BioMarin Pharmaceutical Inc (BMRN) 2015 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the BioMarin Pharmaceutical conference call to discuss third-quarter 2015 financial results.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Traci McCarty, Senior Director of Investor Relations at BioMarin. Please go ahead.

Thank you, operator. With me today from BioMarin Management are Jean-Jacques Bienaime, Chairman and Chief Executive Officer; Dan Spiegelman, Chief Financial Officer; Hank Fuchs, Chief Medical Officer; 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, including excitations 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 products programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.

Now I'd like to turn the call over to BioMarin's CEO and chairman JJ Bienaime.

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

Today, we announced that BioMarin's commercial organization delivered $662 million in total BioMarin revenue year-to-date, resulting in 28% growth compared to the same period last year. The primary drivers of these results were the continued robust global launch of the Vimizim and strong growth in demand for Kuvan, which more than offset the negative impact of foreign exchange headwinds and uneven ordering patterns from Naglazyme. Global market penetration of Vimizim has continued and we have been able to bring new patients on to therapy at a faster pace than we had originally anticipated.

Significantly, we have also been able to achieve and maintain our target revenue per patients globally. As a result, we are in a position to increase full-year revenue guidance for Vimizim and we now expect 2015 full-year revenue to be between $220 million and $235 million.

While we expect Q4 2015 sales to slower Q3, due to some extra large government orders in that quarter, consistent with what we see with Naglazyme is that transient patient growth and penetration continues to be excellent. We fully expect 2016 Vimizim revenues into continue to grow and to exceed $300 million. In a moment, Jeff, will review some of the dynamics driving updated guidance across our commercial portfolio.

In addition to strong commercial results in Q3, during the last quarter, we entered into two important strategic transactions that will increase both our leverage and profitability by streamlining our development portfolio. First, we entered into an agreement with Medivation for the sale of talazoparib for $410 million upfront and up to an additional $150 million upon the achievement of regulatory and sales milestones and also mid-single digit royalties. Then in a separate, but strategically matched transaction, we acquired all the global rights to Kuvan and pegvaliase that we did not already own, with the exception of Kuvan rights in Japan.

While we continue to believe that talazoparib may be the best PARP inhibitor under development, as our core [monogenetic] rare disease portfolio has continued to develop the expected financial returns for BioMarin in the PARP or started to fall below our other opportunities. In particular, the opportunity to acquire global rights for both Kuvan, with the exception of Kuvan in Japan, pegvaliase and technologies will allow us to leverage our existing R&D investment in pegvaliase and our global commercial infrastructure. Due to existing rest of the world Kuvan sales and a five-year patent runway in Europe, this transaction also has limited downside and substantial upside.

We believe the restructuring of our product pipeline, as a result of these two transactions, will optimize our portfolio and focus our resources on BioMarin-established areas of expertise, developing and marketing novel products to treat rare and ultra-rare genetic diseases. On the portfolio development front, we are pleased to have been invited to the Peripheral and Central Nervous System Drugs Advisory Committee of the US Food and Drug Administration to review the new drug application for Kyndrisa.

We are hopeful that a near-term accelerated approval of Kyndrisa will make available an improved treatment option for children with Duchenne muscular dystrophy amenable to Exon 51 skipping treatment, a devastating muscle wasting disease. In addition, as part of our long-term commitment to Duchenne families, in the quarter we launched our kNOWyourDuchenne program to help patients and physicians obtain and interpret genetic testing for patients with Duchenne muscular dystrophy.

This types of tailored service is something BioMarin has provided for patients receiving our currently commercialized product And we're very proud to have the opportunity to leverage our experience for the Duchenne community.

Looking at our other developments and regulatory catalysts over the coming months, we will highlight the productivity of BioMarin's R&D investments. Over the next four quarters, we could potentially have three new molecular entities in registrations for approval: Kyndrisa for DMD, cerliponase alfa for CLN2 disorder, and pegvaliase for PKU. I cannot think of any other biotechnology company that has achieved this level of productivity. These opportunities truly represent BioMarin's core mission, growing the company through innovation for the benefit of our patients who have rare or ultra-rare diseases.

Irrespective of the political rhetoric of our direct pricing we've heard about over the last few weeks, it is important to appreciate the distinction between taking unreasonable price increases on all drugs versus investing heavily in research and development to discover breakthrough treatments for people, mostly children in BioMarin's cases, who have no alternative. We are truly proud of what we do and we just want to thank you for understanding the uniqueness of BioMarin's mission. This uniqueness is to be innovators for the many patients with rare diseases that we serve around the world.

With that, I'd like to turn the call over to Jeff who will discuss progress of our commercial products in the quarter. Jeff.

Thank you, JJ. Persistent growth of patients on BioMarin's brands drove continued increase in the underlying demand across the commercial portfolio, resulting in strong revenue growth in the quarter and year-to-date. This result came in spite of foreign exchange headwinds and the impact of uneven ordering patterns in some regions that have the effect of skewing quarter-to-quarter comparisons.

Starting with Vimizim, the commercial organization delivered $65.1 million in Vimizim revenue in the third quarter. Recall, we set a goal for Vimizim of being 80% penetrated of known patients in greater than 50 markets in four years, half of the time required to achieve that level of penetration for Naglazyme. 1.5 years from the first launch, we are 33% penetrated of known patients in 32 markets. So we're well on track and making great progress against that goal.

Moreover, with more than 2/3 of identified patients still potentially new users of the drug, plus new potential patients still being identified, there is significant future upside as we make Vimizim available to the patients who are not yet on therapy. We now expect increased full-year revenue for Vimizim of between $220 million and $235 million.

This is in the face of a stronger dollar, which created headwinds for Vimizim revenue growth. And we estimate that Vimizim revenues would have been approximately $20 million higher in 2015 if rates had been the same as in 2014.

In addition, it should be noted that third quarter Vimizim revenue included a large order from Latin America that is not expected to be repeated in Q4. We have historically experienced uneven order patterns for Naglazyme from Latin America and occasionally other regions and we now expect this pattern to apply to Vimizim as well. Therefore, it will be important going forward to consider full-year revenue figures for Vimizim and expect occasional choppiness in quarter-to-quarter results.

