A Deeper Look At Ultragenyx Prescription drugs (NASDAQ:RARE)

Repetition of an argument proves your willpower, not reality.”― Raheel Farooq

Shares of uncommon illness concern Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) are buying and selling some 60% larger after pricing a secondary in October 2023 at $30, owing to optimism relating to its pipeline. The corporate has seven uncommon illness belongings within the clinic that would deal with a affected person inhabitants of ~200,000, six of which have encouraging early returns. With a considerable money bleed regardless of income from 4 industrial merchandise however with sufficient money post-secondary to function into FY26, Ultragenyx merited a deeper dive. An evaluation follows under.

Firm Overview:

Ultragenyx Pharmaceutical Inc. (RARE) is a Novato, California based mostly commercial-stage biotechnology concern centered on the in-licensing, improvement, and commercialization of therapies for the remedy of uncommon and ultrarare ailments. The corporate has 4 industrial merchandise treating 5 indications and 7 scientific packages, 5 of that are in registrational trials. Ultragenyx was based in 2010 and went public in 2014, elevating internet proceeds of $121.7 million at $21 per share. The inventory trades close to $47.50 per share, translating to a market cap of simply over $4 billion, after giving impact to 1.67 million pre-funded warrants.

Business Merchandise

Though the corporate markets 4 merchandise, it generates the preponderance of its prime line from three: Crysvita (burosumab); Dojolvi; and Mepsevii.

Crysvita is a subcutaneously injected antibody focusing on fibroblast progress issue 23 (FGF23) employed to fight X-linked hypophosphatemia (XLH), a uncommon, hereditary, musculoskeletal dysfunction (a.ok.a. rickets) characterised by low ranges of serum phosphorus introduced on by extra FGF23. Not like regular rickets, XLH sufferers don’t reply to vitamin D remedy. Its prevalence is ~48,000 within the developed world (~15,000 within the U.S.), comprising ~36,000 adults and ~12,000 kids. It’s the solely authorised remedy for XLH and can also be green-lighted within the U.S. and different territories for the remedy of FGF23-related hypophosphatemia in tumor-induced osteomalacia, which afflicts ~2,000 to ~4,000 worldwide.

First authorised by the FDA in 2018, Crysvita is bought globally in collaboration with Kyowa Kirin (OTCPK:KYKOF). Its gross sales are topic to funds to Royalty Pharma (RPRX) and the Ontario Municipal Workers Retirement System (OMERS). Whole income generated from Crysvita to Ultragenyx was $233.9 million within the first 9 months of 2023 (YTD23), representing an 18% improve over YTD22.

Dojolvi is an artificial, 7-carbon fatty acid triglyceride employed as a metabolite substitute for people with long-chain fatty acid oxidation issues (LC-FAOD), that are a battery of metabolic ailments marked by the physique’s incapability to transform fats into power that may result in low blood sugar, muscle rupture, in addition to coronary heart and liver illness. Roughly 8,000 to 14,000 folks undergo from LC-FAOD within the developed world. Authorized in 2020, Dojolvi generated YTD23 gross sales of $47.3 million, up 21% from the prior yr interval.

Mepsevii is an intravenously administered enzyme substitute remedy used to deal with ultrarare illness mucopolysaccharidosis VII (Sly syndrome), which afflicts ~200 people globally. Authorized in 2018, it accounted for YTD23 gross sales of $22.6 million, representing a rise of 42% over YTD22.

Ultragenyx additionally markets Evkeeza, a monoclonal antibody designed to scale back ldl cholesterol in sufferers with homozygous familial hypercholesterolemia (HoFH), exterior the U.S. as a part of a collaboration with Regeneron (REGN). In return for $30.0 million upfront and potential milestones of $63.0 million, Ultragenyx receives a affected person inhabitants of ~3,000 to ~5,000 to which to market. Inked in January 2022, the deal solely generated YTD23 gross sales of $1.5 million.

Pipeline

Along with its protein biologic and small molecule industrial portfolio, Ultragenyx is advancing one different monoclonal antibody, an antisense oligonucleotide (ASO), a lipo-nanoparticle mRNA oligonucleotide, and several other gene remedy packages via the clinic. All have orphan designations from the FDA. Beneath is a short description of essentially the most related six.

