Ultragenyx Pharmaceutical Inc

NASDAQ:RARE

Earnings Call Transcript 2022-Q3

[Operator]

Thank you for standing by. Good afternoon, and welcome to the Ultragenyx Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, you will have the opportunity to ask questions during the Question-and-Answer portion of the call.

It is now my pleasure to turn the call over to Joshua Higa, Executive Director and Head of Investor Relations.

[Joshua Higa, Head of Investor Relations]

Thank you. We issued a press release detailing our financial results, which you can find on our website at ultragenyx.com.

Joining me on this call are Emil Kakkis, Chief Executive Officer and President; Erik Harris, Chief Commercial Officer; Mardi Dier, Chief Financial Officer; and Camille Bedrosian, Chief Medical Officer.

I'd like to remind everyone that during today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties and our actual results may differ materially. Please refer to the risk factors discussed in our latest SEC filings.

I'll now turn the call over to Emil.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Thanks, Josh, and good afternoon, everyone. 2022 has been a year focused on execution for our team both commercially and in our pipeline. We have made substantive progress across our key priorities and in issues despite ongoing macroeconomic challenges. In the third quarter, we continue to achieve strong year-over-year growth from our commercial programs and continue to broaden our commercial revenue base.

In Latin America, we are seeing positive commercial and regulatory momentum across multiple countries with increasing revenue. In Europe, our launch of Evkeeza is underway and we are seeing significant enthusiasm from lipid experts on the potential for Evkeeza to change the treatment paradigm. We've submitted already or will submit reimbursement dossiers in multiple countries and are beginning country-specific pricing discussions. We believe the enthusiasm of lipid expert for the product will help in supporting effective reimbursement discussions.

With regards to our pipeline, we acquired full control of the GTX-102 program on promising science and the interim Phase I/II data that we shared in July. We continue to be encouraged by the progress of patients in the program and the safety profile with 10 to 12 mid-doses now being used in maintenance.

Over the next few months, we anticipate completing enrollment in the Phase III study for GSDIa, which has enrolled very well with the enthusiasm of patients for a new treatment option. We also plan to complete enrollment of the Phase II portion of the study for osteogenesis imperfecta in mid-2023, which should give us data on the bone biomarker response of two dose levels.

Last month, I visited our gene therapy manufacturing facility outside of Boston with the Ultragenyx Board of Directors and we are hosted by our team building the plant. I continue to be impressed with the quality of the work and the facts have met or exceed our timelines and maintain costs within budget for this greenfield project. Despite the pandemic and global supply chain issues, the facility has remained on track to begin manufacturing operations next year. It should be a big boost to our gene therapy franchise. We've also been focused on laying a solid financial foundation for the years ahead.

In July, we raised $500 million worth sale of a portion of our Crysvita royalty and have established additional cost controls limiting headcount, operating expenses as well into 2023. We believe we have the right team in place to achieve our priorities and we will actively manage our headcount and span while achieving these objectives. Erik will provide more specifics on the commercial team's performance in the third quarter, but I wanted to briefly touch on our partnership with Kyowa Kirin.

We have worked closely with our partners throughout commercialization process to make Crysvita a very successful rare disease launch. We recently amended our collaboration agreement to allow both companies be in the U.S. field for an extended period of time, ensuring U.S. Crysvita franchise will continue building on the solid foundations we have established.

In the press release we issued earlier today, we shared details and amendments that increases our joint commercial effort for one-year after the transition of commercial responsibilities through April, 2024. Under the revised terms KKNA recently began field operations ahead of the transition and Ultragenyx will maintain a consistent presence here in the U.S. for an additional full-year until April, 2024 after the transition to further increase field coverage.

The surge of additional efforts should help with identifying more XLH patients and providing them an opportunity to be treated and highlights each partner's commitments to maintaining continuity with the Crysvita franchise. During this time, Ultragenyx salesforce expenses will continue to be shared with KKNA. In addition, Ultragenyx will continue to call on Medical Genetics in North America after the transition and indefinitely based on the original terms of our collaboration agreement. And we will co-lead the XLH and TIO disease monitoring programs in partnership with KKNA. Medical Genetics are an important segment of healthcare providers who treat patients with XLH and many of the diseases targeted by our other clinical stage programs.

With that, I turn the call over to Erik to provide more specifics on the commercial performance for the quarter.

[Erik Harris]

Thank you, Emil, and good afternoon, everyone. I'll focus my section on the commercial team's efforts in the third quarter, supporting Crysvita, Dojolvi and the upcoming launch of Evkeeza across Europe. For Crysvita, within a profit share territory, we continue to see meaningful increases in key metrics, including the number of start forms, patients on reimbursed therapy and unique prescribers.

In the third quarter, approximately 120 start forms were completed. This is particularly impressive given the last time we saw this type of increase in any given quarter was in early 2021. These start forms have led to a steady increase in the number of reimbursed patients on therapy driven by an ever expanding base of unique prescribers.

In the third quarter, approximately 60 new healthcare providers wrote a prescription for Crysvita. We are well over four years into the launch of this rare disease product and I applaud the team's continued efforts to find those community-based physicians as we are increasingly finding more adults with community physicians. Almost 50% of our new patients are now coming from new prescription writers, while the other 50% is coming from existing prescribers.

