United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______ to _________.
Commission file number: 000-26727

BIOMARIN PHARMACEUTICAL INC.
(Exact name of registrant issuer as specified in its charter)

Delaware 68-0397820
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

371 Bel Marin Keys Blvd., Suite 210, Novato, California 94949
(address of principal executive offices)
(Zip Code)
(415) 884-6700
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No_____

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 44,216,795 shares
common stock, par value $0.001, outstanding as of October 31, 2001.

BIOMARIN PHARMACEUTICAL INC.

TABLE OF CONTENTS

<table>
<s> <c>
Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

Consolidated Balance Sheets..............................................................2
Consolidated Statements of Operations for the three- and nine-month
periods ended September 30, 2000 and 2001 and for the period
from March 21, 1997 (inception) through September 30, 2001.........................3
Consolidated Statements of Cash Flows....................................................5
Notes to Consolidated Financial Statements..............................................6

Item 2. Management's Discussion and Analysis............................................10

Item 3. Quantitative and Qualitative Disclosure about Market Risk.......................26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings................................................................27

Item 2. Changes in Securities and Uses of Proceeds.......................................27

Item 3. Defaults upon Senior Securities..................................................27

Item 4. Submission of Matters to a Vote of Security Holders..............................27

Item 5. Other Information................................................................27

Item 6. Exhibits and Reports on Form 8-K.................................................27

SIGNATURE..........................................................................................28
</table>

BioMarin Pharmaceutical Inc. and Subsidiaries
(a development-stage company)

Consolidated Balance Sheets as of
December 31, 2000 and September 30, 2001
(In Thousands)
<table>
<s> <c> <c>
December 31 September 30
2000 2001
------------------ ------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 16,530 $ 7,230
Short-term investments 23,671 36,675
Accounts receivable, net 1,135 996
Due from BioMarin/Genzyme LLC 1,799 3,855
Inventories 436 525
Prepaid expenses 970 1,361

------------------ ------------------
Total current assets 44,541 50,642

Property, plant and equipment, net 20,715 27,996
Goodwill and other intangibles, net 9,862 8,314
Investment in BioMarin/Genzyme LLC 1,482 2,164
Note receivable from officer - 878
Deposits 333 408
------------------ ------------------
Total assets $ 76,933 $ 90,402
================== ==================

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,747 $ 3,923
Accrued liabilities 2,109 2,072
Current portion of capital lease obligations - 65
Notes payable - short-term 27 30
------------------ ------------------
Total current liabilities 6,883 6,090

Long-term portion of notes payable 56 32
Long-term portion of capital lease obligations - 114
------------------ ------------------
Total liabilities 6,939 6,236
------------------ ------------------

Stockholders' equity:
Common stock, $0.001 par value: 75,000,000
shares authorized. 36,921,966 and 42,253,611
shares issued and outstanding December 31,
2000 and September 30, 2001, respectively 37 42
Additional paid in capital 153,940 195,104
Common stock warrants - 5,134
Deferred compensation (1,530) (903)
Notes from stockholders (1,940) (2,014)
Deficit accumulated during development stage (80,513) (113,197)
------------------ ------------------
Total stockholders' equity 69,994 84,166
------------------ ------------------
Total liabilities and stockholders' equity $ 76,933 $ 90,402
================== ==================
</table>

The accompanying notes are an integral part of these statements.

-2-

BioMarin Pharmaceutical Inc. and Subsidiaries
(a development-stage company)

Consolidated Statements of Operations
For the Three-Month Periods Ended September 30, 2000 and 2001
(In Thousands, except per share data, Unaudited)

<table>
<s> <c> <c>
Three Months Ended September 30,
----------------------------------------------------
2000 2001
----------------------------------------------------
Revenues:
Revenues - products $ 662 $ 572
Revenues - services 9 71
Revenues from BioMarin/Genzyme LLC 2,136 3,079
Revenues - other - 22
----------------------------------------------------
Total revenues 2,807 3,744
----------------------------------------------------

Operating Costs and Expenses:
Cost of products 188 234
Cost of services 6 47
Research and development 8,529 10,143
Selling, general and administrative 2,331 2,993
Carson Street closure - -
----------------------------------------------------
Total operating costs and expenses 11,054 13,417
----------------------------------------------------

Loss from operations (8,247) (9,673)

Interest income 691 530
Interest expense (2) (8)
Loss from BioMarin/Genzyme LLC (590) (1,864)
----------------------------------------------------

Net loss $ (8,148) $ (11,015)
====================================================

Net loss per share, basic and diluted $ (0.23) $ (0.26)
====================================================

Weighted average common shares outstanding,
basic and diluted 36,064 42,136
====================================================

The accompanying notes are an integral part of these statements.
</table>

-3-

BioMarin Pharmaceutical Inc. and Subsidiaries
(a development-stage company)

Consolidated Statements of Operations
For the Nine-Month Periods Ended September 30,
2000 and 2001 and for the Period from March
21, 1997 (Inception) to September 30, 2001
(In Thousands, except per share data, Unaudited)

<table>
<s> <c> <c> <c>
Period from
March 21, 1997
Nine Months Ended September 30, (Inception) to
---------------------------------------------------
2000 2001 September 30, 2001
-------------------------------------------------------------------------------
Revenues:
Revenues - products $ 1,749 $ 1,760 $ 5,644
Revenues - services 177 245 692
Revenues from BioMarin/Genzyme LLC 7,262 8,621 24,489
Revenues - other - 182 475
-------------------------------------------------------------------------------
Total revenues 9,188 10,808 31,300
-------------------------------------------------------------------------------

Operating Costs and Expenses:
Cost of products 480 719 1,765
Cost of services 59 141 386
Research and development 25,109 31,842 107,258
Selling, general and administrative 6,517 7,505 27,570
Carson Street closure 4,423 - 4,423
-------------------------------------------------------------------------------
Total operating costs and expenses 36,588 40,207 141,402
-------------------------------------------------------------------------------

Loss from operations (27,400) (29,399) (110,102)

Interest income 2,281 1,434 6,995
Interest expense (6) (11) (750)
Loss from BioMarin/Genzyme LLC (1,845) (4,708) (9,340)
-------------------------------------------------------------------------------

Net loss $ (26,970) $ (32,684) $ (113,197)
===============================================================================
Net loss per share, basic and diluted $ (0.76) $ (0.83) $ (4.12)
===============================================================================

Weighted average common shares outstanding,
basic and diluted 35,493 39,601 27,458
===============================================================================

The accompanying notes are an integral part of these statements.

</table>

-4-

BioMarin Pharmaceutical Inc. and Subsidiaries
(a development-stage company)

Consolidated Statements of Cash
Flows For the Nine-Month Periods Ended
September 30, 2000 and 2001 and for
the Period from March 21, 1997 (Inception) to September 30, 2001
(In Thousands, Unaudited)

<table>
<s> <c> <c> <c>
Period from
March 21, 1997
Nine Months Ended September 30, (Inception) to
------------------------------------------
2000 2001 September 30, 2001
------------------------------------------------------------------

Cash flows from operating activities:
$ (26,970) $ (32,684) $ (113,197)
Net loss ------------------------------------------------------------------

Adjustments to reconcile net loss to net cash used
in operating activities:

Depreciation 3,234 3,827 12,561
Amortization of deferred compensation 986 627 3,539
Amortization of goodwill, net 1,118 1,711 4,725
Loss from BioMarin/Genzyme LLC 9,947 13,328 32,983
Compensation in the form of common stock
and common stock options - - 18
Write-off of in-process technology - - 2,625
Carson Street closure 3,791 - 3,791

Changes in operating assets and liabilities:
Accounts receivable, net (285) 139 (995)
Due from BioMarin/Genzyme LLC (208) (2,056) (3,855)
Inventories 230 (89) 74
Prepaid expenses (209) (391) (1,360)
Note receivable from officer - (878) (878)
Deposits (182) (75) (408)
Accounts payable (1,303) (824) 3,922
Accrued liabilities (176) (37) 2,072
------------------------------------------------------------------
Total adjustments 16,943 15,282 58,814
------------------------------------------------------------------
Net cash used in operating activities (10,027) (17,402) (54,383)
------------------------------------------------------------------

Cash flows from investing activities:
Purchase of property, plant and equipment (1,962) (10,901) (44,140)
Investment in BioMarin/Genzyme LLC (10,727) (14,010) (35,147)
Sale (purchase) of short-term investments 8,165 (13,004) (36,675)
Purchase of Biochemical Research Reagent
Division of Oxford GlycoSciences, Plc. - (163) (1,663)
------------------------------------------------------------------
Net cash used in investing activities (4,524) (38,078) (117,625)
------------------------------------------------------------------

Cash flows from financing activities:
Proceeds from the sale of common stock and warrants,
net of issuance costs 842 45,446 144,372
Proceeds from issuance of convertible notes payable - - 25,615
Accrued interest on notes receivable from stockholders 68 - -
Proceeds from exercise of common stock options
and warrants 6,347 625 7,250
Repayment of notes from stockholders - - 804
Issuance of common stock for ESPP - 158 472
Proceeds from notes payable - - 134
Repayment of equipment loan (21) (21) (73)
Repayment of capital lease obligations - (28) (28)
Other - - 692
------------------------------------------------------------------
Net cash provided by financing activities 7,236 46,180 179,238
------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents
(7,315) (9,300) 7,230

Cash and cash equivalents, beginning of period 23,413 16,530 -
------------------------------------------------------------------
Cash and cash equivalents, end of period
of these statements $ 16,098 $ 7,230 $ 7,230
==================================================================

The accompanying notes are an integral part of these statements.
</table>
-5-

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION:
---------------------

BioMarin Pharmaceutical Inc. (the Company) is a biopharmaceutical company
specializing in the development of enzyme therapies for debilitating
life-threatening chronic genetic diseases and other diseases and conditions.
Since inception, the Company has devoted substantially all of its efforts to
research and development activities, including preclinical studies and clinical
trials, the establishment of laboratory, clinical and commercial scale
manufacturing facilities, clinical manufacturing, and related
administrative activities.

