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

Okay. We're going to go ahead and get started. Thanks, everybody, for being here, and thanks for attending. This is the 34th Annual Piper Sandler Healthcare Conference. My name is Chris Raymond. I'm one of the lead -- Biotech leads here on the research side at Piper. Very pleased to have with us Emil Kakkis who is the CEO -- President and CEO of Ultragenyx. Just to go over the format here, this is a fireside chat format, so very informal. So if anybody has any questions from the audience, please raise your hand, I'd love to get some participation in here for you guys. I have probably 3 hours of questions for Emil, but we only have about 20 minutes. So we're going to try to pack as much as we can in here. But before we do that, Emil, maybe just provide for folks who might not -- for the rare investor who doesn't know Ultragenyx, maybe just give us a sort of a 2- to 3-minute overview of the company and then we'll jump in.

Sure. So Ultragenyx is a company focused on rare and ultra-rare diseases, it's been in business for 12 years. Started with me and my secretary and now more than 1,000 employees globally. We have 5 products or 5 programs, 4 products that are commercial already, producing revenue over $300 million this year. And we have 5 programs in advanced studies and a couple of other earlier stage. We work on both gene therapy, antisense oligonucleotides and traditional biologics and small molecules among our portfolio. We try to focus on the right product for the right disease. And I think the biggest most exciting things coming forward are the Angelman program, which a lot of people ask about, which is an antisense oligonucleotide for a rare neuro development disorder. We've shown some exciting results and a safety issue. We are working past that safety issue and back in the clinic. We can talk more about that a little later. Osteogenesis imperfecta is an anti-sclerostin antibody setrusumab partnered with Mereo. That program, I think, is extremely important to us. It's showed excellent data in a nearly 100-patient Phase II study and the ability to improve bone strength, we think we'll improve the ability of patients resist fractures. Combine that with a gene therapy franchise with GSD1 farthest long in Phase III, but also enrolling in Wilson and starting soon OTC. Three different programs in gene therapy. We've added in Abeona from Abeona, a deal with MPS IIIA gene therapy that's already passed the main part of it study and fits into our general gene therapy portfolio. We have a manufacturing plant that we are completing for gene therapy. And beyond that, we have, I think in an early-stage pipeline, but we are currently, I think, probably 1 of the richest pipelines in the business. And I think we're -- we've been pretty capital and time-efficient despite the pandemic. So I'm looking forward to continued revenue growing and a number of programs coming through a pivotal program with a number of catalysts in the coming year.

Awesome. Well, yes, tons to get to -- you mentioned 1 of the richest pipelines, certainly the richest in my coverage universe. So lots to talk about. But before we do that, maybe Emil, we get a decent amount of questions around the KKC sort of profit share. I wanted to ask about this. Your North American profit share is supposed to revert to a royalty structure early next year. I know you guys announced last quarter on your earnings call and extension of this agreement to increase the sort of the joint commercial effort for 1 year after the transition of commercial responsibility. But just overall, talk about what this transition means to your U.S. commercial infrastructure. I know you have setrusumab potentially coming online soon, but just give us a sense, I know you get this question, how do you answer it?

Well, the transition planning with KKC is all about assuring that we continue to grow the Crysvita franchise, and mutually important to both of us. Important thing to recognize is that the before and after it doesn't change our position too much between being a profit share versus a royalty stream. In the profit share, there is a transfer price that they get to around 30% or so. We're splitting with 70%, which is, let's say, 35% to us, then our expenses of commercialization come off of that. Going forward, it will be a 29% royalty. We have sold some of that royalty, but that's what the royalty is. We don't have the full commercial responsibilities. We have agreed now with them to continue to support with their support from field team, it won't be quite the same size, but a good sized field team that will continue to promote in the space for an additional year and after that we'll then [ run ] back to doing just medical genetics is a long term outcome for us in U.S. We don't disappear from commercially, we still continue in medical genetics where we have multiple other products that we'll be able to leverage. So our commercial footprint will shrink some, but the benefit of having both companies in the field is an overlap now, which will assure the transition goes well. We'll have more people on Crysvita during the year from '23 to '24, allow us to drive, we think, drive the revenue and do the best for the transition to ensure that we're there on a day-to-day basis to make sure the product does what it needs to do. And then with time some of our employees will move over in April to them, from our commercial team [indiscernible] charge them with some employees and we think the overlap plus the transfer of some employees will set up Crysvita for success. So we don't think it will be a big change. And I want to be clear, we're not losing Crysvita, we're just -- it's just who is the commercial lead now.

