Ultragenyx Pharmaceutical Inc. — Q3 2016 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2016. Financial statements are unaudited. Ultragenyx is a clinical-stage biopharmaceutical company focused on rare and ultra-rare genetic diseases; it had no approved products and reported only nominal named-patient sales.
Financial performance and position
Amounts below are in millions of U.S. dollars, except per-share data. Revenue remained immaterial, so conventional revenue margins are not meaningful.
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $0.111 | $0 | $0.128 | $0 |
| Research and development | $48.7 | $29.7 | $132.5 | $70.2 |
| General and administrative | $17.2 | $10.2 | $45.1 | $21.4 |
| Operating loss | $(65.8) | $(39.9) | $(177.5) | $(91.6) |
| Net loss | $(64.9) | $(39.2) | $(174.6) | $(90.4) |
| Basic and diluted loss per share | $(1.64) | $(1.03) | $(4.46) | $(2.51) |
- Operating cash used was $113.3 million for the first nine months, versus $65.5 million in the comparable 2015 period. Net loss included $34.8 million of stock-based compensation for the 2016 period.
- Cash and cash equivalents were $142.3 million; short- and long-term investments totaled $330.4 million. Together, these amounted to $472.6 million at September 30, 2016. The filing does not give a cash-runway estimate.
- Total liabilities were $59.3 million and stockholders’ equity was $455.9 million. No borrowings or debt balance are reported in the presented balance sheet.
- Cash provided by investing activities was $98.3 million, largely reflecting investment maturities and sales; financing provided $63.7 million, including ATM share sales and Takeda-related proceeds.
Changes versus prior comparable periods
- For the first nine months, revenue rose from zero to $0.128 million, reflecting UX003 named-patient sales in Europe; the company said it did not expect significant product-sales revenue before regulatory approval.
- Nine-month R&D expense increased 89% and G&A expense increased 111% year over year. Management attributed growth to later-stage clinical programs, manufacturing and regulatory work, commercial planning, professional services, higher personnel costs, and stock-based compensation.
- Nine-month net loss widened to $174.6 million from $90.4 million. Operating cash use also increased year over year.
- At September 30, 2016, total assets were $515.2 million, down from $559.6 million at December 31, 2015; equity fell from $531.1 million to $455.9 million.
Funding, outlook, and material items
- In July, the company established a $150 million at-the-market (ATM) program and sold shares for $33.7 million net through September 30. From October 1 through November 7, it sold an additional $26.0 million net; $89.1 million of aggregate ATM capacity remained at that date.
- Takeda purchased 374,590 shares for $40.0 million in July. The company recorded a $14.3 million monetary liability for the related collaboration arrangement while the amount to be repaid for development work remained uncertain. In October, Ultragenyx exercised a put option, resulting in a further $25.0 million share purchase by Takeda.
- Management expected continuing losses and higher R&D and G&A spending as programs advanced and commercialization preparations developed. It said further capital may be needed; financing might require equity issuance, debt, or collaborations and could dilute shareholders or require surrendering rights.
- Pipeline milestones and expectations stated in the filing included: KRN23 adult XLH Phase 3 enrollment completed; pediatric XLH Phase 3 initiated in October; EU conditional marketing filing planned near year-end 2016 and U.S. BLA planned for the second half of 2017. The rhGUS Phase 3 study met its urinary GAG primary endpoint, and regulatory filings were planned for the first half of 2017. UX007 Glut1 DS Phase 2 data were expected in Q1 2017, with a movement-disorder Phase 3 study planned by year-end 2016. UX007 LC-FAOD Phase 3 was planned for 2017. Ace-ER Phase 3 data were expected in 2017; the EU application had one remaining major objection concerning interpretation of Phase 2 clinical data.
- Management cautioned that some reported clinical findings came from small, uncontrolled or open-label studies and require confirmation. Development, regulatory review, patient recruitment, manufacturing supply, collaboration performance, and future financing remain significant risks. The company reported no material legal proceedings, effective disclosure controls, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current cash and investment balances, subsequent ATM proceeds, Takeda’s October $25 million share purchase, and remaining ATM capacity.
- The composition and expected settlement of collaboration-related liabilities, including the $14.3 million Takeda liability and accrued collaboration repayment obligations.
- Actual timing and outcomes of regulatory submissions and decisions for KRN23, rhGUS, and Ace-ER, including the unresolved Ace-ER EU objection.
- Whether clinical results from small or uncontrolled studies are confirmed in ongoing or planned controlled trials, and whether safety or endpoint issues affect development.
- Future operating cash use, spending growth, and any additional financing or dilution required to advance the pipeline.