Ultragenyx Pharmaceutical Inc (RARE) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ultragenyx Fourth Quarter 2017 Financial Results and Corporate Update. (Operator Instructions) As a reminder, today's conference may be recorded. I'd now like to introduce your host for today's conference, Ms. Danielle Keatley. Ma'am, please go ahead.

Good afternoon, and welcome to the Ultragenyx Pharmaceutical financial results and corporate update conference call for the fourth quarter and full year 2017. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Danielle Keatley, Director of Investor Relations and Corporate Communication. With me today are Emil Kakkis, Chief Executive Officer and President; Shalini Sharp, Chief Financial Officer; and Jayson Dallas, Chief Commercial 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 types of statements identified as forward-looking in our quarterly report on Form 10-Q filed on November 3, 2017; our annual report on Form 10-K for the year ended December 31, 2017, that will be filed soon; and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that actual results could differ materially from those projected in any forward-looking statement.

For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements as well as risks related 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, and thank you for joining us. We've had an exciting 2017 with our first approval, progress in terms of major filings, clinical studies and gene therapy acquisition. I'll start by discussing our recent progress and milestones. Shalini will then give an overview of our fourth quarter and full year results. And finally, Jayson Dallas will provide a commercial update.

2017 marked a year of transition for Ultragenyx for being a development stage company to a commercial one with approval for our first commercial product, Mepsevii, for the treatment of MPS 7. Commercial transitions happen only once in the life of a company. We are approaching this transition with deep thought and care to assure we maintain and grow ourselves in the right way and become able to deliver our products for the last miles of the journey through development to commercial availability.

We must be an incredibly successful business, and we must also manage global patient access consistent with our principles. In December, we received a positive [pain] from CHMP on the burosumab conditional marketing authorization for XLH in children who are currently waiting a final EC decision this month. Burosumab is designated as a breakthrough therapy in the U.S. and the [OP] has been extremely collaborative during the review process, which is on track for a PDUFA date of April 17, 2018. If approved, we also expect to receive a priority review voucher for burosumab since it has been designated a drug for rare pediatric disease.

Regarding pipeline development. We have progressed our UX007 program into a Phase III study for Glut1 deficiency syndrome reading out later this year and also are negotiating with FDA regarding an early filing with for a fatty acid oxidation disease as well, also preparing for our Phase III program to be initiated this year.

Late in 2017, we acquired Dimension Therapeutics, which added AB gene therapy technology to our portfolio, including 2 clinical stage metabolic programs, 1 already underway for Ornithine Transcarbamylase or OTC, and another clinical program beginning soon for glycosylation disorder type 1a. The gene therapy acquisition gives us a wider variety of unique methods to treat rare diseases that also includes recombinant protein small molecules or mRNA. This combination now with gene therapy will allow us to select the best treatment strategy available for each disease. The integration of Dimension's gene therapy business has gone well with the retention of the very important technical leadership and management team that operate the programs and continue to make progress across the portfolio.

Finally, we finished 2017 with an Analyst Day, where we disclosed 2 new preclinical programs, UX053 and mRNA based treatment for glycogen storage type III and UX068, a small molecule prodrug for the treatment of creatine transporter deficiency. With regards to burosumab at Analyst Day, a 48-week data from the -- although Phase III results have presented showing sustained maintenance of normal serum phosphate level, increased rate of fracture healing and further improvement of stiffness, physical function and pain and notably, a substantial decrease in pain medicine usage over 48 weeks.

On November 15, 2017, our first product, Mepsevii, was approved by the FDA for the treatment of MPS 7, marking a significant milestone for the company, our first approval. U.S. launch has gone well so far, and Jayson will provide more color later in the call.

In Europe, the review process continues and is moving along as expected, and we anticipate a CHMP pending on the first half of 2018. As a reminder, regarding burosumab review in the U.S., the FDA accepted our BLA for both the pediatric and adult indications and granted priority review with a PDUFA date of April 17, 2018.

The accepted application is based on currently available data from our multiple ongoing site for both children and adults. Today, we also announced that the 64-week burosumab treatment data from the Phase II study in 1 to 4 year olds demonstrated a reduction of rickets and bowings that was consistent with or further improve what was seen in the 48 week -- 40 weeks. These results are also included in sustained improvements in serum phosphorus levels and a progressive reduction in normal range -- into the normal rage of alkaline phosphatase, a commonly used metabolic sign of rickets. More importantly, there are continued improvements in bowing and rickets at 64 weeks. The safety profile observed in the study was consistent with other burosumab studies. These data continues to support the concept that early treatment could have a more profound effect on the bone deformities that would have typically affect the XLH patients throughout their lives.

