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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

Or

For the transition period from                              to                             .

Commission File Number: 000-26727

BioMarin Pharmaceutical Inc.

(Exact name of registrant as specified in its charter)

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  x    No  ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 20, 2003 was $516,165,247. The number of shares of common stock, $0.001 par value, outstanding on February 20, 2003 was 53,864,416.

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 20, 2003 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

We develop enzyme therapies to treat serious, life-threatening diseases and conditions. We leverage our expertise in enzyme biology to develop product candidates for the treatment of genetic diseases, as well as other critical care situations such as cardiovascular surgery and serious burns. Our product candidates address markets for which no products are currently available or where current products have been associated with major deficiencies.

Our lead product candidate, Aldurazyme^®, is currently being evaluated for market approval in the United States, the European Union, Canada and Australia for the treatment of Mucopolysaccharidosis I (MPS I) disease. MPS I is a debilitating and life-threatening genetic disease caused by the deficiency of (alpha)-L-iduronidase, an enzyme responsible for breaking down certain carbohydrates. MPS I is a progressive disease that afflicts patients from birth and frequently leads to severe disability and early death. There are currently no drugs on the market for the treatment of MPS I. Aldurazyme has received both fast track designation from the U.S. Food and Drug Administration (FDA) and orphan drug designation for the treatment of MPS I in the United States, the European Union and Australia. We are developing Aldurazyme through a joint venture with Genzyme Corporation (Genzyme). In collaboration with Genzyme, we submitted a “rolling” Biologics License Application (BLA) to the FDA, which was completed on July 29, 2002, and submitted a Marketing Authorization Application (MAA) to the European Medicines Evaluation Agency (EMEA) on March 1, 2002. On January 15, 2003, an FDA appointed advisory committee voted unanimously that the data on Aldurazyme demonstrated clinically meaningful improvements in endurance and pulmonary function in MPS I patients. The advisory committee stated that any remaining safety issues could be addressed with appropriate labeling and post-approval monitoring. On January 28, 2003, the FDA issued a complete response letter for Aldurazyme. On February 21, 2003, we received notice that the Committee for Proprietary Medicinal Products (CPMP) of the European Union issued a positive opinion on our marketing application for Aldurazyme.

We are developing our second product candidate, Neutralase^™, for reversal of anticoagulation by heparin. Heparin is a carbohydrate drug commonly used as an anticoagulant in a range of surgical procedures such as coronary artery bypass graft (CABG) surgery and angioplasty. Neutralase is a carbohydrate-modifying enzyme that cleaves heparin, allowing coagulation of blood and potentially aiding patient recovery following surgery. We believe that Neutralase has the potential to address a broad market with multiple potential medical indications.

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Our first target indication for Neutralase is for the reversal of anticoagulation by heparin in CABG surgery. We began enrolling patients in a Phase 3 trial of Neutralase for the reversal of heparin in CABG surgery in February 2003 and we anticipate that this trial will be completed in the fourth quarter of 2003 or the first quarter of 2004. We also plan to evaluate Neutralase in interventional cardiology procedures such as angioplasty, and in other procedures such as hip and knee surgeries, where heparin or heparin-like anticoagulants such as Lovenox^® (a low molecular weight heparin) or Arixtra^® (a pentasacharride) are used. We have retained all worldwide commercial rights to Neutralase.

In addition to Aldurazyme and Neutralase, we are developing other enzyme-based therapeutics for the treatment of a variety of diseases and conditions. In March 2002, we began a Phase 2 trial of Aryplase^™ for the treatment of Mucopolysaccharidosis VI (MPS VI), another seriously debilitating genetic disease for which no treatment currently exists. The six-month treatment phase of the Phase 2 trial ended in January 2003 and patients are continuing to receive Aryplase as part of an extension phase of the trial. We have received orphan drug designation for Aryplase in the United States and the European Union. We also are developing Vibrilase^™, a topical enzyme product for use in removing burned skin tissue in preparation for skin grafting or other therapy. We initiated a Phase 1 clinical trial of this product in the United Kingdom in the second quarter of 2002 and we expect to begin a Phase 2 clinical trial in either the United States or the United Kingdom following the completion of this Phase 1 trial. In addition, we are pursuing preclinical development of several other enzyme product candidates for genetic and other diseases. We have retained all worldwide commercial rights to these product candidates.

Recent Developments

Public offering of common stock

On February 26, 2003, we completed a public offering of our common stock. In the offering, we sold 7,500,000 shares at a price to the public of $10.00 per share, or a total offering price of $75.0 million. The net proceeds, after expenses and underwriting discounts, were approximately $70.1 million. Additionally, we have granted the underwriters an option to purchase up to an additional 1,125,000 shares at the same offering price to the public of $10.00 per share to cover over-allotments. If this option is exercised in full, we expect to receive net proceeds of $10.6 million. We intend to use the net proceeds from this sale of shares for the development and commercialization of our lead product candidate, Aldurazyme; additional clinical trials and the manufacturing of Neutralase; preclinical studies and clinical trials for our other product candidates; potential licenses and acquisitions of complementary technologies, products and companies; general corporate purposes; and working capital.

EMEA issues positive opinion

On February 21, 2003, we received notice that the CPMP of the European Union issued a positive opinion on our marketing application for Aldurazyme. The positive CPMP opinion is the final step before formal approval to market Aldurazyme in the 15 countries of the European Union. We have been advised that the committee’s opinion will be forwarded to the European Commission, which is expected to make a final decision on marketing authorization within three to four months.

FDA issues complete response letter

On January 28, 2003, the FDA issued a complete response letter related to our marketing application for Aldurazyme. The FDA noted that the data submitted in the application supported the safety and effectiveness of Aldurazyme in patients with MPS I. The FDA has not requested any additional clinical data in order to grant final approval of Aldurazyme. To satisfy the FDA’s requirements, and in collaboration with Genzyme, we plan to provide additional information to the FDA and take further action with respect to the following three matters outlined in its letter: post-marketing commitments, final product labeling, and follow-up on pre-marketing manufacturing inspection observations. We expect to fully respond to the FDA on these matters in the near future. The FDA also noted that it would work with the companies to make this drug available to patients.

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Unanimous FDA advisory committee recommendations

On January 15, 2003, the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee voted unanimously that the clinical data on Aldurazyme demonstrated efficacy. In two separate votes, the panel voted 12 to 0 that our Phase 3 trial showed a meaningful treatment effect in both primary endpoints—pulmonary capacity, as measured by percent predicted forced vital capacity, and endurance, as measured by the distance covered in a six-minute walk test. The panel stated that any remaining safety and efficacy issues could be addressed with appropriate labeling and post-approval monitoring.

Aldurazyme

Our lead product candidate, Aldurazyme, is being developed for the treatment of MPS I. MPS I is a genetic disease caused by the deficiency of (alpha)-L-iduronidase. 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 patients with MPS I die from complications associated with the disease as children or teenagers. About 3,400 individuals in developed countries have MPS I, including about 1,000 in the United States and Canada.

There are currently no approved drugs for the treatment of MPS I. Bone marrow transplantation has been used to treat severely affected patients, generally under the age of two, with limited success. Bone marrow transplantation is associated with high morbidity and mortality rates as well as with problems inherent in the procedure itself, including graft vs. host disease, graft rejection, and donor availability, which severely limit its utility and application.

Aldurazyme is a specific form of recombinant human (alpha)-L-iduronidase that replaces a genetic deficiency of (alpha)-L-iduronidase in MPS I patients, thus reducing or eliminating the build-up of certain carbohydrates in the lysosomes of cells. By eliminating this carbohydrate build-up, Aldurazyme is able to significantly reduce symptoms experienced by these patients. In clinical trials to date, researchers have observed significant clinical and biochemical improvement in patients treated with Aldurazyme, including improved pulmonary function, improved endurance, decreased joint stiffness, decreased fatigue, improved vision, reduced airway obstruction, weight and height gain, improved cardiac function and the elimination of severe headaches.

