Ultragenyx Pharmaceutical Inc. (RARE) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Ultragenyx Second Quarter 2018 Financial Results and Corporate Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Ms. Danielle Keatley. Please go ahead.

Thank you. Good afternoon and welcome to the Ultragenyx Financial Results and Corporate Update Conference Call for the Second Quarter of 2018. We've issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Danielle Keatley, Senior Director of Investor Relations and Corporate Communications. With me today are Emil Kakkis, Chief Executive Officer and President; and Shalini Sharp, Chief Financial Officer. I'd 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 type of statements identified as forward looking in our quarterly report on Form 10-Q that was filed on May 8; our quarterly report on Form 10-Q for the quarter ended June 30, 2018, 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, Danielle, and good afternoon, everyone. Thank you for joining us. First half of 2018 has been a transformational period for us with strong initial launch for both Crysvita and Mepsevii as well as the progress on development front across our programs. I'll start first with the Crysvita program. We launched in the U.S. in April 27, which means that by June 30, we had only 2 months of commercial activity this quarter. [indiscernible] launch is going very well. At the end of the quarter, we had received approximately 300 completed patient start forms that [indiscernible] unique prescribers across 38 states. This shows broad adoption well above beyond the 10 U.S. [indiscernible] sites. At this point, the majority [ of ] major metabolic centers have prescribed Crysvita and approximately 2/3 of patients with completed start forms have been naive to treatment with Crysvita. Among the completed start forms, we continue to see a 60-40 split among pediatric [indiscernible] , which indicates substantial interest amongst both adults and children with XLH. We're also encouraged by the number of patients who have been converted to commercial therapy to date. We continue to work through the reimbursement process for the majority of patients with completed start forms. As anticipated, this takes about 30 to 90 days during this medical exception period with a newly approved therapy. The payer mix as of the end of the quarter was approximately 70% private plans with the majority of the remaining plans from government payers. We've seen medical policies from a mix of national and regional payers covering about 100 million lives. And the policies have been consistent with the broad Crysvita label for the treatment of XLH in adult and pediatric patients 1 year of age and older. And the policies have not differentiated between children and adults. In these early days of launch, we're continuing to see new start forms come in and new patients be identified by our Patient Diagnosis Liaison team. This reinforces our belief in our estimate of 3,000 pediatric patients and 9,000 adult patients in the United States. We regularly hear feedback [indiscernible] from XLH patients, and we look forward to the launch progress in the coming quarters. As our launch continues, we've also succeeded in developing additional clinical data which support Crysvita's superiority to conventional therapy of oral phosphate and active vitamin D. Quarter to date, our pediatric Phase III randomized control study, the first study directly compared to conventional phosphate therapy. In this study, we showed that Crysvita had a rapid and profound effect on the underlying XLH disease with normalization or near-normalization serum phosphorous achieved on average with Crysvita that was not achieved with conventional therapy. The strong improvement in phosphorus levels led to significant improvement in bone disease of patients treated with Crysvita were 39x more likely to achieve substantial healing of rickets compared to patients treated with conventional therapy. In addition to these new Phase III results, the New England Journal of Medicine recently published the results from the Phase II study of Crysvita in children age 5 to 12, a pivotal study for the pediatric indication. In summary, the Crysvita launch is off to a strong start, and we also see continued strength in the clinical evidence base of Crysvita's encouraging new data. Turning to Meps, this launch had been underway for 8 months and is progressing well. We continue to identify new patients with this extremely rare disease [indiscernible] we continue to receive start forms [indiscernible] give us confidence in our estimate of 200 patients worldwide. Following the U.S. approval, we are now refining requests for named patient programs in other countries. We will also be expanding our efforts [indiscernible] into Europe where the CHMP recently adopted a positive pending -- recommending the marketing authorization of Mepsevii under exceptional circumstances. This should be followed by a decision from European Commission in the third quarter of 2018 and reimbursement in Europe happens on a country-by-country basis and can take up to 24 months. Also product update on UX007 in long-chain fatty acid oxidation defects, or LC-FAOD. For the past few months, we've been working with the FDA to determine the acceptability of an NDA based on data from the Phase II study as well as additional supportive data. In their review, the FDA noted that the effect on reducing hospitalization was substantial and important. However, the question was a result of [indiscernible] in dietary care of the patients during the study due to differences in [indiscernible] levels of UX007 and MCT oil. More specifically, the protocol specified UX007 [indiscernible] 30% is higher than the usual MCT dose that targets 20% but ranged from 0 to 30% in the study subject at baseline. The change in target UXO subdoses predetermined in the protocol and was based on years of prior academic work and the range of change observed in individuals' MCT doses is very broad and not proportionally [indiscernible] with improvement. After reviewing the [indiscernible] information we provide, the FDA has maintained their concern regarding whether [indiscernible] the UX007 was confounded by diet. We, as well as many investigators and patients, believe the reduction events of this magnitude had to be the UX007 drug at that dose. As a result, we are continuing discussions with FDA. And when these discussion with FDA and further discussions with EMA conclude, we will determine if and what additional study may be needed. Most importantly, we believe that the submitted data from the Phase II study, the retrospective medical record view, emergency IND cardiomyopathy and [indiscernible] that is showing an effective cardiac function, are together [indiscernible] support early filings. These data aren't [indiscernible] any other rare disease products filed and approved. We're rigorously pursuing a path forward to get this potential therapy to patients as soon as possible, realizing the importance of doing so. We expect to have an update on progress at FDA and EMA in half of 2018. I look [indiscernible] update [indiscernible] . We also continue to make progress with our gene therapy program. In July, we dosed the first patient in our Phase II DTX401 study, an adeno-associated virus vector-based gene therapy for the treatment of glycogen storage in type Ia or GSDIa. The FDA also granted fast-track designation program to help us still facilitate the development and expedite the review of this therapy for patients with [indiscernible] debilitating disease that can lead to severe hypoglycemic seizures. The first [indiscernible] part of the study will enroll 3 patients, and we expect data the second half of this year. [ Clinical ] pipeline is also progressing nicely and our plan continues to be generating new IND every March, years from this portfolio. With that, I'll turn the call over to Shani 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. Net loss for the second quarter of 2018 was $52.7 million or $1.06 per share, basic and diluted, compared with a net loss of $72.9 million or $1.72 per share, basic and diluted, for the second quarter of 2017. This includes a $40.3 million gain from our portion of the sale of the priority review voucher received upon Crysvita approval. For the first half of 2018, cash used in operations was $165.6 million compared to $110 million in the first half of 2017. This includes adjustments for significant noncash charges, including stock-based compensation expense of $38.4 million, $12.2 million in depreciation and amortization and $5.8 million in noncash foreign currency remeasurement losses resulting from restructuring of some of our foreign subsidiaries. Noncash charges, such as stock-based compensation expense and depreciation and amortization expense, are expected to continue to increase quarter-over-quarter and year-over-year. For the second quarter of 2018, we reported $12.8 million in total revenue, which includes $8.9 million in revenue from our research agreement with Bayer. For Crysvita, we recognized $1.6 million in profit sharing and royalty revenue from our collaboration and license agreement with Kyowa Hakko Kirin. This includes $1.1 million in collaboration revenue in the U.S. profit share territory where Crysvita became commercially available on April 27, 1 month into this quarter. It also includes $0.5 million in royalty revenue in the European territory where Crysvita received conditional marketing authorization on February 23 of this year. There were nominal net product sales for Crysvita in other regions. Mepsevii product revenue for the second quarter of 2018 was $2 million and UX007 named patient revenue was $0.2 million. At this early point in our product launches, we will not be providing any financial guidance. Emil provided you today with some metrics, including patient start forms, unique prescribers and payer mix to provide insight into the Crysvita launch progress. These are metrics that we would likely only provide in the first quarters of launch, and we will continue to evaluate the appropriate time to write these and other metrics and/or revenue guidance as we gain experience with both Crysvita and Mepsevii. As a reminder, it can take 30 to 90 days to obtain reimbursement, and we are committed to putting patients on therapy without reimbursement as soon as possible. Our total operating expenses were $107.7 million for the second quarter of 2018, including research and development costs of $76.8 million and SG&A costs of $30.7 million. Our research and development costs will continue to increase as we advance our clinical programs, including gene therapy and preclinical translational research programs, with SG&A increasing to support multiple product launches in multiple territories. We expect the proportion of our operating expenses attributable to R&D versus SG&A to remain generally consistent, and we expect total OpEx to continue to increase quarter-over-quarter for the remainder of the year. We ended the second quarter with $547.1 million in cash, cash equivalents and investments on the balance sheet, including the proceeds from the 2 PRV sales. We believe that our cash resources should be sufficient to support the initial years of launch from Mepsevii and Crysvita. I will now turn the call back over to Emil.

