Ultragenyx Pharmaceutical Inc (RARE) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Ultragenyx First Quarter 2017 Financial Results and Corporate Update. (Operator Instructions) I would now like to introduce your host for today's presentation, Mr. Ryan Martins. Sir, please began.

Thanks, Allen. Good afternoon, and welcome to the Ultragenyx Pharmaceutical financial results and corporate update conference call for the first quarter 2017. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Ryan Martins, VP of strategy and IR. With me today are Emil Kakkis, Chief Executive Officer and President; and Shalini Sharp, our Chief Financial Officer. I would like to remind investors that this presentation contains 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 2016 annual report on Form 10-K filed on Feb 17, 2017; our quarterly report on Form 10-Q for the quarter ended March 31, 2017, that will be filed soon; and our subsequent periodic reports filed with the SEC, which will all be available on our website at ultragenyx.com 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 statements. 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, please see our periodic reports filed with the SEC. I'll now turn the call over to Emil.

Thanks, Ryan, and good afternoon, everyone, and thank you for joining us. I will start by discussing our recent progress and milestones, and Shalini will then give an overview of our first quarter results. We started the year with promising data and significant advances for 2 of our lead programs, burosumab or KRN23 and UX007. In April, we announced positive 64-week data from the pediatric Phase II study of burosumab where the data showed that serum phosphorus levels, rickets, growth rates, and other functional outcomes improved with burosumab treatment. The treatment effects we saw at the 40-week time point in the study were maintained through 64 weeks of treatment.

Safety was acceptable with injection site reactions as the most common treatment related outcome, which were generally mild. We believe these longer-term data on safety and efficacy further support burosumab's impact on bone health and growth in children and our planned BLA filing in the U.S. pending our pre-BLA meeting with the FDA.

In April, we announced interim 24-week data from a separate pediatric Phase II study in patients aged 1 to 5 years. In this study, patients demonstrated increase in mean serum phosphorus and maintained levels in the low normal range through 24 weeks of treatment. Patients also demonstrated increases in serum 1,25-dihydroxyvitamin D levels and significant decreases in alkaline phosphatase levels. Safety observed was comparable to that observed in the older 5- to 12-year-old study.

Last month, we also announced positive 24-week data from the randomized double-blind placebo-controlled Phase III study of burosumab in adults with XLH. The study met its primary endpoint of increasing serum phosphorus levels and demonstrated a statistically significant improvement with stiffness after a pre-specified multiplicity adjustment and strong trends in pain and physical functioning.

Burosumab has been well tolerated in the study with a similar safety profile seen in the Phase II pediatric study in 5- to 12-year-olds. Approximately 23% of patients had injection site reactions, all of which were considered mild.

Since the recent release of the adult Phase III data, we've had some additional positive data on the healing of fractures. We've previously noted that the achievement of mean peak phosphate levels in the normal range and also a substantial increase in bone formation or modeling markers in the burosumab treated patients but not in the placebo patients in this study. An improved bone turnover and production would be expected to be associated with fracture healing. In our protocol, we have planned analysis of fractures and healing in our additional endpoints which are not part of topline results but are now available.

Fractures were identified at baseline using a skeletal survey in all patients, and those with fractures identified were followed with further x-ray evaluations at week 12 and week 24. The x-rays were scored by 2 radiologists and a third adjudicator in a predefined blinded evaluation process. At baseline, 52% of patients comprising 48% of KRN23 patients and 56% of patients on placebo present with either fractures or pseudofractures or both.

At week 24, 37% of active fractures or pseudofractures in patients treated with burosumab were completely healed compared to 10% on placebo. Additionally, at week 24, 3% of existing active fractures or active pseudofractures in patients treated with burosumab worsened compared to 11% worsening on placebo. The changes observed with fracture healing are consistent with the impact that normalizing phosphate has on bone metabolism and likely the underlying osteomalacia that leads to fractures in these patients. Additional data from the study will be presented at a future medical meetings. With burosumab, we've now reported positive data for patients in all age group studies, including 1- to 4-, 5- to 12- and 18- to 65-year-old subjects and it's consistently shown that burosumab increases serum phosphorus levels in these patients with all patients across the studies reaching a normal range.

Burosumab also is shown to improve bone mineral metabolism and increase bone biomarkers, which is associated with improvements in the bone diseases, whether assessed by rickets growth or fracture healing. These improvements were associated with improvements in symptoms in both pediatric and adult patients.

