Ultragenyx Pharmaceutical Inc (RARE) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ultragenyx Fourth Quarter and Full Year 2018 Financial Results Conference Call. (Operator Instructions) I would now like to turn the call over to Danielle Keatley. You may begin.

Thank you. Good afternoon, and welcome to the Ultragenyx Pharmaceutical financial results and corporate update conference call for the fourth quarter and full year 2018. We've issued a press release detailing our financial results, which you can find on our website at ultragenyx.com.

I'm Danielle Keatley, Senior Director of Investor Relations and Corporate Communication. With me today are Emil Kakkis, Chief Executive Officer and President; Shani Sharp, Chief Financial Officer; and Vlad Hogenhuis, Chief Operating 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 November 6, 2018; our annual report on Form 10-K for the year ended December 31, 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.

Good afternoon, everyone, and thank you for joining us. I'll start today by providing some brief introductory remarks before turning the call over to Vlad Hogenhuis. Vlad joined Ultragenyx last September as our Chief Operating Officer managing commercial, technical operations and business development, and he'll provide an update on the 15th commercial launches.

Next, Shani will update you on our fourth quarter and full year financial results. I will come back and close the call, providing an update on our clinical programs as well as things to look forward to in 2019.

The last 12 months have been truly transformative for Ultragenyx. Over the course of 2018, we have simultaneously launched Crysvita and Mepsevii in 3 major geographic regions of the world. We've also successfully worked with the FDA to enable submission of a new drug application for our third product, UX007, for long-chain fatty acid oxidation disease this year.

In our gene therapy programs, we have shown clinical proof of concept in both ornithine transcarbamylase deficiency, with 2 patients achieving a [parent towards], and strong results for Cohort 1 Glycogen Storage Disease Type 1A. Our early development successes and approvals are now creating a substantial commercial engine that will fuel our future strategic growth. This will enable us to continue to expand the availability of our currently approved medicines and develop new therapies for patients with rare diseases who have limited or no options.

With that, I'll turn it over to Vlad.

Thanks, Emil, and good afternoon, everyone. I'll start with Crysvita, which was commercially available for 8 months in 2018, following our launch in late April.

We're pleased the launch continues to be strong with great enthusiasm, pediatric and adult patients with XLH in the United States. By the end of the fourth quarter 2018, we have received more than 900 completed start forms from treating physicians, a 50% increase compared to the prior quarter. Approximately 80% of these start forms are from patients who are not previously treated with Crysvita, and there continues to be a 60-40 split between pediatric and adult patients on commercial therapy. Over 400 unique doctors have prescribed Crysvita, with many writing multiple prescriptions.

The payer mix as of December 31 remains approximately 70% private plans, with the remaining 30% comprised of government and other payers. Nearly 70 payers in the United States have published policies for Crysvita covering approximately 200 million lives. We believe we now have nearly full coverage as additional payers without formal policies are approving Crysvita on a case-by-case basis. This includes Medicare Part B, which covers Crysvita under the buy and bill process. This extensive coverage across all payer types has led to adding nearly 250 patients on reimbursed commercial therapy in the fourth quarter alone. This brings the total number of patients on reimbursed commercial therapy at the end of 2018 to approximately 550 patients in the United States.

Now from the beginning of Ultragenyx, we sought to improve the development and commercial process by enhancing physician and patient expectation, it was a separate dedicated team in addition to the usual sales and medical science liaison teams.

As we prepared for the Crysvita launch, we established these 3 teams with distinct responsibilities to ensure we'd quickly reach as many patients as broadly in the community as possible. The patient diagnostic liaisons are solely focused on identifying doctors who may have patients with XLH. This team shares the information with our UltraCare liaisons who provide health care providers the information and support needed to assist them in placing patients on therapy. Once start forms are submitted, our UltraCare Guides are there to ensure patients have a seamless experience gaining access to reimbursed therapy.

Eight months into the launch, we're seeing that the three-pronged approach is working well and has created a positive experience for doctor and patients alike. Based on the early launch success, we've added additional UltraCare Liaisons and additional UltraCare Guides to our team to meet the growing demand for service, and we continue to evaluate the size of the team in order to meet the demand and best serve doctors and patients.

We're also making progress in expanding the global reach of Crysvita in our commercial territories. Most notably, at the end of 2018, we received approval and launched Crysvita in Canada for the treatment of XLH in adult and pediatric patients 1 year of age and older. Canada is covered by the same North American profit share agreement as in the U.S. with our partner Kyowa Hakko Kirin or KHK.

