BioMarin Pharmaceutical Inc (BMRN) 2017 Q2 法說會逐字稿

Welcome to the BioMarin Second Quarter 2017 Financial Results Conference Call.

Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Traci.

Thank you, Operator, and thank you all for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, Inc. including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's 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.

On the call from BioMarin management today are J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Global Research and Development; Dan Spiegelman, EVP and Chief Financial Officer; Jeff Ajer, EVP, Chief Commercial Officer; and Robert Baffi, EVP of Technical Operations.

Now I'd like to turn the call over to BioMarin's Chairman and CEO, J.J. Bienaimé.

Thank you, Traci. Good afternoon, and thank you for joining us on today's call. During the first half of this year, we made significant progress achieving our financial goals, progressing our development pipeline and getting our sixth commercial product approved in both the U.S. and Europe.

In the second quarter specifically, we achieved record revenues, received approval for Brineura in both the U.S. and EU earlier than anticipated, and we submitted our application for approval of pegvaliase in the U.S. and in July, shared unprecedented data for our BMN 270 gene therapy product for hemophilia A.

Also announced today, we are very encouraged by the maturing 4E13 dose data, and therefore, intend to start 2 separate Phase III studies to explore both the 6E13 and the 4E13 dose as soon as possible.

As we shared with you at ISTH, 6E13 is the preferred dose of investigators and QOLs that we've been talking to, given its demonstrated ability to transform severe hemophilia patients to the normal range of Factor VIII activity and as Hank will explain a little later, there is enthusiasm in many centers all around the world to treat patients with this dose.

However, to the most recent data of the 4E13 dose with an additional 8 weeks of observation supports further exploration. Factor VIII levels continue to rise at week 24 and beyond for our furthest-along patients as noted in the Table 1 of our program update press release issued earlier today. And we anticipate that the most recently dosed patients will continue to follow that trend.

With this new data in hand, we are more confident that the clinical benefit of steady state Factor VIII levels in the normal range or physiological range will provide complete coverage for our patients, thereby, eliminating all source of bleeds and the requirements for all recombinant Factor VIII infusions.

Furthermore, based on data from both the 6E13 and the 4E13 dose cohorts, we believe that we have the opportunity to potentially disrupt the current treatment paradigm for severe hemophilia A patients. As such, we plan to invest our resources, manufacturing capabilities and commercial development know-how to maximize the BMN 270 development program and progress both doses as quickly as possible.

In addition to our dose development strategy, given the lower level of pre-existing immunity or antibodies to AAV5, which is the vector we use for BMN 270, we expect that approximately 90% of hemophilia A patients will be treatment candidates for BMN 270 based on this criteria.

Moving to top line results in the second quarter. BioMarin generated record total volume revenues of $317 million. We continue to see strong patient demand for our legacy products, and I look forward to adding contributions from Brineura as we execute the rollout globally.

The commercial launch of Brineura is doing very well, and the initial stages are centered on awareness, early diagnosis and clinical readiness, as Jeff will describe in more detail momentarily.

All the regulatory accomplishments in the quarter include the submission of the pegvaliase BLA in the U.S., and we expect to hear from the FDA on the filing of our submission as well as the Prescription Drug User Fee Act, or PDUFA, action date within 60 to 74 days from when we filed the application. So early September is when we expect to hear from the FDA.

We also intend to submit an application for registration in the European Union by year-end.

We are committed to pegvaliase as we believe it offers an improvement new treatment option for those adult patients with PKU unable to manage their conditions with existing treatments. Phase III pegvaliase data have demonstrated significant Phe-lowering which many treating physicians in the community believe plays an important role in improved neurocognitive function in PKU patients. We continue to believe that there is a path forward based on the Phe-lowering, and we look forward to keeping you appraised of regulatory developments as we move forward.

In conclusion, we are very pleased with our accomplishments in the first half of this year, and we believe a tremendous amount across the financial, regulatory and development areas of the business. And while we expect to incur a GAAP net loss for 2017, we remain on track, as you saw in our release, to achieve non-GAAP profitability for the full year 2017.

Now I would like to turn the call over to Jeff who will review the commercial business in more detail.

Thank you, J.J. I'm extremely pleased with the commercial team's execution in the second quarter and first half of 2017, generating a 16% increase in total BioMarin revenues year-to-date.

Before reviewing specific product revenues, I would like to provide an update on the Brineura launch in the U.S. and Europe following approvals in the second quarter. The early launch dynamics reflect a high level of interest from physicians, institutions and families. Following approval in the U.S. in April and commercial product availability in mid-June, we were pleased to have achieved sales in 2 countries in the second quarter, the U.S. and Argentina. Since the end of the quarter, we've already recorded our first sales in Europe, serving patients in both France and Germany.

Briefly, our commercial strategy is focused on 3 distinct components, disease awareness and early diagnosis, site readiness and reimbursement. Our efforts that facilitate earlier diagnosis include disease awareness and education campaigns, highlighting the symptoms that may signal the need for early testing for CLN2 disease including unprovoked seizure preceded by language delay. These education programs are multipronged in that they target physicians and families, respectively.

We will also have a presence at major international and regional pediatric neurology, epilepsy and genetic congresses in order to get in front of physicians who will be diagnosing CLN2 and prescribing Brineura.

We have also implemented a genetic testing program in the United States named Behind the Seizure that provides pre-epilepsy gene panel testing in order to shorten the diagnostic journey for families. Similar programs have been implemented in Latin America and will soon be activated in Europe.

Touching briefly on site readiness. Due to the complexity of coordinating institutions' preparedness for port surgery and biweekly intraventricular infusions, one of our key launch metrics is the number of institutions ready to treat and service CLN2 patients. Recall, our global target for the first year during commercial launch is 50 target institutions, so we are well on our way. I'm pleased to share that as of today, 26 target institutions are treatment-ready. This means they are interested and able to serve CLN2 patients properly resourced and in-service.