Thank you, Shani. As you can see, we made tremendous amount of progress with the recent launches of Crysvita and Mepsevii. In addition to our launch activity we're seeing our clinical and translational programs, we've announced important catalysts across our pipeline over the remaining half of 2018. For Crysvita, we're expecting data from the Phase II study of Crysvita patients -- in patients with tumor-induced osteomalacia in the second half of 2018. The co-primary endpoint in this 48-week study are a change in serum phosphorus and key biopsy parameters of osteomalacia. We previously presented data showing significant increase in mean serum phosphorus levels and bone turnover markers in patients at 24 weeks and improvements in histomorphometric indices of osteomalacia in 3 of the 4 patients with bone biopsies who had completed 48 weeks of treatment. For UX007, as we discussed earlier, we expect additional clarity from both FDA and EMA on potential [ regulatory filings ] for UX007 in patients with LC-FAOD in the second half of the year. Our Phase III study UX007 in patients with Glut1 deficiency syndrome with movement disorders is fully enrolled and on track, and we expect data in the second half of the year. Turning to our gene therapy program, the DTX30 -- study or for our [ AVG ] [ therapy ] for the treatment for OTC deficiency, we'll have 3 patients that were enrolled in the second dose cohort of the study, and we expect to announce data from this cohort in the second half of the year. After reviewing data from the second cohort, we'll have the option to move to a higher dose or depending on the data, we may elect to study DTX301 in additional 3 patients at the same dose. For DTX401, our AAV gene therapy for the treatment of GSDIa, the first patient was enrolled. And we expect data from this -- first lowest dose cohort of patients in the second half of 2018. I look forward to updating you throughout the year on our progress. And now let's move to your questions. Operator, can you please provide any instruction for the Q&A portion of the call?

