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

Hi, everyone. My name is Farzin Haque. I'm an associate from Morris team at Jefferies. It's a pleasure to welcome Emil Kakkis, CEO of Ultragenyx. I think he has a few slides to start off with.

Yes.

Welcome.

Thank you for having me. It's good to be in London. It's been so long since I've been in London. Walking around Covent Garden, been a while, it's been in a long time, too long. Happy to be here in London again, one of my favorite places and talk to you a little about where Ultragenyx is. 12 years ago with me and my secretary, couple of million dollars, and this is where we are today. With the commercial franchise, there is a forward-looking statement, growing commercial revenue, crossing $350 million this year in multiple products, now just added [indiscernible] in addition to the other programs, strong -- and a strong clinical pipeline with 5 programs in Phase III or at filing stage and combine that with not just the ultra-rare program, with multiple programs that are actually large potential opportunities. And we have a mixed risk return portfolio that is -- we have some high risk, high return type products as well as some solid wins and build a rare disease business. But I've been in the business a long time, and I think we're in a great place from the standpoint of progression of Ultragenyx. We made it through the pandemic and continuing to build our business. The franchise or 3 rare disease franchises that we have, bone endocrine area driven by Crysvita, but following along with setrusumab now in OI, which is a great product. We also have a number in the inborn error metabolic areas, multiple approved products as well as gene therapies that are coming. And finally, CNS/muscle, probably driven biggest by the Angelman program, which everyone wants to hear about, but other programs in that area. And I think we're -- if you look at the number of programs and the amount of work we've done, I think we're one of the most efficient companies in terms of getting products into development and translated ahead and doing it a time-efficient, capital-efficient way is extremely important. Just to be clear, our revenue growth has been steadily growing at more than 30% annual rate of growth and we expect that to continue with just the programs already approved, right? Just program proved driving revenue for the next few years. The new programs will come and start adding to that. And our plan, of course, is a trajectory towards profitability. If you look at our operation expenses, we've had a growing operation expenses because of the number of programs we've added and our growth. We're expecting next year to plateau and a substantial net cash run reduction. We had a lot of onetime cash burn expenses building the manufacturing plant, acquiring the Angelman program from GeneTx and the addition of key settled portfolio, but those expenses won't recur. And we expect a significant reduction in net cash for next year and a flattening of operation expenses. We want to be disciplined on how we grow and how we develop. And we think our cash and our operational growth with the revenue growth ongoing, will put us in a position of going profitable at some time not too in the distant future, but I think we're turning the corner in a really important way. And I think doing it with enough firepower and the clinical to really cross profitability and actually continue to sort of pass and that's where the direction we're going in. We have a lot of catalysts. I won't go through all of them. The gene therapy for GSDI is fully enrolled or nearly fully enrolled and that will be at 48 weeks plus some analysis time to get data which will probably be late in the year or early next year. 143, Phase II part is unblinded for this study. You'll see data from pediatric use of setrusumab in the first half. Angelman program could be first half, could be second half, but we'll have data on our expansion cohorts and the ongoing extension data on what's going on with Angelman, we'll probably talk more about it, plus a few other catalysts. We're going to have a busy year 2023. I would say if you look through companies, how many have this much pipeline at our size, with the broad commercial portfolio, I think we're a very unique asset at a very important point in our history as a company. So fireside chat with that set up.

Thanks. Great intro. So of course, start off with the Angelman Syndrome program. So for that program, can you talk about the progress so far? Any specific data observations that give you confidence that the clinical and dosing regimen is in a meaningful range for efficacy?

