U.S. Markets open in 3 hrs 39 mins

Edited Transcript of RARE earnings conference call or presentation 5-Nov-19 10:00pm GMT

Q3 2019 Ultragenyx Pharmaceutical Inc Earnings Call

Novato Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Ultragenyx Pharmaceutical Inc earnings conference call or presentation Tuesday, November 5, 2019 at 10:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Danielle Keatley

Ultragenyx Pharmaceutical Inc. - Senior Director of IR & Corporate Communications

* Emil D. Kakkis

Ultragenyx Pharmaceutical Inc. - President, CEO & Director

* Shalini Sharp

Ultragenyx Pharmaceutical Inc. - CFO & Executive VP

================================================================================

Conference Call Participants

================================================================================

* Adam Anderson Walsh

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst

* Andrea R. Tan

Goldman Sachs Group Inc., Research Division - Research Analyst

* Christopher Joseph Raymond

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Huidong Wang

Barclays Bank PLC, Research Division - Research Analyst

* Jonathan Patrick Wolleben

JMP Securities LLC, Research Division - Associate

* Joseph Patrick Schwartz

SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst

* Laura Kathryn Chico

Wedbush Securities Inc., Research Division - SVP of Equity Research

* Matthew Thomas Holt

JP Morgan Chase & Co, Research Division - Analyst

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Vincent Chen

Sanford C. Bernstein & Co., LLC., Research Division - VP

* Yaron Benjamin Werber

Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen, and welcome to the Ultragenyx Third Quarter 2019 Financial Results and Corporate Update. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Danielle Keatley. You may begin.

--------------------------------------------------------------------------------

Danielle Keatley, Ultragenyx Pharmaceutical Inc. - Senior Director of IR & Corporate Communications [2]

--------------------------------------------------------------------------------

Thank you and good afternoon, and welcome to the Ultragenyx Pharmaceutical Financial Results and Corporate Update Conference Call for the Third Quarter 2019. We've issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. I am Danielle Keatley, Senior Director of Investor Relations and Corporate Communications. With me today are Emil Kakkis, Chief Executive Officer and President; and Shalini Sharp, Chief Financial Officer.

I'd like to remind investors that this call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, the types of statements identified as forward-looking in our quarterly report on Form 10-Q that was filed on August 2nd, 2019; our quarterly report on Form 10-Q 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.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Good afternoon, everyone, and thank you for joining us. I'll start today by discussing our commercial performance in the third quarter 2019. Shalini will then summarize our financial results for the quarter. I'll come back at the end to discuss the progress across our clinical and preclinical programs and our outlook for the rest of the year.

Starting with Crysvita, the growth we saw in the third quarter across all of our key metrics, including sales in the United States, continue to support this as one of the top rare disease launches in the industry. We have accomplished while maintaining a responsible price for Crysvita and by building a unique commercial model which places a great deal of emphasis on finding patients and helping patients and physicians through the reimbursement process. Crysvita is poised to ultimately be one of the larger rare disease products worldwide.

The execution of our U.S. commercial team in the third quarter 2019 continues to bring this important therapy to patients in need. We have seen steady quarter-on-quarter growth driven by high-level excitement and interest among patients and physicians.

In the third quarter, we received approximately 170 new completed start forms, bringing the total number since launch to approximately 1,430. This cohort is split among adult and pediatric patients began to shift towards adults with approximately 45% adults and 55% pediatric patients on reimbursed therapy. This compares to prior quarters where the split was 40% adults and 60% pediatric patients. We believe this increases in the proportion of adult patients will continue to grow slowly over time.

Approximately 670 unique physicians have now prescribed Crysvita. This steady increase of 90 unique prescribers per quarter is encouraging. We anticipate more prescribers who continue to write second and third prescriptions as they gain experience with Crysvita.

At the end of September, the FDA approved a label expansion for Crysvita, which we believe will further support our strong ongoing launch and continued penetration in the adult and pediatric markets. For adult patients, the label now includes improvement in stiffness, a meaningful measurement of muscle disease that impacts nearly all adult XLH patients. In addition, long-term sustained and further benefit in fracture healing in adults is included.

For pediatric patients, the new label includes clinical data demonstrating Crysvita's superiority versus conventional therapy from our head-to-head Phase 3 study in pediatric patients. The indication has also been expanded to include infants as young as 6 months of age. This is important as we receive numerous requests for treatment at this earlier age and believe in the value of treating as early as possible before progressive deformity and loss of growth has occurred.

In the third quarter, steady increase of approximately 170 new patients went on reimbursed commercial therapy bringing the total number of such patients to approximately 1,130. Our confirmatory genetic testing initiative that we commenced earlier this year is helping us to identify more patients with a confirmed diagnosis and convert those patients to reimbursed therapy.

In Canada, we are encouraged by the interest and uptake among patients with private insurance in our initial year of launch. More than half of Canadians have supplemental private insurance today; a number that has grown significantly in recent years. There are already a number of pediatric and adult patients who have been approved for reimbursement and are receiving Crysvita through their private insurance drug plans. We also continue to pursue public reimbursement in Canada, which will take more time.

Moving to Latin America, there continues to be significant interest and excitement about this treatment option. In Argentina, Colombia, the number of patients on reimbursed named patient treatment continues to increase and the feedback has been very positive. In Brazil, we are currently in the process of getting pricing and full reimbursement approval from the Ministry of Health. The first 2 patients have now been treated after successfully negotiating the legal review process, and there are more patients currently navigating the process. Ultimately we believe there is a significant potential for Crysvita in Latin America with growing demand in multiple countries for the product.

