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

Welcome, everyone, to the Tuesday morning of the 41st Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by Malcolm Kuno and Priyanka Grover from the team. Our next presenting company is Ultragenyx. And presenting on behalf of the company, we have the CEO, Emil Kakkis. Emil?

Thank you, Anupam. Happy to be here today in person. Hustle and bustle of JPMorgan again. It's great. So we're happy to be back in the mode and I want to give you an update on Ultragenyx. Where we are today. This is our forward-looking statement. Our mission since 2010, I think it's been going beyond every day to change the lives of rare disease patients. And we've been successful in doing that with 4 approved products and 5 indications in that time frame, treating more than 3,000 patients globally. And we've done it with precision and efficiency, 70% success rate for our programs. And while we have 4 approvals and 4 products, we also have 7 programs in clinical, 5 advanced-stage programs. So we've managed to fill the pipeline and advance those programs into pivotal stage as well. So I think we've been extremely successful in moving forward the goal of going beyond in treating patients with rare disease. Now the -- our specialized approach is not maybe so unusual, but it's about making good decisions and being smart about how you go about understanding what's going on in the disease, understanding at a deep level, and really understanding the biology and picking the choices where you can change the future of the patients by fixing that biology. And then picking the right drug and we're agnostic as to modality as we do different types of modes. We pick the mode is really the best choice for that particular disease and biology. The thing that's also very important is how you get informed by the patient experience. Everyone wants to be patient-centric, but the question is what that mean is that having a Chief Patient Officer or is it really getting connected and learning from patients on what's going on in their lives to understand how to design a trial. In our Crysvita program, for example, we found out talking directly patient stiffness was a critical component of their lives and it was their #1 complaint. The stiffness has to do with their bones, has to do with their muscles. We built that into the program and prove that the drug actually helps. Now it was really important because many people said adults would never get treated, but now more than 50% of the prescriptions are for adults who want the benefit of what Crysvita can provide. Same thing with true reason with Duchenne -- with the glycogen storage disease type 1a. There are a lot of ways of looking at this disorder where you can't make glucose, but what was important to patients with the fact that they have to take cornstarch every few hours, and there's like a gun to their head that they could go low in glucose at any time. That's the fear being able to remove the need to have that drive to starch is what would change the future for them, and that's our endpoint in that program is a reduction in cornstarch usage, the ability to be free of the fear of needing to take cornstarch. Two examples of how we use patient experience to design and develop our products. Now as we're growing now, we're a company that's both driving revenue growth and driving clinical data, and we have to do it in a very operationally efficient way. In the current environment, it's also necessity to make sure we're focusing on really high-value drivers, the large pivotal programs and try to leverage as much our current pipeline investment in people and infrastructure as well. And I'll talk a little more about our revenue growth and data generation here in the next couple of slides. Now reaching and driving revenue growth, we've built out a global commercial organization. The truth in rare disease, if you really want to capture the value of a product, you do need to become global to take the full efficiencies of gains that happened by being one company managing globally. And you can see now we've covered in North America, South America, Europe, Turkey and Middle East through our loan or through distributors, and we just added a Japanese subsidiary as well. That's now going to launch our commercial products there. We also manage compassionate use in other territories because it's a rare disease company, it's imperative to us to consider the needs of patients wherever they are. We have to run the business and do that well, but we also need to do it in the right way if you have the privilege of being a rare disease company must take the responsibility, too. Now what we've done since we go on to our first program in 2018 has gone to now what we predict this year to be between $425 million and $450 million in revenue, which I think starting from 2 people in 2010 to be talking about mid-$400 million of revenue is a tremendous success for the company in terms of commercializing our programs globally. If you look at our use of cash, last year was a peak year in burn. We used a number of cash investments related to the Genetics acquisition -- a company we bought that involved with the Angelman program. We also bought a license into Evkeeza product. And thirdly, we built out our manufacturing plant, which is now completed. This year, we expect our cash use to move down OpEx, cash used in operations to decrease actually from last year as well as our expenditures in onetime CapEx investments. And so we expect net cash used in operations to be well below $400 million. And that's part of also we've done to tighten up the operation and really be smart about our choices in how we run the company. Now with -- as a mature integrated company now and growing revenue base, we're in an important place for our future. And we spent a lot of time trying to look at how to increase our leverage, how to improve our operating efficiencies, being global commercial and having more products in place definitely start to add to gain as you build that out, you can now utilize that resources and get there. The GeneTx acquisition