Ultragenyx Pharmaceutical Inc. Q2 FY2023 Earnings Call

Good afternoon, and welcome to the Ultragenyx Second Quarter 2023 Financial Results Conference Call. It is now my pleasure to turn the call over to Joshua Higa, Vice President of Investor Relations.

Thanks, Josh, and good afternoon, everyone. It has been a year of increasing momentum marked by advances in our lead clinical programs which we expect to result in multiple important data catalysts over the next few quarters. At the same time, our excellent commercial offers continue to drive meaningful revenue growth across the portfolio, including Crysvita revenue in North America with our partner, and in Latin America as well. I'll spend a few minutes discussing the osteogenesis imperfecta and Angelman syndrome programs before turning the call over to Erik Harris to talk through our commercial update. Beginning with OI. In June, we reported exciting data from the Phase II dose-finding portion of the pivotal orbit study, showing statistically significant increase in levels of serum P1NP, a sensitive marker of bone formation. The bone production response in these patients was extraordinary. This led to a rapid bone-building effect following just 3 months of treatment with setrusumab, resulting in nearly a 10% increase in lumbar bone mineral density. At baseline, these patients had very limited bone density with an average Z score in the 20 mg cohort of minus 2.12, which means the bone mineral density was 2 standard deviations below the mean of normal patients for their age. After 3 months on therapy, that means the Z score increased by plus 0.65 points, resolving nearly 1/3 of the deficit from normal in a relatively short period. As we've said before, patients are showing meaningful improvements in bone health, and we are highly encouraged with how they're doing. Improved bone health refers to the instance of fractures, bone pain, and relative global health and activity of the patients. In the ongoing Phase II, we continue to collect data to compare fracture frequency during the study to show the impact of setrusumab on increasing bone density and its effect on fracture rates. We expect to share this data at an Analyst Day in mid-October around the time of ASBMR, the major bone focused meeting. In July, we announced that we initiated dosing patients in 2 Phase III studies in setrusumab in 2 different age groups. The Phase III portion of the pivotal orbit study is evaluating the effect of setrusumab compared to placebo on annualized clinical fracture rate in patients aged 5 to 25 years old. The newly initiated Phase III CASA study is an active controlled study of setrusumab compared to IV bisphosphonate therapy on the annualized total fracture rate in patients aged 2 to 5 years old. Enrollment in both of these studies is going well so far, in part because the Phase II data has generated a lot of excitement for the potential of setrusumab among both clinical sites and the patient community. Moving on to our Angelman program. In May, we announced we received FDA agreement to expand the ongoing global Phase I/II trial of GTX-102 in patients with Angelman syndrome in the U.S. The procollagen enabled us to harmonize the dosing ranges used between the U.S. and ex-U.S. cohorts of the study. Since then, we've been working to activate U.S. sites that had been on hold for a couple of years. We continue actively enrolling the expansion cohorts globally. Enrollment in the expansion cohort has done well, particularly over the last couple of months. As of today, we've enrolled more than 20 patients. While we are on track to have 8 patients with a full 6-month data by the end of the year, we've noted that waiting just a few more months will enable us to report a more substantial update on more than 20 patients with 6 months of clinical data plus safety data for all enrolled. Though the trial is going well, it seems more prudent to wait for this larger set of expansion cohort data, which we expect to have in the middle of the first half of 2024 based on enrolled patients to date. We will also be having the Angelman Program Update Analyst Day event in mid-October. This is an opportunity for us to provide more context for the clinical meaning of the changes that have been observed in the study. Now I'll turn the call over to Erik Harris to provide an update on our commercial efforts for the first quarter.

