10-K

                                  United States
                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    Form 10-K

(Mark One)

[X] Annual  Report  Under  Section  13 or 15(d) of the  Securities
       Exchange  Act of 1934 For the fiscal year ended  December  31,
       2000

                                       Or

[ ] 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 small business issuer as specified in its charter)

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

371 Bel Marin Keys Blvd., #210, Novato, California                 94949
 (Address of principal executive offices)                      (Zip Code)

                  Registrant's telephone number: (415) 884-6700


        Securities registered pursuant to Section 12(b) of the Act: None
                       Securities registered under Section
                               12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of Class)

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
    -----     ----

Indicate by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation  S-K is not contained in this form, and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. __


The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of March 9, 2001 was $181,664,320.  The number of shares of common
stock, $0.001 par value, outstanding on March 9, 2001 was 37,115,610.


The documents incorporated by reference are as follows:

Portions  of  the  Registrant's  Proxy  Statement  for  the  Annual  Meeting  of
Stockholders  to be held May 17, 2001 are  incorporated  by reference  into Part
III.



                          BIOMARIN PHARMACEUTICAL INC.

                                     Part I

                           FORWARD LOOKING STATEMENTS

      This Form 10-K  contains  "forward-looking  statements"  as defined  under
      securities  laws. Many of these statements can 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,"  "Description  of  Business,"  and other
      sections  of this  Annual  Report on Form  10-K.  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 Form 10-K. You should carefully consider that
      information before you make an investment decision.

      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-K to reflect
      later  events  or   circumstances   or  to  reflect  the   occurrence   of
      unanticipated events.

Item 1.   Description of Business

Overview

BioMarin  Pharmaceutical  Inc. (BioMarin) is a developer of enzyme therapies for
debilitating, life-threatening, chronic genetic diseases and other diseases and
conditions.  We are currently  focusing our research and development  efforts on
three potential products, AldurazymeTM , rhASB and Vibriolysin.

Aldurazyme for MPS-I

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
mucopolysaccharidosis-I   or  MPS-I,  a  life  threatening   genetic   disease.
Aldurazyme is a specific form of recombinant  human  (alpha)-L-iduronidase  that
replaces a genetic deficiency of  (alpha)-L-iduronidase  in MPS-I patients.  The
26-week  clinical  results  were  presented  at the  American  Society for Human
Genetics in October 1999.  The initial  clinical trial treated ten patients with
MPS-I at six  medical  centers in the  United  States.  Based on data  collected
during the initial  twelve-month  evaluation period,  Aldurazyme met the primary
endpoints set forth in the  investigational  new drug application.  In addition,
Aldurazyme  demonstrated  efficacy  according to various secondary  endpoints in
each of the patients.  We continue to collect data from the ongoing treatment of
these original patients. In January of 2001, 52-week study results were reported
in the New England Journal of Medicine.

The New England Journal of Medicine article,  titled "Enzyme Replacement Therapy
in  Mucopolysaccharidosis  I,"  describes the results of the open label trial in
ten MPS-I patients conducted at Harbor-UCLA  Medical Center and five other sites
in the U.S. The study  subjects  ranged in age from 5 to 22 years and included a
wide  spectrum of clinical  severity.  All patients  received 52 weeks of weekly
intravenous infusions of Aldurazyme and an intensive series of assessments at 0,
6, 12, 26 and 52 weeks.

Key clinical outcomes reported in the publication include:


1.   Significantly  decreased liver or spleen size in all subjects, with 8 of 10
     subjects showing a normal liver size at 26 weeks and 52 weeks.

2.   Reduced  excretion of complex  carbohydrates in the urine within 3-4 weeks,
     reaching near normal excretions in 9 of 10 subjects.

3.   Improved  range of motion in the  shoulder,  as patients were able to raise
     their  right and left arms an  average  of 28 and 26  degrees  higher  than
     before.

4.   Clinically  significant  improvements  in sleep  apnea,  with a 61  percent
     reduction  in  night-time  episodes  of  interrupted  breathing  (apnea  or
     hypopnea).

5.   In the 6 prepubertal  patients,  height  growth rate  increased 85% and the
     weight growth rate increased by 131%.

6.   Improvements in physical  function reported by all subjects by one class or
     more using the four  classes of the New York Heart  Association  functional
     scoring system.
                                       1

In addition,  study findings showed  Aldurazyme  therapy to be well tolerated in
all study subjects.  Adverse events  consisted  primarily of allergic  reactions
including rash in 5 subjects and facial and throat swelling in 3 subjects. These
allergic  reactions were  manageable  with  pre-medications  and slower rates of
infusion. No neutralizing antibodies were reported.

In September 1998, we established a joint venture with Genzyme for the worldwide
development and commercialization of Aldurazyme.  In collaboration with Genzyme,
we are  conducting  a  randomized  double-blind,  placebo-controlled  Phase  III
clinical  trial of  Aldurazyme  at five sites in the United  States,  Canada and
Europe.  This pivotal  trial began in December  2000 and is  evaluating up to 45
MPS-I patients,  for a period of six months; patient enrollment was completed in
March 2001. All patients will be dosed weekly,  and will be evaluated using both
clinical  and  biochemical  measures of  efficacy.  Primary  clinical  endpoints
include  measures of pulmonary  function and exercise  tolerance.  Secondary and
tertiary  endpoints  include  both  surrogate  markers  of  efficacy  as well as
additional  measures of clinical benefit.  We intend to file a Biologics License
Application (BLA) with the U.S. Food and Drug Administration (FDA) late in 2001,
pending the successful outcome of the Phase III Trial.

Aldurazyme  has received  fast track  designation  for the treatment of the more
severe forms of MPS-I. The FDA has granted Aldurazyme an orphan drug designation
giving us exclusive  rights to market  Aldurazyme to treat MPS-I for seven years
from the date of FDA approval if  Aldurazyme is the first product to be approved
by the FDA for the treatment of MPS-I. In addition,  the European Commission has
designated  Aldurazyme for the treatment of MPS-I as an orphan medicinal product
in the European Community, giving us similar market exclusivity in Europe for 10
years.

MPS-I is a life-threatening  genetic disease caused by the lack of a sufficient
quantity of the enzyme (alpha)-L-iduronidase, which affects about 3,400 patients
in developed countries,  including  approximately 1,000 in the United States and
Canada.  Patients with MPS-I have multiple  debilitating symptoms resulting from
the buildup of carbohydrate  residues in all tissues in the body. These symptoms
include  delayed  physical  and mental  growth,  enlarged  livers  and  spleens,
skeletal and joint  deformities,  airway  obstruction,  heart  disease,  reduced
endurance and pulmonary function, and impaired hearing and vision. Most children
with  MPS-I  will die from  complications  associated  with the  disease  before
adulthood.

In August 2000, our Galli Drive  manufacturing  facility and a smaller  clinical
manufacturing  laboratory  in our Bel Marin Keys  Boulevard  facility  were both
subjected to an extensive  inspection by the State of  California  Food and Drug
Branch  and  were  granted  licenses  to  produce  clinical   product.   We  are
manufacturing  bulk  Aldurazyme  in our Galli  Drive  manufacturing  facility in
compliance with current Good Manufacturing Practices (cGMP) regulations.

RhASB for MPS-VI

In  October  2000,  we  initiated  a  clinical   trial  of   recombinant   human
N-acetylgalactosamine-4-sulfatase  also  known  as  arylsulfatase  B or rhASB in
enzyme  replacement  therapy for MPS-VI;  patient  enrollment  was  completed in
February 2001. MPS-VI, also known as Maroteaux-Lamy  syndrome, is similar in its
clinical symptoms to MPS-I. However,  MPS-VI does not appear to have the central
nervous system  involvement and mental  retardation  characteristics of the most
severe form of MPS-I. We are manufacturing  clinical bulk rhASB in the Bel Marin
Keys Boulevard facility in compliance with cGMP regulations.  RhASB has received
fast track and orphan drug  designations  by the FDA. In addition,  the European
Commission  has  designated  rhASB  for the  treatment  of  MPS-VI  as an orphan
medicinal product in the European Community.

Vibriolysin for the debridement of serious burns

We have successfully  conducted  preclinical studies in two animal models of our
burn  enzyme,  Vibriolysin,  for use in burn  debridement  (cleaning)  in  wound
preparation for skin grafting.  We expect to submit an application to the FDA or
a foreign equivalent to begin a clinical trial for Vibriolysin by mid-year 2001.

Carbohydrate-active Enzyme Therapeutics

Carbohydrates are a fundamental class of biological  molecules that play diverse
and critical  roles in maintaining  the health and  functional  integrity of all
cells and tissues.  Enzymes are proteins  that act as specific  tools that allow
cells to build up and break  down  many  vital  components.  Carbohydrate-active
enzymes construct  cleave,  or otherwise modify  carbohydrates to regulate their
production,  maintenance and degradation.  These carbohydrate-active enzymes are
critical  to  a  wide  range  of  functions  within  the  body,  including  cell
proliferation,  digestion,  blood  clotting,  immune  response,  wound  healing,
conception and control of infection and inflammation. The body, when functioning
normally,  produces  appropriate  quantities of  carbohydrate-active  enzymes to
perform these functions.  Carbohydrate-active enzymes have the potential to play
an  important  therapeutic  role in  certain  diseases  or  disorders  by either
replacing  deficient  enzymes or  supplementing  the enzymes that are  naturally
present in the body.






                                       2

Role of Carbohydrate-active Enzymes in Genetic Diseases

There  are more  than 70  genetic  diseases  that are  known to be caused by the
deficiency  of a single  enzyme.  In these  genetic  diseases  the body fails to
produce  sufficient or functional  quantities of certain enzymes.  Most of these
genetic  diseases are rare,  affecting only a few dozen to a few thousand people
in the United States.  Examples of genetic  diseases  include  Gaucher  disease,
hemophilia and MPS diseases.  Since there is not extensive literature regarding
these rare genetic diseases, we hired a market research consultant,  The Frankel
Group, to conduct research regarding this potential market. The figures cited in
the following paragraph were developed by The Frankel Group.

Currently,  only eight genetic diseases have effective  treatments,  and five of
these  eight  are  treated  through  enzyme  replacement.  Historically,  enzyme
replacement  therapy  has been  limited by the  inability  of  manufacturers  to
produce the correct form of enzymes in  sufficient  quantities.  Manufacture  of
sufficient  quantities to support a therapeutic  program has now become possible
with  advancements  in  recombinant  DNA  production  methods.  In these  cases,
recombinant  production  methods  apply  human  DNA to host  mammalian  cells to
produce human enzymes the host cells would not naturally  produce.  In 1998, the
worldwide  sales of  pharmaceuticals  used to treat  genetic  diseases by enzyme
replacement were approximately $2.7 billion.

Genzyme's  treatment  for  Gaucher  disease is an example of a  treatment  using
enzyme replacement therapy.  Gaucher disease, which afflicts approximately 5,000
people  in the  developed  world,  is  caused  by a  deficiency  in  the  enzyme
glucocerebrosidase.  In April 1991,  following a single clinical trial involving
13 patients,  Genzyme's treatment for Gaucher disease was approved for marketing
by the FDA. Approximately 2,500 patients worldwide are using Genzyme's treatment
for  Gaucher  disease.  Sales  of  Genzyme's  treatments  for  Gaucher  disease,
Cerezyme(R)   enzyme  and  Ceredase(R)   enzyme,   generated  total  revenue  of
approximately $537 million in 2000.

Business Strategy

Our business strategy is to develop  therapeutic  products to treat a variety of
diseases and conditions  involving enzymes and/or  carbohydrates.  The principal
elements of this strategy are:

o    Focus on Drug  Candidates  with Known  Biology and Low  Technical  Risk. We
     identify potential products that treat serious diseases or conditions where
     the  biological  role of  enzymes  is well  understood  and the  method  of
     treatment is  straightforward.  As part of this strategy,  we are initially
     focusing on treating genetic  diseases such as MPS-I and MPS-VI,  which are
     caused by the deficiency of a single enzyme.

o    Select Products that May Be Developed Relatively Quickly. We are developing
     therapeutic  products for serious  diseases or  conditions  that we believe
     will require  relatively  limited  time and capital to conduct  preclinical
     studies and small numbers of patients for clinical trials.  Because many of
     our potential  drug  products are intended for serious or  life-threatening
     conditions  and may address unmet medical  needs for these  conditions,  we
     believe that they will qualify for fast track  designation by the FDA. If a
     preliminary  review of the  clinical  data  suggests  that the  producte is
     effective, the FDA may initiate review of sections of a license application
     for a fast track product before teh  application is complete.  This rolling
     review is available if the applicant  provides a schedule for submission of
     remaining  information and pays applicable user fees. In September 1998, we
     received  from  the FDA  fast  track  designation  for  Aldurazyme  for the
     treatment of severe MPS-I.  Similarly, in July 2000, we received fast track
     designation for rhASB for the treatment of MPS-VI.

o    Pursue  Well-defined,  Niche Markets. We develop potential drug products to
     treat small patient  populations for diseases for which there are currently
     no  effective  therapies.  Often  these  markets  are for life  threatening
     diseases, which offer the potential for a clear reimbursement rationale and
     life  extension.  We  believe  that such  products  will be  reimbursed  at
     favorable  rates. We believe we will receive orphan drug  designation  from
     the FDA and European Commission for many of our products, providing us with
     market  exclusivity for our drug  formulation for seven years in the United
     States and ten years in Europe if we are first to gain product  approval to
     treat the specific disease.

o    Develop Direct Sales and Marketing Organization for Select Markets. We will
     be able to directly market some of our potential drug products  because the
     conditions  they  treat  have  small  patient  populations,  for  which the
     treatments are often concentrated in specialized institutions,  and because
     of the existence of patient  support groups for many of our initial disease
     targets. We may develop a small sales and marketing  organization to target
     markets where we believe we can effectively  reach the targeted patient and
     physician  groups.  Alternatively,  we may pursue strategic  collaborations
     with  biopharmaceutical  or other companies to develop products targeted at
     markets with larger patient populations.

Products Under Development

Mucopolysaccharidosis Diseases

MPS diseases are seriously  debilitating  genetic diseases  characterized by the
systemic  accumulation  of  mucopolysaccharides,  which are now better  known as
glycosaminoglycans  or GAGs. GAGs are complex  carbohydrates  synthesized by all
cells in the body and are needed to form the  structure  of tissues  and to give


                                        3

them special properties,  like the resilience of cartilage. At least ten enzymes
are  required  for the  complete  breakdown  in the  cell of  GAGs.  The  normal
breakdown of GAGs is  incomplete  or blocked if any one of these  enzymes is not
present  in  sufficient  quantity.  The  cell  is then  unable  to  excrete  the
carbohydrate residues and they accumulate in the lysosomes of the cell.

Patients  with MPS diseases  are usually  diagnosed by one to five years of age.
MPS diseases are progressive  diseases that afflict patients from birth and that
frequently lead to severe  disability and early death.  During the course of the
disease, the build-up of GAGs results in one or more of the following symptoms:

o    Inhibited growth

o    Delay and regression of mental development

o    Impaired vision and hearing

o    Impaired cardiovascular and  heart function especially heart valve
     dysfunction

o    Coarse facial features

o    Upper airway obstruction and reduced pulmonary function

o    Enlarged liver and spleen

o    Joint deformities and reduced range of motion

o    Sleep disorders

o    Malaise and reduced endurance

MPS-I.  MPS-I is a  genetic  disease  caused  by the  deficiency  of the  enzyme
(alpha)-L-iduronidase.  About 3,400 patients in developed  countries have MPS-I,
including about 1,000 in the United States and Canada. If untreated,  almost all
children  diagnosed with the more severe forms of MPS-I will die before reaching
adulthood.  Patients  with  milder  forms of  MPS-I  still  exhibit  many of the
symptoms described above and require extensive medical care. Currently, the only
available  treatment  for MPS-I is a bone marrow  transplant  that is  primarily
performed in youngm, more  severely  affected patients.  However, many  patients
cannot find an  appropriate  bone marrow  donor.  Of the  patients  that do find
appropriate  donors, many choose not to receive a bone marrow transplant because
of its risks and serious side effects.

Aldurazyme.   We  are   developing  a  specific  form  of   recombinant,   human
(alpha)-L-iduronidase,  designated  Aldurazyme,  for  the  treatment  of  MPS-I.
Aldurazyme  treats  MPS-I by  replacing a  deficiency  in  (alpha)-L-iduronidase
caused by genetic defects.  Until now, enzyme replacement  therapy for MPS-I has
been impractical  because no one has been able to manufacture  adequate supplies
of  (alpha)-L-iduronidase  with the  proper  structure  and  purity.  The proper
structure of mannose-6-phosphate structures on the enzyme is essential to ensure
efficient  uptake of the enzyme by the cells and enable a therapeutic  effect at
relatively low doses. Using production and purification processes licensed by us
and  subsequently  improved,  we are able to produce  sufficient  quantities  of
Aldurazyme with the proper structure and purity.

In April 1999,  we completed a  twelve-month  evaluation  period for our initial
clinical  trial of Aldurazyme.  Initiated in December 1997,  this clinical trial
treated ten patients with MPS-I at six medical centers in the United States. We
continue  to treat and  monitor  eight of these  ten  patients  according  to an
extension  protocol.  Patients are treated with a slow  intravenous  infusion of
Aldurazyme  once a week at a dose of 100 units per  kilogram of patient  weight.
(The activity of the product used in the pre-clinical and early clinical studies
was defined at 125,000 units/ml. Due to a subsequent optimization and validation
of the product  activity assay,  the same product activity is now defined at 100
units/ml.  This change does not  represent a change in either the actual dose or
the formulation of the product, merely a change in assay conditions and activity
definition.)

The primary endpoints set forth in the  investigational new drug application for
Aldurazyme  were a reduction  in liver or spleen size and a reduction in urinary
GAG levels.  Eight of the ten patients  achieved the primary  endpoint goal of a
20% reduction of liver size within the six-month  evaluation  period. Of the two
patients who did not achieve the targeted liver reduction,  one patient achieved
a liver size in the normal range and the second  patient,  who had  hepatitis at
the end of the six-month period,  achieved the 20% reduction after the six-month
period. Five of the ten patients achieved a 20% reduction in spleen size. All of
the ten patients  achieved the primary endpoint goal of at least a 50% reduction
in urinary GAG levels.

