Earnings Call Transcript - RARE Q2 2022

Operator, Operator

Good afternoon and welcome to the Ultragenyx Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, you will have the opportunity to ask a question during the Q&A portion of the call. It is now my pleasure to turn today's call over to Joshua Higa, Executive Director and Head of Investor Relations.

Joshua Higa, Executive Director and Head of Investor Relations

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

Emil Kakkis, CEO and President

Thanks Josh and good afternoon, everyone. We're now six months into the year. And across the company, we continue to make meaningful progress against our goals. The commercial team delivered another solid quarter of revenue growth as they commercialize their products across the globe. We acquired the late-stage product UX111 from MPS III, or Sanfilippo Syndrome, for which we have extensive experience. In July, we bolstered our cash position with a substantial royalty financing that also enabled us to acquire Genetics and gain full control of our important Angelman program. These activities, along with progress across all of our early and late-stage clinical programs, put us in a strong position for exceptional value creation over the coming years. I want to touch on a couple of pipeline updates before turning the call over to other leadership team members to provide more detail on the quarter. Starting with GTX-102 for Angelman syndrome, we reached a significant moment in this program with the acquisition of Genetics and now have full control over the GTX-102 program. As we said on our call last week, we are all-in on Angelman syndrome with the exceptional signs regarding the target region and with the excellent data we've seen to date in Phase I/II study. It's rare to see a significant improvement in development function as we have seen recently; this is something I haven’t seen in 30 years of drug development. Last week we shared data that demonstrates our ability to safely dose patients with GTX-102 at up to 10-milligram doses. We observed meaningful clinical changes in a group of children that are severely impacted by the disease due to the deletion of the maternal UBE3A gene region. This severe mutation predicts a very slow rate of learning, as Dr. Berry-Kravis, one of the principal investigators on the study, said on our call last week. These early clinical responses across multiple domains and measures have been independently confirmed by clinicians, therapists, and patient families. We observed significant improvements for some children and expect to further enhance these effects by increasing loading doses and providing more time in the study. One specific measure I would like to highlight is the Bayley Scales of Infant Development, or Bayley. I'd like to remind everyone that Bayley is a standardized measure used to diagnose levels of delay in childhood and is administered in the clinic by trained therapists. Bayley is often used in clinical trials with cognitive, language, and motor development in children. In this study, we're using the latest version of Bayley, which allows for evaluation of children with delays who exceed the age limit of neurotypical children. The extensive historical data with this measure allows the ability to set statistically significant thresholds for improvement when evaluating individual patient results and showing they differ from error or variation. We know historically that scores of this measure do not meaningfully change for patients with Angelman syndrome, particularly those with deletion-type mutations. Receptive and expressive communication sub-scores are important parts of Bayley, especially for patients with Angelman syndrome who lack communication skills. Across the patients in Cohorts 4 and 5, who have been treated for a minimum of 128 days, seven of nine children showed a statistically significant improvement in either the Bayley receptive or expressive communication score as of their most recent evaluation. This compares favorably to two of the original five patients who were treated in the U.S. and showed statistically significant changes in the same score at day 128. Our results from the original five patients also included patient-reported results that were well past the day 128 time point, as many patients were four months past their last dose at the time of that data release. The results of this objective third-party measure, combined with the Bayley findings from natural history studies, give us confidence that we are improving communication skills in Angelman syndrome in a meaningful manner. The full potential improvements of Bayley communication measures will likely depend on treating patients for a longer period and starting with higher doses. In fact, all three of the ex-U.S. patients who reached day 170 evaluation in the current study improved in both receptive and expressive communication beyond their day 128 results before receiving their first maintenance dose. We've also amended the protocol in the UK and Canada and have begun treating patients in additional dose selection cohorts, with two patients dosed at the higher of 7.5 and 5 mg dosing starting doses for the loading phase that we've already used to treat patients in Cohorts 4 and 5. Another important step forward was the readout of the first patient from the originally treated U.S. cohort last week in Canada, with no reported drug-related safety events. Our team is also now working to file an interim clinical study report with the FDA to support discussions that would allow for a harmonization of the U.S. and ex-U.S. protocols. With all these components coming together, this is the right point for Ultragenyx to lead the development of this program. We have the right expertise and capability to ensure a robust clinical program and regulatory strategy for GTX-102. We believe the UX111 data are strong and support the use of the trial approval pathway. Our team is hard at work on the filing strategy for our discussions with the agency and we look forward to providing updates later in the year.