Thank you, Emil, and good afternoon, everyone. On April 27, 2023, 5 years after we began our highly successful Crysvita commercialization efforts, we transitioned the North American commercialization responsibilities to our partner. In the second quarter of 2023, the combined teams in the U.S. continued to generate new start forms and have provided continuity of care for the existing patients. Our close collaboration and planning for the transition over the past 2 years has resulted in a seamless transition, continued revenue growth, and importantly, minimized the impact on patients and their providers. As a reminder, a smaller Ultragenyx commercial team will remain in place supporting the Crysvita program in the U.S. alongside their KKC counterparts through April 2024. Even beyond that time, Ultragenyx will continue to retain the responsibilities to promote Crysvita to medical genetics in North America. We are thankful for the successful collaboration and expect to continue expanding penetration in the adult and pediatric markets. Shifting to Crysvita in Latin America, the team has continued to build impressive momentum in the region. As of June 30, there were approximately 410 patients on reimbursed therapy, which includes approximately 65 new patients who began commercial therapy in the quarter. Latin America is beginning to approach the same rate of commercial patient accrual as we saw last year in the U.S., which bodes well for the long-term potential in the region. Each country has its own process to obtain regulatory and reimbursement approval. But our team has been diligently working to facilitate broad access to Crysvita despite the hurdles. I expect the underlying demand for Crysvita in Latin America to continue growing at a steady rate and becoming an increasingly greater contributor to the Ultragenyx commercial story. Today, we are reaffirming the Crysvita guidance we issued at the beginning of the year, the range of $325 million to $340 million, which includes all regions and all forms of Crysvita revenue. More specifically, it includes Crysvita product revenue from Latin America and Turkey, the cash and non-cash royalties from North America and Europe, and the collaboration profit share revenue prior to the transition. I'll now turn to Dojolvi and begin in North America. In the second quarter, we modestly expanded the U.S. Dojolvi commercial team with seasoned personnel from our Crysvita team to support continued growth and adoption of Dojolvi. During the first half of 2023, we added 61 completed start forms. We also increased reimbursements to 54 reimbursed patients in the first half of 2023. We continue to expand the number of treaters of Dojolvi, adding 18 new prescribers, including some healthcare professionals and centers for neuromuscular medicine. In Canada, we continue to make steady progress following the positive opinion we received from Health Canada, completing PAN CPA pricing negotiations and signing preventional listing agreements. In Latin America, we are continuing to leverage our existing infrastructure to commercialize Dojolvi. The patient-finding efforts have generated a growing number of patients with a confirmed diagnosis across Argentina, Brazil, Mexico, and Colombia. We are continuing to work with the authorities across the region to ensure that Dojolvi is available for all patients who could benefit from this therapy. Across Europe, we continue to deepen awareness of LCF ALD with key stakeholders and address the high unmet need through named patient and early access programs. Requests are coming from across all major European markets as well as Greece, Israel, and the Middle East. We expect 2023 global Dojolvi revenue to be between $65 million and $75 million, reaffirming the range we announced at the beginning of the year. Lastly, I'd like to touch on Evkeeza. The team is focused on unlocking access across all markets in the EMEA region, deepening awareness of HoFH and the urgency to treat, and reinforcing Evkeeza's unique profile amongst stakeholders. Across the region, a steadily growing number of patients are gaining access to Evkeeza through various early access programs. We are on track to launch in certain key EU markets over the next 6 months, and the teams are preparing the markets accordingly. Outside of the U.S., we are continuing to prepare for launches in Canada, Japan, and other major markets around the world, further expanding global access to this important therapy. Across all regions, we have received overwhelmingly positive feedback for Akeso from KOLs and patients, and they have continued to highlight the significant unmet need for this treatment. Our teams will continue their efforts to bring this product to people living with HoFH as quickly as possible. In closing, we are reaffirming our 2023 total revenue guidance range issued at the beginning of the year of $425 million to $450 million. With that, I'll turn the call to Aaron to share more details on the financial results for the quarter.

Thanks Erik. Earlier today, we issued a press release that included financial results for the quarter, which I'll briefly summarize. Company revenue for the quarter ended June 30, 2023, totaled $108 million. Crysvita revenue for the quarter was $83 million, which includes $61 million from North America, $16 million from Latin America, and $6 million in European royalty and other product revenue. The Crysvita revenue figures for North America and Europe are inclusive of non-cash components as a result of our previous royalty financings. As we typically remind you, in Latin America it can fluctuate quarter-to-quarter; however, we are continuing to see significant growth in the underlying demand for Crysvita. Dojolvi revenue for the quarter was $16 million, with continued strong North American demand driving a 22% growth versus the second quarter of 2022. Mepsevii revenue during the same period was $8 million. It's worth noting, Mepsevii revenue maintained the same level we saw in the first quarter, largely driven by new patients in Brazil and a strong order from the U.S. Even 6 years after launch, this ultra-rare product continues to grow in patient accrual and geographic reach. Our total operating expenses for the quarter ended June 30, 2023, were $256 million, which includes R&D expenses of $165 million, SG&A expenses of $81 million, and cost of sales of $10 million. Operating expenses for the quarter include non-cash stock-based compensation of $35 million and a one-time milestone of $9 million payable to Mereo upon initiation of the Phase III Orbit study in OI. For the second quarter of 2023, the net loss was $160 million or $2.25 per share. We ended the quarter with approximately $618 million in cash, cash equivalents, and marketable securities. As expected, through the first half of the year, cash used in operations was disproportionately greater than what we expect in the second half of the year. This is primarily driven by the timing of annual bonus payments and changes in certain working capital accounts. Additionally, we expect operating expenses to decrease in the second half of the year, driven by realized cost efficiencies and substantially reduced North America commercial expenses with the conclusion of the profit share period in April. With the impact of these cost reductions, projected second-half revenue growth, and the timing of the working capital changes previously mentioned, we expect 2023 net cash used in operations to be around $400 million. Now I'll turn the call to our CMO, Eric Crombez, who will provide an update on our key clinical programs.

