Ultragenyx Pharmaceutical Inc (RARE) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ultragenyx Third Quarter 2018 Financial Results and Corporate Update Conference Call. (Operator Instructions)

I would now like to introduce your host for today's conference, Ms. Danielle Keatley. Ms. Keatley, you may begin.

Thank you, and good afternoon and welcome to the Ultragenyx Pharmaceutical Financial Results Corporate Update Conference Call for the Third Quarter of 2018. We've issued a press release detailing our financial results, which you can find on our website at ultragenyx.com.

I am Danielle Keatley, Senior Director of Investor Relations and Corporate Communications. With me today are Emil Kakkis, Chief Executive Officer and President; and Shani Sharp, Chief Financial Officer.

I'd like to remind investors that this call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, the types of statements identified as forward looking in our quarterly report on Form 10-Q that was filed on August 3; our quarterly report on Form 10-Q for the quarter ended September 30, 2018, that will be filed soon; and our subsequent periodic reports filed with the SEC, which will all be available on our website in the Investors section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that actual results could differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements as well as risks relating to our business, see our periodic reports filed with the SEC.

I'll now turn the call over to Emil.

Thanks, Danielle, and good afternoon, everyone, and thank you for joining us. I'll be writing -- I'll start by providing an update on our recent commercial and development programs, and Shani will provide an update on our third quarter financial results.

First, I'd like to start with an update on the Crysvita launch, which continues to go very well. As of the end of September, we had 5 months of sales since launch on April 27, and we're pleased by the growing demand among both pediatric and adult patients with XLH in the United States.

At the end of the third quarter, we had received approximately 600 completed patient start forms from more than 300 unique prescribers. Importantly, we had reached more than 300 patients on reimbursed commercial therapy by the end of the third quarter. As was the case last quarter, we continue to see approximately 60% pediatric patients and 40% adults receiving therapy. As of the end of the third quarter, almost 75% of reimbursed patients were naive to prior Crysvita treatment, that is they were not previously in our clinical trials.

The payer mix as of September 30 remains approximately 70% private plans with the remaining 30% comprised of government and other payers. As of the third quarter, we have payer policies covering approximately 200 million lives, nearly doubling our coverage from the end of the last quarter. We continue to see most payer policies consistent with the Crysvita label. We're also pleased that the Centers for Medicare and Medicaid Services, or CMS, recently published the J code for Crysvita on their website. This will make our reimbursement process more efficient for Medicare and Medicaid patients with XLH where buy and bill is required, improving accessibility to Crysvita for these patients.

The recent feedback we received from the patients and doctors suggests that our multipronged approach of patient diagnosis liaisons, UltraCare liaisons for sales, UltraCare guides or case managers and the medical science liaisons has proven to be an effective and efficient way to broadly reach and support doctors and their patients getting on Crysvita.

5 months into the U.S. launch, the enthusiasm for Crysvita in the XLH community continues to grow as we hear more and more stories from individual families starting treatment on Crysvita. We're also making progress in extending the global reach with recent filings in Canada, Brazil and Colombia as well as reimbursed patient treatment in Argentina in response to multiple physician requests.

In the U.K., a country where our partner KHK leads commercialization efforts, the National Institute of Health and Care Excellence (sic) [National Institute for Health and Care Excellence], or NICE, recently issued a positive recommendation for Crysvita. This positive and rapid decision is important not only for the U.K. but also for other countries where NICE reimbursement decisions can have an impact. We'll continue to update you as we see regulatory decisions in these important global regions.

Let's shift now to tumor-induced osteomalacia, or TIO, program for Crysvita. At this year's American Society of Bone and Mineral Research (sic) [American Society for Bone and Mineral Research] annual meeting in Montreal, we shared positive 48- and 72-week data. In adults with TIO, Crysvita was associated with increases in serum phosphorus and serum 1,25 dihydroxy vitamin D levels. Normalization of phosphate levels led to improvements in osteomalacia, mobility and vitality and reductions in fatigue. Adverse events generally reflected the patient's underlying disease, and there were no serious treatment-related adverse events during the study. We're continuing discussions with the FDA about the regulatory pathway for TIO with Crysvita, and we'll provide an update once we have additional clarity.

Next, let's turn to Mepsevii for MPS VII. In the United States, similar to Crysvita, the J code for Mepsevii was recently published on the CMS website, which further facilitates reimbursement for Medicare and Medicaid patients with MPS VII. In Europe, we were pleased the European Commission approved our marketing authorization application, along with CHMP's positive opinion in August. And we have since launched Mepsevii in Germany. Reimbursement in Europe can take up to 24 months, and our team is working diligently to ensure all patients, regardless of country or reimbursement status, are able to receive this important therapy.

We're also pleased to receive approval from Brazil's National Health Surveillance Agency last month, making this the third MPS Mepsevii approval in a major geographic region -- U.S., Europe and Brazil -- all within a 12-month period. In 2019, we look forward to additional regulatory decisions in Colombia and Chile. Overall, we are encouraged that we continue to identify new patients, and these efforts support our estimate of 200 patients with MPS VII around the world.

