Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) Q3 2023 Earnings Call Transcript

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) Q3 2023 Earnings Call Transcript November 2, 2023

Ultragenyx Pharmaceutical Inc. misses on earnings expectations. Reported EPS is $-2.23 EPS, expectations were $-2.08.

Operator: Good afternoon, and welcome to the Ultragenyx Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, you will have an opportunity to ask questions during the Q&A portion of the call. It is now my pleasure to turn the call over to Joshua Higa, Vice President of Investor Relations.

Joshua Higa: Thank you. We’ve 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; Eric Crombez, Chief Medical Officer; Aaron Olsen, Senior Vice President of Corporate Strategy and Finance; and Ted Rozinka, Chief Accounting 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. Before we get started, I’d like to welcome our new CFO, Howard Horn to the call. To say, he has hit the ground running is an understatement. He already has an Ultragenyx Analyst Day and a financing under his belt. We’re happy to have him on board as we prepare for our Catalyst Rich 2024. It’s great to see many of you at our Analyst Day a few weeks ago. We hope that the new data shared along with the positive clinical impressions of the investigators on two of our programs showed you why we have confidence in our lead therapeutic candidates and their potential to transform debilitating diseases with limited or no treatment options. We kicked off the day by sharing new data from the Orbit study for setrusumab in osteogenesis imperfecta, and has been prevented a few days earlier at ASBMR the America Society for Bone Mineral Research 2023 Annual Meeting.

Interim data from the Phase 2 portion of the study demonstrated that setrusumab significantly reduced the analyzed fracture rate by 67% after at least six months of treatment and continue to demonstrate ongoing substantial increases in lumbar spine bone mineral density reaching 19% in just six months in the younger patients. We also provided an update on our GTX-102 program in Angelman syndrome. The data we covered was longer-term extension data from the dose escalation cohorts in the Phase 1/2 study and it showed that treatment with GTX-102 resulted in clinically meaningful improvements across multiple domains through both the loading and maintenance phase of treatment. The improvements we saw in Bayley and the interim severity assessments, formerly known as the CGI-S severity scale were also supported by objective changes in EEG and comparisons to natural history.

We also looked at the emerging first ever development changes from three of the original US patients. When these patients stopped receiving GTX-102, they lost these first ever developmental gains but we’re able to gain these skills once they start treatment with new dosing regimen. Other patients also saw many first-ever development gains, which gives us confidence in the potential transformative effect for this neurodevelopmental disease. These first-evers are very important to the families and give clinical meaningful to the changes we are seeing in the quantitative assessments. The third program we highlight was our UX701 AAV gene therapy for Wilson disease. We provided data on the five patients in the first lowest dose cohort at 5E12gc per kilo four of the five patients showed improvements in copper trafficking and have begun tapering off standard of care with key layers and or zinc therapy.

This includes two of the earlier treated patients who are now completely off standard of care and doing well. Eric Crombez will provide more detailed updates on these programs later in the call. But it’s clear we have three large value programs all generating data that meaningfully derisks the probabilities of their success. Now, I’ll turn the call over to Erik Harris to provide an update on our commercial efforts for the first quarter.

Erik Harris: Thank you, Emil, and good afternoon, everyone. After five years of successfully commercializing Crysvita in North America, this responsibility was transitioned to Kyowa Kirin on April 27, 2023. As part of the transition, a small Ultragenyx field team and patient support services team was kept to help the Kyowa Kirin field team to find and start diagnosed patients while ensuring a smooth handoff. With the combined field efforts, the demand for start forms throughout this year has remained strong and is greater than what we saw during the same period last year. In recent months, the majority of the start forms have come from adult patients, which further supports our strategy of expanding the search into community physicians to find these patients.

