nambitomo
Although I believe in the company, Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a drag on my portfolio because, despite its revenue stream, its lack of near-term catalysts has kept it stolidly down. The company has four molecules approved in five orphan indications, and these together pull in around a third of a billion dollars every year (by 2021 figures). They have two phase 3 drugs, 3 in phase 2, and couple more in phase 1. They have a huge amount of cash. The short interest is also low. So why does this stock keep hitting new lows?
One reason, like I said, is lack of major near-term catalysts. There are no PDUFAs or pivotal trial toplining in the next few months.
Another major reason is a few hiccups in some of their trials. Their latest stage candidate – as mentioned on their website – is UX111 (formerly ABO-102), a gene therapy in an ongoing pivotal Transpher A trial in patients with Sanfilippo syndrome type A (MPS IIIA). I see from clinicaltrials.gov that one trial for this candidate in advanced MPS IIIA was terminated due to lack of efficacy – here. Another open label study is still ongoing, with a completion date of December 2024. This asset is shown as the company’s latest stage asset, so the lack of clarity as to its future is confusing.
Another study is Angelman Syndrome, which is for GTX-102, and has just posted phase 1 data. The study was once put on clinical hold in 2020 due to patients showing lower extremity weakness at high doses of 20mg and 36mg due to a local inflammation caused by the drug. After the hold was lifted, the dosage was reduced drastically, which has not produced those side effects. However, now there’s a lack of obvious efficacy. In U.S. patients, the data was better, however UK and Canada patients from cohorts 4 and 5 performed poorly in investigator-assessed measures, which showed probable bias. However, even the most objective score, EEG, did not show any clear benefit. The issue was compounded by small patient populations and the open label nature of the single arm study. See the complete data here.
On the issue of differences in scoring, here’s a discussion from their earnings call:
Maurice Raycroft
Got it. And also for Angelman, there’s been some discussion on potential CGI score discordance in the United States versus EU and Canada. Do you have a strategy in place to standardize assessment and reduced buys across sites for the CGI measure?
Emil Kakkis
Yes. Certainly, that’s a question that’s fair to be raised. I think we’re working on additional training to ensure that we’re normalizing that. I would say also though, the reliance on the third-party like the psychology assessment that’s done with the original specific calibrated scoring system where you’re measuring performance and scoring is the one way to gain the kind of objectivity. And we’ve shown some of that data, for example, in the Bayley score or the [indiscernible] score. But the Bayley score particularly because it’s psychologist administered, not the PI, not the parent. So I have a combination of training and also dependence and reliance on some of these independent scores that help give us confidence that what we’re seeing is an important effect and not a placebo effect.
So while investors were not impressed, the company seemed to be quite impressed with the data, and went ahead and purchased GeneTx, the company which originally developed the drug. This did not actually help the stock either, especially if the market wasn’t originally impressed by the molecule. They purchased it for $75mn, and they lost a lot more than that in market cap soon after. The purchase did save them $20mn. The original agreement was for $125mn, but the $75mn now and the $30mn which they have agreed to pay should the molecule enter phase 3 together amounts to $105mn.
While there are some of the risks with the Angelman program, there are only a handful of companies working in this target area. An OTC company called Neuren has the latest stage program, followed by Ultragenyx, Ionis/Biogen, Roche and Anavex. Ovid Therapeutics had a program in phase 3 in 2020, which it abandoned. So even the bit of potential seen in the trial should be followed up with later stage trials. Their next data update will occur in late 2022 or early 2023. A loading dose schedule has been approved by the FDA. All in all, the company seems to have managed the safety issue with a different dosing; now the efficacy thing has to be sorted out.
On the positive side:
“We model $694M in peak probability-adjusted (50% POS) global sales of GTX-102 based on a conservative 8-15% peak penetration into the 18k/28k-patient US/EU markets,” Cowen’s Yaron Werber wrote in a note. “Thus, Angelman syndrome represents a lucrative commercial opportunity for Ultragenyx especially given the high unmet need and complete lack of disease-modifying therapies.”
