Novato Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Ultragenyx Pharmaceutical Inc earnings conference call or presentation Thursday, February 13, 2020 at 10:00:00pm GMT

Ultragenyx Pharmaceutical Inc. - Senior Director of IR & Corporate Communications

* Emil D. Kakkis

Ultragenyx Pharmaceutical Inc. - President, CEO & Director

Ultragenyx Pharmaceutical Inc. - CFO & Executive VP

* Andrea R. Tan

Sanford C. Bernstein & Co., LLC., Research Division - VP

Ladies and gentlemen, thank you for standing by. And welcome to the Ultragenyx Fourth Quarter and Full Year 2019 Financial Results Conference Call. (Operator Instructions)

I would now like to hand the conference to your speaker today, Danielle Keatley. Please go ahead.

Danielle Keatley, Ultragenyx Pharmaceutical Inc. - Senior Director of IR & Corporate Communications [2]

Thank you. Good afternoon, and welcome to the Ultragenyx Pharmaceutical financial results and corporate update conference call for the fourth quarter and full year 2019. We've issued a press release detailing our financial results, which you can find on our website at ultragenyx.com.

I'm Danielle Keatley, Senior Director of Investor Relations. And with me today are Emil Kakkis, Chief Executive Officer and President; and Shalini Sharp, Chief Financial Officer.

I'd like to remind investors that this call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, the types of statements identified as forward-looking in our quarterly report on Form 10-Q that was filed on November 6, 2019, our annual report on Form 10-K that will be filed soon; and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section.

These forward-looking statements represent our views only as of the date of this call and involves substantial risks and uncertainties, including many that are beyond our control.

Please note that actual results could differ materially from those projected in any forward-looking statement.

For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements as well as risks relating to our business, see our periodic reports filed with the SEC.

I'll now turn the call over to Emil.

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [3]

Thank you, Daniel. I'll start with our commercial performance in the fourth quarter of 2019. Shalini will then summarize our financial results for the quarter and the year. I'll come back at the end to discuss the progress across our clinical and preclinical programs and our outlook for the rest of the year.

Starting with Crysvita, which has been the main focus of our commercial efforts and the primary driver of revenue in 2019. Performance in the fourth quarter built on the momentum in the first 5 quarters of launch, this was reflected by continued increases in depleted start forms and the number of patients on reimbursed therapy.

In the U.S., we ended the year with approximately 1,590 completed start forms, 160 more than the third quarter. We also ended the year with approximately 1,330 patients on reimbursed therapy, a 200 patient increased versus the end of the third quarter.

As the commercial team continues to work to penetrate the adult market, we believe Crysvita will continue to be one of the most successful rare disease programs launched.

Our 2020 Crysvita revenue guidance of $125 million to $140 million further reflects the confidence we have in Crysvita and our commercial team's ability to execute. Now that the early launch period is over, going forward, we do not plan on providing specific launch metrics, but we'll focus on revenue for Crysvita. To put our launch progress in perspective, we mapped out the top rare disease launches through their first 6 quarters over the last 15 years. We found that Crysvita is one of the top rare disease launches based on top line total product sales. We've also generated a substantial revenue of setting a price that is substantially lower than any of the other top rare disease drugs. As a result, we have successfully ensured that payer view our pricing as responsible, allowing us to reach more patients, especially adult and achieve a positive financial outcome for the company. This approach is core to our philosophy about improving access and total revenue by moderating rare disease pricing.

Turning to Canada, we are seeing continued prescribing interest from physicians and the number of reimbursed patients with private insurance has exceeded our expectations. More than half of Canadians have supplemental private insurance today and the number of pediatric and adult patients were receiving Crysvita through their private insurance drug plans continues to grow. We also continue to pursue public reimbursement in Canada, which will take more time.

Moving to Latin America. In Argentina and Colombia, the number of patients are reimbursed, named patient treatment continues to increase, and the feedback has been very positive.

In Brazil, the demand has been strong, with a significant number of patients successfully navigating the cumbersome legal process and a few receiving reimbursed treatment to date. We're also seeking pricing and full reimbursement approval by the Ministry of Health to enable more rapid access for patients in Brazil. Ultimately, we believe there is significant potential for Crysvita in Latin America, with growing demand in multiple countries for the product.

Briefly turning to Mepsevii. The therapy approved in the United States, Europe and Brazil, and demand continues to build gradually as typical for enzyme replacement therapies. We are also continuing reimbursement discussions with various government health authorities throughout the world.

With that, I'll turn the call over to Shalini, who will provide a financial update.

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Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [4]

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Thank you, Emil. And good afternoon, everyone. Earlier today, we issued a press release that included a financial update, which I will briefly summarize.

Ultragenyx's total net revenue for the 12-month period ending December 31, 2019, was $103.7 million. And for the fourth quarter of 2019 was $35.6 million. The following is a product-by-product breakdown of these figures.