The two teams are working hard to ensure patient and physician continuity while continuing to identify new subscribers and patients. Shifting to Latin America. Shifting to Crysvita in Latin America. As of Q3, 2023, there are over 460 patients on reimbursed therapy, which includes approximately 50 new patients who began from commercial therapy in this quarter. This year alone we have converted approximately 150 new patients to the commercial drug in this region. The Latin America team has continued to build solid momentum, further strengthened by the recent reimbursement approval for pediatric patients from the largest public payer in medical called IMSS. Crysvita is approved in six countries in Latin America including Argentina, Brazil, Chile, Colombia, Mexico and Peru.

Brazil continues to be the largest market in Latin America and we continue to see growing demand in this country. While the uneven ordering patters in Brazil will drive some quarter-to-quarter variability, the underlying demand remains strong. Today, we are reaffirming the Crysvita guidance we issued at the beginning of the year, the range of $325 million to $340 million includes all regions in all forms of Crysvita revenue. More specifically, it includes Crysvita product revenue from Latin America and Turkey and the cash and non-cash royalties from North America and Europe and the collaboration profit share revenue prior to the transition. For Dojolvi in North America, the demand for start forms remains strong. In the US, we have added nearly 19 start forms and converted over 70 patients to reimbursed throughout this year.

We continue to expand the number of treaters of Dojolvi in the US adding 30 new prescribers this year including some healthcare professionals in the soonest for neuromuscular medicine. In Canada, we continue to make progress following a positive opinion from Care Act, completing pan CPA pricing negotiations and signing listing agreements. Outside of the US, there continues to be growing demand for Dojolvi. In Latin America, our commercial teams are continuing to identify more patients and we expect demand will continue to steadily increase over time. Across Europe, we continue to deepen the awareness for LC-FAOD in key stakeholders and address the high unmet medical need through main patient and early access programs. Requests are coming from across all major European markets as well as Greece, Israel and the Middle East.

Today, we are reaffirming our 2023 global Dojolvi revenue guidance range of $65 million to $75 million, the range we announced at the beginning of the year. Lastly on Evkeeza, we continue to make progress in major markets in Europe and the Middle East. Evkeeza is now approved in Germany, where we have started to convert patients to commercial drug. In many other countries the demand is steadily growing as patients gain access to Evkeeza through various early access programs. In Canada, we received marketing approval from Health Canada for adult and pediatric patients aged five years and older for HoFH. We also continue to make steady progress in Japan, where we have meetings scheduled later this year with the Ministry of Health, Labor and Welfare to discuss pricing and reimbursement.

Across all regions, we have received overwhelmingly positive feedback for Evkeeza from KOLs and patients. And they have continued to highlight significant unmet need for this disease and the importance of this potent new treatment. We continue to respond to many urgent requests for early access and our teams will continue their efforts to bring this product to people living with HoFH, as quickly as possible. In closing, we are reaffirming our 2023 total revenue guidance range issued at the beginning of the year of $425 million to $450 million. With that I’ll turn the call to Howard to share more details on the financial results for the quarter.

Howard Horn: Thanks, Erik. It’s great to join the team for today’s call. Before we get into the numbers, I’d like to thank Ted, Aaron and their teams for all of their contributions over the last year. They implemented a number of important initiatives around financial discipline, which have contributed to the strength of our current financial position. I will briefly summarize the financial results that were included in the press release we issued earlier today, starting with revenue, our total revenue for the third quarter was $98 million. Crysvita revenue for the third quarter was $75 million, which included $50 million from North America; $19 million in product sales primarily from Latin America; and approximately $6 million in European royalty and other product revenue.

As we have previously disclosed, the third quarter US Crysvita revenue was negatively impacted by a onetime decrease in channel inventory related to Kyowa Kirin’s change from Ultragenyx-labeled product to Kyowa-Kirin-labeled product, as part of the transition of North America commercialization responsibilities. Again, this is a onetime change and we expect Crysvita channel inventories to increase to more normal levels at the end of the year. Dojolvi revenue for the third quarter was $7 million with North American demand driving 25% growth versus third quarter 2022. Shifting to expenses. Our total operating expenses for the third quarter were $243 million, which included R&D expenses of $157 million, SG&A expenses of $75 million and cost of sales of $11 million.

