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What changed in Ultragenyx Pharmaceutical Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ultragenyx Pharmaceutical Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+493 added−528 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-17)

Top changes in Ultragenyx Pharmaceutical Inc.'s 2023 10-K

493 paragraphs added · 528 removed · 375 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

148 edited+69 added−99 removed185 unchanged
Biggest changeThe laws that may affect our ability to operate include: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent; • the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, which prohibits executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters and imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information; • the EU General Data Protection Regulation, or GDPR, which applies to processing of personal data in the context of the activities of an establishment in the EEA, and to processing related to the offering of goods or services to individuals who are in the EEA, or the monitoring of individuals who are in the EEA, and imposes requirements and limitations relating to the processing, storage, purpose of collection, accuracy, security, sharing and transfer of personal data outside the EEA, in particular with respect to special categories of personal data like health data, and the notification of regulation authorities about data breaches, accompanied by a strong sanctioning mechanism; • the 21 st Century Cures Act, or the Cures Act, which introduced a wide range of reforms, such as broadening the types of data required to support drug approval, extending protections for generic competition, accelerating approval of breakthrough therapies, expanding the orphan drug product program, requiring disclosures about compassionate care programs, and clarifying how manufacturers communicate about their products; • the federal transparency laws, including the federal Physician Payment Sunshine Act, that requires drug manufacturers to disclose payments and other transfers of value provided to various healthcare professionals and teaching hospitals; and • state and foreign law equivalents, or similar, of each of the above federal laws, such as transparency laws, anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and privacy and security of health information laws, including comprehensive privacy and security laws in California, and others taking effect in 2023.
Biggest changeGeneral Data Protection Regulation, or UK GDPR, which apply to processing of personal data in the context of the activities of an entity established in the EEA/UK, and to processing by an entity not established in the EEA/UK where such processing is related to the offering of goods or services to individuals who are in the EEA/UK, or the monitoring of the behavior of individuals who are in the EEA/UK, and imposes requirements and limitations relating to the processing, storage, purpose of collection, accuracy, security, sharing and transfer of personal data outside the EEA/UK, in particular with respect to special categories of personal data like health data, and the notification of supervisory authorities about data breaches, accompanied by a strong sanctioning mechanism—in addition, EU member states may also impose additional requirements in relation to health, genetic and biometric data through their national implementing legislation; 26 • the 21 st Century Cures Act, or the Cures Act, which introduced a wide range of reforms, such as broadening the types of data required to support drug approval, extending protections for generic competition, accelerating approval of breakthrough therapies, expanding the orphan drug product program, requiring disclosures about compassionate care programs, and clarifying how manufacturers communicate about their products; • the federal transparency laws, including the federal Physician Payment Sunshine Act, that requires drug manufacturers to disclose payments and other transfers of value provided to various healthcare professionals and teaching hospitals; and • state and foreign law equivalents, or similar, of each of the above federal laws, such as transparency laws, anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and privacy and security of health information laws, including comprehensive privacy and security laws in California.
We do not have the right to control prosecution of the in-licensed patent applications, and our rights to enforce the in-licensed patents are subject to certain limitations.
We do not have the right to control prosecution of the in-licensed patent applications, and our rights to enforce the in-licensed patents are subject to certain limitations.
In May 2016, we entered into a research, collaboration and license agreement with the University of Pennsylvania under which we are collaborating on the pre-clinical development of gene therapy products for the treatment of phenylketonuria and Wilson disease, each, a Subfield.
University of Pennsylvania In May 2016, we entered into a research, collaboration and license agreement with the University of Pennsylvania under which we are collaborating on the pre-clinical development of gene therapy products for the treatment of phenylketonuria and Wilson disease, each, a Subfield.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
We have adopted a flexible, hybrid working arrangement for employees, which allows some of our employees to work remotely during certain days of the week.
We have adopted a flexible, hybrid working arrangement for our employees, which allows some of our employees to work remotely during certain days of the week.
The first biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologics submitting under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) eighteen months after approval if there is no legal challenge, (iii) eighteen months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has been submitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.
The first biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologics submitted under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) eighteen months after approval if there is no legal challenge, (iii) eighteen months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has been submitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.
We continue to support commercial and medical affairs organizations as well as other capabilities across North America, Europe, Latin America, and Japan to meet the scientific educational needs of the healthcare providers and patients in the rare disease community, focusing on providing accurate disease state information and balanced product information across our portfolio for appropriate management of patients with rare disorders.
We continue to support commercial and medical affairs organizations as well as other capabilities across North America, Europe, Latin America, and Japan to meet the educational needs of the healthcare providers and patients in the rare disease community, focusing on providing accurate disease state information and balanced product information across our portfolio for appropriate management of patients with rare disorders.
As a condition of NDA or BLA approval, the FDA may impose additional requirements, such as post-marketing studies and/or a Risk Evaluation and Mitigation Strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use.
As a condition of NDA or BLA approval, the FDA may impose additional requirements, such as post-marketing studies and/or a Risk Evaluation and Mitigation Strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. A REMS can include medication guides, assessment plans, communication plans for healthcare professionals, and elements to assure safe use.
In this circumstance, and upon request by the applicant, the CHMP’s evaluation time frame is reduced to 150 days, excluding time taken by an applicant to respond to questions. 27 MA Validity Period MAs have an initial duration of five years. After five years, the authorization may subsequently be renewed on the basis of a reevaluation of the risk-benefit balance.
In this circumstance, and upon request by the applicant, the CHMP’s evaluation time frame is reduced to 150 days, excluding time taken by an applicant to respond to questions. MA Validity Period MAs have an initial duration of five years. After five years, the authorization may subsequently be renewed on the basis of a reevaluation of the risk-benefit balance.
We continually evaluate our business need and opportunity and balances in-house expertise and capacity with outsourced expertise and capacity. Currently, we outsource substantial clinical trial work to clinical research organizations and certain drug manufacturing to contract manufacturers. Workforce Safety and Employee Wellbeing We maintain a safety culture grounded on the premise of eliminating workplace incidents, risks and hazards.
We continually evaluate our business need and opportunity and balances in-house expertise and capacity with outsourced expertise and capacity. Currently, we outsource substantial clinical trial work to clinical research organizations and certain drug manufacturing to contract manufacturers. 27 Workforce Safety and Employee Wellbeing We maintain a safety culture grounded on the premise of eliminating workplace incidents, risks and hazards.
We utilize third-party suppliers to perform packaging, labelling, distribution, and testing as needed for Evkeeza. 21 Product Candidates The drug substances and drug products for our product candidates are manufactured using our network of GMP contract manufacturing organizations, or CMOs, which are carefully selected and actively managed for high quality, reliable clinical supply.
We utilize third-party suppliers to perform packaging, labelling, distribution, and testing as needed for Evkeeza. Product Candidates The drug substances and drug products for our product candidates are manufactured using our network of GMP contract manufacturing organizations, or CMOs, which are carefully selected and actively managed for high quality, reliable clinical supply.
Mepsevii (Vestronidase Alfa) Exclusivity We own four issued U.S. patents and the corresponding issued foreign patents covering Mepsevii and its use in the treatment of lysosomal storage disorders such as MPS VII. These patents expire in 2035. Mepsevii is also protected in the U.S. by regulatory exclusivity until 2029 and by orphan drug exclusivity for treating MPS VII until 2024.
Mepsevii (Vestronidase Alfa) Exclusivity We own four issued U.S. patents and corresponding issued foreign patents covering Mepsevii and its use in the treatment of lysosomal storage disorders such as MPS VII. These patents expire in 2035. Mepsevii is also protected in the U.S. by regulatory exclusivity until 2029 and by orphan drug exclusivity for treating MPS VII until November 2024.
Dojolvi is also protected in the U.S. by regulatory exclusivity until 2025 and orphan drug exclusivity for treating FAOD until 2027. 18 Evkeeza (Evinacumab) Exclusivity We have an exclusive license from Regeneron to certain Regeneron patents for the development and commercialization of Evkeeza outside of the U.S. for the treatment of HoFH and other hyperlipidemia/hypercholesterolemia indications.
Dojolvi is also protected in the U.S. by regulatory exclusivity until 2025 and orphan drug exclusivity for treating FAOD until 2027. Evkeeza (Evinacumab) Exclusivity We have an exclusive license from Regeneron to certain Regeneron patents for the development and commercialization of Evkeeza outside of the U.S. for the treatment of HoFH and other hyperlipidemia/hypercholesterolemia indications.
The review process can be significantly extended by FDA requests for additional information or clarification. 23 The FDA’s Decision on an NDA or BLA The FDA may issue an approval letter if it finds the application has adequate support for commercial marketing. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
The review process can be significantly extended by FDA requests for additional information or clarification. The FDA’s Decision on an NDA or BLA The FDA may issue an approval letter if it finds the application has adequate support for commercial marketing. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
Abeona In May 2022, we announced an exclusive License Agreement with Abeona for an AAV gene therapy for the treatment of MPS IIIA, or UX111. Under the terms of the agreement, we assumed responsibility for the UX111 program and in return, we are obligated to pay Abeona certain UX111-related prior development costs and other transition costs.
Abeona In May 2022, we announced an exclusive License Agreement with Abeona for an AAV gene therapy for the treatment of MPS IIIA, or UX111. Under the terms of the agreement, we assumed responsibility for the UX111 program and in return, we are obligated 13 to pay Abeona certain UX111-related prior development costs and other transition costs.
The regulatory authorities may also impose specific obligations as a condition of the MA. RMPs and Periodic Safety Update Reports, or PSURs, are routinely available to third parties requesting access, subject to limited redactions. Special rules apply in part for ATMPs.
The regulatory authorities may also impose specific obligations as a condition of the MA. RMPs and Periodic Safety Update Reports, or PSURs, are routinely available to third parties requesting access, subject to limited redactions. 23 Special rules apply in part for ATMPs.
The content of the MAA is similar to that of an NDA or BLA filed in the U.S., with the exception of, among other things, country-specific document requirements. 26 Authorization Procedures Medicines can be authorized by using, among other things, a centralized or decentralized procedure.
The content of the MAA is similar to that of an NDA or BLA filed in the U.S., with the exception of, among other things, country-specific document requirements. Authorization Procedures Medicines can be authorized by using, among other things, a centralized or decentralized procedure.
Additional capabilities important to the rare disease marketplace in the U.S. include the management of key stakeholders such as managed care organizations, specialty pharmacies, and government payers. In many countries outside the U.S. single national payers are critical to providing reimbursement access.
Additional capabilities important to the rare disease marketplace in the U.S. include the management of key stakeholders such as managed care organizations, specialty pharmacies, specialty distributors, and government payers. In many countries outside the U.S. single national payers are critical to providing reimbursement access.
The clinical investigation of a drug is generally divided into three or four phases. Although the phases are usually conducted sequentially, they may overlap or be combined. 22 • Phase 1. The drug is initially introduced into healthy human subjects or patients with the target disease or condition.
The clinical investigation of a drug is generally divided into three or four phases. Although the phases are usually conducted sequentially, they may overlap or be combined. • Phase 1. The drug is initially introduced into healthy human subjects or patients with the target disease or condition.
The commercial infrastructure for rare disease products typically consists of a targeted, specialty field organization that educates a limited and focused group of physicians supported by field management and internal support teams, which includes patient support services, distribution, and market access.
The commercial infrastructure for rare disease products typically consists of a targeted, specialty field organization that educates a limited and focused group of physicians supported by field management and internal support teams, which includes marketing, patient support services, distribution, and market access.
Department of Agriculture’s Animal Welfare Act; • submission to the FDA of an IND, which must become effective before human clinical studies may begin and must be updated annually; • conducting adequate and well-controlled human clinical studies that generally follow the three- to four-phase design described above to establish the safety and efficacy of the product candidate for each proposed indication under an active IND and approved by an independent IRB representing each clinical site; • preparation of and submission to the FDA of a new drug application, or NDA, or biologics license application, or BLA, after completion of all pivotal clinical studies; • potential review of the product application by an FDA advisory committee, where appropriate and if applicable; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the proposed drug substance and drug product are produced to assess compliance with Good Manufacturing Practices, or GMP; • FDA inspection of one or more clinical sites to assure compliance with GCP; and • FDA review and approval of an NDA or BLA.
Department of Agriculture’s Animal Welfare Act; • submission to the FDA of an IND, which must become effective before human clinical studies may begin and must be updated annually; • conducting adequate and well-controlled human clinical studies that generally follow the three- to four-phase design described above to establish the safety and efficacy, or for BLA products, the safety, purity, and potency, of the product candidate for each proposed indication under an active IND and approved by an independent IRB representing each clinical site; • preparation of and submission to the FDA of a new drug application, or NDA, or biologics license application, or BLA, after completion of all pivotal clinical studies; • potential review of the product application by an FDA advisory committee, where appropriate and if applicable; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the proposed drug substance and drug product are produced to assess compliance with Good Manufacturing Practices, or GMP; • FDA inspection of one or more clinical sites to assure compliance with GCP; and 19 • FDA review and approval of an NDA or BLA.
Our Strategy The critical components of our business strategy include the following: • Focus on rare and ultra-rare genetic diseases with significant unmet medical need and clear biology. There are numerous rare and ultra-rare genetic diseases that currently have no drug therapy approved that treat the underlying disease. Patients suffering from these diseases often have a significant morbidity and/or mortality.
Our Strategy The critical components of our business strategy include the following: • Focus on rare and ultrarare genetic diseases with significant unmet medical need and clear biology. There are numerous rare and ultrarare genetic diseases that currently have no drug therapy approved that treat the underlying disease. Patients suffering from these diseases often have a significant morbidity and/or mortality.
We are collaborating to develop products that combine Solid’s differentiated microdystrophin construct, our Pinnacle PCL TM producer cell line platform, or Pinnacle PCL Platform, manufacturing platform, and our AAV8 variants. Solid may provide some development support and was granted an exclusive option to co-invest in products we develop for profit-share participation in certain territories.
We are collaborating to develop products that combine Solid’s differentiated microdystrophin construct, our Pinnacle PCLTM producer cell line platform, or Pinnacle PCL Platform, manufacturing platform, and our AAV8 variants. Solid may provide some development support and was granted an exclusive option to co-invest in products we develop for profit-share participation in certain territories.
The exclusivity positions for our commercial products and our clinical-stage product candidates as of December 31, 2022 are summarized below. Crysvita (Burosumab) Exclusivity We have in-licensed rights from KKC to patents and patent applications relating to Crysvita and its use for the treatment of XLH, TIO, and various other hypophosphatemic conditions.
The exclusivity positions for our commercial products and our clinical-stage product candidates as of December 31, 2023, are summarized below. Crysvita (Burosumab) Exclusivity We have in-licensed rights from KKC to patents and patent applications relating to Crysvita and its use for the treatment of XLH, TIO, and various other hypophosphatemic conditions.
The Inflation Reduction Act of 2022, or the IRA, is intended to foster generic and biosimilar competition and to lower drug and biologic costs. The IRA provides the Centers for Medicare & Medicaid Services, or CMS, with significant new authorities. CMS will be able to directly negotiate prescription drug prices and to cap out-of-pocket costs.
The Inflation Reduction Act of 2022, or the IRA, is intended to foster generic and biosimilar competition and to lower drug and biologic costs. The IRA provides the Centers for Medicare & Medicaid Services, or CMS, with significant new authorities. CMS is able to directly negotiate prescription drug prices and to cap out-of-pocket costs.