Turning for a moment to reimbursement. We are extremely pleased with how well the various stakeholders are aligning and navigating the complexities to provide treatment and reimbursement for patients with CLN2. Payers understand the urgency to treat, given the rapid progression and devastating consequences of CLN2. And we're happy to report that in the U.S., payer authorizations have been proceeding and we have no denials pending. To date, coverage policies are facilitating access to all CLN2 patients based on our studied population and in alignment with our label.

Outside of the United States, we've received named patient approvals for a number of patients. We have begun the sequence of submitting reimbursement dossiers as a first step in the process in securing permanent pricing and reimbursement in European markets. While it is still early days and the complexities of coordination approach is involved, we believe we are uniquely qualified and well-equipped to successfully launch Brineura worldwide.

I would now like to turn to second quarter results for our other approved products, all of which contributed to record revenues in the quarter. Starting with Vimizim, commercial uptake continues to be robust despite some uneven order patterns, which we highlighted for you last quarter. Vimizim delivered $103 million of revenue in the quarter. Solid patient growth continued in the second quarter, resulting in 24% growth in commercial patients year-over-year.

In just over 3 years since first launch, we are now selling Vimizim in 43 markets. That compares to sales of Naglazyme in 55 markets after 12 years and indicates significant leverage gaining rapid access to market.

Turning now to Naglazyme. We are very pleased to report a 16% increase in revenue year-to-date. Naglazyme delivered $86 million in revenue for the second quarter, up 9% compared to the same period last year. Also contributing to Naglazyme results was continued steady growth of the underlying base of business as measured by commercial patients. Over the prior year, commercial patient counts increased by 7% in its 12th year on the market.

Finally onto Kuvan. Strong revenue in the quarter and first half of 2017 resulted in 13% and 16% in growth in those periods, respectively. Robust Kuvan sales were driven by strong growth in North America and the continuing development of the ex U.S. markets.

In closing, the commercial team delivered record revenue in the second quarter of 2017 despite continued uneven order patterns for Naglazyme and Vimizim. I'm very pleased with the continued level of demand we are seeing for all of our products worldwide, and we are extremely pleased with the rollout of the commercial program with Brineura and believe we are laying the groundwork for future commercial success.

We look forward to keeping you apprised of our progress over the coming quarters. Now I'd like to turn the call over to Dan to provide more detail on the financial results from the second quarter. Dan?

Thank you, Jeff. Earlier today, we issued a press release summarizing our financial results for the second quarter, and I refer you to that release for full details.

Starting with top line results. As J.J. and Jeff have already mentioned, our second quarter revenues all highlight the total BioMarin revenues for the first half of 2017 were a record $621 million, an increase of 16% year-over-year, driven by strong contributions from all of our marketed products. As we have said previously, we expect top line growth over the next few years to be around 15%, and we expect to track toward that goal until the contribution from new product launches takes us above that level.

Looking at full year revenue guidance, we remain on track to meet our full year goals for each of our products.

In addition, in July 2017, we received a $35 million onetime payment from Sarepta Therapeutics related to the license and settlement agreements resolving the exon skipping patent litigation. This amount will be recognized as revenue under royalty and other revenues in the third quarter and will therefore increase our top line full year guidance by $35 million on both sides of the range.

Our updated total BioMarin revenue guidance is now between $1.285 million and $1.335 million for full year 2017.

In terms of operating expenses, R&D expenses decreased to $143 million in the second quarter of 2017 compared to $167 million in the second quarter of 2016. The year-over-year decrease was primarily due to decreased spending on the Brineura program as well as termination of the Kyndrisa program.

For the second half of the year, we expect R&D expenses to increase due to acceleration of the BMN 270 and vosoritide Phase III program.

SG&A expenses increased to $144 million in the second quarter of 2017 compared to $110 million in the second quarter of 2016. The year-over-year increase primarily reflects increased expenses related to: the acquisition of ROW Kuvan rights in support of our global PKU franchise; costs associated with the Brineura launch; and legal expenses related to disputes with Par Pharma and Sarepta, both of which have now been settled. In addition, there was an increase in noncash SG&A stock compensation as compared to a decrease in R&D stock compensation for the second quarter.

While our expectation for full year operating expense is unchanged, we are reallocating $10 million of expected full year expenses from R&D to SG&A. Consequently, we now expect full year SG&A guidance of between $530 million and $560 million and are also reducing full year R&D guidance to between $610 million and $640 million.

Putting the full year planned operating expense for R&D and SG&A in context, it is worth noting that at the midpoint of the guidance, our total operating expense for R&D plus SG&A of $1.17 billion would represent an increase of 3% compared to prior year R&D and SG&A, and even at the high end of guidance a 5% increase.

This is in contrast to the expected increase in revenues of 17% at the midpoint of guidance and 20% at the high end.

The revenue growth rate and lower OpEx growth rate is consistent with our stated goals for this year and for the rest of the decade of growing revenues at 15% a year and operating expenses at a lower rate in order to generate increasing bottom line results year-over-year.

Turning to current year bottom line results. GAAP net loss in the second quarter was $37 million as compared to a GAAP net loss of $419 million in the second quarter of 2016. The GAAP net loss in the second quarter of 2016 was impacted, driven, in fact, by a $599 million impairment charge, the vast majority of which was related to the write-down of the remaining value of Kyndrisa following the withdrawal of the MAA in the EU in May 2016.

For 2017, we are adjusting full year GAAP net loss guidance by $25 million due to the anticipated after-tax impact of the $35 million payment from Sarepta. And, hence, we now expect full year GAAP net loss of between $115 million and $155 million.

