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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                      .

Commission File No. 001-36276

 

ULTRAGENYX PHARMACEUTICAL INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

 

27-2546083

(State or other jurisdiction of incorporation or organization)

 

 

(I.R.S. Employer Identification No.)

 

60 Leveroni Court
Novato, California

 

94949

(Address of principal executive offices)

 

(Zip Code)

(415) 483-8800

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

RARE

The Nasdaq Global Select Market

As of July 26, 2019, the registrant had 57,691,957 shares of common stock issued and outstanding.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES      NO  

 

 

 


ULTRAGENYX PHARMACEUTICAL INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019

INDEX

 

 

 

 

 

 

  

Page

 

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  

1

 

 

 

 

 

Part I –

 

Financial Information

  

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

  

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

  

2

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

  

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

  

4

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

5

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

  

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

  

8

 

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

18

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

  

26

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

  

27

 

 

 

 

 

Part II –

 

Other Information

  

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

  

28

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

  

28

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  

59

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

  

59

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

  

59

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

  

59

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

  

60

 

 

 

 

 

 

 

 

 

Signatures

 

 

  

61

 

 

 

 


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the Quarterly Report) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words, or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

our commercialization, marketing, and manufacturing capabilities and strategy;

 

our expectations regarding the timing of clinical study commencements and reporting results from same;

 

the timing and likelihood of regulatory approvals for our product candidates;

 

the anticipated indications for our product candidates, if approved;

 

the potential market opportunities for commercializing our products and product candidates;

 

our expectations regarding the potential market size and the size of the patient populations for our products and product candidates, if approved for commercial use;

 

estimates of our expenses, revenue, capital requirements, and our needs for additional financing;

 

our ability to develop, acquire, and advance product candidates into, and successfully complete, clinical studies;

 

the implementation of our business model and strategic plans for our business, products and product candidates and the integration and performance of any businesses we have acquired or may acquire;  

 

the initiation, timing, progress, and results of ongoing and future preclinical and clinical studies, and our research and development programs;

 

the scope of protection we are able to establish and maintain for intellectual property rights covering our products and product candidates;

 

our ability to maintain and establish collaborations or strategic relationships or obtain additional funding;

 

our ability to maintain and establish relationships with third parties, such as contract research organizations, contract manufacturing organizations, suppliers, and distributors;

 

our financial performance and the expansion of our organization;

 

our ability to obtain supply of our products and product candidates;

 

the scalability and commercial viability of our manufacturing methods and processes;

 

developments and projections relating to our competitors and our industry; and

 

other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those discussed under Part II, Item 1A. Risk Factors and discussed elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

 

 

June 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

131,337

 

 

$

113,432

 

Short-term investments

 

486,949

 

  

 

346,274

 

Accounts receivable

 

20,901

 

 

 

12,740

 

Inventory

 

13,632

 

 

 

7,065

 

Prepaid expenses and other current assets

 

46,612

 

 

 

42,858

 

Total current assets

 

699,431

 

 

 

522,369

 

Property and equipment, net

 

25,317

 

 

 

20,046

 

Investment in Arcturus equity securities

 

24,167

 

 

 

 

Intangible assets, net

 

129,069

 

 

 

129,223

 

Goodwill

 

44,406

 

 

 

44,406

 

Right-of-use assets

 

33,356

 

 

 

 

Other assets

 

3,181

 

 

 

3,514

 

Total assets

$

958,927

 

 

$

719,558

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

8,743

 

 

$

12,275

 

Accrued liabilities

 

59,264

 

 

 

62,450

 

Short-term lease liabilities

 

6,999

 

 

 

 

Total current liabilities

 

75,006

 

 

 

74,725

 

Deferred tax liabilities

 

31,166

 

 

 

31,166

 

Long-term lease liabilities

 

32,968

 

 

 

 

Other liabilities

 

 

 

 

4,759

 

Total liabilities

 

139,140

 

 

 

110,650

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock — 25,000,000 shares authorized; nil outstanding as of June 30, 2019 and

   December 31, 2018

 

 

 

 

 

Common stock — 250,000,000 shares authorized; 57,665,375 and 50,860,588 shares issued

   and outstanding as of June 30, 2019 and December 31, 2018, respectively

 

58

 

 

 

51

 

Additional paid-in capital

 

2,045,685

 

 

 

1,639,773

 

Accumulated other comprehensive income (loss)

 

255

 

 

 

(633

)

Accumulated deficit

 

(1,226,211

)

 

 

(1,030,283

)

Total stockholders’ equity

 

819,787

 

 

 

608,908

 

Total liabilities and stockholders’ equity

$

958,927

 

 

$

719,558

 

See accompanying notes.

