Ultragenyx Pharmaceutical Inc. Q3 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Ultragenyx Third Quarter 2020 Financial Results and Corporate Update. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your host, Joshua Higa. Sir, please go ahead.

Good afternoon and welcome to the Ultragenyx financial results and corporate conference call for the third quarter 2020. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Joshua Higa, Director of Investor Relations. Joining me on this call are Emil Kakkis, Chief Executive Officer and President; Camille Bedrosian, Chief Medical Officer; Erik Harris, Chief Commercial Officer; and Mardi Dier, our Chief Financial Officer who joined the company a couple of weeks ago. Shalini Sharp, Executive Vice President for Finance, is also on and will be available in this meeting for Q&A at the end of the scripted portion of this call. I would like to remind investors that this call will include forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to the types of statements identified as forward-looking in our 2019 Annual Report on Form 10-K that was filed on February 14, 2020, our quarterly report on Form 10-Q that we filed today, and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that the actual results could differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, as well as risks related to our business, please see our periodic reports filed with the SEC. I will now turn the call over to Emil.

Good afternoon, and thank you, everyone, for joining us on today’s call. It’s been a busy week, quarter and year for Ultragenyx. This matches the fundamental part of my philosophy for the company, which is a relentless focus on execution. I am proud of how productive the company has been throughout the year across all facets of our diverse business. Our regular team and development teams have received two new approvals in two weeks in June. The commercial team and all the people supporting the products have rapidly and successfully launched those products to patients in need, while still growing Crysvita in XLH and improving our annual guidance despite the global impact of COVID. The clinical team, internally and jointly working with our partner, GeneTx, has delivered a series of positive updates on our gene therapy programs and now the Angelman program. The business development team brought in the new gene therapy program for Duchenne on top of the gene therapy technology partnership announced with Daiichi Sankyo in March. We’ve been firing on all cylinders and we will provide updates on all of this progress on the call today. Starting with our commercial programs, which provide a stable source of growth that underpins the rest of our development. Crysvita continues to perform strongly and is now bolstered by the additional tumor-induced osteomalacia indication. In the first quarter of launch, Crysvita is off to a strong start in its first quarter, which is encouraging. We received start forms and a large number of prescribers for patients in our trials but also for those naive to Dojolvi. This speaks to the unmet need for those living with LC-FAOD and to the strong relationships that we have with physicians and the major treatment centers. Moving to our strategic collaboration with Solid Biosciences, last week, we announced that we are developing a new gene therapy for the treatment of Duchenne Muscular Dystrophy, or DMD. While there are other Duchenne programs that are far more advanced, this was a unique opportunity to combine Solid’s technology with our technology and two like-minded companies to create a next-generation gene therapy for this disease. We will combine Solid’s best-in-class microdystrophin with its potential ability to enhance blood flow to working muscles with our novel capsid, which has an excellent immune profile and is produced by a high-quality 2,000-liter HeLa cell manufacturing process. We believe this could be a differentiated therapy for Duchenne that we will seek to achieve global accessibility. We look forward to collaborating with Solid to bring new treatments forward rapidly and we will continue to update you on the progress coming out of the collaboration in the coming quarters. Moving to Angelman, yesterday, we announced positive interim data from the ongoing Phase 1/2 study of the investigational product GTX-102 in Angelman syndrome, which is part of the collaboration with GeneTx Biotherapeutics. GTX-102 is the first antisense oligonucleotide program for Angelman to reach the clinic and is based on the extraordinary science from Dr. Scott Dindot supported by GeneTx. In our update, all five patients of the first patients treated in the study have shown substantial improvements in the Clinical Global Impression scale, or CGI, tailored for some of the key domains of Angelman with a mean change score of 2.4. The positive clinical effects are supported by other endpoints and remarkable reports of changes provided by the characteristics of patients treated with GTX-102. These include two patients going from being nonverbal their entire lives with difficulty communicating to now using multiple words, while others are beginning to use signs, gestures, and augmentative communication devices for the first time. Some patients have adopted independent capabilities such as using a fork to feed themselves for the first time. Others are learning to swim on their own, and other reports include the ability to follow commands, focus on tasks, respond by name, and sleep through the night. Not only were these changes profound, but they began rapidly, often after just a few weeks or a few months of treatment, and in some patients, even after the lowest dose. In part due to these reportedly unprecedented changes, all families have indicated a desire to continue in the study. Turning to safety, all five patients at the highest doses had a serious adverse event, or SAE, of lower extremity weakness, with an elevation of protein in the CSF that has now completely resolved. We believe the SAE is related to local inflammation in the region of the intrathecal administration of GTX-102. This lower extremity weakness was not observed at the lower doses in the study, where we also saw clinically meaningful responses. We believe the impact of GTX-102 is manageable with changes in dose and administration strategy. And so we expect to resume enrollment and dosing once we get an amendment filed and agreed to with the FDA. We are very excited about what we are seeing, as are the patients’ families who are hearing about these results for the first time yesterday. We plan to provide additional data on these patients at the FAST Summit in December and additional safety and efficacy data on the program in 2021. Looking at these two recent developments, both Duchenne and Angelman are very significant diseases, both in terms of unmet need and prevalence. They align with our company’s strategy of developing therapies for rare diseases, where there is the greatest need, and we will leverage our various modalities and platforms to create the best treatment options for patients. Now before I turn the call over to Mardi, I would like to start by thanking Shalini Sharp for joining us on one last conference call, all the way from New Zealand. Shalini Sharp has been with me from the early days of the company and has been a greatly valued friend, colleague, and a superb CFO. She has been instrumental in building Ultragenyx to where it is today, and it could not be here without her contribution throughout that time, the ups and downs in all the financings, and all the work with many of you on the phone call. We certainly wish her the best going forward, but I just want her to know that her legacy and contribution to the company will remain with us at Ultragenyx forever. And with that, I hand the call over to Shalini.