Each patient with MPS-I exhibits a different mix of clinical symptoms. We tested
each patient at intervals throughout the six-month evaluation period measuring a
variety of secondary  endpoints to determine  whether the primary  endpoints are
reasonably likely to predict clinical benefit.  The secondary  endpoints we used
included joint disease, eye disease and cardiac function. Additional measures of
efficacy included sleep apnea and airway evaluations, endurance and fatigue, and
evaluations of bone. Except for the evaluations of the patient's bones, in which
no  improvement  was  expected  due to the short  duration  of the  trial,  most


                                       4

patients who exhibited physical symptoms of the disease achieved  improvement in
those  symptoms  during the course of the  evaluation  period for the  secondary
endpoints and additional clinical measures of efficacy.

During the twelve-month  evaluation period, four of the ten patients experienced
immune responses  specific to the enzyme.  No long-term  effects of these immune
responses  have been  observed at this time.  A few  patients  experienced  side
effects,  primarily  hives in five  patients,  which  probably  were  related to
Aldurazyme.  The hives became  recurrent with each infusion in four patients but
eventually decreased and resolved with increased pre-medication. No patients had
life-threatening allergic reactions. Of the events that probably were related to
Aldurazyme,  the symptoms  occurred  during the infusions  only, were manageable
with  medications,  and did not impact the health or  well-being  of the patient
outside the  administration  setting as can be determined at this time.  Neither
clinical nor  laboratory  evaluations  showed any harmful  effect of  Aldurazyme
therapy.

At 103 weeks of  therapy,  a seven year old  patient in the  initial  trial died
suddenly of a respiratory arrest due to a systemic viral illness associated with
significant  pulmonary  and cardiac  infection.  The death took place  during an
airplane  flight.  The  contribution of altitude and altered  oxygenation to her
demise is unclear. The principal  investigator  believes the event was unrelated
to treatment with Aldurazyme and at this time we concur. A second patient in the
study died after 2 1/2 years of therapy due to a complication  following surgery
for a pre-existing MPS-I related skeletal problem.

In  collaboration  with  Genzyme,  we  initiated a Phase III  clinical  trial of
Aldurazyme  in December  2000 with the intention to file a BLA with the FDA late
in 2001, pending the successful outcome of the Phase III Trial.

The joint venture plans to continue assessment of the efficacy of treatment with
Aldurazyme in this Phase III trial.  The  parameters for this clinical study are
expected to include:

o    Pulmonary  function  (Forced  Vital  Capacity  (FVC-1),  a measure  of lung
     capacity)

o    A 6-minute walk test (a test of overall physical function)

Secondary parameters will include:

o    Functional ability assessment questionnaire

o    Hepatomegaly (enlargement of the liver)

o    Sleep apnea

o    Urinary GAGs

Tertiary parameters will include:

o    Joint range of motion

o    Patient's quality of life

o    Growth velocity

o    Visual acuity

o    Electrocardiogram and echocardiogram (cardiac function)

o    Other pulmonary function testing

o    Investigator global assessment

o    Parents' quality of life

The FDA  designated  Aldurazyme a fast track product for the treatment of severe
MPS-I.  Drugs  that show a  potential  to address  an unmet  medical  need for a
serious or life  threatening  disease  may be  eligible  to  receive  fast track
designation.  Fast track  designation does not guarantee a faster approval.  The
FDA may still require additional studies or data regarding Aldurazyme, which may
delay approval and  subsequent  commercial  sales.  See "Factors That May Affect
Future  Results--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--If  our
joint  venture  with  Genzyme  were  terminated,  our  ability to  commercialize
Aldurazyme would be delayed."

The joint venture  intends to  investigate  the safety of Aldurazyme in patients
with severe MPS-I. An initial trial to confirm safety in this patient population
is  expected to begin in 2001.  This  information  is  intended to be  available
during the BLA review with the FDA.






                                       5

MPS-VI.  MPS-VI,  also known as  Maroteaux-Lamy  syndrome,  is a genetic disease
caused by a deficiency  of the enzyme  N-acetylgalactosamine  4-sulfatase  (also
known as  arylsulfatase  B). Estimates from disease  frequency  studies indicate
that  there  are  approximately  1,100  patients  suffering  with  MPS-VI in the
developed world of which  approximately 340 are in the United States and Canada.
Patients with MPS-VI have symptoms similar to those for MPS-I.  However,  MPS-VI
patients do not have impairment of mental  function.  If untreated,  the average
life span of MPS-VI patients is estimated to be between the teenage years in the
severe form to over 30 years in the mild form.  MPS-VI has been  treated by bone
marrow  transplants.  However,  many  patients do not find an  appropriate  bone
marrow donor. Of the patients who find an appropriate  donor, many choose not to
receive a bone marrow transplant because of its serious risks and side effects.

rhASB. We are developing recombinant, human N-acetylgalactosamine 4-sulfatase or
rhASB,  for the treatment of MPS-VI.  We believe that rhASB will treat MPS-VI by
replacing a deficiency in the enzyme N-acetylgalactosamine 4-sulfatase.

From 1994 through 2000, preclinical studies of rhASB were conducted on cats with
naturally  occurring feline MPS-VI.  Cats with feline MPS-VI have  physiological
characteristics  and clinical symptoms similar to those exhibited by humans with
MPS-VI.  RhASB was shown to be well  tolerated  for at least six months in three
cat studies of rhASB in feline MPS-VI.  Additionally,  biochemical  activity was
confirmed as a significant reduction in stored carbohydrate material (GAG's) was
observed in the cats' major organ systems and peripheral  circulation.  Clinical
benefit was also shown in the cats'  skeletal and  neurological  systems.  These
studies were summarized in the rhASB investigational new drug application.

We are continuing to develop improved production and purification  processes for
rhASB  for the  clinical  and  commercial  manufacturing  processes.  RhASB  has
received fast track and orphan drug designations from the FDA. In addition,  the
European  Commission  has  designated  rhASB for the  treatment  of MPS-VI as an
orphan medicinal product in the European Community.  An investigational new drug
application  was filed with the FDA and a Phase I clinical  trial for the use of
rhASB at two dose levels to treat MPS-VI in six patients  began in October 2000.
Patient  enrollment  in this trial was completed in February  2001,  and initial
clinical results from this trial should be available in September 2001.

Other Diseases And Conditions

Burn Debridement

In 1997,  approximately  65,000  patients in the United  States were admitted to
hospitals  with  serious  burns.  Approximately  20% of these  patients had very
severe  burns  that   destroyed   all  layers  of  the  skin,   referred  to  as
full-thickness or third-degree  burns.  Full-thickness  burns require major skin
grafts. This typically requires admission to one of approximately 150 major burn
centers in the  United  States.  Full-thickness  burns are  treated by  removing
unhealthy and dead tissue, a process called  debridement,  to prevent  infection
and to prepare the burned site for skin  grafting or other  therapy.  Currently,
full-thickness  burns are  debrided by  multiple  surgical  procedures  that are
complicated by loss of blood, loss of healthy tissue,  continued trauma and pain
and scarring. In many instances, surgery must be delayed in severely compromised
patients.  Additionally,  certain parts of the body, such as the hands and face,
are difficult to treat by this method.

A limited number of topical debridement products are available as an alternative
to surgery.  Topical enzymatic products,  however, have not been widely accepted
by physicians  treating burn patients because the products either act too slowly
and are  ineffective,  or act  indiscriminately  on both  dead and  living  skin
causing the patient intolerable pain.

A significant  part of human skin is made up of carbohydrates  and proteins.  We
believe  that there is an  opportunity  for more  selective  enzyme  debridement
products that have greater specificity at digesting carbohydrates or proteins in
dead tissue.

Based on  discussions  with general  wound  specialists,  we believe that if the
products  successfully debride  full-thickness burns, they have the potential to
effectively debride partial thickness burns and other types of wounds as well.

Vibriolysin.

Vibriolysin  is an enzyme from a marine  bacterium that acts  preferentially  on
denatured  (unfolded)  proteins and was discovered by scientists at W.R. Grace &
Co. Upon review of the data from preclinical studies that were conducted by W.R.
Grace,  in May 1998 we  obtained  a  three-year  option to  obtain an  exclusive
license to  Vibriolysin.  In January 2001,  we notified W.R.  Grace that we were
exercising  that option and we are  currently in  negotiations  to finalize this
agreement. In preclinical studies supported by W.R. Grace, Vibriolysin was shown
to safely debride  full-thickness burns in pigs, and accelerate wound healing in
less severe burn lesions.  In studies  sponsored by us and conducted at UCSD and
Vanderbilt,  the  ability of  Vibriolysin  to debride  full-thickness  burns was
confirmed in mice,  rats and pigs.  Tests to apply skin grafts to burns debrided
by  Vibriolysin  were  successful  in mice  and  pigs  (tests  in rats  were not
attempted).  Based on the successful  completion of  appropriate  toxicology and
pharmacokinetic  studies,  the Company  expects to initiate a clinical  trial in
2001 pending regulatory submission and approval in the US or Europe.


                                       6

Other Research and Development

We intend to develop additional enzyme  replacement  therapies for other genetic
diseases.  We have identified genetic diseases that we believe will respond well
to enzyme replacement  therapy.  We are developing enzyme replacement  therapies
that we believe qualify for orphan drug  designation.  Due to the known biologic
mechanism of proposed enzyme  replacement  therapies,  we believe that the human
clinical trials for future genetic diseases may be similar to those for MPS-I.

We are applying a portion of our research and development efforts on enzymes for
the treatment of other non-genetic  disease  conditions where the biology of the
disease is well  understood  and therefore the  potential  therapeutic  value of
these types of enzymes can be assessed.  This would include  diseases  currently
without  effective  therapies  where we can  leverage  our core  competence  and
technology to move quickly  through  preclinical  development  and into clinical
trials.

Carbohydrate Analysis, Products and Services

Glyko, Inc., our wholly-owned subsidiary, sells carbohydrate analytical products
and services.  These products and services  provide  sophisticated  carbohydrate
analysis  to  research  institutions  and  commercial  laboratories.  Commercial
laboratories  use  carbohydrate  analysis to determine  carbohydrate  structure,
sequence  and  quantity.  Glyko,  Inc.'s  key  technology,  Fluorphore  Assisted
Carbohydrate  Electrophoresis,  also known as FACE(R), is a rapid and relatively
inexpensive method of analyzing complex carbohydrates. In a typical application,
FACE(R)  will  rapidly  process a sample of  unknown  composition.  It will then
identify the  carbohydrate  structures  present,  quantify  their  abundance and
prepare a detailed report.

Glyko,  Inc.'s primary product is the FACE(R)Imaging  System, an electrophoretic
system that includes an imager and software  designed to separate,  identify and
quantify carbohydrates.  Glyko, Inc. also sells the consumable products required
for the system's operation.

In addition, Glyko, Inc. provides:

o    Reagents  used in  carbohydrate  chemistry,  including  carbohydrate-active
     enzymes

o    Custom   analytical   services  for   profiling  and   sequencing   complex
     carbohydrates

o    Research services on carbohydrate related problems

o    Diagnostic methods and services for lysosomal storage diseases, diseases in
     which residues build up in lysosomes because of deficiencies in enzymes.

Glyko,  Inc. also markets the only urinary screening test cleared by the FDA for
lysosomal  storage  diseases.  Glyko,  Inc.  also  provides a lysosomal  storage
diseases  screening  service using its test and related  diagnostic  technology.
Glyko,  Inc.'s diagnostics line includes software for the automated diagnosis of
oligosaccharidoses,  a subclass of lysosomal  storage  diseases.  Glyko, Inc. is
developing  similar  software for MPS  diseases.  Glyko,  Inc. is expanding  its
ability to measure  GAGs in urine.  In  addition  to MPS-I,  elevated or reduced
levels of GAGs in urine may serve as early, non-invasive indicators for a number
of  diseases,  including  osteoporosis,   degenerative  joint  diseases,  kidney
diseases  as well as  lysosomal  storage  diseases.  In  addition,  Glyko,  Inc.
provides  analysis  of  plasma  heparin,  a type of GAG,  and is  developing  an
automated  analyzer for heparin in whole blood and in urine. The direct analysis
of  heparin  concentration  in blood or plasma  allows for close  monitoring  of
patients on  heparin-based  anti-coagulation  therapy.  Over-or  under-dosing of
heparin can result in serious adverse side effects.

Glyko,  Inc.  purchased the reagent  business of Oxford  GlycoSciences in May of
1999.  This  business  adds  a  product  line  of  chromatography   columns  and
disposables as well as additional reagents and enzymes to the current technology
offered by Glyko,  Inc.  As of March  2001,  Glyko,  Inc.  markets  17 kits,  63
enzymes,  110  carbohydrate  standards,  as well as HPLC columns,  miscellaneous
reagents, analytical and diagnostic services.




















                                       7

Manufacturing

The drug  candidates  we are currently  developing  require the  manufacture  of
recombinant enzymes. For our genetic disease programs,  we expect to manufacture
the bulk  enzymes.  We believe  that we will be able to  manufacture  sufficient
quantities  of our  genetic  disease  drug  products  for  clinical  trials  and
commercial sales in part because relatively low doses are required for treatment
and because the targeted patient populations are small. In general, we expect to
contract  with outside  service  providers for certain  manufacturing  services,
including  final product fill and finish  operations and bulk enzyme  production
for clinical and early commercial  production where the production  requirements
exceed our manufacturing capacity.

In the first  quarter of 2000, we began  production  of Aldurazyme  for clinical
requirements  including the Phase III clinical trial and other clinical studies.
The bulk  production  is being  done in our  Galli  Drive  (Novato,  California)
manufacturing  facility.  Galli is a 32,800 square foot cGMP production facility
including  support  areas housing  utilities,  laboratories  and  administrative
functions.  We expect to support the commercial  launch of Aldurazyme  from this
facility. Vialing and packaging will be performed using contract manufacturing.

We are developing additional  manufacturing capacity to support commercial sales
of Aldurazyme,  rhASB or other genetic diseases  enzymes.  We intend to complete
this phase of  development  in 2001 by selective  additions  to certain  support
activities in our Galli Drive manufacturing facility.

In 2000, the manufacturing  facilities in Novato were inspected and subsequently
licensed by the State of California  Food and Drug Branch for the  production of
clinical trial material.  These facilities will be inspected by the FDA or other
regulatory  agencies after the filing of a BLA or other  marketing  application.
These facilities, and those of any third-party manufacturers, will be subject to
periodic inspections  confirming  compliance with applicable law. Our facilities
must be cGMP certified before we can manufacture our drugs for commercial sales.
Failure to comply with these  requirements  could  result in the shutdown of our
facilities, fines or other penalties.

Sales and Marketing

Pharmaceutical  Sales and Marketing.  We have no experience marketing or selling
pharmaceutical  products. To commercially market our products once the necessary
regulatory  approvals  are  obtained,  we must either  develop our own sales and
marketing force or enter into arrangements with third parties.

We  established a joint venture with Genzyme for the worldwide  development  and
commercialization  of  Aldurazyme  for the  treatment of MPS-I.  Under the joint
venture,  Genzyme will be  responsible  for marketing,  distribution,  sales and
obtaining reimbursement of Aldurazyme worldwide.

In the  future,  we may  develop  the  capability  to  market  and sell our drug
products that are targeted at small or concentrated patient populations. In many
cases, we believe that these patient populations are typically well-informed and
well-connected to the medical community.  Often family/patient  groups suffering
from niche diseases are capable users of the internet to share  experiences  and
gather  information.  We believe  that  direct  marketing  to these  families or
patients  would  be  effective.   We  may  also  market  our  products   through
distributors or other collaborators, particularly for those products targeted at
larger  patient  populations  or  for  countries  where  the  development  of an
infrastructure is not economically attractive.

Sales and Marketing of  Carbohydrate  Analytical  Products and Services.  Glyko,
Inc.  sells its  products and services  primarily  to  distributors  of research
products,  quality control laboratories and research  laboratories.  Glyko, Inc.
has a sales  staff of three,  who cover the United  States,  Canada and  Europe.
Direct sales efforts accounted for  approximately 70% of Glyko,  Inc.'s revenues
in 2000.  Glyko,  Inc. has  established a network of  distributors to expand its
coverage in the analytical  products market.  Glyko, Inc. has relationships with
three major research  products  distributors  worldwide and with one distributor
for North America.  These distribution  agreements allow these companies to sell
Glyko, Inc. manufactured products under the distributor's own name (OEM). Glyko,
Inc.  also  has  distribution  agreements  with  third  parties  covering  Asia,
Australia,  Europe and Mexico. Sales by distributors accounted for approximately
24% of Glyko,  Inc.'s  revenues  in 2000.  The  remaining  19% of Glyko,  Inc.'s
revenues  are from OEM  sales.  Services  provided  to  BioMarin  accounted  for
approximately 20% of Glyko, Inc.'s overall revenue in 2000.

Patents and Proprietary Rights

Our success depends in part on our ability to:

o    Obtain patents

o    Protect trade secrets

o    Operate without infringing the proprietary rights of others

o    Prevent others from infringing on our proprietary rights


                                       8

We may obtain licenses to patents and patent applications from others.

We have  thirteen  patent  applications  presently  pending in the United States
Patent and Trademark Office. We have filed six foreign counterpart  applications
and expect to file a foreign counterpart to one of the other pending U.S. patent
applications at the proper time.

Glyko,  Inc.  owns twelve  issued U.S.  patents.  In addition,  Glyko,  Inc. has
licensed four U.S. patents and their foreign counterparts from AstroMed Ltd. and
its  successor  Astroscan  Ltd.  on  an  exclusive,   worldwide,  perpetual  and
royalty-free basis. Glyko, Inc. has also licensed six U.S. patents from Glycomed
Incorporated on an exclusive, worldwide, perpetual and royalty-free basis. These
patents are all related to Glyko, Inc.'s products and services.

