Ultragenyx Pharmaceutical Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited consolidated results; financial amounts below are in U.S. dollars unless stated otherwise.
Business context and financial position
Ultragenyx develops and commercializes therapies for rare and ultra-rare genetic diseases. Its marketed portfolio includes Crysvita, Mepsevii and Dojolvi; the company also obtained rights to commercialize Evkeeza outside the U.S. in January 2022. Key development programs include DTX401, DTX301, UX701, setrusumab, GTX-102 and UX053.
- Cash, cash equivalents and marketable debt securities totaled $813.8 million at March 31, 2022, down from $999.1 million at December 31, 2021. Cash and cash equivalents alone were $154.0 million.
- Total assets were $1.384 billion; current assets were $707.5 million and current liabilities were $167.2 million.
- The balance sheet reported a $355.6 million liability related to the sale of future royalties. The filing does not report conventional borrowing debt in the presented balance sheet.
- Stockholders’ equity was $796.4 million. The company had 69.8 million shares outstanding at quarter-end.
Results and cash flow
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $79.9 million | $99.4 million | Down 20% |
| Operating expenses | $216.6 million | $206.0 million | Up 5% |
| Operating loss | $136.6 million | $106.6 million | Loss increased |
| Net loss | $152.3 million | $136.1 million | Loss increased |
| Net loss per share, basic and diluted | $2.19 | $2.03 | Loss per share increased |
| Cash used in operating activities | $117.5 million | $159.3 million | Use decreased |
| Cash used in investing activities | $37.4 million | $182.4 million | Use decreased |
Gross margin was not separately reported. Investing cash flow included $32.2 million of property and equipment purchases and a $30.0 million Evkeeza intangible-asset payment, partly offset by net proceeds and maturities of marketable securities. Financing provided $1.6 million, primarily from employee equity plans.
Material changes versus Q1 2021
- Product sales rose 62% to $26.7 million: Crysvita sales increased 60% to $9.4 million, Mepsevii increased 35% to $4.9 million, and Dojolvi increased 77% to $12.4 million.
- Crysvita collaboration revenue in the U.S./Canada profit-share territory rose 25% to $45.2 million; European non-cash royalty revenue rose 25% to $4.8 million.
- Daiichi Sankyo collaboration and license revenue fell to $3.2 million from $42.8 million as technology-transfer performance obligations were substantially completed by March 31, 2022. This was the main reason total revenue declined.
- R&D expense decreased 3% to $143.2 million, reflecting the absence of the $50.0 million Mereo upfront charge recorded in Q1 2021. Spending rose on gene-therapy programs and nucleic-acid and other biologic programs.
- Selling, general and administrative expense increased 26% to $67.3 million, mainly due to personnel, commercialization and professional-services costs.
- Non-cash fair-value losses on equity investments were $9.3 million, versus $20.6 million a year earlier. The company cautioned that these publicly traded investments can be volatile.
Outlook, commentary and risks
- Management said existing capital resources were expected to fund projected operating requirements for at least the next 12 months. It also expects annual losses to continue for the foreseeable future and stated it will likely need additional capital to execute its plans.
- Management expects R&D and SG&A expenses to increase as programs advance and commercial operations expand. No numerical revenue or earnings guidance was provided.
- Clinical outlook disclosed in the filing included ongoing Phase 3 enrollment for DTX401; expected DTX301 Phase 3 screening in mid-2022; ongoing UX701 Phase 1/2/3 enrollment; a setrusumab Phase 2/3 study initiated in April 2022; and preliminary UX053 data and a repeat-dose study expected in the second half of 2022. These are forward-looking expectations, not guarantees.
- COVID-19 had disrupted clinical enrollment, site and staff availability, patient identification, regulatory interactions and supply deliveries. Management said future effects remained uncertain.
- Material business risks include clinical and regulatory uncertainty, difficulty enrolling rare-disease patients, dependence on third-party and single-source manufacturers (including KKC for Crysvita), gene-therapy manufacturing execution, reimbursement and market-access uncertainty, and the need for future financing.
- Potential future payments include up to $254 million of Mereo development, regulatory and commercial milestones; up to $63 million of Evkeeza milestones; and payments associated with the GeneTx option. In April 2022, after quarter-end, Ultragenyx amended the GeneTx option arrangements, including a $75 million interim acquisition option, a later $125 million option and a potential milestone of up to $30 million.
- The company reported no material legal proceedings and stated disclosure controls were effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether growth in Crysvita and other product sales can offset the expected reduction in Daiichi Sankyo revenue after technology transfer completion.
- Cash burn, the pace of investment in clinical programs and manufacturing facilities, and whether additional financing will be needed sooner than management expects.
- Clinical enrollment, data timing and regulatory progress for DTX401, DTX301, UX701, setrusumab, GTX-102 and UX053.
- Supply reliability and the operational and financial implications of Crysvita’s 2023 commercial-responsibility transition to KKC.
- The assumptions underlying the $355.6 million future-royalty liability and its non-cash interest expense, which depend on future European Crysvita sales and timing.
- Potential dilution from equity compensation or use of the company’s remaining at-the-market offering authorization; no ATM shares were sold in Q1 2022.