Studies have also shown an acceptable safety profile for burosumab, confirmed by the first placebo-controlled results in the adult Phase III. We look forward to discussing this [package] update along with the new fracture data with regulators.

Now switching to our UX007 program in March, we announced the data from the Phase II study of UX007 in Glut1 DS patient with seizures, which showed a clear and substantial reduction in absence seizures, which we consider clinical proof-of-concept for the treatment of absence seizures. The 7 patients who only have absence seizures and completed both EGs showed a mean 92% reduction in seizure frequency. 4 of these patients had a 100% reduction from seizure rates of 7.9 to 331.5 per day decreasing to a rate of 0 seizures per day.

Safety was consistent with other studies and the most common AEs being from mild to moderate GI events including vomiting, diarrhea and abdominal pain and usually were managed with dose titration or administration with food.

Given these clinically significant reductions in absence seizures in Glut1 DS patients, we are unveiling a potential plan to conduct a randomized controlled study to support the absence seizure indication based on these promising results. It has been reported that about half of Glut1 DS patients with seizures have absence seizures, which suggests that a treatment for absence seizures would be important to these patients.

Last week, we announced that we initiated the Phase III study of UX007 for the treatment of Glut1 DS patients with disabling paroxysmal movement disorders. This is a global randomized double-blind placebo-controlled crossover study that evaluates the efficacy and safety of UX007 in approximately 40 patients. A previous investigator-sponsored study of UX007, 6 patients showed that UX007 can reduce paroxysmal events by about 90%. The events recurred on withdrawal of UX007 and then reduced again on reintroduction of the drug. Disabling motor events were about 70% of the total motor events observed, and about 30% of all events observed scored. Disabling motor events were substantially reduced to a similar extent of the overall total movement event. These disabling motor events are the primary endpoint [in our variable wheel study] in the Phase III study.

I'll now go through our upcoming milestones for each program, starting with burosumab. We're on track with our plan to file our biologics license application for burosumab in the second half 2017 based on the pediatric Phase II data and the adult Phase III data that we recently announced. We plan to discuss the details of the submission in a pre-BLA meeting with the FDA and will provide an update after this meeting.

In Europe, our burosumab filing was validated by the European Medicines Agency at the end of last year and we expect an opinion from the CHMP by the end of 2017.

In the second half 2017, we expect additional 40-week treatment data from the Phase II study of burosumab in children between the ages of 1 and 5 years. The 40-week data will include rickets evaluation via x-rays.

In late 2017 or early 2018, we also expect data from the bone quality Phase III study in adults with XLH, evaluating the resolution of osteomalacia based on bone biopsies in smaller and longer 40-week open-label study. These data could provide important support information on the treatment of underlying bone disease osteomalacia present in XLH patients, which can lead to the fractures observed with these patients.

Moving on to rhGUS. We are on track with regulatory filings in the U.S. and Europe in the first half of 2017 based on the positive Phase III data from last year. For UX007, as I mentioned earlier, we are evaluating our options for UX007 in Glut1 DS patients with absence seizures and we'll update you as we know more. We continue to plan for discussion with regulators regarding the Phase III study in patients with FAOD.

Lastly, for Ace-ER, we expect data from the pivotal Phase III study in GNE myopathy in the second half of this year. The fully enrolled double-blind placebo-controlled international study evaluates the efficacy and safety of the Ace-ER compared with placebo over 48 weeks in 89 patients. If these data are positive, we plan to submit an NDA and an MAA. With that, I'll 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 first quarter of 2017 was $68.3 million or $1.63 per share, basic and diluted, compared with $52.8 million or $1.35 per share, basic and diluted, for the first quarter of 2016. This reflected cash used in operations of $61.2 million for the first 3 months of 2017 compared with $44.9 million for the same period in 2016. We continue to expect cash used in operations to increase for the remainder of the year.

Net loss for the first quarter of 2017 included approximately $15.6 million in noncash charges with stock-based compensation of $14.5 million, amortization of premiums on purchased investments, depreciation and amortization and other noncash charges. We expect stock compensation expenses to continue to increase over time.

Our total operating expenses were $70 million for the first quarter of 2017. Research and development costs were $51.3 million during this period with our Phase III programs accounting for the greatest proportion of R&D costs.

As a reminder, we share burosumab development costs 50-50 with our collaborative partner, Kyowa Hakko Kirin.