Increased patient penetration will continue to drive revenue increases for Vimizim and we expect 2016 revenues for Vimizim could exceed $300 million. In summary, the commercial launch of Vimizim in 2015 has been robust and we expect growth to continue on a strong trajectory, driven by consistent and steady growth of new patients in all our commercial territories.

Now turning to our other commercial products and starting with Kuvan. As expected, following a seasonal dip in the first quarter, second and now, third quarter revenue growth was strong, resulting in year-to-date revenue of $174.5 million or growth of 20% year-over-year. In the third quarter, Kuvan revenue was $64.2 million, a 20% increase over the same period last year, due to patient count increases and high rates of compliance.

Factors driving success in the quarter continue to be the positive impact of the revised label that includes safety in zero to four-year-old and the education and adoption of ACMG practice guidelines that are raising awareness of the benefits of Kuvan and the importance of lifelong treatment of PKU. We expect these trends to continue and today increased 2015 full-year Kuvan guidance to between $235 million and $245 million.

Turning now to Naglazyme, recall that last quarter, revenue included a very large order from Latin America. As expected, there was reduced ordering in Latin America in the third quarter and revenues decreased to $54.1 million. In addition, the strong dollar, particularly versus emerging market economies, also continued to have a negative impact on our reported Naglazyme revenues.

For the full year, we expect foreign exchange effects, net of hedging, to reduce revenues of Naglazyme by approximately $20 million to $25 million. As a result, we are lowering Naglazyme guidance for full year 2015 to between $300 million and $310 million.

Importantly, the base of patients on Naglazyme remains impressively compliant and persistent supporting the underlying strength of this business. New patients on Naglazyme continue to drive increased demand. The number of patients on Naglazyme commercial therapy at the end of the third quarter 2015 was approximately 9% greater than it was a year earlier at the end of the third quarter in 2014.

Finally, turning to Duchenne muscular dystrophy and our efforts to help support families in need of diagnosis assistance. We have learned that, while physicians report that a majority of their patients have been genotyped to confirm the diagnosis of DMD, many have not had their genetic test results interpreted, resulting in a gap in the awareness of amenability for genetically targeted treatments and developments.

To address that gap, in the third quarter, BioMarin introduced the kNOWyourDuchenne program to help families and physicians obtain and interpret genetic testing for patients with Duchenne muscular dystrophy. This novel program will provide evaluation of a patient's genetic test to help caregivers and clinicians learn if their son or patient is amenable to treatment with an Exon skipping therapy. This effort is similar in some respects to the market characterization we did ahead of our Vimizim launch and is the normal course of action when preparing for the successful launch of a therapy to treat a rare disease.

In summary, I am very pleased with the level of demand we are seeing for Vimizim across all of our commercial regions. Going forward, the commercial teams will focus on driving market penetration of Vimizim in substantially all marketed regions and continuing to deliver revenue growth across our commercial portfolio.

We will focus on commercial preparation in advance of a potential approval and launch of Kyndrisa in the US, as well as market characterization activities related to the CLN2 patient population in our global territories. Finally, we are preparing to assume sales of Kuvan in all global territories, with the exception of Japan, beginning in January.

Now I will turn the call over to Dan who will review quarterly results.

Thank you, Jeff.

Earlier today, we issued a press release summarizing our financial results for 2015 third quarter and year-to-date and I refer you to that release for full details. Starting with top line results, total BioMarin revenue for the third quarter of 2015 was $208.9 million, an increase of 18% year-over-year, driven by strong sales of Vimizim and Kuvan.

Year-to-date, total revenue was $662 million which is 28% higher than in the same period last year. As a result, the strong growth of Vimizim and Kuvan, combined with a solid base of revenues from Aldurazyme and Naglazyme, we are raising full-year 2015 total BioMarin revenue guidance to between $880 million and $900 million.

While reported revenues grew 28% year-to-date, the strong dollar and foreign exchange headwinds continue to have a negative effect on our reported revenues. The stronger dollar reduced total revenues by approximately $10 million and $38 million for the third quarter and year-to-date. Moreover, our full-year total revenue guidance would have been $40 million to $50 million higher if rates had been the same in 2015 as they were in 2014.

These pro forma results are net of the foreign exchange hedging program we have in place. Historically, we have hedged a significant portion of our euro exposure, but only limited amounts of our emerging market exposures. Consequently, though the euro has a stabilized against the dollar, continuing weakness in emerging markets currencies continues to negatively impact reported results.

Moving to operating expenses, GAAP R&D expenses increased to $158.7 million compared to $125.7 million in the third quarter of 2014. The year-over-year increase, which was consistent with our expectations and with our guidance, was primarily due to our new DMD programs, drisapersen, and to a lesser extent, our three Phase II Exon skippers, BMN44, 45, and 53. The prior-year comparison period does not include these expenses. While continuing to advance our portfolio, we are maintaining R&D expense controls and we are maintaining 2015 full-year R&D expense guidance at the levels set at the beginning of the year.

GAAP SG&A expense has increased to $94 million in the third quarter compared to $74.6 million in the same quarter last year. The largest driver of this increase relates to DMD marketing and commercial planning. With continued progress towards potential launch of Kyndrisa in the US and throughout our global territories in 2016, we are updating SG&A guidance to be between $400 million and $410 million for full-year 2015. This small increase includes the effect of our recently announced kNOWyourDuchenne campaign, which will help all DMD patients obtain a genetic test and an interpretation of that test.

Turning to bottom line operating results, non-GAAP net loss in the third quarter was $41.3 million compared to $23.1 million in the third quarter of 2014. As previously discussed, our non-GAAP results are based on GAAP earnings before interest, taxes, depreciation, and amortization and adjusted to exclude certain non-cash stock compensation expense, non-cash contingent consideration expense, and certain other specified material items.

As such, we believe the non-GAAP results taken in conjunction with our GAAP information provides additional information regarding the performance of BioMarin's core ongoing business. Moreover, it is non-GAAP profitability in 2017 that we are targeting if we are able to obtain early approval of drisapersen.

Due to increased revenues and consistent with our drive towards non-GAAP profitability, we are pleased to lower our non-GAAP net loss guidance for the year to a loss of between $115 million and $135 million. In addition, we reported a $90.9 million GAAP net loss in the third quarter compared to GAAP net income of $7.4 million in the third quarter last year.

