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

Okay. Hi. Good Afternoon, everybody. Welcome to Day 1 of the Cantor Global Healthcare Conference. Really pleased to be on stage with Ultragenyx. Joining me from the company is Dr. Emil Kakkis, the CEO. Thanks so much for being here. Really appreciate it.

Happy to be here.

So I am actually going to do something a little bit different. I know you have lots of children and pipeline programs that you care about. But I'd love to spend our session today really diving deep into setrusumab for a while if that's okay.

Sure.

Okay. But before I do that, maybe just big picture, what are you most excited for in the company over the next 12 months?

Well, since founding it 14 years ago, we've put ourselves in a great position with growing revenue in a base of programs, which is taking us toward profitability, but to be able to put 3 more BLAs into filing in the next year period, which include the GSDIa program, the MPS IIIA program, and we think setrusumab as well. It's an opportunity to really leap ahead as a company. And beyond that, with the Angelman program, it gives us a chance to really have a tremendous inflection point for growth at the company and to serve a lot of different patient types and patient disease with different technologies, biologics, small molecules, gene therapy, ASOs, all in one portfolio. So I think the next year, having 3 more BLAs to file will be an amazing thing to do and scary sometimes for people in the regulatory department, but we try to keep them excited, and they are excited.

Yes. And beyond this, the voice and work you've done for the rare disease community even outside of Ultragenyx hasn't gone unnoticed. So thank you so much for all of your support for the field in general.

Yes. Well, we think there's so many great technology right now. We've got to do the right things in how we regulate so we get the true benefit of the science we've created.

Yes. All right. Let's dive into OI. So 2 years ago, you made a really bold statement around setrusumab. You described it as your highest value program with the strongest data and the highest probability of success. Is that still the case today? And at that time, why were you so confident without having all of the data you've now since generated?

Well, I was confident, and I do think it was also a bit of a reaction to the Angelman obsession at the time. And I think that in many ways, OI is a simpler story and with one we have a lot more experience in, the mechanism that's easier and a drug type that's even easier. So we have a disease that's genetically defined bone. And we know when you treat children with bone disease particularly, they can have dramatic effects as we saw with Crysvita and XLH. We've launched to commercialize a product like that. And it's an IV infusion monoclonal antibody. So it's a drug type and delivery type we're comfortable and convenient with. So in our view, the problem of making that work, if the drug worked, was very high, and we felt that the mechanism of the drug was really the right mechanism, which is that these patients, while they have defects in collagen, the really bigger problem is they're not making enough bone. It's not that the bone is bad, it's just they're not making enough. And that's simply turning on bone production as we've seen in the Bruno mouse model, could normalize bone strength and if you normalize bone strength, you should greatly reduce fractures. So we expected what we saw. However, no one else among the experts in the field thought so. And I think it's one of those things in rare diseases that there always is a major well-accepted fact that's actually wrong. And part of our job is to figure out what that fact -- what's wrong. And when you figure that out, and you figure out the solution. So OI, fixing the collagen is not necessary, you fix the bone production problem, and that will have the biggest impact. So we're very confident. I'm glad it has played out as we hoped. And it's great to be able to do something for these kids who people thought didn't have a shot. There's nothing really going on.

Yes. I would love to spend a little bit more time on the science about how an anabolic agent really works on both sides of the bone formation equation, whereas drugs like the [ bisphosphonate ] tends to only work on one with limited benefit. So understand that you don't necessarily need to fix the collagen defect, but how do we just know -- I mean it sounds so simple, right? Greater bone strength and mass should mean a better bone profile. But what specifically is going on there that makes that bone so strong that when you fall or you experience some type of trauma, you're less likely to fracture?

Well, the bone is an amazing tissue. You think of it as like a fixed piece of cement, but it's not. It's a living trabecular structure that's engineered, constantly ongoing engineering. And so when you want to run around, your bone, your little trabeculae will wiggle or move. And if they're wiggling, they change their structure and signaling to attract bone cells to lay down bone. So at a microstructure level, they are actually inducing the bone to be laid down where the bone is weakest, which means if you can just turn on bone production, it will lay down bone where the bone is weakest. Therefore, it will help do exactly what you need to prevent fractures. And that's why your physical activity is very important in bone strength. If you lay in bed, your bones will resorb and your bones will become weak. But by running around, by pounding and movement, it stimulates bone production. Now these kids have turned down bone production because they're spending too much time trying to edit the bone that they made because it looks like abnormal bone and the body is trying to recycle it. It doesn't spend enough time making bone. And so what [indiscernible] is doing is dialing up bone production and dialing down bone resorption to get better -- to balance so that you have a net bone production. We know that they're not making enough bone because, let's say the Phase II patients in the trial, their Z-score was nearly minus 2 Z-score. So they are 2 standard deviations below the mean, as their mean bone mineral density. Some were minus 4, right? So they're way below bone mineral density. So the fact is we know they're not making enough bone, so it's not an imagination they need more, they are way down the list, how much bone they make.

