Ultragenyx Pharmaceutical Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited consolidated results; amounts are in U.S. dollars. Ultragenyx develops and commercializes therapies for rare and ultra-rare genetic diseases and reported three commercially approved products: Crysvita, Mepsevii, and Dojolvi.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $81.6 million | $81.5 million | $268.0 million | $179.5 million |
| Operating loss | $89.8 million | $50.3 million | $279.2 million | $234.0 million |
| Net loss | $73.0 million | $68.8 million | $331.6 million | $162.6 million |
| Net loss per share, diluted | $1.08 | $1.13 | $4.91 | $2.73 |
| Operating cash used | Not separately stated | Not separately stated | $284.4 million | $69.8 million |
- Q3 revenue was essentially flat year over year; nine-month revenue increased 49%. Product sales rose to $22.0 million for Q3 and $56.8 million year to date, led by Dojolvi and Crysvita. Cost of sales was $4.2 million for Q3 and $12.5 million year to date.
- Research and development expense increased 30% in Q3 to $113.4 million and 33% year to date to $374.1 million. Selling, general and administrative expense increased 28% in Q3 to $53.9 million and 22% year to date to $160.6 million.
- At September 30, cash and cash equivalents were $197.5 million; marketable debt securities totaled $743.8 million. Together these were $941.4 million, versus $1.212 billion at December 31, 2020. Current assets were $846.9 million and current liabilities $135.9 million.
- Cash, cash equivalents, and restricted cash fell $516.8 million during the first nine months. Investing cash use was $264.4 million, including $57.0 million for property and equipment; financing provided $32.8 million, primarily from equity-plan issuances.
- Total liabilities were $551.1 million. The filing reports no conventional borrowings; notable obligations include a $348.1 million liability from the sale of future Crysvita royalties and $44.0 million in lease liabilities.
Material changes and notable items
- Q3 collaboration and license revenue declined 18% to $55.0 million, mainly because Daiichi Sankyo revenue fell to $12.1 million from $32.9 million. Nine-month collaboration revenue increased 37% to $198.0 million, including $76.8 million from Daiichi Sankyo versus $51.7 million.
- Crysvita collaboration revenue in the North American profit-share territory increased 26% in Q3 and 33% year to date, which management attributed mainly to more patients receiving treatment. Dojolvi product sales increased to $10.7 million in Q3 from $3.9 million and to $27.7 million year to date from $6.6 million.
- Net loss widened year to date, in part because the fair-value effect of equity investments shifted from a $91.3 million gain in the first nine months of 2020 to a $26.0 million loss in 2021. In Q3 2021, those investments produced a $25.7 million gain, compared with an $11.5 million loss in Q3 2020. The filing highlights substantial share-price volatility in Arcturus and Solid investments.
- Operating cash use increased substantially year over year, including a $74.4 million cash outflow from the reduction in Daiichi Sankyo contract liabilities as previously received consideration was recognized as revenue.
Outlook, risks, and contingencies
- Management expects annual losses to continue for the foreseeable future and expects R&D and SG&A expenses to increase as programs advance and commercial operations expand. It believes existing capital resources are sufficient for at least the next 12 months, while also stating that additional capital will be needed to fully implement longer-term plans.
- No numerical revenue or earnings guidance is provided. The company may seek funding through equity, debt, collaborations, licensing, or other arrangements; financing may be unavailable or could dilute shareholders or require concessions.
- Clinical and regulatory milestones described as expected around the end of 2021 included Phase 3 start-up for DTX401 and DTX301 and initiation of UX053’s Phase 1/2 study. The FDA had removed the clinical hold on GTX-102; initial patient dosing in Canada had begun, with U.S. and U.K. dosing expected later in Q4 2021. These are forward-looking expectations, not reported outcomes in this filing.
- COVID-19 had disrupted clinical enrollment and dosing, regulatory interactions, commercial patient identification, and supply of clinical materials; further delays, shortages, or costs were possible. Management said the financial impact could not be reliably estimated.
- Other key risks include clinical failure or adverse events, rare-disease patient recruitment, third-party and single-source manufacturing dependence, reliance on Kyowa Kirin for Crysvita supply and commercialization in certain markets, reimbursement uncertainty, and construction and scale-up risk for the planned gene-therapy manufacturing facility.
- The royalty-sale liability carries an estimated effective annual interest rate of approximately 9.9%; future amortization and non-cash interest depend on estimates of Crysvita European royalties. Potential milestone obligations under licenses and collaborations are excluded from the contractual-obligations table because amounts and timing are uncertain.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of September 30, 2021.
Important facts for investors to verify
- Whether Crysvita and Dojolvi demand growth, and Mepsevii performance, continue to support product revenue as Daiichi Sankyo technology-transfer revenue changes over time.
- Progress, enrollment, safety, and data timing for DTX401, DTX301, UX701, UX053, UX143, and GTX-102, including any changes to management’s stated timelines.
- Cash consumption and the effect of clinical expansion, facility construction, and changing collaboration-related contract balances on liquidity; compare actual results with management’s at-least-12-month runway statement.
- Changes in Arcturus and Solid share prices and their resulting non-cash gains or losses, which can materially affect reported net loss.
- COVID-19 and other supply, manufacturing, reimbursement, and partner-related developments that could delay trials, constrain product availability, or affect sales.