Well, thank you so much, Emil, and good afternoon to everybody. I am delighted to join you all for our last quarterly conference call. I’d like to take this opportunity to thank Emil, the executive team, the finance team, the IT team, and the rest of the Ultragenyx team for the extraordinary experience that I have had working here. I could not be more proud of this company, its mission to serve patients above all, and its ability to effectively execute on this mission every day. I would also like to thank you all, our analysts and our investors for your support of Ultragenyx over these past years. And with that, I am very pleased to introduce you to our new CFO, Mardi Dier. You will be in excellent hands with Mardi, and I’ll now turn the call over to her to walk you through the financials for the quarter.

Well, thank you, Shalini, and I am very excited to be joining Ultragenyx during its next stage of growth in helping patients with rare diseases. Shalini has been a critical part of building a fantastic team, one that I know already will make this a very smooth transition. So thank you, Shalini. So today, we issued a press release that included a financial update, which I will briefly summarize. Total company revenue for the first nine months of 2020 totaled $179.5 million, representing 163% growth over the same period in 2019. This includes revenue from Crysvita in Ultragenyx territories of $98.5 million, a 91% growth over 2019; and combined revenue from Mepsevii and Dojolvi totaling $18.3 million or a 78% increase compared to 2019. Total revenue for the three months ending September 30, 2020, was $81.5 million. For the quarter ended September 30, 2020, Crysvita revenue in the Ultragenyx territory was $37.3 million. This included $34.1 million in collaboration revenue in the North America profit share territory and net product sales in other regions of $3.3 million. Total royalty revenue related to the sales of Crysvita in the European territory was $3.3 million. Mepsevii product revenue for the third quarter of 2020 was $4.1 million. We expect these revenues may modestly increase over time, but we do not expect there to be significant growth. In the initial quarter after receiving U.S. FDA approval, worldwide revenue from Dojolvi was $3.9 million. This includes named patient sales and U.S. product sales. We also recognized $32.9 million of revenue related to the collaboration and license agreement with Daiichi Sankyo that was executed in March 2020. The majority of revenue from this agreement will be recognized as work is performed on the technology transfer to Daiichi. They will be recognized based on progress towards completion, not on a straight line, and we expect the majority of this work to be completed by the end of 2021. Our total operating expenses were $131.8 million for the third quarter of 2020, which includes research and development expenses of $87.3 million and SG&A expense of $42.1 million. We expect our R&D costs to continue increasing over time as we advance additional product candidates from preclinical development into early and pivotal clinical studies. We also expect SG&A to modestly increase over the coming quarters as we support the expansion of our existing commercial programs and the launch of Dojolvi for LC-FAOD and Crysvita for TIO. We expect the split of R&D versus SG&A expense to remain fairly consistent. In the third quarter of 2020, we reported a net loss of $68.8 million or $1.13 per share, basic and diluted. This compares to a net loss of $113 million or $1.96 per share, basic and diluted, for the third quarter of 2019. The net loss for the third quarter of 2020 includes an $11.5 million unrealized loss from the fair value adjustment on the investment in the Arcturus equity. This also includes $8.6 million in non-cash interest expense on the liability related to the sale of future royalties. For the first nine months of 2020, net cash used in operations was $69.8 million compared to $273.3 million for the same period in 2019. We ended the third quarter 2020 with $765.5 million in cash, cash equivalents, and available-for-sale investments. I would now like to turn the call to Erik who will provide an update on our commercial performance for the quarter and an update on our guidance range for Crysvita.