Today, we also announced adult XLH bone biopsies from all patients with bone quality demonstrating a continued improvement osteomalacia. In our discussion with the FDA, the indicated improvement osteomalacia could also be considered an important outcome for adults with XLH. At 48 weeks, all 10 patients with a valuable paired bone biopsies demonstrated meaningful improvements from baseline in mean osteoid volume relative to bone volume, the mean decrease from 26.1% to 11.2% among these patients represents a 57% improvement from baseline in mean osteoid volume relative to bone volume, which is the gold standard for the evaluation of osteomalacia.

The number of patients reached single-digit percent level close to the 3% upper limit of normal for osteoid fractional volume. The patients also demonstrated mean improvements of 32% and 26% in osteoid thickness and osteoid surface relative to bone service parameters, respectively, while also experiencing a mean improvement -- meaningful improvement in mineralization lag time.

The results are consistent with the data already provided with the FDA in the first 6 of these 10, showing a substantial reduction of osteomalacia. These data provide important support of data on substantial -- severity of the underlying osteomalacia bone disease in adult XLH patients and the ability of burosumab to treat this underlying bone disease present in adult XLH patients.

Now turning to our OTC gene therapy program. We recently presented data from the first lowest dose cohort of the Phase I/II study in OTC. One patient's rate of ureagenesis was normalized, maintained with a 3% increase in the rate of ureagenesis from baseline to week 12 to reach 87% of normal. The second patient did not show a clinically meaningful change in the rate of ureagenesis over the 12-week period. And the third week -- third patient showed a modest increase of ureagenesis from baseline over the first 6 weeks of treatment with 12-week treatment not yet available. There were no inflation-related adverse events and no serious adverse events reported. The only treatment-related adverse events were mild clinically asymptomatic and manageable elevations to alanine aminotransferase or ALT in 2 patients, who both have completed a standard tapering course of corticosteroids to treat the ALT elevations. Additional extension deal will be coming soon and a second cohort is planned once the DMC completes its review in early March.

Regarding UX007, we announced that following the end of Phase II meeting, we are working to provide additional information to submit to the FDA for consideration of an early filing based on the results from the Phase II study. While the FDA still prefers that a randomized control trial be completed before filing, it left open the possibility of filing on the current data.

We're simultaneous completing the design of the Phase III study to be used for registration or confirmatory purposes depending on the outcome of other data review. With more than 100 FAOD patients treated over the year, there are about 80% of subjects still on therapy for an average of 4 years with some as long as 17 years. We do believe there's enough evidence to support the safety and efficacy of UX007. That said, a randomized controlled Phase III study confirming a substantial reduction of major clinical events, as observed in our Phase II study, would be extremely helpful in the long term regulatory review and commercialization of UX007.

Now on the Glut1 program. Screening has closed in the Phase III study for the treatment of Glut1 with the movement disorder phenotype. Data from the study is expected in the second half of 2018. I would like to now take a moment to recognize and welcome Camille Bedrosian Petrosian to Ultragenyx as our Chief Medical Officer. I am particularly happy to note that Camille will be taking over responsibility for the Chief Medical Officer from me since I've been doing it the last many months. We're excited Camille bring her passion and track record of developing new rare disease treatments to improve the lives of rare disease patients as we continue to build and advance our pipeline. Camille is a hematologist/oncologist by training and was most recently Chief Medical Officer at Alexion. She spent a number of years at Genetics Institute, Wyeth, in the area of analytics and developing multiple drugs, many for rare disease indication. She has both the skills and the driving spirit required to work successfully in the rare disease space.

This year, 2018, is shaping up to be a year with a number of important catalysts across the portfolio, potentially launching 2 products -- 2 programs of Phase III, 2 gene therapy programs reading out early clinical data. For burosumab, from a (inaudible) standpoint, we're expecting a final EC decision in February on the burosumab conditional marketing authorization for pediatric XLH, our BLA for the treatment of XLH in both pediatric and adults is being reviewed by FDA, and we have a PDUFA date of April 17, 2018. For study data, we are expecting new data from the randomized active control pediatric Phase III study comparing burosumab to oral phosphate and active vitamin D therapy in the second half of 2018. This study will not be required for U.S. approval and will serve as a confirmatory study in Europe. We do believe it will provide further support for the benefit of burosumab over current therapy. Finally, for TIO data from all patients in the Phase II study are expected in the first half of 2018.

For UX007, for the treatment of Glut1 deficiency syndrome in FAOD, our Glut1 indication enrollment has gone well and screening has closed. We expect data from the Phase III movement disorder study in Glut1 deficiency syndrome in the second half of 2018.

In FAOD patients, we expect the decision of potentially filing for approval based on Phase II data in FAOD. And FAOD patients will be made by mid-2018. For the DTX301 AB gene therapy for the treatment of OTC Deficiency, full data for the first cohort in the Phase I/II study and a DMC review are expected in March. The second quarter patients are being screened now and the product is already manufactured. We'd expect Cohort 2 treatment to occur in the first half after the DMC review with data available in the second half of 2018.