gave us an incredible value in the Angelman program, giving us full control of it and running it, we'll talk a little more about Angelman in a moment. The gene therapy manufacturing plant was a big investment, but now that's done and now it gives us an opportunity to really take control and control the cost of gene therapy manufacturing set us up as a commercial gene therapy company. And we have looked hard at our managing headcount growth as a company that has grown and making good choices in putting our priority programs first as we move forward. Key upcoming catalysts, I won't go in detail. I'll note that we're going to talk a lot more about Osteogenesis Imperfecta and Angelman programs today. I'll note that for the gene therapy [indiscernible] did achieve Phase III last patient in, and that puts us closer than have a time clock of a 1-year study, which would be at the end of the year, early next year when we expect to see data for that program. 701 program is enrolling, and we're pleased with how that's going, and that should finish enrollment this year and the 301 program was just beginning. So let's talk about UX143 setrusumab. We haven't spent as much time talking about it and perhaps the Street hasn't asked a lot about it, but I want to highlight to you, I think this is our highest value program, and I actually think it has the strongest data and it's -- I think the highest probably success. And I think it builds on our expertise with Crysvita and our knowledge of bone -- rare bone disease, 90% of the KOLs for Osteogenesis Imperfecta are aligned with our XLH and we're well positioned commercially to do this program. Now we've got into Osteogenesis Imperfecta through a partnership with Mereo. And the disease that they're treating is actually 3 types of Osteogenesis Imperfecta at least 60,000 patients. What I would say to you, I think it's significantly more patients at XLH and really with a higher unmet need with no approved products at all. What we like about the anti-sclerostin antibody, setrusumab is -- it has a wonderful mechanistic 1-2 punch. It recruits osteoblast to become bone cells and those bone cells will land where bone is needed, where the bone is weak. Then they [indiscernible] do those cells to start making bone. To recruit cells to make bone and drive them to make bone. It's a perfect answer to the question of weak bone and what they need. What we've shown and they've shown a number of studies that have been done, showing that when you give anti-sclerostin antibody, you do production of bone, you can see the little red spots in the bone. You're producing bone in the middle of the structure, but also around the surface of the bone. So this is in the long run will create strength by having both the fibers inside as well as on the surface being strengthened. So the mechanism is really the right one for what you'd want to see. And if you look what happens in Osteogenesis Imperfecta model, you can take an animal has sufficiently decreased bone mass or -- and bone weakness. And with an anti-sclerostin you can actually take that mutated animal and give them essentially normal bone mass and normal strength, essentially reverses the impact of the mutated collagen in these animals, which is, I think, a powerful mechanism that tells you that what we're fixing is the real problem. The fact that the bone is not strong in these patients because of the reaction of the mutation by restoring that production, we're able to get this to move forward. Now if you look at that compared to, for example, bisphosphonates, which are used in these bone diseases, with setrusumab, you see improvement in bone mass and improvement in bone stiffness and load. But when you look at the bone mass improvement that you see with bisphosphonates you get that and move the mass improvement, but you don't see the same improvement of strength because bone is not being put down where it needs to be. That's a distinct difference is bisphosphonates. The bone is not put down. It's just kept where it is. It's not laid down where it needs to be. That's why an anabolic agent like setrusumab is the right kind of solution for an Osteogenesis Imperfecta patient. But what happens in real patients, well, the study that Mereo conducted the ASTEROID study showed that lumber spine bone mineral density showed a very dose-dependent response, a very strong bone mineral response. A 9% increase in bone mineral density is double what's been seen with any other OI agent ever before. So it's a very profound. If you look at the radius failure load, this is actually a calculate measurement of the structure of the radius that the strength improvement is predicted to be a stronger bone. So the amount more bone there is actually done in a way that improves bone strength prediction, and you can see a strong statistical significance to that. So we think what we see in the animal models is replicating in the humans. This will improve bone mineral density in the effective way and improve bone strength in OI. The program right now is in a Phase II/III study. In the Phase II part, we're optimizing the dose. We've learned the dose of 20 that works in the adults very well. We just want to optimize for children to see whether the children might need more or not. We believe children though, and all the experience we've had in bone diseases, they respond better and faster than adults. So we expect to see even better results in how setrusumab will work in children. In addition to the Phase III study, which we'll be initiating then for that program, we have a second Phase III study in young patients, the most severe patients with fractures and which will be another randomized study, another opportunity to show how setrusumab will be better than a bisphosphonate in a very severe population of patients whose bones are probably going to be the most rapidly responsive. So I strongly believe that this product is a type of product that will be transformative for OI. It's just doing the right mechanisms in the right population, and we're excited about the potential, what we see for setrusumab going forward. Let's