BioMarin Pharmaceutical Inc (BMRN) 2013 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the BioMarin Pharmaceutical Incorporated third quarter 2013 financial results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder this conference call is being recorded.

I would now like to turn introduce your host for today's conference, Traci McCarty of Investor Relations. You may begin.

Thank you very much, operator.

Before we begin let me just say that we had a technical difficulty with our press release vendor and their server is down. The 8-K has now crossed and has been filed and you can get the press release through that.

With us today on the call we have JJ Bienaime, the CEO of BioMarin; Dan Spiegelman, CFO; Hank Fuchs, CMO; Jeff Ajer, Chief Commercial Officer; and Robert Baffi, Executive Vice President of Technical Operations.

This nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc. 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 filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.

Now I'd like to turn the call over to JJ, BioMarin's CEO.

Thank you Traci. Good afternoon and thank you for joining us on today's call.

As you can see from our results you will be able to look at the 8-K. For the first quarters of the year, three quarters of the year we continue to see steady growth of our core business, which is funding our investment in several additional first in class therapies. Importantly, we are making good progress towards the potential approval of Vimizim which will potentially provide us the opportunity to pass the $1 billion revenue mark.

At the same time that we are pursuing an important regulatory approval, all five of our clinical stage programs have either recently started their pivotal proof of concept studies, or we expect they will be starting it in the next two quarters. I am pleased to say that the aggressive development and commercial goals that we set forth for ourselves at the beginning of the year all appear on track.

For Vimizim we remain on track for FDA and EMA potential approvals in Q1 of next year. The FDA recently confirmed for us that the government shutdown did not affect our application timing. We look forward to our November 19 advisory committee meeting, where we will review data supporting the safety and efficacy of Vimizim, including important long-term follow up data for the patients that have remained on Vimizim after the 48 week study.

While the US is an important market for Vimizim and FDA approval is a critical milestone, since the US represents only about 15% of the worldwide market opportunity for Vimizim we are also actively pursuing regulatory approvals outside the US. In Europe during the third quarter, the EMA shares our assessment timeline from accelerated to standard, but we should still be a position to have a CHMP opinion near the end of the year or early in 2014.

In addition to seeking approval of Vimizim we have five new molecules in clinical development, including three active clinical studies. Hank will go through the details of all these programs but let me highlight a few key items. The Phase 3 study with PEG-PAL for the treatment of PKU is enrolling well and we anticipate data in Q4 of next year. This will be an important 2014 milestone, because as Kuvan continues to grow the potential commercial opportunity for PEG-PAL is starting to get more and more visibility.

For the pivotal Phase 3 study with BMN-673 for the treatment of germ line BRCA breast cancer, we are actively screening patients and expect to dose the first patient any day. In addition we are pleased to have established collaborations with some of the leading organizations in the oncology community to enroll and execute on our [6RA3] Phase 3 study. For this study we are working with the National Breast Cancer Coalition, US Oncology Research, and TRIO, standing for Transnational Research in Oncology, and collectively we expect these organizations will help drive enrollment initiatives and trial site management in the US and around the world.

Also of note, incremental data from a variety of studies with BMN-673 continue to mature. We are very encouraged by the duration of response we are seeing in the ongoing Phase 1/2 trial with 673. The median progression free survival, or PFS, has now exceeded 31 weeks and continues to mature in this heavily pretreated patient population.

Additional data on 673 was presented at AUCR and CIURTC meeting, The International Conference on Molecular Targets and Cancer Therapeutics in Boston, where Dr. Yves Pommier presented data demonstrating that BMN-673 traps PARP DNA 100-fold more efficiently than olaparib and rucaparib. Clearly we are excited to see the growing body of evidence supporting the potential efficacy and potency of BMN-673.

On a commercial front our business continues to expand, Kuvan revenue grew almost 20% year-over-year for the quarter and year-to-date sales for all of our four products were almost 9%. This steady rate of growth continues to strengthen the foundation for the Company and helps fund the development of our R&D programs. We also recently completed a significant financing that provided almost $700 million in net proceeds to BioMarin for the continued expansion of our commercial markets and development of our product pipeline, bringing our current cash balances to over $1.2 billion. Dan will review the details of the financing later in the call.

In summary we look forward to a number of important milestones over the coming weeks and months. In addition to the Vimizim advisory committee meeting on November 19 and potentially regulatory approvals for Vimizim in the following month, we expect to dose the first patients in the pivotal Phase 3 study BMN-673 in BRCA breast cancer over the next few days and we will initiate both Phase 2/3 trials with 701 for Pompe Disease, and a Phase 1/2 trial with BMN 111 for achondroplasia.

Next Dan Spiegelman will review the financials for the third quarter. Jeff Ajer, will then provide more detail on our commercial portfolio and Hank Fuchs will provide an update on our R&D programs before we open the call for questions.

And now I would like to turn the call over to Dan.

Thanks JJ.

Earlier today, we meant to issue a press release but it came out through the 8-K. In there we summarized our finance results for the third quarter and first nine months of the year. And I refer you to that release and 8-K for full details. Today I will discuss the results highlights for the quarter ended September 30, 2013, our guidance for the remainder of the year and a review of our recently completed convertible bond offering.

In the quarter, we stayed on target to meet the full year financial goals we set at the beginning of the year for revenue growth, operating spend and net results. Total revenue grew approximately 7% in the third quarter of 2013 compared to the third quarter of 2012. Overall revenue increased despite delay of a large order from Brazil for Naglazyme which we normally receive each quarter.

Over the last six quarters, Naglazyme sales to Brazil have been between $11 million and $17 million per quarter and in each of these quarters there has been a centralized Brazil Ministry of Health order for more than 50% of the ordering from Brazil. However, in Q3 there was no centralized order from the Brazilian MOH and as a result, sales in Brazil were less than $6 million in the quarter, which was a key contributor factor to Naglazyme sales being $63.2 million and essentially unchanged from the third quarter of 2012.

Based on our prior experience we do not believe the lack of a consolidated Brazil MOH order this quarter reflects a change in underlying demand for the product, simply the timing of when orders are placed. And in fact, we have now received that Q3 order. It is worth noting that if the Brazil MOH had placed an order equal to its average order over the last six quarters, Naglazyme sales would have grown approximately 15% instead of the 1% recorded.

More than offsetting the lower Naglazyme reported revenue growth in the third quarter, Kuvan continued to demonstrate strong double-digit growth with a 19.8% increase for the quarter and 18.4% for the first three quarters of the year. Kuvan is an important focus for our overall business as we intend to expand our PKU franchise with PEG-PAL for which we expect pivotal Phase 3 data at the end of 2014. Jeff will describe the commercial programs driving this growth in more detail later.

In terms of bottom line operating results we reported a GAAP net loss for the quarter of $53 million versus a loss of $5.4 million in the third quarter of 2012. Adjusted EBITDA, a non-GAAP measure which we believe is the best measure of our operating results because it excludes non-cash accounting expenses such as stock compensation and contingent consideration was a loss of $16.7 million for the quarter and a loss of $24.6 million for the first three quarters of the year. These near breakeven operating results are a major factor contributing to cash and security balances of $527.5 million at the end of Q3 2013, being essentially unchanged compared to $533.2 million at the end of the quarter a year ago, Q3 2012.