The Company was incorporated on October 25, 1996 in the state of Delaware and
first began business on March 21, 1997 (inception) as a wholly-owned subsidiary
of Glyko Biomedical Ltd. (GBL). Subsequently, the Company has issued stock to
outside investors in a series of transactions, resulting in GBL's ownership of
the Company's outstanding common stock being reduced to 26.9 percent at
September 30, 2001.

On October 7, 1998, the Company acquired Glyko, Inc., a wholly-owned subsidiary
of GBL, in a transaction valued at $14.5 million. The transaction was accounted
for as a purchase and resulted in Glyko, Inc. becoming a wholly-owned subsidiary
of the Company. Glyko, Inc. provides products and services that perform
sophisticated carbohydrate analysis for research institutions and commercial
laboratories.

In January 2001, the Company signed an agreement with Acqua Wellington North
American Equities Fund Ltd. (Acqua Wellington) for an equity investment in the
Company. In August 2001, this agreement was terminated and a new agreement was
signed in order to comply with recent guidance from the Securities and Exchange
Commission (SEC). The new agreement allows for the purchase of up to 2,500,000
shares (a reduction of 1,500,000 shares from the original agreement). Under the
terms of the new agreement, the Company will have the option to request Acqua
Wellington to invest through sales of registered common stock at a small
discount to market price. The maximum amount that the Company may request to be
invested in any one month is dependent upon the market price of the stock (or
can be mutually agreed-upon by both parties) and is referred to as the "Draw
Down Amount." Subject to certain conditions, Acqua Wellington is obligated to
purchase this amount if requested to do so by the Company. In addition, the
Company may, at its discretion, grant a "Call Option" to Acqua Wellington for an
additional investment in an amount up to the "Draw Down Amount" which Acqua
Wellington may or may not choose to exercise. Through September 30, 2001, Acqua
Wellington purchased 282,518 shares for $3 million ($2.8 million net of issuance
costs, the majority of which will be nonrecurring upon future transactions
associated with this agreement). Under this agreement, Acqua Wellington may also
purchase stock and receive similar terms to any other equity financing raised by
the Company.

In May 2001, the Company completed two private placements of the Company's
securities, raising total net proceeds of approximately $42.5 million. On May
16, 2001, the Company sold 4,763,712 shares of common stock at $9.45 per share
and, for no additional consideration, issued three-year warrants to purchase
714,554 shares of common stock at an exercise price of $13.10 per share. On May
17, 2001, a fund managed by Acqua Wellington purchased 105,821 shares of common
stock and received warrants to purchase 15,873 shares of common stock on the
same price and terms as the May 16, 2001 transaction.

Through September 30, 2001, the Company had accumulated losses during its
development stage of approximately $113.2 million. Based on current plans,
management expects to incur further losses for the foreseeable future.
Management believes that the Company's cash and cash equivalents and short-term
investment balances at September 30, 2001 will be sufficient to meet the
Company's obligations for the next twelve months. Until we can generate
sufficient levels of cash from our operations, we expect to continue to finance
future cash needs through the sale of equity securities, equipment-based
financing, and collaborative agreements with corporate partners.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information on substantially the same basis as the annual audited
financial statements. However, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair presentation
have been included.

-6-

Operating results for the three- and nine-month periods ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. These consolidated financial statements should be read
in conjunction with the financial statements and footnotes thereto for the year
ended December 31, 2000 included in the Company's Form 10-K Annual Report.

2. SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made by management include determination of progress to date of
research and development projects in-process, the amortization period of
goodwill and other intangibles, and asset impairment reserves related to certain
leasehold improvements and equipment.

Cash and Cash Equivalents

For the consolidated statements of cash flows, the Company treats liquid
investments with original maturities of less than three months when purchased as
cash and cash equivalents.

Short-term Investments

The Company records its investments as held-to-maturity. These investments are
recorded at cost at September 30, 2001, which approximates fair market value.
These securities are comprised mainly of A1/P1 rated commercial paper and
Federal Agency investments, including Federal Home Loans and Federal Farm
Credits.

Goodwill and Other Intangibles, net

Pursuant to the purchase agreement between Oxford GlycoSciences, Plc. (OGS) and
Glyko, Inc. dated May 4, 1999, the Company paid to OGS in June 2001 the deferred
final installment of $163,000 of the purchase price. The final installment was
based on two years of sales of OGS products and inventory. This amount was
recorded as an increase to Goodwill and Other Intangibles in the accompanying
consolidated balance sheets.

Investment in BioMarin/Genzyme LLC and Related Revenue

Under the terms of the Company's joint venture agreement with Genzyme, the
Company and Genzyme have each agreed to provide 50 percent of the funding for
the joint venture. All research and development, sales and marketing,
administrative, and other activities performed by Genzyme and the Company on
behalf of the joint venture are billed to the joint venture at cost. Any profits
or losses of the joint venture are shared equally by the two parties.

The Company accounts for its investment in the joint venture using the equity
method. The Company recognizes 50% of amounts billed to the joint venture as
revenue in accordance with its policy to recognize revenue for these billings to
the extent that payments for the billings were funded by Genzyme. The 50% of
amounts billed to the joint venture that was funded by the Company was recorded
as an offset to the Company's equity in the loss of the joint venture.

Note Receivable from Officer

Pursuant to an employment agreement with an officer of the Company, the Company
loaned the officer $860,000 to purchase a local residential property and
received a promissory note secured by the property. The note matures on October
31, 2004 (subject to various conditions in the employment agreement) and bears
interest at the Federal mid-term rate.

-7-

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using
the straight-line method. Leasehold improvements are amortized over the life of
the asset or the term of the lease, whichever is shorter. Significant additions
and improvements are capitalized, while repairs and maintenance are charged to
expense as incurred.

Property, plant and equipment consisted of the following (in thousands):

<table>
December 31, September 30, Estimated
2000 2001 Useful Lives
================== ================== ========================
<s> <c> <c>
Computer hardware and software $ 678 $ 1,140 3 years
Office furniture and equipment 1,056 1,424 5 years
Manufacturing/laboratory equipment 9,323 11,369 5 years
Leasehold improvements 16,685 24,994 Shorter of life of
asset or lease term

Construction in progress 1,048 1,060
------------------ ------------------

28,790 39,987
Less: Accumulated depreciation (8,075) (11,991)
------------------ ------------------

Total, net $ 20,715 $ 27,996
================== ==================
</table>

Stockholders' Equity

The notes from stockholders included in stockholders' equity include notes from
stockholders, which were due in March 2001. The notes are anticipated to be
paid within the next six months. The Company does not believe there will be any
problems collecting on the notes.

Research and Development

Research and development expenses include the expenses associated with contract
research and development provided by third parties, research and development
performed in connection with the BioMarin/Genzyme LLC joint venture (including
clinical manufacturing, clinical operations, regulatory activities), and
internal research and development activities. All research and development
expenses, including those discussed, above are expensed as incurred.

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by
the weighted average common shares outstanding during the period. Diluted net
income per share is calculated by dividing net income by the weighted average of
common stock outstanding and potential common shares during the period.
Potential common shares include dilutive shares issuable upon the exercise of
outstanding common stock options, warrants, and contingent issuances of common
stock. For periods in which the Company has losses, such potential common shares
are excluded from the computation of diluted net loss per share, as their effect
is anti-dilutive.

3. CARSON STREET CLOSURE:
---------------------

During the first quarter of 2000, the Company decided to close its Carson Street
clinical manufacturing facility. In connection with this decision the Company
recorded a charge of approximately $4.4 million. The charge primarily consisted
of impairment reserves for leasehold improvements and equipment located in the
Carson Street facility.

-8-

4. NEW ACCOUNTING PRONOUNCEMENTS:
------------------------------

SFAS 141 and 142:

On June 29, 2001, the Financial Accounting Standards Board (FASB) approved for
issuance Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Intangible Assets. Major provisions
of these Statements are as follows: all business combinations initiated after
June 30, 2001 must use the purchase method of accounting; the pooling of
interests method of accounting is prohibited except for transactions initiated
before July 1, 2001; intangible assets acquired in a business combination must
be recorded separately from goodwill if they arise from contractual or other
legal rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part of a
related contract, asset or liability; all acquired goodwill must be assigned to
reporting units for purposes of impairment testing and segment reporting;
effective January 1, 2002, goodwill and intangible assets with indefinite lives
will not be amortized but will be tested for impairment annually using a fair
value approach, except in certain circumstances, and whenever there is an
impairment indicator; other intangible assets will continue to be valued and
amortized over their estimated lives; in-process research and development
acquired in business combinations will continue to be written off immediately;
goodwill arising between June 29, 2001 and December 31, 2001 will not be subject
to amortization. Management is currently assessing the impact of the new
standards. Amortization of goodwill which will cease upon adoption of this
standard totaled $0.5 million and $1.7 million for the three- and nine-month
periods ended September 30, 2001, respectively.