Earlier today, our partner, Kyowa Kirin, announced that the European Medicines Agency has accepted their application for the expanded use of Crysvita for adults with XLH in Europe. This application is now being reviewed. We're pleased with the step forward to bring this therapy to more patients in Europe.

Briefly turning to Mepsevii. This therapy is approved in the United States, Europe and Brazil, and the demand continues to build gradually as is typical for enzyme replacement therapies. We're also continuing reimbursement discussions with various government health authorities throughout the world.

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

--------------------------------------------------------------------------------

Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [4]

--------------------------------------------------------------------------------

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

Total Ultragenyx revenue for the 3 months ending September 30, 2019 was $25.8 million. Crysvita sales in North America, Europe and Latin America, which are shared with our partner, Kyowa Kirin or KKC, were approximately $81 million for the third quarter and approximately $211 million year to date.

Total Crysvita revenue recognized by Ultragenyx for the 3 months ending September 30, 2019, was $22.6 million. This includes $19.5 million in collaboration revenue in the North American profit share territory, $2.0 million in royalty revenue on KKC sales in the European territory, and $1.1 million in net product revenue in other regions.

In the United States, a significant order was placed on the last day of the quarter, which will not be recognized as revenue until the fourth quarter due to shipping terms. Depending on ordering patterns, there are expected to be fluctuations in our quarter-to-quarter revenue recognition from time to time. In Latin America, full reimbursement takes place on a country-by-country basis and can take some time, which can be further complicated by economic and political instability.

Mepsevii product revenue for the third quarter of 2019 was $2.4 million. Due to the rarity of MPS 7, we expect revenues for this product to be somewhat irregular from quarter to quarter and to build very gradually as Emil mentioned is typical for enzyme replacement therapies.

UX007 named patient revenue in the third quarter was $0.7 million. We also recognized $0.1 million in revenue this quarter from our research agreement with Bayer. As we have stated previously, we continue to expect revenues from this Bayer agreement to be minimal going forward.

Our total operating expenses were $143.8 million for the third quarter of 2019. For the past several quarters, up to 20% of our operating expenses, excluding business development transactions like GeneTx and Arcturus, have consisted of noncash items. Our research and development costs were $100.1 million, which includes a $20.0 million expense from the GeneTx upfront payment. We expect our R&D costs to continue increasing over time as we continue advancing product candidates from early preclinical development into early and pivotal clinical studies.

Our SG&A costs in Q3 were $41 million. We expect SG&A to increase over time as we support our commercial programs, simultaneously launching across multiple geographies. Over time, however, we expect our revenues to grow significantly and to offset more and more of our operating expenses.

Net loss for the third quarter of 2019 was $113.0 million, or $1.96 per share, basic and diluted, compared with a net loss of $87.3 million, or $1.74 per share, basic and diluted, for the third quarter of 2018. The loss for the third quarter of 2019 includes the $20.0 million R&D expense for the GeneTx upfront payment and a $2.2 million unrealized gain from the fair value adjustment on the investment in Arcturus equity.

For the first 9 months of 2019, cash used in operations was $273.3 million. This includes $20.0 million for the GeneTx upfront payment in the third quarter of 2019, $15.6 million for the amended Arcturus license rights in the second quarter of 2019 as well as adjustments for significant noncash charges including stock-based compensation expense of $62.3 million.

We ended the third quarter of 2019 with $527.1 million in cash, cash equivalents and available-for-sale investments, which is a net of the $20 million paid for the GeneTx collaboration this past quarter as well as $30 million paid to Arcturus for the amendment to that agreement in Q2 of 2019. We believe our cash resources should be sufficient to continue to support the initial years of launch for Crysvita and Mepsevii and allow us to continue to build and advance our clinical and translational research program pipeline.

I would now like to turn the call back over to Emil.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Thank you, Shalini. I'll now provide an update on our clinical and preclinical programs, then we'll turn to the upcoming catalysts. I'll start with UX007 for long chain fatty acids oxidation disorders, a group of diseases with high mortality rate, even despite newborn screening and current treatment with MCT oil.

Last month the FDA accepted our new drug application for UX007. We'll work with the agency as they validate the filing over the next several months. The FDA has set a PDUFA date of July 30 (sic) [31], 2020. At this point, they have indicated that they do not plan to hold an advisory committee meeting to discuss the application.

Moving to DTX301, our gene therapy program for ornithine transcarbamylase deficiency, or OTC deficiency. OTC deficiency is an X-linked urea cycle disorder that limits the body's ability to metabolize ammonia. And patients with OTC deficiency build up excessive amounts of ammonia in their blood and can quickly deteriorate into a full metabolic crisis, suffering from neurological deficits and other toxicities leading to hospitalization, coma and even death.

We previously reported data for the first 2 cohorts of the OTC study. We've had 2 responders of normalized ureagenesis for 78, 52 weeks and have maintained normalized ammonias after discontinuing ammonia scavenger medications and liberalizing their diets. They continue to do well off all therapy. In our view, these 2 patients demonstrate that metabolic cure is achievable with DTX301. We have since dosed all 3 patients in the third cohort of 1e13 GC/kilo. And without seeing any safety concerns, we will provide data from this cohort around the end of the year.

We're also planning to study additional cohort at 1e13 GC/kilo using prophylactic steroids as opposed to reactive steroids, based upon our own nonclinical data and data from others that prophylactic steroids could further enhance expression over and above that observed with the increased dose alone. We believe prophylactic steroid use could further enhance the consistency of expression for the OTC program, and we're encouraged by the potential to treat this disease. We expect to initiate this cohort with steroids in the first half of 2020.

