Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) Q1 2024 Earnings Call Transcript

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) Q1 2024 Earnings Call Transcript May 2, 2024

Ultragenyx Pharmaceutical Inc. misses on earnings expectations. Reported EPS is $-2.02505 EPS, expectations were $-1.72. RARE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, and welcome to the Ultragenyx First Quarter 2024 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call to Joshua Higa, Vice President of Investor Relations. You may begin.

Joshua Higa: Thank you. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. Joining me on this call are Emil Kakkis, Chief Executive Officer and President, Erik Harris, Chief Commercial Officer; Howard Horn, Chief Financial Officer; and Eric Crombez, Chief Medical Officer. I’d like to remind everyone that during today’s call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties and our actual results may differ materially. Please refer to the risk factors discussed in our latest SEC filings. I’ll now turn the call over to Emil.

Emil Kakkis: Thanks, Josh, and good afternoon, everyone. This is the year that we’re harvesting the exciting results of multiple years of focused execution across our key clinical programs, and we’ve shared a lot of meaningful data already this year. At the World Symposium meeting in February, we presented positive biomarker and long-term cognition data from our UX-111 gene therapy in Sanfilippo syndrome. The data showed the treatment resulted in rapid and sustained reduction of CSF heparan sulfate and that this was correlated with improved long term cognitive development. We also participated in a workshop on the heparan sulfate biomarker hosted by the Reagan-Udall Foundation. This workshop brought together FDA representatives, patient advocates, scientists and industry leaders to discuss the overwhelming body of data supporting the use of CSF heparan sulfate as a biomarker to enable accelerated approval in neuronopathic MPS diseases.

The support of Peter Marks and the FDA in recognizing this biomarker as a surrogate endpoint to support accelerated approval would be a profound benefit for the MPS communities and companies working on these diseases and really to all companies working on gene therapies or other type precision medicines. Shifting to setrusumab, just this week, we announced that we’ve completed enrollment in our Phase II/III Orbit study and our Phase III COSMIC study in osteogenesis imperfecta. The Phase II data presented late last year was clearly compelling for the study investigators that led to accelerated interest and enrollment in the program. Two weeks ago, we announced strong positive interim data from the Phase I/II study of GTX-102 in Angelman syndrome.

The interim data we shared confirmed in a larger body of data that GTX-102 can fundamentally change the development trajectory of Angelman patients. Importantly, the magnitude of the effect across all domains and expansion cohorts was found to be similar or greater than what we observed previously with the dose escalation cohorts. Ongoing treatment with GTX-102 resulted in continuous and sustained improvement of these patients as evidenced by the long-term data in the dose escalation cohorts, and we’ve demonstrated the safety profile can be successfully managed. This Phase I/II study is valuing the most severe Angelman syndrome patients, those with genetic deletions, where there’s typically no improvement on the Bayley scale. This has been observed in both natural history and placebo-controlled studies.

For example, our recent Angelman clinical study after one year, their placebo group showed only a 0.8-point improvement in Bayley-III cognition score. What we saw in our study was a 5-point improvement in the Bayley-4 score beginning as early as day 170 in dose expansion cohorts and almost doubled that at one year in the dose escalation cohorts. We also saw that this improvement continued through day 758 in the dose escalation cohorts. The magnitude of the change we observed with the Bayley was further supported in multiple other assessments, including Angelman severity assessments and the aberrant behavior checklist. The improvements in domain of sleep and behavior or hyperactivity at day 170 were better than what we saw after a year or more in the prior cohorts.

Families also talked about their kids being calmer, more attentive, more aware of the world around them. This allowed greater independence across multiple facets of development like eating, sleeping, and mobility. The improvements in cognition and motor function really came across in the videos that we showed on April 15th call. The patient was able to solve puzzles and navigate more challenging walking paths, which provide a small real-world sample of the significant changes we’re seeing in the charts and graphs. The combination of improvements across cognition, receptive communication and motor function provides a real sense of the potentially transformative nature of this therapy. The Multi-domain Responder Index or MDRI also resonate with physicians and families.