Thank you, Mardi. In the third quarter, Crysvita continued to deliver meaningful revenue growth. The team also launched Dojolvi for patients with long-chain fatty acid oxidation disorders and Crysvita for tumor-induced osteomalacia. Our third product, Mepsevii, continues to provide a meaningful therapy to patients with MPS 7 and ultra-rare diseases. I would like to begin by providing an update on the Dojolvi launch, which is going very well. Dojolvi was approved in June by the U.S. FDA and was launched on July 22 for the treatment of all forms of LC-FAOD with a molecularly confirmed diagnosis across the 2,500 to 3,000 pediatric and adult patients in the U.S. As of the end of the third quarter, we have received approximately 120 start forms from approximately 60 unique prescribers. All 80 of the clinical trial and compassionate use patients have been converted to commercial therapy with many successfully navigating reimbursement and approximately 30% of all start forms are for patients who are naive to prior Dojolvi therapy. The team has made significant progress on the reimbursement front in the first few months after being approved. This has led to more than 60 patients on reimbursed commercial therapy. The payer mix is approximately 70% commercial and 30% government. Some payers have put formal policies in place, but most are approving Dojolvi on an exception basis during their new-to-market coverage guidelines. We continue to work closely with commercial and government payers to ensure that Dojolvi is accessible to all LC-FAOD patients, as indicated by the broad FDA label. Dojolvi has a pharmacy benefit, and its administration process does take time as various payers establish their coverage policies. Looking forward, we will continue leveraging our established commercial infrastructure along with the fewer than 10 incremental hires we added to support the Dojolvi launch. Over time, we expect revenue from Dojolvi in the U.S. to gradually build as the launch gains even more traction. Outside of the United States, Dojolvi has been submitted for approval with Anvisa in Brazil and has been submitted to Health Canada after being granted priority review. The discussions with EU regulators are ongoing. And with the U.S. approval, patients in other European and Latin American countries are now able to access Dojolvi through named patient programs. These programs have been a meaningful way for patients in France and Italy to gain access to this important therapy. I would like to reiterate our commitment to broad access. During these regulatory discussions and review phases, requests for named patient access will continue to be supported in all relevant countries. We continue to expect named patient sales to make up the bulk of Dojolvi sales in 2020. Moving next to Crysvita, which was approved last quarter by the FDA for a second indication, the treatment of FGF23-related hypophosphatemia in tumor-induced osteomalacia, or TIO, we estimate there to be between 500 and 1,000 TIO patients in the U.S., with 50% having unresectable tumors. The launch for this indication has gone well, as we have been able to successfully leverage our existing infrastructure and relationships with physicians to ensure the small patient population is able to receive this important therapy. Now, turning more broadly to Crysvita for XLH, we have been able to maintain continuity of care for just about all patients on treatment. We continue to adapt to the COVID situation by shifting more resources to digital initiatives, along with virtual personal promotions and limited in-person meetings more recently. We are also starting to see increasing success in finding more patients, leading to growth in new start forms and reimbursed patients. In Latin America, a strong patient community and KOL support continue to drive a lot of awareness and demand for Crysvita. In Brazil, the region’s largest market, we are seeing a steadily growing number of injunctions that are being granted and funded by both the state and federal governments. Similarly, in Colombia and Argentina, the number of patients on reimbursed named patient treatment have increased. Over time, we expect Latin America to provide a more meaningful contribution to revenue as the launch of this region progresses. Recall at the beginning of the year, pre-COVID, we established a range of $125 million to $140 million for Crysvita revenue in Ultragenyx territories. On our second quarter call, we maintained this range as we continued to evaluate the impact of the pandemic and our team’s ability to execute. Based on recent trends, we are raising the lower end of our guidance to $130 million, bringing the revised range to $130 million to $140 million. While there is still some uncertainty related to COVID as we enter the winter season and its long-term impact on Crysvita revenue, we are confident the strategies and tactics we have put in place will allow us to close out the year within this range. At peak, we continue to believe Crysvita has the potential to be a blockbuster as it will be a significant rare disease treatment for patients with XLH and TIO around the world. With that, I will turn the call over to Camille who will provide an update on the gene therapy clinical programs.

Thank you, Erik, and good afternoon, everyone. Emil provided the encouraging update on our Angelman syndrome program, and I will review progress with our other clinical stage programs. Starting with DTX301, our gene therapy program for the treatment of ornithine transcarbamylase deficiency, or OTC, OTC is the most common of urea cycle disorders caused by an inability to detoxify ammonia into urea. Patients with OTC can experience metabolic crises that could result in neurological complications, hospitalizations, and coma. It also sometimes results in death. Data from our ongoing Phase 1/2 study demonstrate durable and clinically meaningful responses to DTX301. Importantly, these improvements have continued after patients discontinued their previous alternative pathway medications and liberalized their diets. For DTX301, a fourth cohort of three patients at the 1x10 to the 13th genome copies per kilogram dose is ongoing using prophylactic steroids. We expect data by the end of 2020. We are also continuing Phase 3 planning and discussions with the FDA and plan to start the Phase 3 study in 2021. Moving to DTX401 for glycogen storage disease type Ia. GSDIa is a life-threatening disease that requires patients to take cornstarch every 3 to 4 hours to avoid severe hypoglycemia, long-term complications, and potentially, death. Results from the Phase 1/2 study so far show that DTX401 is changing the lives of these patients who are showing improved glucose metabolism with significant reduction in and less reliance on cornstarch. Prior to gene therapy, these levels of cornstarch reduction would have put these patients at risk for death. Safety has been acceptable to date with any transaminase elevations managed by reactive steroids. In addition to following the first three cohorts for longer-term data, we are also enrolling a fourth cohort of three patients using a prophylactic steroid regimen at the same 6x10 to the 12th genome copies per kilogram dose level. This decision is based on the value of preventing standardized use of steroids rather than reactive monitoring and treatment present in the commercial setting. The timing of this cohort will not impact the initiation of the Phase 3 study. We are moving forward with planning our Phase 3 study for DTX401. Following meetings with the FDA and finalization of the study design, we plan to initiate the study in the first half of 2021. With these updates, I will now turn the call back to Emil. Thank you very much.

Thank you, Camille. Now adding to Erik’s summary on our commercial programs, they have been very strong throughout 2020, and we are in a unique position with this robust commercial business that has three products simultaneously in the growth phase of launch. On top of that, we have a gene therapy platform that has delivered positive clinical results in 2020 across three diseases, but also continues to be a source of new pipeline opportunities and new partnerships. Next up will be Wilson disease gene therapy, which is a larger rare disease and will be the first program internally to leverage the scalability of our HeLa manufacturing platform that is vital for larger patient populations. And behind that, we have other large indications moving ahead. This includes the newly announced Duchenne program, which is a competitive space but one that we believe we are uniquely able to bring forward. And beyond the gene therapy space, we have the exciting Angelman data from yesterday that supports that we have a potent molecule in that disease, and we have a plan in place to work through the safety issues to advance this product forward for this large and severe disease. Over the last couple of years, we have gone from a clinical stage biotech to a diversified commercial rare disease leader. With a number of large opportunities ahead of us, we will continue executing across all facets of our business with our dedicated employees across the globe and a strong balance sheet and growing revenue. Let’s move on to your questions. Operator, please provide the instructions for the Q&A portion of the call.

