Ultragenyx Pharmaceutical Inc. Q1 FY2022 Earnings Call

Good afternoon, and welcome to the Ultragenyx Pharmaceutical financial results and corporate update conference call for the first quarter of 2022. We have issued 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; Erik Harris, Chief Commercial Officer; Mardi Dier, Chief Financial Officer; and Camille Bedrosian, Chief Medical Officer. I would 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.

Thanks, Josh, and good afternoon, everyone. In the first quarter, we continued to make progress across our diverse clinical and commercial programs. In the late-stage clinical pipeline, we're now enrolling patients in three registrational studies, with the fourth to initiate later this year. This includes the three gene therapy programs for glycogen storage disease Type 1a, Wilson disease, and ornithine transcarbamylase deficiency, as well as our anti-sclerostin antibody for osteogenesis imperfecta. The GTX-102 study for Angelman syndrome is progressing well, and we remain confident in the program. The results we shared in 2020 from the original five patients led us to reimagine what is possible for patients with Angelman syndrome. Given the importance of this program, we've looked at various ways to accelerate it. Recently, we amended our agreement with Genetics to allow us an additional option to acquire them at an earlier time point based on interim data. I'll let Camille share more in her section about the favorable safety profile and enrollment status across the regions. We also look forward to providing a more robust interim update in mid-2022. On the commercial side, the teams continue developing and executing their plans to define more patients who could benefit from Crysvita, Dojolvi, and Mepsevii. These efforts are supported by the work our clinical and regulatory teams are doing with country-specific authorities to enable greater access to these therapies. In the first quarter, we also closed on the strategic partnership with Regeneron, which pairs our expertise in global rare disease launches with a key opinion leader in antibody drug discovery and development. We leverage our global commercial medical affairs and regulatory functions to bring Evkeeza, a novel, highly potent and approved antibody to patients where the current standard of care does not adequately reduce LDL cholesterol in patients with HoFH. Since closing the deal, we transferred the marketing authorization in Europe and have begun the process to submit reimbursement dossiers. While this review process and negotiations can take time, we will leverage the team that currently supports Mepsevii and Dojolvi to respond to CREST for named patient access within Europe. Feedback from the KOL community has been enthusiastic about the important role Keith could play in the management of Familial Hypercholesterolemia. Evkeeza gives us a fourth product across five different indications that will be generating revenue for the company, creating a diversified base of value that will help support our continued clinical execution for years to come. I'll let the team go into more detail on their progress in the quarter. Erik, can you begin?

Thank you, Emil, and good afternoon, everyone. Commercialization teams have continued to adapt to evolving strategies to meet the constantly changing landscape. For Crysvita, within the North American territory, strong underlying demand from adult and pediatric patients with XLH and TIO continues. Compliance among patients who are already on therapy remains high, with patients reflecting on how much better they feel once they start receiving Crysvita. In the first quarter, approximately 80 new patients began therapy, which is consistent with the steady growth we have seen over the last few quarters. These increases are largely driven by community prescribers, with nearly 50 new doctors writing a prescription in the first quarter. In Latin America, we are continuing to see accelerating demand for Crysvita, driven by patients seeking therapy through the main patient programs. This is particularly the case in Brazil, the largest market in the region, where we are in the final stages of full reimbursement negotiations with the authorities. Ordering in this region can be variable from quarter to quarter, but it is clear there is a strong demand for Crysvita from the patient and medical communities. Crysvita revenue in the first quarter of 2022 grew 29% compared to the first quarter of 2021. As is typical, there was some seasonality as patients work through the reauthorization process with their insurance providers at the beginning of the year. As we saw in 2021, we expect stronger revenues in the second half of the year, and we maintain that Crysvita revenue in Ultragenyx territories will be between $250 million and $260 million in 2022, representing 30% growth in the product's fifth year. Turning now to Dojolvi. As a reminder, we will no longer provide detailed start forms and other metrics for this program since we are past the early quarters of launch. In the U.S., the number of new start forms and patients on reimbursed therapy are consistent with the steady growth seen in previous quarters. While we are seeing utilization at nearly all major centers for inborn errors of metabolism, we have begun to find new prescribers at some of the neuromuscular centers of excellence. We will increase our efforts on these specialists as we look to expand the network of prescribers. Outside of the U.S., use of Dojolvi continues through our main patient and early access programs in Europe. In France and Italy, there is continued meaningful demand through our named patient program. In Brazil, health authorities approved Dojolvi for treating both pediatric and adult patients with LC-FAOD late last year. We are continuing to work through the process to get full reimbursement approval, but this can take a bit of time to complete. For the year, we are reaffirming the guidance range of $5 million to $65 million that we announced in January. I commend the team's work to generate more than 50% growth in this product's third year post-approval. With that, I'll turn the call over to Mardi to share more details on our financial results for the quarter.

