BioMarin Pharmaceutical Inc (BMRN) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioMarin Pharmaceutical Inc. second-quarter 2014 financial results conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Traci McCarty. You may begin.

Thank you, operator. With me today from BioMarin's Management team are J.J. Bienaime, CEO; Dan Spiegelman, CFO; Hank Fuchs, CMO; Jeff Ajer, Chief Commercial Officer; and Robert Baffi, Executive Vice President of Technical Operations.

To remind you, this non-confidential 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, available of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K, and 8-K reports. Now I'd like to turn the call over to BioMarin's CEO, J.J. Bienaime.

Thank you, Traci, and good afternoon and thank you for joining us on today's call. In the second quarter, BioMarin's global teams continued to advance our commercial development and operational objectives for 2014. The commercial team provided Vimizim to an increasing number of patients with Morquio A syndrome and drove significant revenue during the first quarter of sales since US approval.

We are extremely pleased with the strong US launch and continued steady progress of our commercial roll-out in Europe. In the quarter, we saw the majority of the US clinical and EAP patients transition to commercial Vimizim and made substantial progress moving pricing and reimbursement submissions forward throughout Europe.

We have now identified nearly 1,600 patients, which translate into potential annual revenues of over $600 million in revenues. We are confident that Vimizim will contribute significantly to BioMarin, generating more than $1 billion in total revenues over the next two to three years.

In addition to robust Vimizim uptake, we delivered another quarter of significant growth across our established commercial products. We achieved total BioMarin revenue growth of 40.1%, including 40.6% in year-over-year revenue growth of Naglazyme. Robust Naglazyme growth in the quarter was driven by both continued underlying patient demand and a large order from Latin America.

Turning to Kuvan, we saw growth of 14.7% year-over-year, an important driver of our strong performance in the second quarter. We are seeing an increase in new PKU patients seeking Kuvan and growth in demand for both the powder and the tablet formulations and we expect these trends to continue. In summary, there is high demand for our commercial products, supporting our driving principle that BioMarin can have a large and sustained impact across the orphan drug market.

Turning to development activities, we are progressing toward our next clinical milestone over the coming quarters across our pipeline of seven new potential products. During the quarter, we dosed our first patients with BMN 701 in the Phase 3 INSPIRE trial for the treatment of late onset Pompe disease.

Our other six product candidates in the development portfolio continue to move forward, positioning BioMarin to a data rich 2015. Next year, we expect to have pivotal clinical data on three programs, PEG-PAL for PKU, BMN 701 for late onset Pompe disease, and BMN 190 for Batten disease.

In addition, we expect to have proof-of-concept data in patients for BMN 111 for achondroplasia; to complete enrollment in our 673, our PARP inhibitor, and to file an IND to start clinical work in Sanfilippo B syndrome and our Hemophilia A gene therapy program. You're going to get more details from Hank on that later.

In addition to the great quality results announced today, we are pleased to announce that we sold the Rare Pediatric Disease Priority Review Voucher, or PRV, that was secured in February of this year with the approval of Vimizim. This voucher, which is fully transferable, allows the holder to convert a standard FDA review into a priority review.

In exchange for this voucher, we received $67.5 million from Regeneron, that's Regeneron Ireland, an indirect wholly owned subsidiary of Regeneron Pharmaceuticals. This is not only a significant non-dilutive source of capital, but another example of how BioMarin can leverage its leading position in the orphan drug industry.

Looking forward, based on the very good first half of the year and expected positive results in the second half of the year, we are raising our full-year revenue guidance and also revising downward our R&D expenses, our GAAP net loss, and our non-GAAP net loss for the full year 2014. Dan will now discuss these updates in more details, as well as our expectations for the remainder of 2014. Dan?

Thanks, J.J. Please refer to our press release issued earlier today for full quarterly results. We are pleased by our strong performance in the first half of 2014. I would like to review specifics of the quarter, expectations for the remainder of the year, and the key factors driving the guidance revision for the remainder of the year.

The second quarter [won us] particularly strong growth, with total BioMarin revenue of $191.7 million, an increase of 40.1% over the second quarter of 2013. This result was driven in part by Vimizim, recording over $14 million in revenues in its first full quarter of sales, plus double-digit growth in sales of all three of our other major products.

In particular, a 40.6% increase in Naglazyme, 14.7% increase in Kuvan, and 15.1% increase in Aldurazyme royalty revenue. The growth in Naglazyme revenues was driven in part by unusually large government orders from Latin America that are not expected to recur in the same size in the second half of the year.

Nevertheless, we expect growth in total revenues to continue during the second half of the year, compared to the first half, primarily due to continued market penetration of Vimizim in the US and in other regions. We also expect continued growth of Kuvan revenues, as well as growth in the number of patients using Naglazyme. These positive long-term trends are expected to more than offset potentially lower sales of Naglazyme to governmental agencies in Latin America in the second half of the year.

