UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended September 30, 2018
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
Commission File No. 001-36276
ULTRAGENYX PHARMACEUTICAL INC.
(Exact name of registrant as specified in its charter)
Delaware |
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27-2546083 |
(State or other jurisdiction of |
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(I.R.S. Employer |
60 Leveroni Court |
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94949 |
(Address of principal executive offices) |
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(Zip Code) |
(415) 483-8800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☑ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☑ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☑
As of October 30, 2018, the registrant had 50,579,619 shares of common stock issued and outstanding.
ULTRAGENYX PHARMACEUTICAL INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2018
INDEX
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Part I – |
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Item 1. |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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14 |
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Item 3. |
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23 |
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Item 4. |
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23 |
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Part II – |
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Item 1. |
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24 |
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Item 1A. |
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24 |
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Item 2. |
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56 |
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Item 3. |
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56 |
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Item 4. |
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56 |
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Item 5. |
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56 |
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Item 6. |
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57 |
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58 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words, or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
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our commercialization, marketing, and manufacturing capabilities and strategy; |
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our expectations regarding the timing of clinical study commencements and reporting results from same; |
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the timing and likelihood of regulatory approvals for our product candidates; |
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the anticipated indications for our product candidates, if approved; |
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the potential market opportunities for commercializing our products and product candidates; |
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our expectations regarding the potential market size and the size of the patient populations for our products and product candidates, if approved for commercial use; |
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estimates of our expenses, revenue, capital requirements, and our needs for additional financing; |
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our ability to develop, acquire, and advance product candidates into, and successfully complete, clinical studies; |
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the implementation of our business model and strategic plans for our business, products and product candidates and the integration and performance of any businesses we have acquired or may acquire; |
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the initiation, timing, progress, and results of ongoing and future preclinical and clinical studies, and our research and development programs; |
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the scope of protection we are able to establish and maintain for intellectual property rights covering our products and product candidates; |
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our ability to maintain and establish collaborations or strategic relationships or obtain additional funding; |
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our ability to maintain and establish relationships with third parties, such as contract research organizations, contract manufacturing organizations, suppliers, and distributors; |
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our financial performance and the expansion of our organization; |
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our ability to obtain supply of our products and product candidates; |
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the scalability and commercial viability of our manufacturing methods and processes; |
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developments and projections relating to our competitors and our industry; and |
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other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors. |
Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those discussed under Part II, Item 1A. Risk Factors and discussed elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
1
ULTRAGENYX PHARMACEUTICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
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September 30, |
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December 31, |
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2018 |
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2017 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
82,956 |
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$ |
100,488 |
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Short-term investments |
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420,142 |
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134,005 |
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Accounts receivable |
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9,155 |
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5,172 |
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Inventory |
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5,556 |
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757 |
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Prepaid expenses and other current assets |
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49,671 |
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29,161 |
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Total current assets |
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567,480 |
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269,583 |
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Property and equipment, net |
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19,828 |
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21,837 |
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Long-term investments |
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— |
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9,975 |
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Intangible assets, net |
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130,232 |
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141,545 |
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Goodwill |
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44,406 |
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44,406 |
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Other assets |
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3,199 |
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3,407 |
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Total assets |
$ |
765,145 |
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$ |
490,753 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ |
8,198 |
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$ |
8,886 |
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Accrued liabilities |
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58,483 |
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62,128 |
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Total current liabilities |
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66,681 |
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71,014 |
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Deferred tax liabilities |
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31,166 |
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31,166 |
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Other liabilities |
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4,702 |
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5,119 |
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Total liabilities |
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102,549 |
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107,299 |
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Stockholders’ equity: |
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Preferred stock — 25,000,000 shares authorized; nil outstanding as of September 30, 2018 and |
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December 31, 2017 |
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— |
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— |
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Common stock — 250,000,000 shares authorized; 50,533,070 and 44,167,071 shares issued |
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and outstanding as of September 30, 2018 and December 31, 2017, respectively |
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51 |
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44 |
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Additional paid-in capital |
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1,605,412 |
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1,221,762 |
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Accumulated other comprehensive loss |
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(410 |
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(5,680 |
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Accumulated deficit |
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(942,457 |
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(832,672 |
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Total stockholders’ equity |
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662,596 |
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383,454 |
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Total liabilities and stockholders’ equity |
$ |
765,145 |
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$ |
490,753 |
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See accompanying notes.
2
ULTRAGENYX PHARMACEUTICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)
|
Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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Revenues: |
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Collaboration and license |
$ |
9,015 |
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$ |
— |
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$ |
28,896 |
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$ |
— |
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Product sales |
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2,748 |
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198 |
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6,338 |
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198 |
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Total revenues |
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11,763 |
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198 |
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35,234 |
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198 |
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Operating expenses: |
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Cost of sales |
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273 |
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— |
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639 |
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— |
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Research and development |
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70,041 |
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60,412 |
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222,380 |
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170,117 |
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Selling, general and administrative |
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31,095 |
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23,499 |
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93,248 |
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62,189 |
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Total operating expenses |
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101,409 |
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83,911 |
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316,267 |
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232,306 |
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Loss from operations |
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(89,646 |
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(83,713 |
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(281,033 |
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(232,108 |
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Other income (expense), net: |
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Interest income |
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2,730 |
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1,117 |
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6,915 |
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3,350 |
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Gain from sale of priority review vouchers |
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— |
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— |
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170,322 |
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— |
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Other income (expense) |
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(147 |
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3,373 |
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(5,601 |
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8,368 |
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Loss before income taxes |
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(87,063 |
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(79,223 |
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(109,397 |
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(220,390 |
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Provision for income taxes |
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(247 |
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(4 |
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(388 |
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(18 |
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Net loss |
$ |
(87,310 |
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$ |
(79,227 |
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$ |
(109,785 |
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$ |
(220,408 |
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Net loss per share, basic and diluted |
$ |
(1.74 |
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$ |
(1.87 |
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$ |
(2.22 |
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$ |
(5.22 |
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Shares used in computing net loss per share, basic and diluted |
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50,319,772 |
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42,471,606 |
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49,447,889 |
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42,222,413 |
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See accompanying notes.