Okay. So obviously, fractures is a very critical component of this disease, but the field is really eager for any kind of treatment option that can remedy other manifestations of the disorder. So how might setrusumab have the potential to address some of the secondary clinical issues, things like pain, level of activity, mobility, wheelchair requirement, et cetera?

Well, pain and fear of pain or discomfort is one of the things that drives what they do. You can imagine, if you've ever had a broken bone, you know what that feels like. But these kids have things happening all over the body, probably a little microfracture, so things that happen to them. So if they have an active day, they know the next day they're going to pay, that they're going to pay and feel terrible, maybe several days or a week. So they learn their body is telling them don't do things, hide, stay safe. And so that changes their whole life and outcome. What we know from what we're seeing, we are studying -- in our placebo-controlled orbit study, we are studying pain and other end points to help support endpoints to look at the story. But what we can tell from the Phase II patients, they are feeling better and they are more active, that they're starting to do sports. They're starting to play at school. There's a kid that was wheelchair- or walker-bound who's running around at the playground now looking like other kids. And so the benefit of that is by becoming more active, they actually are going to strengthen their bones more. Now people worry about them having fractures, but the truth is that running around will cause their bones to become stronger. And so it's actually a benefit if they can get out and do that. So we are capturing some of those responses in the trial, and we know they're very important. In fact, one of the real reasons bisphosphonates are used is not really for fracture reduction as it is for pain, discomfort management. It does make people feel a little better by stopping some of the excess resorption, it can make them feel a little bit better. But we think we're going to have a much more profound effect by truly strengthening the bone, that you can't get with bisphosphonates.

Yes. I'd love to talk about pain in a little bit more detail. So I actually got to go to an OI Foundation Conference in July. And I remember eating breakfast with a table full of OI patients. And they were all saying that they got .5 hours, 1 hour of sleep, why? Because they couldn't sleep on the bed, they were in pain. I would describe this as a very average comfortable mattress. I don't have a lie. So something to me like that was like, wow, this truly impacts every single day if you can't sleep on literally a bed of cotton. So when you think about the potential to reduce pain, is it because you're not like sedentary, you're getting up, you're doing more things? Or is it that if you're building a better bone profile and fracturing less? Or is it a little bit of everything that may have that impact?

It's probably a little of everything, but I'll say to you early in our Phase II trial, we had one patient who had a fracture turning over in bed, okay? So got a fracture in bed, that's how weak their bones were at the beginning. Simply rolling over in bed a little too aggressively, somehow they fractured themselves. So these are kids that probably sleep on little egg crate mattresses at home and they are not used to the -- the mattress you're talking about are way hard for them. Their bones are fragile and delicate. So it's a tough way to live.

Yes. But it really does put it into perspective, right? It's not just pain from falling. It's literally going to sleep at night, and you're not comfortable. So how do these factors all correlate to their quality of life and being able to maintain -- I would think they'd want some level of independence as much as they can have.

Well, absolutely. I think -- when you talk about type III and IV patients, those are the ones that often get bound by devices and don't walk around. The type I patients, most of them are walking around well, but are afraid of things. They don't participate in sports or activities, they try to avoid and they're afraid. Type IIIs and IVs are the ones that are truly disabled. And the challenge is if you're already 20 years old and disabled, your spine maybe degenerated and you have a lot of physical problems, stopping fracturing is a benefit. But for those patients, treating them when they were 2 or 3 years old, where you protect their vertebral column from collapsing, this will be the transformative thing. And so one of the reasons to run the Cosmic study in the 2 to 4 year olds, which we expect to have a lot of type III and IV patients in, will be an opportunity to see those kids' vertebral columns be protected and not have them collapse. If you can change that, then you can change the whole course of this disease. And so the idea of running that study early was to get solid data showing superiority to bisphosphonates but in addition, lay the foundation for showing that their vertical columns do not collapse and they stay strong and tall, which will change their life from the standpoint of both physical function but also pain and suffering that come from nerve compression, which happen when your vertebral column collapses. And if you -- if you break a long bone, you can get surgery, right, and they can put a plate and do something, right? When you collapse your vertebrae, what have you got? You got nothing, nothing you can do, nothing you can fix. So that's one of those irreversible problems that we think strengthening the bone in the vertebral column could help.