Based on these drivers, and also reflecting the revenue from the sale of our priority review voucher in Q3, as J.J. mentioned, we are pleased to be increasing our 2014 revenue guidance. Strong performance across our established core products, as well as the successful commercial launch of Vimizim, and even before the PRV voucher, would have been the basis for us to raise total revenue guidance from the previous range of $650 million to $680 million, to $680 million to $700 million.

However, after taking into account the sale of the PRV voucher, our full-year total revenue guidance is further increased to $745 million to $765 million for the year. In terms of the specific products, we are increasing Naglazyme net product revenue from the previous range of $290 million to $310 million, now to a higher range of $305 million to $320 million. For Vimizim, we are reiterating our full-year guidance of $60 million to $70 million, and believe that we will be at the high end of that range.

Turning now to operating expenses. R&D expenses of $107.7 million in the second quarter increased about 25% compared to $85.7 million in the second quarter of 2013. This was primarily due to the timing of pivotal study starts. And consistent with our prior R&D guidance, we anticipate R&D expenses will continue to increase during the second half of the year compared to the first half, as enrollment in BMN 701, 673, 190, 111, and our other programs continues to ramp up.

Though we expect R&D expenses to continue to increase in the second half of the year, we are lowering our R&D expense guidance for the full year by almost 10% due to a combination of factors. Across all of our development programs, we have spent a little less than originally budgeted and we have also held back on spending on some earlier stage pre-clinical programs. In addition, we had reserved funds for a more rapid ramp-up of enrollment in our three pivotal studies than we have experienced.

Very importantly, we remain on track to achieve our previously announced enrollment completion and data read-out timelines for the candidates in the clinical development pipeline. Based on these spending dynamics, we are revising our research and development expense guidance downward for the year from the prior range of $500 million to $530 million, to the lower range of $460 million to $480 million.

In terms of SG&A expenses, in the second quarter they increased to $68.1 million compared to $50.7 million, driven primarily by increased Vimizim sales and marketing activities and increased non-cash stock-based compensation. We are revising SG&A expenses upward for the full year 2014, mainly due to a forecasted increase in these non-cash long-term stock compensation expenses and to the ramp-up of our ongoing commercial Vimizim launch activities in Europe and other regions. Our SG&A guidance will increase from the prior range of $265 million to $285 million, to $280 million to $295 million for the year.

Turning to bottom line operating results, we reported non-GAAP net income of $10.8 million for the second quarter compared to non-GAAP breakeven in the second quarter of 2013. We believe non-GAAP net income or loss is the best measure of our operating results because it excludes non-cash accounting expenses such as stock-based compensation, non-cash interest expense, and certain non-recurring items. Note for the first half of the year, we reported non-GAAP net income of $9.1 million, indicating that operations for the first half of the year were slightly ahead of breakeven.

In addition to our non-GAAP results, we also reported a GAAP net loss for the second quarter of $33.5 million versus a GAAP net loss of $21.5 million in the second quarter of 2013. The increased non-GAAP net income for the second quarter compared to the same period the prior year was primarily due to strong uptake of Vimizim in its first full quarter of commercial sales, and significant growth as previously discussed in revenues from our other commercial products.

GAAP net loss increased, while non-GAAP net income also increased, due to increased income tax expenses and interest expense, which are included in GAAP net loss but excluded from non-GAAP measurements. Based on an expectation of increased revenues and reduced expenses, we are revising our non-GAAP net loss and GAAP net loss guidance downward for the full year.

We are lowering non-GAAP net loss guidance for the year from the prior range of $100 million to $130 million, to the lower range of $60 million to $80 million. We are also lowering GAAP net loss guidance for the year from the prior range of $255 million to $285 million to the lower range now of $180 million to $195 million.

Please note that the PRV voucher sale is not included in the non-GAAP guidance because of its not necessarily recurring nature, but does contribute approximately $50 million after-tax benefit to the GAAP loss guidance. As a final note, we ended the second quarter with cash, cash equivalents, and investments of over $1.1 billion. Now I would like to turn the call over to Jeff who will provide an update on our commercial programs.

Thanks, Dan. We are extremely pleased with the pace of the Vimizim commercial launch, which is now in motion across major markets around the world. Vimizim sales totaled $14.3 million in Q2. Sales were recorded in 11 countries and reflect 132 patients on commercial therapy at the end of the second quarter.

Last quarter, we reported initial sales in US, France, and Argentina. To that list in the second quarter can be added, Germany, Austria, Denmark, Saudi Arabia, Qatar, United Arab Emirates, Israel, Colombia, and just this month, Italy. In the quarter, we were pleased to have received registration approval in Canada, our first international registration.

In total, Vimizim commercialization is proceeding at the high end of our expectations. Accordingly, we remain confident that we can achieve the high end of our revenue guidance for full-year sales of between $60 million and $70 million.

In just five months since approval, US market penetration has been rapid and expansive. The majority of early access and clinical trial patients have now been transitioned to commercial Vimizim. In addition, we have seen a steady rate of naive patient referrals, many of whom have already transitioned to commercial therapy.

