Ultragenyx (NASDAQ:RARE) is a $2.9 billion market cap biotechnology company focused on developing better medications for rare and ultra-rare debilitating genetic diseases. The company has completed phase 3 study of recombinant human beta-glucuronidase (rhGUS) in patients with mucopolysaccharidosis VII (MPSVII), a rare lysosomal storage disease, and submitted for regulatory approvals in the U.S. and EU. The company is also conducting a phase 3 study of aceneuramic acid extended release (Ace-ER) in patients with GNE myopathy, a progressive muscle-wasting disorder. In a promising study, Ultrgenyx is conducting phase 2 and phase 3 studies of burosumab, an anti-fibroblast growth factor 23 (FGF23) immunotherapy for patients with bone mineralization disorders X-Linked hypophosphatemia (XLH) and tumor-induced osteomalacia (TIO). UX007 is being evaluated in a phase 3 studies for glucose transporter type-1 deficiency syndrome (Glut1 DS) and a phase 2 clinical study in patients with long-chain fatty acid oxidation disorders (LC-FAOD). Takeda (TKPYY) and Ultragenix have entered into a rare disease pact that could give Ultragenix a strong foothold in the rare disease space. In depth scientific publication information on RARE candidates can be found here on the company website.
RARE announced in May 2017 that its application (BLA) submitted to FDA and a Marketing Authorization Application (MAA) submitted to EMA for rhGUS, (UX003), an enzyme replacement therapy for MPS VII (Sly syndrome) were accepted for review. MPS VII is caused by beta-glucuronidase deficiency, required for glycosaminoglycan catabolism (dermatan sulfate, chondroitin sulfate, and heparan sulfate). Progressive accumulation of these moieties results in a multi-system disease that includes a severe form called non-immune hydrops fetalis. MPS VII currently has no approved treatments. Regulatory guidance decisions regarding the therapy are expected in late 2017 and early 2018. The phase 3 study involved only twelve patients for 24 weeks of treatment with rhGUS. FDA and EMA analysis of the totality of the data was granted given its difficulty to treat and rare demographic prevalence. According to the company, "EMA agreed that approval under exceptional circumstances could be possible based on the Phase 3 study with urinary GAG levels as a surrogate primary endpoint, provided the data are strongly supportive of a favorable benefit/risk ratio and that some evidence or trend in improvement in clinical endpoints is observed". The condition is extremely rare, with only 1 in 250,000 being affected, and only 100 cases being reported in the U.S. Other FDA approved MPS enzyme replacement treatments have been successfully employed such as Aldurazyme for MPS I, Elaprase for MPS II, Vimizim for MPS IVA, and Naglazyme for MPS VI. Given the relaxed regulatory stance by FDA and pre-existing model for the therapeutic product, Strong Bio would expect high chance of approval on this candidate. However, sales cannot be expected to help the company maintain a market cap of $3 billion.
GNE myopathy is a Rare disorder caused by a defect in sialic acid biosynthesis leading to progressive muscle weakness and atrophy, usually with adult onset. RARE is testing sialic acid therapy to determine if it confers a meaningful clinical benefit based upon encouraging preclinical data. Sialic acid extended release (SA-ER) was shown to increase upper extremity muscle strength (10 Naïve subjects demonstrated a +3.47 kg improvement in UEC at week 24) with no effect on walk speed or stair climb test in a phase 2 GNE myopathy study. However, in extension studies lower extremity function seemed to resist deterioration, but did not increase in a statistically significant manner. It was well-tolerated with no serious adverse events reported, with most common being gastrointestinal types. A phase 3 study examining Ace-ER in GNE myopathy is fully enrolled with key readouts in 2H 2017, which will be necessary for EMA approval. The 89 patient double-blind placebo-controlled study is evaluating safety and efficacy of Ace-ER compared to placebo over 48 weeks, and if positive results are obtained, will be sufficient for NDA and MAA submission. GNE myopathy is ultra-rare as well, affecting about one out of one million people worldwide.
Burosumab (KRN23) is a monoclonal antibody specifically binding and inhibiting FGF23, implicated in bone deterioration. FGF23 is responsible for reduction in serum phosphorous levels by acting in the kidney to promote phosphaturia, as well as affecting vitamin D production. KRN23 was given FDA Breakthrough Therapy designation by FDA in June 2016 for patients only one year old and older. RARE and Kyowa Hakko Kirin are in final stages of developing this antibody to treat X-Linked hypophosphatemia, a common X-linked dominant heritable form of rickets, and TIO. In a 24 week phase 3 study in adults, Burosumab treatment met endpoints of serum phosphorous response and secondary endpoint of stiffness. Patients treated with burosumab demonstrated a statistically significant improvement in serum phosphorus levels, with 94% of patients achieving normal levels compared to 8% on placebo (p<0.0001). The treatment group also showed a statistically significant increase in fracture healing relative to placebo. Phase 2 study of burosumab for 64 weeks showed sustained reduction in bone disease and improvement in bone growth in 52 children. FDA submission of the burosumab Pre-Biologics License Application is planned for the second half of 2017, as it was decided that data from ongoing phase 3 clinical studies would not be necessary as part of the BLA. 24 week treatment with KRN23 was also shown to increase phosphorous levels and bone health in patients with TIO in a phase 2 study. Because FGF23 misregulation can require multiple divided doses of vitamin D and phosphate to treat, burosumab may offer an alternative to the cumbersome standard of care. Only about 300 cases of TIO have been reported in the literature, however X linked hypophosphatemia occurs in 1 of 20,000 births. Nearly half of these are associated with elevated FGF23 levels. Thus this rare disease market might move the needle even for a $3 billion market cap company.