SFAS 143:

In June 2001, the FASB approved for issuance SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred and that the associated asset retirement costs be
capitalized as part of the carrying value of the related long-lived asset. SFAS
No. 143 will be effective January 1, 2002 for the Company. Management does not
expect this standard to have a material impact on the Company's consolidated
financial position or results of operations.

SFAS 144:

In August 2001, the FASB approved for issuance SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 broadens the
presentation of discontinued operations to include more transactions and
eliminates the need to accrue for future operating losses. Additionally, SFAS
No. 144 prohibits the retroactive classification of assets as held for sale and
requires revisions to the depreciable lives of long-lived assets to be
abandoned. SFAS No. 144 will be effective January 1, 2002 for the Company.
Management does not expect this standard to have a material impact on the
Company's consolidated financial position or results of operations.

5. SUBSEQUENT EVENTS:
------------------

On October 31, 2001, the Company purchased from IBEX Technologies Inc. (TSE:
IBT) and its subsidiaries the intellectual property and other assets associated
with the IBEX therapeutic enzyme drug products (including NeutralaseTM and
Phenylase) for $10.4 million, consisting of $2 million in cash and $8.4 million
in BioMarin common stock at $10.218 per share (814,647 shares). The purchase
also includes up to approximately $9.5 million in contingency payments upon
regulatory approval of Neutralase and Phenylase, provided that approval occurs
within five years. The transaction will be accounted for using the purchase
method of accounting and will be reflected in the fourth quarter 2001
consolidated financial statements. It is estimated that a substantial portion of
the purchase price will be allocated to in-process research and development,
which, under GAAP, will be immediately expensed by the Company.

During October 2001, the Company sold to Acqua Wellington, utilizing our equity
line facility, 1,061,676 shares of our common stock for $10.4 million (net of
$105,000 of issuance costs).

-9-

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

FORWARD-LOOKING STATEMENTS

The following "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains "forward-looking
statements" as defined under securities laws. These statements can often
be identified by the use of terminology such as "believes," "expects,"
"anticipates," "plans," "may," "will," "projects," "continues,"
"estimates," "potential," "opportunity" and so on. These forward-looking
statements may be found in the "Factors that May Affect Future Results,"
and other sections of this document. Our actual results or experience
could differ significantly from the forward-looking statements. Factors
that could cause or contribute to these differences include those
discussed in "Factors that May Affect Future Results," as well as those
discussed elsewhere in this document.

You should not place undue reliance on these statements, which speak only
as of the date that they were made. These cautionary statements should be
considered in connection with any written or oral forward-looking
statements that we may issue in the future. We do not undertake any
obligation to release publicly any revisions to these forward-looking
statements after completion of the filing of this Form 10-Q to reflect
later events or circumstances or to reflect the occurrence of
unanticipated events.

Overview

We develop enzyme therapies for debilitating, life-threatening, chronic genetic
diseases and other diseases or conditions. Since our inception on March 21,
1997, we have been engaged in research and development activities, including
preclinical studies, clinical trials, clinical manufacturing, and the
establishment of laboratory and manufacturing facilities, and administrative
activities.

We have incurred net losses since inception and had an accumulated deficit
through September 30, 2001 of $113.2 million. Our losses have resulted primarily
from research and development activities and related administrative expenses. We
expect to continue to incur operating losses for the foreseeable future.

To date, we have not generated revenues from the sale of our drug products. Our
lead drug product is AldurazymeTM, laronidase for injection, (recombinant human
(alpha)-L-iduronidase), which has recently completed a Phase III clinical trial
for use in enzyme replacement therapy for Mucopolysaccharidosis I or MPS I. In
the Phase III clinical trial, patients were evaluated at defined intervals to
assess progress in meeting two primary endpoints. The preliminary data analysis
showed a statistically significant increase in pulmonary capacity (p=0.028), and
demonstrated a positive trend in endurance as measured by a six-minute walk test
(p=0.066). Based on the strength of the trial's results, our joint venture
partner, Genzyme, and we plan to meet with U.S., Canadian and European
regulatory authorities to discuss applications to market Aldurazyme. We have
completed a Phase I clinical trial of rhASB (recombinant human
N-acetylgalactosamine-4 sulfatase), for use in enzyme replacement therapy for
the treatment of MPS VI or Maroteaux-Lamy Syndrome. Based on data from this
previous trial, we plan to initiate a Phase II trial of rhASB early in 2002. We
also are developing Vibriolysin Topical, a topical enzyme product for use in
removing burned skin tissue in preparation for skin grafting or other therapy.
We initiated a Phase I clinical trial of this product in the United Kingdom in
the fourth quarter of 2001, and we expect to begin a Phase II-B clinical trial
in either the United States or the United Kingdom following the completion of
this Phase I trial. On October 31, 2001, we completed the acquisition of the
pharmaceutical assets of IBEX Technologies Inc. and its subsidiaries. These
assets include the development programs related to IBEX's two lead product
candidates, NeutralaseTM and Phenylase. We are developing NeutralaseTM for
reversal of anticoagulation by heparin in patients undergoing Coronary Artery
Bypass Graft, or CABG, surgery and angioplasty. Heparin is a carbohydrate drug
commonly used to prevent coagulation, or blood clotting, during certain types of
major surgery. Neutralase is a carbohydrate-modifying enzyme that cleaves
heparin, allowing coagulation of blood and aiding patient recovery following
CABG surgery and angioplasty. We expect to initiate a Phase III clinical trial
of Neutralase for use in coronary artery bypass graft surgery in 2002. Phenylase
is an orally active enzyme with the potential to treat phenylketonuria (PKU), a
genetic disease in which the body cannot properly metabolize the amino acid,
phenylalanine. Phenylase is currently in a preclinical development stage.

-10-

the original agreement). Under the terms of the new agreement, the Company will
have the option to request Acqua Wellington to invest through sales of
registered common stock at a small discount to market price. The maximum amount
that the Company may request to be invested in any one month is dependent upon
the market price of the stock (or can be mutually agreed-upon by both parties)
and is referred to as the "Draw Down Amount." Subject to certain conditions,
Acqua Wellington is obligated to purchase this amount if requested to do so by
the Company. In addition, the Company may, at its discretion, grant a "Call
Option" to Acqua Wellington for an additional investment in an amount up to the
"Draw Down Amount" which Acqua Wellington may or may not choose to exercise.
Through September 30, 2001, Acqua Wellington purchased 282,518 shares for $3
million ($2.8 million net of issuance costs, the majority of which will be
nonrecurring upon future transactions associated with this agreement). Under
this agreement, Acqua Wellington may also purchase stock and receive similar
terms to any other equity financing raised by the Company.

In May 2001, we completed two private placements of our securities, raising
total net proceeds of approximately $42.7 million. On May 16, 2001, we sold
4,763,712 shares of our common stock at $9.45 per share and, for no additional
consideration, issued three-year warrants to purchase 714,554 shares of our
common stock at an exercise price of $13.10 per share. On May 17, 2001, a fund
managed by Acqua Wellington purchased 105,821 shares of our common stock and
received warrants to purchase 15,873 shares of our common stock on the same
price and terms as the May 16, 2001 transaction.

Results of Operations

The Quarters Ended September 30, 2001 and 2000

Revenues for the third quarter of 2001 totaled $3.7 million compared to revenues
of $2.8 million in the third quarter of 2000. Third quarter 2001 revenues
included $3.1 million for services provided to the joint venture for Aldurazyme
compared to $2.1 million for the same period in 2000. The increase was primarily
the result of clinical trial expenses related to the Phase III clinical trial of
Aldurazyme and increased regulatory expenses. Third quarter 2001 revenues also
included $643,000 generated by Glyko, Inc. compared to $671,000 for the third
quarter of 2000. The decrease in product revenues was primarily due to reduced
enzyme sales.

Cost of products and cost of services related to Glyko, Inc. operations were
$281,000 in the third quarter of 2001 and were $194,000 for the same period in
2000. Glyko's total external product and service costs as a percent of the sales
of products and services were 44% in the third quarter of 2001 and 29% in the
third quarter of 2000. The change was due primarily to an increase in labor
content in the cost of sales in 2001.

Research and development expenses for the third quarter of 2001 increased by
$1.6 million to $10.1 million from $8.5 million in the third quarter of 2000.
Increased expenses in support of our Aldurazyme, rhASB and Vibriolysin Topical
programs were the major factors in the growth of research and development
expenses.

Selling, general and administrative expenses increased to $3.0 million in the
third quarter of 2001 from $2.3 million in the third quarter 2000. This increase
was primarily due to increased legal and accounting fees related to a delayed
potential transaction.

The Company's equity in the loss of its joint venture with Genzyme was $1.9
million for the third quarter 2001 compared to $0.6 million for the same period
of 2000 as the joint venture incurred significant expenses for its Phase III
clinical trial of Aldurazyme in 2001 (the trial began late in 2000).

Interest income was $530,000 for the third quarter of 2001 compared to $691,000
for the same period in 2000. The decrease was due to the reduction of cash, cash
equivalents and short-term investment balances available for investment prior to
the private placement in May 2001 and decreased interest rates.

Net loss was $11.0 million ($0.26 per share, basic and diluted) in the third
quarter of 2001 compared to a net loss of $8.1 million ($0.23 per share, basic
and diluted) for the same period in 2000.

