Ultragenyx Pharmaceutical Inc. (RARE) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us at the Bank of America Healthcare Conference. I'm Tazeen Ahmad, one of the senior biotech analysts here at the bank. It's my pleasure this morning to introduce our next presenting company, Ultragenyx. Speaking for Ultragenyx this morning is Chief Financial Officer, Shalini Sharp. Good morning, Shalini.

Good morning, Tazeen. Thanks for having us.

Of course, we look forward to spending the next 30 minutes with you. Maybe as a starter, can you give anyone on the line who may not be as familiar with RARE a brief highlight of the company's recent accomplishments? And then we can talk about some upcoming catalysts in a little bit more detail.

Sounds great. So thank you, everyone, for dialing into this presentation about Ultragenyx. We are a company focused on rare and ultra-rare diseases in the San Francisco Bay Area. Where we are today is we have had a couple of very strong launches of 2 products in the last couple of years. We also have an extraordinarily broad clinical and preclinical pipeline backing that up. In fact, with a couple of programs that have PDUFA dates coming up shortly. We also have 2 pretty broad platforms in gene therapy as well as in mRNA, which is a great source of additional pipeline. And from a financial perspective, we have $705 million on the balance sheet as of the end of Q1, and that does not include another $125 million that we received from a partnership agreement that we signed in Q1 as well with Daiichi Sankyo for gene therapy. At the same time, we are exhibiting financial discipline by making sure that we have a greater than a 20% reduction in net cash burn in 2020 as well. In terms of the pipeline and upcoming catalysts, we have a PDUFA date lined up for a new indication for Crysvita called tumor-induced osteomalacia on June 18, which appears to be on track. We have for UX007 in long-chain fatty acid oxidation disorders a PDUFA date for July 31 as well, which also seems to be on track. We have 2 clinical stage gene therapy programs. One is in OTC deficiency and we had data -- updated data announced from that just yesterday. And we have data coming up from our program in GSDIa, also with gene therapy, which is coming up tomorrow. So we had several abstracts at ASGCT this year, so it's been very exciting. We also have another clinical stage compounds that is not a gene therapy. It's an ASO for Angelman syndrome through a partnership we have with a company called GeneTx. And that IND was already submitted and accepted earlier this year, and we are in a Phase I study at the moment. The first cohort has already been enrolled, and that appears to be on track at the moment. We expect to file an IND in gene therapy for Wilson disease by the end of the year. And as I just mentioned, we recently announced the partnership with Daiichi Sankyo, utilizing our gene therapy manufacturing technology right around the end of the quarter. And with that, I will hand it over to Tazeen for any questions.

Yes. So there's a lot to dig into there. Maybe as a starter, let's get the COVID question out of the way, right at the forefront. So can you talk about the impact on your operations overall, if there are any, that you're seeing from the pandemic, particularly on sales, around potential approval, launch plans for some of the molecules that you talked about, your 007, Crysvita for TIO?

Sure. Yes. Yes. So the UX007 and TIO regulatory filings, as I mentioned, are on track. We were fortunate that they were far enough along that as far as we know, all expected inspections, et cetera, have been -- had taken place already. So barring any new information or requests that are unexpected, we believe those are on track. In terms of our other impact on operations, we have obviously taken precautions like everybody to protect our employees and patients. And for patients who have been very focused on ensuring continuity of care for the vast majority of the patients, we've been able to achieve that. Through Q1, our revenues remained on track. And in fact, I think from an external perspective, in line or exceeded expectations. We do continue to closely monitor the situation. To date, the impact has been more on identifying new patients and physicians as opposed to continuing to serve patients and physicians that we were already working with. Now in terms of the new launches, TIO is targeting exactly the same audience as XLH. So the same physicians are treating this disease, and there was no anticipated change to our commercial effort in terms of the number of people or locations or anything like that. So it's a little bit more continuous. Fatty acid oxidation disorders is a new indication. However, we are targeting metabolic geneticists who we were already seeing for MPS 7 or Mepsevii or other approved product. So there is some continuity there as well. We did anticipate a small increase to the field force for that, and that is something we're going to continue to review in terms of the ability to be in the field versus having to do things virtually.

Okay. Great. So as it relates to Crysvita, you did reaffirm sales on your company's earnings call at $125 million to $140 million for the year. Based on what you just talked about with COVID impacts, I guess what are the metrics that you've used in order to gain the confidence in the ongoing sales trajectory for this product?

Sure. Well, as I mentioned, Q1 sales remained in line or ahead of expectations, and we have relooked at our internal forecast in light of the COVID situation. And despite potential headwinds, we are currently remaining comfortable with our revenue guidance as originally given. But we will continue to monitor the situation because there will likely be a greater impact of COVID in Q2 and possibly Q3 of this year.