We make our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports, available on our internet website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. 32
We make our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports, available on our internet website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. 29
Once an NDA or BLA has been submitted, the FDA’s goal is to review the application within ten months after it accepts the application for filing, or, if the application relates to an unmet medical need in the treatment of a serious or life-threatening condition, six months after the FDA accepts the application for filing.
Once an NDA or BLA has been accepted, the FDA’s goal is to review the application within ten months after it accepts the application for filing, or, if the application relates to an unmet medical need in the treatment of a serious or life-threatening condition, six months after the FDA accepts the application for filing.
To continually assess and improve our employee retention and engagement, we conduct an engagement survey approximately every 18 months, with "pulse" surveys in between, the results of which are discussed with our board of directors, at all hands employee meetings and in individual functions.
To regularly assess and improve our employee retention and engagement, we conduct an engagement survey approximately every 18 months, with "pulse" surveys in between, the results of which are discussed with our board of directors, at all hands employee meetings and in individual functions.
In the field of orphan diseases, and except for ongoing studies being conducted by KKC, we are the lead party for development activities in the profit-share territory and in the European territory until the applicable transition date.
In the field of orphan diseases, and except for ongoing studies being conducted by KKC, we were the lead party for development activities in the Profit-Share Territory and in the European Territory until the applicable transition date.
After April 2024, our rights to promote Crysvita in the U.S. will be limited to medical geneticists and we will solely bear our expenses related to the promotion of Crysvita in the profit-share territory. See “Item I.A. Risk Factors” for additional information on the risks related to the expiration of our exclusive right to promote Crysvita in the profit-share territory.
After December 31, 2024, our rights to promote Crysvita in the U.S. will be limited to medical geneticists and we will solely bear our expenses for the promotion of Crysvita in the Profit-Share Territory. See “Item I.A. Risk Factors” for additional information on the risks related to the expiration of our exclusive right to promote Crysvita in the Profit-Share Territory.
Please see “—License and Collaboration Agreements—Approved Products—Regeneron” for a description of our license agreement with Regeneron Pharmaceuticals. 7 Clinical Product Candidates UX143 (setrusumab) for the treatment of Osteogenesis Imperfecta, or OI UX143 (setrusumab) is a fully human monoclonal antibody that inhibits sclerostin, a protein that acts on a key bone-signaling pathway by inhibiting the activity of bone-forming cells and promoting bone resorption.
Please see “—License and Collaboration Agreements—Approved Products—Regeneron” for a description of our license agreement with Regeneron Pharmaceuticals. 6 Clinical Product Candidates UX143 (setrusumab) for the treatment of Osteogenesis Imperfecta, or OI UX143 (setrusumab) is a fully human monoclonal antibody administered by IV that inhibits sclerostin, a protein that acts on a key bone-signaling pathway by inhibiting the activity of bone-forming cells and promoting bone resorption.
We believe our commercial organization is highly specialized and focused, due to the nature of rare disease treatment. 5 Approved Products and Clinical Product Candidates Our current approved therapies and clinical-stage pipeline consist of four product categories: biologics, small molecules, gene therapy, and nucleic acid product candidates.
We believe our commercial organization is highly specialized and focused, due to the nature of rare disease treatment. 4 Approved Products and Clinical Product Candidates Our current approved therapies and clinical-stage pipeline consist of four product categories: biologics, small molecules, AAV gene therapy, and nucleic acid product candidates.
Pursuant to this license, we have rights to five issued U.S. patents, as well as issued patents and patent applications in other jurisdictions. The U.S. patents expire between 2028 and 2035.
Pursuant to this license, we have rights to six issued U.S. patents, as well as issued patents and patent applications in other jurisdictions. The U.S. patents expire between 2028 and 2035.
TIO can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness. We are collaborating with Kyowa Kirin Co., Ltd., or KKC (formerly Kyowa Hakko Kirin Co., Ltd., or KHK), and Kyowa Kirin, a wholly owned subsidiary of KKC, on the development and commercialization of Crysvita globally.
TIO can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness. We are collaborating with Kyowa Kirin Co., Ltd., or KKC, and Kyowa Kirin, a wholly owned subsidiary of KKC, on the development and commercialization of Crysvita globally.
First, we have in-licensed an issued U.S. patent owned by the University of Pennsylvania, or UPENN, and sublicensed to us by REGENX relating to the AAV8 capsid used in DTX401 that expires in 2024.
First, we have in-licensed an issued U.S. patent owned by the University of Pennsylvania, or UPENN, and sublicensed to us by REGENX relating to the AAV8 capsid used in DTX401 that expired in January 2024.
We invest in the growth and development of our employees through various training and development programs that build and strengthen employees’ leadership and professional skills, including leadership development programs for new leaders, as well as a mentoring program.
We invest in the growth and development of our employees through various training and development programs that build and strengthen employees’ leadership and professional skills, including leadership development programs for new leaders, six sigma certification, as well as a mentoring program.
The drug substance agreement has an initial term of five years, which will be automatically extended for another five years following the initial term, and will continue in full force and effect for its term unless earlier terminated. Following the initial term, we and Rentschler can withdraw from the agreement without cause upon prior notice for specified periods.
The drug substance agreement had an initial term of five years, which was automatically extended for another five years following the initial term and will continue in full force and effect for its term unless earlier terminated. Following the initial term, we and Rentschler can withdraw from the agreement without cause upon prior notice for specified periods.
Our modalities of biologics, small molecules, gene therapy, and nucleic acids provide us with what we believe is an optimal set of options to treat genetic diseases by selecting the best treatment strategy available for each disease. • In-license promising product candidates; retain global commercialization rights to product candidates.
Our modalities of biologics, small molecules, adeno-associated virus, or AAV, gene therapy, and nucleic acids provide us with what we believe is an optimal set of options to treat genetic diseases by selecting the best treatment strategy available for each disease. • In-license promising product candidates; retain global commercialization rights to product candidates.
Risk Factors Risks Related to Our Intellectual Property.” As of December 31, 2022, we own, jointly own, or have exclusive rights to more than 225 issued and in-force patents (not including individually validated national patents in European Patent Convention member countries) that cover one or more of our products or product candidates, methods of their use, or methods of their manufacture, including more than 45 in-force patents issued by the U.S.
Risk Factors Risks Related to Our Intellectual Property.” As of December 31, 2023, we own, jointly own, or have exclusive rights to more than 250 issued and in-force patents (not including individually validated national patents in European Patent Convention member countries) that cover one or more of our products or product candidates, methods of their use, or methods of their manufacture, including more than 50 in-force patents issued by the U.S.
The in-licensed UPENN patent portfolio includes an issued U.S. patent relating to the AAV8 capsid used in DTX301 that expires in 2024, as well as two issued U.S. patents expiring in 2035 (not accounting for any available PTE) and corresponding foreign patents and patent applications covering the codon-optimized version of the OTC gene used in DTX301.
The in-licensed UPENN patent portfolio includes an issued U.S. patent relating to the AAV8 capsid used in DTX301 that expired in January 2024, as well as three issued U.S. patents expiring in 2035 (not accounting for any available PTE) and corresponding foreign patents and patent applications covering the codon-optimized version of the OTC gene used in DTX301.
Only one patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
Only one patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
We are obligated to make future payments of up to $190.0 million upon the achievement of certain milestones, including up to $30.0 million in milestone payments upon achievement of the earlier of initiation of a Phase 3 clinical study or product approvals in Canada and the U.K., up to $85.0 million in additional regulatory approval milestones for the achievement of U.S. and EU product approvals, and up to $75.0 million in commercial milestone payments based on annual worldwide net product sales.
We may be required to make payments of up to $190.0 million upon the achievement of certain milestones, including up to $30.0 million in milestone payments upon achievement of the earlier of initiation of a Phase 3 clinical study or product approvals in Canada and the U.K., up to $85.0 million in additional regulatory approval milestones for the achievement of U.S. and EU product approvals, and up to $75.0 million in commercial milestone payments based on annual worldwide net product sales.
Beyond these BRI patents and patent applications, we own a pending U.S. patent application, corresponding foreign patent applications, and issued patents in Australia, Israel, Korea, Malaysia, and Taiwan relating to our pharmaceutical-grade Dojolvi composition; these owned patents and any additional patents issuing from these owned applications are expected to expire in 2034.
Beyond the patent portfolio in-licensed from BRI, we own a pending U.S. patent application, corresponding foreign patent applications, and issued patents in Australia, Brazil, Canada, Israel, Korea, Malaysia, and Taiwan relating to our pharmaceutical-grade Dojolvi composition; these owned patents and any additional patents issuing from these owned applications are expected to expire in 2034.
Each year, CMS will select and negotiate a preset number of high-spend drugs and biologics covered under Medicare Parts B and D that lack generic or biosimilar competition. Price negotiations begin in 2023. Taking effect in 2023, the IRA provides a new “inflation rebate” that covers Medicare patients and is intended to counter certain price increases in prescription drugs.
Each year, CMS will select and negotiate a preset number of high-spend drugs and biologics covered under Medicare Parts B and D that lack generic or biosimilar competition. Price negotiations began in 2023. Effective from 2023, the IRA provides a new “inflation rebate” that covers Medicare patients and is intended to counter certain price increases in prescription drugs.
GTX-102 for the treatment of Angelman Syndrome GTX-102 is an antisense oligonucleotide, or ASO, that is being developed for the treatment of Angelman syndrome, a debilitating and rare neurogenetic disorder caused by loss-of-function of the maternally inherited allele of the UBE3A gene. There are an estimated 60,000 patients in the developed world affected by Angelman syndrome.
GTX-102 is being developed for the treatment of Angelman syndrome, a debilitating and rare neurogenetic disorder caused by loss-of-function of the maternally inherited allele of the UBE3A gene. There are an estimated 60,000 patients in the developed world affected by Angelman syndrome.
We expect to continue to add employees in 2023 with a focus on expanding our in-house manufacturing capacity in connection with completing construction of our gene therapy manufacturing facility, increasing expertise and bandwidth in clinical and preclinical research and development and commercialization activities and expanding our geographic reach in connection with the global launches of our approved products.
We expect to continue to strategically add employees in 2024 with a focus on expanding our in-house manufacturing capacity in connection with maintaining and operating our gene therapy manufacturing facility, increasing expertise and bandwidth in clinical and preclinical research and development and commercialization activities and expanding our geographic reach in connection with the global launches of our approved products.
In July 2022, we exercised our option to acquire GeneTx and entered into a Unit Purchase Agreement, or the Purchase Agreement, pursuant to which we purchased all the outstanding units of GeneTx.
In July 2022, pursuant to the terms of the Unitholder Option Agreement, as amended, we exercised the Option to acquire GeneTx and entered into a Unit Purchase Agreement, or the Purchase Agreement, pursuant to which we purchased all the outstanding units of GeneTx.
KKC pays us a royalty of up to 10% based on net sales in the European territory. We sold our interest in the European territory royalty to RPI Finance Trust, an affiliate of Royalty Pharma, in December 2019. In Latin America, we pay to KKC a low single-digit royalty on net sales.
KKC pays us a royalty of up to 10% based on net sales in the European Territory. We sold our interest in the European Territory royalty to RPI Finance Trust, an affiliate of Royalty Pharma, in December 2019.
Second, we have a non-exclusive license from the National Institutes of Health, or NIH, to an issued U.S. patent expiring in 2034 (not accounting for any available PTE) and corresponding foreign patents covering a recombinant nucleic acid construct used in DTX401 that includes a codon-optimized version of the G6Pase gene.
Second, we have a non-exclusive license from the National Institutes of Health, or NIH, to an issued U.S. patent expiring in 2034 (not accounting for any available PTE) and corresponding foreign patents covering a recombinant nucleic acid construct used in DTX401 that includes a codon-optimized version of the G6Pase gene. 15 DTX301 (Avalotcagene Ontaparvovec) Exclusivity We have a license to two patent families covering elements of our DTX301 product candidate.
We share the costs for development activities in the profit-share territory and the European territory conducted pursuant to the development plan before the applicable transition date equally with KKC. In April 2023, which is the transition date for the profit-share territory, KKC will become the lead party and be responsible for the costs of the development activities.
We shared the costs for development activities in the Profit-Share Territory and the European Territory conducted pursuant to the development plan before the applicable transition date equally with KKC. In April 2023, which was the transition date for the Profit-Share Territory, KKC became the lead party and became responsible for the costs of the development activities.
Further, 1,155 are based in the U.S., including at our facilities in Novato, California, Brisbane, California, Cambridge, Massachusetts, and Woburn, Massachusetts, and 156 are based at our international locations.
Further, 1,089 employees are based in the U.S., including at our facilities in Novato, California, Brisbane, California, Cambridge, Massachusetts, and Woburn, Massachusetts, and 187 employees are based at our international locations.
Beyond these in-licenses, we own a patent family covering AAV vectors expressing a novel truncated version of the ATP7B protein produced by UX701; we expect any patents emanating from this patent family to expire in 2040 (not accounting for any available PTE).
Beyond these in-licenses, we own a patent family covering AAV vectors expressing a novel truncated version of the ATP7B protein produced by UX701; we expect any patents emanating from this patent family to expire in 2040 (not accounting for any available PTE). Trademarks We own registered trademarks covering the Ultragenyx word mark in the U.S. and multiple other jurisdictions.
Notwithstanding these provisions, the IRA’s impact on competition and commercialization remains largely uncertain. 25 Abbreviated New Drug Applications for Generic Drugs and New Chemical Entity Exclusivity The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, authorized the FDA to approve generic drugs that are bioequivalent (i.e. identical) to previously approved branded drugs.
Abbreviated New Drug Applications for Generic Drugs and New Chemical Entity Exclusivity The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, authorized the FDA to approve generic drugs that are bioequivalent (i.e. identical) to previously approved branded drugs.
In September 2022, we entered into an amendment to the collaboration agreement which clarified the scope of increased participation by KKC in support of our commercial activities prior to April 2023 and granted us the right to continue to support KKC in commercial field activities in the U.S. through April 2024, subject to the limitations and conditions set forth in the amendment.
In 2022, we entered into an amendment to the collaboration agreement which granted us the right to continue to support KKC in commercial field activities in the U.S. through April 2024, subject to the limitations and conditions set forth in the amendment.
All other raw materials are commercially available. Dojolvi The pharmaceutical-grade drug substance for Dojolvi is manufactured by IOI Oleo GmbH, or IOI Oleo, in Germany under an exclusive worldwide supply agreement, subject to certain limitations, executed in 2012 with an initial term of three years.
All other raw materials are commercially available. Dojolvi The pharmaceutical-grade drug substance for Dojolvi is manufactured by IOI Oleo GmbH, or IOI Oleo, in Germany under an exclusive worldwide supply agreement, subject to certain limitations, executed in 2012 and subsequently amended and restated in 2023.
We have not experienced any material employment-related issues or interruptions of services due to labor disagreements and are not a party to any collective bargaining agreements.
We believe our relationship with our employees to be generally good. We have not experienced any material employment-related issues or interruptions of services due to labor disagreements and are not a party to any collective bargaining agreements.
The majority of new employees hired during the year ended December 31, 2022 were to support and extend our clinical and preclinical pipeline as well as our commercialization activities, with hires in commercial, clinical development and operations, research, manufacturing, and general and administrative functions. We believe our relationship with our employees to be generally good.
The majority of new employees hired during the year ended December 31, 2023 were to support and extend our clinical and preclinical pipeline, our in-house manufacturing capacities for our GTMF, as well as our commercialization activities, with hires in commercial, clinical development and operations, research, manufacturing, and general and administrative functions.
Separately, if a biologic drug for which no biosimilar exists delays a biosimilar’s market entry beyond two years, CMS will be authorized to subject the biologics manufacturer to price negotiations intended to ensure fair competition.