Yes. Right. P&L neutral as it is working out. Just, I guess, historically in terms of the way you guys have communicated around Crysvita, I think you've got a cadence of providing guidance at JPMorgan in early January, but next year is going to be different. So not to put you on a spot, but have you guys thought a little bit about how to handle that going forward now that it's the better part of 2023 will be under somebody else's.

Yes. So our expectation is still to provide guidance for Crysvita and the other programs. We'll work out that guidance with our partner on what that would be, but we'll do that guidance early on. We're also planning to put out guidance on cash burn and other financials because the beginning seems to be rather important to people. For programs like Evkeeza that's launching, we won't put guidance, we'll wait for a few quarters of progress before we will start. But Evkeeza launch will be ongoing in Europe, and we're highly encouraged by what we're seeing from KOLs. But right now, it will be Crysvita and the Dojolvi, Mepsevii programs will be the guidance we will provide.

Excellent. Good. Okay. So maybe let's talk about Angelman, sorry. I know everyone wants to talk about that. But -- we get -- still a lot of questions on this. I know we're expecting an update sometime in next year. I think that number will be 14 patients, as I understand from cohorts 4, 5, 6 and 7, and then some from 8 and 9. But just given that the expansion cohorts won't begin enrolling patients into the first half of next year, is it fair to think the next data update would fall in the sort of mid to the second part of the year? Or how are we thinking at not to ask for more granularity than you've given, but how are we thinking about that in terms of knowing we know about the enrollment pattern?

Yes. Well, we've been non-committal about the timing because even cohort 4, 5, 6, 7 are titrating up in their dose, right, and are collecting more data. What we said is we won't come forward until we have what we believe is a compelling set of data on the success of the product that helped guide us on where we're going next. We've been non-committal because we just want to give ourselves the opportunity to do whatever we see. It won't only depend on a fully expanded data set, which would take some time. It could include some expansion patients, some of the existing patients. But all the patients now, as we've announced in the quarter, are in the 10 to 12 dose range, which we think is the range we need to be in, which is from the beginning, Chris, we've been saying that's the dose range, that from [indiscernible] primary study should get us where we need to go. So we have a fair number of patients hitting those dose levels right now. So that will help us. So the timing, I wouldn't necessarily say is second half. It could be middle of the year, it could be earlier. And it depends on when we have enough data to say, hey, we've got something that we believe it sets us up for the next stage. All I can say is we're very encouraged. We are planning to expand into the 20 and 20 in the young and the older cohorts. And I think we're excited about the fact we're not seeing the safety event or even a hint of inflammation going on, which gives us -- means we're in the therapeutic range, and we can do this safely, so far. So we're pretty pleased. And all I can say is we've seen, we've discussed before is the kind of response you don't see from placebo, [indiscernible], it's the same as placebo. It's not the same. It is substantial, and we're -- we haven't set what the primary endpoint will be, but we'll -- we have plenty of opportunities on what we might describe would be a great way to assess Angelman syndrome, at least 5 domains to work with. So I think we're really encouraged about where it's going. And looking forward to putting out more data when it gets -- when it's ready.

And so another question I get a lot from investors is you obviously made a lot of changes to the protocol, the titration, the Trendelenburg, the administration, all these things, and you haven't seen the safety issues yet. But the question I would get is, well, what makes you confident that you're not going to see anything as you continue to dose higher I'm sure you get that question as well. How do you answer that?