In September 1998, we formed a 50/50 joint venture with Genzyme for the worldwide development and commercialization of Aldurazyme. We are responsible for product development, manufacturing and United States regulatory submissions. Genzyme is responsible for sales, marketing, distribution, obtaining reimbursement for Aldurazyme worldwide and international regulatory submissions.

In collaboration with Genzyme, we completed a 45-patient, double-blinded, placebo-controlled Phase 3 clinical trial of Aldurazyme in August 2001. All patients completed the trial and elected to receive Aldurazyme in an open label extension study. On November 2, 2001, we announced positive results from this trial. In July 2002, we announced that, together with Genzyme, we submitted the final portion of our “rolling” BLA to the FDA. The BLA was formally accepted and granted priority review status in September 2002. On January 15, 2003, the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee voted unanimously that the clinical data contained in the application demonstrated the efficacy of Aldurazyme. On January 28, 2003, the FDA issued a complete response letter related to the Aldurazyme application.

In accordance with the terms of our joint venture, Genzyme submitted an MAA to the EMEA in the first quarter of 2002 for marketing in the European Union. On February 21, 2003, we received notice that the CPMP of the European Union issued a positive opinion on our marketing application for Aldurazyme. In December 2002, Genzyme submitted applications for market approval of Aldurazyme in Canada and Australia. In Canada, the application has been accepted and was given priority review status under Health Canada’s Therapeutic

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Products Program. Genzyme also requested priority review status in Australia, where the Therapeutic Goods Administration has previously given Aldurazyme orphan drug designation.

The FDA has granted Aldurazyme orphan drug designation, which will result in 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, in the European Union, Aldurazyme has been designated as an orphan medicinal product for the treatment of MPS I, giving the potential for ten years of market exclusivity in the European Union.

Neutralase

We are developing Neutralase for the reversal of anticoagulation by heparin in patients undergoing CABG surgery and angioplasty. Patients undergoing CABG surgery are treated with heparin to prevent coagulation during surgery. Once the procedure is completed, protamine is administered to reverse the effect of heparin and therefore prevent excessive bleeding. Currently, protamine is the only commercially available therapeutic for the reversal of heparin anticoagulation. Protamine has been associated with adverse side effects, such as abnormal changes in blood pressure, depression of heart function and acute allergic reactions.

We believe Neutralase has the potential to reverse heparin anticoagulation without many of the serious side effects associated with protamine. Neutralase is a carbohydrate-modifying enzyme that breaks down heparin in a manner that reverses heparin’s anticoagulation effect and restores the normal coagulation of blood. We believe Neutralase has the potential for use as a reversal agent for heparin anticoagulation in open-heart surgery such as CABG procedures, interventional cardiology procedures such as angioplasty, and in other procedures where heparin or heparin-like anticoagulants are used, such as hip and knee surgeries.

Data from Phase 1 and Phase 2 clinical trials indicate that Neutralase can reverse heparin anticoagulation without the adverse changes in blood pressure associated with protamine usage. We began enrolling patients in a Phase 3 trial of Neutralase for the reversal of heparin in CABG surgery in February 2003. This Phase 3 trial of Neutralase is being conducted in patients undergoing CABG surgery, both in instances where heart-lung bypass machines are and are not used. The trial is expected to enroll approximately 600 to 800 patients at 30 sites (24 sites in the United States and 6 sites in Canada). The protocol compares Neutralase to protamine for its ability to reverse anticoagulation by heparin following CABG surgery. If the trial is successful, we anticipate that we will commence a second Phase 3 study shortly thereafter.

Aryplase

We are developing Aryplase as an enzyme replacement therapy for the treatment of MPS VI, a debilitating genetic disease similar to MPS I. Aryplase is a specific form of recombinant human N-acetylgalactosamine 4-sulfatase (also known as arylsulfatase B). Aryplase has received fast track designation from the FDA as well as orphan drug designation for the treatment of MPS VI in the United States and in the European Union. In September 2001, we reported positive results from a Phase 1 clinical trial of Aryplase. We initiated an open-label, multi-national Phase 2 clinical trial in March 2002 to evaluate the efficacy, safety and pharmacokinetics of weekly intravenous infusions of 1.0 mg/kg of Aryplase in ten MPS VI patients. The trial was completed in January 2003 and results will be presented at The American College of Medical Genetics, 9th Annual Clinical Genetics Meeting, to be held March 13-16, 2003 in San Diego, California.

Other Product Development Programs

Vibrilase

We are developing Vibrilase for use in removing burned skin in preparation for skin grafting or other therapy. In the second quarter of 2002, we initiated a Phase 1 clinical trial of this product candidate in the United

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Kingdom and we expect to begin a Phase 2 clinical trial in either the United States or the United Kingdom following the completion of this Phase 1 trial.

Phenylase^™

Phenylase is being developed as an oral enzyme therapy for patients with phenylketonuria (PKU), a genetic disease in which the body cannot properly metabolize the amino acid phenylalanine. If left untreated, elevated levels of phenylalanine lead to brain damage and severe mental retardation.

Compliance with existing treatment, consisting of highly restricted and generally unpalatable diets, usually only occurs through middle childhood to ensure normal brain development. Recent data demonstrates that adolescent and adult PKU sufferers who no longer follow restricted diets suffer from a number of psychological and neurological symptoms. Phenylase is intended to enable disease control without the need for restrictive diets. Phenylase is currently in preclinical development.

NeuroTrans^™

NeuroTrans is a novel technology that is designed to allow large molecules such as proteins to be transported efficiently across the blood-brain barrier after administration by traditional intravenous delivery. The technology is based on a protein, p97 or melanotransferrin. Brain capillaries have a high concentration of receptors that actively transport p97 into the brain. We are exploring the delivery of lysosomal enzymes to the brain and will be seeking partners on the delivery of other therapeutics such as neurotrophic factors and cancer drugs.

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 for our genetic disease drug products and bulk enzyme production for clinical and early commercial production of our other drug products.

In 2000, we began production of Aldurazyme for clinical requirements including the Phase 3 clinical trial and other clinical studies. The bulk production is being done in our Galli Drive (Novato, California) manufacturing facility. Following the recently completed expansion, Galli is an approximately 54,000 square foot current Good Manufacturing Practices (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 either our joint venture partner or contract manufacturers. We also have approximately 16,000 square feet of warehouse space and quality control laboratories at our 79 Digital Drive 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 have been inspected, but not yet licensed, by the FDA and other regulatory agencies in connection with the BLA and other marketing applications. 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.

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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.

Patents and Proprietary Rights

Our success relies on a strong intellectual property portfolio that supports our future revenue streams and also erects barriers to our competitors. We are maintaining and building our patent portfolio through: filing new patent applications; prosecuting existing applications; licensing and acquiring new patents and patent applications; and enforcing our issued patents. Furthermore, we seek to protect our ownership of know-how, trade secrets and trademarks through an active program of legal mechanisms including assignments, confidentiality agreements, material transfer agreements, research collaborations and licenses.

Our number of issued patents now stands at eighty-six (86) patents including sixteen (16) patents granted by the U.S. Patent and Trademark Office (USPTO). Furthermore, our portfolio of pending patent applications totals seventy-eight (78) applications with twenty (20) applications in the USPTO.