Costs for our multiple preclinical translational research programs are also increasing as programs advance toward the clinic. While OpEx this quarter is relatively flat as compared with Q4 of 2016 due largely to timing of expenses, we expect it to increase during the remainder of the year due to the initiation of additional late-stage clinical studies, manufacturing costs related to clinical supply of multiple programs, increased regulatory activity across the programs, including filings for approval, staged investments on our U.S., European and Latin American commercial infrastructure and patient identification efforts, general and administrative expenses to support these activities, and increases in stock-based compensation expenses. While our expenses will continue to increase significantly in 2017 as a result of these activities, the rate of increase year-over-year is expected to begin slowing down going forward. We ended the first quarter with $506.1 million in cash, cash equivalents and investments on the balance sheet. We believe that we are in a position to fund all of our current clinical programs through Phase III trials and to potential launches, and we do not have any debt outstanding. With that, I will turn the call back over to Emil.

Thank you, Shalini. This year is off to a strong start with positive data from our burosumab studies in both pediatric and adult patients with XLH. We're planning to advance this program and our rhGUS program into the regulatory process this year.

UX007 seizure data showed promising results in absence patients. We continue to evaluate our options in absence seizures while simultaneously advancing this compound, in the Phase III study in Glut1 DS patients with movement disorders and also in fatty acid oxidation patients.

Finally, we expect Phase III data from the Ace-ER in GNE myopathy program in the second half of this year. In summary, by the end of this year, we expect to have 2 programs with global regulatory filings, 4 active Phase III studies, leading a robust clinical program in multiple translational research programs. The strong team continues to push these programs forward for preparing for potential near-term global commercialization. I look forward to updating you throughout the year on our progress. Let's move to your questions now. Operator, can you please provide the instructions for the Q&A portion of the call?

(Operator Instructions) Our first question or comment comes from the line of Eric Schmidt with Cowen and Company.

Emil, I assume that the bone healing data that you provided this afternoon, that was a pretty specified endpoint, but you're not allowed to give a P value because it was hierarchically determined. Is that right?

Well, it was considered one of the other endpoints in the study, so it wasn't part of the prespecified hypothesis testing. So that we didn't do the analysis. We can do something post hoc. But because it wasn't among the core multiplicity adjusted endpoints, we didn't announce P value. I think what you can see is I'm not really concerned about it, because the change -- the ratio of change, 37% to 10% is a pretty profound difference in healing. So we're comfortable on the meaningfulness of that. We can do some additional work in statistics, but we didn't release it because it wasn't part of the prespecified analyses. However, I will point out that we did it in a rigorous way with blinded readings, et cetera, so I think it was done in a way that makes it a credible result.

Okay. And then in terms of the pre-BLA meeting that you're looking forward to with burosumab, other than the usual sort of obvious stuff, what does the FDA think of the data? Can you file, et cetera? Is there anything that you're looking to get back from the agency in that meeting?

Well, obviously, the first thing is confirmation that this [package of] data is ready for filing. That's the #1 thing you get from a pre-BLA meeting. There are also a number of secondary technical details that are not worth discussing at this point in time. But we -- obviously, we'll talk about our proposal to file for pediatric and adults with this set of data. It also gives them an opportunity to tell us about things they want to see in the BLA. But our hope is to come out of the meeting with, yes, we can file and we're filing with the intent to seek approval in pediatrics and adults. And we'll have whatever technical details worked out that would be important for the FDA in their review.

Our next question or comment comes from the line of Cory Kasimov from JPMorgan.

Hi, this is actually Brittany on for Cory. So just looking ahead to later this year for the GNE myopathy readout, can you just kind of help set expectations: what you'd like to see, what would be considered clinically meaningful?

Sure. So the study, to remind everyone, has a composite of upper extremity strength as the primary endpoint. And what we're looking for is to demonstrate a statistically significant result, which we believe would happen with a range of something like, let's say, 4% to 8% kind of range is what our expectation would be. Because of the international study, although we had a larger effect, maybe 8.5% before, I'd expect it to be a little bit smaller than what we saw. What we know from the EMA in our discussions was the magnitude of effect seen in Phase II was sufficient in their mind. We did not have to prove a larger effect. That, that sized effect we've seen was sufficient. So we think it's in that range. Now proving clinical benefit, well, we hope to support it through the use of the GNEM-FAS scale, the functional activity scale, which is secondary endpoint. Secondary endpoint though, we'll also look at lower extremity strength and we'd look at the scores and the strength -- lower extremity strength to help with that. But our view right now is that if we get statistically significant stabilization and muscle strength compared to a decline in placebos that our understanding is that would be sufficient to show benefit at least from the EMA standpoint.

Our next question or comment comes from the line of Adam Walsh from Stifel.