Separately, if a biologic drug for which no biosimilar exists delays a biosimilar’s market entry beyond two years, CMS will be authorized to subject the biologics manufacturer to price negotiations intended to ensure fair competition. Notwithstanding these provisions, the IRA’s impact on competition and commercialization remains largely uncertain.
Pursuant to the terms of the agreement, we received the rights to develop, commercialize and distribute the product for 13 HoFH in countries outside of the U.S. Upon closing of the transaction in January 2022, we paid Regeneron a $30.0 million upfront payment.
Pursuant to the terms of the agreement, we received the rights to develop, commercialize and distribute the product for HoFH in countries outside of the U.S. Upon closing of the transaction in January 2022, we paid Regeneron a $30.0 million upfront payment. During the year ended December 31, 2023, a $10.0 million regulatory milestone was achieved.
In addition, we are obligated to pay tiered mid- to high single-digit percentage royalties based on licensed product annual net sales.
We will also pay tiered mid- to high single-digit percentage royalties based on licensed product annual net sales.
In accordance with the terms of the Purchase Agreement, we exercised our option to acquire GeneTx Biotherapeutics LLC (GeneTx) for an option exercise price of $75.0 million, in addition to outstanding cash and adjustments for working capital, for a total purchase consideration of $91.2 million.
In accordance with the terms of the Purchase Agreement, we paid the option exercise price of $75.0 million, an additional $15.6 million to acquire the outstanding cash of GeneTx, and adjustments for working capital and transaction expenses of $0.6 million, for a total purchase consideration of $91.2 million.
We also entered into a Stock Purchase Agreement with Solid in October 2020 pursuant to which we purchased 7,825,797 shares of Solid’s common stock for an aggregate price of $40.0 million. In October 2022, Solid announced a 1 for 15 reverse stock split.
We also entered into a Stock Purchase Agreement with Solid in October 2020 pursuant to which we purchased 521,719 shares (as adjusted for the October 2022 reverse stock split) of Solid’s common stock for an aggregate price of $40.0 million.
Orphan Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the U.S., or if it affects more than 200,000 individuals in the U.S. and there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales in the U.S. 24 Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers.
Orphan Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the U.S., or if it affects more than 200,000 individuals in the U.S. and there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales in the U.S.
Approved Products Kyowa Kirin Co., Ltd. In August 2013, we entered into a collaboration and license agreement with KKC.
Following is a description of our significant license and collaboration agreements. Approved Products Kyowa Kirin Co., Ltd. In August 2013, we entered into a collaboration and license agreement with KKC.
If we receive and resell an FDA priority review voucher, or PRV, in connection with a new drug application approval, GeneTx is entitled to receive a portion of proceeds from the sale of the PRV or a cash payment from us, if we choose to retain the PRV. 15 Mereo In December 2020, we entered into a License and Collaboration Agreement with Mereo to collaborate on the development of setrusumab.
If we receive and resell an FDA priority review voucher, or PRV, in connection with a new drug application approval, GeneTx is entitled to receive a portion of proceeds from the sale of the PRV or a cash payment from us, if we choose to retain the PRV.
Under the license agreement, we are obligated to pay to SLU a low single-digit royalty on net sales of the licensed products in the U.S., Europe, or Japan, subject to certain potential deductions. Our obligation to pay royalties to SLU in these territories continues until the expiration of any orphan drug exclusivity.
Under the license agreement, we are obligated to pay to SLU a low single-digit royalty on net sales of the licensed products in the U.S., Europe, or Japan, subject to certain potential deductions.
The Phase 3 study has a 48-week primary efficacy analysis period and enrolled approximately 50 patients eight years of age and older, randomized 1:1 to DTX401 (1.0 x 10^13 GC/kg dose) or placebo. The primary endpoint is the reduction in oral glucose replacement with cornstarch while maintaining glucose control.
In May 2023, we announced the last patient had been dosed in the Phase 3 study of DTX401. The 48-week study has fully enrolled patients eight years of age and older, randomized 1:1 to DTX401 (1.0 x 10^13 GC/kg dose) or placebo. The primary endpoint is the reduction in oral glucose replacement with cornstarch while maintaining glucose control.
First, we have in-licensed patents owned by UPENN and sublicensed to us by REGENX relating to the AAV9 capsid used in UX701 that expire between 2024 and 2026 in the U.S., and in 2024 in foreign countries.
UX701 Exclusivity We have two licenses to patents and patent applications covering elements of our UX701 product candidate. First, we have in-licensed patents owned by UPENN and sublicensed to us by REGENX relating to the AAV9 capsid used in UX701 that expire between September 2024 and 2026 in the U.S., and in September 2024 in foreign countries.
OTC deficiency is the most common urea cycle disorder, and there are approximately 10,000 patients in the developed world with OTC deficiency, of which we estimate approximately 80% are classified as late-onset, our target population. DTX301 has received Orphan Drug Designation in both the U.S. and in the EU and Fast Track Designation in the U.S.
DTX301 is being developed for the treatment of patients with OTC deficiency, which is the most common urea cycle disorder, and there are approximately 10,000 patients in the developed world with OTC deficiency, of which we estimate approximately 80% are classified as late-onset, our target population.
We will also make milestone payments of up to $25.0 million per approved product, if certain commercial milestones are achieved, and will pay low to mid- single-digit royalties on net sales of each Subfield’s licensed products. GeneTx In August 2019, we entered into an agreement with GeneTx to collaborate on the development of GeneTx’s GTX-102.
We will also make milestone payments of up to $25.0 million per approved product, if certain commercial milestones are achieved, and will pay low to mid- single-digit royalties on net sales of each Subfield’s licensed products.
This means that clinical trials conducted in the EU or EEA have to comply with EU clinical trial legislation and that clinical trials conducted outside the EU or EEA have to comply with ethical principles equivalent to those set out in the EEA, including adhering to international good clinical practice and the Declaration of Helsinki.
This means that clinical trials conducted in the EU or EEA have to comply with EU clinical trial legislation and that clinical trials conducted outside the EU or EEA have to comply with ethical principles equivalent to those set out in the EEA, including adhering to international good clinical practice and the Declaration of Helsinki. 24 Exceptional Circumstances/Conditional Approval Orphan drugs or drugs with unmet medical needs may be eligible for EU approval under exceptional circumstances or with conditional approval.
For the year ended December 31, 2022, more than half of our total revenues were generated under our collaboration agreement with KKC. Human Capital General Information As of December 31, 2022, we had 1,311 total employees, of which 705 are in research and development and 606 are in sales, general, and administrative.
For the year ended December 31, 2023, more than half of our total revenues were earned from our collaboration partner KKC. Human Capital General Information As of December 31, 2023, we had 1,276 total employees, of which 876 are in research and development and 400 are in sales, general, and administrative.
Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products and human cell and tissue products. A sponsor may seek RMAT designation if its regenerative medicine product is intended for a serious condition and preliminary clinical evidence indicates that the regenerative medicine therapy has the potential to address unmet medical needs for such condition.
A sponsor may seek RMAT designation if its regenerative medicine product is intended to treat, modify, reverse, or cure a serious or life-threatening condition and preliminary clinical evidence indicates that the regenerative medicine therapy has the potential to address unmet medical needs for such condition.
Please see “—License and Collaboration Agreements—Approved Products—Kyowa Hakko Kirin” for a description of our collaboration and license agreement with KKC.
Please see “—License and Collaboration Agreements—Approved Products—Saint Louis University” for a description of our license agreement with Saint Louis University.
It is also approved in the European Economic Area, or EEA, as a first-in-class therapy for use together with diet and other low-density lipoprotein-cholesterol, or LDL-C, lowering therapies to treat adults and adolescents aged 12 years and older with clinical HoFH. There are approximately 3,000 to 5,000 patients with HoFH in the developed world outside of the U.S.
Evkeeza is approved in the U.S., where it is marketed by our partner Regeneron Pharmaceuticals, or Regeneron. It is also approved in the European Economic Area, or EEA, as a first-in-class therapy for use together with diet and other low-density lipoprotein-cholesterol, or LDL-C, lowering therapies to treat adults and adolescents aged five years and older with clinical HoFH.
We are maintaining and building our patent portfolio by filing new patent applications, prosecuting existing applications, and licensing and acquiring new patents and patent applications. 17 Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed, or misappropriated, or such intellectual property and proprietary rights may not be sufficient to achieve or maintain market exclusivity or otherwise to provide competitive advantages.
Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed, or misappropriated, or such intellectual property and proprietary rights may not be sufficient to achieve or maintain market exclusivity or otherwise to provide competitive advantages.
GTX-102 Exclusivity We have an exclusive license from Texas A&M University, or TAMU, to a patent family filed in the U.S. and several foreign jurisdictions relating to UBE3A antisense oligonucleotides including GTX-102 and their use for the treatment of Angelman syndrome, 19 or AS.
GTX-102 Exclusivity We have an exclusive license from TAMU to a patent family filed in the U.S. and several foreign jurisdictions relating to UBE3A antisense oligonucleotides including GTX-102 and their use for the treatment of Angelman syndrome. The in-licensed TAMU patent family includes three issued U.S. patents expiring in 2038 (not accounting for any available PTE).
DTX401 for the treatment of glycogen storage disease type Ia, or GSDIa DTX401 is an adeno-associated virus 8, or AAV8, gene therapy clinical candidate for the treatment of patients with glycogen storage disease type Ia, or GSDIa, a disease that arises from a defect in G6Pase, an essential enzyme in glycogen and glucose metabolism.
DTX401 for the treatment of glycogen storage disease type Ia, or GSDIa DTX401 is an adeno-associated virus 8, or AAV8, gene therapy clinical candidate, administered by a one-time IV infusion that is designed to deliver stable expression and activity of G6Pase-α, an essential enzyme in glycogen and glucose metabolism.
You are advised to read this Annual Report in conjunction with other reports and documents that we file from time to time with the Securities and Exchange Commission, or the SEC.
No portion of our website, or any other website that may be referenced, is incorporated by reference into this Annual Report. You are advised to read this Annual Report in conjunction with other reports and documents that we file from time to time with the Securities and Exchange Commission, or the SEC.
Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the drug’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, established the Breakthrough Therapy designation.
Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the drug’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative vendors or do so on commercially reasonable terms. Switching or adding additional vendors involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new vendor commences work.
Biggest changeAs a result, the commercial prospects for our product candidates could be harmed, our costs could increase, and our ability to generate revenue could be delayed. 42 If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative vendors or do so on commercially reasonable terms.
The supply price to us for commercial sales of Crysvita in Latin America and the transfer price for commercial sales of the product in the U.S. and Canada was 35% of net sales through December 31, 2022 and is 30% thereafter, which is higher than the typical cost of sales for companies focused on rare diseases.
The supply price to us for commercial sales of Crysvita in Latin America and the transfer price for commercial sales of the product in the U.S. and Canada was 35% of net sales through December 31, 2022 and 30% thereafter, which is higher than the typical cost of sales for companies focused on rare diseases.
The disaster recovery and business continuity plans we have in place currently are limited and are may be inadequate in the event of a serious disaster or similar event.
The disaster recovery and business continuity plans we have in place currently are limited and may be inadequate in the event of a serious disaster or similar event.
Our ability to generate substantial future revenue from product sales, including named patient sales, depends heavily on our success in many areas, including, but not limited to: • obtaining regulatory and marketing approvals with broad indications for product candidates for which we complete clinical studies; • developing a sustainable and scalable manufacturing process for our products and any approved product candidates and establishing and maintaining supply and manufacturing relationships with third parties that can conduct the processes 35 and provide adequate (in amount and quality) product supply to support market demand for our products and product candidates, if approved; • launching and commercializing our products and product candidates for which we obtain regulatory and marketing approval, either directly or with a collaborator or distributor; • obtaining market acceptance of our products and product candidates as viable treatment options; • obtaining adequate market share, reimbursement and pricing for our products and product candidates; • our ability to sell our products and product candidates on a named patient basis or through an equivalent mechanism and the amount of revenue generated from such sales; • our ability to find patients so they can be diagnosed and begin receiving treatment; • addressing any competing technological and market developments; • negotiating favorable terms, including commercial rights, in any collaboration, licensing, or other arrangements into which we may enter, any amendments thereto or extensions thereof; • maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and • attracting, hiring, and retaining qualified personnel.
Our ability to generate substantial future revenue from product sales, including named patient sales, depends heavily on our success in many areas, including, but not limited to: • obtaining regulatory and marketing approvals with broad indications for product candidates for which we complete clinical studies; • developing a sustainable and scalable manufacturing process for our products and any approved product candidates and establishing and maintaining supply and manufacturing relationships with third parties that can conduct the processes 32 and provide adequate (in amount and quality) product supply to support market demand for our products and product candidates, if approved; • launching and commercializing our products and product candidates for which we obtain regulatory and marketing approval, either directly or with a collaborator or distributor; • obtaining market acceptance of our products and product candidates as viable treatment options; • obtaining adequate market share, reimbursement and pricing for our products and product candidates; • our ability to sell our products and product candidates on a named patient basis or through an equivalent mechanism and the amount of revenue generated from such sales; • our ability to find patients so they can be diagnosed and begin receiving treatment; • addressing any competing technological and market developments; • negotiating favorable terms, including commercial rights, in any collaboration, licensing, or other arrangements into which we may enter, any amendments thereto or extensions thereof; • maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and • attracting, hiring, and retaining qualified personnel.
Disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to: • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our collaborators; and • the priority of invention of patented technology.
Disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to: • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights; 53 • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our collaborators; and • the priority of invention of patented technology.
We have, and may in the future, be required to take inventory write-offs and incur other charges and expenses for products and product candidates that fail to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. The drug substance and drug product for our products and most of our product candidates are currently acquired from single-source suppliers.
We have, and may in the future, be required to take inventory write-offs and incur other charges and expenses for products and product candidates that fail to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. 44 The drug substance and drug product for our products and most of our product candidates are currently acquired from single-source suppliers.
If KKC, Regeneron, the University of Pennsylvania, REGENX, Arcturus or any of our future licensing partners fail to appropriately prosecute, maintain, and enforce patent protection for the patents covering any of our products or product candidates, our ability to develop and commercialize those products or product candidates may be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products.
If KKC, Regeneron, the University of Pennsylvania, REGENX, or any of our future licensing partners fail to appropriately prosecute, maintain, and enforce patent protection for the patents covering any of our products or product candidates, our ability to develop and commercialize those products or product candidates may be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products.
If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences. 54 Competitors could enter the market with generic versions of Dojolvi or our small-molecule product candidates, which may result in a material decline in sales of affected products.
If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences. Competitors could enter the market with generic versions of Dojolvi or our small-molecule product candidates, which may result in a material decline in sales of affected products.
Also, we may be subject to additional federal, state and local privacy laws and regulations in the U.S., including new and recently enacted laws (such as CCPA and CPRA), that may apply to us and/or our service providers now or in the future and that require that we take measures to be transparent regarding, honor rights with respect to, and protect the privacy and security of certain information we gather and use in our business, including personal information, particularly personal information that is not otherwise subject to HIPAA. 60 If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, disgorgement of profits, and the curtailment or restructuring of our operations.
Also, we may be subject to additional federal, state and local privacy laws and regulations in the U.S., including new and recently enacted laws (such as CCPA and CPRA), that may apply to us and/or our service providers now or in the future and that require that we take measures to be transparent regarding, honor rights with respect to, and protect the privacy and security of certain information we gather and use in our business, including personal information, particularly personal information that is not otherwise subject to HIPAA. 58 If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, disgorgement of profits, and the curtailment or restructuring of our operations.