Turning to 2019. We anticipate additional approval and launches in Brazil and Colombia as well as continued reimbursed named patient treatment in Argentina in response to multiple physician requests.

Now briefly turning to Mepsevii, which continues to make an important difference in the lives of patients with MPS 7. Mepsevii is currently approved in 3 major geographic regions, including the United States, the EU and Brazil. In 2019, we look forward to additional regulatory decisions in Colombia and Chile. Reimbursement discussions with European payers are ongoing, and we'll provide updates as they are available. Overall, we're encouraged that we continue to identify new patients with MPS 7 around the world.

With that, I'll turn the call to Shalini, who will provide a financial update.

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

Ultragenyx's total revenue for the 12-month period ending December 31, 2018, was $51.5 million and for the fourth quarter of 2018 was $16.3 million. The following is a product-by-product breakdown of these figures.

For Crysvita during the year ended 2018 December 31, we recognized total revenue of $18.9 million. This includes $15.3 million in collaboration revenue in the U.S. profit share territory and $2.9 million in royalty revenue in the European territory from our collaboration and license agreement with KHK.

Net product sales for Crysvita and all other regions totaled $0.6 million. Keep in mind, these revenues represent 8 months of sales after launching Crysvita on April 27, 2018.

Crysvita's revenue in the fourth quarter of 2018 was $11.6 million. This includes $9.9 million in collaboration revenue in the U.S. profit share territory and $1.3 million in royalty revenue in the European territory from our collaboration. Net product sales for Crysvita in other regions were $0.4 million.

Earlier this month, KHK reported top line sales of Crysvita totaling JPY 7.7 billion or approximately $70 million in 2018. These sales are from their international regions, which include North America, Europe and South America. For the fourth quarter, KHK reported top line Crysvita sales of JPY 4.5 billion or approximately $41 million in the same international regions.

Mepsevii product revenue for the year ended December 31, 2018, was $7.9 million and for the fourth quarter of 2018 was $2.7 million.

UX007 named patient revenue for the year ended December 31, 2018, was $1.3 million and for the fourth quarter was $0.5 million.

In the year ended December 31, 2018, we recognized $23.5 million in revenue from our research agreement with Bayer, $1.6 million of which came in the fourth quarter of 2018. We expect these revenues to be minimal going forward.

As a reminder, we are continuing to gain commercial experience with Crysvita and Mepsevii and will not be providing financial guidance at this time. 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.

Our total operating expenses were $106.6 million for the fourth quarter of 2018 and $422.9 million for the full year, including research and development costs of $71.6 million for the fourth quarter and $294 million for the full year. We expect our R&D costs to continue increasing over time as we advance our product candidates from early preclinical development into pivotal studies.

We expect SG&A to increase over time as we support our commercial programs in multiple geographies. We also expect the split of R&D versus SG&A expense to remain fairly consistent.

Net loss for the fourth quarter of 2018 was $87.8 million or $1.73 per share, basic and diluted, with a net loss for the fourth quarter of 2017 of $81.7 million or $1.89 per share, basic and diluted. For the year ended December 31, 2018, net loss was $197.6 million or $3.97 per share, basic and diluted, compared with a net loss for the same period in 2017 of $302.1 million or $7.12 per share, basic and diluted.

The net loss for the full year ended 2018 was reduced by the sale of the Mepsevii priority review voucher in January 2018 for net proceeds of $130 million and a $40.3 million gain from Ultragenyx's portion of the sales of the PRV received with the Crysvita approval.

Cash used in operations for the year ended December 31, 2018, was $290.6 million compared to $253.8 million from the same period of 2017. This includes adjustments for significant noncash charges, including stock-based compensation expense of $80.1 million, $19.5 million in depreciation and amortization and $5.3 million in noncash foreign currency remeasurement losses in connection with the change in the company's tax structure and fluctuations of exchange rates related to intercompany transactions.

We ended the year with $459.7 million in cash, cash equivalents and investments on the balance sheet. We believe that our cash resources should be sufficient to continue 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, Shani. I'll spend a few minutes on our recent development progress, and we'll then open up the call to your questions.

For UX007 in long-chain fatty acid oxidation diseases, we've released data from the 75 patient long-term extension study. The study includes patients who have previously been treated with UX007 as well as patients who had not received prior UX007 treatment. In the extension study, patients previously treated in our Phase II study showed sustained clinical efficacy with the median rate going down to 0 -- further to 0 for both annualized major clinical events and annualized duration rates.