Thanks, Erik. Earlier today, we issued a press release that included financial results for the quarter, which I will briefly summarize. Company revenue for the three months ended March 31, 2022, totaled $79.9 million. Crysvita revenue in Ultragenyx territories was $54.6 million, including $45.2 million from the North America profit share territories and net product sales of $9.4 million in other regions. Total royalty revenue for the sales of Crysvita in the European territory was $4.8 million. Dojolvi revenue for the first quarter of 2022 was $12.4 million. Mepsevii revenue for the same period was $4.9 million. We expect these revenues may modestly increase over time. We also recognized $3.2 million of revenue in the first quarter related to tech transfer as part of our strategic manufacturing partnership with Daiichi Sankyo around our PCL and HEK293 technologies. Recall that in the fourth quarter of 2021, the technology transfer activities were substantially completed, and revenue from this agreement going forward will be minimal. Excluding Daiichi revenue in both periods, total revenue has grown 35% in the quarter compared to the first quarter of 2021. Our total operating expenses for the first quarter of 2022 were $216.6 million, which includes research and development expenses of $143.2 million, SG&A expenses of $67.3 million, and cost of sales of $6.1 million. I should note this also includes expenses related to non-cash, stock-based compensation of $29.4 million. As we have discussed in prior quarters, we continue to expect our R&D spend to somewhat increase in 2022 as we support three pivotal gene therapy clinical studies, namely the UX143 Phase II/III clinical study in OI and the Angelman Phase I/II study, as well as the Phase I/II study for our most advanced mRNA program, UX053 in GSDIII, along with a number of other preclinical activities as we prepare to advance the next programs into the clinic. We expect SG&A to modestly increase in 2022 as we continue to support the expansion and launches of our existing commercial products and the launch of Evkeeza. For the quarter ended March 31, 2022, the net loss was $152.3 million or $2.19 per share. The net loss includes a $9.3 million decrease in the fair value of equity investments. Our net cash used for the second quarter of 2022 also includes the $30 million up-front payment for closing the Regeneron collaboration agreement and significant investments in our gene therapy manufacturing plant, which we plan to operate in 2023. We ended the quarter with approximately $814 million in cash, cash equivalents, and marketable securities. This puts us in a very solid position to achieve critical clinical milestones and expand our global commercial presence. Now I'll turn the call over to Camille to touch on some of our clinical programs.

Thank you, Mardi, and I too wish everyone a good afternoon. In my section, I will briefly provide status updates for our six clinical-stage programs, including the GTX-102 Phase I/II study being conducted by our partner, Genetics, before turning the call back to Emil. Starting with the gene therapy programs, DTX401 for the treatment of glycogen storage disease Type Ia or GSD1a is currently dosing patients in the randomized placebo-controlled Phase III study. Similarly, UX701 for the treatment of Wilson disease is currently dosing patients in a seamless Phase I/II/III randomized placebo-controlled study. DTX301 for the treatment of ornithine transcarbamylase deficiency is currently in the final stage of the study start-up and site activation. We anticipate the first patients will enter the 4- to 8-week baseline screening period in mid-2022, after which they will be dosed in the Phase III randomized placebo-controlled study. Outside of gene therapy, UX143 or setrusumab, an anti-sclerostin antibody, has begun dosing patients in the SEAMLESS Phase II/III study for pediatric and young adult patients with osteogenesis imperfecta. We are also planning to initiate an additional study in children less than 5 years old in the second half of the year. GTX-102, the ASO in development with our collaborator, Genetics, for patients with Angelman syndrome continues to dose patients under the amended Phase I/II protocol. In the U.K. and Canada, both Cohorts 4 and 5 have expanded following a review of available safety data by their respective DSMBs. We began dosing patients in December, with some receiving up to five doses so far. As we have previously indicated, the initial assessment of these patients has shown early and encouraging signs of clinical activity in multiple domains, similar to what we saw in the original five patients at these low doses. To date, there have been no drug-related safety issues or lower extremity weakness in any of the newly treated patients. In the U.S., eight patients were allocated one-to-one in the drug and comparator groups and have been enrolled. We have received some anecdotal reports of limited improvements from these patients being dosed who have received the drug at the 2 mg dose level. To reiterate, a most important finding for this stage of the study across all regions has been that there have been no reports of lower extremity weakness in any of the patients treated under the amended protocol. We look forward to providing a more robust update on this program in mid-2022. UX053, our first mRNA treatment modality being developed for glycogen storage disease type III is currently dosing patients in the single ascending dose arm of the Phase I/II study. Preliminary data from that arm, as well as initiation of repeat dosing phase of the study, are anticipated in the second half of this year. With these updates, I will now turn back the call to Emil.