The recent issuance of one core patent and allowance of two key patent applications continues to strengthen our patent portfolio. Our ultra-pure (alpha)-L-iduronidase composition or Aldurazyme is now protected by US Patent No: 6,426,208. Furthermore, the recent allowance of two patent applications directed toward the purification (09/711,202) and the treatment MPS I disease (09/711,205) will further strengthen our Aldurazyme patent. The issuance of US Patent No. 6,455,494 also protects the use of our NeuroTrans technology toward our efforts in treating the neurological manifestations of lysosomal diseases.

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. 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 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.

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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 post-approval studies to validate the surrogate endpoint or confirm the effect on the clinical endpoint and 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. In June 2000, the FDA designated Aryplase a fast track product for the treatment of MPS VI. We cannot predict the ultimate impact, if any, of the fast track process on the timing or likelihood of FDA approval of Aldurazyme, Aryplase or any of our other potential products.

Orphan Drug Designation

In September 1997, Aldurazyme received orphan drug designation from the FDA. In February 1999, Aryplase 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, which for this program is defined as having a prevalence less than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a 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 Aryplase received designation as orphan medicinal products by the European Commission in February 2001.

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 in the U.S. and ten years in Europe. Although obtaining approval to market a product with orphan drug exclusivity may be advantageous, we cannot be certain:

Competition

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:

Aldurazyme for MPS I

Between November 21, 2000, and February 25, 2003, Transkaryotic Therapies, Inc. (TKTX) announced that three US patents on (alpha)-L-iduronidase had been issued and that these patents had been exclusively licensed to TKTX. We have examined the patents, the patent files, the prior art and other information available as of the date of this report. Corresponding applications have been filed in Canada and Japan. These applications are still pending and are being prosecuted by the applicants. We believe that the patents, and patent applications, 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

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pursue the development of Aldurazyme with commercial diligence, concurrent with our challenge of the patents, in order to gain marketing approvals as rapidly as possible and to provide MPS I patients with the benefits of Aldurazyme. If any or all of the patents are deemed (or ruled) to be valid, the joint venture will need to reach an accommodation with the holder of the license to the patent.

These patents, and patent applications, do not affect our ability to market Aldurazyme in Europe. A patent making the same claims was rejected by the European Community and cannot be refiled.

A small private company announced that it has novel enzymatic technology to make enzymes with proper glycosylation and phosphorylation. Since that announcement, that company has been acquired by our joint venture partner, Genzyme. Pursuant to our joint venture agreement with Genzyme, both Genzyme and our Company must mutually agree on any technological developments relating to Aldurazyme. 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. Our 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.

Neutralase for anticoagulation reversal

Currently protamine sulfate (US) and protamine chloride (EU) are the only products used to reverse heparin. Neutralase, if approved, would have to compete with protamine in the market place. Protamine is relatively inexpensive; for Neutralase to achieve significant market share, clinical data will be needed to demonstrate advantages in safety or efficacy or both for the reversal of heparin. We believe that Neutralase has superior characteristics but cannot predict that clinical studies will demonstrate this superiority. Other than protamine, there are no significant competitive drugs in clinical trials for the reversal of heparin.

An alternative source of competition comes from substitutes for heparin, and hence reducing the need for Neutralase. The Medicines Company has an approved drug AngiomaxTM (hirudin) that is a substitute for heparin in angioplasty and potentially other indications. We cannot predict how much this competitor will reduce the potential market size of Neutralase for angioplasty or other indications. One additional source of competition comes from changes in medical practice that may decrease the use of procedures that require heparin and so Neutralase. Off-pump coronary artery bypass surgery has increased in frequency and the amount of heparin used is less, though heparin is still used. Increased off-pump CABG could reduce the use of heparin to some degree and therefore decrease the market for Neutralase. Other unpredictable changes in medical practice or other non-heparin-like anticoagulants could occur or be approved and potentially reduce the market for Neutralase. At this time, we do not foresee a large competitive challenge to heparin or the need for heparin reversal.

Aryplase 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.

Vibrilase 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

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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 Vibrilase continues to be surgical debridement.

Employees

As of February 20, 2003, we had 219 full-time employees, 123 of whom are in operations, 67 of whom are in research and development and 29 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.

Our principal executive offices are located at 371 Bel Marin Keys Boulevard, Suite 210, Novato, CA 94949 and our telephone number is (415) 884-6700. “BioMarin,” “Aryplase,” “Neutralase” and “Vibrilase” are our trademarks. “Aldurazyme” is a registered trademark of BioMarin/Genzyme LLC. All other trademarks or trade names referred to in this report are the property of their respective owners. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge on our web site at www.biomarinpharm.com as soon as reasonably practicable after electronically filing such reports with the SEC. Information contained in our website is not part of this report.

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 the development stage and have operated at a net loss since we were formed. Since we began operations in March 1997, we have been engaged primarily in research and development. We have no sales revenues from any of our product candidates. As of December 31, 2002, we had an accumulated deficit of approximately $225.6 million. We expect to continue to operate at a net loss for at least the next few years, and we expect that our net loss for the first quarter of 2003 will be greater than that for the comparable period of 2002. Our future profitability depends on our receiving regulatory approval of our product candidates and our ability to successfully manufacture and market any approved drugs, either by ourselves or jointly with others. The extent of our future losses and the timing of profitability are highly uncertain. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations.

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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 may be unable to raise additional financing when needed due to a variety of factors, including our financial condition, the status of our product programs, and the general condition of the financial markets. If we fail to raise additional financing as we need such funds, 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. The amount of capital we will need depends on many factors, including:

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:

We believe that our cash, cash equivalents and short term investment securities balances at December 31, 2002 and the additional funds raised in our recently completed public offering, will be sufficient to meet our operating and capital requirements through 2004. These estimates are 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, our potential for generating positive cash flow will be diminished and the capital necessary to fund our operations will be increased.

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

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

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

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

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

We completed a 235 week patient evaluation for the initial clinical trial of our lead drug product, Aldurazyme, for the treatment of MPS I. Two of the original ten patients enrolled in this trial died in 2000. One of these patients received 103 weeks of Aldurazyme treatment and the other received 137 weeks of treatment. A third patient from this initial trial died in 2002, after 234 weeks of treatment. One of the original forty-five patients who completed the Phase 3 clinical trial died after 16 weeks of the Phase 3 extension study. One patient treated under a single-patient use protocol died after 28 weeks of Aldurazyme treatment. Based on medical data collected from clinical investigative sites, none of these cases directly implicated treatment with Aldurazyme as the cause of death. If cases of patient complications or death are ultimately attributed to Aldurazyme, our chances of commercializing this drug would be seriously compromised.

The fast track designation for our product candidates may not actually lead to a faster review process and a delay in the review process or approval of our products will delay revenue from the sale of the products and will increase the capital necessary to fund these programs.

Aldurazyme and Aryplase have obtained fast track designations, which provides certain advantageous procedures and guidelines with respect to the review by the FDA of the BLA for these products and which may result in our receipt of an initial response from the FDA earlier than would be received if these products had not received a fast track designation. However, these procedures and guidelines do not guarantee that the total review process will be faster or that approval will be obtained, if at all, earlier than would be the case if the products had not received fast track designation. If the review process or approval for either product is delayed, realizing revenue from the sale of the products will be delayed and the capital necessary to fund these programs will be increased.

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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 facilities and processes. 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 facility compliance, 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. Due to the complexity of the processes used to manufacture our products, we may be unable to pass federal or international regulatory inspections in a cost effective manner. For the same reason, any potential third party manufacturer of our drug products may be unable to comply with cGMP regulations in a cost effective manner.

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

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

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

Because the extent and scope of patent protection for some of our drug products is particularly limited, orphan drug designation is particularly important for our products that are eligible for orphan drug designation. For eligible drugs, 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 that do not have patent protection, our competitors may then sell the same drug to treat the same condition.

