BioMarin Pharmaceutical Inc (BMRN) 2013 Q4 法說會逐字稿

Good morning my name is Ashley and I will be your facilitator for BioMarin conference call to discuss the FDA approval of Vimizim preliminary 2013 results and 2014 financial guidance. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As reminder this conference call is being recorded I would now like to introduce your host for today Traci McCarty Director Investor Relations with BioMarin, Ms. McCarty you may begin.

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

Keep in mind this is a non-confidential presentation that contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin's financial performance, commercial products, and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K reports.

Now I would like to turn the call over to J.J. Bienaime, our CEO. Go-ahead J.J.

Good morning everyone, thank you Traci. Thank you for joining us to discuss Friday's approval of Vimizim and the opportunity preliminary 2013 results and 2014 financial guidance. We are obviously thrilled, we have received FDA approval of Vimizim, on the treatment of patients with more Morquio Syndromes or MPS4A. For these patients the approval of Vimizim is in the United States with a Broad level and makes available the first and only therapies that addresses their disease at the cellular level.

For BioMarin this achievement underscores our leadership in the open drug market and represents the next significant step in the expansion of our commercial portfolio. I want to acknowledge the many contributors and efforts have made this day possible. I want to thank the scientists who developed Vimizim, investigators who participated in the people sites, the FDA who partnered with us to help the development of Vimizim, and most importantly the patients and their families.

I also want to think the team here at BioMarin who came together and delivered on all facets of the development program, including; research and clinical developments, regulatory affairs, medical affairs, quality and manufacturing among others. Thanks to their efforts and contributions Vimizim clinical development took less than five years from the time it was first [dosed] in humans to Friday's approval. This development efficiency will allow us to take full advantage of our strong patent position which runs through 2030.

The final significance of today's approval and BioMarin's long-term prospects for developing new drugs and for also providing returns to our shareholders cannot be understated. We expect sales of Vimizim to drive BioMarin to more than $1 billion in total revenue for the next few years.

As we have stated before and want to reiterate today we believe the successful commercialization of Vimizim can be the basis for BioMarin's [receiving]operating profitability. Thereafter as Vimizim sales continue to grow and as new products from our robust pipeline are introduced we expect substantial revenue growth and increasing profitability.

With US Vimizim approval in hand I'm confident that our long-term growth prospects. We now have five commercial products with the next one Textile potentially only 24 months behind. Our increasing commercials strengths will continue to drive the expansion of our people pipeline.

In 2013 we made significant progress across all of our development programs. We have five first candidates in the clinic, three of which are set to deliver data between the end of this year and the second half of next year. PEG PAL for PKU, BMN 111 for achondroplasia, BMN 190 for Batten Disease.

In addition we just selected BMN 270 and BMN 250 to move forward for the treatment of hemophilia A and MPS IIIB or Sanfilippo type B respectively. These programs will make the next 24 months a data rich period for BioMarin.

Now I would like to have the call over to Hank who will provide more detail on Vimizim approval.

Thanks J.J.

This is an important day indeed for everyone involved. Starting with the label the approved indication for Vimizim is all patients with mucopolysaccharidosis type IVA or Morquio A syndrome. We are very pleased to receive the broadest possible label. The recommended dose is 2 milligrams per kilogram given intravenously over a minimum range of 3.5 hours to 4.5 hours, based on infusion volume administered once every week.

As with most approved enzyme replacement therapy the label does include a boxed warning citing the risk of anaphylaxis and hypersensitivity. In pre-marketing clinical trials 18 of 235 patients or 7.7% of patients treated with Vimizim experienced signs and symptoms consistent with anaphylaxis. These 18 patients expense 26 anaphylactic reactions during infusion.

In the trials hypersensitivity reactions occurred in 44 of 235 or 18.7% of patients and included anaphylactic reactions urticaria, peripheral edema, cough, dyspnea, and flushing. Not uncommon reactions when administering a biological agent.

Due to potential anaphylaxis or hypersensitivity reactions it is recommended that pre-treatment with antihistamines with or without antipyretic's be administered 30 to 60 minutes prior to the start of the infusion. This is consistent with the administration of Vimizim during our pivotal phase three trial.

Turning now to post marketing requirements, BioMarin has agreed to conduct a post approval registry not are to understand Vimizim long terms safety and effectiveness. Investigators will follow patients for a period of ten years. This registry is voluntary but patients who are treated with Vimizim in the commercial will be encouraged to participate.

We have experience with these types of programs as evidenced by our Naglazyme registry that is been tracking natural history of MPS6 patients for about eight years. Data from a Naglazyme registry combined with that from our clinical trial program have provided important efficacy and safety information on the effects of long-term treatment with Naglazyme in MPS6 patients. For example we've observed improved growth outcomes associated with longer treatment with Naglazyme.