The decreased GAAP net income in the third quarter of 2015 compared to the prior-year was primarily due to proceeds from the one-time sale of the Company's were pediatric disease priority review voucher of $67.5 million pretax in the third quarter of 2014. With respect to guidance for GAAP operating results, we are providing the following updates.

First, for the sale to Medivation of our talazoparib program, resulting in a $410 million upfront payment to BioMarin. Net of approximately $30 million book value, that upfront payment will be treated as a gain on sale of an asset in the fourth quarter of 2015, similar to the treatment of the PRV sale in the third quarter last year.

Based on the transaction with Medivation, as well as increased non-cash stock comp expense driven by increases in our share price in 2015, we are revising full-year 2015 GAAP net loss guidance to a loss of between $85 million and $105 million.

The second transaction that was announced on October 1 and expected to close during January 1, 2016 is our acquisition of the PKU franchise from Merck Serono for a total purchase consideration, including an upfront payment of EUR340 million and up to an additional EUR185 million if certain future sales and regulatory milestones are attained. This will be treated as a purchase of the business.

There is no financial statement impact in 2015. But starting in 2016, the upfront portion of the consideration allocated to Kuvan commercial outset will likely be amortized over the exclusivity period of five years and the balance to pegvaliase rights, which will sit on the balance sheet until approved in Europe and then amortize over time. The exact split is to be determined, but we estimate it will be roughly 50/50 of the total purchase price between those two assets.

In closing, BioMarin delivered a very strong third quarter. Our legacy products continue to perform even with expected seasonality for Kuvan and uneven ordering patterns in Latin America and other regions for Naglazyme and now Vimizim.

Our commercial team has hit its stride, balancing the strong launch of Vimizim while maintaining meaningful sales of our other products. With both the US and EU filings of Kydrisa accepted and under review, we look forward to the opportunity to meet with the advisory committee panel on November 24 with the goal of getting drisapersen approved and available to boys with DMD. We continue to believe an early approval in the US will take us to profitability on a non-GAAP basis in 2017, with growing profits after that.

Now, I'd like to turn the call over to Hank to provide an update on our pipeline products and expectations over the coming months.

Thank you, Dan. The third quarter was especially busy for the research and development organization.

The regulatory team focused on preparations for a meeting with the Peripheral and Central Nervous System Drugs Advisory Committee of the Food and Drug Administration to review the new drug administrative for Kyndrisa on November 24. During the quarter, we've been asked by many of you about our confidence as we get closer to the December PDUFA date, so I'd like to share how we're thinking about things.

Overall, since acquiring Prosensa in January, we maintain a confidence in a potential near-term approval of Kyndrisa. We have had very productive discussions with the agency and there have been no surprises throughout the review process. We continue to believe the totality of the data demonstrates a favorable benefit to risk profile.

Also during the fourth quarter, at the World Muscle Society meeting, investigators shared results of the Clinical Global Impression Scale Assessment from our Phase 3 patients. To remind you, the Clinical Growth Global Impression scale is a research tool used to quantify and track clinical status and treatment response over time. This tool was used by our investigators to determine the well-being of our Kyndrisa patients and we're pleased that 30% of Kyndrisa patients were assessed as clinically improved compared to the baseline one year earlier compared with 5% of placebo-treated patients.

As we've talked about before, there are several things we believe may have influenced the equivocal results of the Phase III study that in our view, have underestimated the magnitude of treatment benefit, including the lack of a loading dose. The inclusion of sicker patients. In use of non-Duchenne experienced clinical trial sites.

Additionally, we have also found that randomization in study 044, the Phase 3 trial, was imbalanced. Correcting for that imbalance improves the results of the study to 16 years, nearly a 60% increase in the benefits of treatment. I believe Kyndrisa can provide a meaningful treatment benefit to boys who are amenable to an Exon 51 skipping therapeutic, based on the totality of evidence obtained from multiple clinical trials.

The file for Kyndrisa is the largest ever presented to the Food and Drug Administration for a Duchenne muscular dystrophy drug. To remind you, the US and European Union filings are based on three randomized placebo-controlled trials and two long-term open label studies of more than 300 patients, in which some boys have been treated for more than three years, accumulating to nearly 500 patient years of exposure.

And so to recap the breadth of our data package, this includes two trials demonstrating improvement in six minute walk distance in patients whose baseline rise from floor time was less than 7 seconds. A third trial included patients whose baseline rise from floor was not restricted, resulting in a much broader patient population. However, six minute walk distance improvements were evident one year later in the group of boys who had received continuous drisapersen for two years compared to the group of boys who had received placebo for one year and Kyndrisa for one year.

Additionally, boys who have been treated for over three years in a separate ongoing extension study maintained their six minute walk test distance in contrast to published natural history controls. Treatment with Kyndrisa seldom is accompanied by adverse drug events requiring discontinuation and the most common adverse events consisted of injection site reactions. Other side effects are much less frequent and can be appropriately monitored. We're continuing to pursue the development of additional Exon skipping products. We currently have three Phase II studies underway for the treatment of other Exon skippers.

BMN 44, 45, and 53 and these studies were looking at various doses and delivery methods in an effort to provide the most efficacious and safest dosing regimens to patients who may benefit from our next Exon skipping products. We are evaluating data from these ongoing studies to determine specific next steps.

Turning to our other pipeline programs, we have a number of exciting catalysts on the horizon. As JJ said, we don't know of another example of a biotech company that has had registrations underway in the same year for three distinct new molecular entities.

For BioMarin in 2016, these could potentially include Kyndrisa for Duchenne muscular dystrophy in Europe, cerlioponase alfa for CNL2 and pegvaliase for phenylketonuria. To say my team is very busy would be an understatement. In the third quarter, we are pleased to have enrolled the first patient in the Phase II study with BMN 270, our gene therapy product for hemophilia A and we look forward to providing you with an update on this program and preliminary data at research and development day next April in New York City. For the remainder of 2015, beyond our advisory committee and PDUFA dates with Kyndrisa, we expect to share results from our study with reveglucosidase alfa for Pompe disease later in the quarter.