Erik Harris, Chief Commercial Officer

Thank you, Emil, and good afternoon, everyone. I'll start my section discussing our team's continued success in commercializing Crysvita before shifting to Dojolvi. For Crysvita within the profit share territory, we continue to find new adult and pediatric patients more than four years since launching the product. As of the end of the second quarter, over 2,600 patients have been prescribed Crysvita, and more than half are adults. In the U.S., we have penetrated almost 40% of the pediatric market and approximately 15% of the adult market. Recall, finding pediatric patients is similar to many other rare diseases where the treatment is consolidated into centers of excellence. This contrasts to finding adult patients who are mostly being treated by community-based physicians scattered across the country. Our team is leveraging a mix of traditional in-person meetings along with innovative and interactive virtual programs to educate healthcare providers and patients, as well as enhancing our digital online education presence. We recently launched education initiatives to specifically target nurses and physician assistants who often work with caregivers and the entire family to develop a comprehensive treatment plan for patients. We believe there is meaningful opportunity to steadily grow the Crysvita franchise with new identified patients, as well as continued strong adherence within existing patients even four plus years into launch. We will continue our efforts as we look towards transitioning their commercial responsibilities outside of the medical geneticists to Kyowa Kirin in April 2023. Outside of the profit share territory, primarily in Latin America, we are now seeing the results of our early launch efforts. In the second quarter, revenue grew 32% versus the first quarter of 2022. In the first half of the year, we have already surpassed the total revenue generated in this region last year. In Latin America, there are over 250 patients on reimbursed therapy, and this will continue to grow as we expand in Brazil and gain momentum from our recent launches in Colombia and Mexico. In Argentina, we continue to support named patient requests and look forward to gaining regulatory approval over the coming quarters. Across all of Ultragenyx regions, Crysvita revenue in the first half of 2022 grew 37% compared to the first half of 2021. Based on our performance to date, we are reaffirming our 2022 revenue guidance in Ultragenyx territories of $250 million to $260 million. Turning now to Dojolvi, we continue to see steady growth across all of the leading indicators as a result of the broad use in key metabolic genetic clinics across the U.S. One of the more promising statistics is that approximately 90% of all cases are approved for reimbursement in less than 30 days. This is an even faster turnaround time than we saw for Crysvita at a similar stage of commercialization. The team is also moving beyond the major centers for inborn errors of metabolism and is expanding call coverage to other high potential healthcare professionals. They are leveraging machine learning and artificial intelligence to generate new leads similar to what we are doing for Crysvita. Outside of the U.S., the use of Dojolvi continues to add new physicians and patients through our named patient and early access programs in Europe. In France and Italy, there continues to be meaningful demand through our named patient program, and we are starting to respond to requests for named patient programs across other countries in Europe. In Brazil, the health authorities approved Dojolvi for the treatment of 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 little bit of time to complete. At this point in the year, we are reaffirming the guidance of $55 million to $65 million that we put out in January. I look forward to providing another update on this and other commercial programs next quarter. With that, I'll turn the call over to Mardi to share more details on the financial results for the quarter.

Mardi Dier, Chief Financial Officer

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 June 30, 2022, totaled $89.3 million. Crysvita revenue in Ultragenyx territories was $64 million, including $51.6 million from the North American profit share territory and net product sales of $12.4 million in other regions. Total royalty revenue related to the sales of Crysvita in the European territory was $5.4 million. Dojolvi revenue for the second quarter of 2022 was $13.5 million. Mepsevii revenue for the same period was $4.9 million. Our total operating expenses for the second quarter of 2022 were $230.9 million, which includes research and development expenses of $154.5 million, SG&A expenses of $68.1 million, and cost of sales of $8.3 million. For the second quarter ended June 30, 2022, net loss was $158.2 million or $2.26 per share. During the first half of the year, there have been a number of non-cash items that have impacted the net loss. This includes approximately $65 million of stock-based compensation, $20 million related to the decline in fair value of our equity investments, and $13 million of non-cash interest expense related to the Royalty Pharma transaction. These are offset by approximately $10 million of non-cash revenue also related to the EU royalty. We ended the quarter with approximately $706 million in cash, cash equivalents, and marketable securities. Subsequent to the end of the quarter, in July we raised $500 million in non-equity dilutive capital in non-equity dilutive capital transactions with OMERS Capital Markets for the sale of a portion of our North American Crysvita royalty. We also exercised our option to acquire Genetics and paid $75 million in July, which allows us to take over the development of GTX-102. We are well capitalized with over $1 billion in the bank, and we are making operating decisions to stage spending on our development programs and slowing headcount growth to manage our burn. As we have said, 2022 is a peak burn year for us as we have initiated multiple late-stage clinical programs, in-licensed Evkeeza, completed the acquisition of Genetics, and are completing the build-out of our gene therapy manufacturing facility. In 2023, we don't anticipate additional one-time events of this nature or large capital expenditures, and we anticipate SG&A will decrease compared to 2022 as we transition U.S. and Canadian commercialization responsibilities for Crysvita to KKC. We will continue to invest in our clinical and preclinical programs, and the overall net effect across the company will be a decrease in net cash burn. Now, I'll turn the call over to Camille.

