Ultragenyx Pharmaceutical Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. The company develops and commercializes treatments for rare and ultra-rare genetic diseases. Its four approved products are Crysvita, Mepsevii, Dojolvi and Evkeeza. Financial statements received an unqualified audit opinion; management and the auditor also reported effective internal control over financial reporting.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total revenue | $363.3 million | $351.4 million | Up 3% |
| Product sales | $118.9 million | $77.0 million | Up 54% |
| Research and development | $705.8 million | $497.2 million | Up 42% |
| Selling, general and administrative | $278.1 million | $220.0 million | Up 26% |
| Operating loss | $648.9 million | $381.7 million | Loss widened |
| Net loss | $707.4 million | $454.0 million | Loss widened |
| Basic and diluted loss per share | $10.12 | $6.70 | Loss per share increased |
| Cash used in operating activities | $380.5 million | $338.7 million | Use increased |
Revenue growth reflected higher Crysvita collaboration revenue in the U.S./Canada profit-share territory and increased sales of approved products. The largest revenue stream was Crysvita collaboration revenue in that territory, at $215.0 million. Product sales rose to $118.9 million, including Crysvita $42.7 million, Mepsevii $20.6 million and Dojolvi $55.6 million. Evkeeza generated no sales recorded by Ultragenyx in 2022.
Operating expenses substantially exceeded revenue; the filing does not present a single company-wide operating margin as a key measure. Cost of sales was $28.3 million, up 77%, including amortization related to the Evkeeza license. Interest income was $11.1 million. Non-cash losses from fair-value changes in equity investments were $19.3 million, while non-cash interest expense on future-royalty liabilities was $43.0 million.
At December 31, 2022, cash, cash equivalents and marketable debt securities totaled $896.7 million. Total assets were $1.545 billion, total liabilities $1.193 billion and stockholders’ equity $352.5 million. The filing does not report conventional funded debt; the material financing obligation was $875.4 million of liabilities for sales of future Crysvita royalties. Management said existing capital resources were expected to fund projected operating requirements for at least the next 12 months, while anticipating a need for additional capital over time.
Investing cash use was $291.7 million, including $116.1 million of property and equipment purchases, primarily for the gene-therapy manufacturing facility, and the GeneTx acquisition. Financing cash provided was $501.2 million, largely from the $491.0 million net proceeds of the OMERS royalty transaction. Cash, cash equivalents and restricted cash declined by $172.0 million during the year.
Material changes and unusual items
- Revenue increased only modestly overall because the $77.3 million decline in Daiichi Sankyo collaboration revenue—following completion of the principal technology transfer—offset part of product and Crysvita growth.
- R&D spending rose by $208.6 million, reflecting broader clinical and gene-therapy programs, development of UX053, UX143 and GTX-102, and the $75.0 million GeneTx-related in-process R&D charge. SG&A rose by $58.2 million, mainly from personnel and commercialization costs.
- In July 2022, Ultragenyx received $500.0 million gross ($491.0 million net) from OMERS for 30% of future U.S. and Canadian Crysvita royalties beginning April 2023, subject to a $725.0 million payment cap. These proceeds are recorded as a liability, not ordinary revenue; associated non-cash interest expense was $19.3 million in 2022.
- The existing RPI transaction covers Crysvita royalties in Europe, the U.K. and Switzerland. Related non-cash royalty revenue was $21.7 million and non-cash interest expense was $35.1 million in 2022.
- Ultragenyx acquired GeneTx for total consideration of $91.2 million and may owe up to $190.0 million in future milestones, plus royalties. The company also paid Regeneron $30.0 million upfront for ex-U.S. Evkeeza rights and may owe up to $63.0 million in milestones.
- A $6.1 million state tax charge was recorded in 2022, principally related to tax-law changes requiring R&D cost capitalization and limitations on use of state net operating losses. Deferred tax assets were largely offset by a valuation allowance.
Outlook, management commentary and risks
Management expects annual losses to continue for the foreseeable future and said R&D expenses may moderate as candidates advance, with timing dependent on clinical outcomes, regulatory requirements and manufacturing costs. SG&A was also expected to moderate, partly as Crysvita commercial responsibilities transition to KKC. No specific consolidated revenue or earnings guidance was provided in the filing.
- Crysvita transition: KKC was due to assume lead commercial and development responsibilities in the U.S./Canada profit-share territory in April 2023. Ultragenyx can continue specified U.S. commercial field support through April 2024; thereafter its U.S. promotion rights are limited to medical geneticists. The company’s future economics shift to a tiered revenue share.
- Pipeline milestones: Management expected DTX301 Phase 3 enrollment to continue, with approximately 50 patients planned; UX701 Stage 1 enrollment completion was expected mid-2023, with safety and possible early activity data expected in early 2024. DTX401 Phase 3 results were expected in the first half of 2024. UX053 single-ascending-dose data were expected in the first half of 2023. These are forward-looking expectations, not assured outcomes.
- GTX-102 safety: The filing describes one special-interest event of decreased ambulation in a patient with severe scoliosis after a loading dose; it resolved clinically within weeks. Dosing under amended protocols continued, and the company reported no other lower-extremity weakness cases under that protocol as of the filing.
- Manufacturing and supply: Ultragenyx relies substantially on third parties and single-source suppliers, including KKC for Crysvita, and is constructing its own gene-therapy facility, which it expected to complete in 2023. Delays, quality problems, scale-up challenges or cost overruns could affect supply and development.
- Key business risks: continuing losses and future financing needs; uncertain clinical and regulatory outcomes; limited patient populations and enrollment challenges; adverse events, especially for gene therapies; reimbursement and pricing uncertainty; competition; intellectual-property disputes; and dependence on partners and contract manufacturers. The company also identified foreign-exchange, inflation, geopolitical and cybersecurity risks.
- More than half of total 2022 revenue was generated under the KKC collaboration, creating partner and product concentration. Crysvita royalty forecasts also affect the accounting for royalty-sale liabilities and require significant assumptions about patient populations, pricing, reimbursement and adoption.
Important facts for investors to verify
- Whether product-sales growth and Crysvita collaboration revenue can offset the continuing high level of operating expenses and cash burn.
- The terms and realized economics of the Crysvita royalty sales, including the $875.4 million year-end liability, caps, future royalty receipts and non-cash interest assumptions.
- Progress and results against the stated pipeline timelines, particularly DTX301, DTX401, UX701 and GTX-102 safety and efficacy updates.
- The operational readiness, cost and utilization of the Bedford gene-therapy manufacturing facility and the reliability of external supply sources.
- The effect of the Crysvita transition to KKC on commercial activity, revenue share, field-force needs and future margins.
- Future financing requirements, given $380.5 million of operating cash use in 2022 and management’s expectation of continued annual losses.