Ultragenyx Pharmaceutical Inc. (RARE) Q4 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Ultragenyx Fourth Quarter 2017 Financial Results and Corporate Update. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, today’s conference maybe recorded. I would now like to introduce your host for today's conference, Miss. Danielle Keatley. Ma’am, please go ahead.

Good afternoon, and welcome to the Ultragenyx Pharmaceutical Financial Results and Corporate Update Conference Call for the fourth quarter and full year 2017. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Danielle Keatley, Director of Investor Relations and Corporate Communications. With me today are Emil Kakkis, Chief Executive Officer and President; Shalini Sharp, Chief Financial Officer; and Jayson Dallas, Chief Commercial Officer. I would like to remind investors that this call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including, but not limited to, the types of statements identified as forward-looking in our quarterly report on Form 10-Q filed on November 3, 2017; our annual report on Form 10-K for the quarter ended December 31, 2017, that will be filed soon; and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that actual results could differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements as well as risks relating to our business, see our periodic reports filed with the SEC. I'll now turn the call over to Emil.

Thanks, Daniel and good afternoon, everyone, and thank you for joining us. We’ve had an exciting 2017 with our first approval, progress in terms of major filings, clinical studies and Gene Therapy acquisition. I'll start by discussing our recent progress and milestones; Shalini will then give an overview of our fourth quarter and full year results; and finally Jayson Dallas will provide a commercial update. 2017 marked a year of transition for Ultragenyx from being development stage company to a commercial one with approval for our first commercial product MEPSEVII for the treatment of MPS 7. Commercial transitions happen only once in the life of company and we are approaching this transition with deep thought and care to assure we maintain and grow ourselves in the right way and become able to deliver our projects for the last mile of the journey through development to commercial availability. We must be in incredibly successful business and we must also manage global patient access consistent with our principles. In December, we have received a positive opinion from CHMP on the burosumab conditional marketing authorization for exhalation children or currently waiting a final EC decision this month. Burosumab is designated as a breakthrough therapy in the U.S. and the MPS has been extremely collaborative during the review process, but is on track for a PDUFA date of April 17, 2018. If approved we also expect to receive a priority review voucher for burosumabs and it has been a designated drug for a rare pediatric disease. Regarding pipeline development, we have progress our UX007 program into a Phase III study for Glut1 deficiency syndrome reading out later this year and also are negotiating the FDA regarding our early filing for fatty acid oxidation disease as well also preparing for our Phase III program to be initiated this year. Late in 2017, we acquired Dimension Therapeutics, which added AAV gene therapy technology to our portfolio including two clinical stage metabolic programs, one already underway for ornithine transcarbamylase, or OTC, and another clinical program beginning soon for Glycogen Storage Disorder Type 1a. So Gene Therapy acquisition gives us a wider variety of the unique method to treat rare disease that also includes recombinant protein small molecules, or mRNA. This combination now with gene therapy will allow us to select the best treatment strategy available for each disease. The integration of management Gene Therapy business has gone well with the retention of the very important techno leadership and management team that operate the program and continue to make progress across the portfolio. Finally, we finished 2017 with an Analyst Day where we disclosed two new pre-clinical programs: UX053 and mRNA based treatment for Glycogen Storage Disease Type 3 and UX068 a small molecule pro-drug for the treatment of Creatine Transporter Deficiency. With respect to burosumab at Analyst Day, a 48-week data from the adult Phase III was also presented that’s showing sustained maintenance of normal serum phosphate levels, increased rate of fracture healing and further improvement of stiffness, physical function and pain and notably a substantial decrease in pain medicine usage over 48-weeks. On November 15, 2017, our first product MEPSEVII was approved by the FDA for the treatment of MPS 7, marking a significant milestone for the company, our first approval. U.S. launch has gone well so far and Jayson will provide more color later in the call. In Europe, the review process continues and is moving along as expected and we anticipate a CHMP Opinion in the first half of 2018. As a reminder regarding burosumab review in the U.S., the FDA except our BLA for both the pediatric and adult indication and granted priority review with a PDUFA date of April 17, 2018. The accepted application is based on currently available data from our multiple ongoing studies for both children and adults. Today, we also announced that the 64-week burosumab treatment data from the Phase II study in one to 4-year-old demonstrate a reduction in rickets and bowing that was consistent with or further improvement what was seen as 48-week – 40-weeks. These results are also included in sustained improvements in serum phosphorus levels and a progressed reduction into the normal range of alkaline phosphatase, a commonly used metabolic sign of rickets. More importantly there were continued improvements in bowing and rickets at 64-weeks. The safety profile observed this study was consistent with other burosumab studies. These data continues to support the concept that early treatment could have a more profound effect on the bone deformity that would typically affect XLH patients throughout their lives. Today we also announced adult XLH bone biopsy data from all patients the bone quality study demonstrating a continued improvement in osteomalacia. In our discussion with FDA, they indicated the improvement in osteomalacia could also be considered an important outcome for adults with XLH. At 48 weeks, all ten patients with the valuable paired bone biopsies demonstrated meaningful improvements from baseline in mean osteoid volume relative to bone volume. The mean decreased from 26.1% to 11.2% among these patients, represents a 57% improvement from baseline in mean osteoid volume relative to bone volume, which is the gold standard for the evaluation of osteomalacia. The number of patients reached the single-digit percent level close to the 3% upper limit of normal for osteoid fraction of volume. The patients also demonstrated mean improvements of 32% and 26% in osteoid thickness and osteoid surface relative to bone surface parameters respectively while also experiencing a mean improvement – meaningful improvement in mineralization lag time. Results are consistent with the data already provided to the FDA in the first six of these ten showing to substantial reduction in osteomalacia. These data provide important supportive data on substantial severity of their underlying osteomalacia bone disease in adult XLH patients and the ability of burosumab to treat this underlying bone disease present in adult XLH patients. Now turning to our OTC gene therapy program, we recently presented data from the first lowest dose cohort of the Phase I/II study in OTC. One patient’s rate of ureagenesis was normalized, maintaining – maintained with a 3% increase in the rate ureagenesis from baseline to week 12 to reach 87% of normal. The second patient did not show clinically meaningful change in the rate of ureagenesis over the 12 week period. And the third week – third patient showed a modest increase in ureagenesis from baseline over the first six weeks of treatment with 12 week treatment not yet available. There were no efficient related adverse events and no serious adverse events reported. The only treatment related adverse events were mild clinically asymptomatic and manageable elevation of the Alanine Aminotransferase, or ALT, in two patients and both completed a standard tapering course of corticosteroids to treat the ALT elevations. Additional extension deal will be coming soon and in second quarter as planned once the DMC completes its review in early March. Regarding UX007, we announced that following in end of Phase II meeting, we are working to provide additional information to submit to FDA for consideration of an early filing based on the results from the Phase II study. While the FDA still preferred that a randomized controlled trial be completed before filing, it left open the possible filing on the current data. We’re simultaneously completing the design of Phase III study that to be used for registration or confirmatory purposes depending on the outcome of the other data review. With more than 100 FAOD patients treated over the years and about 80% of the subjects still on therapy for an average of four years with some as long as 17 years. We do believe there is enough evidence to support the safety and efficacy of UX007. As said a randomized controlled Phase III study confirming a substantial reduction in major clinical events as observed in our Phase II study would be extremely helpful in the long-term regulatory view and commercialization of UX007. Now on the Glut1 program, the screening has closed in the Phase III study for the treatment of Glut1 with the movement disorder phenotype. Data from this study is expected in the second half of 2018. I would like now to take a moment to recognize and welcome Camille Bedrosian to Ultragenyx as our Chief Medical Officer. I am particularly happy now that Camille will be taking of her responsibility for the Chief Medical Officer role from me. I have been it doing for the last many months. We’re excited that Camille will bring her passion and track record in developing new rare disease treatments to improve the lives of rare disease patients as we continue to build and advance our pipeline. Camille is a hematologist and oncologist by training and was most recently a Chief Medical Officer at Alexion. She spent a number of years at Genetics Institute, Wyeth-Ayerst and Alexion developing multiple drugs mainly for rare disease indication. She has both the skills and the driving spirit required to work successfully in the rare disease space. This year 2018 shaping up to be a year with a number of important catalysts across the portfolio potentially launching two products – two programs in the Phase III, two gene therapy programs reading out early clinical data. For burosumab from retro V standpoint, we're expecting a final EC Decision in February on the burosumab conditional marketing authorization for pediatric XLH. Our BLA for the treatment of XLH in both pediatric and adults is being reviewed by FDA and we have PDUFA date of April 17, 2018. For study data we are expecting new data for the randomized active control pediatric Phase III study comparing burosumab to oral phosphate and active vitamin D therapy in the second half of 2018. This study will not be required for U.S. approval and will serve in the confirmatory study in Europe. We do believe we will product further support for the benefit of burosumab over current therapy. Finally for TIO data from all patients, the safety is expected in the half of 2018. For U.S. for the treatment of Glut1 deficiency syndrome and FAOD, our Glut1 indication enrollment has gone well and screening have closed. We expect data from the Phase III movement disorder study in Glut1 deficiency syndrome in the second half of 2018. In the FAOD patients, we expect the decision are potentially filing for approval based on Phase II data in FAOD. And FAOD patients will be made by mid 2018. For the DTX 301 AAV gene therapy for the treatment of OTC deficiency, full data for the first cohort in the Phase I/II study and the DMC review are expected in March. The second cohort patient is being screening now and the product is already manufactured. We would expect cohort two treatments occur in the first half after the DMC review with data available in the second half of 2018. Of the DTX 401, AAV gene therapy for the treatment of GSD1a, an IND filing in GSD1a patients is expected in the first half of 2018. The product is also already being manufactured with the trial and the data from the first quarter of patients is expected to in the second half of 2018. Finally for DTX 201 and AV treatment for hemophilia A partnered with Bayer, an IND filing in hemophilia A is on tract for the second half of 2018. With that I will turn the call over to Shalini to provide an overview of our financial results.