Government Regulation

Food  and  Drug  Administration  Modernization  Act of  1997.  The Food and Drug
Administration  Modernization  Act of 1997 was enacted,  in part,  to ensure the
availability  of safe and  effective  drugs,  biologics  and medical  devices by
expediting  the FDA review  process  for new  products.  The  Modernization  Act
establishes  a  statutory  program  for the  approval  of fast  track  products,
including  biologics.  The fast track  provisions  essentially  codify the FDA's
accelerated approval  regulations for drugs and biologics.  A fast track product
is defined as a new drug or biologic  intended for the treatment of a serious or
life-threatening  condition  that  demonstrates  the  potential to address unmet
medical needs for this condition.  Under the new fast track program, the sponsor
of a new drug or biologic may request the FDA  designate the drug or biologic as
a fast track product at any time during the clinical development of the product.
The  Modernization  Act  specifies  that the FDA must  determine  if the product
qualifies for fast track designation  within 60 days of receipt of the sponsor's
request.

Approval of a license  application  for a fast track  product can be based on an
effect on a clinical  endpoint or on a  surrogate  endpoint  that is  reasonably
likely to predict clinical benefit. Approval of a license application for a fast
track product based on a surrogate endpoint may be subject to:

o    Post-approval  studies to validate  the  surrogate  endpoint or confirm the
     effect on the clinical endpoint

o    Prior review of all promotional materials

If a  preliminary  review of the  clinical  data  suggests  that the  product is
effective,  the FDA may initiate review of sections of a license application for
a fast track product before the application is complete.  This rolling review is
available  if the  applicant  provides a schedule  for  submission  of remaining
information and pays applicable user fees. However, the time period specified in
the Prescription Drug User Fees Act, which governs the time period goals the FDA
has  committed  to  reviewing  a license  application,  does not begin until the
complete application is submitted.

In September  1998, the FDA  designated  Aldurazyme a fast track product for the
more severe forms of MPS-I.  We cannot predict the ultimate  impact,  if any, of
the fast track process on the timing or likelihood of FDA approval of Aldurazyme
or any of our other potential products.

Orphan Drug  Designation.  In September  1997,  Aldurazyme  received orphan drug
designation  from  the  FDA.  In  February  1999,  rhASB  received  orphan  drug
designation from the FDA. Orphan drug designation is granted by the FDA to drugs
intended to treat a rare  disease or  condition.  A rare disease or condition is
one,  which  generally  affects  fewer than  200,000  individuals  in the United
States.  Orphan drug designation must be requested before submitting a biologics
license application.  After the FDA grants orphan drug designation,  the generic
identity of the  therapeutic  agent and its  potential  orphan use are disclosed
publicly by the FDA. A similar system for orphan drug designation  exists in the
European  Community.  Both  Aldurazyme and rhASB received  designation as orphan
medicinal  products by the European  Commission in February 2001. In Europe this
designation allows for 10 years of market exclusivity.

Orphan drug  designation  does not shorten the  regulatory  review and  approval
process  for an orphan  drug,  nor does it give that drug any  advantage  in the
regulatory  review  and  approval  process.  If an orphan  drug  later  receives
approval  for  the  indication  for  which  it  has  designation,  the  relevant
regulatory  authority may not approve any other  applications to market the same
drug for the same indication,  except in very limited  circumstances,  for seven
years.  Although  obtaining  approval  to  market a  product  with  orphan  drug
exclusivity may be advantageous,  we cannot be certain that we will be the first
to obtain approval for any drug for which we obtain orphan drug designation. Nor
can we be certain  that orphan drug  designation  will result in any  commercial
advantage  or  reduce  competition.  Nor  can we be  certain  that  the  limited
exceptions to this  exclusivity  will not be invoked by the relevant  regulatory
authority.

Competition

Pharmaceutical Products. The biopharmaceutical  industry is rapidly evolving and
highly competitive.  The following is a summary  competitive  analysis for known
competitive threats for each of our major biopharmaceutical product programs:


                                       9

Aldurazyme for MPS-I. On November 21, 2000, Transkaryotic Therapies, Inc. (TKTX)
announced  that a US patent on  (alpha)-L-iduronidase  had been  issued and that
this patent had been exclusively  licensed to TKTX. We have examined the patent,
the patent file, the prior art and other  factors.  Our assessment is that there
is reason to believe that the patent may not survive a challenge.  However,  the
processes of patent law are  uncertain  and any patent  proceeding is subject to
multiple unanticipated  outcomes. We believe that it is in the best interests of
our joint  venture with Genzyme to pursue the  development  of  Aldurazyme  with
commercial  diligence,  concurrent with our challenge of the patent, in order to
gain  marketing  approvals as rapidly as possible and to provide MPS-I  patients
with the benefits of Aldurazyme.  If the patent is valid, the joint venture will
need to reach an accommodation with the holder of the license to the patent.

This patent does not affect our ability to market Aldurazyme in Europe or Japan,
both major pharmaceutical  markets. A patent making the same claims was rejected
by the European Community and cannot be refiled.

A small private company has announced that it has novel enzymatic  technology to
make  enzymes  with  proper  glycosylation  and   phosphorylation.   The  proper
carbohydrate  and phosphate  structural  elements of the enzyme are essential to
facilitate  uptake of the enzyme by the patient's cells to have efficient enzyme
replacement  therapy.  This company has stated an  intention  to begin  clinical
trials  of its  enzyme  for  MPS-I  in  2001.  BioMarin's  preclinical  analysis
indicates that Aldurazyme is highly  efficient in being taken up by cells during
enzyme replacement therapy as a result of the proper mannose-6-phosphate ligands
(glycosylation  and   phosphorylation)  on  the  enzyme.  We  do  not  have  any
comparative data to assess directly the relative potential therapeutic qualities
of Aldurazyme and the other enzyme.

RhASB  for  MPS-VI.  We  know  of  no  active  competitive  program  for  enzyme
replacement therapy for MPS-VI that has entered clinical trials.

Gene therapy is a potential  competitive threat to enzyme replacement  therapies
for both MPS-I and MPS-VI. We know of no competitive  program using gene therapy
for the treatment of either MPS-I or MPS-VI that has entered clinical trials.

Vibriolysin  for debridement of serious burns.  Other  enzymatic  products exist
which  might be possibly  used for the  debridement  of serious  second or third
degree  burns.  Those  products  in their  current  form have not  captured  any
meaningful share of the debridement  function in the treatment of burn patients.
We know of no clinical program of a new enzymatic product for the debridement of
serious burns. The primary competition for Vibriolysin  continues to be surgical
debridement.

Carbohydrate Analysis Products and Services. The FACE(R)Imaging System's primary
competitors are alternative carbohydrate analytical technologies including:

o    Capillary electrophoresis

o    High-pressure liquid chromatography

o    Mass spectrometry

o    Nuclear magnetic resonance spectrometry

The major advantages of FACE(R) are:

o    Low cost

o    Quantification of carbohydrates present

o    Easy application to samples of unknown composition

o    User friendly procedures and software

o    Provides versatility for other non-carbohydrate applications

The major disadvantages of FACE(R) are:

o    FACE(R) requires  single-use  specialized gels which give FACE(R) systems a
     higher  disposable cost than some competitive  products which have reusable
     components.

o    Some  competitive  products may provide a more precise  measurement  of the
     molecular weight of a sample.

o    One competitive technology can provide more complete structural information
     about the sample.

The acquisition of the Oxford  GlycoSciences  reagents business has given Glyko,
Inc.  the ability to compete  directly  with  companies  with  expertise in HPLC
technologies.  The competition in the  carbohydrate-active  enzymes  business is
comprised  primarily  of  distributors  of broad lines of research  products and
supplies,  particularly fine chemicals and reagents. Glyko, Inc. competes on the
basis of the catalog of products it offers and the number of carbohydrate-active
enzymes it offers and their  proprietary  nature.  Glyko,  Inc. believes that it
also  provides  superior  service  because  it  provides  customers  with  sales
information  and assistance  based on scientific  understanding  of carbohydrate


                                       10

chemistry and function.  However,  it does not offer as many products as some of
its competitors.  Glyko,  Inc. plans to expand its enzyme product offerings over
the next several years to compete with the broadest  product lines offered today
by competitors.  However,  neither we nor Glyko, Inc. can assure you that Glyko,
Inc. will  successfully  broaden its product offerings or will otherwise compete
successfully.

Glyko,  Inc.'s  diagnostic  product line  competes  primarily  with  alternative
technologies and laboratory  services.  Glyko, Inc. believes that its diagnostic
approaches are novel. Glyko, Inc. has the only urinary screening test cleared by
the FDA for certain lysosomal  storage  diseases.  Glyko, Inc. believes that the
test  may be used as a  screening  tool  for  early  detection  of a  number  of
lysosomal  storage  diseases  and that  success of the  product  will  depend on
whether  it  becomes  widely  adopted.  See  "Factors  that  May  Affect  Future
Results--If we fail to compete successfully,  our revenues and operating results
will be adversely affected."

Employees

As of  March  9,  2001,  we had 174  full-time  employees,  100 of  whom  are in
manufacturing,  51 of whom are in  research  and  development,  5 of whom are in
sales  and  marketing  of  the  Glyko,  Inc.  products  and  18 of  whom  are in
administration.

We consider our employee  relations to be good. Our employees are not covered by
a collective  bargaining agreement.  We have not experienced  employment related
work stoppages. We cannot assure you that we will be able to continue attracting
qualified personnel in sufficient numbers to meet our needs.






























































                                       11

                     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 that involves 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
drug  products.  As of  December  31,  2000,  we had an  accumulated  deficit of
approximately  $80.5 million.  We expect to continue to operate at a net loss at
least through 2002. Our future profitability depends on our receiving regulatory
approval of our drug 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.

Because of the  relative  small size and scale of our  wholly-owned  subsidiary,
Glyko,  Inc.,  profits from its products and services  will be  insufficient  to
offset the expenses associated with our pharmaceutical business. As a result, we
expect that  operating  losses will  continue and  increase for the  foreseeable
future.

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.   Activities   which  will  require   additional
expenditures include:

     Research and development programs

     Preclinical studies and clinical trials

     Process development, including quality systems for product manufacture

     Regulatory processes in the United States and international jurisdictions

     Commercial scale manufacturing capabilities

     Expansion of sales and marketing activities

The amount of capital we will need depends on many factors, including:

     The progress, timing and scope of our research and development programs

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

     The time and cost necessary to obtain regulatory approvals

     The time and cost  necessary  to develop  commercial  processes,  including
     quality systems

     The time and cost  necessary  to build  our  manufacturing  facilities  and
     obtain the necessary regulatory approvals for those facilities

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

     Any  changes  made  or  new  developments  in our  existing  collaborative,
     licensing and other commercial relationships

     Any new collaborative, licensing and other commercial relationships that we
     may establish

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:




                                       12

     Additional leases for new facilities and capital equipment

     Additional licenses and collaborative agreements

     Additional   contracts  for  consulting,   maintenance  and  administrative
     services

     Additional contracts for product manufacturing

We believe that the cash, cash equivalents and short-term  investment securities
balances  at December  31, 2000 will be  sufficient  to meet our  operating  and
capital  requirements  through 2001.  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.

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 candidates  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  may 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  candidate.  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 products.  Additional  factors that can cause delay or termination of our
clinical trials include:

     Slow patient enrollment

     Longer treatment time required to demonstrate efficacy

     Lack of sufficient supplies of the drug candidate

     Adverse medical events or side effects in treated patients

     Lack of effectiveness of the drug candidate being tested

     Regulatory requests for additional clinical trials

Typically,  if a drug product is intended to treat a chronic disease, 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 addition,  clinical  trials on humans
are typically  conducted in three phases. The FDA generally requires two pivotal
clinical trials that demonstrate substantial evidence of safety and efficacy and
appropriate dosing in a broad patient population at multiple sites to support an
application for regulatory approval.  If a drug is intended for the treatment of
a serious or life-threatening  condition and the drug demonstrates the potential
to address unmet medical needs for this condition,  fewer clinical trials may be
sufficient  to prove safety and efficacy  under the FDA's  Modernization  Act of
1997.









                                       13

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.
The results were presented at the American Society for Human Genetics in October
1999. We continue to collect data from the ongoing  treatment of these  original
patients.  The initial  clinical  trial  treated ten patients with MPS-I at six
medical centers in the United States.  Two of the original ten patients enrolled
in the first  clinical trial of Aldurazyme  died in 2000.  Based on medical data
collected from clinical  investigative  sites,  neither case directly implicated
treatment  with  Aldurazyme  as the cause of death.  The data  suggest  that one
patient died due to a  combination  of systemic  viral  illness,  residual MPS I
coronary disease,  and external factors.  This patient had received 103 weeks of
Aldurazyme  administration.  For the other  patient,  the data  suggest that the
patient  died  due  to  complications  following  posterior  spinal  fusion  for
scoliosis. This patient had received 127 weeks of Aldurazyme administration.

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

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

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  before the
Aldurazyme marketing applications can be approved. We cannot ensure that we will
manufacture  the  process  qualification  batches or pass the  inspections  in a
timely manner, if at all.

If we fail to obtain orphan drug  exclusivity for our products,  our competitors
may sell products to treat the same conditions and our revenues may 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 obtains
the first 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.

We received  orphan drug  designation  from the FDA for  Aldurazyme in September
1997. In February  1999, we received  orphan drug  designation  from the FDA for
rhASB for the  treatment  of MPS-VI.  In February  2001 we received  orphan drug
designation from the European  Community for both products.  Even though we have
obtained  orphan drug  designation  for these drugs 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 that
exclusivity would effectively protect the product from competition.  Orphan drug
designation neither shortens the development time or regulatory review time of a
drug so designated nor gives the drug any advantage in the regulatory  review or
approval process.

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







                                       14

Our initial drug candidates target diseases with small patient populations.  As
a result,  our per patient prices must be high enough to recover our development
costs and achieve  profitability.  For example, two of our initial drug products
in genetic  diseases,  Aldurazyme  and rhASB,  target  patients  with MPS-I and
MPS-VI,  respectively.  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  payors,  there  would be no  commercially  viable  markets  for our
products.

The course of treatment for patients with MPS-I using  Aldurazyme 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
without reimbursement from third-party payors.

Third-party  payors,  such  as  government  or  private  health  care  insurers,
carefully  review  and  increasingly  challenge  the price  charged  for  drugs.
Reimbursement  rates from private  companies vary  depending on the  third-party
payor,  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  payors will pay for the costs of our drugs
and the courses of treatment.  Even if we are able to obtain  reimbursement from
third-party payors, 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  payors 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.  Meaningful  patent  protection may not be available for some of the
enzymes we are  developing,  including  Aldurazyme  and rhASB.  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, including those for Aldurazyme and rhASB,
have been published and are believed to be in the public domain. The composition
and  genetic  sequences  of other MPS  enzymes  which 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
composition-of-matter  patents,  we will depend on orphan drug status to provide
us a competitive advantage.

In  addition,  our owned and  licensed  patents and patent  applications  do not
ensure  the  protection  of our  intellectual  property  for a  number  of other
reasons:

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




                                       15

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.  As a Company,  we have no  meaningful
experience with competitors interfering with our patents or patent applications.

Enforcing  patents  is  expensive  and  may  absorb   significant  time  of  our
management.  In litigation, a competitor could claim that our issued patents are
not valid for a number of  reasons.  If the  court  agrees,  we would  lose that
patent.

Even if we receive a patent, it 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:

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

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

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.

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 a patent that
related to (alpha)-L-iduronidase.  If Aldurazyme infringes on this patent and we
are not able to  successfully  challenge it, we may be prevented  from producing
Aldurazyme unless and until we obtain a license.

The United  States  Patent and Trademark  Office  recently  issued a patent that
includes  claims  related  to  (alpha)-L-iduronidase.  Our  lead  drug  product,
Aldurazyme,  may infringe on this patent. We believe that this patent is invalid
on a number of grounds.  A patent making the same claims was filed in Europe and
has been rejected and cannot be refiled.  Our challenges to the U.S.  patent may
be  unsuccessful,  but the  rejection of the European  application  supports our
strategy  to  challenge  the  validity  of  the  U.S.  patent.  Even  if we  are
successful,  challenging the patent may be expensive,  require our management to
devote  significant time to this effort and may delay  commercialization  of our
product in the United States.

The patent holder has granted an exclusive license for products relating to this
patent to one of our competitors. If we are unable to successfully challenge the
patent,  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.











                                       16

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 Ceredase(R) and Cerezyme(R)  enzymes for Gaucher  disease,  a
rare genetic disease, 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.

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.

Upon  termination  of the joint venture one party must buy out the other party's
interest in the joint  venture.  The party who buys out the other will then also
obtain,  exclusively,  all rights to  Aldurazyme  and any  related  intellectual
property and regulatory approvals.

If the joint venture is terminated by Genzyme for a breach on our part,  Genzyme
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
our  interest  in the joint  venture.  We would  then  effectively  be unable to
develop and commercialize  Aldurazyme.  If we terminated the joint venture for a
breach by Genzyme,  we would be obligated to buy out  Genzyme's  interest in the
joint  venture and, we would then be granted all of these  rights to  Aldurazyme
exclusively.   While  we  could  then  continue  to  develop  Aldurazyme,   that
development would be slowed because we would have to divert substantial  capital
to buy out Genzyme's interest in the joint venture. We would then either have to
search for a new partner to  commercialize  the  product  and to obtain  foreign
regulatory approvals or have to develop these capabilities ourselves.

If the joint venture is terminated by us without  cause,  Genzyme would have the
option,  exercisable  for one year, to  immediately  buy out our interest in the
joint venture and obtain all rights to Aldurazyme exclusively.  If the agreement
is terminated by Genzyme  without cause,  we would have the option,  exercisable
for one year, to immediately buy out Genzyme's interest in the joint venture and
obtain these  exclusive  rights.  In 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 us because Genzyme fails to make the $12.1
million payment to us upon FDA approval of the BLA for  Aldurazyme,  we would be
obligated to buy  Genzyme's  interest in the joint  venture and would obtain all
rights to Aldurazyme  exclusively.  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.





                                       17

With the  exception of  Aldurazyme,  we have no  experience  manufacturing  drug
products in volumes  that will be  necessary to support  commercial  sales.  Our
manufacturing  process  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.

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
rhASB,  Vibriolysin or any future  product  candidates  successfully  in a scale
large enough to support their respective commercial markets.