One other thing I heard from some doctors is that a lot of the patients have -- end up getting small fractures in their vertebrae and they don't -- they go unnoticed because they're not -- the full bone isn't fracturing, but they complain about back pain and that's something that they already commonly deal with, right? But that can be quite dangerous if it goes unnoticed, it gets worse. So can we talk maybe a little bit about the different types of fractures? Obviously, no fractures are good, but is that something that you thought about, the ones that can end up going unnoticed and are quite dangerous?

Sure. So the vertebral column or morphometric fractures are in trabecular bone. This is bone that is, has a cortex, but has these little spicules of -- like little columns and struts inside. That's your vertebral column-type bone. That bone on setrusumab responds very well, has a very strong effect on improving bone mineral density and strength, presumed strength. So we think that is one of the biggest problems that occurs in OI. Now the FDA has been more interested in long bones. And the fracture we're focused on in Orbit is long bones, all clinical fractures, that means fractured identified through pain, local pointed pain, but we're excluding fingers, toes and skull, the lumbar or vertebral fractures you're talking about, would only be scored if they present with pain, local pain. Asymptomatic or, let's say, unrecognized vertebral column fractures would be missed. So the primary endpoint there will focus on what the FDA has requested for long bone, nonfinger, toes and only pain-causing vertebral column, but we will have as a second endpoint total fractures and we'll look at vertebral column fractures as well, which we think is going to be important in the long run. So we'll look at all different types. But I think the FDA's focus has been on those types that are more clinical fractures rather than vertebral fractures.

Sure. So putting all these metrics together, if this product is ultimately approved, there are going to be patients that want this product, even if they're ones that are actively not fracturing for a lot of these other benefits we described. Is that a fair statement in your opinion?

I think there's a lot of people who may not have fractures because they are sedentary and they're avoiding activities and their body is fragile. I think if their bone mineral density is weak and low, that they're candidates for treatment because they're at risk, whether they've had a fracture or not because most of the patients try to avoid fractures by avoiding doing anything. So if their bone mineral density is low, I think that would justify someone having weak bones and potentially could strengthen their bone through treatment, and we'll be able to show that. And we'll be able to show, I think, in this study that bone mineral density improvement by the anabolic mechanism of setrusumab correlates with fracture reduction risk, right? So in other situations, bone mineral density hasn't exactly correlated and that's created confusion for FDA or others. But when you talk about an anabolic agent of this type of mechanism, it will predict bone strength. And so we believe that the indication will include dealing with people with bone mineral density and improving bone mineral density to reduce fractures. So I do think the addressable population will be anyone with poor bone mineral density who are at risk for fractures.

And when you use this term that patients aren't doing activities, are we talking about things that are more on the extreme end, like playing in the backyard, soccer? Or are we even frankly talking about things as simple as walking around the house, even if you can get from point A to point B, maybe you use a wheelchair or a walker when really you can probably technically be able to walk there on your own, you just might be afraid.

I think it's people like sitting at home on their couch and not going outside. We now have a kid who's -- in one of the studies who, at school, they won't let the walk because the kid -- they're afraid. They make the kid go in a wheelchair because they're afraid of the kid walking and having a fracture. Although the kid is feeling good, they let the kid walk for their promotion thing, for their little parade, they may let them walk without the wheelchair. Kid really wanted to, they're feeling good. So I think they are hiding out from any momentary risk because these kids can fall out of a chair and break something. And so when you have that kind of fragility, you just don't want to do anything. And it's a sad way to be.

Yes. Thanks for that perspective. So let's talk about the trial, the upcoming readouts. You have a few interim readouts for overwhelming efficacy, only you're going to remain blinded, but can you help frame for our audience essentially what would be the trigger point for these? And how are you also thinking about expectations? The first one is a pretty high bar that you have to hit.