Moving now to UX007 in long-chain fatty acid oxidation disorders or FAOD. We have made significant progress with our regulatory pathway for UX007 FAOD, and the FDA recently accepted our proposal to submit a new drug application based on currently existing data. We have a pre-NDA meeting with FDA scheduled for later this year. During this meeting, we expect to gain further clarity on the timing of our submission, which we expect to take place in 2019. We will also discuss the post-marketing requirements that we would pursue for the program.

We're also progressing discussions with the EMA regarding a potential conditional marketing authorization filing for UX007 in FAOD, and we look forward to finalizing our regulatory path. We'll provide updates on these interactions with both the FDA and EMA as we gain more clarity.

I'll now spend a few minutes discussing our recent decision to terminate the glucose transporter 1 type-1 deficiency syndrome, or Glut1 DS, indication from the UX007 program. Last month, we announced results from a Glut1 DS Phase III study that did not show a significant difference between UX007 and placebo. Remain confident that the study was designed and executed well, we believe that there are Glut1 deficiency syndrome patients that do respond to UX007, but that the consistency and prevalence of that response was not enough to pursue further development. We are disappointed that we are not going to be able to help patients with Glut1 DS, and as we wind down the program, we're thankful for the commitment from patients, caregivers, investigators and our employees have shown.

It is important to reiterate that our FAOD program is not affected by this Glut1 DS outcome, and it's moving forward as expected. Glut1 DS is a brain disease and different from FAOD, which is primarily a disease of liver, muscle and heart. Furthermore, we have substantially more FAOD clinical data from many more patients and from multiple studies with drug treatment for up to 17 years to support the benefit and safety of UX007 in FAOD. For all these reasons, we do not believe the Glut1 deficiency syndrome results impacts our FAOD program.

Now let's review our gene therapy program where we continue to make good progress this quarter. Clinical data from DTX301 investigational adeno-associated virus vector for ornithine transcarbamylase deficiency, or OTC, continued to support successful treatment of clinical proof of concept. Top line data from our ongoing Phase I/II revealed a second responder patient in Cohort 2 that also demonstrated normalization of ureagenesis at 24 weeks. The second responder has since discontinued all alternate pathway medications and has been clinically stable now for more than 1 month.

The first responder from dose cohort 1 at week 52 showed a further increased level of ureagenesis to 170% of normal, and has been clinically stable now for more than 8 months after discontinuing alternate pathway medications. The patient has also been clinically stable with normal ammonias after more recently liberalizing their protein-restricted diet near the 52-week time point.

The remaining 4 patients in cohorts 1 and 2 continue to demonstrate no clinically meaningful change in rate of ureagenesis. Safety has been acceptable in all patients with only modest rises in ALT in some patients, well-treated by reactive and tapering steroid regimen. All patients have remained clinically and metabolically stable.

Based on the Data Monitoring Committee's review of the data from the first 2 cohorts, and consistent with their recommendation, we initiated enrollment of the third dose cohort for the study at the end of September. This month, the first patient Cohort 3 received treatment. We look forward to sharing data from the higher dose Cohort 3 in mid-2019.

Moving to our preclinical pipeline. In October, we announced an exclusive license with REGENXBIO to develop a gene therapy to treat CDKL5 deficiency, or CDD. This is a severe and debilitating x-linked genetic disorder that leaves patients with seizures, severe growth, motor and intellectual impairments that typically begin within the first 2 months of life. CDD shares many features of Rett Syndrome, and historically was identified as an atypical Rett Syndrome until genetic testing changed this view and enabled more accurate diagnoses. We believe the biology of this disease makes it potentially a prime target for treatment and with an increasing disease prevalence, as diagnoses are more accurately being made by genetic testing. The license also commonly uses REGENXBIO capsids which include AAV9, which has been successful in other neurologic diseases.

While early, the [CV programmatics portfolio] of translational research program by offering a potential gene therapy that could meaningfully improve the lives of patients with this disease, that has no treatment options, is now beginning to be better understood and diagnosed.

With that, I'll turn the call over to Shani Sharp, one of the Fiercest Women in Life Sciences for 2018, to provide an overview of our financial results.

Thank you, Emil, and good afternoon, everyone. We issued a press release earlier today that included a financial update, which I will briefly summarize.

Net loss for the third quarter of 2018 was $87.3 million or $1.74 per share, basic and diluted, compared with a net loss of $79.2 million or $1.87 per share, basic and diluted, for the third quarter of 2017.

For the 9 months of 2018, cash used in operations was $234.7 million compared to $172 million in the same period of 2017. This includes adjustments for significant noncash charges, including stock-based compensation expense of $59 million, $16.6 million in depreciation/amortization and $5.9 million in noncash foreign currency remeasurement losses in connection with a change in the company's tax structure and fluctuations of exchange rates related to intercompany transactions.

For the third quarter of 2018, we reported $11.8 million in total revenue. For Crysvita, we recognized $5.4 million in profit sharing and royalty revenue from our collaboration and license agreement with Kyowa Hakko Kirin. This includes $4.4 million in collaboration revenue in the U.S. profit share territory and $1 million in royalty revenue in the European territory. There were nominal net product sales for Crysvita in other regions. Mepsevii product revenue for the third quarter of 2018 was $2.1 million, and UX007 named patient revenue was $0.4 million. Total revenue also included $3.6 million in revenue from the last stages of our research agreement with Bayer, which importantly we expect to be negligible going forward.