To date, the market access landscape in the United States has proved to be generally favorable with no material surprises. For the remainder of the year, in the United States, we expect an incremental increase in existing and new patient referrals, transitioning to commercial Vimizim.

Turning now to the EU, we have made substantial progress launching Vimizim across this region since gaining approval in late April. As previously discussed, many markets require a formal price and reimbursement submission and we are happy to report that this process is moving ahead as planned.

We currently have numerous patients on commercial Vimizim across Europe, including a mix of both clinical trial patients transitioning and naive patients. We expect continued uptake of commercial patients throughout the EU for the remainder of 2014, including from additional new markets. In other non-EU markets in our [EUMEA] region, we are seeing steady uptake of commercial Vimizim through [named] patient sales and we expect continued strong growth in these markets.

In Latin America, we are also making good progress through named patient sales and expect this trend to continue. Recall that in this region, there is typically a required start-up time frame for patients to work through local approval processes. We are still waiting for marketing approval in Brazil, but expect to receive the first commercial orders for Vimizim beginning in this quarter.

Overall, the commercial launch of Vimizim has met the high end of our expectations, particularly the pace at which US patients have transitioned to commercial therapy. The European launch is tracking to plan and we have submitted pricing and reimbursement documents on our timeline. Outside of the US and Europe, we have seen significant interest in and acceptance of Vimizim by patients and physicians and we expect this trend to continue.

Now turning to our base commercial products, Naglazyme revenue growth of 40.6% to $98.3 million in the quarter exceeded our expectations and was driven by a large order from Latin America, coupled with continued growth in numbers of patients on therapy. The upward revision of full-year Naglazyme guidance reflects our expectation that new patient growth will continue along its current trajectory and will ultimately pace revenue growth for the year of 12% to 18%.

Turning to Kuvan, growth of 14.7% to revenue of $46.9 million in the quarter reflects expected seasonality compared to results in the first quarter. Growth in the number of commercial patients taking Kuvan was consistent with the increase in sales. 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.

Kuvan powder for oral solution launched earlier this year has proven to be a contributor to sales growth and will be a growth driver going forward. We remain bullish on Kuvan growth prospects throughout 2014 and are maintaining our previous full-year guidance of $180 million to $200 million for the year.

In closing, I'm very pleased with the level of demand we are seeing for Vimizim, both in the US, as well as in other regions. The commercial launch of Vimizim has met the high end of our expectations to date and we look forward to continuing our commercial efforts in the US, EU, and other international markets.

The results we are seeing from the Vimizim launch and our overall quarterly results are testament to our broad and deep experience in bringing ultra orphan drugs to patients. For the remainder of 2014, the commercial teams will focus on driving market penetration of Vimizim in substantially all marketed regions and continuing to deliver strong revenue growth across our other established products. Now I will turn the call over to Hank who will review the pipeline.

Thank you, Jeff. Overall, our clinical and research programs are progressing as planned and we are on track to meet our previously announced enrollment and data readout timelines across our development portfolio. To remind you, we anticipate numerous clinical milestones over the coming 18 months, including data readouts on PEG-PAL to treat phenylketonuria, BMN 701 for the treatment of late onset Pompe disease, and BMN 190 to treat Batten disease.

We expect proof-of-concept data for BMN 111 for the treatment of achondroplasia. And we expect enrollment completion of BMN 673, a talazoparib, for the treatment of BRCA breast cancer and the filing of two IND candidates, BMN 270, gene therapy to treat Hemophilia A, and BMN 250, for the treatment of Sanfilippo B syndrome.

As you may have read in today's release, we announced that the World Health Organization has approved the international non-proprietary name talazoparib for BMN 673. The acceptance of the INN marks the continued evolution of talazoparib toward the goal of improving outcome of patients with genetically defined cancer and marks an important milestone for BioMarin, as we proceed along the path to regulatory approval with this product.

Also in the second quarter, we were pleased to enroll our first patients in the pivotal study with BMN 701 for the treatment of late-onset Pompe disease. As a reminder, patients in this study will have been previously treated with alglucosidase alfa.

The primary endpoint is Maximal Inspiratory Pressure, as we believe this is a direct measure of respiratory muscle strength and likely an important indicator of 701's effectiveness in this setting. The study is being conducted using our new higher producer cell line and we expect the study to complete in the first half of next year 2015.

In closing, our development pipeline is unparalleled in the orphan drug industry. I believe our track record of developing and commercializing therapies to treat serious medicals conditions is also unmatched.

We are energized by the prospect of moving all of our development compounds forward and look forward to keeping you apprised of our progress over the coming months. With that, operator, we'd now like to turn the call over to you to open up the line for questions. Thank you.

(Operator Instructions)

The first question is from Navdeep Singh of Goldman Sachs. Your line is open.

Hey, guys, congrats on the solid quarter and the guidance upgrade. I'm just trying to better understand the underlying demand for Vimizim. If you assume that 132 patients were on Vimizim for the entire quarter at about $95,000 a quarter, you get to about $12.5 million for the quarter, which is below the $14 million that you posted.

