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

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Emil Kakkis, CEO of Ultragenyx. Welcome, Emil.

Thank you.

For those who may not be familiar with Ultragenyx, can you provide a brief introduction?

Sure. I can give you just a few minute snapshot. Ultragenyx is a company focused on rare and ultra-rare diseases. We have been in business about 11 years and have about 1,000 employees across the world. We have 4 approvals in 3 products, and we focus on bone/endocrine, inborn errors and neurological products. All the diseases, we focus on our genetic diseases. We use multiple modes of treatment; small molecules, traditional biologics, like antibodies or enzymes, but we also have gene therapy and mRNA franchises. Our biggest clinical catalysts are coming from our gene therapy program. We have 3 gene therapy programs entering pivotal stage for OTC, GSDI and Wilson disease. In addition, we have an osteogenesis imperfecta program of monoclonal antibodies entering also a pivotal stage. So 4 pivotal programs are initiating this year. In addition, we have a new mRNA technology platform that is entering the clinic as well. And finally, what most people are interested in the Angelman program that antisense oligonucleotide partnered with GeneTx and that had some exciting data in last year, including though a safety event. We've been managing that this year and entering back in the clinic soon with Angelman syndrome treatment, and we're excited about that potential. So overall, global biopharmaceutical company with rare disease franchises and commercial and clinical catalysts. I think we're at a very important point in our history. We're well financed and ready to go. So I think we're going to have a great next 5 years.

Great. Let's start with the GTX-102. Can you remind us of what you've seen in the first 5 patients of data?

Yes. So the first 5 patients were treated with a rapid titration scheme in which the first few patients got very low dose and then higher and higher doses and each cohort had different dosing regimens. So those are series of different doses between 1 and 5 doses. What we saw in the 5 patients is that all the patients had an improvement on the global impression skill score around average of 2.4, with 3 patients -- 2 patients getting a very much improvement, a score of 3 and 3 patients getting a 2 score in terms of their clinical improvement across multiple domains. When we look at the individual domains, we saw improvements in both receptive and expressive communication, including the acquisition of words, which many patients with Angelman never acquire. In addition to the improvements in speech, we saw improvements in gross motor originally: fine motor, like using a fork to eat; behavior, sitting still listening. And in addition to that, for those patients who had significant sleep problems, they had improvements in sleep. When we looked at their EEG manifestations, these patients have very slow energy biowave and very high energy. And that delta power have actually reduced. So we had some objective data showing that their brain wave patterns were improving, moving towards normal, which we think is a strong indicator that these clinical findings we're having, whether by -- reported by patients, a psychologist or the PI were supported by other changes that we're seeing in these patients. So that was what the exciting news. We had, though, a lower extremity weakness that occurred in these patients that put us on hold. That weakness came up. It peaked within a couple of weeks and then resolved usually within a few weeks. And it's clearly something very different from the brain effect. It's only lower extremity, not upper extremity, and it appears to be due to an irritation inflammation of the lower nerve roots at the base where the drug is first applied. It doesn't involve anything above -- on the core or the brain. So we believe the problem is a local contact irritation effect of the drug, and we think it's something that can be managed. And we're currently heading back to the clinic now with an alternate dosing regimen to treat more Angelman patients.

And earlier this year, you announced your ability to move forward in U.K. and Canada to begin dosing, as you said, and you're working with your partner to get sites enrolling and dosing patients. Just curious if there's any update on U.K. and Canada?

Yes. Well, sites are ready to go in both areas. We expect that Canada appears to be first in line. They have 4 patients identified and we expect them to be enrolled imminently. With the timeline, we would expect to get the 4 patients need to get at least 2 doses before we can treat the rest of the 8 in the group. So they'll have to get 2 doses evaluated at a DSMB, and then we can treat the additional 8. We'd expect between now and the end of the year to get about 3 doses of data on those 4 patients is what we're expecting.

Great. And then can you talk about what the agencies in U.K. and Canada agreed to and how will the protocol and doses in the U.S. differ?