[Operator Instructions] And our first question comes from the line of Adam Walsh from Stifel.

Congrats on all the progress, guys. I'm trying to get some clarity around the UX007 in LC-FAOD. And you say in your press release, the FDA continues to believe that the data are confounded and not sufficient to support an NDA. When you say continues, have there been additional data submitted since the last quarterly update? And then have you presented all the data to the FDA already? Are you continuing to aggregate, analyze the prior Phase II study and submit additional info at this point?

Since the last time we've talked, we have submitted additional data on the diet information and statements from physicians, et cetera, so additional data was provided. But they are looking just at the Phase II study. At this point, our belief is that not only in the Phase II data, but for us, of other data that I mentioned are supportive of the value of the product. And we're pressing our case with them to look at the broader set of data and not just the one study, which we think was profound results. So that's -- we have done more work and filed more information and answered questions and the process continues.

And have you finished submitting all the data? Or is there additional new data that might be convincing to the FDA?

Well, there is additional questions and detail regarding diet and things that were required, which we provided, and we've also looked at other information that help support the interpretation of the data. So additional information has been provided to the FDA and the process continues.

And our next question comes from the line of Cory Kasimov from JPMorgan.

This is Carmen on for Cory. Just following along with the last set of question, could you just say whether you're feeling more or less confident at this point in the possibility of filing on that Phase II trial in FAOD just based on your ongoing conversations compared to where we were a few months ago?

I think what we've said from the beginning is that a lower probability, however -- but we think as we looked at the data and the breadth of data that we have, including emergency IND cases, the randomized controlled study that was done as well as our own data and that we do have support that's broader and in fact, comparable. And we provided reviews of existing products approved, and we feel the product profile and the data are as good as many products that have been filed and approved. So at this point, we believe that -- I feel strongly that we are in good position. However, the FDA is -- has to make their decision, so our position for everyone has always been this lower probability just from historical reality. It doesn't mean it's not necessarily the right thing to do in which we strongly believe it is.

And our next question comes from the line of Gena Wang from the Barclays.

The first one's regarding Crysvita. I know it is still very early days. I was just wondering, given the initial launch metrics, is that in line with your internal expectation?

Well, I think we're doing really well. I mean, we didn't have a precise expectation for start forms, but we're certainly on track with our expectation. And I think the thing that's been encouraging is the fact that we have this -- that many start forms from as many prescribers now. Our launch planning with Patient Diagnosis Liaison, 30 in the field and 32 reps was designed to help assure that we're getting breadth in the launch and the reach required. And we think that those data show, with more than 150 individual prescribers in just 2 months, that we are reaching well beyond [indiscernible] centers and which was our goal in launch. So we feel very good about how that's gone, and I think it's doing well. We haven't really changed our guidance. I think what we said to people is there's still reimbursement process that we have to get through; a lot of plans, we have some policies, but there's still more to do. But so far, we're very encouraged by what we're seeing.

Okay. And then another follow-up question is regarding the gene therapy programs for OTC and the GSDIa, both programs you have a data presentation second half this year. Just wondering if you can provide a little bit more color in terms of a form of a presentation. Should we expect at one of the medical meetings later this year? And then regarding GSDIa, that's the first dose cohort, based on your animal data, should we expect that this will be falling within the therapeutic window?