For the DTX401 AAB gene therapy for the treatment of GSDIa, an IND filing in GSDIa patients is expected in the first half of 2018. The product has also already been manufactured with the trial and data from the first cohort of patients is expected in the second half of 2018.

Finally, for DTX201 and AB treatment for hemophilia A partnered with Bayer, an IND filing in hemophilia A is on track for the second half of 2018. 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 fourth quarter of 2017 was $81.7 million or $1.89 per share, basic and diluted, compared with $71.3 million or $1.75 per share, basic and diluted, for the fourth quarter of 2016.

For the year ended December 31, 2017, total net loss was $302.1 million or $7.12 per share, basic and diluted, compared with a net loss of $245.9 million or $6.21 per share, basic and diluted, in 2016. The net loss for the fourth quarter and the full year of 2017 includes a noncash nonrecurring tax benefit from the Dimension acquisition of $16.2 million. This was the result of the change in the U.S. corporate tax rate from 34% to 21% on the deferred tax liability.

The net loss for the full year 2017 reflected cash used in operations of $253.8 million in 2017 compared with $161 million in 2016. Net loss for 2017 included approximately $52.3 million in noncash charges, including stock-based compensation of $68 million, amortization of premiums on purchased investments, depreciation, amortization and other noncash charges, offset by the nonrecurring income tax benefit recorded. We expect stock compensation expenses to continue to increase over time.

For the fourth quarter and full year of 2017, we reported $0.3 million and $0.5 million, respectively, in Mepsevii revenues. Our total operating expenses were $99.2 million for the fourth quarter of 2017 and $331.6 million for the full year. Research and development costs were $231.6 million in 2017 with our Phase III program accounting for the greater proportion of R&D costs. As a reminder, we share burosumab development costs 50-50 with our collaborative partner, Kyowa Hakko Kirin. Costs for multiple preclinical translational research programs are also increasing as programs advance towards the clinic. We ended the year with $244.5 million in cash equivalent and investments on the balance sheet.

In January 2018, we completed the sale of our Mepsevii PRV for $130 million and raised $271 million in net proceeds to an equity offering. We also anticipate receiving 50% of the proceeds of any potential burosumab PRV sale in 2018.

During 2018, absent one-time items, such as PRV sales, we expect the OpEx for our base business to experience a modest increase with some additional increase due to the addition of the gene therapy business. The proportion of operating expenses that is noncash should remain materially similar in 2018. The proportion of operating expenses dedicated to R&D should remain materially stable in 2018 as well. With the Mepsevii U.S. product launch underway and the April 17, 2018, burosumab PDUFA date, I wanted to take a few minutes to discuss revenue expectations around both drugs.

For Mepsevii, we are not providing any product sales guidance at this early stage of the launch. Jason will provide some additional detail on the launch, but we would like to reiterate that MPS 7 is an extraordinarily rare disease, so expect a gradual build over time as patients are found, put on therapy and ultimately reimbursed. We have also expensed any production of Mepsevii prior to the date of U.S. approval. Until that supply is utilized, there will be minimal cost of goods sold associated with Mepsevii sales.

For both burosumab and Mepsevii, we know that reimbursement could take 3 to 9 months to complete. While this would most significantly impact revenue in the early launch period when all of the patients are essentially new, we do expect that ultimately over time, penetration would reflect the true value of these products as demonstrated in our clinical programs.

I will also take this opportunity to review again the terms of the collaboration with KHK. Our agreement with KHK outline 3 territories: the U.S. and Canada, Latin America; and Europe. In the U.S. and Canada, for the first 5 years post-launch, Ultragenyx will launch burosumab and share development and commercial costs 50-50 with KHK. Ultragenyx will also pay KHK a supply price that is a fixed double-digit percentage of net sales. This supply price reflects a higher than typical cost of goods margin for a biologic and essentially compensates our partner for the fact that we were not required to pay any upfront or milestone payments, nor have we paid for the cost of the product during the development period or any associated manufacturing costs.

In North America, our half of the burosumab revenues will be shown net of the supply price. After the first 5 years, KHK will take over the majority of commercialization efforts in the U.S. and Canada. And instead of the profit share mechanism, Ultragenyx will receive a tiered royalty in the mid- to high 20% range. This royalty is intended to reflect the same economics as during the profit share period. Throughout these periods, the agreement states that KHK will book sales for burosumab in the U.S. and Canada.

Turning to Latin America. The agreement states that Ultragenyx will commercialize burosumab and recognize revenue while paying KHK a low single-digit royalty on net sales. In Latin America, Ultragenyx will pay KHK the same supply price in the U.S. and Canada, a significant fixed double-digit percentage of net sales.

In Europe, KHK will commercialize and book burosumab sales while Ultragenyx will receive a royalty of up to 10% of net sales. As a reminder, in Europe, it can take 12 to 24 months for approved products to receive reimbursement on a country-by-country basis.