We are focused on increasing face-to-face activities and educating physicians as we come out of COVID and as many new offices are now open to seeing our field personnel. While our team has been working closely with Kyowa Kirin for several years, the recently signed amendment allows us to work side-by-side in the field to ensure we can maximally support our patients during this transition. The combination of additional KKNA sales specialists beginning last month and the extension of our U.S. field team through April, 2024 enhances Crysvita's long-term potential.

Outside of the profit share territory, Crysvita was recently approved in Argentina for the treatment of XLH in adults and children six months and older. This therapy is now approved in five countries in Latin America, including Argentina, Brazil, Chile, Colombia, and Mexico. Brazil continues to be the largest market in Latin America and while the uneven ordering patterns drive some well known quarter-to-quarter variability, the underlying demand continues to grow at a steady pace.

Across all of our Ultragenyx regions, Crysvita revenue in the first nine months of 2022 grew 34% compared to the same period of 2021. We know the underlying demand is strong and supports our full-year revenue forecast and we are reaffirming our 2022 Crysvita revenue guidance in Ultragenyx territories of $250 million to $260 million.

Turning now to the Dojolvi and beginning with the efforts in the U.S. Many of the leading indicators, including number of start forms and patients on reimbursed therapy, continued to exceed our expectations. As of the third quarter, we have received approximately 400 completed start forms, with over 340 patients on reimbursed therapy. Since launch, approximately 180 healthcare providers have written prescriptions for Dojolvi, with nearly half writing for more than one. Despite these strong metrics, there is an opportunity to continue educating healthcare providers on the benefits of optimal dose titration and supported by our clinical studies to assure patients are receiving an optimal dose.

Outside of the U.S., demand for Dojolvi continues to be led by named patients and early access programs in Europe, particularly in France and Italy. In Latin America, Dojolvi is currently approved in Brazil where we are continuing to work through the process to get full reimbursement approval. In Mexico, we recently received orphan product recognition, which is similar to receiving approval with a few benefits that will enable us to get this important therapy to patients even faster.

While we continue to work to address the need for better dose titration for maximal effect in the U.S, at this time, we are reaffirming the guidance range we set at the beginning of the year of $55 million to $65 million.

Closing briefly with Evkeeza, which we are preparing to launch in Europe followed by Latin America, Canada, and then Japan for patients with clinically diagnosed homozygous familial hypercholesterolemia. The data from Regeneron's pivotal study for Evkeeza were very impressive. The drug demonstrated a significant improvement over standard of care with a 49% reduction in LDL-C on top of all existing LDL-lowering treatments.

The study also showed Evkeeza reduced LDL-C by 72% in the most severe patients with less than 2% of LDL receptor activity. Feedback from key opinion leaders is very positive, especially those who participated in the clinical studies and have seen the value of this novel mechanism of action for their patients. They understand that Evkeeza blocks ANGPTL3, which enables a proven alternative pathway to convert VLDL into remnant cholesterol that can be easily cleared by the liver. This bypasses the normal lipid metabolic process that leads to dangerously high levels of LDL-C in these patients.

Across Europe, we are in the process of filing reimbursement dossiers and look forward to beginning the country-specific pricing discussions. In parallel, we are evaluating requests for named patient access, which could generate the first orders later this year. In summary, the global commercial team is delivering on our mission to being a leader in rare disease by ensuring access to Crysvita, Dojolvi, Mepsevii and now Evkeeza to all patients who could benefit from these therapies.

With that, I'll turn the call to Mardi to share more details on the financial results for the quarter.

[Mardi Dier]

Great. Thanks, Erik. Earlier today, we issued a press release that included financial results for the quarter, which I will briefly summarize. Company revenue for the three months ended September 30, 2022, totaled $90.7 million. Crysvita revenue in Ultragenyx territories was $64.5 million, including $51.3 million from the North America profit share territory and net product sales of $13.2 million in other regions. Total royalty revenue related to the sales of Crysvita in the European territory was $5.4 million. Dojolvi revenue for the third quarter 2022 was $13.3 million. Mepsevii revenue for the same period was $6 million.

Total operating expenses for the third quarter 2022 were $315.8 million, which includes R&D expenses of $237.3 million, SG&A expenses of $69.8 million and cost of sales of $8.6 million. Operating expenses for the quarter included non-cash stock-based compensation of $35.8 million and a one-time R&D expense of approximately $75 million related to our acquisition of GeneTx.

For the quarter ended September 30, 2022, net loss was $245.1 million, or $3.50 per share. It's important to highlight a handful of non-cash items that have impacted net loss during the first nine months of the year. This included approximately $101 million of stock-based compensation, $27 million of non-cash interest expense related to the Royalty Pharma and OMERS transactions, and $21 million related to the decline in fair value of our equity investments in Arcturus and Solid Bio. These are offset by approximately $16 million of non-cash revenue related to the EU royalty.

We ended the quarter with approximately $1 billion in cash, cash equivalents and marketable securities. While we are well capitalized, we are also continuing to make strategic operating decisions to manage our cash burn rate. As we have said, 2022 is a peak burn year for us as we have initiated multiple late-stage clinical programs in-licensed Evkeeza, completed the acquisition of GeneTx and are completing the build-out of our gene therapy manufacturing facility.

