UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended September 30, 2008March 31, 2009

Or

For the transition period from                    to                    .

Commission file number: 000-26727

BioMarin Pharmaceutical Inc.

(Exact name of registrant issuer as specified in its charter)

Registrant’s telephone number: (415) 506-6700

(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 preceding 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data fie required to be submitted and posted pursuant to Rule 405 of the Regulation S-T during the preceding 12 months (or for such greater period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant has 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  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

Applicable only to issuers involved in bankruptcy proceedings during the proceeding five years:

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such greater period that the registrant was required to submit and post such files)    Yes  ¨    No  ¨

Indicate by check mark whether the registrant has 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: 99,826,28499,986,841 shares common stock, par value $0.001, outstanding as of October 31, 2008.April 24, 2009.

BIOMARIN PHARMACEUTICAL INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)

See accompanying notes to unaudited consolidated financial statements.

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2007March 31, 2008 and 20082009

(In thousands, except for per share data, unaudited)

See accompanying notes to unaudited consolidated financial statements.

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the NineThree Months Ended September 30, 2007March 31, 2008 and 20082009

(In thousands, unaudited)

See accompanying notes to unaudited consolidated financial statements.

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2008March 31, 2009

(Unaudited)

(1) NATURE OF OPERATIONS AND BUSINESS RISKS

BioMarin Pharmaceutical Inc. (the Company or BioMarin^®) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. BioMarin received marketing approvalselects product candidates for diseases and conditions that represent a significant unmet medical need, have well-understood biology and provide an opportunity to be first-to-market or offer a significant benefit over existing products. The Company’s product portfolio is comprised of three approved products and multiple investigational product candidates. Approved products include Naglazyme^® (galsulfase) in the United States (U.S.) in May 2005 and in the European Union (E.U.) in January 2006. Aldurazyme^® (laronidase) has been approved in the U.S and E.U. and is marketed by Genzyme Corporation (Genzyme). Effective January 2008, the Company restructured its relationship with Genzyme as discussed in Note 4. In December 2007,, Kuvan^® (sapropterin dihydrochloride) received marketing approval in the U.S. The Company is incorporated in the state of Delaware., and Aldurazyme^® (laronidase).

Through September 30, 2008,March 31, 2009, the Company had accumulated losses of approximately $601.1$589.7 million. Management believes that the Company’s cash, cash equivalents, and short-term investments and long-term investments at September 30, 2008March 31, 2009 will be sufficient to meet the Company’s obligations for the foreseeable future based on management’s current long-term business plans and assuming that the Company achieves its long-term goals. If the Company elects to increase its spending on development programs significantly above current long-term plans or enter into potential licenses and other acquisitions of complementary technologies, products or companies, the Company may need additional capital. Until the Company can generate sufficient levels of cash from its operations, theThe Company expects to continue to finance net future cash needs that exceed its operating revenues primarily through its current cash, cash equivalents, short-term and short-termlong-term investments, milestone payments from third parties, and to the extent necessary, through proceeds from equity or debt financings, loans and collaborative agreements with corporate partners. In April 2007, the Company raised approximately $316.4 million in net proceeds from a public offering of senior subordinated convertible debt due in 2017.

The Company is subject to a number of risks, including the financial performance of Naglazyme, Kuvan, and Aldurazyme; the potential need for additional financings; risks related to the manufacturing of its products; its ability to successfully commercialize its product candidates, if approved; the uncertainty of the Company’s research and development efforts resulting in successful commercial products; obtaining regulatory approval for such products; significant competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; dependence on corporate partners and collaborators; and possible restrictions on reimbursement, as well as other changes in the health care industry.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

These unaudited consolidated financial statements include the accounts of BioMarin and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for interim financial information and the Securities and Exchange Commission (SEC) requirements for interim reporting. However, they do not include all of the information and footnotes required by U.S. GAAP 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.

Operating results for the three and nine months ended September 30, 2008March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.2009. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.2008.

(b) Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, 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.

(c) Cash and Cash Equivalents

The Company treats liquid investments with original maturities of less than three months when purchased as cash and cash equivalents.

(d) Investments

The Company recordsdetermines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such designation at each balance sheet date. All of the Company’s securities are classified as either held-to-maturity or available-for-sale.available-for-sale and reported in cash equivalents, short-term investments or long-term investments. Held-to-maturity investments are recorded at amortized cost. Available-for-sale investments are recorded at fair market value, with unrealized gains or losses being included in accumulated other comprehensive income/loss.loss, exclusive of other-than-temporary impairment losses, if any. Short-term and long-term investments are comprised mainly of corporate securities, commercial paper, U.S. federal government agency securities, U.S. treasury bills, and money market funds.funds and certificates of deposit. As of September 30, 2008,March 31, 2009, the Company had no held-to-maturity investments.