Okay. Well, we're halfway through the quarter. Yes, we're about halfway through the quarter. I don't know if there's any kind of qualitative observations you can share.

No. I mean I think the one thing to keep in mind is that the shelter-in-place policies and things like that really were just starting at the end of March and are really in full force for all of Q2, and we'll see how far into Q3. So like I said, I do think there will be a greater impact in Q2, Q3. And the impact would be more on new patients as opposed to the existing patients, where the team has done a phenomenal job of trying to maintain continuity for all those patients as much as possible.

Okay. Great. You, at the intro, also talked about some data that's happening actually this week at ASGCT. Maybe we could spend a few minutes talking about that. So specific to 301 for OTC, you did present some updates from the Phase I/II study yesterday. Can you just quickly recap that data? How significant is that? You've got 3 complete responses now in the last cohort, as you're kind of gearing up to prepare to discuss with FDA what the next steps might be at the end of Phase II meeting later this year.

Sure. Yes. So just as a reminder, 301 is an AAV8 gene therapy for the treatment of late onset OTC. And these patients are deficient in the OTC enzyme. They can't metabolize ammonia into urea and ammonia is a potent neurotoxin. So that can cause brain damage or even death in some patients. Our trial essentially measures the rate of conversion of ammonia into urea, which is called ureagenesis. We also look at ammonia levels, which are really the key to this disease, among other endpoints as well. So in terms of the data that just came out, we are really excited about the data. In the third cohort, all the patients received the 1e13 dose, and all 3 patients in the third cohort are responders. One who was previously an unconfirmed responder is now confirmed because he has had consecutive readings of an increased ureagenesis, and the increase is 188% of baseline, so very significant, and his ammonia levels have remained normal. So over time, we are hoping that he will liberalize his diet and discontinue ammonia scavenger medications. The other update is that a previous female responder from the cohort has now discontinued one of her 2 ammonia scavengers and increased her protein intake. So she's in the process of making those transitions. And the third female complete responder from the cohort has discontinued all of her ammonia scavengers, liberalized her diet, and she is metabolically stable. And then we have an update from the prior responders. So there were 2 complete responders in Cohorts 1 and 2, and they remain in excellent condition. They have -- despite having discontinued all their ammonia scavengers, completely liberalized their diets, and they're now out to 1.5 and 2 years. And another responder from the previous cohorts is in the process of reducing their medications and liberalizing diet as well and ureagenesis and ammonia continue to look good. So both the prior cohorts as well as the third cohort, we feel really good about that data. We do have a fourth cohort and an end of Phase II meeting planned for the second half of 2020. And the fourth cohort is expected to look at the use of prophylactic steroids at the same dose level, with the Phase III expected to start in the first half of 2021, assuming there's no major delays from COVID.

Okay. So what are the specific topics that you want to discuss with the FDA at the end of Phase II?

When we ended Phase II, we really just hoped to finalize the design of the Phase III and to have a discussion about the key endpoints because we know that ammonia is going to be a critical endpoint from the FDA's perspective, but it's possible to both look at reducing high levels of ammonia at baseline or to look at maintaining a normal ammonia after you've removed ammonia scavenger medications or both. So those specific kind of details are things that we do need to work out with the FDA.

I see. And can you remind us on the timing of the meeting exactly and when we could also see prophylactic cohort data?

Sure. Yes. So right now, we're just saying second half of 2020 for the meeting. I don't think we actually have a specific date lined up quite yet. And in terms of prophylactic steroid cohort, we are not currently able to enroll those patients. We did say we would have data in the second half of this year, and that is still possible, depending on how things evolve with the COVID situation. If that cohort is delayed significantly, our thought is that we're likely to be using prophylactic steroids in the Phase III study in any case. We just would like to have a little bit of data prior to that. So we don't expect it to be a gating item even if the prophylactic steroid cohort is significantly delayed.

Okay. That's good to know. And so can you then briefly talk about how you're thinking about the trial design for Phase III? Like what kind of endpoints do you think would be important to look at? And maybe set the tone for what we would consider to be clinically meaningful data.

Sure. Yes. So we do expect it to be a controlled study, so placebo-controlled. And it would likely be in the range of something like 30 to 50 patients. And like I said, we do expect ammonia to be a primary endpoint. We just have to discuss further with the agency exactly in what way we will measure ammonia and whether we'll be taking patients with high ammonia, baseline or not, and how we'll evaluate that over time. So those are the key pieces to look at. We have also been looking at ureagenesis and have other inputs in terms of how patients are doing clinically, et cetera, but really, ammonia is the key endpoint.

Okay. Now maybe we could move on to 401. That's, of course, gene therapy for GSDIa. Can you remind us what data we're going to see for that program at ASGCT?