3
ULTRAGENYX PHARMACEUTICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
|
Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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Net loss |
$ |
(87,310 |
) |
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$ |
(79,227 |
) |
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$ |
(109,785 |
) |
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$ |
(220,408 |
) |
Other comprehensive loss: |
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Foreign currency translation adjustments |
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61 |
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(3,326 |
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(3 |
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(8,377 |
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Transfer of cumulative translation adjustment for the substantial liquidation of foreign subsidiaries |
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— |
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— |
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5,272 |
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— |
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Unrealized gain (loss) on available-for-sale securities |
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183 |
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|
145 |
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1 |
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68 |
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Other comprehensive income (loss): |
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244 |
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(3,181 |
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5,270 |
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(8,309 |
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Total comprehensive loss |
$ |
(87,066 |
) |
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$ |
(82,408 |
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$ |
(104,515 |
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$ |
(228,717 |
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See accompanying notes.
4
ULTRAGENYX PHARMACEUTICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended September 30, |
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2018 |
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2017 |
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Operating activities: |
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Net loss |
$ |
(109,785 |
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$ |
(220,408 |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Gain from sale of priority review vouchers |
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(170,322 |
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— |
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Stock-based compensation |
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59,027 |
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48,473 |
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Amortization of premium (discount) on investment securities, net |
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(1,832 |
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|
1,451 |
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Depreciation and amortization |
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16,595 |
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|
3,311 |
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Foreign currency remeasurement (gain) loss |
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5,853 |
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(8,431 |
) |
Other |
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(145 |
) |
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— |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(9,155 |
) |
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|
— |
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Prepaid expenses and other current assets |
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(20,007 |
) |
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|
760 |
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Other assets |
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(62 |
) |
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|
492 |
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Accounts payable |
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(593 |
) |
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|
3,879 |
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Accrued liabilities and other liabilities |
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(4,287 |
) |
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|
(1,547 |
) |
Net cash used in operating activities |
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(234,713 |
) |
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|
(172,020 |
) |
Investing activities: |
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Purchase of property and equipment |
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(2,884 |
) |
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|
(1,894 |
) |
Proceeds from sale of priority review vouchers |
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170,322 |
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|
— |
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Purchase of investments |
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(500,049 |
) |
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(230,490 |
) |
Proceeds from the sale of investments |
|
7,655 |
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|
27,642 |
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Proceeds from maturities of investments |
|
218,064 |
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|
202,833 |
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Net cash used in investing activities |
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(106,892 |
) |
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|
(1,909 |
) |
Financing activities: |
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Proceeds from issuance of common stock in connection with a public offering, net |
|
270,969 |
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|
|
— |
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Proceeds from issuance of common stock in connection with at-the-market offering, net |
|
27,626 |
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|
|
67,616 |
|
Proceeds from issuance of common stock from equity awards, net |
|
26,016 |
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|
|
4,212 |
|
Net cash provided by financing activities |
|
324,611 |
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|
|
71,828 |
|
Effect of exchange rate changes on cash |
|
(617 |
) |
|
|
167 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
(17,611 |
) |
|
|
(101,934 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
103,041 |
|
|
|
164,607 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
85,430 |
|
|
$ |
62,673 |
|
|
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|
See accompanying notes.
5
ULTRAGENYX PHARMACEUTICAL INC.
Notes to Condensed Consolidated Financial Statements
1. |
Organization |
Ultragenyx Pharmaceutical Inc. (the Company) is a biopharmaceutical company incorporated in California on April 22, 2010. The Company subsequently reincorporated in the state of Delaware in June 2011.
The Company is focused on the identification, acquisition, development, and commercialization of novel products for the treatment of serious rare and ultra-rare genetic diseases. The Company has two approved therapies. Crysvita® (burosumab) is approved by the U.S. Food and Drug Administration (FDA) for the treatment of X-linked hypophosphatemia (XLH) in adult and pediatric patients one year of age and older, and has received European conditional marketing authorization for the treatment of XLH with radiographic evidence of bone disease in children 1 year of age and older and adolescents with growing skeletons. The Company has also received FDA approval and European marketing authorization under exceptional circumstances for Mepsevii™ (vestronidase alfa), the first medicine approved for the treatment of children and adults with MPS VII, also known as Sly syndrome.
In addition to the approved treatments for XLH and MPS VII, the Company has four ongoing clinical development programs. Crysvita is being studied for the treatment of tumor induced osteomalacia (TIO), a rare disease that impairs bone mineralization. UX007 is being studied in patients severely affected by long-chain fatty acid oxidation disorders (LC-FAOD), a genetic disorder in which the body is unable to convert long chain fatty acids into energy. The company has two gene therapy pipeline candidates: DTX301 is an adeno-associated virus 8 (AAV8) gene therapy product candidate in development for the treatment of patients with ornithine transcarbamylase (OTC) deficiency, the most common urea cycle disorder; and DTX401 is an AAV8 gene therapy product candidate for the treatment of patients with glycogen storage disease type Ia (GSDIa). The Company operates as one reportable segment.