Thank you, Emil, and good afternoon everyone. We issued a press release earlier today that included a financial update, which I will briefly summarize. Total net loss for the fourth quarter of 2017 was $81.7 million or $1.89 per share, basic and diluted, compared with $71.3 million or $1.75 per share, basic and diluted, for the fourth quarter of 2016. For the year ended December 31, 2017, total net loss was $302.1 million or $7.12 per share, basic and diluted, compared with a net loss of $245.9 million, or $6.21 per share, basic and diluted, in 2016. The net loss for the fourth quarter and the full year of 2017 includes a non-cash non-recurring tax benefit from the Dimension acquisition of $16.2 million. This was the result of the change in the U.S. corporate tax rate from 34% to 21% on the deferred tax liability. The net loss for the full year 2017 reflected cash used in operations of $253.8 million in 2017 compared with $161 million in 2016. Net loss for 2017 included approximately $52.3 million in non-cash charges including stock-based compensation of $68 million, amortization of premiums on purchased investments, depreciation amortization and other noncash charges. Offset by the non-recurring income tax benefit recorded. We expect stock competition expenses to continue to increase over time. For the fourth quarter and full year of 2017, we reported $0.3 million and $0.5 million respectively in MEPSEVII revenues. Our total operating expenses were $99.2 million for the fourth quarter of 2017 and $331.6 million for the full year. Research and development costs were $231.6 million in 2017 with our Phase III program accounting for the greatest proportion of R&D costs. As a reminder, we share burosumab development costs 50:50 with our collaborative partner Kyowa Kirin. Cost for our multiple preclinical translational research programs are also increasing as programs advanced towards the clinic. We ended the year with $244.5 million in cash, cash equivalents and investments on the balance sheet. In January 2018, we completed the sale of our MEPSEVII PRV for $130 million and raised $271 million in net proceeds through an equity offering. We also anticipate receiving 50% of the proceeds of any potential burosumab PRV sale in 2018. During 2018, absent one-time such as PRV sales, we expect OpEx for our base business to experience a modest increase with some additional increase due to the addition of the gene therapy business. The proportion of operating expenses that is noncash should remain materially similar in 2018. The proportion of operating expenses dedicated to R&D should remain materially stable in 2018 as well. With the MEPSEVII U.S. product launch underway and the April 17, 2018 burosumab PDUFA date, I wanted to take a few minutes to discuss revenue expectations around both drugs. For MEPSEVII, we are not providing any product sales guidance at this early stage of the launch. Jayson will provide some additional detail on the launch, but we would like reiterate that MPS 7 is an extraordinarily rare disease, so we expect a gradual build over time as patients are found, put on therapy and ultimately reimbursed. We have also expensed any production of MEPSEVII prior to the date of U.S. approval. Until that supply is utilized there will be minimal cost of goods sold associated with MEPSEVII sales. For both burosumab and MEPSEVII, we know that reimbursement could take three to nine months to complete. While this would most significantly impact revenue in the early launch period when all of the patients are sensually new, we do expect that ultimately over time penetration would reflect the true value of these products as demonstrated in our clinical programs. I will also take this opportunity to review again the terms of the collaboration with KHK. Our agreements with KHK outline three territories: the U.S. and Canada, Latin America and Europe. In the U.S. and Canada for the first five years post-launch, Ultragenyx will launch burosumab and share development and commercial costs 50:50 with KHK. Ultragenyx will also pay KHK a supply price that is a fixed double-digit percentage of net sales. This supply price reflects a higher than typical cost of goods margin for a biologic and essentially compensates our partner for the fact that we’re not required to pay any upfront or milestone payments nor have we paid for the cost of the product during the development period or any associated manufacturing costs. In North America, our half of burosumab revenues will be shown net of the supply price. After the first five years, KHK will take over the majority of commercialization efforts in the U.S. and Canada and instead of the profit share mechanism Ultragenyx will receive a tiered royalty in the mid to high 20% range. This royalty is intended to reflect the same economics as during the profit share period. Throughout these periods, the agreement states that KHK will book sales for burosumab in the U.S. and Canada. Turning to Latin America, the agreements state that Ultragenyx will commercialize burosumab and recognize revenue while paying KHK a low single-digit royalty on net sales. In Latin America, Ultragenyx will pay KHK the same supply price of in the U.S. and Canada, a significant fixed double-digit percentage of net sales. In Europe, KHK will commercial and book burosumab sales, while Ultragenyx will receive a royalty of up to 10% of net sales. As a reminder in Europe it can take 12 to 24 months for approved products to receive reimbursement on a country by country basis. Overall, we estimate that we hold roughly one third of the value burosumab in the territory that the territories that are subject to the agreement. This concludes my remarks for today. I would now like to turn the call over to Jayson Dallas, our Chief Commercial Officer, who will provide a commercial update.