I'm just trying to get a better sense of underlying demand and trying to figure out if there was any one-time effects there. So any color on that would be helpful?

Hi, Navdeep, this is Jeff, I'll try to take that one on. We've got patients that are adding and going onto therapy in the quarter and in different places, the United States, some European countries, Middle East, and Latin America. Our general guidance on Vimizim and Naglazyme and Kuvan is there's very little channel stocking for these products and so sales effectively reflect patient demand.

But keep in mind that there are orders for product which may not exactly all come one week at a time. So for example, we might see weekly or bi-weekly order patterns, typically in the United States, but in some of the other markets, for example, Saudi Arabia or Qatar, we might see orders that reflect more than one or two weeks coming in for patients starting therapy.

And then those orders precede those patients being on therapy, so we might ship product and recognize revenue one week, and depending on where in the world the patient is, the patient might go on therapy several days to several weeks later. Also, worth noting that a patient's size varies and the number of vials ordered to get those patients started can vary too.

Okay. That's helpful.

If I can make a general comment. For all of our products, we do not go through wholesalers. They are distributed, all of those to specialty pharmacy. There is no possible channel stocking.

That's very helpful, J.J. and Jeff. Just another question on your achondroplasia program. I assume that you're currently dosing at the second dose of the dose escalation portion of the trial.

Pre clinically, do you think you can see an adequate efficacy signal in humans at the second dose or do you believe you're going to have to go up to the third dose? And then just as a small sub-part to that question, do you expect to have any achondroplasia data ready by the R&D day in December? Thanks.

Hi, it's Hank here. Yes, we're at the second dose level. This is the dose level base pre-clinically that we do expect to see some signs of growth. But of course until we treat humans and follow them long-term we don't know how much growth.

And I do expect that we will go to the third dose level. That's a reasonable expectation to have. And no, I don't expect that we'll have updated growth data at R&D day.

Okay. That's helpful. Congrats on the quarter.

If we go to the third dose, it's not only for efficacy reasons, but if a second dose is shown to be safe enough, why not go after the third dose? So my point is that the fact that we go to the third dose, if we do, is not a reflection on a lack of efficacy in the second dose.

Got it. Thanks, J.J.

Thank you. The next question is from Phil Nadeau of Cowen and Company. Your line is open.

Good afternoon. Thanks for taking my question. My first one is on the R&D guidance cut. In your prepared remarks, Dan, you mentioned that there was money set aside for fast enrollment, but enrollment is on pace but you don't need to spend that money. Could you go through that again? How are you enrolling patients at the same pace but with less money?

Well, the trials always enroll very back ended and when we model these things, we have a model for how many patients are going to be in at any time. We can be off a little bit in terms of the number of front-end patients we get and hence the spending this year is a little off, but it's not material enough to affect when we think we're going to finish the study.

I get it. Okay.

Also, if I may add also a general comment. When we make projections on budgets on cost of clinical studies, they're estimates. It's not always easy to get the estimates very accurate as compared to actuals, even irrespective of enrollment rates.

Okay. Then second question. It's related to one of the earlier ones on Vimizim. In the average price per patient guidance that you gave us at the time of launch or before launch, there were certain assumptions about the weight of the patients and compliance.

Do you have any sense for weight and compliance are trending early in the launch? Are they in line with what you incorporate in your guidance or are either of those factors also going somewhat better than you had initially assumed?

We can comment on the patient weight dimension which is going right along with what we expected when provided initial guidance. It's too early to tell about compliance rates. It will take us several quarters to be able to see and collect some data and make some comments or conclusions about that.

Okay. And then one last question on Vimizim. What are the next countries that are likely to come online? You listed a lot that came online up until now. What are the next ones where you think you'll start to see sales?

We mentioned in the script that we have not yet received a registration in Brazil, but we are expecting some orders to come through for first patients on a named patient basis this year. So that would be one material market I would expect to come online.

Also another point on Vimizim launch that I don't think we've made [before], in addition to whatever quantitative results we're getting, in terms of patients treated and [sales at], we are doing marketing research to get some feedback, qualitative feedback from our customers as to how they think their patients are reacting to Vimizim and that feedback has been very positive so far. Add anything to this, Jeff? More color?

The drug is perceived by our prescribers and the physicians that participated in the clinical trials to be very effective. That's had an impact on the robustness of the initial demand for the product and reinforces our confidence in both the near-term prospects and also the long-term commercial prospects for Vimizim.

Great. Thanks for taking my questions.

Thank you. The next question is from Cory Kasimov of JPMorgan. Your line is open.

Good afternoon, guys. Thanks for taking the questions and a great quarter. First question is on the Vimizim launch as well and it sounds like you've had a lot of early success converting patients to commercial product in the US. Wondering how you expect this process to be similar or different in the rest of the world? And I have one follow-up?