For our ongoing Phase 1/Phase 2 study of cerliponase alfa for the treatment of CLN2 disorder, we expect to conclude the study by year-end, share results in the first quarter, and if the data are supportive, to pursue registration. We continue to be very encouraged that this study could support registration.

In March/April 2016, we'll share Phase 3 pivotal study results from our study with pegvaliase for the treatment of phenylketonuria. We hope to file the biologics license application in the United States in the second half of 2016. Once we have pivotal data in March or April, we will determine the path forward for pursuing approval in the European Union.

We would hope to use the data from our United States study to support a regulatory pathway in the European Union, but we will not have clarity on that until we meet with health authorities in Europe once we have Phase III results. Also expected at our R&D day in New York in April, data from ongoing phase 2 study with vosoritide for achondroplasia, as well as plans and timelines for our pivotal study.

We've fully enrolled the fourth arm of the Phase II study with the 30 microgram per kilogram dose. While the first three cohorts in the Phase 2 study move forward in the extension arm of the Phase 2 study with the 15 microgram per kilogram dose.

That's a brief rate update on the status of our clinical programs. We're obviously very busy in the research and development organization and look forward to sharing with you the impending milestones just reviewed over the next few quarters.

So with that, operator, we'd like to open the call for questions.

(Operator Instructions)

Mark Schoenebaum, Evercore ISI.

It's Mark Schoenebaum, I've got John Scotti on with me as well, who might ask a question. The Wall Street concern right now I'd just like you guys to address this head on, and that is this confirmatory trial. There's obviously the letter in the public domain that Prosensa received from FDA in 2014 and I think, strongly encouraged Prosensa at the time to begin a confirmatory trial and yet, we sit here in late 2015, you guys have not yet started a confirmatory trial.

That bears say, uh-oh, the bulls say BioMarin knows what they're doing when it comes to negotiating with the FDA around orphan diseases. But can you just give us any assurances that the fact that trial has not started by the time of PDUFA or is not well ongoing should not be an impediment to approval? And John may have one follow-up.

Hi, Mark, this is Hank and I'm strongly with the bulls, here. BioMarin knows what it's doing. The issue of a confirmatory trial, as I've said numerous times before, is that it must address the issues that are identified during the review. And I think those issues get, to some degree or to a large degree, peer-reviewed by advisory committee. We've made a lot of preparations for what that confirmatory program could be, but we don't want to initiate enrollment into a confirmatory study until we're sure that we have the issues that are in consideration addressed in the confirmatory study.

Now I should also remind you that we have ongoing a very large natural history study. We reported some preliminary results of that in April at the American Association of Neurology. So we're already accumulating prospective natural history data on patients and we clearly have been in discussion of the Food and Drug Administration about the nature of next steps of studies. We don't have anxiety about where we stand in regard to pulling the trigger, if you will, on a confirmatory study.

Okay. If I may, and correct me if I'm wrong, Hank, so far we've never heard from the FDA that initiation of a confirmatory trial was a prerequisite for approval of the drug.

That's correct.

Hey, guys, this is John, if I could just follow up. We all saw Sarepta's data released a month ago, their new data. I was just wondering to the extent -- I'm sure you can't comment too much on Sarepta's data, but to the extent that we'll see maybe some new data cuts from you guys from DEMAND 3 maybe in light of -- besides just greater than seven years old and less or what you said before the clinical trial sites, but maybe with regard to six minute walk tests as a prognostic factor for benefit.

Is there anything new that we'll see on DEMAND 3 during the Adcom or something that could, in that vein, with regard to what we saw with some Sarepta data earlier? Let me ask you more succinctly, do you believe Sarepta put anything in the public domain that materially changes the debate?

I'm going to answer the less succinct question and I'll leave the more succinct question to JJ. We've mentioned that the DEMAND 3 study included sicker patients. We are sharing analysis with the Food and Drug Administration and I would expect that we will, at the advisory committee, have an opportunity to discuss the impact of the inclusion of those sicker patients in the study. Texturally, there's nothing substantially different about that today than when we, BioMarin took over the program. To say beyond that, we believe that it takes longer for sicker patients to have the benefit they have. Less remaining muscle tissue for targeting of an Exon skipper and therefore, to achieve benefit takes longer.

I did mention a new piece of information that I did want to highlight for you or two new pieces of information that I want to highlight for you. One is we found that randomization was pretty meaningfully imbalanced in DEMAND 3. We'll share that information with the advisory committee and you'll have a chance to see that in a bit more detail. And we share with you also that the clinicians' global impression of improvement is meaningfully benefited by Kyndrisa compared to placebo. I think that these are all things which give me growing confidence in the medical value for patients of receiving Kyndrisa.

So what was the second question, again?

JJ, I was just wondering, all of this paper introduced in the marketplace from Sarepta over the last couple weeks, did you see anything in those data sets that materially changed the debate around the --

I presume you are referring to data analysis that was presented at the WMS meeting?

Yes, sir.

The new [post hoc] comparatory group of 13 patients?

Yes, the new natural history comparative group.

I understand that 13 patients came from two centers in Europe, one Italian center, one Belgian center. The group was made over three years after the completion of the trial. I would say we don't believe it [changes] the landscape in any way, shape, or form based on our interaction with the FDA. But also there is another issue which is we don't -- it still unclear what is the data in terms of walk distance. Whether it's the original analysis or the new analysis what is the data for 30 milligram?

Because we understand the data was presented lumping 30 milligrams and 50 milligrams and it appears, although we don't know, it appears Sarepta had been filing for 30 milligram, not 50. I think we understand there were questions about it at the WMS meeting and I think the answer I heard from management was that the dystrophin production was about the same for 30 and 50 milligram, but at the same time, it looks like we couldn't really show relationship between dystrophin and walk. We don't believe it has substantial impact on the landscape, but maybe Hank has another --?

The only other thing I'd add is, if I'm glad that -- it's impossible to compare studies apples to apples, not head-to-head trials, et cetera, so making no comment about the quantum of evidence that came from our trial versus the quantum of evidence that's come from anybody else. But to say that I'm glad that BioMarin has, in addition to 3.5 years of long-term safety and efficacy data from 12 boys treated in which we demonstrated maintained maintenance of the ambulation, I'm glad we have three other randomized placebo-controlled trials to independently bring to advisory committee consideration with an additional group of patients that have been filed in open label extension studies.