My first one is on the MAA in Europe. Will you be folding in the recent adult data into the MAA in Europe and does that potentially extend the timelines for CHMP opinion?

Yes. Well, our expectation is to take all -- we are filing for conditional marketing authorization and working closely with KKI, which is a subsidiary of Kyowa Hakko Kirin who's going to be commercializing there on the plan. Our expectation is to submit the adult Phase III data, the complete Phase II ped data and the under 5 data, all that data will get submitted as answers to questions in the process. Our expectation is that it wouldn't. But we'd want to make sure by discussing that with the regulators. But our expectation is that this data was expected. We had told them that it was coming when we talked to them about filing the conditional marketing authorization. So it should not be a surprise to them. They knew that, and they knew what the process would look like.

Terrific. And just one more if I can. On the Fanny Mochel study in Huntington's, do you -- obviously it's investigator sponsored, do you happen to have any update there? And then, would you consider initiating your own company-sponsored Huntington's study?

Well, as we've said in the past, it is an investigator study and it's up to her and their conduct. It is moving along, the study. And we haven't set a timeline for releasing any information from the study. We're supporting the study though extensively, and it is a 100 patient randomized study. And our expectation is based on data from the study, we would decide on whether we would initiate a Phase III -- our own Phase III randomized study at the appropriate point in time. But we haven't discussed the timeline for that data yet. I know it's going along well, and that may be something that happens later.

Our next question or comment comes from the line of Chris Raymond from Raymond James.

This is Laura Chico on for Chris Raymond today. I guess, just one quick question on the burosumab bone healing data that you highlighted tonight. Just curious if those trends are kind of correlating at all by age or perhaps phosphate normalization or if you've done those analyses yet and in which forum we might get to see the detailed data?

Yes, we have just gotten the top line analysis of these other endpoints. So we don't have all of the secondary analyses to understand trends both age, phosphate response, to decide who's responding or who's not. A good fraction of the total fractures are responding and it appears they're improving over time. Just as we saw with the other endpoints, there is a progression over time. So I wouldn't necessarily look at that data to decide which fraction of patients can respond. I'd look at it more as evidence that adult patients have clinical problems that can improve by treatment. But the true sense of what the population of adults that require treatment would require more time and exposure. And I think we're just turning the corner here at 24 weeks after 40 years of bone disease. And so our expectation is that over a year or 2, you'd have a better understanding of what the overall benefit in clinic would be. But we think this data is important enough to support an indication in adults. Now in terms of the forum, we haven't publicly announced what forum, but we are expected to put this into a scientific forum. There are several out there. I won't say what the plan specifically is, but many of our important data have come out of ASBMR meetings in the past so that's the meeting where there has been a lot of bone data. But we haven't set at this point where exactly the data will come out.

Okay, that's really helpful. And, I guess, one unrelated question on Ace-ER. There was recently a publication that came out on a first-in-human Phase I study of ManNAc. And just kind of curious how you're thinking about perhaps the competitive landscape in GNE myopathy, if anything has changed at all, or perhaps stayed the same or, I guess, high level, how are you thinking about the landscape here?

Yes. There's been a program initiated at NIH for ManNAc, and we've been talking about here and there in the past. It's gone very slowly. The data that look at ManNAc versus sialic acid would suggest that they both work, including data, the most recent data from NIH in animals. Their human program is very early-stage. At this point, we haven't expressed much of a concern. I think our future is determined by our own success and our program. And if our program is successful and we launch and we'll be the first substrate replacement therapy available for patients. At this point, I don't think there's any evidence to say ManNAc would be better than sialic acid. But it's out there, and it's gone very slowly, so we haven't at this point, concern.

Our next question or comment comes from the line of Joseph Schwartz from Leerink Partners.

This is [Dagan] Dialing in for Joe. So 2 quick ones for me. With regards to the bone data that was disclosed today for burosumab, can you put that data into a little more commercial context? So how do you envision this to have material impact, if any, in terms of commercial uptake in adult populations and how that compares to your thoughts on pediatric uptake? And then the next question is on the rhGUS. So can you remind us what kind of initiatives or executions you've been conducting since the Phase III data read out last year ahead of filing BLA and MAA mid this year?