Our first question comes from the line of Yaron Werber of Cowen. Your line is open.

Hi, this is Brendan on for Yaron. Thank you very much for taking the questions and congrats again on the progress. Just a couple of quick ones from us, I guess first on DMD. As you mentioned, there are obviously a few players already in motion here. And I totally understand it’s very early in the process. But can you just give us maybe a little bit of a sense of how you kind of plan to be differentiated in your approach maybe mechanistically, or if it’s really a matter of your capsid versus the other ones out there? And then just really quickly on the data from the gene therapy prophylactic steroid cohorts. I know you mentioned we could potentially get data from the OTC by year end, just kind of wondering about timing for the GSDIa patients? Thank you very much.

Very good. Well, when I look at the Duchenne program, there are several aspects of differentiation. One is the non-binding microdystrophin from Solid. The second is the capsid we have used, which has an excellent immune profile. And third is the ability to produce these AAV in a mammalian large-scale system, which we’ve been using now for two programs very successfully and produce high-quality AAV. High-quality and many features, which are achievable with the producer selling approach is more difficult to do with a transactional approach. We think with those three areas, we are differentiated. And combined with the skills both companies have in the space, I think we have an opportunity to bring something special for Duchenne patients and to bring a program forward that can become accessible globally, not just in the U.S. So that’s, I think, how I would answer that question. On the prophylactic steroid timing, we are dosing patients in both groups. We will have some data on them this year, but neither program does the steroid cohort interfere with the initiation of Phase 3. Both programs plan to have the prophylactic steroid approach built into the program, but it’s just helpful to us before we start Phase 3 to have done some patients and shown how it looks. So the Phase 3 planning continues for both in prophylactic steroid data. We’ll provide some data this year on those patients.

Alright, great. Thank you very much.

Thank you. Our next question comes from Chris Raymond of Piper Sandler. Your question please.

Hi, thanks. Also on the DMD program, Emil, there is a hypothesis surrounding gene therapy in DMD where muscles aren’t able to be transduced maybe as efficiently as they would normally because of the damage that’s caused by the actual disease. I guess – I’m sure you’ve looked at this closely. Is there a way to address that clinically? Or do you have any thoughts on that? And then also maybe sort of a question on just execution on the program that you have specifically, can you remind us how long it takes to establish a HeLa producer cell line? Thanks.

Sure. So on Duchenne, and really, we’re familiar with a lot of different muscle diseases. Muscle even without injury, by the way, is very difficult to deliver particulates or large molecules in general. They have very tight sensory and capillaries that create difficulty in the delivery of products. It’s designed that way, so you don’t create big, swollen muscles when you exercise. It’s designed to control fluid flow. And that creates challenges by delivering. We’re highly aware of the issue, and we have ways that we’re approaching how to improve it. The issue being damaged or not, I think that is certainly another part of the story. But we are looking at ways to help improve that. And I won’t say any more of it at this point in time, but we’re aware of the challenge and the challenge in muscle in general. With regard to producer cell lines, using the automated approaches we have created at the company and processes that we’ve established, generally, we can identify a high-quality, stable clone within approximately six months of time. That would be a clone that can survive growth to 2,000 liters, maintain stable incorporation, and can produce high titers of AAV vector. The process – the automation allows us to actually screen a large number of clones and help identify a stable and high-producing clone. The combination of those approaches gives us the power then to create a manufacturing platform that has hyper-reproducibility, high quality, and can be done in a way that is from a long-term commercial standpoint, reproducible at the 2,000-liter scale.

Okay, thank you.

Thank you. Our next question comes from the line of Maury Raycroft of Jefferies. Your line is open.

Hi, thanks for taking my questions. For Dojolvi, just wondering for the 30% naive patients, if you can talk more about those patients and their demographics, including age, and can you comment if the naive patients represent a bolus or more of a natural uptake of getting patients on treatment?

Well, we haven’t really described in detail what are the exact ages of the patients, I think they are across the spectrum. There have been newborns, of course, identified and put on drug as well. But in general, it’s a spectrum of patients. And obviously, it’s early on launch, and I don’t think we can say if it’s a bolus or steady yet because we’re just talking about a quarter of work. But we believe from the response we’re getting from physicians out there and the number of prescribers, which is now already 60, there’s clearly a broad interest in the product, and we would expect this to continue seeing start forms generated, though the exact dynamics are yet to be fully observed.

Got it. Okay. And then for Angelman, I guess besides the natural history data out there, is there good existing efficacy data to contextualize what you’re seeing in Angelman based on the time points and the age range? And along these lines, is it possible to reconcile or convert data on the CGI IAS versus the more general CGI scale?

Well, certainly, I can try to provide some help for you. When you look at natural history data in Angelman patients, they generally gain some ground until around 2 or 3 years of age. From there on, they’re relatively flat, and they don’t really change much over time. They’re pretty flat. So the changes we’re seeing are not something that’s seen commonly. Patients with deletions are nonverbal, and by the way, all deletion patients are nonverbal. They never become verbal. So to have patients becoming verbal and using words is highly unusual. Regardless of what CGI or any other score you could apply, the fact that patients are talking, learning their names, responding to instructions, and using other forms of communication is something unique and different and valuable in and of itself because communication problems are the number one family-reported need that affects them and their life with the patient. With regard to the CGI, the global score involves looking at all the domains and just creating a summation of the physician’s view. Each domain has particular areas that they look at in making the score for each CGI. It’s not really that different from any other CGI. It’s just that it is based on particular problems that patients with Angelman have inside each domain. In general, people do not see changes in Angelman on any score, including CGI, and there is some data on what the placebo effect might be in CGI. However, I think the kind of magnitude we’re seeing, which was a mean change of 2.4, means basically half between much improved and very much improved is a very strong exploration that has surpassed anything possible with natural history by far, and for families with the disease, absolutely unique and compelling.