Camille Bedrosian, Chief Medical Officer

Thank you, Mardi, and I too wish everyone a good afternoon. This is truly an exciting time for clinical development at Ultragenyx. We have seven programs in the clinic, including our ASO for Angelman syndrome that Emil discussed earlier and mRNA for glycogen storage disease Type 3, four late-stage gene therapy trials, and a Phase 2/3 monoclonal antibody for osteogenesis imperfecta. In my section on today's call, I will focus on this antibody, UX143, or setrusumab, which we are developing for osteogenesis imperfecta. Osteogenesis imperfecta, or OI, is caused by a defect in collagen that results in significant bone weakness and bone fragility, leading to fractures, deformities, stiffness, and pain. Currently, there are no approved therapies for OI. As a company, we have spent a lot of time studying bone biology with XLH, TIO, and our preclinical candidate for OI, before we did the deal for setrusumab. One of our key insights is that OI is not simply an issue of weak collagen; it is excessive bone resorption and inadequate production of new bone triggered by this abnormal collagen that leads to low bone mass. What we have found is that if you can increase bone formation and reverse the excessive bone resorption, you can improve bone strength even with the abnormal collagen and improve fracture prevention. We believe this insight gives us the opportunity to change the future for patients with osteogenesis imperfecta. I won't take time today to go back to all the details of the Phase 2b ASTEROID data that Mereo has presented. I do want to remind you of a few of the most important points. This trial was a large randomized blinded study of 90 adult patients with OI being studied across three different dose levels. After 12 months, the results indicated dose-dependent and statistically significant effect on bone formation and bone mineral density. Furthermore, the substantial improvements in bone mineral density occurred across multiple anatomical sites, and the observed substantial bone formation, we believe, is a very important factor in improving bone strength. All of these findings were accompanied by a favorable safety profile. Similar to how we developed burosumab for XLH when we took over development from Kyowa Kirin, we are taking these impressive setrusumab results in adults with OI and looking to further improve upon them for pediatric patients. Currently, we are enrolling and dosing patients with OI between the ages of five and 25 years, with the goal of using the serum bone formation marker P1NP to optimize the dose. Once we have determined the pediatric dose strategy, we will transition directly into Phase III, evaluating the benefit of setrusumab on fractures. With this update, I will now turn back the call to Emil. Thank you.

Erik Harris, Chief Commercial Officer

Emil, we're having a bit of a hard time. I'm happy to finish this out.

Emil Kakkis, CEO and President

No, I'm fine. I just had a problem with my phone. But I'm fine now. Thank you. So thanks, Camille. Before we shift to the Q&A portion of the call, I'll provide a quick reminder of the key upcoming milestones. For UX143 in osteogenesis imperfecta, we'll continue enrolling patients in the Phase II portion of the study and expect to provide an update on the dose strategy for the Phase III portion around the end of the year. Separately, we expect to initiate a study in children under five years old in the second half of the year. In our gene therapy pipeline with UX111 for Sanfilippo syndrome, we are continuing to follow patients who have been dosed in the pivotal study and are continuing to evaluate the feasibility of filing for approval based on convincing biomarker data. We'll continue enrolling in Phase III for DTX401 and the first stage of the UX701 study. We also expect to finalize start-up activities for DTX301 and begin dosing patients later this year. On the manufacturing side, we will continue the build-out of our facility in Bedford, Massachusetts, which is on track to begin producing material in the first half of 2023. For UX053 and glycogen storage DTX 3, 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 stage. For GTX-102 in Angelman syndrome, we're off to continue enrolling Cohorts 6 and 7 at 7.5 or 10 milligrams outside the U.S. Our expectation is to provide the next update once we determine the optimal dose and have gathered substantial data from the expansion cohort. All of these programs create an opportunity to make a meaningful difference for patients, and we believe we have one of the most robust, diverse, late-stage pipelines in rare diseases. With that, let's move on to your questions. Operator, please provide the Q&A instructions.

Operator, Operator

Thank you. Our first question comes from Gena Wang of Barclays. Your line is open.

Gena Wang, Analyst

I have two quick questions. First one is on Crysvita. Just wanted to make sure I heard it correctly that you penetrated 15% of the adult market. If that's the case, I'm wondering how you would expand the adult market share and how active you are to leverage family trees. And the second question is regarding the Angelman program. Since the early this week update, I wanted to know if the expansion cohort would still define clinical benefit with two scores in two domains? And are you willing to open to dose higher than 14 milligrams?