Okay. So on terms of timing with -- when we have full cohort worth of data through a certain level of repeated evaluation, we'll put out data whether [indiscernible] or by our own release, so we haven't restricted ourselves to only doing it at meetings. We want to make sure we're providing prompt data to the Street. However, we've also said we're not going to dribble out data one patient at a time. We think it's more appropriate to take patients -- a whole cohort of patients through to a set a point in time before we start doing our disclosures at this point. So obviously, medical meetings would be important place to do it, but we wouldn't be restricted to only medical meetings. With regard to GSDIa, the dose is at the lower end of the range. We expect it should be effective. However, it's not at the middle or high end of the range. It's the lower end of the range. GSDIa patients do have some liver disease. We think it's prudent to not push too hard right out the gate until we get some experience with these patients. However, we do believe it's a dose that could be effective, although, we are prepared and plan -- in our plan to go to higher dose levels.

And our next question comes from the line of Ritu Baral from Cowen.

Emil, I've got a few other questions on some of the launch metrics. Can you talk about the Crysvita time to fill on the start forms and how that's changed over the course of the launch? And also can you talk to maybe some of the prior op requirements you've seen and the specialty split between the prescribers so far?

Sure. So we haven't really put out information on the time from start forms to sale. I mean, our target is to get that in 30 days, but we're in this medical exception period phase. So it's going to vary by, I think, some places will for fill right away as an exception, some won't. And so that's why we're sort of giving the guidance of 30 and 90. And I think looking at that metric right now, I'm not sure it's going to matter. I think it's going well. But our target would be to get 85% of those within 30 days at some -- as we move forward, but we're not -- we're just -- we feel like we're having pretty good [indiscernible] in so far. The policies we're seeing are, I think, pretty much to label, there are some diagnostics. But we're not seeing stepped out of like things in less than 4% covered lives. So we're pretty comfortable about how the policies are coming together. And as I said before, we're not seeing any differentiation between peds and adults. I'm sorry, I missed your third one. The third one was?

The prescriber mix that you're seeing, the specialties.

Yes. Well, it's mostly peds and endocrine adults, [ the endocrine ] . But we are seeing some nephrologists, [ fraction ] [indiscernible] yet that in detail. But I don't think it's so surprising a mix. I know some people talk about a lot of nephrologists and we want to put forth clearly, I guess, if you're asking who are we [indiscernible]. This is not like traditional launch, we see certain doctors randomly. We are actually targeting docs and new patients regardless of what type they are if we have patients from the codes and other work we've been doing. In some hospitals, nephrologists see XLH, [ and both ] endocrine or peds endocrine see them. Some places medical genetics [indiscernible] , which I used to see in the space. So we're actually going whoever doctor is treating XLH and peds endocrine, endocrine, nephrologists are the majority of the patients. But there are a few people that are in more rural areas [indiscernible] of specialists. And if they have a lot -- if they're seeing XLH and treating them, we're going to them as well. So unlike at [ field force ] where we're targeting only certain docs, we're actually [indiscernible] patients.

Got it. And for my follow-up, the GSDIa data that's coming, what is going to be the most important efficacy metrics that are going to come out of that data set from the first cohort? Or what should we be looking at?

Well, I think from a standpoint of patient value, one of the first is how long can the patient go fasting before they get hypoglycemic, which will tell us -- is critically important for patients because many of them -- basically, all of them can't get through the night, for example, without having feeds, 2 feeds, cornstarch or something. So the time to hypoglycemia during fasting is an important one. We also get a chance to look at the liver size. The livers are often full storage and enlarged. So we can kind of get a sense of [indiscernible]. And finally, there will be biochemical markers that tell us how disturbed their energy metabolism combination of those, both fasting [indiscernible] , lactase, uric acid and other things that will tell us a little bit more about how their body is managing energy. From that data, I think we'll get a handle on whether we're doing what we need to do in combination. Look, our hope is to delay the time to which hypoglycemia would begin during fasting, it's kind of an important clinical parameter for outcome.

And is that going to be measured by diary? Or is there a specific challenge as part of the protocol?

They're -- yes. They're in the hospital [indiscernible] and monitored. You can't do that by diary. You'd have to -- you put them in the hospital and watch them at intervals to check this out. Yes.

And our next question comes from the line of Joseph Schwartz from Leerink Partners.

This is Dae Gon dialing in for Joe. So first one, I might have missed this, Emil. But going back to Crysvita, can you comment on the uptick trends between peds and adults? I know you mentioned U.S. prevalence of 3,000 peds and 9,000 adults. Just wanted to get some take on the initial uptake trends of both of those segments. And then I've got a couple of follow-up.

Yes. I did put forth that we're seeing 60% peds start forms to 40% adult start forms. So showing substantial interest in adult feeds. So I think that's really important because I think that the mark where the people would see only peds adoption and not [indiscernible] anything else. But we're seeing a lot of adult adoption. [indiscernible] tremendous need in adults, and we've made that case. And I think the patients are making that case with a 60-40 ratio at this point in time.