As Emil mentioned, in the third quarter, we began the process of implementing initiatives that will limit headcount and operating expenses as we head into 2023, while maintaining focus on our key value drivers.

With that, I will now turn it over to Camille.

[Camille Bedrosian]

Thank you, Mardi, and I too wish everyone good afternoon. In the third quarter, we continue to advance one of the most diverse and late-stage clinical pipelines in rare disease. We also have made a number of strategic changes to our clinical studies that will enable faster enrollment as well as interim cuts of the data from our pivotal programs.

Of the programs currently in the clinic, I will briefly touch on GTX-102, Phase I/II for Angelman syndrome, the UX143, Phase II/III for osteogenesis imperfecta and a few of the gene therapy programs.

Starting with GTX-102 for Angelman syndrome, we continue to enroll and dose patients in the dose escalation cohorts of the Phase I/II study. Thus far, 13 patients have received a cumulative dose of at least 20 milligrams and 14 patients have had over 132 days of exposure to GTX-102 with no reported serious drug-related safety events, including no reports of lower extremity weakness. Crossing these thresholds safely is important as the original five patients experienced lower extremity weakness, at a minimum cumulative dose of 20 milligrams and at an exposure up to 132 days.

This continues to give us confidence that the amended dose administration strategy and slower titration may allow us to safely recreate the efficacy seen in the original five patients. We also have redosed the first two patients from the originally treated U.S. cohort with at least two doses each in Canada, including one that previously had a significant lower extremity weakness event. These patients are doing well, and there have been no reported serious drug-related safety events, including no lower extremity weakness.

We are continuing to work through the process of aligning the U.S. and ex-U.S. protocol and intend to have clarity in the next few months. We expect to begin enrollment in the expansion cohorts in the first half of 2023, and we will provide a data update once we have gathered substantial data from the cohort.

Turning now to UX143 or setrusumab for osteogenesis imperfecta. The anti-sclerostin mechanism of setrusumab has the potential to reverse the majority of the bones maladaptive response to collagen mutations and strengthen bones substantially. And we have a particularly strong belief in the value of this mechanism for patients with osteogenesis imperfecta.

For our ongoing setrusumab study, we recently amended the pivotal Phase II/III protocol to remove placebo from the dose-ranging Phase II stage of the study to enable us to do real-time analysis of the program. We believe this change, along with activating the last few sites will allow us to complete enrollment of the 24 patients in this stage of the study in the next few months. Data from this portion of the study are expected to be available in mid-2023, including the two-month changes in bone biomarker response that will establish the Phase III dosing algorithm. Concurrent with the data readout, we plan to transition to the larger randomized Phase III portion of the study.

Moving to our gene therapy programs and starting with DTX401 for the treatment of Glycogen Storage Disease Type Ia, which we are currently evaluating in a pivotal 48-week randomized, double-blind, placebo-controlled Phase III study. This program was recently granted prime designation from the European Medicine of Medical Authority, or EMA. This designation provides opportunities for additional interactions with the agency and could lead to an accelerated approval pathway.

Recall earlier this year, we focused resources on enrolling this study, and these efforts have helped increase the rate of enrollment. We currently anticipate completion of enrollment around the end of the year with Phase III data approximately one-year thereafter.

Turning now to UX701 for Wilson disease, which continues to enroll patients in the dose-finding stage of the pivotal study. Similar to UX143, we recently removed the placebo from the stage of the study. While the protocol dictates a progressively shorter observation period between each patient, we expect to complete enrollment of this stage in mid-2023 and plan to share data on safety and initial signs of clinical activity in late 2023 or early 2024.

The last program I'll mention in my prepared remarks is DTX201 for hemophilia A. As part of our regular review, Bayer has decided to discontinue development of this program and return the rights to Ultragenyx. We continue to believe that this is a better version of hem A gene therapy is in the right development hands. We will not initiate further development of DTX201 without a partner, but we would be interested in a quality partner that has a clinical expertise in rare hematological disorders and an interest in developing a high-quality AAV hem A therapy. We will continue to monitor the hemophilia A gene therapy landscape and explore our options with respect to potential partners.

With these updates, I will now turn back the call to Emil. Thank you.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Thank you, Camille. Before we shift to the Q&A portion of the call, I'll provide a quick reminder of the upcoming milestones. We expect GSDIa Phase III to be fully enrolled around the end of the year based on how well it is rolling now with the data to be shared approximately one-year later. For UX143 in osteogenesis imperfecta, we expect to complete enrollment of the dose-finding stage in the next few months and expect to share Phase II data and transition to Phase III in mid-2023.

In GTX-102 and Angelman syndrome, we are highly encouraged by the progress and expect to begin enrollment of large expansion cohorts in the first half of 2023 and plan to provide a data update once we've gathered substantial data in 2023.

Lastly, UX111 for Sanfilippo syndrome. We are continuing to evaluate biomarker and other data generated by Abeona are finalizing an approach to the FDA regarding filing for approval based on this current date. These clinical catalysts, our commercial team's continued execution in the field and the cost control measures Mardi mentioned, put us in excellent position to deliver meaningful value to patients and shareholders.