UX007 is currently being evaluated in a few indications of its orphan drug designations, including Glut1 DS phase 3 studies, a brain energy deficiency disorder associated with seizures, developmental deal, and movement disorders. The study was initiated in April 2017. Study primary endpoint compares frequency of disabling paroxysmal movement disorder events with placebo over an eight week treatment period. Secondary endpoints include a diverse array of movement-related scores over 22 weeks including duration of paroxysmal movement disorder events, walking capacity and endurance, objective reporting of physical function, mobility, fatigue, pain, and cognitive function. Adverse events will also be examined closely as they pertain to movement and mobility. A Phase 2 study of UX007 in Glut1 DS patients with seizures is also being conducted by RARE, with March 2017 top-line data showing a decrease in absence-type seizures but no decrease in overall seizure number. RARE is conducting a phase 2 clinical study in patients severely affected by long-chain fatty acid oxidation genetic disorders (LC-FAOD), in which the body is unable to catabolize long chain fatty acids into energy. There are approximately 3,000 to 7,000 Glut1 DS patients in the United States. There are currently no FDA approved treatments specific to Glut1 DS. Given this is a repeat treatment option for this condition, the market could be significant enough to impact the company's bottom line.
Takeda and RARE entered into a rare disease pact in June 2016, enabling the development of one rare disease candidate plus a collaboration to develop up to five more rare disease candidates. Takeda will invest up to $65 million in Ultragenyx in two tranches, the first of which was a $25 million stock purchase along with a $15 million cash premium at closing. This first tranche will be followed at Ultragenyx's option, within 12 months, by a second equity purchase of $25 million. In return for the preclinical assets and funding, Takeda has picked up an option on the Asian rights to any licensed products that emerge from the collaboration. Emil D. Kakkis, MD, PhD, Chief Executive Officer of Ultragenyx stated, "Takeda has an impressive early pipeline of therapies with potential across a number of rare genetic diseases, and we are pleased that Takeda has chosen to partner with us to bring these therapies to patients with rare diseases that have few or no treatment options." Strong Bio regards this collaboration as the key to RARE's financial success. Though its candidates are not yet identified, it is this statement by Dr. Kakkis that should be seen as having a lot of potential. First, it was regarded by RARE leadership as important, and second, the project came with a cash investment of $65 million by a well-respected Japanese pharma, Takeda.
RARE reported cash and cash equivalents at roughly $500 million at end Q1. Operating expenses for 1Q were approximately $70 million. This puts the cash burn of RARE well into 2019 before needing more funds. In spite of being a company of rare diseases, the constitutive treatment regimens of its candidates might imply its sales could be significant, especially if Takeda is bringing some promising candidates with expandable labels to the table. Moreover, FDA stance on companies that target rare diseases are often more accommodating in terms of approving drug efficacy than for companies attacking large competitive markets. 14 analyst consensus at $84.50 per share is encouraging as well. The sector of biotechnology companies in rare diseases is promising. Still, with market cap of nearly $3 billion Strong Bio would look for a pullback in price for an initial position if possible, targeting the sub $60 range.
Risks for the company include that it has no products yet approved, and FDA regulatory approval may be associated with delays. Manufacturing obstacles for first-product launches have been historically significant, and should be seen as a risk for RARE. That being stated, its scale of production should not be much larger than for clinical trials in some indications. The market for rare diseases is also usually not regarded as very large, although due to the severity of the diseases RARE is attacking, daily treatment may be required, increasing its product sales per patient relative to some therapies. Competition could be a key risk for the company given its low target markets as well. For instance, the industry leader in MPS disorders is considered to be BioMarin (BMRN), a company that is well equipped to expand into a MPS VII label. Gene therapy approaches in which functional copies of metabolic enzymes are stably transfected should also be seen as a threat, but it is unlikely that the hundreds of thousands of gene variants can all be mediated by gene therapy before patent expiration. The risk of further dilution is significant, but most of this investment decision hinges on Takeda and RARE revealing their candidate profile. If the candidates turn out to be lackluster there is a risk this company will not sustain a $3 billion market cap, in spite of its stability over the past several years. RARE's pipeline is certainly worthy of any biotechnology watchlist.
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