Sure. Yes. So what you'll see is an oral presentation of the available data from the confirmatory cohort of the Phase I/II study of DTX401, which is an AAV-based gene therapy for GSDIa. And just as a reminder, the GSDIa patients are deficient in the G6Pase enzyme, so they can't convert glycogen stored in the liver into glucose. So as a result, they're constantly in the state of severe hypoglycemia. And they have to take very large quantities of cornstarch throughout the day at regular intervals to keep their blood sugar up. And if they miss a dose of cornstarch, they can have seizures, comas, even death. So very serious disease, and that includes having to go through the night and waking up to take cornstarch. So we have now treated 9 patients, 3 at the 2e12 dose level, 6 at the 6e12 dose level. We liked what we saw at the 6e12 dose level in the second cohort. So we enrolled 3 patients in a confirmatory cohort at the same dose level. So those are the last 3 of the 6 that I mentioned. We did make a few changes. So we allowed for more proactive administration of steroids. We introduced continuous glucose monitoring and reduced the cornstarch that patients were given at the beginning of their overnight fasting challenge to 5 grams from 35 grams of cornstarch because in prior tests, it was noted that by giving them 35 grams of cornstarch after they had an active transgene, they were getting hyperglycemic, which was causing them to have an insulin spike and crashing their blood sugar right at the time that we're measuring their blood sugar. So in any case, we made that modification to the cornstarch as well. So what you'll see on Friday is whatever data we have available at this time from the third cohort. And as before, we're going to be looking at things like time to hypoglycemia, and the fasting challenge, cornstarch, intake, et cetera.

Okay. So what is the time line for us to get additional data from the confirmatory cohort? And when do you think this program might be ready to move on to a pivotal program?

So we would likely have additional data from this cohort in the second half of 2020, and of course, it's barring any significant delays from COVID-19. And we also hope to begin a Phase III trial by the end of the year, again, assuming there's no significant delays from COVID-19.

Okay. I guess in general, how -- before we move on to talking about some of your other programs, how are you thinking about the long-term implications of COVID? We touched upon this in passing with a couple of the statements that you've made about the various programs. But is there anything that you're changing in the way that you're doing business or in the way that people are interacting with your company that you think will persist even after things start to return to some level of normalcy?

Well, I mean, I think like everyone else, we have become pretty savvy at working remotely and working from home, and maybe we will see some of that persist into the future. I think there will be a longer-term introduction of social distancing into specific places, indoor places like labs and plants, office buildings. And the field teams especially have had to make some innovative changes to how they replicate things like doctors' visits and medical education and conferences and things like that, and they have to figure out how to do these things remotely rather than in person. So I think they're discovering and implementing some new innovative ways to do that, that might persist because they might be very effective and efficient. We have already -- we already had an aggressive program of home health visits and home nursing, and patients can actually self-administer Crysvita if their doctors allow for that or suggest that. So those modes of administration could persist as well for some patients, particularly for Crysvita because it's just a subcutaneous injection. I think it's just really clear that something like COVID puts into perspective for the whole industry really what we do and why we do it and why it's important. So I think that's been one, I guess, small silver lining of the situation. But those are the kinds of things that could persist for us heading forward. And I don't think they're too different than what other companies might experience.

Okay. And then you talked about this a little bit at the beginning as well. But as you're prepping for the upcoming launches, has there been any kind of change in your -- in the company's view about how to cover the sales territories or whether even you need as many people as you originally thought?

Well, there's no chance -- no discussion of changing our current infrastructure for commercializing the products that are already on the market. The new indications, TIO and FAOD, are coming up shortly. TIO really is 100% the same treating population as we have for XLH. So there was no plan to make any changes to the field effort there. For TIO, they just have -- they would have an additional indication to talk about with the same physicians. So I don't expect really any change there. I think for UX007 in FAOD, we were only expecting to add maybe up to a dozen people to support that program because we're already commercializing an MPS 7 to the same physicians. And we just -- it's a relatively small disease. So that was the goal there. So even if there were going to be any changes to our -- to the way that we commercialize or launch that product, it wouldn't be a huge impact in terms of the commercial infrastructure.

Okay. And then maybe in keeping with this theme, let's say that the COVID environment leads eventually into a potential recession. And if that recession lasts longer than expected, how do you think the company is positioned to operate as a commercial -- obviously, you have several commercial launches underway under that environment? And is there any opportunity for cost offsets because you already are a company that operates pretty leanly?