For Crysvita, during the year ended December 31, 2019, we recognized total revenue of $87.3 million. This includes $74.9 million in collaboration revenue in the U.S. profit share territory in Canada and $8.1 million in royalty revenue in the European territory from our collaboration and license agreement with our partner, Kyowa Kirin or KKC. Net product sales for Crysvita in other regions totaled $4.3 million. Total Crysvita revenue recognized Ultragenyx for the 3 months ended December 31, 2019, was $29.9 million. This includes $26.1 million in collaboration revenue in the North American profit share territory, $2.2 million in royalty revenue on KKC sales in the European territory and $1.6 million in net product revenue in other regions.

Recall, there was a significant order that was placed on the last day of the third quarter of 2019, which was recognized in the fourth quarter due to shipping terms. Depending on ordering patterns, we continue to expect fluctuations in our quarter-to-quarter revenue recognition from time to time.

In Latin America, full reimbursement takes place on a country-by-country basis and can take some time, which can be further complicated by economic and political instability. Total 2019 Crysvita sales in North America, Europe and Latin America, which are shared with KKC were approximately $104 million for the fourth quarter and approximately $316 million for the full year 2019.

Mepsevii product revenue for the fourth quarter of 2019 was $4.4 million and was $12.6 million for the year. Due to the rarity of MPS 7, we expect revenues for this product to be somewhat irregular from quarter-to-quarter and to build very gradually as is typical for enzyme replacement therapies.

UX007 named patient revenue in the fourth quarter was $1.2 million and was $3.3 million for the year. We also recognized $0.1 million in revenue this quarter and $0.5 million for the year from our research agreement with Bayer.

As we have stated previously, we continue to expect revenues from this agreement to be minimal going forward. Our total operating expenses were $130 million for the fourth quarter of 2019. For the past several quarters, up to 20% of our operating expenses, excluding expenses related to business development transactions like genetics and Arcturus has consisted of noncash items.

Our research and development costs were $83.1 million. We expect our R&D cost to increase moderately over the time as we continue advancing product candidates from early preclinical development into early and pivotal clinical studies.

Our SG&A costs in Q4 were $41.9 million. We expect SG&A to increase moderately over time as we support our commercial programs simultaneously launching across multiple geographies.

Our cost of sales were $5.1 million for the fourth quarter of 2019. This includes a $3.8 million reserve on Mepsevii inventory that did not meet our quality standards.

Recalling the third quarter of 2019, there was a $1.9 million reserve for a similar issue. We expect that a majority of these reserves will be recovered from our supplier, and we do not currently anticipate any supply interruptions or future reserves related to this issue.

Net loss for the fourth quarter of 2019 was $93.8 million or [$1. 62] per share, basic and diluted compared with a net loss of $87.8 million or $1.73 per share basic and diluted for the fourth quarter of 2018. For the year ended December 31, 2019, net loss was $402.7 million or $7.12 per share, basic and diluted, compared with a net loss for the same period in 2018 of $197.6 million or $3.97 per share basic and diluted.

The net loss for the fourth quarter of 2019 and for the year ended December 31, 2019, includes unrealized gains of $1.4 million and $13.4 million, respectively, from their fair value adjustment on the investment in our Arcturus equity securities.

The net loss for the full year ended 2018 was reduced by $170.3 million due to sales of priority review vouchers.

For the year ended December 31, 2019, cash used in operations was $345.4 million. This includes $20 million for the GeneTx upfront payment in the third quarter of 2019, $15.6 million for the amended Arcturus license rights in the second quarter of 2019 as well as adjustments for significant noncash charges, including stock-based compensation expense of $82 million.

We ended the fourth quarter of 2019 with $760.4 million in cash, cash equivalents and available for sale investments. This includes proceeds of $320 million we received from the sale of the company's royalty interest in Crysvita in the European territory.

Moving to our guidance for 2020. We continue to expect the Crysvita revenue to Ultragenyx in our territories to be between $125 million and $140 million. Those territories include North America, Latin America and Turkey and exclude the EU royalty, as this was monetized in the transaction that was completed with Royalty Pharma that was announced in December 2019. We expect the pace of our revenue growth to significantly exceed the pace of expense growth. And therefore, we are projecting a greater than 20% decrease in net cash burn, which includes net cash used in operations as well as capital expenditures.

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Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [5]

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Thank you, Shalini. I'll spend a few minutes on our clinical and preclinical programs before turning to the upcoming catalysts. I'll start with Crysvita for tumor-Induced Osteomalacia a rare disease for which approximately half of the patients have tumors that cannot be surgically removed and leading them with no other current treatment options.

In December of last year, we submitted a supplemental biologic license application ahead of our anticipated timing. We expect to hear back from FDA on submission acceptance and review designation later this month.