As a reminder, we will not be providing any financial guidance in this early stage of launch-related growth. In the meantime, we have provided other launch metrics, including patients on reimbursed therapy, growth in start forms and unique prescribers to help characterize the strength of our launch. We plan to provide this level of granularity only in the early quarters of launch, and we will evaluate the appropriate time to shift away from these metrics and perhaps towards specific revenue guidance as we gain experience with our commercial products.

Our total operating expenses were $101.4 million for the third quarter of 2018, including research and development costs of $70 million. We expect our R&D costs to continue increasing over time as we advance our product candidates through preclinical, translational and clinical development.

We expect the SG&A to increase over time as we support our commercial programs in multiple geographies. We also expect a split of R&D versus SG&A expense to remain fairly consistent. In addition, we expect the proportion of cash to noncash expenses to remain fairly consistent with stock compensation and other noncash items to increase generally proportionally over time.

We ended the third quarter with $503.1 million in cash, cash equivalents and investments on the balance sheet. We believe that our cash resources should be sufficient to support the initial years of launch for Crysvita and Mepsevii and allow us to continue making strategic investments developing our clinical and translational research portfolio.

I will now turn the call back to Emil.

Thank you, Shalini. As you can see, we're in a strong financial position to continue making strategic investments in the commercial launches of Crysvita and Mepsevii and in our pipeline. Over the last 2 months of 2018 and into 2019, we expect a number of important milestones, including for UX007, we expect additional feedback regarding our proposal to submit a new drug application in patients with fatty acid oxidation defects from our pre-NDA meeting with the agency at the end of this year.

For DTX401, our AAV gene therapy for the treatment of GSDIa, we expect data from the 3 patients, the lowest dose of cohort 1 around the end of 2018. For DTX301, our AAV gene therapy for the treatment of OTC deficiency, we expect data from our third dosing cohort in mid-2019. For Crysvita, we look forward to building on the momentum of our U.S. launch as we increase the number of reimbursed patients, broaden the prescriber base and expand managed care coverage.

And we step back and look at the big picture for Ultragenyx since our IPO in 2014. Of the 6 treatment indications we were developing, 4 of them have been successful in development. In the 4 years since IPO, we've achieved 2 commercially approved therapies in both U.S. and the EU, the third product heading to an NDA filing, a gene therapy franchise that's just beginning to show promise for changing the future in metabolic diseases. Combined with our developing early-stage pipeline, we feel poised to achieve great success as the next-generation rare disease company.

Now let's move to your questions. Operator, can you please provide the instructions for the Q&A portion of the call?

(Operator Instructions) And our first question comes from Gena Wang from Barclays.

The first one just regarding the Crysvita U.S. and Europe revenue. Just based on the royalty, our rough calculation is about $13.3 million in the U.S. sales and then around $11 million in Europe. Is that similar right calculation from your point of view? And also related question is the average reimbursement process for this quarter, are there any improvement compared to the last quarter in terms of the time line?

I'll answer the second part first, and I'll let Shani answer the first part. Since the last quarter, we certainly have more policies in place, now covering 200 million lives. And so as policies get issued and as progress happens, we are seeing improvement in the ability to get patients on drug over time. We haven't provided any more detail, but we are seeing steady improvement in the process it takes. We are continuing to support through our hub all the steps that are required based on those policies that have been published. So I do think it's going well. There are always things to work on in the early stages of the launch. Shani, why don't you answer the question about the revenue?

Sure. Thanks for the question, Gena. So KHK actually did report their earnings a little bit before we did, and they reported JPY 2.7 billion in total revenue, and they categorized it as collaboration revenue under international. They don't provide a further breakdown by geography. What we have provided is that in North America, we had $4.4 million in Crysvita revenue, and the European royalty will be $1 million, so $1 million. So the proportion that you're estimating is an estimate, but it's in the right ballpark. There's just not specific numbers that we're giving out that can tie exactly apples to apples with what KHK is giving out.

And just very quick follow-up regarding the launching FAOD. Just wondering, for the pre-NDA meeting, will you also send the Glut1 data to the FDA? And then when will you share the FDA feedback with us?

Well, we'll -- certainly, in any package for a product, when you file, you certainly will include that data, and we'll provide any data if there's interest in that data. We think there's safety data, certainly, in any drug that you'd want to include in their discussion, and we don't think any of the Glut1 safety data has any bearing. It's very similar to what we've seen with FAOD. We'll provide an update on our pre-NDA meeting once we have it or we have clarity as to what's required to get the filing in and what we think our timing will be for that filing. And we expect to do that before the end of the year, and we won't provide any more clarity yet on what exactly that's happening, but we're moving along. It will happen before the end of the year.

And our next question comes from Cory Kasimov from JPMorgan.

I guess my first one is just a follow-up on that FAOD topic. Now that the FDA's accepted your proposal to submit an NDA for 007 based on the existing data, I guess I'm curious what additional details are, like, forthcoming from your pre-NDA meeting. I'm just trying to understand if there's anything left unresolved or if there's any risk to that filing strategy? Or is this just to hammer out the post-approval commitments and things like that? And I have one follow-up.