Okay. Yes, we've been really pleasantly surprised, not surprised, but pleased with the progress of uptake in the United States, both with the clinical trial and the EAP patient transitions, which have moved right along, and with the pace of naive patients coming on board. Outside of the United States, as you know, the timelines are a little bit different and the timelines are driven by two major factors -- the first is registration in those markets where we require registration, and the second is negotiating price and reimbursement approvals.

So the US, we all have an expectation, would be the more rapid market. The other markets are going to be coming on individually and [gaited] by those registration and price and reimbursement factors just noted. That would be for both naive and clinical trial patient transitions, generally, and we made mention of the markets that we are so far through the gate on for commercial orders and we're expecting more to follow.

Okay. Great. Thanks. And then the follow-on is more a bigger picture strategic question. Just curious what you do with $1 billion of cash?

What we do is we don't (inaudible) -- well, let me -- Dan will give you financial perspective and I will come back.

As you know, we're continuing to drive our portfolio forward. We expect to incur some losses over the next several years until we get to $1 billion and above in revenues. We're also investing a portion of the capital into building out our manufacturing plant and the bulk of it is in reserve.

I would say, we're nearing, hopefully in two to three years, we should have $1 billion or so in revenue, so having $1 billion of cash, we don't believe is excessive. We want to have some reserve.

In addition to the fact that we are likely to utilize some cash this year and next year to be able to move fast in case we see some significant opportunities at a right price or set of opportunities in the orphan disease field and also the gene therapy field. As you know, we're getting involved in gene therapy. But we've had $1 billion of cash now for over seven or eight months. It's obviously not burning our pocket.

All right. Thanks for taking the questions.

Thank you. The next question is from Andrew Peters of UBS. Your line is open.

Hi, thanks, guys, for taking the questions and congrats on the launch. It's very impressive. Was just wondering, last quarter you gave some very helpful detail in terms of number of patients in the BPPS and number of patients prescribed in Latin America. Was wondering if you are going to be providing those numbers again or if you can provide those numbers again?

And then I just have a follow-up on the PARP program, regarding the recent announcement with the Sarah Cannon Research Institute and the enrollment there. Is that a result of slower enrollment as expected or had that been planned ahead of time and is just more of a global roll-out? Thanks.

This is Dan. I'll take the first question. During the course of this year, we're going to be providing some information in detail on the launch as we did last quarter, but transitioning to where everybody ends up, which is giving revenue guidance. You can already see in the first quarter, you start to get into little -- people start getting confused about disconnects on 132 patients and $13 million and those types of things.

So the guidance we gave this quarter, which is number of patients, number of identified Vimizim potential patients, Morquio A patients, and revenues is what we will do for the remainder of the year. And by the time we get to the end of the year and going forward, we'll just be doing revenues.

On the roll-out question on talazoparib, in some cases we'll go to Europe first and the US will follow; in other cases we'll go to US first and Europe will follow. This was a case where we planned to go to the US first and Europe coming online shortly thereafter. So this was part of the planned roll-out.

Great. Thanks.

Thank you. The next question is from Yaron Werber of Citi. Your line is open.

Great. Thanks for taking my questions. I just had a question -- the one question on Vimizim and one question about hemophilia. On Vimizim, you've diagnosed already over 1,600 patients, which is honestly very impressive and it sounds like it's been up 100 or so over last quarter. You're almost tracking at about 100 a quarter.

So I'm just trying to understand, the diagnosis, where are the patients, and I don't know if you can help us understand within the next year or two, what percentage of those do you think you can get to over the next two years? And then secondly on hemophilia, you've now commented it's going to be an [A V8] vector. I want to know if it's a modified vector, and if not, did you get a license from somebody for the vector itself?

Jeff here. I'll field the first question. We're really pleased to have the number of identified patients around the world up now to 1,600. Actually, that hasn't moved for several quarters from our figure of 1,500 and so that's a slower rate of increase relative to the prior couple of years.

The reason for that is we've been really focused on and very busy launching Vimizim, which is a related but slightly different activity than trying to find new patients. As we guided at R&D day late last year, our expectation is that once we get past the acute launch phase, we'll be continuing to do patient identification activities, our people are out there. We'll continue to keep turning over new patients at the rate that we've seen over the last couple of years. That's our expectations going forward.

In terms of getting to all those patients, there's a lot of markets around the world, and we're selling in 50 markets presently with all our products, so we've tried to give a little bit of guidance as to when those 50 markets are coming along. We've got a registration now in the US, EU, Canada, certain other markets, we can get into without a registration or prior to a registration on an in-patient basis and many of them are now gaited by the pace of our international registrations, which you'll hear about on a quarterly basis.

One thing to add on this before I let Hank answer the question on hemophilia is also, based on what we're observing, we're pretty confident that there are at least 2,000 MPS4A patients in the world. We will be able to find at least 2,000 and maybe up to 3,000.

It's somewhere in between. So this is -- if we find 2,000 patients, that will be close to $800 million of business so this is starting to be a pretty significant product.

