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

All right. Let's go ahead and get started. Welcome, everyone, to the 42nd Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by my squad, Malcolm Kuno, Priyanka Grover and [ Marea Hall ]. Our next presenting company is Ultragenyx, and presenting on behalf of the company, we have CEO, Emil Kakkis. Emil?

Thank you. Good to see all of you today. It's been my 20th, so it's 42, but I'm -- my 20th here. So it's great to be here and give you an update on Ultragenyx. We have a big year ahead. 2024 is a big year, a lot of build up, putting us in good position, and we'll talk a little about that update today. Forward-looking statement for all of you. Now, I think if you look at what we've been doing in our 10th year from going public, we're just coming up to our 10th anniversary of going public, I think we've been the most productive company in the rare disease industry in the sense that we've got 4 products for 5 indications approved in our first 10 years being on the public markets. I think that is a special accomplishment. It's a tribute to a lot of things, which I'll explain in a moment. But we've done a lot to get there and are having a big impact on a lot of different types of diseases. In addition to that, commercial portfolio has been growing, we also have 6 late-stage programs that are in Phase III or transitioning to Phase III. And we also have 4 different therapeutic modes of treatment, that is different ways to treat disease based on their [ known ] cause. And we've built that all together in these 10 years since going public. Yes. When you look at what's the basis for -- when you want to look at a comparison of what we've done with others, I think it's good to look at some of the really successful companies. The company has done very good in the area of rare diseases. Genzyme, of course, one of the originals, but BioMarin where I was at one time, Alexion, Alnylam, Vertex, these are all really successful companies done well. But how do we compare in terms of how many years did it take us from IPO to get a product approved? It was only 3 years, and we actually had 2 products that got approved. By 10 years, we will have 5 products approved and by 15 years, we expect to be somewhere with the 8 to 12 approvals. It puts us on a very special place in terms of our productivity and ability as a rare disease company. There's a reason for it. It's part of becoming a next-generation rare disease company to design and development of your programs and your company that puts you in a position to be able to do and accomplish what we've been accomplishing. So some of the keys to our success shown here. Deep scientific understanding, now everyone wants that, everyone believes that, but there are some aspects to it in rare that are extremely important. And one of them is realizing that a lot of rare disease are not really well understood. And one of our important tenets as a company is that's a really steady rare disease. You have to understand that every rare disease has at least one major well-accepted fact that's actually wrong. And if you ask KOLs how to do it, they won't give you the right answer. And you need to go directly to patients to learn and then you uncover the truth of how to unlock the development and how to actually get there. And that's one of the key secrets of that deep understanding is getting deeper and closer to patients. Our success rate, we put 11 programs into the clinic, 9 out of 11 have been successful. So it gives you a measure of how that has worked. Our regulatory and development engine is very different for many. We have very different regulatory strategies and development strategies and how we designed to limit the white space, the time and how do we hedge risk and how do we manage endpoint development. These are all things we have a whole department, for example, that develops endpoints that we've created from scratch, something different that's not usually done. And that allows us to get the right people to come up with the right answers and allow us to both develop endpoints and trials that enhance the power and the ability to detect and develop and data to show efficacy. With those changes, they also help us with speed. And the key thing in how we run development is, we make sure teams are highly aware of the value of their program, not just their budget this year spend. So they need to look at their budget as one item, but when you look at their NPV cash account. And when you're making decisions, how are you spending from your value account, as well as how you're spending from your cash count because you might say, "Hey, I save $50,000 my cash, but if you cost us $10 million in NPV by having a 2-month delay, where is the savings in that. By making those decisions, you actually make smarter decisions because what's really important is the overall value of your product, not the cash you spend and the truth is, the time in rare disease drug development is more important than the spending. That loss of time is more impactful than the spending. And usually, we make the wrong decisions to save business spending and ruin the time line. And that's been key to going faster. It's constantly worked on reducing the white space and ensuring we do the best we can on time. Finally, once you get products approved in rare, being a global organization is the best way to extract value most efficiently, especially when the programs are smaller. It's very hard to split P&Ls and have the difficulties of working. We think that maintaining a global commercial enterprise allows you to maximally gain value. That takes a little work, and we've been developing that commercial organization. But we are now in the U.S., Canada, Latin America, Europe, Turkey, Middle East, through distributors in the Middle East and Japan is our newest addition to our operation. They allow us to capture maximum value out of our programs, which is really important in how to succeed in the rare disease world. Now, what has that done? If we global commercialization works and drives revenue, what we've been able to do is, we've expanded each product in territories and drive the patient identification process and other aspects of commercial, which is unique and different in rare. We've managed a steady growth rate in the 20% plus for now with our projection this year crossing $500 million in revenue, about 20% a year for all those years, and we continue to do so with these 4 products. And we put out guidance for this year, continued growth in our programs, growing in different territories or different products at different points in time, but that the synthesis of all that growth in the global commercial gives us the ability to continue to grow revenue and put us on a path toward profitability. But, of course, getting a profitability also means managing the expense side of the equation. In 2022, we had a peak in burn. We were setting up a manufacturing plant, and we did deals with involve Mayo, Genetics and Evkeeza. We spent a number of cash, but that set us up. Last year, we had a significant reduction in our cash -- net cash used. And this next year, we expect, again, to get below net cash used of $400 million, but puts us in a good position in the following year and fourth -- going forward to get toward profitability and a path to profitability in 2026. We have enough cash to move us forward and to