 

 

 

2


ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and license

$

19,247

 

 

$

10,519

 

 

$

33,485

 

 

$

19,881

 

 

Product sales

 

4,902

 

 

 

2,275

 

 

 

8,836

 

 

 

3,590

 

 

Total revenues

 

24,149

 

 

 

12,794

 

 

 

42,321

 

 

 

23,471

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

766

 

 

 

141

 

 

 

1,218

 

 

 

366

 

 

Research and development

 

96,045

 

 

 

76,835

 

 

 

174,150

 

 

 

152,339

 

 

Selling, general and administrative

 

39,812

 

 

 

30,718

 

 

 

78,641

 

 

 

62,153

 

 

Total operating expenses

 

136,623

 

 

 

107,694

 

 

 

254,009

 

 

 

214,858

 

 

Loss from operations

 

(112,474

)

 

 

(94,900

)

 

 

(211,688

)

 

 

(191,387

)

 

Interest income

 

4,063

 

 

 

2,448

 

 

 

7,149

 

 

 

4,185

 

 

Gain from sale of priority review vouchers

 

 

 

 

40,322

 

 

 

 

 

 

170,322

 

 

Change in fair value of investment in Arcturus equity securities

 

9,828

 

 

 

 

 

 

9,828

 

 

 

 

 

Other expense

 

(376

)

 

 

(496

)

 

 

(788

)

 

 

(5,454

)

 

Loss before income taxes

 

(98,959

)

 

 

(52,626

)

 

 

(195,499

)

 

 

(22,334

)

 

Provision for income taxes

 

(213

)

 

 

(102

)

 

 

(429

)

 

 

(141

)

 

Net loss

$

(99,172

)

 

$

(52,728

)

 

$

(195,928

)

 

$

(22,475

)

 

Net loss per share, basic and diluted

$

(1.72

)

 

$

(1.06

)

 

$

(3.54

)

 

$

(0.46

)

 

Shares used in computing net loss per share, basic and diluted

 

57,519,308

 

 

 

49,819,528

 

 

 

55,376,336

 

 

 

49,046,838

 

 

See accompanying notes.

 

 

 

3


ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

$

(99,172

)

 

$

(52,728

)

 

$

(195,928

)

 

$

(22,475

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

26

 

 

 

225

 

 

 

155

 

 

 

(64

)

Transfer of cumulative translation adjustment for the substantial

    liquidation of foreign subsidiaries

 

 

 

 

 

 

 

 

 

 

5,272

 

Unrealized gain (loss) on available-for-sale securities

 

377

 

 

 

67

 

 

 

733

 

 

 

(182

)

Other comprehensive income:

 

403

 

 

 

292

 

 

 

888

 

 

 

5,026

 

Total comprehensive loss

$

(98,769

)

 

$

(52,436

)

 

$

(195,040

)

 

$

(17,449

)

See accompanying notes.


4


ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Balance as of March 31, 2019

 

 

57,303,888

 

 

$

57

 

 

$

2,013,859

 

 

$

(148

)

 

$

(1,127,039

)

 

$

886,729

 

 

Issuance of common stock in connection with

    at-the-market offering, net of issuance costs

 

 

88,978

 

 

 

 

 

 

5,523

 

 

 

 

 

 

 

 

 

5,523

 

 

Employee stock-based compensation

 

 

 

 

 

 

 

 

22,490

 

 

 

 

 

 

 

 

 

22,490

 

 

Issuance of common stock under equity plan

    awards, net of tax

 

 

272,509

 

 

 

1

 

 

 

3,813

 

 

 

 

 

 

 

 

 

3,814

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

403

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(99,172

)

 

