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

Great. Thank you, everyone, for joining. I'm Max Skor, biotech analysts with Morgan Stanley. And I'm happy to be hosting this session with Ultragenyx, Eric Crombez, Chief Medical Officer. Thank you very much for joining us today. And I just wanted to briefly touch on important disclosures. 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. So great. Eric, if you don't mind I'll open the -- if you'd like to open up the conversation, anything you'd like to highlight?

Yes. So great. I appreciate the opportunity. I appreciate the time. Just, I guess, a very just brief introduction on Ultragenyx. So we've been around for 15 years, fully dedicated to the development of new treatments for patients suffering from rare diseases where there really is very high unmet medical need. Foundational to the company was Mepsevii in enzyme replacement therapy and then moving on to Dojolvi, a small molecule and then really rounding out with our gene therapy programs and then more recently, our Angelman program as an ASO, OI as an antibody. So really looking at a diversity of platforms there. So again, we can really focus on these rare diseases, figuring out the right way to go after them and then pursuing those into a commercialized setting.

Great. So Ultragenyx is really balancing near-term growth with a broad pipeline. So what 3 proof points give you confidence in double-digit growth, near-term launches and GAAP profitability in 2027?

Yes. So double-digit growth, I mean, it really is foundational to Crysvita. That is by far our biggest commercialized product and what's really driving a lot of that growth. Yes, we have Mepsevii, that's important. Yes, we have more recently Evkeeza, and that's been growing and being very successful. But really, that is on the background of Crysvita and the success we've had there. It's hard to have a single proof point for the pipeline because we just have such a big pipeline. And with my 8-year tenure at Ultragenyx, we actually haven't had anything fall out of that pipeline. So with that maturity comes our 2 gene therapy programs. We're actively under filing with Sanfilippo. We announced we initiated a rolling submission for GSDIa and then quickly followed up there with osteogenesis imperfecta, which is an important value driver for the organization, a much bigger indication. And then again, we very recently announced completion of enrollment in our Phase III trial for Angelman with that data readout being in the second half of next year. So really busy end of year for us, very busy 2026 and then full GAAP profitability. So again, that is on the backbone of Crysvita and the growth we've had there. We are obviously looking to pull these late-stage programs across the finish line and moving those into the commercialized setting. And then as far as the other side of that, with spend, we have been very disciplined. We've kept a lot of programs and develop them up into the IND phase and then kind of really park them there to really focus on these late-stage programs because obviously, once you move these programs into the clinic, they become expensive and you really want to move very quickly on them. And that balance there is really what gets us to profitability in that time horizon.

Okay. Great. So I'd like to pivot to setrusumab. I think that's kind of on the top of most investors' minds at this point. Maybe you could just set the stage for us in osteogenesis imperfecta. What's the core value proposition for setrusumab? And which aspects of the profile are really resonating with physicians?

Yes. I think it's led by a reduction in fracture rate. I mean osteogenesis imperfecta is referred to as brittle bone disease, and that's exactly what's driven with this genetic defect. So these patients are at really high risk from fractures. We talk about fragility fractures which is meaning there's really an absence of trauma there. For us, for me, running through listings in these trials, it's not uncommon to see cause of fracture listed as occurring during sleep. So that's just the tension on these long bones as you roll over and move over in sleep. Yes, we then talk about the traumatic fractures due to whatever level of trauma there. Moving beyond fracture reduction, which is important, we are looking at pain. These patients do on a day-to-day basis suffer from pain that becomes very debilitating for them. And then really rounding out with the quality of life, and we have a very big focus on sports-related type of quality of life instruments because we really want to be able to measure that reduction in fracture rate, but also allowing them the freedom to escape that's really protective what becomes an sedentary lifestyle where they're not leaving home. They're not taking any risk because that risk means they could result in any fracture. So yes, fractures are very important, but we are looking at the totality of that data.

Okay. Maybe just before we jump into the 2 trials that are ongoing right now, can you remind us what you saw in the Phase II trial?

Yes. So the Phase II trial, I mean, it really was the strength of that data that allowed us to take a look at Orbit, modify that design, add those 2 interim analyses. And at our most recent data release, we saw the reinforcement of that 67% reduction in fracture rate. And again, that's across patients with Type 1, Type 3 and 4. With our Phase II trial, it was 24 patients in an open-label setting, which differs from the Phase III part of Orbit, which is 159 patients, 2:1 randomization in a blinded controlled setting.

Okay. So you have Orbit and Cosmic. We've gone through 2 interims with Orbit. Cosmic hasn't been touched correctly -- correct?

Yes.