talk about Angelman. A lot of want to talk about Angelman. We picked up this exciting program. It's now been 2.5, 3 years ago, and it came out of the blue for most people, why would we be working at Angelman. But at that time, we were really intrigued by the science that come forth by Dr. Dindot. And that science told us about this disease locus, the Angelman locus. Now Angelman itself is a devastating developmental neurodevelopmental disorder. It's caused by deletion primarily in most patients of a piece of one of the chromosomes and that deletion then doesn't allow the expression of an important protein. By using an antisense oligonucleotide, we can turn on the father's copy of that chromosome and allow UBE3A to be produced. So the science that they discovered was very interesting, and Dr. Dindot, I think, had a better insight into this whole regulation. And then normally, we wouldn't go into a competitive space like this, but because what they had discover, we felt there was a distinct edge and what they were doing, and we had confidence in the work they were doing. Now we've announced the data originally from 5 patients some time ago, and I'll tell I'll just summarize where we are. We've been treating some more patients of Angelman syndrome with the deletion type here in a Phase I/II study. There's 4 monthly doses and 2 doses that are given every 3 months, and we've been titrating to different levels of load and try to move up through the dose range and find the right balance between safety and efficacy as we move forward. We announced some data later in July, and I'll summarize some of that data and give you an update on where we're currently. Now some of the data, and I won't go through all of it, don't have time, but the receptive and expressive communication results in the Bayley score were actually most profound. I studied the Bayley in a lot of different diseases. I've never seen the Bayley for change open-label, randomized control, it doesn't change. It's a very rigorous quantitative tool. And we saw 6 out of 9 patients with proven and receptive communication. What this means that the patients were able to hear instructions and follow instructions respond to their name for the first time. And these were very important for parents. If you look at what matters to parents is communication is a top issue with these kids. That improved receptive communication with some patients also included repressive communication, the ability to either to make silence, noises or express their wants. And the commentary from the families that this was very important for them, very exciting to them and when you look at natural history in these patients, it doesn't change. In fact, the [indiscernible] patients have zero change. So over time, in expressive and reception communication. So we're excited about these results and these continue in these patients as we have continued treating them over the last year. The other really strong result was in the sleep area, particularly, and 3 of the patients that had in the young cohort that had very severe sleep problems began sleeping through the night. And you can see from the quote how important that is the families. If you have a kid who's developmentally delayed, who's up all night, that means you're up all night or someone's up all night. It's very disruptive to the family and causes a great deal of difficulty plus the kids that now are not slept. So when -- in the morning, they are not well slept either. So they're irritable and difficult to have maladaptive behavior. So sleeping actually becomes a really big deal. And it's one thing we've seen the drug do very well. It's a change in sleep patterns and patient able to sleep normally and wake up appropriately. Now with the safety profile, we've been now treated 23 doses in the new Phase II study. Loading doses range from 2 to 10 and maintenance doses in the range of 10 to 14 now up to 14. We have 10 patients with almost a year of exposure and 5 patients well over a year of exposure. So a lot of patients. Now we've had one additional AE of special interest, which is a lower extremity weakness, it is similar to what we saw before. This patient had gotten a fourth dose loading at 12. It was a 17-year old, a very small 17-year-old, a 46 kilos and he had a very severe scoliosis. So it was an unusual kid. He had moderately elevated CS protein and some of the difference in weakness in walking, but that seems to resolve very promptly. He's doing fine now. We've had no other incidents of this lower weakness, but we continue to dose patients and continue to work toward progression of the program. Now if you look at the whole story right now, we haven't put out a major new data update. We will do that later this year. But what we're seeing is very encouraging signs of clinical activity. We're seeing clinical responses at these lower loading doses. And we're continuing to do that dose escalation through the maintenance doses. We'll add some more patients in an expansion cohort, which will help give us more information about what the safety and efficacy looks like in the middle doses. And what we're seeing, though, I think, is very encouraging clinical activity, the Bayley score type of changes, improvement in sleep, improvement in maladaptive behavior. Some of the kids have a lot of maladaptive behavior problems and including things like using a fork or walking in more stable gate and better gate. And so we're encouraged talking to new investigators and parents. We talk to the parents about how important these changes are. And honestly, they are driving to the clinic, getting lumbar punctures every 3 months, many of them for quite a while now. So it's a very worthwhile thing. Now from the original 5 patients that had a lower extremity weakness problem before, they've all wanted to get on treatment. We now have 3 of them back on treatment. 