In addition, 20 patients who were naive to UX007 at the beginning of the extension study, demonstrated a 70% reduction in median annualized event rate and a 80% reduction in median annualized duration rate, replicating the effect we saw in a separate set of patients in the Phase II study.

The safety profile for all patients in the extension study was similar to what we've seen in previous UX007 studies. These results are encouraging that they can reconfirm what we previously saw across other studies in a broader and more diverse patient population.

Moving to DTX401, our gene therapy program in Glycogen Storage Disease Type 1A. We reported positive top line results from the lowest dose cohort of the Phase I/II clinical studies in early January. All 3 patients demonstrated clinical response reflected by improved glucose control, reduced need for raw cornstarch therapy and increased time to hypoglycemia during fasting. Two patients demonstrated a clinically meaningful improvement in time to hypoglycemia, making it possible to sleep through the night without severe hypoglycemia.

Typically, for GSDIa patients, cornstarch or tube feeding is required during the night to prevent severe hypoglycemia, which can cause seizures or death. There were no infusion-related adverse events and no treatment-related serious adverse events reported. We're encouraged by the strength and consistency of the response of the gene therapy at even the first lowest dose and look forward to providing updates on the program.

Turning to Crysvita. We recently reached 64-week data that demonstrates its superior efficacy in a randomized head-to-head comparison with conventional oral phosphate and active Vitamin D treatment in pediatric patients. For these patients, procedures showed significantly greater improvements in the healing of rickets, growth and bowing of the legs compared with oral phosphate, Vitamin D regimen that has been the standard of care for the last 30 years. The 64-week safety profile was similar to what we observed at 40 weeks and in other Crysvita pediatric XLH studies. We have gained our support of our label and will help ensure all pediatric patients with XLH receive this innovative therapy.

Turning forward to 2019. We have a number of important milestones in the upcoming months that will continue to drive our progress. On the commercial front, we look forward to reaching more patients with XLH and MPS 7 and updating you on our progress on quarterly earnings calls. We also have a number of active filings and expect additional regulatory reimbursement decisions, ex U.S., for both Crysvita and Mepsevii throughout the year.

For UX007, we are on track to submit our NDA to the FDA in mid-2019. The submission includes a comprehensive package with data from more than 75 patients, including the company-sponsored Phase II studies and the long-term efficacy and safety extension study, a retrospective medical record review of compassionate use patients, expanded access data and the randomized controlled investigator-sponsored study showing an effect of UX007 on cardiac function.

For DTX401 for the treatment of GSDIa, we expect our first data from 3 patients in the second-dose cohort in mid-2019 and further long-term data from the first cohort of patients.

For DTX301, our AAV gene therapy for the treatment of OTC deficiency, we expect data from our third-dose cohort in mid-2019.

In closing, 2018 was a breakthrough year for us as we built out our commercial organizations and launched 2 products. For Crysvita, specifically, the first 8 months of launch have shown the strength our clinical data can translate to commercial success and will support the tremendous potential that's important in therapy for patients with XLH. Looking forward, we continue to expand our global commercial reach and advance our clinical pipeline and translational research programs.

On April 17, we plan to hold an Analyst Day in New York City to provide more detail on our commercial and development programs and also dive deeper into our most advanced translational research programs that are nearing clinical stage. We look forward to sharing more details with you on Analyst Day in the coming weeks.

Let's move now 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 the line of Cory Kasimov from JPMorgan.

This is Carmen on for Cory. So with regards to the gene therapy data sets expected later this year, could you give us a sense of kind of the cadence of events and whether we could expect them at a medical meeting or if a press release is more likely?

Well, the cadence, we have 2 things coming forward. One is a GSDIa second-cohort data, which we expect midyear. And we will also expect to have some 24-week data on GSDIa, which might come sooner than that. The OTC data, second-cohort data, also is midyear. So somewhere towards middle of the year, you'll hear from both of those programs. Our expectation and tendency has been to announce the top line data in a press release when we have it rather than holding it for months until a meeting, and we will then provide greater detail at an appropriate scientific meetings.

Okay. And then one more follow-up on the gene therapy front. For your Wilson Disease program, you mentioned that you are in a position to potentially move towards clinic soon. When could we expect to see additional preclinical characterization of the program? And what additional work needs to be done prior to moving to clinic?