With that, let's move on to your questions. Operator, please provide the Q&A instructions.

[Operator]

Certainly. [Operator Instructions] Our first question comes from the line of Gena Wang from Barclays. Your question please.

[Gena Wang, Barclays]

Thank you for taking my question. I have one regarding the Angelman. Since I think the press release, you said you were dosing an expansion cohort in first half 2023. Does that mean the cohort 6 and 7 showed the sufficient CGI score improvement that you don't need to do the further dose escalation? And also, what will be the timing for next data update?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. So we're not now going to be commenting on the data from the dose escalation cohorts. We're just giving you a general timing of when we get to the expansion cohorts. And we'll provide more data on the whole program looking at the dose cohorts and expansion cohorts when we feel it's an appropriate time, but we're making good progress, and we're encouraged.

[Gena Wang, Barclays]

Okay. Also quickly for two patients who received two doses each in Canada, what doses did they receive? And how frequent was the dosing?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Well, they initiated on the protocol that we had in place for Cohorts four and five, the same protocol depending on their age. And so that was either a 3.3 dose to start or the 5 dose, the same one. And so they would receive two – one received two and the other received four doses, I think, already. The important thing is they've had no adverse effect at all, and we're encouraged by how they're doing. So there's more patients who want to get treated. We're hoping to get the other ones treated.

[Gena Wang, Barclays]

Great. Thank you very much.

[Operator]

Thank you. [Operator Instructions] And our next question comes from the line of Joseph Schwartz from SVB Securities. Your question please.

[Joori Park, SVB Securities LLC]

Hi. I'm Joori dialing in for Joe. Thank you for taking our questions. The first one is on f GTX-102. I believe that you previously guided to cohort six and seven expansion update in late 2023 or early 2020 – sorry, late 2022, or early 2023, but it looks like you will begin enrollment in the first half of 2023. I was just wondering if there are some things that need to be done in order to begin enrollment in the first half of 2023.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Well, we've already been enrolling cohorts. They've been already enrolled. So what we said is we're completing enrollment in those cohorts and initiating the expansion by early in the year. So that's all underway. We just haven't – we've decided not to provide more point-by-point progress. And what we said before is that we would announce data when we had a substantial amount of data rather than dribbling out bits of data with each cohort. So we're going to wait until we have a substantial body of data, but we're encouraged by the progress.

[Joori Park, SVB Securities LLC]

Okay. Got it. And then as a follow-up, I guess in the press release, you mentioned that discussions with the FDA to harmonize, the U.S. and ex-U.S. studies are ongoing. I was wondering if you could provide some color on what the FDA is looking for in order to make this happen. Thank you very much.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Well, we previously noted that we had provided some information before at FDA, and they wanted a complete set of data in terms of CSR, which we prepared. And we're working through the process. We usually don't go through the details of the back and forth, but we'll provide the report and other information that they requested, and we hope we'll then be sufficient to reopen the U.S. study – the U.S. sites to run the current study. So that's ongoing. But they wanted just a more complete set, and we've been preparing that for them.

[Operator]

Thank you. [Operator Instructions] And our next question comes from the line of Christopher Raymond from Piper Sandler. Your question please.

[Christopher Raymond, Piper Sandler]

Hey. Thanks. Just two questions. First on 401 – DTX401. Just thinking about the European review process and the prime designation. I know you guys have announced it before, but – just looking back at the prior data, you guys saw corn starch for use reduction pretty meaningfully even at week 24. I'm just kind of curious with this review. Is there any chance of an interim look here to serve as the basis for accelerated approval? Or is that just sort of totally off the table? And then on setrusumab, I know you guys sort of talked about a protocol amendment. Can you just clarify, is that the reason for the delay in finishing enrollment of the Phase III, just kind of clarify that? Thanks.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Okay. With acquired DTX401, we have to serve both U.S. and Europe and the trials blinded. So even if six-month data were better, we had committed to 48-week of blinded data for both. So there's no way to use that to accelerate. Once we get our blinded complete data, though, the prime designation will help us accelerate the review discussion process to get to a file. And so that would be the main benefit of it. But we couldn't use that to shorten the study. We'd have to honor the 48-week blinded main body of the study.

For setrusumab, I would say, look, in general, all year because of Omicron in the beginning of the year, sites are under duress. I think a lot of people have had challenges getting studies going, and we've managed that. We're pushing ahead. We are enrolling the study. The placebo though, removal of placebo just gives us an opportunity to see what's going on, on each patient. We're doing a wide range of ages. And we'll able to feed data all along while our studies going on in more real time allow us to help kind of think through the dosing. I don't think we're just picking one dose. It could be a dosing algorithm like the different ages get different doses. So by being able to see the data fly will just help us through that and get through it faster. So when we get the final bit of data in, we can make a decision on whether we need to go higher for the younger patients and for what ages. So it's a main benefit to us.