We just have, beyond our own long-term open label extensions, we just have a lot more trials and I think that's going to be a very important consideration as the advisory committee works its way through understanding the total body of evidence.

All right. Great. Thanks for taking my question. Nice to see you last week at the Evercore mixer, JJ, bye.

Chris Raymond, Raymond James.

Another drisapersen question if you will, so there's been a decent amount of talk on this confirmatory trial. I think I've heard some speculation from you guys that it might be in non-ambulatory patients. I'm just curious. You mentioned sicker patients being a confounding factor in the Prosensa trial. Can you maybe talk about that and maybe reconcile that?

I think there are two different issues. One is the inclusion of patients who are more advanced in the course of their illness has the potential to dilute the treatment signal. And you know that the placebos studies 876 and 117 had essentially negligible decline in the placebo group and yet, the DEMAND 3 044 study had about 50 or so meter or maybe more decline in the placebo group. The placebo group was sicker in DEMAND 3 than it was in the other 1178 and 1176 studies.

The inclusion of those are sicker patients, because they have advanced fat and fibers tissue infiltration into their muscles, diminishes lower extremity muscle that is the target for Exon skipping. So therefore, it's not surprising that six minute walk distance improvements in that group of patients are of a smaller magnitude and take a longer time to achieve. I keep mentioning the lack of a loading dose. We learned, subsequent to the completion of all of these trials that it takes about six to eight months to get to steady state tissue concentrations of Kyndrisa.

It's actually pretty amazing that we were able to observe improvements in the 044 DEMAND 3 trial at 48 week time point, considering the patients are only at steady state tissue concentrations for a relatively short period of time. That dilution of treatment benefit, if you will, is one important consideration. And I'd put that, by the way, in a context. PTC recently reported with ataluren a resolution of a question that had been outstanding for a while and that is it looked like their data said works better in sicker and their confirmatory trial resolves that dilemma by saying there's a sweet spot for effectiveness that's probably north of or healthier than the lower limit of inclusion in the BioMarin 044 trial.

I think biological data, external data point us in the direction that says if you have lost a lot of lower extremity function, the benefit is going to be there but it's going to take longer to see and it's going to be of lower magnitude in regard to ambulatory function endpoints. The other thing I mentioned was that because the inclusion of sicker patients, that meant that the trial was vulnerable to imbalances in randomization and I'll go through that at the advisory committee. But the short version of that is, we always assume randomization works perfectly, except that it doesn't when you don't stratify randomization for key prognostic factors.

Because these findings -- the knowledge of the natural history of Duchenne has only really emerged in the last five years. Unfortunately, the study wasn't designed with those elements in mind and therefore, the study is to some extent, partially compromised by that as well. Two factors influenced the interpretation of the equivocal results of the Phase 3 trial amongst others, dilution of treatment benefit and balance of randomization.

Thanks, Hank. And if I could ask a follow-up question on the commercial side, I was kind of struck by your comments on Naglazyme. I know order patterns, especially in Latin America, are choppy, but another company with a rare disease portfolio highlighted macro issues in Latin America as sort of a longer-lasting headwind. But conspicuously, I don't think I heard that from you guys. Can you talk about what you're seeing there?

Yes, so I think the main elements for us in Latin America are the change in the foreign exchange rates that's the Brazilian real very hard. It's also hit the Colombian peso this year. That is the main one. And then we have these very large uneven order patterns that are coming from Latin America that are -- they're making the quarter to quarter comparisons very difficult to keep track of.

They could also spill into year-over-year comparisons based on the timing of these big orders. Finally, like this other company you referred to, we're watching macroeconomic conditions in Latin America and other regions and I would say we are watching, we're concerned, we have not yet seen that be a negative influence on our business. It could happen in the future. I haven't seen it yet.

Okay. Thank you very much.

Chris, in spite of this year's -- again the number of Naglazyme patients around the world has increased in Q3 over Q2. But definitely the collapse or the dramatic reduction of the value of some Latin American currency as its compared to the dollar obviously hasn't helped us.

Geoff Meacham, Barclays.

Thanks for taking the question. I have got a few for Hank. One, vosoritide, I guess when you think about the next steps, how much exposure to the high dose do you really need to see before starting a Phase 3 and then what's the gating factor beyond that? I have a follow up just to continue to beat the dead horse on drisapersen.

That's a living thoroughbred stallion. (Laughter) The next steps on how much exposure, so we believe that we reported the six-month findings and we believe that normalization of growth at six months portends very well. Obviously, you can follow patients longer, you can always ask the question about how well that efficacy is sustained. We believe that vosoritide's efficacy will be sustained because we saw a sustaining of the biological marker of the CNPs activity urinary excretion cyclic GMP from beginning to end of the study. And so we think the data will hold up and obviously, we're continuing to follow those patients.

We believe we have enough evidence to date to pivot to Phase 3 and then the next gating items are really lining up the health authorities on the design of a global registration program. It's very important in the rare disease space because of the rareness of the patient populations and the desire to get meaningful clinical outcomes in clinical trials means that your sample sizes tend to be on the larger size and the availability of patients tends to be on the smaller side because of the rareness of the population. So that pushes us to want to make sure that we dot our I's and cross our T's with health authorities around the world.

We've initiated that process. We're feeling good about this process and I'd say stay tuned, as I mentioned in my prepared remarks, for an update at R&D day in April. Exactly what we'll be able to tell you at that point in time will depend on the amount of progress we've made, but we'll provide what update we can. And then you had another question about the stallion?

Yes. So just on subsequent studies, clearly, you'll get input from the panel and obviously, ahead of the PDUFA date on what the design of those studies and to finalize that. But I wanted to ask you what the venue or mechanism was to get European input? Clearly you want to have a trial that works for both geographies or if there's any other input from health authorities globally to what they may ask for when you think about what a confirmatory study may look like.

Yes. That's really an outstanding question as well. We're in registration in EU and the United States simultaneously. The process in the EU is structured a little bit differently than the process in the United States. But we're able to have dialogue with each of the agencies independently. They're well aware of the rareness of the patient population. They're well aware of the need for considerate use of patient resources in the post-approval setting.