Yes. So in our planning for the trial, we started with the plan that something that was 18 to 24 months because it's -- this belief of how many fracture events, how long it would take, what the magnitude of the effect was, right? But once we saw an effect size that was much higher, and we saw bone mineral density effect that was very rapid, it started to change the time ports of the trial. And so we pulled that in to be an 18-month trial rather than 18 to 24 months, that brought in the back end. Then the question raised, if the fracture rate were higher than expected, then the trial could hit significance very early. And since we're taking kids off bisphosphonates, randomized through a trial with placebo, they are off their current whatever treatment benefit it has, and you put them on placebo, which is now going to be washing out their bisphosphate, whatever they had. The truth is that puts those kids at risk of having worsening pain, suffering and problems. So our view was we should -- if the patient have a high fracture rate and the groups separate, that we should be able to detect that early and end the study when it's appropriate to end the study. So the first interim, which is happening about the end of the year, early next year, will hit -- will require a 0.001 p-value. We want to be really stringent because not everyone will have had 1 year of treatment. If that hits, we'll be informed, we'll only inform that we have been received, that the interim is hit. We will not report any results. The trial will still have a couple of more months of conduct to finish and close out some annual visits and other things. So won't instantly stop because we have to -- it's a Phase III trial. We have to conduct it and complete it in such a way that we would create a tidy and effective data set. So once that's done, then cleaned and locked, then we announce. So it's going to be several months between then and the actual data readout, just to clarify to everyone. That bar is very high because we have less than a year in all the patients. At the second interim, a few months later, all the patients will have at least 1 year. So we feel it's a better moment in terms of data collection. There's a major assessment at 1 year. If that hits at 0.01, then we -- we' lower, we stop and close out and clean out that study as well. And then the third assessment happens at 18 months after the last patient is -- the rest of the alpha spend. I would just clarify that you can have an equally profound result at any other point because the first means they've separated, but the truth is the speed of separation will maybe define, but the delta could be just as big at the interim 2. So I don't look at them as telling us a degree of efficacy. It's a little more about the exact rate of fractures and separation rate and the timing, but we don't think it changes the overall meaning of the efficacy. We set the bar high because we knew the FDA would be reluctant for us to stop a study early like that. And that -- I think that's generally a correct statement FDA has always been apprehensive about early study stops. But I think it doesn't make sense to keep people's children, and I would look at these as people's children, off of whatever they were on and suffering for longer than need be. And I think 10 or 11 months in a rare disease trial is a lot of time, plenty of time to figure out what's going on.

Thank you for that. So the Cosmic and Orbit studies were enrolled at very similar paces. Do you have different expectations for each patient population given the early impact on bone mineral density changes we saw in different age groups?

Well, we think the young patient Cosmic study will advance faster, that I think in our history, every time we looked at the younger kids, they respond even more aggressively. So we think they will respond very aggressively and have a very rapid effect. But we're not going to hinge off that. We need to file off the Orbit study. So when we do the interims for Orbit, if an interim for Orbit comes positive, we'll look in at Cosmic and determine. But we won't stop Cosmic if it's not positive, but my expectation is Cosmic will become positive before Orbit. The one difference in Cosmic is not placebo. They are on their bisphosphonate treatment. So therefore, it's not like we're denying them any treatment. They are on the treatment that have been available, right? So it's a little bit different of an ethical issue as it is when you're running a placebo-controlled trial, I think. So that's the way the design is, but I expect them both to be pretty in sync. And I would think that when one's positive, the other one should already be positive.

Okay, thanks. And a lot of investors we speak to truly do see the potential of setrusumab, but one question that keeps coming up is how is the placebo going to perform? We think the drug is great, but when we think about all these powering assumptions, where do we get the level of comfort there? So can you walk us through your powering assumptions then also how you came up with that assumption for the placebo performance?