Operating expenses for the quarter included non-cash stock-based compensation of $35 million. For the third quarter, net loss was $160 million or $2.23 per share. As of September 30, 2023, we had $524 million in cash, cash equivalents and marketable securities. After the end of the quarter, we raised an additional $326 million from an underwritten public offering of common stock and prefunded warrants. Through the third quarter, net cash used in operations was $391 million. We expect fourth quarter net cash used in operations to be around $35 million, driven by anticipated strong fourth quarter revenues and factoring in expected changes in working capital. As a result we now expect full year net cash used in operations to be around $425 million.

The team has worked hard over this past year to ensure we are in a strong financial position and we will continue to build on these efforts going forward. Now, I’ll turn the call to our CMO Eric Crombez who will provide an update on our key clinical programs.

Eric Crombez: Thank you, Howard, and good afternoon everyone. Emil mentioned the key clinical updates we shared at Analyst Day and I’ll provide just a bit more detail on our priority programs. Starting with UX143 or setrusumab for the potential treatment of osteogenesis imperfecta. The data we presented at the Analyst Day supports our view that this is a disorder of inadequate bone production as much as it is about defects and collagen. Across the 24 patients enrolled in the Phase II portion of the ORBIT study, we saw an improvement in bone mineral density Z-score of 0.85 at six months. Importantly, a subset of 5- to 12-year old saw nearly a 20% increase in bone mineral density with a Z score change of 1.19. These improvements in bone mineral density across the 24 patients treated in the Orbit Phase II translated to a 67% reduction in the annualized fracture rate following treatment with setrusumab for at least six months.

20 of the 24 patients did not experience any new fractures in the six months following treatment with setrusumab. For the four, who did have a radiographically confirmed fracture, many of them occurred early on in treatment or had a traumatic precipitating event. The data is all the more compelling because many of the patients in this study were previously treated with estates over the two years prior to dosing with setrusumab. During this time, these patients continue to see a high annualized fracture rate with many fractures occurring with very minimal activity. These types of fractures are referred to as fragility fractures and examples include fractures occurring during sleep or when transferring out of a chair. What we heard from two principal investigators who joined us at Analyst Day is that they are not seeing fragility fractures in these studies patients treated with setrusumab and that many of these kids are now feeling strong enough to engage in more physical activities with friends and family.

Next, turning to GTX-102 for the potential treatment of Angelman syndrome where we showed clinically meaningful improvements across multiple domains for the patients in the loading and maintenance phases of the dose escalation cohorts 4 to 7 with the long-term extension data, we showed improvements compared to natural history data and supportive EEG data providing further evidence that the changes we are assuming are meaningful and improving over time. We also share data from three of the original U.S. patients, who stopped and restarted treatment. These patients gained lost and regained a number of skills including following complex directions communicating needs and wants and improved behavior in sleep. These changes show the importance of GTX-102 to enable continued development in these patients with a hope that they will continue to learn and develop new skills.

Dr. Elizabeth Barry Kravis, who is a principal investigator for the study took us through a few video examples of what these developmental improvements translate to for her patients and their caregivers. Dr. Barry Kravis has been working with Angelman patients in her clinic for decades and noted that it can take years for these patients to learn a single new skill. So the fact that these patients are learning multiple things in such a short amount of time is remarkable. Enrollment in the dose expansion cohorts, cohorts A through V continues to go well and we anticipate sharing data from at least 20 patients who have been on therapy for at least six months in the first half of 2024. Lastly, UX701 for the potential treatment of Wilson Disease, which is a disorder of copper trafficking.

As Emil mentioned, we are seeing a response in four of the five patients treated in the first dosing cohort with patients two and three completely discontinuing their chelators and/or zinc. At Analyst Day, we said that Cohort 2 receiving a dose of 1e13 has been fully enrolled. The DSMB is scheduled to meet soon to review the available data which will enable initiation of dosing in the third and final cohort in Stage 1. The five patients for this last dose escalation cohort have been identified and meet enrollment eligibility. We expect dosing in this core to complete around the end of the year. The improvement in copper biomarkers and ability to reduce current standard of care are promising signs of the establishment of normal trafficking of copper in these patients, and we look forward to sharing additional progress with this important gene therapy program.