We expect to present some data on the program at our Analyst Day on April 17, and that will be probably one of the first places where you'll see additional nonclinical data. We're working through the various parts of the manufacturing scale-up required in order to do the commercial -- the clinical and commercial treatment of Wilson Disease patients, and we need to do some work with the regulators. But our expectation is to give you that first glimpse of data on April 17.

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

I have 2 related questions about Crysvita launch. So based on my calculation, the Europe -- EU revenue was roughly $14.4 million, and the U.S. revenue was roughly $25.4 million. EU revenue seemed flattening out, but U.S. revenue more than doubling over the last quarter. Should we expect continued modest growth in Europe and a major driver will be from the U.S.?

Well, I think -- let me answer that particular question. Obviously, the European launch is in -- is under the care of KHK, and I think it's gone well. But remember, the European launch involves reimbursement in a number of territories, which takes time and it's dragged over a period of time, and I think that's very important in how you look at the launches. In the U.S. launch, obviously, we have a lot of health plans that we have to deal with, but it's not quite the same as a separate country reimbursement authority to have to deal with. So there may be some differences in the cadence and sequence of those reimbursement authorizations in how we grow, but we're pretty bullish about how both the U.S. and Europe are going, and we're pleased with the progress we're seeing.

Okay. And a quick follow-up for the adult patients on Crysvita. What percentage of patients were based on family tree identification through pediatric patients?

I don't have a specific number for you on family tree identification. There's certainly a number of cases where families came together to the clinic to get treated. I don't have a quantified number of that at this point. I don't think it's a big factor in the totals, but we do believe the pedigrees will matter. Did you want to add a word on the pedigree strategy, Vlad?

I think the pedigree analysis gives an opportunity for patients to connect with their families and connect with them and see whether they might be affected by the disease as well, which represents an opportunity for them to discuss that with their particular physician and see if Crysvita therapy is appropriate. And we look forward to launching a pedigree program in the near future to help those patients who have that desire.

Yes. So I think the pedigree part and family connection will be a real important part in the overall launch, but at this point, I can't give you specific numbers of how much was found that way at this moment in time.

So is it fair to say minority of the small percentage is through family pedigree?

Well, I would say to you, we announced that we had greater than 900 start forms, right, with 400 doctors, so clearly distributed a lot with a lot of doctors. So at this point, it's less groups of families as opposed to individuals, but I don't think it matters. I think we're in the beginning of launch, and I think the family connections are going to be an important part of succeeding in an excellent XLH launch.

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

This is Dae Gon dialing in for Joe. So, Emil, one question on UX007 and the other on 401 for GSDIa. First question on UX007, you mentioned the NDA filing by mid-2019, but can you maybe talk a little bit about how the discussions are ongoing on the EMA side? What do they want to see before you can file there? And can you briefly remind us what your patent coverage is on both sides of the Atlantic? And then the second question is on 401 -- DTX401. What do you see as the ultimate profile for that drug before you can approach the FDA for end of Phase II discussions? And, I guess, given the significant unmet need, any thoughts on filing under accelerated approval? Or alternatively, how would you envision the Phase III trial in terms of design?

Great. Thank you. So for UX007, we have begun discussions with the European authorities, and those are still ongoing. And we have no complete conclusion at this point, but we're working through the scientific device process and discussing with regional authorities as well. That continues. On regard to patents, we do have patents issued to cover the U.S. I think it's probably too complicated a process to go through here, and we can provide more follow-up on the various patents. But we do have some patents that are composition-like patents that do protect the product. But I'll also remind you that in Europe, there's 10-year orphan drug exclusivity, whereas in the U.S., it's 7 years. So the 10-year exclusivity, I think, is an important protection piece that comes with Europe. So on 401, I think the reduction in the risk for hypoglycemia during fasting is a fundamental clinical risk problem for these patients and the one that really threatens them every night and every day. We feel confident that the FDA will recognize that as a clinically meaningful change. And our expectation is that we can safely extend that time for patients so that they're not at risk of going hypoglycemic during the night, so that should be clinically meaningful in our expectation to pursue that. We'll certainly look at supportive clinical endpoints on what's happening with their liver and other aspects of the metabolism, but we think that, that key piece about hypoglycemic will be sufficient. And we're planning to go talk to the FDA as promptly as we can to get our first look. But our expectation is that we're going to do a Phase III trial and not file a Phase I/II. And I think that it's fair for us to get enough patients in a Phase III. Our plan for Phase I/II is if the second cohort was the right dose, we would still do another 3, but that would make only 6 patients at the dose and our expectation's that we really would want to treat more than that in order to get filed for approval. So at this point, I would expect, at Phase III, we'll get to talking to FDA soon with the data we have about what our path forward is.