Great. So the next couple of questions were on the gene therapy. So with regards to the 301 and 401, more specifically on the GSDIa, can you remind us what the desired expression level of the protein or enzyme is that you were hoping to get with this low-dose cohort? And kind of expanding upon that and applicable to both 301 and 401, the recently issued FDA draft guidance is on gene therapy and rare diseases, how did you see that? And how do you see that affecting your pipeline strategy going forward? And I guess specifically, pertaining to these programs, will this guidance change the way you think about the next trial or perhaps the regulatory filing time line?

Okay. So good question. So the GSDIa, we don't have a precise target we're expecting. What we know from the prior animal studies, including dog and mouse studies, is that achieving -- and from some human clinical information, that if you can achieve approximately 3% [ at a minimal ] , you could achieve some normalization of glucose management. So it doesn't take a lot to get that effect. So that encourages us that the threshold, the benefit is lower maybe in GSDIa than OTC. In OTC, we think maybe that number is more like 8% to 10%. So -- but we think there's possibility the low dose will work, although we're fully committed to moving up to higher dose cohorts to find the right number. I think the important thing is we have confidence that what we're doing is the right thing, and we'll get to a dose that can help these patients. But this one we don't have a set outcome [indiscernible] GSDIa, but 3% is the threshold we think we need. Regarding the FDA guidance, I think what's [ important ] for what the FDA is saying in those guidance is that they want to be smart about looking at biochemistry in patients like this and the biology of the disease in making decisions about whether [indiscernible] working or not. I think that's saying to the community of [indiscernible] that show us this thing is biochemically [indiscernible] in a meaningful way. We will work with you on a plan to get that available to patients, and I think it's a great thing that they're doing with that position. I think it's the right thing. And it will have some potential impact for us, both how fast you can get through, what length of time with [indiscernible]. But I don't think our programs were exactly overdesigned at all. I think what we're doing is already a reasonable [indiscernible] . And I think that's what the FDA has done, and their guidance has really established their thinking and writing rather than just telling you in meetings. And I think that just helps us plan for what to expect, and that's really important in terms of setting expectations and getting our development plans in order. We still believe we want to show something clinical in our patients where we can do it. It's always better for the company, for the product and the patient, the reimbursement in the long run to show something clinically meaningful, rather than just a biochemical parameter. But [indiscernible] it does open the door in some diseases where the clinical [indiscernible] it might be harder to verify or might take more [indiscernible] . And this could allow you to shorten the development time and potentially accelerate. So we'll look carefully at that as we pull forward other gene therapy programs. But right now, we've -- certainly, our hands are full with the 2 GSDIa and the OTC programs and pushing them to a successful conclusion.

So in that line of thinking my last question is, can you remind us about your manufacturing capacity if you have one in-house? If not, given the recent development in one of your colleagues development trajectory, how are you assessing a potential contamination due to a research-grade material?

Yes. We keep -- what -- first of all, I would point out that the team -- I would also add gene therapy is a superb team from the process development and -- at our Woburn facility, the group there actually runs 250-liter scale, full-scale size runs of product development and really sophisticated group of production there. So I think we have a lot of experience in how to do that. Our manufacturing GMP currently is through contracted manufacturers. And we're obviously always looking carefully at the balance between using contract manufacturers or developing your own manufacturing facilities. These are important questions for us in the long run if you're going to be in the gene therapy space. Regarding contamination, we haven't had some quality team. We're well aware of what [indiscernible] questions and this relates [indiscernible] DNAs that we're using. So we're aware of the issue. And our goal is to have GMP in plasma and production and controls. And so far, we haven't experienced the problem that's been experienced there. Our quality team, both at the main headquarters in UGX and the team at our UGT Group in Woburn and Cambridge are exceptionally qualified. And we feel very good about the work we're doing and the quality of the production we're doing so far.

And our next question comes from the line of Laura Chico from Raymond James.

I guess kind of continuing the gene therapy discussion. Emil, I know you've discussed this before, but wondering if you could elaborate or remind us how you're viewing the current unmet need for DTX301 in OTC deficiency? And I guess I just wanted to clarify essentially, you've estimated there's probably about 8,000 patients with late-onset disease globally. Would love to get your thoughts in terms of the proportion of identified or diagnosed patients. And then also I guess I'm trying to reconcile the unmet need in the size of the population against the backdrop of availability of agents like RAVICTI, and just trying to better understand if there are certain segments of the population that have higher unmet need than others.