We may  encounter  problems  with any of the following if we attempt to increase
the scale or size of manufacturing:

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

     Production yields

     Purity

     Quality control and assurance systems

     Shortages of qualified personnel

     Compliance with regulatory requirements

We have  constructed  and  built-out a total of 41,200 square feet at our Novato
facilities for  manufacturing  capability for Aldurazyme and rhASB. We expect to
expand the Galli Drive  facility in stages over time,  which creates  additional
operational complexity and challenges.  We expect that the manufacturing process
of all of our new products,  including rhASB,  will require lengthy  significant
time and  resources  before  we can  begin  to  manufacture  them (or have  them
manufactured by third parties) in commercial quantity.  Even if we can establish
the necessary  capacity,  we cannot be certain that manufacturing  costs will be
commercially   reasonable,    especially   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:

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

     Improving the processes licensed from others, or

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

A recombinant  cell line is a cell line with foreign DNA inserted  which is used
to produce a protein that it would not have otherwise produced.  The development
of a stable, high production cell line for any given enzyme is risky,  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 and our
Glyko,  Inc.  products,  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.


                                       18

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 candidates.

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,  which  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.  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 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.

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.




                                       19

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.

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:

     Progress  of  Aldurazyme  and our other  lead  drug  products  through  the
     regulatory  process,  especially  Aldurazyme  regulatory  actions  in the
     United States

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

     Government   regulatory   action  affecting  our  drug  candidates  or  our
     competitors' drug candidates in both the United States and foreign
     countries Developments or disputes concerning patent or proprietary rights

     General  market  conditions  for  emerging  growth  and   biopharmaceutical
     companies

     Economic conditions in the United States or abroad

     Actual or anticipated fluctuations in our operating results

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

     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:

     Trading in different time zones

     Different ability to buy or sell our stock

     Different market conditions in different capital markets

     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 46% of the outstanding  shares
of our common stock. Glyko Biomedical Ltd. owns 31% 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:







                                       20

     The election of all directors;

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

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

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 2.   Properties

We are  currently  leasing a total of six  buildings.  Four of our buildings are
located  in  Novato,  California,  each  within  a  half-mile  radius.  The four
buildings, each named for the streets on which they are located, are:

o    Bel Marin Keys facility

o    Galli Drive facility

o    Pimentel Court facility

o    Digital Drive facility

The fifth and sixth  buildings,  collectively  the Carson Street  facility,  are
located in Torrance, California.

The  Bel  Marin  Keys  facility  houses  administrative  staff  and  a  clinical
production  laboratory.  It consists of  approximately  13,400 square feet.  The
lease  expires in May 2001.  We have an option to extend the lease for up to two
additional three-year periods.

The Galli Drive facility consists of approximately  69,800 rentable square feet.
It currently houses research and development laboratories, storage and warehouse
functions,  administrative  offices, and our Aldurazyme  manufacturing facility.
The lease expires in August 2010 and has the option to extend for two additional
five-year periods.

The Pimentel Court facility,  with approximately  11,500 square feet, houses the
manufacturing,  research and administrative  operations of Glyko, Inc. The lease
expires  in April  2003  and has  options  for two  2-year  extensions.

The Digital Drive  facility,  34,000  rentable  square feet, is planned to house
research  and  process  development  functions.  The  building  shell  has  been
completed.  Development of internal  laboratory  space is on hold until at least
2002. When fully developed, it will consist of approximately 42,000 square feet.
The lease expires in November 2009.

The Carson Street facility housed our initial commercial manufacturing operation
for  Aldurazyme.  During the first quarter of 2000, the Company decided to close
its Carson Street clinical  manufacturing  facility.  The facility was no longer





                                       21

required for the  production of  Aldurazyme,  the initial  purpose of the plant,
after  a  decision  by the  BioMarin/Genzyme  LLC  (joint  venture)  to use  the
Company's  Galli Drive facility for the  manufacture of bulk Aldurazyme both for
the Phase III trial and for the commercial  launch of Aldurazyme.  This decision
was based in part on FDA guidance to use an improved production  process,  which
was  installed  in the Galli Drive  facility,  for the clinical  trial,  the BLA
submission  and  for  commercial  production.  The  majority  of  the  Company's
technical  staff  at  the  Carson  Street   facility  in  Torrance,   California
transferred to the Galli Drive  facility in Novato,  California in May. In 2000,
we were able to  sub-lease  the  office  facilities  in  Torrance,  but have not
subleased  the main  manufacturing  facility in which the lease  expires in June
2001.

Our administrative  office space is expected to be adequate until mid-2002.  Our
Aldurazyme production facilities' capacity may have to be supplemented beginning
in 2004 if the MPS-I market  penetration rates are such that the output from the
plant would be less than the market  demand.  Based on the  timelines  for other
genetic diseases such as MPS-VI, manufacturing capacity for these products will
have to be developed or purchased  from third parties for production of clinical
materials,  beginning  in  2002.  We plan  to use  contract  manufacturing  when
appropriate  to provide  product for both clinical and  commercial  requirements
until such time as we believe  it  prudent  to  develop  in-house  manufacturing
capability.

Item 3.  Legal Proceedings

We have no material legal proceedings pending.

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

No matters were  submitted to a vote of our security  holders during the quarter
ended December 31, 2000.


























































                                       22

                                     Part II

Item 5.  Market For Common Equity and Related Stockholder Matters

As of July 1999, our common stock has been listed on the Nasdaq  National Market
and the Swiss New Market SWX under the symbol "BMRN".  The following  table sets
forth the closing  sales prices for the our common stock for the periods  noted,
as reported by Nasdaq National Market.

                                                              Prices

Year                        Period                     High             Low


1999           Third Quarter (beginning July 22)      $18.75          $11.625
1999                    Fourth Quarter                $17.00          $11.625
2000                     First Quarter                $38.75          $12.75
2000                    Second Quarter                $27.75          $16.75
2000                     Third Quarter                $21.75          $16.375
2000                    Fourth Quarter                $17.62          $7.15625

On March 9, 2001, the last reported sale price on the Nasdaq National Market for
our common stock was $9.50.  We have never paid any cash dividends on our common
stock and we do not anticipate paying cash dividends in the foreseeable future.

Holders

As of March 9, 2001,  there were 64 holders of record of 37,115,610  outstanding
shares of our  common  stock.  Additionally,  on such date  options  to  acquire
6,463,061 shares of our common stock were outstanding.

Unregistered Securities

In October  2000, we issued  801,500  shares of common stock to Bank Vontobel AG
pursuant to the exercise of common  stock  warrants  issued on various  dates in
1997.  In  connection  with the  exercise of the  warrants,  we  received  total
consideration of $801,500.  The shares were issued pursuant to an exemption from
registration  under Regulation S of the Securities Act of 1933, as amended.  The
shares  were  appropriately  legended to reflect  the  restrictions  required by
Regulation  S and we have the right to refuse to register  any transfer not made
in accordance with Regulation S.

In February 2001, we issued 25,000 shares of common stock to Fredric Price,  the
Company's  Chief  Executive  Officer and Chairman of the Board,  pursuant to his
employment  agreement  with the Company.  The shares were issued  pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended  and Rule 701 under the  Securities  Act.  The shares are  appropriately
legended to indicate that the shares may not be resold unless  registered  under
the Securities Act or an exemption from registration is available for such sale.


Item 6. Selected  consolidated  financial data (in  thousands,  except per share
        data)

The selected consolidated balance sheet data of BioMarin  Pharmaceutical Inc. (a
development-stage company) as of December 31, 1997, 1998, 1999, and 2000 and the
statements of operations data for the periods from March 21, 1997 (inception) to
December 31, 2000 and the years ended December 31, 1998, 1999 and 2000 presented
below  are  derived  from the  consolidated  financial  statements  of  BioMarin
Pharmaceutical  Inc. and  subsidiaries,  including  Glyko,  Inc. from October 7,
1998,  the  date on  which  it was  acquired  by  BioMarin.  These  consolidated
financial  statements of BioMarin and  subsidiaries  have been audited by Arthur
Andersen LLP, independent public accountants. The consolidated balance sheets as
of December 31, 1998, 1999 and 2000 and the related  consolidated  statements of
operations for the periods from March 21, 1997 (inception) to December 31, 2000,
and the years ended  December 31, 1998,  1999 and 2000 and the related  reports,
are included elsewhere herein.

The selected consolidated  financial data set forth below contain only a portion
of BioMarin's financial statement  information and should be read in conjunction
with the Consolidated  Financial Statements of BioMarin  Pharmaceutical Inc. and
related Notes and "Management's  Discussion and Analysis of Financial  Condition
and  Results of  Operations"  included  elsewhere  herein.  All  financial  data
presented in thousands, except per share data.















                                       23


                                                                                                      Period from
                                                                                                     March 21, 1997
                                                                                                     (inception) to
                                                            Year Ended December 31,                   December 31,
                                              ----------------------------------------------------
                                                    1998              1999             2000               2000
                                              ----------------------------------------------------  ------------------

BioMarin's Consolidated
    Statements of Operations
                                                                                          
Revenues                                      $   1,190        $    6,976          $  12,326          $   20,492
Operating costs and expenses:
    Cost of products and services                   108               464                719               1,291
    Research and development                     10,502            27,206             35,794              75,416
    Selling, general and administrative           3,532             6,805              8,814              20,065
    Carson Street closure                            -                 -               4,423               4,423
                                              ----------------------------------------------------  ------------------
    Total costs and expenses                     14,142            34,475             49,750             101,195
                                              ----------------------------------------------------  ------------------
Loss from operations                            (12,952)          (27,499)           (37,424)            (80,703)

Interest income                                     685             1,832              2,979               5,561
Interest expense                                     -               (732)                (7)               (739)
Equity in loss of joint venture                     (47)           (1,673)            (2,912)             (4,632)
                                              ----------------------------------------------------  ------------------
Net loss                                      $ (12,314)       $  (28,072)         $ (37,364)         $  (80,513)
                                              ====================================================  ==================
Net loss per common share, basic
     and diluted                              $   (0.55)       $    (0.94)         $   (1.04)         $    (3.21)
                                              ====================================================  ==================
Weighted average common
    shares outstanding                           22,488            29,944             35,859              25,057
                                              ====================================================  ==================


                                                                     As of December 31,
                                                     ---------------------------------------------------
BioMarin's Consolidated Balance Sheet Data:              1997         1998        1999         2000
                                                     ---------------------------------------------------
                                                                                
Cash, cash equivalents and short-term investments     $   6,888    $ 11,389    $ 62,986     $ 40,201
Total current assets                                      7,507      12,819      66,422       44,541
Total assets                                              7,653      31,510     103,549       76,933
Long-term liabilities                                        -          110          85           56
Total stockholders' equity                                7,380      29,394      98,377       69,994



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations


The following  discussion  of the financial  condition and results of operations
should be read in conjunction  with our  consolidated  financial  statements and
their notes appearing elsewhere in this document.

Overview

We are a  developer  of 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 and clinical manufacturing,  the
establishment of laboratory and  manufacturing  facilities,  and  administrative
activities.

We have  incurred  net losses since  inception  and had an  accumulated  deficit
through December 31, 2000 of $80.5 million.  Our losses have resulted  primarily
from research and development activities and related administrative expenses. We
expect to continue to incur operating losses at least through 2002.

To date,  we have not generated  revenues from the sale of our drug  candidates.
Our lead product is Aldurazyme,  laronidase for  injection,  (recombinant  human
(alpha)-L-iduronidase),  which is undergoing  clinical  trials for use in enzyme
replacement  therapy for  Mucopolysaccharidosis-I  or MPS-I. We have initiated a
clinical  trial of rhASB,  an enzyme  replacement  therapy for the  treatment of
MPS-VI  or  Maroteaux-Lamy   Syndrome.  We  have  also  successfully   conducted
preclinical studies in pigs and mice of our burn enzyme, Vibriolysin, for use in
debridement  and  grafting  and  expect to submit an  application  to the FDA or
foreign equivalent to begin a clinical trial by mid-2001.


Results of Operations

Years Ended December 31, 2000 and 1999

For the years ended December 31, 2000 and 1999,  revenues were $12.3 million and
$7.0  million,  respectively.  Revenues from our joint venture with Genzyme were
$9.7 million and $5.3 million,  and Glyko,  Inc.  revenues were $2.6 million and
$1.5 million for the years ended December 31, 2000 and 1999,  respectively.  The
increase in joint venture revenues in 2000 was primarily the result of increased
manufacturing  activities  as we began enzyme  production in our new Galli Drive
manufacturing facility in Novato,  California.  Glyko, Inc. revenues increase in
2000  primarily as a result of increased  efforts in both the United  States and
European sales offices.

Cost of products and cost of services  related to Glyko,  Inc.  operations  were
$719,000 for 2000 compared to $464,000 for 1999.  Glyko's total external product
and service  costs as a percent of the sales of products and  services  were 28%
and 31% for the years ended December 31, 2000 and 1999, respectively.

Research and development  expenses increased to $35.8 million in 2000 from $27.2
million in 1999.  Increased  expenses in support of the Aldurazyme joint venture
with Genzyme,  especially manufacturing  requirements,  and of the rhASB program
were the major factors in the growth of research and development expenses.

Selling,  general and administrative  expenses increased to $8.8 million in 2000
from $6.8 million in 1999.  This increase was partially due to the  acceleration
of the  amortization  of goodwill for the purchase of Glyko,  Inc. The estimated
life of the goodwill was decreased from ten years to seven years in 2000.

In the first quarter of 2000, the Company  recorded a charge of $4.4 million for
the closure of its Carson Street clinical  manufacturing  facility. The facility
was no longer required for the production of Aldurazyme,  the initial purpose of
the plant, after a decision by the BioMarin/Genzyme LLC joint venture to use the
Company's  Galli Drive facility for the  manufacture of bulk Aldurazyme both for
the Phase III trial and for the commercial  launch of Aldurazyme.  This decision
was based in part on FDA guidance to use an improved production  process,  which
was installed in the Galli facility,  for the clinical trial, the BLA submission
and for the commercial  production.  The majority of our technical  staff at the
Carson  Street  facility  transferred  to the Galli  Drive  facility  in Novato,
California in May. The charge  primarily  consisted of  impairment  reserves for
leasehold improvements and equipment located in the Carson Street facility.

BioMarin's equity in the loss of its joint venture with Genzyme was $2.9 million
for 2000 compared to $1.7 million for 1999,  as the joint venture  continued the
original clinical trial of Aldurazyme and began a Phase III clinical trial.

Interest  income  increased  by $1.2  million to $3.0  million in 2000 from $1.8
million in 1999  primarily  due to increased  cash reserves  resulting  from our
initial public offering  (concurrent with an investment by Genzyme) in July 1999
and funds received from exercise of stock options and warrants.

The net loss was $37.4  million  ($1.04 per share,  basic and diluted) and $28.1
million ($.94 per share, basic and diluted) for 2000 and 1999, respectively.



                                       24

Years Ended December 31, 1999 and 1998

For the years ended  December 31, 1999 and 1998,  revenues were $7.0 million and
$1.2  million,  respectively.  Included  in 1999  revenues  is $5.3  million for
services  provided to the joint venture for Aldurazyme  compared to $837,000 for
1998 as a  consequence  of  Aldurazyme  being in more  complex,  later stages of
development  and the  effect of a full year of  operation  in 1999  compared  to
approximately  three months of operation in 1998. Revenues in 1999 also included
$1.5 million generated by Glyko, Inc. compared to $250,000 for 1998. We acquired
Glyko,  Inc.,  our  subsidiary  engaged in the sale of analytical and diagnostic
products and services,  on October 7, 1998.  External  revenues for products and
services for 1999 were up in comparison to 1998 as a result of revenues from the
biochemical reagents business of Oxford GlycoSciences Plc. (LSE: OGS), which was
acquired in May 1999.

Cost of products and cost of services  related to Glyko,  Inc.  operations  were
$464,000 for 1999 compared to $108,000 for 1998.  Glyko's external  products and
services  costs as a percent of the sales of products and services  were 31% for
1999 and 44% for 1998. The improvement was due to a favorable  revenue mix, with
a greater percentage of higher margin product sales.

Research and development expenses increased to $27.2 million for 1999 from $10.5
million for 1998.  Increased expenses in support of the Aldurazyme joint venture
with Genzyme and the rhASB and the  Vibriolysin  programs were the major factors
in the growth of research and development expenses.

Selling,  general and administrative expenses increased to $6.8 million for 1999
from $3.5 million for 1998.  This increase  resulted from the  consolidation  of
Glyko, Inc. selling and administrative expenses in 1999 expenses, an increase in
staffing in our  administration in 1999 compared to 1998, and a related increase
in  facilities  expense  charged to  administration  in 1999.  The  increase  in
administrative  staff and related  expense  was  necessary  to support  expanded
operations.

The  equity in the loss of our joint  venture  with  Genzyme  increased  to $1.7
million  for 1999 from  $47,000  for 1998  primarily  as a result  of  increased
process development and clinical manufacturing expenses. The joint venture began
in September 1998 and operated for only  approximately  one quarter of that year
as compared to a full year of operation in 1999.

Interest income increased by $1.1 million to $1.8 million for 1999 from $685,000
for 1998 primarily due to increased  cash reserves  resulting from a convertible
note  financing in April 1999,  the initial  public  offering in July and August
1999, and the private placement with Genzyme in July 1999.

Interest expense related  primarily to interest on the convertible notes accrued
prior to their conversion in the initial public offering.

The net loss was $28.1 million  ($0.94 per share) and $12.3  million  ($0.55 per
share) for 1999 and 1998, respectively.

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 $133.0 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 of $8.0 million by Genzyme as
part of our joint venture with them, an initial  public  offering  including the
underwriters'  over-allotment  exercise,  the concurrent  $10.0 million  Genzyme
investment  in us, the sale of $1.0 million in common stock to Acqua  Wellington
and pursuant to stock option and warrant exercises.

Our combined cash,  cash  equivalents and short-term  investments  totaled $40.2
million at December 31, 2000 and  decreased  $22.8 million from $63.0 million at
December  31, 1999.  The primary use of cash during the year ended  December 31,
2000 was to finance  operations,  fund the joint venture and purchase  equipment
and leasehold  improvements.  The primary source of cash during the year was the
issuance of common  stock  pursuant to the exercise of stock  options  under the
1997 Stock Plan and pursuant to the exercise of common stock  warrants.  For the
year ended December 31, 2000,  operations used $12.9 million,  we invested $13.7
million in the joint venture  (which was consumed in joint venture  operations),
we purchased  $3.8 million of equipment  and leasehold  improvements,  we raised
$7.3  million  from the  exercise of stock  options and warrants and we received
$804,000 from the repayment of a promissory note.