As noted previously, we also measure our performance on a non-GAAP basis, which is based on EBITDA, excluding interest, taxes, depreciation and amortization, and also excludes stock compensation, contingent consideration and certain other specified items. Our non-GAAP income in the second quarter of 2017 was $27 million compared to non-GAAP income of $17 million in the second quarter of 2016.

As noted above, we expect R&D expenses to increase in the second half of the year for BMN 270 and vosoritide, and therefore, we expect lower non-GAAP income in the second half of 2017 compared to the first half of 2017. However, our bottom line guidance for improving profitability remains on track. Specifically we continue to expect a GAAP net loss but non-GAAP profitability for the full year.

In terms of cash, cash equivalents and investments as of June 30, we had $1.2 billion.

In closing, BioMarin delivered another solid quarter and excellent first half of 2017 with strong Vimizim, Naglazyme and Kuvan sales, controlled operating expenses and our continued progress towards non-GAAP profitability this year.

Now I would like to turn the call over to Hank. Hank?

Thank you, Dan. As J.J. has already described, we achieved a number of important milestones during the first half of 2017, many of them in regulatory and clinical development.

In the quarter, we were thrilled to have established the support of health authorities in both the U.S. and Europe through the approval of Brineura on an expedited time line. That outcome demonstrates the understanding both agencies have with the challenges of development of medicines for patients with ultra-rare disorders, and we and CLN2 families are grateful for their support.

Before I turn to our exciting update on the BMN 270 program, I'd like to provide a brief of our other programs and also to remind you to plan to join us at R&D Day where we'll provide an update on all of our pipeline products.

Starting with vosoritide for the treatment of a achondroplasia, we are pleased to share that enrollment in the feeder study is going extremely well, demonstrating a consistent high level of interest in the program. We're also happy to learn in the quarter that Japan's Health Ministry has expressed an interest in participating in our global Phase III study, which is nicely aligned with the rest of our global plans.

At R&D Day in October, we look forward to providing an update on the most recent data available from the Phase II study including growth-related parameters, such as velocity, high Phe scores, proportionality and other outcomes, such as cyclic GMP and other biomarkers. We are pleased with the progress we're making in the study and looking forward to sharing more with you in October.

Turning to pegvaliase. We're happy to have met our goal of submitting the BLA in the second quarter. The dramatic effect that pegvaliase has on lowering phenylalanine having achieved a primary endpoint of mean change blood Phe with a p-value of less than 0.0001 gives us confidence that we have a path forward in the U.S. with this application.

Typically, a Phe-restricted medical nutritional program does not allow for any protein intake outside of medical food. However, patients in our study were estimated to be eating about 75% of the normal daily recommended allowance for protein intake for a healthy adult. This is very important because it is highly motivating for patients seeking to control blood phenylalanine when medical nutritional therapy is no longer an option. We look forward to learning of the status of our BLA submission over the coming weeks and keeping you appraised of next steps in the process.

Now turning to BMN 270 gene therapy for hemophilia A. We saw a number of you at the ISTH Meeting in Berlin where we provided unprecedented data from the program. And to remind you, we announced at that time that all patients on the 6E13 vg/kg dose had reached 52 weeks of post-treatment follow-up, median and mean Factor VIII levels from week 20 through week 52 for the 6E13 dose cohort have been consistently within normal levels post-treatment as a percentage calculated based on the numbers of international units per deciliter of plasma.

At 1 year of dosing, median and mean Factor VIII levels for 6E13 cohort continued to be above 50%, and in fact, hover around 100%.

As we announced today, the maturing 4E13 vg/kg data is proving to be an important option in our development plans having met our internal target for advancement. With an additional 8 weeks of observation since the data cut we used at the ISTH, the 4E13 dose has demonstrated robust results supporting continued advancement into Phase III studies.

To remind you, for the 3 patients who were given the 4E13 dose in December at week 32, all are in or near the normal range of Factor VIII activity levels with both median and mean Factor VIII levels and about 51%, with an extremely tight range between 48% and 54%.

For the cohort of 3 patients who were given the 4E13 vg/kg dose in March, April time frame of 2017, their most recent readings are available from week 20 and their Factor VIII activity levels have all moved into the mild range and 2 of the 3 are continuing to track upward.

For all 6 patients in this 4E13 dose cohort at week 20, median Factor VIII levels were 34% and mean was 31% at week 20. And in fact, with the exception of that single patient who is lagging, values for these remaining 5 patients tightly range between 20 and 45 for all patients in the 4E13 cohort at week 20.

With the additional 8 weeks of data for BMN 270 at the 4E13 dose, we now plan to move forward as rapidly as possible with 2 separate Phase III studies: one with the 4E13 dose; and the other with the 6E13 dose. These studies are expected to begin in the first quarter, and we are very encouraged by the high level of interest in the program and look forward to starting soon.

What has been accomplished in the beyond the groundbreaking efficacy and safety results gives us increasing confidence that BMN 270 is a validated treatment option for hemophilia A patients. A few key other attributes of 270 that have been demonstrated to date include: the safe delivery of the gene to the target organ; durable transgene expression; clear dose response; no cytotoxic response to the capsid; no need for long-term steroid use; and, importantly, a low level of pre-existing immunity to the AAV5 capsid which we expect will enable approximately 90% of hemophilia A patients to be treated -- treatment candidates for BMN 270.

Needless to say, we're thrilled with results of our gene therapy program that demonstrate a clinical benefit of steady-state Factor VIII levels in the normal range achieved with the 6E13 dose and the maturing results with the 4E13 dose are an unparalleled scientific achievement for treatment of hemophilia A.

We are fortunate to be able to be in a position to take both doses forward in a Phase III study, and we believe this will be another advantage as we approach the market ultimately in greater and more rapid adoption by the widest range of adult patients.

We look forward to providing the next BMN 270 program update at R&D Day in October as well as thereafter at ASH in December.