OtherAs of March 31, 2009, long-term investments are comprised ofincluded an equity investment denominated in British Pounds. The equity investment is accounted for under the provisions of Statement of Financial Accounting Standard (SFAS) No. 115,Accounting for Certain Investments in Debt and Equity Securities.The Company classified the investment as available-for-sale and accordingly the investment is recorded at fair market value. Changes in the fair market value are reported as a component of accumulated other comprehensive income, exclusive of other-than-temporary impairment losses, if any. Losses determined to be other-than-temporary are reported in earnings in the period in which the impairment occurs. Translation gains/losses on thisthe equity investment, a non-monetary asset, resulting from fluctuations in foreign exchange rates are included in accumulated other comprehensive income under the provisions of SFAS No. 52,Foreign Currency Translation. Losses related to changes in market value and exchange rates determined to be other-than-temporary are reported in earnings in the period in which the impairment occurs.

(e) Inventory

The Company values inventories at the lower of cost or net realizable value. The Company determines the cost of inventory using the average-cost method. The Company analyzes its inventory levels quarterly and writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value and inventory quantities in excess of expected requirements. Expired inventory is disposed of and the related costs are written off to cost of sales.

United States regulatory approval for Kuvan was received in December 2007, and manufacturingManufacturing costs for this product prior to this date werecandidates are expensed as research and development expenses. The Company considers regulatory approval of product candidates to be uncertain, and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. As such, the manufacturing costs for Kuvanproduct candidates incurred prior to regulatory approval wereare not capitalized as inventory. When regulatory approval wasis obtained, the Company beganbegins capitalizing inventory at the lower of cost or net realizable value.

In the first quarter of 2008, the Company received $26.8 million of inventory distributed by the Company’s joint venture with Genzyme pursuant to the terms of the joint venture restructuring (see Note 4 for further information). The inventory distribution was recorded at the historical production cost, which represented the lower of cost or market value.

Stock-based compensation of $1.3$0.9 million and $3.3$1.3 million was capitalized into inventory for the three and nine months ended September 30,March 31, 2008 and 2009, respectively compared to $0.5 million and $1.5 million capitalized into inventory for the three and nine months ended September 30, 2007, respectively.

See(see Note 56 for further information on inventory balances as of December 31, 2007 and September 30, 2008.information).

(f) Investment in and Advances to BioMarin/Genzyme LLC and Equity in the Income (Loss)Loss of BioMarin/Genzyme LLC

Effective January 1, 2008, the Company restructured its relationship with Genzyme (see Note 4 for further information). The Company accounts for its remaining investment in the joint venture using the equity method. Accordingly, the Company records an increase in its investment for contributions to the joint venture and for its 50% share of the incomeloss of the joint venture, and a reduction in its investment for its 50% share of any losses of the joint venture or disbursements of profits from the joint venture. Equity in the income (loss)loss of BioMarin/Genzyme LLC includes the Company’s 50% share of the joint venture’s loss/incomeloss for the period. Advances to BioMarin/Genzyme LLC include the current receivable from the joint venture for the reimbursement related to services provided to the joint venture by the Company and theThe investment in BioMarin/Genzyme LLC includes the Company’s share of the net equity of the joint venture.

(g) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the related estimated useful lives, except for leasehold improvements, which are depreciated over the shorter of the useful life of the asset or the lease term. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Property and equipment purchased for specific research and development projects with no alternative uses are expensed as incurred. See Note 67 for further information on property, plant and equipment balances as of December 31, 20072008 and September 30, 2008.March 31, 2009.

Certain of the Company’s operating lease agreements include scheduled rent escalations over the lease term, as well as tenant improvement allowances. The Company accounts for these operating leases in accordance with SFAS No. 13,Accounting for Leases, and Financial Accounting Standards Board (FASB) Technical Bulletin No. 85-3,Accounting for Operating Leases with Scheduled Rent Increases. Accordingly, the scheduled increases in rent expense are recognized on a straight-line basis over the lease term. The difference between rent expense and rent paid is recorded as deferred rent and included in other liabilities in the accompanying consolidated balance sheets. The tenant improvement allowances and free rent periods are recognized as a credit to rent expense over the lease term on a straight-line basis.

(h) Revenue Recognition

The Company recognizes revenue in accordance with the provisions of SEC Staff Accounting Bulletin No. 104,Revenue Recognition (SAB 104), and Emerging Issues Task Force Issue (EITF) No. 00-21,Accounting for Revenue Arrangements with Multiple Deliverables. The Company’s revenues consist of net product revenues from Naglazyme and Kuvan, Aldurazyme product transfer and royalty revenues beginning January 1, 2008, revenues from its collaborative agreement with Merck Serono and other license and royalty revenues. Milestone payments are recognized in full when the related milestone performance goal is achieved and the Company has no future performance obligations related to that payment.

Net Product Revenues—The Company recognizes net product revenue from Aldurazyme, Naglazyme and Kuvan when persuasive evidence of an arrangement exists, the product has been delivered to the customer, title and risk of loss have passed to the customer, the price to the buyer is fixed or determinable and collection from the customer is reasonably assured. Product sales transactions are evidenced by customer purchase orders, customer contracts, invoices and/or the related shipping documents. Amounts collected from customers and remitted to governmental authorities, which are primarily comprised of value-added taxes (VAT) related to Naglazyme sales in foreign jurisdictions, are presented on a net basis in the Company’s statements of operations, in accordance with EITF No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement,in that taxes billed to customers are not included as a component of net product revenues.