From our inception  through  December 31, 2000, we have purchased  approximately
$33.2  million of  leasehold  improvements  and  equipment.  We expect  that our
investment in leasehold  improvements and equipment will increase  significantly
during the next two years because we will provide facilities and equipment for a
larger staff and increase manufacturing capacity.

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.

                                       26

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 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 December 31, 2000, we had expended to date  approximately  $1.0 million on
the  analytic  projects  and $1.1  million on the  diagnostic  projects.  If all
acquired in-process research and development projects proceed to completion,  we
expect to spend approximately $150,000 in incremental direct expense to complete
the analytic projects in phases over  approximately 6 months. We expect to spend
approximately  $400,000 to complete the diagnostic projects in phases within the
next 9 months. None of these 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 IPO.  Genzyme has committed to pay us an  additional  $12.1
million upon approval of the BLA for Aldurazyme.

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  of up to $50  million.  Subject to certain  conditions,  including  the
market price of BioMarin stock, these funds will be available,  at the Company's
discretion,  over the  course of the next 20  months  from  sales of  registered
common stock to be sold at a small discount to the market price.  In the initial
transaction under this agreement on February 2, 2001, Acqua Wellington purchased
$1 million of the Company's common stock.

The net proceeds from any sales of our common stock to Acqua  Wellington will be
used  to  fund  operating  costs,   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 and our late-stage  preclinical
program for Vibriolysin,  which is being studied for the debridement  (cleaning)
of severe burns. 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 at least through 2001. 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

    .  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:

    .  Preclinical studies, clinical trials and regulatory review

    .  Commercialization of our drug candidates

    .  Development of manufacturing operations

    .  Process development

    .  Scale-up of manufacturing facilities
                                       27

We anticipate a need for additional  financing to fund the future  operations of
our business,  including the  commercialization of our drug candidates 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:

    .  The progress of our research and development programs

    .  The progress of preclinical studies and clinical trials

    .  The time and cost involved in obtaining regulatory approvals

    .  Scaling up, installing and validating manufacturing capacity

    .  Competing technological and market developments

    .  Changes and developments in collaborative, licensing and other
       relationships

    .  The development of commercialization activities and arrangements

    .  The leasing and build-out of additional facilities

    .  The purchase of additional capital equipment

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.


Item 7A.    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.  The  Company  places  its
investments  with high credit  issuers and by policy limits the amount of credit
exposure to any one issuer.  As stated in its policy,  the Company  will seek 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 December 31, 2000.

Investment portfolio:                              Carrying value
                                                 (in $ thousands)

Cash and cash equivalents........................     $16,530
Short-term investments...........................      23,393*
Certificates of deposit..........................         278
                                                     ---------
   Total.........................................     $40,201
                                                     =========

* 100% in United States agency securities.

Item 8.  Financial Statements and Supplementary Data

The information  required to be filed in this item appears on pages 34 to 49 and
is incorporated herein by reference.

Item 9. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure.

Not applicable.















                                       28

                                    Part III

Item 10. Directors, Executive Officers, Promoters and Control Persons

   We  incorporate  information  regarding our directors and executive  officers
   into  this  section  by  reference  from  sections  captioned   "Election  of
   Directors"  and  "Executive  Officers"  in the proxy  statement  for our 2001
   annual meeting of shareholders.

Item 11.  Executive Compensation

   We  incorporate  information  regarding our directors and executive  officers
   into  this  section  by  reference  from  the  section  captioned  "Executive
   Compensation"  in  the  proxy  statement  for  our  2001  annual  meeting  of
   shareholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

   We  incorporate  information  regarding our directors and executive  officers
   into this section by reference from the section captioned "Security Ownership
   of Certain  Beneficial  Owners" in the proxy  statement  for our 2001  annual
   meeting of shareholders.

Item 13.  Certain Relationships and Related Transactions

   We  incorporate  information  regarding our directors and executive  officers
   into this  section by  reference  from the  section  captioned  "Interest  of
   Insiders in Material Transactions" in the proxy statement for our 2001 annual
   meeting of shareholders.








                                       29

                                     Part IV

Item 14.  Exhibits, List and Reports on Form 8-K

(a) Documents are filed as exhibits to this report as enumerated in the Index to
Exhibits hereto, Part V Item I.

(b)      Reports on Form 8-K

         On  November  7,  2000,  we filed a report on Form 8-K  disclosing  the
resignation of John Klock as a member of the Company's Board.















































































                                       30

                                     Part V

Item 1.  Index to Exhibits

Exhibit
Number          Description of Document
- ----------      --------------------------------

3.1   Amended   and   Restated   Certificate   of   Incorporation   of  BioMarin
      Pharmaceutical Inc., a Delaware Corporation, as filed onJuly 23, 1999. (1)
3.2   Amended and  Restated  Bylaws of BioMarin  Pharmaceutical Inc., a Delaware
      corporation. (1) 10.1 Form of Indemnification  Agreement for directors and
      officers
10.2  1997 Stock Plan, as amended on December 22, 1998, and forms of agreements.
      (2) 10.3 1998 Director Option Plan and forms of agreements thereunder. (2)
10.4  1998 Employee Stock Purchase Plan and forms of agreements  thereunder. (2)
      10.5 Form of Amended and Restated Registration Rights Agreementby and
      among the Company and the investors named therein.(2)
10.6  Amended and  Restated  Founder's  Stock  Purchase  Agreement with Grant W.
      Denison, Jr. dated as of October 1, 1997 with exhibits. (2)
10.7  Amended  and  Restated   Founder's   Stock  Purchase   Agreement with  Dr.
      Christopher M. Starr dated as of October 1, 1997 with exhibits. (2)
10.8  Employment Agreement with Fredric D. Price dated December 22, 2000. (3)
10.9  Employment  Agreement with Dr. Christopher M.Starr dated June 26, 1997, as
      amended. (2)10.10 Employment Agreement with Raymond W. Anderson dated June
      22, 1998, as amended. (2)
10.11 Employment  Agreement with Stuart J. Swiedler,  M.D., Ph.D., dated May 29,
      1998, as amended.  (2) 10.12 Employment  Agreement with Emil Kakkis, M.D.,
      Ph.D., dated June 30, 1998, as amended. (2)
10.13 Employment Agreement between Brian K. Brandley, Ph.D and Glyko, Inc. dated
      February 22, 1998, as amended. (2)
10.14 License  Agreement  with Glyko  Biomedical,  Ltd. dated June 26, 1997 with
      exhibits  attached.  (2) 10.15 Option Agreement with W.R. Grace & Co.dated
      as of May 1, 1998. (4) (*)
10.16 Grant  Terms  and  Conditions   Agreement with  Harbor-UCLA  Research  and
      Education Institute dated April 1, 1997, as amended. (4) (*)
10.17 License   Agreement  with  Women's  and  Children's   Hospital,  Adelaide,
      Australia  dated August 14, 1998. (5) (*) 10.18 Lease  Agreement dated May
      18, 1998 for 371 Bel Marin Keys Boulevard, as amended. (2)
10.19 Standard  NNN  Lease  dated  June 25,  1998 for 46 Galli  Drive. (2) 10.20
      Standard Industrial Commercial  Single-Tenant Lease dated May 29, 1998 for
      110 Digital Drive, as amended. (2)
10.21 Sublease dated June 24, 1998 for 1123 West Carson Street. (2)
10.22 Commercial  Lease and  Deposit  Receipt  with Glyko,  Inc. for 11 Pimentel
      Court and 13 Pimentel Court, dated December 23, 1996. (2)
10.23 Collaboration  Agreement with Genzyme Corporation dated September 4, 1998.
      (5)
10.24 Astro  License  Agreement  dated  December  18,  1990  among  Glyko, Inc.,
      Astromed,  Ltd., and Astroscan,  Ltd. (4) 10.25 Glycomed License Agreement
      dated December 18, 1990 between Glyko, Inc., and Glycomed, Inc. (4)
10.26 Operating   Agreement   with  Genzyme   Corporation.   (1)
10.27 Form of Convertible Note Purchase Agreement dated as of April 12, 1999
      with form of Convertible Promissory Note. (1)
10.28 Common Stock Purchase  Agreement between BioMarin Pharmaceutical  Inc. and
      Acqua Wellington North American Equities Fund, Ltd.dated January 26, 2001.
      (6)
10.29 Employment Agreement with Robert Baffi dated April 20, 2000.
21.1  List of Subsidiaries. (2)
23.1  Consent of Independent Public Accountants.
24.1  Power of Attorney (Included in Signature Page)

- --------------------------------------------------------------------------------
(1)   Incorporated  by  reference   from  the  Company's   Amendment  No.  2  to
      Registration Statement on Form S-1  (Registration  No. 333-77701) filed on
      July 6, 1999.
(2)   Incorporated by reference from the Company's Registration Statement on
      Form S-1 (Registration No. 333-77701) filed on May 4, 1999.
(3)   Incorporated  by  reference   from  the  Company's   Amendment  No.  1  to
      Registration Statement on Form S-3  (Registration  No. 333-48800) filed on
      January 11, 2001.
(4)   Incorporated  by  reference   from  the  Company's   Amendment  No.  1  to
      Registration Statement on Form S-1  (Registration  No. 333-77701) filed on
      June 14, 1999.
(5)   Incorporated  by  reference   from  the  Company's   Amendment  No.  3  to
      Registration Statement on Form S-1  (Registration  No. 333-77701) filed on
      July 21, 1999.
(6)   Incorporated  by  reference   from  the  Company's   Amendment  No.  2  to
      Registration Statement on Form S-3  (Registration  No. 333-48800) filed on
      January 29, 2001.
(*)   This exhibit has been granted confidential treatment.











                                       31

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the 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:   March 15, 2001            By:  \s\ Raymond W. Anderson
- ----------------------------           ----------------------------------------
                                        Raymond W. Anderson.
                                        Chief Financial Officer, Chief Operating
                                        Officer and Vice President, Finance and
                                        Administration (Principal Financial and
                                        Accounting Officer)


                                POWER OF ATTORNEY

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears   below   constitutes   and   appoints   Raymond   W.   Anderson,    his
attorney-in-fact,  with  the  power  of  substitution,  for  him in any  and all
capacities,  to sign any  amendments  to the Report on Form 10-K and to file the
same, with exhibits  thereto and other documents in connection  therewith,  with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said  attorneys-in  fact, or his  substitute or  substitutes,  may do or
cause to be done by virtue hereof.

         In  accordance  with the  Exchange  Act of 1934,  this  report has been
signed below by the  following  persons on behalf of the  Registrant  and in the
capacities and on the dates indicated.


     Signature                            Title                                              Date

                                                                                     
\s\ Fredric D. Price                                                                       March 15, 2001
- ----------------------------                                                              -------------------
Fredric D. Price                  Chairman, Chief Executive Officer and Director
                                  (Principal Executive Officer)

\s\  Grant W. Denison, Jr.                                                                 March 15, 2001
- ----------------------------                                                              -------------------
Grant W. Denison, Jr.               Director

\s\ Ansbert S. Gadicke, M.D.                                                               March 15, 2001
- ----------------------------                                                              -------------------
Ansbert S. Gadicke                  Director

\s\ Erich Sager                                                                            March 15, 2001
- -----------------------------                                                             -------------------
Erich Sager                         Director

\s\ Gwynn R. Williams                                                                      March 15, 2001
- -----------------------------                                                             -------------------
Gwynn R. Williams                   Director

































                                       32

                          INDEX TO FINANCIAL STATEMENTS


BioMarin Pharmaceutical Inc. Financial Statements
Report of Independent Public Accountants....................     34
Consolidated Balance Sheets.................................     35
Consolidated Statements of Operations.......................     36
Consolidated Statements of Changes in Stockholders' Equity..   37-39
Consolidated Statements of Cash Flows.......................     40
Notes to Consolidated Financial Statements..................   41-49
















































































                                       33

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
BioMarin Pharmaceutical Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets  of  BioMarin
Pharmaceutical  Inc.  (a  Delaware  corporation  in the  development  stage) and
subsidiaries  as of  December  31,  1999 and 2000 and the  related  consolidated
statements of operations,  changes in stockholders'  equity,  and cash flows for
the years ended  December 31, 1998,  1999 and 2000 and the period from March 21,
1997  (inception)  to December  31, 2000.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of BioMarin  Pharmaceutical  Inc.
and  subsidiaries  as of  December  31,  1999 and 2000 and the  results of their
operations and their cash flows for the years ended December 31, 1998,  1999 and
2000 and the period from March 21, 1997  (inception)  to December 31,  2000,  in
conformity with accounting principles generally accepted in the United States.

                                                         /s/ ARTHUR ANDERSEN LLP


San Francisco, California,
February 20, 2001






















































                                       34

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

                       Consolidated Balance Sheets as of December 31, 1999 and 2000

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

                                                                          December 31,

                                                             ----------------------------------------
                                                                     1999                2000
                                                             ----------------------------------------
                                                                             
      Assets
      Current assets:
       Cash and cash equivalents                              $    23,413          $   16,530
       Short-term investments                                      39,573              23,671
       Accounts receivable, net                                     1,186               1,135
       Due from BioMarin/Genzyme LLC                                1,280               1,799
        Inventories                                                   676                 436
        Prepaid expenses                                              294                 970
                                                             ----------------------------------------
         Total current assets                                      66,422              44,541
      Property and equipment, net                                  25,093              20,715
      Goodwill and other intangible assets, net                    11,462               9,862
      Investment in BioMarin/Genzyme LLC                              421               1,482
      Deposits                                                        151                 333
                                                             ----------------------------------------
        Total assets                                          $   103,549          $   76,933
                                                             ========================================

      Liabilities and Stockholders' Equity
      Current liabilities:
       Accounts payable                                       $     3,095          $    4,747
       Accrued liabilities                                          1,966               2,109
        Short-term portion of notes payable                            26                  27
                                                             ----------------------------------------
        Total current liabilities                                   5,087               6,883
      Long-term liabilities:
        Long term portion of notes payable                             85                  56
                                                             ----------------------------------------
        Total liabilities                                           5,172               6,939
                                                             ----------------------------------------
      Stockholders' equity:
       Common stock, $0.001 par value: 75,000,000 shares
          authorized, 34,832,578 and 36,921,966 shares
          issued and outstanding at December 31, 1999
          and 2000, respectively                                       35                  37

       Additional paid-in capital                                 146,592             153,940
        Warrants                                                      128                  -
       Deferred compensation                                       (2,591)             (1,530)
       Notes receivable from stockholders                          (2,638)             (1,940)
       Deficit accumulated during the development stage           (43,149)            (80,513)
                                                             ----------------------------------------
        Total stockholders' equity                                 98,377              69,994
                                                             ----------------------------------------
        Total liabilities and stockholders' equity            $   103,549          $   76,933
                                                             ========================================


The accompanying notes are an integral part of these statements.




























                                       35

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

                                Consolidated Statements of Operations for
                        the Years Ended December 31, 1998, 1999 and 2000 and for
                     the Period from March 21, 1997 (inception) to December 31, 2000

                                (In thousands, except for per share data)



                                                                                                  Period from
                                                                                                 March 21, 1997
                                                                December 31,                    (inception) to
                                                     ------------------------------------------   December 31,
                                                         1998          1999          2000           2000
                                                     ----------------------------------------------------------
                                                                                     
Revenues:

     Product sales                                    $    138    $    1,401     $    2,345      $    3,884
     Service revenue                                       112            85            250             447
     BioMarin/Genzyme LLC                                  837         5,300          9,731          15,868
     Other revenues                                        103           190             -              293
                                                     ----------------------------------------------------------
           Total revenues                                1,190         6,976         12,326          20,492


Operating costs and expenses:

     Cost of products                                       49           362            635           1,046
     Cost of services                                       59           102             84             245
     Research and development                           10,502        27,206         35,794          75,416
     Selling, general and administrative                 3,532         6,805          8,814          20,065
     Carson Street closure                                  -             -           4,423           4,423
                                                     ----------------------------------------------------------
           Total operating costs and expenses           14,142        34,475        49,750          101,195
                                                     ----------------------------------------------------------
           Loss from operations                        (12,952)      (27,499)      (37,424)         (80,703)




Interest income                                            685         1,832         2,979            5,561
Interest expense                                            -           (732)           (7)            (739)
Equity in loss of BioMarin/Genzyme LLC                     (47)       (1,673)       (2,912)          (4,632)
                                                     -----------------------------------------------------------
           Net loss                                   $(12,314)   $  (28,072)    $ (37,364)      $  (80,513)
                                                     ==========================================================
Net loss per share, basic and diluted                 $  (0.55)   $    (0.94)    $   (1.04)      $    (3.21)
                                                     ==========================================================
Weighted average common shares outstanding              22,488        29,944        35,859           25,057
                                                     ==========================================================


The accompanying notes are an integral part of these statements.


