Thank you, Shalini, and good afternoon everyone. I would like to start up by providing an update on the MEPSEVII launch. On our approval call in November, we have talked about deploying our commercial sales force and focusing on supporting access to treatments to eligible patients. This team which we call UltraCare Liaisons has been educating healthcare providers and payors about MEPSEVII and has been working to provide essential services for patients to gain entirely an affordable access to this new therapy. We had also talked about establishing a comprehensive in-house support program called the UltraCare Hub designed to help patients seeking access to Mepsevii. Since launch UltraCare has been providing patients with a central point of contact to help provide treatment support and understand the insurance process and their financial assistance options. One of our goals with UltraCare is to ensure that patients who are uninsured, lack coverage, or need assistance with their out-of-pocket costs are able to receive treatment. We are pleased to announce that the U.S. MEPSEVII launch is progressing well and we continue to receive new patient starts forms. While why we are not disclosing patient numbers the number of start forms received to date are in line with our expectations. Additionally, we have received start forms for a few patients who have been diagnosed since we have received approval. These start forms continue to convert to active therapy and we have been able to treat new patients steadily since approval. The approval in the U.S. allows us to respond to requests for named patient programs in other countries. And we are excited by the progress we've made and look forward to providing updates throughout the year. As we prepare for potential burosumab approval in the U.S., we continue our patient diagnosis activities and are encouraged by the patients we are finding and remain confident in the expected prevalence numbers that we have previously communicated. Additionally, given the strength of the data in both pediatric and adult patients with XLH, we believe that burosumab has an increasingly robust value proposition in both populations. We have shared the composite, clinical and developing value story in our early interactions with payers and have thus far been well received. That being said, as Shalini previously mentioned, we expect a gradual build for burosumab in 2018 for a number of reasons. Firstly, many adults with XLH are being features for complications of their disease rather than the underlying disease. As such, once we receive approval there is work to do to ensure that these patients get referred to metabolic, bone or endocrine centers for diagnostic confirmation and treatment of their XLH. Secondly, getting placement on to formularies and achieving widespread reimbursement takes some time. And finally we'll only have a possible year sales in 2018. We are presently expanding the capacity of our UltraCare Hub and will be prepared to deliver the same high level of patients and caregiver support once we receive approval for burosumab. Following approval in the U.S. we will be able to respond to name patient request in specific countries in Latin America as well as Turkey. To conclude, the MEPSEVII launch is going well in its early phase and we feel very comfortable about burosumab prevalence numbers, as well as our level of preparation for launch in the U.S. if we receive FDA approval. With that I'd like to turn the call back to Emil.

Thank you, Jayson. As you can see we've made a lot of progress with the recent approval of MEPSEVII in the U.S. and the positive CHMP opinion for burosumab in Europe. Two UX007 indications are in Phase III and we have initial positive gene therapy data. This is an important year for the commercial execution of launch in potentially two programs and the company is intimately and intensely engaged on these two critical launches. You know how important these are and that making commercial transition is a critical one part success business. In addition by the end of 2018 we’re hoping to further extend these results by doing the following: obtaining approval of burosumab in key regions including the U.S. and Europe and other areas, adding to the list of approved geographies for Mepsevii, obtain additional proof-of-concept data across our gene therapy portfolio, readout data from our UX007 Phase III study in movement disorders, clarify the regulatory path for FAOD initiated Phase III study and drive forward our two new translational research programs UX068 and UX053 toward clinical development. I look forward to updating you throughout the year on our progress. Now let's move to your questions. Operator can you please provide the instructions for the Q&A portion of the call?

[Operator Instructions] Our first question comes from line of Eric Schmidt with Cowen and Company. Your line is now open.