The MDRI brings all the domain of movement across the study population together and is a great way to look at changes across the individual patients for a heterogeneous patient group. MDRI analysis across the four domains of cognition, receptors, communication, behavior and sleep resulted in statistically significant media improvement of two domains across all cohorts at this early time point of day 170. Further, the majority of the patients in the expansion cohorts achieved improvements in at least two and up to all four domains. Importantly, the data we presented show that GTX-102 has a tolerable safety profile. Lower extremity weakness is now a rare, well understood transient event that occurred in two out of 53 patients in extension cohorts who had completed the loading phase.

Both patients were in the Cohort A and B and no events observed in Cohort C through E. The events were classified as mild and moderate and all resolved quickly with the patient remaining in the study. Six earlier patients with this safety issue from the beginning of the study are all on chronic dosing and received multiple doses without any issues. Given our understanding of this issue and recent feedback from regulators, we’re comfortable that the current safety profile is acceptable and manageable, and we’ll continue providing routine safety updates only with our efficacy updates. We’ve heard strong enthusiasm from KOLs over the past couple of weeks, including those reviewed by our analysts, some of you might be on the call. These treating physicians expressed comfort with the safety profile and the route administration of these patient population and the broad agreement that treatment with GTX-102 resulted in clearly meaningful efficacy in these patients, where you just don’t typically see any improvements.

With all this put together, we have a strong product candidate and plan for Phase III development. We’re confident this product candidate has the potential to be a transformative treatment for patients with Angelman syndrome. Now, I’ll turn the call over to our Chief Commercial Officer, Erik Harris, to provide an update on our commercial efforts that led to another successful quarter.

Erik Harris: Thank you, Emil, and good afternoon, everyone. I’ll start with Crysvita’s performance in North America. I want to remind everyone that Kyowa Kirin has been responsible for driving Crysvita’s revenue in North America since the transition in April of last year. We have continued to augment their efforts through additional field support to ensure a smooth transition, maintain patient continuity and help them generate additional start forms. The demand for Crysvita in the U.S. remained strong in Q1 2024. Approximately 60% of the start forms came from adult patients prescribed by community physicians, resulting in nearly 70 new prescribers in the quarter. This is encouraging given adult penetration is in the low 20s, and this implies Crysvita has ample room to continue growing.

As it is typical, this quarter had some seasonality as patients work through the reauthorization process with their insurance providers at the beginning of the year. We are confident in our full year U.S. revenue projections given the strength of the underlying demand. Shifting to Crysvita in Latin America, where we lead commercialization. Our team delivered another successful quarter in Latin America by adding approximately 50 new patients to Crysvita, totaling over 550 patients on reimbursed therapy since launch. While Brazil drove more than 60% of Crysvita’s Latin America revenue in Q1 2024, We also saw a significant uptick from Argentina and Mexico. We are particularly excited about Mexico, the second largest market in Latin America, which recently cleared all pediatric and adult reimbursement hurdles.

IMSS, Mexico’s largest payer, approved Cyysvita for pediatric patients in about two years versus the three to five years it usually takes for such approval. This recognizes the value they see for Crysvita in pediatric patients. Our team is now busy getting Crysvita on local hospital formularies to expedite reimbursement for these patients. As I mentioned on previous earnings calls, we expect quarter-to-quarter variability in Latin America revenue driven by uneven ordering patterns, but remain confident in the underlying demand growth for our products. Moving on to Dojolvi. Growth of new start forms remained strong. In the U.S., we added over 30 start forms and 15 patients on reimbursed therapy, resulting in over 485 reimbursed patients since launch, with approximately a 65 to 35 split between pediatric and adult patients.

The number of new prescribers continued to grow, adding approximately 10 new prescribers in Q1 2024. As you know, Dojolvi has not yet been approved by the European Medicines Agency. So, across Europe and the EMEA region, Dojolvi is driven by named patient sales request. Approximately 200 patients are treated under MPS across 12 countries as of the first quarter. The majority of demand is from France, but we are receiving increasing requests from other countries within the EMEA region. 2024 is an important launch year for Evkeeza. As of Q1 2024, we are treating nearly 100 patients in EMEA through MPS and regular reimbursement processes where we have approval. We expect to launch Evkeeza in more EMEA countries in 2024. In Canada, we started enrolling patients in our hub after Health Canada’s approval last year.