Sure. Cory, all pre-NDA meetings have a very important technical step to precisely define what the list of data is provided in what form. And we have different types of data in our package. We have clinical studies or sponsor studies. We have emergency IND patients, 56 patients either emergency IND or around the world that were in heart failure or other critical problems that we treated, and there's some of that data. There's historical data as well from the comp use patient. We just need to get clarity of what form and what exactly structure they want all that in to really understand what -- how much it's going to take to put that together. So those are some of the details because there's so much data of different source types that we need to get straight, but that is the main issue is really around all the clinical data that we have to get straightened out with them. We'll also talk a little bit about what are the steps regarding studies that we will have to conduct because part of our proposal included the work we'll do to help support the benefit-risk of the product once it's approved. That was an integral part of how we proposed what we would do. And I think in -- consistent with what Dr. Gottleib, the Commissioner, has put forth is ability to file or approve early, but with high-quality data from the post-marketing setting is important. So we'll try to nail down that part as well. That may not hold up the timing of the filing, but we may need to, for example, have a fully completed protocol, agreement on various terms, potentially have started a study or something like that. Our view is -- right now is that we will be filing in 2019, and the question whether it's earlier or later is the question we have to work through.

Okay. That's helpful. And then my second question's on the gene therapy side of things. I guess, what would you consider a success for the first 3 patients treated the low dose with DTX401 in terms of an efficacy bar? Maybe just help set the stage a little bit ahead of that data we'll see towards the end of this year.

Well, the main thing we're looking for is whether we're delaying their time to hypoglycemia during a challenge -- a fasting challenge. And so we put them on a fasting challenge in the hospital, we monitor their glucose, and we look and see how long their body can support their glucose level. So it'll be a measure of time, how many hours. Most the kids are in the order of 3 hours or something like that, 3 or 4 hours if they go hypoglycemic. That's to show you how dangerous it is, right? Going to sleep for them is dangerous. So we'll be looking at that as that time delay. And obviously, we see some significant delay in some patients. I certainly consider that a success that we can actually deliver the enzyme and change their glucose metabolism pathway. We'll certainly be looking at other metabolic parameters, but I would say the time to hypoglycemia under a fasting challenge is kind of the main clinical thing we'll be looking at.

And our next question comes from Chris Raymond from Piper Jaffray.

Just a question on Crysvita in Latin America. So obviously, that geography, you guys have a different economic structure with KHK, and I know you've hired ahead of LatAm. And you've talked about approval -- full approval there as time goes on, but can you just maybe give us a sense of the catalyst flow and the updates we should be looking for? Is it country by country? Or are you going to give us the news as it happens or maybe hold it for their earnings calls? Just for modeling purposes, can you maybe outline that?

Well, obviously, Latin America is really important to us and this product, and we own that product in that area, and we owe a transfer price as well as a small royalty. We've hired one of the best in the business, I believe. Eduardo is long-experienced in rare disease launches, and he's pulling in a top-tier team of Latin American leaders to do this. And we have general managers in several territories, and we've filed already, as we've just noted in our conference call today -- and both Colombia and Brazil. And we are also receiving patient requests from Argentina as well. So we are already working in parallel across all countries. Now many companies in the rare disease space have not filed in Brazil, for example, so early as we have. And we have because the things are changed down there, and they really want us people to file; not to sit, using named patient sales and the legal process in Brazil. And so we're complying with the local authorities, what their goals are, and building the quality team. So what you're going to expect to see from us is at some point, we'll have updates on named patient treatment from fulfilling doctor requests. We'll talk about Colombia approval -- I'm sorry, Brazil approval, Colombia approval. And we'll talk more about the metrics of what's happening in South America. We haven't set all of it down so completely as we have in the U.S., but we'd expect to put forth a sufficient color for you to understand how launch is going in South America.

Great. And maybe just a follow-up. I know it's still early days on the launch, but can you maybe describe any sort of cases of Crysvita discontinuations, if there have been any, and the nature?

I'm actually not familiar with any discontinuations at this point. We've had I think very good success getting people on therapy. And we've only been hearing actually -- I have actually card on my door right now, getting cards from people who are sending us notes of thanks about how this has become a generational product for them. How their mother and them and their kid are now getting on treatment and how that's changing things. So we haven't actually heard much about discontinuations. It's early in the launch. I would expect there would be some. But if you look historically at our clinical trials, we had no pediatric patient that went off drug, and among adults, it was a small handful, just a few that came off the drug during the trial. And so I actually feel that the adherence has been quite good.

And our next comes from Joseph Schwartz from Leerink Partners.

So my first question is on DTX301. I was wondering if you could just appraise for us the data that you've generated so far, and what patterns do you think that you're seeing? The FDA has also said that Phase I, II, III pivotal trial designs are possible. Do you think that the data that you have so far is pointing in a dispositive enough direction that you can foresee the profile emerging that's pretty clear to you at this point, or are you thinking about another trial after this based on what you've seen? Just wondering if you can summarize for us the data to date and if it's generating the target product profile that you hope to see.