Thanks and congrats on the progress. Maybe first one for Jayson, I think, you mentioned the initial payor reaction to burosumab in the U.S. was well received. Can you just talk about what kind of granular discussions you're able to have prior to the actual FDA approval date and what exactly it was that you thought was a favorable interaction?

Yes, sure Eric. So we've been able to meet with payors over the last couple of months following the MEPSEVII approval. And obviously when we meet with them we talk about the company, and we talk about out portfolio and of course we get we get questions about Chris Veda [ph]. And we're able to share some of the data we have. Obviously we've got a couple of new data sets recently that are fairly compelling that we've been able add to do the discussions that we have. And with the value proposition is really coming together quite nicely the clinical data in both pediatric patients and adult is extremely robust. And the story starts to hang together quite nicely in the adult population, which is the one where we expect things to be a little bit trickier. But having bone biopsy data, which leads to fracture healing data, which leads to improvements in the way patients feel about their disease is really coming together as a compelling story. So it's been extraordinarily well received clearly we haven't had any specific discussions around Chris Veda [ph] and formal replacement and certainly we haven't had any discussion around pricing for our burosumab yet.

Thank you and then maybe a second one for Shalini. I know the economics are complex around Chris Veda [ph] but is it possible that you would be recognizing negative revenue in the early part of U.S. launch as the sales are relatively small relative to the cost of the joint venture or would the joint venture cost be a different line? Just help us understand the mechanics of the P&L? Thanks.

Sure Eric, that's a great question. So the way that you will see the North American revenues on the income statement in terms of geography is that you will see 50% of the products sales minus our transfer price which is a percentage of the product sales in the revenue line, so that will always be a zero to positive number. And then you will see the cost associated with any R&D or SG&A in the operating expense line, our 50% of the cost. Does that make sense?

Absolutely, thank you.

Our next question comes from line of Steven Breazzano with Evercore ISI. Your line is now open. Mr. Breazzano you line might be muted

Hi, thanks for taking the question sorry about that. Maybe on triheptanoin could you just walk us through some of the differences in the Movement Disorder study versus the seizure phenotype and what gives you a confidence for success here in the syndication? Thank you.

Sure I think that is a good question. In the Movement Disorder study we had a pilot study showing a strong effect. We actually had clinical data showing a really strong effect 90% reduction movement event. That went away on drive, came back one drug was removed and went away again we put back on drug. Before we ran the seizure study we actually did not have any clinical data on observable seizures in that study that was the first study. So we had no basis for knowing what to expect. We had some evidence that observable seizures would improve based on prior data, but there wasn't any observable seizure difference. So one critical difference what data we have going into the study and we had some significant clinical data in the Movement Disorder side. So that's I think number one. I think the second thing we certainly improved how we managed dosing of the drug and how we managed the trial design as a randomized crossover design, double crossover. So each patient becomes their own control which will help us in the heterogeneity problem that can happen. Finally, the good one in movement disorder patients are not – most of them or very few of them are on ketogenic diet. So this is a more true, prevalent population where seizure patients we had in our study were people who all failed all the therapies basically and they were age 15 not young. And so Movement Disorder studies are more I would say were relevant to the prevalent population and not people who've been failing multiple therapies. So those are three reasons why I think Movement Disorder is different. And why we're more encouraged by the potential for it. Is it still neurology? I will point out. So I don't want to underestimate the complexity of neurology, but we do believe there's a stronger basis for belief with the movement study and its potential demonstrating effective result.

Thank you, very helpful.

Our next question comes from the line of Cory Kasimov with J.P. Morgan. Your line is now open.

Hi this is Carmen on for Corey. Thanks for taking the question. So on the hemophilia A gene therapy program how are thinking about the evolving competitive landscape? And where do you see DTX301 being differentiated? Also one follow-up, did you change anything about that program after you acquired it from Dimension? Thanks.

So there's competition in hem A in gene therapy.

Yes we were aware. Just quite a lot obviously BioMarin has done very good work on that area and there’s Spark, of course, and others. It is a program fully partnered with Bayer, and Bayer is supporting the program hundred percent at this point. We are bringing to bear our knowledge insights on drug development, as well as in managing with the particulars about hem A, but it is a Bayer’s program fundamentally and they're fully running those major decisions. I’s point out so that Camille who has joined us now is actually a hemo expert and worked at Genetics Institute on hemophilia. So is quite experienced as well. Our job will be to help support Bayer in making the best decisions possible. And I do think there's more to be done and hem A. I don't think it's all solved by what BioMarin has done at this point or others. I think there's a lot of uncertainties of why it's so variable and why are the doses of the virus so very high. I think those are factors that there's still room for improved understanding and a controlled and reproducible gene therapy for hem A.

Great, thanks very much.

Our next question comes from line of Adam Walsh with Stifel. Your line is now open.

Hi guys Neil Carnahan in on for Adam. Beyond reimbursement can you outline the parameters that's going to lead the gradual uptake of burosumab? And then can you talk to us about how you’re thinking about the for the peds versus the adult patient populations?

Sure I’ll let Jayson handle the questions.

Yes so the fundamental difference between the peds and the adult population is that the majority of the pediatric patients who we've been able to identify are presently being managed by pediatric endocrinologists. And so if you like already in the office of the docs who ultimately would be making a treatment decision around using burosumab on that. And I think as you know the pediatric population, the prevalent population we expect to be around 25% to 30%. In the adult population things are a bit trickier because the vast majority of patients we've been able to identify are actually rather in the office of someone who is treating one of the symptoms of the disease or one of the complications of the disease. So that may be a fracture, it may be nephrocalcinosis, it may be something else. And therefore not necessarily in the office of the doctor who ultimately is going to treat them. So that the work that we have to do following approval is to make certain that we establish strong referral and that works in referral patents from those offices into the offices of the metabolic bone centers on the endocrinologist who are going to treat them. So it’s almost an extra step if you like in getting those folks to the doctor ultimately going to make a final diagnosis and treatment decision for them. We're not giving any guidance in terms of revenue because as you can imagine you'll see a slightly slower build in the adult population than you will in the pediatric population given that there's this extra step in getting them to therapy.

Great, thanks. That’s it.

Our next question comes from line of Tazeen Ahmad with Bank of America Merrill Lynch. Your line is now open.

