Ultragenyx Pharmaceutical Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Ultragenyx develops and commercializes treatments for rare and ultra-rare genetic diseases. Its three approved products were Crysvita, Mepsevii and Dojolvi.
Financial performance
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $87.0 | $61.7 | $186.4 | $98.0 |
| Operating expenses | $169.8 | $124.8 | $375.7 | $281.7 |
| Operating loss | $(82.8) | $(63.1) | $(189.3) | $(183.7) |
| Net income (loss) | $(122.4) | $25.3 | $(258.6) | $(93.7) |
| Basic loss per share | $(1.81) | $0.42 income | $(3.84) | $(1.59) |
- Q2 revenue increased 41% year over year; first-half revenue increased 90%. Product sales were $18.3 million in Q2 and $34.9 million in the first half, up 127% and 140%, respectively.
- Q2 product sales included Dojolvi $10.0 million, Mepsevii $5.4 million and Crysvita $2.9 million. Revenue growth reflected Dojolvi’s U.S. launch in 2020 and increased Crysvita demand, alongside Daiichi Sankyo collaboration revenue.
- Research and development expense rose 40% to $113.2 million in Q2 and 35% to $260.7 million in the first half. Selling, general and administrative expense rose 26% to $53.4 million in Q2 and 19% to $106.7 million in the first half.
- The filing does not present a consolidated gross-margin percentage. Cost of sales was $3.1 million in Q2 2021; first-half cost of sales was $8.3 million, compared with a $1.7 million credit in the prior-year period, which included a $4.6 million manufacturing credit. Management expects gross margin percentage to decrease as previously expensed inventory is depleted and full manufacturing costs are reflected.
- Net results were materially affected by volatile equity investments: Q2 2021 included a $31.0 million fair-value loss, versus a $95.2 million gain in Q2 2020. First-half figures were a $51.7 million loss in 2021 versus a $102.9 million gain in 2020. These non-cash movements largely explain the year-over-year deterioration in net income.
- Operating cash use was $224.7 million in the first half, versus $7.8 million in 2020. Investing cash use was $223.7 million; financing provided $25.3 million. Cash, cash equivalents and restricted cash decreased $423.4 million to $302.9 million.
- At June 30, cash and cash equivalents were $290.9 million and marketable debt securities totaled $682.9 million, or $973.8 million combined. Current assets were $949.5 million and current liabilities $127.1 million. The company reported a $344.0 million liability related to its sale of future Crysvita royalties; the filing does not describe conventional borrowings as a material balance-sheet debt category.
Changes, outlook and risks
- Revenue growth was driven by higher Crysvita profit-share revenue, increased Dojolvi and other product sales, and Daiichi Sankyo license revenue. The latter arrangement contributed $64.7 million in first-half 2021 revenue versus $18.9 million in first-half 2020; management expected to recognize remaining revenue allocated to initial technology transfer by year-end 2021.
- Management said existing capital resources were expected to fund projected operating requirements for at least the next 12 months. It also expects annual losses and R&D spending to continue, with R&D and SG&A likely to increase. No numeric earnings or revenue guidance was provided. A $350 million at-the-market equity facility was available, but no shares had been sold under it by June 30.
- Pipeline plans included expected first dosing in the second half of 2021 for Phase 3 DTX401 and DTX301 studies and a Phase 1/2/3 UX701 study; a pediatric Phase 2/3 setrusumab study was also expected to begin in the second half. GTX-102’s U.S. study remained on hold during FDA discussions; enrollment in Canada and the U.K. was progressing, with additional protocol revisions needed for the U.S.
- COVID-19 had disrupted patient enrollment and dosing, regulatory interactions, clinical materials supply, commercial patient identification and facility construction. The company said the impact on 2021 and later financial results could not be reliably estimated.
- Other important risks include continued operating losses and potential need for additional capital; clinical, regulatory, safety and patient-enrollment uncertainty; reliance on third-party manufacturers and KKC for Crysvita supply and commercialization; and construction and scale-up risks for the planned gene-therapy manufacturing facility. Management noted a serious adverse event of lower-extremity weakness in the GTX-102 study, believed related to local inflammation at the highest doses.
Investor verification points
- Assess the durability and mix of revenue growth, particularly Crysvita demand, Dojolvi commercialization and Daiichi Sankyo revenue recognition.
- Separate recurring operating performance and cash burn from non-cash fair-value changes in Arcturus and Solid investments and from royalty-sale accounting.
- Track available liquidity, operating cash use, the royalty liability and whether the company draws on its $350 million ATM facility.
- Verify clinical timelines and regulatory status for DTX401, DTX301, UX701, setrusumab and GTX-102, including the U.S. study hold and safety developments.
- Monitor COVID-related supply and trial disruptions, manufacturing capacity and facility construction, as well as Crysvita’s 2023 commercial transition under its KKC agreement.