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

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analyst. 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 Ultragenyx with CEO, Emil Kakkis. Welcome, Emil.

Thanks for having me, Jeff.

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

Sure, Jeff. Ultragenyx now has been -- well, it's been in existence for 13 years, and with 4 approvals and 5 programs in late-stage development. And I think of entering a period of multiple important catalysts for the company. Our program in osteogenesis imperfecta, setrusumab showed phenomenal bone mineral density improvement recently, and we'll be talking more about that program and fractures, which are important part of osteogenesis imperfecta at our Analyst Day on October 16th. Our other programs with 3 gene therapy programs, GSDIa, OTC, and Wilson that are entering important stages of their development. And we have probably the program most people are interested in, which is the Angelman program, GTX-102, which will come up to an update at the October 16th meeting where we'll talk about the extension patients and the changes they're observing and their clinical meaningfulness, and we'll follow that up with expansion data on a larger data set in the first half of '24. We also have a gene therapy program for MPS IIIA that we acquired. And as a company, I think we've managed to build a strong gene therapy franchise, and I think there's a lot of room for AV value in treating human genetic disease. But in addition, the ASO treatment, GTX-102 or traditional antibodies are places where we can gain value of the company, and I see us as continuing to grow our commercial business and a series of catalysts in the next 6 months and potential multiple approvals. Going forward, we'll put us in a position to be one of the leading rare disease companies in the business.

Great. Let's start with setrusumab. A few months ago, you mentioned that you reported data from the Phase II/III study. So can you just talk about that study and remind us of what you saw?

Yes, the Phase II/III ORBIT study had 24 patients in a Phase II portion, which allowed us to look at dose, whether we're going to dose with 20 or 40 milligrams. And we reported data showing in this disease, osteogenesis imperfecta. The patients at baseline have -- they have a defect in their collagen, but they also have a more fundamental problem, which is they don't make enough bone. Their bone mineral density was minus 2 Z-score, which means they're at the fifth percentile of the population of bone mineral density. So that's how weak their bones are. We showed that giving them setrusumab that they had a massive increase in bone mineral density, essentially about 10% in only 3 months. The good news about that is said that the patients with osteogenesis imperfecta have bones that are ready to start making bone if you simply stimulate them in the right way, they'll start making bone. And we think that will translate into substantial improvement in bone fractures. So we're impressed with the speed and the magnitude of the effect that we were seeing. We didn't see that much difference between 20 milligrams and 40 milligrams, which kind of said, look, once you turn the system on, it doesn't matter trying to turn it on more is when we matter, turn it on, these kids are ready to respond. And that's what we just want to make sure that we didn't miss efficacy, and we're pretty comfortable with the 20 milligrams dose, which was the easier way to go forward. So we will be putting out more data on those patients now through 6 months and/or longer and looking at fractures. We said at that time as the patient had improvement in bone health, bone health meaning the appearance of fracture, bone pain and functional activities like how they were doing, which told us patients are doing well and we're pretty encouraged. But I think there's a lot of interest in the Street on the exact effect on fractures, and we'll be talking about how this cohort of patients fracture frequency changing over time between the first month, let's say, second month, third month. And that allow us to give you kind of a sense of what the fractures are looking like and a little bit more about the overall bone health. So we'll be putting that data out. The trial is already into the Phase III portion. We're enrolling the Phase III, and it's moving along well. And our expectation is to get close to finishing enrollment if not finished by the end of this year. And that program then will read out between 1 year to 2 years depending on how many events there are. With regard to another program we have, which is the COSMIC trial, that's the younger patient trial that's head-to-head with bisphosphonates. That trial is also initiated and ongoing. It will give us a placebo-controlled trial where we can show the fracture benefit in a wide range of ages, improve the efficacy of the drug and the [ Wilson ] effect on symptoms. The other trial will help prove head-to-head against bisphosphonates that setrusumab is a far better treatment. And we're very comfortable that is true. Bisphosphonates have a 20% reduction of fractures, but our expectations for setrusumab will be at least 50% or greater fracture reduction.