And our next question comes from the line of Chris Raymond from Piper Jaffray.

Just had 2 questions. First on Crysvita. I guess, could you -- I think, last quarter, you mentioned the mix was 60-40, peds to adults. And I think you also said that, at that time, there were no discontinuations. Can you maybe give an update on that? Are you still seeing the same trend with respect to that mix and then maybe an update on the discontinuations? And then on the GSDIa program, just from the data that you have back in January, I think there was a third patient that I think they all had cornstarch intake go down dramatically, but there was one patient that saw, I think, just a slight increase from baseline and time to hypoglycemia. Can you give a little bit more color on that third patient? Was there some baseline characteristic that might have driven that, for example? And then maybe if I could slide one more 401 question in there. Are you assessing gene expression in the study? And will you give an update on that at all this year?

Okay. So let's start with the 60-40, peds-adults. The 60-40 still continues the same as before. It hasn't really changed and so we're comfortable with that. We haven't really talked about discontinuation. In the clinical program, it's been very few. And so far, we're in good shape. So let me just start with that, because you have 3 questions. GSDIa data, the third patient, [call it]. The third patient had kind of a higher baseline time of 5.4 hours and went to 6.5 hours. So they're almost already at getting through the night, but they were the less, let's say, less severely affected. The thing that was important about that patient, even though the time to hypoglycemia was not a change. They were already decreasing their cornstarch needs approximately 50% and so there were -- their fasting glucose were improving sufficiently to allow them to reduce cornstarch intake. So as you believe, all 3 patients responded to GSDI, and there is some degree of variation of how severe they were and, therefore, how big the change is. But right now, we're very comfortable that all 3 are responders. Now with regard to gene expression, we're not measuring gene expression directly because it is going to be expressed in the liver, and we don't want to go into the tissue source. I do think that these patients have essentially null -- are null for GSD -- for the glucose 6 phosphate enzyme, their genotypes are null. Therefore, they really have no enzyme at all. Their ability to release glucose for extended periods of time are in a sense an assay of their whole body's expression of that enzyme. And so we think that just simply measuring glucose, in a sense measuring their enzyme assay, and we haven't planned anything more specific than that.

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

The first question is on Crysvita. For the new 64-week data, we noticed that you showed [stat sig] benefit on the 6 Minute Walk Test, which was not shown in the 40-week data. So I'm just wondering if you have any comments on the meaningfulness of the data point and if it can make its way into the label.

Well, we have shown an effect on walking even from the Phase II study that was quite substantial, particularly in those patients that had impairment of walking. So this is simply verifying once again that the walking has improved as a component of the total phenotype. The challenge with walking is it is an effort-based test. And although the trial is a randomized trial, it's not placebo-controlled because it can't be controlled and, therefore, an effort-based test might have a harder time getting into the label for that reason. However, we certainly can ask. And I think, if you looked at the data, I think what I would say to you, whether it's walking and any other parameter you measure, Crysvita is so much better than standard of care. There's just no question about it that there's no reason for patients to be on oral phosphate any longer, given the efficacy up and down the line, every single endpoint. Walking just being another one. And so our hope would be in talking with the agency is to get the best label that will actually give doctors the right advice on what to be doing with their patients with XLH. But we think certainly walking is important but I think because it's open label or not blinded, I think it may be harder to get on the label than other things.

Got it. That's helpful. And then as a follow-up for Crysvita in the Latin American countries, are you still on track for approval starting in the first half of '19? And then can you provide any granularity on how you expect the launch in specific countries to play out?

Well, we have several filings in play that and we -- right now, we're not quite predicting exactly when those approvals are coming out, but we expect in 2019 to have at least a couple of countries where we would get approval, and we'd work through the reimbursement process, which can take some time as well. But -- so we haven't provided any more granularity, partly because it will take us time to figure out what they -- what are required in getting through the reimbursement process as well as the regulatory approval. But we're confident that we'll be able to press ahead, get approval, and begin the launch process in South America for Crysvita beyond just the named patient work that's going on right now in Argentina

Our next question comes from the line of Edward Nash from SunTrust Robinson.

This is Fang-Ke Huang for Edward. My first question is maybe on the manufacturing side for gene therapy. Can you just talk briefly what's the capacity you have for gene therapy manufacturing? If I've got it correctly, both of the 301 or 401 are currently manufacturing using HEK293 adherent and [main line] cells. Do you have any plans to transition that manufacturing platform to another, for example, more HeLa cells? Then I have a follow-up.