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

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

Two of our lead drug candidates, Aldurazyme and Aryplase, target diseases with small patient populations. As a result, our per-patient prices must be relatively high in order to recover our development costs and achieve profitability. Aldurazyme targets patients with MPS I and Aryplase targets patients with MPS VI. We estimate that there are approximately 3,400 patients with MPS I and 1,100 patients with MPS VI in the developed world. We believe that we will need to market worldwide to achieve significant market share. In addition, we are developing other drug candidates to treat conditions, such as other genetic diseases and serious burn wounds, with small patient populations. Due to the expected costs of treatment for Aldurazyme and Aryplase, we may be

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unable to obtain sufficient market share for our drug products at a price high enough to justify our product development efforts.

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

The course of treatment for patients with MPS I using Aldurazyme and for patients with MPS VI using Aryplase is expected to be expensive. We expect patients to need treatment throughout their lifetimes. We expect that most families of patients will not be capable of paying for this treatment themselves. There will be no commercially viable market for Aldurazyme or Aryplase without reimbursement from third-party payers. Additionally, even if there is a commercially viable market, if the level of reimbursement is below our expectations, our revenue and gross margins will be adversely affected.

Third-party payers, such as government or private health care insurers, carefully review and increasingly challenge the prices charged for drugs. Reimbursement rates from private companies vary depending on the third-party payer, the insurance plan and other factors. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis.

We 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. 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 will not know what the reimbursement rates will be until we are ready to market the product and we actually negotiate the rates. If we are unable to obtain sufficiently high reimbursement rates, our products may not be commercially viable or our future revenues and gross margins may be adversely affected.

We expect that, in the future, reimbursement will be increasingly restricted both in the United States and internationally. The escalating cost of health care has led to increased pressure on the health care industry to reduce costs. Governmental and private third-party payers have proposed health care reforms and cost reductions. A number of federal and state proposals to control the cost of health care, including the cost of drug treatments have been made in the United States. In some foreign markets, the government controls the pricing, which would affect the profitability of drugs. Current government regulations and possible future legislation regarding health care may affect reimbursement for medical treatment by third-party payers, which may render our products not commercially viable or may adversely affect our future revenues and gross margins.

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

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

The patent positions of biotechnology products are complex and uncertain. The scope and extent of patent protection for some of our products are particularly uncertain because key information on some of the enzymes we are developing has existed in the public domain for many years. Other parties have published the structure of the enzymes, the methods for purifying or producing the enzymes or the methods of treatment. The composition and genetic sequences of animal and/or human versions of many of our enzymes have been published and are believed to be in the public domain. The composition and genetic sequences of other MPS enzymes that we intend to develop as products have also been published. Publication of this information may prevent us from obtaining composition-of-matter patents, which are generally believed to offer the strongest patent protection.

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For enzymes with no prospect of broad composition-of-matter patents, other forms of patent protection or orphan drug status may provide us with a competitive advantage. As a result of these uncertainties, investors should not rely on patents as a means of protecting our product candidates, including Aldurazyme.

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

In addition, competitors also seek patent protection for their technology. Due to the number of patents in our field of technology, we cannot be certain 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 the following:

It is also unclear whether our trade secrets are adequately protected. 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. These government organizations and universities may be unwilling to grant us any exclusive rights to technology or products derived from these collaborations prior to entering into the relationship. 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

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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 has issued three patents to a third party that relate to (alpha)-L-iduronidase. If we are not able to successfully challenge these patents, we may be prevented from producing Aldurazyme unless and until we obtain a license.

The United States Patent and Trademark Office has issued three patents to a third party that include composition-of-matter, isolated genomic nucleotide sequences, vectors including the sequences, host cells containing the vectors, and method of use claims for human recombinant (alpha)-L-iduronidase. The third patent, with claims to the isolated genomic nucleotide sequences, vectors including the sequences, and host cells containing the vectors, was issued on February 25, 2003. Our lead drug product, Aldurazyme, is based on human recombinant (alpha)-L-iduronidase. We believe that these patents are invalid on a number of grounds. A corresponding patent application was filed in the European Patent Office claiming composition-of-matter for human recombinant (alpha)-L-iduronidase, and it was rejected over prior art and withdrawn and cannot be re-filed. However, corresponding applications are still pending in Canada and Japan, and these applications are being prosecuted by the applicants. It is not known whether any of these applications will issue as patents or the scope of the claims that would issue from these applications. In addition, under U.S. law, issued patents are entitled to a presumption of validity, and our challenges to the U.S. patents may be unsuccessful. Even if we are successful, challenging the U.S. patents may be expensive, require our management to devote significant time to this effort and may delay commercialization of Aldurazyme in the United States.

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

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

We are relying on Genzyme to apply the expertise it has developed through the launch and sale of other enzyme-based products to the marketing of our initial drug product, Aldurazyme. 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.

Either Genzyme or we 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. Although we are not currently in breach of the joint venture agreement and we believe that Genzyme is not currently in breach of the joint venture agreement, there is a risk that either party could breach the agreement in the future. Either party may also terminate the agreement upon one-year prior written notice for any reason. Furthermore, we may terminate the joint venture if Genzyme fails to fulfill its contractual obligation to pay us $12.1 million in cash upon the approval of the BLA for Aldurazyme.

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

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title to Aldurazyme is to be sold to the highest bidder, with the proceeds to be split equally between Genzyme and us.

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

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

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

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

Although we have successfully manufactured Aldurazyme at commercial scale and within our cost parameters, due to the complexity of manufacturing our products we may not be able to manufacture any other drug product successfully with a commercially viable process or at a scale large enough to support their respective commercial markets or at acceptable margins.

Our manufacturing processes may not meet initial expectations and we may encounter problems with any of the following if we attempt to increase the scale or size or improve the commercial viability of our manufacturing processes:

Improvements in manufacturing processes typically are very difficult to achieve and are often very expensive and may require extended periods of time to develop. If we contract for manufacturing services with an unproven process, our contractor is subject to the same uncertainties, high standards and regulatory controls.

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

The manufacture of Neutralase involves the fermentation of a bacterial species. We have never used a bacterial production process for the production of any commercial product. IBEX Technologies Inc., from which we acquired Neutralase, had contracted with a third party for the manufacture of the Neutralase used in prior clinical trials. We have also contracted with a third party for the manufacture of additional quantities of Neutralase.

We have built-out approximately 54,000 square feet at our Novato facilities for manufacturing capability for Aldurazyme and Aryplase including related quality control laboratories, materials capabilities, and support areas. We expect to add additional capabilities in stages over time, which could create additional operational complexity and challenges. We expect that the manufacturing process of all of our new drug products, including Aryplase and Neutralase, will require significant time and resources before we can begin to manufacture them (or have them manufactured by third parties) in commercial quantity at an acceptable cost.

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

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

If we are unable to create 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 expand capabilities either by developing our own sales and marketing organization or by entering into agreements with others, we may be unable to successfully sell our products. We believe that developing an internal sales and distribution capability will be expensive and time consuming. Alternatively, we may enter into agreements with third parties to market our products. For example, under our joint venture with Genzyme, Genzyme is responsible for marketing and distributing Aldurazyme. However, these third parties may not be capable of successfully selling any of our drug products.

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

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agreements on acceptable terms, if at all. If we cannot compete effectively in these specific physician and institutional markets, it would adversely affect sales of Neutralase.

If we fail to compete successfully with respect to product sales, we may be unable to generate sufficient sales to recover our expenses related to the development of a product program or to justify continued marketing of a product.

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. With respect to Aldurazyme and Aryplase, if our competitors successfully commercialize a product that treats MPS I or MPS VI, respectively, before we do, we may effectively be precluded from developing a product to treat that disease because the patient populations of the diseases are so small. If one of our competitors gets orphan drug exclusivity, we could be precluded from marketing our version for seven years in the U.S. and ten years in the European Union. However, different drugs can be approved for the same condition. If we do not compete successfully, we may be unable to generate sufficient sales to recover our expenses related to the development of a product program or to justify continued marketing of a product.