They're both well aware that the questions that get posed that are part of -- whether they're post-marketing commitments, post-marketing requirements or confirmatory studies, they need to be important, because it is a lot of effort. It is a burden on patients. It is a very rare patient population. It's really through our dialogue independently with the agencies that we're able to try to line up and come up with a global post-approval program. It's kind of another factor of why we don't want to rush into one thing until we're sure we know what the issues are globally.

Great. Okay. Thanks a lot.

Cory Kasimov, JPMorgan.

Hi this is Whitney on for Cory. First question, I'm going to stick with drisapersen here, just on the ISRs. We've had a couple conversations with doctors recently where they've independently brought up the ISRs, both the rate and severity and talked about them as potentially being duration of therapy limiting. Just wondering if you can remind us what you were seeing with the injection site reactions and whether or not you think that's going to be a particular issue looking towards the Adcom.

In two years of study of close to 100, 200 patients, call it, we've seen one discontinuation due to cutaneous toxicity of drisapersen. As you follow patients for longer, there is evidence that the frequency and the severity of the skin reactions can evolve to the worst. That leading edge, if you will of patients, were patients who were on the study that we call 673, where we now have 3.5 years of data on those boys and those boys were started on therapy before a rigorous program of injection site rotation was undertaken. We know that injection site rotation is an important element to manage the occurrence of injection site reactions.

It's imaginable that there will be a need for, let's call it, an alternative route of delivery for some boys if the cutaneous toxicity in year three, year four, year five, year six gets to the point where it's unmanageable. Therefore, we'll be working on, for example, an IV formulation. But SubQ formulation really provides a lot of convenience for patients. It can be handled safely by patients and their families and has not risen to the level of an overt toxicity requiring discontinuation, except for in very rare circumstances in the first two years of therapy.

Also, the SubQ routes reduces the cost of administering the therapies substantially. We understand our competition requires about a one hour infusion, which is about two to three hours in the physician's office with the added requirements for infusion [suites] in the physicians office or DMD centers and we understand they're not equipped for that. But as Hank states, for the very few patients that might want to evolve from SubQ therapy over the long-term, we have an active plan to work on that, including the ability to give the drug intravenously and we have a few patients already on IV therapy in Europe.

Thanks. That's helpful. Then just a quick one, can you remind us how much you've been doing at-risk ahead of the PDUFA and how quickly you could be ready to launch if approved on December 27.

Yes. Just to clarify, when you say how much we are doing at-risk, are you talking about market preparation or how fast we can have finished goods on the shelf ready to ship?

I guess both.

Okay. Well, in terms of market preparation this is not BioMarin's first launch of a drug to treat an ultra-rare disorder. We've been working on this one all year long. We're conducting the normal and appropriate market characterization and also market conditioning. We're preparing our team in the United States and our support system. So if we get an approval on or around our PDUFA date, from a commercial perspective, we're basically ready to go, subject to the interruption of the holiday season. Maybe I would ask Robert to comment on product.

This is Robert Baffi, head of technical operations. We have been, over the course of the year since we acquired the product, building up inventory, both from an API perspective and drug product perspective and we would be available to launch drugs shortly after approval.

Also, on a related topic, we'd like to emphasize that, as far as we're concerned, we have no long-term manufacturing capacity constraints and we believe that we should be able to supply market demand with our product.

Thanks.

Terence Flynn, Goldman Sachs. Your line is open.

Thanks for taking the question. Just a few on the hemophilia program. I was wondering, you mentioned an update at your April R&D day, do you expect that include only a single dose cohort or can we expect more than one? And any more details you can share around your vector and anything in the protocol around the use of steroids? Thank you.

Vector we're going to talk about at the American Society of Hematology at the end of the year. I kind of want to answer your question about whether we will give you more than just the single dose cohort by saying we only ever plan to treat patients with a single dose, but I think you meant -- I think you're asking about additional dose levels. We're just starting in the program. I think it's premature to talk about what the dose ranges or what data might be available in April. Stay tuned.

And as to the steroid regimen, we're highly sensitized to the -- highly aware of the issue that brief transaminitis can markedly attenuate the transgene expression and we believe that we have a program place that adequately protects patients during that period and we'll just have to get more patient data. I'll have more patient data to share with you, hopefully at analyst day that can speak to how that program worked or what modifications might be needed.

Thank you.

Joseph Schwartz, Leerink Partners.

Great. Thanks very much. I was wondering if you think that a REMS will be required for Kyndrisa and how that might look?

It's premature to talk about what the post-approval requirements are going to be, especially ahead of the advisory committee because there's still fair amount of review still to go. One thing I would say is generally, we've looked at -- our regulatory group has done some research on utilization of REMS and a couple of things have come out of that review. One is they seem to be declining in number and also, the agency is reluctant to introduce those late in the course of programs because there's a lot of internal lining up that has to go on at the agency to implement the REMS.

So notwithstanding those trend patterns, we do still think it's premature to talk about whether and what type of REMS could be required. I think it's important to say that we're going to do what will be necessary to assure safe and appropriate use of Kyndrisa the in the commercial arena. We'll do what it takes to make sure that the patients get a benefit and are safe.

Okay. That makes sense. And are there any metrics that you can share from the Know your Duchenne initiative since it was launched and how do you anticipate this program might evolve upon potential approval of Kyndrisa?

Jeff?

What I can say qualitatively -- I don't have metrics to share on the phone today, but what I can say qualitatively is that the program has been well-received. We've gotten inquiries from patients, caregivers, and also physicians across the United States. Many of those inquiries have translated into those patients enrolling in the program to either get additional testing results or to have their testing results interpreted by an independent analyst and so we're pretty happy with how that program is going.

As I stated in the prepared remarks, one of the things that we learned very quickly here is that while its true that patients and physicians for the majority of patients with DMD have had a molecular test that's generally been to confirm the diagnosis of Duchenne muscular dystrophy. It is not the case that the majority of those patients, caregivers, or physicians have done the interpretation recently and are aware of the status of those test results and whether or not that patient would be amenable to treatment with an Exon 51 skipping therapy, any other Exon skipping therapy, or any other genetically targeted therapy that might become available.