Got it. That’s really helpful. Thanks for taking my questions.

Thank you. Our next question comes from Gena Wang of Barclays. Your question please.

Thank you for taking my questions. First, I wanted to say to Shalini, it has been great working with you for the past 5, 6 years, and my best wishes to your next journey. And Mardi, we are looking forward to working with you. So I have two sets of questions. First one is the Dojolvi. So is it fair to assume the majority of the patients right now on drug are teens and adults, let’s say, 70% to 80% are teen and adult? And also, how many ex-U.S. patients are right now on the named patient access program? And my second question is regarding the DMD gene therapy. I know you’ve mentioned that you could file for R&D within 1 year. Can you give additional color on all the preparation you need to do for the R&D, including CMC and potency efficiency? And also, do you need FDA inspection in order for you to start?

Well, thanks, Gena. That’s quite a few questions. I don’t know if you want to say anything, Shalini? No, okay. So with Dojolvi, the thing to understand about dosing is that the patients in the first 4 or 5 years of life have increasing drug usage, but once you get to about 5, 6, 7, 8 years old, then it’s a very flat curve. Therefore, patients from school age to adults are getting very similar amounts of drug, which we estimate is after adjustment for gross to net compliance of around $130,000 a year. So what might matter is how many very young patients we have, but we’re probably not going to put out that much delineation at this point in time. I don’t know if you want anything else, Erik, on this issue of patients on Dojolvi?

Nothing else to add to that.

Alright. I think the other question you asked was how many patients were on named patient ex-U.S.? Yes. On the French-HU program, it’s a little less than 50 patients, I think, are on the FAOD in France. In Italy, it’s a handful of patients, but because of the approval in the U.S., we are able to respond to named patient requests in more countries now. So we expect that potentially to grow, although not dramatically. The U.S. revenue is certainly going to grow, we think, significantly as we move forward in the launch. Last question was on IND for Wilson. So far, the program has gone well.

For DMD.

With DMD, did you say? I’m sorry, yes. Okay. For Wilson, we have completed making the drug substance at scale, and it runs well in the HeLa platform. We have made a lot of product. We’re in the test release phase of that program, which requires a lot of analytical methods and so forth, and that’s ongoing. There is some non-clinical work going in and those pieces are coming together. We should be on track to file at the end of the year, and our expectation is that as long as there’s no more COVID-related shutdowns of labs or other things going on, then we shouldn’t find ourselves somewhat delayed. But overall, the process has gone well, and we’ve been working and have the clinical development plan put together for the program. So on Duchenne, with the other program, it’s at its beginning stage. We are in the process of making the production system which is the HeLa producer cell line system, and we’re also going to be testing a number of other factors in the design. It will take some months to get through that process. We haven’t said a time frame, but it’s certainly well more than a year for us to be able to get the manufacturing and nonclinical work put together. It’s not an immediate event, and we want to get it right. If we’re coming in at this point after other parties are already in the clinic, we want to come in and nail it with a very high-quality system and quality production as well as a good strategy administration that will optimize the treatment effect.

Thank you.

Thank you. Our next question comes from the line of Tazeen Ahmad of Bank of America. Your line is open.

Hi, good afternoon. Thanks for taking questions. Emil, I just wanted to get your thoughts on where you are in reaching commercial supply scale for both DTX401 and 301 programs? And more specifically, have you completed any necessary potency assays for the FDA? And then I have a follow-up.

Yes. Well, we’ve been dealing with the potency assay across the program – across all the programs and have an understanding with the agency of how we’re managing that for all the programs. They have been talking to us about this for a while, so it’s not a new thing. I think it’s pretty clear to them that in entering Phase 3, they want to see a potency assay as part of each manufacturing process and on lot release. Their point is they want to make absolutely sure that we’re giving potent vector. We have a number of – the guidance allows for a matrix on multiple assays. We have multiple but they definitely want one that looks at the active protein story. We’ll have those in place for those programs.

Okay. And then can you just give us a little bit more background on what led to the decision to add a prophylactic steroid cohort to the DTX401 program?

Well, the DTX401 plan was sort of there. We just hadn’t talked about it as much. We – in cohort 3, we used steroids a little earlier. We set the trigger for initiation of steroids a little bit earlier. It looked like we got a better effect at controlling any inflammatory response from the liver. The sense was it – with the safety of parent doing that, we decided we would look at moving the steroids up even a little bit earlier on in the process, and we think that would just, practically speaking, become a lot easier in the commercial setting and would help us get ahead of any inflammation that might get going. So it’s basically learnings from cohort 3, but it was actually in the plan. With the data, the way it looks from our third cohort, it seemed prudent to do that as well. It doesn’t affect us. We have product available and we could treat another three. I will tell you the other benefit, of course, for having 12 patients here and 12 patients in the other program, is that while the number of patients that we treat – that are successfully treated, certainly can help us with the long-term durability argument because they will be on treatment far ahead of the Phase 3 program. That, as you know, is going to become an important piece at getting – moving forward in a filing approval process is to ensure that we have enough durability. So having a few extra is probably helpful in that. We’ll be exploring that. We’re already enrolling patients in it, and I think it just adds to the story for how to treat in an efficient way when you’re in the commercial setting.

Okay, thank you.