The Company began recognizing revenue related to Aldurazyme in the first quarter of 2008, effective with the restructuring of the Company’s Aldurazyme joint venture with Genzyme (see Note 4 for further information). According to the terms of the restructuring, BioMarin receives a 39.539.5% to 50% royalty on worldwide net Aldurazyme sales by Genzyme depending on sales volume, which is included in net product revenuerevenues in the consolidated statements of operations. The Company recognizes a portion of this amount as product transfer revenue when product is released to Genzyme as all of the Company’s performance obligations are fulfilled at that point.point and title to, and risk of loss for, the product has transferred to Genzyme. The product transfer revenue represents the fixed amount per unit of Aldurazyme that Genzyme is required to pay the Company if the product is unsold by Genzyme. The amount of product transfer revenue will eventually be deducted from the calculated royalty rate when the product is sold by Genzyme. The Company records the Aldurazyme royalty revenue based on net sales information provided by Genzyme and records product transfer revenue based on the fulfillment of Genzyme purchase orders in accordance with SAB 104 and the terms of the related agreements with Genzyme. As of September 30, 2008,March 31, 2009, accounts receivable included $13.1$14.3 million of unbilled accounts receivable related to net incremental Aldurazyme product transfers to Genzyme.

The Company sells Naglazyme worldwide and sells Kuvan in the U.S. In the U.S., Naglazyme and Kuvan are generally sold to specialty pharmacies or end-users, such as hospitals, which act as retailers. In the E.U., Naglazyme is sold to the Company’s authorized European distributors or directly to hospitals, which act as the end-users. Additionally, the Company receives revenue from sales of Naglazyme in other countries, which are generally made to distributors or directly to hospitals. Because of the pricing of Naglazyme and Kuvan, the limited number of patients and the customers’ limited return rights, Naglazyme and Kuvan customers and retailers generally carry a limited inventory. Accordingly, the Company expects the sales related to Naglazyme and Kuvan will be closely tied to end-user demand.

The Company records reserves for rebates payable under Medicaid and other government programs as a reduction of revenue at the time product salesrevenues are recorded. The Company’s reserve calculations require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. The Company updates its estimates and assumptions each period, and records any necessary adjustments to its reserves. The Company records fees paid to distributors as a reduction of revenue, in accordance with EITF Issue No. 01-09,Accounting for Consideration given by a Vendor to a Customer (including a Reseller of a Vendor’s Products).

The Company records allowances for product returns, if appropriate, as a reduction of revenue at the time product sales are recorded. Several factors are considered in determining whether an allowance for product returns is required, including market exclusivity of the products based on their orphan drug status, the patient population, the customers’ limited return rights and the Company’s experience with returns. Because of the pricing of Naglazyme and Kuvan, the limited number of patients and the customers’ limited return rights, most Naglazyme and Kuvan customers and retailers carry a limited inventory. Certain international customers, usually government entities, tend to purchase larger quantities of product less frequently. Although such buying patterns may result in revenue fluctuations from quarter to quarter, the Company has not experienced any increased product returns or risk of product returns. The Company’s products are comparable in nature and sold to similar customers with limited return rights, therefore the Company relies on historical return rates for Aldurazyme and Naglazyme to estimate returns for Kuvan, which has a limited history. Genzyme’s return rights for Aldurazyme are generally limited to defective product or product that does not meet applicable regulatory specification at the time of delivery.product. Based on these factors, management has concluded that product

amortization of the up-front license fee received from Merck Serono. Nonrefundable amounts received for shared development costs are recognized as revenue in the period in which the related expenses are incurred. Contract research revenue included in collaborative agreement revenues represents Merck Serono’s share of Kuvan development costs under the agreement, which are recorded as research and development expenses. Allowable costs during the development period must have been included in the pre-approved annual budget in order to be subject to reimbursement, or must be separately approved by both parties.

Collaborative agreement revenues during the three and nine months ended September 30,first quarter of 2008 includeincluded the recognition of $1.5 million and $4.5 million, respectively, of the up-front license fee received from Merck Serono recognized as revenue and $0.9$25.0 million and $2.9 million of reimbursable Kuvan development costs incurred during the three and nine months ended September 30, 2008, respectively. Collaborative agreement revenues during the three and nine months ended September 30, 2007 include $1.7 million and $5.3 million, respectively, of the up-front license fee received from Merck Serono recognized as revenue and $1.4 million and $5.5 million of reimbursable Kuvan development costs incurred during the three and nine months ended September 30, 2007, respectively. Amortization of the up-front license fee received from Merck Serono and recognized as revenue decreased during the third quarter and first nine months$1.0 million of 2008reimbursable development costs for Kuvan, compared to the same period in 2007 due primarily to the changes in the amortization period.first quarter of 2009, which included $0.5 million of reimbursable development costs for Kuvan.

Royalty and license revenues—Royalty revenue includes royalties on net sales of products with which the Company has no direct involvement and is recognized based on data reported by licensees or sublicensees. Royalties are recognized as earned in accordance with the contract terms, when the royalty amount is fixed or determinable based on information received from the sublicensee and when collectibility is reasonably assured.