And so how are you thinking about the endpoints and success thresholds that you're targeting in both Orbit and Cosmic? How will this potentially translate into a label-ready claim?

Yes. So primary endpoint for Orbit remains reduction in fracture rate. For Phase III, that was a change from baseline because all patients were treated in an open-label setting. In the Phase III part of Orbit, it is your head-to-head comparison of those patients on active treatment compared to placebo. We are using the negative binomial regression model, and that is appropriate type of statistical design, if you don't have what you're looking at, in this case, fractures happening in an equal way across patients with equal intervals between fractures in these patients. And then again, rounding that out with our quality of life bone mineral density.

Okay. So in the Phase II, we saw a 67% reduction. I think a lot of investors are trying to figure out probably pulling a lot of KOLs, getting feedback around what is clinically meaningful. For Orbit, with something above 50% reduction be clinically meaningful? What's really resonating with the physician population?

Yes. So we have that conversation also with the KOLs, patient organization is very important as well as the regulators, and we powered Orbit with that 159 patients that have a greater than 80% power to achieve at least a 50% treatment effect. So that is where we initially set that bar. I've had some people ask me, what about 40%, that's still roughly reducing your annual fracture rate by half. And I still think that is very clinically meaningful to these patients because again, these aren't small stress fractures, these aren't repetitive motion type fractures. These are long bone fractures that are really meaningful to these patients.

Okay. So is there a specific patient population age group where physicians are really seeing an unmet need? Or maybe I'll get around to the question of what if Orbit hits in Cosmic close or Cosmic hits and Orbit close, what is do you think more meaningful?

Yes. So I think it depends what lens you're looking at. From a pure regulatory perspective, when you have 2 Phase III trials, you need at least one of them to be positive to move forward with the plans you have obviously, and there's been cases where you come close, the math has failed you in some way, and you can have that conversation with the FDA, but it is a different conversation. So that's important to us. We've always kind of talked about Orbit as leading. And Orbit was originally the Phase III trial to support this. It would by itself be a very strong label and a successful launch. That doesn't mean we are trying to hedge or plan to not hit significance on Cosmic. We have planned to show superiority to bisphosphonates, and that's important. I think particularly in some regions, particularly maybe Europe, they're going to want to have the debate or potentially have a debate on what is the effect of bisphosphonate. And should we really be using setrusumab over bisphosphonates. This will give us a Phase III data set in a well-designed controlled trial that we can then have a data-driven debate on the difference between bisphosphonates and setrusumab.

Is it reasonable to ask the question for Orbit patients are potentially washing out of bisphosphonates. Timing around that, how long does it usually take? Could there be some rationale why potentially the second interim didn't hit?

Yes. So with bisphosphonates, no one can give you a straight answer on when they will wash out with any precision because that study has not been done. The data is just not available. I think everyone will agree that, that is not weeks or a month. You're really talking about months plural. So I am very confident in saying the washout of bisphosphonates would not have played a role in IA1. It probably did with all patients at, at least 12 months, start to potentially play a role in IA2, but certainly, with all patients at, at least 18 months as we head into end of year with the full data readout for this trial that potentially that washout of bisphosphonates for the patients randomized to placebo could potentially lead them to have additional fractures. We did not count on that when we were designing or powering the study. So in a sense, that would work for us.

That would work for you. Okay. So what's the real-world advantage? Is it fracture-free days, mobility pain function, school work attendance that kind of persuades community providers to initiate setrusumab over continuing bisphosphonates?

Yes. So I think it begins -- it's not -- it doesn't end, but it begins with fracture rate because it's really that fear of fracture that leads them to a very protective lifestyle. They're not taking any unnecessary risk, and that sometimes really means staying confined to the home. With children, they oftentimes are put into wheelchair because they don't have the mobility or they are at risk of fracture in school in those types of settings. So that really drives a lot of the clinical importance there. But again, pain is very debilitating to these patients. That isn't very important. And then again, we really want to see an increase in activity moving away from that protective life cell while also reducing your fracture rate in this way.

Okay. And then one additional question. My own interest in regards to the biology of the disease, the mechanism of action of the therapy. I mean you're dealing with bone here. It could take a while to remodify and change. Is there anything you'd like to add just in regards to your confidence in the final readout?

Yes. So I mean, I think when we really go to the root of the biology and you're looking at this antibody and the effect on sclerostin, it does go to your osteoblasts and your osteoclasts. And really your osteoblasts' job it is to build bone. So that really helps here. And it was surprising when we saw the Phase II data from Orbit because at that point, we really only had the relatively small amount of data coming out of ASTEROID that was originally run by Mario. So I think when you think about adults and what those osteoblasts and osteoclasts are doing, it's really working on bone remodeling. In children, it's bone remodeling and growth, but we don't think of that in the setting of something that happens in weeks or a few months. It takes -- that's time. So I think with the effect we saw really within the first couple of months of treatment of setrusumab with your increase in bone mineral density, your effect on biomarkers and then your reduction of fracture rate really come into play within 6 months, that was impressive to us. So I think great and then certainly getting out to 18 months, I think we're really going to see a strong effect there.