We consider Vimizim registry to be optimal means to achieve the goal of long-term follow-up. We intend to leverage this registry addressed other post targeting requirements to continue assessing patients enrolled in our ongoing phase three extension study Mor-005 and our ongoing phase two pediatric trial Mor-007. We've also agreed to evaluate immunogenicity and the potential to modify outcomes of immune responses.

We have a few additional CMC related post marketing commitments which we consider to be reasonable and very manageable. We are also pleased to have received as part of the Vimizim approval the first ever rare pediatric disease priority review voucher. This voucher is an incentive to encourage the development of new drugs and biologic's, for the prevention and treatment of rare diseases, for the treatment of rare pediatric disorders, like Vimizim does. BioMarin can use this voucher to receive priority review on one of our own future market applications that would otherwise be a standard review, or we can transfer the voucher to another company.

As you may know we are on schedule for this week's meeting of the committee for medicinal products for human use or CHMP. We expect to CHMP's opinion to be available on their website this Friday. A positive opinion from the CHMP this week would lead to a potential European commission approval approximately 60 days later. We will share the outcome of the CHMP opinion once we have it.

In conclusion it is hard to believe that in less than five years the BioMarin team has successfully developed the first and only drug therapy approved to treat Morquio A patients. With this accomplishment in hand we look forward to our next development opportunity. We are well-positioned to apply our deep experience and successful track record of commercializing important therapeutics, that help patients who have few or no treatment options, and we look forward to writing the next chapter in our story.

Not like to turn the call over to Jeff who will review our preparedness for commercial launch.

Thanks Hank.

Let me begin by sharing the US commercial organizations excitement and enthusiasm following Friday's FDA approval of Vimizim. Our existing US organization which currently sells Naglazyme for MPS6 has been scaled up, trained, has the necessary launch materials and is ready for a strong product launch. Commercial label Vimizim is in our distribution center released and available to ship to hospitals immediately.

As a reminder, we have identified approximately 1500 Morquio A patients globally to date, about 15% of which are in the United States and expect to continue to identify new patients going forward. During the initial launch commercial goals are twofold.

First, switch early access program EAP and clinical trial patients to commercial drug. Second, get new naive to treatment patients on therapy. We have a number of strategies in place to achieve both.

For EAP patients, the first step is to begin case managing each patient to obtain reimbursement approval. We expect that some payers will approve reimbursement in a matter of days, while it will take months for others. For new patients, we will leverage our established Naglazyme and MPS6 commercial organization that has working relationships with many of the physicians treating Morquio A patients.

Clinics not experience with the use of Vimizim through the clinical trials or EAP will be called on by our team who will provide materials and tools for infusion training. We will also leverage the BioMarin patient and physician services, BPPS program for Naglazyme and Kuvan to include Vimizim in Morquio A patients. BPPS is immediately available to both patients and clinics to guide them through reimbursement approval and treatment with Vimizim.

In addition as of January 1, the National Organization for Rare diseases or NORD, has financial assistance programs in place for qualifying patients. To further facilitate reimbursement approval for Vimizim, several additional steps will be taken. Medicaid and VA agreements are in place and simply require Vimizim to be added to the list of approved products.

All commercial payers will receive notification of Vimizim approval and initial information required to allow a reimbursement approval. The top 50 plans are targeted for face-to-face meetings to present Vimizim in the first 90 days. We have a very successful track record in obtaining reimbursement for both Naglazyme and Kuvan and expect similar results for Vimizim.

For physicians BioMarin has already been actively promoting awareness of Morquio A and providing education on the serious and multi systemic nature of the disease. In addition to educating geneticists, these efforts have targeted orthopaedist's, skeletal dysplasia specialists, and other specialists who treat or diagnose Morquio A patients.

With the Vimizim approval in hand we will expand our efforts and will become active at medical meetings and through targeted direct calls on physicians. Websites with important information are also live. Vimizim.com for product information, Morquioanswers.com for physicians seeking disease information and Morquiosity.com with information for patients.

Vimizim is priced at a level that reflects the investment required to bring an innovative first in class biologic treatment for an ultra rare disease. The list price per vial of Vimizim is $1068 and the typical 22.5 kilogram patient will require nine vials per weekly infusion.

Based on this list price the average annual cost of therapy for a typical patient on Vimizim is expected to be approximately $380,000 per patient per year, consistent with the other enzyme replacement therapies to treat ultra rare disorders. This average estimated cost takes into account discounts, expected compliance, and an estimated weight of 22.5 kilograms for the typical patients.

While we are extremely excited about the US launch of Vimizim, keep in mind that it only represents about 15% of the potential market. The next key region we are planning for is Europe. As J.J. and Hank both mentioned we are on the CHMP agenda this week and expect another opinion Friday.