Due to the significant role the Company plays in the operations of Aldurazyme, primarily the manufacturing and regulatory activities, as well as the rights and responsibilities to deliver the product to Genzyme, the Company elected not to classify the Aldurazyme royalty as other royalty revenues.

Royalty and license revenues in the first quarter of 2009 include $1.4 million of Orapred product royalties, a product the Company acquired in 2004 and sublicensed in 2006, and $0.2 million of Kuvan royalty revenues from Orapredfor product sold by Sciele Pharma, Inc. (Sciele),in Japan and Europe compared to the sublicensee of the Orapred product line, of $0.8 million and $2.3 million for the three and nine months ended September 30, 2008, respectively. Royalty and license revenues for the three and nine months ended September 30, 2007, included $0.4 million and $1.2 million from Orapred products sold by Sciele. During the thirdfirst quarter of 2008 the Company earned a $1.5which included only included $0.3 million milestone payment related to the Japanese approval of Kuvan in July 2008.Orapred royalties. There is no cost of sales associated with the royalty and license revenues recorded during the periods and no related costs are expected in future periods.

The Company recognized the $4.0 million milestone in the second quarter of 2007 as a result of the one year anniversary of the receipt of approval from the Food and Drug Administration (FDA) for the marketing application of Orapred ODT. Although the receipt of the $4.0 million payment was based solely on the passage of time from the FDA approval, the Company did not recognize the payment during the twelve-month period following approval because the fee was not considered to be fixed or determinable until it became due and payable. In making this determination, management considered the extended one-year payment term, the related uncertain future product sales, and the Company’s lack of experience with Sciele. Milestone payments are recognized in full when the related milestone performance goal is achieved and the Company has no future performance obligations related to that payment.

(i) Research and Development

Research and development expenses include expenses associated with contract research and development provided by third parties, product manufacturing prior to regulatory approval, clinical and regulatory costs, and internal research and development costs. In instances where the Company enters into agreements with third parties for research and development activities, costs are expensed upon the receiptearlier of goodswhen non-refundable amounts are due or as services are performed. The accounting for amountsperformed unless there is an alternative future use of the funds in other research and development projects. Amounts due under such arrangements thatmay be either fixed fee or fee for service, and may include up-frontupfront payments, monthly payments, and payments upon the completion of milestones are evaluated based on the natureor receipt of the underlying service and whether there is an alternative future use in other research and development projects. When non-refundable amounts are paid in advance of future services, the cost is capitalized and expensed as the services are performed.deliverables. The Company accrues costs for clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the vendors that perform the activities.

The Company believes that regulatory approval of its product candidates is uncertain, and does not assume that products manufactured prior to regulatory approval will be sold commercially. As a result, inventory costs for product candidates are expensed as research and development until regulatory approval is obtained in a major market, at which time inventory is capitalized at the lower of cost or net realizable value.

(j) Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income/loss by the weighted average shares of common stock outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are

excluded if their effect is anti-dilutive. Potential shares of common stock include shares issuable upon the exercise of outstanding employee stock option awards, common stock issuable under our Employee Stock Purchase Plan (ESPP), restricted stock and contingent issuances of common stock related to convertible debt and a portion of acquisition costs payable in stock at the Company’s option. For the three and nine months ended September 30, 2007, such potential shares of common stock were excluded from the computation of diluted net loss per share, as their effect is antidilutive.

Potentially dilutive securities for the three and nine months ended September 30, 2007 include (in thousands):

The following represents a reconciliation from basic weighted shares outstanding to diluted weighted shares outstanding and the earnings per share for the three and nine months ended September 30,March 31, 2008 (in thousands, except per share data):

In addition to the stock options included in the above table, options to purchase approximately 3.2 million and 1.70.3 million shares of common stock were outstanding during the three and nine months ended September 30,first quarter of 2008, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive during the period using the treasury stock method. These options were anti-dilutive because the fair value of the Company’s stock exceeded the assumed proceeds. Additionally, approximately 26.326.4 million of the underlying shares of the Company’s convertible debt were not included in the diluted average common shares outstanding because they were antidilutive during both the three and nine months ended September 30,first quarter of 2008 using the “if-converted” method whereby the related interest expense on the convertible debt is added to net income for the period.

The following represents a reconciliation from basic weighted shares outstanding to diluted weighted shares outstanding and the earnings per share for the three months ended March 31, 2009 (in thousands, except per share data):

In addition to the shares of common stock held by the Nonqualified Deferred Compensation Plan included above, the following potential shares of common stock were excluded from the computation as they were anti-dilutive during the period using the treasury stock method (in thousands):

(k) Stock-Based Compensation

Stock-based compensation is accounted for in accordance with SFAS No. 123R,Share-Based Payment, and related interpretations. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating future stock price volatility and employee stock option exercise behaviors. If actual results differ significantly from these estimates, stock-based compensation expense and results of operations could be materially impacted.

Expected volatility is based upon proportionate weightings of the historical volatility of the Company’s common stock and the implied volatility of traded options on the Company’s common stock. The expected life of stock options is based on observed historical exercise patterns, which can vary over time.

As stock-based compensation expense recognized in the consolidated statements of operation is based on awards expected to vest, the amount of expense has been reduced for estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.