Yes. I mean I think we're really fortunate because virtually, we're really well capitalized. So as I mentioned, we have a 715 -- sorry, $705 million on the balance sheet as of the end of March, with another $125 million received after that from the Daiichi transaction. So the Daiichi transaction brought $200 million upfront. And before we had that transaction, we already had runway into mid-2023. So I think we're extremely well capitalized. We are commercializing products that I think are really significant and move the needle for patients. They are looking at real unmet medical need, serious diseases, little to no alternatives in terms of treatment options. So we think that patients and physicians would continue with treatment even in the event of a recession. We are very diversified. So we have multiple programs on the market, especially with the 2 filings that we have upcoming. We have multiple modalities. So we think that, that's helpful in terms of diversifying risk, and we have been really careful to responsibly price the compound and maximize access to them. So price and access have not really been a barrier, which are both things that could be impacted in a recession. And we have been equally successful with private and government payers. And we do, if we need to, have the ability to further tune the pace and the amount of spending. We were already forecasting a greater than 20% reduction in net cash burn in 2020, but we do -- we would have more latitude than that if we really needed to. So I think we're pretty well positioned.

Yes, it seems that way. So maybe we can go talk about partnerships and collaborations for a few minutes. Can you talk a little bit about Daiichi? You recently signed a partnership with them for a gene therapy manufacturing technology. What was the rationale behind it? And what are you hoping would be some of the first outputs of that collaboration?

Sure. Yes. So basically, under this collaboration, we transfer our HEK293 and HeLa PCL manufacturing technology to Daiichi Sankyo on a nonexclusive basis, which I think is really important. It's nonexclusive. We do retain exclusive rights to our own indications, including indications we're working on but are not public. And we have the ability to opt into any Daiichi Sankyo rare disease AAV programs going forward. That's another potential source of pipeline. Now HeLa PCL is the largest scale AAV mammalian cell manufacturing system out there. It's currently operating at 2,000 liters. In fact, it's in the clinic already with Bayer's Hem A program, which was developed in collaboration with us. And basically, under the terms of the agreement, Daiichi Sankyo paid upfront $125 million and purchased $75 million of our common stock at a premium. And they'll pay another $25 million upon the completion of the technology transfer of these 2 platforms to them. So that's probably the next near-term milestone that would take place here. There are also single-digit royalties on net sales that are made in either system. And we're also reimbursed for all the costs associated with the tech transfer. So for us since the transaction is nonexclusive and it's primarily focused on non-rare indications, it's purely accretive and non-dilutive to us. And we're really gratified that Daiichi Sankyo thought so highly of the manufacturing platform, which we think is really important and has proprietary unique value.

Okay. Maybe we can also talk about your partner program for Angelman syndrome. That is something that's already in the clinic. You've got 2 patients enrolled. What should we expect at the data cut next year for sort of an early view of this program?

Sure. So as a quick background, we entered into agreement last year with a company called GeneTx involving an ASO for the treatment of Angelman, which affects about 60,000 patients worldwide. So it's actually the largest indication we're working on. These patients have a loss of expression of the maternal copy of the UBE3A gene. And that results in a lack of speech, cognitive issues, motor issues, seizures, sleep disorders, et cetera, but not neurodegenerative. So that actually means the brain function could be there if we're able to solve some of the disease mechanism issues. And the patients have a normal but silent paternal copy of this gene. So the ASO simply binds the antisense that suppresses that paternal copy and allows for the protein to be produced just from the paternal copy of it since the maternal copy is not working. And we think our ASO binds multiple transcripts, and so it should have greater potency. And it's in a Phase I/II study, looking at dose escalation intra-patient in about 20 pediatric patients. And we'll be looking at all those things I mentioned: motor development, communication, seizures, sleep behavior and then, of course, safety PK/PD. And the first cohort is enrolled, and the program is ongoing and continuing, and we currently expect early data in the first half of 2021. So very exciting program. And we have an option to acquire GeneTx for $125 million after the data comes out from the study.

Okay. Great. So we look forward to that. And then finally, you guys are going to be hosting an investor call on Friday morning with respect to the data that we talked about a few minutes ago. Just wanted to ask what we should be expecting there.

Well, I mean I think we've disclosed data from this study a couple of times previously. So the nature of the data will be similar. We will continue to follow some of the same things in terms of the time to hypoglycemia test and the fasting challenge, which is given overnight in the hospital. We are looking at cornstarch and the amount of cornstarch that patients are taking. We have now introduced continuous glucose monitoring so we can get a glimpse of what that looks like potentially as well. So no change to really the nature of the data, just more updated data on more patients.

Okay. Great. With that, I will say thank you very much for spending the last half hour with us, and thanks for participating in our conference, and we look forward to speaking with you again later this week.

Sounds great. Well, thank you. Thanks very much for hosting us. We appreciate it.

Thanks, Shalini, Talk to you soon.

Okay. Take care. Bye.