Switching to DTX401, our gene therapy program in glycogen storage disease type 1a, or GSD1a. GSD1a is caused by a defective gene for the enzyme glucose-6-phosphatase-alpha, resulting in the inability to allow the liver to release glucose into the circulation. This leads to severe and sometimes life-threatening hypoglycemia. Today, patients go to sleep thinking that they could die that night if they don't wake up to their alarm and take their cornstarch. While the cornstarch can keep glucose levels up and improve survival, it does not directly address the disease and its long-term complications. So while cornstarch therapy has saved lives and improved health, it is not a normal life by any measure.

We're encouraged that all 6 patients in the first 2 cohorts have shown meaningful clinical response to therapy at the 2e12 and 6e12 GC/kilo dose levels. This includes improvements in glucose control shown by time to hypoglycemia and reduction in cornstarch requirements. All 3 of the patients, the first dose cohorts are now off cornstarch or on regular just cornstarch therapy. And the second dose cohort, all patients are showing a more meaningful reduction in glycogen storage as measured by the liver fraction and improved some metabolism measured by lactate levels. These data indicate that cohort 2's dose is showing greater transient expression and continued starch reductions and a stronger effect on the pathophysiology of the disease.

As a result, we have moved to enrolling the confirmatory expansion cohort of 3 patients at 6e12 GC/kilo dose, and we expect to have data from this cohort in the first half of 2020. Once we establish the dosing regimen, we will initiate a Phase 3 at the pre-determined dose.

I'll also touch on our new agreement with GeneTx Biotherapeutics to advance an antisense oligonucleotide for the treatment of Angelman syndrome, a truly devastating disease. Angelman is a larger rare disease indication with approximately 22,000 patients in the United States, and there are no approved treatment options today. The disease mechanism is well understood, and ASO is a well-validated class and is a good approach for Angelman syndrome that targets the disease mechanism directly.

We recently made an upfront payment of $20 million, which includes an exclusive option to acquire GeneTx. We can exercise this option at any time prior to 30 days after the IND for GTX-102 goes into effect, or we can also extend the option to exercise at a later time point. GTX-102 has received Orphan Drug Designation and Rare Pediatric Disease Designation. GeneTx is on track to file the IND, and we will continue to write updates in this program as it advances to the clinic.

I'll spend a few minutes now discussing a number of important milestones in the coming months that will continue to drive our progress, then we can move to the Q&A.

For Crysvita, we expect to see continued strong performance in North America. We believe the recent label expansion will further support these efforts. We will also continue to expand our reach with the Canadian launch and named patient sales and regulatory decisions in Latin America.

We plan to submit a supplemental biologics license application to the FDA for Crysvita for the treatment of TIO in the first half of 2020, and we're on track with the submission. While this population's smaller than XLH, it is an urgently ill population with sometimes very severe disease that we believe we'll adopt to see to over phosphate therapy based on our data to date.

For UX007, we'll continue to work with the FDA as they review our NDA, working toward a PDUFA date of July 31, 2020. We're encouraged by the discussion to date on the Phase 2 data package. We just look forward to an opportunity to treat many more FAOD patients much more quickly with this early filing pending approval.

Moving to the gene therapy programs. Our 2 programs in GSD1a and OTC continue to progress. We'll provide an update on OTC program around the end of the year, and we'll have data from the confirmatory GSD1a cohort in the first half of 2020, which has already begun dosing.

Finally for the preclinical pipeline, we continue to advance 4 preclinical programs including our gene therapy program for Wilson Disease and the collaborative GeneTx ASO program for Angelman syndrome.

To summarize briefly, the execution by our commercial team third quarter continues to drive the success of the Crysvita launch. We have 2 additional programs nearing potential commercialization with UX007 NDA under review and the Crysvita supplement BLA planned for TIO in the first half. Along with Mepsevii for MPS 7, this sets us up to potentially have 3 commercial therapies treating 4 diseases in 2020. Our gene therapy programs are advancing through the clinic toward Phase 3 studies, and we have a robust preclinical pipeline as well.

We continue to deliver on our goal of bringing therapies to patients with rare disease without good treatment options, and we have a number of important [tells] in gene therapy, new product lines and commercialization as we finish up the year ahead into early 2020.

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

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Gena Wang from Barclays.

--------------------------------------------------------------------------------

Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

My first question is regarding launching FAOD, and it seems PDUFA date is all set. Just wondering what is your thoughts on pricing? And a second question is regarding the GSD1a. I think the last time when we discussed that 35 gram of cornstarch fasting challenge seems to interfere with sensitive glucose metabolism. Just wondering if you can share with us the latest thoughts on optimized the test design so that it will be able to capture true clinical benefit.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

We'll start with the FAOD price. We certainly haven't priced the product yet. But I would let Shalini maybe discuss what we know about the pricing, at least what's out there at this point in time.

--------------------------------------------------------------------------------

Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [4]

--------------------------------------------------------------------------------

Sure. So as Emil said, we haven't made a final decision on pricing for that product yet, but you'll -- you probably know that the sell side models tend to range on the lower side for this product, estimating somewhere between $50,000 to $100,000 per patient per year. Mostly likely because this is a small molecule therapy, and so because of that, the Street has expected lower in terms of rare disease pricing. And we don't think that's an unreasonable assumption, but we don't have a final decision on pricing.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Very good. And Gena, I'll answer the question on GSD1a. The challenge we were seeing in the GSD1 program is that the patients had a time to hypoglycemia improvement and were having cornstarch reduction, but the amount of time improvement in the test was not necessarily correlating with their ability to reduce their cornstarch, which didn't quite make sense. And what we began realize what was happening is that the way this test was being done, 35 grams of starch were given. It was causing a glucose surge in especially the Cohort 2 patients, which it drove down their glucose through an insulin response, while some of those patients were able to go with very low cornstarch during the week, but during the test were actually driven down.