-11-

Nine Months Ended September 30, 2001 and 2000

Revenues for the nine months ended September 30, 2001 totaled $10.8 million
compared to revenues of $9.2 million for the same period in 2000. Revenues for
the nine months ended September 30, 2001 included $8.6 million for services
provided to the joint venture for Aldurazyme compared to $7.3 million for the
same period in 2000. The increase was due to increased services provided to the
Aldurazyme joint venture. Revenues for the nine months ended September 30, 2001
also included $2.0 million generated by Glyko, Inc. compared to $1.9 million for
the same period in 2000. This increase is due to growth in HPLC, FACE and sugar
standards sales offset by a slight decrease in enzyme and analytical services
sales.

Cost of products and cost of services related to Glyko, Inc. operations were
$860,000 for the nine months ended September 30, 2001 and were $539,000 for the
same period in 2000. Glyko's total external product and service costs as a
percent of the sales of products and services were 43% for the nine months ended
September 30, 2001 and 28% for same period in 2000. The change was due to the
same reasons as discussed in the quarterly results above.

Research and development expenses for the nine months ended September 30, 2001
increased by $6.7 million to $31.8 million from $25.1 million for the same
period in 2000. Increased expenses were due to the same reasons as discussed in
the quarterly results above.

Selling, general and administrative expenses increased to $7.5 million for the
nine months ended September 30, 2001 from $6.5 million for the same period in
2000. This increase was due to the Glyko, Inc. marketing expenses accounted for
in selling, general and administrative expenses in 2001.

In the first quarter of 2000, the Company recorded a provision of $4.4 million
for the closure of its Carson Street clinical manufacturing facility. The
provision primarily consisted of impairment reserves for leasehold improvements
and equipment located in the Carson Street facility.

The Company's equity in the loss of its joint venture with Genzyme was $4.7
million for the nine months ended September 30, 2001 compared to $1.8 million
for the same period in 2000. The increase was due to the same reasons as
discussed in the quarterly results above.

Interest income was $1.4 million for the nine months ended September 30, 2001
compared to $2.3 million for the same period in 2000. The decrease was due to
the same reasons as discussed in the quarterly results above.

Net loss was $32.7 million ($0.83 per share, basic and diluted) for the nine
months ended September 30, 2001 compared to a net loss of $27.0 million ($0.76
per share, basic and diluted) for the same period in 2000.

Liquidity and Capital Resources

We have financed our operations since our inception by the issuance of common
stock and convertible notes and the related interest income earned on cash
balances available for short-term investment. Since inception, we have raised
aggregate net proceeds of approximately $179.3 million. We were initially funded
by GBL with a $1.5 million investment. We have since raised additional capital
from the sale of common stock in private placements, the sale of promissory
notes convertible into common stock, an investment by Genzyme as part of our
joint venture with them, an initial public offering including the underwriters'
over-allotment exercise, an investment in our common stock by Genzyme concurrent
with the initial public offering, the sale of common stock under our equity line
facility with Acqua Wellington, and sales from stock option and warrant
exercises and the Employee Stock Purchase Plan.

Our combined cash, cash equivalents and short-term investments totaled $43.9
million at September 30, 2001, an increase of $3.7 million for the nine months
ended September 30, 2001. The primary uses of cash during the nine months ended
September 30, 2001 were to finance operations, fund the joint venture and
purchase leasehold improvements and equipment. The primary source of cash during
this period was the sale of $46 million of common stock in private placements.
In addition, we sold $3.0 million in common stock to Acqua Wellington. For the
nine months ended September 30, 2001, operations used $17.4 million, we invested
$14.0 million in the joint venture (which was consumed in joint venture
operations), we purchased $10.9 million of leasehold improvements and equipment,
we raised net proceeds of approximately $42.6 million from our private
placement, we received $2.8 million (net of issuance costs) from the sale of
common stock to Acqua Wellington, we received $625,000 from the exercise of
stock options and we received $158,000 from the sale of common stock pursuant to
the Employee Stock Purchase Plan.

-12-

From our inception through September 30, 2001, we have purchased approximately
$44.1 million of leasehold improvements and equipment. We expect that our
investment in leasehold improvements and equipment will increase significantly
during the next two years as we provide facilities and equipment for a larger
staff and increase manufacturing capacity for both commercial and clinical
requirements.

As part of the acquisition of Glyko, Inc., we acquired in-process research and
development projects, the value of which was expensed as a portion of the
purchase price at the time of the acquisition. The 11 projects acquired are each
relatively small and can be grouped into two categories, analytic projects and
diagnostic projects.

The analytic projects are intended to expand the analytic product line by adding
new enzymes for reagent sales, new kits for agricultural applications, new
instrument capabilities for protein analysis and a major upgrade of software
capabilities. At the time of the acquisition of Glyko, Inc., all of the analytic
projects had completed feasibility work and the software projects were 75%
complete and have since been completed. The development of specialized materials
supporting instrument capabilities is deemed to be the most difficult technical
hurdle for the completion and commercialization of the analytic projects. The
fair value of the analytic projects was $1.7 million at the time of the
acquisition.

The diagnostic projects are intended to expand a product line based on very
precise measurements of the level of complex carbohydrates in blood and urine as
indicators of serious disease conditions including heart disease, kidney disease
and mucopolysaccharidoses or carbohydrate lysosomal storage diseases. At the
time of the Glyko, Inc. acquisition, preliminary feasibility work had been done
for all of the projects and a software project was well advanced as to
programming, which has since been completed. The development of new more
sensitive carbohydrate chemistry techniques is deemed to be the most difficult
technical hurdle for the completion and commercialization of the diagnostic
products. The fair value of the diagnostic projects was $924,000 at the time of
the acquisition.

As of September 30, 2001, we had expended to date approximately $1.2 million on
the analytic projects and $1.4 million on the diagnostic projects. All acquired
in-process research and development of analytic projects have either been
completed or terminated as of September 30, 2001. In order to replace those
analytic projects terminated, new analytic projects have been initiated. We
expect to spend approximately $100,000 to complete the diagnostic projects in
phases within the next few months. None of the diagnostic projects have been
terminated to date.

Since the acquisition of these in-process research and development projects,
there have been no subsequent developments which indicate that the completion
and commercialization of either of the projects are less likely to be completed
on the original planned schedule or less likely to be a commercial success.

We have made and plan to make substantial commitments to capital projects,
including expanding the Aldurazyme and rhASB manufacturing facilities,
developing new research and development facilities, and expanding our
administrative and support offices.

In September 1998, we established a joint venture with Genzyme for the worldwide
development and commercialization of Aldurazyme for the treatment of MPS I. We
share expenses and profits from the joint venture equally with Genzyme. Genzyme
purchased $8.0 million in common stock upon signing the agreement and $10.0
million of common stock at the IPO price of $13 per share in a private placement
concurrent with the initial public offering. Genzyme has committed to pay us an
additional $12.1 million upon approval by the FDA of the biologics license
application (BLA) for Aldurazyme as a treatment for MPS I.

-13-

Through September 30, 2001, Acqua Wellington purchased 282,518 shares for $3
million ($2.8 million net of issuance costs, the majority of which will be
nonrecurring upon future transactions associated with this agreement). Under
this agreement, Acqua Wellington may also purchase stock and receive similar
terms to any other equity financing raised by the Company.

In May 2001, we completed two private placements of its securities, raising
total net proceeds of approximately $42.7 million. On May 16, 2001, we sold
4,763,712 shares of our common stock at $9.45 per share and, for no additional
consideration, issued three-year warrants to purchase 714,554 shares of our
common stock at an exercise price of $13.10 per share. On May 17, 2001, a fund
managed by Acqua Wellington purchased 105,821 shares of our common stock and
received warrants to purchase 15,873 shares of our common stock on the same
price and terms as the May 16, 2001 transaction.

The net proceeds from any sales of our common stock in private placements and
sales of our common stock to Acqua Wellington will be used to fund operating
expenses, capital expenditures and working capital requirements, which may
include costs associated with our lead clinical programs including Aldurazyme
for MPS I, rhASB for MPS VI, Neutralase for heparin reversal and Vibriolysin
Topical for burn debridement. In addition, net proceeds may also be used for the
research and development of other pipeline products, building of the Company's
supporting infrastructure, and other general corporate purposes.

We expect our current funds to last for the next twelve months. Until we can
generate sufficient levels of cash from our operations, we expect to continue to
finance future cash needs through:

o The sale of equity securities

o Equipment-based financing

o Collaborative agreements with corporate partners

We do not expect to generate positive cash flow from operations at least through
2002 because we expect to increase operational expenses and manufacturing
investment for the joint venture and to increase research and development
activities, including:

o Preclinical studies and clinical trials

o Process development, including quality systems for product manufacture

o Regulatory processes in the United States and international jurisdictions

o Clinical and commercial scale manufacturing capabilities

o Expansion of sales and marketing activities

We anticipate a need for additional financing to fund the future operations of
our business, including the commercialization of our drug products currently
under development. We cannot assure you that additional financing will be
obtained or, if obtained, will be available on reasonable terms or in a timely
manner.

Our future capital requirements will depend on many factors, including, but not
limited to:

o The progress, timing and scope of our preclinical studies and clinical
trials

o The time and cost necessary to obtain regulatory approvals

o The time and cost necessary to develop commercial manufacturing
processes, including quality systems and to build or acquire
manufacturing capabilities.

o The time and cost necessary to respond to technological and market
developments

o Any changes made or new developments in our existing collaborative,
licensing and other commercial relationships or any new collaborative,
licensing and other commercial relationships that we may establish

-14-

We plan to continue our policy of investing available funds in government
securities and investment grade, interest-bearing securities, primarily with
maturities of one year or less. We do not invest in derivative financial
instruments, as defined by Statement of Financial Accounting Standards No. 119.