Operating expenses for the current quarter are consistent with our full-year guidance and are driven by the growth in our product portfolio and commercial operations. Increased R&D expenses in the current quarter compared to the same quarter a year ago were primarily driven by clinical development and manufacturing activities related to 701, 673 and PEG-PAL, while increased SG&A expenses in the quarter were driven primarily by increased Vimizim, precommercial expenses and Naglazyme and Kuvan sales and marketing activities.

Turning now to guidance for full-year 2013, with one quarter remaining we are reaffirming all elements of our prior financial guidance with the exception of year-end cash balance, which is being revised to at least $1.18 billion reflecting the net proceeds from our convertible bond offering. While we are not revising our guidance ranges, let me provide some additional color. With respect to revenue guidance, as I noted, we have received centralized MOH Brazilian order that was expected in the third quarter.

However we are unsure at this time as to whether there will be a second order in Q4. With our current order in hand, we expect to be at the lower end of our revenue ranges. If however we receive a second large order this quarter we would be near the middle or potentially above the middle of that range.

In terms of expenses, we're running near the middle to lower end of our range for both R&D and SG&A and combining all these projections we would expect to be at the favorable end of our GAAP and non-GAAP net loss forecasts. Looking to next year, repeating the guidance discussed at our R&D day last month we expect R&D to increase next year as all five of our clinical programs will incur expenses for the full year compared to the start up and partial year expenses in 2013, and with the launch of Vimizim we expect a 20% to 25% increase in SG&A.

Turning finally to our recent convertible bond offering, in October we completed a convertible debt offering of $750 million which consisted of $375 million in 0.75% senior subordinated convertible notes due 2018 and $375 million in 1.5% notes due 2020. For both of these notes the conversion price is $94.15, which represents a 40% premium to the closing price of BioMarin on October 8, the date of the offering.

The bond offering was heavily oversubscribed and these bonds were priced at the low-end of the expected coupon offering range and above the upper end of the expected conversion range. In order to minimize potential future dilution to BioMarin's common stock, upon potential conversion of these notes, we entered into caps call transactions with respect to 50% of the principal amount of each of the notes with three of the underwriters or their affiliates. The effect of this transaction is to change the effective conversion price from the company's perspective on half of the notes to approximately $121.05, which would represent a premium of approximately 80% over the closing price on the date of the offering.

Net proceeds from the offering after fees, transaction costs and the purchase of the capped call are approximately $697 million. To save someone from having to ask the question later, the reason we executed a cap call on 50% of the bonds and not 100% was to balance our desire to minimize dilution on the one hand and maximize net proceeds on the other. We felt that having half the bonds convert at $94 and half at $121, while only spending 4% of the precious bond proceeds was that proper balance and hence 50%.

A final item of note on the bonds, in order to maximize flexibility and to potentially minimize future dilutions, these bonds are structured that on conversion BioMarin has the option to settle the bonds in cash, stock or a combination of the two. Because we have retained the right to repay the converted bonds in cash accounting rules require that the notes be accounted for by separating the instrument into separate debt and equity components.

For GAAP purposes the equity component, estimated at $161 million is treated as a discount to the notes and this discount is amortized to interest expense over the life of the notes. As shown in the table in our press release, this accounting treatment will result in $25 million to $30 million a year of non-cash interest expense.

It is important to note that this additional GAAP interest expense does not have a current, past or future impact on cash flows. Combined with stock compensation expense recorded in GAAP, which also does not have a current, past or future impact on operating cash flows starting next year we will have close to $100 million a year of pretax GAAP expenses that do not impact cash operating results, further highlighting why management focuses on adjusted EBITDA results in managing the business.

Now I would like to turn the call over to Jeff who will provide an update on our commercial program.

Thanks Dan.

Starting with Naglazyme, Q3 2013 sales of $63.2 million increased 1.1% over Q3 2012. This small quarter to quarter increase was impacted by the delay of the centralized order from the Brazilian Ministry of Health in the quarter that, as Dan discussed, has now been received. Outside of Brazil, sales growth was healthy and demand for Naglazyme continues to grow steadily. Patients on commercial therapy, a base measure of demand increased by 4% during the quarter.

First commercial shipments were made to Peru and Denmark in the quarter, and while these markets are small, they represent continued incremental growth from geographic expansion. We suggest you evaluate Naglazyme sales performance on an annual rather than a quarterly basis due to the erratic timing of large orders from certain government purchasers, particularly Brazil.

Turning to year to date growth sales in 2013 for the first nine months were $202.5 million, up by 4.4% from the same period last year. Turkey, US, Saudi Arabia, and Russia are all markets contributing material sales growth year-to-year, year to date compared to 2012. Other markets were impacted by timing of large orders, but none, other than Brazil, that our material on a year-to-date basis.

A report a longitudinal natural history and galsulfase treatment in MPS6, a 10-year follow up from the original MPS6 natural history study, was made at ICIEM in Barcelona. This important study reinforces the long-term benefits of Naglazyme enzyme replacement therapy. ERT was associated with sustained improvement in six minute walk test and pulmonary function, stability in cardiac function and a decrease in mortality. The full publication is expected soon.

Moving onto Aldurazyme, sales continue to grow at steady rates. Total sales reported by Genzyme in the third quarter of 2013 increased just above 5% over the prior year quarter. And increased just over 9% in 2013 year to date sales.

As for Kuvan, sales of $43.6 million in the third quarter of 2013 increased almost 20% over the prior year quarter. Year to date sales of Kuvan were $122.1 million, up a comparable 18.4% from the prior period in 2012. This reflects a continuing increase in underlying demand as measured by patients on therapy and is similar to the increase in dispensed tablets reported by specialty pharmacies, up 17.4% year to date as compared to the same period in 2012.

New Kuvan business continues to benefit from steady levels of new patients being referred for a response trial and the positive impact of the field based clinical coordinators that support patients for effective trials. The base business continues to show strong signs of compliance and persistence. Continuing patients similarly benefit from the support of clinical coordinators if required.

A report of the PKU 016 ASCEND study was made at ICIEM in Barcelona. Study results evaluating neuropsychiatric outcomes concluded that Kuvan was associated with improvement in inattention among Kuvan responders with ADHD symptoms. The complete results will be submitted for publication in a peer reviewed journal.

Briefly now on Firdapse, sales of $4.1 million in the third quarter increased almost 14% compared to sales in the third quarter of 2012, and flat compared to sales last quarter. We do not foresee any material changes in our expectations going forward for Firdapse sales.

Turning now to Vimizim, patient mapping efforts continue. Morquio A patients identified to date have increased to 1,400. We expect to see continued steady increases through the launch period. Other launch preparations continue. We will be prepared to launch Vimizim in Q1 2014 in both the EU and US and will also be ready in the event that we receive an early than expected action date.

As noted last quarter, the US early access program is open and new patients continue to enroll. We are working with health authorities in the EU to treat patients under the nominate ATU process and have treated our first patient in France. The broader access program is under review in France and other countries.