Overall, we estimate that we hold roughly 1/3 of the value of burosumab in the territories that are subject to the agreement. This concludes my remarks for today. I would now like to turn the call over to Jayson Dallas, our Chief Commercial Officer, who will provide a commercial update.

Thank you, Shalini, and good afternoon, everyone. I would like to start out by providing an update on the Mepsevii launch. On our approval call in November, we have talked about deploying our commercial sales force and focusing on supporting access to treatments to eligible patients. This team, which we call UltraCare Liaisons, has been educating health care providers and payers about Mepsevii and have been working to provide essential services for patients to gain timely and affordable access to this new therapy. We had also talked about establishing a comprehensive in-house support program called the UltraCare hub, designed to help patients seeking access to Mepsevii.

Since launch, UltraCare has been providing patients with essential point of contact to help provide treatment support and understand the insurance process and their financial assistance options. One of our goals with UltraCare is to ensure that patients who are uninsured, not coverage, who'll need assistance with their out-of-pocket costs are able to receive treatment. We are pleased to announce that the U.S. Mepsevii launch is progressing well, and we continue to receive new patient start forms. While we are not disclosing patient numbers, the number of start forms received to date are in line with our expectations.

Additionally, we have received start forms for a few patients who have been diagnosed since we have received approval. These start forms continue to convert to active therapy, and we have been able to treat new patients steadily since approval.

The approval in the U.S. allows us to respond to requests for named patient programs in other countries, and we are excited by the progress we've made and look forward to providing updates throughout the year.

As we prepare for potential burosumab approval in the U.S., we continue our patient diagnosis activities and are encouraged by the patients we are finding and remain confident in the expected prevalence numbers that we have previously communicated.

Additionally, given the strength of the data in both pediatric and adult patients with XLH, we believe that burosumab has increasingly robust value proposition in both populations. We have shared the composite clinical and the developing value story in our early interactions with payers and have thus far been well received. That being said, as Shalini previous mentioned, we expect a gradual build for burosumab in 2018 for a number of reasons.

Firstly, many adults with XLH are being treated for complications of their disease rather than the underlying disease. As such, once we receive approval, there is work to do to ensure that these patients get referred to metabolic bone or endocrine centers for diagnostic confirmation and treatment of their XLH. Secondly, getting placement onto formularies and achieving widespread reimbursement takes some time. And finally, we only have a possible year of sales in 2018.

We are currently expanding the capacity of our UltraCare hub and will be prepared to deliver the same high level of patients and caregiver support once we receive approval for burosumab. Following approval in the U.S., we will be able to respond to name patient requests in specific countries in Latin America as well as Turkey.

To conclude, the Mepsevii launch is going well in this early phase and we feel very comfortable around burosumab prevalence numbers as well as our level of preparation for launch in the U.S. if we receive FDA approval.

With that, I'd like to turn the call back to Emil.

Thank you, Jason. As you can see, we've made a lot of progress with the recent approval of Mepsevii in the U.S. and the positive CHMP opinion for burosumab in Europe. Two UX007 indications are in Phase III, and we have initial positive gene therapy data. This is an important year for the commercial execution of launch and potentially 2 programs and the company is intimately and intensely engaged on these 2 critical launches. We know how important these are and that making the commercial transition is a critical one for our success as a business.

In addition, by the end of 2018, we're hoping to further extend these results by doing the following: to improve burosumab in key regions, including the U.S. and Europe and other areas, adding the list of approved geographies for Mepsevii; obtain additional proof-of-concept data across our gene therapy portfolio; read out data from our UX007 Phase III study movement disorders; clarify the regulatory pathway for FAOD and initiate a Phase III; and drive forward on our 2 new translation research programs, UX068 and UX053 toward clinical development. I look forward to updating you throughout the year on our progress. Now let's move to your questions. Operator, can you please provide the instructions for the Q&A portion of the call?

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

Maybe first one for Jason. I think you mentioned the initial payer reaction to burosumab in the U.S. was well received. Can you just talk about what kind of granular discussions you were able to have prior to the actual FDA approval date? And what exactly it was that you thought was a favorable interaction?

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

And then maybe the second one for Shalini. I know the economics are complex around Crysvita. But is it possible that you would be recognizing negative revenue in the early part of the U.S. launch as the sales are relatively small relative to the cost of the joint venture? Or would the joint venture cost be on a different line? Just help us understand the mechanics of the P&L.

Sure, Eric. That's a great question. So the way that you will see the North American revenues on the income statement in terms of geography is that you will see 50% of the product sales minus our transfer price, which is a percentage of the product sales in the revenue line. So that will always be a 0 to positive number. And then you will see the cost associated with any R&D or SG&A in the operating expense line, our 50% of the cost. Does that make sense?

Absolutely.