Thank you, Camille. Before we shift to the Q&A portion of the call, I'll provide a quick reminder of the key upcoming milestones for the company. For GTX-102 in Angelman syndrome, we will provide an interim update in mid-2022 on Cohorts 4 and 5 in the Canada and U.K. arm of the study, as well as available safety and efficacy data from the patients treated in the U.S. We continue to be confident this program looks for opportunities to accelerate development. For UX143 in osteogenesis imperfecta, we will continue enrolling patients in the Phase II portion of the study and expect to provide an update on the dose strategy we have selected for the Phase III portion in the second half of the year. Separately, we expect to initiate a study in children under 5 years old in the second half of the year. Across the gene therapy pipeline, we will continue enrolling the Phase III for DTX401 and the Phase I/II/III for UX701. We also expect to finalize study start-up activities for DTX301 and begin dosing patients in mid-2022. On the manufacturing side, we will continue to build out our facility in Bedford, Massachusetts, which is on track to begin producing material next year. For UX053 in the second half of the year, we expect to share single-dose data from the first part of the Phase I/II study and to initiate the repeat dosing study stage. All these programs create a distinct opportunity to make a meaningful difference for patients with a rare genetic disease. We look forward to sharing further updates with you throughout the year. You may have also seen that we launched our inaugural ESG report for 2021 last month. This report reflects the meaningful evolution of the journey we've been on for the last 12 years as a company. We will continue to build on this foundation and report on our progress. With that, let's move on to your questions. Operator, please provide the Q&A instructions.

Our first question comes from Gena Wang with Barclays.

I have two questions on the Angelman program. So Emil, can you comment on any chemistry differences between your locked nucleic acid assets versus Roche's locked nucleic acid assets? And my second question is based on comments you made that early opting for the GTX-102, should we expect some clinical benefit at the midyear update beyond the 2 CGI score improvement in domain 2 to support the right dose?

Thank you, Gena. On the chemistry differences, I am not deeply familiar with the specifics of the Roche molecule and all the different linkages because there are a lot of them. We know that it has gapmer like ours; there are specific differences in the sequences, no doubt, and some other minor chemistry changes. But I think the biggest change is the differences in where these are targeted. The overall safety profile of a product is not just the chemistry; it's also the dose and the potency that will determine it. We believe our product is targeted, it is very potent, and that the dose range will be at the lower end of the range, which is partly related to the potency of the locked nucleic acid type of ASO. So we're confident about the chemistry. While they both have LNA locked nucleic acid components, I can't say that those differences alone would allow for any conclusions. Now with regard to the opt-in, the opt-in just gives us an opportunity to execute earlier on interim data and potentially accelerate the program. It does not indicate that we would need more or better or worse efficacy; it's just an option for us based on the interim data to execute the acquisition earlier under a somewhat different set of terms, but we think it's a potential way for us to excite the program depending on what we see and announce midyear.

Our next question comes from Yigal Nochomovitz with Citi Group.

We do have this intent to...

Operator, this might not be related to our call.

We'll move on to your questions. Tazeen Ahmad with Bank of America.

Emil, I just wanted to get a sense from you on how you plan on aligning protocols going forward between FDA and EU regulators, assuming that you're going to move into your pivotal study for Angelman? And then secondly, can you talk about the cadence of growth for Crysvita thus far, is turning to move into sort of the mid-stage of growth? What was the main growth driver this quarter? And where do you see the remaining opportunity for growth on a go-forward basis?

Good. Well, I'll deal with the protocol piece first, and Erik, maybe you can talk about the areas of growth for Crysvita after I finish with the first part. On aligning protocols, it's not actually that difficult. Both protocols are treating essentially a once-a-month dosing, but it's just a different dose and regimen for administration. Our expectation is that we will align them in the Phase II. We'll take our data from ex-U.S. from Canada and the U.K. that show us the drug is safe and that the new administration strategy is appropriate, and bring that data along with other safety data we have to the U.S. and request that they open essentially an amendment that will align all three regions under the same protocol. We think we have enough data at this point to demonstrate that the new regimen and dosing are safe. And while we have been dosing patients at 2 mg, it would give us an opportunity to bring the higher dosing that we're using ex-U.S. The other part we would align for individuals who happen to be at lower doses, whether in the U.S. or outside the U.S. If a dose was determined that it needed to be higher, we'll provide a makeup dose to those patients to help bring their load level up in line with the other patients, ensuring they are where they need to be. So we'll take the data and get the U.S. open, we believe, with that ex-U.S. data and get everyone aligned in Phase II. From there going forward in Phase III, we expect to have all regions aligned on a single Phase III program. Let's talk about the cadence of growth for Crysvita. Some of it has been moving toward adults, but Erik, maybe you can provide a little more color on the growth in Crysvita over time.