I’ll now turn the call back to Emil to close with the key upcoming milestones and provide some closing remarks.

Emil Kakkis : Thank you, Eric. I’ll summarize the key upcoming clinical catalysts and before we open up to Q&A. Starting with UX143 for osteogenesis imperfecta enrollment in both the Phase 3 studies is going well with strong support for the medical community following both of our data releases this year. We’re enrolling at 50 sites around the world and are targeting complete enrollment in the first quarter of next year. We also expect to provide another longer-term data updates from the Phase II portion of the study next year. Next GTX-102 in Angelman syndrome. Based on the patients who are currently enrolled in dose we are on track to provide an update on the expansion course in the middle of the first half of 2024. And as we have said it will include at least 20 patients data.

We’ve been on there for at least six months and include longer-term efficacy data on early enrollees and a safety update on the total exposed population. Closing with our gene therapy program DTX401 for GSD 1a dose the last patient pivotal study earlier this year. We’re now in the 48-week window and expect to unblind and share the Phase 3 data in the first half of 2024. US 111 for Sanfilippo syndrome. We are continuing to see meaningful clinical responses in these patients and we’re working with the FDA around biomarker to help support an accelerated approval filing. DTX301 for OTC is enrolling patients in the Phase 3 and we expect the last patient to be dosed in the first half of 2024. UX701 for Wilsons Disease should have all patients dosed in Stage 1 this year and we expect to provide safety and efficacy data on all of these patients in the first half of 2024.

We’ve worked hard over this past year to ensure we are in a strong financial position heading into 2024 and beyond. We continue to see growing demand for our commercial products and completed a financing that gives us the ability to advance our large value program through meaningful inflection points. We’ve been employing more aggressive financial discipline including realigning our headcount, restructuring in places and doing the work we need to make sure we’re putting the people and capital where we have the ability to generate the most value. Ultragenyx has come a long way since our humble beginnings. As I said at Analyst Day we expect to have around 8 to 12 approvals in our first 15 years post IPO and these are an extremely debilitating disease with urgent need for treatment options.

I think that really demonstrates the responsibility we feel to lead the future of rare disease medicine. 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] One moment for questions. Our first question comes from Anupam Rama with JPMorgan. You may proceed.

Anupam Rama: Hey, guys. Thanks so much for taking my question. And welcome Howard. Hope you’re well man? So I got a quick broader question here which is what are you monitoring here for the Sarepta DMD gene therapy regulatory review process that could maybe potentially read through to your broader gene therapy efforts and pipeline? And then on one of your gene therapy programs, specifically, 401 and GSD1 we heard a little bit about that program at R&D Day, but maybe you could help us define a win scenario to that program when you flip the card and maybe help us understand the market opportunity a little. Thank you guys so much.

Emil Kakkis: Very good. Thank you for the question. So as everyone knows the Sarepta Phase 3 in blinding showed this the primary endpoint of NSAA, but hit strongly to other endpoints. I think it shows that the drug is working. I think the NSA is a terrible endpoint and frankly I have said we would never want to work with that endpoint because it’s just a clinician score. So it’s not so surprising. I think the drug shows it’s working and it will be up to Sarepta to manage that forward. I think — what I would say in the broader context for our own program is that the ability to deliver microstep having an important clinical benefit in these patients is still a first step in a path toward improved care for these patients. But we think — I think in general it says that these microstrophin gene therapy programs can work and we’re still encouraged and still pressing our own program ahead in development.

Regard to 401 GSDIa the program we think there’s something around 68,000 patients and about one-fourth of that would be US patients. The majority of these patients like 80-plus percent of the patients are null or have no or very essentially no enzyme. What that means is 80% of the patients are severe — that means 80% of the patients are at risk of dying if they miss a dose of cornstarch. These are the patients that have essentially had done to their head taking cornstarch every day. The driver for adoption is the peace of mind of knowing I’m not going to die if I forget to take my cornstarch. And we think that’s a big driver. We believe it’s one of the reasons why the Phase 3 trial enrolls so quickly people really wanted to get out of this treadmill that they’re on with cornstarch and sugar control and the fear of every night being a potential risk in death if something went wrong or if they go and exercise they could collapse and be hypoglycemic.