Our next question comes from the line of Steven Breazzano with Evercore ISI.

Maybe on triheptanoin, could you just walk us through some of the differences in the movement disorder study versus the seizure phenotype and what gives you confidence for success here in this indication?

Sure, I think that is a good question. In the movement disorder study, we had a pilot study showing a strong effect. So we actually had clinical data showing a really strong effect, 90% reduction and movement event that went away on drug, came back when drug was removed and went away again when put back on drug. Before we ran the seizure study, we actually did not have any clinical data on observable seizures in that study. That was the first study, so we had no basis for knowing what to expect. We had some demos that are seizure improved based on prior data, but there wasn't any observable seizure difference. So what critical difference, what data we have going into the study, we had some significant clinical data in the movement disorder side. So that's, I think, number one. I think the second thing, we certainly improved how we manage dosing the drug and how we manage the trial design as a randomized crossover design, doublecross over. So each patient becomes their own control, which will help us in the heterogeneity problem that can happen. Finally, the Glut1 movement for our patients are not -- most of them -- or very few of them are on ketogenic diet. So this is a more true prevalent population where if a seizure patient we have in our study were people who all have failed all the therapies basically and they were age 15, not young. And so the movement to our studies are more, I would say, relevant to the prevalent population. They're not people who've been failing multiple therapies. So those are 3 reasons why I think moves are different and why we are more encouraged by the potential for it. It is still neurology, I will point out. So I don't want to underestimate the complexity of neurology, but we do believe there's a stronger base for belief with the movement study and its potential to demonstrate that effective result.

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

This is Carmen on for Cory. So on the hemophilia A gene therapy program, how are you thinking about the evolving competitive landscape? And where do you see DTX201 being differentiated? Also, one follow-up. Did you change anything about that program after you acquired it from Dimension?

So there's competition in hem A in gene therapy? Yes, we were aware. You have quite a lot. Obviously, Bayer has done a very good work on that area. And there's Spark, of course, and others. Is the program fully partnered with Bayer and Bayer is supporting the program 100% at this point? We are bringing to bear our knowledge insights on drug development as well as in managing with that particulars about hem A. But it is Bayer's program fundamentally, and they're fully running those major decisions. I'd point out also that Camille, who's joined us now, is actually a hemo expert worked at Genetic Institute on hemophilia. So it’s quite experience as well. And our job will be to help support Bayer in making the best decisions possible. And I do think there's more to be done in hem A, I don't think it's all solved. But what Bayer has done at this point or others, I think, there's a lot of uncertainties of why it's so variable and why are the dose of the virus so very high. I think those are factors that there's still room for improved understanding and the control then reproduce both gene therapy for hem A.

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

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

Sure. I'll let Jason handle the questions.

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

Our next question comes from the line of Tazeen Ahmad with Bank of America Merrill Lynch.

For XLH, can you give us, as you get closer to being on the commercial side of things, a range of what kind of pricing would be reasonable to assume? And then I have a follow-up question on FAOD.

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

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

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

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

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

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

Our next question comes from the line of Maury Raycroft with Jefferies.

Just as a follow-up to the last question. For the 46 compassionate user requests that you had in FAOD, can you comment on how many of those were fulfilled? And can you provide any details on the results and how those data may support your total data package in the potential for early filing?

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

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

Well, some of the patients that have ended up on compassion use have been converted over to an extension study where we actually collect long-term safety data on them. Some of the patients we've collected the data in a form, for example, the patients with heart failure that we published 10 patients on heart failure that we treated showing a doubling of ejection fractions, so we collected that data and can put it together in ways that help it. To be core data for a filing, you'd have to have the rigor of inspectable datasets, et cetera. Not all that patient data can be converted in that format, but we have done that for our retrospective study as well as other data on the heart failure patients. So there -- that combination the data provides, I think, the #1 is that patients have been on drugs for years, many years showing that it is safe and that they are -- fact they want to stay on therapy for so many years shows persistence and value. And I think a lot of those patients were treated as compassionate use patients in the early 2000s, and they're still on drug. And so with that analysis of the medical records we did, so we brought some of that data in that's medical records in our retrospective study, which is published and you can look at, we showed how 20 patients were treated. Most -- nearly all the patients had at least 5 years of UX007 treatment that their reduction in major clinical events was substantial over the historical period for each of them. So we are bringing it in through those retrospective chart reviews and other types of analyses in addition to the prospective data we've collected going forward. So what I would point out is that it's not a trivial amount of data. It's not like we have 10 patients' worth of data. We're talking about a lot of patients, dozens of patients treated over many years. So I think it gives one very -- greater confidence on the issue of is this drug going to do harm. It's like one of the first questions that you have to decide. This drug's been in a lot of patients for a lot of years. So we feel that question is answered and doesn't do benefit than we've shown in various ways that it has. So I think if you look at that total picture, I would say, this has more data than many programs I've started with, with regard to long-term exposure, safety and efficacy in major clinical manifestations. So we've presented that data to them. We're presenting some more detailed data on historicals that is what happened to our trial patients in 18 months before we saw them when they were getting hospitalized. Were they getting good medical care? Do they see their doctors? What were they -- how they're -- were they being managed? And we know all those patients were at major clinical centers that treat FAOD because they're all our investigators, and these investigators are all experts in that area. So we know they were being managed, and they're being seen. And these were the, basically, the worst 2 or 3 patients each doctor had that we enrolled in study. So we just need to give those FDA that -- the hardcore support that will get them convinced.