If we fail to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to develop new products and to continue to expand our product pipeline.

Our competitors compete with us to attract organizations for acquisitions, joint ventures, licensing arrangements or other collaborations. To date, several of our product programs have been acquired through acquisitions, such as Neutralase and NeuroTrans, and several of our product programs have been developed through licensing or collaborative arrangements, such as Aldurazyme and Vibrilase. These collaborations include licensing proprietary technology from, and other relationships with academic research institutions. 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 with us. 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. If we are unable to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to develop new products and to continue to expand our product pipeline.

If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we publicly announce the expected timing of some of these milestones. All of these milestones are based on a variety of assumptions. The actual timing of these milestones can vary

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dramatically compared to our estimates, in many cases for reasons beyond our control. If we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

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 and/or foreign government 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. Our staff, financial resources, systems, procedures or controls may be inadequate to support our operations and our management may be unable 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 Emil D. Kakkis, M.D., Ph.D., our Senior Vice President of Business Operations or Christopher M. Starr, Ph.D., our Senior Vice President of Scientific Operations, could be detrimental to us if we cannot recruit suitable replacements in a timely manner. While Mr. Price, Dr. Kakkis and Dr. Starr are parties to employment agreements with us, these agreements do not 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. Due to this intense competition, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business.

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

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

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

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

We are exposed to the potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceuticals. The BioMarin/Genzyme LLC maintains product liability insurance for our clinical

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trials of Aldurazyme with aggregate loss limits of $5.0 million. We have obtained insurance against product liability lawsuits for the clinical trials for Aryplase, Vibrilase and Neutralase with aggregate loss limits of $6.0 million. Pharmaceutical companies must balance the cost of insurance with the level of coverage based on estimates of potential liability. Historically, the potential liability associated with product liability lawsuits for pharmaceutical products has been unpredictable. Although we believe that our current insurance is a reasonable estimate of our potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the insurance, we may be subject to claims in connection with our current clinical trials for Aldurazyme, Aryplase, Vibrilase and Neutralase for which our insurance coverage is not adequate.

If Aldurazyme, Aryplase, Vibrilase or Neutralase receives FDA or foreign regulatory approval, the product liability insurance we will need to obtain in connection with the commercial sales of Aldurazyme, Aryplase, Vibrilase or Neutralase may be unavailable in meaningful amounts or at a reasonable cost. In addition, while we take, and continue to take, what we believe are appropriate precautions, we may be unable to avoid significant liability if any product liability lawsuit is brought against us. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we may incur substantial liabilities that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for the development and commercialization of our product programs.

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:

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:

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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.

Anti-takeover provisions in our charter documents, our stockholders’ rights plan 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 an additional 249,886 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.

On September 11, 2002, our board of directors authorized a stockholders’ rights plan and related dividend of one preferred share purchase right for each share of our common stock outstanding at the close of business on September 23, 2002. As long as these rights are attached to our common stock, we will issue one right with each new share of common stock so that all shares of our common stock will have attached rights. When exercisable, each right will entitle the registered holder to purchase from us one one-hundredth of a share of our Series B Junior Participating Preferred Stock at a price of $35.00 per one-hundredth of a Preferred Share, subject to adjustment.

The rights are designed to assure that all of our stockholders receive fair and equal treatment in the event of any proposed takeover of us and to guard against partial tender offers, open market accumulations and other abusive tactics to gain control of us without paying all stockholders a control premium. The rights will cause substantial dilution to a person or group that acquires 15% or more of our stock on terms not approved by our board of directors. However, the rights may have the effect of making an acquisition of us, which may be beneficial to our stockholders, more difficult, and the existence of such rights may prevent or reduce the likelihood of a third party making an offer for an acquisition of us.

The ability of our stockholders to recover against Arthur Andersen LLP may be limited because we have not been able to obtain, after reasonable efforts, the reissued reports of Arthur Andersen with respect to the financial statements included in this annual report.

Our consolidated financial statements as of December 31, 2002 and for the year then ended included with this report have been audited by KPMG LLP. However, our consolidated financial statements for the years ended December 31, 2000 and 2001 included with this annual report have been audited by Arthur Andersen LLP. We have not been able to obtain, after reasonable efforts, the reissued reports of Arthur Andersen with respect to the financial statements included in this annual report. Therefore, in reliance on Rule 437a promulgated under the Securities Act, we have dispensed with the requirement to file with this annual report the reissued report and consent of Arthur Andersen with respect to these financial statements. As a result, our stockholders will not be

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able to recover against Arthur Andersen under Section 11 of the Securities Act for any untrue statement of a material fact contained in these financial statements or any omissions to state a material fact required to be stated therein. In addition, the ability of Arthur Andersen to satisfy any claims properly brought against it may be limited as a practical matter due to recent developments involving Arthur Andersen.

Item 2.    Properties

Our real estate strategy is to lease and develop property that will allow us to maintain our research and development, clinical and commercial manufacturing and administrative activities in line with our current organizational strategies and anticipated needs in the near future. We are currently leasing a total of six buildings. Five of our buildings are located in Novato, California, each within a half-mile radius. The five buildings, each named for the streets on which they are located, are:

The sixth building is located in Montreal, Ontario, Canada, which we sublease from IBEX Technologies, Inc. for portions of our research and development efforts relating to Neutralase and Phenylase. We are currently negotiating an extension to our sublease through October 2003.

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 2004 and we have an option to extend the lease for 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 we have the option to extend for two additional five-year periods.

The Pimentel Court facility, with approximately 11,500 square feet, provides additional space for administrative, research, and quality control functions. The current lease expires in April 2003, however, we have elected to exercise our option to extend this lease until April 2005 with the right to terminate the lease at any time with six months advance notice to the building owner.

The 79 Digital Drive facility, which was leased in 2001, provides warehousing support for our entire organization. Its primary focus is to provide controlled access warehousing and the required segregation and testing of all cGMP raw materials used in our manufacturing operations. In addition, 79 Digital serves as the primary shipping, receiving and storage point for all other materials used throughout our entire organization.

The 95 Digital Drive facility is a 34,000 square foot, building shell. In December 2002, we decided to abandon further development of this building that was originally planned for expansion of research and development activities. The lease on this building expires in November 2009.

Our administrative office space is expected to be adequate until at least the middle of 2003, at which time we may add additional office space. We may need to supplement the capacity of our production facilities if it is not sufficient to meet market demands. We believe that to the extent required, we will be able to lease additional facilities at commercially reasonable rates. 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 clinical and/or additional commercial manufacturing capacity.

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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, 2002.

Part II

Item 5.    Market For Common Equity and Related Stockholder Matters

Since July 1999, our common stock has been listed on the Nasdaq National Market and the Swiss SWX New Market under the symbol “BMRN”. The following table sets forth the high and low sales prices for our common stock for the periods noted, as reported by Nasdaq National Market.

On February 20, 2003, the last reported sale price on the Nasdaq National Market for our common stock was $10.25. 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 February 20, 2003, there were 110 holders of record of 53,864,416 outstanding shares of our common stock. Additionally, on such date options to acquire 7,651,940 shares of our common stock and warrants to acquire 779,846 shares of our common stock were outstanding.

Sales of Unregistered Securities

None

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

The selected consolidated financial data set forth below contain only a portion of our financial statement information and should be read in conjunction with the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this annual report. All financial data presented in thousands, except per share data.

We derived the statement of operations data for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 and balance sheet data as of December 31, 1998, 1999, 2000, 2001 and 2002 from audited financial statements. Historical results are not necessarily indicative of results that we may expect in the future.