The Company has sustained operating losses and expects such annual losses to continue over the next several years. The Company’s ultimate success depends on the outcome of its research and development and commercialization activities, for which it expects to incur additional losses in the future. Management recognizes the need to raise additional capital to fully implement its business plan. Through September 30, 2018, the Company has relied primarily on the proceeds from equity offerings to finance its operations.
The Company intends to raise additional capital through the issuance of equity, borrowings, or strategic alliances with partner companies. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plans.
2. |
Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K filed on February 21, 2018 with the United States Securities and Exchange Commission (SEC).
The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018. The condensed consolidated balance sheet as of December 31, 2017 has been derived from audited financial statements at that date, but does not include all of the information required by GAAP for complete financial statements.
Use of Estimates
The accompanying consolidated financial statements have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to sales return reserves, clinical trial accruals, fair value of assets and liabilities, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
6
Cash, Cash Equivalents and Restricted Cash
Restricted cash primarily consists of money market accounts as collateral for the Company’s obligations under its facility leases.
In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. The Company adopted the standard as of January 1, 2018 on a retrospective basis, wherein the statement of cash flow of each period presented was adjusted to reflect the effects of applying the new guidance. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows (in thousands):
|
|
September 30, |
|
|
September 30, |
|
||
|
|
2018 |
|
|
2017 |
|
||
Cash and cash equivalents |
|
$ |
82,956 |
|
|
$ |
60,407 |
|
Restricted cash included in prepaid expenses and other current assets |
|
|
652 |
|
|
|
461 |
|
Restricted cash included in other assets |
|
|
1,822 |
|
|
|
1,805 |
|
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows |
|
$ |
85,430 |
|
|
$ |
62,673 |
|
Revenue Recognition
Collaboration and license revenue
The Company has certain license and collaboration agreements that are within the scope of Accounting Standards Codification (ASC) 808, Collaborative Agreements, which provides guidance on the presentation and disclosure of collaborative arrangements. Generally, the classification of the transactions under the collaborative arrangements is determined based on the nature of contractual terms of the arrangement, along with the nature of the operations of the participants. The Company records its share of collaboration revenue, net of transfer pricing related to net sales in the period in which such sales occur, if the Company is considered as an agent in the arrangement. The Company is considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. Funding received related to research and development services and commercialization costs are classified as a reduction of research and development expenses and selling, general and administrative expenses, respectively, in the consolidated statement of operations, because the provision of such services for collaborative partners are not considered to be part of the Company’s ongoing major or central operations.
The Company also receives royalty revenues under certain of the Company’s license or collaboration agreements in exchange for license of intellectual property. If the Company does not have any future performance obligations for these license or collaboration agreements, royalty revenue is recorded as the underlying sales occur.
In order to record its results of operations, the Company utilizes certain information from its collaboration partners , including revenue from the sale of the product, associated reserves on revenue, and costs incurred for development and sales activities. For the periods covered in the financial statements presented, there have been no significant or material changes to prior period estimates of revenues and expenses.
The terms of the Company’s collaboration agreements may contain multiple performance obligations, which may include licenses and research and development activities. The Company evaluates these agreements under ASC 606, Revenue from Contract with Customers, to determine the distinct performance obligations. The Company analogizes to ASC 606 for the accounting for distinct performance obligations for which there is a customer relationship. Prior to recognizing revenue, the Company makes estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration may include nonrefundable upfront license fees, payments for research and development activities, reimbursement of certain third-party costs, payments based upon the achievement of specified milestones, and royalty payments based on product sales derived from the collaboration.
If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. The standalone selling price is generally determined based on the prices charged to customers or using expected cost plus margin. Revenue is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure.
7
The Company sells its approved products through a limited number of distributors. Under ASC 606, revenue from product sales is recognized at the point in time when the delivery is made and when title and risk of loss transfers to these distributors. The Company also recognizes revenue from sales of certain products on a “named patient” basis, which are allowed in certain countries prior to the commercial approval of the product. Prior to recognizing revenue, the Company makes estimates of the transaction price, including any variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Product sales are recorded net of estimated government-mandated rebates and chargebacks, estimated product returns, and other deductions.
Provisions for returns and other adjustments are provided for in the period the related revenue is recorded, as estimated by management. Limited historical data is available for use in developing estimates of the amount of the reduction for reserve in gross revenue. The estimates applied are periodically reviewed and adjusted as necessary.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires an entity that is a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases. This guidance also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods and early adoption is permitted. In July 2018, the FASB issued updated guidance which allows an additional transition method to adopt the new leases standard at the adoption date, as compared to the beginning of the earliest period presented, and allows entities to recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of adoption. The Company expects to elect to use this transition method at the adoption date of January 1, 2019, and, as a result, will record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. The Company also plans to elect to use the package of practical expedients upon transition that will retain the lease classification and initial direct costs for any leases that exist prior to adoption of the new guidance. The Company is continuing to evaluate the effect that this guidance will have on its Consolidated Financial Statements and related disclosures.