Right. So on the Angelman program, we're using an antisense oligonucleotide to induce expression of the paternal copy in these patients, they diluted the maternal copy. We're inducing this enzyme on called UBE3A. In July, we put out data where we're doing the 2 lowest doses of a titration and showing already activity. Now we're very encouraged by this as it meant that even loading at the lowest doses of our titration curve we're already seeing activity, which told us we're in the therapeutic range. However, our expectation based on non-primary data would be that we need to get into the 10 to 12 milligram dose for load. That dose to get to the near maximal knockdown. We're doing that now. We've been titrating up because we had a safety event in which caused lower extremity weakness. We believe it was a local irritation inflammation of the nerve roots by having patients that were sitting up too quickly after the lumbar punctures. We're simply making them lay down flat, to [indiscernible] position head down and using a flush to help just move the drug up and get it mixing. And those simple adjustments have allowed us to do this now without having a problem we had before. So we think we've solved that problem. We've been titrating steadily because of the safety issue to avoid any risk. And so far, a 10 to 12 up to even 1 patient has got 14, not having a problem. And we're now in the load range, which I think would get us near maximum knockdown. So we'll put out data on that this coming year, exactly when, what we said to the Street, we want to make sure we have enough data to be confident of the magnitude of the fact we're seeing. What I can say to you what we've already seen and talked about is a meaningful change in these patients. And therefore, we think we're just going to get a more consistent response against more patients when we get to the right dose level and we're encouraged. We acquired GeneTx because we're confident that we have a win in here and now it's up to us to navigate the therapeutic window and to get to the right place. Roche and Ionis both have competing programs. But scientifically, we're patented a particular region of the chromosome for ASOs. That's distinct from their region. We're at the 5 prime end of the antisense message, which the science shows is a more potent place to be knocking down the message. And was that angle, that scientific edge is why we got in. I'm not interested normally in battling with Ionis and Roche head-to-head in ASOs, right? We only do that if you got a real angle. And I really strongly believe in this case, Scott Dindot, that one really smart guy lab can figure out something no one else knows. I was one of the scientists at one time. Scott Dindot has a terrific science. His paper is getting published and with that told us that he knew something no one else knew. The drug we're doing works at in a monkey at 1 milligram dose. The Roche program, what they presented is 24 milligram dose to get the same effect. So I think his data are right that we're operating much more potent. And since it's patented and distinct, we have a proprietary position and I think we're going to win the game. Now right now Roche has been in the clinic for 3 years. They've put off the time line for data. I'm not sure why they have, but they haven't put out anything and they've been in the clinic for 2, 3 years. I would have thought if it was working, they'd be talking about it all day long, but we haven't heard yet. So I'm not really concerned. I believe where we are so much more potent that we'll succeed and that will be the best ASO and ASO for Angelman Syndrome.

Right. So for the next substantial update based on the current trajectory, how many patients can we expect from the expansion cohort?

Well, remember the original 10 patients in the first cohort 4 and 5, there's 4 patients in cohort 6 and 7 and then there's 8 and 9 expansion cohorts. So you're going to expect to see the -- certainly the 14 patients that are ex-U.S. plus some expansion patients. So it's in that kind of a range of numbers. The question is how many expansion patients would we include. We haven't set the exact number. We don't necessarily have to have all 40 patients before we show data. It could be some of them. We just want to make sure we have enough data loaded at the right doses to be able to say something definitive to the Street, right? So that's why the time is not quite certain. But I'm comfortable that that dose level will get us a really good effect given that we've seen a good effect already even at the lowest doses. So we expect it not to be too long.

Got it. So do you know what will be -- what should we expect in the update, like CGI data, but any objective measures like EEG or because there's something that [indiscernible] like to see?

Well, there's a lot of different measures. What I would say to you is that the different measure types should be consistent with each other, right? One type measure is the investor opinion, the global -- clinical global impression scale, CGI. That's the director's opinion. Are you mildly improved, much improved, very much improved plus 1, plus 2, plus 3. That's a directional score. It's not so quantitative as if that's your opinion. Then there are the quantitative scores that come from a psychologist, like, the Bayley score, psychology-administered, where they're actually testing the kid. The kid has to perform in the visit and do stuff. Those are quantitative. They're more rigorous. They can vary, but how the patient is behaving that day. But they're rigorous and they should line up that if someone is saying they're seeing their better language or better that the psychologists say, hey, their language is better, right? That gives you confidence. The third thing is the parents', caregiver's scores. That's like the ORCA, which is a caregiver language score or the Vineland score, which is the doctor solicitating the patients, the caregiver's views on what's going on at home, right, how kids are behaving? Are they taking care of themselves? Are they doing active day living other things? So those 3 types of scores, we'd expect to see them lined up. If talking about language, we expect the CGI language be plus 1 or plus 2, we'd expect the quantitative show you improvement. We expect the ORCA, then the patient score to show something, right? This should be working if the drug is at a level where we're getting a consistent response. What we have seen so far is that we have seen CGI scores that have improved. We've also seen quantitative scores in Bayley improve that are beyond statistical variation of the testing method, which is meaningful. And I've done the Bayley score for many, many studies, open label or not, never seen the Bayley score improve. So it's the first time I've seen Bayley scores improve in 6 out of 9 patients even at the earliest doses. And the third thing the ORCA was improving already in certain patients. So we feel we'll be looking across those 3 -- it's like 3 different assessors, but they should be complementary to each other in any particular domain.