Yes. As far as Crysvita is concerned, we're expecting steady growth in North America as we've seen. We've been building momentum in Latin America for the last couple of quarters. We expect that to continue to accelerate in growth, although, as we stated, the growth is recognized in stages. It's kind of lumpy in how it grows quarter-to-quarter. But overall, on an annual basis, it should be steady, accelerating growth. When you look at Europe, we're seeing increased sales growth for Dojolvi with some expansion across Europe for named patient sales for Dojolvi and expect to recognize meaningful growth in Evkeeza revenue in 2023 and beyond.

Thanks, Erik. I think in the U.S., one of the elements of color that we can provide here is that there is a continuing shift to more adult patients and pediatric patients. Nearly half the prescriptions or new start forms are coming from new prescribers with new adult patients. There is a very broad, diverse group of doctors treating patients. That's by seeking and finding those patients, and we will continue to find patients. When we find them, we have a very high rate of conversion to people who actually want to be prescribed. It's about getting the word out. And so that's continuing to be a driver of steady growth: finding those new doctors, new patients in the U.S., and we'll continue driving that activity. Hopefully, that's good for you, Tazeen.

Thank you. Our next question comes from Yaron Werber with Cowen.

This is Brendan on for Yaron. Just a couple of quick ones from us. First, I wanted to ask about the OTC pivotal study. I just wanted to see what you can tell us, maybe about enrollment and recruitment there. I know originally, it was thinking to get underway earlier this year. Now it looks like it's going to be closer to starting screening mid-year, so I just wanted to see if there's any color you can provide. And then on Angelman, assuming the mid-year update really focuses on the ex-U.S. study as the U.S. kind of gets going here, do you have a sense of maybe timing over the next 6 to 12 months of your planned cadence for additional updates from potentially higher doses?

Good. So the OTC program among the three gene therapy programs, we had set DTX401 for GSDIa as our priority. There are a lot of patients ready, and we were able to get through the process faster and drive that one ahead, which is now enrolling. We purposely then put the OTC program a little further behind. Remember, we are running four pivotal programs at once, which is quite a lot for any company. The OTC is by design a little behind; it has not started enrolling, but the sites are getting started, and we've gotten through the regulatory process. I think we're aligned up and we'll start enrolling, and I think we'll do fine. DTX401 will likely be the first gene therapy to get through the Phase III process and yield data. Now with regard to Angelman, right now, we're coming out mid-year with the current dose regimen. What we have said in the past is that we would expect to take what we've learned and what doses we've cleared and initiate new cohorts starting at those new doses, so we can load patients at the higher doses that have been cleared as safe. We would expect to do that this year if we're able to show that, that dose is safe and achieves the threshold across patients. We would then expand it to a larger cohort of patients to collect more data. While that larger cohort will be enrolling later this year, we will begin the process of planning and discussing regulatory authorities regarding the Phase III, which we expect to start next year. Did that give you a little more color on the timeline, Brendan?

Our next question comes from Cory Kasimov with JPMorgan.

This is Tiffany on for Cory. So at this stage, with Angelman, do you have any ideas on how many U.S. patients you can expect initial safety and efficacy data from your update? And what would be the cutoff for inclusion there? Would it be simply any data ahead of a specified date before the readout or kind of a required follow-up through a certain amount of time?

Well, we would expect, as we said, that all eight patients in the U.S. were enrolled, and four patients dosed at the 2 mg dose level. We would expect to provide all the data we have on them at that point in time. There will certainly be a certain amount of formal data, but we would provide what we know about how the patients are doing at that time to give people more of an interim look. Remember, this is not a final end-of-story study update; it's just an interim look. So we'll provide as much as we can on those four patients that will have received multiple doses, as well as the patients ex-U.S. in cohorts 4 and 5 that would have gotten the higher doses and been going through the titration.

Got it. So sort of like 16 patients.

Yes. Well, we've enrolled the cohort and then the four. Yes.

Our next question comes from Yigal Nochomovitz from Citigroup.

Apologies for earlier; I was juggling multiple calls. Just a question on the guidance for Crysvita in the Ultragenyx territories. So, as far as I understand, you did $55.5 million in Q4 '21 and $54.6 million in the most recent quarter. So just if you could help elaborate a little on the rationale behind the $250 million to $260 million, just because based on the last two quarters, it does seem perhaps a touch aggressive.