Thank you, Aaron, and good afternoon, everyone. Emil has already discussed the progress in the quarter for the osteogenesis imperfecta and Angelman programs, so I will briefly touch on the latest progress in our gene therapy pipeline. Starting with UX701 for the potential treatment of Wilson disease. Earlier this week, we announced that we have begun dosing the second dose escalation cohort in our pivotal study following completion of dosing and data review from the first cohort. In this first stage of the pivotal study, we are evaluating the safety and efficacy of up to 3 dose levels to determine the dose for the second stage of the study that will support registration. In July, the Data Safety Monitoring Board agreed that it was safe to proceed with dosing patients with a higher dose of 1e13. Their first patient in cohort 2 has already been dosed, and the other 4 patients have been identified. This gene therapy is designed to directly address the underlying cause of the disease by establishing the normal trafficking of copper. This will address both the toxicity of free copper and the copper deficiency driving many of the signs and symptoms seen in patients who are not well-managed on chelators. In the first dose cohort, UX701 has been well tolerated with no unexpected related treatment-emergent adverse events observed as of July 11, and there are early signals of the establishment of normal trafficking of copper. Initially, study entry required well-controlled signs and symptoms of Wilson disease on the current standard of care, which proved challenging and resulted in a large number of screen failures, as many patients, for example, still had elevation in liver transaminases despite optimized chelator and zinc therapy. This tells us that even with the current standard of care, there remains a real unmet need for these patients. After additional discussions with regulatory authorities, we have changed enrollment criteria, and enrollment has accelerated. We are now on track to complete enrollment in Stage 1 around the end of the year and expect to share initial data in the first half of 2024. Moving to DTX401 for the potential treatment of glycogen storage disease type 1a, it is important to remember that all patients in the Phase I/II study responded and showed meaningful reductions in their dependence on oral glucose replacement therapy. These patients have demonstrated a durable response, with patients moving into their fourth and fifth year of follow-up, with more detailed data presented at ASGCT in May. As we have previously disclosed, the Phase III study was fully enrolled earlier in the year. We expect data from the 48-week primary analysis period to read out in the first half of 2024. We look forward to sharing the first Phase III data generated by our gene therapy portfolio next year. Quickly on DTX301 for the potential treatment of OTC, or ornithine transcarbamylase deficiency, Enrollment in the Phase III study began earlier this year, and this is a 64-week study designed to enroll approximately 50 patients. We are gaining meaningful traction with recruitment for the study, especially as more healthcare providers and patients appreciate the Phase I/II data with durable responses lasting more than 5.5 years, with more detailed data also presented at ASGCT in May. Currently, there are 15 active global sites, with additional activations pending regulatory and IRB feedback in Italy, the U.K., Japan, and Australia. We look forward to providing enrollment updates over the coming quarters as this program continues to build momentum. I'll now turn the call back to Emil to highlight the key upcoming milestones and provide some closing remarks.

Thank you, Eric. I'll summarize the key upcoming clinical catalysts before we open up for Q&A. Starting with UX 143 for osteogenesis imperfecta. Enrollment in both of the Phase IIIs is going well, supported by meaningful demand from patients. Our goal is to have both of these studies fully enrolled around the end of the year. We also plan to provide additional clinical data from the Phase II portion study, including fracture data at Analyst Day in mid-October. Next, GTX-102 in Angelman syndrome. We're planning to give an update on the program at the Analyst Day in mid-October that would include some information about the treatment effects we have observed so far in the earlier dose cohorts. We expect to share expansion data in the middle of the first half of 2024, when we're able to share 6-month data on at least 20 patients. Closing with our gene therapy programs, we are enrolling patients in the dose-finding stage. We're excited about completing the first cohort and starting the second. We expect this final stage to be complete around the end of the year, with data on safety and an initial set of efficacy expected in the first half of 2024. GTH-41 for GSD1a dosed the last patient in the pivotal study earlier this year, and we're now in the 48-week window, expecting to share this Phase III data in the first half of 2024. Through the first half of the year, we've made meaningful progress across all our priority initiatives; we finished and opened our gene therapy manufacturing facility outside of Boston and successfully completed the first manufacturing run just last week. This is not a modular assembly plant or a refurbished cleanroom, but a true ground-up designed and built state-of-the-art GMP manufacturing plant. To have built a great plant is hard, but to do it during the pandemic while staying on time and on budget is exceptional. We congratulate our team on this accomplishment. In the second quarter, the commercial team continued to deliver meaningful revenue growth, with the Latin America Crysvita franchise doing particularly well and becoming a larger contributor to the company's financials. Across the globe, our development teams are advancing one of the largest late-stage rare disease clinical pipelines in the industry, and we expect to generate a number of important data catalysts over the next few quarters. 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.