Assuming we receive a positive CHMP opinion, we expect European commission approval approximately 60 days afterward. Once approved in the EU, we will pursue reimbursement on a country by country basis. The timetable for this process varies greatly, as I have addressed previously.

The US approval allows the name patient sales process to begin in certain markets including Turkey and Brazil. To remind you we are RD selling Vimizim in France under the French ATU program. We will keep you apprised of registration and market developments quarterly.

Now I would like to turn the call over to Dan to review preliminary 2013 results and financial guidance for 2014.

Thanks Jeff.

While our complete financial results will be available shortly, when we have final audited financials, we thought it would be helpful to provide revenue results for 2013, confirmation of 2013 expense and bottom line guidance, and then provide financial guidance for 2014. To begin with, total revenue grew over 11.4% to $146.9 million in the fourth quarter of 2013, compared to the fourth quarter of 2012. For the full-year, total BioMarin revenue increased to $548.5 million and 9.5% increase, compared to full-year revenue in 2012.

Naglazyme net product revenue in the fourth quarter was $68.7 million, a 9% increase compared to the same period last year, and was $271.2 million for the full-year, a 5.5% increase over the prior year. Kuvan continued to demonstrate double-digit growth. Growing to $45.3 million or 13.3% increase in the fourth quarter and growing to $167.4 million it for the full-year, a 17% increase over the prior year.

Kuvan is an important focus for overall business as we intend to expand our PKU franchise with PEG-PAL for which we expect to have pivotal data in the fourth quarter of this year.

As noted in the press release issued this morning, we are reaffirming all of our full-year 2013 guidance, including non-GAAP net loss and GAAP net loss. Recall that we expect non-GAAP net loss to be between $40 million and $65 million. We believe non-GAAP net loss is the best measure of our operating results because it excludes non-cash accounting expenses, such as stock compensation and interest expense.

In 2013, we had a little over $70 million of these expense items that are non-cash and non-cash for all time. In 2014, we expect to have over $100 million of these charges in our GAAP results, further emphasizing our internal focus on this profit loss measure. For completeness, we also continue to expect GAAP net loss to be between $185 million and $160 million for the full-year.

Turning now to guidance for full-year 2014. This will be an exciting year for BioMarin as we launch what we expect to be our largest revenue product to date and see the expansion of our development portfolio. On the revenue front we look forward to total revenues in the $650 million to $680 million range, a more than 20% increase over 2013.

For our established commercial products, we expect total revenues of approximately $600 million. This includes continued growth in Naglazyme to between $290 million and $310 million and in Kuvan, to total net product revenues between $180 million and $200 million. As noted before with PEG-PAL phase three data at the end of this year, continued growth in the Kuvan franchise is an encouraging indicator of the market opportunity for what could be our next product.

Based on Friday's FDA approval of Vimizim and our current understanding of the timing of EU approval, we are reiterating our guidance for Vimizim for 2014, within a range of $60 million to $70 million. Of course, first-year revenue numbers can move substantially depending on which month patients initiate commercial therapy.

To help you better evaluate launch progress in 2014, during our initial launch year we intend to provide information on a key internal metric, total number of patients on commercial therapy. Our goal for 2014 is to be at 350 or more patients on drug by the end of the year, which would set us up for a substantial revenue year in 2015.

Turning now to operating expenses, as previously discussed R&D expenses are expanding to support the seven programs in clinical and pre-clinical development. As a result we expect that R&D expenses for 2014 will be in the range of $500 million to $530 million.

Looking beyond 2014, we continue to expect that this will be our peak year in terms of R&D as percentage of revenues and we expect that ratio will fall next year and in the years beyond that. Also, in absolute terms, we expect any increase in R&D over the next couple of years to be materially smaller in magnitude than the increase in 2014.

Following is some additional detail on where we are investing in 2014. Fully 55% of R&D is going to our five clinical programs, which have an additional 15% also going to Vimizim as we keep patients in studies and on drug, until we obtain additional regulatory approvals around the world. Included in our clinical standards over $80 million in clinical drug supply for Vimizim and the other clinical programs.

In addition to our clinical programs there is 20% for research; pre clinical programs such as na glue and gene therapy and general R&D. In addition this 10% for regulatory and other support of our existing commercial products. 2014 SG&A expense are expected to be in the range of $265 million to $285 million, with the majority of the increase due to the commercial and administrative support required to launch Vimizim and continue to grow Naglazyme and Kuvan.

This increase is consistent with our product guidance that there will be a 25% increase in SG&A to support Vimizim with most of it coming in 2014. That 25% increase still seems right in total, with the balance coming in 2015.

During this year of initial revenues from Vimizim, but full R&D expenses and launch year commercial expenses, our operating loss as measured by non-GAAP net loss, will expand somewhat to a net loss of $100 million to $130 million. As Vimizim revenues increase we will drive the Company first to breakeven and then to profitability.