Well, it's real simple because when we saw the effect when we gave 20 or 36, right? That effect on the brain from the cord up to the brain, we didn't see any problem up there. So we gave enough drug to cause all that benefit without any side effect up in that part. We only saw it at the very bottom. Does that tell you something? So if we simply give the drug required to get the concentration there, but don't let it settle in the back, we'll change the pattern what we see. If that drug was causing an effect up and down the cord at that dose, then it told you we can't distinguish between dose, but because it's only in 1 spot, it tells you that we just need to avoid concentration of the drug in settling and we can still achieve concentrations that would give the effect of 36 or 20 up in the brain without necessarily causing impact, right? Because that concentration did exist, was there. It caused the effect. Does that make sense to you? I actually thought if you have a safety event, what we had is the best kind because it's like a local application administration thing. Those are the easy ones. The fact it was highly localized and it was all administration based. That's easy. If we had a symptom effect that was systemic that we couldn't distinguish between the 2, it would be harder. But because we can, we simply stop the kids from sitting up within 2 minutes, letting the drug settle, make sure they stay laid down in Trendelenburg and flush them keeps the drug mixing and should allow us to get to a concentration that gives us the effect we hope for, without having that highly concentrated local effect that causes trouble. So once we saw what we were seeing, I actually was encouraged as this was solvable. And I think we have. We've been giving multiple doses of drug, we're not seeing the issue at all, and we're just keeping the kids sedated for another 45 minutes or an hour, in Trendelenburg, head down a little bit and the additional flush just helped move the drug and get it mixing. So I think it's working. I don't think it's going to -- I think we can get the drug concentration without seeing a side effect just because we didn't see an effect in the brain in the quarter before. So that's why I'm pretty confident we'll get there.

And so just in terms of the other audience here on this, which is the FDA. And I know you guys have been working with them. They've asked for a clinical study report, CSR. Where -- maybe just give us an update where do things stand on the status of that?

I never look at the FDA as an audience, they're more like a participant anyway. It would be nice if they are audience and we're just doing the show. But they're an active participant, obviously. They are very conservative and they're trying to protect American public. But think of this situation, we understood what was going on, they just weren't sure. So we need to provide them more data. So -- in the meantime, the ex U.S. authorities, Canada and U.K. were totally agreeing with our philosophy of what was going on, how to manage it. They had 0 question. We had no issue getting through and getting open. So explain it, why it's too dramatically different responses. The good part is we did what we said that it worked. Now we take all that data back, which they want a CSR. I mean they want a more complete story and we provided and we have additional information on immunological response, which we have provided. And we're having that discussion with the agency. I believe we'll be able to get open and get the protocol synchronized. And I think they just needed more evidence to support it. But that's partly why we went -- as soon as we had the problem, I knew we were going to have to open up ex U.S. They've been through this before. Particularly the MHRA in the U.K. tends to be very forward thinking, progressive, and they can open the door to things they wouldn't necessarily get open elsewhere. The Canadian authorities were also. So that put us a way to get to the end. Our hope is to get the U.S. open and be able to expand in the U.S. So when we need to expand the patient numbers, we'll include U.S. sites that would be our hope. But we're encouraged by where we're at right now.

And remind us, is that the last sort of gating factor to harmonizing the U.S. and ex U.S.?

Yes. FDA just need to agree to doing that to open up the higher dosing cohort. They've allowed the 2 mid-core dosing thing, which was a -- back open the door and we started it, they need to allow us to synchronize the dosing which I think they can because now we have the data thing it's safe to do.

Excellent. Okay. So maybe let's just talk about the competitive setup. So Ionis, Roche, they've got competitive programs. So it does seem Roche, their time lines have slipped. I think they're now expecting year-end '23 or 2024, I think for an update. Just remind us the setup versus these other programs as you see it.