One quick question regarding the Angelman program. In the mid-October update, what clinical measurement will you be presenting, and is Baileys your key measurement? And if so, what is your bar for efficacy to move forward?

Yes. So our plan with the October update is to discuss the clinical meaning of the effects we’re seeing. The information on the Baileys in that comparison will focus on the expansion cohorts, where we have a large number of patients, compared to a larger number of natural history patients, to give you a robust quantitation. The October update will focus more on the clinical meaningfulness and not so much on the detailed quantitative information. We'll reserve that for the expansion cohorts.

Okay, Emil. So maybe a follow-up, a quick follow-up question. Based on the natural history, what would be the Bailey's change that you consider clinically meaningful that you would be looking for in your expansion cohort?

We've established that the change we've observed is clinically significant. The data you are aware of is still relevant. I prefer not to delve deeper into that topic right now, as we require a more thorough discussion with the appropriate data available. When we share the Bailey data and additional findings, we will have the clinical metrics alongside the thresholds and quantitative insights from the natural history data to examine. It's important to note that our focus isn't limited to Bailey; we are also assessing various other endpoints as we analyze the data from our expansion cohorts to determine the right conclusions. Additionally, the Global Impression Scale and CGI scores, which the FDA has recognized as primary, will help us cover more areas and provide targeted insights. We're still evaluating several specific endpoints. The reality is that we have had a limited amount of data from the escalating cohorts, but the expansion data will enable us to treat a larger number of patients consistently, giving us strong quantification. I'm confident about our current position in the program, and we need to strategize on moving to Phase III.

Our next question comes from Liisa Bayko with Evercore ISI.

Can you just give us a sense of kind of your level of confidence about what you're seeing in the OI program and how the changes in bone mineral density relate to potential changes you might see in fractures?

Yes. We have a high level of confidence that the magnitude of bone mineral density we saw at 3 months was already sufficient enough to improve the strength of bones and probably reduce fractures. At that level, we saw at 3 months. So we have high confidence in the fact that bone mineral density improved through this mechanism, the anti-sclerostin mechanism, where you're getting anabolism or producing new bone will translate into fracture improvements. We've talked about the non-clinical data in the past, but we'll be able to talk more about this at the October Analyst Day to provide that support, but we have a high level of confidence that the BMD produced by setrusumab will translate into fracture reduction.

Just as a follow-up on that. Can you explain to me the amount of bone mineral density levels of OI patients, and how do they relate to those of osteoporosis patients? Because I'm just trying to kind of relate the changes you're seeing to what we’ve seen in osteoporosis. It seems to be maybe the bone mineral density levels are slightly different. Can you expand on that at all?

Sure, Liisa. What we've stated for this population in this study is that the mean bone mineral density was minus 2.12, which means 2 standard deviations below normal. Now osteoporosis patients have reduced bone mineral density. I don’t have the exact comparisons for you to put forth. But I would say that the mean of minus 2 standard deviations is pretty low on the bone scale. If you look at the range we had, patients had as low as minus 4 standard deviations. These patients have, on average, a more severe bone mineral density problem than an average osteoporosis patient would and therefore, have a greater need for bone production. The misunderstanding has been that everyone thought that the defect in the collagen was why the bones were fracturing. We’re trying to illustrate that while that may be a factor, the effect of that mutation on bone production appears to be a bigger factor, and that's something we can change with setrusumab. That's why we think we're going to have an important effect on OI.

Our next question comes from Maurice Raycroft with Jefferies.

Based on the expansion data in the first half, is the timeline for the pivotal study start shifted out some? And have you received any preliminary feedback from regulators on your data so far and what the pivotal design and endpoints could be? And is this something we can learn more about in the mid-October update?