Our multi-year plan is still to transition to operating profitability at around $1 billion in revenues. Our final guidance item GAAP loss in 2014 is projected to be between $255 million and $285 million.

Now I'd like to hand the call back over to J.J. for closing remarks. J.J?

Thank you Dan. Before we open the call for questions I want to conclude by reminding everybody that BioMarin is committed to making a big impact on small patient population with serious and medical needs. I think Friday's approval is another example of execution and leadership in rare diseases, and our deep knowledge and expertise in developing enzyme replacement therapies. I am very proud of the team and again want to thank everyone at BioMarin for their contribution to Friday's approval of Vimizim.

At this time we will open the call to your questions. Operator?

Thank you.

(Operator Instructions)

Salveen Richter, Canaccord.

Thanks for take my question. I think in January you mentioned there are about over 270 patients that are currently on drug. Can you comment on how many, what proportion of those are in the US and those in named patient markets like Turkey and Brazil, and how long it should take for these patients to switch over to paying customers?

A great question. (Multiple speakers) Those patients are spread around the world so we have a number of patients that have been in the clinical trial programs in the United States. We also have patients coming out of the early access program in the United States.

I don't have the level of detail that would be able to fully accommodate an answer to your question. Previously, I have guided that mid- double digits of patients are in the early access program and low- to mid-double digits of patients in the United States in the clinical trial program. Those patients are obviously a priority for transition to commercial drug. The named patient sales markets including Turkey and Brazil both have meaningful numbers of patients, and we will begin working on that transition.

As a reminder, the named patient sales programs take some time to move patients through. And also, in certain markets we will need a full approval to transition those patients out of the clinical trial and onto commercial drug.

Thanks and just a quick follow-up. Can you just maybe, is there any chance we can find it with the pricing is in France per the ATU? And where does the Vimizim at home administration trial stand currently?

Sure, the French ATU price has not been disclosed. But we think that the euro-based price in France will be consistent with our net, meaning after discount pricing in Europe and is consistent with the US price and again, expecting a net after discount price.

And let's see the, at home. Yes. The phase 2 clinical program that is being run in the UK includes a home infusion component, that home infusion component is undergoing presently we are gathering data and we will have some experience to publish on for the global market.

Thanks.

Jeff, do you want to comment, I think you'll follow what happens with Naglazyme. Approximately how many of what percent of Naglazyme patients now that are receiving home infusion?

The number varies by market. But essentially, the United States and the UK are the two key markets where we expect home infusion to be prevalent for Vimizim patients. Greater than half of our MPS VI patients are infused in the home setting. A reminder that many physicians will take a decision to move patients to a home infusion setting after they have substantial experience being infused on the drug. Some physicians consider that something like a year on therapy is an appropriate period of time before moving a patient to home infusion.

Great, thank you.

Navdeep Singh of Goldman Sachs.

Hi this is Lisa in for Navdeep. Thanks for taking the question. Given FDA approval of Vimizim, should we expect full launch of Brazil and Turkey or does full broad use of Vimizim in those territories require approval? And would you say it is fair that you will have full access to the 45% of MPS IV patients with approval in the US?

Yes, so Brazil and Turkey are two of a number of markets where named patient sales are possible following a US approval and we will seek to gain access through those programs in applicable markets. Because we don't have a full registration, we are not in a position to promote our drug. What we can do in those markets is provide education and support the appropriate use of Vimizim through named patient sales channels. And we will do that. In short I would say we will not be vigorously promoting in those markets, but we will be supporting the uptake and use of Vimizim.

As for access to the full 45%, a reminder that BioMarin's geographic region that we referred to as the EUMEA region includes the EU, Europe outside of the EU borders, the Middle East, North Africa, and Turkey. So some of those markets including the Middle East and Turkey become accessible to us now with the US approval and some of those markets or most of those markets become accessible to us once we have an EU approval, which we would expect and hope in the following 60 plus days, and some of those markets including EU countries outside of the EU borders require further registration efforts.

Thanks and one quick follow-up, when do expect the Ireland Shanbally Plant to come online and how this impact your tax rate? And furthermore what percentage of your Vimizim production do expect to come from the plant in the long-term? Thanks.

Hi this is Robert Baffi. The Shanbally Plant in Ireland is scheduled to produce qualification lots in late 2015 and to be approved approximately 2017. And the percentage of production that will occur there will depend primarily on the commercial demand with the ability to move product from a California plant to Ireland.

(Multiple speakers) Our intentionally term is to source the vast majority of Vimizim active substance from this plant.