New Accounting Pronouncements

SFAS 141 and 142:

On June 29, 2001, the Financial Accounting Standards Board (FASB) approved for
issuance Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Intangible Assets. Major provisions
of these Statements are as follows: all business combinations initiated after
June 30, 2001 must use the purchase method of accounting; the pooling of
interests method of accounting is prohibited except for transactions initiated
before July 1, 2001; intangible assets acquired in a business combination must
be recorded separately from goodwill if they arise from contractual or other
legal rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part of a
related contract, asset or liability; all acquired goodwill must be assigned to
reporting units for purposes of impairment testing and segment reporting;
effective January 1, 2002, goodwill and intangible assets with indefinite lives
will not be amortized but will be tested for impairment annually using a fair
value approach, except in certain circumstances, and whenever there is an
impairment indicator; other intangible assets will continue to be valued and
amortized over their estimated lives; in-process research and development
acquired in business combinations will continue to be written off immediately;
goodwill arising between June 29, 2001 and December 31, 2001 will not be subject
to amortization. Management is currently assessing the impact of the new
standards. Amortization of goodwill which will cease upon adoption of this
standard totaled $0.5 million and $1.5 million for the three- and nine-month
periods ended September 30, 2001, respectively.

SFAS 143:

SFAS 144:

-15-

FACTORS THAT MAY AFFECT FUTURE RESULTS

An investment in our common stock involves a high degree of risk. We operate in
a dynamic and rapidly changing industry involving numerous risks and
uncertainties. The risks and uncertainties described below are not the only ones
we face. Other risks and uncertainties, including those that we do not currently
consider material, may impair our business. If any of the risks discussed below
actually occur, our business, financial condition, operating results or cash
flows could be materially adversely affected. This could cause the trading price
of our common stock to decline, and you may lose all or part of your investment.

If we continue to incur operating losses for a period longer than anticipated,
we may be unable to continue our operations at planned levels and be forced to
reduce or discontinue operations.

We are in an early stage of development and have operated at a net loss since we
were formed. Since we began operations in March 1997, we have been engaged
primarily in research and development. We have no sales revenues from any of our
product candidates. As of September 30, 2001, we had an accumulated deficit of
approximately $113 million. We expect to continue to operate at a net loss for
the foreseeable future. Our future profitability depends on our receiving
regulatory approval of our product candidates and our ability to successfully
manufacture and market any approved drugs, either by ourselves or jointly with
others. The extent of our future losses and the timing of profitability are
highly uncertain. If we fail to become profitable or are unable to sustain
profitability on a continuing basis, then we may be unable to continue our
operations.

If we fail to obtain the capital necessary to fund our operations, we will be
unable to complete our product development programs.

In the future, we may need to raise substantial additional capital to fund
operations. We cannot be certain that any financing will be available when
needed. If we fail to raise additional financing as we need it, we will have to
delay or terminate some or all of our product development programs.

We expect to continue to spend substantial amounts of capital for our operations
for the foreseeable future. Moreover, our fixed expenses such as rent, license
payments and other contractual commitments are substantial and will increase in
the future. These fixed expenses will increase because we may enter into:

o Additional leases for new facilities and capital equipment

o Additional licenses and collaborative agreements

o Additional contracts for consulting, maintenance and administrative
services

o Additional contracts for product manufacturing

We believe that our cash, cash equivalents and short-term investment securities
balances at September 30, 2001 will be sufficient to meet our operating and
capital requirements at least through the next 12 months. This estimate is based
on assumptions and estimates, which may prove to be wrong. As a result, we may
need or choose to obtain additional financing during that time.

-16-

If we fail to obtain regulatory approval to commercially manufacture or sell any
of our future drug products, or if approval is delayed, we will be unable to
generate revenue from the sale of our products.

We must obtain regulatory approval before marketing or selling our drug products
in the U.S. and in foreign jurisdictions. In the United States, we must obtain
FDA approval for each drug that we intend to commercialize. The FDA approval
process is typically lengthy and expensive, and approval is never certain.
Products distributed abroad are also subject to foreign government regulation.
None of our drug products has received regulatory approval to be commercially
marketed and sold. If we fail to obtain regulatory approval, we will be unable
to market and sell our drug products. Because of the risks and uncertainties in
biopharmaceutical development, our drug products could take a significantly
longer time to gain regulatory approval than we expect or may never gain
approval. If regulatory approval is delayed, our management's credibility, the
value of our company and our operating results will be adversely affected.

To obtain regulatory approval to market our products, preclinical studies and
costly and lengthy clinical trials will be required, and the results of the
studies and trials are highly uncertain.

As part of the regulatory approval process, we must conduct, at our own expense,
preclinical studies in the laboratory on animals and clinical trials on humans
for each drug product. We expect the number of preclinical studies and clinical
trials that the regulatory authorities will require will vary depending on the
drug product, the disease or condition the drug is being developed to address
and regulations applicable to the particular drug. We may need to perform
multiple preclinical studies using various doses and formulations before we can
begin clinical trials, which could result in delays in our ability to market any
of our drug products. Furthermore, even if we obtain favorable results in
preclinical studies on animals, the results in humans may be significantly
different.

After we have conducted preclinical studies in animals, we must demonstrate that
our drug products are safe and efficacious for use on the target human patients
in order to receive regulatory approval for commercial sale. Adverse or
inconclusive clinical results would stop us from filing for regulatory approval
of our drug products. Additional factors that can cause delay or termination of
our clinical trials include:

o Slow or insufficient patient enrollment

o Slow recruitment of, and completion of necessary institutional approvals
at, clinical sites

o Longer treatment time required to demonstrate efficacy

o Lack of sufficient supplies of the product candidate

o Adverse medical events or side effects in treated patients

o Lack of effectiveness of the product candidate being tested

o Regulatory requests for additional clinical trials

Typically, if a drug product is intended to treat a chronic disease, as is the
case with most of the product candidates we are developing, safety and efficacy
data must be gathered over an extended period of time, which can range from six
months to three years or more.

In April 1999, we completed a twelve-month patient evaluation for the initial
clinical trial of our lead drug product, Aldurazyme, for the treatment of MPS I.
Two of the original ten patients enrolled in this trial died in 2000. One of
these patients received 103 weeks of Aldurazyme treatment and the other received
127 weeks of treatment. Based on medical data collected from clinical
investigative sites, neither case directly implicated treatment with Aldurazyme
as the cause of death. If cases of patient complications or death are ultimately
attributed to Aldurazyme, our chances of commercializing this drug would be
seriously compromised.

The fast track designation for our product candidates may not actually lead to a
faster review process.

Although Aldurazyme and rhASB have obtained fast track designations, we cannot
guarantee a faster review process or faster approval compared to the normal FDA
procedures.

-17-

We will not be able to sell our products if we fail to comply with manufacturing
regulations.

Before we can begin commercial manufacture of our products, we must obtain
regulatory approval of our manufacturing facility and process. In addition,
manufacture of our drug products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as cGMP. The cGMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities are continuously subject to inspection by the FDA,
the State of California and foreign regulatory authorities, before and after
product approval. Our Galli Drive and our Bel Marin Keys Boulevard manufacturing
facilities have been inspected and licensed by the State of California for
clinical pharmaceutical manufacture. We cannot guarantee that these facilities
will pass federal or international regulatory inspection. We cannot guarantee
that we, or any potential third-party manufacturer of our drug products, will be
able to comply with cGMP regulations.

We must pass Federal, state and European regulatory inspections, and we must
manufacture three process qualification batches (five process qualification
batches for Europe) to final specifications under cGMP controls for each of our
drug products before the marketing applications can be approved. Although we
have completed process qualification batches for Aldurazyme, these batches may
be rejected by the regulatory authorities, and we may be unable to manufacture
the process qualification batches for our other products or pass the inspections
in a timely manner, if at all.

If we fail to obtain orphan drug exclusivity for some of our products, our
competitors may sell products to treat the same conditions and our revenues will
be reduced.

As part of our business strategy, we intend to develop drugs that may be
eligible for FDA and European Community orphan drug designation. Under the
Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a
drug intended to treat a rare disease or condition, defined as a patient
population of less than 200,000 in the United States. The company that first
obtains FDA approval for a designated orphan drug for a given rare disease
receives marketing exclusivity for use of that drug for the stated condition for
a period of seven years. However, different drugs can be approved for the same
condition. Similar regulations are available in the European Community with a
ten-year period of market exclusivity.

Because the extent and scope of patent protection for our drug products is
limited, orphan drug designation is particularly important for our products that
are eligible for orphan drug designation. We plan to rely on the exclusivity
period under the orphan drug designation to maintain a competitive position. If
we do not obtain orphan drug exclusivity for our drug products, which do not
have patent protection, our competitors may then sell the same drug to treat the
same condition.

Even though we have obtained orphan drug designation for certain of our product
candidates and even if we obtain orphan drug designation for other products we
develop, we cannot guarantee that we will be the first to obtain marketing
approval for any orphan indication or, if we do, that exclusivity would
effectively protect the product from competition. Orphan drug designation
neither shortens the development time or regulatory review time of a drug nor
gives the drug any advantage in the regulatory review or approval process.

Because the target patient populations for some of our products are small, we
must achieve significant market share and obtain high per-patient prices for our
products to achieve profitability.

