SecProbe.io

CORRESP
1
filename1.htm

Correspondence

 October 16, 2008

 Via
EDGAR and Facsimile

 Mr. Jim B. Rosenberg

 Senior
Assistant Chief Accountant

 Securities and Exchange Commission

 450 5th Street
N.W.

 Washington, D.C. 20549-1103

Re:
BioMarin Pharmaceutical Inc.

Form 10-K for the Fiscal Year Ended December 31, 2007

Form 10-Q for the Quarterly Period Ended June 30, 2008

File No. 0-26727

 Dear Mr. Rosenberg:

 We are writing in response to comments received from the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), by letter
dated October 7, 2008 (the “Comment Letter”), with respect to BioMarin Pharmaceutical Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2007 (the “Form 10-K”) and Quarterly
Report on Form 10-Q for the quarter ended June 30, 2008 (the “Form 10-Q”).

 Set forth below are the Company’s responses to the
Staff’s comments. We have recited the comments set forth in the Comment Letter in italicized, bold type and have followed each comment with the Company’s response thereto. Our responses have been numbered to correspond to the numbers
assigned to each of the Staff’s comments in the Comment Letter.

 Form 10-K For the Fiscal Year Ended December 31, 2007

Exhibits 31: Certifications

1.
Please represent to us that you will revise your certifications in all future filings to provide the wording exactly as require by Item 601(b)(31) of Regulation S-K. In
this regard, please remove the officer’s title from your introductory sentence.

 Response

 In response to the Staff’s comment, the Company will revise its certifications in all future filings to provide the wording exactly as required by
Item 601(b)(31) of Regulation S-K.

 Form 10-Q For the quarterly period ended June 30, 2008

 Financial Statements

 Note 2(o) Reclassifications and
Adjustments

 Page 1

2.
You disclose the correction of an error recorded in the second quarter of 2008 related to sales taxes associated with inventory and property, plant and equipment purchased
between April 2007 and March 2008. You indicate that you improperly expensed a total of $1.2 million of these sales taxes at the time of purchase and that the impact of the correcting adjustment to capitalize these taxes was not material to prior
periods or to the expected results for the year ended December 31, 2008. Please provide us your analysis of the materiality of this adjustment by period. Please ensure that this analysis addresses both quantitative and qualitative factors, such
as analyst consensus expectations as indentified in SAB Topic 1:M1.

 Response

 In response to the Staff’s comment, our analysis of the materiality of the sales tax expense correction to the historical periods and the projected
full year ending December 31, 2008 included the following:

 Quantitative Factors (in thousands):

Historical Period

Overstatement
of Operating
Expenses*

Percentage
of Net
Income
(Loss)*

Percentage
of Total
Revenues

Percentage
of Total
Operating
Expenses

Percentage
of Total
Assets

Q2 2007

$
255

(6.6
%)

0.9
%

0.6
%

0.03
%

Q3 2007

$
258

(4.9
%)

1.0
%

0.6
%

0.06
%

Q4 2007

$
277

10.8
%

0.6
%

0.5
%

0.1
%

2007

$
790

(5.0
%)

0.7
%

0.4
%

0.1
%

Q1 2008

$
385

22.8
%

0.6
%

0.6
%

0.14
%

2008 Projected

$
790

2.6
%

0.3
%

0.3
%

N/A

*
The effect of the adjustment on basic and diluted earnings (loss) per share was less than $0.01 for all periods presented.

 Based on the disproportionate amounts of net income to the gross income statement components for certain periods above and the second quarter of 2008, the
Company believes that net income alone is not the most appropriate basis under which to evaluate materiality, and total revenues and total operating expenses more accurately reflect the magnitude of the error correction in proportion to the income
statement on the whole. Also, as the historical errors also affected the balance sheet amounts of inventory and fixed assets, the Company also analyzed the amount of the misstatements as compared to total assets.

 Qualitative Factors:

 SAB Topic 1: M1 Factors

 Company Assessment for All Periods Noted Above

Whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate.

The amount does not require judgment or estimation.

Whether the misstatement masks a change in earnings or other trends.

No, the misstatement does not mask a change in earnings or other trends due to relatively small size of the adjustment as compared to the Company’s total revenue and expenses as well as net
income.

 Page 2

Whether the misstatement hides a failure to meet analysts’ consensus expectations for the enterprise.

No, the misstatements due to the sales tax correction did not hide a failure to meet analyst’s consensus expectations for the periods included above. For all periods discussed above where
the Company’s actual results met or exceeded analyst consensus expectations, adjusting for the effect of the sales tax error in any of those periods would only serve to further exceed these consensus expectations. With respect to the full year
ending December 31, 2008 projected results, the Company does not expect the sales tax error correction to hide a failure to meet analyst consensus expectations.