So that concludes our updates on the development pipeline, and I'll the turn the call over to the operator for your questions.

(Operator Instructions) Your first question comes from the line of Phil Nadeau of Cowen.

Hank, one question to you to follow up on the remarks that you just made. On that one patient who looks like they're 7% at normal, the one BMN 270 patient who's 7% normal at week 20, what do you know about what's different about that patient? Is there any signs of reaction to the capsid or other issues? Or at this point, is it kind of a mystery why they're down there?

We haven't identified a precise reason for some patients to vary in general, and we think that there's a good chance of that that's just an intrinsic biological property of variability of humans. We know that variability for us, both preclinically and clinically, is a function of both dose and expression. So the higher the dose and expression, the higher the variability. The, as we've demonstrated, lower dosing expression, lower variability. But we don't guarantee that there won't be any variability when treating a larger number of patients. As of yet, the low patient in the 4E13 group and the low patient in the 6E13 group is not precisely explained.

Got it, okay. And then second, on your regulatory interactions on BMN 270, can you talk a little bit about where you are in that process? Is it mostly finalized? But just a few details remaining? Or is there still substantial back-and-forth with the regulators over the design?

What I'd like to say about the regulatory discussions, they're not done until they're done, and we're aiming to start the study by the end of the year, and so our anticipation is that they won't be done until closer to the end of the year. We're very pleased. There's quite a bit of availability and dialogue that we've had with health authorities. And as I indicated at ISTH, we have substantial agreement on most of the key elements of the program and so we're really in the final stages of aligning U.S. and EU regulators.

And your next question comes from the line of Cory Kasimov of JP Morgan.

So Hank, I wanted to take this dosing discussion one step further. I'm honestly not sure if this is a good question or really a naïve one, but is there any thought to also exploring, say, a middle-middle dose, if you will, at 5E13 in that ongoing pilot study? It's something I've been asked about and basically trying to split the difference between the 4 and 6 doses.

Well, we thought about it. And as the data are maturing, we'll continue to think about it. In the moment, where we see a plateau at 6E13, that has a great opportunity to get patients mostly into the normal range. The 4E13 dose has the feature of getting patients closer to the bottom end of the normal range. And from what we've heard from our physician investigators, they like that option; that is, some patients may want to be in a much higher range so that they increase their activity levels and some patients may not need to or want to be at that higher range. So for the time being, we plan on carrying 4 and 6 forward, having thought about the split-the-difference option.

Okay. And then what do you believe is enable -- or what about the product might be enabling the sustained rise in Factor VIII levels that you're seeing all the way to and potentially through 32 weeks where you're not seeing some sort of earlier plateau than that?

Well, that is still too early to make any definitive statements about what explains that. We just noticed it. I mean, and we'll be investigating it and beyond that, I can't really say.

And your next question comes from the line of Chris Raymond of Raymond James.

Just another 270 question, if you don't mind. So I apologize if this is maybe a dumb question, but just kind of explain, I assume once you get the read out for both doses, you'll make a decision on one and commercialize one. Is that a fair assumption, you wouldn't commercialize 2 doses, I guess, first and foremost?

Well, I think before we get to the issue of commercialize, we have to both -- we have to register and before we get to register, we have to see the data. And so we're going to conduct the studies and the study data will drive the registration and help along the commercialization decision. I think it's probably worth noting that we are aware that there -- in having the 2 studies going on, that one could finish before the other based on what physician opinion leaders have told us that 6E13 dose level will have the highest demand and likely will finish earliest. I don't think that J.J. would let me slow down the application for registration if those data support a registration decision. So I'll have to say let's cross that bridge when we get closer to having the final data.

And this is maybe a hard question to answer, but I would imagine the standard answer, Hank, would, if when asked, which dose would you go forward with when once you see the data, and you have to see the data, but could -- it's obviously a safety/efficacy trade off, but can you put some brackets around what would make that decision to go with one or the other?

Well, I think we've covered this to some large extent at ISTH but just to remind you, the advantage of being around 100% is that you can increase your activity with relative impunity without having to worry about minor trauma-induced bleeds. Whereas if you're in the mild range, relatively minor trauma can cause potentially very large problems. So there's a very significant reason to be in the normal range as opposed to in the mild range. Additionally, mortality may be higher. And for mild hemophiliacs, certain vascular hemorrhages may be higher for mild hemophiliacs. And I think that's a big reason that clinicians are driving towards being at the higher range. We've noted there's a theoretical risk of complications of being in the higher range. To date, we haven't observed that. We remind people that that theoretical risk is relatively small in magnitude, in absolute -- I'm sorry, it's absolutely small in magnitude and it's also relatively easily managed. So there's a lot to say good about the 6E13 dosing getting in the normal range, and there's something to be said for having the option to get patients into the low end of the normal range.

Okay. And one more question, if you don't mind. So finally, you have a competitor that had some data today. And I'm just curious if you're getting any feedback from physicians. Your product contemplates many multiples of vector genomes over theirs in terms of the dose. Any perspective from physicians you can share with respect to that difference of what's actually being injected?

Well, I might start with, first of all, congratulating the competitor. They are the first group to corroborate (inaudible) Factor IX data. Now they're the first group to demonstrate corroboration of gene therapy in hemophilia A, and those are pretty substantial accomplishments. Our clinicians are chomping at the bit to get started, and that's why we're moving so quickly into Phase III. There's a very significant amount of demand for the program. And I think that overall statement of the community, the physician community that we get exposed to is they're just thrilled that the opportunity to make a major difference in the lives of hemophilia patients is upon us. They are beyond thrilled to be talking about normalizing Factor VIII levels. I mean, this is the Holy Grail for this community for a long time.

And your next question comes from the line of Andrew Peters of Deutsche Bank.