And then on the hemophilia project, I don't believe we've disclosed the serotype of the transfecting capsid. Maybe there's some confusion because it's Hemophilia A factor VIII. But we haven't said what the capsid serotype is.

And other than the original licensing deal that we've undertaken that we announced with UCL, there have been no additional material licenses that we've entered into. And as a reminder, that original license pertained to the expression cassette, so maybe a little bit of confusion out there, apologies. Factor VIII is the protein and the capsid serotype has not been identified.

Do you mind if I just follow? Back in your R&D day, you mentioned you identified about 1,400 and it was about -- it was up 200 from a year before that. What I'm trying to key into is 1,400 going to 1,500 going to 1,600, so the diagnosis rate is going up, fairly substantially over the last six months?

It is [too at] a steady pace, but however, as Jeff said, we are not focusing on finding new patients. Despite that, we do find new patients but that's not the primary area of focus of our representatives right now. Their focus is on getting the identified patients on commercial therapy.

And we have expressed that some of the patients that are on therapy were not in that identified group. We even have a few. But you're right, Yaron, it's been about 100 new identified every couple of quarters for a little while now.

That's why we're pretty confident we will find at least 2,000.

Great. Thank you.

Thank you. The next question is from Lee Kalowski of Credit Suisse. Your line is open.

Thank you. Question on the Vimizim launch. You had said that you were seeing some conversion of expanded access and such to commercial in Q2. There would also be some additional country launches, obviously. As we think about the Q3 patient adds, and obviously we're now midway through the quarter, I'm wondering if you can comment or give us some sense of the pace of adds that we might think about in Q3 relative to what we saw in Q2 ending with 132?

We'll report next quarter obviously on the number of patients at the end of this quarter. We have a revenue guidance that we're reinforcing to be at the high end of $60 million to $70 million. And qualitatively, I would add to that statement, the US launch went really fast and we penetrated really fast and really well that patient population.

We're going to have more new growth from the United States going forward, but that's going to slow down. Has to. Europe is in process. It's a bigger pool ultimately, but it will be coming along steadily and probably a little slowly relative to the US launch.

Okay.

But again, at the same time, we tell you we're tracking to the upper end of the guidance, and we just told you that we have more and more countries where patients are being treated, that we have named patient sales in France and Italy and Germany. Germany's not quite named patient. But we have -- without having an official price in any European country yet, we are starting to generate some significant sales in these countries, and same for Latin America, same for Middle East.

Okay. Thanks. And quick question on BMN 701. In the past you had said that we could see data next year. I didn't see that in the press release as far as events as far as the data release. I'm wondering if you can confirm if the expectations are for something around second half 2015?

That's right. Apologies. Good catch. Enrollment completion Phase 2, [3] trial for BMN 701, for the treatment of Pompe disease, first half of the year, it's a six month trial, so the data should be -- we've included it as data in the next 18 months. So good catch.

Okay. Thanks.

Thank you. The next question is from Tim Lugo of William Blair. Your line is open.

Congratulations on a strong quarter. A question for Hank. We saw some VEGF and PI3K combo data that looked interesting with PARP inhibitors at ASCO. I just wanted to get your updated thoughts on potential combos for 673 and maybe looking at partners for accessing some other combo products?

We've started -- the National Cancer Institute, I should say, has started an investigator-sponsored trial in combination with temozolomide in patients with Ewing's Sarcoma. That's very interesting because that's an area where we've seen very strong synergy. And similarly, University of California Los Angeles has started a combination with temozolomide or irinotecan in two different cohorts.

And so those are some of the, let's call them, lower tech combo of talazoparib. As to the more novel, novel types of combinations, we haven't announced any initiations there, but we're keen to -- we follow that data as well and we're keen to explore and exploit potential synergies of talazoparib and other emerging cancer therapies.

That's good to hear. Are you also looking at small cell and pancreatic, or any other additional tumor sites?

Well, in BRCA other tumors, there is ongoing recruitment, and it's a little too early to say what our plan in non-breast BRCA is. And beyond BRCA, germ-line BRCA, we do have a plan to initiate trial activity, hopefully towards the back end of this year, in patients who are not BRCA mutant, but who are potentially sensitive to talazoparib by virtue of molecular signatures. And I'd say stay tuned to this channel for more details as that rolls out.

Great. Thanks for the updates.

The next question is from Robyn Karnauskas of Deutsche Bank. Your line is open.

This is Evan on for Robyn. A question on the Naglazyme. I noticed that there was a significant increase quarter-over-quarter from $80 million to about $98.3 million. You said the majority of this was driven by a big order in Latin America. How much, as a percent, was actually driven by Latin America, just so we can understand what's going to happen in the next quarter and the quarter after?

Yes. So we don't give that individual specifics, but we've given you everything else, which is you have the first half actuals and we've given you the full-year guidance.