Emil Kakkis, CEO and President

Okay. Let me answer the second one first. Then Erik, you can touch on the Crysvita adult market penetration question. So on the expansion, we are still using the two-plus domain to set criteria for titration; we expect that we're going to be very close to where we need to be. In fact, we're going to look at all efficacy results, including the longer-term results, that often tell us a little more about where we're at, but that's what we expect. We don't expect to have to go beyond 14, frankly. I think we're very close. So right now, I wouldn't speculate on that. I don't think it's going to be necessary once we start loading this next cohort level. But we'll want to make sure we get the dose right. So we'll continue to evaluate what we're seeing both in the CGI score and also in the quantitative scores over longer periods to ensure we're getting to a dose level that will provide us substantial, meaningful clinical benefit to study in Phase III. Now for the penetration, I think we've been talking about the challenges of finding adults for Crysvita, but the good part is when we find them, they do get prescribed. So Erik, maybe you can touch on the questions she’s asking about the penetration in the adult market being 15% versus 40% for the pediatric market, and what our expectations are and the challenges.

Erik Harris, Chief Commercial Officer

Thanks, Emil. Yes, you heard correctly; penetration is 15% in the adult market versus 40% for the pediatric market. The adult market represents about two-thirds of the overall prevalence. So there is a significant growth opportunity with adults. It just takes longer to pull through because, as I stated, many of these patients are lost in the system of community physicians being treated for signs and symptoms related to XLH, but not necessarily XLH excluding the XLH. But one thing, as Emil stated, when we do find them, we're able to convert them at a very high rate, and they stay on therapy. We do offer genetic counseling which does pedigree family tree work, and the work we've done to date, we think there are about two to four family members for each XLH program. So, for each patient that's been identified, there are around two to four on average that we're finding when patients take advantage of genetic counseling and family tree analysis. So that is something that we do leverage.

Gena Wang, Analyst

Thank you.

Operator, Operator

Our next question comes from Joel Beatty of Baird. Your line is open.

Joel Beatty, Analyst

Thanks for taking the questions. With the new cash on hand from the recent deal, what are your plans for this cash?

Emil Kakkis, CEO and President

Well, I think maybe Mardi would like to respond.

Mardi Dier, Chief Financial Officer

Sure. Thanks, Joel. We have already used a portion of the cash, specifically $75 million, for the acquisition of Genetics. With over $1 billion in the bank now, we are confident that this will support our development program and set us on a solid path to profitability. We have significant milestones coming up in the next few years, and the available cash will help us meet those targets. It also provides us with flexibility in our operations. However, we are being prudent and disciplined in our spending. We are managing our headcount growth and slowing the pace of that growth. Additionally, I want to emphasize that this year we are experiencing a peak in one-time expenses from acquisitions, in-licensing, and starting multiple programs. We anticipate that our net cash use will continue to decline over time. Overall, we are well-positioned for the future, Joel.

Joel Beatty, Analyst

Great. Thank you.

Operator, Operator

Our next question comes from Dae Gon Ha of Stifel. Your line is open.

Dae Gon Ha, Analyst

Great. Good afternoon. Thanks for taking our questions. Two from us. One on GTX-102. Emil, when the commentary or I guess guidance for the next update is contingent upon substantial data. Given that it's more of an individualized dosing on a per-patient basis, can you maybe walk us through what that substantial data definition would be? Also, because longer-term duration of follow-up seems to correlate with better functional improvements? And then second question for Mardi. As we think about that, I guess $1 billion plus and the net cash burn seemingly coming down. Can you maybe walk us through some of that sensitivity, like what factors into a cash runway of five years versus total profitability?

Emil Kakkis, CEO and President

Sure. I'll start Mardi, and you can deal with the cash question. So, on what we're talking about in our next data output, we want to be clear that we're not going to just release a few patients' worth of data at the next cohort. We'll be operating the dose escalation cohorts, and then expand the cohorts to treat a larger number of patients. What we said is we'll come out when we've treated enough patients to give us a substantial efficacy result that we can speak to and that people can be confident in rather than small bits of data going forward. We think the major update is very important because it provides clarity that we can dose this drug and do it without having drug-related safety events, and that we are seeing efficacy. So, we are in the game and we have an opportunity to demonstrate substantial meaningful results and we’re clearly seeing as we’ve talked today quantitatively. But the next time I want to talk about, I want to have a substantial data set that will provide confidence that we are on the right direction toward heading toward Phase III.