I just wanted to ask another one on hemophilia. I guess I wanted to understand, I guess, how well known or appreciated is the risk profile for factor over expression, kind of the KOL conversations that you've had so far? I know in the past you've talked about the differences between relative and absolute risk and maybe some of the other genetic conditions that can somewhat mimic the risk profile. But how well is this appreciated in the clinical community? And is this something that you can begin to kind of educate the broader clinical community about what this risk, absolute risk actually represents kind of as the studies are enrolling, et cetera? Just to kind of frame what that super therapeutic levels actually are?

Yes, thank you. That's an interesting question. I was talking to a colleague of mine yesterday about sort of that person was reminding me that during the developments in the long-acting factors, they've got a lot of feedback about "Geez, we want to avoid levels above 50% because potential for thrombosis with the levels swinging around like that." And the message point that was given was that the hemophilia doctors are not fully up to speed on Factor VIII on thrombophilia, the other side of the equation. And a lot of our clinicians take care of both the clotting as well as the thrombosis side, but that may not be true for all hemophilia treatment providers. And I think that does give us, therefore, an opportunity to do more education and involvement about what's known about the thrombophilia disorders and their management. But what we have been using are, in terms of framing that discussion, there have been publications, several different ones, over the years that quantify the apparent isolated contribution of elevated Factor VIII levels to thrombotic risk. It obviously remains to be seen how thrombosis risk in hemophilia patients who are corrected turns out. They could be more vulnerable, they could be less vulnerable. And, of course, that's an important aspect of our 4E13 dose arm.

And J.J. here, there is the recent publications of significant risk still, mortality risk as Hank alluded to for most of the hemophilia patients that have a hemophilia stroke rate that's 3.5x the normal. So I would say if you are a player in the field of shooting for transforming modern hemophilia to mild hemophilia, which is what our competitor seems to be shooting for, might obviously not be the end-all of a deal.

Great. And just a quick follow-up. Have you had a similar amount of discussion with regulators regarding the mid-dose plan to move forward with the Phase III? Or do you plan to, I guess, speak with them shortly following the decision today?

Well, that's a pretty recent update. We've certainly shared with health authorities our plans to investigate both 6 and 4 as we've communicated several times before. And we've shared with them our dose selection strategy. And as I said before, they had no comment on our strategy for selecting dose. So our anticipation is that we're substantially in the clear for both of those doses. Now as I've said before, obviously, it's not done -- the regulatory process isn't final until it's final.

(Operator Instructions) Your next question comes from the line of Alethia Young of Credit Suisse.

Congrats on all the progress on hemophilia in the quarter. I guess I'm going to not ask a hemophilia question and move on to another product. With PEG-PAL, I guess, I'm just wondering like how we should kind of think how the regulators are looking at kind of the data related to neurocog and your filing. And then also, as it relates to EU versus the U.S., are there kind of any differences or nuances in how the regulators look at the [filing] thing?

I don't think there's really much new to report as to U.S. regulatory feedback on neurocog, but just some of the greatest hits to remind and bring everybody onto the same page, we have substantial reduction in blood phenylalanine levels, which was the primary and really the sole basis approval of Kuvan and phenylketonuria and that was over a wide range of both children and adults with phenylketonuria. We have an even more substantial reduction in a much higher proportion of patients treated with pegvaliase. And we've demonstrated that we can safely sustain those substantial reductions in blood Phe-levels on pegvaliase. We've communicated here that we attempted to look at the neurocognitive outcomes of patients whose blood Phes are controlled by pegvaliase in 2 different ways: one with a nested randomized trial, which wasn't successful; and the other with the long-term open label extension, which demonstrated pretty significant improvements in neurocognitive ability. Our interactions with Food and Drug Administration have indicated that there is a path to approval on the basis of the fee data and the ancillary data that we talked about. And as to which path to approval this goes down, that's going to be a subject of review discussion, which we hope to be in shortly. As far as U.S. and EU, it's really too early to talk about the EU process. We've indicated a time line of anticipating or expecting or setting a goal to file by the end of the year, and we're on track to that goal. But it's a little too early to give any kind of color on the differences between U.S. and Europe regulatory-wise.

And then just a quick one on achondroplasia. I think you said it was tracking well. I guess have you been surprised or -- by anything that's going to happen as the enrollments kind of proceed? I think your guidance is to be complete by the middle of 2018. Do you feel like you could possibly kind of get ahead of that or just general thoughts there?

Well, the general thought there is that we've set this senior study both to collect longitudinal perspective natural history data on gross velocity, but also to create and identify patients for inclusion in the Phase III trial on a global basis. As I said in my prepared remarks, we're pretty pleased with how that feeder study has gone, essentially completed the enrollment in the study overall. The caveat there is that yes, we'd like for this to be a global multinational trial. You know we started the program in Australia, but it would be important to give clinicians around the world hands-on experience during the Phase III clinical trial. As we did with Vimizim, whereas we could have enrolled everybody on day 1, we chose to have an enrollment that's a little longer than the already pent-up demand simply to enable global opinion leaders to participate in the program. And so I'm encouraged by the feeder study, not surprised by it because that's what we expected the demand to be like and staying on track for our normal target.

Your next question comes from the line of Matthew Harrison of Morgan Stanley.

I think 2, if I may, for me. So the first one on 270 and then one on 250. So you made a comment about your view of immunogenicity and you thought you'd only see about 10% immunogenicity. Can you comment on what you see as the immunogenicity levels for the other vectors in the field and if you think you're differentiated on in that respect? And then I'll follow up on 250.

Yes, so just to be clear, that 10% is what we think of as the 0 prevalence of the pre-existing immunity to the asset. And that's for our AAV5. A little difficult to get our hands on competitor data about this, but in general, the AAV 8-based capsid types tend to run around 40%. Just to remind you that AAV 8s are derived for more closely to human-related viruses whereas AAV5 is a virus that hasn't been implicated in humans. And therefore, that's why we believe the 0 prevalence to be lower. This is an important topic and an important potential competitive advantage for BMN 270 and something that I would point you to ASH as a potentially interesting area to dig deeper into.