Our next step is to secure reimbursement agreements with public payer authorities in late 2024 or early 2025. The team is also working closely with private payers to secure reimbursement in 2024 for enrolled patients who have insurance through these private plans. In Japan, we received the regulatory approval in January and pricing and reimbursement approval in April. The launch is underway. The HoFH physician and patient community in Japan is very excited about Evkeeza. We started to receive start forms in our hub, and we expect a robust launch in 2024 as we continue to educate physicians and patients on the benefits of the Evkeeza label for appropriate patients. Overall, Q1 2024 was a strong quarter for Ultragenyx, generating $109 million in revenue.

Given the strong underlying demand for our four commercial products across all regions and the upcoming Evkeeza launches, we remain confident in delivering our 2024 revenue guidance. With that, I’ll turn the call to Howard to share more details on our financial results for the quarter.

Howard Horn: Thanks, Erik, and good afternoon, everyone. I’ll briefly summarize our financials that were reported in our press release earlier today. As Erik noted, we reported $109 million in total revenue for the first quarter of 2024. Crysvita contributed $83 million including $40 million from North America, $36 million from Latin America and Turkey, and $6 million from Europe. Crysvita net sales and underlying patient demand continued to grow meaningfully compared to the prior year, including in North America. As a reminder, since the transition of North American commercial responsibilities to KKC in April 2023 and going forward, our revenue in the region shifted from a profit share to a royalty. This is calculated using annual revenue tiers based on net sales with royalties ranging from the mid-20s up to 30%.

As a result, our first quarter revenue started at the low end of the royalty range, and we expect the blended rate for the full year to be at the upper end of the range. With the increasing royalty rate and growing underlying demand, we expect North American Crysvita quarterly revenue to meaningfully increase throughout the year. Dojolvi revenue in the Q1 was $16 million and Mepsevii revenue in the first quarter was $7 million. Our total operating expenses in the Q1 were $274 million, which included R&D expenses of $178 million SG&A expenses of $78 million and cost of sales of $18 million. Operating expenses included non-cash stock-based compensation of $37 million. In the first quarter, net loss was $171 million or $2.03 per share. As of March 31, 2024, we had $569 million in cash, cash equivalents and marketable securities.

In the first quarter, net cash used in operations was $191 million. The first quarter of the year is typically a larger use of cash than the other three quarters because it includes items like the payment of annual bonuses. This quarter also ended with a relatively high accounts receivable balance due to the timing of receipts from our commercial activity. Importantly, our guidance for 2024 net cash used in operations remains unchanged from what we provided last quarter and is expected to be less than $400 million for the year. We are also reaffirming our 2024 revenue guidance ranges. Total revenue is expected to be between $500 million and $530 million which represents 15% to 22% growth versus 2023. Crysvita revenue is expected to be between $375 million and $400 million which includes all regions and all forms of Crysvita revenue to Ultragenyx.

Specifically, it includes Crysvita product revenue from Latin America and Turkey and the cash and non-cash royalties from North America and Europe. Our Crysvita guidance range represents 14% percent to 22% growth versus 2023. Dojolvi revenue is expected to be between $75 million and $80 million which represents 6% to 13% growth versus 2023. Our Dojolvi projections represent a blend of faster growth in countries where we commercialize and lower growth in countries where we respond to name patient requests. With that, I’ll turn the call to our CMO, Eric Crombez, who will provide an update on our upcoming clinical data readouts.

Eric Crombez: Thank you, Howard, and good afternoon, everyone. Emil already went through the exciting GTX-102 and two data that we shared last month, so I will focus most of my comments on some of our other programs. I would, however, like to reiterate the enthusiasm that we are hearing from patient advocacy organizations and the treating community, who all feel that GTX-102 has the potential to be a transformative treatment for patients with Angelman syndrome. We are at an important inflection point for the GTX-102 program. We have clear and clinically meaningful efficacy and we are transitioning to Phase III study startup. The Phase III will be a global randomized placebo-controlled study that is expected to enroll approximately 100 to 120 patients.

We expect to finalize these plans, including endpoints and study duration and an end of Phase 2 meeting that has been scheduled with the FDA in mid-2024. We plan to initiate the Phase III around the end of the year. Shifting to DTX401, our investigational gene therapy for the treatment of glycogen storage disease type 1a. Phase III data from this program, which we expect this quarter, will be the first pivotal data set from our large and late-stage gene therapy portfolio. All of the patients in the Phase I/II study demonstrated a clinically meaningful response to DTX401 that has proven durable with the earliest treated patients in their fifth year of follow-up. The randomized placebo-controlled Phase III study enrolled 49 patients and we expect to see clinically meaningful and statistically significant reductions in daily cornstarch therapy.