Right. Okay. Great. And then--

This is not the first time this happens. Since we've launched this product, we've had a lot of variability quarter-to-quarter, because Latin -- mainly Brazil, [and to some extent] a few other countries, do order in a lumpy way. But there is growth in patients, underlying growth in patients, real growth for Naglazyme, so the increase is not just due to the order. There is underlying growth in patients.

And when you take out the quarter-to-quarter variability and if you look at our guidance for 2014 Naglazyme sales, which get that lumpiness out, and you compare it to 2013, we'll be between 12% and 18% growth in a product that's in its ninth year on the market.

Great and then one more about Vimizim. In terms of reimbursement in Europe, what's the progress on some of the more permanent agreements with the governments in Germany, France and even in the UK?

Previously we've guided a little bit to the process on this and we've also guided that the full reimbursement process takes between six months in some of the more rapid countries to what we expect could be a couple years in the UK. We've also announced this quarter that we've seen initial commercial sales into some of those countries.

Those would be in the countries that either don't require a robust price and reimbursement process, like Denmark, or countries like Germany, Italy, and France that have a mechanism for selling while we're going through the full reimbursement process. Also, we guided that all of our submissions that needed to be into these various countries are in, they're in process. And the best indicator for you to follow along on that will be the quarterly reported sales and when we report sales into new countries.

So no more color as to when we'd see sales in the UK?

Well, we've submitted and we're in process and when we get through the gates we're going to report that to you.

Okay.

But you know that the UK is not the fastest country in Europe to price new drugs.

Of course. But there's no early access program that we're seeing?

Correct.

Okay.

So far.

Okay. Excellent. Thank you, guys. Congrats on the quarter.

Thanks.

Thank you. The next question is from Brian Abrahams of Wells Fargo. Your line is open.

This is Shin calling in for Brian. Congrats on a great quarter. In terms of extrapolating Vimizim uptake in the US, I was wondering how reliable IMS data is. According to IMS, June month-to-month growth dropped from 100% plus in the prior month to about 13%. I was wondering if this is a trend that you guys are observing on the ground and whether we should be thinking about this as we model out rest of the year?

And maybe a follow-up question on pricing in Germany. By my calculation it looks like the launch price of Vimizim is on par with that of the US price or even slightly higher. Where do you think the price will eventually settle in a year when you get the final negotiated price? Is it going to be significantly higher? Lower? Somewhere in between?

Okay. This is Jeff. I'll try to take those in pieces. We've guided that the US uptake has been rapid and expansive, and frankly, above our initial expectations, and that we've got additional naive patients that are continuing to get referred into our system and make their way onto commercial therapy and that we expect that trend to continue. So the curve in the United States, you should draw conclusions from those remarks, is pointing up. I would not --

IMS data for products distributed to specialty pharmacies is relatively unreliable.

We wouldn't advise using that.

[You might want] to save some money.

And then we have guided that generally our pricing in the EU after expected discounts that we expect wwe will have to give through the full price and reimbursement process is expected to be on a par with our announced US pricing, which also will be subject to discounts to the government. And so, yes, you're correct in concluding that the pricing in Germany is and will be on a par with what we get in the United States.

Great. Thank you very much.

Thank you. The next question is from Kim Lee of Janney Capital. Your line is open.

Good afternoon. Thanks for taking the questions. Just a brief one on Vimizim. Can you delineate how many patients on drug now in the US versus ex-US? And then a second question on BMN 190. When do you expect data from that program? Thanks.

Jeff here. No, we're not splitting out the numbers of patients on commercial therapy between US and ex-US. On BMN 190, we expect enrollment completion by the end of this year and one year follow-up, and hence results, the end of 2015.

Okay. And then as far as the patients on Vimizim, is it safe to say that the majority are in the US, or can you give any clarity on that?

Qualitatively, you should follow you along from the remarks that the majority presently are in the United States.

Okay.

But that will change over time because the US market is only 15% of the world market. So we are probably peaking in terms of the share of the US for overall sales right now.

Yes. Okay. Thanks.

Thank you. The next question is from Michael [Yee] of RBC Capital Markets. Your line is open.

Thanks. Two questions for Hank. On achondroplasia, the data, it's not that far around the corner, you've gone over some of the numbers and some of the clinical [mean implements] as to what you're looking for based on natural history. But should we fully expect, [then] is powered for statistical significance?

Do we need to see that? And since we're going right into humans, we're trying to convert from animals, can you dose higher than the cohorts that you have already outlined if it doesn't hit what we need as a back-up?

And then similar question [firing off] on Batten, you're enrolling patients, and our understanding is that these patients can progress pretty quickly. So although I wouldn't expect much placebo effect here, what are you really looking for there to get excited?

The eight patients per cohorts has ample resolutionability to see the targeted doubling or more of growth velocity, assuming that the variants of growth is what we expect it to be based on the natural history studies that we have done and others have published. And yes, we would be interested to go to higher doses and we do have the ability to evolve the protocol, based on safety at lower doses, to go to higher doses. Of course, we're not there yet, and again, we're guiding towards the middle of next year to see six month data for the 15 microgram dose.