If our current and future products fail to achieve an adequate level of acceptance by physicians, patients, payors, and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable. The insurance coverage and reimbursement status of newly approved products is uncertain.
If our current and future products fail to achieve an adequate level of acceptance by physicians, patients, payors, and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable. 47 The insurance coverage and reimbursement status of newly approved products is uncertain.
However, such a license may not be available on commercially reasonable terms or at all. 53 Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to continue commercialization of our products, or block our ability to develop and commercialize one or more of our product candidates.
However, such a license may not be available on commercially reasonable terms or at all. Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to continue commercialization of our products, or block our ability to develop and commercialize one or more of our product candidates.
In addition, there may be periods during which the use of state income tax NOL carryforwards and other state tax attribute carryforwards (such as state research tax credits) are suspended or otherwise limited, which could potentially accelerate or permanently increase future state tax liabilities for us. Litigation may substantially increase our costs and harm our business.
In addition, there may be 64 periods during which the use of state income tax NOL carryforwards and other state tax attribute carryforwards (such as state research tax credits) are suspended or otherwise limited, which could potentially accelerate or permanently increase future state tax liabilities for us. Litigation may substantially increase our costs and harm our business.
We rely on third parties for the automation, characterization and validation, of our bioanalytical assays, companion diagnostics and the manufacture of its critical reagents. 44 Companion diagnostics are subject to regulation by FDA and similar regulatory authorities outside the U.S. as medical devices and require regulatory clearance or approval prior to commercialization.
We rely on third parties for the automation, characterization and validation, of our bioanalytical assays, companion diagnostics and the manufacture of its critical reagents. Companion diagnostics are subject to regulation by the FDA and similar regulatory authorities outside the U.S. as medical devices and require regulatory clearance or approval prior to commercialization.
Even if our third-party product 46 manufacturers develop acceptable manufacturing processes that provide the necessary quantities of our products and product candidates in a compliant and timely manner, the cost to us for the supply of our products and product candidates manufactured by such third parties may be high and could limit our profitability.
Even if our third-party product manufacturers develop acceptable manufacturing processes that provide the necessary quantities of our products and product candidates in a compliant and timely manner, the cost to us for the supply of our products and product candidates manufactured by such third parties may be high and could limit our profitability.
We also expect the FDA will require the development and regulatory approval of a companion diagnostic assay as a condition to approval of our gene therapy product candidates. There has been limited success to date industrywide in developing and commercializing these types of companion diagnostics.
We also expect the FDA will require the development 41 and regulatory approval of a companion diagnostic assay as a condition to approval of our gene therapy product candidates. There has been limited success to date industrywide in developing and commercializing these types of companion diagnostics.
If our qualifying product candidates are approved by the FDA after the current approval deadlines, we will not be eligible to receive additional PRVs for our product candidates and accordingly, we would be unable to use such PRV for Priority Review for another one of our programs or to sell such PRV, which sale has the potential to generate significant proceeds. 41 Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
If our qualifying product candidates are approved by the FDA after the current approval deadlines, we will not be eligible to receive additional PRVs for our product candidates and accordingly, we would be unable to use such PRV for Priority Review for another one of our programs or to sell such PRV, which sale has the potential to generate significant proceeds. 38 Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. 67 Increased scrutiny regarding ESG practices and disclosures could result in additional costs and adversely impact our business and reputation.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. Increased scrutiny regarding ESG practices and disclosures could result in additional costs and adversely impact our business and reputation.
The timing and amount of any royalty payments that are made by KKC based on sales of Crysvita in Europe will depend on, among other things, the efforts, allocation of resources, and successful commercialization of Crysvita by KKC in Europe; • the timing and amount of any payments we may receive under our agreement with KKC will depend on, among other things, the efforts, allocation of resources, and successful commercialization of Crysvita by KKC in the U.S. and Canada under our agreement; • KKC may change the focus of its commercialization efforts or pursue higher-priority programs; • KKC may make decisions regarding the indications for our product candidates in countries where it has the sole right to commercialize the product candidates that limit commercialization efforts in those countries or in countries where we have the right to commercialize our product candidates; • KKC may make decisions regarding market access and pricing in countries where it has the sole right to commercialize our product candidates which can negatively impact our commercialization efforts in countries where we have the right to commercialize our product candidates; • KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use or commercial use (including as a result of the COVID-19 pandemic), which could result in program delays or lost revenue; • KKC may elect to develop and commercialize Crysvita indications with a larger market than XLH and at a lower price, thereby reducing the profit margin on sales of Crysvita for any orphan indications, including XLH; • if KKC were to breach or terminate the agreement with us, we would no longer have any rights to develop or commercialize Crysvita or such rights would be limited to non-terminated countries; • KKC may terminate its agreement with us, adversely affecting our potential revenue from licensed products; and • the timing and amounts of expense reimbursement that we may receive are uncertain, and the total expenses for which we are obligated to reimburse KKC may be greater than anticipated.
The timing and amount of any royalty payments that are made by KKC based on sales of Crysvita in Europe will depend on, among other things, the efforts, allocation of resources, and successful commercialization of Crysvita by KKC in Europe; • the timing and amount of any payments we may receive under our agreement with KKC will depend on, among other things, the efforts, allocation of resources, and successful commercialization of Crysvita by KKC in the U.S. and Canada under our agreement; • KKC may change the focus of its commercialization efforts or pursue higher priority programs; • KKC may make decisions regarding the indications for our product candidates in countries where it has the sole right to commercialize the product candidates that limit commercialization efforts in those countries or in countries where we have the right to commercialize our product candidates; • KKC may make decisions regarding market access and pricing in countries where it has the sole right to commercialize our product candidates which can negatively impact our commercialization efforts in countries where we have the right to commercialize our product candidates; • KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use or commercial use, which could result in program delays or lost revenue; • KKC may elect to develop and commercialize Crysvita indications with a larger market than XLH and at a lower price, thereby reducing the profit margin on sales of Crysvita for any orphan indications, including XLH; • if KKC were to breach or terminate the agreement with us, we would no longer have any rights to develop or commercialize Crysvita or such rights would be limited to non-terminated countries; • KKC may terminate its agreement with us, adversely affecting our potential revenue from licensed products; and • the timing and amounts of expense reimbursement that we may receive are uncertain, and the total expenses for which we are obligated to reimburse KKC may be greater than anticipated.
Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock. 65 Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock. 63 Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
We have in the past sought and may in the future seek funds through a sale of future royalty payments similar to our transactions with Royalty Pharma and OMERS or through collaborative partnerships, strategic alliances, and licensing or other arrangements, such as our transaction with Daiichi Sankyo, and we may be required to relinquish rights to some of our technologies or product candidates, future revenue streams, research programs, and other product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.
We have in the past sought and may in the future seek funds through a sale of future royalty payments similar to our transactions with Royalty Pharma and OMERS or through collaborative partnerships, strategic alliances, and licensing or other arrangements, such as our transaction with Daiichi Sankyo Co., Ltd., or Daiichi Sankyo, and we may be required to relinquish rights to some of our technologies or product candidates, future revenue streams, research programs, and other product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.
Clinical study delays could also shorten any periods during which our products have commercial exclusivity and may allow our competitors to bring products to market before we do, which could negatively impact our ability to obtain orphan exclusivity and to successfully commercialize our product candidates and may harm our business and results of operations. 38 If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.
Clinical study delays could also shorten any periods during which our products have commercial exclusivity and may allow our competitors to bring products to market before we do, which could negatively impact our ability to obtain orphan exclusivity and to successfully commercialize our product candidates and may harm our business and results of operations. 35 If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.
Our stock price could be subject to wide fluctuations in response to a variety of factors, including but not limited to the following: • adverse results or delays in preclinical or clinical studies; • any inability to obtain additional funding; • any delay in filing an IND, NDA, BLA, MAA, or other regulatory submission for any of our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory agency’s review of that IND, NDA, BLA, MAA, or other regulatory submission; • the perception of limited market sizes or pricing for our products and product candidates; 63 • decisions by our collaboration partners with respect to the indications for our products and product candidates in countries where they have the right to commercialize the products and product candidates; • decisions by our collaboration partners regarding market access and pricing in countries where they have the right to commercialize our products and product candidates; • failure to successfully develop and commercialize our products and product candidates; • the level of revenue we receive from our commercialized products or from named patient sales; • post-marketing safety issues; • failure to maintain our existing strategic collaborations or enter into new collaborations; • failure by us or our licensors and strategic collaboration partners to prosecute, maintain, or enforce our intellectual property rights; • changes in laws or regulations applicable to our products; • any inability to obtain adequate product supply for our products and product candidates or the inability to do so at acceptable prices; • adverse regulatory decisions; • introduction of new products, services, or technologies by our competitors; • changes in or failure to meet or exceed financial projections or other guidance we may provide to the public; • changes in or failure to meet or exceed the financial projections or other expectations of the investment community; • the perception of the pharmaceutical industry or our company by the public, legislatures, regulators, and the investment community; • the perception of the pharmaceutical industry’s approach to drug pricing; • announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us, our strategic collaboration partners, or our competitors; • the integration and performance of any businesses we have acquired or may acquire; • disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies; • additions or departures of key scientific or management personnel; • significant investigations, regulatory proceedings or lawsuits, including patent or stockholder litigation; • securities or industry analysts’ reports regarding our stock, or their failure to issue such reports; • changes in the market valuations of similar companies; • general market, macroeconomic conditions or geopolitical developments, including the impact from the COVID-19 pandemic, rising inflation and the potential recessionary environment; • sales of our common stock by us or our stockholders in the future; and • trading volume of our common stock.
Our stock price could be subject to wide fluctuations in response to a variety of factors, including but not limited to the following: • adverse results or delays in preclinical or clinical studies; • any inability to obtain additional funding; • any delay in filing an IND, NDA, BLA, MAA, or other regulatory submission for any of our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory agency’s review of that IND, NDA, BLA, MAA, or other regulatory submission; • the perception of limited market sizes or pricing for our products and product candidates; • decisions by our collaboration partners with respect to the indications for our products and product candidates in countries where they have the right to commercialize the products and product candidates; • decisions by our collaboration partners regarding market access and pricing in countries where they have the right to commercialize our products and product candidates; 61 • failure to successfully develop and commercialize our products and product candidates; • the level of revenue we receive from our commercialized products or from named patient sales; • post-marketing safety issues; • failure to maintain our existing strategic collaborations or enter into new collaborations; • failure by us or our licensors and strategic collaboration partners to prosecute, maintain, or enforce our intellectual property rights; • changes in laws or regulations applicable to our products; • any inability to obtain adequate product supply for our products and product candidates or the inability to do so at acceptable prices; • adverse regulatory decisions; • introduction of new products, services, or technologies by our competitors; • changes in or failure to meet or exceed financial projections or other guidance we may provide to the public; • changes in or failure to meet or exceed the financial projections or other expectations of the investment community; • the perception of the pharmaceutical industry or our company by the public, legislatures, regulators, and the investment community; • the perception of the pharmaceutical industry’s approach to drug pricing; • announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us, our strategic collaboration partners, or our competitors; • the integration and performance of any businesses we have acquired or may acquire; • disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies; • additions or departures of key scientific or management personnel; • significant investigations, regulatory proceedings or lawsuits, including patent or stockholder litigation; • securities or industry analysts’ reports regarding our stock, or their failure to issue such reports; • changes in the market valuations of similar companies; • general market, macroeconomic conditions or geopolitical developments, rising inflation, and the potential recessionary environment; • sales of our common stock by us or our stockholders in the future; and • trading volume of our common stock.
Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic or biosimilar medications.
Even if patents covering our products or product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic or biosimilar medications.
Such a security breach could harm our reputation, erode confidence in our information security measures, and lead to regulatory scrutiny and result in penalties, fines, indemnification claims, litigation and potential civil or criminal liability. 62 We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Such a security breach could harm our reputation, erode confidence in our information security measures, and lead to regulatory scrutiny and result in penalties, fines, indemnification claims, litigation and potential civil or criminal liability. 60 We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Applications for our product candidates could fail to receive regulatory approval, or could be delayed in receiving regulatory approval, for many reasons, including but not limited to the following: • regulatory authorities may disagree with the design, implementation, or conduct of our clinical studies; • regulatory authorities may change their guidance or requirements for a development program for a product candidate; • the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical studies; • the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an NDA, or biologics license application, or BLA, or other submission or to obtain regulatory approval; 40 • we may be unable to demonstrate to regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable; • regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities used to manufacture our clinical and commercial supplies; • the U.S. government may be shut down, which could delay the FDA; • the FDA may be delayed in responding to our applications or submissions due to competing priorities or limited resources, including as a result of the COVID-19 pandemic, lack of FDA funding or personnel; • failure of our nonclinical or clinical development to comply with an agreed upon Pediatric Investigational Plan, or PIP, which details the designs and completion timelines for nonclinical and clinical studies and is a condition of marketing authorization in the EU; and • the approval policies or regulations of regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Applications for our product candidates could fail to receive regulatory approval, or could be delayed in receiving regulatory approval, for many reasons, including but not limited to the following: • regulatory authorities may disagree with the design, implementation, or conduct of our clinical studies; • regulatory authorities may change their guidance or requirements for a development program for a product candidate; • the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical studies; • the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an NDA, or biologics license application, or BLA, or other submission or to obtain regulatory approval; 37 • we may be unable to demonstrate to regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable; • regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities used to manufacture our clinical and commercial supplies; • the U.S. government may be shut down, which could delay the FDA; • the FDA may be delayed in responding to our applications or submissions due to competing priorities or limited resources, including as a result of the lack of FDA funding or personnel; • failure of our nonclinical or clinical development to comply with an agreed upon Pediatric Investigational Plan, or PIP, which details the designs and completion timelines for nonclinical and clinical studies and is a condition of marketing authorization in the EU; and • the approval policies or regulations of regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Even if we believe such claims are without merit, a court of competent jurisdiction could hold that one or more of these patents is valid, enforceable, and infringed, in which case the owners of any such patents may be able to block our ability to commercialize a product candidate unless we obtained a license under the applicable patents, or until such patents expire.
Even if we believe such claims are without merit, a court of competent jurisdiction could hold that one or more of these patents is valid, enforceable, and infringed, in which case the owners of any such patents may be able to block our ability to commercialize a product candidate unless we obtain a license under the applicable patents, or until such patents expire.
Further, given that cGMP gene therapy, mRNA, DNA and siRNA manufacturing is a nascent industry, there are a small number of CMOs with the experience necessary to manufacture our gene therapy product 42 candidates and we may have difficulty finding or maintaining relationships with such CMOs or hiring experts for internal manufacturing and accordingly, our production capacity may be limited.
Further, given that cGMP gene therapy, mRNA, DNA and siRNA manufacturing is a nascent industry, there are a small number of CMOs with the experience necessary to manufacture our gene therapy product candidates and we may 39 have difficulty finding or maintaining relationships with such CMOs or hiring experts for internal manufacturing and accordingly, our production capacity may be limited.
If patients are unwilling to participate in our studies for any reason (such as drug-related side effects), the timeline for and our success in recruiting patients, conducting studies, and obtaining regulatory approval of potential products may be delayed or impaired, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented.
If patients are unwilling to participate in our studies for any reason (such as drug-related side effects), the timeline for and our success in recruiting patients, conducting studies, and obtaining regulatory approval of potential products may be delayed or impaired, the commercial prospects of our product candidates will be harmed, and our ability to generate product sales from any of these product candidates could be delayed or prevented.