With the data, though, we'll be able to of course inform the Street what the drug looks like as well in the younger patients, and it will help us also with raising awareness of the drug and its [indiscernible] for people globally. And when you look hard at anti-sclerostin as a strategy and all the data, both animal and human, it's a very profound effect in a very important way for OI. That's why we think having the dose data probably will be also helpful to us in raising awareness and driving our Phase III.

[Operator]

Thank you. Our next question comes from the line of Tazeen Ahmad from Bank of America. Your question please.

[Tazeen Ahmad, Bank of America Merrill Lynch]

Hi, good afternoon. Thanks for taking my question. Just a point of clarification for UX143 for your OI indication, can you maybe [indiscernible] expectations on what you would consider to be clinically meaningful data? And just remind us about how large you think this population could be for addressable patients? And then secondly, to clarify, when should we expect to see Phase III data for DTX401? Thanks.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Sure. So let's start with the size. For the UX143 or setrusumab should address both type 1, type 3 and type 4 OI in that group, which is very amazing and powerful to be able to do all three types. That would allow us to treat on the order of 60,000 patients in developed world. So essentially larger than what XLH is. So it's a very meaningful population. Within the study, the first part of the study, the Phase II, will help establish the right dose. So we'll have biomarker-driven data basically to make that decision.

For the Phase III with the FDA discussion, the main 301 Phase III, we'll be looking at clinical fractures, rate of clinical fractures between the treated and placebo group. We're also going to be running another study 314 study, which we'll look at a younger age with very high fraction, which we'll randomize from setrusumab or bisphosphonate, which is used in those very severe young patients, which gives us another way to demonstrate the powerful effect, particularly in the young patients where we – from our own experience in rare bone diseases, the young patients can really respond to a new drug in a profound way. So we think it's another way for us to demonstrate the product.

That study will be open label, but randomized. And so both – that one will look at total fractures. So both of them are looking at fractures, one clinical fracture, the other total fractures. And I think a meaningful reduction. Well, this fascinates a failed 3x out of 5x study, but the proximate effect is maybe about 20% reduction in fractures. We think that this drug will have a better than 50% reduction in fractures, and that's how we've powered the studies. We think that certainly would be clinically meaningful.

But right now, I think that there's probably more disease than just fractures, and we'll be looking at a number of endpoints, which will help enhance the clinical meaningfulness, like how patients feel, how they respond because we think those are in their daily live things, those will have impacts on how well the drug will be used and how important it is in their lives.

[Operator]

Thank you. Our next question comes from the line of Dae Gon Ha from Stifel. Your question please.

[Dae Gon Ha, Stifel]

Great. Good afternoon. Thanks for taking my questions. One clarification question on the KKC amendment. So perhaps for Mardi, does the extension to April 2024 also apply to profit share or just cost share? And I guess, another way, transition to royalty base, should we expect that to occur starting in April 2024 or April 2023? And then as a follow-up for GTX-102, just wanted to clarify, have any patients reached the 14-milligram dose at this point? Thank you very much.

[Mardi Dier]

I'll go first, just jump in. Very straightforward. So the royalty structure takes place at the initial time of transition, so April 2023, that we'll have the amendment. We will be able to have additional folks in the field to help – to make sure we have a smooth transition and we continue to grow Crysvita and that will be under the cost sharing arrangement.

[Emil Kakkis, Founder, President and Chief Executive Officer]

With regard to the Angelman GTX-102, there is one patient that reached 14 in the titration, but there's a large number of patients and many have received 10 and 12 from the earlier cohorts. So we've moved – we've achieved a significant level of drug without having a side effect, and we're encouraged by what we're seeing.

[Operator]

Thank you. Our next question comes from the line of Maury Raycroft from Jefferies. Your question please.

[Maurice Raycroft, Jefferies LLC]

Hi. Congrats on the update and thanks for taking my questions. For Angelman, I wanted to see if you can clarify how many new patients have been dosed since the data cutoff in July – for July 12?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. I don't think we can give you that precise detail. I think you're all trying to triangulate around. We're working through the dose escalation cohorts, which are – can be two to four patients, but in each one – we said we're going to be through them and expect them fully enrolled before the end of the year. And early first half, we would be doing the expansion cohorts, which is the larger 20 group expansion. So that's kind of where we are. I won't provide any more detail on that at the moment.

[Maurice Raycroft, Jefferies LLC]

Got it. And also for Angelman, there's been some discussion on potential CGI score discordance in the United States versus EU and Canada. Do you have a strategy in place to standardize assessment and reduced buys across sites for the CGI measure?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. Certainly, that's a question that's fair to be raised. I think we're working on additional training to ensure that we're normalizing that. I would say also though, the reliance on the third-party like the psychology assessment that's done with the original specific calibrated scoring system where you're measuring performance and scoring is the one way to gain the kind of objectivity. And we've shown some of that data, for example, in the Bayley score or the [indiscernible] score. But the Bayley score particularly because it's psychologist administered, not the PI, not the parent. So I have a combination of training and also dependence and reliance on some of these independent scores that help give us confidence that what we're seeing is an important effect and not a placebo effect.

[Operator]

Thank you. Our next question comes from the line of Yigal Nochomovitz from Citi. Your question please.

[Yigal Nochomovitz, Citigroup Inc.]