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

Hey, Emil, this is Dae Gon dialing in for Joe. Two quick ones for me; one, to follow up on the FAOD. I know that discussions and the strategy is working out there, but in the meantime, you're still working through the Phase III trial design, and your corporate deck also highlights the planned endpoint of major medical events. So I'm just wondering, given the longevity of the trial that's going to be necessary, whether it be for registrational purposes or confirmatory, what's stopping you from initiating the trial right now just so once you engage the FDA, you can have that card and play it wisely? And the second question is on DTX201 hemophilia A just to follow up on Carmen's question. Can you remind us what the hemophilia B program vector usage was in -- under the hands of dementia? And then perhaps as you look through that data, what is the vector you're using here? And what can we anticipate or what lessons have you learned from the hemophilia B vector usage to give you confidence on the 201 program?

Sure. So on the Phase III major clinical event study, we received feedback on a few features of the study from the FDA, which we need to settle down, and we are drafting a -- we're basically drafting a design over the Phase III and some details around how blinding or not, how it's being done that are being worked out. But I agree with you. We need to pull that study together, get it going and get it agreed to with FDA. We're doing that in parallel with preparing other filing because we don't need to lose more time. So we are pressing ahead with a randomized controlled study, which we'll meet, we hope, some of the questions raised by the FDA at our last meeting in end of Phase II. So on hem A -- the hem B vector was rh10, which is part of the Clade E vectors, but it's rh10. And while they did achieve some long-term low-level expression, it did appear that they had more inflammatory reaction. And the basis for these differences is hard to know, but they discontinued the program because of that. The hem A program vector has not been disclosed. It is not the same vector. It's not rh10. It's a different vector that is liver tropic. And that vector, it's been prepared at 2,000-liter scale now using the HeLa cell system that the company has developed and is moving forward toward an IND and as we said, in the second half. And so far it's gone well. But I do think it's a different vector. And I do think the vector does matter as best we can tell on the -- so we think there is reason to not think of hem B as predicting or reading through to what hem A is going to do.

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

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

Our next question comes from the line of Laura Chico with Raymond James.

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

Okay. So the Rett program you're talking about is probably in the investigator-initiated study. There are 2 that are ongoing. The basis for those is there was a scientific paper published in the rat model showing that triheptanoin or UX007 had an important benefit in Rett syndrome animals. It was rather compelling. And what people don't realize, Rett, well, I think of it as neurological. It actually has a significant metabolic component, which is not fully understood. And it appeared that triheptanoin was helping those mice substantially. So we had received requests for ISTs. And as our typical pattern as a generous company, we have supported supplying drug to the Rett ISTs that are ongoing. We don't have any data from them. They're not studies in our control. But they were based on strong animal data that got people interested. There's a lot of people working on Rett now though, and that's good. It's a bad disease and hasn't had anything. So it's a good thing to see. That ketogenic diet in Rett, I don't know of anyone doing ketogenic diet in Rett. there are some seizures in Rett syndrome, but I don't know that people have been using ketogenic diet for seizure disorder. I can't -- I'm not an expert, though, on Rett, so I wouldn't want to overstate that. So how does it all fit in? Well, our focus as a company on sponsored studies is FAOD and Glut1. We think those are 2 where the genetics are very clear and distinct. But we get a lot of requests, and we get a lot of requests for use of triheptanoin and all these different indications. And if there is a sound, I would say, an animal pharmacology study or other basis for it, our view was to help support some of that investigation. Our goal would be to get it approved in one or both of these disorders, get on the market. And then as some of these ISTs show up, we'll figure out if there are other ways this drug might be used and will help support sponsored follow-on work from those ISTs. That's sort of our general strategy.

Our next question comes from the line of Gena Wang with Barclays.

First question regarding the OTC program. Can you remind us the higher dose you will be using for the OTC program? And then how many patients will be presented in second half this year?

Yes. So the starting dose was 2e12, okay? And the next level is 3 [fold] higher or 6e12. That's cohort 2. So the way the protocol is designed is after the DMC review, then we can enroll 3 patients at a maximum pace of 1 a week at the next dose cohort level. And what we're saying is those 3 patients would be the data we would show later in the year. If that data showed that we achieve our efficacy and safety goals based on ureagenesis and other measures, then we would potentially do a third cohort at the same dose level, and that would be the finish of the Phase II study. If we hadn't met our criteria on those 3 patients, then we would step to 1 more dose level, which I believe is 1e13 as the top dose level for OTC.