3. |
Financial Instruments |
Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
The following tables set forth the fair value of the Company’s financial assets remeasured on a recurring basis based on the three-tier fair value hierarchy (in thousands):
|
September 30, 2018 |
|
|||||||||||||||
|
|
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|
|||||
|
Fair Value Hierarchy |
|
Amortized Cost |
|
|
Gains |
|
|
Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
Level 1 |
|
$ |
52,728 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
52,728 |
|
Time deposits |
Level 2 |
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
Corporate bonds |
Level 2 |
|
|
183,000 |
|
|
|
2 |
|
|
|
(193 |
) |
|
|
182,809 |
|
Commercial paper |
Level 2 |
|
|
64,585 |
|
|
|
— |
|
|
|
— |
|
|
|
64,585 |
|
Asset-backed securities |
Level 2 |
|
|
22,576 |
|
|
|
— |
|
|
|
(19 |
) |
|
|
22,557 |
|
U.S. Government Treasury and agency securities |
Level 2 |
|
|
150,362 |
|
|
|
— |
|
|
|
(171 |
) |
|
|
150,191 |
|
Total |
|
|
$ |
483,251 |
|
|
$ |
2 |
|
|
$ |
(383 |
) |
|
$ |
482,870 |
|
8
December 31, 2017 |
|
||||||||||||||||
|
|
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|
|||||
|
Fair Value Hierarchy |
|
Amortized Cost |
|
|
Gains |
|
|
Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
Level 1 |
|
$ |
79,670 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
79,670 |
|
Corporate bonds |
Level 2 |
|
|
39,330 |
|
|
|
— |
|
|
|
(90 |
) |
|
|
39,240 |
|
U.S. Government Treasury and agency securities |
Level 2 |
|
|
105,029 |
|
|
|
— |
|
|
|
(290 |
) |
|
|
104,739 |
|
Total |
|
|
$ |
224,029 |
|
|
$ |
— |
|
|
$ |
(380 |
) |
|
$ |
223,649 |
|
At September 30, 2018, the remaining contractual maturities of available-for-sale securities were less than one year. There have been no significant realized gains or losses on available-for-sale securities for the periods presented. All marketable securities with unrealized losses at September 30, 2018 have a loss that was considered to be temporary in nature. The Company does not intend to sell the investments that are in an unrealized loss position before recovery of their amortized cost basis.
4. |
Balance Sheet Components |
Inventory
Inventory consists of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2018 |
|
|
2017 |
|
||
Work-in-progress |
|
$ |
4,600 |
|
|
$ |
737 |
|
Finished goods |
|
|
956 |
|
|
|
20 |
|
Total inventory |
|
$ |
5,556 |
|
|
$ |
757 |
|
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2018 |
|
|
2017 |
|
||
Research and clinical study expenses |
|
$ |
20,363 |
|
|
$ |
17,141 |
|
Payroll and related expenses |
|
|
29,670 |
|
|
|
26,527 |
|
Repayment liability under collaboration agreement |
|
|
— |
|
|
|
3,681 |
|
Contract liabilities |
|
|
— |
|
|
|
5,986 |
|
Other |
|
|
8,450 |
|
|
|
8,793 |
|
Total accrued liabilities |
|
$ |
58,483 |
|
|
$ |
62,128 |
|
5. |
Revenue |
The following table disaggregates total revenues from external customers by collaboration and license revenue and product sales (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Collaboration and license revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KHK (Crysvita) |
$ |
5,401 |
|
|
$ |
— |
|
|
$ |
6,993 |
|
|
$ |
— |
|
Bayer |
|
3,614 |
|
|
|
— |
|
|
|
21,903 |
|
|
|
— |
|
Total collaboration and license revenue |
|
9,015 |
|
|
|
— |
|
|
|
28,896 |
|
|
|
— |
|
Product sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crysvita |
|
268 |
|
|
|
— |
|
|
|
294 |
|
|
|
— |
|
Mepsevii |
|
2,127 |
|
|
|
198 |
|
|
|
5,253 |
|
|
|
198 |
|
UX007 |
|
353 |
|
|
|
— |
|
|
|
791 |
|
|
|
— |
|
Total product sales |
|
2,748 |
|
|
|
198 |
|
|
|
6,338 |
|
|
|
198 |
|
Total revenues |
$ |
11,763 |
|
|
$ |
198 |
|
|
$ |
35,234 |
|
|
$ |
198 |
|
9
The following table disaggregates total revenues based on geographic location (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
United States |
$ |
9,879 |
|
|
$ |
— |
|
|
$ |
31,731 |
|
|
$ |
— |
|
Europe |
|
1,616 |
|
|
|
198 |
|
|
|
3,209 |
|
|
|
198 |
|
All other |
|
268 |
|
|
|
— |
|
|
|
294 |
|
|
|
— |
|
Total revenues |
$ |
11,763 |
|
|
$ |
198 |
|
|
$ |
35,234 |
|
|
$ |
198 |
|
The following table presents changes in the contract assets (liabilities) for the nine months ended September 30, 2018 (in thousands):
|
December 31, 2017 |
|
|
Additions |
|
|
Deductions |
|
|
September 30, 2018 |
|
||||
Contract assets (liabilities) |
$ |
(5,986 |
) |
|
$ |
22,491 |
|
|
$ |
(14,767 |
) |
|
$ |
1,738 |
|
The Company’s largest accounts receivables balance accounted for 65% of the September 30, 2018 total accounts receivable balance as compared to 97% as of December 31, 2017.