Got it. And can you elaborate more on the -- where you're at with the dose harmonization discussions in the U.S. and ex-U.S.? And will you have that clarity by the time of the next update?

We expect to have the clarity on U.S. versus ex-U.S. We're talking to U.S. authorities currently. We've presented them answers to their questions and shown that their fears about hemological things are not true. We've also shown that the safety event was reversible and we've shown that we can redose the original patients that had the safety event. In Canada, we had to fly them to Canada, another sort of reverse medical -- usually Canadians come to the U.S. to get this case going the other way. So we sent the patients to Canada because they were tired of waiting and they really want to get back on drug. And 2 of the patients have gotten redosed 2 to 4 times already, no safety problem. So those, I think, give us confidence that we should be able to present this information to the FDA and be able to get the U.S. open and we'll be negotiating with the agency on that. That should be sooner than the time we put out data. And our expectation is to be able to get going in the U.S., but we still have to work through that. When we get a final answer, we'll put out information on it.

So at the last update, you mentioned you're going to submit a CSR. So that had not been submitted yet or this will be updated package?

The process is going on right now with FDA, submitting things and so forth.

Got it.

It's going on right now.

Okay. Can you also talk about the manufacturing front where you're at, especially when can we expect another deal like the Daiichi?

So the gene therapy manufacturing, specifically, yes. Well, one thing that's happened between the time -- the Daiichi deal with a technology transfer deal, techno license deal for their own indications to use the PCL -- the Pinnacle PCL platform. We've done all the tech transfer work with it. They are continuing to do their plan. And we're now looking at -- having completed that looking at other potential deals. Because we've completed the manufacturing plant now in Bedford, Massachusetts, it also gives us another angle to a deal, which is manufacturing slots at a quality plant, a new plant, high quality with a team that knows the PCL platform. So we're looking at a deal that would involve potential PCL technology plus potential slots in a manufacturing plant as a way to leverage our investment in the plant earlier. So that gives us something special. I think there's a number of companies looking at gene therapy right now. Gene therapy got hot, then it got cold and starting to fog in. And you're seeing a number of big pharma starting to look back at it. What I would say to you is when the situation where you needed to do gene edition, you have to give another gene. AAV gene therapy is still the best thing in terms of an off-the-shelf, cost-efficient, scalable approach to adding a gene. Lentiviral can work, but it has its complexities in doing custom cell culture, ex-vivo strategies. Gene editing, ex-vivo is working, in vivo in the liver for knockout, working. But gene edition, I think AAV still is a special place and I think we'll be in the best position to offer a technology deal. We're talking to a number of companies. Our expectation is to do one good deal and to bring in another partner into the area of PCL platform and using the plant as well.

Got it. So for the Wilsons program, so how long in your protocol do you allow the combination of chelators and the gene therapy? Like is there a target reduction in the use of the standard of care?