Very good. So currently, we have no manufacturing gene capacity of our own. We're using contract manufacturing for our program. What we do have at Woburn is a team and a set up that will allow us to run full-scale manufacturing operations to develop the process, and then we transfer that to the contract manufacturers after it's fully developed. Currently, the 293 cell or HEK293 cells are being used for OTC in the adherent format, but we have developed a suspension format, which is what we would do for Phase III. For the 401 program, we are also in a HEK293 cell transection strategy, but they are already in suspension so the product being used in the clinic is a suspension not adherent, 200-liter suspension that we run 4 reactors, so an 800-liter process. We have the ability then to convert that to HeLa cells, which is something we plan to do for the GSDIa program. For Wilson we plan to go straight to the HeLa system, that's what we're starting with. And for the Hem A program with our partner Bayer, it is a HeLa cell suspension producer cell line system.

Great. That's very helpful. The second question is more related to the 401 program. You mentioned that the second dose cohort could be the right dose. And then can you just provide some quantitative metrics that are saying when do you think it's going to be the right dose?

I think it's an important question getting the dose right. Our expectation is we want them to last through the night, in other words beyond an 8-hour period, but what we would expect to be full night, without any risk of getting hypoglycemia. So that's kind of the basic important thing. We want to also know that there is improvements in their metabolism and their liver that are consistent with achieving a complete effect, because we wouldn't want to stop at a dose that was very good but not essentially taking the patients to a cure. And those will be additional elements that we will look at in totality, but we haven't specified to the public yet any specific criteria. But I would focus on the time that hypoglycemia needs to be -- not just get barely through the night, it needs to be comfortably safely through the night for all patients.

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

A couple of quick ones. The first one is a bit of a follow-up on the previous question on the gene therapy manufacturing. I'd be curious to hear a little bit more about how you think about the trade-off in choosing between different manufacturing platforms, sort of the adherent HEK293 cells, the suspension and then the HeLa cells. Clearly there's scalability advantages to different ones, but it ultimately is more time involved in sort of making those transitions, so I would love to hear a little bit about how you think about that. And then a second follow-up, I'll talk to that later on, the UX007 opportunity and the LC-FAOD.

Well, our view is that suspension HEK293 using essentially transection -- multiple plasma transection, is a rapid way to get to the clinic and to initiate development. And I think it can be commercial, and we have succeeded in scaling it up further. The producer cell line approach with HeLa cells, I think, provides a larger scale more commercially long-term viable strategy in which you can run 2,000-liter production and have it -- create a very consistent way, is a lot like producing vaccines where you grow up a clonal cell line to 2,000 liters and then to use a helper virus to recover your AAV. So I think there's advantages to both 293 cell system, maybe it's a little bit faster to get there, and very well widely used and approved. The HeLa cell system takes a little longer to get set up but in the long run provides you a better cost structure and scalability than you can get with 293. We are using both of these in our armamentarium for manufacturing and mix and matching as we move ahead to get to the clinic as promptly as we can and also to manage the necessary scale and costs required to create a long-term gene therapy business.

I see. And then on the UX007 opportunity in LC-FAOD, if you think about the U.S. prevalence of LC-FAOD, sort of 2,000 to 3,500 or so, how do these patients break down into the different subsegments of LC-FAOD, is how well identified is each segment? And what segments would you expect to see more or less uptake in?

So when you say subsegments, I assume you mean the different genotypes there are?

Yes, the different -- I guess the different LC-FAODs.

Yes, there's 6 different genotypes that are considered within the LC-FAOD pool; 5 of them have been in our clinical studies to any significant degree. The VLCAD type is the most common we'd expect to see the most of those patients. The CPT II and LCHAD types are less common and form a smaller fraction of the total. The CACT type is a very small fraction, very small number, but also very lethal and potent, and some of our compassionate-use patients have been the CACT type who are in terrible heart failure that have gotten [approved]. So I think that gives you at least a sense. VLCAD is definitely the largest and the LCHAD, [TFP 2] group is a smaller fraction of the total. This is -- you can find information on this in the public literature, using numerous screening program data from either California or other states, it will give you a sense for the ratio.