Two of our lead drug candidates, Aldurazyme and rhASB, target diseases with
small patient populations. As a result, our per-patient prices must be
relatively high in order to recover our development costs and achieve
profitability. Aldurazyme targets patients with MPS I and rhASB targets patients
with MPS VI. We estimate that there are approximately 3,400 patients with MPS I
and 1,100 patients with MPS VI in the developed world. We believe that we will
need to market worldwide to achieve significant market share. In addition, we
are developing other drug candidates to treat conditions, such as other genetic
diseases and serious burn wounds, with small patient populations. We cannot be
certain that we will be able to obtain sufficient market share for our drug
products at a price high enough to justify our product development efforts.

If we fail to obtain an adequate level of reimbursement for our drug products by
third-party payers, there would be no commercially viable markets for our
products.

The course of treatment for patients with MPS I using Aldurazyme and for
patients with MPS VI using rhASB is expected to be expensive. We expect patients
to need treatment throughout their lifetimes. We expect that most families of
patients will not be capable of paying for this treatment themselves. There will
be no commercially viable market for Aldurazyme or rhASB without reimbursement
from third-party payers.

-18-

Third-party payers, such as government or private health care insurers,
carefully review and increasingly challenge the prices charged for drugs.
Reimbursement rates from private companies vary depending on the third-party
payer, the insurance plan and other factors. Reimbursement systems in
international markets vary significantly by country and by region, and
reimbursement approvals must be obtained on a country-by-country basis. We
cannot be certain that third-party payers will pay for the costs of our drugs.
Even if we are able to obtain reimbursement from third-party payers, we cannot
be certain that reimbursement rates will be enough to allow us to profit from
sales of our drugs or to justify our product development expenses.

We currently have no expertise obtaining reimbursement. We expect to rely on the
expertise of our joint venture partner Genzyme to obtain reimbursement for the
costs of Aldurazyme. We cannot predict what the reimbursement rates will be. In
addition, we will need to develop our own reimbursement expertise for future
drug candidates unless we enter into collaborations with other companies with
the necessary expertise.

We expect that, in the future, reimbursement will be increasingly restricted
both in the United States and internationally. The escalating cost of health
care has led to increased pressure on the health care industry to reduce costs.
Governmental and private third-party payers have proposed health care reforms
and cost reductions. A number of federal and state proposals to control the cost
of health care, including the cost of drug treatments have been made in the
United States. In some foreign markets, the government controls the pricing
which would affect the profitability of drugs. Current government regulations
and possible future legislation regarding health care may affect our future
revenues from sales of our drugs and may adversely affect our business and
prospects.

If we are unable to protect our proprietary technology, we may not be able to
compete as effectively.

Where appropriate, we seek patent protection for certain aspects of our
technology. Patent protection may not be available for some of the enzymes we
are developing. If we must spend significant time and money protecting our
patents, designing around patents held by others or licensing, for large fees,
patents or other proprietary rights held by others, our business and financial
prospects may be harmed.

The patent positions of biotechnology products are complex and uncertain. The
scope and extent of patent protection for some of our products are particularly
uncertain because key information on some of the enzymes we are developing has
existed in the public domain for many years. Other parties have published the
structure of the enzymes, the methods for purifying or producing the enzymes or
the methods of treatment. The composition and genetic sequences of animal and/or
human versions of many of our enzymes have been published and are believed to be
in the public domain. The composition and genetic sequences of other MPS enzymes
that we intend to develop as products have also been published. Publication of
this information may prevent us from obtaining composition-of-matter patents,
which are generally believed to offer the strongest patent protection. For
enzymes with no prospect of broad composition-of-matter patents, other forms of
patent protection or orphan drug status may provide us with a competitive
advantage. As a result of these uncertainties, investors should not rely on
patents as a means of protecting our product candidates, including Aldurazyme.

We own or license patents and patent applications to certain of our product
candidates. However, these patents and patent applications do not ensure the
protection of our intellectual property for a number of other reasons:

o We do not know whether our patent applications will
result in issued patents. For example, we may not have
developed a method for treating a disease before others
developed similar methods.

o Competitors may interfere with our patent process in
a variety of ways. Competitors may claim that they invented
the claimed invention prior to us. Competitors may also claim
that we are infringing on their patents and therefore cannot
practice our technology as claimed under our patent.
Competitors may also contest our patents by showing the patent
examiner that the invention was not original, was not novel or
was obvious. In litigation, a competitor could claim that our
issued patents are not valid for a number of reasons. If a
court agrees, we would lose that patent. As a company, we have
no meaningful experience with competitors interfering with our
patents or patent applications.

o Enforcing patents is expensive and may absorb
significant time of our management. Management would spend
less time and resources on developing products, which could
increase our research and development expense and delay
product programs.

-19-

o Receipt of a patent may not provide much practical
protection. If we receive a patent with a narrow scope, then
it will be easier for competitors to design products that do
not infringe on our patent.

In addition, competitors also seek patent protection for their technology. There
are many patents in our field of technology, and we cannot guarantee that we do
not infringe on those patents or that we will not infringe on patents granted in
the future. If a patent holder believes our product infringes on their patent,
the patent holder may sue us even if we have received patent protection for our
technology. If someone else claims we infringe on their technology, we would
face a number of issues, including:

o Defending a lawsuit takes significant time and can be very
expensive.

o If the court decides that our product infringes on
the competitor's patent, we may have to pay substantial
damages for past infringement.

o The court may prohibit us from selling or licensing
the product unless the patent holder licenses the patent to
us. The patent holder is not required to grant us a license.
If a license is available, we may have to pay substantial
royalties or grant cross-licenses to our patents.

o Redesigning our product so it does not infringe may not be
possible or could require substantial funds and time.

It is also unclear whether our trade secrets will provide useful protection.
While we use reasonable efforts to protect our trade secrets, our employees or
consultants may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that someone else illegally obtained and is using
our trade secrets, like patent litigation, is expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Our competitors may
independently develop equivalent knowledge, methods and know-how.

We may also support and collaborate in research conducted by government
organizations or by universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or even be prohibited from developing, manufacturing or selling products
requiring these licenses. There is also a risk that disputes may arise as to the
rights to technology or products developed in collaboration with other parties.

The United States Patent and Trademark Office recently issued two patents that
relate to (alpha)-L-iduronidase. If we are not able to successfully challenge
these patents, we may be prevented from producing Aldurazyme unless and until we
obtain a license.

The United States Patent and Trademark Office recently issued two patents that
include composition of matter and method of use claims for
(alpha)-L-iduronidase. Our lead drug product, Aldurazyme, is based on
(alpha)-L-iduronidase. We believe that these patents are invalid on a number of
grounds. A corresponding patent application was filed in the European Patent
Office claiming composition of matter for (alpha)-L-iduronidase, and it has been
rejected over prior art and withdrawn and cannot be refiled. Nonetheless, under
U.S. law, issued patents are entitled to a presumption of validity, and our
challenges to the U.S. patents may be unsuccessful. Even if we are successful,
challenging the U.S. patents may be expensive, require our management to devote
significant time to this effort and may delay commercialization of Aldurazyme in
the United States.

The patent holder has granted an exclusive license for products relating to
these patents to one of our competitors. If we are unable to successfully
challenge the patents, we may be unable to produce Aldurazyme in the United
States unless we can obtain a sub-license from the current licensee. The current
licensee is not required to grant us a license and even if a license is
available, we may have to pay substantial license fees, which could adversely
affect our business and operating results.

If our joint venture with Genzyme were terminated, we could be barred from
commercializing Aldurazyme or our ability to commercialize Aldurazyme would be
delayed or diminished.

We are relying on Genzyme to apply the expertise it has developed through the
launch and sale of other enzyme-based products to the marketing of our initial
drug product, Aldurazyme. Because it is our initial product, our operations are
substantially dependent upon the development of Aldurazyme. We have no
experience selling, marketing or obtaining reimbursement for pharmaceutical
products. In addition, without Genzyme we would be required to pursue foreign
regulatory approvals. We have no experience in seeking foreign regulatory
approvals.

-20-

We cannot guarantee that Genzyme will devote the resources necessary to
successfully market Aldurazyme. In addition, either party may terminate the
joint venture for specified reasons, including if the other party is in material
breach of the agreement or has experienced a change of control or has declared
bankruptcy and also is in breach of the agreement. Either party may also
terminate the agreement upon one-year prior written notice for any reason.
Furthermore, we may terminate the joint venture if Genzyme fails to fulfill its
contractual obligation to pay us $12.1 million in cash upon the approval of the
BLA for Aldurazyme.

If the joint venture is terminated for breach, the non-breaching party would be
granted, exclusively, all of the rights to Aldurazyme and any related
intellectual property and regulatory approvals and would be obligated to buy out
the breaching party's interest in the joint venture. If we are the breaching
party, we would lose our rights to Aldurazyme and the related intellectual
property and regulatory approvals. If the joint venture is terminated without
cause, the non-terminating party would have the option, exercisable for one
year, to buy out the terminating party's interest in the joint venture and
obtain all rights to Aldurazyme exclusively. In the event of termination of the
buy out option without exercise by the non-terminating party as described above,
all right and title to Aldurazyme is to be sold to the highest bidder, with the
proceeds to be split equally between Genzyme and us.

If the joint venture is terminated by either party because the other declared
bankruptcy and is also in breach of the agreement, the terminating party would
be obligated to buy out the other and would obtain all rights to Aldurazyme
exclusively. If the joint venture is terminated by a party because the other
party experienced a change of control, the terminating party shall notify the
other party, the offeree, of its intent to buy out the offeree's interest in the
joint venture for a stated amount set by the terminating party at its
discretion. The offeree must then either accept this offer or agree to buy the
terminating party's interest in the joint venture on those same terms. The party
who buys out the other would then have exclusive rights to Aldurazyme.