Hi guys, thanks so much for taking my questions. For XLH, can you just – as we get closer to being on the commercial side of things, a range of what kind of pricing would be reasonable to assume? And then I have a follow-up question on FAOD.

Thank you Tazeen. Now obviously pricing is a really big factor. We have not put out pricing specifically we've discussed the general range of things with payors as part of the discussions but we haven't really discussed the specific big number. We're still working through the final work but Jayson would like to say anything about pricing?

Yes I would just add that we've had a couple of very compelling data sets report out over the last few months. So of course we're taking those data sets and putting them into our value estimates and valley calculations and looking at health economics work. So you know where we're getting close but we're not ready to make a final pricing recommendation just yet.

I think the new data particularly is wrong in adults in the compelling case for how many adults have substantial osteomalacia and how big the effect is on osteomalacia in fracture healing. I think those that effects start to change the equation around the value for treating adults.

So just as the story becomes extraordinarily compelling whether you're speaking to a clinician who treats adult patients with XLH or actually somebody who is ultimately going to have to reimburse this when you can essentially say you have fractures, or you have patients who have fractures how are consuming resources at the moment. And we can show that these fractures actually heal. It’s not a whole lot out there that heals fractures at this point.

Okay, thanks for that color. And then FAOD, Emil in your prepared remarks you gave us some insight into where everything is right now with FDA. If it's a case that FDA still is leaning towards wanting a pivotal study what is giving you confidence that there still could be a path to a faster approval like what in particular did if they say that they went they would need to feel more comfortable?

Well I worked with the regulators an FDA for many years. And sometimes reading the tea leaves and I would say in this case there were indications that the size of the treatment effect we observed was considered a major effect, a major reduction. Therefore they felt it was clinically compelling and they did not have the debate on how clinically important that was. And because of that, because it's such an important result in their mind that it made they offered the idea that if we could show that this crossover of patients from existing therapy on to our therapy was really distinctly about being on UX007, versus any other change in their care. And that their care was well optimized beforehand that we have a better opportunity to present them why those products get approved. That said, we've been saying all along there actually it's preferences for randomized controlled study, but this is true if you had to ask them about any drug and any disease they would say the same thing and we appreciate the reason for that. They want the high caliber data involved. We think in this case because of the study will be a major clinical event study we’ll take time. And because of the harm and difficulties we're seeing in our patients and we had 46 compassionate user requests last year, including patients at the end of life in terrible situations, we just feel that providing access earlier would help deal with these death, near-death experiences that are going on and allow us to get the data in parallel. I think that's kind of the point we made. I think they've left the door open to doing it, however, is not a trivial result to get them to agree. But we think for the company and for patients it's important to press hard. And we have done this before with other programs by the way the XLH program we had originally a requirement to have a randomized trial Phase III for pedes to file. And we were able to convince them of the data and the quality of it to allow us to file a year earlier. So it just requires good science, good analysis and the right kind of discussion. I think we're pretty experienced to doing that and we respect their needs and we are going still to Phase III regardless. But we do think that smart move ahead and file if we can.

Okay. Thank you.

Our next question comes from the line of Maury Raycroft with Jefferies. Your line is now open

Hi thank you for taking my questions. Just is a follow-up to the last question for the 46 compassionate use request that you had in FAOD, can you comment on how many of those were fulfilled? And can you provide any details on the results how those data may support your total data package and the potential for early filing?

Yes I don't have the exact number we fulfill but we do have a number of patients we have approved. We have certain criteria if they are very sick with heart failure things that we've shown have been benefited before by the product. If they don't qualify for trial than there are sick patients and we have been supporting a number of requests. But I can't tell you the exact number the 46 are approved, I would say was a substantial number of patients approved.

And how will those data support the total package for potentially early filing?

Well some of the patients that have ended up on compassion use have been converted over to an extension study where we actually collect long-term safety data on them. Some of the patients we've collected the data in a form, for example, the patients with heart failure that we published ten patients on heart failure that we treated showing a doubling of ejection fraction, so we collected that data. And can put it together in ways that help it. To be core data profiling you would have to have the rigor of inspectable datasets, et cetera. Not all that patient data can be converted in that format, but we have done that for our retrospective study, as well as other data on the heart failure patients. So that combination of data provides, I think, the number one the patients have been on drugs for years, many years showing that it is safe and that they are in fact they want to stay on therapy for so many years shows persistence and value. And I think a lot of those patients were treated as compassionate patients in the early 2000 and they're still on drug. And so with that analysis medical records we did, so we brought some of that data in that’s medical records in our retrospective study, which is published and you can look at. We showed up 20 patients, who were treated, most, nearly all the patients had at least five years of UX007 treatment that their reduction in major clinical events was substantial over the historical periods for each of them. So we are bringing in through those retrospective chart reviews and other types of analyses in addition to the perspective data that we have collected going forward. So what I would point out is that it’s not attributable amount of data. It’s not like we have ten patients worth of data. We are talking about a lot of patients, dozens of patients, treated over many years. So I think it gives one very – greater confidence on the issue of is this drug is new harm, it’s like one of the first question [indiscernible] drugs has been in a lot of patients for a lot of years. So we feel that that question has been answered and doesn’t do benefit and we've shown in various ways that it has. So I think if you look at that total picture, I would say this has more data in many programs I've started with regard to long-term exposure, safety and efficacy in major clinical manifestations. So we presented that data to them. We'll presenting some more detailed data on historical that is what happened to our trial patients in 18 months before we saw them when they were getting hospitalized, where they’re getting good medical care, did they see their doctors, what were they – how they – were they being managed. And we know all those patients were at major clinical centers to treat FAOD because they’re all our investigators. And these investigators are all experts in that area. So we know that they were being managed and they're being seemed. And these were the basically the worst two or three patients each doctor had that we rolled in the study. So we just need to give the FDA that the hardcore support that would get them convinced.

Got it, very helpful. Thank you.

Our next question comes from the line of Joseph Schwartz with Leerink Partners. Your line is now open.