If factors change and different assumptions are employed in the application of SFAS No. 123R, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period. Seeperiod (see Note 3 for further discussioninformation).

(l) Nonqualified Deferred Compensation Plan

Other non-current assets include $0.9 million and $1.2 million, respectively, of investments held in trust related to our Nonqualified Deferred Compensation Plan for certain employees and directors as of December 31, 2008 and March 31, 2009, respectively. All of the Company’s accountinginvestments held in the Nonqualified Deferred Compensation Plan are classified as trading securities and recorded at fair value in accordance with SFAS No. 115 with changes in the investments’ fair values recognized in earnings in the period they occur. In accordance with EITF 97-14,Accounting for stock-based compensation.Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested, restricted stock issued into the Nonqualified Deferred Compensation Plan is accounted for similarly to treasury stock in that, the value of the employer stock is determined on the date the restricted stock vests and the shares are issued into the Nonqualified Deferred Compensation Plan. The restricted stock issued into the plan is recorded in equity and changes in its fair value are not recognized. Additionally, the Company has recorded a corresponding liability for the Nonqualified Deferred Compensation Plan in other liabilities.

The Nonqualified Deferred Compensation Plan allows eligible employees, including management and certain highly-compensated employees as designated by the plan’s administrative committee and members of the Board to make voluntary deferrals of compensation to specified dates, retirement or death. Participants are permitted to defer portions of their salary, annual cash bonus and restricted stock. The Company is not allowed to make additional direct contributions to the Nonqualified Deferred Compensation Plan on behalf of the participants without further action by the Board.

(l)(m) Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. There was a full valuation allowance against net deferred tax assets of $294.4$294.7 million at December 31, 2007.2008. Future taxable income and ongoing prudent and feasible tax planning strategies have been considered in assessing the need for the valuation allowance. An adjustment to the valuation allowance would increase or decrease income in the period such adjustment was made. ForDuring the threefirst quarters of 2008 and nine months ended September 30, 2008,2009, the Company recognized $0.3$0.1 million and $0.5$0.4 million of income tax expense, respectively, primarily related to income earned in the U.S. and certain of the Company’s international subsidiaries, respectively, compared to $0.2 millionCalifornia state income tax and $0.6 million in the threeU.S. Federal Alternative Minimum Tax expense.

(n) Foreign Currency and nine months ended September 30, 2007, respectively. Other Hedging Instruments

The Company has recorded an insignificant amounttransactions denominated in foreign currencies and, as a result, is exposed to changes in foreign currency exchange rates. The Company manages some of these exposures on a consolidated basis, which results in the netting of certain exposures to take advantage of natural offsets and through the use of forward contracts. Gains or losses on net current U.S. Federal and state income tax expense, primarily because the Company expects to utilize net operating loss carry forwards and research and development creditsforeign currency hedges are intended to offset most of its 2008 taxable income. However, the Company has not released any incremental valuation allowance against net deferred tax assets beyond the amount of deferred tax assets expected to be used for 2008 taxable income.

(m) Recent Accounting Pronouncements

In December 2007, the FASB released SFAS No. 141(R), Business Combinations. This Statement applies prospectively to business combinations for which the acquisition date is onlosses or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which would impact the Company for business combinations completed after January 1, 2009. The objective of this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The effect of this statementgains on the Company’s consolidated financial position, results of operationsunderlying net exposures in an effort to reduce the earnings and cash flow volatility resulting from fluctuating foreign currency exchange rates.

The Company accounts for its derivative instruments as either assets or cash flows will dependliabilities on the potential future business combinations entered into by the Companybalance sheet and measures them at fair value. Derivatives that will be subject to the statement.

In December 2007, the FASB released SFAS No. 160,Noncontrolling Interestsare not defined as hedges in Consolidated Financial Statements—an amendment of ARB No. 51. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, which for the Company is the year ending December 31, 2009, and the interim periods within that fiscal year. The Company does not expect the adoption of SFAS No. 160 to have a material effect on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment to SFAS No. 133 (SFAS No. 161), which changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities, are adjusted to fair value through earnings. Gains and its related interpretations,losses resulting from changes in fair value are accounted for depending on the use of the derivative and (c) how derivativewhether it is designated and qualifies for hedge accounting (see Note 11 for further information).

(o) Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires the Company to disclose the fair value of financial instruments for assets and related hedged items affect an entity’s financial position, financial performance,liabilities for which it is practicable to estimate that value.

The carrying amounts of all cash equivalents and forward exchange contracts approximate fair value based upon quoted market prices or discounted cash flows. This statement’s disclosure requirements are effective for the Company asThe fair value of January 1, 2009. Because the statement only requires additional disclosures relatingtrade accounts receivables, accounts payable and other financial instruments approximates carrying value due to the Company’s derivative instruments, the adoption will not impact the Company’s consolidated balance sheets, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles. SFAS No. 162 becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to Statement on Auditing Standards No. 69,The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, for periods completed after January 1, 2009. The Company does not expect that the adoption of SFAS No. 162 to have a material effect on its consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3,Determination of the Useful Life of Intangible Assets(FSP FAS 142-3), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142,Goodwill and Other Intangible Asset. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. This Statement is effective for fiscal years beginning on or after December 15, 2008, which for the Company is the year ending December 31, 2009. The Company is currently evaluating the potential impact the adoption of FSP FAS 142-3 will have on its consolidated financial statements.their short-term nature.