Endpts also notes, in the link above, a comment from the primary investigator which discusses the efficacy:
“We are treating severely developmentally impaired individuals who are non-verbal and normally have a very slow rate of learning, making only minimal progress over years based on clinical observations and natural history studies,” said Elizabeth Berry-Kravis, a primary investigator in the US trial. “The changes that we have seen clinically in less than a year in both the original five patients and the current patients, which are also captured by the AS Change and Severity Scales, may seem small but are truly important improvements, given the rate of developmental progress in Angelman syndrome.”
The company is running a pivotal study of UX143 or setrusumab in collaboration with Mereo Pharma. In their earnings call, the company stated:
For our ongoing setrusumab study, we recently amended the pivotal Phase II/III protocol to remove placebo from the dose-ranging Phase II stage of the study to enable us to do real-time analysis of the program. We believe this change, along with activating the last few sites will allow us to complete enrollment of the 24 patients in this stage of the study in the next few months. Data from this portion of the study are expected to be available in mid-2023, including the two-month changes in bone biomarker response that will establish the Phase III dosing algorithm. Concurrent with the data readout, we plan to transition to the larger randomized Phase III portion of the study.
UX143 an Anti-sclerostin mAb that is targeting osteogenesis imperfecta, a bone disease caused by collagen mutations. There are no US or EMA approved therapies, and in these geographies, there are approximately 60000 patients.
Another pivotal trial is for DTX401 for the treatment of Glycogen Storage Disease Type Ia. This is a 48-week randomized, double-blind, placebo-controlled Phase III study. There are some 6000 patients in the US and EU. The company anticipates enrollment by year-end and topline data by end-2023.
Another pivotal program is for UX701 for Wilson disease, which is enrolling in a dose finding portion of the study. The company plans to complete enrollment of this stage in mid-2023 and share early data in late 2023 or early 2024. Target patient population is 50,000.
Financials
RARE has a market cap of $2.47bn and cash, cash equivalents, and marketable debt securities of $996.2 million as of the September quarter. This includes $491.0 million in net proceeds that was received in July 2022 from OMERS, the largest Canadian pension plan, to which Ultragenyx sold 30% of future Crysvita royalty in the profit share territory. Total payments to OMERS are capped at $725 million, which is 1.45 times the purchase price.
Crysvita is approved in the U.S. and Canada for X-linked hypophosphatemia, and FGF23-related hypophosphatemia in tumor-induced osteomalacia. In the last four years, the molecule had sales of nearly $1.2bn. However, the OMERS sale makes sense because Ultragenyx needed some short term cash to pursue Angelman, and this was a non-dilutive way to get it.
In the third quarter, the company earned total revenue of $90.7 million and Crysvita® revenue in Ultragenyx territories of $64.5 million. “The Company continues to expect 2022 revenue for Crysvita in Ultragenyx territories to be between $250 million and $260 million and Dojolvi revenue to be between $55 million and $65 million.” Of note, Mepsevii earned another $6mn in the quarter.
Total operating expenses for the third quarter of 2022 were $315.8 million, which includes research and development expenses of $237.3 million, selling, general and administrative expenses of $69.8 million, and cost of sales of $8.6 million. At that rate, the company would have a cash runway of just around 3 quarters, however its incoming revenue of nearly a quarter billion dollars gives it another quarter or so of runway. Bottom line, the company’s financial position is not that good, their expenses are pretty high, and they did well with the OMERS sale, but they need to start generating fresh revenue streams.
Bottom line
Ultragenyx Pharmaceutical Inc., like I said, is a company I like. They are producing good medicine, they are advancing their pipeline and earnings revenues, and while in the past there have been hiccups, they have moved on positively. However, the stock is down, and will likely remain so for the foreseeable future.
If Ultragenyx Pharmaceutical can get an approval by 2024, and add to their revenue stream, I can see the stock moving up. In fact, if they get positive data as a prelude to such an approval – in 2023 – I can see the Ultragenyx stock moving up sooner. However, I am afraid it is going to remain stagnant for a while now, and we will need a lot of patience with this otherwise great company.
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