Thank you. Our next question comes from the line of Yigal Nochomovitz of Citi. Your line is open.

This is Samantha on for Yigal. Thanks very much for taking our questions. Just first on the Crysvita guidance revision. Is that incremental $5 million on the lower end related to the expectations for the TIO launch, or is that related to the increase and the identification of new XLH patients that you mentioned in your prepared remarks?

Well, the guidance we put out at the beginning of the year did assume that TIO would get approved and launched. So the guidance we put out was for all Crysvita sales for the year. We’ve moved up the lower end of the guidance because our revenue is actually guiding into the higher part of the guidance, so that was simply a tightening up of the predictions for the future. I don’t know, Erik, if you had any other thoughts on the guidance that you want to provide?

Yes. I would just say, just to build on my remarks earlier, so far, less than 1% of existing patients have been impacted as a result of the COVID pandemic. While we’re seeing growth rates that are trending back toward pre-COVID levels, they’re not there yet but are trending in the right direction. I think that’s a result of the team continuing to find innovative ways to educate providers and patients through virtual meetings and in live meetings we’re allowed according to safety protocols, more offices are opening up, and more are seeing patients in clinic. So we are encouraged by the rebound that we are seeing.

Great. Thanks, Erik. So the bottom line is not TIO; really, the maintenance of the base off of COVID has kept us in game, and the launch has continued, and we’re able to tighten up our focus and remove the bottom end of the guidance range. I think that’s good news for the Crysvita franchise.

Okay, great. Thank you. And then just a follow-up from the DMD question, once you get this construct into the clinic, how quickly do you think you can advance into a pivotal trial? Do you think you will be able to use the safety data that you have generated for 401 and 301 to advance this a little bit faster maybe than some of your other gene therapy programs?

Well, I think we would be able to understand from those programs the safety profile, but more importantly, the dosing range effect. But I think the truth is in Duchenne, the dosing is quite different. The safety will be quite different. So there’s a little bit less that we can leverage upon. I think the manufacturing might be helpful, particularly the HemA program, which is HeLa-produced, would give us some advantage. I don’t think they would say it is necessary those programs alone. I think the biggest advantage would come through in understanding the likely dose range we need to achieve and being able to design – and the biomarker endpoints involved as well as clinical endpoints and being able to design a seamless design trial, which would take us through the dosing phase as well as the randomized phase more rapidly, which is the approach we are going to take with Wilson. I think that type of design, which has been promoted by CBER and Peter Marks, is possible when you know enough about the disease to know the endpoints and the measures you want to make. Then you can kind of predict a plan and just settle the dosing and move right into Phase 3 without having a gap. That would be one of the ways we can shorten the time line after we get to the clinic.

Okay, great. Thanks for taking our question.

Thank you. Our next question comes from the line of Cory Kasimov of JPMorgan. Your question please.

Hey good afternoon. First off, it is great to hear from Shalini, so hope you are enjoying your time in New Zealand. Two questions for me as well. First on UX701 in Wilson’s, can you just give us some insight into how you are thinking about initial clinical studies and what the duration of follow-up might look like there? And then my second question is just a follow-up on DTX401 for GSD1a. And with your comment that the new prophylactic steroid cohort that you are evaluating now would not impact the timing of Phase 3, does that mean you would start Phase 3 and amend the protocol if necessary to just take an early look and build a prophylactic steroid kind of regimen into that?

Okay. So the first question is around UX701, which is the gene therapy for Wilson disease, the clinical studies. Our plan in the clinical studies is to do a significantly larger study than what we did in the others, but there will be three cohort groups that will explore dose. With that dose information, we will essentially go straight into the Phase 3 design and one seamless design. We are getting – we are going to be seeking approval on doing a single seamless design, where you go through dosing and go right to the pivotal design. The reason that is possible is that there is agreement on a biomarker-based primary endpoint, which is doable because of the history of approvals in Duchenne. Therefore, we think we can set up and operate a program straight through in one shot. This will help it. The study length, I think the FDA is very clear that they want to make sure there’s sufficient durability in the program. The patients from the early dose cohorts would probably end up having close to a year or more time on drug than the Phase 3 component patients. We haven’t fully nailed down what exactly the amount of length of time is. Our expectation based on design is to have a 48-week blinded study. How much extension data we will need? We will need to discuss with the agency at some point in time. But our plan is to study for the core efficacy and safety determination. So regarding the 401 prophylactic steroid question, we are primarily looking to see that we can keep inflammation down in the first few weeks and that that effect is sufficient to allow us to get the good cornstarch reduction.

Okay, thanks.

Our next question comes from the line of Salveen Richter of Goldman Sachs. Your question please.

Good afternoon, Shalini. It’s been great working with you and enjoy the break. Mardi, congratulations on joining Ultragenyx. Emil, I was just wondering if you could update us with regard to optimizing the HeLa platform to create this third-generation process? And how you intend to layer this HeLa manufacturing into your pipeline, particularly with Wilson?