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

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

Our next question comes from the line of Liisa Bayko with JMP Securities.

This is Jon on for Liisa. I guess, just a follow-up to the FDA feedback. Can you walk us through your framework for an early filing and what you're going to the FDA with, with this new data you'll be bringing to them?

You're talking about the FAOD again, is that right?

Yes.

Okay. So the primary focus of the data is -- relates to the Phase II study, although we are looking at some of the other supportive data as well. In our Phase II study, there were 29 patients total enrolled, 25 whom had data through the main part of the 78 week of the study. What we're looking at in those Phase II study patients, their history in -- of 18 months when they were having more medical events, and we're looking at how many times they saw the doctor, how well managed were they and who -- the quality of the care that they received and what the diet and other factors were in their management with the concept of showing a rare find that these patients were under good care by an expert in the field and they had been seeing frequently, and therefore, their change in outcome is not just because someone finally paid attention to them and gave them good care. That's the core of what we're going to them with. We're not collecting new data. We're just collecting retrospective data on the patients within that study. There are certainly other things we could do with our heart failure patients, et cetera, but heart failure patients, all of them are in terrible condition with a lot of medication and things being thrown at them. They are being hospitalized. They're at heart failure. They're in the ICUs or on ECMO. It's a little hard to not say there's a million things going on there. And so when you say someone who's in that situation, was there anything else going on, a little harder to prove. However, we know from doctors there is that, for many patients within a day, within 24 hours, being in heart failure with a heart that's in function, they were able to get contractility back. And so there are many that believe that this was quite important at pulling patients out and particularly because, long term, they didn't go back in for heart failure again that they felt like they changed something about the physiology of these patients. However, that data, remember, is all compassionate use. It's all urgent and emergent. So it's a little harder to be compelling when we have -- I think the study data is really at the core of what we need to demonstrate to them at this point in time. There's also randomized controlled study that looked at triheptanoin versus MCT oil that was done by an investigator within our study. It did show an improvement in ejection fraction when treated with UX007, triheptanoin. And you can argue how much -- with that effect, is it big enough or not. But it did show head to head over a 4-month period that there was an improvement in ejection fraction, increase in pulse and overall improvement, cardiac performance when patients crossed on to triheptanoin versus MCT. That's another piece of data that's also in their hands, although it's not our own study. It's an investigator study. So those are the package of data we will be putting forth to them.

Our next question comes from the line of Vincent Chen with Bernstein.

Two quick ones. The first is a question on how we should think about the patient population waiting to go on burosumab? As your medical affairs teams go out and identify physicians with XLH patients, what's your sense for a number of warehouse patients who are waiting to go on drug and the mix there between adult and children? I've realized it will take a while to get reimbursed as well, so these are not going to translate immediately into revenue. But I imagine it could be a substantial warehouse population waiting for drug.

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

Well, I agree 100%. We've previously communicated, we expect prevalence in the U.S. to be around 12,000 patients. As we identify patients, we're getting more and more, more comfortable that, that number is about right. We know what rare diseases you tend to see some patients emerge once you've got approval and once there's a viable therapeutic option on the table. And then like Emil said, actually, we're seeing about half-half at the moment, so about half the patients we're finding are pediatric. The other half are adults. And again, we just expected those to be a little bit more complicated and take a little bit more time.

Of the pediatric patients, is it safe to say that most of the U.S. patients who are pediatric patients with XLH are treated in one of these major centers and pretty easy to find?

Not necessarily major centers. Actually, fairly, fairly widespread. We -- both actually for the clinical trials and for the patients that we've identified since the clinical trials, the diagnosis has been pretty diffused, actually, less clustered than we may have initially anticipated.

And one thing I'd point out to is that there are a number of patients that will go to, let's say, Yale and Dr. Carpenter to see him at the beginning. They see him. They get his blessing. They get in treatment. But then they go back, and they're seeing their local doctor because they're not going to fly to Connecticut to see Dr. Carpenter except intermittently. So sometimes those doctors have patients that they've seen once or twice from around the nation, but that's not really for a commercialization. He's not really going to be the prescriber for them. It needs to be their doctor they're seeing regularly. So that's the thing that Jayson talked about. There's a number of big centers that see a lot of patients, but their actual real doctor that are prescribing and being on there is many -- is more...

Yes. And even from the clinical trial patients, where we know the patients are being treated still by the clinical trial center, will go back and be treated in the communities that they originated from, not necessarily by the clinical trial program once the drug is commercially available.

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

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

If you were to normalize to a, I guess, sort of expected liver size, would you say they gotten much higher dose than the others?