Okay, perfect. And then on 250, I think you said you're now at the highest dose and you're going to be following patients to sort of see what happens with the neurodegenerative aspect of the disease. Can you give us any sense for how long you think you need to follow these patients or what kind of follow-up data you need before you can talk about what your next trial plan might be?

Well, to some extent, that's a function of how big the effect is and how much deterioration in the natural history there is. If BMN 250 is similar to BMN 190 now known as Brineura, then the separation of treated patients from their otherwise expected untreated natural history could be evident as early as 48 weeks in some patients. But it may take longer to document that in other patients. Now 2 other things to mention about 250 and observations of effectiveness is one is that with 250 but not with Brineura, we have a biological marker that we can track in the cerebral spinal fluid, namely heterotopic levels. And second, in the case of BMN 250, there is some manic involvement, namely enlargement of liver and spleen. So we have 2 additional ways of discerning whether there's relevant clinical activity of BMN 250 that weren't available to us for Brineura. So while it's early in terms of to say when we'll have significant neurodegenerative types of data, we could be seeing encouraging signs once we get a decent number of patients treated for a year.

Your next question comes from the line of Ying Huang of Bank of America Merrill Lynch.

Congrats on the 4E13 data. I just have 2 quick ones on this. One is, Hank, you guys mentioned that it will be fewer than 100 patients for a Phase III. Now you're advancing the 4E13 dose as of the 6E13 dose. Is it still the case? Or are you going to look at maybe bigger patient number for Phase III? Secondly, why are you deciding on 2 separate Phase III trials instead of just one Phase III with I guess 2 different dose cohorts?

Yes. So whereas we had said 1 trial wouldn't require fewer than 100 patients, we're planning on the 4E13 trial being able to support registration. So plan on it requiring also up to 100 patients. So as we sit here today, the expectation should be that we plan to enroll up to 200 patients in the program as a whole. Now, just to remind you, we have ample manufacturing capacity to be able to do that. And as a robust company, there's not going to be any effort to cut corners in terms of sample size. As to why we chose to do this with 2 separate trials or 1 trial, just, you have to remember that there are a very active strong group of clinicians and patient advocates that are very keen to see the 6E13 group get enrolled and finished and through registration. And if that turns out the -- if that information turns out to be what guides enrollment, then there's a very real possibility that 6E13 will finish much faster than 4E13. So we didn't want to slow down the application if 4E13 was going to end up going slower. That's why we chose to do 2 studies.

And also, I just want to say -- expand a little more Hank said on the manufacturing capacity. We have our Robert Baffi, our head of technical operations also available on the phone here. But we have -- well we're still basically beyond our capacity, the manufacturing facility here in Novato, California is finished. So the marginal cost of doing an additional dose of up to an additional 100 patients is quite insignificant for us. So Robert, do you want to say a few words about where we stand on the manufacturing?

Sure. Thanks, J.J. We've made a tremendous progress on building the facility, commissioning it, producing the initial batches from the facility and very encouraged by the overall comparability we've seen, from the material used to generate clinical results and are working closely with Hank's team to coordinate availability of material to support these 2 Phase III studies to begin by the end of this year.

Yes. Yes, it's a series of 2,000 scale, which is the anticipated commercial scale. And I see our current estimates that initially this facility should be able to supply around 2,000 patients per year of product.

And your next question comes from the line of Joseph Schwartz of Leerink Partners.

So we've noticed that you have only been studying patients with severe hemophilia versus your competitor who is studying patients with moderate or severe hemophilia, Hank. So should this distinction impact our interpretation of the results in any way? Do you think that the data that we are seeing is baseline dependent at all?

Well it could, in the sense that the inclusion of a more moderate population might cause one to overestimate the reduction in bleeding that one observes. But I would say in general, it's more likely that this is a distinction without a difference. When you get down to that low a level, if you're a severe hemophiliac and you're on prophylactic therapy that you really need to be on gene therapy instead.

Okay. And then I guess this is like a manufacturing or a tech ops question but also a clinical question. How precisely are you able to define the dose of drug that is actually being administered? In other words, how much variability is there around the dose levels that we keep referring to? Is there any reference standard for the measurements that you and others are invoking? Or are different parties quantifying the amount of drug that's being administered independently? For example, would it even be possible to target a dose of 5E to the 13 versus 4 or 60 to the 13 with any confidence?

Robert, do you want to answer this question?

Yes. Sure, J.J. So first of all, when we produce a product, the quality of the product is a very critical component of it in terms of potency and strength that gets put into the vial to be able to accurately dose the patient. There are really 2 contributors to variability. One is the manufacturing process itself and what the product that is produced, and we work very diligently to generate a robust manufacturing process that delivers consistent quality through production. The second aspect of variability has to do with the number and types of assays that are used, and we use a very wide orthogonal approach. So we look at the molecule from many different perspectives. And each of those assays has its own variability associated with accuracy and precision. There's a number of ways to reduce that precision to a very detailed level, and that may be by using specific methods that are known to have less variability. It may be to repeat methods multiple times on unique samples and create a larger database to accurately predict the strength and potency of the material. And we employ all those strategies when we do that, and we have high confidence that when we're talking about a 4E dose or a 6E dose, that what we're dosing the patients with comes with an accurate and precise determination. Our analytical chemistry group and our quality groups are very proficient at that. We've honed that through the development of our other biological products, and all of that information comes to bear as we decide to label the product for the specific dose. So we think we can do that with a high degree of confidence.

Your next question comes from the line of Ian Somaiya of Bank of Montréal.

I think we should move to the next questions. We might come to this.

Your next question comes from the line of Geoff Meacham of Barclays.