Hey, Emil. This is Dae Gon dialing in for Joe. Thanks for taking our questions. I have two quick ones for me, one to follow up on the FAOD. I know the discussions and the strategy is working out there, but in the meantime you're still working through the Phase III trial design and your corporate deck also highlights the planned end point of major medical events. So I'm just wondering given the longevity of the trial that's going to be necessary whether it would be for registrational purposes or confirmatory? What's stopping you from initiating the trial right now or just so once you engage the FDA you can have that card and play it wisely? And the second question is on DTX 201 hemophilia A, just a follow up on Carmen’s question. Can you remind us what the hemophilia B program vector usage was in under the hands of dementia? And then perhaps as you look through that data, what is the vector you're using here? And what can we anticipate or what lessons have you learned from the hemophilia B vector usage to give you confidence on the 201 program? Thanks.

Sure, so on the Phase III major clinical event study, we’ve received feedback on a few features of the study from the FDA, which we need to settle down and we are drafting a – we’re basically drafting a design over the Phase III. And some details around how we’re blinding or not, how it’s being done that are being worked out, but I agree with you we need to pull that study together, get it going and get it agreed to the FDA. We’re doing that in parallel with preparing our other filing because we don't need to lose more time. So we are pressing ahead with the randomized controlled study, which will meet we hope some of the questions raised by the FDA at our last meeting in end of Phase II. So on heme A, the heme B vector was rh10, which is part of the Clade E vectors, but its rh10. And then while it did achieve some long-term low level expression, it did appear that they had more inflammatory reaction. And the basic for these differences is hard to know, but they discounted the program because of that. The heme A program vector has not been disclosed. It’s not the same vector. It’s not rh10. Its different vector that is liver tropic and that vector has been prepared in 2000 liter scale now using the HeLa cell system that the company has developed and is moving forward toward 90 in this as we said in the second half and so far it’s gone well. But I do think it's a different vector and I do think the vector does matter. It’s just we can tell on the – so we think there is a reason to not think of heme B is predicting our readings through to what heme A is going to do.

Would it be able – would you be able to comment whether it is an rh vector or if it’s just an AAV modified version?

It's a natural occurring AAV liver tropic, but it’s not the rh10.

Okay, thank you very much.

Our next question comes from the line of Laura Chico with Raymond James. Your line is now open.

Thanks for taking the question. I wonder if we could just continue related to UX007. We noticed a new study is starting for Rett Syndrome. And I guess I'm just curious if you could walk us through perhaps why Rett would be an interesting disorder to pursue versus I guess the other many seizure related disorders out there? And also wondering if you have a sense as to how widely used ketogenic diet might be in among these Rett patients? And then lastly, I guess, how do you see this kind of fitting into the overall efforts with FAOD and Glut1 DS proceeding?

Okay, so the Rett program you’re talking about is probably in the investigator initiated study. There are two that are ongoing. The bases for those is there was a scientific paper published in the Rett model showing that Triheptanoin UX007 had an important benefit in Rett syndrome animals, who is rather compelling. And what people don’t realize Rett was well I think it was neurological. It actually has a significant metabolic component, which is not fully understood. And it appeared that Triheptanoin was helping those might substantially. So we’ve received request for IST. And then so our typical pattern as a generic company, we have supported supplying drugs to the – that the Rett ISTs are ongoing. We don’t have any data from them. They’re not studies in our control, but they were based on strong animal data. They’ve got people interested. There is a lot of people working on Rett now though and that’s good it’s a bad disease and haven’t had anything. So it’s a good thing to see. At ketogenic diet Rett, I don’t know of anyone doing ketogenic diet Rett. There are some seizures in Rett syndrome, but I don’t know that people have been using ketogenic diet for seizure disorder. I can’t – I am not an expert in doing Rett, so I wouldn’t want to oversee that. So, how does all fit in? Well, our focus as a company on sponsored studies FAOD and Glut1, we think those are two were the generics are very clear and distinct. But we get a lot of requests and we get a lot of requests for use of Triheptanoin in all these different indications. And if there is a sound, I would say in animal pharmacology study or other basis for it, our view was to help support some of that investigation. Our goal would be to get it approved in one or above the disease disorders, get on the mark. And then in some of these IST show up we’ll figure out that there are other ways this drug might be used and will help to support sponsored follow on work from those ISTs. That’s sort of our general strategy.

Thanks very much.

Our next question comes from the line of Xiaobin Gao with Barclays. Your line is now open.

Thank you for taking my questions. First question regarding the OTC program, can you remind us the higher dose you will be using for the OTC program? And then how many patients will be presented in the second half of this year?

Yeah, so the starting dose was to e12, okay, and the next level is threefold higher, or 6e12 and that’s cohort 2. So the way the protocol is designed is after the DMC review then we can enroll three patients at a maximum phase of one a week at the next dose cohort level. And what we’re saying is those three patients would be the data that we would show later in the year. If that data showed that we have achieved our efficacy and safety goal based in ureagenesis and other measures, then we would potentially do a third cohort at the same dose level and that would be the finish of the Phase II study. If we hadn’t met our criteria on those three patients then we would step to one more dose level which I believe is 1e13 as the top dose level for OTC.

Okay, great. And then one quick question regarding the launching FLD. You comment that you are trying – just wondering the timing of the Phase III trial design completion and the FDA making final decision – filing decision. Will the FDA make filing decision based on Phase II data and also Phase III trial design?

Well, I don’t think the Phase III design is going to determine their decision, but we do think they are linked to some degree that is if we’re saying you’re going to get a lot of file, they want to know how we’re going to get the confirmatory evidence. So we think they’re both going to be submitted together is our expectation and what we said is we might have a further follow up discussion. And therefore, we’re looking at mid-year to get an answer on all of this. But our setup for the Phase III trial, we were trying to get going as promptly as we can based on any feedback we do get from the FDA. But we are moving them along in parallel both the tracks.

Thank you.

Your next question comes from the line of Liisa Bayko with JMP Securities. Your line is now open.

Hi, this is John on for Liisa. Thanks for taking the question. I guess just a follow up to the FDA feedback. Can you walk us through your framework for an early filing and what you’re going to the FDA with this new data you will be bringing to them?

You’re talking about the FAOD again. Is that right?

Yes.