do what we need to do at this point. Now, if you look at the catalyst of the company and the focus, rare is a big area. But we've decided to focus in 3 main areas where we think there's the highest value, the most unmet need and the clearest biology where we can get things done. The bone endocrine area highlighted by Crysvita and its successes followed up now with UX143/setrusumab for osteogenesis imperfecta is a great product to follow on and build that bone endocrine franchise. And then inborn errors. We have 3 approved products that manage inborn errors of metabolism and 4 gene therapies coming forward to manage those biochemical genetic disorders, which I'm very familiar with. Finally, seen us muscle Angelman's our lead program there, but there's a lot of genetic neurologic disease out there, a lot no treatments. And the latest tools are opening the door to actually using molecular scalpel like an ASO and going in and tweaking the gene expression of a particular piece of one chromosome and turning on a gene program that causes the brain to start to function. That's what we're seeing in Angelman. That is the power that I think CNS/muscle now is available and the ability then to move forward and change the future, I think it's quite exciting. We have other programs here we're talking about Duchenne and CDKL5 deficiency. Those are both gene therapies. But we have others, even a small molecule and some other programs in the neurogenic space, which I think are sitting there ready to come forward. Now, if you look at our pipeline in another way, and you can look at just in terms of the therapeutic mode, the green here represents the traditional biologics. And we believe in traditional biologics is a very good solution, particularly in some of these bone disorders, where you're not going to do gene therapy at osteocytes. But for those, the traditional biologics are great. Small molecules can be important. In this case, it's a muscle disease, but we have other ones for a brain disease where there's a missing substrate that we need to deliver, and we develop prodrugs or other versions of drugs that help deliver a need metabolite. The gene therapy is all about replacing a missing enzyme in these cases or transport in one case. And then the nucleic acid opportunities, particularly in CNS, I think, opens a door to a dramatic effect potentially on gene expression we just talked about. Now, among that pipeline, there are actually a large number of different population sides, which are real important to notice. We have ultrarares and we have rares, and there is a mix. And what we really look for are diseases where the biology is clear, and the unmet need dramatic and where we have a therapeutic angle of how you can treat it. Some of them are ultrarare, but those are valuable, but they're not as big. But mix in the portfolio, you need to have some larger ones that give you the potential upside of this business. And in the last few years, we've added 3 programs, which have put us in a position to have that kind of larger upside. And those 3 programs are here, the osteogenesis imperfecta program. We looked around, we think, for that OI disease that a bone production type of mechanism is the right mechanism for that disease. And in OI, everyone thought you have defective collagen in that disease, and that's why their bone fracture. But the truth is that's not quite right. It turned out that the real reason they fracture, the main reasons because they're not making a bump. And in an animal model, we found with both setrusumab and as well as another drug that we're looking at that if you normalize bone mineral density, the bone strength is normal. That's one of those facts that actually turned out to be wrong, that the collagen, while it affects the bone, it doesn't make it bad bone, which means if you just make more bone, bring the bone mineral density normal, you might have a good effect, and we have a released data now showing that that's very true, and I'll talk a little more about the data in a moment. With Angelman syndrome, a patient family group came up with an indication, a woman who's a daughter got diagnosed, she found -- she was not willing to give up. She had to find a way, and she called me a few years ago, and I got here and said, "You need to find an up-and-comer, top scientists in the best lab, who's starting a lab and you raise money for him, that person and help you find a direction." She did find that guy, Dr. Dindot. And they actually developed the drug. And 4 years later, she tells me about the conversation we had on the phone. I didn't quite remember because I do a lot of those calls. I always talk to patients, when they call, I always call and talk. She said, that's what you told me, we did and we came back, and we don't know, we end up buying the product and the company and put it into play. What a good story, good coming back to good. But there is another example, Angelman, another big program. And Wilson is the last one. When we started the gene therapy franchise, we brought Dimension. We had a lot of choice in there. The small ones are just not going to work in gene therapy. The commercial potential is just problematic even if it might work. But Wilson disease treatment looked very promising. It's also a larger rare and so it becomes 1 of the 3 large potential opportunities in front of us for value creation. Now, let's talk about these programs briefly. I won't go through all the data. We had an Analyst Day, and I recommend you look at the slides from Analyst Day to get deep into these stories. Setrusumab is a monoclonal antibody that blocks sclerostin, which regulates bone. When you block sclerostin, the bones make more bone cells and those bone cells then transform into making more bone. So by recruiting osteoblast to become osteocytes and making [ assets ] make more bone, it's at 1, 2 punch is absolutely dramatic and ability to increase bone production. When we looked at all the possible ways to do that, the sclerostin path that look like the most powerful and potent. And we showed you this is true. We took patients with OI, young kids whose bones can develop much more rapidly in humans -- adults and showed a 67% reduction in fractures, and that's really after only 6 months of treatment. That's very early on. They actually continue to gain bone mineral density and continue to gain ground. But we had kids like this Type IV OI patient, which is one of the more severe types who are spending a lot of time in wheelchairs not getting about, he doesn't use a wheelchair anymore. He is running around, and he's fallen and not had fractures. So potential life-changing result. And the doctors who said, I didn't think you could just make bone and make them well, they're like amazed and that data release got them now excited and realized, wait, this is actually going to maybe really change OI, and that's really important in driving had the enrollment where we are right now, it's working to close enrollment this year and move toward potentially an interim assessment later in the year or the following year. So we're very excited about the potential here for OI and driving forward to a product that we think will fit well within our portfolio. And the Angelman program we've mentioned, we've shown a lot of data at Analyst Day. This is a developmental disorder where you're not expressing a region of a chromosome that's been deleted, and