Hank, for vosoritide, I'm just curious whether the additional efficacy measurements are official secondary endpoints and whether they have any regulatory consequence if they're not going all in the same direction? Just trying to separate out, I guess, which data would be helpful for you guys for the launch and which is more of a formal endpoint. And I have one follow up.

Well, endpoints like proportionality can be secondary endpoints and -- but endpoints of evaluation, for example, functional impairment and its relationship to final at all height or the distribution of expected final at all heights or the relationship between growth velocity and final at all heights won't just come from the pivotal trial. So they won't be in the way you would ordinarily think of secondary endpoints as secondary endpoints of a study -- there'll be additional endpoints of ancillary of a compositive of ancillary studies.

Okay. That makes sense. And I know early days for Brineura but maybe if you can help us with any initial commercial feedback, what successes you guys have had in either access or identification beyond those end of studies?

Jeff, this question is for you.

Early successes in Brineura. Early successes in Brineura. Well, we're really happy with what we're seeing in Brineura so far. A reminder that different dynamics go into our expectations that uptake of commercial patients on Brineura will be slower than, for example, to Vimizim. So more complexity in patient selection, more complexity around preparing the patient and the institution for treatment and more complexity in doing intraventricular infusions relative to IV infusions for the other enzymes, which are very standard. Also, it's also gating factor here are reimbursement decisions. Fortunately, our first approval came in the United States, which is the most favorable environment for reimbursement decisions. And as we've seen patients navigate through those complexities that I just described, we've been seeing payer reimbursement approvals that are pointing to good reimbursement environment for the United States. Outside of the U.S., we've gotten some early named patient sales approvals, which are really encouraging. But where we have an additional approval in Europe, you know that we have to go through the formal steps of -- or the steps of getting formal reimbursement. We're in the midst of all of that right now, but those reimbursement steps take some time. And we haven't seen anything come out the other yet in terms of formal reimbursement approvals in Europe. They're in motion. We're expecting the best.

Your next question comes from the line of Jing He of Gabelli.

So just one on 270 and I have a few follow-up. It's understandable that you want to get 6E out as well if possible and 4E as an additional option for doctors, but is it possible to add a -- let's say a mid-mid dose later as a part of label extension?

It's always an option. As Robert said before, the precision of characterizing 5 versus 4 or 6 may also be an additional challenge. I wouldn't want to take anything off the table, but would not want to confuse matters and say that the Phase III program that we're launching is one at 6, one study at 6 and one study at 4.

And also I'm wondering, could you comment on what percentage of your business is under 340B and what would be the impact from the recent changes in that program?

And so more specifically, you say our business. You mean our base business? Or are you thinking about future hemophilia business?

I would say base, and also I'm thinking about your Brineura comment as well.

So the first thing I would say is our U.S. business as a percentage of our total base is about 20%. And there are a number of 340B eligible treatment centers that treat our Naglazyme and Vimizim patients. But the changes to the 340B program really have had minimal to no impact on additional discounts or exposure to discounts. So the changes to the 340B program may be material to other companies with other types of business and a large concentration of their business in the U.S. are really nonstarters for us.

I remember -- if I remember correctly, I think during your Brineura call, you were saying that gross to net, you expected is due to a large number of patients in 340B.

Okay. So for Brineura, which is so far a small part of our business, yes, it is true that we expect that patients in the United States will be treated in 340B eligible institutions or otherwise eligible for Medicaid rebate and that's what's driving our guidance on gross to net for U.S. sales of Brineura. Fair enough.

Got it. And just a quick one lastly, do you plan to announce another G30 candidate on your R&D Day?

Stay tuned.

Your next question comes from the line of Tim Lugo of William Blair. Your next question comes from the line of Martin Auster of UBS.

Congratulations on the strong results and the strong 4E13 update. Maybe just a couple small questions on vosoritide, Hank. For the update planned at the R&D Day in October, can you just confirm again that will we be seeing follow-ups on growth velocity from the open label extension? And then secondly, would you expect to have any update, I know you talked before on these calls, about the importance of treating the achondroplasia patients as young as possible to produce the greatest outcome? Any updates you're planning on the status for dosing infants or toddlers with vosoritide?

So on your first question, yes, we'll be updating based on the open label extension. And not sure exactly what update we'll have on the infant/toddler program at that particular point. We're in the final stages of finalizing that program aligning with health authorities, so stay tuned.

Your next question comes from the line of Vincent Chen of Bernstein.

A couple more on hemophilia A. First on consistency. Your competitors have pointed to careful patient selection, manufacturing consistency in an effort to tighten measurements of drug [volume tighters] as drivers of improved consistency in their trials. What steps have you taken whether on these dimensions or others to improve the consistency of treatment response? How do you know that the variability of the 4E13 dose would be somewhat less than the 6E13? Are there changes you've implemented during the course let's say to drive this, or is it more just a matter of the lower dose and some luck of the draw in patient selection?

Yes. I mean, I think just to sort of zero in on the heart of the matter to answer the question, I think the higher expression level you aspire to achieve, the higher the variability that's going to be realized. We see this in our pre-clinical studies and it mirrors what we see clinically, and others have documented this in their preclinical studies. And I think a reasonable expectation to have is that as expression levels in dose rise, variability will rise.

Got it. And is there any emerging sense of what types of patients might achieve lower level of factors? For example, I guess is there an effort to exclude these patients from the study? Or to assess during through the course of the development program, what patients might fall into the category to guide future use therapy?

That, in general, proves to be a very tough, I mean, value -- a tough proposition to achieve. And I think everybody would love to concentrate administering their drug only to those in whom it works the best and exclude patients that are going to dilute the demonstration of efficacy. In general, that's difficult to do and no reason to believe that, that will be possible to do in hemophilia gene therapy. As I said, this is -- it appears to be an intrinsic property of the delivery of the gene. It's true in so many of the constructs that we've tested preclinically, and it's something that we've seen from other groups, both academic and industrial, who investigate different levels of expression achievable. The more expression, the more variability of expression.