Mardi Dier, Chief Financial Officer

Yes. I'll comment a little bit more on the runway for you. No, we don't give specifics about when we’ll be cash flow positive. But what we did say, just to reiterate that this has put us on the pathway towards profitability. Given our growth in revenues and our increase in the number of developments moving forward, we do see our net cash use coming down. As I've said many times. But those development programs also afford us a lot of flexibility and levers to pull if we need to manage our net cash burn moving forward. We don't have specific timelines but we feel like we're in a good cash position with prudence going forward, leveraging what we have to move toward profitability.

Dae Gon Ha, Analyst

Okay, great. Thank you very much.

Operator, Operator

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

Tazeen Ahmad, Analyst

Thank you for taking my questions. Minor on Angelman. So Emil, when do you anticipate actually discussing with the FDA about trying to align the protocol that you've got ex-U.S. with the U.S.? And as it relates to dosing, do you think that ultimately you may want to try to dose to where you had been dosing originally, just at a slower titration? So do you think you could want to go to, let's say, 36 mg again? And how long could that take if that's something that's on the table?

Emil Kakkis, CEO and President

Our plan for aligning in the U.S. is a top priority. We now have enough data and have been asked to provide it in the CSR format, which requires additional effort that we are currently undertaking. We aim to submit that and initiate U.S. patient involvement this year, as it would significantly aid our expansion. This is our goal for this year. I have had multiple discussions and we continue to engage with the division in various capacities, and I believe we can accomplish this. Concerning dosing, I don't think we need to reach 36 mg. That number was based on single dose data in monkeys for knockdown purposes. You can achieve a single dose, but it’s not necessary. You can get nearly maximal knockdown with 10 mg given three times. I really don’t believe that escalating to 36 mg is needed. I also believe that the quantitative data we've discussed shows we are at a similar place as before. So, I don't think we are far off and that getting into the 10 mg range will help us reach our objectives with multiple doses. Therefore, I wouldn't speculate that increasing to 36 mg is essential.

Tazeen Ahmad, Analyst

Thanks, Emil. Just to clarify regarding your discussions with the FDA, do you think you need to gain more confidence in the final dosing regimen based on the information you're currently gathering before your meeting with the FDA, or does it not make a difference?

Emil Kakkis, CEO and President

No, our feeling was we have enough data to enter the clinic and include U.S. patients in the dosing program that we're doing right now. We can dose at the levels we're at that we're doing it carefully. We can monitor it and are not seeing any drug-related safety events. The point is to get the U.S. involved in that dose determination phase, not afterwards. I don’t think there’s concerns about a number of questions—such as certain assays and certain biologies—which we've now shown do not occur. The fact that we've been able to dose safely with the new administration strategy should help open the door to including the U.S. in the dose titration part of the study going forward. We're going to work to get that done as promptly as we can and get those patients in the U.S. into the program this year.

Tazeen Ahmad, Analyst

Okay. Great. Thank you.

Operator, Operator

Thank you. Our next question comes from Cory Kasimov of JPMorgan. Your line is open.

Cory Kasimov, Analyst

Thanks for the question. I was just wondering if you could provide any incremental color on the redosing of the original five Angelman patients around their dosing paradigm? And will their data be included in the next readout?

Emil Kakkis, CEO and President

Yes. I think it's a very important thing. We've been pursuing this because those patients wanted to get redosed. So we wanted to give them an avenue, given that we're unable to do that in the U.S. We're able to get one good site for us in Canada to dose. And what they're doing is dosing at the same Cohort 4 and Cohort 5 regimen, which is a 3.3 dose for the young patient, and it would be a five dose for someone who's eight or older. That's what they're going to get started with. The first patient has been dosed; the second one is signed up. We'll try to get as much done that way, until we hopefully get the U.S. open and get the patients actually back in the U.S. But as we know, the first patient hasn't dosed safely, did well and had no problems; no drug-related safety issues, which we expected. There was no reaction to the drug, based on a history of exposure. So, we’re happy that got started. I'm sad though that it's taken so long to get these kids back on because they're just aching to get back on, given all the benefits they saw before.

Cory Kasimov, Analyst

Great. Thank you.

Operator, Operator

Thank you. Our next question comes from Yaron Werber of Cowen. Your line is open.

Yaron Werber, Analyst

I've got two quick ones on Angelman, and one actually on 053. Just on Angelman, I assume the FDA just wanted to look at the clinical site reports, right? They're not necessarily waiting for Liz Berry-Kravis to have that natural history from the four controls. And then secondly, if you're considering obviously doing an MDRI as an endpoint, also as opposed to, let's say, CSIA, once you choose the dose, is there a plan to then expand the study and maybe have a placebo to have some experience with that before going to Phase III? And then I have actually a question separately on 053.