Whether the misstatement changes a loss into income or vice versa.

No.

Whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or
profitability.

Not applicable due to the Company operating in a single segment and the nature of the error being of an administrative nature.

Whether the misstatement affects the registrant’s compliance with regulatory requirements.

No.

Whether the misstatement affects the registrant’s compliance with loan covenants or other contractual requirements.

No, the Company has no such loan covenants or contractual requirements.

Whether the misstatement has the effect of increasing management’s compensation – for example, by satisfying requirements for the award of bonuses or other forms of incentive
compensation.

The misstatement had no effect on management compensation for 2007. In 2008, the Company’s corporate incentive compensation plan includes a variable component if operating income exceeds
the corporate target, up to a certain limit. Due to this variable component of the incentive compensation plan and the fact that the adjustment affected operating income, the correction of the error in 2008 may increase management compensation,
however the amount is de minimus.

Whether the misstatement involves concealment of an unlawful transaction.

No.

 Based on the analysis above, the Company concluded that the misstatement due to the erroneous
expense recognition of sales tax related to inventory and fixed assets to be immaterial for all prior periods (using both the rollover and iron curtain approaches) and for the projected financial results for the full year ending December 31,
2008, and that revision of the prior period financial statements was not required.

 This conclusion was discussed with KPMG’s National
Office who concurred.

3.
Although your adjustment to correct the sales tax error may not be material to your expected results for 2008, the adjustment appears to be material to your operating results
for the interim periods of 2008. Please revise your MD&A to discuss the impact of this adjustment on your results of operations for the three-and six-month periods ended June 30, 2008. In addition, please confirm to us that if
the recorded adjustment proves to be material to actual full-year 2008 results of operations that you will revise your 2007 and 2008 financial statements to record the errors in the correct interim/annual periods.

 Page 3

 In response to the Staff’s comment, in the Company’s quantitative materiality analysis of the
sales tax error correction to the 2008 interim periods, the Company acknowledges that it was near break-even and therefore also considered the gross amounts of revenues and expenses during the period, as represented in the following table (in
millions):

 Line Item

Q1 2008

Q2 2008

Six Months
Ended June 30,
2008

 Total Revenues

$
60.4

$
64.2

$
124.6

 Total Operating Expenses

$
59.6

$
59.6

$
119.2

 Net Income

$
1.7

$
3.8

$
5.5

 Understatement (Overstatement) of Net Income Due Sales Tax Error and Related Correction

$
0.4

$
(1.2
)

$
(0.8
)

 Related Misstatement as a Percentage of:

 Total Revenues

0.6
%

1.8
%

0.6
%

 Total Operating Expenses

0.6
%

2.0
%

0.7
%

 Net Income

22.8
%

30.8
%

14.4
%

 As noted in the Company’s response to the Staff’s comment #2 above, the Company believes
that net income alone is not the most appropriate basis under which to evaluate materiality, and total revenues and total operating expenses more accurately reflect the magnitude of the error correction in proportion to the income statement and the
Company’s operations on the whole. The Company acknowledges that without the increase to net income during the second quarter of 2008 due to the $1.2 million sales tax error, the Company’s earnings would have been $0.5 million less than
the analyst consensus expectations. However, management believes that the Company’s quarterly net income is not the primary area of focus for investors due to the net income volatility experienced from quarter to quarter based on the variable
timing of the Company’s research and development activities.

 For the aforementioned reasons, the Company does not believe that the
amount of the sales tax error correction was material to the second quarter of 2008. However, the Company acknowledged that the absolute amount of the $1.2 million correction as compared to the $3.8 million of net income for the second quarter of
2008 could be perceived to be material and accordingly the Company disclosed the correction in the footnotes to the financial statements under APB 28.

 The Company acknowledges the size of the correction as a percentage of net income for each quarter but notes that the percentage of the expected results for the year ending December 31, 2008 is only 2.6%.

This conclusion was also discussed with KPMG’s National Office who concurred.