Okay. So on the bone data, I think what the bone data say is that we're actually healing the underlying bone disease to some degree, which is -- which means and we expect that the osteomalacia is improving, which is the fundamental disease that exists in adults that leads to the fragility of the bone and the reason they fracture in the first place. So we think that treating that problem is changing how bone is healing and allowing bones to heal more completely. We think then it is evidence that the bone disease of adults can be improved with burosumab. And we expect to have more data on that later in the year when we have the Phase III biopsy or bone quality study readout information. What we think when we talk to doctors is that treating the underlying osteomalacia is the reason to treat. Osteomalacia is a known bad bone that doesn't function and it makes patients at risk both for fracture and other deformities and problems as well as pain and symptoms. So I think it's very well recognized if you can treat osteomalacia, which usually is improving bone quality as you might find in the biopsy study but also is improving -- healing the fractures that are the consequence of osteomalacia, we think that, that is a basic reason why patients would get treated by their doctors. We think with these symptom data we have just shows that, that is translating the patients and -- at least in the 24-week time frame, the patients are starting to feel the difference, particularly in stiffness. But we expect over time though, the symptoms would improve based and what we've seen to date and what we've seen in the Phase II study previously. So our view right now is that the data helps support the potential of treatment of adults in -- with XLH, and we think that the combination of that with other data, I think will be supportive in the adoption of this as a new treatment for XLH adults. Now for rhGUS, from the time of the Phase III, we've been, of course, collecting all of our data. We've treated some patients in the under 5 program as well, which we haven't talked too much about. But we've accumulated some patients who are under 5 on treatment, collected all that data and are preparing the filings. And we've said we would file first half, which we'll announce once the filings are accepted. So the process mainly has been focused on that. From a commercial standpoint, our focus is only on patient identification. It's like a traditional NPS program. Really, all the work is all about patient identification. There's really no other types of market development work you need to do other than find patients and doctors that are treating them. So we continue to do that and are building our global team in Europe and starting our Latin American team, and through them and contractors are working through the identification of patients with MPS 7, wherever they are. And in a few cases, treating them early if necessary if they're under a year of age and are sick and need treatment, we have been initiating some of those patients on drug.

Emil, are you able to comment on how many patients you've identified to date on the MPS 7 side?

We haven't put out the information yet. I think at some point, when we're getting ready to launch, we can talk about where we're at. But we haven't really put out the numbers yet. We've said in the past that we expect there to be, if we found every single person in the world diagnosed -- [the adult world,] about 200. I still think that's right. And we're continuing to do the work to get there.

Our next question or comment comes from the line of Tazeen Ahmad from Bank of America.

Emil, just wanted to get some color from you on whether or not there's some secondary endpoints that we should be looking for in the Ace-ER study? And also, would the upper extremity composite endpoint itself be sufficient for a U.S. approval in particular? And then I have a follow-up.

Yes. So in the lower -- in the secondary endpoints, there is going to be a lower extremity composite, LEC, and the knee extension, which is another leg. And then the mobility score, FAS. And then other endpoints would be upper extremity FAS. And so I would look at this as an upper extremity focus in the primary endpoint. Secondary focus is in the lower extremity in the secondary endpoint. And in the U.S. and Europe, they accepted upper extremity strength primary endpoint as the required data for execution. The EMA and the FDA would certainly like to see a lower extremity effect, and that's why those data are in there and how we design and who's included in the study. It was not stated to be a requirement. But particularly EMA was interested in seeing some effect on lower extremity. And there was acceptance that it could be in a lower extremity muscle strength composite rather than something like walking. In the U.S., they were comfortable with the upper extremity composite. Even without supportive data, it was sufficient to prove a benefit because it's how patients function. So their mind is that strength is an obvious patient function endpoint therefore, clinical and intrinsically meaningful. So, of course, when you get data, you'll always have to explain it. And we think we have the types of endpoints built into this program that will help us provide clinical context if necessary. As the first treatment ever for this disease, though, I would expect that there is not a lot of standard for what you should be doing. But these patients are losing the ability to walk over 10 to 20 years and their upper extremities are failing. They often end up quadriplegic. So it doesn't take too much imagination to see that if you're stabilizing their strength and they're not losing it, that that's going to add up over time to be something clinically meaningful. In our long-term extension study where we had patient on drug for a long time, where you project out our natural history for our placebo-controlled groups, you can see that, that differential would grow over time, which we think is a very clinically meaningful thing for these patients. And even if the study is only 48 weeks, it's not hard to imagine that, that differential in strength change will add up to a lot when you talk about the years of lifetime exposure to this disease.

And then for KRN23, just if we could go back to your recent data. For the secondary endpoints, as you discussed them with FDA, did the agency indicate to you that any one of those particular secondary endpoints might be more important than the other? In your view, is it problematic that the pain secondary endpoint was not that big?