Hi, Emil and team. Thank you very much for taking the questions. I had one on the commercial business, I think, maybe for Mardi. Just regard to the guidance range for Dojolvi, for the fourth quarter, it looks like you need a significant reacceleration in the trajectory to meet the lower end of guidance. So if you could just spend a few minutes just clarifying the assumptions around getting into that guidance range? Thank you.

[Mardi Dier]

Sure. I mean I'll start, but then Erik is here as well, and he can take – give some commentary on just what's going on with Dojolvi. We always – not always. It hasn't been launched for that long. But what we've seen with actually both Crysvita and Dojolvi that you do indeed have a heavier fourth quarter as a percentage of the total revenue. So we expect that we're – given the health of the business and the growth that we've seen in the start forms and the number of patients treated, we expect that again going into the fourth quarter this year for Dojolvi and Crysvita, mind you. But Erik, I don't know if you want to give any more commentary just on Dojolvi and how well we think it's doing.

[Erik Harris]

Dojolvi, demand is strong. And as I have stated, it continues to exceed our expectations with regards to identifying patients and converting those patients to commercial therapy in a timely manner. The challenge that we're working on is optimizing the dosing. And so we have an educational campaign underway at this time to increase awareness and working closely with both patients and providers around optimal dosing and timely titration of the treatment.

[Yigal Nochomovitz, Citigroup Inc.]

Got it. And just one quick follow-up on the pipeline. I thought it was interesting that both for the antibody setrusumab as well as for the gene therapy in Wilson's disease and the totally unrelated disease, you removed the placebo part for the dose finding. I'm just wondering if there's any connection between those decisions or if they were just independent and coincident. Thank you.

[Erik Harris]

They're independent and coincidence, just we have been running four trials at the same time right now. So they're all at the same stage. We always – we seek to have the more perfect design, which I think placebo can be considered that. But sometimes the practical reality is that actually. And then it's your ability to know what's going on and learn and do things. And so we felt like it was going to be better for us to learn what was happening on the fly and maintain the placebo for the main body of the study, but simplify the upfront part.

It also makes it easier to be able to talk to patients about rolling in the program because if they haven't seen the drug and the doctors didn't know anything about it, just helps with that discussion. So it's totally separate. It just happens to be we're at the same stage for everything. And we're adapting what's the best way forward to get this drug enrolled and advanced as fast as we can.

[Operator]

Thank you. Our next question comes from the line of Joon Lee from Truist. Your question please.

[Joon Lee, Truist Securities]

Hi. Thanks for taking our questions. You mentioned cost alignment for 2023. Can you outline which areas you're focused on? And any comment on cash runway? And for 102, is multi-domain responder index a possible way to mitigate noise given your expertise there? Thank you.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. I'll start with expense, and you can provide a little more detail?

[Mardi Dier]

Yes, sure.

[Emil Kakkis, Founder, President and Chief Executive Officer]

The main job here is to not spend money in place that don't create value. That's a big thing and to really drill harder down on that in our growth. We've had a lot of growth, need to manage it. Maybe Mardi can provide some more color on that.

[Mardi Dier]

Yes. Sure. So we mentioned headcount, for example, we have had a lot of growth for the past couple of years, starting really with the Dimension acquisition. And so our goal is to keep – limit headcount and keep headcount flat going forward as well as our operating expenses as well, our goal would be to keep OpEx flat going into 2023 as well. And that really – and to do that is exactly what Emil is saying, looking where we can drive value and prioritize and not spend money.

We're on things that perhaps would not drive the value that we want in the near-term. And I think that's good housekeeping, right? So we've had this period of growth. And these are programs that we're implementing, and I think we'll see results where we've already seen results. So that's great. From a cash runway standpoint, we are in good shape. We have about $1 billion on the balance sheet, and that takes us – we haven't given specific dates, but we always say the next couple of years and definitely through some critical milestones on questions you've asked about 102 and 401. So from a cash standpoint, we feel lucky and that we're in good shape. We want to take care of that cash moving forward.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Thanks, Mardi. So on the MDRI, the multi-domain responder index for those of you not familiar with that, is a way of potentially evaluating many different domains and capturing big wins or big changes in a very heterogeneous population. We think Angelman is a prime disease state, given the fact that there are multiple different domains, five or six domains of clinical importance that you could evaluate. You evaluate with given endpoints and you add up the big wins through minimally important difference filter.

We think that method allows you to capture efficacy that might vary between patients in a population, which would allow them to not have to select the population [indiscernible] carefully for the particular thing we're looking at. So it's one way forward, I would say to you that if you're using a Bayley’s or other types of third-party measure test you have professionals measures who do the assessments, that you can get control as well, and you can imagine having a Bayley receptive and expressive communication score, for example, as a primary endpoint, it's certainly potential.

So we're going to look at all those options and work through it. The MDRI is not widely accepted by FDA. We did use it in Mepsevii, but they're aware of it. We've had a lot of discussions at a senior level there, there's a lot of good features to it. It could be something that would be great for a disease like Angelman where there's lots of heterogeneity. So it's in the pallet of options right now, but we have time yet to figure out, but there's so much going on in the Angelman that it's not a problem to figure out the endpoint. It's really a matter of trying to optimize how we capture efficacy across a heterogeneous population.