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

I also wanted to follow up on the gene therapy question. So you talked a little bit about what you're looking for in the second cohort for 401. Could you also talk about what kind of a profile you'd like to see in that third cohort of 301 that would lead you to go -- to decide on a go-forward dose? And then can you talk about what the next steps might be and what might be gating to a registrational trial or cohort?

Sure. So, Arlinda, you're asking about the 301 ornithine transcarbamylase program?

Right.

What we're looking for is what we consider a cure for 2 out of 3 or 3 out of 3. What I mean by cure is achieving normalized regenesis which will allow them to come off their drugs and potentially off dietary restriction. If we can achieve that in 2 out of 3, we feel that is an adequate dose. We certainly would hope to see all 3 patients having a clinical response. Some patients may start with a lower OTC level, which make it harder to reach full normality. But that is our general view to get a lead to -- towards to move on to the next dose. At this point, we have 2 patients that have shown a cure effect out of ones that we've treated, and we're hoping the higher dose will give us a consistency of effect across more patients and allow us to proceed to the next stage of Phase III.

And then can you maybe talk about what kinds of things are you looking for in discussions with regulatory agencies? Or could you go ahead and start expanding a dose cohort to maybe gather additional information at the dose that you've selected?

Yes. So our strategy has always been to manage the time line. And what we would do is if we hit our -- if the next third cohort showed what we wanted to see, we would then initiate the process of talking to regulatory authorities while in parallel we would treat another 3 patients with that same dose. We've teed it up to move briskly ahead. By the time the meeting would happen, we would probably have some information from those other patients. But our expectation is not to sit and wait for the next cohort but to take the data we have and move those discussions to the regulatory authorities promptly to manage the time line as crisply as we can.

Our next question comes from the line of Martin Auster from Crédit Suisse.

This is Tiago for Marty. So, for Crysvita and the opportunity in Latin America, just curious if you could give us any color on how established is patient identification there, if there are registries, how well established is standard of care, how dispersed are those patients there, and how could that impact the launch? And just on the gene therapy for OTC and GSDIa, if you could outline the patient segmentation, and given the broad severity spectrum, what do you think is actually the addressable population considering the patients that you're enrolling and the target product profile you're pursuing right now.

I'll give you a little general about Latin America and I'll let then Vlad touch on more specifically on what we're doing in XLH. In general, Latin America, through the other launches I've been involved with, there tend to be Centers of Excellence that have very large reach areas of coverage to which patients go to, to get, at least, diagnosed. Care, of course, may become more local, but there's usually Centers of Excellence which is their primary place to start with in identifying patients. Obviously, Crysvita is extremely important product for us in Latin America, and we're doing our best to get set to manage and reach all patients there. We do believe the frequency of XLH in Latin America is the same as it is elsewhere because it is [excelling] dominant. But of course, there's challenges, differences in how Latin America will operate. I'll let Vlad then talk a little about the team and what we're doing to set up for launch in Latin America.

So, we have a strong General Manager, Eduardo Thompson, who has a lot of experience in Latin America. He's built 3 strong teams in Argentina, Brazil and Colombia with a mixture of MSLs and liaisons, UltraCare Liaisons who are now in the process of working with the different metabolic bone centers, mapping a number of patients and responding to named patient program requests that we are supporting. We also have built up a strong reimbursement function that helps with the different submissions for reimbursement. And as soon as we have updates, regulatory approvals and reimbursement, we'll share them with you. But we've got a strong team that's experienced and well established to clear the task, not only for also Crysvita but also Mepsevii where we are approved in Brazil.

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

This is Andrea on for Salveen. My first one is, as you come up on 1 year post the Crysvita launch in the U.S., can you speak on the feedback that you've received thus far? And have you seen any gating factors to doctors prescribing this drug?

I think the feedback for doctors who have experienced treating patients is very positive. I think doctors are discovering patients are feeling better than they -- more -- better than they thought they could because the doctors didn't always appreciate how sick the patients were. And we've had a number of doctors tell us that patients they thought were not that bad actually still felt a lot better on treatment. So we're real interested in making sure that doctors aren't -- get out of the habit of not treating adults that they haven't treated for a while and start stepping forward in really changing the view of what needs to happen. And so, I thought -- Vlad, if you have any thoughts a little bit on what else we might do with the -- what we're doing with [results].

Yes. I think the other piece of feedback in addition to the clinical observations by pediatrics, endocrinologists and -- endocrinologists is also the appreciation of the physician of how we're supporting their offices with getting their patients with a prior authorization process by assisting them, making sure all the information is compiled, available and processed promptly so that the patients don't have to wait too long for getting their reimbursed therapies. I would add that as a second point.