Laura, I think those are important questions. I think the current substrate diversion therapies are temporizing measure that still require highly restricted protein diets and still leave patients with a gun to their head regarding a [ medical crises ] if they get sick or something happens; it still puts people in the hospital. So while those things do help and they're important, we're looking at gene therapy as a way to help prevent patients having such crises, and also potentially not have to take these meds that are in fact, difficult to take and have challenges in how they work from efficacy standpoint. So we think there's a lot of room for improvement. But I would say you don't need to have 8,000 to 10,000 patients in your program to make it a valuable program. There may be patients who are very mild, who may not necessarily make gene therapy their choice, but I think if you start with 8,000 to 10,000 patients, you still have a large enough market to come away with an important gene therapy market. Currently, we're dealing with the older [indiscernible] I think as we grow more experienced, we'll move [indiscernible]. And I think we're just going to look hard at those patients that have a sufficient [indiscernible] problems with regard to ureagenesis to make this an important change in their life. I can't tell you anything more specific about the market size. I think it's going to be a much better discussion, more fruitful when we are looking at what the efficacy looks like and how powerful it is. And then we're going to say more about how many patients really benefit from the drug.

And our next question comes from the line of Liisa Bayko from JMP Securities.

I just wanted to turn back to [indiscernible] side and for Crysvita, can you give us a sense [indiscernible] for the sales? And maybe you said it and I missed it, but prior to the profit sharing and all of that.

Yes. While I -- we are -- obviously, we have a partner [ with this strain ] and been working with them on the detail, but we're putting out what our profit share is. I'll let -- maybe Shalini, are you there, to go ahead and deal with how we're going to [indiscernible] sales.

Sure. Yes. So we did not put out Cage, Cape top line revenue because when they reported, they grouped it differently, and they have grouped international sales, and they have collaboration revenue, which reflects the transfer price from Ultragenyx and things like that. So it's a very apples-to-oranges comparison between what they report and what we report. And right now, since revenues are relatively at an immaterial level, we're not going into a lot more detail around collaboration arrangements, but we will provide more detail in the future as hopefully this amount becomes more material.

In other words, you would be able to [indiscernible] top line sales growth was or anything like [indiscernible].

At the moment, we don't have any metrics like that to provide. But in the future, we might provide more metrics.

Okay. And was there any spend in terms of any R&D spend that went against that? Or was this just mainly -- become launch-related activities, commercial spend, stuff like that?

We still do have R&D spend associated with Crysvita. You'll see the product-by-product breakdown in our 10-Q when that's filed shortly. But we do still have ongoing clinical trials that are wrapping up, and we have a post-marketing commitment that we are satisfying through our disease monitoring program and things like that. So there would be ongoing R&D expenses associated with this, and those expenses are split 50-50 with KHK in the profit share territory.

Okay. And is it -- is your -- the way you report this, is it net of those things? Or is that more in your R&D line? Where can we find [indiscernible]?

You can find any R&D expenses, are a proportion of that, in the R&D line.

That's not included in this profit share then?

It's not included in the revenue line at all.

And our next question comes from the line of Arlinda Lee from Canaccord.

I wanted to maybe go back to the gene therapy programs. On 401, I'm kind of curious what you think the interpatient variability might be if you think 3 patients in the first cohort would be sufficient to kind of let you guys assess that. And if the first 3 fits some efficacy measures, would you go on to do a second cohort? Or what do you think you would need to see in order to determine that, that would be sufficient? And then could you also provide an update on what's going on with 201?

Okay. So let's talk about 4 -- with regard to the 301 program, which is the OTC, ornithine transcarbamylase program. We had talked a little about what our expectations might be and obviously, our goal would be to see normalization, ureagenesis, in all 3 patients, that would be our best goal that would give us confidence that we've achieved what we need to achieve. I would agree with you, though, that 3 patients is not a lot of patients. So the confidence level is going to be limited by the size of the cohort. But if 3 patients look like they have achieved normalization, then we would do another 3. If there's something less than that, then we'll have to make a call about whether that effect is big enough or whether we should see to a higher dose level in order to derive a greater prevalence of normalization. If we see only 1 normalized and 2 increased or something less than, let's say, 3 normalized, then we might want to proceed to the third cohort. So that's the kind of thing we're going to look at for OTC normalization. I think with GSDIa, we'll look at the clinical phenotype of the hypoglycemia. But if -- we have to look at some of the other parameters there that relates to the biochemistry, the energy metabolism, what the livers look like. And there will be other contributing factors to make sure we get it right because -- if for the small cohort of 3 patients -- and I've done a lot of programs with just small, and you really -- more than 1 piece of data to make that call. So with GSDI, we certainly want to use more data than that. With regard to the 201 program, but those [indiscernible] with the numerics, that is the Hem A program that we have in partnership with Bayer. Bayer is running the clinical program. We have made the product at 2,000-liter scale, have produced lots of the product for them. And they are -- the IND was filed and is active, and they are in process with regard to [ initiating the clinical ] program, and we're leaving it up to them to disclose publicly what's going on with the clinical program. But it is active and proceeding.