2 have flown to Canada to get their treatment, sort of reverse medical tourism. They're doing well. They're gaining ground again and very excited about how they're benefiting. They've had no weakness. We had one patient that we approached FDA, the investigator approach FDA for early access program, the FDA granted it, including a cap of 7.5 milligrams, which was higher than we had before. That patient after one dose, actually, within a couple of weeks start sleeping in through the night. And you can see here at the note from the mom the first time they got 1 dose of drug and they were sleeping through the night and the whole family was excited and the kid. You can see what she talks about following directions learning, playing with his kids, friends, he changed and they lost all that. So they were like she wrote me this in passion letter to please be a hero from our kid get this kid treated. They wrote to the FDA with that and the FDA agreed to let them get dosed. They're back on track. They're excited. And I'm really pleased that even at the lower doses, they got to sleep effect immediately and the kid's feeling and doing better. So I would say to you the very unusual. And for me, and I would say actually a history, how many times we ever treated anything and improved developmental function within weeks to months? It just doesn't happen. That's something very special. Certainly, one of the exciting things, certainly I've done in my career. So very confident about the value of GTX-102 and its ability to change the future for our Angelman. And we're working through the dosing and we'll put out data more here about where we are on that program and how we're going to head to Phase III. So next steps is to get the FDA to harmonize and let us get the protocol open for expansion in the U.S., expanding, of course, ex U.S., which are ready to start and later in the year, Phase III planning. So I'll touch on the gene therapy franchise. I won't go into detail. We have quite a lot, but it is an important area. And while gene therapy has had its ups and downs, the truth is regardless of what the ups and downs are, the gene therapy has the ability to do something we couldn't do any other way before. That's not going away. That problem, the gene therapy solution is a solution of things you can't solve any other way. And so we have a number of programs, I think, will be the first ever treatment for these diseases, and I think we'll be a profound change for the future. I won't go through all of these, but there's 4 programs in pivotal studies will also have an IND this year for our CDKL5 deficiency disorder and an early stage program for Duchenne as well. If you look at our pivotal program, GSDIa and OTC are the ones we've acquired with Dimension originally. GSDI is actually Phase III is fully enrolled now, and that's gone well. The Phase III for OTC is beginning. We acquired the MPS IIIA gene therapy from Abeona. And we're going to be talking to FDA about how to get to accelerated approval. We think it's time for the FDA to change our attitude about accelerated approval. While we can monitor those patients and show that they're getting the clinical benefit, I think it's time to change the future for gene therapy and for this disease and get accelerated approvals would be the order today. It shouldn't just be for Alzheimer's [indiscernible] these type of diseases or the biochemistry is even better and more precise. This is the right way, and we've always been an advocate for a change in improvement in what we do in regulation. The Wilson program is moving along very nicely, and we'd expect by [indiscernible] to have enrolled all the dose cohorts and would be coming to data fairly soon. And we're excited about that. And one thing I'll say about Wilson, some people have told me, hey, key layers are fine. They're not fine. Key layers don't change the problem in Wilson. The problem in Wilson is copper distribution. The toxicity is part of the problem, a copper distribution has failed. And we don't know what the truth is what copper distribution done correctly and Wilson sees will do for that disease until we do it. What I'll tell you is one of the ones I'm sure will change people's mind of what really is going on in Wilson Disease when we get there. So we're excited about the Wilson possibility of change in future of Wilson disease patients by doing -- fixing the problem, not just stopping up the extra copper. Finally, the Pinnacle platform and our gene therapy franchise with the Wilson program, we are using the Pinnacle PCL platform. The great value of that is it reduces the cost of making the gene therapy by 80%. It also allows us to go to bigger scale and to be very efficient. And we've taken the platform. We've now built a plant that will run that platform and can run HEK triple transfection as well. The plant -- we'll be able to take on a number of our programs will give us the flexibility, quality, cost control to allow our gene therapy franchise to become true commercial programs to be good opportunities, both for patients and as a business. Foundation for value generation. I think if you think about where we are, what's the next step that's going to drive us forward and we like to put this forth to you that any one of these 3 osteogenesis imperfecta, Angelman or Wilson could drive us forward as a company, being a major driver of value for us. And yet we have all 3 coming forward. And we think people would think hard about the diversified strength of the company and how many ways we have to grow and the fact that we have an established base of 4 products also already generating revenue. I think it puts us in a very unique position of value creation that you don't see too often in the rare disease industry. So we are trying to lead and we are leading the future rare disease medicine, both in what we do in drug development, but also what we do in policy. We have one of the most robust pipelines, especially advanced pipelines in rare, broad commercial global footprint generating revenue and very effective, strong clinical execution with a high success rate. I think more important than anything, we have -- we're inspired by the mission and the responsibility that comes with the privilege of being a company developing rare disease treatments. Well, thank you for this and time for a chat.