UX143 (setrusumab). Probably the most promising of those candidates is UX143, an anti-sclerostin monoclonal antibody present process analysis in a Section 2/3 trial for the remedy of osteogenesis imperfecta (OI), a illness characterised by brittle bones and no authorised therapies that afflicts ~60,000 worldwide. The Section 2 portion is totally enrolled and early returns are encouraging. Of sufferers with at the least six months of remedy, the annualized fracture price – which excludes fractures of the fingers, toes, cranium, and face – throughout 24 sufferers was decreased by 67% whereas the median annualized fracture price was decreased to 0.00 versus 0.72 within the two years previous to remedy (p=0.042) with just one fragility fracture (e.g., whereas getting away from bed) noticed. This information despatched shares of RARE 10% larger within the subsequent buying and selling session (October 16, 2023), setting the stage for a secondary providing.

The Section 3 portion is anticipated to enroll ~195 sufferers, whereas one other 65-patient Section 3 research will examine UX143 to intravenous bisphosphonate remedy. Each Section 3 research must be totally enrolled by 1Q24, whereas extra knowledge from the Section 2 portion are anticipated in 2024.

The event and industrial rights, which exclude Europe, have been in-licensed from Mereo (MREO) for an upfront consideration of $50 million, with Ultragenyx potential obligated on milestone funds as much as $254 million, in addition to double digit royalties.

GT-102. One other Ultragenyx remedy focusing on a worldwide affected person inhabitants of ~60,000 is GT-102. It’s an ASO underneath evaluation for the remedy of Angelman syndrome, a uncommon and debilitating neurogenetic dysfunction characterised by issues with speech and stability, mental incapacity, (in some cases) seizures, and blissful excitable personalities. It’s attributable to a loss-of-function of the maternally inherited allele of the UBE3A gene and at the moment has no authorised remedies. GT-102 is present process evaluation in a multi-cohort Section 1/2 trial and has exhibited some promise thus far. Of 11 sufferers eligible for analysis at Day 338, all demonstrated enchancment in at the least considered one of 5 useful classes (sleep, conduct, cognition, communication, and motor expertise), with median complete internet responses at +2 (p=0.001). One other replace is anticipated in 1H24, which ought to set the stage for a pivotal Section 3 research.

DTX401. Ultragenyx has 4 gene remedy packages, together with DTX401, which is being assessed in a Section 3 research for the remedy of Glycogen Storage Illness Kind 1a (GSDIA), an inherited dysfunction that forestalls the liver from breaking down glycogen as a result of a deficiency of enzyme glucose-6-phoshatase. The one identified treatment for the ~6,000 troubled is liver transplantation. The first endpoint of the 48-week, 50-patient trial is the discount in oral glucose substitute with cornstarch whereas sustaining glucose management versus placebo. Information are anticipated in 1H24.

UX111. One other member of the gene remedy franchise is UX111, an intravenous adeno-associated virus 9 (AAV9) gene remedy that gives a cross-correcting enzyme to deal with Sanfilippo syndrome sort A (MPS IIIA). It’s a uncommon lysosomal storage dysfunction affecting the mind and spinal twine and is attributable to a buildup of enormous sugar molecules within the physique’s lysosomes. The ~3,000 to ~5,000 troubled (globally) current progressive mental incapacity, hyperactivity, dementia, and lack of mobility. There are at the moment no authorised therapies, which Ultragenyx goals to alter because it continues to huddle with the FDA relating to an accelerated evaluation pathway after a profitable pivotal research wherein sufferers tracked on a traditional developmental vary. That mentioned, UX111 is decrease on the precedence scale for administration.

DTX301. One other late-stage gene remedy candidate is DTX301, an intravenous AAV8 remedy for urea cycle dysfunction ornithine transcarbamylase deficiency (OTC). Owing to the faulty enzyme, the physique can not correctly detoxify ammonia, which may result in a number of points, together with ataxia, lethargy, and dying with out speedy intervention. OTC impacts ~10,000 globally, of which 80% are late onset. A Section 3 trial is anticipated to be totally enrolled by 1H24. Expectations are excessive after seven of 11 sufferers in a Section 1/2 research demonstrated sturdy metabolic management with sustained responses as much as 5.5 years.