If we were obligated, or given the option, to buy out Genzyme's interest in the
joint venture, and gain exclusive rights to Aldurazyme, we may not have
sufficient funds to do so and we may not be able to obtain the financing to do
so. If we fail to buy out Genzyme's interest we may be held in breach of the
agreement and may lose any claim to the rights to Aldurazyme and the related
intellectual property and regulatory approvals. We would then effectively be
prohibited from developing and commercializing the product.

Termination of the joint venture in which we retain the rights to Aldurazyme
could cause us significant delays in product launch in the United States,
difficulties in obtaining third-party reimbursement and delays or failure to
obtain foreign regulatory approval, any of which could hurt our business and
results of operations. Since Genzyme funds 50% of the joint venture's operating
expenses, the termination of the joint venture would double our financial burden
and reduce the funds available to us for other product programs.

If we are unable to manufacture our drug products in sufficient quantities and
at acceptable cost, we may be unable to meet demand for our products and lose
potential revenues or have reduced margins.

With the exception of Aldurazyme, we have no experience manufacturing drug
products in volumes that will be necessary to support commercial sales. Our
manufacturing processes may not meet initial expectations as to schedule,
reproducibility, yields, purity, costs, quality, and other measurements of
performance. Improvements in manufacturing processes typically are very
difficult to achieve and are often very expensive. We cannot know with certainty
how long it might take to make improvements if it became necessary to do so. If
we contract for manufacturing services with an unproven process, our contractor
is subject to the same uncertainties, high standards and regulatory controls.

The manufacture of Neutralase involves the fermentation of a bacterial species.
We have never used a bacterial production process for the production of any
clinical or commercial production. IBEX contracted with a third party for the
manufacture of the Neutralase used in prior clinical trials.

The availability of suitable contract manufacturing at scheduled or optimum
times is not certain. The cost of contract manufacturing is greater than
internal manufacturing and therefore our manufacturing processes must be of
higher productivity to yield equivalent margins.

If we are unable to establish and maintain commercial scale manufacturing within
our planned time and cost parameters, sales of our products and our financial
performance will be adversely affected.

Although we have successfully manufactured Aldurazyme at commercial scale within
our cost parameters, we cannot guarantee that we will be able to manufacture any
other drug product successfully with a commercially viable process or at a scale
large enough to support their respective commercial markets or at acceptable
margins.

-21-

We may encounter problems with any of the following if we attempt to increase
the scale or size or improve the commercial viability of our manufacturing
processes:

o Design, construction and qualification of manufacturing
facilities that meet regulatory requirements

o Production yields

o Purity

o Quality control and assurance systems

o Shortages of qualified personnel

o Compliance with regulatory requirements

We have built-out approximately 67,000 square feet at our Novato facilities for
manufacturing capability for Aldurazyme and rhASB including related quality
control laboratories, materials capabilities, and support areas. We expect to
complete an expansion of the Galli Drive facility in the fourth quarter of 2001
and possibly add additional capabilities in stages over time, which create
additional operational complexity and challenges. We expect that the
manufacturing process of all of our new drug products, including rhASB and
Neutralase, will require significant time and resources before we can begin to
manufacture them (or have them manufactured by third parties) in commercial
quantity at acceptable cost. Even if we can establish the necessary capacity, we
cannot be certain that manufacturing costs will be commercially reasonable,
especially if contract manufacturing is employed or if third-party reimbursement
is substantially lower than expected.

In order to achieve our product cost targets we must develop efficient
manufacturing processes either by:

o Improving the product yield from our current cell lines,
colonies of cells which have a common genetic make-up,

o Improving the manufacturing processes licensed from others, or

o Developing more efficient, lower cost recombinant cell lines
and production processes.

A recombinant cell line is a cell line with foreign DNA inserted that is used to
produce an enzyme or other protein that it would not have otherwise produced.
The development of a stable, high production cell line for any given enzyme is
difficult, expensive and unpredictable and may not result in adequate yields. In
addition, the development of protein purification processes is difficult and may
not produce the high purity required with acceptable yield and costs or may not
result in adequate shelf-lives of the final products. If we are not able to
develop efficient manufacturing processes, the investment in manufacturing
capacity sufficient to satisfy market demand will be much greater and will place
heavy financial demands upon us. If we do not achieve our manufacturing cost
targets, we will have lower margins and reduced profitability in commercial
production and larger losses in manufacturing start-up phases.

If we are unable to increase our marketing and distribution capabilities or to
enter into agreements with third parties to do so, our ability to generate
revenues will be diminished.

If we cannot increase our marketing capabilities either by developing our sales
and marketing organization or by entering into agreements with others, we may be
unable to successfully sell our products. If we are unable to effectively sell
our drug products, our ability to generate revenues will be diminished.

To increase our distribution and marketing for both our drug candidates, we will
have to increase our current sales force and/or enter into third-party marketing
and distribution agreements. We cannot guarantee that we will be able to hire in
a timely manner the qualified sales and marketing personnel we need, if at all.
Nor can we guarantee that we will be able to enter into any marketing or
distribution agreements on acceptable terms, if at all. If we cannot increase
our marketing capabilities as we intend, either by increasing our sales force or
entering into agreements with third parties, sales of our products may be
adversely affected.

-22-

Under our joint venture with Genzyme, Genzyme is responsible for marketing and
distributing Aldurazyme. We cannot guarantee that we will be able to establish
sales and distribution capabilities or that the joint venture, any future
collaborators or we will successfully sell any of our drug products.

With our acquisition of Neutralase from IBEX Technologies Inc., we have an
enzyme product that has a significantly larger potential patient population than
Aldurazyme and rhASB and will be marketed and sold to different target audiences
with different therapeutic and financial requirements and needs. As a result, we
will be competing with other pharmaceutical companies with experienced and
well-funded sales and marketing operations targeting these specific physician
and institutional audiences. We may not be able to develop our own sales and
marketing force at all, or of a size that would allow us to compete with these
other companies. If we elect to enter into third-party marketing and
distribution agreements in order to sell into these markets, we may not be able
to enter into these agreements on acceptable terms, if at all. If we cannot
compete effectively in these specific physician and institutional markets, it
would adversely affect sales of Neutralase.

If we fail to compete successfully, our revenues and operating results will be
adversely affected.

Our competitors may develop, manufacture and market products that are more
effective or less expensive than ours. They may also obtain regulatory approvals
for their products faster than we can obtain them, including those products with
orphan drug designation, or commercialize their products before we do. If our
competitors successfully commercialize a product that treats a given rare
genetic disease before we do, we will effectively be precluded from developing a
product to treat that disease because the patient populations of the rare
genetic diseases are so small. If our competitor gets orphan drug exclusivity,
we could be precluded from marketing our version for seven years in the U.S. and
ten years in the European Union. However, different drugs can be approved for
the same condition. These companies also compete with us to attract qualified
personnel and organizations for acquisitions, joint ventures or other
collaborations. They also compete with us to attract academic research
institutions as partners and to license these institutions' proprietary
technology. If our competitors successfully enter into partnering arrangements
or license agreements with academic research institutions, we will then be
precluded from pursuing those specific opportunities. Since each of these
opportunities is unique, we may not be able to find a substitute. Several
pharmaceutical and biotechnology companies have already established themselves
in the field of enzyme therapeutics, including Genzyme, our joint venture
partner. These companies have already begun many drug development programs, some
of which may target diseases that we are also targeting, and have already
entered into partnering and licensing arrangements with academic research
institutions, reducing the pool of available opportunities.

Universities and public and private research institutions are also competitors.
While these organizations primarily have educational or basic research
objectives, they may develop proprietary technology and acquire patents that we
may need for the development of our drug products. We will attempt to license
this proprietary technology, if available. These licenses may not be available
to us on acceptable terms, if at all. We also directly compete with a number of
these organizations to recruit personnel, especially scientists and technicians.

We believe that established technologies provided by other companies, such as
laboratory and testing services firms, compete with Glyko, Inc.'s products and
services. For example, Glyko's FACE(R) Imaging System competes with alternative
carbohydrate analytical technologies, including capillary electrophoresis,
high-pressure liquid chromatography, mass spectrometry and nuclear magnetic
resonance spectrometry. These competitive technologies have established customer
bases and are more widely used and accepted by scientific and technical
personnel because they can be used for non-carbohydrate applications. Companies
competing with Glyko may have greater financial, manufacturing and marketing
resources and experience.

If we do not achieve milestones as expected, our stock price may decline.

For planning purposes, we estimate the timing of the accomplishment of various
scientific, clinical, regulatory and other milestones, such as the commencement
or completion of scientific studies and clinical trials and the submission of
regulatory filings. These estimates are based on a variety of assumptions. The
actual timing of these milestones can vary dramatically compared to our
estimates, in many cases for reasons beyond our control.

If we fail to manage our growth or fail to recruit and retain personnel, our
product development programs may be delayed.

Our rapid growth has strained our managerial, operational, financial and other
resources. We expect this growth to continue. We have entered into a joint
venture with Genzyme. If we receive FDA approval to market Aldurazyme, the joint
venture will be required to devote additional resources to support the
commercialization of Aldurazyme.

-23-

To manage expansion effectively, we need to continue to develop and improve our
research and development capabilities, manufacturing and quality capacities,
sales and marketing capabilities and financial and administrative systems. We
cannot guarantee that our staff, financial resources, systems, procedures or
controls will be adequate to support our operations or that our management will
be able to manage successfully future market opportunities or our relationships
with customers and other third parties.