A group of Morquio A experts have met twice to facilitate the development of expert treatment guidelines for Morquio A. A publication of treatment guidelines, including the role of enzyme replacement therapy with Vimizim is expected early next year.

Now I will turn the call over to Hank Fuchs who will review the pipeline.

Thanks, Jeff.

Starting with Vimizim for Morquio A, the FDA's advisory committee meeting is scheduled for November 19, as was recently noticed in the Federal Register. We look forward to the opportunity to provide a detailed view on the Vimizim pivotal data to both the FDA and the Morquio A community, as well as the advisory committee.

Specifically, encouraging trends from the ongoing long-term expansion study support data that we have already submitted from the pivotal double-blind study. Given the positive durability of response we have seen in patients who remained on Vimizim after the 48-week study, we are happy to supply data from the study to the FDA upon their request. To remind you, we received priority review status from the FDA with a PDUFA date set for February 28, 2014.

Turning to the EMA, in the quarter, the review status for Vimizim was moved to standard from accelerated. We believe this change may only add from one to three months time to the approval timeline under the EMEAs guidelines, so in our best case scenario we remain on track for a CHMP opinion later this year or early next year. Both the FDA and the EMA have conducted and completed all preapproval inspections associated with the review of the marketing applications. Based on the feedback to date from the agencies, we believe the inspections and review are on track and should not negatively impact the timing of the approval decisions.

We also recently submitted the marketing application in Brazil, and I am pleased to report that at the end of the third quarter, the visa GNP inspection was successfully completed, and we received a satisfactory status rating for Vimizim. This is an important milestone in the worldwide regulatory process since Brazil along with the United States are expected to be the largest market opportunities for Vimizim. Other foreign applications are being prepared as we look to eventually selling Vimizim in the 40 plus countries that we sell Naglazyme.

Moving onto BMN 673 for genetically defined cancers, as of our most recent data presenting at the upcoming EORTC-NCI-ACR, or triple meeting earlier in the week, the resist response rate from the ongoing Phase 1/2 trial in germ line BRCA mutation in breast cancer patients is 7 out of 14 patients were being treated at the dose of 1 milligram per day, which is the dose that has been selected for the Phase 3 study. This again includes seven confirmed objective responses consisting of one complete and six partial responses.

In addition, there are five patients who are ongoing with stable disease lasting at least 24 weeks for an overall clinical benefit rate at this dose of 86% for 12 out of the 14 patients. It is important note that the median progression free survival in this group of 14 patients treated at the dose that we will study in the Phase 3 trial is 31 weeks and is very impressive.

As a reminder, the Phase 3 study has been (technical difficulties) to achieve a hazard ratio of 0.67, implying an underlying assumption of a change from the control arm of 6 weeks to 24 weeks in the treatment group, and so our 31-week progression free survival bodes well for the success of that trial. The Phase 1/2 study is still ongoing and the Company will provide additional updates later this year at the San Antonio Breast Cancer Symposium in December.

We are encouraged by a few recent data readouts at the European Cancer Conference meeting just this week at the triple meeting. The conference on molecular targets and cancer therapeutics in Boston, BMN 673 was featured in five separate posters.

A leading poster among them was presented by doctors Yves Pommier and Junko Murai from the National Cancer Institute and was titled Stereo Specific Trapping of PARP DNA Complexes by BMN 673 in comparison with Olaparib and Rucarparib. Dr.'s Pommier and Murai concluded that BMN-673 was about 100-fold more efficient at trapping PARP DNA complexes. We think that this is the likely explanation for why BMN-673 shows antitumor activity with far greater potency than other PARP inhibitors.

Also reported at the meeting, Dr Zeb Weinberg of UCLA provided a further update to the ongoing Phase 1/2 study of BMN 673 in patients with solid tumors. In addition to the breast cancer data that I mentioned, Dr. Weinberg reported that one of seven patients with small cell lung cancer initially enrolled in this study has a confirmed partial response, suggesting a potential role for BMN 673 in tumors where BRCA mutations are not known to be present. Additional patients with small cell lung cancer are currently being entered into the study to better define the activity of PARP inhibition in this disease.

Recall that we decided to explore the small cell lung cancer based on a discovery by Dr. Roman Byers at the MD Anderson, showing that small cell lung cancer cell lines are very sensitive in vitro. Work at BioMarin collaborated with Dr. Byers to extend. It was very appropriate that this first small cell lung cancer PARP responded to PARP inhibition as being at the MD Anderson Hospital.

The experiencing portion of the Phase 1 study also enrolled Ewing's sarcoma patients and we have not observed responses at this point. At the meeting, a poster from the National Cancer Institute's evaluations of BMN 673 for the treatment of deleterious BRCA mutation metastatic breast cancer was also described evaluating preclinical data on BMN 673 in combination with temozolamide and other chemotherapies. As noted in the poster, we are currently in discussions about a possible clinical trial of BMN 673 to translate these results to patients.

As J.J. said earlier, we are privileged to be working with these, with three highly esteemed oncology organizations to help facilitate our pivotal study. The National Breast Cancer Coalition is partnering with BioMarin on trial enrollment initiatives globally and serving as a resource of study design, implementation and execution. We will also be collaborating with US Oncology Research, one of the nation's largest research networks specializing in Phase 1 through Phase 4 clinical trials.

Finally we are working with the Translational Research and Oncology, or TRIO, a not-for-profit clinical research organization that is dedicated to advancing translational cancer research by bringing forward innovative and targeted therapeutic concepts into the clinical trial setting. They have a worldwide network of 2,000 investigators, and a proven track record of delivering clinical trial results accurately, efficiently and on time. We are very fortunate to have all three of these oncology networks collaborating with us on our pivotal study.

Now turning to BMN 111 for achondroplasia, as we shared with you with at R&D day, the US and European regulatory authorities have agreed that our Phase 2 study in achondroplasia can start without additional data. In addition, our patient identification efforts continue to pay off. We've already identified a number of patients who are candidates for enrollment in the trial, and we expect to initiate the Phase 1/2 clinical study in patients with achondroplasia in Q4 2013 or Q1 2014.

In the quarter we initiated a Phase 1/2 trial with BMN-190 for Batten's Disease and expect the Phase 2/3 trial with BMN 701 to treat late onset Pompe's Disease to begin by the year-end or early 2014. At R&D day we reported that maximum inspiratory pressure, or MIP, was accepted by the FDA as the primary endpoint of the study.

We have completed a full scale production campaign using our new higher producing cell line. We have verified the expected fivefold production yields, improvement in yields. Characterization testing is currently ongoing and will be required to be satisfactorily completed prior to introducing this material into clinical studies. Regulatory submission of the data is expected to be submitted in Q4 of 2013.

As for the remainder of our pipeline all programs are advancing to the next stage of development and generating value for the Company. We initiated the Phase 3 PEG-PAL trial for PKU in the second quarter and I am pleased to report that enrollment is going extremely well. We continue to expect to report topline data in the fourth quarter of 2014. Over the next couple of days we expect to announce the first patient in our Phase 3 trial for BMN 673 for the treatment of deleterious germ line BRCA mutation in metastatic breast cancer.