6. |
License and Research Agreements |
Kyowa Hakko Kirin Collaboration and License Agreement
In August 2013, the Company entered into a collaboration and license agreement with Kyowa Hakko Kirin Co., Ltd. (KHK). Under the terms of this collaboration and license agreement, as amended, the Company and KHK will collaborate on the development and commercialization of Crysvita in the field of orphan diseases in the United States and Canada, or the profit share territory, and in the European Union and Switzerland, or the European territory, and the Company will have the right to develop and commercialize such products in the field of orphan diseases in Mexico and Central and South America, or Latin America. In the field of orphan diseases, and except for ongoing studies being conducted by KHK, the Company will be the lead party for development activities in the profit share territory and in the European territory until the applicable transition date; the Company will also be the lead party for core development activities conducted in Japan and Korea, for which the core development plan is limited to clinical trials mutually agreed to by the Company and KHK. The Company will share the costs for development activities in the profit share territory and the European territory conducted pursuant to the development plan before the applicable transition date equally with KHK, and KHK shall be responsible for 100% of the costs for development activities in Japan and Korea. On the applicable transition date in the profit share territory and the European territory, KHK will become the lead party and be responsible for the costs of the development activities. However, the Company will continue to share the costs of the studies commenced prior to the applicable transition date equally with KHK. Crysvita was approved in the European Union in November 2017 and was approved by the FDA in April 2018.
The collaboration and license agreements are within the scope of ASC 808, which provides guidance on the presentation and disclosure of collaborative arrangements.
Collaboration revenue related to sales in profit share territory
The Company and KHK share commercial responsibilities and profits in the profit share territory until the applicable transition date. Under the collaboration agreement, KHK will manufacture and supply Crysvita for commercial use in the profit share territory. The remaining profit or loss after supply costs from commercializing products in the profit-share territory, until the applicable transition date, are shared between the Company and KHK on a 50/50 basis. Thereafter, the Company will be entitled to receive a tiered double-digit revenue share in the mid-to-high 20% range.
The Company is considered the agent in the arrangement as KHK controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product. The Company recognizes a pro-rata share of collaboration revenue, net of supply costs, in the period the sale occurs. The Company concluded that its portion of KHK’s sales in the Profit Share Territory is analogous to a royalty and therefore recorded $4.4 million and $5.4 million as collaboration revenue, similar to a royalty, during the three and nine months ended September 30, 2018, respectively.
Royalty revenue related to sales in European territory
KHK has the commercial responsibility for Crysvita in the European territory. The Company is entitled to receive a royalty of up to 10% on net sales in the European territory.
10
The Company’s share of collaboration revenue related to Crysvita was as follows (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
||||
Company's share of collaboration revenue in profit share territory |
$ |
4,364 |
|
|
$ |
— |
|
|
$ |
5,429 |
|
|
$ |
— |
|
|
Royalty revenue in European territory |
|
1,037 |
|
|
|
— |
|
|
|
1,564 |
|
|
|
— |
|
|
Total |
$ |
5,401 |
|
|
$ |
— |
|
|
$ |
6,993 |
|
|
$ |
— |
|
|
Product revenue related to sales in other territories
The Company is responsible for commercializing Crysvita in Latin America. The Company is considered the principal in the arrangement as the Company controls the product before it is transferred to the customer. Accordingly, the Company records revenue on a gross basis related to the sale of Crysvita once the product is delivered and the risk and title of the product is transferred to the distributor. Product sales are recorded net of estimated product returns and other deductions.
Under the collaboration agreement, KHK manufactures and supplies Crysvita, which is purchased by the Company for sales in the Latin America territory. The Company also pays to KHK a low single-digit royalty on net sales.
In May 2017, the Company signed an agreement with a wholly-owned subsidiary of KHK pursuant to which the Company was granted the right to commercialize Crysvita in Turkey. KHK’s subsidiary has the option to assume responsibility for commercialization efforts from the Company, after a certain minimum period. The Company is considered the principal in the arrangement as the Company controls the product before it is transferred to the customer; accordingly, the Company will record revenue on a gross basis for sales made in Turkey, including named patient sales, until KHK’s subsidiary assumes responsibility for commercialization efforts.
Cost sharing payments
Under the collaboration agreement, KHK and the Company shares certain development and commercialization costs. As a result, the Company’s expenses were reduced as follows (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Research and development |
$ |
7,612 |
|
|
$ |
7,605 |
|
|
$ |
25,268 |
|
|
$ |
22,930 |
|
Selling, general and administrative |
|
2,868 |
|
|
|
1,145 |
|
|
|
10,718 |
|
|
|
2,286 |
|
Total |
$ |
10,480 |
|
|
$ |
8,750 |
|
|
$ |
35,986 |
|
|
$ |
25,216 |
|
Collaboration receivable
The Company had accounts receivable from KHK in the amount of $5.9 million and none, and other receivables recorded in prepaid and other current assets of $12.0 million and $10.3 million, as of September 30, 2018 and December 31, 2017, respectively.
Takeda License and Collaboration and Purchase Agreements
The research and development under the initial development plan pursuant to the collaboration and license agreement with Takeda Pharmaceutical Limited (Takeda) had been completed as of June 30, 2018. The Company was responsible for the costs under the initial development plan. A significant portion of the work under the initial development plan was performed by Takeda, and as a result, the Company paid $10.6 million to Takeda for performance of their services. The Company concluded that the payments to Takeda were not in return for a distinct service that Takeda had transferred to the Company; therefore, the payments made to Takeda were accounted for as a reduction in the total transaction price of $14.3 million. The Company concluded that the remaining $3.7 million of the transaction price should not be constrained because it is probable that a significant reversal in the amount to be recognized will not occur. The unconstrained transaction price was allocated to the distinct performance obligations on a relative standalone selling price basis. The Company recorded none and $1.4 million for the three months ended September 30, 2018 and September 30, 2017, respectively, and $1.2 million and $1.7 million for the nine months ended September 30, 2018 and September 30, 2017, respectively, as a reduction of research and development expenses by measuring the progress toward complete satisfaction of the individual performance obligation using an input measure.