Yes. Both Canada and the U.K. agreed on the same protocol, which will basically treat patients under 8 with 3.3 twice and then will allow us to titrate to 5 milligrams twice as 4 doses. And in the older patients, they'll start at 5 twice, and then they'll get 7.5 twice. So they agreed both on this dose regimen and the titration scheme. And titration is based on whether they are having efficacy or not. If they don't get 2 domains that are much improved or very much improved, then we continue titrating until they do or we look for a safety event. So that's the basic protocol. The thing that was changed also is we're putting them in Trendelenburg and using a flush -- post-infusion flush, which will help reduce contact time in the lower back where the irritation thing was occurring. We think it's a very straightforward and rational thing to do. And the U.K. and Canada both agreed with us that, that was adequate and effective, and we did not have much -- no debate at all really with both entities. In the U.S., there is more concerns and FDA took more time, more conservative. And we've agreed to dosing at a lower dose than in the ex U.S., a little bit lower and that rather than trying to titrate, we'll hold to that same dose, 4 times. We'll treat 4 patients that are small at that lower dose. And then, we'll have 4 patients that we monitor alongside for their efficacy and safety, kind of like a control group, but they're not really a randomized group. And after 4 doses, then we'll come back to the FDA and tell them what we see.

And the FDA has asked for some adjustments to the protocol before resuming dosing. What's the latest on resuming in the U.S.?

Well, we've got an agreement on the protocol, the dosing, all that. What more was issue was who's monitoring the patients? And are we making sure they're thoroughly monitored like checklist and details? And there are some other aspects of how we approach responses and what we do. And so, they want it all spelled out in a protocol. And so, we've made those amendments, submitted them, and we'd expect to hear [a segment ] from that. If we've achieved and resolved every I dotted, T crossed and our hope would be we can get started soon. Because the ex U.S. data will drive a little bit higher dosing titration and optimal administration regimen, it will scientifically drive the program forward, but we do want to start treating U.S. patients and we'll get more data from that group, certainly at a lower dose, but it will give us another bit of information in which to compare and put us on track. When all that data comes together, ex U.S. and in U.S., we'll be able to pull it together. And if the drug is looking effective and safe, we'll be able to bring it back to the U.S. and optimize and standardize across the globe in terms of the dosing strategy and the administration strategy.

You plan to provide an update on some patients treated with 102 by year-end. I guess, now there's been a little more time, you've kind of maybe already kind of given in some indication in this conversation, but do you have a better sense for how many patients that might be in the upcoming data?

Well, we should have all 4 patients enrolled since they're already identified and ready to go. And so, it should be 4 patients dosed, and we would expect to be able to get 3 doses in that time frame. So it's something in that range. I'd be clear, it's a first indication. It's a direction. Is it safe? Is there something happening? Is the efficacy showing a sign of something happening? But it's still early. And what I'd say is when we get additional 8, we get 12 patients treated, right? And we get day 128 data, 4 months of data plus time for the drug to have its effect day 128, which will happen in the first half. We'll have much better sense. Are we there? What I can say is that we're committed to making it work in Angelman, GTX-102, other versions of it. It's such an important finding and the result is so compelling that we're going all out on driving forth on usual program right now.

Great. Maybe moving on to Crysvita. On the 2Q call, you indicated that the continued uptick was driven by North America and Latin America. So I guess for North America, you highlighted growth in the adult XLH population. What are the most important drivers of growth in the adult population? And how much more upside do you think that there is in adults?

Well, one of the areas of growth in adults is that we're finding ancillary positions, not the typical ones, who have 1 patient or 2 around the country. So our PDLs are tracking down, what I would call the random loss to follow-up patients who are not in major cities, who are often little community centers. There's a lot of people across the U.S. It's a big country. So a good part of the new patients are being found in those locations. And there are no doctor not aware of what's going on the fact there's a new treatment or anything going on. So that's a part of what I would call the groundwork to find those patients and it's been working. And when we find if we find patients, we -- 85% of them convert to being treated. So with that kind of a ratio, right, there's a real important value in going out there and finding those patients. So that's one of the areas. We're starting to get more traction with the pedigree approach, too. Pedigree involves taking a patient, talking through their family tree and then trying to help them get those patients to get connected and realize there's a treatment now that some of their aunts and uncles or other relatives may not know. We've had -- on average, each patient will have 3 to 4 relatives. There's only a small fraction of patients that are new, but there are some new mutation patients. But on average you'll find 3 to 4. We've had some families had 8 to 10 patients connected within a family. So we think it's a very valuable approach to trying to help patients discover there's a new treatment and doing it through their family.