(n)(p) Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

Comprehensive income/lossincome includes net income/loss and certain changes in stockholders’ equity that are excluded from net income/loss,income (loss), such as changes in unrealized gains and losses on the Company’s available-for-sale securities, unrealized gains and gains/losses on foreign exchange hedges, and changes in the Company’s cumulative foreign currency translation account. There were no tax effects allocated to any components of other comprehensive income/lossincome (loss) during the thirdfirst quarters or first nine months of 2007 or 2008.2008 and 2009.

Comprehensive loss was approximately $0.4$12.2 million for the three months ended September 30, 2008 and comprehensive income was approximately $4.4 million for the nine months ended September 30, 2008,March 31, 2009, compared to comprehensive lossnet income of $5.1 million and $18.2$1.9 million for the three and nine months ended September 30, 2007, respectively. Comprehensive income (loss) included the following changesMarch 31, 2008. The fluctuation in accumulated other comprehensive income (loss) is comprised of the following (in thousands):

(o)(q) Restricted Cash

The Company’s balance of restricted cash amounted to $7.3 million and $8.9 million at December 31, 2008 and March 31 2009, respectively. The December 31, 2008 and March 31, 2009 balances include $6.2 million and $7.7 million related to cash received for royalties earned pursuant to the Orapred sublicense agreement, respectively, which are restricted from use until August 2009 and are included in other current assets. Restricted cash also includes investments of $0.9 million and $1.2 million held by the Company’s Nonqualified Deferred Compensation Plan as of December 31, 2008 and March 31, 2009, respectively, which is included in other assets.

(r) Recent Accounting Pronouncements

In April 2009, the FASB issued FASB Staff Position FAS 157-4,Determining Whether a Market Is Not Active and a Transaction Is Not Distressed,or FSP FAS 157-4; FSP FAS 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS No. 157. FSP FAS 157-4 provides additional authoritative guidance in determining whether a market is active or inactive, and whether a transaction is distressed, is applicable to all assets and liabilities (i.e., financial and nonfinancial) and will require enhanced disclosures. This standard is effective for periods ending after June 15, 2009, which for the Company is the second quarter of fiscal 2009. The Company is evaluating the impact this standard will have on its consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 115-2, FAS 124-2, and EITF 99-20-2,Recognition and Presentation of Other-Than-Temporary Impairments, or FSP FAS 115-2, FAS 124-2, and EITF 99-20-2; and FSP FAS 115-2, FAS 124-2, and EITF 99-20-2 provides additional guidance to provide greater clarity about the credit and noncredit component of an other-than-temporary impairment event and to more effectively communicate when an other-than-temporary impairment event has occurred. This FSP applies to debt securities and is effective for periods ending after June 15, 2009 with early adoption permitted. The Company is currently evaluating the impact this FSP will have on its consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments, or FSP FAS 107-1 and APB 28-1. FSP FAS 107-1 and APB 28-1, amends FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. This FSP also amends Accounting Principles Board Opinion No. 28,Interim Financial Reporting, to require those disclosures in all interim financial statements. This FSP is effective for periods ending after June 15, 2009, which for the Company is the second quarter of fiscal 2009. The Company is currently evaluating the impact this FSP will have on its financial statements.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (SFAS No. 161). The standard requires additional quantitative disclosures and qualitative disclosures for derivative instruments. The required disclosures include how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows; relative volume of derivative activity; the objectives and strategies for using derivative instruments; the accounting treatment for those derivative instruments formally designated as the hedging instrument in a hedge relationship; and the existence and nature of credit-related contingent features for derivatives. The Company adopted the provision of SFAS No. 161 on January 1, 2009. As a result of adopting the provision of this standard, the Company has expanded its disclosures regarding derivative instruments and hedging activities within Note 11.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS No. 157). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. In February 2008, the FASB issued FSP No. 157-2, which deferred the effective date of SFAS No. 157 for one year relative to certain nonfinancial assets and liabilities. On January 1, 2009, the beginning of our fiscal 2009, the Company adopted the requirements of SFAS No. 157 that had been deferred under FSP 157-2,Effective Date of FASB Statement No. 157. The adoption did not have a material impact on the Company’s consolidated financial statements during the first quarter of 2009.

In October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP FAS 157-3). FSP FAS 157-3 clarifies the application of FAS No. 157 in a market that is not active and defines additional key criteria in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with FAS No. 157. FSP FAS 157-3 was effective upon issuance and the application of FSP FAS 157-3 did not have a material impact on the Company’s consolidated financial statements in the first quarter of 2009.

