Ultragenyx Pharmaceutical(RARE) - 2021 Q1 - Quarterly Report

Part I – Financial Information Financial Statements The company's Q1 2021 revenue grew significantly while net loss widened due to higher operating expenses Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $383,794 | $713,526 | | Marketable debt securities | $663,238 | $498,513 | | Total current assets | $1,070,936 | $1,295,304 | | Total assets | $1,597,763 | $1,759,555 | | Total current liabilities | $127,044 | $189,609 | | Total liabilities | $543,181 | $605,180 | | Total stockholders' equity | $1,054,582 | $1,154,375 | Condensed Consolidated Statement of Operations Highlights (in thousands, except per share data) | Account | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total revenues | $99,395 | $36,309 | | Research and development | $147,518 | $112,961 | | Selling, general and administrative | $53,258 | $47,516 | | Loss from operations | ($106,569) | ($120,665) | | Change in fair value of equity investments | ($20,619) | $7,668 | | Net loss | ($136,141) | ($119,025) | | Net loss per share, basic and diluted | ($2.03) | ($2.05) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Account | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($159,346) | ($95,152) | | Net cash used in investing activities | ($182,424) | ($95,125) | | Net cash provided by financing activities | $12,649 | $55,615 | | Net decrease in cash, cash equivalents and restricted cash | ($329,892) | ($135,285) | Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 174% driven by collaborations and product sales, while higher R&D and investment losses increased the net loss Overview and Pipeline The company advances a diversified pipeline for rare diseases despite some COVID-19 related delays - The company's pipeline is diversified across four product categories: biologics, small molecules, gene therapy, and nucleic acid product candidates[106] - The COVID-19 pandemic has caused interruptions to clinical trial activities, including patient enrollment and dosing, and has delayed some regulatory interactions and data reporting[104] Key Upcoming Clinical Milestones in 2021 | Product Candidate | Indication | Milestone | Expected Timing | | :--- | :--- | :--- | :--- | | UX143 (setrusumab) | OI | Pediatric Ph2/3 Initiation | 2H 2021 | | DTX401 | GSDIa | Ph3 Initiation | Early 2H 2021 | | DTX301 | OTC | Ph3 Initiation | 2H 2021 | | UX701 | Wilson Disease | Ph1/2/3 Initiation | Early 2H 2021 | | GTX-102 | Angelman Syndrome | Resume Ph1/2 Study | 2021 | | UX053 | GSDIII | Ph1/2 Initiation | 2H 2021 | Results of Operations Q1 2021 revenue surged 174% due to collaboration and product sales, while R&D expenses rose 31% Revenue Breakdown (in thousands) | Revenue Source | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Crysvita collaboration revenue | $36,260 | $27,215 | 33% | | Daiichi Sankyo | $42,750 | $0 | N/A | | Total Product Sales | $16,513 | $6,479 | 155% | | Dojolvi Product Sales | $7,034 | $1,444 | 387% | | Crysvita non-cash royalty revenue | $3,872 | $2,615 | 48% | | Total Revenues | $99,395 | $36,309 | 174% | Research & Development Expenses Breakdown (in thousands) | Expense Category | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Commercial programs | $13,661 | $5,857 | 133% | | Gene therapy programs | $21,362 | $13,200 | 62% | | Upfront license and milestone fees | $50,000 | $32,000 | 56% | | Total R&D Expenses | $147,518 | $112,961 | 31% | - The increase in upfront license fees was primarily due to a $50.0 million payment to Mereo in January 2021, partially offset by a $25.0 million payment to GeneTx and a $7.0 million payment to REGENXBIO in Q1 2020[137] - The fair value of equity investments in Arcturus and Solid Biosciences decreased by $20.6 million in Q1 2021, compared to a $7.7 million increase in Q1 2020, causing significant volatility in net loss[142] Liquidity and Capital Resources The company maintains over $1 billion in liquidity, sufficient for operations despite increased cash usage - The company holds $1.047 billion in available cash, cash equivalents, and marketable debt securities as of March 31, 2021[148] - Cash used in operating activities increased to $159.3 million in Q1 2021 from $95.2 million in Q1 2020, reflecting a higher net loss and unfavorable changes in working capital, including a decrease in contract liabilities related to the Daiichi Sankyo agreement[150][152][154] Contractual Obligations (in thousands) | Obligation | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating and finance leases | $12,140 | $24,224 | $15,058 | $2,410 | $53,832 | | Manufacturing and service contracts | $7,760 | $1,033 | $0 | $0 | $8,793 | | Building construction agreement | $17,744 | $141 | $0 | $0 | $17,885 | | Total | $37,644 | $25,398 | $15,058 | $2,410 | $80,510 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks stem from volatile equity investments, with minor interest rate and currency exposures - The company has significant equity risk from its investments in Arcturus and Solid, with the fair value of these investments decreasing by $20.6 million in Q1 2021[164] - A hypothetical 10% decrease in the market price of its equity investments in Arcturus and Solid as of March 31, 2021 would decrease their fair value by $13.4 million[164] - Interest rate risk is managed through a low-risk, investment-grade debt instrument policy, and a hypothetical 100 basis point change in interest rates would not have a material impact[165] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures with no material changes in internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[167] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2021[168] Part II – Other Information Legal Proceedings The company is not currently involved in any material legal proceedings - As of the filing date, the company is not a party to any material legal proceedings[169] Risk Factors Key risks include a history of losses, clinical development uncertainties, and reliance on third-party partners - The company has a history of operating losses and expects to continue incurring them for the foreseeable future due to high R&D and commercialization costs[176] - Clinical drug development is a lengthy, expensive, and uncertain process, with gene therapy candidates in particular posing risks of undesirable side effects[186][198] - The company is dependent on its partner KKC for the clinical and commercial supply of Crysvita and for its commercialization in key markets[215][233] - The ongoing COVID-19 pandemic has impacted and could continue to materially adversely affect business operations, including clinical trials, regulatory timelines, and the supply chain[282][283][284] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[326] Exhibits This section lists all exhibits filed with the report, including required certifications and XBRL data - The exhibits include the CEO and CFO certifications required under the Sarbanes-Oxley Act and Inline XBRL documents[332]