Turning to UX007 for LC-FAOD. A devastating set of diseases with a high mortality rate despite newborn screening and current use of MCT oil. The FDA is currently reviewing the new drug application and set a PDUFA date for July 31, 2020. As we've discussed before, the FDA does not currently plan to hold an advisory committee meeting to discuss the application. The review process continues on track, and we expect to review decision by the PDUFA date.

In addition to progress in U.S., we've also submitted a marketing authorization application to regulatory authorities in Brazil, and we continue discussion with other regulatory authorities in the EU and Canada.

Based on our experiences, we know that there are a lot of patients with LC-FAOD, who are not doing well on current treatment of MCT oil and are seeking new treatment options. In France alone, for example, there were originally only a few doctors requesting UX007 via the ATU named patient program. Now there are approximately 20 physicians treating 34 patients for the LC-FAOD, who are using UX007 through that named patient program. We expect there to be significant interest in the product, if approved, but as with many inborn air products, we believe, will build steadily and will take time.

In the developed world, there are approximately 8,000 to 14,000 patients with LC-FAOD and we own the worldwide rights to the product.

Moving to DTX301, our gene therapy program for ornithine transcarbamylase deficiency or OTC deficiency. OTC deficiency is an X-linked urea cycle disorder that limits the body's ability to detoxify ammonia into urea. These patients can quickly deteriorate into full metabolic crisis, causing neurologic deficits, hospitalization, coma, in some cases, death.

In January, we reported positive data from dose Cohort 3 and longer-term data from the first 2 cohorts of our OTC study.

In Cohort 3, we are seeing responses from all 3 patients. 2 of the patients are confirmed responders, and the third patient appears to be responder as well, but we will wait until we have longer-term data to confirm this.

In total, up to 6 of the 9 patients have responded. Importantly, 3 patients have come off their ammonia scavenger medications and liberalize their diet. We consider these patients complete responders and these patients appear to be metabolically cured.

Based on these data and the favorable safety profile, we believe the Cohort 3 1e13 GC per kilogram dose is the appropriate dose level. We're seeing a more consistent response across the patients, and we believe this higher dose has achieved the adequate level of therapeutic effect. From here, we will enroll a fourth cohort at the same dose of Cohort 3, this time using prophylactic steroids rather than reactive steroids. We believe this will enhance the level of expression, also provide more consistent expression. We expect data in the second half of 2020 from this cohort. If positive will proceed to dose 3 more patients and simultaneously discuss the design of the Phase III study and end points with regulators.

Based on our ongoing conversation with FDA, we expect that ammonia will be a primary endpoint. The FDA considers ammonia validated clinical endpoint, and they've approved other products based on ammonia.

Switching to DTX401, our gene therapy program in glycogen storage disease type Ia, a disease that leads to severe and sometimes life-threatening hypoglycemia. Patients with GSDIa today have to take cornstarch every 3 to 4 hours, which can keep glucose levels up. But it does not address the disease and its long term consequences. While cornstarch therapy has same lives and improved health, it is not a normal life by any measure and patients or their parents live in fear of death, if they miss a single dose of cornstarch.

Today, we've shown data from the first 2 cohorts of all 6 patients demonstrating a meaningful clinical response to the therapy at the 2e12 and 6e12 dose levels. This includes improvement in glucose control, shown by timed hypoglycemia reductions in cornstarch requirements for all patients. In the second dose cohort, all patients showed a meaningful reduction in glycogen storage and improvements in metabolism. These days data indicate that Cohort 2 dose is showing greater transgene expression and our view that these patients have greatly improved glucose control. They are weighing down their starch requirements, and we think we have a treatment that could change the future of GSDIa patients.

We've now moved to a confirmatory cohort of 3 patients at the same dose and are simultaneously having discussions with the FDA about the Phase III study. We expect to have data from the confirmatory cohort in the first half of 2020. And we could be in a position then to begin Phase III in the second half of 2020.

I will also touch on our agreement with the [gene genetics] Biotherapeutics to advance GTX-102, an antisense oligonucleotide for the treatment of Angelman syndrome. Angelman is a devastating neurologic disease that affects approximately 60,000 patients worldwide, and there are no approved treatment options today. Disease is not neurodegenerative. So there is potential to reverse some disease symptoms, which include speech, cognitive impairment, seizures, ataxia and sleep dysfunction. As a result, we think Angelman's one of the disease in neurology that could benefit most from a treatment. The disease mechanism is well understood, and ASOs (inaudible) can target the disease directly. We believe that the team at GeneTx has developed a very potent and specific differentiated antisense oligonucleotide. We are excited to partner with this group.

The IND for this program is now active, and GeneTx has received IRB our Institutional Review Board approval for the first study site. We expect enrollment in the Phase I/II study to begin in the coming months. Following the acceptance of IND, we paid a $25 million milestone to obtain the option to maintain the option to acquire the company until the earlier of 30 months after the first patient's dose or 90 days after the results are available from the Phase I/II study.