Well, I think the other programs are based on Ionis patent and where Roche is operating is when the Ionis patented area, which came from original ARPO [indiscernible], which was based really on mouth data on where this antisense transcript was that we're knocking down the regulator that's stopping paternal chromosome expression. What Scott Dindot figured out is that the fire prime end of the gene, which is a further -- a little further over is actually more important, that is more potent ASOs designed there. For some reason, their patent ended, and then there's a little region left. That region now is the patented region we have and we've shown that those are much more potent than the one further downstream. And so while the further downstream can work potency could be many form different. And from our own comparison, what Roche has put out we are 24 milligrams of their drug, which is only seen presented in 1 form, got knocked down to occur. We are operating at 1 milligram over 1 or 2 few doses. So we're on the order of 10 to 24 more potents than their molecule, which in the ASO world is extremely important. So while Roche is out there and Ionis as well, we did the deal and work in this program knowing that only because we felt there was a scientific advantage of what was being done in terms of the design of the ASO, the region patented that was unique and separate. So we're not concerned. I think the fact Roche has been in the clinic as long us and have no data out, you have to wonder what's happening, why you're not seeing any data, haven't heard anything from Ionis yet. They're a little further back, and they're moving along. But I actually don't -- I think our future is dependent on what we do with our program right now. I'm not really as worried about the competitors.

Excellent. Okay. So let's switch gears. Setrusumab, so you filed a protocol amendment to remove the placebo group in that Phase II portion of the Phase II/III Orbit study. Maybe just frame the rationale for removing that placebo portion, placebo group.

Yes. Well, I think it's important to plan the rationale why we had it in there first, which might help you. Originally, our thought was we'll do 10, 20, 40, placebo, 20, 40, and then we'll try to include those patients in the Phase III population for analysis, the ones that were on 20 or 40, but when it came to the FDA, they really weren't interested in us doing that. They were creating issues we are not doing that. So turned out, we wouldn't be able to -- so we wouldn't gain any efficiencies, which is what we hope to do. So then without the efficiencies, the issue of putting kids on placebo-controlled trials having never seen kids treated before become somewhat of an issue and wasn't getting us any benefit. So we decided to remove the placebo make it easier for investigators treating kids for the first time to treat some kids who had to come off their current bisphosphonate treatment. They entered a trial get confident about the drug, learn and allows us to learn on the fly a lot faster because we can be seeing data as it comes instead of batch, right? So every time a data -- patient's data comes out, we can look at it. It just allows us to be more facile and looking at evaluating and determining what the dosing algorithm will need to be. So it's just -- there's no benefit to us keeping them on placebo any longer. It's why we took it out, is better for patients and allowed us to work more in a more fluid fashion. The patients -- we are already enrolling patients. The ones that are on placebo will get put on drug. And we'll proceed. We should be able to get data on the biomarker by mid next year. We'll enroll the 24 and get data, which will tell us about how much P1Ps being generated, which we've seen is very highly core how much density you can achieve and the main purpose of this is we know 20 mg dose. So it's not about dose finding. It's about dose optimization.

Do kids need a higher dose is a question we're currently answer?

I think 20 is a fine dose for the older kids, but if you're 5 or 8, would you do better having twice as much drug or 50% more. So we'll look at the PK, the concentration of the drug, the pharmacology, modeling and the P1 and P to try to get a sense of what's the right dosing algorithm because we don't want to leave efficacy on the table for the young kids where the disease is the most important. Just for reference in Crysvita, the dosing in children is 1.6x the dose of adults, right? There's already a history of that kind of difference existing. So we want to make sure we don't underdose kids by using data from an adult dose study. That will be what we get. You'll hear more data. You'll get -- this way, you'll also get a disclosure around what happened. The catalyst or the middle of the year about how it's working. And I'm highly enthusiastic about setrusumab and anti-sclerostin as a strategy of our OI. So we'll get our first look next year.

So before we started this talking, Emil you never sort of [indiscernible] is guess the dichotomy that's going on right now in terms of the level of advancement that's been happening in the space and how Wall Street or investors or the market is missing and not noticing this. Obviously, we've seen sort of ups and downs in the market. But I guess there's no space that's more acutely like that, than gene therapy. Arguably, we've been arguing this for a long time that your gene therapy assets are getting almost 0 credit. There's a lot of gene therapy companies whose gene therapy assets are getting 0 credit. Gene therapy only...