And our next question comes from the line of Salveen Richter from Goldman Sachs.

This is [ Ross ] on for Salveen. On the Crysvita launch, can you guys give details on the breakdown between Medicare and Medicaid patients? Then I have a follow-up.

Well, we haven't really broken that out for you. We've said they were around 70% commercial and 30% were mostly Medicare or Medicaid, other. At this point, we're not adding any more details that I don't think it's really -- I don't think it's all -- in that breakout. I think it's kind of really traditional. And what was the second question?

And then how comfortable are you guys with the current sales force? Do you guys have any plans to expand?

The team right now has 32 based on territories and number of target docs. It's really based on how many doctors that potentially have XLH patients that we need to them to see. And right now, I think that's a good number. But remember, one of the things we're doing that's different is we have within each territory essentially another person, which is a Patient Diagnosis Liaison. They're out finding patients, and then the rep is really just -- basically, job is to take known patients to doctors and work on prescriptions and they're getting them on drug. So the team is sort of a tag team in how they work, and they're paired in a pod with an MSL. So there's 3 people that manage each territory in various aspects. Because of that, it creates some separation of activity. So you could look at the 30 PDLs and 32 reps as a 62-patient course with another 10 or 11 MSLs and UltraCare guys in the hub. So it's a pretty substantial team. And at this point, we're not planning on increasing it. But we're going to continue to monitor week-by-week how it's going and continue to do what we have to do to drive the program forward and get as many patients access as we can.

And our next question comes from the line of Matthew Harrison from Morgan Stanley.

This is Ishmael on for Matthew. For UX007 and Glut1 DS, can you just talk a little bit more about what you will view as favorable data for when you report the Phase III study?

Yes. So UX007 and Glut1 deficiency syndrome movement disorders are -- we're looking at a reduction in movement disorder. You could think of them as -- like seizures, they're having events and these patients have quite a few events. And we're looking at the reduction in those events. In the pilot study with 6 patients in -- individually optimized patients, and they achieved a 90% reduction in disabling movement disorder events and -- in all actually, movement disorder events. What we are looking for, though, we're not going to see 90% in a randomized controlled study. So our expectation is to look for a statistically significant reduction to be less than 50% on average because they'll be -- could do better, some that may not have response mixed together in a study. So I wouldn't [indiscernible] expect it to be more than 50%. But we'd look to see that within the study, there would be a substantial patients who are having an important effect and there was statistically significant difference. I just want to be clear, we have not seen any data, have not seen anything. I don't -- we don't have any information at this point. Study is progressing well, and we'd look for then a statistically significant reduction, a significant percent. And certainly, we have patients that have a greater than 50% reduction in events and some -- that group of responders that would be important. But if we can prove an overall statistical reduction and then demonstrate that the cohort patients have a strong effect, that would be the kind thing you might see in a seizure study or other neurological products. So I don't think those standards are something different or unusual from what you normally see in neurology.

And our next question comes from the line of Maury Raycroft from Jefferies.

For the secondary endpoints for the movement disorder study, how should we think about those? Which ones are going to be more important for the regulatory filing package and ultimately, the value proposition?

Well, some of them are put in there because [indiscernible] ones that people wanted to see that are fixed assets. I actually think the majority of the benefit or value will be seen in the overall major disabling movement disorder events. I mean, that's the thing that really disturbs these patients' lives. So I really think the primary endpoint is going to drive more of the value than secondaries. Certainly, I think patients, how they report, how they feel is important, like what's their global impressions, one of the other things we're looking at. But they're not necessarily as sensitive as looking at how many times I'm -- my disease is causing me to be unable to function every day. I just -- it's kind of hard to see other endpoints having a bigger impact than what's in the primary. So we think it's to be a supportive data, but I don't actually think they are going to [indiscernible] beyond what you're seeing with the primary. But I think they could [indiscernible] data.

Got you. And then for the baseline disorder events that these patients are having, are you going to do any perspective subanalyses on the patients based on that?

Well, we had a minimal requirement for a number of [ events ]. And the patients had a lot of events during the 6-week baseline rate establishment period. So they had a lot of events well above the threshold for getting in the study. So we feel there's a lot of events to deal with, and that's important for the study. But in terms of doing subanalyses, we'll certainly do them. But from a standpoint of doing a study we consider a pivotal study for primary analysis, you're really going to be pushed into doing an intend-to-treat analysis. And subanalyses are -- can be helpful in understanding the character of a response, but they wouldn't overcome hitting or not hitting the primary endpoint. But we'll certainly look at event rate as one of those things or types of events are things that we'd naturally do and also demographic type [indiscernible] of site and other things are pretty natural things we would get. But severity is a natural factor and normally, in our models, we always look at severity or number of events as kind of a baseline variance, covariance. So hopefully, that helps you -- an idea there. We do see a lot of events in the patients. So we're pretty comfortable they have something we can measure.