Yes. Well, we have some experience now or a bit of time on the program. We're actually comfortable with how it performs and how the second half of the year is stronger. Maybe, Erik, do you want to touch on that or Mardi? Erik?

Yes. With regards to the steady growth in North America, we're seeing accelerating growth in Latin America and expecting potential full reimbursement by the end of the year, which will help speed up the transition for patients that have been waiting for treatment through the injunction patient sales process.

Yes. So Latin America will contribute. Did you want to add...

I was just going to add, Yigal, if you look at the quarterly progression in '21, in terms of how the sales progressed throughout the year, we expect the same in '22 as well. You will see that first quarter, as always, has a seasonal impact and the preop work, etc. And then there's just some timing between Q4 and, but you should see in the second half of the year that the revenues continue to accelerate. So yes, we feel good about the guidance range of $250 million to $260 million, and we're reconfirming that today.

Yes, seasonal patterns plus improvement in Latin America. We feel good about what Crysvita will continue to grow. I think the demand is strong, and the compliance and persistence have been excellent. So people, once they get on, they really do stay on the drug, probably as good as any you've ever seen. We think it's a great product that will continue to grow.

All right. Okay. Can I ask another one? Okay. And then hopefully, this wasn't already asked. But in terms of just the quarter-over-quarter trends for North America, I'm assuming that the $45 million in this most recent quarter was a seasonal effect. And then if you could just comment on Rest of World, which looked very, very nice increase quarter-over-quarter. If you could comment a little bit on the thinking behind that.

Yes. Well, maybe, Erik, do you want to talk about the core quarter thing? I think it fits into what we have just gone through.

Consistent with what Mardi would just say, the first quarter was pretty much in line with our expectations. We had anticipated some seasonality, as you stated, as a result of the reauthorization process. In addition, the Omicron virus impacted us a bit more than COVID has impacted us previously, as we had about three-quarters of our sales force out on protocol at some point in the first two months of the year. So there was some impact there. But consistent with previous years, we are expecting steady growth throughout the year with quarterly splits consistent with what you saw in 2021, with increasing sales in the second half of the year. With regards to the rest of the world, I've stated increasing momentum in Latin America as more and more patients are being granted injunctions and receiving reimbursed therapy. That's going to continue to accelerate as we get full reimbursement in Brazil and across other countries in Latin America. For Europe, we've seen steady growth in named patient sales with Dojolvi, particularly driven by France, and now we're expanding that across other countries in Europe. Subsequently, the potential for meaningful increasing revenue in 2023 with Evkeeza.

Good. Hopefully, that answers your question.

Next, we have Joon Lee with Truth Securities.

In the prepared remarks regarding GTX-102, you mentioned enrolling in drug and a comparator group. Can you elaborate on what you mean by the comparator group? And also, you said you have administered up to five doses in some patients. Are you able to share if that's been in Cohort 4, 5 or in the U.S.?

Yes. In the U.S., with the FDA agreement, we were going to dose four patients with 2 mg once per month. That was the agreement. They also wanted to enroll another four patients, not randomized, simply to do the assessments on them without drug dosing. So that's the four comparators, as described before, but perhaps missed. That's what's happening ex-U.S. Regarding the question about up to five, we're talking about the patients now ex-U.S. The first few patients have actually gotten all four doses plus a maintenance dose, all right? So that's five doses, with others having fewer. We haven't disclosed the specifics of all the time course of all of it. The point is we have multiple patients who've received five doses of the drug without any lower extremity weakness. So just to clarify, exposing the patient or the drug repeatedly is not going to cause the problem by itself at any dose level.

Just to clarify, what is the rationale for having a comparator that is not a placebo?

The FDA was looking; knowing that placebo is hard to do, I think they wanted some measure of how consistent you would do these complex psychologist-driven tests on a patient and how what that would look like, just to understand the variability of the methods when they're done repeatedly. That's the basis for it. It's not a true control. I think they just wanted to look at how much variation would you see just in measuring patients with the people doing it. It's a test of the system really and not a control group in that sense. We're confident that patients don't really change much, but there's no doubt that when you do measures like this, there's going to be some variation. The question is whether what we see in our patients is beyond that variation, and we've addressed that before to say that the magnitude of change seen, for example, in the CGI that was presented last year at FAST showed that the level of change observed was far beyond what you would see in the placebo change over time or in a control group for natural history. So we're comfortable with that, and we are complying with the FDA's request on just having four more patients getting assessed.

The next question comes from Joseph Schwartz with SVB Securities.