Costs incurred by the Company associated with co-development activities performed under this collaboration are included in research and development expense in the accompanying consolidated statements of operations. The Company had no repayment liability as of September 30, 2018, a $3.7 million repayment liability as of December 31, 2017, no contract liability as of September 30, 2018, and a $0.6 million contract liability as of December 31, 2017.
11
The Company has an agreement with Bayer Healthcare LLC (Bayer) to research, develop and commercialize AAV gene therapy products for treatment of hemophilia A (DTX 201). Under this agreement, Bayer has been granted an exclusive license to develop and commercialize one or more novel gene therapies for hemophilia A. The Company is responsible for the development of DTX201 under the agreement through a proof-of-concept (POC) clinical trial, in accordance with the mutually agreed upon research budget. Upon the successful demonstration of clinical POC, the agreement requires that Bayer use commercially reasonable efforts to manage and fund any subsequent clinical trials and commercialization of gene therapy products for treatment of hemophilia A. Bayer will have worldwide rights to commercialize the potential future product.
Bayer is responsible to fund certain research and development services performed by the Company in the performance of its obligations under the annual research plan and budget. Under the terms of the agreement with Bayer, the Company is eligible to receive development and commercialization milestone payments of up to $232.0 million, as well as, royalty payments ranging in the high single-digit to low double-digit percentages, not exceeding the mid-teens, of net sales of licensed products. The Company achieved the first milestone in December 2017, the second milestone in April 2018, and has received $15.0 million for such milestones to date.
As of the acquisition date of Dimension Therapeutics, Inc. on November 7, 2017, the Company valued the contract under ASC 805, Business Combinations, and recorded an intangible asset of $13.5 million. The intangible asset is being amortized to research and development expense over the research term which is expected to be complete in 2019. The Company recorded research and development expense of $2.5 million and $11.3 million for the three and nine months ended September 30, 2018, respectively, for the amortization of the intangible asset.
The Company evaluated the agreement under ASC 606 and recorded a contract liability as of November 7, 2017 of $2.5 million. It was determined that the performance obligations under the agreement includes (i) research and development services to be provided over the research term, (ii) a development and commercialization license, and (iii) the Company’s participation in certain committees. It was determined that these performance obligations are not distinct in the context of the contract and therefore are a single performance obligation. The Company calculated the transaction price by including the unconstrained milestones along with the estimated payments for research and development services and recorded $3.6 million and $21.9 million as collaboration and license revenue for the three and nine months ended September 30, 2018, respectively, by measuring the progress toward complete satisfaction of the performance obligation using an input measure. The performance obligation under the contract is expected to be substantially complete by end of 2019. As of September 30, 2018 and December 31, 2017, the Company had a $1.7 million contract asset and a $5.4 million contract liability, respectively.
7. |
Stock-Based Awards |
The 2014 Incentive Plan (the 2014 Plan) provides for automatic annual increases in shares available for grant, beginning on January 1, 2015 through January 1, 2024. As of September 30, 2018, there were 2,089,420 shares reserved under the 2014 Plan for the future issuance of equity awards and 2,246,823 shares reserved for the 2014 Employee Stock Purchase Plan.
The table below sets forth the stock-based compensation expense for the periods presented (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|||||
Research and development |
$ |
11,858 |
|
|
$ |
9,951 |
|
|
$ |
34,749 |
|
|
$ |
28,528 |
|
|
Selling, general and administrative |
|
8,809 |
|
|
|
7,229 |
|
|
|
24,278 |
|
|
|
19,945 |
|
|
Total stock-based compensation |
$ |
20,667 |
|
|
$ |
17,180 |
|
|
$ |
59,027 |
|
|
$ |
48,473 |
|
8. |
Net Loss Per Share |
Basic net loss per share has been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock and potential dilutive securities outstanding during the period.
The following weighted-average outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Options to purchase common stock and RSUs |
|
7,242,989 |
|
|
|
5,835,271 |
|
|
|
7,396,423 |
|
|
|
5,736,646 |
|
Employee stock purchase plan |
|
31,285 |
|
|
|
32,014 |
|
|
|
17,533 |
|
|
|
17,942 |
|
Common stock warrants |
|
149,700 |
|
|
|
149,700 |
|
|
|
149,700 |
|
|
|
149,700 |
|
|
|
7,423,974 |
|
|
|
6,016,985 |
|
|
|
7,563,656 |
|
|
|
5,904,288 |
|
12
In July 2017, the Company entered into an At-The-Market, or ATM, sales agreement with Cowen and Company, LLC (Cowen), whereby the Company can sell up to $150.0 million in aggregate proceeds of common stock from time to time, through Cowen as its sales agent. In March 2018, the Company and Cowen entered into an amendment to the ATM sales agreement to sell, from time to time, the remaining $72.6 million in common stock under the sales agreement under the Company’s new registration statement that was filed with the SEC on February 21, 2018. During the three and nine months ended September 30, 2018, 205,202 shares and 445,619 shares, respectively, were sold pursuant to the sales agreement, resulting in net proceeds of approximately $15.9 million and $27.6 million, respectively, after commissions and other offering costs.