                                       36

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

       Consolidated Statements of Changes in Stockholders' Equity for the
                  Years ended December 31, 1998, 1999 and 2000

                      (In thousands, except per share data)




                                                                                                                 Deficit
                                                                                                    Notes       Accumulated
                                                              Additional                           Receivable    During       Total
                                             Common Stock      Paid-in      Warrants     Deferred    from      Development     SH's
                                           Shares   Amount     Capital   Shares   Amount   Comp.  Stockholders    Stage      Equity
                                           ------   ------     -------   ------   ------  ------  ------------  -------     --------
                                                                                                 
Balance, January 1, 1998                   20,567     $ 21    $ 12,549     802    $ 128   $ (217)   $(2,338)    $(2,763)    $ 7,380
 Issuance of common stock on June 30,
  1998, for cash, $6.00 per share (net of
  issuance costs of $263 including the is-
  suance of 31 shares of common stock,
  $6.00 per share, for brokerage services)... 599        1       3,327      --       --       --         --           --      3,328

 Issuance of common stock on July 14,
  1998,for cash, $6.00 per share (net of
  issuance costs of $387, including the is-
  suance of 65 shares of common stock,
  $6.00 per share, for brokerage services)..1,385        1       7,924      --       --       --         --           --      7,925

 Issuance of common stock on August 3,
  1998, for cash, $6.00 per share (net
  of issuance costs of $12, including the is-
  suance of 2 shares of common stock,
  $6.00 per share, for brokerage
  services)................................    31       --         176      --       --       --         --           --        176

 Issuance of common stock to Genzyme Cor-
  poration on September 4, 1998, for
  cash, $6.00 per share.................... 1,333        1       7,999      --       --       --         --           --      8,000

 Issuance of common stock to Glyko
  Biomedical, Ltd. for the purchase of
  Glyko, Inc. on October 7, 1998, for
  common shares, $6.00 per share and
  the assumption of options of Glyko,
  Inc. employees (see Note 1)...            2,259        2      14,859      --       --       --         --           --     14,861
 Exercise of common stock options.......        2       --           2      --       --       --         --           --          2
 Interest on notes receivable...........       --       --          --      --       --       --       (150)          --       (150)
 Deferred compensation on stock options.       --       --       3,222      --       --   (3,222)        --           --         --
 Amortization of deferred compensation.        --       --          --      --       --      186         --           --        186
Net loss...............................        --       --          --      --       --       --         --      (12,314)   (12,314)
                                           ------   ------     -------   ------   ------  ------  ------------  -------     --------
Balance, December 31, 1998...............   26,176    $ 26      $50,058    802    $ 128   $(3,253)   $(2,488)   $(15,077)   $29,394
                                           ======   ======    =========  ======  ======   =========  =========  =========   ========

                                   The  accompanying  notes are an integral part of these statements.
































                                       37

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

       Consolidated Statements of Changes in Stockholders' Equity for the
                  Years ended December 31, 1998, 1999 and 2000

                      (In thousands, except per share data)




                                                                                                                 Deficit
                                                                                                    Notes       Accumulated
                                                              Additional                           Receivable    During       Total
                                             Common Stock      Paid-in      Warrants     Deferred    from      Development     SH's
                                           Shares   Amount     Capital   Shares   Amount   Comp.  Stockholders    Stage      Equity
                                           ------   ------     -------   ------   ------  ------  ------------  -------     --------

                                                                                                
Balance, January 1, 1999...............    26,176     $ 26     $ 50,058    802    $ 128   $(3,253)   $(2,488)   $(15,077)  $ 29,394
 Issuance of common  stock on July 23,
  1999, in an initial  public  offering
  (IPO) for cash at $13.00 per share
  (net of issuance costs of $7) ........    4,500        4       51,805     --       --        --         --          --     51,809

 Issuance of common stock on July 23,
  1999 to Genzyme Corporation in a
  private placement concurrent with the
  IPO for cash at $13.00 per share.....       769        1        9,999     --       --        --         --          --     10,000

 Issuance  of  common  stock  on July  23,
  1999  concurrent  with the IPO upon con-
  version of promissory  notes plus accrued
  interest of $720 at $10.00 pershare
  (net of issuance costs of $1).......      2,672        3       25,612     --       --        --         --          --     25,615

 Issuance of common  stock on August  3,
  1999 and  August  25,  1999 from the over-
  allotment exercise by underwriters at
  $13.00 per share (net of issuance costs
  of $1)........................              675        1        8,141     --       --        --         --          --      8,142

 Exercise of common stock options.......       40       --          148     --       --        --         --          --        148

 Interest on notes receivable from
  stockholders..........................       --       --          150     --       --        --       (150)         --         --

 Deferred compensation related to stock
  options..............................        --       --          679     --       --      (679)        --          --         --
 Amortization of deferred compensation.        --       --           --     --       --     1,341         --          --      1,341
 Net loss...............................       --       --           --     --       --        --         --     (28,072)   (28,072)
                                           ------   ------     -------   ------   ------  ------  ------------  -------     --------
Balance, December 31, 1999..............   34,832     $ 35     $146,592    802    $ 128   $(2,591)   $(2,638)   $(43,149)   $ 98,377
                                           ======   ======    =========  ======  ======   =========  =========  =========   ========
                                   The  accompanying  notes are an integral part of these statements.



































                                       38

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

       Consolidated Statements of Changes in Stockholders' Equity for the
                  Years ended December 31, 1998, 1999 and 2000

                      (In thousands, except per share data)



                                                                                                               Deficit
                                                                                                    Notes       Accumulated
                                                              Additional                           Receivable    During       Total
                                             Common Stock      Paid-in      Warrants     Deferred    from      Development     SH's
                                           Shares   Amount     Capital   Shares   Amount   Comp.  Stockholders    Stage      Equity
                                           ------   ------     -------   ------   ------  ------  ------------  -------     --------
                                                                                                 
Balance at December 31, 1999               34,832    $35       $146,592   802     $128    $(2,591)  $ (2,638)   $(43,149)   $98,377
 Issuance of common stock on April 30,
  2000 pursuant to the Employee Stock
  Purchase Plan at $11.05 per share...         18       -            199     -       -          -          -           -        199

 Issuance of common stock on October 31,
  2000 pursuant to the Employee Stock
  Purchase Plan at $11.05 per share....        10       -            115     -       -          -           -           -       115

 Exercise of common stock options.......    1,301       1          5,674     -       -          -           -           -     5,675

 Exercise of common stock warrants......      802       1            929  (802)   (128)         -           -           -       802

 Common stock surrendered by stockholders
  for payment of principal and interest...    (41)      -          (170)     -       -          -         170           -         -

 Repayment of notes from stockholders......     -       -             -      -       -          -         804           -       804

 Interest on notes receivable..............     -       -           276      -       -          -        (276)          -         -

 Amortization of deferred compensation.....     -       -             -      -       -          1,386       -           -     1,386

 Deferred compensation related to stock and
  option issuances, net of terminations...      -       -           325      -       -           (325)     -            -        -

Net loss.................................       -       -             -      -       -              -      -      (37,364)  (37,364)
                                            ------   ------    --------   ------  ------   --------   ---------  ---------  --------
Balance at December 31, 2000                36,922   $ 37      $153,940      -     $ -     $(1,530)   $(1,940)   $(80,513)  $69,994
                                            ======   ======    =========  ======  ======   =========  =========  =========  ========
                                                    The accompanying notes are an integral part of these statements.











































                                       39


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

                                          Consolidated Statements of Cash Flows
                                 the Years Ended December 31, 1998, 1999 and 2000 and for

                             the Period from March 21, 1997 (inception) to December 31, 2000

                                                      (In thousands)



                                                                                                        Period from March 21,
                                                                        December 31,                    1997 (inception) to
                                                         --------------------------------------------    December 31,
                                                              1998           1999          2000              2000
                                                         ------------------------------------------------------------------
Cash flows from operating activities:
                                                                                            
Net loss                                                $  (12,314)    $ (28,072)     $  (37,364)       $   (80,513)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
  Depreciation                                                  308         4,074           4,347              8,734
  Amortization of deferred compensation                         185         1,341           1,386              2,912
  Amortization of goodwill                                      271         1,143           1,600              3,014
  Compensation in the form of common stock
   and common stock options                                      -             -               -                  18


  Loss from BioMarin/Genzyme LLC                                 47         6,973          12,635             19,655
  Write-off of in-process technology                          2,625            -               -               2,625
  Carson Street closure                                          -             -            3,791              3,791
 Changes in operating assets and liabilities:
  Accounts receivable, net                                    (148)          (899)             51               (996)
  Due from Glyko Biomedical, Ltd.                              (34)           (25)             -                (138)
  Due from BioMarin/Genzyme LLC                               (419)          (861)           (519)            (1,799)
  Inventories                                                  (72)            (5)            240                163
  Prepaid expenses                                            (137)           383            (676)              (969)
  Deposits                                                     (79)           (72)           (182)              (333)
  Accounts payable                                           1,172          1,754           1,652              4,746
  Accrued liabilities                                          597          1,326             143              2,109
  Due to Glyko, Inc.                                           (61)            -               -                  -
                                                         ------------------------------------------------------------------
  Net cash used in operating activities                    (8,059)        (12,940)        (12,896)           (36,981)
                                                         ------------------------------------------------------------------
Cash flows from investing activities:
 Purchase of property and equipment                        (6,385)        (22,944)         (3,760)           (33,239)
 Purchase of Biochemical Research Reagent
 Division of Oxford Glycosciences                              -           (1,500)             -              (1,500)
 Investment in BioMarin/Genzyme LLC                          (732)         (6,709)        (13,696)           (21,137)
 (Purchase) sale of short-term investments                 (1,075)        (37,597)         15,902            (23,671)
                                                         ------------------------------------------------------------------
 Net cash used in investing activities                     (8,192)        (68,750)         (1,554)           (79,547)
                                                         ------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from note payable                                    134              -               -                 134
 Proceeds from issuance of convertible notes
 payable                                                       -           25,615              -              25,615
 Proceeds from exercise of common
 stock options and warrants                                    -              148           6,477              6,625
 Repayment of equipment loan                                   -              (24)            (28)               (52)
 Repayment of notes from stockholders                          -               -              804                804
 Issuance of commons stock for ESPP                            -               -              314                314
 Proceeds from sale of common stock, net of
 issuance costs                                            19,692          69,951              -              98,926
 Other                                                       (150)             -               -                 692
                                                         ------------------------------------------------------------------
 Net cash provided by financing activities                 19,676          95,690           7,567            133,058
                                                         ------------------------------------------------------------------
 Net increase (decrease) in cash and cash equivalents       3,425          14,000          (6,883)            16,530
Cash and cash equivalents:
 Beginning of period                                        5,988           9,413          23,413                 -
                                                         ------------------------------------------------------------------
 End of period                                            $ 9,413       $  23,413      $   16,530        $   16,530
                                                         ==================================================================


The accompanying notes are an integral part of these statements.











                                       40

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

                   Notes to Consolidated Financial Statements

1.   NATURE OF OPERATIONS AND BUSINESS RISKS:


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,  BioMarin  has issued stock to
outside  investors in a series of transactions,  resulting in GBL's ownership of
BioMarin's  outstanding common stock being reduced to 31 percent at December 31,
2000.

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.

Through  December  31,  2000,  the Company  had  accumulated  losses  during its
development  stage of  approximately  $80.5  million.  Based on  current  plans,
management  expects to incur further  losses at least  through 2002.  Management
believes that the Company's cash and cash equivalents and short-term  investment
balances  at  December  31,  2000  will  be  sufficient  to meet  the  Company's
obligations at least through 2001.

Business Risks - The Company is exposed to the following risks:

o        There can be no assurance that the Company's  research and  development
         efforts will be successfully  completed or that its product  candidates
         will be shown to be safe and effective.

o        There can be no assurance that its product  candidates will be approved
         for  marketing by the U.S.  Food and Drug  Administration  (FDA) or any
         equivalent  foreign  government  agency or that its product  candidates
         will be successfully  commercialized or achieve any significant  degree
         of market acceptance.

o        Certain  of the  Company's  products  and  product  candidates  rely on
         proprietary  technology and patents owned by certain  universities  and
         other  institutions and licensed to BioMarin.  These  universities also
         provide research and development  services.  Cessation of relationships
         with these universities could significantly affect the Company's future
         operations.

o        In order to grow significantly,  the Company must expand its efforts to
         develop new products in pharmaceutical  applications.  The Company will
         also need to enhance manufacturing  capabilities,  to develop marketing
         capabilities,  and/or enter into collaborative  arrangements with third
         parties having the capacity for such manufacturing or marketing.

o        There can be no assurance  that any of the Company's  current or future
         product  candidates  will  be  successfully  developed,   prove  to  be
         effective in clinical trials, receive required regulatory approvals, be
         capable of being produced in commercial quantities at reasonable costs,
         gain reasonable reimbursement levels, or be successfully marketed.

In addition, the Company is subject to a number of risks, including the need for
additional  financing,  dependence on key personnel,  small patient  population,
patent protection, significant competition from larger organizations, dependence
on  corporate   partners  and  collaborators,   and  expected   restrictions  on
reimbursement, as well as other changes in the healthcare industry.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of  Presentation--These  consolidated  financial  statements  include  the
accounts of BioMarin,  Glyko, Inc., a wholly-owned subsidiary of BioMarin (since
October 7, 1998),  and BioMarin  Genetics,  Inc., a  wholly-owned  subsidiary of
BioMarin  formed for the purpose of the joint  venture  discussed in Note 8. All
significant intercompany transactions have been eliminated.

Concentration of Credit Risk--Financial instruments that may potentially subject
the Company to  concentration  of credit risk consist  principally of cash, cash
equivalents,  and  short-term  investments.  All  cash,  cash  equivalents,  and
short-term  investments are placed in financial  institutions with strong credit
ratings, which minimizes the risk of loss due to nonpayment. The Company has not
experienced any losses due to credit  impairment or other factors related to its
financial instruments.
                                       41

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 as cash and cash equivalents.

Short-Term Investments--The Company records its investments as held-to-maturity.
These investments are recorded at cost at December 31, 2000, which  approximates
fair market  value.  These  securities  are comprised  mainly of Federal  Agency
investments,   including   Freddie  Macs  and  Federal  Home  Loans,   and  bank
certificates of deposit.

Inventories--Inventories  consist of analytic kits and instrument-based  systems
held for sale. Inventories are stated at the lower of cost (first-in,  first-out
method) or estimated market value. All inventories at December 31, 1999 and 2000
belonged to Glyko, Inc.

Investment in BioMarin/Genzyme  LLC and Related  Revenue--Under the terms of the
Company's joint venture  agreement with Genzyme (the Agreement - see notes 7 and
8),  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,  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. Losses of the
joint venture ($1.7 million,  $14.0 million, $25.3 million and $41.0 million for
the years ended  December 31,  1998,  1999 and 2000 and for the period March 21,
1997  (inception)  through  December 31, 2000,  respectively)  are  allocated in
proportion  to the funding  provided  by each joint  venture  partner.  BioMarin
provided $22.0 million in funding to the joint venture through 2000.

During the years ended  December  31, 1999 and 2000,  the Company  billed  $10.6
million  and  $19.4  million,  respectively,  to the  joint  venture  under  the
Agreement.  Of these amounts, $5.3 million and $9.7 million respectively,  or 50
percent,  was recognized as revenue in accordance  with the Company's  policy of
recognizing  revenue to the extent that research and development costs billed to
the joint  venture  have been funded by Genzyme.  At December 31, 1999 and 2000,
the Company had  receivables  of $1.3  million and $1.8  million,  respectively,
related to these billings.

The Company  accounts for its  investment  in the joint venture using the equity
method.  Accordingly,  the Company recorded a reduction in its investment in the
joint  venture of $7.0 and $12.7  million,  during the years ended  December 31,
1999 and 2000,  respectively,  representing  its 50 percent share of the loss of
the joint venture. The percentage of the research and development costs incurred
by the  Company and billed to the joint  venture  that was funded by the Company
(50 percent,  or $5.3 million and $9.7 million for the years ended  December 31,
1999 and 2000, respectively) was recorded as a credit to the Company's equity in
the loss of the joint venture.

At December 31, 2000 the summarized  assets and liabilities of the joint venture
and its results of operations from inception to December 31, 2000 are as follows
(in thousands):

 Assets                          $ 3,368
                                 =+=====
Liabilities                      $ 2,890
Net equity                           478
                                 -------
                                 $ 3,368

Cumulative net loss              $40,971
                                 =======

Research and Development--Research and development expenses include the expenses
associated  with contract  research and  development  provided by third parties,
research and development provided in connection with the joint venture including
manufacturing,   clinical  and  regulatory  costs,  and  internal  research  and
development  costs.  All  research and  development  costs  discussed  above are
expensed as incurred.

Property and  Equipment--Property and equipment are stated at cost. Depreciation
is computed using the straight-line method. Leasehold improvements are amortized
over the life of the  assets 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.

As of December  31,  1999 and 2000,  property  and  equipment  consisted  of the
following (in thousands):



                                       42


                                                  December 31,
                                         -------------------------------
Category                                      1999           2000             Estimated Useful Lives
- -------------------------------------    -------------------------------  --------------------------------
                                                                        
Computer hardware and software           $    426       $    678                 3 years
Office furniture and equipment              1,017          1,056                 5 years
Manufacturing/Laboratory equipment          8,254          9,323                 5 years
Leasehold improvements                     18,889         16,685            Shorter of life of assets
                                                                                or lease term
Construction in progress                      879          1,048
                                         -------------------------------
                                           29,465         28,790
Less:  Accumulated depreciation            (4,372)        (8,075)
                                         -------------------------------
Total property and equipment, net        $ 25,093       $ 20,715
                                        ===============================


Depreciation  expense for the years ended  December 31, 1998,  1999 and 2000 and
for the period  March 21,  1997  (inception)  to  December  31,  2000,  was $0.3
million, $4.1 million, $4.3 million and $8.7 million, respectively.

Goodwill and Other  Intangible  Assets--In  connection  with the  acquisition of
Glyko, Inc., the Company acquired certain intangible assets including  developed
technology,  customer  relationships  and  goodwill.  In this  acquisition,  the
Company  obtained  Glyko  Inc.'s  ongoing  business of  providing  products  and
services to research institutions and commercial laboratories. Additionally, the
Company secured ongoing access to Glyko,  Inc.'s proprietary  technologies which
assist the Company in supporting the manufacturing  process testing and clinical
testing  for our two lead drug  candidates,  Aldurazyme  for MPS-I and rhASB for
MPS-VI.

The  purchase  price of $14.5  million was  allocated  to the net  tangible  and
intangible assets acquired, based on the relative fair value of these assets. In
connection with this  allocation,  $2.6 million was expensed as a charge for the
purchase of in-process research and development. Of the $11.7 million designated
as  intangible   assets   (after  the  write-off  of  in-process   research  and
development),  $1.2 million was allocated to developed  technology and amortized
over six years, $73,000 was allocated to assembled work force and amortized over
seven  years,   and  $10.4   million  was   allocated   to  goodwill   (customer
relationships,  trade name, pure business goodwill) and initially amortized over
twelve years. In performing this allocation, the Company considered, among other
factors,   Glyko,  Inc.'s  technology  and  research  and  development  projects
in-process at the date of  acquisition.  With regard to the in-process  research
and development  projects,  the Company  considered factors such as the stage of
development of the technology at the time of acquisition, the importance of each
project  to  the  overall  development  plan,  alternative  future  uses  of the
technology  and the  projected  incremental  cash flows from the  projects  when
completed and any associated risks.