 With respect to the impact of the adjustment on the Company’s results of operations for the three and six months ended June 30, 2008, the
Company did not include specific discussion of the sales tax adjustment in Management’s Discussion and Analysis (“MD&A”) in its Form 10-Q for the second quarter of 2008 due to the immateriality of the adjustment within the
operational reporting format of the Company’s MD&A, whereby key fluctuations are presented by product, development program and significant business events. The Company presents noteworthy fluctuations in comparable period net income/loss in
a table at the beginning of the “Results of Operations” in order to give a high-level analysis of the key fluctuations affecting net income. These changes are presented in the form of

 Page 4

revenue by product and primary income statement line item. Although the sales tax adjustment was presented as a $1.2 million overstatement of net income for
the three and six months ended June 30, 2008 in the footnotes to the consolidated financial statements, for purposes of MD&A, the adjustment was presented within the increased amounts provided in the related income statement line item
(i.e., research and development expense and selling, general and administrative expense). The effects of the sales tax adjustment on the MD&A net income/loss fluctuations that were presented in the Form 10-Q for the second quarter of 2008 are
included in the following tables (in thousands):

 Net Income (Loss)

As Reported

Effect of
Adjustment

Adjusted

 Net loss for the three months ended June 30, 2007

$
(3.9
)

$
—

$
(3.9
)

 Increased Naglazyme gross profit

12.0

—

12.0

 Increased Kuvan gross profit

10.6

—

10.6

 Increased Aldurazyme gross profit

12.0

—

12.0

 Decreased collaborative agreement revenues

(1.0
)

—

(1.0
)

 Absence of Orapred milestone revenue

(4.0
)

—

(4.0
)

 Increased Orapred gross profit

0.8

—

0.8

 Increased research and development expense

(4.6
)

—

(4.6
)

 Increased selling, general and administrative

(7.9
)

(1.2
)

(9.1
)

 Increased losses from BioMarin/Genzyme LLC

(7.1
)

—

(7.1
)

 Decreased interest income

(2.8
)

—

(2.8
)

 Increased interest expense

(0.4
)

—

(0.4
)

 Sales tax error correction

—

1.2

1.2

 Other, net

0.1

—

0.1

 Net income for three months ended June 30, 2008

$
3.8

$
—

$
3.8

As Reported

Effect of
Adjustment

Adjusted

 Net loss for the six months ended June 30, 2007

$
(13.2
)

$
—

$
(13.2
)

 Increased Naglazyme gross profit

19.9

—

19.9

 Increased Kuvan gross profit

15.7

—

15.7

 Increased Aldurazyme gross profit

25.1

—

25.1

 Decreased collaborative agreement revenues

(2.7
)

—

(2.7
)

 Absence of Orapred milestone revenue

(4.0
)

—

(4.0
)

 Increased Orapred gross profit

0.7

—

0.7

 Increased research and development expense

(4.0
)

(0.3
)

(4.3
)

 Increased selling, general and administrative

(15.3
)

(0.5
)

(15.8
)

 Increased losses from BioMarin/Genzyme LLC

(13.8
)

—

(13.8
)

 Decreased interest income

(0.9
)

—

(0.9
)

 Increased interest expense

(2.1
)

—

(2.1
)

 Sales tax error correction

—

0.8

0.8

 Other, net

0.1

—

0.1

 Net income for six months ended June 30, 2008

$
5.5

$
—

$
5.5

 Page 5

 With respect to the specific discussion of the research and development and selling, general and
administrative fluctuations within the “Results of Operations” section of MD&A, the Company believes that the most effective presentation format for such fluctuations is from a product and development program perspective. As such,
portions of the sales tax correction are divided among the detailed line item fluctuations and accordingly the Company did not separately present the effect of the sales tax adjustment. When considering each product independently, the impact of the
sales tax adjustment related to any one product is immaterial compared to the overall product expenses.

 Based on the above context of the
presentation and perspective of the Company’s MD&A and the relative materiality of the sales tax adjustment to the consolidated financial statements and MD&A on the whole, the Company does not believe that the effects of the sales tax
adjustments on these line items was material for purposes of special mention within MD&A, and respectfully requests that the Staff agree that revision of the MD&A for the relevant periods is not necessary.

 Lastly, the Company does confirm to the Staff that if the recorded adjustment proves to be material to the actual full-year 2008 results of operations
that the Company will revise its 2007 and 2008 financial statements to record the errors in the correct interim/annual periods.

 Note 4:
Joint Venture

4.
You disclose that you restructured your Aldurazyme joint venture with Genzyme effective January 1, 2008. You indicate that the operational responsibilities for you and
Genzyme did not significantly change as a result of the revised joint venture structure; you manufacture Aldurazyme while Genzyme markets and distributes it. In your January 3, 2008 press release announcing the joint venture restructuring you
indicated that the payments under the revised structure are projected to result in both you and Genzyme receiving approximately the same profit as under the original joint venture structure. In this note you disclose that instead of sharing all
costs and profits equally with Genzyme through the 50/50 joint venture, Genzyme records sales of Aldurazyme to third party customers and pays you a tiered royalty. In addition, you recognize product transfer revenue when product is ship