And so maybe on the last point on -- like what are you expecting for the IV bisphosphonates?

Yes. The historical data, there have been 5 randomized trials in OI, and they had only 2 of the 5 studies were actually positive, which tells you the treatment effect size is small. The treatment effect size was about 20% reduction, but people are using because there's nothing else. So it does seem to help their -- how patients feel about their bones. The bones feel better, which is probably because it's reducing some level of microfractures. But their problem is, there's probably too much resorption in OI, but the bigger problem is they're not making new bone. When you make new bone, that's how you strengthen bones. Preventing resorption can help the bones a little bit, but what they really need to lay down bone where the bones are weakest. And the way the bone production system works, whenever you turn on the bone making machinery, it always lays down the bone where the bone is moving where it's unstable. So that's why the anabolic effect of setrusumab will be the right effect to strengthen OI bones, and we're encouraged so far that this is exactly what they need, that even if you have a mutated collagen, we can make their bones substantially improved in strength and improved their bone health without necessarily fixing their collagen effect.

And maybe taking a step back to the Phase II data that you spoke about. So then how are you thinking about those results in the context of fracture rates for the Phase III portion?

Well, we didn't report any fracture rates in Phase II, but we did show the bone mineral density effect of 10% approximately in 3 months. Now that level of effect should be sufficient already to improve bone fractures based historically on you've seen in other trials. So we think we already have a bone mineral density improvement magnitude. I think the question people ask is, is bone mineral density [ predictive ] of fractures because there have been some situations, particularly with not antiresorptive agents where fracture frequencies or bone health was not optimally changed, but not in the case of anabolic agent. So those things that make more bone, those have consistently shown that bone mineral density improvement by the bone and anabolic pathway will strengthen the bone. And so we're confident that we'll see that predictive value for the bone mineral density we did observe.

Great. And you mentioned the COSMIC study. Maybe can you just talk a little bit more about the study and what you hope to see?

In our view, the great potential for setrusumab is to take a 2-year old or a 1-year old who has OI and prevent their spine from degenerating, prevent from becoming wheelchair-bound chronically in pain patients. If we can help their bone strength, prevent the fractures that deform their bones at a young age, we can have a dramatic effect on the future and make this standard-of-care. So getting young patients that it gives us an opportunity to look at all fractures, including the spine and establish how much this will change a young kid. Now in that trial, we're doing it head-to-head with bisphosphonates because in many centers, they are already putting them on bisphosphonates and putting them on placebo at the younger age was a challenge. But we look at that as an upside, though, because it will give us head-to-head data, which will be very important in Europe and in some territories that know that here's this thing that people are being given and that your drug is way better than them. So it's -- we'll look at superiority in terms of the fractures against bisphosphonates. So that has had basic study. It's a 2- to 4-year-old randomized controlled versus bisphosphonate. It should be in the 60-70 patient range. And based on the very high fracture rates in that population, it should be more than adequately powered to look at reduction.

And given that these patients are younger than those in Orbit, how does that affect the bar for success on fracture rate?

Well, with more fractures, it's easier to detect the change. So some of those kids can have 8 to 10 fractures a year versus 1 to 2, right? So 8 to 10 fractures a year just give you way more ability to detect the difference if it was 50% versus 20%, let's say. My hope is that the difference is going to be bigger than that. But I think there's plenty of power in that study. That's why it doesn't need to be as large.

Great. Maybe shifting to GTX-102. Can you just remind us how many patients are currently on drug and how enrollment is progressing? And are you on track to enrolling the 40 to 50 patients that you've mentioned in the past?