Okay. And then last question, I'll give this a shot. Will you report both studies at the same time?

Yes. So we haven't said exactly what we're going to do. And to be honest with you, we're still talking through exactly how that will all look. It was very important to me to land enrollment for those 2 studies at the same time because I need those 2 studies to go into together to the filings to really have this conversation about the broad label there. So I think we understand the importance of both studies, and I think that would make sense.

Okay. And it will take -- it will be a quicker turnaround in regard to cleaning the data once the trial reads out, correct?

Well, so I mean, we always do -- so we have placed an emphasis on Orbit. We've said it's important to us. So we will go fast, but this is also our final data readout, and it is 2 trials. So there are -- once that 159 patients hit their last visit, there are long lead time labs that need to be sent away. We need to make sure our queries and sometimes you need a query and a query to finalize. So we will take the time to do that. We need to do our sanity check to make things stay together. So when we talk about data readout around the end of the year is what we defined as December or January, that plus/minus gives us the ability to work through all of that.

Okay. December, January. That's where it's. Okay. That's helpful. Maybe pivoting to Angelman. Would you like to introduce this program, key data that we've -- to date and then introduce what we can expect next year?

Yes. So Angelman is our other big value driver as anyone who's been following us knows very, very well there. So -- and I think we proved that when we say it's something that's important to us, and we're really putting a lot of emphasis that was shown through the rapid enrollment in the Phase III. So with that Aspire Phase III trial, we enrolled 129 patients in about 7 months. And by itself, that's a lot of patients in a relatively short period of time, but it is also -- these are patients who are dosed under anesthesia and there's a lot of logistics to it. So it does speak to the importance of this program. It also speaks to the unmet medical need there. I mean these parents who have these children who are really not developing. They're not learning and gaining new skills like neurotypical children will. When you look at the natural history, it's just a really flat developmental line. And when you look at the Phase II data, we have shared and been very transparent with and looking at a total of 74 patients dosed in Phase II, we are seeing these children now on their own developmental curve. And for these families, having these children really come alive for them, start to follow directions, start to have better emulation potty training, language, these are important developmental milestones that they would have not been able to achieve without this therapy.

Okay. And so the clinical trials, if you can talk to maybe the status of the clinical trials? And then what magnitude and durability of effect would you view as clinically persuasive and payer actionable?

Yes. So we have 2 Phase III trials, kind of similar approach that we took with Orbit and Cosmic. So Aspire is kind of our primary Phase III trial, if you will. Again, that's 159 patients. And then we have Aurora and what Aurora does is looks at younger and older patients and patients with other genotypes. Because like we did in Phase II, we are focused in Aspire on patients with full deletion those patients are at the severe end of the spectrum, and I hesitate there just because there really is no such thing as a mild Angelman patient. These are patients who are very affected by this disease. But there's a consistency with these full deletion patients which makes signal detection better. And again, with neurology, that always can be a little harder. So we think that's important there. And then rounding this out with Aurora looking at the other genotypes like UPD and stuff and then again, taking the full label approach with those 2 studies together. And again, as far as what's clinically meaningful, if we can duplicate what we saw in the Phase II, that will be a very powerful successful study. And again, we're not seeing patients in Phase II plateau. They're not hitting a developmental ceiling. We see these patients to continue on their developmental curve, and that's what's important.

And can you just remind us of the competitive landscape there, I believe Ionis as a program?

Yes. So they do. So Ionis is out there. They press released on their breakthrough designation therapy by the FDA there. So they're out there. I think that's very validating when you're looking at ASOs as a class. I think it's still kind of a relatively novel approach there. But molecularly, when you have that second paternal copy there just sitting there, imprinted and locked down, if you can knock down that imprinting and start expressing protein in every cell you need in every neuron, that really gives you the best chance of development there. Looking at when we both announced we cleared IND, we announced first patient dosing. Obviously, we've also said we have now completed dosing, we think we're moving first, and that's important to us. And then in addition, there is Oak Hill that recently took over the Roche product, a small private company in Massachusetts who plan to take that molecule forward.

Okay. So now pivoting to UX111. I believe, yes, you recently received a CRL. Could you just provide any observations that -- or can you provide an update on the status of addressing these issues? What's a realistic resubmission time line? And when do you plan to have your Type A meeting?