[Operator]

Thank you. Our next question comes from the line of Yaron Werber from Cowen. Your question please.

[Yaron Werber, Cowen and Company, LLC]

Great. Thanks for taking my question. Maybe, Emil, just on that point, FDA, as you know very well, is very much a fan of the ORCA for communication, and I believe they even give a grant to validate that endpoint to an academic site. Can you just give us – and I believe that might have been accepted as a primary endpoint on communication. Where is that toward validation? And is there any chance you might explore that? Or that requires validation a priority, and that's going to take too long. And then maybe just secondly, once you do select a dose, would you move to a sort of a placebo Phase II before you run the pivotal? Thank you.

[Emil Kakkis, Founder, President and Chief Executive Officer]

So we're familiar, we're running the ORCA, and we've seen improvements in the ORCA. I think the ORCA – the validation will be done. I think it's either done now or going to be done. So I think that all will happen. The thing I would say to you is that when you look at clinical development that putting a caregiver assessment as primary is a tricky thing because it can be critiqued and is complicated and often there's noise. In fact, with caregivers assessments in this regard. I would generally – putting it to the sole primary endpoint, I think, would be a challenge.

I would much rather see an independent professional valuation for that. But you missed something when you have a professional valuator like the setting is not comfortable, it might alter how patients behave. So we're aware of all that. We have time for us to figure it out. I think ORCA could variably – one of the components of the language whether would be primary, I would be less comfortable with it being a primary. But the validation will happen, it will be an important part of overall assessment of how patients do.

[Yaron Werber, Cowen and Company, LLC]

My second question was around the Phase II, when we introduced placebo.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes, that's right. Well, our plan right now does not include running additional Phase II placebo trial. The fair question you're asking, Yaron, really is how will we know the treatment effect we're seeing is sufficiently large to not be placebo. It's been a common discussion item for a lot of people, but I think we're going to be looking for an efficacy change that we feel is compelling and persistent. And the kind of thing we think we have seen gives us confidence we can get that kind of data. If the data were less certain, then it would raise more question, but will we have the dose right or not, frankly, because I don't think we want to enter Phase III unless we have a definitive treatment effect that we're comfortable is worth investing in.

If there was need for that, we could consider it. But right now, we're looking for really solid large amount of efficacy before we head to Phase III. That would be our preference. But your point is well taken, but I think that if we can get the kind of efficacy that is incontrovertible in our mind, then we'd move right to Phase III.

[Operator]

Thank you. Our next question comes from the line of Salveen Richter from Goldman Sachs. Your question please.

[Elizabeth Webster, Goldman Sachs Group, Inc.]

Hey. Good afternoon, and thanks for taking our questions. This is Elizabeth on for Salveen. For the Wilsons' data update on the end of next year or early 2024, could you provide color on what signs you're looking for? And then on the OTC program, if you could discuss how you expect enrollment to progress? Thank you.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Certainly. So for the Wilson update, what we will expect to have is we're planning to enroll five patients in each of three cohorts, now all open label. So we have 15 patients worth of data. We'd expect the FDA to include data on the different dose cohorts. I would tell you about urinary copper, ceruloplasmin and other parameters that relate to copper physiology and metabolism in Wilson. Those would be the core measures that would be telling us, are we hitting the right dose and what our dose is going forward and what the safety looks like in that population. So that's what we do expect to put out at that time.

For OTC, we consciously put OTC after GSDI in start-up enrollment running as many trials as we are. So we pushed it out a lot of the GSDI to be our prime focus to get it going and enrolling, which it has. And we'll now be adding more effort on OTC to get that enrolled. It is a 64-week study, so it's a little bit longer. It will take more time to enroll. We'll probably have to enroll more outside the U.S. and in the U.S., is our expectation. But it's still a 50-patient randomized trial, and it will take somewhat more time than GSD probably to enroll.

[Operator]

Thank you. Our next question comes from the line of Joel Beatty from RW Baird. Your question please.

[Joel Beatty, Robert W. Baird & Company, Inc.]

Thanks. For Crysvita, I think you mentioned that about half the new scripts are coming from new prescribers. How does the remaining addressable market split across new prescribers and existing prescribers? And then the second question is on the hemophilia B program returned from Bayer, what could make that attractive to a new partner?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Well, let me answer the second one first, and then, Erik, you can answer the first one. So on what came back was our hemophilia A program. They had acquired significant data, had a number of patients who had a great reduction in events. And they decided it wasn’t meeting with criteria they wanted and they had other priorities. And so they decided to bring it back to us. What we're looking for – first of all, we have a lot on our plate as a company. We don't want to put more money into an area where we're not experts.

So we think hemophilia still has room. I think [Bayer] program is getting there. But we think they're still room for a better gene therapy. We do think that the type of AAV and our manufacturing, large-scale manufacturing process would be, I think, a benefit. And we've looked for our partner who wants to pick up development, and we'd be happy to do the manufacturing. We have a new plant as well, which would give us an edge and we'll be looking to use our Pinnacle PCL platform and to manufacture that product. But we think that there's still a lot of room left for something better. Erik, why don't you answer the question on the prescribers?