In January 2018, the Company completed an underwritten public offering in which 5,043,860 shares of common stock were sold, which includes 657,895 shares purchased by the underwriters pursuant to an option granted to them in connection with the offering, at a public offering price of $57.00 per share. The total proceeds that the Company received from the offering were approximately $271.0 million, net of underwriting discounts and commissions.
10. |
Accumulated Other Comprehensive Loss |
Total accumulated other comprehensive loss consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2018 |
|
|
2017 |
|
||
Foreign currency translation adjustments |
|
$ |
(29 |
) |
|
$ |
(5,298 |
) |
Unrealized loss on securities available-for-sale |
|
|
(381 |
) |
|
|
(382 |
) |
Total accumulated other comprehensive loss |
|
$ |
(410 |
) |
|
$ |
(5,680 |
) |
11. |
Gain from Sale of Priority Review Vouchers |
In January 2018, the Company completed the sale of a Rare Pediatric Disease Priority Review Voucher (PRV) it received in connection with the approval of Mepsevii for $130.0 million. In June 2018, the Company also completed the sale of the PRV it received in connection with the approval of Crysvita for $80.6 million, net, which was shared equally with KHK. As the PRVs did not have a carrying value, the gain recognized was equal to the net proceeds received. The Company recorded its portion of the net proceeds in other income of $170.3 million for the nine months ended September 30, 2018 as a gain from the sale of the PRVs.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “Annual Report”).
Overview
We are a biopharmaceutical company focused on the identification, acquisition, development, and commercialization of novel products for the treatment of serious rare and ultra-rare genetic diseases. We target diseases for which the unmet medical need is high, the biology for treatment is clear, and for which there are no currently approved therapies. Our strategy, which is predicated upon time- and cost-efficient drug development, allows us to pursue multiple programs in parallel with the goal of delivering safe and effective therapies to patients with the utmost urgency.
Approved Therapies and Clinical Product Candidates
Our current approved therapies and clinical-stage pipeline consist of three product categories: biologics, small-molecule substrate replacement therapies, and gene therapy product candidates. Enzymes are proteins that the body uses to process materials needed for normal cellular function, and substrates are the materials upon which enzymes act. When enzymes or substrates are missing, the body is unable to perform its normal cellular functions, often leading to significant clinical disease. Several of our therapies are intended to replace deficient enzymes or substrates. Gene therapy is a therapeutic approach in which an isolated gene sequence or segment of DNA is administered to a patient, most commonly for the purpose of treating a genetic disease that is caused by mutations. Gene therapy aims to address the disease-causing effects of absent or dysfunctional genes by delivering functional copies of the gene to the patient’s cells, offering the potential for durable therapeutic benefit.
Our biologic products include approved therapies Crysvita® (burosumab) and Mepsevii™ (vestronidase alfa):
|
• |
Crysvita is an antibody targeting fibroblast growth factor 23, or FGF23, developed for the treatment of X-linked hypophosphatemia, or XLH, a rare, hereditary, progressive and lifelong musculoskeletal disorder characterized by renal phosphate wasting caused by excess FGF23 production. Crysvita is approved in the United States for the treatment of XLH in adult and pediatric patients one year of age and older. In Europe, Crysvita is conditionally approved for the treatment of XLH with radiographic evidence of bone disease in children one year of age and older and adolescents with growing skeletons. A filing to expand the label to include adults with XLH is also planned in Europe. |
Crysvita is also being developed for the treatment of tumor-induced osteomalacia, or TIO. TIO results from typically benign tumors that produce excess levels of FGF23, which can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness.
We are collaborating with Kyowa Hakko Kirin, or KHK, and Kyowa Kirin International, or Kyowa Kirin, a wholly owned subsidiary of KHK, on the development and commercialization of Crysvita globally.
|
• |
Mepsevii is an intravenous, or IV, enzyme replacement therapy, developed for the treatment of Mucopolysaccharidosis VII, also known as MPS VII or Sly syndrome, a rare lysosomal storage disease that often leads to multi-organ dysfunction, pervasive skeletal disease, and death. Mepsevii is approved in the United States for the treatment of children and adults with MPS VII. In Europe, Mepsevii is approved under exceptional circumstances for the treatment of non-neurological manifestations of MPS VII. In Brazil, Mepsevii is approved for the treatment of MPS VII for patients of all ages. |
Our substrate replacement therapy pipeline includes UX007, which is in clinical development for the treatment of long-chain fatty acid oxidation disorders, or LC-FAOD:
|
• |
UX007 is a synthetic triglyceride with a specifically designed chemical composition being studied for the treatment of LC-FAOD, which is a set of rare metabolic diseases that prevents the conversion of fat into energy and can cause low blood sugar, muscle rupture, and heart and liver disease. The U.S. Food and Drug Administration, or FDA, has accepted our most recent proposal to submit a New Drug Application, or NDA, for UX007 for the treatment of LC-FAOD based on existing Phase 2 study data. We expect to hold a pre-NDA meeting with the FDA before the end of 2018. We also continue to have discussions with EMA about a potential filing based on the current data and expect additional clarity from these conversations by the end of 2018. |
Our gene therapy pipeline includes DTX301 and DTX401 in clinical development for the treatment of two diseases:
|
• |
DTX301 is an adeno-associated virus 8, or AAV8, gene therapy product candidate designed for the treatment of patients with ornithine transcarbamylase, or OTC, deficiency. OTC is part of the urea cycle, an enzymatic pathway in the liver that converts excess nitrogen, in the form of ammonia, to urea for excretion. OTC deficiency is the most common urea cycle disorder and leads to increased levels of ammonia. Patients with OTC deficiency suffer from acute hyperammonemic episodes that can lead to hospitalization, adverse cognitive and neurological effects, and death. We have reported positive data from the first and second dose cohorts of the Phase 1/2 study, and plan to enroll the first patient in the third dose cohort in 2018 with data expected in mid-2019. |
14
The following table summarizes our approved products and advanced product candidate pipeline:
Recent program updates
Crysvita for the treatment of XLH
In addition to regulatory submissions and approvals of Crysvita in the U.S. and Europe, we have submitted regulatory filings in Canada, Brazil and Colombia, and anticipate regulatory decisions in these markets by the end of 2019.