Right. So the Wilson program is produced with the HeLa, we call it 2.0 version of the process. However, we have already created HeLa 3.0 versions from that version. We don’t have, at this point, time or need to cross over to it, but we could at some point in time. Right now we will head to the clinic with the 2.0 version, which is already very productive and provides more than enough product. The HeLa 3.0 level of productivity improvements are substantial and very important. The team, led by Sam Wadsworth, is of course tuning, looking at what is next, and is continuing to add to the platform and build its value. I think these changes are the kind of things that happened in the early days of monoclonal antibodies. Whoever controlled the creation of a large-scale, cost-efficient system for monoclonal antibodies started to own the field and ended up partnering and gaining a lot of ground. We believe there are additional collaborations possible, whether for indications we would develop or ones for which we would provide the technology in an agreement as we did with Daiichi Sankyo. We are looking at those types of arrangements. The deal with Daiichi Sankyo involves a lot of tech transfer and effort. On the spectrum, we could do another deal as extensive as that or other deals, where the technology is licensed for particular indications. We are open to a variety of avenues. If we have created the largest mammalian system and high-quality system for AAV manufacture, it’s coming to us to make it available and work with companies to put more products in play. The Duchenne story just became one that we could take advantage of ourselves as an area of muscle that we are pretty knowledgeable about for which Solid is a partner available to help bring unique Duchenne knowledge to the fourth, especially their microdystrophin. We certainly would look at other deals of a similar type where we would supply our technology and pick up another product where the unique, scalable and large-scale production and high-titer productivity of the HeLa platform could be a distinct advantage, particularly in high-dose indications. So we are looking at those, and Sam will continue to ask for investment in further versions of the platform. I can guarantee it.

Our next question comes from Laura Chico of Wedbush Securities. Please go ahead.

Hi, this is Ken Shields on for Laura Chico. Thanks for taking my question. So one for Mardi, what drew you to the opportunity? And how should we think about capital allocation and financing strategy? Ultragenyx has benefited from recent transactions. So what should we anticipate as we look ahead?

Yes, great, great. Thanks for the question. It’s a pretty easy decision to join Ultragenyx, and I think you heard a lot about it on the call. The team has guided the company in such a great way to get to this point, but they have certainly planned for their next phase of growth. I’m pretty honored to be part of the team now and to help them achieve that. In terms of capital allocation, I think the company has done a fantastic job to be here. If you look at our cash balance at the end of last year and the cash balance today, it’s pretty darn close to the same number. The last two deals that brought in capital in a non-equity dilutive nature were the Royalty Pharma deal last December and then, of course, the Daiichi deal which we have talked about today, bringing in well over $500 million into the company. That’s fantastic. The company is in a really strong cash position. We did announce the Solid deal recently. With that deal and our base business going forward, we have cash that takes us into 2023. I want to highlight that we are on a growth path. We like deals that look quite solid. I want to highlight the GeneTx purchase option as well. For the Angelman program, we have the option to purchase that company for $125 million after some period of time after Phase 2 data. We are in a great position, but we are very active as well, and we look forward to the next steps.

Thank you. And maybe just one more, so on Angelman syndrome, how do you think about the competitive landscape and the potential for a CRISPR-based therapy versus an ASO strategy? I think there was a recent publication that came out. And in light of your interim data, just wondering if you could apply an IND potential for gene-editing disease?

Thank you. For the Angelman disease, fortunately, for Angelman patients, there is a lot of people working on strategies right now. There are a lot of very interesting strategies out there, and they certainly all have potential. We ticked ASO, by the way, particularly because we felt it was more likely to be superior than gene therapy or even a CRISPR-type approach. The ASO can – and particularly various ASOs distribute well to the whole brain and induce the expression in a wide array of neurons across the brain, which we think is really important in this disease state. Gene therapy, even in primate or in humans, is still getting a small fraction of total neurons. While that can work in diseases like SMA, it may not work in diseases that have very complex neuronal communications. I think gene editing is going to be extremely challenging, the brain getting adequate and effective expression in enough neurons to actually have the impact you desire. Keep in mind, it’s only the neurons that are imprinted; non-neuronal cells are not imprinted. So if you gene-correct non-neuronal cells, you are perhaps not achieving the desired outcome. Biology is complicated. I would say, having looked at all, our view is that ASOs is the best strategy. It turns on the paternal chromosome, which is there, allowing that expression to occur in a regulated fashion and does it in a wide variety of neurons. I think that’s going to be hard to beat. Even so, there are more ASOs out there than us. Roche, Biogen, and Ionis are capable firms with a lot of expertise. We picked the GeneTx program to get involved because we felt they had a superior understanding of the RNA regulation, and the science behind it is more evolved regarding how to knock down the RNA and their oligo I think is substantially more potent than others that were tried in the laboratory. So we are excited about that oligo. I think it’s still going to be the best strategy, and it will be hard to match, I think, with other strategies.

Okay, thank you very much.

Thank you. Our next question comes from Jeff Hung of Morgan Stanley. Please go ahead.

Thanks for taking the question and best wishes to Shalini. Just to clarify on the guidance, if I am looking at this right, the midpoint of the range implies approximately flat sequential growth for fourth quarter Crysvita sales in Ultragenyx territories. You mentioned outstanding uncertainty due to COVID. So is that the main driver, or is it conservatism? Or are there any other potential factors that we should be thinking about for the fourth quarter? Thanks.

Well, I think there are probably a lot of factors like how about the widely discussed COVID surge ongoing out there? Erik, do you want to touch on the question, which is really how the guidance relates to what is happening? What are the risks to the guidance maybe going forward and what the changes were? Is that about right, Jeff?

Yes. As I stated, we are encouraged by the rebound that we’re seeing. But there is still a great deal of uncertainty as to when the market will fully open to pre-COVID levels. So it creates some challenges with forecasting as you think about as we move in – close out the year and move into 2021.

Alright. Thank you.

Thank you. Our next question comes from Joon Lee of Truist Securities. Your line is open.