Emil Kakkis, CEO and President

Okay. The control is not really part of the safety story; they are part of assessing efficacy. Those controls have gone through their day 120. We just didn't have that data at the time of the release. So we can't include that information, but the more important information was the dosing administration safety in detail and CSR complete clinical study report format, GCP-compliant format—that's what we're asked for. We'll be doing that on the ex-U.S. data and we'll provide the U.S. an update. The control information will be in there. Regarding the MDRI, we'll look at multiple domains and will analyze the data we have by that method as we get there. We're planning to do an expansion once we hit our dose to help us gain insight into the dose and how good it is, and how we really optimize it for all types. Perhaps it may provide us more color on the youngest patients versus the oldest patients and how the dose banding should be conducted for a trial. Regarding adding a control group, there’s a lot of interest in what's the mandate of change seems to be the theme. I'm not sure why there's so much interest in it. I think we could add that control group, but it does make things complicated. I think the question you have is whether you believe the data or the size and the magnitude of effect we will have is a credible real effect or whether you're believing that it's just placebo. We’re seeing movements that are significant beyond just variation; we’re confident we are well past that. I think the quantitative data are actually a little more meaningful because they're an absolute change rather than a feeling about how they're changing, so we’re excited about what we’re seeing.

Yaron Werber, Analyst

Right. Yes. I mean, I guess if there's a two-point difference in 24 weeks, I mean it's one thing if it's 0.9 or 1.1. I'm just making numbers up, random numbers, obviously. And it's obviously a little bit of a different discussion. Also, not just for us, obviously for regulators more importantly. And then for you in terms of how do you vent power for a new endpoint for Pivotal?

Joshua Higa, Executive Director and Head of Investor Relations

Well, I'm jumping in. It looks like your phone might have clicked off again.

Emil Kakkis, CEO and President

Yes. Unfortunately, my phone, when it goes on whatever, sleeps screens remote, it basically turns off, it appears. So sorry for that. So in any case, I don't know when you lost me, but I think we should be seeing substantial data that would make us confident that it's not a placebo. You rarely see movements beyond the variability; we’re seeing things significant beyond the test variability already. I think that just is not something you see normally, so I’m confident we are well past that. The quantitative data are actually a little more meaningful because they're an absolute change rather than a feeling about how they're changing. So we’re excited about what we see; I don’t think we’ll need a placebo to make the call for Phase III, but I understand the question which is how confident will we be that what we are seeing is a real effect that will sustain a placebo-controlled trial. Your sense is having some control might actually help us make that call, and I appreciate that point.

Yaron Werber, Analyst

Yes. Because I mean, it's a placebo; if you look at IBIT data, which you know well, really did less than a point at a year. So in any way, maybe just a quick question. I apologize for all these questions on 053 for GSDIII: you're dosing IV Q2 weeks—so is there a chance to think about going subcutaneously? And then secondly, just given the tolerability so far? And I know it's very early given it's in the mRNA therapeutics. Thank you.

Emil Kakkis, CEO and President

It's very early. I don't want to go into details yet. It’s very early in the program. But our expectation is to go, perhaps, once a month in dosing, not every two weeks. That is the limit edge of this. Our plan is to be once a month. We think once a month will be enough, because in this case, we need to clear the abnormal dextrin and limit dextrin storage material. Once you clear it, it doesn't accumulate that fast. If you can clear it, it doesn’t matter if the drug has faded away after two or three weeks; you’ll still be okay for a couple of weeks and then clear it again. Does that make sense? You don't have to be completely clear continuously to get the benefit of the drug. So we're looking for monthly, and we wouldn't necessarily go to subcutaneously, but we certainly have done subcutaneous before.

Yaron Werber, Analyst

Great. Thank you so much.

Emil Kakkis, CEO and President

All right.

Operator, Operator

Thank you. Our next question comes from Salveen Richter of Goldman Sachs. Your line is open.

Unidentified Analyst, Analyst

Hi. This is Tommy on for Salveen. Thanks for taking our question. We have two on Angelman. The first is that it seems based on the interim update that the younger patients benefited more, and we're wondering how much of this do you think might be due to the drugs needing to be given earlier so that patients would develop naturally, like more quickly at a younger age versus when they are older? And secondly, about the Phase III study, do you have any guidance on when this might begin? Would you wait for the different geographies to align under the same protocol, or could we see a similar design as in the Phase I/II, where the dosing protocol is different from geography?