So we've modified and amended the protocol already to reduce that to 10 grams or less of starch, so we should not see that kind of hyperinsulinemic response. We think that'll help demonstrate the difference between what the patients are doing on their own without cornstarch compared to what they could now when they have an enzyme in the liver that's releasing glucose. So we think that small fix should help improve what we're seeing. And we look at those data in totality in that Cohort 2 and we felt good about the fact that we're having a very meaningful effect on GSD1a, and we proceeded ahead with that dose in cohort. We'll see that data soon.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [7]

--------------------------------------------------------------------------------

First a commercial question on Crysvita. I think I heard Shalini mention that there was a large order on the last day of the quarter, which I think you guys maybe pointed to as a driver of some quarter-on-quarter choppiness, if you will. But just doing some math on the patient numbers, the 1,130 patients on reimbursed therapy that's, if we just do the math from the prior 2 quarters, that does represent a decent slowdown in patients. I think it's 18% quarter-on-quarter whereas the last 2 quarters were 30-some percent. Just can you talk a little bit about that dynamic? Are we seeing a slowdown, or is that also something that's subject to some choppiness? And I have a follow-up.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [8]

--------------------------------------------------------------------------------

I think the 170 new start forms we think is fairly consistently with what the plan has been seeing, There may be some degree of slowing, but I think this is sort of expected as launch continues. But we don't think there's anything sudden. I think there was a little bit of timing issues. But at this point we feel good about how it's progressing and are not concerned about a significant change. But we see what you're seeing there, but I think if you saw all the numbers that go into your graph, you would look at it as kind of being a steady progression.

--------------------------------------------------------------------------------

Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [9]

--------------------------------------------------------------------------------

Okay. And then a related question. I'm sorry if you already addressed this, Emil. But adding -- expanding the label to include kids as young as 6, what does that do to the prevalent patient pools? How much does that increase that?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [10]

--------------------------------------------------------------------------------

So the label increase is to allow instead of 1 year and up, to allow 6 months and up.

--------------------------------------------------------------------------------

Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [11]

--------------------------------------------------------------------------------

6 months -- sorry, 6 months.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [12]

--------------------------------------------------------------------------------

Yes. So it's really, it's not a large change in the population, but there are kids that are let's say 8, 9, 10 months that want to get on treatment. The parents want them on treatment. So we do think it would be great for those patients to go straight on Crysvita rather than starting on phosphate, potentially get injured from that drug and then get Crysvita. Before 6 months, the phosphate isn't really low enough. We don't think there's a need to go before 6. So we think the 6 months addition will allow us to treat kids in an optimal way.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Your next question comes from the line of Yaron Werber from Cowen.

--------------------------------------------------------------------------------

Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [14]

--------------------------------------------------------------------------------

And maybe I have a couple of questions, maybe one, Emil, for you. With respect to the very slight shift that you're seeing now, but it looks like the number of adults or the percentage of adults is increasing. Any sense as to what's driving that, or is that just the natural cadence as you're going to find more and more prevalent patient and that sort of the newly diagnosed? And then secondly, if you can help us understand in Angelman with GeneTx, what would be the end points that you're going to be looking for? It's going to be obviously a safety study initially, but what about the efficacy parameters?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [15]

--------------------------------------------------------------------------------

Okay. In terms of the shift, remember that we expect that 9,000 patients in U.S. who are adults and 3,000 are peds. But the main difference is that kids will come into the clinic frequently, and therefore they see their doctor frequently, and therefore their doctor can offer Crysvita on a more frequent basis. If you look at what we've done a little over year launch with pediatrics, we've actually -- we're already treating 25% of the U.S. pediatric population in the first year or so which I think is a pretty incredible degree of penetration of a marketplace to have 25% of all expected peds in the United States to be on therapy.

So it's natural to expect now as we reach out and send our PDL teams out looking for adults that have been lost to follow up in outlying clinics, and we're going to start to find those people and bring them into the fold, and they'll finally come to their clinic and get offered treatment. I think the improved label will actually help a lot because the muscle stiffness is a common problem, and oral phosphate doesn't really do anything for it. And so being able to have a distinctive feature that we achieve with Crysvita I think will bring some patients in who maybe thought they didn't need treatment but weren't really fully appreciating how much they had.

So we expect to see a continued shift toward adults in time. I think it just means we're finding more of the adults, and we're also penetrating a lot of the kids who come to clinic. But we do think in the end the majority or nearly all pediatric patients will -- should get on therapy, and that a significant fraction of the adults, perhaps half or more that might -- should be treated. So we think this is the natural progression. Now on the second question you asked with GeneTx and the end points. Well, we're beginning the program.

And to be clear, GeneTx is really running the program, and we have our own core team that's sort of mirrored and supporting them and helping do things. We haven't made all the decisions on the clinical end point program at this point. I don't think we would talk about them. There's certainly a number of end points such as Ovid has used in their program, and we certainly will look at a lot of these. But I look at the Phase 2 beginning program. As a first look, an exploratory study, and then as time goes on, we'll help hone in on what we think are the approval end points we'd want to put into a program, but I wouldn't want to commit to that much at this point in time.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [17]

--------------------------------------------------------------------------------

Congrats on the progress. I guess I wanted to ask a guidance question just to see if you can provide any more clarity on what you're looking for to get more comfortable with launch dynamics to provide more guidance on Crysvita.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [18]

--------------------------------------------------------------------------------

I think maybe I should let Shalini talk about guidance and plans.