Hi, congrats on the strong quarter and thanks for taking my questions. On GTX-102 for Angelman’s, you use IVIg to treat some of the patients, which implies IGG response. Yet you said on the call yesterday, I believe, that IgG to albumin were not altered. So can you just tell us a little bit more about the nature of the new response? What was the greatest extent of the spread of the inflammation in the patient – in any patient, actually? Just trying to assess the potential to spread to other, I might call, levels maybe a little bit more about functions?

Sure. So the use of IVIg or steroids was done more reactively as the patient symptoms indicated. It was not actually based on a known hematological situation that we thought IVIg would work. It was just looking parallel to some other conditions, not because there was any rational basis. It was simply used. It’s not clear that IVIg and steroids are actually having effect. We were just including them for completeness, but it does not indicate that there’s an immunoglobulin based, and we have no evidence for that at this point. With regard to localized, we said lumbosacral, but actually lumbosacral was the largest extent, and that was in the smallest patients. That’s where it extended to the lumbar region. In the bigger patients, it was really almost localized to the fecal region only, so it was smaller. The biggest region was up to the lumbar, and it did not include thoracic levels for higher levels. So we don’t think it would spread. It appears to be confined to the region where the drug sits immediately after administration. Without Trendelenburg, the smaller patients would fill up more than a bigger patient who can only fill up the bottom part. We believe we can alter the distribution.

And just a follow-up question, were there other ASO therapies that led to some localized inflammation or reactions that was resolved with Trendelenburg?

Well, there are other ASO therapies that clearly cause meningeal irritation and elevated CSF protein. Multiple ones have shown that in the clinic. It’s not uncommon. The Trendelenburg can be used in any situation. I don’t know, but I can’t speak to the clinical judgment of other people and what they do or don’t do. Trendelenburg is widely used in intrathecal therapies as a way to take the heavier drug solution and move it toward the brain where it needs to work.

Great, thank you.

Thank you. Our next question comes from Arlinda Lee of Canaccord. Your question please.

Hi, thank you for taking my questions. Maybe a quick one on Dojolvi, can you provide an update on what is going on in the discussions with the regulatory agencies? And then maybe more involved on the HeLa efficiencies, you have mentioned that you are now in version 3.0. I am wondering if you are looking to further enhance improvements there. Can you talk about how you think about the HeLa program and your appetite for additional collaborations and additional indications you would be interested in going into?

Thank you. So on Dojolvi regulatory, we have – just to update, we have filed in Canada under priority review. We filed in Brazil, in addition. So those are the two that are in play. In Europe, we are having discussions because we need to get a pediatric investigational plan, and we are having ongoing sessions. So no filing plan yet for Europe. We can do named patient sales in many places where the requests come to us and we can fulfill those requests. Regarding HeLa 3.0, the new version includes alterations that help generate more productivity and are significant. The team led by Sam Wadsworth is, of course, tuning and looking on what is next and is continuing to add to the platform and build its value. I think that these changes are the kind of things that happened in the early days of monoclonal antibodies. Whoever controlled the creation of a large-scale, cost-efficient system for monoclonal antibodies started to own the field and ending up partnering and gaining a lot of ground. We believe there are additional collaborations possible, whether for indications we would develop or ones for which we would provide the technology in an agreement. We are open to a variety of avenues.

Our next question comes from Vincent Chen of Bernstein. Your question please.

Thank you so much. I have a couple of science questions on Angelman’s and DMD. Starting with Angelman’s, I was wondering if you could provide some more color on what you think the mechanism is for the potential inflammation seen and what findings or observations support this hypothesis? Is this something that you think is likely to be an effect common to simply RNA dose intrathecally above a certain dose? Or is this something that may be related to certain RNA molecules or certain RNA applications? For DMD and the solid collaboration, I would be curious what is your thinking around what causes the complement-related side effects that have been seen previously. Are these likely to be related to the use of a longer half-life vector like AAV9, and do you think a program using your capsid would be potentially less susceptible?

Sure. So in the Angelman story, the mechanism of inflammation, we think, is probably very distinctive from the mechanism of the action of the drug. All ASOs can help impart toxicity to cells in their culture. Stan Crooke from Ionis has published some very elegant papers, showing how ASOs of various kinds combine certain proteins and lead to toxicity. The idea of ASOs positive toxicity as a class is pretty well-established in many different oligos. This is not something very new. The issue of meningeal inflammation for protein in CSF is also widely observed. We don’t think the mechanism has anything to do with the mechanisms of oligo and RNA. It has really to do with a local cell toxicity relating to too much oligo present and being taken up, which is why we believe it’s primarily an issue of getting the concentration and the contact time down locally. We know that our nonhuman primates demonstrated high concentrations in the local tissues without a problem, and we’ve now seen that reflected in humans. Concentrations in the brain are lower than what you see in locally applied drugs. We therefore have action; however, we are taking action to ensure it does not become an issue. For Duchenne, both Pfizer and Solid's programs have shown complement activation, which appears to be antibody-related. This could be due to longer exposure time with AAV9, which lasts longer than AAV8. We have an AAV8 variant that has a very good immune profile, which we think provides a good potential for being an optimum product. We know it delivers to muscle. Therefore we feel confident that it’s a good choice. Solid has current products that should do well and handle their issues. This also gives them another path to work with us and another upside potential for Duchenne patients. I like deals that create a common goal and combine the best technology available in the market.

Great. Thanks for taking the questions. Congrats on the progress.

Thank you. At this time, I would like to turn the call back over to Joshua Higa for closing remarks. Sir?

Thank you. This concludes today’s call. If there are any additional questions, please contact us by phone or at ir@ultragenyx.com. Thank you for joining us.

Ladies and gentlemen, thank you for participating. You may now disconnect.