And adults now make up about 50% of Crysvita patients on therapy, up from 40% earlier in the launch. Where do you think the split will go in the longer term and is there much more room for it to go beyond the 50-50?

Yes. So what you're talking about is the start forms, like the new prescriptions. The new prescriptions are now running 50-50, and they started at more 60 peds, 40 adults. So the adult fraction is [Technical Difficulty] going up. Part of it's because we have a pretty high fraction and the peds already on more than 30% of all the children in the United States with XLH already on drug and we're about 10% in the adults and the adults make up 3x larger population, right? So we have a lot more room to run in the adult population. So I would expect that the percentage would end up shifting to be majority adults and peds. And if you do it strictly on age ratios, it should be 70-30 or 80-20, 75-25, the ratio between adults and peds. Peds just have a higher demand and a greater [ need/proceed ] need. But what we're finding is that a lot of adults, even adults that don't realize it are actually in need of therapy. And when they get treated, they feel way better and they're starting to be more functional and they get off disability. They -- when things happen in their life, they start to realize there is a value. And we're seeing that time and again as people realize that their stiffness, for example, is impairing their ability to get about and to enjoy life. So we're excited about how it's changing adult lives. And I think our strategy and how we manage this launch is changing lives for a lot of adult patients and additional little kids with bowed legs.

And you continue to see growth in demand across Latin America and have indicated that you're in the final stages of negotiating full reimbursement in Brazil. Any update on how much more there is for that process and how long it might be?

It should be imminent. There is -- we've [ gone and are at the] last stage for Brazil. It does take a while to get through Brazil. That said, they're still putting in orders using the judiciary process, right, the unimproved process is still occurring, and we're adding patients. There's a lot of enthusiasm because the early days when you start treating with Crysvita are very exciting because kids feel better and they start moving around. And so, the feedback doctors get is so strong that they get motivated to put more kids on treatment. So as Brazil gets some traction, starts getting -- people get experience, I'm guessing they'll accelerate in demand, but it's not that far along, but they continue to approve orders. So that's definitely starting to improve. And we're getting some traction elsewhere in Latin America as well. So the team down there has done a good job of moving along, but they obviously had terrible COVID problem. And as a company, we have to recognize that they have a lot of health issues going on with COVID. So we'll do our best to drive it forward, but a lot of the world is suffering under the COVID, the brunt of COVID right now.

And once you have full reimbursement in Brazil, what kind of sales or growth to Latin America sales do you think is achievable, let's just, for example, say, over the first year?

Well, I can't tell you. I don't think my commercial guy would have let me give you a projection like that. What will happen is it will simplify the process. It will also set a price, which usually will be at some discount to whatever the price is in the other process, right? But my hope is whatever that discount is, will still enable us to get a lot more patients on drug. And so, we'd expect the revenue to really improve at that point in time, but we haven't set out projections for that. But Latin America is a really important part of our business because we do own a larger fraction of the value in Latin America.

And a few weeks ago, you announced the approval of Dojolvi in Brazil. How big of an opportunity is Brazil and Latin America for Dojolvi and any similarities or differences to Crysvita?

I think Dojolvi is -- there's a lot of patients in Brazil with it and I think for FAOD. There isn't new brand screening, but there are really good amount of op centers in Brazil. Brazil has a number of really high-caliber metabolic doctors who know the disease, who can diagnose it. And the truth is, Dojolvi is a lot easier in a country for people who may live out far away from the center because it's an oral drug, and they can get bottles of it and they can keep it at home, and they don't even need to refrigerate it, right? So they don't have to go do an infusion, right, like -- or have to go get an injection. So in many ways, it will be actually commercially more tractable because there's less burden and the thing about Dojolvi is that its effect, I think, in the publications we put forth would suggest you could reduce hospitalizations and major crises. And [indiscernible] if you can keep them from having those things, they can kind of be normal kid growing up, right? In a country like Brazil, I think that's a really big plus. They love their kids, but having kids that can live a more normal life as opposed to some disease where they're really devastated, even if you treat them, you can't fix them completely in this case, those kids could grow up kind of normally and not -- and avoid having crises. So I have great hopes that Dojolvi, priced correctly, could do really well in Latin America as a treatment.