Yes. So there are a lot of different groups of patients that are on the drug currently. So there are 3 patients from the original 5 who are being redosed. And we will talk about those at October 16th as well, how they did before and how they're doing now. There's a group of patients that were treated in U.S. -- sorry, in U.K. and Canada that are part of the cohorts 4 through 7. That cohort group is around a dozen patients, 11, 12 patients that have been on drug now for more than a year. So that group of patients will talk about how they're doing. They've been in the maintenance phase and they've been titrated. There is -- that's at those 2 groups, there's an additional 7 patients that were in the U.S. that are also being treated. Now those 7 in the U.S. have been converted on to a high-dose regimen or loading, and that's going. And we have now opened up the expansion, which is cohorts A and B, particularly, which are multiple ex-U.S. sites, not just U.K. and Canada, but multiple sites, including the ones we'd expect for Phase III. And that's enrolled more than 20 patients already in that segment. So adding it up, it's quite a few patients I don't want to drug. I haven't put it all the numbers together. But we'd expect to have the extension patients talked about on October 16th with the redosing. And the expansion patients, which we pushed out in time to get to 20 patients worth of data mid-first half. So 20 patients, we think, will be loaded at a certain dose level. I think we'll provide the Street a stronger view of what this looks like, and we'll put us in position for initiating a Phase III next year.

And you kind of touched upon this, but since you harmonized the dose ranges between the U.S. and ex-U.S. cohorts, any update on activating U.S. sites that were on hold?

Yes. So we are activating U.S. sites and several coming on now. There have been -- of course, the first site at Rush has been extremely efficient, and they've already converted their 7 patients onto the new LOAD regimen. And then there are a few what we call cohort CD patients enrolled in the U.S. and those sites coming up. Some of those will not get shoved to the 20 that we're talking about, but will contribute to the broader 40 patients worth of data that we'll get. And these patients from the -- this Phase II as a group, 50 patients, something will become kind of the long-term exposure patients. So that once the Phase III is completed, we'll have -- these patients will have at least another year of exposure that allows us and discussion this with the FDA or other regulatory authorities of what's the longer-term safety and maintenance, and that's what these patients will provide. So that's where we are on that.

And so for the data update in the first half of '24, can you just talk again and clarify like how that relates to your expectations for the Phase III to begin next year? Like how does it not impact or timing?

Well, in our last meeting with FDA, which is the Type A meaning to get open, we already talked about running a 100, 120 patient randomized controlled trial, placebo-controlled trial. That part was already kind of agreed to as the basic plan. And that one trial would be -- should be enough to drive the approval. And in addition to that, they want us to talk with Koa. We're going to be talking with the clinical outcomes group and the division agreed also to talk with us about endpoints because they recognize the endpoints stories complicated, a lot of different choices. So we'll have those discussions along the way. When we get the 20 patient data, that will be a point where we would go and trigger in end of Phase II meeting. But the end of Phase II meeting should be to complete the discussion on endpoints not to initiate it. And our hope would then will be convert into a Phase III trial, which should be designed by the first half, but hopefully initiated in the second half. These days, I would say to you that a lot of clinical trials are being hampered to some degree by the post-COVID health care systems. A lot of the PIs have lost staff and [ specifically ] this whole health care system is under strain. And so we have to find ever create more creative ways to help support sites, so they can conduct the trials that we need. But this is one where we're planning now. And the way we designed the Phase II was to give a lot of sites at least a patient or 2 in Phase II to tee them up, get their site prepared, train them on the endpoints. So when it's time to train them on for Phase III, they all are Phase II experienced. That is the concept, because we knew this trial was more complex. We need to have sites that already have hands on instead of being for the first time, getting involved in intrathecal therapy and a neurodevelopmental disorder. So by setting up all those sites in Phase II and scattering some patients allows us to essentially pre-train Phase III sites, get contracts understanding of how to contract and budget with each of them. So our hope is all that's about teeing up Phase III to go quicker.

So if you need to modify the protocol based off of the data update, meaningfully relative to what you had been expecting. I guess is there much buffer built in to remain on track to still start the study in 2024?