Okay. So the primary focus of the data is relates to the Phase II study although we are looking at some of the other support of data as well. In our Phase II study, there were 29 patients in total enrolled, 25 of whom had that data through the – only goes through the main part of the 78 week of the study. What we’re looking is in those Phase II study patients, their history 18-month when they were having more medical events and we’re looking at how many times they saw the doctor, how well managed were they and who – the quality of the care that they received and what the diet and other factors were in their management with the concept of showing or verifying these patients were under good care by an expert in the field and they had been seen frequently. And therefore, their change and outcome is not just because someone finally paid attention to them and give them good care. That’s the core of what we’re going to them with. We’re not collecting new data. We’re just collecting retrospective data on the patients within that study. There are certainly other things we could do with our heart failure patients et cetera, but heart failure patients all of them are in terrible condition with a lot of medication and things being thrown at them that are being hospitalized, they’re at heart failure, they’re in the ICU, they’re on ECMO. And so it’s a little hard to not say there’s many things going on there. And so when you save someone, who is in that situation, was there anything else going on, a little harder to prove. However, we know from doctors there is that for many patients in a day who is 24 hours is being in heart failure with a heart that’s in function, they were able to get contractility back. And so there is many other believes that this was quite important. It’s pulling patients out. And particularly this long-term they didn’t go back in for heart failure again that they felt like the change something about the physiology of these patients. However that data remembers all capacity uses, all urgent and emergent. So it’s a little harder to be compelling when we have – I think the study data is really at the core of what we need to demonstrate to them at this point in time. There is also randomized controlled study that looked at Triheptanoin versus MCT oil that was done by an investigator within our study. It did show an improvement in ejection fraction when treated with UX007, triheptanoin. And you could argue how much – will that effect is it big enough or not, but that would did show a head to head over a four month period that there was an improvement in ejection fraction, a decrease in pause in overall improvement in cardiac performance when patients crossed on to Triheptanoin versus MCT. That’s another piece of data that’s also in their hands, although it’s not our own study. It’s an investigator study. So those are the packaged data we would be putting forth to them.

Got it. Thanks for the overview.

Our next question comes from the line of Vincent Chen with Bernstein. Your line is now open.

Hey, thank you very much for taking my questions, two quick ones. The first is the question how we should think about the patient population waiting to go on burosumab. As your medical affairs team to go out and identify physicians with XLH patients, what’s your sense for a number of warehouse patients who are waiting to go in drug and the mix there between adult and children? I realize it will take a while to get reimbursement as well so these not again translated median into revenue, but I imagine it could be a substantial warehouse population of waiting for drug?

Well, I think there is a lot of pediatric patients in the clinics as Jayson have already said. There’re already being seen. They’re already being treated. And a lot of those doctors, some of them purchasing our trials, some are not. But I think those people are waiting and we have been able to find a lot probably more pediatric patients than adult patients just because they're being actively treated. I can't really comment on warehouse a sort of usually what people talk about when they're not given the treatment. Right they're holding off waiting for your treatment but I don't think they're quite being warehouse that is in this case they would be giving them the oral phosphate, they wouldn't hold off for treating them at all, I think, in this regard. I don't think that matters on the commercial potential. Jayson do you have any thoughts on this as well?

I agree hundred percent. We've previously communicated we expect prevalence in the U.S. to be around 12,000 patients. As we identify patients were getting more and more, more comfortable that that number is about right. We know what's rare diseases you tend to see some patients emerge once you've got approval once as a viable therapeutic option on the table. And then Emil said, actually we’re seeing about half-half of the patients we're finding are pediatrics the other half are adults. And again we just expect the adults to be a little bit more complicated and take a little bit more time.

Of the pediatric patients is it safe to say that most of U.S. patients were pediatric patients with XLH or treating one of these major centers and pretty easy to find.

Not necessarily a major centers actually fairly widespread. We both actually for the clinical trials and for the patients that we've identified since the clinical trials the diagnosis has been pretty diffuse. Actually, last cluster that we may have initially anticipated.

And one thing I'd point out to is that there are a number of patients that will go to let's say Yale and Dr. Carpenter to see him at the beginning. They see him. They get his blessing. They’re getting treatment, but then they go back and they're seeing their local doctor because they're not going to fly into Connecticut to see Dr. Carpenter except intermittently. So sometimes those have doctors have patients that they’ve seen once or twice from around the nation, but that's not really for a commercialization he's not really going to be the prescriber from them, he seems to be their doctor they're seeing regularly. So that's the thing that Jayson talked. There was a number of big centers that see a lot of patients but their actual real doctor that they're prescribing and being on there is many is more. And even from the clinical trial patients where we know the patients are being treated still by the clinical trial center will go back and be treated in the communities that they originated from, not necessarily by the clinical trial program once the drug is commercial available.

I see, it’s very helpful. And switching briefly to DTX301 if you've had time to go through data further is there anything that sets the first patient apart from the other patients which might explain the better response?

Well we looked hard at that. The only thing that's different about that patient is the fact that the patient was the largest patient and so that patient actually got the most virus total in absolute terms. It was 100 kilos and one of the smallest patients was maybe 60 kilos. So he actually got more substantially more virus that some of the other. So whether that's the issue or not, I don't know, but….

But if you were to normalize to I guess sort of expected liver size would you say they got a much higher dose than the others?

Well yes one of those questions because some of these patients are obese in fact because the eat a lot of carbohydrates.

Yes.

But the truth is that the blood volume does not really expand when you have a lot of fat.

Yes.

So we're really talking about how much of virus is in the blood volume which will determine how much the liver sees. So my guess is if you're very heavy and you're shooting to the dose that your actual virus load that can be given to your blood stream is probably higher. So that’s the only thing I could say that patient did get one of the largest substantially larger let's say than patient three. So actually it was larger than patient two as well. So that’s the only thing we can see right now there was nothing else going on that we could figure out between them. But I would say – it’s not usual every gene therapy companies have some variation in response. So…

Yes, yes definitely. How much variability do these patients have in their baseline? I guess baseline in levels? How confident can we be that the no to response is real and not just a variation?

Well both of them got two – they’ve got two ureagenesis that they find. There were two XLHs and you can look at those two as replicates. So that patient with two replicates were not too far apart and then it went up a lot. So at least those replicates that you could see were relatively close but they could be variable. We think that the change we're seeing is well beyond what we've considered variation in the ureagenesis assay, so in that one patient. So at this point, I think, your point is well taken these are biochemical measure they can vary. But with the two measures closeout we get at least a sense of within patient variation that it's not really relevant to that first patient.