I don’t believe the change in timeline will impact the schedule for the Phase III trial. We will be preparing the protocol, plan, and endpoints even before the complete data is available. We will have a clear understanding of the situation and plan to discuss this with the FDA shortly after. Our goal is to have a full protocol ready to launch in 2024. While the timeline may be adjusted regarding how much information we have and when, we will be making progress throughout the year. We anticipate engaging with the clinical outcome assessment group at the FDA this year, but we have not yet had detailed talks with them. We are considering the timing for those discussions. The FDA has indicated they are open to our approach, which will require more extensive conversation than usual due to the complexity of this developmental disorder. The initial meeting with the CoA will provide us with valuable insights and feedback. We expect to develop our data progressively over the year, and I anticipate that by late this year or early next year, we will have a clearer idea of the endpoints. This data will also help us finalize our decision on dosing and prepare for the Phase II meeting in the first half of the year.

Our next question comes from Joseph Schwartz with Leerink Partners.

I'm Joori in for Joe. I have two on UX701 for Wilson's disease. First, could you talk about your decision to move to an open label business line and broadening the inclusion criteria in Stage 1? How do these two factors impact the efficacy results, if any? And is any of that going to be included in the data that we're going to get in the first half of '24? And secondly, I believe in your opening remarks, you mentioned timelines around 2. But I'm curious about when can we expect the Stage 1 cohort 3 patients to be dosed? And will the Cohort 3 data be included in the update provided in the first half?

Sure. Well, I'll start with the last part. Yes, our expectation when we talk about the first half is to include cohort 3 patients. The point would be to make a decision on dose and to kick off enrollment in Phase III because it's a combination study. We go directly to Phase III; we make the call, make the decision, and move. The beauty of that is it'll cut out any dead time. It's already agreed on the endpoints moving forward. But let me let Eric Crombez talk through the open label and the criteria changes, as well as the reasoning behind those in the study.

Yes. In the context of a single study registration, it's commonly necessary to transition to a double-blind format. However, we want to learn in that initial stage, and the blinding was hindering that. This was a major driver for moving to an open-label approach, and I think it was absolutely the correct decision based on the data and early signals we saw after the first cohort readout. Regarding entry criteria, a gene therapy has never been studied in Wilson patients. It’s crucial to put any liver-directed gene therapy into as healthy a liver as possible. A lot of treaters would say their patients are in good shape, but we realized when screening many patients that most of these individuals do not have liver function tests (LFTs) in the normal range. We needed to have discussions with the agency to adjust those entry criteria to allow more patients to enter the study.

Our next question comes from Yigal Nacheviz with Citigroup.

Another question on 701. I think you mentioned that you're seeing early signals of normal traffic of copper. Can you expand on that a little bit? Is the goal of this gene therapy to get patients back into the normal range of copper or just closer to the normal range?

It's a little bit early. I'll let Eric comment a little more on that, but it's a bit premature to delve deep into the data since we are just at cohort 1. The goal of the program certainly was to improve copper distribution sufficiently to remove copper deficiency, which we believe is occurring but not fully understood in many patients. We haven’t set a threshold requirement for how much that would be, but we do expect that by establishing both detoxification and some improvement in distribution, we believe this approach will make a significant impact. So maybe Eric wants to elaborate further on the early signals of copper.

Right. The key leaders have been beneficial for this patient population, but chelators bind to copper that is freely in circulation. They are not effective in pulling copper out of hepatocytes, where it's accumulating. Elevated transaminases indicate that you're not excreting copper into the bile and you're not loading copper onto ceruloplasmin, which is how it traffics to cells, providing copper as a co-factor for many enzymes. So, when measuring copper levels, it's different than how we assess copper levels in chelators. Once normal trafficking patterns are established, we are also looking at activity-based assays that demonstrate the loading of copper onto ceruloplasmin, providing a direct measure of the effects of this gene therapy.

Yes. The tracking measures give us direct insights where it looks at how we're measuring copper, which helps us ascertain the improvement in copper trafficking. But it’s early yet; it’s cohort 1, and we have more cohorts to go.

And moving on to the next question, can you provide an operational update for the upcoming updates in October?

Yes. The Analyst Day we’ll be hosting is going to feature a variety of programs, not just 143 and GTX-102. We expect many topics to be covered, and it will be a very informative session. Don’t miss it. We have a great pipeline, and we will showcase several significant updates to enhance understanding of our company’s value in rare diseases.

Our next question comes from Anupam Ram with JPMorgan.

I just have one quick question. Will the Analyst Day be focused only on the 143 and GTX-102 programs? Or will the overall pipeline also have various updates?

Yes. Our expectation is to highlight several other programs there. Some you know about, and maybe some you don’t. It could be interesting. Don’t miss it. Ultragenyx has a robust pipeline and has got half a dozen things, and it will be exciting to share the breadth of our value as a leading rare disease company.

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, this does conclude today's presentation. You may now disconnect, and have a wonderful day.