Well, it's one of those questions because some of these patients are obese. In fact, they eat a lot of carbohydrates. But they -- the truth is that the blood volume does not really expand when you have a lot of fat. So we're really talking about how much virus is in the blood volume, which will determine how much the liver sees. So my guess, if you're very heavy and you're contributing to the dose that your actual virus load that we can give into your bloodstream is probably higher. So that's the only thing I could say. That patient did get -- was the largest -- substantially larger, let's say, than patient 3, so -- actually, larger than patient 2 as well. So that's the only thing we can see right now. There was nothing else going on that we could figure out between them. But I would say to you, we're not -- this is not unusual. Every gene therapy company has had some variation in response so...

Oh, yes, yes, definitely. How much variability do these patients have in their baseline, I guess -- yes, baselines and levels? How confident can we be that the notary response is real and not just sort of variation?

Well, they -- both of them gotten 2 -- they get 2 ureagenesis at baseline. There were 2 actually. So you can look at those 2 as replicates. So that patient, the 2 replicates were not too far apart and then it went up a lot. So at least those replicates that you could see were relatively close, but they could be variable. We think that the change we're seeing is well beyond what we've considered variation in the ureagenesis assay, so -- in that one patient. So at this point, I think your point is well taken. These are biochemical measures. They can vary. But with the 2 measures close up, we get at least a sense of within patient variation, that is not really the relevant to that first patient.

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

Regarding the split on adult versus pediatric, I think it was just mentioned that it's -- that what you're seeing in the recent chart pulls or recent market diligence is that it's closer to a half-half split versus, I think, the prior commentary was 1/4 adult -- or rather 3/4 adult, 1/4 pediatric. Are you sort of updating your thoughts on the market sizing and split there? Or is it still your view that it's predominantly adult?

No, we -- our original plan is based on the reality the patients don't die as children, and therefore, the adult prevalence, the peds prevalence are just based on the number of years of life, right? So those numbers hold. What I think Jayson was getting at is that the peds patients are easier to find because they're in the doctor's clinic all the time. And so the fact we're finding more of them is just because of they're in the (inaudible).

Yes. No, I would make one other comment about is that the ICD-10 code that most closely relates to XLH because there isn't actually a stand-alone code for XLH is one called familial hypophosphatemia. And that code has only been around for about 18 months. And when you look at that, you get this mix that's a little more 50-50. That being said, we know that the bulk of the adult patients are not actually being coded to that code. They're being coded with something else related to their complication or related to other things that they're showing up for, right? So it goes back to the comments I made earlier. So just to be clear, I still believe the prevalence is right. I still believe that the 25% to 30% of the prevalent population being pediatric versus the rest adult is correct. It's just that the kids are easier to find because they are coded more around the underlying disease rather than the complications.

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

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

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

Go ahead, Jayson.

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

I think 1 encouraging thing is we've actually found 2, 3 patients, so...

Yes. We -- as I said in my text, we've actually managed to have a couple patients be diagnosed since approval. These are patients that were not on our radar screen prior to approval. And this is what we see with rare diseases. Once there's a viable therapy that you do tend to diagnose (inaudible) patients.

People start (inaudible) we're finding people.

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

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

Yes. We haven't laid out that plan yet. If you have particular thoughts on what you think you'd want to see, you can send them to Ryan.

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

I had a couple more on FAOD and also maybe on burosumab as part of profit share, if you could maybe provide what you're planning to do on -- in terms of guidance on the OpEx side as well. And on FAOD, maybe -- can you talk a little bit about what the Phase III might look like, the duration, number of patients? I know this is in parallel with trying to get an early filing on the Phase II data but maybe a little bit about more detail on the Phase III that you're thinking about.

Okay, sure. We certainly have not finalized it. I'll give you -- we have put out like a rough idea on the FAOD Phase III. It'll be over 100, maybe 120 patients in that range that we're randomizing to 1 to 1 to be on the current care versus the UX007. Exactly the blinding and dosing is one of the question marks we're working through. We'd expect this study, though, to have an in-life period of around 78 weeks or 18 months just as we did for Phase I/II. We could try to do shorter. The challenge is do we get enough of that data to power the study. And by going 18 months, it gives us a little bit more power. So that's why it's 18 months and in-life period. It will be an international randomized study, certainly, U.S. and Europe. And whether we go anywhere else will be yet to be determined. That's a little bit, hopefully, helpful to you on the FAOD Phase III design.

Yes, it is.

And you wanted more clarity on burosumab OpEx. So I think that's something that maybe Shalini should help you with.

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

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

Yes, that's right. So the modest increase to the base Ultragenyx business includes the launch of both products, MEPSEVII and burosumab, and we're also able to, however, take out some of the expenses associated with the development of Ace-ER. So as a result of that, we're able to keep 2018 as a relatively modest increase over '17 for the base business plus the gene therapy business on top of that.

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

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

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