Well, the FDA received our modified plan. And we had no indication that they would give us 1 or 2. But our expectation is that we had a multiplicity adjusted analysis, which showed that there is a clinically meaningful effect on stiffness. They were aware of the stiffness is in the past. They've referred to the clinical problems of pain and stiffness to us, so to I feel comfortable they're aware of stiffness. I will tell you though in a lot of FDA meetings, I've been in, it would be very hard to get them to say, "if this happens, we're going to approve you." They just don't like that conversation. And I never ask that question because it puts them in the position of trying to make a decision off hypotheticals. And that's not fair to them. So our view is that we've shown clinical benefit with stiffness. We can demonstrate its meaningfulness. They were aware of the analysis method. The multiplicity analysis says, look, we've adjusted for the probability of testing 3 times and that will alter your rigor and we've shown clinical meaningfulness in stiffness. In addition, nominally, it was significant physical functioning and pain was a strong trend. So it's 1 positive, 2 strong trends. And now additional information on the 50% of patients that have fractures showing bone healing. We think that that's independently supportive data that demonstrate clinical benefit, we believe. Of course, at the agency it's going to become a review issue no doubt, but we'll have a pre-BLA meeting. We'll have a first discussion about it, and we'll update you at that point.

Has that meeting been scheduled?

Well, we usually don't talk about when they're scheduled or what day they're happening. But we're obviously working through that process to get the this done as promptly possible, because obviously, we feel filing this program is probably the most important activity the company needs to be doing.

Our next question or comment comes from the line of Arlinda Lee from Canaccord.

I have a few on KRN23, particularly on the pseudofractures and active fracture improvement. Is there -- my understanding is that on the pseudofractures side, that's a little bit more recalcitrant types of fractures. Do you have -- do you have any further granularity on the breakdown in pseudo versus...

We did note that it was, I think, 12% of fractures were just real recent straight fractures and the others were pseudofractures. But both are fractures that -- both are happening because of osteomalacia. Pseudofractures are sort of incomplete healing and their a defect in the bone in that they don't actually heal. I would say to you that these types of -- these were mainly in the weight-bearing parts of the patients, so they're clinically meaningful relating to the weight of pressure of walking and so forth. What I would say to you is I think that the fact that you are healing these type of fractures, which are things that happen to people, for example, on -- people on osteoporosis drugs as an adverse event and almost don't heal very well. So we feel pretty comfortable that the fact we're taking these fractures and healing them to a significant percentage within a 24-week period is a meaningful change in the bone health, which is allowing these fractures to heal. But most of the fractures are pseudofractures as I said, but both types of fractures were healed to a similar degree.

Okay, great. And then, I guess, I have 2 other questions on KRN23. One, can you maybe talk about what kind of [pairing] assumptions you're assuming for the Phase III pediatric trial comparing versus active control. And then also maybe on the financial side, can you maybe walk us through what happens after the 5-year profit share?

Well I'll do the Phase III piece, and I'll let Shalini handle the -- after the profit share. So the Phase III P study is a randomized control study that's been enrolling. And it's not blinded. It's not a blinded study since you can't really blind oral phosphate treatments. So it's a randomized controlled open-label study, and it will look at rickets -- rickets scoring as we've done before comparing the 2 treatments to each other. It's superior designed, were looking for superiority of KRN23. I've had people ask, why not do non-inferiority? I say, well, if you're to go out with a new drug that's meant to improve the health of these patients, I think you need to demonstrate superiority. There's not much benefit in coming out with a new drug that's no better than historical data. We think from the data we've seen, that -- and based on our review of data from other patients treated on the current care, that the treatment effect size that we're seeing in KRN23 will be larger. And we think that's because we're improving phosphate to the normal range, whereas oral phosphate therapy barely moves phosphate at all. I'll let Shalini answer the question on the 5-year profit-share.

Sure. So just to back up a little bit, during the first 5-year period post launch of the product in North America, it -- that's called the profit share period under the collaboration agreement with KHK. And during that time, what happens is Ultragenyx pays KHK for supply of the product, and then the remainder of the costs are split 50-50 between the 2 companies. Now 5 years post-launch, KHK wanted to take over the majority of promotional activity for the product, but Ultragenyx did not want to pay 50-50 for a large company's commercialization cost, just because the cost structures are very different between large and small companies. And so the structure changes at that point into a royalty, which is a royalty to Ultragenyx in the mid- to high 20% range on net sales. Does that help?