I think one thing that's important from what you're commenting on is that the FDA has taken a very proactive stand toward the registry process in gene therapy products, which I think bears well for the whole gene therapy franchise. For the specific case of OTC and for DTX301, we have 2 patients that appear to be cured in the sense that they have normal ureagenesis, gone off their meds, do not appear to be having any problem controlling ammonias. And so we're encouraged by the fact, first off, that we're able to cure some patients with OTC. It is only 2 patients, and we haven't cured all the patients. And our view in terms of our development was a drive toward a dosing that would get us majority of patients with that kind of response. So we think the response we're getting in those 2 is an adequate level of response; we just need to see that it's more prevalent across patients. We have planned at this point to do a Phase III that we're not expecting to be able to file off of this Phase I/II study. I do think that there is some additional experience required. We haven't approached that. I think approach that approach of going faster. I do think the FDA is speaking to situations of patients who are dying without any other treatment where this might be appropriate acceleration. Right now, we haven't planned it. I think the plus side we have for us is that there are approved biomarkers that have been used in the urea cycle disorders that have been for multiple product approval. So that gives us some regulatory guidance. But we do expect to do a Phase III to gain more experience, and would hope that this third cohort would give us the answers that we need to move on and toward a Phase III trial.

Okay. Emil, so then moving to UX007 again, do you think that you have the data for that the FDA -- I'm sorry, the FAOD patient community wants to see? Can you just give us your own impression of how strong the data that you've generated so far is, given that you'll be potentially filing early here? And this is a community that has access to MCT oil already.

Yes, but of course, all the patients that were enrolling were having trouble with their disease are already on MCT oil, essentially. Essentially all of them. So the disease that we're seeing is despite MCT. And in fact, the beginning development of 007 began because MCT was not doing what it needs. In fact, there's good animal data showing that MCT sometimes makes patients worse, triheptanoin actually did improve them. We are -- at this point, since the time we published our 201 -- or presented our 201 data showing an improvement both in exercise tolerance, as well as in outcomes, we've had now several dozen requests for emergency or urgent therapy from around the world from doctors, and awareness of the product, both patients with heart failure, patients with significant muscle disease, both U.S. and Europe and elsewhere. So I think there's a recognition in the field that this is something that's new and different that can be used in these patients that are not responding well. So we feel very comfortable that the quality of what we're seeing is important. And I think what you think about the symptoms we're talking about are in the exercise tolerance piece, in terms of improved walking or other physical things, were important. But the strongest data, and really the one that really drives both the FDA as well as community, is the number of hospitalization, the days in the hospital. And to go from 5.5 or so days in the hospital for the median patient in the 201 FAOD study, to around 1.5 or a 77% reduction in median days in the hospital, is a big deal. If you're a parent, not being at the hospital is a big deal. And these are all controlled. Each patient controlled what was happening to them. So we feel that's a very accurate number as to what was really going on to patients with FAOD. So we think that's the data that certainly was compelling for FDA, and the challenge has been was the drug itself the whole cause. We believe it is the cause, and we have multiple bits of evidence to support that. And I think the agency let us proceed, and we think if we go out there and patients and doctors see this data too, I think based on the response we're getting from named patient treatment, as well as emergency care treatment, there's recognition that the value the profile brings.

And our next question comes from Maurice Raycroft from Jefferies.

Just a follow-up from Gena's question earlier. I'm wondering if you expect the Crysvita EU and U.S. total sales proportions as calculated in 2Q and 3Q to remain consistent going forward. And if you can comment on whether the 60 to 40 pediatric and adult proportions should also remain consistent in the U.S. and the EU as well.

Let me answer the last question, and I'll let Shalini answer the first question. The second question is the product or the conditional marketing authorization in Europe for pediatrics only, so they are actually not including adults. They launched really in Germany, and then we'll be launching other countries as the year progresses. In the U.S., we're launching with a broader label of pediatric and adults, so I'd expect the two markets to behave somewhat differently. Shalini, perhaps you have some thoughts on the revenues ratios.

Sure. Typically speaking, if you were to look at some analogue products, you would expect to see a higher level of revenue in North America relative to Europe. So I can say that much. In terms of any other forecast by geography, we obviously haven't provided that at this point. I can remind you the way the economics work are that in North America, there's a profit share with KHK, between KHK and Ultragenyx. And so the revenue line, you would subtract a transfer price that we pay to KHK and then divide it by 2 and that's our top line. And then we would also incur half of the operating expenses. In Europe, we simply receive a royalty of up to 10%. So the economics to Ultragenyx are also different and hard to compare apples to apples across those 2 geographies.

Got it. That's helpful. And just a quick one on TIO. I'm just wondering if you can remind what the population looks like out there and the number of patients, and then what you're aiming to get from conversations with the FDA for next subs for that opportunity.

The TIO patient population is definitely a trickier one to know because it is relatively smaller. But not all TIO patients would be candidates for treatment, because if they can't excise their tumors, then they wouldn't be treated. We think among the addressable population is around 500 to 1,000 patients in the U.S. Or I would say that's an estimate, and we certainly can't have perfect knowledge of that particular population. We think it's a significant opportunity. Based on the data, we think is an important new treatment for those particular patients and that's why we're pursuing it. We believe the data we have are comparable to the adult bone quality Phase III study that we did for XLH. TIO is definitely more variable than XLH, and that is a factor which we'll have to work through with the authorities. It's just not the same amount of FGF23 between patients and how they respond. So we're going to continue to talk with them about a path forward, and we think we have strong efficacy data that's just comparable to what you see with XLH, but in a different disease indication. So we'll be prosecuting that with them a little further. There's still a little further discussions to go through and nail down what's the right path for TIO.