Thanks, Emil. So just as a reminder, 3 ways you can ask a question here. You can see it in the digital book you can e-mail me or if you want to get bold, you can raise your hand and we'll call on you. But probably the most common question that we've gotten since the update on Friday after the close as well as the disclosure of the slide is on the adverse event of special interest in Angelman. Maybe you could expand on what exactly you were seeing there and how you think about this AE like as you're dosing now more and more patients at higher loading and maintenance doses.

Well, the case is a little bit complicated, and I probably wouldn't have picked someone with scoliosis for a lumber puncture-type treatment. We'll have that discussion with the investigator, but the truth is, when you are scoliosis, it's hard to do the procedure. What we're doing with the procedure is, we're putting the drug in the lower back, right, in the lumbar space. And we're putting the patient into a number, so the drug moves to the north, and we put a flush drug to move along. Part of what we know is the genesis of the problem is it's too much of a high concentration of drug locally. You're the nerve roots, right, where you put the drug in. That's sort of the genesis of the problem, highly localized irritation. It's a very simple solution, but I think in this case, the solution didn't work. I'd hate to make conclusions about the overall program from this rather unusual patient. We have a lot of people getting 10 to 14 milligrams of drug right now without any issue. So we think we have to manage the process of how it's done, but we don't think it really changes the overall outcome for Angelman.

Questions from the audience? Emil, I think you want some setrusumab questions based on your comment on the podium. So I'll ask one. But can you remind us of the key biomarkers of focus and what level of benefit you'll be looking for in the midyear update?

Well, in the midyear update, let's be clear, we already know a dose that 20 mg per kilo gives us an excellent bone mineral density response. We already have that in hand. The only question we want to know is, if you're a 5-year-old, not 25-year-old would you might need more drug in order to get the same level of exposure in pharmacodynamic effect. So it's about tuning the dose, not about defining the dose. So the tune a dose, we want to look at what P1NP. P1NP for those who don't know what it is, it's the little pieces of peptide that get cutoff of collagen, your body makes collagen in the form of little tags on the end. And when the contractor lays it into your bone, it chops off the tags and they slot in and they form fibers. When you chop off those -- those little tags, they end up in your urine and then you can look at those tags and tell you how much bone is getting laid down but how much collagen being laid down. So that's what we're going to look at. If we see a 10% or 15% improvement, it doesn't matter. I think if we're looking for in the young kids, if we see that the PK concentrations are not as high as the 20 mg dose and we're getting more where we want to be and the P1NP is 50% to 80% more then I think that would tell you that there is a meaningful benefit in the younger patients to give a higher dose. We don't expect that to be needed for the older patients. We're including them in this test just to show that they -- we have topped out on the effect. And based on everything we think we have. So that's kind of what we're looking. We'll use the P1NP. Now we know from the data that was shown with a very nice data set, the P1NP actually will predict bone mineral density in the patients over the year. And so you can look at the first couple of months and know what their bone mineral density pattern is going to be. Even though bone mineral density is building over an entire year, the first couple of months of P1NP will give us an adequate predictive value of what's going to happen with bone mineral density.

We actually have a question in the portal related to setrusumab, which is, will the drug work differently in cortical versus cancellous bone?

It works on all different types of bone, frankly. That's part of that picture I showed you. It works on the surface and within the middle of bone. So if you look at the -- in fact, the one thing you have to understand when you measure bone mineral density, is often easiest when you're looking at, for example, lumbar spine to see the bone mineral density improvement. When you look at long bones of bone mineral densities, concentrated around the outer [indiscernible]. And so you don't see the bone with density change as much. The percent change isn't much, but it's because it's on a long thin shaft. When you look in the vertebrae and the only reason we look at the vertebrae is they have a lot more individual spicules of bone that you can detect that change. And the thing I would say to you is whether it's on -- it's really affecting both, it's just the way you look at bone mineral density, it's different between those types of bones. But what I would say to you is very important is that the lumber spine is actually very important in OI. People think about bone breaking like the long bones. But your long bones you can always fix, but if you're vertebrae collapse, there's no fix for that. And with these kids with type 3 and type 4, their vertebrates are actually collapsing as their kids and they shrink and they end up causing nerve compression, back pain problems, they end up in wheelchairs. That's the devastation of type 3 or type 4 OI. So the lumber spine benefit in that type of bone is actually extremely important in keeping their spines long and keeping them from having the kind of compression and loss of function that I think is devastating. That's why treating the really young kids like we're doing in that study could be very important to be able to take a 2-year old and change their future and be able to show that as early as we can in the development and commercialization of the program to show what this can do to change their bone future. In a bone type that you can't put a cast on it. You can't fix it once it's messed up.