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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.

Results of Operations

In December 2001, we decided to close the carbohydrate analytical business portion of our wholly owned subsidiary, Glyko, Inc. (Glyko). The decision to close Glyko has resulted in the operations of Glyko being classified as discontinued operations in our consolidated financial statements and, accordingly, we have segregated the assets and liabilities of the discontinued operations in our consolidated balance sheets. In addition, we have segregated the operating results in our consolidated statements of operations and have segregated cash flows from discontinued operations in our consolidated statements of cash flows.

Years Ended December 31, 2002 and 2001

For the years ended December 31, 2002 and 2001, revenue from our joint venture with Genzyme was $13.9 million and $11.3 million, respectively. The increase in joint venture revenue in 2002 was primarily the result of increased manufacturing activities, including increased facility costs such as depreciation of the plant expansion completed in 2001 and increased costs to support the Phase 1 and Phase 3 extension studies of $3.9 million, partially offset by decreased clinical activities of $0.8 million and a reduction in process development activities of $0.5 million.

Research and development expenses in 2002 increased by $9.6 million to $54.5 million from $44.9 million in 2001. The major factors causing the increase include $5.2 million of increased expenses for the Aldurazyme joint venture with Genzyme, particularly manufacturing and regulatory requirements, $2.2 million for increased external manufacturing costs for Neutralase and $1.9 million for increased research staff to support our product programs.

General and administrative expenses increased to $17.5 million in 2002, from $6.7 million in 2001. The significant factors causing the increase include asset write-offs and a lease commitment accrual related to the abandonment of the 95 Digital facility totaling $3.4 million, additional legal and other fees associated with our acquisition of all of the outstanding capital stock of Glyko Biomedical Ltd. of $2.0 million, increased staffing in finance, purchasing, business development and human resources of $1.5 million, increased legal and consulting expenses of $1.1 million, expenses relating to the implementation of an improved financial reporting and budgeting software system of $0.4 million and an increase in rent expense of $0.4 million.

In-process research and development expense of $11.2 million in 2002 represents the purchase price of all of the outstanding stock of Synapse Technologies, Inc. (Synapse) in March 2002 plus related expenses. We purchased Synapse for $10.2 million of our common stock (885,240 shares). In connection with the Synapse purchase, we issued options and warrants to purchase 80,221 and 27,419 shares of our common stock, respectively. These options and warrants were valued using the Black-Scholes option pricing model and the resulting $561,000 and $85,000, respectively, was included as additional purchase price. The purchase agreement includes our agreement to pay up to Cdn. $8 million (which equaled approximately U.S. $5.1 million as of December 31, 2002) in contingency payments upon achievement of certain regulatory and licensing milestones if they occur before March 21, 2012, payable in our common stock or cash at our discretion. In-process research and development in 2001 represents all of the purchase price of our acquisition of the IBEX therapeutic assets in October 2001 plus related expenses totaling $11.6 million.

The loss of BioMarin/Genzyme LLC was $9.5 million in 2002 compared to $7.3 million in 2001. The increase is due to expenses related to the filing of the BLA with the FDA and the filing of the MAA in Europe and an increased level of marketing expenses in preparation for the commercial launch of Aldurazyme.

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Interest income increased to $2.0 million in 2002 from $1.9 million in 2001 primarily due to higher cash balances maintained throughout 2002 from financing activities completed during 2001.

Interest expense was $0.5 million and $17,000 in 2002 and 2001, respectively. The increase is due to equipment loans of $2.6 million and $5.5 million executed during 2002 and during the month of December 2001, respectively.

Income (loss) from discontinued operations was $0.1 million in 2002 and ($2.3 million) in 2001. The increase to income in 2002 was due to an increase in sales to customers in anticipation of the sale or discontinuance of the analytics business of Glyko.

Loss from disposal of discontinued operations in 2001 represents the Glyko closure expense of $7.9 million consisting primarily of an impairment reserve against the unamortized balance of goodwill and other intangible assets related to the initial acquisition of Glyko. In January 2003, we sold certain assets of Glyko including intellectual property, inventory and customer lists, to a third party for a total sales price of up to $1.5 million. The sales price was comprised of cash totaling $0.2 million, a note receivable payable in quarterly installments through 2006 totaling $0.5 million and quarterly royalties based upon future sales of certain Glyko products through 2008 up to a maximum of $0.8 million. The proceeds from the sale of the Glyko assets, including the discounted note receivable, will be recorded as a gain from discontinued operations in the first quarter of 2003 and the royalties will be recorded as earned.

Years Ended December 31, 2001 and 2000

For the years ended December 31, 2001 and 2000, revenue from our joint venture with Genzyme was $11.3 million and $9.7 million, respectively. The increase in joint venture revenues in 2001 was primarily the result of increased manufacturing activities in support of our Phase 3 clinical trial and our Phase 1 and Phase 3 extension studies, increased regulatory, clinical and plant and process validation efforts in preparation for a BLA filed in 2002.

Research and development expenses increased to $44.9 million in 2001 from $38.9 million in 2000. The major factors in the growth of research and development expenses include increased expenses in support of the Aldurazyme joint venture with Genzyme, especially manufacturing, regulatory and clinical requirements, manufacturing and clinical requirements to support our Phase 1 clinical trial of Aryplase, of the contract manufacturing requirements to support our Phase 1 clinical trial of Vibrilase and the increased manufacturing and research staff, including the scientific staff we assumed in Montreal, Canada in our purchase of the therapeutic assets of IBEX Technologies, Inc. and its subsidiaries in October 2001, to support our product programs. Research and development expenses in 2000 include a charge of $4.4 million for the closure of our Carson Street clinical manufacturing facility. The charge primarily consisted of impairment reserves for leasehold improvements and equipment located in the Carson Street facility.

General and administrative expenses increased to $6.7 million in 2001 from $6.5 million in 2000. This increase was primarily due to the costs incurred in 2001 in legal and other fees associated with our purchase of all of the outstanding capital stock of Glyko Biomedical Ltd. (in exchange for our common stock) that closed in 2002, increased staffing in finance, business development, information systems and purchasing, partially offset by savings due to the elimination of the President position from our executive team.

In-process research and development in 2001 represents all of the purchase price of our acquisition of the IBEX therapeutic assets in October 2001, plus related expenses totaling $11.6 million. On October 31, 2001, we purchased from IBEX Technologies Inc. and its subsidiaries the development activities associated with the IBEX therapeutic enzyme drug products (including Neutralase and Phenylase). The purchase agreement called for a total purchase price of $10.4 million, consisting of $2 million in cash and $8.4 million of common stock. In accordance with the purchase agreement, the number of common shares was based on the average share price

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from September 5, 2001 to October 8, 2001, which resulted in the issuance of 814,467 shares. In connection with the transaction, we issued options to purchase 43,861 shares of our common stock. These options were valued using the Black-Scholes option pricing model and the resulting $291,000 was included as additional purchase price. The purchase agreement includes up to approximately Cdn. $14.6 million (which equaled approximately U.S. $9.3 million as of December 31, 2002) in contingency payments upon regulatory approval of Neutralase and Phenylase, provided that approval occurs prior to October 31, 2006. We were also assigned a contingent liability in the amount of approximately $1.0 million payable to a contract manufacturer upon the approval of Neutralase.

The loss from our joint venture with Genzyme was $7.3 million for 2001 compared to $2.9 million for 2000, as the joint venture conducted a double-blinded, placebo-controlled Phase 3 clinical trial of 45 patients in 2001 and a continued extension study of the Phase 3 clinical trial of Aldurazyme.

Interest income decreased by $1.1 million to $1.9 million in 2001 from $3.0 million in 2000 primarily due to the decrease in cash available for investment through most of 2001 (as our follow-on offering occurred in December 2001) and the decrease in interest rates available on short-term investments.