Negative credit. Below cash.

So -- but you've got a lot of stuff coming. DTX401, for example. So you've demonstrated already with this asset, proof-of-concept. You've had ongoing updates. I think at ASGCT in May. You had continued durability enrollment, I think started earlier this year, you're guiding the last patient in by the end of the year. Walk us through sort of the setup into this event data potentially next year and next year. What should we be thinking in terms of the timing and what does success look like? And how should we be gearing up as investors think about that as a value driver?

Great. So in GSDIa, one of the reasons -- I think it was a good indication is that you really only need a few percent of normal in the liver to get to normal, only a small amount could have a dramatic effect. We've shown now the gene therapy that we can get 100% response rate. Everyone responds, which I think is special. And we've shown that you can reduce cornstarch reduction and change people's life in a fundamental way by changing their dependence on continuous oral glucose infusion as a way to keep themselves from crashing and dying. So the study and the interest in the study has been very high with key opinion leaders as well as patients. So we had a lot of people lining up. We enrolled -- we've enrolled very well, and we're at the end of enrollment, and we expect to have the patients in the study this year. There's a baseline metabolic period where we -- we put them in the study and we have to monitor them for 8 weeks and manage their starch and things and then they get dosed. So we're in good shape to fully enroll and be on track. Once last patient in occurs, dosing occurs, then there's 48 weeks from dosing to the end of the in-life period of the study. And then an analysis, clean lock and so forth. So it's likely end of the next year, early '24 before the Phase III data would come out, based on where we're at, at the moment. But we're feeling confident about that time line now that we've we're going to get to where we need to go on that program. So it's been exciting to see that. And you see the global enthusiasm for getting into study. We've had to get some sites down now because we're getting to full enrollment, which was that people were upset, disappointed, which we hear about, but we're excited about that one. It's going well.

And then another 1 that's reading out in the same time frame as your Wilson UX701 new program. I think the design of this trial, however, shifted maybe a little bit along the way. Sort of walk through those changes and what we should expect to see when you present those data in a similar fashion.

Sure. Just like in OI, in Wilson disease, we plan to have placebo-controlled Phase I study, Phase I/II, where we have dose groups and placebo, and then we include some of those patients for our Phase III. That, again, had the same kind of issues with combining the data with the FDA. It also is hard doing it first in man with placebo because you were trying to manage their existing key layer therapy and other things. So we decided just to remove the placebo to simplify it. We had already patients enrolled, but we'll treat the ones that are already enrolling on placebo. Trial is going to be 5 patients for 3 different dose cohorts, which shortens the time because there is a necessary staggered time frame that FDA required. We couldn't enroll all of it. So it will be 5, 5 and 5. We expect to have that enrolled and to have data from last patient in 6 months of data by the end of the year, early '24 as well. But because openly, we'll see what's going on in the Wilson program all year long. And it has already started enrolling. And so we're encouraged. I think Wilson gene therapy is in the situation where people say, well, look, there is a chelator, it's working fine. But I don't think you really know what's going on with the disease, you start treating it correctly. When you treat it correctly, you often see things you didn't realize. People told me adults with XLH, by the way, Chris, were fine, they didn't really need anything. We start treating them. Even the ones that said they were fine, they said, actually, I'm not fine. They don't even realize how fine, how not fine they are until they actually get treated and realize, oh God, I've not been operating correctly. I think Wilson will be like that. I think missing copper distribution is a serious problem and that chelating takes the edge off the problem. It doesn't solve the problem, and I think a gene therapy could. So we're excited about the potential. The change in future for Wilson disease in a more profound and fundamental way.

Well, as I appreciate, we've only scratched the surface here in terms of your pipeline. So lots going on, but no more time. Please join me in thanking Emil for the great talk.

Thank you.