveen Richter from Canaccord.

Thanks for taking my question. I'm just wondering how much of the $52 million in R&D expense related to drug supply was expensed in first quarter? And then how should we think about the trajectory for the rest of 2012?

Well $52 million is for the year.

$52 million is for the full year. We haven't really laid out the actual material costs by quarter, but what I can say is that the material costs are heavily weighted in the first half of the year which is when we have our GALNS us campaign. And probably about half of that $52 million is related to GALNS. So you'll see a higher percentage in the first and second quarter than you will in the third and fourth quarter.

Okay and then just the manufacturing the GALNS manufacturing costs is that just first quarter specific?

The GALNS manufacturing costs will occur mostly in the first and second quarter.

Okay, Thank you.

And that's why the run rate in this quarter is a little higher than it will be for the remaining quarters.

Thank you.

Chris Raymond from Robert Baird Company.

Thanks. Just maybe a question for Hank on the GALNS program. Just wondering if you could maybe sort of clear up some confusion that we're picking up from folks. You guys have talked about sort of three ways to win with the Phase III, and also a lot of description of the three ancillary studies that you're running in parallel. I know this is a blinded trial but is this commentary at all a reflection of your confidence in meeting the six minute walk test? Sort of end point? Or is it maybe just running these studies et cetera just -- sort of your desire to do parallel path, to just sort of path these programs?

So maybe I'll get started on that and then I'll let Hank elaborate further. Actually the main reason of the additional studies actually building a very robust reimbursement file and have -- and maximize reimbursement support for the product around the world at launch. Definitely the under five is for that because we're not planning on getting the drug only approved for patients under five. But we want to make sure it's also approved and reimbursed for patients under five. The non-ambulatory or limited ambulation studies to make sure that also patients that are of limited ambulation are covered by payers around the world. Because obviously if we use a primary influence of walk distance is difficult to walk -- measure walk for patients that are in a wheelchair. So it's -- the main gist of it is reimbursement support including the third study that Hank can elaborate about further. So it could potentially help also for approval but the key component of it and the key thrust behind those ancillary studies is reimbursement support. Hank?

Yes and in addition, the -- you know we've talked about the three ways to win, and what I'd say about that is that the point of all that was to demonstrate that we've really thought about all the different ways to run the study, to run it really well and maximize our chance to win. And as I had answered earlier, all of that seems like it's working well and so therefore we're confident in the pivotal trial. And just the final thing to say is from a medical perspective I think, JJ talked about the reimbursement value of it. I think clinicians are very keen to understand the patterns of how the drug works and the ancillary populations and the ancillary studies, I think that helps build their confidence in the product. Their understanding about how to use it. As I said on my prepared call, one of the main things that we'll get out of this -- out of these ancillary studies is comparisons of outcomes in siblings which has really validated the need to use enzyme replacement therapy early and throughout life. So all together I think we -- the package is going to -- it is a very strong package and we're very confident about how it's running.

And so these -- just to clarify, these ancillary studies will be part of the package, correct?

Yes. They are part of the package.

And then just a clarification on the Pompe program. JJ you mentioned a hiatus between the first patient, I think at 20 mg per kg dose. And then I thought I heard you say that you just got approval for the new process.

In early April.

Right, okay. So we should assume then that really your just getting under way with that 15 does cohort -- or 15 patient cohort?

Yes. Well we actually have enrolled already two patients now in the 20 mg cohort.

Great. Thanks.

But we have, as Hank said I think in his prepared remarks that we have several patients lined up for enrollment that were pre-identified and that's why we're pretty confident that we are going to enroll most of these patients relatively quickly here. And by the way that's good news that the FDA and EMA approved that, the new process. We are still doing some work on the new process that's why we're not going to start the Phase III study until the end of next year. But we are definitely making some progress.

Joseph Schwartz with Leerink Swann.

Hello thanks for taking the question. I was wondering are you enrolling patients -- this is relative to BMN-701, are you enrolling Pompe patients in your Phase One/Two that have previously been exposed to Myozyme and Lumizyme? And if so, are you doing any sort of a test to see what their antibody tighters are?

Hello. We're only enrolling patients who are naive to prior therapy and we do obviously evaluate their imogenis the imogenis of the products during the course of the trial.

Okay. And do you guys have a hypothesis on how much the antibody generation of those two marketed drugs is due to the high protein load versus the severity of the genetic lesion and how much you might be able to avoid due to the IGF tag that might allow better affinity and you might be a better expression too?