Because the target patient populations of our products and product candidates are small, and the addressable patient population potentially even smaller, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth. We focus our research and product development on treatments for rare and ultra-rare genetic diseases.
Because the target patient populations of our products and product candidates are small, and the addressable patient population potentially even smaller, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth. We focus our research and product development on treatments for rare and ultrarare genetic diseases.
Fast Track, Breakthrough Therapy, Priority Review, or Regenerative Medicine Advanced Therapy, or RMAT, designation by the FDA, or access to the Priority Medicine scheme, or PRIME, by the EMA, for our product candidates, if granted, may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
Fast Track, Breakthrough Therapy, Priority Review, or Regenerative Medicine Advanced Therapy, or RMAT, designations by the FDA, or access to the Priority Medicine scheme, or PRIME, by the EMA, for our product candidates, if granted, may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
Risk Factor Summary • We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future. • We have limited experience in generating revenue from product sales. • We expect to need to raise additional capital to fund our activities. • Clinical drug development is a lengthy, complex, and expensive process with uncertain outcomes. • Adverse effects if we do not achieve our projected development goals in the time frames we announce and expect. • We may experience difficulty in enrolling patients. • The regulatory approval processes of the FDA and comparable foreign authorities are lengthy and inherently unpredictable. • Fast Track Product, Breakthrough Therapy, Priority Review or RMAT Designations by the FDA, and analogous designations by the EMA, for our product candidates may not lead to faster development or approval. • Our product candidates may cause undesirable or serious side effects. • We face a multitude of manufacturing risks, particularly with respect to our gene therapy and mRNA product candidates. • Our products remain subject to regulatory scrutiny even if we obtain regulatory approval. • Product liability lawsuits against us could cause us to incur substantial liabilities. • We may not realize the full commercial potential of our product candidates if we are unable to source and develop effective biomarkers. • We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us. • We are dependent on KKC for the clinical and commercial supply of Crysvita for all major markets and for the development and commercialization of Crysvita in certain major markets. • We rely on third parties to manufacture our products and product candidates. • The loss of, or failure to supply by, any of any of our single-source suppliers for our drug substance and drug product could adversely affect our business. • The actions of distributors and specialty pharmacies could affect our ability to sell or market products profitably. • Our revenue may be adversely affected if the market opportunities for our products and product candidates are smaller than expected. • Our competitors may develop therapies that are similar, more advanced, or more effective than ours. 33 • We may not successfully manage expansion of our company, including building an integrated commercial organization. • Our exclusive rights to promote Crysvita in the U.S. and Canada will transition back to KKC. • Commercial success of our products depends on the degree of market acceptance. • We face uncertainty related to insurance coverage and reimbursement status of our newly approved products. • If we, or our third-party partners, are unable to maintain effective proprietary rights for our products or product candidates, we may not be able to compete effectively. • Claims of intellectual property infringement may prevent or delay our development and commercialization efforts. • We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses. • We may face competition from biosimilars of our biologics product and product candidates or from generic versions of our small-molecule product and product candidates, which may result in a material decline in sales of affected products. • We could lose license rights that are important to our business if we fail to comply with our obligations in the agreements under which we license intellectual property and other rights from third parties. • We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, or be subject to claims that challenge the inventorship or ownership of our patents. • Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. • We may not be able to protect our intellectual property rights throughout the world. • We have no experience as a company developing or operating a manufacturing facility. • Our success depends in part on our ability to retain our President and Chief Executive Officer and other qualified personnel. • Our revenue may be impacted if we fail to obtain or maintain orphan drug exclusivity for our products. • Our operating results may be adversely impacted if our intangible assets become impaired. • We may not be successful in identifying, licensing, developing, or commercializing additional product candidates. • We may fail to comply with laws and regulations or changes in laws and regulations could adversely affect our business. • We are exposed to risks related to international expansion of our business outside of the U.S. • Our business may be adversely affected in the event of computer system failures or security breaches. • We or our third-party partners may be adversely affected by earthquakes or other serious natural disasters. • We may incur various costs and expenses and risks related to acquisition of companies or products or strategic transactions. • The market price of our common stock is highly volatile. • Future sales and issuances of our common stock could dilute the percentage ownership of our current stockholders and result in a decline in stock price. • Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us or could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. • We face general risks related to our ability to maintain effective internal controls over financial reporting, additional tax liabilities related to our operations, our ability to use our net operating loss carryforwards, costs of litigation, stockholder activism and increased scrutiny regarding our ESG practices and disclosures. 34 Risks Related to Our Financial Condition and Capital Requirements We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future.
Risk Factor Summary • We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future. • We have limited experience in generating revenue from product sales. • We may need to raise additional capital to fund our activities. • Clinical drug development is a lengthy, complex, and expensive process with uncertain outcomes. • We may experience delays in commercialization of our products and other adverse effects if we do not achieve our projected development goals in the time frames we announce and expect. • We may experience difficulty in enrolling patients. • The regulatory approval processes of the FDA and comparable foreign authorities are lengthy and inherently unpredictable. • Fast Track Product, Breakthrough Therapy, Priority Review or RMAT designations by the FDA, and analogous designations by the EMA, for our product candidates may not lead to faster development or approval. • Our product candidates may cause undesirable or serious side effects. • We face a multitude of manufacturing risks, particularly with respect to our gene therapy and mRNA product candidates. • Our products remain subject to regulatory scrutiny even if we obtain regulatory approval. • Product liability lawsuits against us could cause us to incur substantial liabilities. • We may not realize the full commercial potential of our product candidates if we are unable to source and develop effective biomarkers. • We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us. • We are dependent on KKC for the clinical and commercial supply of Crysvita for all major markets and for the development and commercialization of Crysvita in certain major markets. • We rely on third parties to manufacture our products and product candidates. • The loss of, or failure to supply by, any of any of our single-source suppliers for our drug substance and drug product could adversely affect our business. • The actions of distributors and specialty pharmacies could affect our ability to sell or market products profitably. • Our revenue may be adversely affected if the market opportunities for our products and product candidates are smaller than expected. • Our competitors may develop therapies that are similar, more advanced, or more effective than ours. 30 • We may not successfully manage expansion of our company, including building an integrated commercial organization. • After the transition of our commercialization responsibilities for Crysvita in the U.S. and Canada, the success of Crysvita in those territories is dependent on the effectiveness of KKC’s commercialization efforts. • Commercial success of our products depends on the degree of market acceptance. • We face uncertainty related to insurance coverage and reimbursement status of our newly approved products. • If we, or our third-party partners, are unable to maintain effective proprietary rights for our products or product candidates, we may not be able to compete effectively. • Claims of intellectual property infringement may prevent or delay our development and commercialization efforts. • We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses. • We may face competition from biosimilars of our biologics product and product candidates or from generic versions of our small-molecule product and product candidates, which may result in a material decline in sales of affected products. • We could lose license rights that are important to our business if we fail to comply with our obligations in the agreements under which we license intellectual property and other rights from third parties. • We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, or be subject to claims that challenge the inventorship or ownership of our patents. • Changes to patent laws in the U.S. and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products. • We may not be able to protect our intellectual property rights throughout the world. • We have limited experience as a company operating our own manufacturing facility. • Our success depends in part on our ability to retain our President and Chief Executive Officer and other qualified personnel. • Our revenue may be impacted if we fail to obtain or maintain orphan drug exclusivity for our products. • Our operating results may be adversely impacted if our intangible assets become impaired. • We may not be successful in identifying, licensing, developing, or commercializing additional product candidates. • We may fail to comply with laws and regulations or changes in laws and regulations could adversely affect our business. • We are exposed to risks related to international expansion of our business outside of the U.S. • Our business may be adversely affected in the event of computer system failures or security breaches. • We or our third-party partners may be adversely affected by earthquakes or other serious natural disasters. • We may incur various costs and expenses and risks related to acquisition of companies or products or strategic transactions. • The market price of our common stock is highly volatile. • Future sales and issuances of our common stock could dilute the percentage ownership of our current stockholders and result in a decline in stock price. • Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us or could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. • We face general risks related to our ability to maintain effective internal controls over financial reporting, additional tax liabilities related to our operations, our ability to use our net operating loss carryforwards, costs of litigation, stockholder activism and increased scrutiny regarding our ESG practices and disclosures. 31 Risks Related to Our Financial Condition and Capital Requirements We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future.
Further, we depend on our manufacturers to purchase from third-party suppliers the materials necessary to produce our products and product candidates.
Further, we depend on our manufacturers 43 to purchase from third-party suppliers the materials necessary to produce our products and product candidates.
Pursuant to the terms of our collaboration and license agreement with KKC, or the collaboration agreement, we have the sole right to promote Crysvita in the U.S. and Canada, or the profit-share territory, for a specified period of time, with KKC increasingly participating in the promotion of the product until the transition date of April 2023.
Pursuant to the terms of our collaboration and license agreement with KKC, or the collaboration agreement, we had the sole right to promote Crysvita in the U.S. and Canada, or the profit-share territory, for a specified period of time, with KKC increasingly participating in the promotion of the product until the transition date of April 2023.
Delays in completing our clinical studies will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue. 39 The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable.
Delays in completing our clinical studies will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue. 36 The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable.
We expect to need to raise additional capital to fund our activities. This additional financing may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other activities.
We may need to raise additional capital to fund our activities. Such additional financing may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other activities.
We anticipate that our expenses will increase substantially if and as we: • continue our research and nonclinical and clinical development of our product candidates; • expand the scope of our current clinical studies for our product candidates; • advance our programs into more expensive clinical studies; • initiate additional nonclinical, clinical, or other studies for our product candidates; • pursue preclinical and clinical development for additional indications for existing products and product candidates; • change or add additional manufacturers or suppliers; • expand upon or build our own manufacturing-related facilities and capabilities, including construction of our own GMP gene therapy manufacturing plant; • seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies; • continue to establish Medical Affairs field teams to initiate relevant disease education; • continue to establish a marketing and distribution infrastructure and field force to commercialize our products and any product candidates for which we may obtain marketing approval; • continue to manage our international subsidiaries and establish new ones; • continue to operate as a public company and comply with legal, accounting and other regulatory requirements; • seek to identify, assess, license, acquire, and/or develop other product candidates, technologies, and/or businesses; • make milestone or other payments under any license or other agreements; • seek to maintain, protect, and expand our intellectual property portfolio; • seek to attract and retain skilled personnel; • create additional infrastructure, including facilities and systems, to support the growth of our operations, our product development, and our commercialization efforts; and • experience any delays or encounter issues with any of the above, including, but not limited to, failed studies, complex results, safety issues, inspection outcomes, or other regulatory challenges that require longer follow-up of existing studies, additional major studies, or additional supportive studies in order to pursue marketing approval.
We anticipate that our expenses will increase substantially if and as we: • continue our research and nonclinical and clinical development of our product candidates; • expand the scope of our current clinical studies for our product candidates; • advance our programs into more expensive clinical studies; • initiate additional nonclinical, clinical, or other studies for our product candidates; • pursue preclinical and clinical development for additional indications for existing products and product candidates; • change or add additional manufacturers or suppliers; • expand upon our manufacturing-related facilities and capabilities, particularly as we continue to ramp-up operations at our GMP gene therapy manufacturing facility; • seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies; • continue to establish Medical Affairs field teams to initiate relevant disease education; • continue to establish a marketing and distribution infrastructure and field force to commercialize our products and any product candidates for which we may obtain marketing approval; • continue to manage our international subsidiaries and establish new ones; • continue to operate as a public company and comply with legal, accounting and other regulatory requirements; • seek to identify, assess, license, acquire, and/or develop other product candidates, technologies, and/or businesses; • make milestone or other payments under any license or other agreements; • seek to maintain, protect, and expand our intellectual property portfolio; • seek to attract and retain skilled personnel; • create additional infrastructure, including facilities and systems, to support the growth of our operations, our product development, and our commercialization efforts; and • experience any delays or encounter issues with any of the above, including, but not limited to, failed studies, complex results, safety issues, inspection outcomes, or other regulatory challenges that require longer follow-up of existing studies, additional major studies, or additional supportive studies in order to pursue marketing approval.
Doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting, and changing laws and regulations such as privacy and data regulations, transparency regulations, tax laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses; • introduction of new health authority requirements and/or changes in health authority expectations; • failure by us to obtain and maintain regulatory approvals for the use of our products in various countries; • additional potentially relevant third-party patent rights; • complexities and difficulties in obtaining protection for, and enforcing, our intellectual property; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems; • limits on our ability to penetrate international markets; • financial risks, such as longer payment cycles, additional or more burdensome regulatory requirements of financial institutions outside of the U.S., difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations; 61 • natural disasters and geopolitical and economic instability, including wars, terrorism, political unrest (including, for example the conflict between Russia and Ukraine and the rising tensions between China and Taiwan), results of certain elections and votes, actual or threatened public health emergencies and outbreak of disease (including for example, the COVID-19 pandemic), rising inflation, the potential recessionary environment, boycotts and resulting staffing shortages, adoption or expansion of government trade restrictions, and other business restrictions; • certain expenses including, among others, expenses for travel, translation, and insurance; • regulatory and compliance risks that relate to maintaining accurate information and control over commercial operations and activities that may fall within the purview of the U.S.
Doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting, and changing laws and regulations such as privacy and data regulations, transparency regulations, tax laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses; • introduction of new health authority requirements and/or changes in health authority expectations; • failure by us to obtain and maintain regulatory approvals for the use of our products in various countries; • additional potentially relevant third-party patent rights; • complexities and difficulties in obtaining protection for, and enforcing, our intellectual property; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems; • limits on our ability to penetrate international markets; • financial risks, such as longer payment cycles, additional or more burdensome regulatory requirements of financial institutions outside of the U.S., difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations; 59 • natural disasters and geopolitical and economic instability, including wars, terrorism, political unrest (including, for example the conflict between Russia and Ukraine, the conflict between Israel and the surrounding areas, and the rising tensions between China and Taiwan), results of certain elections and votes, actual or threatened public health emergencies and outbreak of disease, rising inflation, the potential recessionary environment, the potential shutdown of the U.S. federal government, boycotts and resulting staffing shortages, adoption or expansion of government trade restrictions, and other business restrictions; • certain expenses including, among others, expenses for travel, translation, and insurance; • regulatory and compliance risks that relate to maintaining accurate information and control over commercial operations and activities that may fall within the purview of the U.S.
As ESG best-practices, reporting standards, and disclosure requirements continue to develop, we may incur increasing costs related to maintaining or achieving our ESG goals in addition to ESG monitoring and reporting. 68 Item 1B. Unresolved Staff Comments None.
As ESG best-practices, reporting standards, and disclosure requirements continue to develop, we may incur increasing costs related to maintaining or achieving our ESG goals in addition to ESG monitoring and reporting. 65 Item 1B. Unresolved Staff Comments None.
Our future funding requirements will depend on many factors, including but not limited to: • the scope, rate of progress, results, and cost of our clinical studies, nonclinical testing, and other related activities; • the cost of manufacturing clinical and commercial supplies of our products and product candidates; • the cost of creating additional infrastructure, including facilities and systems, such as our GMP gene therapy manufacturing plant; • the number and characteristics of the product candidates that we pursue; • the cost, timing, and outcomes of regulatory approvals; • the cost and timing of establishing and operating our international subsidiaries; • the cost and timing of establishing and operating field forces, marketing, and distribution capabilities; • the cost and timing of other activities needed to commercialize our products; and • the terms and timing of any collaborative, licensing, acquisition, and other arrangements that we may establish, including any required milestone, royalty, and reimbursements or other payments thereunder. 36 Any additional fundraising efforts may divert our management’s attention from their day-to-day activities, which can adversely affect our ability to develop our product candidates and commercialize our products.