The main thing that will happen when we get the data is we're going to order the endpoints. We're not going to be doing new endpoints. The endpoints will have been developed. We're just going to order them and get comfort from FDA as they agreed to that [ ordering ]. We'll then talk to other regulatory authorities. But that's the only thing that's going to happen because the trial design otherwise, including its length and its size, will be pretty set. So I don't think there's a lot of variables left. It's really trying to order and decide on how we're going to look at 5 different domains in this complex disease. But to turn it into a simple story is this transforming regimen syndrome into a disease where patients can actually gain ground and where and how to communicate and learn how to do other things of life that they've been unable to do in the past. And we think the treatment will be transformative and we'll continue to figure out those pieces. We'll also learn a little bit more about maintenance dosing with time. But the maintenance dosing won't affect the Phase III exactly. So we have a little time for that to kind of optimize. And I would also point out that all neurologic disorders like this, in the end, in the long-term commercial setting will require some level of optimization on an individual basis because you're talking about ages 2 or 4 to 17 are potentially adult to think that's all going to be one dose and one situation, it's just not right. But our hope would be to establish a load range and a maintenance range and give people the tools on how to optimize each kids care.

Great. Let's talk about the Analyst Day coming up next month. You talked about this at the beginning and actually in some of the other responses that you had. But can you just remind us of what to expect from the event?

Well, first of all, we haven't held an Analyst Day for a while. We've generally put together strong events because we have a lot going on, and I think it's a great opportunity to give investors a deeper dive into the basis for who we are and what we do. And I think these days, it's harder for investors with the strain and stress of what's going on to be able to open their sites to more than one program. So this is an opportunity to lay out more of what we've got going on. We will have an important section on osteogenesis imperfecta. The timing of the Analyst Day relates to the ASBMR, which is the big bone meeting going on in Vancouver. So that's the timing of it. That's why it's at that point, and we'll be releasing the bone update data. So that will be an important piece. And we'd expect to have some investigators talk about how drug is doing as well as what the data are. We'll talk about Angelman as well. I said extension patients, whilst redosing patients hopefully give you both a sense of how much effect we're seeing and as well as how it's clinically meaningful for patients. We're going to talk -- we'll have a high-level view of the clinical stage of gene therapy programs. And then we're looking at diving deeper at a few of the other programs that we have going on, which we haven't talked as much about. And we'll finally decide what that lift will be. But at the time -- but there's a number of programs that are moving along, including one new program people have never heard about, but I think we'll be pretty surprising and exciting. So that will be the reason of the state of the end.

So for GTX-102, you said that the data will be more high level and focus more on clinical meaningfulness with less quantitative information. Can you just clarify like what we should expect to see around that?

Well, we get a lot of requests from the Street, and there was considering that the quantitative data wasn't as understandable what the numbers meant. And so we were trying to emphasize more clinical meaning for this. Of course, as soon as we said that, everyone said to me, "I want to know what about the quantitation." So it's like a way to win as like one or the other. So we'll try to provide a broad update on how those patients are doing, including some quantitative scores, including [indiscernible]. So we'll just see what we're seeing. It's a Phase II program we're learning. And I think what I can say to you, the drug is working. I think it's safe in this regimen. And we have said all along that it was way more potent than the Roche molecule and the Roche pulled out because the truth was that molecule wasn't potent enough to achieve efficacy without having significant other side effect issues. And I think in the ASO world, all the drugs that work are the ones that are really potent, right? They're really potent and you can do something neurologically, you can't do any other name, right? That's when they're valuable. If they're not very potent, then you get all the other chemical toxicity issues with ASOs. And then they're not a great drug. So we're talking about having efficacy in the 5 to 14 milligram dose range, which is pretty close to where Spinraza is around 12%. So I think that gives you kind of a sense when you're in that range, I think it's when you see the kind of efficacy that's really important for patients. So this all relates to the underlying science of the GTX-102 program, which is where we're targeting, which is a separate patented area from where Roche and Ionis are, it's further [ Five Prime ]. And the importance of being further Five Prime is that when you clip the transcripts that are coming from the end of [ end-to-end ] at the very beginning of transcription, they derail the transcription completely. It's far more potent. It's an important part. It's in the paper that doctor did to put out. That termination transcription is far better when you clip near the Five Prime in. So this understanding of the human structure of the gene and how to target, it seems esoteric and arcane, but that is how we made the decision to actually do the project because the only way to be better than a company like Roche or [ Biogenesis ] that have tremendous experience in neurologic space is to know something that they didn't know about the gene transcription. In this case, Dr. [ Dindo ] did have that information. That gave us the confidence that the science will win out and we'll have a drug that works.