Well, I don't think that the antibody response is related to the protein load. I think the clinical consequences of anaphylactoid reactions hypertendency reactions is related to protein load. But, and the reason I say that is because you the pretty much observe antibody responses in almost everybody that's treated with enzyme replacement therapy. If you design your [ATPase] with enough sensitivity and -- so in spite of great efforts to make the form perfect to the reconder versions look like natural human proteins, the immune system with time can recognize almost everything as foreign. The -- that antibody response is more brisk in naive patients -- I'm sorry, in infants, that is in patients who have essentially no native GAA that's a big part of why we're doing our study in later onset patients. And the 701 peg probably won't reduce the antibody formation but it should -- it can be expected to reduce the immunogenicity because of higher affinity and potentially faster and better uptake.

Great. Thank you.

Tim Lugo from William Blair.

Thanks for taking my question. Hank I believe you talked about validating three minutes of stair climb with the FDA in the past. Can you kind of give us an update on that?

Sure. And the process there is pretty well laid out and written documents and it's a process of establishing the correlation of the outcome measure -- measure it in the trial through the stair climb. And patient well-being. And we've done a lot of work developing the patient well-being questionnaire, and that we'll help us establish the clinical relevance of the change in the stair climbing. And if all things go well and there's an improvement in stair climbing as we observed with Naglazyme, and it's deemed to be clinically relevant by health authorities, that can be included in the package insert and then available for reimbursement consideration and promotional use. And this kind of activity, mobility improved on a flat surface, mobility improved on an incline are kind of different measures are about different systems in the body. And could be incrementally valuable for product adoption and support.

And if I may add also, as we have talked about we have other products in development that could actually benefit from our evaluating this end point to the FDA, and to all of the regulatory authorities. And right now, they are (inaudible). Used to the [600] done point, but fixing the walk. But I think if you can introduce the stair walking -- the stair climbing as another potential end point for other products we have in development, that could be useful down the road. Because the time saved, they might be -- stair climbing might be a better measure of overall status of the patient but yet to be determined.

Okay, that makes sense. And can you talk about, you mentioned some acceleration possibly for Kuvan if positive outcomes trial [kurtneas], is I guess is released in 2013. Can you talk about what kind of acceleration we could see? The product seems to be doing pretty well recently.

The product is doing pretty will recently. I think as clinicians have had more experience with it, have seen the benefits. They are more comfortable with putting more and more patients on. But at this point, we're still in a situation where the only real claim we can make is that it helps to lower Phe levels, which is important. But being able to translate that lower Phe level to say it improves neurocognitive functioning or that it improves psychological well being, gives an added value to the proposition that I think is going to make it a much more attractive option as parents consider whether to put their children on. And as adults, consider whether to go on themselves. So we think a positive 016 could have a significant positive impact on the ramp up.

All right. Thank you.

Michael Yee from RBC Capital Markets.

Hello, this is Charmane on behalf of Michael from RBC. My question is with regards to 701, when you say that it's new material that is being dosed, I just want to make sure. Is it like just from the scale of from the 12,000 liter or is it using a different cell line that's more productive as well? And secondly, you mentioned that you -- there's possibility that you would start Phase III slightly earlier, if that's the case when would you know? And what's the gating factor for that? Thank you.

Yes, so I'll start with the first question. So this material we're using right now on a going forward basis for the ongoing Phase One/Two study is just a scale up material with the existing or original cell line. We are doing some work right now in the next few months to actually potentially select another cell line because we have identified several cell lines that are potentially more productive than this one. But therefore when we take make those changes they are always some different variable that changes too. So we're going to probably take the next few months to figure out if we want to introduce the new cell line and if we do, which one and when? So it's still up in the air.

This time whether the Phase II will be with -- the Phase II will be for sure with the 12,000 liter scale but whether it will be with the current cell line or a new cell line remains to be determined. There are lots of options. We could start the Phase III with the current cell line then move to a cell line that has been done in the space before. During the Phase III, or actually wait for the Phase III and move to a new cell line after the Phase III for commercial scale after one or two years of commercialization. So we -- we're evaluating all that. The good news is again, the 12,000 liter scale is pretty much established and that's the one we will be using on a going forward basis for the existing study. So it's very unlikely that we will start the Phase III before the end of next year. All the reasons that I just explained. There is no real shortcut to initiate the Phase III faster.

Okay great. Thank you.

Matthew Harrison from UBS.

Hello good afternoon. I was wondering if you could talk about Pompe a little bit and how you would view the efficacy readout from the Phase II in the 15 patients in the 20 mg per kg arm. What you would view as a positive readout and what sort of criteria you would use?

You want to start Hank?