Potential update in first half of 2019 for that?

Yes, I would expect us to have somewhere between now and then have update on TIO pathway. It's ongoing.

And our next question comes from Adam Walsh from Stifel.

This is Edwin Zhang on for Adam. So also on Crysvita, have you identified any key factors in markets uptake for the outpatient? What have you learned so far from the initial launch? Are there any barriers for doctors to prescribe Crysvita?

I think what we were seeing, in fact, is that there are a lot of doctors who will write prescriptions for Crysvita. It's 40% of the total are for adults. So I think that's telling you that there are doctors interested. We do think that some of the adult patients who let's say were diagnosed clinically 30 year ago, may not have had genetic testing or other testing requirements. And some of the policy plans that have been published have required testing, either genetic or FGF23 testing, and so we are having to support implement that. There are patients who can get the testing, but it is a step in the process that we have to work on with adults. The trial patient conversion certainly has gone well, and we haven't seen any issue with converting them in general. For the others, for most adults, the policies have generally been not that different than for peds are to the label. There are a few policies where a very small number of lives covered that maybe have a step edit, like they have to had to been on oral phosphate in the past. But most of the adults have been on an oral phosphate in the past, and so we don't expect that to be a practical limitation at this time. So I guess overall, I would say we're not seeing any systemic barriers to getting adults on therapy. And our biggest challenge will always be finding those adults who have been lost to follow up or out among other doctors, which we've advised would be important in ultimately penetrating that market with patients. But what I can say is that the adults that are taking the drug are feeling very good, and the doctors are getting good feedback which we're hearing about.

And our next question comes from Liisa Ann Bayko from JMP Securities.

Just wanted to ask about Mepsevii, and if you could just comment on your ability to find new patients and immerse them. It looks like there's just a smaller amount of growth this quarter. I'm curious about any recent trends, and I know with these smaller populations, it can become lumpy, but I'm curious about how it's going and what you're learning.

Liisa, we are continuing to find patients in the broader community, but in a disease like any of the rare MPS disorders that I've worked on, it's a one-by-one process. We find one here and one there and they keep showing up. We are adding them. The U.S. has been less active. We found some patients. We have a lot of them on treatment now. We are working on Europe, and certainly we haven't done as much work in Europe and South America where there are probably more opportunities to find new patients than we've had in the past, and that's definitely been one of our focus points. We just got our U.S. -- our European approval, so that will help us. And with the Brazil approval, that will also help us get Brazilian patients on therapy. We're finding some patients in places like Turkey as well, and other places that have a high frequency of other autosomal recessive diseases that can support treatment of patients. Those countries do take some time to get going, but we are actively working through that with our Turkish group. So we expect to continue finding them. I don't have any particular color to say is it faster or slower. I think we're finding them and it is a type of steady growth that you see in all of the rare MPS enzyme therapy programs.

And our next question comes from Salveen Richter from Goldman Sachs.

Just want to dig into the gene therapy programs a little bit more. With regard to the OTC program and the data that we've seen to date, do you think to get an improvement here, that this is a question of increasing the dose or really optimizing the manufacturing or the construct? And then secondly, when you look at that data in the OTC, at least the 2 initial cohorts that we've seen in OTC, can you help us understand the relative dosing and then frame the read-through to the first cohort in GSDI?

Okay. Our view on what's happening, why some patients respond. Some patients who respond, respond extremely well. We would suggest that when you see a pattern like that, it is a lot more likely related to individual factors rather than a construct issue. If it was really a construct issue, then we wouldn't have seen normalization in a couple patients. I think to get to normalization in a couple patients, it's just that the construct works well and that the product can deliver. I think what the challenge will be, there's differences in the immunology and efficiency of virus delivery. And the number of companies have been in the mid-E13 levels to get good normalization levels. I would say the fact that we got normalization of function in the liver at 2E12 and 6E12, it actually bodes well for the product. Thing is actually reasonably potent. So we actually don't think there's any issue with the manufacturing the construct. The issue on manufacturing, certainly people have brought up certain aspects of chemistry, but we test every lot for its efficiency of infecting cells so we know that they're effective in doing that and a critical part of assuring that the manufacturing is going well for each product lot. So we think it is primarily a dose, but dose -- it's dose, and what we're doing is overcoming individual factors for how people handle these viruses and how they inactivate them and protect themselves from them, and that is the thing we're thinking we have to get past. I just think if you look at other companies in the space, they are all showing substantial variability in different patients. And why some patients respond much better than others is I think not -- less likely a manufacturing than it is an endogenous, biological, protective schemes that the body has built to fight viruses. So we need to figure out how to overcome that with the OTC. And you had asked a second question, which was on GSDI and the dosing expectations on that program. We do believe that the requirement for OTC is higher than GSDI in terms of needing to get to more like 10% of normal, whereas GSDI, the data would suggest that 3% of normal is sufficient to normalize the liver function. And I believe that, because the enzyme required is a hydrolase, the type of enzyme that can really turnover molecules pretty quickly, we believe. So we have expectations that you wouldn't need as much GSDI enzyme. The low dose in this program and the OTC program were both based on regulatory discussions. Our proposal originally was to go more towards the middle dose of 5 or 6E12 as a starting place. The regulatory authorities for these new indications felt that it was important to start lower and to ensure that there was no safety issues. We've gotten past that with OTC. GSDI is in that same plan. But I would expect that if the low dose is more of a safety dose, I'm not sure what to expect for GSDI at this point. But because the threshold's lower, the potential that we could see something, but I would suggest that it was not likely we would stop at that dose. We'd want to make sure we'd gotten enough of an effect across enough of the liver to change the lives of GDSI patients if you're doing a one-shot therapy. So we're looking forward to the first cohort data, but it is the low dose and it was driven off of safety considerations rather than an efficacy target.