--------------------------------------------------------------------------------

Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [19]

--------------------------------------------------------------------------------

Sure. Well, Maury, so far we have provided a lot of granularity in terms of other metrics to give you a good sense of how the market is evolving over time. And as the quarters go by, we are learning more and more about the trajectory of the product, so I think we'll get more comfortable with giving guidance. That is, it's our aim to provide you guidance at some point. We just haven't committed to exactly when that is. I think we'd like to make sure we're very clear about the trajectory of the launch and what different quarters look like and what the dynamics look like, and then we'll feel more comfortable giving you a better number.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [20]

--------------------------------------------------------------------------------

Got it. That's helpful. And just as a follow-up, for 401, just wondering if you can recap what the gene regulatory regions are in the gene therapy construct, and if you're planning on exploring those in the expansion cohort or potentially in the Phase III, exploring those and potentially leveraging those in some way.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [21]

--------------------------------------------------------------------------------

We know, Maury, that the promoter we're using is a 3-kilobase region of the G6P promoter. It includes elements that respond to steroids, GRE elements that increase expression substantially. It also has elements that for insulin might suppress it, glucagon might induce it. And in fact, it really is designed to coordinate and integrate your body's needs with regards to glucose, which we think is a unique feature of our 401 program. And we can see that happening that as the steroids that we fix induced a hyperglycemic response, which is what happens in normal people, but most GSD1a patients do not respond to steroids normally because they can't release glucose. They actually get -- they go the other way. They get hypoglycemic.

We studied the regulation in vitro as well in liver cell lines, and we know a lot about it, and we think that it's going to be important. For one thing, it does give us the opportunity to use steroids to induce the gene expression if we wanted to. It's something that certainly is a tool we have in our toolbox if we wanted to do that at some point in time. But at this point we want to let patients get stabilized, get off their cornstarch completely, let their body come into a normal regulation where they're not all insulinemic and high starch all the time, and they can get into a normal cycle of being between in glucose. And I think that will allow the gene expression to build even further we would expect, and that might help them. So once they get off their starch and get stabilized, we'll see how they're doing. But we do have the opportunity to use steroids, for example, to induce expression if we wanted to.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

Your question comes from the line of Cory Kasimov from JPMorgan.

--------------------------------------------------------------------------------

Matthew Thomas Holt, JP Morgan Chase & Co, Research Division - Analyst [23]

--------------------------------------------------------------------------------

This is Matthew on for Cory. So for the 401 study and to follow up on Gena's question, how should we be thinking about the comparability between data sets from the current versus amended cornstarch challenge in the context of thinking about the go-forward dose for this program?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [24]

--------------------------------------------------------------------------------

We will -- so in terms of testing, the confirmatory cohort we initiated will have a new start testing regimen from baseline. So you'll have baselines for them. But I would say too for the other ones, we'll test them from what they were with the cornstarch, and then we'll have a repeat that will not have the cornstarch. You'll look head-to-head. What I would say to you is rather than comparing -- for the first 2 quarters, rather than comparing baseline to end game, when I would say to you, it doesn't matter what their baseline is. The question is can they stay off? Can they stay in normal sugar levels for the entire night? If they can do that with the new regimen, then that's the answer. The answer is they can do that now and they couldn't do it before. So you don't necessarily have to compare baseline to get the answer that's clinically meaningful. If we keep all 6 patients from going hypoglycemic once they're off starch and they're not getting the high starch in the test, that's your answer, it's working.

--------------------------------------------------------------------------------

Matthew Thomas Holt, JP Morgan Chase & Co, Research Division - Analyst [25]

--------------------------------------------------------------------------------

Got it. And then just quickly on the 301 program. Given the data around year-end and the prophylactic steroid cohort expected after, how should we be thinking about time lines to Phase 3 study?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [26]

--------------------------------------------------------------------------------

Well, because we are planning to do the steroid arm for that, that would bring it out a little further for OTC. Because assuming GSD1 goes straight through, then that would be faster and OTC would have a little bit more to do before going to Phase 3. But we would expect at least in the first half of the year to have a sense for what the Phase 2 plan is -- I mean what the Phase 3 plan is for OTC and time line going forward. And I think if we can show that we're actually curing the majority of patients, metabolically curing the majority of patients with a steroid regimen, I think at least you'll have an answer that there is a product there and it can move forward. But it would be a little after the GSD1 program, which is potentially moving faster at this point in time.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Your next question comes from the line of Laura Chico from Wedbush.

--------------------------------------------------------------------------------

Laura Kathryn Chico, Wedbush Securities Inc., Research Division - SVP of Equity Research [28]

--------------------------------------------------------------------------------

I guess one first on UX007. I think you've spoken to this opportunity representing about 2,000 to 3,000 U.S.-based patients. I'm curious if you will actually have perhaps a number on the number of identified patients prior to launch just to get a better estimate of perhaps the addressable treatment market. And then a separate question on DTX301. I think I just missed it, but when might we get the data from that prophylactic steroid cohort? And then how does that factor into your plans for advancement?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [29]

--------------------------------------------------------------------------------

Okay. So for long chain fatty acid defects in the United States, now in all 50 states, we are newborn screened, and we know there's around 100, 150 range diagnosed every year. So the patient identification program will be different. Now the challenge is patients let's say over age 10 may have been missed, and we will have to work on finding those patients. But we should have maybe first 10 years of patients should have been diagnosed, which I think will be an important advantage at launching, especially since every year when you get a new group of patients diagnosed, to have the drug available that will be covered by insurance rather than something you're paying out of pocket, and would have information about it would suggest it's superior at preventing major hospitalizations I think would be good drivers for adoption.