And this is Dan and on the taxes side, we will be able to take advantage of the tax deferrals associated with the plant certainly by 2017 and potentially earlier. And we will be able to maintain a effective tax rate on earnings of Vimizim of about 12.5%. In fact we will be able to utilize this for several of our future products which is why we have previously guided to a long-term tax rate in the 20% range.

Great thanks again.

Cory Kasimov of JPMorgan.

Great, good morning guys, thanks for taking the questions, congratulations on the approval. First of all I wanted to clarify something with the price. Is the $380,000 the anticipated net price for Vimizim or should we still apply a gross to net adjustment to that?

(Multiple speakers) Hi Cory, the -- estimated annual cost of therapy that we have pegged at $380,000 is a net. So that includes a gross to net adjustment and also an estimate of compliance, which will be less than 100%.

Okay that's what I thought just wanted to make sure. Then secondly on R&D, I'm just trying to better understand the components here given the magnitude of this jump. Is their one product in particular that is really driving the incremental uptick that we are seeing? And then based on the percent distribution Dan that you provided, there is at least $100 million being allocated to early stage research. Is that roughly in line with what you have invested there in the past or are you further accelerating efforts in this area?

Yes, thanks Cory. There is no one product that particularly drives it. The three phase 3 programs, 673, PEG-PAL, and 701 make up about 75% of that 55%. With the two earlier stage programs, the Battens and CNP program, about 25%.

And in terms of the research number, the research number is a little heavier this year than it has been in the past because we have two IND candidates working their way through the system this year as you know the NAGLU Sanfilippo B program that we talked about at world, and our Gene therapy program.

And maybe just one other thing to add, Cory, is that don't forget that the research team also supports product in development. So that there is still some ongoing expense for products even after an IND is filed.

That is helpful, thank you.

Also again, we mentioned that earlier but a lot of the R&D expenses are actually manufacturing expenses of product in development. Since most of our products in development are proteins, large molecules, these are significant expenses. We do mention about $80 million of R&D expenses are just product supply for people trials and expansion trials, but there is a lot of in process, R&D in process, technology core development here that is included in that amount.

Right, okay, appreciate the color. Thank you.

Phil Nadeau of Cowen and Company.

Good morning thanks for taking my questions. First one on the label. The label does specifically mention that the safety and effectiveness have not been established for children under five. Do you expect that to have any implications for how you can promote Vimizim or your ability to get reimbursement for the young kids?

Hi Phil, let me start then I will turn it over to Jeff. So the indication is broad for patients with MPS IV-A. There is as you know that declarative statement in the pediatric use section which really pertains to the fact that the under five trial was ongoing at the time of the US submission. And we elected not to delay the product's approval while we finish that trial. And I think in large measure that was driven by physician keenness to have the product in their hands and relatively low physician doubt about the importance of starting treatment early, but let me turn it over to Jeff for more commercial reflection.

Yes the general expectation on the part of our geneticist prescribers is that enzyme replacement therapies work best when patients are treated earlier. So there is a natural tendency to want to treat as early as possible. That said it will be helpful to have clinical trial experience demonstrating the relative safety and effectiveness in zero to four year olds. As a reminder we have the MOR-007 trial that is in process and that will be concluding shortly and that we will be able to publish from, so I don't anticipate a barrier with zero to four year-olds and shortly we will have the data to fully address that part --

Based on our Naglazyme experience we had the same issue as when we initially launched the product, that didn't seem to be a major problem for use in patients under four or five.

Okay. When do think you could have the 007 data in front of the FDA?

I don't think we can give a specific timeline. The think that the thing to remember is we are years ahead of producing these data compared to Naglazyme. So I think our view about this is reflected to be favorable.

Okay second is on patient numbers in the past you have suggested there is about 3,000 patients worldwide actually I think you said in this weekend's press release and 15% of those are in the US which corresponds to about 450 patients in the US. In the FDA's press release it mentioned an 800 patient number in the US, why is there a discrepancy? What is the FDA seeing that you're not or conversely or are you just more accurate than the FDA?

The 800 number figure for the United States is probably based on a maximum theoretical epidemiology figure. So if one were to calculate 2.X patients per million births and multiply that out by a population of 330 million you would get to 800 patients in the United States. That would be based on epidemiology but it is not firmly established and not considering early mortality of Morquio A patients.

Our experience to date is finding 200 or 200-plus patients in the United States. We expect to continue to find patients in the United States going forward, but we do not expect any time soon to be in the 800 patient range in the US.

If I could just add, that number is not an FDA number. That number was in our advisory committee presentation. We use the larger end of the range for an illustrative purposes basically to underscore the fact that even if you use the most conservative number that you could imagine, there was still substantially fewer patients available than could be trialed for additional purposes.

What we didn't want, is we didn't want an argument about underestimating the number patients in front of the FDA but as Jeff, said nobody is more incentive to get the patient count numbers right than Jeff and his team and that is a probably more relevant number.