Do you still have to pay KHK for products afterwards?

No, we do not. We only pay -- or we only receive the royalty and that royalty is intended to mimic the economics of the profit-share period.

And, then I guess, maybe one more follow-up on the Huntington's disease trihep. I know somebody asked earlier. At clinicalstrial.gov lists this as a primary completion date of June. If it's going to be presented at a medical conference or if there's any top line data to be had, would you press release that? Or how -- what kind of data information are we going to get from you guys?

Yes. Well, we obviously don't control the release of that data exactly, so because it's hers, but if it was being presented at a scientific meeting, obviously, since we're supporting it's material that and we would coordinate with her on what we would do before a release at a meeting.

Our next question or comment comes from the line of Liisa Bayko from JMP.

I was just wanting to ask some questions on the FAOD study. Where are you in terms of your discussions with FDA, when we might expect more details on what you're thinking for Phase III?

Right now, so we're still working on the FAOD design. We have said that we're moving toward -- in the direction of doing an event-based study, because we think it would show more substantial value of the product. And in the current scheme, I'm concerned about prices and value. We think something that reduces hospitalization days in a hospital will just be a more compelling story than exercise tolerance. So we're looking at that. We need to do the feasibility and understand how to construct before we present that to FDA, so we're doing that design work right now. We'd expect to talk with the FDA soon, and we haven't really set a timeline for getting that study going. But we're excited about that data, and I think investigators in the field are actually pretty excited too, about the effect that we're seeing. So you just want to make sure that when you pull the trigger on a study of that type that you set it up right and that you power it and you design the number of sites, et cetera, to end up with a study that can execute as promptly as possible and generate the result you're expecting.

And in terms of any formulation changes that you were planning, where are you with that? If you can just give us an update, that would be great.

We're sticking currently with the oil formulation. We had done some work on a powder, which had some issues, and we haven't gone back and restarted a powder story. But there's certainly possible ways to generate a powder and we've just focused in on using the oil. We've gotten better at understanding how to manage the oil and tolerability, and there have been patients on drug now 15 years or so, so it can be tolerated in long term. The techniques involve mixing it with food and other things that help emulsify it and the people have gotten into the habit of doing it and tolerate it long term. We will still look at the possibility of a powder at some point, but we're not doing that right now. The first powder we made did not meet our specifications for moving forward.

Our next question or comment comes from the line of Matthew Harrison from Morgan Stanley.

This is Cyrus on for Matt. So there's been some debate with investors around the clinical meaningfulness of the adult isolation data that recently came out. Since you guys have that data in house, I'm sure you've shared it with your key XLH KOLs. Can you comment on their views on the data, and then how this could impact their adult patients?

Well, we normally don't discuss what the doctors tell us in our story. We are comfortable that if we're treating the osteomalacia, we're healing fractures and people and patients are feeling it, that, that is a potential reason to treat patients. I think there was a good call that was done with Dr. Carpenter that's probably available to people to look at. And I think Dr. Carpenter's view is that this was good data that it showed the patients are changing from 40 years of bone disease and starting to improve and he felt comfortable that, that was important. He, like many doctors, are comfortable that changing the phosphate to a normal range is treating the disease. If you fix the phosphate, you fix the disease. So our issue is more about demonstrating that effect for FDA. While the focus of Phase III was about symptoms, we think the fracture data provide the kind of hard data, so to speak, that will support that what you're seeing with symptoms is based on a change in the bone, at least to some degree. And we think that's just supported from a regulatory pathway. From a doctor's a standpoint, I think Dr. Carpenter's view is pretty common in that change the phosphate, you change disease and that 40 years of bone disease will take time to fully reverse. In some parts, the disease like osteoarthritis, which has progressed, would probably not be reversible. But we think there's a number of symptoms that we might benefit even in adult patients.

Our next question or comment comes from the line of Yigal Nochomovitz from Citigroup.

Just going back to the burosumab Phase III. Obviously, there's a lot of secondary outcome measures. There are 12, I believe, and then there are 5 of the other outcome measures you've reported on, the 3 key ones for the clinical outcomes and then you just reported on the radiographic data today. What does that mean in terms of the other secondary and other outcomes that you haven't discussed? Are we going to be seeing those or is the assumption that you didn't see effects there that were satisfactory? So, for example, 6-minute walk is another outcome, patient global impression and then there's a whole long list of biomarkers among the secondary outcome measures.