I'm Julie on for Joe. You've previously mentioned using a multi-domain responder index as a possible endpoint for GTX-102. So curious about what the receptivity is to that endpoint from the regulatory agencies; and, are there other domains you would consider for the MDRI besides the five in the CGI-I-AS? Also, what are the minimally important differences for the individual domains to set as a threshold to be considered a responder?

Wow, this is a deep dive into clinical study design. Very good. For those of you who know what the Multi-domain Responder Index is, it's a technique for just analyzing endpoints to capture the totality of the data across multiple domains. I've read a paper on it with our Head of Biometrics, PK Tendon, and we've also had meetings with the FDA, including a large number of senior FDA people about the meaning of the approach. They are interested in it; they have questions, still. But it needs kind of a test case, and perhaps Angelman is the test case. It's not been accepted yet, although it was accepted in the sense that we ran an MDRI in our Mepsevii program that was approved. When we hit the endpoint in that small study, it showed the power of the approach to capture efficacy. If we were to approach it in Angelman syndrome, we would use the five domains that we are talking about. Probably the ones we would select include the communication domain, receptive and expressive, as well as sleep behavior, which is basically through the scale, and we would also look at fine motor and gross motor scales. Each of those scales like the Bayley-4 Express Communication and the fine motor have normative data as well as what are considered MID data to support them, not necessarily in Angelman syndrome but in general. We think there are several thresholds we could capture. We have an entire team headed by experts who are terrific at this stuff; they can generate more MIDs or supportive data. We feel like it's a powerful way to look at heterogeneous complex diseases like Angelman. That said, if we had to, we could do CGI; we see tremendous power in the CGI, and the FDA has accepted it before. I don't see any risk here. We can always put the MRI as a secondary and gain the benefit there if we get approved off a primary CGI Angelman syndrome. At this point, I feel like the good part is we're talking about meaningful changes that are easily captured; therefore, you can do it practically any way you want to.

Our next question comes from Maury Raycroft with Jefferies.

I was going to ask you a question about Angelman safety. So based on the time course of the SAE in your original patient #2 disclosed previously, it appears to be a peak dose effect. How do you get comfortable with cumulative dosing effects, since the SAE occurred about 6 to 30 days after the last dose across the five patients?

The reason we are comfortable that it's not cumulative is because the actual dose at which someone had the problem was highly variable between patients and unrelated in severity. For example, one patient, the fifth patient had one dose of only 20 and had the effect. We had also the first patient that had 106 milligrams and had mild problems. There's not much relationship to the accumulation or the time course of the effect, like the 6 days. The time course of these adverse effects and the efficacy effect is unrelated. So this is really something operating on a different mechanism. Everything we have suggests that it's a concentration-dependent effect, and what we're seeing right now from dosing for as many months as we have, we're not seeing the effect of accumulation causing the problem. Does that answer your question, Mardi? We've dosed multiple patients with five doses over a month and not seen the effects of accumulation that would have caused the problem, but they haven't. We think that verifies our view that this is an acute toxic effect due to high concentration—it’s more like an irritation of the meninges and the nerve roots. We think the change in administration method and dosing will mitigate that, and we believe we've seen that to be true.

Our next question comes from Salveen Richter with Goldman Sachs.

This is on for Salveen. I wanted to ask about Angelman safety. Basically, your confidence on why the safety events were to specific rather than molecule-specific, specifically as it relates to the chemistry and the binding site, and then also an update on where you're at now with dose escalation. What level do you think could be reached by the update?

Sure. Thanks for your question. I think you're asking whether the safety effect was related to the molecule versus the chemistry. Based on the safety work done on the molecule meaning the sequence itself, we're comfortable that it's not hitting off-site target effects in other situations. When you look at the pattern of the safety, the fact that it peaks in one or two weeks and then declines over several weeks doesn't fit the specific antisense omitted pattern. It fits a different kind of effect. What we do know—it’s been published—is that ASOs in general have a nonspecific chemistry toxicity that can be demonstrated in vitro; if you put a lot of it in there, it can bind to certain proteins and cause some toxicities. So this tells you that you must manage the local concentration carefully at the time of administration. That chemistry effect can be enhanced by being a locked nucleic acid, but the locked nucleic acid also gives you a longer half-life and greater potency. The question is how do you balance the benefits of locked nucleic acid against the toxicity issues? There are ways to look at that and we think the molecule we have worth targeting and the fact that only 1 milligram in a monkey can provide sufficient knockdown, which is well below what's been seen with other ASOs. We think we have the potency that allows the benefit alone to be obtained without risking the toxicity issues that happened from those more stable ASOs.

Just a follow-up on the dose escalation, the progress there.