Our experience with the Phase I/II program helped us to better understand the importance of reducing dependence on overnight cornstarch and the great fear that all patients with GSD1a and their families have regarding missing a cornstarch dose and the resulting potential for hypoglycemia during sleep, which can be fatal, especially in children. As seen on our Phase I/II results, we do expect the Phase III to show improved glucose control during the day and also importantly overnight improvement. We plan to share top line data within the next couple of months. I’ll close with setrusumab, our fully human monoclonal antibody for the treatment of osteogenesis imperfecta. We recently announced completion of enrollment in our Phase III Orbit and COSMIC studies.

We ended up over enrolled in record time with 158 patients in Orbit and 66 patients in COSMIC and this could not have been done without the efforts and strong support from the patient and treating communities. We expect to share additional data from the Phase II portion of the Orbit study in the second half of this year. This data will include at least 12 months of follow-up and build on the data we presented last October. I’ll now turn the call back to Emil to provide some closing remarks.

Emil Kakkis: Thank you, Eric. In the first part of the year, we made significant progress advancing our clinical pipeline and I’ll close by quickly summarizing our key clinical catalysts for the rest of the year. Later in this quarter, we expect to share top line Phase III DTX401 data from our gene therapy for GSD1a. We’ve scheduled the GTX-102 and the Phase II meeting with FDA in mid-2024 that would enable initiating our Phase III around the end of the year. The UX701 for Wilson disease stage I data is expected in the second half of 2024. This will be approximately six months after the last patient was dosed in Phase III plus some time for all the data to be collected and analyzed. On UX143, we expect to share updated long term Phase II data in the second half of the year.

For the UX143 Phase III portion of the Orbit study, there are two interim analyses planned with the first anticipated by the year end or early 2025. The first analysis will have a stringent threshold of P less than or equal to 001. If the threshold is not met, a second interim analysis will occur a few months later, followed by a final analysis at 18 months. Interim analyses will not report to the company by the data monitoring committee, unless they are positive. In the event of a positive interim analysis, we would share that outcome, but top line results will not be announced immediately as the study would require patients to complete a final visit and time to collect and prepare the data for a formal analysis. For those of you keeping track, we may have three products at or near our readiness for BLA filings in Sanfilippo Syndrome with UX111, GSD1a with UX401 and osteogenesis imperfecta with setrusumab over the next year or so.

We are at a company defining inflection point that builds on our strong base of growing commercial products and positions us to transform the lives of even more rare disease patients. With that, let’s move on to your questions. Operator, please provide the Q&A instructions.

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Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question will be coming from the line of Yigal Nochomovitz with Citigroup. Your line is open.

Yigal Nochomovitz: Oh, hi. Great. Thank you so much for taking the questions. I just had one on GSD1a program that we haven’t talked about too much, but you’re coming up on the pivotal data. Could you just remind everybody what is required in terms of the primary endpoint to reach a positive study? What are the timelines in terms of the filing strategy for this program? And then thirdly, can you just give a little bit perspective on the incidence and prevalence of GSD1a and how you would think about pricing this product? Thank you.

Emil Kakkis: Yes. So for the GSD1a program, the primary endpoint is the continuous variable now of some cornstarch utilization. And so, we’ll be comparing the decrease in cornstarch utilization for the primary, between the treated and placebo group. That is also requires that the patients have good glucose control for that reduction in starch. That’s the primary endpoint agreed with the FDA. In terms of filing strategy, we are transitioning the manufacturing into our plant and we plan with the data to go to FDA and have a discussion and lay that out. So, we’ll provide more detail on the filing timeline of when we have it. But the transition of the manufacturing and we’ll need to talk to the FDA in setting it, but it’s on path assuming our data are positive.