Crysvita for the treatment of TIO
On October 1, 2018, we presented the positive 48-week and 72-week data from an ongoing Phase 2 study of Crysvita in adults with TIO syndrome at the American Society for Bone and Mineral Research 2018 Annual Meeting in Montreal. In adults with TIO, Crysvita was associated with increases in serum phosphorous and 1,25(OH)2D; improvement in osteomalacia; improvement in mobility and vitality; and reductions in fatigue. Regulatory discussions regarding a potential filing are ongoing with the FDA.
Mepsevii for the treatment of MPS VII
On August 27, 2018, the European Commission approved under exceptional circumstances the Marketing Authorization Application, or MAA, for Mepsevii for the treatment of non-neurological manifestations of MPS VII. Mepsevii is now approved for use in all 28 European Union, or EU, countries as well as in Iceland, Liechtenstein and Norway, and recently launched in Germany.
On October 18, 2018, Brazil’s National Health Surveillance Agency, or ANVISA, approved Mepsevii for the treatment of MPS VII for patients of all ages. Additional regulatory decisions for patients in Columbia and Chile are anticipated by the end of 2019.
UX007 for the treatment of LC-FAOD
The FDA has accepted our most recent proposal to submit an NDA for UX007 for the treatment of LC-FAOD based on currently available data from our positive 78-week Phase 2 study, a published retrospective medical record review, emergency IND
15
cardiomyopathy patients, and a published randomized controlled investigator study. Further details will be forthcoming following a pre-NDA meeting, which we expect to take place by the end of 2018.
We also continue to pursue a potential filing with EMA based on the current data and expect to have further clarity from these discussions before the end of 2018.
UX007 for the treatment of Glut1 DS
In October 2018, we announced that a Phase 3 study evaluating UX007 in patients with glucose transporter type-1 deficiency syndrome, or Glut1 DS, experiencing disabling paroxysmal movement disorders did not achieve its primary endpoint of demonstrating a statistically significant reduction in the frequency of paroxysmal movement events with UX007 treatment compared to placebo, and did not demonstrate a meaningful difference between treatment groups. The study also did not meet its key secondary endpoints. The safety profile observed in this study was consistent with what has been previously reported with UX007. We plan to discontinue further clinical development of UX007 for the treatment of Glut1 DS.
DTX301 for the treatment of Ornithine Transcarbamylase (OTC) Deficiency
On September 27, 2018, we announced data from the second dose cohort of the Phase 1/2 study of DTX301 showing that a second patient in the study (Cohort 2, Patient 4) demonstrated normalization of ureagenesis to 104 percent at Week 24. The other two patients in Cohort 2 (study patients 5 and 6) did not show clinically meaningful changes in rate of ureagenesis at 12 weeks. In addition, we announced that the first patient in the study (Cohort 1, Patient 1) completed the initial 52-week study period, and demonstrated a further increased level of ureagenesis at 52 weeks as well as ongoing clinical stability seven months after discontinuing all alternate pathway medication and recent liberalization of a protein-restricted diet. As of the cutoff date of September 12, 2018 there have been no infusion-related adverse events and no serious adverse events reported in the study. All adverse events have been Grade 1 or 2. The only treatment-related adverse events were mild, clinically asymptomatic elevations in ALT in two patients in Cohort 1 and one patient in Cohort 2, which have all been controlled with standard tapering courses of steroids. These ALT elevations were mild and similar to what has been observed in other programs using AAV gene therapy. All patients have remained clinically and metabolically stable. The Data Monitoring Committee completed its review of Week 12 data from Cohort 2 and recommended that we proceed to the third dose (1.0 × 10^13 GC/kg) cohort of the study. The first patient in Cohort 3 has been enrolled, and data from the cohort are expected in mid-2019.
DTX401 for the treatment of GSDIa
All three patients in the lowest dose Cohort 1 of the Phase 1/2 study have been dosed and we expect data from this cohort around the end of 2018.
Financial Operations Overview
We are a biopharmaceutical company with a limited operating history. To date, we have invested substantially all of our efforts and financial resources in identifying, acquiring, and developing our products and product candidates, including conducting clinical studies and providing selling, general and administrative support for these operations. To date, we have funded our operations primarily from the sale of equity securities.
We have incurred net losses in each year since inception. Our net loss was $87.3 million and $79.2 million for the three months ended September 30, 2018 and 2017, respectively, and $109.8 million and $220.4 million for the nine months ended September 30, 2018 and 2017, respectively. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant and material changes in our critical accounting policies during the nine months ended September 30, 2018, as compared to th