As we said, we have several patients who have gone through five doses, which means they have gone through four loading doses and then one dose of their maintenance regimen, which happens three months after the fourth dose. We haven't disclosed all the levels of dose titration yet, and we'll put out all that detail on titration to what dose level and outcomes in all the patients at mid-year. It is not really appropriate to start putting that out yet. But as I said, multiple patients reached 5 doses, which means they had 4 loading doses and then one maintenance dose that happens 3 months after the fourth dose.

Our next question comes from Dae Gon Ha with Stifel.

Dae Gon, are you there? Operator, why don't we move to the next caller.

Our next question comes from Jeff Hung with Morgan Stanley.

Can you talk about what we should expect to see from the setrusumab and the UX053 updates later this year?

Sure. For setrusumab, we expect to have almost 40 patients enrolled that have been dosed for two months, and we'll have this information on their P1 biomarker, for which historical data from the ASTEROID study in 90 patients showed a nice correlation between their bone density improvements and the P1 MP. We'll look at the P1 marker and other data, safety, and efficacy to help decide what our approach will be regarding dosing for pediatric and adult patients in the disease. You'll learn about safety, biomarker information at a high level, and then we'll talk about our dosing strategy going forward in our planned Phase III for setrusumab. For UX053, we're going to have basically single-dose data where we'll look at the safety, of course, as well as effects on glucose and other biomarkers and clinical assessments as well. Due to its early stage and it being only a single dose, we wouldn't expect to see dramatic clinical benefit at this point, but we're looking to see clinical activity in the biomarker endpoints that would help us assess that the enzyme being delivered and the mRNA being leveraged are active and functional in the liver.

Next question comes from Joel Beatty with Baird.

I want to start there. What's the compliance rate with patients sticking on therapy? Have you seen any (inaudible)? And then also for gene therapy and manufacturing, once the plant is operational next year, how does that capacity of that plant compare to the clinical pipeline programs that you have in development?

The persistence or compliance, you're talking about was for Crysvita?

Yes.

Yes. Okay. The Crysvita persistence rate is in the high 90 percentile range, so it's excellent. Compliance is in the 90% plus range. We see these are really good numbers for compliance and persistence so far. I think part of the reason for that is that patients can feel when they're on the drug and when they're not. If they miss a dose, their phosphate levels will start to fall, and they'll feel that effect and return to the regimen. We think that the fact that they can feel when their phosphate goes down is a factor in why they're staying on track. Once they get on, they want to stay on. Regarding the gene therapy plant, it's about 100,000 square feet and it will ultimately have two independent suites that can run up to 2,000 liter production, and we'll turn over a number of runs in the year. It should be able to handle a significant fraction of our total, although our plan was still to have a hybrid model with some contract manufacturing to supplement it. If we hit our marks in commercializing gene therapy, we have also the ability, as we have purchased additional land next to the plant, to add essentially double the plant capacity with two more suites that could double our total capacity. So within those ranges, we have good traction on what we're doing but we still are planning a hybrid model, not a complete takeover of manufacturing. If push comes to shove, and we need to, we certainly could have the capacity to take on the programs we have short of Duchenne. If the Duchenne program does well and hits the clinic, the quality of product required for that program will be substantial, and we'll need more capacity.

Our next question comes from Laura Chico with Wedbush.

I guess I wanted to take a step back. And for Emil and team, how should we be thinking about the potential for longer-term revenue guidance targets? Obviously, with Crysvita, you have considerable experience with this, but you're approaching a transition point. I'm just kind of wondering what is the potential for longer-range targets? And then maybe secondarily, how do you balance becoming profitable with continuing to expand your pipeline efforts at this point?

Thank you, Laura. First of all, I think our expectation is to see steady growth. The addition of that piece also helps fill out the pipeline growth. Crysvita will continue to grow, we believe, along with Dojolvi, which is doing really well. That puts us on track with these three products, and now adding Evkeeza has the potential to hit substantial revenue growth every year in the 30-plus% range or more, so we feel very good about that. Now regarding our pipeline, our plan here is not to run about 68 clinical stage programs at the same time. I want to become commercial; it's separate from development. The idea is that we want to create a certain size of spend around R&D that would generate a product filing on an average year, if averaged over two to three years. We think that's achievable. So we don't want to keep growing R&D indefinitely. We're currently at a peak because we have four programs in pivotal, which is not normal. Our expectation is that over the next couple of years, we'll plateau the R&D spend and aim to hold that line. Our expectation is that revenues will continue to grow, and we'll achieve operating leverage, leading to profitability. Our plan to become profitable includes launching many new products in the next three or four years, which would position us to cross profitability and soar far above it. There's always a debate about how much to spend versus how much to manage profitability. The key is to spend wisely and effectively. Right now, we believe we're in a good range with our level of spend, and as long as we continue to see revenue growth, we will be a profitable company. The long-term outlook shows a robust pipeline across a wide array of treatments and indications, which I believe will make us one of the leading companies in the field of rare diseases.