Your next question comes from the line of Christopher Marai of Nomura.

It sounds like in terms of manufacturing capacity, you're well on your way with respect to 270. I was wondering just thinking about backfilling that in talking about the next program you might update us on in October. How do we think about that next program? Is that a program that might be already in the clinic in some sort of BD M&A that you might -- that might take place? Or is it more of a sort of licensing transaction that we've seen from others?

I think as Hank said, we are not committed to announce the next program at R&D Day, and we have not disclosed whether if we announce it, when we announce it, whether this is a gene therapy program or not a gene therapy program. So I think it's premature to answer this question. Right now, the facility is dedicated to BMN 270. It can, down the road, be used for other products and actually other vectors, but actually, the facility -- at this time, the facility (inaudible) are dedicated to 270.

Your next question comes from the line of Ian Somaiya of BMO Capital.

A second shot. First question for you on 270. If we ignore that 1 patient that was an outlier or had less of a response, can you just speak to the range of Factor VIII expression that was seen in the remaining 5 patients?

We have.

I gave those on the call, so I will remind. The range was between at week 20 for the 5 patients who have experienced a week 20 visit, it's between 28 and 45. So reasonably tight expression in the group of 5 patients who were not outliers.

And is there any thought amongst the clinician community of what range of expression is acceptable? I know we're obviously looking at a paradigm shift in how these patients are treated. But given potential 2 options that might be available to patients, is this degree of variability something they're comfortable with? Is there something less that -- I mean, I just -- I guess, we as investors, are quite sensitive to the variability. I'm just curious how -- what the level of sensitivity is with KOLs or the regulatory body.

Well, I think if you asked a doctor to draw it on the magic board what their preference would be, they would say 100 plus or minus 0. In a practical context, no drug is without variability. It's just natural biological human response that we don't fully understand. And the opportunity to get patients into the normal range has distinct incremental advantages in the hemophilia context -- well for the purpose of this call, I'll repeat a little bit of an anecdote that I mentioned in Berlin. One of the clinicians we were talking to when we were talking about would you prefer a milder dose that gets you to the low-end of the range? Or would you prefer to go for the dose that gets you to the 100 range. And the story she told me was a patient had -- about a patient who had mild hemophilia who was going to get married and go on a bicycle tour. And she encouraged the patient to take Factor with him and he was reluctant. "No, I don't want to be burdened on my vacation with my fiancée with having to carry Factor." And she said, "Well, I'll explain how to use it to your fiancée, so you don't have to bear the burden of it." He said, "No, I don't want to burden her with how to learn how to administer Factor concentrate." So they left on their holiday without Factor and wouldn't you know it, he takes a header and goes over a guardrail on California Highway 1. And was being airlifted back to her hospital. That's what a life of a mild hemophilia patients is, and that's why doctors want to avoid being in the mild range if they can possibly avoid it. The beauty of 6E13 is it gives you the best chance of ending up in that place. And if you don't end up in that place as a 6E13 patient, then you'll certainly go from being a severe hemophilia patient to being a mild hemophilia patient. That's been substantially what's driven us to move 6E13 aggressively. And that's what we've heard mostly from our community of physicians. And we don't hear a lot of pushback. And I was telling you an anecdote. I basically said if we were going to hear it, we'd had heard it. And we haven't heard it.

Okay. And just one last question.

And we definitely don't hear any push back about being around 50%.

I can't imagine you would. But one last question on the regulatory interactions you've had regarding again, 270, with this 2-trial strategy. Are they onboard with filing off the first study that reads out, in this case, hopefully 6E13 or do you think they'll want to wait for the 4E13 data?

Well, I mean, first of all, that's a question that's a little hard to answer in the abstract of not having the data to hand or knowing what the timing is between them. You could certainly imagine that situation where 4E13 study enrolls well and is a couple of weeks behind 6E13, then waiting makes sense. On the other hand, if the 6E13 study enrolls dramatically faster than the 4E13, let's say they're a year apart, you could imagine nobody really wants to withhold the availability of a novel therapy. So it really is very much driven by specific answers to the timing.

This is a trial that you plan to conduct at the same traits -- sorry, same sites? Or are you going to try to have some sort of variability with sites and as a result, allow both trials to enroll rapidly?

We're just getting into that. In terms of operational details, today's the announcement of the decision to have a 4E13 strategy -- 4E13 study. So stay tuned for further details on sites.

And your next question comes from the line of [Nathan Markowitz] of Barclays.

Congratulations on the success in 270. As an investor and more importantly as a patient, I was wondering if you'd speak to the strength of the product. Would this product allow for offsprings to not have a carrier status or not -- or get rid of the chances of the hemophilia patient to not give it to offsprings?

Thank you for your questions. The AAV system that we use does not integrate into the germ line. So it will help the treated patient, but not the offspring of that treated patient.

All right. All right, good. Congratulations on the success of BMN 270. I appreciate it.

Thank you.

And that concludes the portion of the Q&A. I would now like to turn the call back over to Mr. J.J. Bienaimé for closing remarks.

Thank you, operator. So in conclusion, we received a tremendous amount of accomplishments in the first half of the year, and I want to thank the hard work and dedication of all BioMarin employees, each of whom has contributed to our significant progress so far this year. And to be launching our sixth commercial product, moving our next review product from the regular channel, developing what could change the way severe hemophilia A treated, all while moving towards profitability on a non-GAAP basis is unparalleled for a company of our size. I'm very proud of our management team and the continued strong execution of our strategy to be the premier open drugs development company in our industry.

I want to thank you for your continued support and for joining us on today's call.

And that concludes today's call. All participants may now disconnect.