Our future funding requirements will depend on many factors, including but not limited to: • the scope, rate of progress, results, and cost of our clinical studies, nonclinical testing, and other related activities; • the cost of manufacturing clinical and commercial supplies of our products and product candidates; • the cost of creating additional infrastructure, including facilities and systems, such as systems in our GMP gene therapy manufacturing facility; • the cost of operating and maintaining our gene therapy manufacturing facility; • the number and characteristics of the product candidates that we pursue; • the cost, timing, and outcomes of regulatory approvals; • the cost and timing of establishing and operating our international subsidiaries; • the cost and timing of establishing and operating field forces, marketing, and distribution capabilities; • the cost and timing of other activities needed to commercialize our products; and • the terms and timing of any collaborative, licensing, acquisition, and other arrangements that we may establish, including any required milestone, royalty, and reimbursements or other payments thereunder. 33 Any additional fundraising efforts may divert our management’s attention from their day-to-day activities, which can adversely affect our ability to develop our product candidates and commercialize our products.
Given the small number of patients who have the diseases that we are targeting, it is critical to our ability to grow and become profitable that we continue to successfully identify patients with these rare and ultra-rare genetic diseases.
Given the small number of patients who have the diseases that we are targeting, it is critical to our ability to grow and become profitable that we continue to successfully identify patients with these rare and ultrarare genetic diseases.
Under our agreement with KKC, KKC has the sole right to commercialize Crysvita in Europe and, at certain specified times, in the U.S., Canada, and Turkey, subject to certain rights retained by us.
Under our agreement with KKC, KKC has the sole right to commercialize Crysvita in Europe and, at certain specified times, in the U.S., Canada, and Turkey, subject to certain rights retained.
If we do not have sufficient patent terms or regulatory exclusivity to protect our products, our business and results of operations may be adversely affected. Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
If we do not have sufficient patent terms or regulatory exclusivity to protect our products, our business and results of operations may be adversely affected. 49 Patent law and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Several factors could cause production interruptions, including equipment malfunctions, malfunctions of internal information technology systems, regulatory inspections, facility contamination, raw material shortages or contamination, natural disasters, geopolitical instability, the COVID-19 pandemic, disruption in utility services, human error or disruptions in the operations of our suppliers.
Several factors could cause production interruptions, including equipment malfunctions, malfunctions of internal information technology systems, regulatory inspections, facility contamination, raw material shortages or contamination, natural disasters, geopolitical instability, disruption in utility services, human error or disruptions in the operations of our suppliers.
If the associated research and development effort is abandoned, the related assets will be written-off and we will record a noncash impairment loss on our Consolidated Statement of Operations. We have not recorded any impairments related to our intangible assets through the end of December 31, 2022.
If the associated research and development effort is abandoned, the related assets will be written-off and we will record a noncash impairment loss on our Consolidated Statement of Operations. We have not recorded any impairments related to our intangible assets through December 31, 2023.
In order to successfully commercialize our products as well as any additional products that may result from our development programs or that we acquire or license from third parties, we are building 48 and expanding our commercial infrastructure in North America, Europe, Latin America and the Asia-Pacific region.
In order to successfully commercialize our products as well as any additional products that may result from our development programs or that we acquire or license from third parties, we are expanding our commercial infrastructure in, Europe, Latin America and the Asia-Pacific region.
A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. 37 Scenarios that can prevent successful or timely completion of clinical development include but are not limited to: • delays or failures in generating sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of human clinical studies or filings for regulatory approval; • failure to demonstrate a starting dose for our product candidates in the clinic that might be reasonably expected to result in a clinical benefit; • delays or failures in developing gene therapy, messenger RNA, or mRNA, DNA, small interfering RNA, or siRNA, or other novel and complex product candidates, which are expensive and difficult to develop and manufacture; • delays resulting from a shutdown, or uncertainty surrounding the potential for future shutdowns of the U.S. government, including the FDA; • delays or failures in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with contract research organizations, or CROs, clinical study sites, and other clinical trial-related vendors; • failure or delays in obtaining required regulatory agency approval and/or IRB or EC approval at each clinical study site or in certain countries; • failure to correctly design clinical studies which may result in those studies failing to meet their endpoints or the expectations of regulatory agencies; • changes in clinical study design or development strategy resulting in delays related to obtaining approvals from IRBs or ECs and/or regulatory agencies to proceed with clinical studies; • imposition of a clinical hold by regulatory agencies after review of an IND application or amendment, another equivalent application or amendment, or an inspection of our clinical study operations or study sites; • delays in recruiting suitable patients to participate in our clinical studies; • difficulty collaborating with patient groups and investigators; • failure by our CROs, other third parties, or us to adhere to clinical study requirements; • failure to perform in accordance with the FDA’s and/or ICH’s good clinical practices requirements or applicable regulatory guidelines in other countries; • delays in patients’ completion of studies or their returns for post-treatment follow-up; • patients dropping out of a study; • adverse events associated with the product candidate occurring that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • greater than anticipated costs associated with clinical studies of our drug candidates, including as a result of hyperinflation; • clinical studies of our drug candidates producing negative or inconclusive results, which may result in us deciding, or regulators requiring us, to conduct additional clinical or nonclinical studies or to abandon drug development programs; • competing clinical studies of potential alternative product candidates or investigator-sponsored studies of our product candidates; and • delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing.
Scenarios that can prevent successful or timely completion of clinical development include but are not limited to: • delays or failures in generating sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of human clinical studies or filings for regulatory approval; • failure to demonstrate a starting dose for our product candidates in the clinic that might be reasonably expected to result in a clinical benefit; • delays or failures in developing gene therapy, messenger RNA, or mRNA, DNA, small interfering RNA, or siRNA, or other novel and complex product candidates, which are expensive and difficult to develop and manufacture; • delays resulting from a shutdown, or uncertainty surrounding the potential for future shutdowns of the U.S. government, including the FDA; • delays or failures in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with contract research organizations, or CROs, clinical study sites, and other clinical trial-related vendors; • failure or delays in obtaining required regulatory agency approval and/or IRB or EC approval at each clinical study site or in certain countries; • failure to correctly design clinical studies which may result in those studies failing to meet their endpoints or the expectations of regulatory agencies; • changes in clinical study design or development strategy resulting in delays related to obtaining approvals from IRBs or ECs and/or regulatory agencies to proceed with clinical studies; • imposition of a clinical hold by regulatory agencies after review of an IND application or amendment, another equivalent application or amendment, or an inspection of our clinical study operations or study sites; • delays in recruiting suitable patients to participate in our clinical studies; • difficulty collaborating with patient groups and investigators; • failure by our CROs, other third parties, or us to adhere to clinical study requirements; • failure to perform in accordance with the FDA’s and/or ICH’s good clinical practices requirements or applicable regulatory guidelines in other countries; • delays in patients’ completion of studies or their returns for post-treatment follow-up; • patients dropping out of a study; • adverse events associated with the product candidate occurring that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • greater than anticipated costs associated with clinical studies of our drug candidates, including as a result of inflation; • clinical studies of our drug candidates producing negative or inconclusive results, which may result in us deciding, or regulators requiring us, to conduct additional clinical or nonclinical studies or to abandon drug development programs; • competing clinical studies of potential alternative product candidates or investigator-sponsored studies of our product candidates; and • delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing.
If we are unable to obtain funding on a timely basis, or at all, we may be required to significantly curtail, delay, or discontinue one or more of our research or development programs or the commercialization of our products and any approved product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, and results of operations.
If we are unable to access our existing cash, cash equivalents and investments and/or are unable to obtain funding on a timely basis, or at all, we may be required to significantly curtail, delay, or discontinue one or more of our research or development programs or the commercialization of our products and any approved product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, and results of operations.
If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm are unable to attest to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities, which would require additional financial and management resources. 66 We may incur additional tax liabilities related to our operations.
If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm are unable to attest to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities, which would require additional financial and management resources.
As we currently lack the resources and the capability to manufacture our products and most of our product candidates on a clinical or commercial scale, we rely on third parties to manufacture our products and product candidates.
As we currently lack the resources and the full capability to manufacture all of our products and product candidates on a clinical or commercial scale, we rely on third parties to manufacture our products and product candidates.
As a result of the accounting for our acquisition of Dimension Therapeutics, Inc., or Dimension, in November 2017, we have recorded on our Consolidated Balance Sheet intangible assets for in-process research and development, or IPR&D, related to DTX301 and DTX401. We also recorded an intangible asset related to our license from Regeneron for Evkeeza.
We have recorded on our Consolidated Balance Sheets intangible assets for in-process research and development, or IPR&D, related to DTX301 and DTX401 as a result of the accounting for our acquisition of Dimension Therapeutics. We also recorded an intangible asset related to our license from Regeneron for Evkeeza.
Further, risks of unauthorized access and cyber-attacks have increased as most of our personnel, and the personnel of many third-parties with which we do business, have adopted flexible working arrangements as a result of the COVID-19 pandemic.
Further, risks of unauthorized access and cyber-attacks have increased as most of our personnel, and the personnel of many third-parties with which we do business, have adopted hybrid working arrangements following the COVID-19 pandemic.
If our future collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing and sales operations.
If our future collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product sales to sustain our business. We face competition from companies that currently have extensive and well-funded marketing and sales operations.
As of December 31, 2022, our available cash, cash equivalents, and marketable debt securities were $896.7 million. We expect we will need additional capital to continue to commercialize our products, and to develop and obtain regulatory approval for, and to commercialize, all of our product candidates.
As of December 31, 2023, our available cash, cash equivalents, and marketable debt securities were $777.1 million. We expect we will need additional capital to continue to commercialize our products, and to develop and obtain regulatory approval for, and to commercialize, all of our product candidates.
Our research and development activities, including our process and analytical development activities in our quality control laboratory, and our and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use, and disposal of hazardous materials, including the components of our product candidates, such as viruses, and other hazardous compounds, which subjects us to laws and regulations governing such activities.
Our research and development activities, including our process and analytical development activities in our quality control laboratory, and our and our third-party manufacturers’ and suppliers’ activities, including activities related to the build-out and operation of our gene therapy manufacturing facility, involve the controlled storage, use, and disposal of hazardous materials, including the components of our product candidates, such as viruses, and other hazardous compounds, which subjects us to laws and regulations governing such activities.
In the U.S., the natural expiration of a patent is generally 20 years after its effective filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited.
In the U.S., the natural expiration of a patent is generally 20 years from its earliest non-provisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited.
It is difficult to predict what CMS or private payors will decide with respect to reimbursement for products such as ours, especially our gene therapy product candidates as there is a limited body of established practices and precedents for gene therapy products.
Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict what CMS or private payors will decide with respect to reimbursement for products such as ours, especially our gene therapy product candidates as there is a limited body of established practices and precedents for gene therapy products.
Accordingly, there are limited patient pools from which to draw for clinical studies. For example, we estimate that approximately 6,000 patients worldwide suffer from GSDIa, for which DTX401 is being studied, and these all may not be treatable if they are immune to the AAV viral vector.
For example, we estimate that approximately 6,000 patients worldwide suffer from GSDIa, for which DTX401 is being studied, and these all may not be treatable if they are immune to the AAV viral vector.
As described in “Item 1. Business – Government Regulation”, we may seek Fast Track, Breakthrough Therapy designation, RMAT Designation, PRIME scheme access or Priority Review designation for our product candidates if supported by the results of clinical trials.
As described in “Item 1. Business – Government Regulation”, we seek Fast Track, Breakthrough Therapy designation, RMAT designation, PRIME scheme access or Priority Review designation for our product candidates if supported by the results of clinical trials. Designation as a Fast Track product, Breakthrough Therapy, RMAT, PRIME, or Priority Review product is within the discretion of the relevant regulatory agency.
Given the illness of the patients in our studies and the nature of their rare diseases, we may also be required or choose to conduct certain studies on an open-label basis.
Given the illness of the patients in our studies and the nature of their rare diseases, we have also been required to or have chosen to conduct certain studies on an open-label basis.
Further, we have reported and expect to continue to report preliminary or interim data from our clinical trials. Preliminary or interim data from our clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and/or more patient data become available.
Preliminary or interim data from our clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and/or more patient data become available.
The CHMP and CAT are also responsible for providing guidelines on ATMPs. These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of ATMPs and include, among other things, the preclinical studies required to characterize ATMPs.
These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of ATMPs and include, among other things, the preclinical studies required to characterize ATMPs.
Research programs to identify and develop new product candidates, such as those under our collaboration with Arcturus, require substantial technical, financial, and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.
Research programs to identify and develop new product candidates require substantial technical, financial, and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.
If we, our collaborators, such as KKC or Regeneron, or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose regulatory sanctions including, among other things, the temporary or permanent suspension of a clinical study or commercial sales, recalls or seizures of product or the temporary or permanent closure of a facility or withdrawal of product approval.
If we, our collaborators, such as KKC or Regeneron, or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose regulatory sanctions including, among other things, warning or untitled letters, fines, unanticipated compliance expenses, the temporary or permanent suspension of a clinical study or commercial sales, recalls or seizures of product or the temporary or permanent closure of a facility or withdrawal of product approval, enforcement actions and criminal or civil prosecution.
Moreover, Arcturus may have interests which differ from ours in determining whether to enforce and the manner in which to enforce such patents.
Moreover, REGENX and the University of Pennsylvania may have interests which differ from ours in determining whether to enforce and the manner in which to enforce such patents.
We may find it difficult to identify and enroll patients in our clinical studies due to a variety of factors, including the limited number of patients who have the diseases for which our product candidates are being studied and other unforeseen events, such as the COVID-19 pandemic.
We may find it difficult to identify and enroll patients in our clinical studies due to a variety of factors, including the limited number of patients who have the diseases for which our product candidates are being studied and other unforeseen events. Difficulty in enrolling patients could delay or prevent clinical studies of our product candidates.
The holder of an approved NDA, BLA, MAA, or other comparable application must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. 43 If we fail to comply with applicable regulatory requirements, or there are safety or efficacy problems with a product, a regulatory agency or enforcement authority may, among other things: • issue warning or notice of violation letters; • impose civil or criminal penalties; • suspend or withdraw regulatory approval; • suspend any of our ongoing clinical studies; • refuse to approve pending applications or supplements to approved applications submitted by us; • impose restrictions on our operations, including closing our contract manufacturers’ facilities; • seize or detain products, or require a product recall; or • require entry into a consent decree.
If we fail to comply with applicable regulatory requirements, or there are safety or efficacy problems with a product, a regulatory agency or enforcement authority may, among other things: • issue warning or notice of violation letters; • impose civil or criminal penalties; • suspend or withdraw regulatory approval; • suspend any of our ongoing clinical studies; • refuse to approve pending applications or supplements to approved applications submitted by us; • impose restrictions on our operations, including closing our contract manufacturers’ facilities; • seize or detain products, or require a product recall; or • require entry into a consent decree.
We cannot provide assurances that identifying alternate sources, if available at all, and establishing relationships with such sources would not result in significant expense or delay in the commercialization of our products or the development of our product candidates.
We cannot provide assurances that qualifying alternate sources, if available at all, for the Dojolvi drug product or for any of our other drug substances and drug products, and establishing relationships with such sources would not result in significant expense, supply disruptions or delay in the commercialization of our products or the development of our product candidates.
Risks Related to Our Intellectual Property If we are unable to obtain and maintain effective patent rights for our products, product candidates, or any future product candidates, we may not be able to compete effectively in our markets.