And in terms of what we're looking for in Batten disease, the patients that are being entered into the trial are at the beginning of the steep portion of their decline in neurological function, as evidenced by language and motor ability, talking and walking. What we'd expect to see is stabilization of brain disease. It would be great to see reversal of brain disease, but that's maybe a too high expectation to set and rather, if we can prevent patients from losing further function, that would be a very large clinical benefit for people.

Thank you.

Thank you. The next question is from Ian Somaiya of Nomura. Your line is open.

I'm sure we're running out of the [Vimizim] questions, but I wanted to try at least get one in there. I was really hoping to get maybe a feel for a sense for what the patient benefit is in the real world versus what you saw in the clinical trial setting and maybe how much -- get a sense for how much of that is driving the uptake?

The clinical trials and the benefits that have been reported out from the clinical trials drive our expectation of what patients will see in the real world, largely because the patients in the clinical trial are very representative -- or in the collection of clinical trials -- are very representative of what the real world is for Morquio A.

he investigators and early treaters that we've talked to so far -- as J.J. mentioned, we've done market research -- those physicians have reported back that their experience so far is very consistent with what was seen in the clinical trials. That's our expectation. Probably early in the commercial experience to have deep comments now, maybe a year or so from now, we'll regroup and take that question on.

Just as a follow-up, I know you've touched upon this in the prior questions, but as you think about the overall market size, the question really that I have is, do you think you can get to that peak number a lot quicker now based on some of the initial experience? I'm just not referring to the US where the expectations should have been rapid adoption, but just some of the initial market experience you're gaining outside the US?

As J.J. says, we're very pleased with the number of patients that have been identified and continue to be identified. That really determines the market potential, which is growing. We have a great deal of confidence in the long-term prospects for this drug.

We're getting great uptake so far. To get to those long-term numbers, we're going to have to get into 50 or so markets again, which will take a little time and we're expecting this process will take something like four to five years, which I'll reinforce is quicker than it took for us to get that deeply penetrated into the global MPS6 market.

Thank you.

Thank you. The next question is from Liana Moussatos of Wedbush Securities. Your line is open.

Thank you for taking my question. Out of 132 patients at the end of Q2, how many were from clinical trials and how many were naive?

We haven't really disclosed that number. I would say it's a mix. We've gotten good conversion of clinical trial patients in places like the United States and early other markets where we can. And we've gotten also really great early uptake for patients that are naive to treatment. So it's a mix really.

Would you say it's 50%/50%?

I wouldn't go beyond that qualitative statement.

All right. I had to try (laughter). Thanks.

Thank you. And the next question is from Stephen Willey of Stifel. Your line is open.

Congrats. I'm probably going to hit you with a couple of nitpicky Vimizim questions, as well. But I just wanted to clarify that when you say 132 patients on commercial product, that also includes patients who are part of the [NPP] program?

You mean named patients?

Yes. Correct.

Yes.

Okay.

Because again, ex-US, we basically only selling on a named patient basis so far.

Understood. And then when you characterized the rate of uptake in the US as being aggressive, is that aggressiveness in terms of patients on commercial product or is that aggressiveness in terms of patients going into BPSS (sic -- see website "BPPS")? I'm trying to get an idea as to whether or not there's maybe still a bolus of US patients who are sitting in BPSS at the moment who have not yet hit the model?

The answer is both. In the United States, to get on the commercial therapy you need to come into our BPPS case management hub and it takes a while for patients to make it through and onto commercial therapy. For some patients, that's literally a week or so and other patients can take several months. We do have a pool of patients that are being case managed, and as we mentioned in our prepared remarks, we're expecting both more naive patient referrals into BPPS, and during the course of this year, more of those patients getting out of BPPS and onto commercial therapy.

Thank you. And there are no further questions. At this time, I'd like to turn the conference back over to Mr. Bienaime for closing remarks.

Thank you. As I summarize where we stand, so clearly, our BioMarin revenue has delivered very strong growth in the quarter, increasing over 40% compared to the second quarter of last year. Combined with the $67.5 million of revenue from the sale of the Priority Review Voucher to Regeneron, we now expect total BioMarin revenue of $745 million to $765 million for the full year.

Between now and the end of the year, we expect to have pivotal clinical data on three programs -- outside the end of next year, sorry -- PEG-PAL for PKU, 701 for Pompe, and 190 for Batten disease. In addition, we anticipate to have proof-of-concept data in patients for BMN 111 for achondroplasia and to complete the enrollment in our talazoparib Phase 3 trial and to file the IND and start clinical work in Sanfilippo B and our Hemophilia A gene therapy program. So we will have seven new molecular entities in the clinic next year.

We're extremely pleased with the pace of US launch of Vimizim, as we discussed, and we expect the EU launch to be just as strong. We believe that Vimizim will contribute to BioMarin generating more than $1 billion in total revenues over the next two to three years, which will be driving us towards profitability, operating profitability, and beyond. Thank you again for your continued support and for joining us on today's call, and goodbye.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.