 

(99,172

)

 

Balance as of June 30, 2019

 

 

57,665,375

 

 

$

58

 

 

$

2,045,685

 

 

$

255

 

 

$

(1,226,211

)

 

$

819,787

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Balance as of December 31, 2018

 

 

50,860,588

 

 

$

51

 

 

$

1,639,773

 

 

$

(633

)

 

$

(1,030,283

)

 

$

608,908

 

 

Issuance of common stock in connection with

    underwritten public offering, net of

    issuance costs

 

 

5,833,333

 

 

 

6

 

 

 

330,409

 

 

 

 

 

 

 

 

 

330,415

 

 

Issuance of common stock in connection with

    at-the-market offering, net of issuance costs

 

 

468,685

 

 

 

 

 

 

24,828

 

 

 

 

 

 

 

 

 

24,828

 

 

Employee stock-based compensation

 

 

 

 

 

 

 

 

42,960

 

 

 

 

 

 

 

 

 

42,960

 

 

Issuance of common stock under equity plan

    awards, net of tax

 

 

502,769

 

 

 

1

 

 

 

7,715

 

 

 

 

 

 

 

 

 

7,716

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

888

 

 

 

 

 

 

888

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(195,928

)

 

 

(195,928

)

 

Balance as of June 30, 2019

 

 

57,665,375

 

 

$

58

 

 

$

2,045,685

 

 

$

255

 

 

$

(1,226,211

)

 

$

819,787

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Balance as of March 31, 2018

 

 

49,665,203

 

 

$

50

 

 

$

1,526,972

 

 

$

(946

)

 

$

(802,419

)

 

$

723,657

 

 

Employee stock-based compensation

 

 

 

 

 

 

 

 

19,563

 

 

 

 

 

 

 

 

 

19,563

 

 

Issuance of common stock under equity plan

    awards, net of tax

 

 

450,853

 

 

 

 

 

 

13,187

 

 

 

 

 

 

 

 

 

13,187

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

292

 

 

 

 

 

 

292

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,728

)

 

 

(52,728

)

 

Balance as of June 30, 2018

 

 

50,116,056

 

 

$

50

 

 

$

1,559,722

 

 

$

(654

)

 

$

(855,147

)

 

$

703,971

 

 

 

5


 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Balance as of December 31, 2017

 

 

44,167,071

 

 

$

44

 

 

$

1,221,762

 

 

$

(5,680

)

 

$

(832,672

)

 

$

383,454

 

 

Issuance of common stock in connection with

    underwritten public offering, net of

    issuance costs

 

 

5,043,860

 

 

 

5

 

 

 

270,964

 

 

 

 

 

 

 

 

 

270,969

 

 

Issuance of common stock in connection with

    at-the-market offering, net of issuance costs

 

 

240,417

 

 

 

1

 

 

 

11,807

 

 

 

 

 

 

 

 

 

11,808

 

 

Employee stock-based compensation

 

 

 

 

 

 

 

 

38,360

 

 

 

 

 

 

 

 

 

38,360

 

 

Issuance of common stock under equity plan

    awards, net of tax

 

 

664,708

 

 

 

 

 

 

16,829

 

 

 

 

 

 

 

 

 

16,829

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

5,026

 

 

 

 

 

 

5,026

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,475

)

 

 

(22,475

)

 

Balance as of June 30, 2018

 

 

50,116,056

 

 

$

50

 

 

$

1,559,722

 

 

$

(654

)

 

$

(855,147

)

 

$

703,971

 

 

 

 

 

 

6


ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Six Months Ended June 30,

 

 

2019

 

 

2018

 

Operating activities:

 

 

 

 

 

 

 

Net loss

$

(195,928

)

 

$

(22,475

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Stock-based compensation

 

42,428

 

 

 

38,360

 

Amortization of discount on investment securities, net

 

(2,960

)

 

 

(913

)

Depreciation and amortization

 

4,225

 

 

 

12,240

 

Foreign currency remeasurement loss

 

567

 

 

 

5,846

 

Change in fair value of investment in Arcturus equity securities

 

(9,828

)

 

 

 

Gain from sale of priority review vouchers

 

 

 

 

(170,322