we're turning on the maternal copy of that and their genes are being expressed and they turn on a system of function. And what is the most amazing is that, you can take kids who don't recognize their name, can't understand instructions. Who are hyperactive, don't sleep at night, and you can actually cause them to understand what you're saying, follow instructions, hear their name and respond to it if they couldn't before, that they can start calmly behaving with other kids. The lights have churned on that they're actually sleeping through the night instead of being disrupted in sleep. And these changes are happening all in the same patient. And these changes, I think, were very compelling, and I would say I've never seen this rare disease drug development, the ability to actually make developmentally delayed children with this kind of impairment actually gain ground. But their brains are intact. It's just they're not functioning well by turning on its expression, they start function within weeks to months. It's quite impressive. Now, if you look at -- just on an individual basis, we showed you that you can look -- if you look across the extension data we showed you here that in these 11 patients had data, we can show that most domains, most of the patients have 2 to 5 domains are improving in a clinically meaningful way. And if you look at the green, the greens are what's better in a really clinical meaningful way, and you can see how many different types of functions are improving the same kids. You see not just one thing, but two, maybe as many as 5 different domains improving in a clinical meaningful way is a transform treatment effect. This analysis method is something we intend to try to promote with the FDA and we'll have a discussion. So our current view with this program is, we're be talking to FDA about the endpoints that we'd like to use, the domains are important for patients and what endpoints we would use. And then we'll work our way with the data to come back then when we hear what they want from us, come back with the data when we get it, which is mid-first half and come back to them have a discussion and the Phase II about a Phase III plan. But the [indiscernible] strategy, I think, is a novel breakthrough way of capturing clinical meaningfulness across many domains. You go to the doctor, the doctor tells you, do you talk about one symptom and prescribe all your treatments? No, he looks at all of you. Don't you come up with a plan. So why do trials involve one endpoint with one thing. It doesn't make any sense. The statisticians have controlled the story, but they don't know clinical message. This disease has many domains of function. We should be looking at all of them incorporating them in our view, what a drug does. And if we do this in neurology, we'll change the future where those terrible scales always fail will be changed by having an appropriate tool that captures efficacy where it exists. So that's why this is part of leading the future of rare disease medicine. The Wilson program released the earliest data now on Cohort 1. We'll have Cohort 2 and 3 data later in the year. This is a transporter gene therapy, it'll help restore copper distribution, as well as detoxication of copper. We only do a gene therapy here to be better than [ articulation ], not to be -- not a replacement [ for articulation ]. We're in the beginning of this. It's early, still much to be done, but we're looking forward to continuing the program and getting more data this year from this first dosing stage of the study. Finally, there's 4 total gene therapy programs. I mentioned the Wilson program, but the GSDIa also has a Phase III that's been underway. It will unblind later in this first half. That program I think is a very urgent one. Patients are stressed about the need to take cornstarch to vent their glucose from going to 0. They can't release glucose from their livers. Therefore, they need it. Otherwise, they'll die. We follow that with MPS IIIA. It's where they're missing an enzyme, they have a toxin in their brain and destroys their brain, both. Those disease we'll be releasing the world -- at WORLDSymposium for data on the MPS III program and help us to get accelerated approval path with FDA. Both of those, I would consider highly urgent gene therapies for disease, which I think will characterize how they will launch. Those are the ones where people want to get treated and they're urgent about it. OTC is a little further back, but another program we hope to finish enrolling Phase III this year. Now, the gene therapy platform is built on a lot of things, but the ability to create the PCLs and the PCL platform is certainly an important part of it. But we've added in building our own first-class plant. Some investors have gone and visited the plant toward it. We do provide opportunity to take a look. It is not a mobile homes assembled into a plant thing. It's an actual greenfield top-tier quality plant, including 2 suites that can run 60 runs a year and a suite for doing drug fill as well fill, finish. So it's a complete plant. It is operating. Now, last year, it started G&P operations and are running, and we'll be moving more things into the plant, taking advantage of a 34% reduction in cost structure, which in the long run will be -- will pay off importantly for us. So we're excited about the team. They've done a great done. They built this plant during middle of pandemic. So that's quite kudos for the team who are able to do that and get the supply chain done ahead of time. So where are we going from here? I'll stop is the UX143 bone program. We're coming forth to getting these 2 trials enrolled, and we'll put a little bit more Phase III data update and hope -- there may be an interim assessment occur. We'll see if it hits high statistical significance, 0.01. You could see a result later in the year if it works, but it's not quite 0.001, it might be the next interim or another. GTX-102 this year is about the expansion cohorts, mid-first half that data. We'll have FDA discussions and probably update where we are in FDA primarily when we talk about the end of Phase II discussions. Wilson will be Stage 1 data and 3 doses that will somewhere in the first half, we'll probably get there. And we'll be able to -- we see how that's going, and we'll look at initiating randomized-controlled trial later in the year. The Phase III data of DTX401 later first half, and that will be an important milestone for that program and one we're excited to look at. And DTX301 is mostly about enrollment this year. Of course, on top of the clinical catalysts, they're all the commercial products and their continued growth throughout the world, building a base -- financial base for the company, puts us in a very great place. We're leading the future of rare disease medicine. We are one of the most productive companies. We're the most productive company based on how many programs we have moved back and forth and succeeded on. We have near-term catalysts, including several large ones this year, particularly Angelman and OI. We have -- those programs could generate tremendous revenue for us and put us in an incredible place in the next 2 to 3 years. And finally, with continued revenue growth in existing products and expense management, we are in a good position in how we move forward with our cash. That's our story today, and thank you for listening.