On the biomarkers, we did mention those, I thought, on the Phase III call that the bone biomarkers actually increased a lot, the turnover of bone. So the P-1-P and CTX and the -- most of [alkyline] and phosphates all increased substantially by 12 weeks and still up at 24 weeks. That's not surprising that we're seeing some bone healing. Those markers would suggest there's bone -- both bone synthesis and bone turnover occurring. We normally don't put out every endpoint. We would expect to do that at a scientific meeting. We put the fracture data out because it was distinctly unique and relevant to the healing that's going on in these patients. And we thought it was complementary to patient data. But we'll put out the data at a major meeting in the future.

So there is still the potential to see something on, for example, the 6-minute walk, potentially?

Yes. There's other data in there to be shown. But it will come out, we would expect, later at a major meeting.

Okay. And then in the pre-BLA meeting, I mean, you didn't hit on the pain endpoint based on the [Hochburg] but are you still going to make an argument to the FDA that, that pain claim should be in the label or considered in the label?

Well, I don't know that -- knowing historically with FDA that they're pretty -- I think they're fairly strong on statistical significance by predefined statistical criteria for a labeling of endpoint. But I think that the pain data or simply -- even though there are strong trend are supportive, across the board what you're measuring in patients, there's something happening for them. I think it's pretty clear that pain is complex in these patients. I don't think not having -- if pain were not on the label, I don't think it really matters. The pain is secondary to a disease process. We're treating the disease and the pain should get better. So the fact -- this is not an analgesic, so you can't compare it to BPI question 3 giving another oral opioid or something where you're directly affecting pain. We're affecting underlying disease, which is changing the pain outcome. So it's very indirect. I think the stiffness is probably a direct effect of phosphate, partly on muscle, maybe on bone. And the physical functioning is kind of a synthesis of a number of clinical features. Both of those were nominally positive, right? So without multiplicity, those 2 are positive, the other one is strong trend. The multiplicity just gives you -- it's a second way of looking at the data to say all right, there's more than 1 secondary and this is just a more rigorous way of saying, despite we did 3, the result is still clinically meaningful. One of them is still surviving that analysis. I think the data on bone healing adds another dimension, the bone dimension to that study, which I think helps support that what we're seeing here is a fundamental change in biology. We're normalizing phosphate. It is turning on bone remodeling and bone synthesis to heal the bone. The bone is healing as we can see and patients are showing effects of this normalization of phosphate on their bones. And I think it's ties the knot straight through from the mechanism of action all the way to clinical outcome. And I think that's a strong story you can tell. Our view on treating XLH is I would prefer myself and in case of the treatment of XLH, I'd rather not have a treatment just of 1 symptom because that's a narrowing view. I'd rather have it as an indication to treat the disease, and that disease manifests itself differently in different people. So someone who doesn't have pain, I wouldn't really -- they'd be treated for some other symptom they have. The question is are you treating the underlying disease? And is that disease clinically meaningful across a whole series of different endpoints and approaches, and I think it is, and I think that's how the story will move forward.

Okay, thanks. And just one more. What additional work are you doing on the commercial side to advance your understanding of the XLH market in terms of patient identification? And If you could comment on the status of some of the XLH registries out there in the states or in other territories.

Well, I think obviously, connecting with both patients and not just the key opinion leader physicians but the secondary physicians who are out in the clinical practice treating patients is quite important. And the whole team has been working on identifying who are the doctors that treat XLH patients using a number of data tools. They're buying and tracking and our team of MSLs and PDLs have been out there tracking and validating doctors and patients and developing essentially, a map of the United States and where everyone is. That work has been progressing and we're probably going to increase the patient diagnosis more substantially later this year to try to discover where are all the patients of XLH that we can find and to set ourselves up for the next step of commercialization, assuming that the product gets approved. So that's the biggest effort that's going on is the patient diagnosis out there. And the XLH network is the main U.S. patient group. They're a relatively young group. We provide them support and they are doing more outreach and have been active now in organizing patients. But I do think that for a disease like this, without really any specific treatment except for oral phosphate, that there is this opportunity to reach out to people who may have -- who are not part of the system that are out [lost] at secondary doctors and to capture those people earlier on in the process in a launch and pull them into the opportunity for a new approach to treating XLH that they probably thought would never happen. And so that's where our focus has been, that finding doctors and patients.

(Operator Instructions) I'm showing no additional audio questions at this time. I would like to turn the conference back over to management for any closing remarks.

Thanks. This concludes the call. A replay of the call will be available shortly. If there are any additional questions, please contact us at (844) 758-7273 or ir@ultragenyx.com. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.