Finally, with respect to our earlier stage pipeline we continue to build on our internal capabilities. With our agreement completed with the University College London earlier this year we added gene therapy candidates to our emerging preclinical pipeline. We look forward to filing an IND on one of our early stage programs in 2014.

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

Thank you.

(Operator Instructions)

Salveen Richter of Canaccord.

Thanks for taking my questions. With regards to Vimizim, I'm just wondering if we could get more concrete color around launch preparations and whether you are ready to launch Vimizim in the US at this point, and then status of filings in Japan and other countries?

Jeff D want to answer the preparation for launch?

Yes, happy to. And thanks for the question. In fact, we are very close to being prepared to launch Vimizim in the United States. We had previously set expectations that we would be incrementally staffing up our sales and marketing and patient services organizations. And the programs that we need to have in place like we do for Naglazyme and for Kuvan to support patient access, market access and services in the United States. I am happy to report that that expanded team is in place and is in process of being trained as with the rest of the group to launch Vimizim in the US. In EU, where we also expect and hope for an approval in Q1, we have some incremental staffing up and training to do there, and we are well on our way to being able to do that. And as for your question about the international registrations, I think I will turf that one to Hank.

Right, so in addition to the United States and European Medicines Agency, we have announced that we filed in Brazil. We have, as you know, a fairly detailed world map rolling out country submissions and we are very much on track with our rollout plan. Not going to go country by country, for the purpose of brevity, but we are very satisfied with the progress of our regulatory submissions.

Hank just a quick question on 673, when are we going to see the data in non-breast cancer patients like in ovarian, small cell lung and Ewing's?

We gave an update on small cell and Ewing's just this week at the triple meeting. And we don't have any further plans for concrete plans for updates. As far as ovarian, the data that we presented at [ESMO] was reasonably mature. And just to remind you there, we had observed response activity of about 44% in the 25 patients with evaluable disease. At this point I think we have pretty much got what we've got in breast and ovarian cancer. And I would say -- and as far as next steps for small cell and Ewing's, stay tuned.

Thank you.

Yes.

Cory Kasimov of JPMorgan.

Good afternoon guys, thanks for taking the questions. I have two for you. First of all, probably for Hank, as we get closer to the Vimizim panel, I'm just wondering what your latest thinking is on what the FDA may focus in on and whether or not that has changed at all since your R&D day? And then the second question is on PEG-PAL. And there I'm interested in how you see that commercial opportunity shaping up relative to Kuvan, which seems to have been gaining some traction and momentum the last couple of quarters. Thanks.

Right, in terms of what to expect from the panel, I think what I can say is that we are having very collaborative productive discussions with the FDA in preparation for the meeting. We have exchanged a lot of information. We are encouraged. We have not been surprised by anything. And until the briefing books are final, you don't really know exactly everything that is going to be discussed. Just to remind you, the briefing books don't get published for a couple, three days before the meeting itself. We expect the usual questions about magnitude, duration, statistical robustness, but as I said we haven't really encountered anything that has been surprising as to the FDA's review at this point. And I will turn the PEG-PAL question over.

Jeff you want to go over PEG-PAL market opportunity?

Yes, I would be happy to. The PEG-PAL market opportunity looks very attractive, relative to the success that we have also been having recently with Kuvan. What is most attractive about PEG-PAL is that it appears to be effective in all PKU patients. And that is different than Kuvan, which is effective in only about 50% of the PKU patients that respond to it. The other thing is PEG-PAL seems to have at least what we have seen in the Phase 3, Phase 2 study, seems to have a stronger effect. So more a powerful effect of lowering Phe levels, which could potentially allow patients to be both in their target Phe level range and possibly liberalize their diet. So both of those elements are very attractive.

The one thing that we know about Kuvan is that it is very safe, and it is effective for a portion of patients, including very young patients. I think it's our expectation that our initial approval for PEG-PAL if we were to get one would be for adult patients and we have some plans in terms of looking into moving the therapy into younger patient populations. We think that PEG-PAL could be a very nice complementary PKU therapeutic to Kuvan, probably targeted at adult patients, patients that were responding very well to Kuvan could remain on therapy, patients that were dissatisfied with the response to Kuvan or did not respond to Kuvan and were of an age group appropriate for PEG-PAL could move on to PEG-PAL. That would allow us to address a large and to now unaddressed portion of the market. Cory, I hope that answers your question. In short very attractive market opportunity.

That is helpful, thank you.

Rachel McMinn of Bank of America Merrill Lynch.

Thanks for the question. Two questions actually. Hank, I guess I just wanted to get a better sense from you of your enthusiasm level for the small cell lung cancer response. Is there anything that you can really extrapolate off of this one patient in terms of baseline characteristics? From a big picture perspective, I am just trying to get a sense of do we know that the denominator for PARP has meaningfully expanded or what level of data do you need to get confidence that that would be true?

And just more of a commercial question when we think about the Vimizim sales launch, it seems like just because this product has been in development for a while and you have such a big register of patients identified, that maybe we should be thinking about this as more of a bolus launch where we see significant step up in sales initially but maybe just a shallower growth curve afterwards. I just wanted to get a sense qualitatively if you think that is correct. Thanks.

The first question, seven is a small denominator for small cell lung cancer so I would say I am cautiously encouraged. I think we need to see larger numbers before we would want to make anything out of the small cell lung cancer. To put it in some perspective, the second line agents in small cell lung cancer are pretty poor. The expected overall objective response rate in second line lung cancer is said to be around 10%. I think cautiously encouraged is where we are. On the Vimizim?

On the Vimizim and I will like Jeff comment further. The product has been in development for a while, although if it is approved in Q1 of next year, it will be five years from, basically around five years from first [enrollment], which is less than half the average industry average. So pretty good. It's unlikely to be a bolus based on our experiences launching other products, and also the experience of our competitors. It is true that it is likely to be more rapid than Naglazyme for all sorts of reasons why we have identified way more patients. We only had about 200 identified Naglazyme patients when the product was approved in May 2005 in the US and we are going to have over 200 patients on drug by the time it is approved, and we have identified over 1,400 patients. And also we now have global commercial operations, commercial presence, experience interacting with key opinion leaders around the world and physicians around the world that treat those patients.

But at the same time, we know that it takes a while -- even for patients that are today on the drug it will take for some of them several weeks or months to get them on commercial therapy because they are spread around the world and because of all the bureaucracy involved in getting these patients to commercial. Just some preliminary comments and maybe Jeff can further elaborate.

Jeff, are you there? Jeff is not in the same room as we are. He is in a meeting on the East Coast. Maybe we lost him here. Rachel, come back and ask another question if that doesn't answer your question.

Thanks, guys.

Navdeep Singh of Goldman Sachs.

Thanks for taking my questions. I think you mentioned in your introductory comments that you initiated an early access program for Vimizim. If that is true, do you know how many more QA patients you have enrolled in the early access programs in the US and in the EU? Then I have a follow-up. Thanks.

I don't know where Jeff is, if he is on the call, and Jeff, feel free to jump in if you can hear us. We actually have not initiated an early access program in the US. We have an expanded access program which is a little different. Which is patients that were -- we have mainly an expanded access program in the US, patients that were in different clinical trials, the Phase 3 trial, the Phase 3 extension. And we have an expanded access program in the sense that in terms of semantics here, early access program in some countries in Europe when you do that the patients pay for therapy. None of the patients in the US are paying for therapy.