Sure. First of all, to say it may be a little bit earle to talk about specific criteria because we're still in the enrollment phase. And what we've said in general is that the comparative basis would be using the Myozyme historical control study -- Myozyme, Lumizyme historical control study that was published by -- in the late onset prom case study. And what we've been focusing on is -- the primary objective of that study was improvement in walk and in vital capacity, breathing ability. And so those parameters can form the basis for that historical comparison. But as to specific numbers, we're still in the process of collecting and evaluating information pertaining to that. So I think that'll be a part of the next bit of work that we do.

And again, however -- it's always difficult to answer until we have the data. But as Hank said, there is a last study as a benchmark and the last study enrolled 60 patients but in terms of one of the coparian points which was walk distance, I know they were. Out of 60, about our or five really responders so that's less than 10%. So one, I'm sure would be to look at do we have 20% responders, or significantly more than 10%. And see if you go back to the Lumizyme approval, again based on the FDA analysis Gemizyme missed the walk [coprem] end point. The P value was 0.06 or less than 0.06. They didn't have that much of an improvement in pulmonary function but they had enough to get P value below 0.05 on the pulmonary function. So obviously we will be looking at all those variables and also different ways to measure pulmonary function. Also, and then look at the weight of the evidence and determine whether it's worth moving into Phase III or not.

Thanks, and just a follow-up on the process. Are you dosing all of the patients in the 20 mg cohort from the 12,000-liter process or is it mixed between the your original process in the 12,000-liter?

It's -- the vast majority of patients will be have the vast majority of their dosing at with the new -- with the scale up process demand them

And so, but did the first two they had from before the scale of?

No the first one was before scale up, the second one was starting with scaled up material.

Got you. Thank you very much.

Nicholas Bishop from Current & Company.

Hello good evening. My question is on PEG-PAL. And it is -- as you look at the evolving data in part D of your Phase II study, I guess I have two questions. One is what's your level of confidence that you'll be able to make a go no-go decision on the pivotal program in the third quarter of this year? And if you feel confident that you'll be able to make that go decision what does the go profile look like in terms of initial tolerability and time frame for (inaudible)?

Well, the go criteria, tackling your second question first. Is not entirely based on the part D study, the part D study is mostly about tuning the initial regimen. I think a big part of the go criteria is what fraction of patients can we achieve Phe lowering? What fraction of patients can sustain Phe lowering? And by the way, we're now almost three years out on some of these initial patients. And as I said in my prepared remarks, continuing to see sustain in efficacy in virtually everybody that's treated chronically with PEG-PAL. And another part of the go criteria is long term safety. And as I said in my prepared remarks, we've nothing new from a safety perspective with an emphasis on long term safety. So increasingly, and the longer that we go the criteria are influenced by the long term observations. Especially in a population that's expected to be on therapy chronically long term for their life.

As far as the go criteria from the part D explicitly, that's again something that we're still in a little bit of internal discussion about what we'd like to see. So it's a little bit premature to talk about that. But maybe a way to think about the part D study is, is it's more around characterizing what to expect and how to get patients started than it is necessarily explicitly coming up with a percent of patients who do or don't have any initial reaction to the product. And the reason I say that is because again as we go -- the longer we go and the more -- the longer we go with great efficacy, high degree of retention and those safety events the lower the burden the less emphasis need to placed on the front end of the -- of starting therapy.

So if I may say another way, the real value of the part D is to again optimize the induction and regimen and minimize the time of the induction regimen. So it's more of a commercial optimization profile study than a regulatory requirement. We probably could have started a regular Phase III trial with what we knew. So we see as every week goes and as Hank said, as we get more and more long term efficacy and safety data the probability that we'll move to Phase III increases and I would think where we stand today is pretty high.

Okay. Thank you.

Liana Moussatos from Wedbush Security.

Thank you for taking my question. Can you give us the geographic break down of Naglazyme sales?

Sure. In the US it was $8.6 million. For the EU $23.1 million, and international $36.9 million.

Thank you.

We have no further questions at this time so I'd like to turn the call back to Mr. Bienaime.

Thank you. So in summary, we believe we are off to a good start for this year. We are focused on our [Creesey] advancing pipeline and we are on track to report many key clinical results from several programs in the second half of the year. Including the results from the pivotal Phase III study program NS, Phase II study (inaudible), Phase One/Two for 701 for Pompe, and the Phase One/Two for 60834 solid tumors. So as we said earlier the success of one or more of these trials could have a very significant impact on the future of the Company and we look forward to keeping you updated on our progress. Thank you again for you're continued support and for turning us on today's call. Bye.

Thank you very much. Okay so ladies and gentlemen that does now conclude your conference call for today and you may now disconnect your lines. Have a great day. Thank you very much for joining.