If we are unable to maintain effective proprietary rights for our products, product candidates, or any future product candidates, we may not be able to compete effectively in our markets.
Without a large internal team or the support of a third-party to perform key commercial functions, we may be unable to compete successfully against these more established companies. Our exclusive rights to promote Crysvita in the U.S. and Canada will transition back to KKC.
Without a large internal team or the support of a third party to perform key commercial functions, we may be unable to compete successfully against these more established companies. 46 Our exclusive rights to promote Crysvita in the U.S. and Canada transitioned back to KKC and the success of Crysvita in those territories are dependent on the effectiveness of KKC’s commercialization efforts.
We may expend our limited resources to pursue a particular product, product candidate or indication and fail to capitalize on products, product candidates or indications that may be more profitable or for which there is a greater likelihood of success. 59 Because we have limited financial and managerial resources, we focus our sales, marketing and research programs on certain products, product candidates or for specific indications.
We may expend our limited resources to pursue a particular product, product candidate or indication and fail to capitalize on products, product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
If we do not obtain orphan drug exclusivity for our drug products and biologic products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity, and our revenue will be reduced. 58 Even though we have orphan drug designation for Dojolvi for the treatment of fatty acid oxidation disorders in the U.S. and for various subtypes of LC-FAOD in Europe, as well as for Crysvita, Mepsevii, DTX301, DTX401 and UX701 in the U.S. and Europe, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.
If we do not obtain orphan drug exclusivity for our drug products and biologic products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity, and our revenue will be reduced. 56 Even though we have orphan drug designation for UX111, UX143, DTX301, DTX401 and UX701 in the U.S. and Europe and for GTX 102 in the U.S., we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.
Modification of the BPCI Act, or changes to the FDA’s interpretation or implementation of the BPCI Act, could have a material adverse effect on the future commercial prospects for our biological products and product candidates.
As a result, its ultimate impact, implementation and meaning are subject to uncertainty. Modification of the BPCI Act, or changes to the interpretation or implementation of the BPCI Act, could have a material adverse effect on the future commercial prospects for our biological products and product candidates.
The BPCI Act does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty.
The BPCI Act does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. The law is complex and is still being interpreted and implemented by the FDA. Moreover, aspects of the law are still being evaluated and interpreted by courts.
If our board of directors elects to increase the number of shares available for future grant under the 2014 Plan, the 2014 ESPP, or the Inducement Plan, our stockholders may experience additional dilution, which could cause our stock price to fall.
At December 31, 2023, there were 130,996 shares available for issuance under the Inducement Plan. If our board of directors elects to increase the number of shares available for future grant under the 2023 Plan, the A&R ESPP, or the Inducement Plan, our stockholders may experience additional dilution, which could cause our stock price to fall.
We have a multinational tax structure and are subject to income tax in the U.S. and various foreign jurisdictions.
We may incur additional tax liabilities related to our operations. We have a multinational tax structure and are subject to income tax in the U.S. and various foreign jurisdictions.
There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application.
There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can prevent a patent from issuing from a pending patent application or provide the basis for third parties to challenge the validity of an issued patent.
For example, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates.
We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates.
Our revenues, financial condition or results of operations may also be affected by fluctuations in buying or distribution patterns of such distributors and specialty pharmacies.
Our revenues, financial condition or results of operations may also be affected by fluctuations in buying or distribution patterns of such distributors and specialty pharmacies. These fluctuations may result from seasonality, pricing, wholesaler inventory objectives, or other factors.
In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers.
Our business strategy focuses on the development of drugs that are eligible for FDA and EU orphan drug designation. In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers.
The timing of our clinical studies depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical studies if we encounter difficulties in enrollment. Each of the conditions for which we plan to evaluate our current product candidates is a rare genetic disease.
Identifying and qualifying patients to participate in clinical studies of our product candidates is critical to our success. The timing of our clinical studies depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical studies if we encounter difficulties in enrollment.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our primary operations are conducted at the leased facilities summarized in the below table. In 2020, we completed our purchase of land located in Bedford, Massachusetts and we are currently in the process of completing construction of our gene therapy manufacturing facility.
Biggest changeItem 2. Properties Our primary operations are conducted at the leased facilities summarized in the below table. In 2023, we completed the construction of our gene therapy manufacturing facility located in Bedford, Massachusetts.
Property Location Use Lease Expiration Date Novato, California Headquarters and office December 2024 Novato, California Laboratory and office October 2028 Brisbane, California Office June 2026 South San Francisco, California Laboratory and office March 2025 Cambridge, Massachusetts Laboratory and office December 2023 Woburn, Massachusetts Laboratory and office April 2025 Woburn, Massachusetts Laboratory and office October 2026 Bedford, Massachusetts Manufacturing facility Owned property
Property Location Use Lease Expiration Date Novato, California Headquarters and office December 2024 Novato, California Laboratory and office October 2028 Brisbane, California Office June 2026 Somerville, Massachusetts Laboratory and office October 2029 Woburn, Massachusetts Laboratory and office April 2025 Woburn, Massachusetts Laboratory and office October 2026 Bedford, Massachusetts Manufacturing facility Owned property 66

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIf this were to happen, the payment of any such awards could have a material adverse effect on our consolidated operations, cash flows and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. Item 4. Mine Safety Disclosures Not applicable. 69 P ART II
Biggest changeIf this were to happen, the payment of any such awards could have a material adverse effect on our consolidated operations, cash flows and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. Item 4. Mine Safety Disclosures Not applicable. 67 P ART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. $100 Investment in Stock or Index Ticker December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Ultragenyx Pharmaceutical Inc.
Biggest changeThis graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. $100 Investment in Stock or Index Ticker December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Ultragenyx Pharmaceutical Inc.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has been traded on The Nasdaq Global Select Market since January 31, 2014 under the symbol “RARE”. As of February 13, 2023, we had 7 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has been traded on The Nasdaq Global Select Market since January 31, 2014 under the symbol “RARE”. As of February 15, 2024, we had 8 holders of record of our common stock.
STOCK PRICE PERFORMANCE GRAPH The following stock performance graph compares our total stock return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology Index for the period from December 31, 2017 through December 31, 2022.
STOCK PRICE PERFORMANCE GRAPH The following stock performance graph compares our total stock return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology Index for the period from December 31, 2018 through December 31, 2023.
The figures represented below assume an investment of $100 in our common stock at the closing price of $46.38 on December 31, 2017 and in the Nasdaq Composite Index, or IXIC, and the Nasdaq Biotechnology Index, or NBI, on December 31, 2017 and the reinvestment of dividends into shares of common stock.
The figures represented below assume an investment of $100 in our common stock at the closing price of $43.48 on December 31, 2018 and in the Nasdaq Composite Index, or IXIC, and the Nasdaq Biotechnology Index, or NBI, on December 31, 2018 and the reinvestment of dividends into shares of common stock.
Removed
RARE $ 100.00 $ 93.75 $ 92.09 $ 298.47 $ 181.31 $ 99.89 NASDAQ Composite Index ^IXIC $ 100.00 $ 96.12 $ 129.97 $ 186.69 $ 226.63 $ 151.61 NASDAQ Biotechnology Index ^NBI $ 100.00 $ 90.68 $ 112.81 $ 141.78 $ 140.88 $ 125.52 Dividend Policy We have never declared or paid cash dividends on our common stock.
Added
RARE $ 100.00 $ 98.23 $ 318.38 $ 193.40 $ 106.55 $ 109.98 NASDAQ Composite Index ^IXIC $ 100.00 $ 135.23 $ 194.24 $ 235.78 $ 157.74 $ 226.24 NASDAQ Biotechnology Index ^NBI $ 100.00 $ 124.41 $ 156.36 $ 155.37 $ 138.42 $ 143.60 Dividend Policy We have never declared or paid cash dividends on our common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThe change in research and development expenses was due to: • for commercial programs, an increase of $23.7 million, primarily related to the cost sharing for ongoing clinical trials with Regeneron for Evkeeza, new Evkeeza regulatory and medical affairs support activities, and increased R&D personnel allocations to commercial programs; • for gene therapy programs, an increase of $45.5 million, primarily related to increases in clinical manufacturing and clinical trial expenses for our Phase 3 programs for DTX401 and DTX301 and development costs related to the UX111 program from Abeona Therapeutics; • for nucleic acid and other biologic programs, an increase of $46.6 million, primarily related to the addition of clinical trial expenses related to UX053, following its IND approval in March 2021; increased clinical trial and manufacturing expenses related to the continued progress of the UX143 program in collaboration with Mereo; and clinical and other development expenses related to the continued progress of the GTX-102 program; • for translational research, an increase of $19.2 million, primarily related to IND-enabling development costs for multiple research projects; • for upfront license, acquisition, and milestone fees, an increase of $25.0 million, primarily due to $75.0 million recognized from the GeneTx acquisition for the year ended December 31, 2022, as compared $50.0 million recognized from the upfront fee for the Mereo license for the year ended December 31, 2021; • for infrastructure, an increase of $12.4 million, primarily related to increased expenses for support of our clinical and research program pipeline, expansion of laboratory space, depreciation of laboratory-related leasehold improvements and equipment, and IT-related expenses; • for stock-based compensation, an increase of $15.4 million, primarily related to the increased employee headcount; and • for other research and development expenses, an increase of $20.9 million, primarily related to increased staffing to support internal manufacturing, increased travel, and increased administrative and general support.
Biggest changeThe change in research and development expenses was due to: • for gene therapy programs, an increase of $15.0 million, primarily related to the addition of the development costs for the UX111 program acquired from Abeona Therapeutics in May 2022, and an increase in production materials purchases for internal manufacturing, partially offset by decreases in external clinical manufacturing expenses for DTX401; • for biologic and nucleic acid programs, an increase of $11.6 million, primarily related to the continued clinical progress of the UX143 and GTX102 programs and associated clinical development and manufacturing expenses, partially offset by a reduction in development expense on UX053 for the treatment of Glycogen Storage Disease Type III; • for translational research, a decrease of $9.6 million, primarily related to decreases in manufacturing and headcount expense for IND-stage projects; • for upfront license, acquisition, and milestone fees, a decrease of $66.0 million, due to $9.0 million related to payment for achievement of a clinical enrollment milestone for the UX143 program recognized during the year ended December 31, 2023, as compared to $75.0 million recognized from the GeneTx acquisition for the year ended December 31, 2022; • for approved products, a decrease of $22.2 million, primarily due to transition of Crysvita commercialization responsibilities in North America to KKC and realized cost efficiencies for Dojolvi, partially offset by reimbursement of Regeneron collaboration expenses and increased personnel and launch costs for Evkeeza; • for infrastructure, an increase of $7.3 million, primarily related to increased expenses for support of our clinical and research program pipeline, expansion of laboratory space, depreciation of laboratory-related leasehold improvements and equipment, and IT-related expenses; and • for other research and development expenses, an increase of $6.6 million, primarily related to increased staffing and material costs to support internal manufacturing and increased administrative and general support.
A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our Consolidated Financial Statements. Item 8. Financial Statements and Supplementary Data Our financial statements are annexed to this Annual Report beginning on page F-1 and are incorporated by reference into this Item 8. Item 9.
A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our Consolidated Financial Statements. 79 Item 8. Financial Statements and Supplementary Data Our financial statements are annexed to this Annual Report beginning on page F-1 and are incorporated by reference into this Item 8. Item 9.
Funding received related to research and development services and commercialization costs is generally classified as a reduction of research and development expenses and selling, general and administrative expenses, respectively, in the Consolidated Statement of 72 Operations, because the provision of such services for collaborative partners are not considered to be part of our ongoing major or central operations.
Funding received related to research and development services and commercialization costs is generally classified as a reduction of research and development expenses and selling, general and administrative expenses, respectively, in the Consolidated Statement of Operations, because the provision of such services for collaborative partners are not considered to be part of our ongoing major or central operations.
Recent Accounting Pronouncements None. 81 I tem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to interest earned on our cash equivalents and marketable debt securities. The primary objective of our investment activities is to preserve our capital to fund operations.
Recent Accounting Pronouncements None. I tem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to interest earned on our cash equivalents and marketable debt securities. The primary objective of our investment activities is to preserve our capital to fund operations.
Clinical programs include study conduct and manufacturing costs related to clinical program candidates. Translational research includes costs for preclinical study work and costs related to preclinical programs prior to IND filing. Upfront license, acquisition, and milestone fees include any significant expenses related to strategic licensing agreements and acquisitions.
Clinical programs include study conduct and manufacturing costs related to clinical program candidates. Translational research includes costs for preclinical study work and costs related to preclinical programs prior to IND filing. Upfront license, acquisition, and milestone fees include any significant expenses related to strategic licensing agreements.
We record our share of collaboration revenue, net of transfer pricing related to net sales in the period in which such sales occur, if we are considered as an agent in the arrangement.
We record our share of collaboration revenue, net of transfer pricing related to net sales in the period in which such sales occur, if we are considered as an 70 agent in the arrangement.
We believe that our existing capital resources will be sufficient to fund our projected operating requirements for at least the next twelve months. Our cash, cash equivalents, and marketable debt securities are held in a variety of deposit accounts, interest-bearing accounts, corporate bond securities, commercial paper, U.S government securities, asset-backed securities, debt securities in government-sponsored entities, and money market funds.
We believe that our existing capital resources will be sufficient to fund our projected operating requirements for at least the next twelve months. Our cash, cash equivalents, and marketable debt securities are held in a variety of deposit accounts, interest-bearing accounts, corporate bond securities, commercial paper, U.S government securities, asset-backed securities, and money market funds.
Please see “Risk Factors—Risks Related to Our Financial Condition and Capital Requirements.” Contractual Obligations and Commitments Material contractual obligations arising in the normal course of business primarily consist of operating and finance leases, and manufacturing and service contract obligations. See Note 9 to the Consolidated Financial Statements for amounts outstanding for operating and finance leases on December 31, 2022.
Please see “Risk Factors—Risks Related to Our Financial Condition and Capital Requirements.” Contractual Obligations and Commitments Material contractual obligations arising in the normal course of business primarily consist of operating and finance leases and manufacturing and service contract obligations. See Note 9 to the Consolidated Financial Statements for amounts outstanding for operating and finance leases on December 31, 2023.
To date, we have not experienced a loss of principal on any of our investments and as of December 31, 2022, we did not record any allowance for credit loss from our investments. Foreign Currency Risk We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars.
To date, we have not experienced a loss of principal on any of our investments and as of December 31, 2023, we did not record any allowance for credit loss from our investments. Foreign Currency Risk We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars.
An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and payments related to license agreements. For the year ended December 31, 2022, a majority of our revenue, expenses, and capital expenditures were denominated in U.S. dollars.
An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and payments related to license agreements. For the year ended December 31, 2023, a majority of our revenue, expenses, and capital expenditures were denominated in U.S. dollars.
We expect our annual research and development expenses to moderate in the future as we advance our product candidates through clinical development.
We expect our annual research and development expenses to continue to moderate in the future as we advance our product candidates through clinical development.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the ability to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively.
A hypothetical 100 basis point change in interest rates during any of the periods presented would not have had a material impact on the fair market value of our cash equivalents and marketable debt securities as of December 31, 2022.
A hypothetical 100 basis point change in interest rates during any of the periods presented would not have had a material impact on the fair market value of our cash equivalents and marketable debt securities as of December 31, 2023.