Well, we are reasoning just assuming that placebo was a bit like bisphosphonates and the 20% reduction. But the challenge is less of what the reduction is than it is the actual rate of fractures. I think that's the bigger factor, like where is the number? Is it -- because if it's 0.7, that's one level. But if it's 1.4 or 2, the power has dramatically improved, right, dramatically improved. The study is really overpowered. You don't really need 158 people to do this. You could do it probably with 60 to 80. However, we did that many because we felt it was a pretty good-sized population and we wanted to power also some other secondary end points with the placebo, right, to have enough power to see some of the other symptoms and other things. So there's a reason for doing that, but just straight-up fractures, I don't think we needed that much to get there. I believe the fracture rate is going to be higher than 0.7 mainly because the 0.7 is historical medical record. And we -- patients tell us they don't record all the fractures. They know they have other ones they haven't recorded. So I'm pretty confident that rate is higher than what's been recorded. And when we're doing it in a trial, every month, the patient goes in, they're going to be queried, fractures will be identified and x-rayed. So we'll have much better ascertainment. The other thing to keep in mind is that when kids go in this trial, they start traveling. They leave the house to get in the car. We just talked about them staying at home all the time. Well, a lot of the reasons patients were afraid to get in the trial is they know that going to the clinic itself, is actually creating a risk, so the placebo group will have a risk of fractures just simply by going to the clinic. Combine that with the fact they're not on bisphosphonates any longer, which means they're starting to wash out, and they'll start losing bisphosphate effect over time. So that may make it worse for them. So those are the way we're looking at the power and I think we are in excess power for what we're expecting. But I don't think that the group will -- the fracture reduction rate of 67% is so much higher than I just don't think there's going to be enough background to be of concern.

I think something that's very underappreciated is there's a wonderful comp about what the market opportunity could look like. And that own comp is your own drug, which makes it a lot better because when we think about Crysvita and that process towards approval, you had to build the specialty sales team for that. Now you're talking about a drug where they're going to be over 90% overlap. So how are you thinking about that opportunity? And especially because things are already kind of on the ground, in place, ready to go if you got approval.

Yes. We've learned a lot from the Crysvita launch. We also innovated in the Crysvita launch. So our Crysvita launch involved using a patient diagnosis team to help find patients and then a sales team in tandem that were equivalent-sized. And that patient find helped drive the funnel of patients available for the sales team to talk to their doctors. So that effect led us in a very strong patient services internally operated hub, which we have. Those particular programs and approaches allowed us to get for the first 6 quarters, one of the best rare disease launches ever on a revenue by quarter growth basis. And that's for a disease that wasn't lethal, that had a cheap alternative and was priced at maybe half of what a lot of rare disease drugs were. So we did really well with that model. So that model is the model we would use again. And if you look at Crysvita, you can see it growing 20% a year, steady, right, continues to grow. And that's because of the patient find model continuing to fill the funnel. And 50% of the scripts we're finding from doctors we haven't known, right, new ones. They are out in the community that have a patient or 2 and they're out there scattered about. And I think this will be true for OI, too. There are a lot of patients in the center. So a lot of patients to start with, but we'll use the same model, the patient-find model, team services hub. We'll use some of the same features, including Fast Start, which is where we put patients on drug immediately, pending their insurance completion, which helps build the connection between us and their physicians and the family that we're here to take care of them. And that allowed us to really get tremendous traction and build a great reputation with those same doctors that treat XLH. So I think coming back through does not often you get a chance to do the same thing, come back through with the same population, but we're going to get that. I'm looking forward to it. We learned a lot. But I think we did something very special with Crysvita, and I'm looking forward to applying the same model again.

Maybe to close, obviously, again, there's a lot going on at Ultragenyx. I appreciate you allowing me to really just focus on this program. But why should somebody own the company for this opportunity alone, forget all the other potential upside levers, why OI alone is a good reason to own the stock now?

Well, osteogenesis imperfecta is a well recognized, well diagnosed and horrible disease that really has not a single good treatment approved, not one. And here, we have an opportunity to be able to strength their bones, reduce their fractures in a fundamental way. And we think there's not other good mechanism around. This is probably one of the best mechanisms. And you have a company that's done it before, knows how to do it in charge and a management team that's been -- the same management team that's been doing that work. So I think it's a very good setup for this thing becoming huge. If you layer OI on top of a base of 4 products that have been globally doing well, and we've beaten raise this year, midyear, and show that progress toward profitability in '26, you add into that a couple of gene therapy filings that are coming to filings for approvals, add into that Angelman for some additional upside, the OI is certainly a strong anchor to what's coming as a value driver for us, but it's built on a robust base of proved products, other products coming and a management team that's been there, done that in the rare disease space. So I think we're in a really good place and a good inflection point for people.

Great. Well, thank you very much. Appreciate your time today. Thanks, everyone.

Thanks.