Yes. So the -- just to be clear with the Wilson program, we did change something. We've now converted the Phase I/II dosing period to be open label, not blinded. Originally, it was blinded because we thought we tried to include that data in the Phase III analysis. But the FDA didn't want us to do that in which case, keeping it blinded became more work than it was value to us. Because doctors wanted to see what it was doing, we decided to make the study open label. We reduced the number of patients to be 5 per group instead of 9, which allowed us to get the Phase I/II part done faster. Shorten the time line, plus we'll be able to provide data. We'd expect to have the cohorts enrolled toward the mid of the year. By the end of the year, we should have 6-month data on all the cohorts for Wilson. And all the patients in the trial are on chelators. They have to be on chelators, are stable. And what we'll be looking for is what happens when you add gene therapy on top of. But to really get a good sense of chelating -- I mean the effect on the toxicity, you have to start weaning the chelator right off to see now without the chelator removing copper, what do you see? And so there's a point in the protocol where we start removing the chelator. Because of that, I think it's the [indiscernible] comfortable without doing that in open label for the first time to see what's going on, to see it in real time. When you have it blinded, they can't tell what's going on in real time. This way, we'll be able to do it in real time. So several months in the program after they've been dosed and we're confident they've gotten past the steroid period and so forth that will wean -- start weaning their chelators and seeing how they're doing. The things we're going to look for in the Wilson program are urinary copper is a primary endpoint. That is maintaining a low urinary copper despite the lack of chelators. We'll look at non-ceruloplasmin serum copper as well and liver function test transaminases. But probably more importantly, we'll look at copper load of ceruloplasmin through plasma activity. That's what the transport normally does. It gets copper loaded in ceruloplasm and the one thing that's very different chelators is chelators only deal with toxicity copper. But the fundamental problem is Wilson is not loading copper onto the correct carrier, ceruloplasm. If you look at Wilson patients, their total copper levels are actually low, not high. They're low because you've lost through copper load of ceruloplasm. The copper that goes up is free copper, and it's a very small amount of the total. And while we focus on chelators, the truth is, the lack of copper -- correct copper distribution is at least an equal problem, we're just not being able to fix it before. For the first time with gene therapy, we'll fix both the toxicity and the proper distribution of copper. And I think the body is not by accident. If there's that much copper load of ceruloplasmin in your bloodstream, it's for a very good reason. The body needs it that way. Not having it not fixing that it can't be right, right? There's got to be a reason we just are not smart enough to know. But that's the one beauty and sometimes a rare disease research, it's for the first time you get to do something and look at what does copper distribution restoration do to Wilson? How does that fix the problem? Maybe the neurological -- variable neurological issues are at least as much copper deficiency as they are copper toxicity and you can't dissect the 2 because you've never been able to, but now we will. So I'm encouraged about the potential that restoring normal copper distribution as well as detoxification will give you the best result for Wilson disease. And that's why we're happy to be in the lead doing that.

So one quick follow-up is how much variability do you see in the copper levels once the patients had taken off the [indiscernible]?

Well, we haven't taken patients off copper. But when you take patients off their chelator, it takes time for the copper to start building, just not -- it's not instantly. It starts building over weeks, weeks to months. And it depends on the individuals. So we haven't done it yet. People have done it in the past, but we haven't done it. So we don't have enough of a feel for that. Our expectation is that they already totally decoppered. We put the gene therapy on that you won't see much change because the copper is being drained. And as soon as we remove it, we'll see the patients maintaining their copper excretion. It won't be out the urine though, right? With the gene therapy, the copper won't be going out of the urine anymore like it does with the chelator. It will be going into the bio system into the stool, right? That's how you normally detoxify copper. So what will happen is we expect to remove the chelator instead of seeing urinary copper rise, we expect it to stay down because the copper is now detoxified in a different way. And we'd expect ceruloplasmin to rise, copper load ceruloplasmin. So we'll have several measures we can get at. And one of the things I'll tell you about our gene therapy programs in general, they're all biochemical. There's a reason we prefer them because it's a lot easier to measure copper, ceruloplasmin, right, as endpoints of what's going on. Just like ammonia and OTC in glucose and GSDIa, these are easier wins to be able to measure quantitatively what's going on. And because you only need a few percent of normal 5% to 10% for maybe Wilson and OTC, 3% only for GSDIa. It's a relatively lower bar to get a meaningful win. And so those choices are not an accident. That's why these are good programs. They have a better chance of succeeding because of the biology and the biochemistry that we're using for endpoints.

Got it. How do you view the competitive landscape? Vivid and Pfizer, they have a similar program at a similar development stage? But we haven't seen any data.

They do. They're using a different truncated transport. The transfer is too big to fit in the AAV gene vector. We have a different one from theirs. There is works too. We've used -- we've made that version. We like the one we're doing better, but we think both could work. I think what they're doing could very well work. I do think that we have a better manufacturing strategy in the PCL platform. The cost to making our vector and reproducibility is much higher. For example, we do one run of our APCL platform. And we now have product through all the dosing groups, right, one run, whereas that's not true with HEK approaches. I think you can make a better quality vector. And the cost of goods for the PCL platform versus HEK is 80% reduced. So in the end, we're going to have a more commercially viable business by having cost of goods that's more like traditional and therefore, your margins are actually workable and you don't have to have a $2 million price to make it work, right, which to me is -- I think it would be hard to imagine a lot of products with a $2 million price getting global distribution, right? I can't see the health systems being able to do that. So the cost of manufacturing gene therapy is going to matter and the quality and cost is going to matter to get a real commercial global sold product. And so that's why I think for Wilson, particularly, the cost of goods improvement will be something that will allow us to manage a more moderate price and treat a lot of patients and do it more than just U.S. or major countries in Europe, but to a lot of the world.

