Ultragenyx Pharmaceutical Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017; unaudited. Ultragenyx is a clinical-stage biopharmaceutical company developing treatments for rare and ultra-rare diseases. It reported one operating segment.
Financial performance and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $0.2 million | $0.1 million | $0.2 million | $0.1 million |
| Research and development expense | $60.4 million | $48.7 million | $170.1 million | $132.5 million |
| General and administrative expense | $23.5 million | $17.2 million | $62.2 million | $45.1 million |
| Operating loss | $83.7 million | $65.8 million | $232.1 million | $177.5 million |
| Net loss | $79.2 million | $64.9 million | $220.4 million | $174.6 million |
| Net loss per share | $1.87 | $1.64 | $5.22 | $4.46 |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $172.0 million | $113.3 million |
Revenue consisted of nominal named-patient sales of vestronidase alfa (UX003); it remained immaterial relative to operating costs. Operating and net margins are not informative given this very small revenue base and continuing losses.
At September 30, cash and cash equivalents were $60.4 million, short- and long-term investments totaled $335.6 million, and management reported $396.0 million of available cash, cash equivalents, and investments. Total assets were $435.0 million; total liabilities were $69.5 million, including $64.3 million current liabilities. The balance sheet reports no borrowings or debt. Stockholders’ equity was $365.6 million. Management said existing capital resources were expected to fund projected operating requirements for at least 12 months.
Cash and cash equivalents declined $100.7 million from year-end 2016. Nine-month financing provided $71.8 million, principally $67.6 million net proceeds from the ATM stock offering. The company had a new ATM agreement allowing up to $150 million in gross proceeds; it reported no sales under that agreement in Q3, but sold shares for approximately $3.6 million net proceeds from October 1 through October 30, 2017.
Changes versus the prior comparable period
- Q3 revenue increased $87,000, while nine-month revenue increased $70,000; both remained nominal.
- Q3 and nine-month R&D expense rose 24% and 28%, respectively. Increases reflected continued development and regulatory preparation for burosumab and vestronidase alfa, UX007 studies, Ace-ER studies and termination-related manufacturing costs, and other research and preclinical activity.
- Q3 and nine-month G&A expense rose 37% and 38%, respectively, primarily from commercial planning, professional services, stock-based compensation, and personnel growth.
- Net loss widened to $79.2 million for Q3 and $220.4 million for the first nine months. Nine-month operating cash use increased by $58.7 million year over year.
- Other income was $3.4 million for Q3 and $8.4 million for nine months, primarily from foreign-exchange movements on intercompany balances; the filing says these effects were largely offset by translation adjustments in other comprehensive income.
Outlook, developments, and risks
- Management expected losses and R&D and G&A expenses to increase as programs advance and the company builds commercial capabilities. It anticipated needing additional capital over time; financing might not be available on acceptable terms.
- After quarter-end, Ultragenyx agreed to acquire Dimension Therapeutics for $6.00 per share in cash, an estimated approximately $151 million payment at closing, plus acquisition costs. The transaction was expected to close in Q4 2017, subject to tender and other conditions. This was a material prospective use of liquidity beyond the operating runway statement.
- Vestronidase alfa’s U.S. BLA had a November 16, 2017 PDUFA goal date; an EU opinion was expected in the first half of 2018. Burosumab’s U.S. BLA received Priority Review, with an April 17, 2018 action date; a European pediatric opinion was expected around year-end 2017.
- Clinical updates included positive reported pediatric XLH burosumab results and interim TIO results. By contrast, UX007’s Phase 2 seizure study in Glut1 DS missed its primary endpoint, and the company was evaluating next steps. A Phase 3 Ace-ER study in GNE myopathy failed its primary and key secondary endpoints; Ultragenyx planned to discontinue the program.
- Key risks include clinical and regulatory failure or delay, limited rare-disease patient populations, dependence on collaborators and single-source manufacturers, commercialization and reimbursement uncertainty, and potential dilution or difficulty obtaining further financing. The company reported no material legal proceedings and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Regulatory decisions and timelines for vestronidase alfa and burosumab, including the stated FDA action dates and EU review milestones.
- Cash use and funding needs after the proposed Dimension acquisition, including closing consideration and related costs.
- Clinical plans and results for UX007, particularly the movement-disorder study and the response to the missed Glut1 DS seizure endpoint.
- Commercial supply readiness, manufacturing capacity, and the company’s reliance on KHK and other limited or single-source suppliers.
- Progress in reducing operating cash burn or securing financing, and the potential dilution from equity issuance and stock-based compensation.