UTX701. The final of the pivotal stage belongings is UTX701, which is an AAV9 gene remedy for the remedy of Wilson illness, a dysfunction attributable to a buildup of copper within the liver, mind, and different organs that afflicts over 50,000 worldwide. A Section 1/2/3 trial was initiated in 2021 with major efficacy endpoints the change in 24-hour urinary copper focus and p.c discount in commonplace of care treatment (chelation remedy) by week 52. Stage 1 knowledge on three cohorts are anticipated in 1H24. Expectations are excessive as two of the primary 5 sufferers in cohort 1 have already discontinued chelation remedy.

It also needs to be famous that the corporate is endeavoring to spin out a separate entity to pursue the Alzheimer’s illness [AD] indication based mostly on encouraging preclinical observations, the place an enzyme dubbed protecting protein/cathepsin A (PPCA) broke up a type of amyloid beta – the speculated protein liable for the illness’s debilitating results – in murine fashions. For the reason that AD indication isn’t uncommon, administration thought it applicable to maintain it separate, though it plans to personal a majority stake within the new concern as soon as public.

3Q23 and YTD23 Financials

As a result of giant variety of scientific trials, the upfront prices of in-licensing offers, and the truth that a few of its income has been bought off to royalty considerations, Ultragenyx is a money burning machine. In 3Q23, it misplaced $2.23 per share (GAAP) on income of $98.1 million versus a lack of $3.50 per share (GAAP) on income of $90.7 million in 3Q23. For YTD23, the corporate has misplaced $6.81 per share on income of $306.9 million versus a lack of $7.96 a share on income of $260.0 million in YTD22.

Steadiness Sheet & Analyst Commentary:

With a money bleed from operations of $390.9 million via September 30, 2023, administration concluded that the money and investments of $524.2 million remaining on its stability sheet was not adequate and elected to boost internet proceeds of $326.4 million via the sale of inventory and pre-funded warrants at $30.00 per share (warrants $29.99) in October 2023, offering it with sufficient funding to function into FY26. Apart from royalty obligations totaling $876.0 million, Ultragenyx has no debt.

Owing to the promise of its gene remedy franchise and different scientific candidates, Road analysts are largely constructive on the corporate, with 9 analyst companies together with JP Morgan and Morgan Stanley reissuing/assigning Purchase/Outperform rankings on the inventory. Worth targets proffered vary from $57 to $140 a share. On common, they expect Ultragenyx to lose $8.34 a share (GAAP) on income of $436 million in FY23, adopted by a lack of $6.11 a share on income of $524 million in FY24.

Verdict:

The corporate’s pipeline is extraordinarily promising. And with knowledge forthcoming on GTX-102, DTX401, and UTX701 in 1H24 and UTX143 someday in 2024 – to not point out an replace on progress in the direction of an accelerated evaluation for UX111 and an AD remedy spin – there are many catalysts to propel shares of RARE larger. Moreover, shares of RARE are down 79% since reaching an all-time excessive of $179.65 in December 2020 on the again of a optimistic election consequence (Republican Home majority) and hypothesis that they may be acquired. The downward transfer is a broadly a operate of the market shifting its focus to the underside line of revenue statements and particularly in response to points surrounding GT-102 – particularly, a delay in knowledge attributable to a trial suspension in 2020 and what the market interpreted as tepid interim outcomes launched in July 2022.

That mentioned, regardless of Ultragenyx proudly owning a stable pipeline focusing on larger affected person populations, on its present trajectory, it won’t be worthwhile till FY27. A typical 3.5 occasions peak income valuation locations its projected peak gross sales at ~$900 million – assuming that stability sheet money and royalty obligations basically cancel one another out – which appears greater than honest at this juncture. Given no outlook-altering knowledge, Ultragenyx turns into engaging at $30 a share (peak gross sales estimate of $700 million) or a tad over that stage. Till then, I plan to stay on the sidelines.

Even the reality is only a mere thought.”― Mokokoma Mokhonoana