Great and then one last question on the R&D expense guidance. Dan in the past you I think you have also highlighted the amount of manufacturing that was included in R&D. Can you remind us what that figure was for 2013? It doesn't seem like it is increasing that much. It brings a longer-term question, if you are doing $500 million in R&D now, even at $1 billion in sales you are still going to have R&D at 50% of revenue, so is there ever going to be a point where BioMarin gets that down into a more normal range of biotech companies, something in the 25% to 40% range?

A bunch of questions in there. I actually don't have the 2013 number right in front of me, but I believe you are right. I don't think it is materially different. Off the top of my head it is in the 60s, but I don't recall the exact number. But we expect that to be fairly stable over the next few years given the stage of development the programs are in.

And in terms of -- and we've said that R&D as a percent of revenues will max out this year; it will decline next year. The math, $500 million and $1 billion is 50% is clearly right. But at higher numbers it gets absolutely down to that sort of, if you will, more typical biotech range of 25% to 30% and that is our long-term target.

And I mean, I will just add a few other comments on this. Is that in order for us to get to $1 billion of revenues we don't actually -- this does not assume that Vimizim has a year in peak sales. I think based on our current products projections I think we can get to around $1 billion, we just -- around $300 million of Vimizim sales. So there is still room to grow this for Vimizim to then allow this R&D ratio to revenues to go down after that. Even if we do not (inaudible) --

You sort of touched on this in your prepared remarks but then can we assume that R&D as an absolute number is going to stay relatively flat for the next several years? I know you said the percentage increases won't be the same, but is a 50% year-over-year increase, so there is a wide range of percentages that could still happen in the future.

We have said any increase -- if there were increases over the next several years, we would expect the magnitude to be materially smaller than the increase this year.

And then just to put that in perspective we went from last year, two years ago one product in a phase three trial, last year one product in registration and one in a phase three trial, and this year we are going to have three products in phase three trials, so there is quite a big step up in the amount of late stage investment.

And maybe it is also worth just spending a minute on the -- how much we spend to get drugs approved because there is sort of this focus on what we are spending on an annual basis, but Vimizim will get approved for 300 -- essentially $300 million. The plans we are on now for PEG-PAL, it will $300 million or less. 701 is in the same ZIP code, 673 for metastatic breast is in the same area as well. And so, while the total number on an annual basis is admittedly over $500 million is a significant number, the amount BioMarin spends to get a drug approved is we think industry-leading efficient.

And also the time is industry-leading. We got Vimizim approved in less than five years. Naglazyme was five years. Five and a quarter.

Thank you.

(Operator Instructions)

Robyn Karnauskas with Deutsche Bank.

Great, thanks this is Alethia for Robyn. And congrats on the approval and also congrats on that cool ped voucher; that sounds interesting for the future. Just wanted to ask some questions around update thoughts on BMN-111 for achondroplasia, one just kind of how the enrollment is going in the last conversations with the FDA and around the Phase II, what would give you comfort that you might be able to avoid surgeries and kind of any later stage thoughts on designing a pivotal study here.

Yes, so 111 doing really well. No further information from an FDA perspective. Once we had a good conversation with them, they were able to agree with our plan, which originally was to increase the duration of dosing and the magnitude of dosing based on clinical criteria instead of requiring a separate short-term sequential desk escalation trial in achondroplastic patients. So now we are in the process of enrolling that longer-term trial with escalating doses. The good news is we had, had a natural history study up and running prior to that phase 2 treatment study and our expectation is, is that it actually identifying patients won't be rate limiting for the conduct of that trial.

And lastly, we expect that it will really be growth data more than for example surgery data that drives the registration and likely adoption of BMN-111 in achondroplasia. Like with Vimizim where we observed the impact of reversing skeletal dysplasia on surgical rates, that was really only at a trend perspective and we don't expect that we will be required to show significant reduction in surgical rates necessarily for registration, although in time that is likely to occur.

Kim Lee of Janney Capital.

Good morning congrats also on the Vimizim approval. Quick question on -- can you elaborate on the CMC post marketing requirements? I know you said reasonable and manageable, but can you give some specifics? Thanks.

Yes this is Robert Baffi again. The requirements in general are around assay optimization. There are a number of methods in the control system that the FDA has specific requests for us to tune up, if you will. And we are well on the way to evaluating those methods and we will report our progress to FDA accordingly.

Matt Roden of UBS.

Hi guys this is Andrew Peters in for Matt. Let me add my congratulations on the Vimizim approval and all the progress in 2013. A quick question for Jeff. In terms of the named patient sales. The first is do you expect those to be a meaningful contributor to the $60 million to $70 million in Vimizim sales this year, and in terms of your expense with Naglazyme does the ability not to promote impact uptake or is kind of patient awareness in this disease setting enough to drive meaningful initial uptake?