And our next question comes from Ritu Baral from Cowen.

My questions are actually follow-ons to Salveen's. Emil, when you think about 401 and the fasting challenge, where is the bar? Is it having to go from 3 hours to 8 or 9 to get overnight? What is the meaningful delta on that fasting challenge, first question. I've got a follow-up.

Sure. I would look at this as two things. One is it's a linear assessment of the rate of enzyme release. And you can look at it like an enzyme assay; it's releasing sugar at a certain rate. Is that rate fast enough to maintain the body? So whether it's clinically meaningful or not, we can still look and see, are we seeing some effect that we could measure? When we talk about it from a clinical standpoint, what's that bar or threshold, our view is that for parents of patients for clinically, if the patient can survive -- safely survive the night without needing tube feeds or cornstarch, that that would be a clinically meaningful result, and I believe potentially approvable, because that is one of the biggest dangers. And every year, with relatively well-controlled children, there are examples of kids that die during the night because something happened and they missed a dose, they didn't wake up, their tube disconnected if they're on tube feeding. So that's a -- it's not a trivial, I'm feeling a little bit better a little longer. It's actually a factor that affects their mortality. So we think that if we can help kids get through the night, a reasonable night's sleep of time, then that would be a clinically meaningful result.

And in your preclinical data, given what you said about the FDA having guided to the low dose, does your preclinical data suggest cohort 1, the one that's reading out, could be subclinical and not really move the needle?

Well, to the extent that you can translate mouse and dogs to humans, it's at the lower end of the dose, but there potentially is some effect. But in the mouse, we were getting -- at this dose or higher, we were getting a more complete treatment of the liver. So I think it suggests that there could be some effect at this level, but it's certainly not the optimal dose, but highly dependent on how you translate mouse or dog dose to humans. And honestly, the range that people give is 10 to 40-fold dosing for mouse to human, so it's a big range. We think there is potential for some effect in the first cohort. However, as I said, I think that the likelihood is we would have to go higher to get the kind of effect you want where you're treating more of the liver and getting a type effect for a single dose, one shot lifelong therapy.

Got it. And my follow-up goes to the immunological variability that you mentioned. Emil, knowing you, you've thought about this extensively. So when you think about the factors that make for an ideal gene therapy patient and a patient who has a robust response, what are those things that could be most important in clinical trials going forward?

Obviously, we already screen for neutralizing antibodies and produce some antibodies. And it's pretty clear; even small amounts of antibodies having some programmed led to issues. And it could be that some of those low-level antibody, even very low levels, are having an effect, and that part of the reason for high dosing has to do with overcoming that. But it turns out there are other immunological systems in play, including potentially complement, including potentially toll receptors and other things that are getting triggered during the gene therapy process. And those different -- those are what I would call intrinsic immune systems, rather than adaptive immune systems, are definitely different between people that may cause some people to respond at a certain dose and others not. We think that it's going to be very hard to let's say take a patient and do 20 tests on them, profile them, decide. But I also say to you, you have to treat everyone. You want to treat everyone. So whatever those issues are, you need to overcome them. So we need to find the dose that overcomes that and allows us to succeed. I think -- we want to make sure that we're achieving a dose level that overcomes like the individual variations to achieve the majority of the patients having the type of effect that is clinically meaningful. So that's what our goal is. And we'll continue to follow the science and try to improve this, but I don't think there's anyone that has this perfect handle on this particular issue. I think everyone is trying to navigate through the uncertainties of how people are going to respond, and we're just one of the other players in that space.

Our next question comes from Vincent Chen from Bernstein.

I have a follow-up to Ritu's just last question. Could you provide a bit more color on your thoughts as to why some patients respond better to DTX301? I imagine there's quite a range of patient differences that could affect efficacy, right? So there's how well a patient can fight off the virus in the bloodstream, keep it away from the cells, how much receptor the patient has that the virus can bind to, how well the receptor internalizes this, (inaudible), et cetera, what the patient's baseline OTC function is and so forth. You alluded earlier to -- this seems like it's something about how well patients fight off the virus. What have you seen in the data that sort of points in this direction? And I guess, would this be something you think you should be able to readily overcome with simply a higher dose that overwhelms any defenses?