Great. Maybe a few questions on the pipeline or other pipeline programs. Next year, you'll be reporting initial data from UX701. Can you just walk us through the design of that study and what we should expect to see from the interim Stage 1 data? And then if you're able to show initial signs of activity, what would be clinically meaningful?

Yes. So the Wilson program, I think, has gained greater interest now, particularly since Alexion pulled out because there is also feeling that maybe greater chelator is all you need in a copper disease like Wilson. What I've been saying from the beginning before that happened, that Wilson disease has been thought of as copper toxicity, but truthfully, it's copper toxicity overlaying copper deficiency at the same time. The copper is in the wrong place. It's also missing from the brain and other places. That complexity means just chelating more is not good enough. You have to start to deliver it. If you really want to improve efficacy. The Alexion story kind of said they had a better chelator, but it didn't actually have the effect that they're hoping for and they pulled out and dropped it. Since we're giving a transport back, we have the opportunity to deliver copper. So the design of the study, there are 3 cohorts at 3 dose levels of 5 patients each. First cohort was completed. We have early data, and we released some information about it saying that it was safe. The cohort passed the DMC cut. We did not have any significant issues. We're doing very traditional AV. This is AV9 but we're talking about liver doses, right, relatively low doses. And we were actually seeing signs of improved copper trafficking, meaning copper, not going to the urine and copper coming into the bloodstream through the other pathway of [ for us ] delivery. So we actually see the signs of the improving copper trafficking, which I think was encouraging us at the lowest dose. We're in the middle of cohort 2. That should be completed. It's a doubling of the dose and then there's one more cohort of 5 for another doubling of the dose. Our expectation is we would go up to the highest dose. If the highest dose is safe, we would do the highest dose. Because we're using the Pinnacle PCL platform, our COGS on this program are 8% reduced. So as long as it's safe, we'd want to get maximum effect for what we hope to be a single-shot therapy and to get the max amount of copper loaded on ceruloplasmin, which will help reverse copper efficiency, which we think is underpinning some of the symptoms in Wilson disease. So after this Phase II patients with cohort will make a decision on dose and go right into enrolling Phase III at the same site. Efficiency of the Phase II/III design, you've seen now several of dose from us, OI and others. The value of this is the sites are set up. And so when we make the trigger to go to Phase III, we don't have to start this process of contracting and regulatory discussion and everything else. There's no dead time. What we've learned, though, was doing placebo-controlled during that Phase II part is hard. So this is now open label. But it's about chemicals or we can look at that chemistry and get quantitative assessment of what's going on. The Phase III trial will take 60 to 70 patients to enroll. But we're assuming good data from the Phase II portion. And with the dropping out of the Alexion AV chelator that there's a lot more interest in what we're doing here that there is maybe a better way, and I think that will help us get that trial enrolled. But we're encouraged so far in Wilson, and we think there's a potential to have a transformative effect for Wilson disease. We're not in the business just to replace chelator drugs, we're in the business to transform disease and treat them in a way they've ever been traded. And I think when you treat a disease like this by the correct method, you discovered something about the disease, you didn't really know. In this case, it's not just copper access, it's copper efficiency at the same time. And gene therapy will allow us to show that.

Great. You're also expecting Phase III data from DTX401. Can you just remind us what you need to see on reduction in oral glucose replacement with corn starch while maintaining glucose control to be considered positive results?