(s) Reclassifications and Adjustments

In the second quarter of 2008, the Company recorded an out of period adjustment to correct inventory and property, plant and equipment balances for sales taxes associated with purchases made between April 2007 and March 2008 that were erroneously expensed at the time of purchase. The correction reduced operating expenses by $1.2 million during the second quarter of 2008. The amounts capitalized into inventory will be recognized into cost of goods sold as the inventory is sold and the amounts capitalized into property, plant and equipment will be depreciated over the assets’ respective estimated useful lives. The Company determined that the impact of the adjustment was not material to prior periods or to the expected results for the year ended December 31, 2008, and as such the adjustment was recorded in the second quarter of 2008 under the provisions of Accounting Principles Board Opinion (APB) No. 28,Interim Financial Reporting.The adjustment did not affect the consolidated statement of operations for the three months ended September 30, 2008, and the adjustment increased net income for the nine months ended September 30, 2008 by $0.8 million.

During the third quarter of 2008, the Company recorded a $0.6 million reserve for an estimated value added tax (VAT) liability in Europe that resulted from professional tax advice received during the third quarter of 2008 that conflicted with professional tax advice received in 2006. The Company is continuing to evaluate the conflicting advice and possible mitigation strategies. The Company determined that the amounts that related to prior periods, which totaled $0.5 million, were immaterial to all prior periods and therefore recognized the expense during the third quarter of 2008.

Certain items in the prior year’s consolidated financial statements have been reclassified to conform to the current presentation.

(3) STOCK-BASED COMPENSATION

The Company’s stock-based compensation plans include the 2006 Share Incentive Plan and the ESPP. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award. Readers should refer toSee Note 3 of the Company’s consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2007,2008 for additional information related to these stock-based compensation plans.

Determining the Fair Value of Stock Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the table below. The expected life of options is based on observed historical exercise patterns. Groups of employees that have similar historical exercise patterns were considered separately for valuation purposes, but none were identified that had distinctly different exercise patterns as of September 30, 2008.March 31, 2009. The expected volatility of stock options is based upon proportionate weightings of the historical volatility of the Company’s stock and the implied volatility of traded options on the Company’s stock for fiscal periods in which there is sufficient trading volume in options on the Company’s stock. The risk free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. During the first nine monthsquarter of 2008,2009, the Company granted approximately 2.8 million228,750 stock options under the 2006 Share Incentive Plan, with a weighted average fair value of $37.98.$6.52. The Company also granted approximately 63,000232,324 options under the ESPP with a weighted average fair value of $13.87$7.63 during the first nine monthsquarter of 2008.2009. The assumptions used to estimate the fair value of stock options granted and stock purchase rights granted under the Company’s 2006 Share Incentive Plan and ESPP for the three and nine months ended September 30, 2007March 31, 2008 and 20082009 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2007				2008				2007				2008
Stock options:
Weighted average fair value of common stock		$	20.66			$	27.79			$	17.69			$	37.98
Expected life			5.5 years				5.6 years				5.2 - 5.5 years				5.2 – 5.6 years
Volatility			51	%			45	%			48 - 51	%			45 – 47	%
Risk-free interest rate			4.4	%			3.1	%			4.4 – 5.1	%			2.8-3.2	%
Dividend yield			0	%			0	%			0	%			0	%

Restricted Stock Units

Restricted stock units (RSUs) are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The Company expenses the cost of the RSUs, which is determined to be the fair market value of the shares underlying the RSU at the date of grant, ratably over the period during which the vesting restrictions lapse. During the nine months ended September 30, 2007,first quarter of 2009, the Company granted 116,62520,000 RSUs with a weighted average fair market value of $17.39 per share. During the nine months ended September 30, 2008, the Company granted 158,255 RSUs with a weighted average fair market value of $38.45$11.05 per share.

Stock-based Compensation Expense

The compensation expense that has been included in the Company’s consolidated statement of operations for stock-based compensation arrangements were as follows (in thousands):

There was no income tax benefit associated with stock-based compensation in the first quarters of 2008 and 2009 because the deferred tax asset resulting from stock-based compensation was offset by an additional valuation allowance for deferred tax assets.

Stock-based compensation of $1.5$0.9 million and $3.3$1.3 million was capitalized into inventory forduring the nine months ended September 30, 2007first quarters of 2008 and 2008,2009, respectively. Capitalized stock-based compensation is recognized into cost of sales when the related product is sold.

(4) JOINT VENTURE

Effective January 2008, the Company and Genzyme restructured BioMarin/Genzyme LLC. Under the revised structure, the operational responsibilities for BioMarin and Genzyme did not significantly change, as Genzyme continues to globally market and sell Aldurazyme and BioMarin continues to manufacture Aldurazyme. The restructuring had two significant business purposes. First, since each party now has full control over its own operational responsibilities, without the need to obtain the approval of the other party, and the parties do not need to review and oversee the activities of the other, it reduces management’s time and effort and therefore improves overall efficiencies. Second, since each party will realize 100% of the benefit of their own increased operational efficiencies, it increases the incentives to identify and implement cost saving measures. Under the previous 50/50 structure, each company shared 50% of the expense associated with the other’s inefficiencies and only received 50% of the benefit of its own efficiencies. Specifically, the Company will be able to realize the full benefit of any manufacturing cost reductions and Genzyme will be able to realize the full benefit of any sales and marketing efficiencies.

