Ultragenyx Pharmaceutical Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014. Ultragenyx was a development-stage biopharmaceutical company focused on treatments for rare and ultra-rare diseases. It had no approved products and generated no revenue.
Financial results and position
| Metric | Q1 2014 | Q1 2013 / prior date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $8.353 million | $5.664 million |
| General and administrative expense | $1.986 million | $1.083 million |
| Total operating expenses | $10.339 million | $6.747 million |
| Net loss | $13.630 million | $6.735 million |
| Net loss attributable to common stockholders | $18.438 million | $8.205 million |
| Basic and diluted loss per share | $0.85 | $2.84 |
| Net cash used in operating activities | $8.336 million | $6.293 million |
| Cash, cash equivalents and short-term investments | $165.397 million | $53.377 million at December 31, 2013 |
| Total assets | $172.707 million | $59.649 million at December 31, 2013 |
| Total liabilities | $6.993 million | $9.540 million at December 31, 2013 |
Amounts are in U.S. dollars. The company reported no product revenue or profit; gross margin is not applicable. Cash and short-term investments included $55.447 million of cash and cash equivalents and $109.950 million of short-term investments. No debt balance was reported. Current liabilities were $6.811 million, versus current assets of $169.636 million.
Material changes and unusual items
- R&D expense increased 47% year over year, led by expanded triheptanoin, SA-ER and KRN23 activities; G&A expense increased 83%, largely due to personnel and professional services.
- The February IPO generated approximately $121.7 million in net proceeds after offering costs and a $4.3 million preferred-stock dividend. The company also received $126.1 million in Q1 common-stock proceeds, including IPO proceeds and option exercises.
- At the IPO closing, preferred stock converted into 19.6 million common shares. A $3.324 million noncash expense from remeasurement of preferred-stock warrants contributed to the quarter’s net loss; the warrants were then converted to common-stock warrants and reclassified to equity.
- Operating cash use was $8.336 million. Investing cash use of $65.398 million primarily reflected purchases of short-term investments, partly offset by maturities; financing provided $121.754 million.
Outlook, development and risks
- Management expected existing resources to fund current operations into 2016, while anticipating continued and increasing losses and a need for additional capital to complete development and pursue approvals.
- Programs included Phase 1/2 rhGUS for MPS 7; Phase 2 triheptanoin studies for LC-FAOD and Glut1 DS; a Phase 2 extension study of SA-ER for HIBM; and KRN23 development with Kyowa Hakko Kirin, with a pediatric Phase 2 study planned for 2014. rhPPCA remained preclinical.
- Management expected rhGUS interim data during 2014, SA-ER extension data in late 2014, and triheptanoin Glut1 DS and LC-FAOD data in 2015. These are forward-looking expectations, not assured outcomes.
- Preliminary rhGUS observations in three patients included reduced urinary GAG excretion; the filing reported no serious adverse events or infusion reactions in those patients through the reported treatment period. The FDA had not agreed to the proposed MPS 7 pivotal-study plan and sought further evidence linking urinary GAG changes to clinical outcomes.
- Key risks include early-stage clinical uncertainty, small patient populations and enrollment challenges, regulatory and manufacturing delays, reliance on single-source suppliers and third parties, competition, intellectual-property limitations, and the possibility that future financing may be unavailable or dilutive.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2014. It disclosed approximately $4.257 million in operating-lease and manufacturing contractual obligations.
Investor verification priorities
- Verify the cash runway assumption against subsequent operating burn, trial costs and financing needs; “into 2016” was management’s estimate.
- Track clinical and regulatory milestones, especially KRN23 study plans, rhGUS pivotal-study requirements, and the expected SA-ER and triheptanoin data.
- Assess whether the preliminary clinical observations translate into durable, clinically meaningful benefit and an acceptable safety profile in larger studies.
- Review supplier capacity, manufacturing readiness, and the company’s dependence on partners, particularly KHK for KRN23.
- Reconcile share counts and potential dilution: the filing reported 30,049,650 shares outstanding at March 31 and 30,035,894 at May 7, 2014, as well as options and warrants.