Well, Vincent, you answered most of that question yourself, but there are a lot of things going on. If you look at some of the data, some of the patients get, for example, a mild hepatitis and some don't at a dose level. So some of them may have systems that are already preventing the virus from having an effect on the liver where others are not. Or some of them are having a reaction at the liver level, which others are not. So that already tells you there's some variation response. The question maybe more fundamental is, can we explain what we're seeing so far? We don't have a clear, perfect explanation for it. We do know that 2 of the patients were male that responded, 2 of the 3 that responded. Is that a factor and none of the females responded? That is something for us to consider, and we're looking at that issue. We don't have any proof that, that is true. There are examples, though, of some difference between females and males with regard to the physiology and biochemistry, which we'd have to look at, but we'll see what cohort 3 tells us. Whatever it is, it's a male or female variation. Whatever the mechanisms are, it's pretty clear with a high enough dose, you can overcome them, but you have to deal with what are the safety implications of that higher dose as well. And so that is what we're navigating right now. We think E13, based on safety data so far, should be -- we think would still be at the safe range, and we hope that we are overcoming. At what point we would stop dosing higher would be a question. We could go to a higher cohort, but our hope is that E13 is sufficient to get the majority of patients to be cured. We also need to look at what about second dosing or other factors for people who have pre-existing immunity. Those are factors we will want to look at, to look for, let's say, a second version of the capsid that we could use for those patients or for re-dosing, which is another factor, I would say, at how you -- how the commercial state -- the commercial market plays out. So I think we should -- we need to get to a point where we have the majority of patients responding with an important effect, and we'll need to figure out then what to do with others to maximize the potential product.

And our next question comes from Yigal Nochomovitz from Citi.

In some of our doc diligence, we've heard that given that the Crysvita vials are actually overfilled a little, that some of the extra drug material, they were able to treat some of the babies in the XLH families that were under 1 year of age, which I thought was very interesting. So I was curious if you could comment at all on your plans to expand the label to the under 1-year-old population.

We're looking at the under 1. Obviously it, as a terms of a segment, it is not a very big segment. I think there's not even clarity whether you need to treat someone under 1, but I would bet it probably would help, particularly because growth is happening at that age and having drug there. With regard to vials, the vials of this size always have to have a certain amount of overfill. I think the encouraging thing is people want to treat everyone in the family. That is the part that I thought was great. They already understand the benefit and would put babies on it. I think from a commercial potential, I don't think that that's going to affect us. But we do have expectations to deal with the under 1 population. And honestly, we should have gotten the under 1 from the beginning, but lately, the agency has become more restrictive on age range. So we'll probably try to find some mom that's having the baby, and after the Apgars are given, we'll inject them with -- so we'll get it from birth that way in our clinical trial. Sorry to be a little facetious, but that appears to be what's necessary. We'll try to treat all the patients we can, but I think the under 1 is something we'll have to look at. We don't have a plan yet.

Okay, got it. And then do you have any plans to do any kind of a prefilled syringe? Some of the other feedback we heard is that with the 10 and the 20 and the 30, it may be helpful for the kids to have -- to be able to use the higher concentration, but the insurance won't approve the highest 30 mg/ml for the weight of the child. So maybe a prefilled syringe with 30 mg/ml, for example, is something I was wondering about.

Yes, I think that's an interesting point. I think we expect at some point that the prefilled syringe would come forward, and we have talked -- had discussions with our partner about putting a prefilled syringe that might use the 30 mg concentration at different volumes inside the prefilled syringe. You just can't fill a vial with very little drug and try to pull it. In order to do small volumes with 30 mg, we would need to use prefilled syringes as the strategy. So we're looking at that. I think that is something we've heard as well on a way to manage it. But we don't think that's having a major impact on the market at this point. I think people are utilizing whichever version they can. But we try to provide as much flexibility to reduce wastage, but we'll continue to look at what's the best product presentation to optimize the market, and a prefilled syringe might be one thing to add over time.

And our next question comes from Edward Nash from SunTrust.

This is Fange-Ke on for Edward Nash. I have a question related to 401. Can you comment on, is there any subregion in the liver that is more important to target than the other region? And then second to that, is the distribution over the 8 vector in the liver overlap with the region that is more important? Just want to get your thoughts on that.

Yes. Well, there's the metabolic region, which is around the portal area, which is probably were for urea cycle -- [wow, geez, you want an important]. The thing I'll point out to you, and this is confusing some investors, is that the data you see in mice is not really the same as monkey and human. So the mouse distribution, the human and non-human primate distribution is different. What we've shown with the AAV8 is that it is getting the metabolic site where it's preferred. That is where it goes to. In the base of the non-human primate are higher, closer to human. So we feel comfortable that the OTC particularly going to that site as well as for the other. I think that the liver and the question of zones, the question we'll have to practically speaking empirically test out as we move forward, but based on the non-human primate data, our vector is going to the sites of cells that are most important, and we feel comfortable that's not an issue.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Ms. Keatley for any further closing remarks.

Thank you very much. This concludes our call today, and a replay will be available soon. If there are any additional questions, please feel free to contact us by phone or at IR at ultragenyx.com. Thanks for joining us.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.