And our last question comes from the line of Yigal Nochomovitz from Citigroup.

Emil, you mentioned that 2/3 of the patients for Crysvita are naive to treatment. Of the remaining 1/3, were those patients on clinical trials with burosumab and rolled on to commercial? Or is that mainly patients that had a oral phosphate and vitamin D?

Yes, no. Those are patients that are from the trial that are starting to -- pediatric and adults that are starting to crossover to commercial. So they -- that means they received buro or Crysvita in a clinical trial of 1 or another.

Okay. So 1/3 of the patients that have started have -- were rolled over from clinical trials.

1/3 of patients that we have were trial patients starts, and then the other 2/3 were naive patients.

Okay. Got it. And then just one clarification on the quarterly numbers for -- the way you report the profit share. So you mentioned earlier that the $1.1 million for the U.S. profit share, there were no costs in that. So is the right interpretation that the total sales for the United States was double, was $2.2 million? Or is the calculation more complicated?

Well, it's more complicated. But Shalini handle that question.

Sure. Yes. Thank you for the question. So what we've said before is that our top line profit share revenue reflects 50% of net sales for the product minus the transfer price for the product. So it's not exactly half. So again, it's apples-to-oranges comparison if you were to look at Cage, Cape disclosures on their financial statement a couple of days ago relative to ours.

And the transfer price, is that something you disclose or no?

No. We haven't yet disclosed it. What we have said is that it is higher than what you typically see with a biologic and it's a double-digit percentage of net sales. And at the moment because revenues are still quite small, we're not going into a lot more detail. But in the future, we would expect to provide more clarity around other ways to look at the revenue line.

And I know you didn't report the royalty rate this quarter, but are you planning to report the royalty rate for Europe in future periods?

What we've said about the royalty rate in Europe is that it is up to 10% of net sales. So that's all that we have provided so far, and we don't have any current plans to change that.

And our next question comes from the line of Vincent Chen from BSI Asset Management.

This is [ Peter ] on for Vincent. To follow up on the earlier question regarding potential variability in DTX301 program, how much variability should we expect to see here? Meaning like how much is contributed by inherent variability in protein production on response to gene therapy versus baseline OTC levels in late-onset patients? Have you had any responses from your advisers in terms of a kind of response rate you might want to see in order to make this a compelling product?

Okay. I think it's definitely a complicated question. So if you look at the severity of the OTC patients at the baseline, you -- we will see a pretty wide range from lower numbers in the 10% or so range to the 50%, 60% range depending on severity. And most of the patients in the study -- in all the patients in the study are late-onset types. They're the more advanced patients. So they're not like newborns with OTC who have very low levels. So these are variable within a significant range. And our goal would be to take those patients toward normalization in ureagenesis, although we think a 50% in ureagenesis that whatever level you're at probably has a meaningful impact to your stability and your ability to manage ammonia. But it would be certainly profitable to see patients reach normal or normal -- within the normal range of ureagenesis. That's sort of the baseline phenotypic variability. The method of ureagenesis measuring by giving a stabilized to open measuring it has some intrinsic variation, and it's why it's being done multiple times; they're monitoring patients over time. That will be something we'll have to look at over time and look and see where patients play out [ for our use ] measurements over time. And remember the [indiscernible] 3 variables. That is, we are giving them a gene therapy; the gene therapy is happening; there may be inflammatory response, steroids might be given as happened in the first cohort. And that will be another, let's say, temporal variable. What I would say to you is while we're going to look at earlier weeks of what happened, we need to really look and see what's happening over the 24-week time frame to really get a sense of where these patients are ending up in the long run. Very complicated in the sense you could have someone who has 10% of normal, for a 40% or 50%, you might say that's an amazing [indiscernible] for that patient, 3, four-fold increase. You could have -- patient goes to 100%, that's a twofold increase, but -- which is normal. Both those are situations that could be quite important in the clinical benefit. And I would say one value of that OTC-type program is that any incremental benefit has some impact on their ability to tolerate protein intake and manage ammonia during crises, so you don't have to have perfect normalization and to not see a clinical meaningful benefit. So we're looking at it carefully. I think our goal would be to see normalization, but we're also cognizant that you can have a 50% increase, let's say, or something substantial like that over a baseline level, that would be a meaningful improvement.

And I'm not showing any further questions. I would now like to turn the call back to Danielle Keatley for any further remarks.

Thank you. This concludes our call today and we'll have a replay available soon. If you have any additional questions, please contact us by phone or at ir@ultragenyx.com. Thanks for joining us.

Ladies and gentlemen, thank you for participating. This concludes today's program. You may all disconnect. Everyone, have a great day.