Emil Kakkis, CEO and President

Sure. Well from the first question, I think it's pretty clear even from the original five patients that the younger patients benefited more rapidly; certainly, that part is clear—they definitely get better more quickly. I think it’s also a factor of potential dosing, as they're getting a dose that for them is higher than it was for the others. In the current cohort, the four-year-old really looked the best, but the four-year-old is getting a dose that is relatively higher than the kid who's seven years old who is much bigger. So I do think it is an aid factor and being earlier, but we’ve seen improvements in even the 13-year-old. So I don't think age is going to stop us from getting good effects; I think we will see it. It may be in different domains, but I do think we will see good effects in all of them. We just need to ensure that the dosing is optimized and not just flat, and it will have to be adjusted for age. Now with regard to the Phase III, our plan would be to get the U.S. involved in the Phase II study. We would certainly need a synchronized global Phase III. We would not want to have a separate rhGUS U.S. Phase III program. I don't think that's a smart move. We think we can get the U.S. on board. They're being conservative at the moment, but I think we can provide the information they require and get them on board and get the patients in the U.S. going in the program this year.

Operator, Operator

Thank you. Joshua Higa: Thank you, Operator, next question? Our next question comes from Maurice Raycroft of Jefferies. Your line is open.

Unidentified Analyst, Analyst

Jean on for Maurice. Just to clarify, how much time gap is needed to enroll the next group of expansion patients after the first two patients have been dosed in cohorts six or seven?

Emil Kakkis, CEO and President

Okay. So the way the cohorts work is the first two patients in each cohort get their two doses; we assess where they are going. If they are titrated, they will get titrated right away. The next cohort will begin while the first six and seven are getting their second two doses. So there's a faster turnaround now in terms of dosing. Does that help?

Unidentified Analyst, Analyst

Okay, makes sense. And then a quick question on Wilson—how is the pace of enrollment? And do you think you can get the Stage one data and selection of the Stage two pivotal by year-end or more like early or mid-year up to next year?

Emil Kakkis, CEO and President

As we've said before in the 701 or Wilson program, the FDA required staged enrollment, which was separated by several weeks between each patient. So it won't be possible to get through all the enrollment in that timeframe and get there. Enrollment has begun, and we are enrolling patients, but it will take time before we see Phase 1/2 data from 701.

Unidentified Analyst, Analyst

Thank you.

Operator, Operator

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

Joon Lee, Analyst

Yeah. Thanks. Regarding GTX-102, I appreciate your comment that 10-milligram in preclinical models gets you near complete knockdown of the antisense. But do you have any evidence that it's actually leading to a meaningful UBE3A expression? Correct me if I'm wrong, but I'm not aware of any UBE3A expression data in animal models that has been publicly disclosed. Thank you.

Emil Kakkis, CEO and President

Yeah. Joon, it does induce, or we wouldn't be talking about it if it didn’t. It induced UBE3A expression primarily because our sequence homologous to monkey allows us to get direct results for monkeys. We have turned out there is a single nucleotide polymorphism in UBE3A in monkeys that will help us in some individual monkeys to distinguish between UBE3A from the maternal versus paternal chromosome. In those animals, we can look for the SNP in the paternal expression of the gene, and we indeed have verified UBE3A expression at that dose level.

Joon Lee, Analyst

Can you quantify—can you put that in a more quantifiable context?

Emil Kakkis, CEO and President

When you get that expression, you end up getting auto-regulation, so you'll end up getting very similar levels between maternal. So they are like 50-50.

Operator, Operator

Thank you. Our next question comes from Liisa Bayko of Evercore ISI. Your line is open.

Liisa Bayko, Analyst

Hi, thank you for taking the question. Just on Angelman, Emil, I didn't completely understand or was totally tracking with the Bayleys versus CGI and why that's so much more convincing in deciphering out the noise. Can you maybe just speak to that again?

Emil Kakkis, CEO and President

Well, the CGI improvement scale is a relative scale where it is minimal or plus one, plus two, plus three; it's very sensitive because they're trying to compare before to after straight up. Usually, the quantitatives are harder to move because they require a therapist to ask and conduct specific things that the child has to do to score right, in order to move. The process tends to be more rigorous and a stronger measure of absolute change, whereas the other test can be somewhat dependent on the investigator and their view of what minimum is. When you're trying to look across investigators in the study, looking at the quantitative gives a better, more objective sense of how much difference there is. That's why we're showing this comparison of quantitative; we’re trying to show how different there are across sites.

Liisa Bayko, Analyst

Understood. Okay. And then with the Bayleys, if it's more quantitative, I'm just trying to think if the kids are acquiring skills just at a lower rate. How does that factor into your thinking on the background rate of change on the Bayley?

Joshua Higa, Executive Director and Head of Investor Relations

Sorry, Emil, you're on mute again.

Emil Kakkis, CEO and President

My phone went off. Yes. The Bayleys have been studied in the natural history. It doesn't change; I don't know Camille if you have anything to say about the Bayleys, but I thought the number of natural history programs indicated it doesn't change. None of the development really changes in the severity.