I see great. That's very helpful. Thank you very much.

Our next question comes from Yigal Nochomovitz with Citi Group. Your line is now open.

Hi Emil – excuse me, hi Emil, thank you for taking the questions.

Yes.

Regarding the split on adult versus pediatric, I think, you just mentioned that what you're seeing in the recent shortfalls or recent market diligence is that it’s closer to do a half-half split versus, I think, the prior commentary was a quarter adult or rather a three quarter adult one quarter pediatric. You were sort of updating the thoughts on the market size and split there, or is it still your view that it’s predominantly adult?

Now our original plan faced and the reality that patients don't die as children and therefore the adult prevalence the pedes prevalence are just based on the number of years of life right. So it's not of fault what I think Jayson was getting at is that Pete stations are users find because there is a doctor's clinic all the time. And so the fact we're finding more of them is because they're in the…

Yes I would make one other comment about is that the ICD-10 code that most closely relates to XLH but there is actually a standalone code for XLH is one called familial hypophosphatemia. And that code has only been around for about 18 months. And when you look at that you get this mix that’s a little more fifty-fifty. That being said we know that the bulk of the adult patients are not actually being coded to that code, they're being coded with something else related to their complication or related to other things that they're showing up for XLH [ph]. It goes back to comments I made earlier. So just to be clear I still believe the prevalence is right, I still believe the 25% to 30% of the prevalent population being pediatric first and the rest is adult is correct. It's just that the kids are easier to find because they’re coded around the underlying disease rather than the complications.

Okay that makes sense. And then I'm not sure if I missed this before, but besides obviously your quarterly updates, are there any other mechanisms that you're going to be putting in place in terms of databases or presumably it’s not IMS. But are there any other mechanisms to track the launch for XLH or is it we’d be relying on your updates quarterly?

Right now, I think, you'll be relying on our quarterly updates. We had not planned any additional measures to project how the launch is going.

Okay. And regarding the MPS launch I know that's early, but are you planning to provide any more formal guidance on that program throughout the course of this year with regard to revenues.

Go ahead Jay.

Yes not at present, I think, we still want to get a feel for exactly how much of the prevalent population where we're able to find and get on therapy. As we said in the past we think there are about 200 patients in the world that's a very small population. As I said earlier we're being encouraged both by the patients that we’re seeing coming in terms of start forms and by the conversion of those start forms to active therapy through the various insurance mechanisms. But it will probably take a couple quarters before we provide specific guidance on this and we get a feel for the real population out there.

I think one of the [indiscernible] is we’ve actually found two, or three patients. So we I said in my text we've actually managed to have a couple of patients be diagnosed since approval. These are patients that were not on our radar screen prior to approval. And this is what we see with rare diseases once there’s a viable therapy you do tend to diagnose you start [indiscernible] patients.

Okay. And regarding metrics for the launch for burosumab what sort of metrics could we expect you to provide beyond just the number of patients on therapy when – as you progress through the launch through I through the rest for the year here?

Again for the first couple of quarters we probably won't provide any guidance or any metrics until we get comfortable with what the uptake curves are looking like? So again expect something maybe very backend of the early next year.

Yes we haven’t laid out a plan yet. If you have particular thoughts on what you think you want to see, you can send them to Ryan.

Okay, well, thank you.

Your next question comes from Arlinda Lee with Canaccord. Your line is now open.

Hi guys. Thanks for taking my question. I have a couple more on FAOD and so maybe on since burosumab is part of the profit share if you could maybe provide what you're planning to do on in terms of guidance on the OpEx side as well? And on FAOD may can you talk a little bit about what the Phase III might look like, the duration, number of patient? I know that this is in parallel with trying to get an early filing on the Phase II data. But maybe a little bit about – more data on Phase III that you are thinking about. Thanks.

Okay sure, we certainly have not finalized. I'll give you – we have put out like a rough idea on a FAOD Phase III. It will be over 100 maybe one 120 patients in that range that we're randomizing to one-to-one be on the current care versus the UX007. Exactly the blinding and dosing is one of the question marks we're working through. You can expect the study though to have an in life period of around 78 weeks, or 18, just what we did for Phase I/II. We could try to do shorter, the challenge is do we get enough of that data to power the study? And by going 18 months it gives us a little bit more power. So that's why it's 18 months and in life period. It will be an international randomized study, certainly U.S. and Europe. And whether we go anywhere else would be yet to be determined. So that a little bit hopefully helpful to you on the FAOD Phase III design?

Yes it does. Thank you very much.

And you wanted more clarity on burosumab OpEx. So I think that’s something that may be Shalini should help you with.

Sure thanks Emil and thanks Arlinda. So we have not given specific guidance on OpEx by product. What we have said basically is heading into 2018 that our OpEx for the base Ultragenyx business will have just a modest increase and there’ll be some additional increase due to the addition of the gene therapy business. We expect the same proportion of OpEx to be non-cash in 2018 of this year relatively speaking. And also true for the proportion of OpEx that’s dedicated to R&D. What you will be in the 10-K that should be filed shortly for the year end 2017 is total development cost our share of that for – by program. So you will be able to find that in the 10-K. But going forward there's no guidance on SG&A associated specifically with burosumab. Hopefully that helps you.

Okay. So the modest increase also incorporates the ultimate increase from the profit share?

Yes that's right. Those modest increase in the base Ultragenyx business includes the launch of the both products Mepsevii and burosumab. And we're also able to, however, take out some of the expenses associated with the development of ACR. So as a result of that we're able to keep 2018 as a relatively modest increase over 2017 for the base business plus the gene therapy business on top of that.

Got it. Thank you

Thank you.

And I’m not showing any further questions in queue at this time. I’d like to turn the call back to Danielle Keatley for closing remarks.

Thank you. This concludes our call. And a reply will be available shortly. If you have additional questions, please contact us at ir@ultragenyx.com. Thank you everyone for joining.

Ladies and gentlemen thank you for your participation in today's conference. This concludes the program and you made now disconnect. Everyone have a great day.