Great. Well, maybe let's move on to setrusumab. You're starting the Phase II/III in the next few months, what gives you confidence that enhancement of bone production by anti-sclerostin will improve bone marrow density and bone strength better than other methods like bisphosphonates.

Well, we actually learned a lot about OI. We had a program, and we don't always disclose all of our early stage programs. We had a -- we have an early stage program. We've been studying OI for like 3 or 4 years. And what we learned from that is something that's common in a lot of rare genetic diseases. Everyone thinks that the bones are weak because the collagens mutated, but it turns out not exactly correct. The collagens mutate, but what ends up happening is the body has a maladaptive response to that defect and is actually breaking down bone to try to fix this bad collagen, but it can't fix it because every time it lays down new collagen, it's not good. So what ends up happening, your body's bone quality control system is actually shifting the patients away from bone production to bone anabolism because they're stimulating osteoclasts constantly. What ends up happening is these don't make enough bones. It turns out in animal models, if you simply make more bone, ship that from resorption back over to production, you can get the bone strength in the [ brittle marrow ] for example, to be normal in 4 or 5 weeks, normal, even though the [indiscernible] still mutated. So Jeff, the fundamental issue is the collagen mutate is not the biggest driver of the weakness. It's the fact your body responds to it and weakens your bone unintentionally. With that insight then, a drug that stimulates anabolism, production of bone, which will produce bone where it needs to be produced so as your body signaling will tell the bone, make it here where there's movement or there's lack of strength, it means you'll make bone-in the right places. And that's why we're hopeful and we look at the animal models effect is profound to get -- potentially normal strength in a few weeks in the model. So we feel good about the potential. What we know from the asteroid study that came from Mereo is that, in 90 patients treated, some of them treated with a 20 mg dose, which is the highest dose treated, they're achieving 8% to 10% improvement in bone marrow density in a year. That's double what you see with a lot of anabolic agents in osteoporosis. Twofold, that's a big deal. That is a huge increase, but it tells you something. It tells you, OI has a bone marrow density problem and you can actually turn that around that dramatically. So we have high hopes that just by driving more bone production, we can strengthen their bones and do it in a way that's better than bisphosphonates by driving proper bone production where it needs to be. And so, we have high hopes for this to be a transformative therapy for osteogenesis imperfecta and a great follow-on product for us with Crysvita, with the skills we have, both in development and regulatory and commercial now, I think it's a great fit for us, and we're happy to have a partnership with Mereo.

Can you talk about the study design? What is the primary endpoint? And what do you need to see to consider the study success?

Yes. The study time we've come to agree to is a randomized controlled Phase II/III study that will have majority peds, but a lot have some young adults, anyone who has a high fracture rate of a certain number of fractures. And what we're looking for in the first part, we'll treat a few patients, and we'll look at 20 versus 40-milligram dosing to try and determine whether 40-milligram dosing in any one, young or old, having a bigger effect. It could be, for example, the young ones might do better with 40 than 20, the olds might do better with 20. So we are going to understand the dosing a little bit more, just to get a little more clarity. We want to make sure we're not under dosing. 20 could be max and 40 could be no different, in which case it's great. So long as that's true, then we know and we've verified it. After that period, we'll expand and add more patients. All patients will be included in the primary analysis. It's a one-to-one randomized control study looking at bone fractures as a primary endpoint. We'll look at bone marrow densities versus secondaries, but fracture is the primary endpoint agreed upon. It will take at least 18 months in life to run and will be a significant size study in international.

Great. Maybe a few questions on the other pipeline. You have programs in DMD and CDKL5 deficiency based on the HeLa manufacturing platform. What do you find most exciting about these programs? And what kind of updates should we look for in the near term?