We won't be able to tell you exactly the addressable population, but because of newborn screening, we could probably predict for you approximately, based on estimates of the lifespan, what the prevalent population should be. But we have been developing our techniques around patient diagnosis and a team that's been doing it, so we feel very good about our ability to find these patients. Most of them will be in medical clinics in about 160 centers, so it's a little bit more focused a group than might be with let's say adult XLH, which is more like a few thousand. So we think we can do it with a relatively focused team.

And because we've been supporting compassionate use, early access and have a number of patients on long-term therapy at a number of centers around the U.S., there's a high awareness for the product already. And so we feel that will give an opportunity to move more quickly to move ahead. So the last thing you asked was 301 prophylactic steroids. What we said is we're going to get the e13 dose data around the end of the year for without -- with reactive steroids. And when we'll be initiating the prophylactic steroids.

Amendment's already been filed a few months ago, so it's already out there in play. So we should be able to proceed. And we're working with our patient diagnosis team obviously to line up OTC patients so that we would start enrolling that patient to the first part of the year. I'd expect the data to take some time to get through to get enough data to really be confident that we're changing course or improving efficiency. And we'll be able to compare with or without prophylactic steroids and to tell us whether that's helping or not. I'd expect around midyear we would have a feel for it, but we haven't set a precise time line yet when we'll know the exact results. It depends on enrollment.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Andrea R. Tan, Goldman Sachs Group Inc., Research Division - Research Analyst [31]

--------------------------------------------------------------------------------

This is Andrea on for Salveen. My first one, just as a follow up to the upcoming DTX301 Cohort 3, can you help frame for us what the expectations are there? And if a positive response in 2 of the 3 patients is still the bar to advance the program, or if that decision is more dependent on the outcome of this additional cohort that's using prophylactic steroids.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [32]

--------------------------------------------------------------------------------

I think we've said that 2 out of 3 patients showing response would tell us that the dose is probably right, and the steroids we hope would increase that to be more consistent, particularly if there's a difference between males and females, which we believe may be true, but we're not 100% certain at this point. So the idea of the steroids would not necessarily increase the peak, but increase the consistency of response. Our expectation, we would probably do the steroid arm anyway. We'll have made the product available to do it. But our goal was to get at least 2 out of 3 to say that we're progressing the program that are responders.

So we think that's a reasonable target to at least tell us that the drug is effective enough. And then if we can get an effective steroids that would help tell us what those combination would give us confidence that we don't need to go higher, that we have a high enough dose. And I'd remind you that we had complete responders, metabolic cures at 2e12 and 6e12. So e13 is kind of substantially more. And so the hope is the steroids would allow those patients that seem more resistant to respond to it in a similar way to the response we've already had. So summarize, we're looking for 2 out of 3 responders, but we would likely do the steroid cohort regardless because we already have the drug in hand.

--------------------------------------------------------------------------------

Andrea R. Tan, Goldman Sachs Group Inc., Research Division - Research Analyst [33]

--------------------------------------------------------------------------------

Got it. Makes sense. And then just secondly on Crysvita. As the launch has continued and you've kind of monitored this, do you have a data metrics on how many physicians are repeat prescribers, and what, if any, are any of the gating factors to this type of repeat behavior?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [34]

--------------------------------------------------------------------------------

Well, a lot -- we have -- actually it was 670 unique prescribers. But first let's be amazed at that number to start with because it is an amazing number. I've been in the rare disease business forever. Never had 670 individual prescribers for anything globally even. So it's a lot. That is partly the reach that we've achieved that PDL team in finding all these docs and feeding them to the reps, and that process really allowed us to do that. About 2/3 of the docs have done basically 1script, and about 1/3 have done more than 1 script. And what we see is that fraction that have done more than 1 script is holding steady.

So as we add new prescribers, some of the 1 prescriber groups are becoming a 2 prescriber or more group, and we see that progression. So that 2/3, 1/3 ratio has been pretty consistent for the last few quarters. So what we see is people try it out with a patient, they get the feedback, and most of the time the feedback is quite profound, and then people start adding prescription. I think that base will bode, the base of prescriber will help bode well for our continued growth of the product. But it does take one test, a response, and then people start adding secondary patients.

I think the other thing is many doctors are testing out the reimbursement situation because they don't want to get caught in a quagmire if there's going to be trouble. Our UltraCare team is extremely good, and certainly when I talk with PIs, a number of them know their UltraCare team member by name, which means they have building relationships. And the idea is that we'd take that half of factors that we can, in terms of dealing what have to be dealt with in order to get things done for patients. But we think that that's going to be really important part.

The other thing is we commit that patients get treated one way or another, and we put them on Fast Start. And if there's any hang-up, we also commit to getting them free drug. So the doctors feel like we're never going to pull a rug out under their patient. They can be confident we're going to stand behind them, and if they offer this to patients that they're going to get treated. And that's how we make it work, and I think we need to keep doing that. People get comfortable that's not just words, that we mean it.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

Your next question comes from the line of Adam Walsh from Stifel.