During 2000 the Company changed its estimate of the useful life of this goodwill
from 12 years to 7 years.  The effect of this change in estimate was to increase
the Company's net loss by $466,000.

Amortization expense related to the acquisition of Glyko, Inc. was $0.3 million,
$1.1  million  and $1.6  million  for the period  from  October 7, 1998 (date of
acquisition)  to December  31, 1998,  and the years ended  December 31, 1999 and
2000, respectively.

In connection  with the purchase of the key assets of the  Biochemical  Research
Reagent  Division  of Oxford  GlycoSciences  Plc. (OGS),  the  Company  recorded
goodwill in the amount $891,000 which is being amortized over seven years. Total
amortization expense for the year ended December 31, 2000, was $139,000.

Impairment of Long-Lived Assets--The Company regularly reviews long-lived assets
and identifiable  intangibles whenever events or circumstances indicate that the
carrying  amount  of such  assets  may not be  fully  recoverable.  The  Company
evaluates  the  recoverability  of  long-lived  assets by measuring the carrying
amount of the  assets  against  the  estimated  undiscounted  future  cash flows
associated  with them.  At the time such  evaluations  indicate  that the future
undiscounted  cash flows of certain  long-lived  assets  are not  sufficient  to
recover the carrying value of such assets, the assets are adjusted to their fair
values (based on discounted cash flows). Except for the Carson Street closure as
discussed  in Note 11 no such  adjustments  have been  made  during  any  period
presented.













                                       43

Accrued  Liabilities--As  of  December  31, 1999 and 2000,  accrued  liabilities
consisted of the following (in thousands):

                                         December 31,
                                   --------------------------
                                       1999         2000
                                   ------------- ------------
Vacation                            $     286     $     411
Construction in progress                  882           225
Carson Street                              -            348
Other                                     798         1,125
                                   ------------- ------------
               Total                $  1,966      $  2,109
                                   ============= ============

Revenue  Recognition--The  Company recognizes Glyko, Inc.'s product revenues and
related cost of sales upon shipment of products.  Glyko, Inc.'s service revenues
are recognized upon  completion of services as evidenced by the  transmission of
reports  to  customers.  Other  Glyko,  Inc.  revenues,  principally  licensing,
distribution  and  development   fees,  are  recognized  upon   satisfaction  of
contractual obligations such as 1) execution of contract; 2) certain milestones;
and 3) certain anniversary dates from the effective date of the contract.

Revenue from the joint  venture is  recognized  to the extent that  research and
development costs billed by the Company have been funded by Genzyme.

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 common shares  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 (all periods  presented),  such potential common shares are excluded from
the computation of diluted net loss per share, as their effect is antidilutive.

Potentially dilutive securities include (in thousands):
                                                         December 31,
                                      ----------------------------------------
                                        1998             1999           2000
                                      ----------------------------------------
Options to purchase common stock       2,801             5,450          5,539
Warrants to purchase common stock        802               802             -
                                      ----------------------------------------
                                       3,603             6,252          5,539
                                      ========================================

Segment Reporting--For the year ended December 31, 1998, the Company adopted the
provisions of SFAS No. 131,  "Disclosures  about  Segments of an Enterprise  and
Related  Information."  The Company  operates  two  segments.  The  Analytic and
Diagnostic  segment  represents the operations of Glyko,  Inc. which involve the
manufacture  and sale of analytic and diagnostic  products.  The  Pharmaceutical
segment  represents  the  research  and  development  activities  related to the
development  and   commercialization   of  carbohydrate   enzyme   therapeutics.
Management of the Company has concluded  that the operations of the Analytic and
Diagnostic  segment are, and will continue to be, immaterial with respect to the
Company's overall activities and, thus, disclosure of segment information is not
required.

New  Accounting   Standards--In  June  1998,  the  FASB  issued  SFAS  No.  133,
"Accounting for Derivative  Instruments and Hedging Activities." SFAS No. 133 is
not expected to have a material impact on the Company's  consolidated  financial
position or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB
101 provides guidance on applying  generally accepted  accounting  principles to
revenue recognition issues in financial statements.  The Company adopted SAB 101
as  required  in the  first  quarter  of 2000  and such  adoption  has not had a
material effect on the Company's  consolidated  financial position or results of
operations.

3.   STOCKHOLDERS' EQUITY:

Common  Stock and  Warrants  - As  disclosed  in the  accompanying  consolidated
statements of changes in  stockholders'  equity,  the Company closed a number of
private  placements in 1997 and 1998. In connection  with these  placements,  an
entity with which the former chief  executive  officer and chairman of the board
is affiliated  (see Note 7) was issued a total of 899,500 shares (valued at $1.4
million) and warrants (valued at $0.1 million) to purchase an additional 801,500
shares of common  stock at an exercise  price of $1 per share.  These  issuances
were made for brokerage  services  rendered in connection with these  placements
and were accounted for as a cost of raising capital. The warrants were exercised
in October 2000.






                                       44

Notes Receivable from Stockholders--Notes receivable from stockholders relate to
2.5 million  shares of common stock  issued in October  1997 to three  executive
officers  under  the  terms  of the  Founder's  Stock  Purchase  Agreement  (the
Agreement).  These notes bear  interest  at 6 percent per annum,  and are due on
March 31,  2001,  or on the date of the  employee's  termination,  whichever  is
earlier.  The  notes  are  secured  by the  underlying  stock  and are with full
recourse.  Interest  was  imputed  at nine  percent,  resulting  in an  interest
discount and related deferred compensation of $200,000, which is being amortized
over the life of the notes. In the event that their  employment is terminated by
the Company,  the Company has the  obligation,  if requested by the officer,  to
repurchase  any or all of the shares  issued under the Agreement at the lower of
the original  purchase price or the current  market value of the shares.  In the
event one of these officers ceases to be an employee, the Company has the right,
but not the  obligation,  to  repurchase  the unvested  portion of the shares at
their original  purchase price.  Pursuant to the terms of the Agreement,  50% of
the shares vest after one year from the date of  employment,  with the remainder
vesting at a rate of 1/24th per month  thereafter.  Upon the former  President's
resignation from the Company in July 2000, the Company repurchased 33,334 shares
at his original  purchase price and concurrently  reduced his promissory note to
the Company for the same amount.  In August 2000, the former  President paid the
balance of his  promissory  note plus accrued  interest to the  Company.  During
October 2000 the Company's  Chief  Executive  Officer  resigned.  His promissory
note, plus accrued interest, is due in full on March 31, 2001.

Deferred Compensation--In  connection with certain stock option and stock grants
during the years ended December 31, 1998,  1999 and 2000,  the Company  recorded
deferred  compensation  totaling  $3.2  million,  $0.7 million and $0.3 million,
respectively, which is being amortized over the estimated service periods of the
grantees.  Amortization  expense  recognized during the years ended December 31,
1998,  1999  and  2000,  was  $0.2  million,  $1.3  million  and  $1.4  million,
respectively.

4.   INCOME TAXES:

The Company  utilizes the asset and liability  method of  accounting  for income
taxes. Under the asset and liability method, deferred taxes are determined based
on the  difference  between the financial  statement and tax bases of assets and
liabilities  using  enacted  tax  rates in  effect  in the  years  in which  the
differences are expected to reverse.

The  Company's  primary  temporary  differences  relate  to items  expensed  for
financial  reporting  purposes  but not  currently  deductible  for  income  tax
purposes, consisting primarily of depreciable lives for property and equipment.

As of December 31, 2000,  net operating  loss  carryforwards  are  approximately
$74.9 million and $66.1 million for federal and California  income tax purposes,
respectively.  These net operating loss  carryforwards,  including net operating
losses of $12.6  million and $2.9 million for federal and  California  purposes,
respectively,  related to Glyko,  Inc.  These  federal  and state  carryforwards
expire beginning in the year 2011 and 2004, respectively.

The Company also has research and development credits available to reduce future
federal and California  income taxes, if any, of approximately  $2.8 million and
$2.8 million,  respectively, at December 31, 2000. These credits include credits
related to Glyko,  Inc.  of  approximately  $0.6  million  and $0.3  million for
federal  and  California  purposes,   respectively.   These  federal  and  state
carryforwards expire beginning in 2012 and 2013, respectively.

The Company also has orphan drug  credits  available  to reduce  future  federal
income taxes, if any, of approximately $7.3 million at December 31, 2000.

The net  operating  loss  carryforwards  and  research and  development  credits
related to Glyko,  Inc.  as of October 7, 1998,  can only be  utilized to offset
future taxable income and tax, respectively, if any, of Glyko, Inc. In addition,
the Tax Reform Act of 1986 contains  provisions that may limit the net operating
loss carryforwards and research and development  credits available to be used in
any given year should certain events occur,  including sale of equity securities
and other changes in ownership.  The acquisition of Glyko,  Inc. and the related
issuance of stock  represented  a change of  ownership  under these  provisions.
There can be no assurance that the Company will be able to utilize net operating
loss carryforwards and credits before expiration.

Deferred  income  taxes are recorded to reflect the tax  consequences  on future
years of differences  between the tax basis of assets and  liabilities and their
financial reporting amounts at each period-end. The Company has a cumulative net
operating  loss  carryforward  since  inception,  resulting  in net deferred tax
assets. A valuation allowance is placed on the net deferred tax assets to reduce
them to an assumed net realizable value of zero.

5.   STOCK OPTION PLANS:

1997 Stock Plan--In  November  1997,  the Board adopted,  and in April 1998, the
stockholders  approved,  the 1997 Stock Plan (the 1997 Plan), which provided for
the  reservation  of a total of  3,000,000  shares of common  stock for issuance
under the 1997 Plan. In December 1998,  the Board adopted,  and in January 1999,
the stockholders  approved, an amendment to the 1997 Plan to increase the number




                                       45

of shares reserved for issuance under it to an aggregate of 5,000,000 and to add
an  "evergreen  provision"  providing  for an annual  increase  in the number of
shares  which may be  optioned  or sold  under the 1997  Plan  without  need for
additional Board or stockholder  action to approve such increase (which increase
shall  be the  lesser  of 4  percent  of  the  then-outstanding  capital  stock,
2,000,000  shares, or a lower amount set by the Board). As of December 31, 2000,
the number of shares  reserved for issuance was an aggregate of 7,695,572  under
the 1997 Plan.  The 1997 Plan  provides  for the grant of stock  options and the
issuance of common stock by the Company to its employees,  officers,  directors,
and consultants.

1998 Director Option Plan--The 1998 Director Option Plan (the Director Plan) was
adopted  by the Board in  December  1998 and  approved  by the  stockholders  in
January 1999.  The Director Plan  provides for the grant of  nonstatutory  stock
options to  non-employee  directors.  A total of 200,000 shares of the Company's
common stock,  plus an annual  increase  equal to the number of shares needed to
restore  the maximum  aggregate  number of shares  available  for sale under the
Director  Plan or the lesser of 0.5 percent of the  outstanding  capital  stock,
200,000  shares,  or a lesser  amount set by the Board,  have been  reserved for
issuance under the Director  Plan. As of December 31, 2000,  options to purchase
165,000  shares were  granted  under the  Director  Plan and options to purchase
400,000 shares were authorized under the Director Plan.

 Options  currently  outstanding  under the Company's 1997 Stock Option Plan and
1998 Director Plan (the Plans)  generally  have vesting  schedules of up to four
years and options terminate after five to ten years or 90 days after termination
of employment or contract.

The  Company  accounts  for  option  grants  in  accordance  with  APB  25.  Had
compensation cost for option grants to employees under the Plans been determined
consistent  with the fair value  provisions  of SFAS No. 123,  the effect on the
Company's  net loss  would have been as follows  (in  thousands,  except for per
share data):

                                                                                                        Period from
                                                                                                      March 21, 1997
                                         Years ended December 31,                                       (Inception)
                          ---------------------------------------------------------------------       to December 31,
                                 1998                     1999                  2000                        2000
                        -----------------------    --------------------  --------------------  -----------------------------
                                                                                         
Net loss as reported      $    (12,314)              $    (28,072)           $  (37,364)             $     (80,513)
Pro  forma  effect  of
SFAS No. 123                      (183)                    (1,074)               (5,412)                    (6,669)
                         ----------------------    --------------------  --------------------  -----------------------------
Pro forma net loss        $    (12,497)              $    (29,146)           $  (42,776)             $     (87,182)
                         ======================    ====================  ====================  =============================
Net  loss  per  common
share as reported         $      (0.55)              $      (0.94)           $    (1.04)             $       (3.21)
                         ======================    ====================  ====================  =============================
Pro  forma   loss  per
common share              $      (0.56)              $      (0.97)           $    (1.19)             $       (3.48)
                         ======================    ====================  ====================  =============================


A summary of the status of the Company's Plans is as follows:

                                                             Weighted
                                                             Average      Exercisable   Weighted Average
                                                            Exercise      at End of      Fair Value of
                                            Option Shares    Price          Year       Options Granted
                                          ------------------------------ ------------- -------------------
                                                                                  
Outstanding at March 21, 1997
    Granted                                    297,000          $1.00                          $0.22
    Exercised                                       -              -
    Canceled                                        -              -
                                          ----------------
Outstanding at December 31, 1997               297,000           1.00       232,000
                                                                         =============
    Granted                                  2,507,660           4.18                          $2.40
    Exercised                                   (1,973)          1.00
    Canceled                                    (1,447)          1.00
                                          ----------------
Outstanding at December 31, 1998             2,801,240           3.85       761,609
                                                                         =============
                                                                                               $8.80
    Granted                                  2,877,430          11.35
    Exercised                                  (40,148)          3.69
    Canceled                                  (188,536)          9.28
                                          ----------------
Outstanding at December 31, 1999             5,449,986           7.59     1,922,041
                                                                         =============
    Granted                                  1,881,310          15.83                          $13.27
    Exercised                               (1,300,532)          4.36
    Canceled                                  (491,506)         11.70
                                          ----------------
Outstanding at December 31, 2000             5,539,258          10.92     2,067,302
                                                                         =============

                                       45

There were 900,510 and 1,048,661  options available for grant under the Plans at
December 31, 1999 and 2000, respectively.

As of December 31, 2000,  the  5,539,258  options  outstanding  consisted of the
following:


Options Outstanding                                                                                  Options Exercisable
- --------------------------------------------------------------------------------------   -------------------------------------------
Range of Exercise  Number of Options      Weighted Average          Weighted Average         Number of Options     Weighted  Average
     Prices          Outstanding          Contractual Life          Exercise Price            Exercisable            Exercise Price
- --------------------------------------------------------------------------------------   -------------------------------------------

                                                                                                         
 $0.00 to $3.50         266,939                 1.8                      $1.03                   254,654                $ 1.03
 $3.51 to $7.00       1,930,998                 4.8                      $5.38                 1,073,652                $ 5.23
 $7.01 to $10.50        175,900                 8.9                      $9.45                    13,446                $ 8.50
 $10.51 to $14.00     1,774,658                 6.6                     $12.78                   431,597                $12.86
 $14.01 to $17.50       781,556                 5.5                     $15.82                   199,654                $15.79
 $17.51 to $21.00       330,749                 7.9                     $19.46                    39,407                $19.65
 $21.01 to $24.50       166,000                 9.0                     $21.95                    28,124                $21.95
 $24.51 to $28.00        96,000                 4.9                     $25.88                    21,873                $25.92
 $28.01 to $31.50        15,000                 4.2                     $31.25                     3,437                $31.25
 $31.51 to $35.00         1,458                 0.1                     $35.00                    1,458                 $35.00
                    ---------------                                                        ------------------
                      5,539,258                                                                2,067,302
                    ===============                                                        ==================


The fair value of each option  grant in 1997,  1998 and through July 22, 1999 is
estimated on the date of grant using the Black-Scholes option pricing model with
the  following  assumptions:  risk-free  interest  rates ranging from 4.6 to 5.7
percent;  expected dividend yield of 0 percent;  expected life of four years for
the Plan's options; and expected volatility of 0 percent.

The fair value of each option grant from July 22, 1999 through December 31, 1999
is estimated on the date of grant using the  Black-Scholes  option pricing model
with the following assumptions: risk-free interest rates ranging from 5.8 to 6.1
percent;  expected dividend yield of 0 percent;  expected life of four years for
the Plan's options; and expected volatility of 38 percent.

The fair value of each option  grant in 2000 is  estimated  on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants : risk-free interest rates ranging from 4.6 to 6.8 percent;  expected
dividend yield of 0 percent; expected life of four years for the Plan's options;
and expected volatility of 105 percent.

6.   COMMITMENTS AND CONTINGENCIES:

Lease  Commitments--The  Company  leases  office  space and research and testing
laboratory space in various  facilities under operating  agreements  expiring at
various dates through 2010.  Future  minimum lease  payments for the years ended
December 31 are as follows (in thousands):

            2001.................        $  1,888
            2002..................          1,754
            2003..................          1,627
            2004.................           1,563
            2005..................          1,563
            Thereafter...........           6,953
                                         ---------
                      Total.....         $ 15,348
                                         =========

Rent expense for the years ended  December 31, 1998,  1999 and 2000, and for the
period from March 21, 1997 (inception),  to December 31, 2000, was $0.4 million,
$1.1 million, $1.5 million and $3.0 million, respectively.

Research  and  Development  Funding and  Technology  Licenses--The  Company uses
experts and  laboratories  at  universities  and other  institutions  to perform
research and development  activities.  Funding commitments to these institutions
for the year ended December 31 are as follows (in thousands):

            2001..................           504
            2002..................           100
            2003..................           100
            2004..................           100
            2005..................           100
                                           ------
                      Total.....           $ 904
                                           ======

The Company has also licensed technology from certain institutions, for which it
is  required  to pay a royalty  upon  future  sales,  subject to certain  annual
minimums.





                                       46

Product Liability and Lack of  Insurance--The  Company is subject to the risk of
exposure to product  liability claims in the event that the use of Aldurazyme or
rhASB  results  in  adverse  effects  during  testing or  commercial  sale.  The
BioMarin/Genzyme  LLC and the Company do carry  product  liability  insurance to
cover the clinical trials of Aldurazyme and rhASB, respectively. There can be no
assurance  that the Company will be able to obtain product  liability  insurance
coverage at  economically  reasonable  rates or that such insurance will provide
adequate coverage against all possible claims.