So in the GSD Ia program, these patients are on 300 to 400 grams of starch per day, and they're taking it as a slurry like 8-ounce, liquid slurry every 2, 3 hours, 3 hours or so, imagine doing that. Now people say, well, it's just corn starch. It's like they think of it like a dessert or something, it's not patients hate it. But the thing you have to understand about the situation is it's not just the corn starch. It's also the gun to the head, because if they don't take it and they go low, they can die. So you're taking starch, but you're always afraid, you're always thinking if I go low, if I go low, I might die, right? Think about living that way. If you talk to some of the parents, you can tell me, and they have been adrenaline fuel like their entire child growing up like that every time they mess up, they don't wake up at night, the kid can die, right? So you have to understand that because you talk about clinical means, I want you to understand that setting, what that feels like, right? So if you bring down the starch you need 80% and patients realize that they miss they're not going to die, you've taken the gun down. Now whether it takes time for them to adapt their metabolism, we're seeing it takes 2 to 3 years to fully adapt, but we think a substantial reduction and particularly some of the ability of them to sleep through the night, not die. They have control that their liver actually produces glucose output. Again some of the patients [ have no ], so they have no output, right? So the truth is that, that is what will be transformed. But what we've seen is with the level of reduction we're seeing within the first 48 weeks that that's a transformative effect. And that effect was large enough that we had great demand to get in the study. In fact, we had people clamoring to get in the study, and then we ended the enrollment, they had some countries that took too long that didn't get involved in the study who were very upset, but they took too long. I thought, well, they should go faster next time instead of dragging us through the mud, like, unfortunately, too many of the countries do. So fortunately, we -- the study will -- I think will show a percent reduction between 50% to 80% reduction is a change of life because now you're not getting to the head kind of dependent, right? You can listen to some are for beta if I can go work out, and I'm not going to crash. I don't have to bring starch with me everywhere I go. Some of them will starch treating the day. They're taking a little more in light. We also learned though that their metabolism messed up by the starch. It takes time for their insulin -- they make a lot of insulin to reduce. Now the insulin, you think would be weird. Why would the person with hypoglycemia make so much insulins because they've been feeding themselves with starch. So they've been overdoing it, driving their glucose up to keep them from the edge, but at the same time, they're driving insulin production. So they're hormones, their beta cells as well as their cortisol are off. And so it's taken time for them to actually get settled back. In the first cohort, it's out like 3 years or so, that's when their hormones actually finally get more straight. That's because they've been on starch for like 20 years for most of these patients. 20 years you train your body, how to be. So we're encouraged that even a 50%, 80% reduction in starch during the trial will be predictive of a substantial improvement. And it should get lower with time is what we've seen as their metabolism, there other factors get better. We'll have other scores, functional scores and that will help us characterize that. But the effect wasn't settle. For regulatory authorities, corn starch reduction didn't seem like a hard core endpoint to them at first. But then they also checked with patients, they found out that actually the patient think it was. So it's one of the things where you had to kind of educate. The FDA held the listening session. The patient has told them this is really important. And FDA changed their mind. That's why they allow that end point. At the EMA meeting, they brought a patient to the meeting after we presented what we're doing. I said what do you think, I totally agree with them. This is really important. They were surprised. I thought the guy was going to tell them something else. But we talk to patients, this is part of our thing. We know what matters to them. And being able to be free of the risk of dying is what is the change for GSD1, right? If you think of it that way and you understand what the story is about. The story is about having some ability to be glucose self-sufficient and not to be afraid that one momentary error is going to result in something horrible happening.

Great. We're over time, but maybe one last quick question maybe like 30 seconds or less. What do you think the Street most misunderstands about Ultragenyx?

That we can have a pipeline that's broad and generate value and that we can do it with high probability of success and that we're pretty capital efficient given we have a significant burn, but we also have more products than I think anyone out there and it's hard for the Street to fully appreciate the true value of all that, but we do. And I think with time, if you look at the 2013, '14 IPO class, how many patients -- how many companies have 4 approvals from that class that may, right? No one. We're the only one I'm aware of. And how many of them not only have 4 approvals that have 5 late-stage also in hand. That part is the efficiency of our ability to find stuff, put it into play, drive it ahead, fight the time line, make sure it goes is important. So I think people have to see that broader value in the fundamental story that is probably, I think, one of the top-tier rare disease companies. And I think will be a legendary story, our first 20 years for sure.

Great. We'll real quickly we'll have to leave it there. Thanks so much.