--------------------------------------------------------------------------------

Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [36]

--------------------------------------------------------------------------------

A couple of quick ones here. The first one is as we look across Latin America for Crysvita, you had mentioned that for both Argentina and Colombia, you've seen named patient sales go up. And in Brazil, you're in the process of reimbursement through the Ministry of Health there. And I'm just curious where or when would we expect some kind of inflection point out of Latin America in your major countries there when it comes to approvals, reimbursement and patient access? And then I have one follow-up.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [37]

--------------------------------------------------------------------------------

So obviously in Latin America, Brazil is the largest factor. And the government there, the current regime has been changing things and creating uncertainties for how they're going to proceed. We have a fairly large queue of patients going through the litigation process. And as I said, we've had the first couple approved. We'd expect that process to start get going, but it has taken longer than we would have normally expected. So I would say the Brazil process of getting reimbursement through the litigation process is what's going to essentially start driving the Brazilian launch.

The actual formal process can take some time. And for most companies, most of the revenue they're getting from Brazil is coming from basically the litigation process. For Argentina, we are actually going to file as well in Argentina, because to get the named patient program to accelerate further, there's the belief that we need to file. And so we've agreed to do that and file there and actually try to drive the formal reimbursement. I think it's going to take a little bit of time to get going, but we are getting revenue and we have a great team down there.

And just things in Latin America can be complicated, both political and economically, but we feel comfortable there's a strong drive for the product. And people are lining up and queuing up in the litigation process, and those cases are coming through and we believe that we'll start generating revenue. But I don't know if it will be exactly inflection point. I think we start seeing some steady growth in the revenue from Latin America over time. We realize Latin America's a huge part of the value for Crysvita for us, so we are not underestimating or underinvesting what's required to produce a reasonable product revenue from Crysvita in Latin America.

--------------------------------------------------------------------------------

Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [38]

--------------------------------------------------------------------------------

Great. That's helpful. And one quick follow up here. On UX007 for long chain fatty acid oxidation disorder, the FDA indicated that there won't be an ad com to you, but also it's clear that there's not a priority review. I'm just curious, you might have thought there would be a priority review given the unmet need and kind of the dire circumstance of the condition. And then on the other hand, you might have thought there would be an ad com given the kind of unconventional nature of the clinical trial program that underlies the NDA. So just any commentary there would be great.

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [39]

--------------------------------------------------------------------------------

We've had a good part of the year of discussion with FDA, and I think we kind of understand the perspective. We requested to file off Phase 2 data that was not randomized controlled data, just remember. And our goal was to shortcut the time line and the investment expense of doing a Phase 3 and essentially taking 4 or 5 years and dozens of millions of dollars, which our goal was to file earlier. Because we don't have randomized controlled study, that does change the perspective whether we've proven it's better than MCT or not. But we think the data do show it's superior, and I think there's a procedural question in their mind and we got standard review for that reason. But they agree that it's important. They have been very constructive in understanding it. And so it's a little bit more of a tactical issue.

From the advisory committee standpoint, I don't think they have any debate that the drug is there and is useful, and therefore there wasn't really a reason driving the advisory committee. And so I look at this as sort of a procedural step in how they approach a drug filed off Phase 2 like this and in the presence of an existing product, MCT oil. We're encouraged by it, frankly. I think it tells us I think we can get through to approval. We're not predicting it, but I think the FDA has been I think very collaborative in discussing application with us, and we feel comfortable we can move forward and have a great chance getting approved and being able to launch this for FAOD patients.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst [41]

--------------------------------------------------------------------------------

Actually, I will continue on the last thread there. Given you and others, other investigators have generated a lot of data for UX007 on different end points amongst different patients and different settings, what do you most want to see end up on the label, and what are the most probable scenarios that could play out based on your interactions with the FDA to date?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [42]

--------------------------------------------------------------------------------

The one thing I'd point out to you, Joseph, that's different I think from let's say oncology drugs that you may be looking at the time, in rare disease drugs, the best label says that UX007 is indicated to treated long chain fatty acid oxidation defect patients, period. That's all you want on the label. You really don't want a lot of fine crafting. You want that there. And the study is the study and the data we presented. Other aspects of the label don't necessarily have so much impact, as long as the disease indicated and there's no limitations in that indication statement. So that's what we're most comfortable with.

And I will point out to you that whether it's superior or not is one of the questions with that around my study, but I think there've been a number of rare disease drugs approved with even noninferiority labels that are actually done fine. I think physician community is very aware of the product. We get dozens of requests for emergency use, and we've been supplying it. So there's a lot of experience out there as well. So our goal with the FDA is to find a reasonable place how to label it and how to support that label with real-world data, disease monitoring program data to help support the value of UX007. Now we're confident that UX007 does improve the outcomes for patients in a significant way, but we didn't -- we filed off Phase 2. We didn't have a randomized controlled study, and I think that's the one distinct difference.

--------------------------------------------------------------------------------

Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst [43]

--------------------------------------------------------------------------------

Okay. That's very helpful. And then in your discussions with payers, what have they been most focused on in order to be confident that UX007 presents an advantage versus MCT oil?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [44]

--------------------------------------------------------------------------------

Well, we've shown both payers and doctors the results of the study, and most are impressed and compelled because it is -- normally with rare disease, and I've been in a lot of programs, it's generally really hard to get for example a 77% reduction in the median number of days in the hospital from 5.5 days to 1.5 over an 18-month period, and then to follow it for another 18 months and have the median go to zero. It goes even lower after 3 years. These you don't see that kind of data that has that direct [pharmosynomic] impact on patients. And the numbers are large and those are statistically significant. So we've had very good response to that both from doctors and payers, frankly, and we feel pretty comfortable that there's a good case for why this drug should be used to help prevent costly and disastrous catastrophic hospitalizations.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Your next question comes from the line of Liisa Bayko from JMP.