Again, that's more of an expanded access program to give hands-on experience to the docs with the drugs in the US and also to allow the patients that were in the Phase 2, Phase 3 trials to continue on the drug until the drug is approved. As Jeff mentioned, we have treated one patient in France, in Europe, as an early access program. That's a nominated ATU. We have filed in a couple of European countries for an official early access program where a patient would be paying for therapy. We're waiting to hear from the authorities there for final approval on this early access program which we hope will start by the end of this year. Or very early next year.

Okay I also noticed that you filed for Vimizim approval in Brazil in the second quarter. When do you think you will have that approval. And I think the US represents 15% of global patients. Is Brazil a similar opportunity? Are there any other material territories outside the US?

I'll defer to Hank regarding the timing, although I don't know the exact timing of approval.

Right, I don't think we're going to give guidance on timing of approval in Brazil.

So in terms of opportunity, for Naglazyme, for MPS6, Brazil is our largest country in the world. It is actually larger than the US. I think for MPS4 it might be about the same size as the US. It's a little hard to tell, so it will definitely be a very significant country for Vimizim. But I just want to remind you also for Naglazyme, Brazil was our number one country in the world ahead of the US without any approval. Although approval is important, some sales are anticipated in Brazil before approval.

Okay, thanks JJ.

Joseph Schwartz of Leerink Swann.

Thanks very much. Just as a follow-on to that last answer, regarding the ATU in France, so I'm clear, is that with a product that is considered commercial? Is there a price associated with the transfer of Vimizim for that patient in France?

Yes, I understand Jeff is back online. Are you back online, Jeff?

I'm here. Would you like me to take that one, J.J.?

Yes please.

Okay. Yes, we have one patient that was treated under the nominative process for ATU in France. That is a channel that allows an individual physician to nominate an individual patient for treatment under the ATU program. And we did -- we were able to charge for that product. That -- the price that we charge is not necessarily indicative of a launch price. And the amount of revenue that was generated for this patient was immaterial.

So we are planning on announcing a launch price when we have and announce a first major market approval expected to be either the US or the EU. Previously we've guided that an average annual cost of therapy for Vimizim would be between Naglazyme and Aldurazyme. Those products are on average $400,000, and $250,000 per year for a typical patient, respectively. At R&D day we guided that we would be above the midpoint between those products. Moving towards the higher end of that pricing range for Vimizim and look for a specific price when we announce our first approval.

Okay. And then now that you have many more resources on hand post the convertible offering, I was wondering if we could get your thoughts on whether you are looking to bring in more development assets or later stage/commercial assets and how you intend to balance the ability to bring your expanding topline down to the bottom line as Vimizim launches over the same timeframe.

Thanks for your question. Indeed, some of this financing was definitely opportunistic. The terms that we got for these convertible bonds were extremely good. Probably some of the best terms that any biotech Company has ever done for convertible bonds. So you allow us to have a cash reserve to be opportunistic also in case we see some interesting acquisitions. I would say at this time there is no imminent identified large acquisition that we are working on, I can tell you that. If you look at our past history, yes we have a history of actually doing early stage acquisition, this is how we believe we build value. That's what we did with when we acquired LEAD Therapeutics and we got 673 from it, what we did with the acquisition of this ZyStor and that led to our rights on BMN 701 for Pompe Disease.

I think we on an ongoing basis we review opportunities. Regarding obviously the trade-off between R&D spend and profitability I think we have been clear in the past few years that we are not managing this Company to maximize short-term profitability but at the same time we believe that once Vimizim reaches about $0.5 billion in revenue, which we hope it will, the Company will have over $1 billion of revenue so I believe at that time we should be cash flow profitable. So it's a good trade-off but at the same time when we see a molecule with -- that has a good chance, very good chance to be first in class and/or best in class, and when there is a huge unmet need of some patients that have no alternative therapies, and when you look at the track record of BioMarin of getting drugs approved for a very small amount of money compared to the industry average and much faster than the industry average, we continue to believe we can create shareholder value with those acquisitions.

All right, thanks for taking my questions.

Tim Lugo of William Blair.

Thanks for taking my question. Regarding the Morquio treatment guidelines that's set to be published sometime next year, do you expect any subpopulations to be excluded from those guidelines? And do expect them to be narrow initially and maybe the Vimizim portion to be expanded once the end payer studies report out and largely do expect them to have any role in the commercial opportunities in year one for Vimizim?

Jeff to want to go over that or maybe Hank?

To start, I don't think the ancillary studies are important to regulatory considerations. They were teed up purely to support commercial adoption and payer acceptance. Physician familiarity, just a reminder that, for example with Naglazyme, we did studies in patients under 5 as part of post marketing commitments. And recognizing the opportunity for Morquio patients to get on therapy as early as possible and avert the terrible course of their disease we accelerated the conduct of our studies in very young patients. That was our motivation. It was really for commercial and payer adoption, not for regulator purposes. Jeff I don't know if you want to comment additionally.

I would be happy to. Hank is exactly right. The ancillary studies were largely put together to address questions related to patient subgroups that we experienced, for example, with Naglazyme and we are able to anticipate those questions and address them up front for Vimizim. I think the ancillary studies will be helpful with regard to early adoption of Vimizim for certain patient subgroups, including very young patients.

In terms of the treatment guidelines, that is now in the hands of external physicians, many of whom are investigators in the clinical trials. They will write their paper and submit it for publication after our first major Vimizim approval is in hand. What I would say from observing some of the discussions of the experts is they recognize that there is a high degree of heterogeneity in Morquio A, we're talking about very small patient numbers. Individually and collectively they have seen different kinds of responses to Vimizim and the clinical studies in patients with very different looking clinical profiles. So, I am not actually expecting a very narrow recommendation on the use of enzyme replacement therapy for Morquio, but again at this point that is in the hands of these external experts.

Thanks for taking my question.

Robyn Karnauskas of Deutsche Bank.

Hi guys, thanks for taking my question and congrats on the updated data on the PARP. I was just wondering, regarding the PARP data you had an incidence around 15% of anemia and thrombocytopenia, but how many of those patients overlap? What is the overall incidence of grade three plus myeloid suppression? And myeloid suppression in general? And then was the alopecia that you saw low grade, do you think that's due to drugs? Because I know we have not seen that before with other PARPs. Thanks.

I don't have the numbers at my fingertip, Robyn, about how much overlap there was. What I would say about myeloid suppression is that it seldom leads to discontinuation. Whether it's in one, two, or three categories of the myeloid precursors. I think that's the important thing. It is a manageable side effect. As far as the alopecia, don't know if that is truly 673 related or a function of heavily pretreated patients. You do know that that hasn't been described extensively with other PARP inhibitors. Doesn't mean it couldn't be 673 related, so we notice it, we're not sure that we know whether that is drug or disease.

Okay. Great, thanks.

Phil Nadeau of Cowen and Company.