My second question is with regards to the FAOD program. Assuming approval and launch in early 2020 can you speak on any launch preparations that may have already been started and if additional sales force would be necessary?

Well, I think that's a good question. What I would point out to you is that our expectation is to launch the U.S. 007 product with the same team that we're launching with in the U.S, Europe and Latin America, in fact, it is the same doctors that are treating MPS 7 and Mepsevii as well. So I think that we'd be able to do this with great synergy and efficiency launching globally. So I would not expect a substantial change in the team that we need, but, of course, we will do what we need to ensure that the launch goes well. But the synergy I think is important there between our other metabolic programs and the fatty acid oxidation detail.

Our next question comes from the line of Yigal Nochomovitz from Citi.

This is Samantha on for Yigal. I wonder for DTX301, is there anything in your preclinical work that gives you confidence that the dose you're using in cohort 3 could be sufficient to demonstrate the dose response relative to cohorts 1 and 2, sort of the 2 out of 3 or 3 out of 3 you mentioned earlier in the call?

Well, I think we have shown in the nonclinical model that we do get better expression at higher doses, that's very consistent. So I think there is -- there's no plateau or maximum effect seen at a dose. So there is data showing that at higher dose it will get a better effect. So we're comfortable from a nonclinical standpoint that we'd expect to get better expression from higher doses.

Great. And then just switching gears to Crysvita. With all the new insight into the XLH market you've gathered into the launch thus far, who's on Vitamin D and oral phosphate and all the additional identification you've done with the families with XLH, are you maintaining your estimate for the 12,000 XLH patients in the U.S. as it would be reasonable to assume that you'd have some updated thoughts, either up or down, approaching 1 year into the launch?

We're still maintaining the 12,000 number. I think everything we've found through various channels seems consistent with getting that number. And I think, I would say in 8 months getting the 900 prescriptions also tells you that, that number is probably pretty real, based on what we think would happen. So at this point, we don't have a reason to change it. And everything we've found seems to triangulate toward that kind of number. Now I would tell you that doesn't mean they're all found and all readily available. There definitely will be some adults who are lots of follow-up and other doctors and a lot of our patient diagnose efforts will be focused on finding those patients wherever they are. But right now, we're sticking to the 12,000 number.

Our next question comes from the line of Jeff Hung from Morgan Stanley.

For Crysvita, can you provide an update on identifying adults? And remind us what you think the biggest hurdles are with that process?

Well, different from pediatrics where the patients are already being managed with treatment or going to the doctor frequently, adults may not be seeing the prescriber on a regular basis because they have nothing to prescribe, so they're not seeing their endocrinologist that they were seeing 5, 6 years ago. They're going to their orthopedic doctor, their rheumatologist, the pain management person. They're seeing all these different doctors. And so they're not really at somewhere who's ready or able to prescribe this product, so we need to find them in those find them in those secondary specialties and find the prescriber for them and get them back. That's just going to take a little bit more time to get deep into the adult population. But we think through a number of tools including new ICD-10 codes and our efforts with the PDLs, that we'll be able to continue to find those patients. But it's just -- the tradition had been to stop treating when you got to puberty then you could have people that have been for many years not really being seen by the doctor that matters. In addition, the outreaching doctors might see the patients for other reasons using codes and other techniques. We're also, of course, doing what Vlad had mentioned before, which is work on the pedigree to make sure we're finding the aunts and uncles of our pediatric patients, in some cases, grandmothers. We have found grandmothers who, wherever they are and that pediatric -- the pedigree effort will be one of those other ways we triangulate and find more patients through the system. It's an important part of the launch, but right now, we feel like it's going well.

Great. And then can you remind us what remains outstanding in your discussions with the FDA on the regulatory path for Crysvita and TIO and what additional data you might need to collect?

We've had some initial discussions with them on TIO, and the question, of course, is that we have Phase II data and biopsy data in phase -- on TIO and the question is whether a randomized study would be required or not. We think we have more than adequate data to show that TIO is behaving like XLH and we're continuing that discussion with XLH to be able to file off the existing data, which we think is the right move. So that discussion continues, and we should have an update later in the year.

And I'm showing no further questions at this time. I'd like to turn the call back to Danielle for closing remarks.

Thank you for joining us. This concludes our call today, and a replay will be available soon. If you have any additional questions, please feel free to contact us by phone or at ir@ultragenyx.com. Thank you for joining us.

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