As a result, we see that there is a big need, and BioMarin has jumped into address that need, there are other programs out there that are available also to address the need of getting appropriate testing and interpretation. Honestly, I see this as something that's going to be important, not only this year, but certainly in 2016, probably 2017.

Are you able to do the same thing outside the US where the privacy laws might be a little bit more strict?

No, the specific program that we have in the United States really applies just to the United States. But the overall concept can be tailored to certain other countries. And based on the response that we've gotten and the inquiries coming in from outside of the United States, we believe it's appropriate to put together programs that are compliant with those local laws, but that would also provide some assistance to patients who don't happen to be in the United States. So we're working on that.

Great. Thanks for taking my questions.

Phil Nadeau, Cowen and Company.

Thanks for taking my questions. First, just a couple of commercial housekeeping items. Jeff, you mentioned that there's a large Latin American order for Vimizim during Q3. Can you give us some idea of how large the non-recurring part of that order was, so how much we should anticipate taking out of future quarters.

So in the range of $5 million to $10 million.

Okay, great. Second on the impact of the FX, you mentioned what the impact of FX was on the top line, obviously you have some operations overseas. How much more would expenses have been if FX had been constant?

Expenses in total would've been around $20 million to $25 million more over the course of a full year.

Okay. Great. A couple on the pipeline, first on reveglucoside, we're going to get interim results later this quarter. Hank, what type of data will be in those interim results? In particular, my guess is people are going to interpret those as a proxy for what the final results are going to show. Is there any reason why we shouldn't do that?

It's a little premature to talk about that just because we haven't finalized that data package. But the type of results will be the safety parameters, which will basically be things like infusion-associated reactions or potential for hypoglycemia or anything unexpected. And then on the efficacy side, we focused on the respiratory muscle strength parameters. Maximum inspiratory pressure, maximum expiratory pressure, we've also measured six minute walk distance. So I think you'll get -- we'll try to give you enough of an interim of a look at the data interim to six month data point to be able to inform a view as to the road ahead.

And do you know approximately how many patients will be in the interim?

Not off the top of my head.

Okay. And then just one last question, back on drisipersen, you can see a skeptic in the FDA panel saying that the collection of data that you have that shows efficacy is interesting, but it's a theory based on post-hoc analyses and you should go and do another study to prove your theory. If that's asked, how would you answer it in particular? Were any of these analyses predefined? How do you answer the post-hoc question?

There isn't any real great answer to the post-hoc question as it pertains to the conduct of the 044 study. I'm going to pivot to good thing we had two other randomized trials that were run essentially concurrently. This isn't one of these programs where there was a bunch of studies done and then a bunch more studies done and then they did one big phase 3 trial and rolled the dice on the Phase 3 trial and then they had to make chicken salad out of all of that.

This is a program where GSK, for better or for worse, ran contemporaneously three randomized placebo-controlled trials and unfortunately, because of the well-motivated desire to make the largest of the trials have the broadest eligibility, the broadest number of centers included, that all was well motivated, but entirely backfired. So when I talk about the totality of evidence, it's informed by guided analyses of the Phase 3 program, but strongly supported, if not pivotally dependent on, the other two randomized trials in the portfolio.

That's very helpful. Thanks for taking my question.

There may be another illustration of this, an aspect that cannot be managed by sub group analysis of the Phase 3 data are things like the fact like the center in --most of the centers in the Phase 3 had no experience with six minute walk test or Duchenne muscular dystrophy in general, and the fact there was no loading dose in the phase 3 trial when Hank tells you that it takes six months to get the maximum tissue penetration with the drug, the absence of loading dose probably a pretty significant impact on the results of the phase 3 trial. And that's the -- you cannot analyze this with subgroup analysis.

Thanks for all the detail. That's helpful.

Andrew Peters, UBS.

Thanks, guys, for taking my question and I appreciate the comments from JJ around drug pricing. I think it's helpful to frame the discussion around you guys. But as drug pricing continues to come under scrutiny in general, does that affect how you think about pricing both for drisapersen and for cerliponase alfa, especially in the context of CLN2 being a bit of a smaller indication where a higher price point could be expected? How do you think about the increased focus on pricing in the industry in general as you go about making those pricing decisions? Thanks.

I'll start, maybe Jeff can give you his perspective. I would say the scrutiny so far has been mainly on large price increases, rather than large prices in general, high prices. I think the scrutiny on the large price increases is difficult not to agree with that and specifically, when a company buys an old molecule, doesn't do any research and jack up the price hundreds of percent overnight. This is not our business model and this will never be our business model. I think I've said on CNBC that we have never in the past increased the price of our products beyond inflation in the US and we have no intention to do that in the future.

We still believe that, for the value-added therapies when there is a very large unmet need and limited competition, we still -- there is still there is still pricing power here. Obviously we are in the process of doing pricing research for Kyndrisa and the environment will be taken into account, but I would say the past few weeks, the environment of the pricing is more of a political environment than a real environment. Also, I just want to highlight that most of our sales, except for Kuvan, but the vast majority of our sales are ex-US where we've been dealing for years with single payers, government payers where there is price control and the price of our products outside of the US is not significantly lower than in the US, actually in some countries it is higher.

And I would say the last point is that the Vimizim launch, which is happening in the context of this pricing headline is going very well. Obviously, there are the usual pushbacks in some countries and every country is trying to get the best possible price that they can. That's not unusual. I would say for us in the short-term, when we talked earlier about the full exchange headwinds are -- have a bigger impact on us than the pricing environment, not to say there is no pricing issue whatsoever but. Jeff, you want to add anything?

That was great, JJ. I guess I would just add that by now, it is a well-established and a well-accepted fact that the economics of drug development manufacturing for drugs that treat ultra-rare disorders result in high prices. That much is no longer disputed. That one was settled a long time ago. Now discriminating careful buyers of those drugs, single national payer systems and government and private insurers in the United States, they care a lot about the strength of the clinical value proposition and the degree of support that these drugs bring to the market and against the price that they're claiming.

BioMarin knows that, we're well aware of that. We take all of those considerations seriously and into account when we price our drugs and the evidence so far has been pretty positive for our commercial portfolio and I expect that we will continue to do the right good job pricing our drugs going forward.

Michael Yee, RBC Capital Markets.

Hello, thanks for the questions. A couple, I'm still trying to beat the dead horse. I hope it's not dead yet.