Yes. Both programs are in the nonclinical stage. And the Duchenne program was something we added through a partnership with Solid using their microdystrophin, our capsid, our manufacturing process and some improvements in both immunomodulation, dose administration that we think will help improve outcomes. We believe in that situation that the high-quality, high-caliber, high -- large-scale manufacturing will allow us to produce a higher quality Duchenne vector. By using a capsid that we think will be better, an AAV8 or related capsid, we should reduce some of the safety risks. At the same time, the use of the microdystrophin, we think, will be more effective. And use of other aspects of our approach, we think we can come out with a better treatment for Duchenne than what's out, what's currently in development. And I think it's a situation where it's complicated enough that a fast follower with good choices can come in and do well. With CDKL5, we started that program a couple of years ago. The data has been spectacular in the mouse model, and we're very confident that you can actually treat that disease. What we're trying to do is optimize our delivery neurons using intracisternal magna delivery through a IT but with -- but at the cisterna magna. We're learning a lot about how to do that well on primates and how to optimize delivery to neurons. But like Angelman, CDKL5 is a defect in neurons communication with each other, but not neurodegenerative. So we also believe like Angelman, you can treat kids who are several years old and actually improve their brain involvement. So that is why we chose CDKL5. Originally, people thought there maybe 1,000 in the world. I had suspicions that were more. Now the papers come out, suggesting it's probably more like 30,000. And so, it's a pretty significant population than in CDKL5 deficiency.

And [ UX503 ] is your first mRNA program and is expected to begin a Phase I/II this year. What interest you notice about that program?

Well, the UX053 is our first opportunity to test out the mRNA franchise that we've partnered with Arcturus and technology that we've licensed in. We have tested in animal models now 4 different mRNAs and found that we could get very potent delivery. We could reach 100% to 400% of normal liver expression of a number of genes. And we find the delivery very complete like to every cell in the liver and very distinctly to all the hepatocytes, but not the Kupffer cells for example. It's very distinctive. We just think if you need a large amount of delivery, you need every cell to get it. The LNPs are working really well in the liver, and we're really encouraged by that. With regard to GSDIII, they have a toxic limit dextrin that hurts your liver and [indiscernible]. You really need to treat all the liver cells to get every single cell to clear. The enzyme is a bifunctional enzyme that's very large, doesn't fit in AAV directly. So there's a few features here. If you can clear the liver of this dextrin, you only have to clear the liver every so often. You don't have to do it immediately, right? And we think then the ability to clear the entire liver will allow us to develop a therapy that we relatively intermittent mRNA infusion. It will open the door to what I call enzyme replacement via the mRNA. That's what we're doing. And as long as -- and instead of the enzyme having to be in the lysosome, the enzyme can be in the cytoplasm, in the mitochondria, in the ribosome. It could be in any organelle because this case, we're not restricted by the process of delivering the protein. We'll use the MRNA, get it expressed, and that will target the enzyme to the right compartment of the cell. The liver is clearly the best target right now. But there's a lot of work going on in getting these own piece of target elsewhere and improve, and I'm sure there will be progression. But right now, it's our first step in a liver-focused mRNA LNP franchise, and we're excited about that opportunity.

Great. Maybe in the last couple of minutes, one final question, it's a little bit more broad. I guess, are there any aspects of the Ultragenyx story that you feel investors either underappreciate or are there any specific programs that you feel investors should pay more closer attention to?

Well, I do think that the osteogenesis imperfecta program is not getting enough attention. I do think it's also an advanced stage program like the gene therapy. In some ways, it's a little more straightforward. And it's right up our ally, and it's bigger than XLH, in our mind, in terms of number of patients and value. So I think OI should probably -- I think the other thing is, as a company, we are incredibly effective and efficient at discovering how to develop things and getting them done. Our average time now from IND to file is about 5.5 years. It's for our first 4 programs. So I think we're really good at -- we're doing rare disease development. And we're inventing endpoints, regulatory strategy, study designs and I think that in that sense, we're an innovator in the rare disease drug revelopment ecosystem. And I think the other part of it, we like to contribute to the whole ecosystem of the company, and that builds a bridge to all the patient groups. We run boot camps to help them. And as a company, we always help patient groups that are trying to do work and other companies, too, because our view is, our job is not just to get our products approved, but to help as many rare diseases to get treated. And I think by doing good, we can do great business. And I think we've shown our approach to drug development. Commercialization, expanded access that we've developed a great reputation and a strong business outcome.

Great. Well, looks like we'll have to leave it there. Thanks so much for your time, Emil.

Thanks for having me, Jeff. Appreciate it.