Good afternoon and thanks for taking my questions. First on Naglazyme, it does seem like Brazil misses an order once out of every five or once out of every six quarters. In your own analysis does the amount of drug that they order in the average quarter equate to the number of patients, or are they truly ordering 15% or 20% more and there is some sort of inventory build up over time?

This is Jeff, and I'm happy to take that one. As Dan described in his remarks, in Brazil we have patients that are covered by a number of different government payers. But over 50% of our volume goes through consolidated purchases from the federal Ministry of Health. You are right, we do miss quarters based on order timing from time to time. The last time this happened was in Q4 2011. There was a steady string of orders that fell neatly -- from the Ministry of Health that fell neatly into quarterly buckets. It has happened, that patients have gone off of therapy because they have run out of drug in Brazil. There is both the issue of order timing, and at the Brazil Ministry of Health level and for the other payers as well, how diligent they are about buying product on time for the patients that need it. In general, the Ministry of Health is buying about a quarter's worth of inventory requirements each quarter.

Okay, so we probably should not expect another order this quarter? You kind of suggested that in your prepared remarks, I just want to --

It's an open question. There is a little less than two months to go. We think that the demand in Brazil relative to the supply could easily support another order by the end of this year. But the orders from the Ministry of Health go through a lot of bureaucracy and so it is possible that the next one could slip into Q1 of next year.

I just want to clarify for everybody that -- the order we were expecting in Q3 we have now received is small, so it will be in Q4. Want to make sure we understand the question, I guess Phil, you were asking was a second order in addition to the one we just received.

Right, exactly. Hank, question for you, on BMN 701, I think at the R&D day you said you were in discussions with the European regulatory authorities over MIP as an endpoint. Is there any update on those discussions and have they accepted that?

We are encouraged about MIP as a primary endpoint. One of the things to note about, we talked a lot about that at R&D day. There was a lot of question about the acceptability of MIP as a primary outcome measure in the context of [force side effect] and six minute walk test being the regulatory basis of approval for prior drug. Turning then to your question, which is on other aspects of the dialogue with health authorities, I think it's fair to say that every health authority would love to have a controlled clinical trial, and given that there is a marketed product, they would love to know how we stack up compared to the other guy. I think the challenge of course is that's a hard trial to do for a variety of different reasons. We are working with them to provide health authorities with the data that we can generate and I think that the trial that we've proposed, that has appeared on clinicaltrials.gov represents the best that we can do in the context of the trials. There may be some additional ancillary information that we can and want to provide to help support the interpretation of the data. But we believe again that that is going to be ancillary to the switching trial that we have discussed.

Okay. Should we take that to mean that we're probably not going to hear another update on European process, that this is the trial and they are comfortable enough with it?

Yes, I think in the main. Maybe some coloring around the edges of some of the ancillary kinds of things, but in terms of the main trial of Vimizim, I think as we sit here today, the expectation should be that is the main trial.

Okay, and then one last question for Jeff, we have heard over the years from other companies that are selling products outside the US that there's a steady pricing pressure on products as they mature. And I don't think that's something that BioMarin has ever commented on. Can you tell us what you see in ex-US pricing for some of your mature drugs like Aldurazyme and Naglazyme? Is there a slow decrease in price in major countries, or are you able to keep price pretty firm?

Good question. You're right, we haven't addressed that one explicitly as that seems to be a subject that is industry wide and not specific to BioMarin. I can't actually speak to Aldurazyme because its marketed by Genzyme and under their control. But what I can say for Naglazyme which has been out for eight years is that see steady pricing pressure in different parts of the world, mainly in the EU. I don't think I have to tell you about which countries and what methods and tactics they use. I can tell you that we're generally subject to the same kind of problems that our peers and their products are subject to. We use a variety of means to try to push back on pricing pressure, and I would say that we are, many times we are either partially or wholly successful in those efforts. The end result is that while we do get hit with certain price reductions in certain places over time, overall the effect has not been material to date.

Okay, so is it less than a low single-digit headwind to ex-US sales year-over-year.

Yes, I would say low single digits year to year.

Okay, great. Thanks for taking my questions.

Brian Abraham of Wells Fargo Securities.

Hi, thanks for taking my questions. A couple of quick ones. Hank, just clarifying one of your earlier remarks, did you yet submit some of the positive long-term Vimizim data into the US regulatory filing, or is that something you would wait for an FDA request for? And could incorporation of that potentially alter review timelines at all?

It is submitted. We don't believe it will alter the review timeline.

Great, and then can you start the Phase 2/3 701 study before the new cell line material is submitted and/or signed off on by the FDA, and then just switch the material part of the way through, or is that a gating factor? I just wanted to confirm that.

No, we believe that we would submit the new material. We don't want to switch in the middle. I think the whole program has been to avoid switching either after the approval or during the trial. The whole game plan has been get the final material right before starting the Phase 3 trial.

Got it. One last quick question if I may. You talked a little bit before in responses from other questions about the expanded access programs that you are working towards. How meaningful a contribution to revenues should we expect these types of programs to be next year as you await reimbursement and or approvals amongst different geographies.

Jeff you want to cover that?

Yes, happy to. I think as I have stated before, I think the early access programs are important for a number of perspectives. But the impact on revenue is not terribly material. The ability to get patients started on therapy while we're waiting for an approval and in some cases in Europe while we are waiting for formal reimbursement, that is positive. The signal from treating physicians that they are interested to start patients on therapy while they are waiting for either registration or reimbursement approval, that's very positive. Of course our incremental revenues generated from patients under early access programs at least in Europe, not in the United States. And I think that's positive, but secondary to the points I just noted.

Great, thanks so much for the clarifications.

Yaron Werber of Citi.

Thanks for taking my questions. I've a question for -- one on the chondroplasia, and one question that relating to neoadjuvant breast. So on the chondroplasia, that product is one of the most exciting products you actually have in your pipeline. It is overlooked by the market and the preclinical data has been very interesting. The question really has to do -- help us understand a little bit what can we expect? The animal models showed very nice and very symmetric, relatively, bone growth. Not asymmetric which is good. What should we -- how much visibility would you have to extrapolating that to humans, I'm trying to get a sense. What can we expect in the human? And then we have a follow on relating to PARP.

Symmetric, in animals that we have treated, we have treated a range of models. Normal animals, mildly achondroplastic and severely achondroplastic. We have published that in severely achondroplastic animals you actually can reverse the disproportionate growth. If you remember a picture of achondroplastic child, they have shortened upper limbs compared to their lower limbs. Their forearms are long relative to their upper arms. That's called rhizomelia, and we can correct that in the animals.

And so the expectation, the hope in children is that we will reverse that. In the Phase 1/2 clinical trial, in addition to measuring simple things like linear height gain, we will also measure proportions with the idea that for example the upper arm will end up being longer than the distal arm. And the reason that that is relevant is because those kinds of disproportionate growth that pinch the nerves at the base of the skull or pinch nerves that exit the spinal canal. The hope is that we actually correct the disproportionate bone growth. And the preclinical data support that. And you had a second question?

Yes, neoadjuvant breast, that field right now is changing a little bit in terms of what the requirements are for ultimate approvals. How did that factor into your development plan as you are heading into a Phase 2 sometime second half of next year? And how does that build on your Phase 3 program for the metastatic setting?