Yes, I think the named patient sales will be a material contributor to the $60 million to $70 million that Dan referred to. I might reflect that Dan also mentioned 350 or more patients that we anticipate having on therapy by the end of the year. I think that latter figure; number of patients on therapy at the end of the year is probably a more meaningful measure of the medium to long-term revenue prospects for Vimizim. So expect there to be a material number of those patients coming from named patient sales markets.

In terms of being able to promote robustly, as I mentioned we can't do that without a registration. What we can do is provide education and support for the appropriate use of Vimizim. So our experience has been that named patient sales -- we will experience some patient uptake through named patient sales. When we get to a point when we are able to fully promote, that will accelerate that uptake.

Joseph Schwartz of Leerink.

Thank you. I wanted to ask about the European approval process and in particular the agenda for the CHMP meeting and vote this week references a list of questions adopted in September of 2013 and a list of outstanding issues adopted in December 2013. Is there any color you can provide us in terms of that review and how it has been going according to your expectations and relative to the successful US position? Thank you.

It's a very procedural process, and we have been following the procedure fairly accurately and so our expectation is reasonably good going into this week's discussion of the opinion. [At 210] we don't see any real red flags. Obviously you don't have it in hand until you have it in hand and we would guide to an update towards the end of the week as to what the outcome of the opinion meeting is.

Tim Lugo of William Blair.

Thanks for taking the question and congratulations on the approval. Obviously, it was a -- wasn't that long of a road but congratulations anyway. I guess a question for Jeff, how lumpy will the revenues from Brazil and Turkey and some of these other named patient sales countries be over the course of the year? I know Naglazyme has been lumpy. Should we continue to expect that for Vimizim during this launch period?

Yes, the Naglazyme revenues are lumpy in part because we have a big base of patients on therapy, and so there are big orders that come and go every so often. We try to get them in quarterly, but it doesn't always work out that way. For Vimizim, the revenues from those markets will be less lumpy because we are starting essentially from a base of zero. So expect the revenues to start out pretty small and to accelerate as we go through each quarter of this year.

Yaron Werber of Citi.

Great thanks for squeezing me in here. A couple of questions. One, just a little bit, give us a sense, you have given us a lot of clarity on R&D and how to think about in the future. Just looking at SG&A and there is obviously more of a step up in investment here this year related to Vimizim. How does that look next year? How much of -- are you prepaying for Europe?

And secondly on clarifying the price for Jeff, the pricing in Europe for Vimizim, should we think of it as $380,000 US dollar equivalent, which is you know around EUR380,000 or should we think of it as EUR380,000?

I will tackle the pricing question and then turn the expense question over to Dan. The guidance of $380,000 per patient per year for a typical patient, that is our global target based on our target global pricing. So when we have EU approval, expect the same kind of pricing and the same kind of gross to net and compliance factors that are baked into that $380,000 per patient per year figure. That would be less in euro terms and we will favorably convert back to dollars. Dan?

On the SG&A expenses, as you posited and also as I commented in my remarks, we said that the launch of Vimizim will take about a 25% increase in SG&A. Most of that has happened in 2014 if you will; roughly the balance will happen in 2015. Looking longer-term, we expect sales and marketing as a percentage of revenues to be in the 20% range when a product matures and our absolute G&A expenses as a percent of revenues will decline over time.

Rachel McMinn of Bank of America.

Yes, two quick questions. Just the Kuvan guidance, looks like you are not really expecting much growth there and was curious if you view that as a conservative metric or if there's something we should be thinking about? And then on the 350 patients that you've mentioned a couple of times on the call, how many of those are actually US or can you give us a sense of the $60 million to $70 million, how much of that is US? Thanks.

First on the Kuvan guidance. We are disclosing revenue in 2013 of $167 million. And guidance in 2014 of $180 million to $200 million. So I think that we are signaling continued or expected continued growth in the Kuvan franchise as we have been experiencing. So we are bullish on Kuvan for 2014.

Relative to the 350 patients, we haven't split that up between US patients and Europe and other markets. That is a composite figure from all markets that we will have access to during the course of the year. What I would say is the US is our really our first approval and our first opportunity to start patients on therapy. Probably the revenues from the United States would be larger this year or larger impact this year than the number of patients on therapy from the US. We will have more of the year as revenue basis.

Ian Somaiya of Nomura.

Thank you and congratulations. It is Matthew on for Ian. I just wanted to switch gears and ask about PEG-PAL. It sounds like there is been a little bit more of a bullish tone in your recent commentary and I was wondering if you could expand a little bit or talk about what has driven that confidence?

