Ultragenyx Pharmaceutical Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Ultragenyx is a clinical-stage biopharmaceutical company developing treatments for rare and ultra-rare diseases. It reported one operating segment and no significant product-sales revenue.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Research and development expense | $51.3 million | $40.4 million |
| General and administrative expense | $18.7 million | $13.2 million |
| Total operating expenses | $70.0 million | $53.6 million |
| Net loss | $68.3 million | $52.8 million |
| Net loss per share, basic and diluted | $1.63 | $1.35 |
| Cash used in operating activities | $61.2 million | $44.9 million |
| Cash, cash equivalents and investments | $506.1 million | — |
| Total assets / total liabilities | $545.8 million / $57.3 million | $540.6 million / $66.7 million at Dec. 31, 2016 |
There is no meaningful operating margin to report: the filing presents operating expenses and losses, and no material revenue base. No debt balance is identified in the provided filing text. Cash and cash equivalents were $159.5 million; short- and long-term investments were $346.6 million. Current liabilities were $51.8 million. The company raised $67.6 million net through its at-the-market offering, selling 912,351 shares; the offering authorization was completed.
Changes versus the prior comparable period
- Net loss increased by $15.5 million year over year; operating cash use increased by $16.3 million.
- R&D expense rose 27%, mainly from burosumab, rhGUS and UX007 development, broader research and preclinical costs, and stock-based compensation. Ace-ER spending declined 20%, primarily due to timing of manufacturing costs.
- G&A expense rose 41%, reflecting commercial planning, professional services, higher stock-based compensation and personnel costs.
- Cash and cash equivalents declined $1.6 million from year-end, while total cash, cash equivalents and investments were $506.1 million at quarter-end. Financing inflows largely offset operating and investing outflows.
Pipeline, outlook and material developments
- Burosumab (XLH): The company reported positive topline Phase 3 adult data in April 2017, after quarter-end. It planned a U.S. BLA submission in the second half of 2017; an EU CHMP opinion was expected by year-end 2017. Pediatric Phase 3 data were expected in 2018. Burosumab Phase 2 data in tumor-induced osteomalacia were expected in the second half of 2017.
- rhGUS (MPS 7): Following positive pivotal Phase 3 results announced in 2016, U.S. and EU regulatory filings were planned for the first half of 2017.
- UX007 (Glut1 DS): The Phase 2 seizure study did not meet its primary endpoint. The company said it was evaluating plans for that indication. It screened the first patient in a Phase 3 movement-disorder study in April 2017.
- Ace-ER (GNE myopathy): The Phase 3 study was fully enrolled, with data expected in the second half of 2017. The filing also notes the prior withdrawal of its EU conditional-authorization application after regulator feedback that the evidence was insufficient.
- Management expected R&D and G&A expenses to increase as programs advance and the company builds commercial capabilities. It anticipated continued losses and stated that additional capital would likely be needed over time, although it expected existing funds to support near-term needs.
- Takeda collaboration consideration of $14.3 million remained fully constrained and recorded as a refund liability because the amount potentially repayable for development work was uncertain. The recorded collaboration repayment liability was $13.1 million at March 31, 2017.
Risks, contingencies and other items
- Key risks include clinical-trial failure or delay, uncertain regulatory outcomes, difficulty enrolling rare-disease patients, manufacturing and single-source supply dependence, and reliance on collaboration partners, notably KHK for burosumab.
- The company has a history of losses and may need further financing; equity financing could dilute shareholders, while other funding arrangements could require restrictive terms or relinquishment of rights.
- Contractual operating-lease and manufacturing/service commitments totaled $37.5 million. The filing reported no material legal proceedings and no off-balance-sheet arrangements.
- Management expected a hypothetical 100-basis-point interest-rate move and 10% foreign-exchange move not to have a material financial-statement impact. Disclosure controls were assessed as effective; no material first-quarter change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether planned regulatory filings and review timelines for burosumab and rhGUS were achieved, and how later clinical data affected those plans.
- How management’s projected cash needs and runway compare with ongoing operating cash burn and expected increases in development and commercial spending.
- Whether the UX007 movement-disorder trial succeeds, and what the failed seizure-study primary endpoint means for further investment in that indication.
- Whether the Takeda refund liability and related transaction accounting change as development costs and repayment obligations become clearer.
- Current status of manufacturing capacity, supply agreements, and commercial readiness for late-stage candidates.