[Erik Harris]

Yes. So if you think about the current market penetration for pediatric patients is about 40% and adult patients is about 15%, we continue to believe that the majority of the pediatric patients will get treated. And about 50%, half of the adult patients will eventually end up on treatment. As we've been stating, many of these patients that we're finding these days, if not most of these patients are in the community setting with doctors that are not necessarily associated with the traditional metabolic bone center. So it takes time to find those patients and get them refer to someone that's going to – that we either treat them or initiate treatment for new prescribers.

[Operator]

Thank you. Our next question comes from the line of Liisa Bayko from Evercore ISI.

[Liisa Bayko, Evercore ISI]

Hi there, how are you doing?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Hi, there.

[Liisa Bayko, Evercore ISI]

I just wanted to ask a couple of questions on Wilson's disease. If you just amended the trial design, and you'll be able to evaluate a couple of preliminary doses. Emil, can you talk about any potential signals that you'd be looking for in that data to evaluate if there's any efficacy? Like what should we be looking for in this initial data set? And will there be any read-through in efficacy?

[Emil Kakkis, Founder, President and Chief Executive Officer]

Well, first of all, all the patients in the trial would have been on stable chelator therapy for a while. So they already have sort of drained their copper. We're going to be looking at urinary copper and then urinary copper after we remove their drugs at some point. But the first part, we're looking at whether we're reducing the amount of copper that ends up in the urine with their chelator versus not. We'll also be looking at a copper loaded through plasma or through plasma activity. That will tell us how much copper is getting loaded on through plasma, which is very low in Wilson.

It's one of the unique features of gene therapy is that we can restore normal copper distribution, which you can't do with a chelator. So we think that's a really important feature. And we showed in the animal model that we could get to significant increases in ceruloplasmin loading and delivery. So that's an easy measure from the bloodstream. Combine that with urine copper, serum copper and probably a few other biochemical measures, it would be – that will be the basic way we'll make the decision on dosing. So it would be urine copper, serum copper or various types as well as ceruloplasmin, I think, is at the core of it. Of course, there's safety, transaminase and safety and how patients are doing overall. But I think most of it is going to be driven off copper biochemistry.

[Liisa Bayko, Evercore ISI]

Okay. And would that be kind of the regulatory endpoint as well? Or is that – maybe if you could just give us some more background. I understand it's like critical to the disease. Just curious on how relevant it is for the bigger picture.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. So the regulatory discussion focused on urinary copper – some people have been using plasma or free copper, the agency actually preferred urinary copper. And so that is the accepted primary endpoint to look at urinary copper control. And we'll do it while they're on their drug, but we're also going to take them off the drug and control to show that we can keep urinary copper low while loading – well, they're getting less – they won't have any copper chelation going on. So if that makes sense.

So we'll be able to show to get rid of their old treatment and use the new treatment and still maintain low urinary copper. So that is the agreed-upon evaluation. One advantage of the Wilson program is that there was clear biomarker-type endpoints that are meaningful that the FDA has already accepted because of the use of chelators in their prior approvals.

[Operator]

Thank you. And our final question for today is a follow-up from the line of Yigal Nochomovitz from Citi. Your question please.

[Yigal Nochomovitz, Citigroup Inc.]

Hi, thanks very much for taking the follow-up. I just wanted to follow up on Yaron's question around the placebo for an Angelman Phase II or Phase III. As you know, in the prior open trial, the placebo effect was around 0.8. That was a mixture of deletion and mutation patients, as you know. I'm assuming that if you do a Phase II or Phase III that you'll only enroll the deletion place patients. And based some of our analysis of the literature in Angelman, it would suggest a placebo effect substantially below 0.8. Just wondering what your thoughts are on that? And if you could confirm that you do a pivotal trial in Angelman that it would be 100% deletion patients? Thank you.

[Emil Kakkis, Founder, President and Chief Executive Officer]

Yes. Our pivotal plan is to do all deletion because we think, including a variation of type, will create a lot of variance, not only around the CGI score, but also around all the other scores. So the last thing you want – there's already a lot of heterogeneity, you want more heterogeneity. So the Phase III will be strictly the deletion type, which is 70% of the population, and we'll conduct some other companion studies that would help expand and understand the use of the drug in the other types like UPD, uniparental disomy or the missense type of patients.

So we want to cover the whole thing for the label, but the randomized study, will focus on the severe population. And honestly, if we can prove in a placebo trial that we are treating severe population, the other stories will be easy to reach consensus. I think controlling noise is extremely important in these type of designs and so by mixing types, even though it might – even if regulators want it, I would resist it because it could harm your outcomes and create a more effect. If you look at natural history in the severe patients, they are very flat, they do not change, they do not gain ground on expressive receptive communication, significant ground. So we think by not mixing with some patients who do gain some ground on expressive, receptive you will avoid that noise. So it is part of our strategy just to keep it tight and therefore, be more confident about this FX we're seeing.

[Operator]

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Joshua Higa for any further remarks.

[Joshua Higa, Head of Investor Relations]

Thank you. This concludes today's call. If there are any additional questions, please contact us by phone or at [e-mail]. Thank you for joining us.

[Operator]

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.