(Multiple speakers) There are two things. I mean one is that we are getting closer to the finish line here. Since we should have the top line data by the end of the year. Also that now we have patients that have been on the drug for over four years and they are still doing fine and they want to stay on the drug. Also we don't have any significant or any dropouts of the patients in the phase 3 program so far. This is pretty positive.

Than the other important one is earlier this year the beginning of the year the new ACMG guidelines that recommend treatment, therapeutic treatment of PKU patients for life which is very good news for PEG-PAL since initially we will be targeting adult patients. So all of this combined makes us pretty excited.

Also the fact that if you look at the numbers in the US they are in the pretty significant opportunity here since there are about 1,000 adult patients in the US, sorry 10,000 adult patients in the US and only 1,000 on Kuvan today, so this approval of 9,000 patients and we believe that out of those 9,000 our target is probably around 5,000 and we can get about 5,000 on therapy, at [2000] by the year, it's a $1 billion opportunity.

Lee Kalowski of Credit Suisse.

Thank you, I guess now that you are through the 180 day and approaching the 210 day in Europe. I'm wondering, based on the feedback and the ongoing discussion in Europe, is your expectation that the European label will, is likely to look similar to what it would look like in the US? Or is there anything else that has come up that we have not seen in the US label?

I think that's a reasonable expectation to have is that there will be reasonable harmony. Looking at the same clinical trial data they have reasonably similar precedents of action in Europe as regards to breadth of labeling.

I think the other thing I could have reminded, will remind now before is that -- and the FDA reminds and the EMA remind people about this all the time -- they caucus regularly with each other about their intended actions. They have a monthly conference call to review items in submission and under review. And so I would expect more similar than different in the European action.

Again, we will know a lot more specifically at the end of the week. To give you more concrete knowledge about what the outcome is.

Ying Huang of Barclays.

Thanks for taking my question and congrats on approval. Firstly, if you are lumping on the patient's in the extended access program and also trials as well as the named patients you can get from Brazil and Turkey, can you give us a rough count of those patients?

And then, secondly I guess for Dan just housekeeping question. That R&D guidance, I guess that does not include options right? And then lastly you have different cohorts in the achondroplasia trial for BMN-111. Would you wait until all of the cohorts sat down and released the data in 2015? Thank you.

I will take the easiest one first. The guidance I gave you is a GAAP numbers so it does include option expense. The only place we exclude that is in the bottom line number.

Thanks.

I will field the question about the patient numbers. About 235 patients coming out of the clinical trials globally. And mid-double digit figures of patients in the early access program in the United States. We have not broken out market-by-market where those patients come from and how they add up to the 350 patients that we intend to have on therapy by the end of the year.

But you can figure that both the US, based on our present approval, key EU markets based on an expectation of having an approval there in the second quarter and key named patients sales markets including Turkey and Brazil, all of those will be meaningful contributors to patients on therapy by the end of the year.

On 111, we've said expect data in the middle part of next year. Could be faster if growth velocity increases happen in the lower dose range or if toxicity happens in the lower dose range. Could take longer we have to go through more cohorts to get to growth velocity increasing doses. Probably won't release data until we're reasonably sure where we stand in regard to dose and response and so the expectation that we have been giving and have no reason to change at this point is, is that data will be available around the second quarter of next year.

Michael Yee of RBC Capital Markets.

Thanks, a long-term question for you. Based on your experience with other products such as Naglazyme, Aldurazyme et cetera, how fast does it take for you to go from your identified patient number to identifying either sort of where you think the prevalence number is?

And the second part of that question more importantly is, in your experience of your current drugs what type of peak penetration do you typically hit or have you been hitting for your identified patients and then of course that prevalence numbers. Trying to figure out where Vimizim might come out relative to your other drugs.

I think the experience is most relevant from Naglazyme, which is another enzyme replacement therapy and a global product. The difference is with Naglazyme, recall that we were launching that product and putting in place capabilities literally country by country as we were going and so we spent something on the order of 7 to 8 years getting into 50 markets. This time, we have a commercial organization present in all of those markets, and we have been able to identify patients, meaningful numbers of patients early.

So we think that we are way ahead on the curve with Vimizim and Morquio A relative to our experience with Naglazyme. And previously I think we've have guided that if it took 7 to 8 years to do that for Naglazyme, and we are targeting something on the order of 4 years to get the same kind of penetration, which is about 80% of identified patients in those 40 to 50 markets with Vimizim.

That is all the time we have for questions today. Like to turn the call back over to management for any further remarks.

JJ do want to say anything to wrap up?

One I just, again this is a significant milestone, this approval for BioMarin. We believe that we are in a great position to maximize value by continuing to invest in R&D and accelerating time to market. Optimizing adoption and reimbursement for our products. We believe that we still have industry-leading efficiency in our R&D engine and we believe that leveraging that engine is in the best interest of shareholders and we are very excited about this launch and thank you for being on the call today and thank you for your support.

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