Interest expense for 2001 and 2000 were immaterial.

Loss from discontinued operations relating to the Glyko analytics business increased by $0.6 million to $2.3 million in 2001 compared to $1.7 million in 2000 due to the increased sales and production staff in 2001 in an attempt to grow the core analytics business.

Loss from disposal of discontinued operations represents the Glyko closure expense of $7.9 million in 2001 consisting primarily of an impairment reserve against the unamortized balance of goodwill and other intangible assets related to the initial acquisition of Glyko. The majority of the Glyko employees were incorporated into the BioMarin business and such employees continue to provide necessary analytic and diagnostic support to our current therapeutic product programs.

Liquidity and Capital Resources

We have financed our operations since our inception by the issuance of common stock and convertible notes, equipment financing and the related interest income earned on cash balances available for short-term investment. Since inception, we have raised aggregate net proceeds of approximately $367.7 million, including the approximate $70.1 million of net proceeds from the public offering of our common stock completed in February 2003. This amount was raised from the sale of our common stock in both public and private offerings, the sale of other securities that have since converted into common stock, and equipment financing.

As of December 31, 2002, our combined cash, cash equivalents and short-term investments totaled $74.0 million, a decrease of $57.1 million from $131.1 million at December 31, 2001. The primary uses of cash during the year ended December 31, 2002 were to finance operations, fund the joint venture with Genzyme, purchase leasehold improvements and equipment and expenses associated with the purchase of Synapse and acquisition of Glyko Biomedical Ltd. The primary sources of cash during the year were proceeds from equipment financing of $2.6 million, receipts of notes receivable from stockholders of $1.7 million and the issuance of common stock pursuant to the exercise of stock options under the 1997 Stock Plan, the aggregate exercise price of which totaled approximately $1.7 million.

From our inception through December 31, 2002, we have purchased approximately $55.9 million of leasehold improvements and equipment.

As of December 31, 2002, our total research and development expenses since inception were $176.8 million, which was allocated $85.1 million to Aldurazyme, $5.9 million to Neutralase, $19.6 million to Aryplase, $7.0 million to Vibrilase and $59.2 million to research and development costs not allocated to specific projects or related to projects that have been abandoned.

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In the year ended December 31, 2002, our research and development expense of $54.5 million was allocated $27.8 million to Aldurazyme, $5.6 million to Neutralase, $6.8 million to Aryplase, $0.7 million to Vibrilase and $13.6 million to research and development costs not allocated to specific projects.

In the year ended December 31, 2001, our research and development expense of $44.9 million was allocated $22.5 million to Aldurazyme, $0.2 million to Neutralase, $8.0 million to Aryplase, $2.8 million to Vibrilase and $11.4 million to research and development costs not allocated to specific projects.

In the year ended December 31, 2000, our research and development expense of $38.9 million was allocated $19.5 million to Aldurazyme, $3.9 million to Aryplase, $0.8 million to Vibrilase and $14.7 million to research and development costs not allocated to specific projects.

We expect to fund our operations with our cash, cash equivalents and short-term investments and supplement our cash, cash equivalents and short-term investments through the sale of equity securities, equipment-based financing, and collaborative agreements with corporate partners. We expect our current funds, including the proceeds from our recently completed public offering, to meet our operating and capital requirements through 2004.

We do not expect to generate positive cash flow from operations at least until 2004 because we expect to continue to incur operational expenses and continue our research and development activities, including:

We also expect to incur costs related to increased manufacturing of Aldurazyme in preparation for the product demands associated with its possible future commercial launch.

We expect that the net proceeds from any sales of our common stock, equipment financing or collaborative agreements will be used to fund operating costs, capital expenditures and working capital requirements, which may include costs associated with the development and commercialization of our lead product candidate, Aldurazyme; additional clinical trials and the manufacturing of Neutralase; preclinical studies and clinical trials for our other product candidates; potential licenses and other acquisitions of complementary technologies, products and companies; general corporate purposes; and working capital. We plan to continue our policy of investing available funds in government and investment grade, interest-bearing securities. We do not invest in derivative financial instruments. There are three current arrangements that may provide us with additional sources of financing in the future:

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We anticipate a need for additional financing to fund our future operations, including the commercialization of our drug products currently under development. We cannot provide assurance 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:

We have contractual and commercial obligations under our notes payable, operating and capital leases and other commitments related to research and development activities, licenses and sales royalties with annual minimums. Information about these commitments as of December 31, 2002 is presented in the table below.

We are also subject to contingent payments totaling approximately $15.8 million upon achievement of certain regulatory and licensing milestones if they occur before certain dates in the future.

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Related Party Transactions

In April 2001, we loaned our chief executive officer $860,000 to purchase a property and received a promissory note secured by the property. The note matures on October 31, 2004, or October 31, 2006, if certain conditions are met, and bears interest at the Federal mid-term rate (3.16% as of December 31, 2002). The balance of the note plus accrued interest at December 31, 2002 was $931,700.

In February 2002, we loaned one of our senior vice presidents $300,000 and received a promissory note secured by the his unencumbered shares of the Company. The note accrued interest at the Federal short-term rate and was repaid during 2002.

In March 2002, we entered into an employment agreement with one of our senior vice presidents pursuant to which we are obligated to advance him up to $100,000 to be applied to the purchase of a home or up to $36,000 annually if a purchase of a home is not completed. The loans bear interest and are due upon his termination of employment with us. As of December 31, 2002, there was $36,000 outstanding under the loan arrangement bearing annual interest of 6.0%.

During 2002, certain consulting services were rendered by one of our directors. The director was paid $56,000 in 2002, and $52,300 in January 2003, for those services.

One of our senior vice presidents holds a position with Harbor-UCLA Research Educational Institute (“REI”). REI licenses certain intellectual property and provides other research services to us. We paid REI approximately $0.8 million and $1.1 million in 2001 and 2002, respectively. We are also obligated to pay REI contingency payments upon achievement of certain regulatory milestones totaling $300,000 and royalties on future sales of products covered by the license agreement. Minimum annual royalties payable to REI are $25,000. Our joint venture with Genzyme is subject to a second agreement with REI that requires the joint venture to pay REI a royalty on future sales of products covered by the agreement through November 2019, of which our senior vice president is entitled to certain portions, based on the sales level per the terms of the agreement.

Critical Accounting Policies

Investment in BioMarin/Genzyme LLC and Related Revenue

Under the terms of our joint venture agreement with Genzyme, Genzyme and we 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 us 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. We recognize revenue for billings to the extent that the services were funded by Genzyme. We provided $65.2 million in funding to the joint venture from inception through December 31, 2002.

We account for our investment in the joint venture using the equity method. Accordingly, we record a reduction in our investment in the joint venture for our 50 percent share of the loss of the joint venture. The costs incurred by us on behalf of the joint venture that are funded by us (50 percent) are recorded as a reduction of the Company’s loss from the joint venture.

Impairment of Long-Lived Assets

We regularly review long-lived assets and identifiable intangibles. We evaluate 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.

Income taxes

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have recorded a full valuation allowance against our net deferred tax asset, the principal

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amount of which is the tax effect of net operating loss carryforwards, of approximately $108.5 million at December 31, 2002. Future taxable income and ongoing prudent and feasible tax planning strategies have been considered in assessing the need for the valuation allowance. An adjustment to the valuation allowance would increase or decrease income in the period such adjustment was made.

Research and Development

Research and development expenses include: expenses associated with contract research and development provided by third parties; services provided to the Aldurazyme joint venture including manufacturing, clinical and regulatory costs; and internal research and development costs. All research and development costs are expensed as incurred. Inventory costs for product candidates are expensed until regulatory approval is obtained, at which time inventory will be capitalized at the lower of cost or market value.