Our next question comes from Dae Gon Ha with Stifel.

Questions for me, one on GTX-102. Emil, I wanted to ask you about the confidence and strength in the GTX-102 IP. It looks like there's some overlap on the sequence targets that Roche, Ionis, and others are going after. What’s your take on that? And secondly, following up on the previous question, going back to Evkeeza, you prioritized a readily commercializable product. What directionality would be enticing to you going forward? Is it more commercializable products or something like Genetics where you can take basically the entire ownership of a program?

Regarding the GTX-102 IP, there is a distinct region within the IP that has a genetic license that we licensed as part of our deal, which is distinctive and separate from where Ionis and Roche operate, a distinct target within the message. Our description involves that sequence, and we are targeting not just introns but also considering other aspects of what we do that are unique. These differences are important in achieving potency because the 5'-end is significantly more potent at determining the transcription of RNA and at destroying existing messages. This is why we think that the 5'-end approach is uniquely patented, powerful, and critical. We would not have planned to go head-to-head with Roche, Biogen, and Ionis in a neurologic disease unless we thought the group had an edge that warranted our collaboration. On the question of commercial versus pipeline, I know some people suggest buying a billion-dollar product that is commercial. However, consider how much you have to pay for that product; I don't think that's a good deal because there is no arbitrage. When we seek late-stage commercial products, they may be smaller niche products that are better suited for us, where we can extract value using our unique distribution system and global team. This is what Regeneron wanted, and we were able to capitalize on that skillset. Angelman, conversely, requires larger returns—those will need to be earlier-stage programs where we can apply our development knowledge and skills to elevate uncertain value into something valuable. I believe that a $20 million investment for a multi-billion dollar opportunity has turned into something of great value, which is the type of investment our biotech focus should entail. Smaller niche products that leverage our operating revenue and our rare disease expertise make sense, whereas earlier stage investments may be higher risk but have greater returns. I hope that clarifies our perspective.

Our next question comes from Yigal Nochomovitz from Citigroup.

Just two clinical ones, Emil. On the gene therapy programs, I don't think I've ever asked you this before, but could you clarify as to why for DTX401 and DTX301 you're doing a 1:1 randomization, whereas for Wilson, you opted for a 2:1 randomization?

Yes. Well, in the 301 and 401, originally we were going to do a 2:1 in a 40-patient study, but I specifically decided we ought to go 1:1 to improve the power of the study because I thought a 40-patient study was on the smallest side. The powering of a study is dependent on the size of the placebo arm, and since we're looking at patients who are undergoing control treatments, we need to ensure we have adequate power. By increasing and making it 1:1, we can incorporate existing treatment and others. In the case of Wilson, the total size of the program is much larger; there are 27 people in the first part, six treated, three placebo in each dose group. So since the study is much larger, we can afford to do the 2:1 randomization and still retain enough power with a large enough placebo group. Our biomarker, such as urinary copper excretion, is highly reliable, and that is why we think the 2:1 works for that. It provides an opportunity for patients to receive treatment while ensuring we can maintain statistical power.

Okay. That's very logical. And then just one on Angelman—apologies if this has already been asked—but just regarding how comfortable you are moving into a Phase III for Angelman. Could you be a little more specific in terms of the point improvement you'd like to see in CGI-AS and across a minimum number of domains? Could you provide some quantitative commentary on the point improvement you need to see and how many domains you're aiming for to feel good about taking the Phase III?

Well, we previously described that for dose titration, we are looking for at least 2 domains of plus 2 or better, meaning much improved or very much improved. In our prior program, we had three patients that were much improved and two patients that were very much improved. This gives you a sense of what we might see. I would look at those as a trajectory of improvement over a period of time. The actual differential and efficacy might depend on how long we decide to mark and treat them, but we believe that this level of change indicates that the anti-sense message must be knocked down, and the expression must be induced. Once you look at it maximally, additional doses won't have value; you simply need to give patients time to develop and improve their skills. We are looking to run a study with CGI AS; we want to receive a plus 2 or better in our design for the Phase III. We want to ensure we can demonstrate a significant level of efficacy with the program.

Thank you. I'm showing no further questions at this time. I'd like to turn the conference back to Joshua Higa.

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

This concludes today's conference call. Thank you for participating. You may now disconnect.