So some of you have been in these sessions with me, 3 ways to ask a question, right? So old school, raise your hand. We'll call -- I'll call on you. New school, if you have access to the portal, you can submit your question. It will come on to this fancy iPad. I will ask a question for you. Intermediate school, maybe you can e-mail me, and I will ask the question. So you guys pre-announced yesterday fourth quarter, as well as provided 2024 guidance. One thing that stood out to me was, given the run rate that you had in the fourth quarter with Dojolvi, like why the guidance appeared a little bit weak for 2024?

Yes. I think, do you want to answer, Howard, the guidance question, Dojolvi?

Sure. I'll try that one. I guess, the thing to understand here is, there's 2 underlying dynamics at play where we're commercializing the product. We're growing at double-digit rates. And where we have named patient sales that's lower rate. So those come together to build the single-digit growth for year-over-year.

Right. So the U.S. revenue growth is still linear continuing. It's just the name patient in the other territories are more limited. But we're excited about Dojolvi. I think it's doing well. And we're still -- we're launching in Canada and start in South America, but we're excited about the potential. But name patient is always a little bit more limited.

And actually, also on the guidance, like how do we think about what you guys are seeing in terms of top line growth in '24 versus '23 with Crysvita given some of the accounting changes?

I think that's perfect. You mentioned accounting that definitely goes to the CFO.

Yes. So, I guess, with Crysvita in '23 and '24, in both cases, they're growing in the 20% range. So Anupam, was there something there beneath that you were asking about?

Just with your partner and how the accounting changes?

Got it. Yes. So what we described last year and described this year is in aggregate, all Crysvita revenues from all locations, whether it's through the partner or not. So what transpired this past year is that, we passed over to our partner, Kyowa Kirin U.S. commercialization.

Questions from the...

I think the thing I would add is that, the switch to the royalty, which is the high 20s royalty [ premonth limits ] our share of the 50-50 profit ship near it exactly. So there's really no step off. It was designed that way 5 or 6 years -- 2013, actually, that's when we did the deal. It actually came out right. That's unusual. I usually never feel don't get it right, but it actually came out matching pretty closely. So that's why it's not -- there's no really a shift because the switch to the royalty really represents our share of the profit share.

Questions from the audience? Maybe just switching to the pipeline. You've got 3 important first half readouts. Any guidance on the cadence of which ones will come first and last between 102, 401 and 701?