--------------------------------------------------------------------------------

Jonathan Patrick Wolleben, JMP Securities LLC, Research Division - Associate [46]

--------------------------------------------------------------------------------

This is Jon on for Liisa. Just 2 questions for me. Can you remind us of your current gene therapy manufacturing capacity and if you're going to have enough clinical supply for all the studies throughout next year? And then just on cost of sales, I saw a pretty substantial quarter-over-quarter increase. Is there anything behind that number, or is that something we should look for moving forward, or is that kind of a one-off?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [47]

--------------------------------------------------------------------------------

I'll talk about gene therapy manufacturing and let Shalini deal with the financial part. So on the gene therapy manufacturing, we are using contract manufacturers. We developed the process at our Woburn facility with our own process development team. Developed fully fledged full processes for how to develop and produce. We are building out our quality control lab to actually do analytical testing ourselves, which we'll have operational next year, which will allow us to accelerate the testing and release of product made. But we're continuing to use several contract manufacturers across the country.

Now with time we plan, and we are planning designing our own manufacturing plant as well. But as close the program at this point, we'll depend on contract manufacturers and potentially our own testing lab. Currently, we have actually been running a number of the runs in preparation for Phase 3. We will have -- we've increased the investment in that to allow us to move more promptly ahead with the Phase 3 program. And we'd expect to have accumulated enough product to start and run the Phase 3s well before those programs get started. So I think we should be in good shape on capacity. I know there is competition over the space, but we've been reserving well ahead and setting up, and we have good relationships with a number of the contract manufacturers.

--------------------------------------------------------------------------------

Shalini Sharp, Ultragenyx Pharmaceutical Inc. - CFO & Executive VP [48]

--------------------------------------------------------------------------------

And on cost of goods sold, there is this quarter a $1.9 million reserve associated with a lot of product that did not meet our quality standards, so that it's something specific to this quarter.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

And we have your last question coming from the line of Vincent Chen from Bernstein.

--------------------------------------------------------------------------------

Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [50]

--------------------------------------------------------------------------------

Just a couple of them. I guess the first one is just about Crysvita commercial dynamics. So you're about 5, 6 quarters into the launch at this point, which is often about the point that growth trajectory for rare disease drugs tends to change a little since many of the patients have been kind of waiting to start drug and our pent-up demand at launch likely have been on drug. How should we think about these dynamics with Crysvita going forward? And how do you think those different patient pools on both the adult and pediatric sides, and how far penetrated are we into them and what might supply for trajectory going forward?

And then second one would just be a quick one to follow up on the early on manufacturing. Curious about how you -- could you provide us some additional color on how you think about the merits of contract manufacturing versus your own manufacturing as the sort of broader gene therapy manufacturing landscape evolves going forward?

--------------------------------------------------------------------------------

Emil D. Kakkis, Ultragenyx Pharmaceutical Inc. - President, CEO & Director [51]

--------------------------------------------------------------------------------

Okay, sure. So let's talk about growth of that launch. I think when we announced start form, you're looking at summarized numbers through time. I think if I showed you the line graph, which I've asked the team to put into our deck so you could see the line, I think you would see that it doesn't really look like it's flattening. It's a steady course, but it's not the same as it was the first few quarters where we had the trial patient on where we were -- and we definitely had some warehouse patients, people lined up and ready to go. But we're seeing a pretty steady, smooth growth to it.

So I just think it's not quite as distinctive a change. But it's not unexpected there would be some slowing. Now what one of our key tenets of the PDL strategy is that we wouldn't run out of docs -- I mean patients that the doctors were seeing because those patients, those PDLs would be finding new patients that our reps have not even gone to. So the idea is to keep the funnel full with investing essentially as many people finding patients as who are doing the sales piece. That's what's unique about the model.

My hope would be if it works out well, it will continue the growth rate because we keep the funnel full of fresh identified patients and doctors. And that's why the prescriber number continues to go up as we keep finding those new doctors and getting them prescribing. So that's sort of the way we see it. And that graph will be put into our deck and you can kind of at least get maybe a greater feel for what it looks like over time. And maybe that'll help manage the question. We don't want to be cagey on that. It's pretty straightforward.

Now on the manufacturing. Contract manufacturing for simple products is definitely more cost-efficient where there's a whole bunch of capacity and you can pick and choose, there's plenty -- you don't have to have a hard time getting to it. Gene therapy has been very competitive. It's also very sophisticated and complex manufacturing, which is -- requires higher standards and performance and people. Our contract manufacturers are doing a fine job and we're moving ahead in the programs. But I think in the long run, for this kind of sophisticated product, we would expect most companies to go to their own manufacturing plant where they control the process, they can control the know-how that will help elevate and improve the productivity, the processes, and allow them to gain efficiencies.

And since we have 2 pros in the clinic and a third one coming, having our own plant will allow us dramatic efficiencies by being able to run 3 programs essentially in one plant when that plant would go online. If you're running one at a time, maybe you wouldn't have that efficiency, but we have enough in play to make it worthwhile. But it takes some time to put a plant together, and we want to do it well. The contractors work in the meantime, but I would say for an expensive, sophisticated product, you're almost always better off from a cost perspective and a control perspective of running your own manufacturing. If it's simple manufacturing like Mepsevii, contract manufacturing for a fed batch tank type thing, I wouldn't build a plant to do that. There's so many people that can do a nice job for you.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

Thank you. I am showing no further questions at this time. I would now like to turn the conference back to Ms. Danielle Keatley.

--------------------------------------------------------------------------------

Danielle Keatley, Ultragenyx Pharmaceutical Inc. - Senior Director of IR & Corporate Communications [53]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Operator [54]

--------------------------------------------------------------------------------

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all now disconnect.