Camille Bedrosian, Chief Medical Officer

Yeah, that's correct. Thank you, Emil. Thank you also, Liisa for the question. The Bayley in particular communication is quite flat over time, particularly in individuals with the deletion mutations, and those are the patients we're studying at this time. There are a number of references that illustrate the relative flatness of improvement in these measures and we actually have one of those references cited in our corporate deck, and we're happy to follow-up with you also on that.

Liisa Bayko, Analyst

Okay. Thank you. And then just to now take this into Phase III. You were thinking about a multi-domain kind of endpoint, so would there be some combination of Bayley and CGI and other things, or how should we be thinking about that?

Emil Kakkis, CEO and President

The multi-domain responders would use only quantitative measures like Bayley. The Bayley receptive expressive could be a communication domain, and we look at those two and measure communication change. We could use Bayley for the gross motor change as well. We could do a different measure for sleep, like an Angel severity score for sleep, et cetera. So there will be a quantitative test for each domain, and we'll have to set a minimum amount of change in order to be considered clinically meaningful in doing the multi-domain responder type approach. The value of that, of course, is that there is some heterogeneity we can capture benefit across multiple domains. It's a lot more powerful; this type of analysis is really tenfold more powerful than other types for many of these complex multi-domain disorders.

Liisa Bayko, Analyst

Okay. I have two more questions. Is that okay? They're relatively quick. One is regarding the shape of R&D for this year. I know you've commented that R&D would be continuing to increase from here and then lower as we go into next year. I just wanted to understand the shape of the R&D spend?

Emil Kakkis, CEO and President

We have a lot going on, and we're trying to manage it. Mardi can give you a sense of what R&D looks like.

Mardi Dier, Chief Financial Officer

Yes. Hi, Liisa, it's Mardi. We don't give specifics about OpEx in general and our net cash use. I did give some examples that we believe SG&A, particularly SG&A next year, will go down as we transition our commercial efforts of Crysvita to KKC. But R&D, we're funding our development programs, right? So we have seven clinical trials, and so that will continue to be a major part of our spend going forward. That said, we're very conscious of what we're spending and we have a lot of levers among the various programs. So, we are measured and paced where we need to be and we're still moving through major milestones.

Liisa Bayko, Analyst

Okay. Thank you.

Operator, Operator

Thank you. Our next question comes from Joseph Schwartz of SVB Securities. Your line is open.

Unidentified Analyst, Analyst

In for Joe. Thank you for taking our question. I have a question on GTX-102. Are we going to be getting more data in the patients you just reported when you provide your next update? And I'm assuming you're going to keep increasing the dose in these patients in the maintenance phase, but I wanted to confirm that. And would it be possible to adjust the schedule to see if they could benefit more on a more frequent dosing regimen in the maintenance space?

Emil Kakkis, CEO and President

Yes. When we provide our next update, we will provide more data on the current patients and longer-term data. They are titrating until we hit where we think we need to be on dosing. We have built into the protocols the ability to make an extra dose on a monthly scale for anyone in the three-month period. We can give an extra dose or two in order to top them up, to get them to the right level. We have the ability to collect more data on the current set and ensure that we are dosing them optimally.

Unidentified Analyst, Analyst

Okay, thank you very much.

Operator, Operator

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

Ashiq Mubarack, Analyst

Ashiq Mubarack on for Yigal. Thanks for taking my questions. I guess just a couple of commercial questions. It looks like your second quarter Crysvita sales showed a nice bump over the last quarter. But if I'm looking at this correctly, it seems like to hit the midpoint of your Crysvita guidance, you're expecting modestly decelerating quarterly growth during the second half. We're just curious as to why that might be and how conservative your guidance might be, along with any commercial dynamics there. And then a similar question on Dojolvi; it seems like at the midpoint of your guidance, you'll need to see some growth or some accelerating growth in the second half. What do you think the key drivers of that acceleration will be?

Emil Kakkis, CEO and President

Great. Yes. We did see a big bump which is kind of equal to a bit of lumpiness that we see. Perhaps Erik, you want to say something about our guidance. But let's put it this way: we put guidance because it's our best estimate going forward, and we certainly will caveat the guidance based on other parameters.

Erik Harris, Chief Commercial Officer

For both products, it's pretty much the same. We're expecting strong sales in the second half of the year, which has been the case if you look at the previous years for Crysvita. So we're confident in our ability to continue to grow and accelerate growth as we find new patients and those patients get converted to treatment.

Emil Kakkis, CEO and President

So we generally had a stronger second half than first half and that’s our expectation for both products.

Ashiq Mubarack, Analyst

Okay. Got it.

Operator, Operator

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Joshua Higa for any closing remarks. Thank you.

Joshua Higa, Executive Director and Head of Investor Relations

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

Operator, Operator

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect. Have a great day.