Yes. So yes, we received a complete response letter. And I think what's -- if there is a good, what's good about that is they're always very clear on what they require for your resubmission. This letter was and they redacted but publicly released relatively recently, we have been transparent with what we've seen there, really focused on CMC. We'd commented before that the FDA referred to the clinical data as robust in our interactions with them since we received the CRL, they remain complementary and supportive of the clinical data, and that's important. So we are reaching clarity on exactly what we need. We are working on our renewed time lines. And once we really nail that down, we can update guidance. But what we have been saying is with that resubmission and then what would be an up to 6-month review cycle because it's a resubmission, it puts us comfortably within that window at the end of September to receive a PRV. So that's where we are today.

Okay. And yes, I saw the CRL definitely redacted. But in regards to reinspection, could you talk me through that? How does that process work? How long does it take to get that scheduled, et cetera?

Yes. So they haven't told us they're going to be redoing a reinspection. I think typically, when you have these types of findings, you would definitely plan for that. I think what also is interesting for us and potentially could be an advantage is we also make our gene therapy for GSDIa in the same facility out in Bedford, Massachusetts. So you could say with the initiation of that rolling submission, we said we'll complete that filing by end of year. If they come to inspect for GSDIa, you could certainly do Sanfilippo at the same time. So our base case is they will do another -- they will make another visit and how exactly they do that, we'll see.

Okay. And then the FDA did ask for updated data, sounded somewhat routine. Should we expect an announcement around that updated data? Will we see how the patients are doing?

Yes. So yes, so they did ask for an update in data, and that is routine because from their perspective, if say, your data -- if you've accumulated, say, 6 months more of data than what you submit in your filing, there's scenario where they could approve you based on that data set and then you could come out with new data that had new findings and that would be a bad situation for them. So they're going to always want a data update. We've agreed to what that will be, and that's something we can easily deliver. We haven't said exactly when we'll do that. I mean the truth is, is we are very, very focused on getting to our refiling there, and we can certainly have that conversation about it if it would make sense to put that back out publicly.

Okay. And I believe you recently provided an update or highlights from the GSDI data at a conference recently. Anything you'd like to call out there? Any highlights we should keep in mind?

Yes. So I guess there's a little more context. So we did press release that we started our initial rolling submission with the FDA, and that's great because you have to get their agreement to do that, and they were agreeable. That's great that it will start the review of the clinical data. And that's -- typically, usually with the rolling submission, clinical is always late because that's what you're waiting for. So that's great. We also did have the press release this week talking about longer-term data. At primary data readout, it was a very powerful result with a reduction of cornstarch and maintaining good glucose control. And that continues to firm up as we go into week 96. Importantly, we have those rollover patients also now on gene therapy. We've talked about the patients in Japan who have been able to discontinue cornstarch entirely. So that meaningful reduction of cornstarch while maintaining good glucose levels means their liver can now break down glycogen to produce glucose during times of fasting or metabolic stress. And that's what takes away that gun to the head of if I am -- if I can't get to my cornstarch, if I'm not reliable with my dose, I can really get myself in trouble with serious episodes of hypoglycemia.

Okay. So this is an important critical time, catalyst-rich next 6 to 12 months. Before we talk about financials and a few final questions, could you just lay out the catalyst path for us near term and then through 2026, how are you thinking about in prioritizing certain programs? And yes, any additional color there would be great.

Yes. So it's really the stack up in a good way of our late-stage programs. So with the refiling of Sanfilippo with a 6-month review, up to 6-month review, GSDIa would then be the typical 8-month review. It puts those PDUFA dates potentially very, very close together next year. Obviously, we put a high priority on osteogenesis imperfecta, that data with the final readout around the end of the year and then the filing coming as quickly as possible. And then Angelman, again, with the announcement of last patient in, that puts that pivotal data readout in the second half of next year. So that's a lot for really any company, but certainly a company of our size. We still very much do care about Wilson. We do care about OTC. And I did mention we've had to hold programs back at the IND phase that are really IND ready. Once we get those across the finish line, we can start to pull them through, which is great, which means we don't need to go outside to find things. If we find something and we can be opportunistic, fantastic, we don't have to.

Okay. And can you remind me on your PRV strategy? I know we have 3 programs here. There is a potential deadline, but yes, can you elaborate on that?

Yes. So with the expiration of the current program, that means you have to have your designation in place in order to receive that PRV with your approval by the last day in September. So that, for us, puts GSDIa, MPS IIIA and OI in play. We've been talking about our strategies with GSDIa and Sanfilippo and that puts us comfortably with that range. Osteogenesis imperfecta it gets tighter for us to hit that time line. But then you can talk about if it's not renewed, do the 2 PRVs become more valuable. If it is renewed in OI, then the 3 together are worth the same value. So it probably works out in the wash there.