Now the last incidence prevalence and pricing. We believe there’s around 8,000 patients with GSD1a in the commercial territories, and that might be a little under 2,000 that are in the U.S. with the disease. That’s an estimate. We haven’t set pricing at all at this point. We’re thinking about it. But it is a severe disease. It is an urgent disease. Patients are on a treadmill every day trying to stay alive. And we’ve seen from the enrollment of the study that there’s a desire. So while prevalence of pricing have an impact, I think the degree of urgency is what defines success in gene therapy launches to date. I think GSD1a is urgent. I think people want to get treated. They want to get off the treadmill. They want to, as I say, put the gun down at this point at their head every day about managing their glucose.

So, we’re excited about the potential, but there’s still obviously more work to do.

Operator: Our next question comes from the line of Anupam Rama with JPMorgan. Your line is open.

Anupam Rama: Hey, guys. Thanks so much for taking the question. Emil, just thinking about the GTX102 update last month, just in your discussions with The Street, what do you think are the most misunderstood or divergent points of feedback you get relative to, say, the physician or KOL feedback you’re getting post AAN? Thanks so much.

Emil Kakkis: Well, I think that there’s still difficulty appreciating the meaning of the changes in Bayley, for example. And I think what we heard from some of the KOL feedback that they’re excited about the changes. These are meaningful changes and they know the Bayley doesn’t change for cognition. So, I think that’s one of the major ones. I think there was some misconception about the safety lower extremity weakness that was reported. It was really one patient moderate — one mild. They resolved quickly. But it’s out of 53 patients now through the full load. So, it’s a relatively small thing. It’s reversible. I think people are still overstating the meaningfulness, but I think if you talk to KOLs, they say it’s not a deal.

It’s not going to be change things. And the regulars said, yes, fine. It’s all good. They didn’t ask us to do anything. Just move ahead. And they went ahead and accept the end of Phase II schedule already. So, I think we’re on path. I think these are the two things that need to be straight. But what I’d say the magnitude of the data we saw, the speed and the combination of domains is something, quite exceptional. And I think people aren’t seeing that multiple domains of improvement for one treatment in treatment areas that normally don’t change. And we need to keep telling our story. And I hope that if people talk to more KOLs and have seen the data, understand it, that might help people inform what the meaningfulness of what we’re seeing and how unusual it is for this disease to see any change at all.

So, we’re excited about it.

Operator: Our next question comes from the line Tazeen Ahmad with Bank of America Securities. Your line is open.

Tazeen Ahmad: Hi, guys. Thanks for taking my questions. Just in terms of timing for the Orbit and COSMIC study for OI, do you think that they’re going to read out at around the same time? And is it your plan to submit for the different age groups as part of a single application or is it going to be scattered?

Emil Kakkis: Well, fortunately, both studies over enrolled, but got to the same point almost the same time. And I actually think the younger patients will probably, as historically true, even respond faster. So, I actually think both studies will have will probably read about at the same time. And our expectation would be to file for the full age range based on that data. So, we’re actually in good shape to do that. I think it’s the right thing. I think it would be tough to submit one part of the age range and not the youngest. So, with the young patient we’re excited getting enrolled, puts it in play to have both studies in parallel and get them both in the filing.

Operator: Our next question comes from the line of Gena Wang with Barclays. Your line is open.

Gena Wang: Thank you. Regarding the GTX-102, the Phase III trial design is going to finalize with FDA. So, what will be your single domain for primary endpoint? Is that the Bayley’s 4 cognition? And also, will you use full loading doses or three loading doses since you’re also exploring the three loading doses in Cohort C2E? And very quickly on the Orbit trial enrollment, Emil, did I hear you correctly the timing, the first interim analysis that will still be the same before year end? Or could that be earlier than initial assumption since now you complete enrollment ahead of expectation?

Emil Kakkis: Very good. So, on the GTX-102 Phase III, the primary endpoint we’re most likely looking at is the Bayley cognition score that we’ve talked about. It is an integration of multiple things that happen. They’re improving the most. It proves rapidly. It’s a validated tool. It’s well known. I think these are features. The FDA is certainly aware of this endpoint choice, we’ve had discussions on it. We’ll include other domains within the secondaries. And the MDRI will be, we think, one of the key secondaries. That’s our expectation in the plan. But I think we’ve got great data on all of these and could potentially use other ones if we wanted to. But I think Bayley cognition is most likely. With regard to three or four doses, let me clear the cohorts that we’re testing all have the same number of doses through day 170.