As ofOn January 1, 2008, instead of sharing all costs and profits equally through the 50/50 joint venture, Genzyme recordsbegan to record sales of Aldurazyme to third party customers and payspay BioMarin a tiered payment ranging from approximately 39.539.5% to 50% of worldwide net product sales depending on sales volume, which is recorded by BioMarin as product revenue. The Company recognizes a portion of this amount as product transfer revenue when product is

released to Genzyme as all of the Company’s performance obligations are fulfilled at this point.point and title to, and risk of loss, for the product has transferred to Genzyme. The product transfer revenue represents the fixed amount per unit of Aldurazyme that Genzyme is required to pay the Company if the product is unsold by Genzyme. The amount of product transfer revenue is deducted from the calculated royalty rate when the product is sold by Genzyme. Genzyme’s return rights for Aldurazyme are generally limited to defective product or product that does not meet applicable regulatory specification at the time of delivery.product. Certain research and development activities and intellectual property related to Aldurazyme continues to be managed in the joint venture with the costs shared equally by BioMarin and Genzyme. Pursuant to the terms of the joint venture restructuring, the Company received distributions of $16.7 million of cash and $26.8 million of inventory from the joint venture in the first quarter of 2008.

InAs a result of restructuring the first quarterjoint venture, the Company made an initial transfer of 2008, BioMarin transferred inventory on-hand to Genzyme, resulting in the recognition of product transfer revenue of $14.0 million.million during the first quarter of 2008. A portion of that initial inventory transfer representing $4.5 million of the related product transfer revenue was also sold by Genzyme during the first quarter of 2008, which resulted in a royalty due to the Company totaling $14.6 million. There were no similar upfront inventory shipments in the first quarter of 2009.

The Company presents the related cost of sales and its Aldurazyme-related operating expenses as operating expenses in the consolidated statements of operations. Equity in the income (loss)loss of BioMarin/Genzyme LLC subsequent to the restructuring includes BioMarin’s 50% share of the net income/loss of BioMarin/Genzyme LLC related to intellectual property management and ongoing research and development activities. The results of the joint venture’s operations for the three and nine months ended September 30, 2007 and 2008 are presented in the table below (in thousands).

		Three Months Ended September 30,							Nine Months Ended September 30,
		2007			2008				2007			2008
Net product sales		$	32,322		$	—			$	88,270		$	—
Cost of goods sold			6,894			—				19,778			—
Gross profit			25,428			—				68,492			—
Operating expenses			8,754			1,149				26,706			3,577
Income (loss) from operations			16,674			(1,149	)			41,786			(3,577	)
Other income			218			5				531			193
Net income (loss)		$	16,892		$	(1,144	)		$	42,317		$	(3,384	)
Equity in the income (loss) of BioMarin/Genzyme LLC		$	8,446		$	(572	)		$	21,159		$	(1,692	)

At December 31, 2007 and September 30, 2008, the summarized assets and liabilities of the joint venture and the components of the Company’s investment in the joint venture are as follows (in thousands):

The critical accounting policies of BioMarin/Genzyme LLC relevant to its operations prior to the restructuring are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

(5) SHORT-TERM AND LONG-TERM INVESTMENTS

At December 31, 2007,2008, the principal amounts of short-term and long-term investments by contractual maturity are summarized in the table below (in thousands).

At September 30, 2008,March 31, 2009, the principal amounts of short-term and long-term investments by contractual maturity are summarized in the table below (in thousands).

		Contractual Maturity Date For the Years Ending December 31,									March 31, 2009
		2009			2010			Total Book Value			Unrealized Gain (Loss)				Aggregate Fair Value
Certificates of deposit		$	7,234		$	2,806		$	10,040		$	(109	)		$	9,931
Corporate securities			39,602			1,029			40,631			32				40,663
Commercial paper			29,437			—			29,437			34				29,471
Equity securities			4,021			—			4,021			6				4,027
U.S. Government agency securities			256,884			—			256,884			325				257,209
Total		$	337,178		$	3,835		$	341,013		$	288			$	341,301

The Company completed an evaluation of its investments and determined that it did not have any other-than-temporary impairments as of September 30, 2008.March 31, 2009. The investments are placed in financial institutions with strong credit ratings and management expects full recovery of the amortized costs.

At September 30, 2008,March 31, 2009, the aggregate amounts of unrealized losses related to fair value of investments with unrealized losses were as follows (in thousands). All short-term investments were classified as available-for-sale at September 30, 2008.March 31, 2009.

At December 31, 2007,2008, the aggregate amount of unrealized losses and related fair value of investments with unrealized losses were as follows (in thousands):. All investments were classified as available-for-sale at December 31, 2008.

(6) SUPPLEMENTAL BALANCE SHEET INFORMATION

As of December 31, 20072008 and September 30, 2008,March 31, 2009, inventory consisted of the following (in thousands):

As of December 31, 2008 and March 31, 2009, other current assets consisted of the following (in thousands):

As of December 31, 20072008 and September 30, 2008,March 31, 2009, accounts payable and accrued liabilities consisted of the following (in thousands):

As of December 31, 20072008 and September 30, 2008,March 31, 2009, other long-term liabilities consisted of the following (in thousands):

(7) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 20072008 and September 30, 2008,March 31, 2009, consisted of (in thousands):