Got it. Switching to the setrusumab program. You also removed the placebo group in the Phase II. So did FDA have any feedback on this and how does this change your stats plan for the Phase II and Phase III?

Yes. So we can see a pattern here. Removing placebos from the first part and same thing in this situation, the FDA would not let us combine that group with the placebo group to get us more power. So we said fine. We already know from setrusumab data in the OI a 90-patient plus 100-patient study that 20 milligram is a good dose. What we're doing in this study is fine-tuning when you go younger just to determine whether a young kid might want -- need more. So it's really not about finding the dose. It's about tuning the dose for different ages. We didn't really need the placebo for that. We're doing the placebo so we could use those data in the Phase III analysis. The FDA didn't want us to do that. I don't know what the EMA would have said, but they're not going to let us, we said, fine, then we'll just take the placebo out so that we can see the data and talk about it. So it will give us a catalyst of information, how does the drug work in children. And we'll be looking at primarily at biomarkers, 2 months' worth of data and we expect that by the middle of the year to have that data, which will tell the Street, hey, the drug is working. How well they're working, what our dosing strategy will be for children? And then we'll go right into the same studies, patient sites will go right into the Phase III, but the Phase III will stay blinded.

So based on the prior data and conversation skills, what are your expectations for reductions in fracture rates and how would this compare to what you see with bisphosphonates?

Well, in bisphosphonates, there have been 5 randomized studies; 3 failed, 2 succeeded. The 2 that succeeded had a effect size of around 20% reduction, which is not very much really. The FDA has been -- is not very pleased with bisphosphonates as a technique. They think you make more bone but not good bone, maybe bad bone. That's what they've been concerned about. I think if you look at the data in our deck, you can see that setrusumab creates more bone, but quality bone, which improves bone strength to normal in the animal models, whereas bisphosphonates improve bone density toward normal, but the bone strength is not normalized because they're keeping bone, but they're not making more good bone. So I do think we'll be far above what the 20% rate is. We powered the studies based on a [indiscernible] reduction. However, I'd be hoping for better than that. When you look at the bone strength in the animal models, you can achieve normal bone strength with setrusumab in the models, even though the collagen is still effective, which is kind of shocking. You think, well, the collagen is effective and that's why the bones rate, why is that happening? It turns out that an OI that the defective collagen causes the body to constantly resorb this bad bone to try to fix it, it's my teleological explanation and stops making more bone. And so what happens in OI, the bones get thin. The bone mass goes down. It's a maladaptive response to the mutated collagen, which actually makes it all worse. If you simply reverse that maladapted response, just make more of the bone, maybe another collagen is not great. But you actually get the strength for most practical purpose to near normal, which means you should have a more dramatic effect than just a 50% reduction. And the truth is, while we're talking about that for adults, in kids, in bone disease, they respond much better than adults. We saw that with XLH and Crysvita, the little kids respond beautifully to bone agents. Their bones are just more metabolically active. I think the same will be true with setrusumab. I think the bone strength will increase very quickly. Patients will feel better. I think the fracture go down by a lot. And I don't think it will be hard to beat bisphosphonates because we're making good bone where it needs to be made in a mechanism that is a 1-2 punch that you just don't have with bisphosphonates.

I think we're almost out of time. Can you just recap the key catalysts that investors should focus on for the next year?

Yes. For the coming year, obviously, Angelman is what a lot of people are focusing on, but we're not about Angelman. We'll have data on Angelman at the higher load levels and we'll come out when we have enough data to give you a definitive result, but we feel confident that we're going to get there with Angelman. Secondly, we'll have setrusumab Phase II data that will be coming out in the first half and we'll tell you about where that program is going in Phase III. In addition to that, the Wilson program, we'll be having open label data in the first cohort. Our expectation is to wait until all 3 cohorts completed, which will be toward the end of the year for Wilson data. GSDI is nearly fully enrolled. So you'll hear about the final enrollment of that program. Data would be 48 weeks plus some analysis time probably late in the year or early next year. So multiple programs reading out data next year. In addition to growing franchises that we have commercially and the Evkeeza launch going on in U.K. -- in Europe, excuse me. And I think Evkeeza will do very well in Europe and the reimbursement process will be part of what will be happening is launch. I think it's a terrific product that's going to change HFH for family and I think we'll become first-line for all HFH patients.

Thank you so much.

Thank you all.