The last product I'll discuss is DTX201 for hemophilia A. Our program is partnered with Bayer and used in material for our proprietary HeLa manufacturing platform.

At the European Association of Hemophilia and Allied Disorders meeting last week, Bayer presented data on first 2 low dose cohorts of the Phase I/II study. All 4 patients showed a response with 3 of the 4 patients showing clinically meaningful increase in Factor VIII levels. One patient Cohort 1 achieved clinically meaningful Factor VIII levels and has experienced only 4 bleeds posttreatment compared to 99 bleeds the prior year. Both patients in dose Cohort 2 achieved clinically meaningful Factor VIII levels up to 24 and 30 weeks.

Patient 4 on Cohort 2 has been bleed-free and treatment-free for up to 7 months of the data cutoff. The same patient had a mild ALT/AST elevations that were managed with a short tapering course of steroids. And the other patients have not required steroids at all. A third high-dose cohort has been dosed, and we expect to see additional updates this year.

While Bayer is responsible for the clinical execution of the program, we are pleased to see that our HeLa manufacturing platform validated and looked forward to continued progress with the program. As a reminder, we are eligible to see milestones and royalty payments from Bayer for this program.

I'll spend a few minutes now discussing a number of important milestones in the coming months that will continue to drive our progress, and then we can move to Q&A.

For Crysvita, in 2020, we expect revenue between $125 million to $140 million across North America, Latin America and Turkey, representing a 58% to 77% increase versus 2019 in the same territories. This will be driven by continued strong performance in the U.S. and expansion of our reach in Latin America through named patient sales and pending regulatory decisions as well as growth in Canada. With our Rare transmission for Crysvita for the treatment of TIO, we are looking to expand procedures in this additional patient population, while there are fewer patients with TIO, there's often a very urgent need for treatment. If approved in this indication, we believe Crysvita therapy will be adopted over phosphate therapy.

For UX007, we will continue to work with the FDA, to view our NDA, working towards the PDUFA date of July 31, 2020. The review is progressing well, and we look forward to being able to provide the stream to many more patients with LC-FAOD. For the gene therapy programs, we have shown strong data for our 2 programs in GSDIa and OTC. In the both phase, we believe we had found the appropriate dose.

The GSDIa program will have a data readout from the confirmatory cohort in the first half, and the OTC program will read out in the second half. We are simultaneously having discussions with FDA about the Phase III studies for both programs.

The Bayer hemophilia A program is writing us with the first clinical data using material from our proprietary HeLa platform, our Wilson disease program will use this HeLa manufacturing system when it enters the clinic, and we are targeting an IND for this program by the end of 2020. We'll also provide more updates on the GTX102 ASO program for Angelman as the program begins to enroll patients.

To summarize briefly, our commercial team continues to execute at an extremely high level, making Crysvita one of the top rare disease launches. The continued efforts with Crysvita and Mepsevii as well as 2 more potential launches this year set us up to grow -- substantially grow our commercial business.

In 2019, we had annual revenue exceeding $100 million for the first time, with substantial growth expected in 2020. We're now well capitalized with $760 million in cash and equivalents, we combined with the financial discipline we are applying and expect to reduce net cash burn in 2020. This puts us in good position to drive our clinical programs forward.

Our gene therapy programs are advancing to a confirmatory dose cohorts through Phase III studies and the Angelman, Wilson disease programs are both large indication opportunities that are nearing clinic with diverse set of early-stage product candidates to follow. We have become a diversified rare disease company, we'll continue to grow. We're constantly innovating, adapting where disease drug developments, strategies, trial designs, and endpoints, working with regulators, establish a more efficient model for rare disease drug development as well as evolving the way we commercialize product in these indications and efficiently manage the cost structure. These are just some of the things we do each day, and we have the foundation while we build an exceptional rare disease company.

With that, let's move to your questions. Operator, can you please provide the instructions for the Q&A portion of the call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Gena Wang from Barclays.

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Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [2]

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I wanted to congratulate you on the great quarter. I have 2 questions. The first one is regarding the Crysvita 2020 revenue guidance. Just wondering the 58% to 77% growth is mainly driven by U.S. growth or geographic expansion? How much growth assumption was building for Latin America.

My second question is regarding the Angelman Syndrome. Could you walk through the Phase I trial design in terms of initial dose? And how would your dose escalate? And what kind of data will lead your decision to acquire GeneTx?

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Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [3]

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Great. So on the Crysvita launch growth, Shalini do you want to answer that particular one, how the numbers...

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Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [4]

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Link:
Edited Transcript of RARE earnings conference call or presentation 13-Feb-20 10:00pm GMT - Yahoo Finance

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