Okay. So how is the team prioritizing spend across filings, launch build-outs, pipeline advancement?

And so -- yes, so with OI not hitting IA2, certainly, we had planned for success and hiring plans and ready to launch and commercialize. So that all moves. We're certainly not going to make that investment now when it's been delayed. So we will -- we make those adjustments there. But we will be ready to support those approval when the time comes. And again, really for me, the biggest lever on controlling spend is keeping those new programs at the pre-IND phase because, again, once you put them into the clinic, those become very expensive clinical trials. And then again, just maintaining overall discipline.

Okay. And then before I jump into a couple of survey questions that we've been asking most of our companies. Is there anything I missed or any questions that are coming up in your investor meetings that you'd like to highlight?

No, I think it's been great. I mean, obviously, everyone wants to understand our thinking with osteogenesis imperfecta coming out of IA2 and our confidence and remaining confidence in the data readout. I think people are excited, and I think it was very validating to see the rapid enrollment for Angelman, rounding out the 2 near-term gene therapy approvals and then Wilson and OTC remain important to us.

Okay. Sorry, one more follow-up question. In regards to your stock price, I mean, do you think it's purely reflective of your commercial business? Do you think your pipeline is getting much value at this point?

No and no. But I mean, yes, I think we think even the baseline business isn't valued appropriate. So we certainly think we're undervalued across the board.

Okay. Then pivoting to our survey questions. With China's rise and biotech innovation, how are you thinking about your competitive position here? And will this influence your R&D or BD strategy?

So I don't think China specifically. I mean I think rare disease is different. I think a lot of rare disease companies have tried to move in China, and it's difficult. The regulatory environment is challenging there. But I can say currently for our R&D, the BD strategy, we're looking at China any differently than any other country. So I think we're aware of it, but it's not -- it really isn't something that's affecting our strategy currently.

Okay. Okay. And how are you currently leveraging AI or thinking about AI's future disruption potential?

Yes. So I guess, speaking, more to the development. And I always consider myself a mid-adopter, I'm never going to run in first, but I'm not going to wait to get left behind there. So to me, I think it's a very powerful tool, and we are getting very comfortable. And for me, at first glance, why not use it for first drafts of all these big documents. You can train a model, put in your TLS and that can be your first draft of the CSR that can certainly help you with your filings, protocols, consents, translation. So to me, when you're looking at first draft of all of these documents, to me, that's a great way to go. And with all of these documents being 500 or more pages, it's a very good place to start and will really save us on time. And it's something we're looking at in near term and even potentially helping us out with osteogenesis imperfecta.

Okay. Very good. And then lastly, what has been most impactful from the regulatory side. How have your interactions gone with the FDA? How are you thinking about potentially the MFN implications and/or tariffs?

Yes. So I mean, certainly, we're looking at tariffs. I think we started out with assumptions, and I think it's been fine, and there's a lot -- I think there was even news today about potentially carve-outs for rare disease and things. From the regulatory environment, specifically with the FDA, I'm seeing over the past months that things have been settling down and maybe we're getting to some level of new normal there. I mean, yes, our gene therapy is within CBER, that's great. Angelman and OI within CDER there. So I think there is some contrast there. I will say with Angelman, our Angelman program getting breakthrough designation with our pre-filing meetings, the meetings we've had across these programs, it's been great to see the people doing the day-to-day work being very engaged and very focused. And that was really my concern coming out of COVID is we had a lot of turnover. I felt like we were having the same conversation from the beginning each time. These people are showing up engaged. They know what they're talking about. They are grounded in the data, and we're able to have a conversation and come out of these meetings with agreement that's been great to see.

Has there been any turnover in the reviewers that you're interacting with?

So yes, I mean, certainly, at the highest levels, Peter Marks moving on was very impactful, particularly to gene therapy. Someone like Nicole Verdon moving on was disappointing to us. She was fantastic. But they've talked about trying to protect inspectors, trying to protect reviewers. We've seen a degree of stability that's been important.

Okay. And then after -- sorry, just going back, one last question, going back to the Type A meeting. Should we expect an update? Should we -- are we going to hear anything in regards to the outcome of that meeting?

Well, I think what we'll do is once we really firm up our time line for resubmission, we'll be able to update guidance there. And obviously, if we're filing, that means we've come to agreement on what we need to do, and we're back on track.

Okay. Well, great. Thank you very much. Really appreciate your time.

Thank you.