We note the evolution of that environment. And I think for us, the key stake in the ground first is to have an early line metastatic trial well underway before there would be a considered -- so that when health authorities would be considering a neoadjuvant approval it would be in the context of already having seen some data in the metastatic setting. So I think that the sequencing that we have supports that. I think the second thing is that at least in the United States the agency is taking an action on the basis of pathological complete response rates. But they note that they were fairly large pathological complete response rate compared to historical controls, and so if there is an early action taken in the neoadjuvant setting it would be driven by a fairly large response.

Part of our planning encompasses investigating not just the activity of 673 as monotherapy in the neoadjuvant setting but also potentially as a combination or sequential therapy in the neoadjuvant setting. We are still at the early stages of design of the neoadjuvant program. I think what we could expect is that there will be some pilot studies, first to determine whether monotherapy or use in a combination or sequence with chemotherapy is the approach that is likely to lead to a more meaningful outcome. Then followed by more definitive trials if we are encouraged by the preliminary data.

Okay, and then, J.J. just for you it sounds like you guys are looking at small acquisitions so we should not expect that you are going be buying Roche?

That is correct. The rumor is unfounded. We are not buying Roche, I can confirm that.

Thank you.

Chris Raymond of Robert W. Baird.

Thanks a lot, just a couple. Hank, I think before you got FDA's agreement with your trial strategy for 701, you had mentioned that was a challenge to get the FDA to agree to that, in which you have. One of the other challenges I think I remember you describing was that there was a population of Pompe physicians in the community who were skeptical of your trial design and MIP as the appropriate endpoint. Can you maybe talk about now what some of the things you are doing to win over that population or to better collaborate with that group of physicians?

Chris, I think that -- from my perspective, I am aware that there is lower familiarity with the respiratory functional parameters in detail in the average molecular metabolic geneticist community. It was not so much a resistance or disagreement, it was a help us understand. What you saw at -- a couple of -- even before going to that, these measures were actually the measures that were used in both the Pompe LOTS trial that got Myozyme and Lumizyme approved in late onset Pompe, and there have also been studied, the same measures have been studied in a number of natural history studies in Pompe Disease. We didn't invent the idea of measures of respiratory muscle strength as primary indicators of improved outcome in a neuromuscular disease like Pompe Disease. Early on in the program, if there was a disconnect it was biologically we had a greater improvement in muscle -- respiratory muscle strength than we did in skeletal muscle strength and I think that was not where the needle was pointed before we started the program. Mainly because people didn't know where deficient delivery would turn out to be benefited when you had a better enzyme.

Now you flash forward and you've got the data that we got. And you talk to people who are really skilled and schooled in measures of muscle strength, both skeletal muscle as well as respiratory muscle strength, and their observations are, number one biologically we should not be surprised that respiratory muscle strength improves in late onset Pompe Disease because that is the organ where you see a good chunk of the impairment, both early and progressively throughout the disease. It's a pretty dominant element of the disease. In hindsight now that we see better enzyme, better delivery, better respiratory muscle strength outcome. Not a surprise with the benefit of hindsight.

Second element is we shouldn't be surprised that the pressures are the parameter that improves as opposed to the volumes because pressure is a more direct measure of strength than the generated volume is. The kind of information that we will generate going forward will be just more of this. One of the things you saw at R&D day was really nice correlations between respiratory muscle strength and ability to breathe independently, or respiratory muscle strength and survival in other neuromuscular diseases as compared to for example volumes. We will build that case, we will fortify that case, we will enable a wide variety of treating physicians, not just the pulmonary medicine community, but the molecular metabolic genetics community to understand Pompe is a disease of muscle impairment, weak muscles improved with better enzyme, improved with better enzyme, stronger muscles.

I guess just your ability to enroll your earlier trials given that it was relatively faster than you had originally thought, that's probably a decent surrogate that you have got some receptivity there?

There's that, but if you talk to practically any Pompe treating physician I don't think anybody is going to say that we have solved the problem with currently available enzyme replacement therapy. Quite the opposite. We have been highly encouraged and you know that from the history of enzyme replacement therapy in this disease, there have been a lot of efforts to improve the quality of the delivered enzyme from recombinant manufacturing -- there was a movie made about putting more glycan on the material after it was processed and purified, the competitor has their own program to do that chemically as opposed to enzymatically. People have been chasing better enzyme for a while. I think the new thing for us is that using this GILT technology to achieve what is too hard to achieve with glycans.

Perfect okay.

To reinforce what Hank said, the level of satisfaction with existing therapy is pretty poor as compared to other enzyme replacement therapies.

Right, one more question if I can. I haven't heard you guys talk in a while about an update on the Shanbally plant. Can you maybe tell us where things stand there?

We have made quite a bit of progress on that. As Hank alluded to earlier, we have had a number of inspections over the summertime and the Shanbally facility was part of that inspection. Not so much from a manufacturing perspective but from a quality control laboratory. The laboratories that were part of the Vimizim overall inspection, and we expect to be able to test and release product from that facility. In the meantime we have completed the designs for producing GALNS in that facility and have already ordered some long time -- long lead equipment and are planning to put that in place during 2014 with the goal of producing qualification batches in 2015. Our plans are well underway for that. And we're very encouraged with the progress we have made thus far.

Thanks very much.

Michael Yee of RBC Capital Markets.

Thanks. Two quick questions. One on BMN 111 just following up. Hank, can you better explain what you are actually measuring in the annualized growth velocity. I know the primary endpoint is 50% increase, so what are you exactly measuring and what kind of linear height gains do you actually expect to see in these patients? You did mention you were looking at that. And my second question was just, as we think about Vimizim launching in Europe, obviously a lot of health assessments, country by country required, so is Germany primarily 2014 and everything else sort of 2015? How should we thinking about modeling that.

The main measure in the BMN-111 program is just vertical height measured on a piece of equipment called a stadiometer, which is just basically a standardized height scale that is widely known in the pediatric clinics, and in drug trials it was the basis of approval of agents like growth hormones. Stadiometrically determined standing height. We expect that -- growth velocity is simply just the change in height from time one to time two divided by the duration of time one and time two. So it's height gain divided by time interval.

Our expectation is that, and I think we showed this at R&D day is that these kids are growing about two to three centimeters per year in this timeframe. Kids should be growing in the six or so centimeters per year timeframe, and so we would like to see height velocity gain increase into the three or four or five centimeters per year time frame. And I think a 50% increase would be kind of at the lower end of, we would like to -- we would like to aim higher. That is achondroplasia. On Vimizim, you're saying about Germany, I am not sure if that was a commercial question or a regulatory question. From a regulatory perspective all the European countries happen at the same time.

Jeff, you want to answer the question on the reimbursement, Germany being potentially the first one in Europe.

Sure, happy to. I think that you characterized the situation aptly with your question noting the different health technology assessments and the different systems for reimbursement that we have in Europe. It is worth noting that an older notion of sequencing launches in Europe to get the best effective price has changed in the last couple of years, so while there is some notion of sequencing, and indeed starting with Germany, in a more practical sense each of the launches in Europe is a parallel sequence. And many of those efforts will get going once we have a registration approval in hand. Most of the countries in Europe have some different process.