So we think there’s a big demand and drive. Of course, cornstarch is not commercially costly, but I do think the peace of mind and stability of people who can live a life instead of one full of fear. I think it’s big. And we have high hopes and that the adoption of the treatment will be more aggressive just as it was in the enrollment of the trial which enrolled everywhere. In fact, we had a lot of people upset when we closed enrollment that couldn’t get in the trial. So we think the demand is going to be there. And while it’s not a huge program it’s — we think 8,000 patients is a substantial one. And we think that there will be early adoption for that program. And I do think that the clinical demand and need is important. I think we’ve seen it for that program.

So I’m pretty encouraged so far.

Anupam Rama: Thanks so much.

Operator: Thank you. One moment for questions. Our next question comes from Dae Gon Ha with Stifel. You may proceed.

Dae Gon Ha: Great. Good afternoon. Thanks for taking our questions. Two maybe on GTX-102 and the setrusumab. Just wanted to clarify on cetrizumab Emil did you say enrollment completion in 1Q ‘024? Is that for both Orbit as well as COSMIC? And are you placing any protocol restrictions on strenuous activity. I mean it’s encouraging their being more active and fearless, but in terms of endpoints I wonder if that could kind of create a confounder. For GTX-102 update in first half 2024 what kind of data should we be expecting? You had ASA MDRI as well as Bayley-4. But if you could frame that for us that would be great. Thanks so much.

Emil Kakkis: Very good. Thank you. So for etuzumab, we’re talking about both Orbit and COSMIC in terms of finishing enrollment. I think we’re likely. But the main one we’re talking about is Orbit which is the main driver, I believe both of them should get done in that time frame. And in terms of this control of excise or the hazard risk, if someone is feeling better in exercising well that’s already what’s happening in Phase I. People were a lot more active and what was actually on the plus side is that they were active and a lot of them where we’re fallen have fractures necessarily. So while there is some risk that they might be doing more there was one person who played volleyball and they hadn’t been playing. We’re actually overall feeling that the pattern of having falls and fractures seems to be better.

And so our net effect overall as we think even with increased activity there will be a reduction in fractures, which is really the best thing possible that is the kid to be active and to have a reduction of fractures while being active. So we’re not so worried about the let’s say the noise of having more fracture risk at this point. It looks like you still see the effect well even if there is some risk there. Now, with regard to GTX-102, I expect the day to be many of the same things you’ve seen which is the Bayleys which will compare of course the natural history data for the main three endpoints we talked about and there were other three that we looked at for the ASA. There are other endpoints we do describe all the endpoints we had. We had said at the meeting that things like the inline and others had a very similar pattern of response to those.

So — but I would look for data to be very similar to the package of data that you saw that we’re probably doing something very similar to what you saw before in terms of comparison to natural history and the ASA. We will try to include enough information to interpret the quantitative changes and the meaningfulness of those changes which I think is one of the debates. And we’re certainly going to look at emerging skills as well in those patients as best we can. So those are the things I think you’d expect to see. It should be 20 patients 6-month data. There will be probably 10 patients that have longer data out of the 254 and more than 30 patients worth of data of any type. So it should be a pretty robust set of data. So I’m looking forward to that.

Joshua Higa: Thanks. Next question.

Operator: Thank you. Our next question comes from Jeffrey Hung with Morgan Stanley.

Michael Riad: Hi. This is Michael Riad on for Jeff Hung. Thank you for taking our question. For setrusumab how do you think regulators will view the clinical benefit for younger patients who are still developing versus adults who are more or less finished growing? Is there any appreciation for the ability to prevent fractures and complications potentially like bone deformations? Thanks so much.