7.   RELATED-PARTY TRANSACTIONS:

The  Company  had   contractual   agreements   for  office   space  and  certain
administrative,  research,  and development  functions with Glyko, Inc. prior to
the acquisition date of October 7, 1998.  BioMarin  reimburses  Glyko,  Inc. for
rent, salaries and related benefits, and other administrative costs. Glyko, Inc.
also reimburses BioMarin for salaries and related benefits.

Reimbursement of expenses (in thousands):


                                                    Paid from         Paid from
                                                  Glyko, Inc. to     BioMarin to
                                                    BioMarin         Glyko, Inc.     Net, to Glyko, Inc.
                                                 ---------------- ---------------  ---------------------

                                                                             
Year ended December 31, 1998                      $   75           $     298          $   223
Year ended December 31, 1999                          68                 335              267
Year ended December 31, 2000                           -                 155              155
March 21, 1997 (inception) to December 31, 2000      276               1,162              886




During  1997  801,500  warrants  were  issued to an entity with which the former
Chief Executive Officer and Chairman of the Board is affiliated (see Note 3).

Since  October 8, 1998,  GBL has agreed to pay the Company a monthly  management
fee for its  services  to GBL  primarily  relating  to  management,  accounting,
finance and government  reporting.  The Company had accrued receivables relating
to these services for GBL of $37,500 and $8,765 for the years ended December 31,
1999 and 2000, respectively.

On April 13,  1999,  the Company  entered  into a  convertible  note  financing
agreement  in the amount of $26.0  million.  Of this amount GBL  purchased  $4.3
million worth of such notes and LaMont Asset  Management SA (LAM) purchased $9.7
million. A director of the Company is also the chairman of LAM. The Company also
entered into an agency  agreement  with LAM pursuant to which the Company agreed
to pay LAM a five percent cash  commission on sales to certain note  purchasers.
On July 23, 1999,  concurrent with the Company's IPO, the Company's  convertible
notes payable  (including accrued interest) were converted into 2,672,020 shares
of the Company's common stock at $10 per share.  GBL's $4.3 million  convertible
note plus  interest  was  converted  to 441,911  shares  and LAM's $9.7  million
convertible note plus interest was converted to 996,869 shares.

Due to the terms of the collaborative agreement with Genzyme outlined in Note 8,
Genzyme is considered to be a related party.  See also Notes 1 and 8 for Genzyme
related-party transactions.

8.   COLLABORATIVE AGREEMENTS:

Genzyme--Effective September 4, 1998, the Company entered into an agreement (the
Collaboration   Agreement)   with   Genzyme  to   establish   a  joint   venture
(BioMarin/Genzyme  LLC) for the worldwide  development and  commercialization of
Aldurazyme  to treat  MPS-I.  In  conjunction  with the  formation  of the joint
venture,  the Company established a wholly-owned subsidiary,  BioMarin Genetics,
Inc.  The  Company  has a 49 percent  interest  in the joint  venture,  BioMarin
Genetics,  Inc.  has a 1 percent  interest,  and  Genzyme has the  remaining  50
percent interest.

Under the Collaboration  Agreement, the Company and Genzyme are each required to
make capital contributions to the joint venture in an amount equal to 50 percent
of costs and expenses associated with the development and  commercialization  of
Aldurazyme.  The  parties  also  agree to share the  profits  equally  from such
commercialization.  In  addition,  Genzyme  purchased  1,333,333  shares  of the
Company's  common stock at $6 per share in a private  placement  for proceeds of
$8.0 million and,  concurrent  with the IPO,  purchased  an  additional  769,230
shares of the Company's  common stock at the IPO price for an  additional  $10.0
million.  Genzyme has also agreed to pay the Company  $12.1 million in cash upon
FDA approval of the biologics license application for Aldurazyme.

Other   Agreements--The   Company  is  engaged  in  research   and   development
collaborations with various academic  institutions,  commercial research groups,
and other  entities.  The  agreements  provide for  sponsorship  of research and
development  by the Company and may also provide for  exclusive  royalty-bearing
intellectual property licenses or rights of first negotiation regarding licenses
to intellectual property development under the collaborations.  Typically, these
agreements are terminable for cause by either party upon 90 days written notice.

                                       47

9.   COMPENSATION PLANS:

Employment  Agreements--The  Company has entered into employment agreements with
eight officers of the Company.  Seven of these agreements are terminable without
cause by the Company upon six months prior notice,  or by the officer upon three
months prior written  notice to the Company,  with the Company  obligated to pay
salary  and  benefits  hereunder  until  such  termination.  In  the  employment
agreement  with the Company's  Chief  Executive  Officer the agreement  shall be
renewed  after three years for one  additional  three-year  period unless either
party gives nine months notice prior to the expiration of the initial three-year
period.   The  annual  salaries   committed  to  under  these  agreements  total
approximately $2 million.  In addition,  three of the agreements provide for the
payment of an annual cash bonus of up to 100  percent of the base annual  salary
of the three officers  based upon the Company's  market  capitalization  through
June 30, 2000. Bonuses for the three officers totaled $294,000 in 2000.

401(k) Plan--The Company  participates in the BioMarin  Retirement Savings Plan.
Most employees (Participants) are eligible to participate following the start of
their employment,  on the earlier of the next occurring January 1, April 1, July
1 or October 1.  Participants  may  contribute up to 15 percent of their current
compensation  to the  401(k)  Plan or an amount up to a  statutorily  prescribed
annual  limit.  The  Company  pays the direct  expenses  of the 401(k)  Plan and
matches 25% of the first 2% contributed to the employee accounts.  The Company's
matching contribution vests over four years from employment commencement.

1998 Employee Stock Purchase  Plan--In  December 1998 the Board adopted,  and in
January 1999 the  stockholders  approved,  the 1998 Employee Stock Purchase Plan
(the 1998 Purchase  Plan). A total of 250,000 shares of Company common stock has
been reserved for issuance under the 1998 Purchase Plan,  plus annual  increases
equal to the lesser of 0.5 percent of the  outstanding  capital  stock,  200,000
shares,  or a lesser  amount set by the Board.  As of December 31, 2000,  28,431
shares have been issued under the 1998 Purchase Plan.

10.   SUPPLEMENTAL CASH FLOW INFORMATION:

The  following  non-cash  transactions  took place in the periods  presented (in
thousands):



                                                                                                                Period from March
                                                                                                                    21, 1997
                                                                    Year Ended December 31,                     (Inception) to
                                                     ------------------------------------------------------        December 31,
                                                          1998             1999                2000                   2000
                                                     ------------------------------------------------------    --------------------
                                                                                                        
Common stock issued upon conversion of
  convertible notes plus interest                      $     -           $ 25,615           $    -                  $25,615
Common stock issued in exchange for notes                    -                 -                 -                   20,500
Common stock and common stock warrants
  issued in exchange for brokerage services                588                 -                 -                    1,518
Bridge loan converted to common stock                        -                 -                 -                      880
Common stock surrendered by stockholders
  for payment of principal and interest                      -                 -                170                     170
Compensation in the form of common stock
  and common stock options                                   -                 -                  -                      18



11.   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  facility was no longer
required for the  production of  Aldurazyme,  the initial  purpose of the plant,
after a decision by the  BioMarin/Genzyme LLC joint venture to use the Company's
Galli Drive facility for the  manufacture of bulk  Aldurazyme both for the Phase
III trial and for the commercial  launch of Aldurazyme.  This decision was based
in part  on U.S.  Food  and  Drug  Administration  guidance  to use an  improved
production  process,  which was installed in the Galli Drive  facility,  for the
clinical trial, the biologics license application  submission and for commercial
production.  The majority of the Company's  technical staff at the Carson Street
facility in  Torrance,  California  transferred  to the Galli Drive  facility in
Novato, California in May. The charge primarily consisted of impairment reserves
for leasehold improvements and equipment located in the Carson Street facility.












                                       48

12.   SUBSEQUENT EVENT

In January 2001,  the Company signed an agreement  with Acqua  Wellington  North
American  Equities Fund Ltd. (Acqua  Wellington)  whereby Acqua  Wellington will
make an equity  investment  in the  Company  of up to $50  million.  Subject  to
certain  conditions,  including the market price of BioMarin stock,  these funds
will be drawn  down,  at the  Company's  option,  over the course of the next 20
months from sales of registered  common stock to be sold at a small  discount to
the market price.

In the initial  transaction  under this  agreement  on  February 2, 2001,  Acqua
Wellington  purchased  $1 million  of the  Company's  common  stock at $9.85 per
share.

13.  QUARTERLY CONSOLIDATED FINANCIAL DATA (unaudited)

The Company's  quarterly  operating  results have fluctuated in the past and may
continue to do so in the future as a result of a number of  factors,  including,
but not limited to, the  completion of  development  projects and  variations in
levels of production.

The Company's common stock has been traded on the NASDAQ Stock Market since July
22, 1999.  There were 64 common  stockholders of record at December 31, 2000. No
dividends were paid for the years ended December 31, 2000 and 1999.



                                                                  Quarter Ended
                                        -------------------------------------------------------------------
                                           March 31,        June 30,      September 30,    December 31,
2000                                                  (In thousands, except per share data)

                                                                                
Total revenue                             $  3,298       $  3,083          $  2,807         $  3,138
Loss from operations                       (11,965)        (7,188)           (8,247)         (10,024)
Net loss                                   (11,736)        (7,086)           (8,148)         (10,394)
Net loss per share, basic and diluted        (0.34)         (0.20)            (0.23)           (0.28)
Common stock price per share:
  High                                    $ 38.750       $ 27.750          $ 21.750         $  17.62
  Low                                       12.750         16.750            16.375            7.156


                                                                  Quarter Ended
                                        -------------------------------------------------------------------
                                           March 31,        June 30,      September 30,    December 31,
1999                                                  (In thousands, except per share data)

Total revenue                              $  1,104      $  1,557          $  1,999         $  2,315
Loss from operations                        (4,583)        (6,145)           (7,732)          (9,040)
Net loss                                    (4,609)        (6,782)           (7,643)          (9,038)
Net loss per share, basic and diluted       (0.18)          (0.26)            (0.24)           (0.26)
Common stock price per share:
   High                                        N/A           N/A           $ 18.750         $ 17.000
   Low                                         N/A           N/A             11.625           11.625
































                                       49

EX-23

                                                                    Exhibit 23.1



                        [Arthur Andersen LLP Letterhead]

                  As independent public accountants, we hereby expressly consent
to the incorporation by reference of the financial statements and related report
prepared by us and  contained in this Annual  Report on Form 10-K in to BioMarin
Pharmaceutical  Inc.'s  Registration  Statement  on Form S-3,  Registration  No.
333-48800.

San Francisco, California

March 16, 2001

                                                     /s/ Arthur Andersen LLP

EX-10

                                April 20, 2000

VIA FED EX

Robert A. Baffi, Ph.D.
8 Elston Court
San Carlos, CA  94070


Dear Robert:

         I am pleased to offer you the  position  of Vice  President  of Quality
Assurance  and  Quality  Control at  BioMarin  Pharmaceutical  Inc. At the Board
meeting of April 19th, you were named an executive officer of BioMarin. You will
report directly to Bill Anderson, our Chief Financial Officer and Vice President
of Finance and Administration. You will be responsible for directing the quality
operations  (internal and external) of all BioMarin and Joint Venture  products;
manage  quality  operations  for clinical  and  commercial  requirements  in all
BioMarin  facilities,  including Bel Marin Keys and Galli Drive, Phases 1 and 2;
quality  control,  quality  assurance and validation  activities;  contribute to
quality  participation in efficient process  development and process changes for
cost  effective  manufacture;  responsible  for  budgets,  forecasts  and actual
financial performance of the Quality organization; and other duties as required.

         Your starting salary at BioMarin will be $200,000 per year. As you will
note from the attached addendum, BioMarin will pay some of your moving expenses.
Although an annual performance bonus cannot be guaranteed at this time, BioMarin
did award short term incentive  compensation for 1999 performance which was paid
in stock  options  at the end of 1999.  We  anticipate  a  continuation  of this
program at the end of 2000 with the likelihood that the means of payment will be
stock options.  You would be a participant  in 2000 awards on a pro-rated  basis
for time with the Company during 2000.

         As additional incentive, the BioMarin Board of Directors has granted to
you stock  options  to  purchase  200,000  shares of  common  stock in  BioMarin
Pharmaceutical Inc. The exercise price of these stock options will be determined
by the Nasdaq closing price on your first day of employment with BioMarin. These
stock  options will have a vesting  schedule as follows:  15% will vest upon FDA
approval of PAI and 15% will vest upon the filing of the BLA of Aldurazyme.  The
above 30% will vest in any case upon the  completion  of four  years of  service
after your start date. The remaining 70% of your





Robert A. Baffi, Ph.D.
Page 2
April 20, 2000


options  shall vest as follows:  6/48ths  upon the  completion  of six months of
employment and 1/48 per month thereafter.

         You will  receive  an  additional  10,000  shares  of  common  stock in
BioMarin  Pharmaceutical  Inc. The exercise price of these stock options will be
determined  by the Nasdaq  closing  price on your first day of  employment  with
BioMarin.  These stock  options  will have a vesting  schedule  as follows:  50%
vesting after six months of employment  and monthly  vesting  thereafter at 1/12
per month.  You will be fully vested in those options one year from grant.  Both
sets of options  will  expire  ten years  after the date of grant.  Should  your
employment  with the company  terminate for any reason your vested stock options
will expire 90 days beyond your termination  date, if not previously  exercised.
Unvested options will immediately cease to vest.

         Upon a change of  control,  should such an event  occur,  you will have
essentially  the same agreement terms as other officers which are detailed in an
attachment  to this  letter.  You will  also be  subject  to an  indemnification
agreement  which  includes   essentially  the  same  terms  as   indemnification
agreements with other officers and directors.

         As a regular  employee at BioMarin you will accrue three weeks per year
of paid vacation and be eligible to be covered by the company's medical, dental,
and group life insurance  plans. A description of the company's  employee manual
was previously  sent to you and you acknowledge  receipt of that  information by
your signature below.

         Your employment may be terminated at any time by BioMarin without cause
upon  six  months'  notice  to you  and by you  upon  three  months'  notice  to
BioMarin's  Board of  Directors.  If your  employment  is  terminated  under the
provisions of this  paragraph,  BioMarin shall  determine in its sole discretion
whether you shall continue to discharge your duties as Vice President of Quality
Assurance  and  Quality  Control.   In  any  case,  you  shall  be  entitled  to
compensation and benefits as provided in this letter until the effective date of
your termination.

         If, within twelve months of this letter, your employment terminates for
"cause" (as defined  herein),  you shall not be  entitled  to  compensation  and
benefits  as  provided  in this  letter.  "Cause"  is  defined  as (i) an act of
personal dishonesty taken by you in connection with your  responsibilities as an
employee  and  intended  to  result  in  your  personal  enrichment,  (ii)  your
conviction or, plea of nolo contendere to, a felony,  (iii) a willful act by you
which  constitutes  gross misconduct and which is injurious to the Company,  and
(iv)  following  delivery to you of a written  demand for  performance  from the
Company which describes the basis for the Company's belief that you have not





Robert A. Baffi, Ph.D.
Page 3
April 20, 2000


substantially  performed  your  duties,  continued  violations  by you  of  your
obligations to the Company.  The notice of  termination  under the provisions of
this paragraph  shall state the grounds for  termination  and state all relevant
facts supporting the grounds.

         If you, in the opinion of a licensed medical doctor, become mentally or
physically  incapacitated  to the extent that you are unable to  discharge  your
employment duties for a period of six months or more, BioMarin shall continue to
provide you, for a period ending six months from the determination of incapacity
with the  compensation as set out in this letter.  If you die during the term of
your  employment,  BioMarin shall continue to pay, for six months following your
death, your  compensation,  as set out in this letter, to your surviving spouse,
if there is one, or if not, to the executor or administrator to your estate.

         This offer of employment is made contingent on your providing  BioMarin
with the legally  required proof of your identity and  authorization  for you to
work in the  United  States.  Please be  advised  that  nothing in this offer is
intended to imply an employment contract of specific duration with BioMarin.

         We are all  eagerly  looking  forward to working  with you. As you know
this is an exciting time in BioMarin's  early growth and I believe you will find
this a very challenging and rewarding experience.  If you accept this offer, you
can plan on starting on or before May 9, 2000.

Sincerely,



R. W. Anderson
Vice President of Finance and Administration
Chief Financial Officer

I accept this offer


- -------------------


Date: ______________





                               RELOCATION ADDENDUM

         BioMarin  will pay  your  moving  and  relocation  expenses,  up to and
including,  Fifty Thousand  Dollars  ($50,000.00)  as indicated  below.  We will
reimburse you from your receipts.

         BioMarin  must  follow  the IRS  guidelines  as to  taxable/non-taxable
status for relocation reimbursement by an employer. Reimbursement for relocation
expenses  received from BioMarin will not be considered income for expenses that
would be  deductible as a moving  expense if directly paid by the employee.  Any
amount paid by BioMarin that would not be  considered a qualified  reimbursement
for relocation expenses will be included as gross income and taxed.

         Deductible   moving   expenses   are   limited   to  the  cost  of  (1)
transportation of household goods and personal effects and (2) travel (including
lodging but not meals) to the new residence.

         To be eligible for the moving  expense a distance test must be met. The
new  principal  place  of work  must be at  least  50  miles  farther  from  the
taxpayer's  old residence  than the old residence  was from the  taxpayer's  old
place of work.

         Where an  automobile  is used in making the move, a taxpayer may deduct
either (1) the actual out-of-pocket expenses incurred (gasoline and oil, but not
repairs,  depreciation,  etc.) or (2) a standard mileage  allowance of ten cents
per mile.

         Any additional relocation expense that you incur that is not deductible
will be paid by BioMarin but will be taxed per the IRS. Those additional  monies
will  show  up  as  gross  income.  If  you  need  clarification  or  additional
information, please consult your tax advisor.

- -------------------------------
R. W. Anderson
Vice President, Finance and Administration
Chief Financial Officer

- -------------------------------
Robert Baffi

Date:  __________________________