But Hank, on drisapersen, can you just remind us where you stand on the dystrophin debate, whether you can comment on whether your data is -- whatever data you have is correlative directionally related or whether that's even been in any discussions at all with the agency. Then second of all, can you just comment about whether or not you actually filed for accelerated approval or not and whether there's any distinct difference as to how I should interpret a quote-unquote confirmatory study versus just post-marketing, and maybe that's differentiation that I should consider to whether or not a confirmatory study is even needed. Thanks.

So two easy things first and just say I won't comment on ongoing discussions with the agency about a particular facet of data review or a particular consideration about whether such thing is a post-marketing commitment requirement or confirmatory study. I've tried to lay the landscape of talking about the potential that any or all of those might apply post-approval, but that we're not at a point in time where we can be specific enough about the nature of the approval or the types of requirements that will ensue. But turning to the very first question that you asked about where are we in the discussion of dystrophin.

I'd say that we are adequately convinced that we can document in patients treated with Kyndrisa that there is Exon skipping and that a novel dystrophin that is made that is a result of Exon skipping as a result of the truncation of the pre-MRNA and the restoration of the reading frame. We are very clear that we cannot -- we have not identified a parameter or a measurement of dystrophin that is a predictive biomarker of change in clinical outcome. That is a very important -- those two things every important to distinguish.

We make dystrophin. Second question, how much dystrophin do have to make for it to be clinically relevant? No one knows the answer to that question yet, and our data don't change that and we're not aware of any trial that's underway that could even possibly address that. It will take a while to validate a measure of dystrophin as a surrogate biomarker of clinical outcome.

But the data's certainly distinct from the placebo and that's your point in terms of dystrophin data regardless of quantitation?

We believe, in aggregate, that's the case. Now some of the things that we've learned are one has to compare pre-treatment to post-treatment in the same patient in the same muscle group to properly interpret the drug-induced change in dystrophin. One must measure a reasonable sized sample of muscle and there are a lot of challenges technically in handling conditions. But when you can measure pre-and post, do it independently, objectively, and quantitatively then our belief is that you can adequately demonstrate that the intended effect of drisapersen is occurring in patients treated with Kyndrisa.

Perfect. Thank you.

Ying Huang, Bank of America.

Thanks for taking my question. Just one, Hank, you mentioned those imbalances at baseline for the Phase 3. Could you just shed more light about exactly what imbalance was there or across different metrics? Then I know you guys have been saying that you have very strong IP position for drisapersen against Sarepta's products. Hypothetically, if both are approved in the US, would you really go to the extreme and potentially block them in the US or Europe because that could create some bad will from the patients in the organization. So just curious your thought about that. Thank you.

So the first part, age, baseline walk, and six minute difference -- I'm sorry -- age, baseline walk, and rise from floor time are all important prognostic indicators of the change in walk and they are all imbalanced, that is against drisapersen, in the 044 placebo-controlled study. Interestingly, not in the other smaller studies. Probably due to the width of the eligibility criteria in the Phase 3 trial and correcting for that confounding improves the treatment benefit. So as we sit here today, it's age, baseline walk, and rise from the floor.

And JJ wants to --

On the IP, I think we've been asked this question several times. And what I need to go back to the facts. I mean, Europe, we have an immediately enforceable patent because the regulations are different from the US, and we want -- the US [Prosensa] that back in 2011, I think late 2011 we won the proceedings there.

Sarepta has appeals, but in the Europe, the European regulations your patent is issued and immediately enforceable, even during the appeal. In the US, we just won the patent interference case with the Patent Trial and Appeal Board related to our method of use patent. There are other patents that are being evaluated.

But I just want to -- just some point of clarification is that in the US, whatever happens to the other patents that are being secured, and by the way, we are pretty confident of the validity of our composition of matter patent in the US similar to the European one, where we won the case. But even if we lost there everything else, it has zero impact on our freedom to operate in the US or in Europe and has zero impact on the validity of the current patent in the US. And assuming that the patent is maintained on appeal, our ability to protect our intellectual property.

That being said, so I don't think we need to make any decisions as to what we will do to defend our intellectual property. It is our intent to aggressively defend our rights here, but I know -- let's wait and see what happens as to who gets approved when and then we'll determine what is the best strategy going forward.

Okay. Thanks.

That concludes the Q&A session. I will now turn the call back over to JJ Bienaime for closing remarks.

Thank you, operator. Thank you for being on the call today. We are, in summary, very pleased with our results for the quarter and for the year to date. So we increased our top line revenue guidance for the second time this year to between $880 million and $900 million for the full year, in terms of total BioMarin revenues and that driven primarily driven by the continued successful global launch of Vimizim and the strong growth of (inaudible) Kuvan. So our commercial team will continue to focus on driving further market penetration with Vimizim worldwide as well as taking over the global Kuvan franchise beginning January 1, 2016.

So over the next six months, we have numerous development and regulatory opportunities to look forward to, including our advisory committee meeting on November 24 for Kyndrisa and our PDUFA date of December 27, followed by an anticipated CHNP appeal in the first half of 2016 in Europe on our marketing authorization application with EMA and the potential approval decision on the second half of next year. Also, in the fourth quarter, we will communicate the results -- top line results for our single arm Phase 2/3 study with reveglucoside alfa for Pompe disease. Then the completion of and the results of our Phase 1/2 study with cerliponase alfa for CLN2 disorder and if the data supportive, anticipate its filing for approval in the first half of 2016.

If we do accomplish that, we will have gone from first-in-human to filing in basically 2.5 years, which is a record, I think, in the industry. Then in March/April next year, we anticipate communicating results of our pivotal study with pegvaliase for the treatment of PKU and the submission of a BLA for pegvaliase in the second half of next year. Finally, we anticipate -- we're planning an R&D day on April 20 in New York and we will update you on all our programs and more specifically, BMN 270 for gene therapy in hemophilia A and the vosoritide for achondroplasia, including the Phase 3 plans and the final Phase 2 updates.

So importantly, we also maintain our goal of becoming profitable on a non-GAAP basis in 2017, assuming an [interim] approval of Kyndrisa. We thank you for your continued support and thank you for joining us on today's call.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect and everyone have a great day.