The timing that we expect for gaining reimbursement and price approval is variable and not always predictable for drugs like Vimizim. So, we will start with Germany as I guided to at the R&D day presentation. We are able to price freely in Germany upon launch, at the time we have to submit Vimizim for reimbursement assessment. Because we're expecting sales less than 50 million euros, we won't be subjected to the IQWiG or AMNOG process, but we will have to negotiate with GBA, and as I guided at R&D day we are expecting that we would have a published referenceable discount of up to 16% in Germany. At the same time however we will be pursuing other countries, smaller countries that have freedom to price such as Austria and Nordic countries. We will be very actively pursuing price and reimbursement in France, the UK and Italy, and those are the major markets.

Also, I think, correct me if I'm wrong, Jeff, but I think we're also, assuming we do have the regulatory medical approval from EMEA in Q1, we anticipate also to have some early access use in France and Italy at a price that would be close to the commercial price.

Very well put, thank you J,J.

Thanks.

Eun Yang from Barclays.

Thanks for taking my questions as well. First for Hank, it was reported that olaparib actually increases sensitivity of non-small cell lung cancer cells to cisplatin. I was wondering if you guys have any plans to look into a combination with BMN 673 and cisplatin in non-small cell?

At R&D day, Dr. Slamon presented a comprehensive assessment of a panel of cell lines and you may remember that non-small cell lung cancer on average was actually the second most sensitive cell line, so yes, we have thought about non-small cell lung cancer. You also know that there are a lot of ideas about what can synergize with 673 and DNA damaging agents has been one of the most highly investigated preclinical areas for combinations with PARP inhibitors. Yes we note that there is some interest in combination with cisplatin. We have not rolled out our combination in human study program just yet. We're still evaluating some of our options. Part of that is, frankly, we are focused on our registration program in germline metastatic BRCA breast cancer. And we are also focused on other monotherapy potential options because those are faster to clinic. But we do take note of the potential synergistic combinations with other chemotherapeutics as well as potentially even novel targeted therapies.

Also, just want to remind you that at R&D day Dr. Slamon communicated that he is planning on initiating a Phase 2 trial, that would be his trial in colorectal cancer in combination with 673 and [topotecan], with full dose 673 and also in melanoma in combination with temozolomide with full dose 673.

That's right. And then on BMN-111, I know that on clinicaltrials.gov it says that these kids will be evaluated every three months, but based on your preclinical assay, how long would you expect that to take. So that it can see meaningful change in the growth velocity in the patients here.

Preclinically we've seen radiographic changes as early as a month, biochemical changes in a month or two months.

In monkeys?

Preclinically. Via different species, we've seen changes as early as four weeks. So, don't know what expectation to have. In terms of the speed of the response in the human, I'm not sure that we want to go so fast that we can see the answer in a month, but we are doing a dose ranging study so we will have a range of data to look at.

And then J.J., I saw you mentioned that when your annual revenue is that about the $1 billion run rate you should expect profitability. Is that your goal I guess?

Is that what, sorry?

Oh, I saw you mentioned that when your run rate is --

Yes, I mean, just to guide that, obviously we believe that by the time we get there, we should be profitable here. And I think while we have communicated that we believe also 2014, next year, will be our peak year in terms of ratio of R&D spend to revenues. And we believe that this ratio will start going down in 2015.

Got you. Thank you.

Lee Kalowski of Credit Suisse.

Great, thanks. Maybe two questions on guidance. The first, at the R&D day, J.J., you had said that you were pretty comfortable with Vimizim at $60 million to $70 million for next year. Is that still the case if I should say now that you're under a standard assessment in the EMA?

Jeff, you want to go over that?

Sure. Yes, we did say that we were comfortable with revenue expectations in that range. And obviously, getting knocked off an accelerated assessment has the potential impact of timing on the revenues from the EU. You also heard Hank say earlier that we are optimistic that we won't be knocked out too far, I think he said that our expectations are still that we could have a CHMP positive opinion by late this year or early next year. The revenue stream from Europe is going to get pushed out by just a little bit but we are also expecting revenues from the United States, we are expecting some revenues starting from early access programs in France and Italy, and upon a US registration we should be able to pursue name patient sales in certain countries that I mentioned at R&D day also. I think that as long as the EMA approval is not a lengthy one, that it won't have a huge impact on what your revenue model should be. In short I would say material but minor downward pressure on those revenues. Probably still in the range of $60 million to $70 million is okay.

Okay, that's very helpful.

This is Dan, just for clarification, that wasn't the guidance, we haven't given revenue guidance yet. We will do that when we lay it out. And the guidance will in fact be impacted to some minor degree by when the actual approvals are.

Okay, makes sense. And Dan, on R&D, last quarter you had said we should be expecting a second-half meaningful step up in R&D. It's obvious why that would be the case but we see that from Q2 to Q3 it doesn't look like that big of a step up. Should we be expecting a material step up in Q4?

Well, we have given you the guidance for that we are going to give, which is that we'll be in the R&D range for the full-year that we set out at the beginning of the year, though I said we will actually likely be -- will likely end the year in the middle to lower part of that range. Yes, there will be continued increase but it may not be dramatic. We may see more of it next year.

Got it, okay. As to the comment about R&D being peaking next year, I know you're not giving guidance now.

As a percent of revenue --

Right, as a percent of revenue. Does that mean that we should think of as a percent of revenue higher than as a percent of revenue in 2013?

We'll give you guidance as usual when we report Q4.

Yes, we're doing the budgets right now.

Okay, thanks guys.

Matthew Roden of UBS.

Hi guys. This is actually Andrew in for Matt. Thanks for taking the final question. Another guidance related question. Regarding the 20% to 25% increase in SG&A expected next year for Vimizim, does that represent infrastructure spend in the US and EU only or does it include other geographies? And if not, should we think about spend as being proportional to market size?

Yes, so a couple parts of that, that spend is US, EU and ROW. I think what we've said was the 20% to 25% relates to the Vimizim launch, it is primarily next year but not entirely all next year.

Great, thanks.

Thank you. At this time I am not showing any further questions. I'd like to turn the call back to management for any further remarks.

Thank you. In summary we are pleased with the steady growth of our commercial portfolio and with the advancement of our pipeline, which we believe is resulting in value generation for the Company. The PEG-PAL Phase 3 trial is progressing well and we will initiate our Phase 3 trial for 701, for Pompe Disease by the end of this year, early next year. We also expect to initiate a Phase 2 trial for 111 in achondroplasia also later this year or early next year. And with our PARP inhibitor 673, we expect to announce the first patient in the pivotal Phase 3 study any day now, and I'm also looking forward to the FDA and the EMA approval for Vimizim in the first quarter of next year, which will be a transformative event for the Company with the potential to double our revenues and bring us to the next phase of growth and maturity. Clearly we have one of the most diversified product port pipelines in the industry. We believe that our strategy of pursuing first in class or best in class therapies is the right thing for the patients and for our business. We hope it will continue to provide many potential value drivers over the coming months and years. So thank you for your continued support, and for joining us on today's call and good bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.