Our future growth and success depend on our ability to recruit, retain, manage
and motivate our employees. The loss of key scientific, technical and managerial
personnel may delay or otherwise harm our product development programs. Any harm
to our research and development programs would harm our business and prospects.

Because of the specialized scientific and managerial nature of our business, we
rely heavily on our ability to attract and retain qualified scientific,
technical and managerial personnel. In particular, the loss of Fredric D. Price,
our Chairman and Chief Executive Officer, or Christopher M. Starr, Ph.D., our
Vice President for Research and Development, could be detrimental to us if we
cannot recruit suitable replacements in a timely manner. While Mr. Price and Dr.
Starr are parties to employment agreements with us, we cannot guarantee that
they will remain employed with us in the future. In addition, these agreements
do not restrict their ability to compete with us after their employment is
terminated. The competition for qualified personnel in the biopharmaceutical
field is intense. We cannot be certain that we will continue to attract and
retain qualified personnel necessary for the development of our business.

If we fail to effectively integrate the recently acquired Neutralase and
Phenylase programs into our current operations, the efficient execution of these
product programs could be delayed and our operating and research and development
expenditures could increase beyond anticipated levels.

Our recent acquisition of assets from IBEX Technologies Inc., including the
Neutralase and Phenylase product programs, will need to be integrated with our
current operations. This will include several technical and administrative
challenges, including managing the information transfer, integrating certain of
IBEX's former technical staff into our research and development structure and
managing multiple operations in different countries. If we do not accomplish
this integration effectively, our programs could be delayed and our operating
and research and development expenditures could increase beyond anticipated
levels. Additionally, the integration could require a significant time
commitment from our senior management.

Changes in methods of treatment of disease could reduce demand for our products.

Even if our drug products are approved, doctors must use treatments that require
using those products. If doctors elect a different course of treatment from that
which includes our drug products, this decision would reduce demand for our drug
products.

Examples include the potential use in the future of effective gene therapy for
the treatment of genetic diseases. The use of gene therapy could theoretically
reduce or eliminate the use of enzyme replacement therapy in MPS diseases.
Sometimes, this change in treatment method can be caused by the introduction of
other companies' products or the development of new technologies or surgical
procedures which may not directly compete with ours, but which have the effect
of changing how doctors decide to treat a disease. For example, Neutralase is
being developed for heparin reversal in CABG surgery. It is possible that
alternative non-surgical methods of treating heart disease could be developed.
If so, then the demand for Neutralase would likely decrease.

If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.

We are exposed to the potential product liability risks inherent in the testing,
manufacturing and marketing of human pharmaceuticals. The BioMarin/Genzyme
LLC maintains product liability insurance for our clinical trials of Aldurazyme.
We have obtained insurance against product liability lawsuits for the clinical
trials for rhASB. We may be subject to claims in connection with our current
clinical trials for Aldurazyme and rhASB for which the joint venture's or our
insurance coverages are not adequate. We cannot be certain that if Aldurazyme
receives FDA approval, the product liability insurance the joint venture will
need to obtain in connection with the commercial sales of Aldurazyme will be
available in meaningful amounts or at a reasonable cost. In addition, we cannot
be certain that we can successfully defend any product liability lawsuit brought
against us. If we are the subject of a successful product liability claim which
exceeds the limits of any insurance coverage we may obtain, we may incur
substantial liabilities which would adversely affect our earnings and financial
condition.

-24-

Our stock price may be volatile, and an investment in our stock could suffer a
decline in value.

Our valuation and stock price since the beginning of trading after our initial
public offering have had no meaningful relationship to current or historical
earnings, asset values, book value or many other criteria based on conventional
measures of stock value. The market price of our common stock will fluctuate due
to factors including:

o Progress of Aldurazyme, Neutralase, rhASB and our
other lead drug products through the regulatory process,
especially regulatory actions in the United States related to
Aldurazyme

o Results of clinical trials, announcements of technological
innovations or new products by us or our competitors

o Government regulatory action affecting our drug
products or our competitors' drug products in both the United
States and foreign countries

o Developments or disputes concerning patent or proprietary
rights

o General market conditions and fluctuations for the emerging
growth and biopharmaceutical market sectors

o Economic conditions in the United States or abroad

o Actual or anticipated fluctuations in our operating results

o Broad market fluctuations in the United States or in Europe,
which may cause the market price of our common stock to
fluctuate

o Changes in company assessments or financial estimates by
securities analysts

In addition, the value of our common stock may fluctuate because it is listed on
both the Nasdaq National Market and the Swiss Exchange's SWX New Market. Listing
on both exchanges may increase stock price volatility due to:

o Trading in different time zones

o Different ability to buy or sell our stock

o Different market conditions in different capital markets

o Different trading volume

In the past, following periods of large price declines in the public market
price of a company's securities, securities class action litigation has often
been initiated against that company. Litigation of this type could result in
substantial costs and diversion of management's attention and resources, which
would hurt our business. Any adverse determination in litigation could also
subject us to significant liabilities.

If our officers, directors and largest stockholder elect to act together, they
may be able to control our management and operations, acting in their best
interests and not necessarily those of other stockholders.

Our directors and officers control approximately 35% of the outstanding shares
of our common stock. Glyko Biomedical Ltd. owns approximately 26% of the
outstanding shares of our capital stock. The president and chief executive
officer of Glyko Biomedical and a significant shareholder of Glyko Biomedical
serve as two of our directors. As a result, due to their concentration of stock
ownership, directors and officers, if they act together, may be able to control
our management and operations, and may be able to prevail on all matters
requiring a stockholder vote including:

o The election of all directors;

o The amendment of charter documents or the approval of a
merger, sale of assets or other major corporate transactions;
and

o The defeat of any non-negotiated takeover attempt that might
otherwise benefit the public stockholders.

-25-

Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.

We are incorporated in Delaware. Certain anti-takeover provisions of Delaware
law and our charter documents as currently in effect may make a change in
control of our company more difficult, even if a change in control would be
beneficial to the stockholders. Our anti-takeover provisions include provisions
in the certificate of incorporation providing that stockholders' meetings may
only be called by the board of directors and a provision in the bylaws providing
that the stockholders may not take action by written consent. Additionally, our
board of directors has the authority to issue 1,000,000 shares of preferred
stock and to determine the terms of those shares of stock without any further
action by the stockholders. The rights of holders of our common stock are
subject to the rights of the holders of any preferred stock that may be issued.
The issuance of preferred stock could make it more difficult for a third party
to acquire a majority of our outstanding voting stock. Delaware law also
prohibits corporations from engaging in a business combination with any holders
of 15% or more of their capital stock until the holder has held the stock for
three years unless, among other possibilities, the board of directors approves
the transaction. Our board of directors may use these provisions to prevent
changes in the management and control of our company. Also, under applicable
Delaware law, our board of directors may adopt additional anti-takeover measures
in the future.

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio. By policy, the Company places
its investments with highly rated credit issuers and limits the amount of credit
exposure to any one issuer. As stated in its policy, the Company seeks to
improve the safety and likelihood of preservation of its invested funds by
limiting default risk and market risk. The Company has no investments
denominated in foreign country currencies and therefore is not subject to
foreign exchange risk.

The Company mitigates default risk by investing in high credit quality
securities and by positioning its portfolio to respond appropriately to a
significant reduction in a credit rating of any investment issuer or guarantor.
The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity.

The table below presents the carrying value for the Company's investment
portfolio. The carrying value approximates fair value at September 30, 2001.

Investment portfolio:
Carrying value
(in $ thousands)

Cash and cash equivalents............................ $ 7,230*
Short-term investments.............................. 36,675**
--------
Total............................................ $ 43,905
========

* 3% invested in A1/P1 rated commercial paper for less than 90-days.
** 81% invested in A1/P1 rated commercial paper and 19% in United States agency
securities.

-26-

PART II. OTHER INFORMATION

Item 1. Legal Proceedings. None.

Item 2. Changes in Securities and Uses of Proceeds. None.

Item 3. Defaults upon Senior Securities. None.

Item 4. Submission of Matters to a Vote of Security Holders. None.

Item 5. Other Information. None.

Item 6. Exhibits and Reports on Form 8-K.

(a) The following documents are filed as part of this report

None.

(b) Reports on Form 8-K.

On August 16, 2001, we filed a Current Report on Form 8-K
regarding the execution of our equity line arrangement with Acqua Wellington
North American Equities Fund, Ltd. and concurrent termination of a previous
arrangement with Acqua Wellington. In response to SEC regulations, the new
equity line was reduced from a maximum of 4,000,000 shares sellable under the
initial arrangement to 2,500,000 shares under the new arrangement.

On September 6, 2001, we filed a Current Report on Form 8-K
regarding the completion and the preliminary results of our Phase I clinical
trial of recombinant human N-acetylgalactosamine 4-sulfatase (rhASB) for the
treatment of MPS VI.

On September 11, 2001, we filed a Current Report on Form
8-K regarding the resignation of Ansbert Gadicke, MD,
from our Board of Directors and the election of Phyllis Gardner, MD, Senior
Associate Dean for Education and Student Affairs, Stanford University School of
Medicine, to our Board.

-27-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

BIOMARIN PHARMACEUTICAL INC.

Dated: November 8, 2001 By: /s/ Raymond W. Anderson
- ----------------------- ------------------------------------------
Raymond W. Anderson
Chief Financial Officer, Chief Operating
Officer, Secretary and V.P. Finance and
Administration (on behalf of registrant
and as principal financial officer)

-28-