Discontinued Operations

The operations of Glyko, Inc. have been classified as discontinued operations in the accompanying consolidated financial statements and, accordingly, we have segregated the assets and liabilities of the discontinued operations in the accompanying consolidated balance sheets. In addition, we have segregated the Glyko, Inc. operating results and cash flows in the accompanying consolidated statements of operations, changes in stockholders’ equity and cash flows.

The loss on disposal of discontinued operations for the year ended December 31, 2001, primarily reflects certain adjustments required to record an impairment reserve against the unamortized goodwill related to Glyko, Inc. of approximately $7.8 million. The aggregate net loss from Glyko Inc.’s operations since its acquisition in 1998 was $6.0 million through December 31, 2002, excluding the loss on disposal of discontinued operations discussed above.

Stock Option Plans

We have three stock-based compensation plans. We account for those plans under APB Opinion No. 25, Accounting for Stock Issued to Employees whereby generally no stock-based compensation cost is reflected in our net loss. We recognize as an expense, the fair value of options granted to nonemployees.

Recent Accounting Pronouncements

We adopted Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets on January 1, 2002. Adoption of these pronouncements did not have a material impact on our net loss.

We adopted SFAS No. 142, Goodwill and Intangible Assets, on January 1, 2002. This requires that goodwill and intangible assets with indefinite useful lives are no longer amortized, but are instead tested for impairment at least annually. The carrying value of our goodwill was reduced to zero in 2001. Adoption of this pronouncement did not have a material impact on our net loss.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses accounting for restructuring and similar costs was adopted by us in the fourth quarter of 2002. Adoption of this pronouncement did not have a material impact on our net loss.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which clarifies disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued after December 15, 2002 and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. As of December 31, 2002, we do not have any guarantees as defined under FIN 45.

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In January 2003, the FASB issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. A variable interest entity is a corporation, partnership, trust, or any other legal structures used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. A variable interest entity may be essentially passive or it may engage in research and development or other activities on behalf of another company. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. We do not expect the adoption of FIN 46 to have a significant impact on our financial statements.

SFAS No. 148, Accounting for Stock-Based Compensation—transition and Disclosure, which amends SFAS 123 to provide alternative methods of transition for a voluntary change to the fair value based method of stock-based employee compensation and revised disclosure requirements, was issued in December 2002. The revised disclosure requirements were adopted by us in the fourth quarter of 2002. Adoption of this pronouncement did not have material impact on our net loss.

Item 7A.    Quantitative and Qualitative Disclosure about Market Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. By policy, we place our investments with highly rated credit issuers and limit the amount of credit exposure to any one issuer. As stated in our policy, we seek to improve the safety and likelihood of preservation of our invested funds by limiting default risk and market risk. We have no investments denominated in foreign country currencies and therefore are not subject to foreign exchange risk.

We mitigate default risk by investing in high credit quality securities and by positioning our 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.

Based on our investment portfolio and interest rates at December 31, 2002, we believe that a 100 basis point change in interest rates would result in a decrease or increase of approximately $0.4 million, respectively, in the fair value of the investment portfolio. Changes in interest rates may affect the fair value of the investment portfolio; however, we will not recognize such gains or losses unless the investments are sold.

The table below presents the carrying value of our investment portfolio, which approximates fair value at December 31, 2002 (in thousands):

Our debt obligations consist of our equipment-based loans and capital lease obligations, which carry fixed interest rates and, as a result, we are not exposed to interest rate market risk on our loans.

Item 8.    Financial Statements and Supplementary Data

The information required to be filed in this item appears on pages F-1 to F-27 of this report.

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

Not applicable.

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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 2003 annual meeting of stockholders.

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 2003 annual meeting of stockholders.

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 2003 annual meeting of stockholders.

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 2003 annual meeting of stockholders.

Part IV

Item 14.    Controls and Procedures

Within the 90 days prior to the date of this report, our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring timely collection and evaluation of all information potentially subject to disclosure in our periodic filings with the Securities and Exchange Commission. There have been no significant changes in our internal controls or in the factors that could significantly affect our internal controls, subsequent to the date our Chief Executive Officer and Chief Financial Officer completed their evaluation.

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Item 15.    Exhibits, List and Reports on Form 8-K

(a)  The following documents are filed as exhibits to this report.

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(b)  Reports on Form 8-K

On October 18, 2002, we filed an Amended Current Report on Form 8-K/A to amend our Current Report on Form 8-K filed on August 26, 2002 to include the financial statements and pro forma financial information related to our acquisition of Glyko Biomedical Ltd.

On October 30, 2002, we filed a Current Report on Form 8-K regarding the scheduled review of the biologics license application for Aldurazyme by the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee on January 15, 2003.

On October 31, 2002, we filed a Current Report on Form 8-K regarding the announcement of our financial results for the quarter ended September 30, 2002.

On November 24, 2002, we filed a Current Report on Form 8-K regarding the release of additional data from the ongoing open label Phase 3 extension study of Aldurazyme.

On December 20, 2002, we filed a Current Report on Form 8-K regarding the filing of a registration statement with the Securities and Exchange Commission for the offer and sale by us of up to an aggregate of $150 million of our common stock.

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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.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Fredric D. Price, 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:

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CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Fredric D. Price, certify that:

1.    I have reviewed this annual report on Form 10-K of BioMarin Pharmaceutical Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)  presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 3, 2003

40

CERTIFICATION

I, Louis C. Drapeau, certify that:

1.    I have reviewed this annual report on Form 10-K of BioMarin Pharmaceutical Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)  presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 3, 2003

41

INDEX TO BIOMARIN PHARMACEUTICAL INC. CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of BioMarin Pharmaceutical Inc.:

We have audited the accompanying consolidated balance sheet of BioMarin Pharmaceutical Inc. and subsidiaries (a development-stage company) as of December 31, 2002, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2002 and for the period from March 21, 1997 (inception) to December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based upon our audit. The cumulative consolidated statements of operations, changes in stockholders’ equity, and cash flows for the period from March 21, 1997 (inception) to December 31, 2002 include amounts for the period from March 21, 1997 (inception) to December 31, 1997 and for each of the years in the four year period ending December 31, 2001, which were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements in their report dated February 21, 2002, and our opinion, insofar, as it relates to the amounts included for the period March 21, 1997 (inception) through December 31, 2001 is based solely on the report of other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the report of other auditors, the 2002 consolidated financial statements referred to above present fairly, in all material respects, the financial position of BioMarin Pharmaceutical Inc. and subsidiaries (a development-stage company) as of December 31, 2002, and the results of their operations and their cash flows for the year then ended and for the period from March 21, 1997 (inception) to December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/    KPMG LLP

San Francisco, California

January 29, 2003

F-1

The following is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the Company’s filing on Form 10-K for the fiscal year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP. As described in Note 2 (s), certain items in the prior year consolidated financial statements have been reclassified to conform with the current year presentation.

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, 2000 and 2001, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years ended December 31, 1999, 2000, and 2001 and for the period from March 21, 1997 (inception) to December 31, 2001. 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, 2000 and 2001 and the results of their operations and their cash flows for the years ended December 31, 1999, 2000, and 2001 and for the period from March 21, 1997 (inception) to December 31, 2001 in conformity with accounting principles generally accepted in the United States.

/s/    ARTHUR ANDERSEN LLP

San Francisco, California

February 21, 2002

F-2

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

(A Development-Stage Company)

CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2002

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

See accompanying notes to consolidated financial statements.

F-3

BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES

(A Development-Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2000, 2001, and 2002 and

Period from March 21, 1997 (inception) to December 31, 2002

(In thousands, except for per share data)