Ultragenyx Pharmaceutical Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Financial statements are unaudited. Ultragenyx is a clinical-stage biopharmaceutical company developing treatments for rare and ultra-rare diseases; it had no approved products and generated no revenue.
Financial results and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $29.7m | $12.9m | $70.2m | $32.4m |
| General and administrative | $10.2m | $3.0m | $21.4m | $7.4m |
| Operating loss | $(39.9)m | $(15.8)m | $(91.6)m | $(39.8)m |
| Net loss | $(39.2)m | $(15.8)m | $(90.4)m | $(43.1)m |
| Basic and diluted loss per share | $(1.03) | $(0.50) | $(2.51) | $(1.73) |
Margins are not meaningful because the company had no revenue. Nine-month operating cash use was $65.5m, versus $32.2m a year earlier. Investing activities used $258.8m, largely reflecting purchases of investments; financing provided $466.7m, principally from equity offerings.
At September 30, cash and cash equivalents were $166.7m, short-term investments $281.7m, and long-term investments $133.5m, totaling $581.9m in cash, cash equivalents and investments. Current assets were $460.7m and current liabilities $24.7m. Total liabilities were $25.4m; the filing reports no debt. Total assets were $602.1m and stockholders’ equity $576.8m.
Material changes versus the prior comparable period
- Q3 R&D expense increased 131% and nine-month R&D increased 116%, driven by expanded clinical, manufacturing, quality and regulatory work across the pipeline.
- Q3 G&A expense increased 243% and nine-month G&A increased 190%, principally due to personnel, stock-based compensation, professional services and commercial planning.
- Nine-month stock-based compensation rose to $15.4m from $3.4m. The prior-year nine-month net loss also included $3.3m of warrant remeasurement expense; there was no comparable 2015 charge after the warrants converted to common stock warrants.
- The company raised approximately $174.5m net in a February 2015 offering and $286.7m net in a July 2015 offering. Common shares outstanding were 38.8m at September 30.
Outlook, programs and notable items
- Management expects losses and R&D spending to increase as clinical programs advance. It stated that existing capital balances were expected to meet needs for current plans, but additional capital may be required; funding may not be available on acceptable terms.
- Clinical and regulatory milestones: Ace-ER Phase 3 began in May 2015; an EU marketing application seeking conditional approval was filed in September and accepted in October, with an EU decision expected in the second half of 2016. The rhGUS Phase 3 study enrolled 12 patients, with data expected mid-2016. KRN23 adult XLH Phase 3 studies were planned to begin by year-end 2015; TIO interim data were expected in early 2016. UX007 LC-FAOD Phase 3 planning was to follow regulatory discussions expected in the first half of 2016. A Glut1 DS movement-disorder Phase 3 study was planned for mid-2016.
- Reported UX007 LC-FAOD interim Phase 2 findings included exercise-test improvements in small patient subsets. Management emphasized that results were preliminary, open-label and uncontrolled and required confirmation in larger controlled studies. Gastrointestinal adverse events were common; one related serious event was reported.
- In October 2015, after quarter-end, Ultragenyx entered an mRNA research collaboration with Arcturus, paid a $10m upfront fee and assumed development and commercialization costs. Potential milestone payments are up to $156m per target for as many as 10 targets, plus royalties.
- Management cited clinical and regulatory uncertainty, small patient populations and enrollment challenges, potential adverse events, reliance on third-party manufacturers and collaborators, uncertain commercial supply, competition, intellectual-property risks and potential future financing needs. Legal proceedings were not material, and management reported no known contingencies expected to have a material adverse effect.
- Management concluded disclosure controls were effective. ERP implementation is ongoing; certain affected financial-reporting processes require testing as implementation progresses. The company expected to lose emerging-growth-company status at December 31, 2015, increasing compliance obligations.
Important facts for investors to verify
- Whether clinical results and timelines—particularly for Ace-ER, rhGUS, KRN23 and UX007—were achieved, and whether regulators accept the proposed endpoints and study designs.
- Whether the EU conditional-approval application for Ace-ER leads to authorization and what confirmatory-study obligations may apply.
- Cash use and future funding requirements as R&D and commercial-planning costs rise; the filing does not provide a specific cash-runway estimate.
- Reliability and capacity of single-source or third-party manufacturing and collaboration arrangements, including KHK and the Arcturus agreement’s potential costs and milestones.
- Safety and efficacy signals from small or uncontrolled studies, and whether preliminary findings persist in larger, controlled trials.