Such factors include, but are not limited to, the success of KKC’s sales and promotion of Crysvita, changing standards of care, delays or disruptions related to the COVID-19 pandemic, macroeconomic and inflationary pressures, the introduction of competing products, pricing for reimbursement in various territories, manufacturing or other delays, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of Crysvita, significant changes in foreign exchange rates as the royalty payments are made in U.S. dollars, or USD, while significant portions of the underlying sales of Crysvita are made in currencies other than USD, and other events or circumstances that could result in reduced royalty payments from sales of Crysvita, all of which would result in a reduction of non-cash royalty revenue and the non-cash interest expense over the life of the arrangement.
Such factors include, but are not limited to, the success of KKC’s sales and promotion of Crysvita, changing standards of care, macroeconomic and inflationary pressures, the introduction of competing products, pricing for reimbursement in various territories, manufacturing or other delays, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of Crysvita, significant changes in foreign exchange rates as the royalty payments are made in U.S. dollars, or USD, while significant portions of the underlying sales of Crysvita are made in currencies other than USD, and other events or circumstances that could result in reduced royalty payments from sales of Crysvita, all of which would result in a reduction of non-cash royalty revenue and the non-cash interest expense over the life of the arrangement.
Item 6. Reserved 70 I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report.
Item 6. Reserved 68 I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report.
Our estimates of government mandated rebates, chargebacks, estimated product returns, and other deductions depends on the identification of key customer contract terms and conditions, as well as estimates of sales volumes to different classes of payors.
Our estimates of government mandated rebates, chargebacks, estimated product returns, and other deductions depends on the identification of key customer contract terms and conditions, negotiated pricing, as well as estimates of sales volumes to different classes of payors.
Our Annual Report on Form 10-K for the year ended December 31, 2021 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2020 in "Part II, Item 7.
Our Annual Report on Form 10-K for the year ended December 31, 2022 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2021 in "Part II, Item 7.
Revenue Recognition Collaboration and License Revenue We have certain license and collaboration agreements that are within the scope of Accounting Standards Codification, or ASC, 808, Collaborative Agreements , which provides guidance on the presentation and disclosure of collaborative arrangements.
Collaboration, License and Royalty Revenue We have certain license and collaboration agreements that are within the scope of Accounting Standards Codification, or ASC, 808, Collaborative Agreements , which provides guidance on the presentation and disclosure of collaborative arrangements.
Due to this required capitalization of research and development expenditures and the significant taxable income generated as a result of our sale of royalties in July 2022, we have recorded a one-time discrete state tax expense of $6.1 million for the year ended December 31, 2022.
Due to this required capitalization of research and 76 development expenditures and the significant taxable income generated as a result of our sale of royalties in July 2022, we recorded a one-time discrete tax expense of $6.1 million for the year ended December 31, 2022.
In conjunction with the Dimension acquisition in 2017, we recorded a deferred tax liability reflecting the tax impact of the difference between the book basis and tax basis of acquired IPR&D.
In conjunction with the acquisition of Dimension Therapeutics, or Dimension, in 2017, we recorded a deferred tax liability reflecting the tax impact of the difference between the book basis and tax basis of acquired IPR&D.
This discussion and analysis generally covers our financial condition and results of operations for the year ended December 31, 2022, including year-over-year comparisons versus the year ended December 31, 2021.
This discussion and analysis generally covers our financial condition and results of operations for the year ended December 31, 2023, including year-over-year comparisons versus the year ended December 31, 2022.
Stock-based compensation expense for RSUs is recognized on a straight-line basis over the requisite service period. PSUs are subject to vest only if certain specified criteria are achieved and the employees’ continued service with the Company after achievement of the specified criteria.
Stock-based compensation expense for RSUs is recognized on a straight-line basis over the requisite service period. PSUs are subject to vest only if certain specified criteria are achieved and the employees’ continued service with the Company.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 82
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Cash Used in Investing Activities Cash used in investing activities for the year ended December 31, 2022 was $291.7 million and was primarily related to purchases of property, plant, and equipment of $116.1 million, primarily related to the construction of our gene therapy manufacturing facility, the acquisition of GeneTx for $75.0 million, net of cash acquired, purchases of marketable debt securities of $614.7 million, and the payment to Regeneron for intangible assets of $30.0 million offset by the sale of marketable debt securities of $84.3 million, proceeds from the sale of Arcturus common stock of $10.1 million, and proceeds from maturities of marketable debt securities of $450.7 million.
Cash used in investing activities for the year ended December 31, 2022 was $291.7 million and was primarily related to purchases of property, plant, and equipment of $116.1 million, primarily related to the construction of our gene therapy manufacturing facility, the acquisition of GeneTx for $75.0 million, net of cash acquired, $79.8 million from net activities in marketable debt securities, and the payment to Regeneron for intangible assets of $30.0 million, offset by proceeds from the sale of Arcturus common stock of $10.1 million.
To date, we have funded our operations primarily from the sale of our equity securities, revenues from our commercial products, the sale of certain future royalties, and strategic collaboration arrangements. We have incurred net losses in each year since inception. Our net losses were $707.4 million and $454.0 million for the years ended December 31, 2022 and 2021, respectively.
To date, we have funded our operations primarily from the sale of our equity securities, revenues from our commercial products, the sale of certain future royalties, and strategic collaboration arrangements. We have incurred net losses in each year since inception. Our net losses were $606.6 million and $707.4 million for the years ended December 31, 2023 and 2022, respectively.
We will require additional capital to fund our operations, to complete our ongoing and planned clinical studies, to commercialize our products, to continue investing in early-stage research capabilities to promote our pipeline growth, to continue to acquire or invest in businesses or products that complement or expand our business, including future milestone payments thereunder, and to further develop our general infrastructure, including construction of our GMP gene therapy manufacturing facility, and such funding may not be available to us on acceptable terms or at all.
We may require additional capital to fund our operations, to complete our ongoing and planned clinical studies, to commercialize our products, to continue investing in early-stage research capabilities to promote our pipeline growth, to continue to acquire or invest in businesses or products that complement or expand our business, including future milestone payments thereunder, and to further develop our general infrastructure and such funding may not be available to us on acceptable terms or at all.
Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. For the year ended December 31, 2022, our total revenues increased to $363.3 million, compared to $351.4 million for the same period in 2021.
Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. For the year ended December 31, 2023, our total revenues increased to $434.2 million, compared to $363.3 million for the same period in 2022.
As of December 31, 2022, we had cash, cash equivalents, and marketable debt securities totaling $896.7 million, which included bank deposits, money market funds, U.S. government treasury and agency securities, and investment-grade corporate bond securities which are subject to default, changes in credit rating, and changes in market value.
As of December 31, 2023, we had cash, cash equivalents, and marketable debt securities totaling $777.1 million, which included bank deposits, money market funds, U.S. government treasury and agency securities, and investment-grade corporate bond securities which are subject to default, changes in credit rating, and changes in market value.
Liquidity and Capital Resources To date, we have funded our operations primarily from the sale of our equity securities, revenue from our commercial products, the sale of certain future royalties, and strategic collaboration arrangements. As of December 31, 2022, we had $896.7 million in available cash, cash equivalents, and marketable debt securities.
Liquidity and Capital Resources To date, we have funded our operations primarily from the sale of our equity securities, revenue from our commercial products, the sale of certain future royalties, and strategic collaboration arrangements. As of December 31, 2023, we had $777.1 million in available cash, cash equivalents, and marketable debt securities.
Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits. As of December 31, 2022, our total gross deferred tax assets were $900.7 million.
Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits. As of December 31, 2023, our total gross deferred tax assets were $1,041.8 million.
Pursuant to the agreement, RPI paid us $320.0 million in consideration for our right to receive royalty payments on the net sales of Crysvita in the EU, the United Kingdom, and Switzerland, effective January 1, 2020, under the terms of our Collaboration and License Agreement with KKC.
Pursuant to the agreement, RPI paid us $320.0 million in consideration for our right to receive royalty payments on the net sales of Crysvita in the European Union, or the EU, the United Kingdom, and Switzerland, effective January 1, 2020, under the terms of our Collaboration and License Agreement with Kyowa Kirin Co., Ltd., or KKC.
Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to 75 historical or future ownership percentage change rules provided by the Internal Revenue Code of 1986, and similar state provisions. The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization.
Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership percentage change rules provided by the Internal Revenue Code of 1986, and similar state provisions.
The calculation of royalty payments to OMERS will be based on net sales of Crysvita beginning in April 2023 and will expire upon the earlier of the date on which aggregate payments received by OMERS equals $725.0 million or the date the final royalty payment is made to us under the KKC Collaboration Agreement.
The calculation of royalty payments to OMERS 71 is based on net sales of Crysvita beginning in April 2023 and continuing until expiration, which is the earlier of the date on which aggregate payments received by OMERS equals $725.0 million or the date the final royalty payment is made to us under the KKC Collaboration Agreement.
For the years ended December 31, 2022, 2021, and 2020 stock-based compensation expense was $130.4 million, $105.0 million, and $85.7 million, respectively. As of December 31, 2022, we had $229.4 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, which we expect to recognize over a weighted-average period of 2.28 years.
For the years ended December 31, 2023, 2022, and 2021 stock-based compensation expense was $135.2 million, $130.4 million, and $105.0 million, respectively. As of December 31, 2023, we had $219.8 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, which we expect to recognize over a weighted-average period of 2.2 years.
Cash Flows Provided by Financing Activities Cash provided by financing activities for the year ended December 31, 2022 was $501.2 million and was comprised of $491.0 million in net proceeds from the partial sale of future North America Crysvita royalties to OMERS and $10.8 million in net proceeds from the issuance of common stock upon the exercise of stock options, net of taxes withheld from the vesting of restricted stock units. 80 Cash provided by financing activities for the year ended December 31, 2021 was $118.6 million and was comprised of $78.9 million in net proceeds from the issuance of common stock from our ATM offering and $40.1 million in net proceeds from the issuance of common stock upon the exercise of stock options, net of taxes withheld from the vesting of restricted stock units.
Cash provided by financing activities for the year ended December 31, 2022 was $501.2 million and was primarily comprised of $491.0 million in net proceeds from the partial sale of future North America Crysvita royalties to OMERS and $10.8 million in net proceeds from the issuance of common stock upon the exercise of stock options, net of taxes withheld from the vesting of restricted stock units.
Volatile market conditions arising from the COVID-19 pandemic, the macro-economic environment, inflation, or global political instability may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars.
Volatile market conditions arising from the macroeconomic environment (including financial conditions affecting the banking system and financial institutions), inflation, or global political instability may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars.
We define our critical accounting policies as those GAAP accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles.
Our significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report. 69 We define our critical accounting policies as those GAAP accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles.
The excess of future estimated royalty payments (subject to the capped amount), in excess of the net proceeds received of $314.2 million and $491.0 million, respectively, is recorded as non-cash interest expense over the life of the arrangements. Consequently, we estimate an imputed interest on the unamortized portion of the liabilities and record interest expense relating to the transactions.
The excess of future estimated royalty payments (subject to the capped amount) to RPI and OMERS, in excess of the net proceeds received of $314.2 million and $491.0 million, respectively, is recorded as non-cash interest expense over the life of the arrangements.
Non-cash Interest Expense on Liabilities for Sales of Future Royalties (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Non-cash interest expense on liabilities for sales of future royalties $ 43,015 $ 29,422 $ 13,593 46% Our non-cash interest expense on liabilities for sales of future royalties increased by $13.6 million for the year ended December 31, 2022, compared to the same period in 2021.
Non-cash Interest Expense on Liabilities for Sales of Future Royalties (dollars in thousands) Year Ended December 31, Dollar Percent 2023 2022 Change Change Non-cash interest expense on liabilities for sales of future royalties $ 66,004 $ 43,015 $ 22,989 53% Our non-cash interest expense on liabilities for sales of future royalties increased by $23.0 million for the year ended December 31, 2023, compared to the same period in 2022.
As of December 31, 2022, we had $896.7 million in available cash, cash equivalents and marketable debt securities. 71 Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP.
Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP.
These expenses consist primarily of clinical studies performed by contract research organizations, manufacturing of drug substance and drug product performed by contract manufacturing organizations, materials and supplies, fees from collaborative and other arrangements including milestones, licenses and other fees, personnel costs including salaries, benefits and stock-based compensation, and overhead allocations consisting of various support and infrastructure costs. 76 Commercial programs include costs for disease monitoring programs and certain regulatory and medical affairs support activities for programs after commercial approval.
These expenses consist primarily of clinical studies performed by contract research organizations, manufacturing of drug substance and drug product performed by contract manufacturing organizations and at our gene therapy manufacturing facility, materials and supplies, fees from collaborative and other arrangements including milestones, licenses and other fees, personnel costs including salaries, benefits and stock-based compensation, and overhead allocations consisting of various support and infrastructure costs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Ultragenyx Pharmaceutical Inc., we or the Company, is a biopharmaceutical company focused on the identification, acquisition, development, and commercialization of novel products for the treatment of serious rare and ultra-rare genetic diseases.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Ultragenyx Pharmaceutical Inc., we or the Company, are a biopharmaceutical company committed to bringing novel products to patients for the treatment of serious rare and ultrarare genetic diseases.
We periodically review our estimates as a result of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Our significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report.
We periodically review our estimates as a result of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate.
Our future funding requirements will depend on many factors, including the following: • the scope, rate of progress, results and cost of our clinical studies, nonclinical testing, and other related activities; • the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates, products that we have begun to commercialize, and any products that we may develop in the future, including the construction of our own GMP gene therapy manufacturing plant; • the number and characteristics of product candidates that we pursue; • the cost, timing, and outcomes of regulatory approvals; • the cost and timing of establishing our commercial infrastructure, and distribution capabilities; • the magnitude and extent to which the COVID-19 pandemic impacts our business operations and operating results, as described in “Part I, Item IA.
Our future funding requirements will depend on many factors, including the following: • the scope, rate of progress, results and cost of our clinical studies, nonclinical testing, and other related activities; • the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates, products that we have begun to commercialize, and any products that we may develop in the future; • the cost of operating our GMP gene therapy manufacturing facility; • the number and characteristics of product candidates that we pursue; • the cost, timing, and outcomes of regulatory interactions and approvals; 78 • the cost and timing of establishing our commercial infrastructure, and distribution capabilities; • the impact of macroeconomic conditions, including the general economic slowdown, inflationary pressure, high interest rates, a potential U.S. federal government shutdown, and potential recessionary environment on our business operations and operating results, as described in “Part I, Item IA.
The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2022 2021 2020 Cash used in operating activities $ (380,465 ) $ (338,695 ) $ (132,220 ) Cash used in investing activities (291,652 ) (195,372 ) (179,121 ) Cash provided by financing activities 501,208 118,552 600,272 Effect of exchange rate changes on cash (1,075 ) (1,194 ) 1,119 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (171,984 ) $ (416,709 ) $ 290,050 79 Cash Used in Operating Activities Our primary use of cash is to fund operating expenses, which consist primarily of research and development and commercial expenditures.
The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Cash used in operating activities $ (474,806 ) $ (380,465 ) Cash provided by (used in) investing activities 168,000 (291,652 ) Cash provided by financing activities 388,142 501,208 Effect of exchange rate changes on cash 462 (1,075 ) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 81,798 $ (171,984 ) Cash Used in Operating Activities Our primary use of cash is to fund operating expenses, which consist primarily of research and development and commercial expenditures.
Cost of Sales (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Cost of sales $ 28,320 $ 16,008 $ 12,312 77% Cost of sales related to our approved products increased by $12.3 million for the year ended December 31, 2022, compared to the same period in 2021.
Cost of Sales (dollars in thousands) Year Ended December 31, Dollar Percent 2023 2022 Change Change Cost of sales $ 45,209 $ 28,320 $ 16,889 60% Cost of sales increased by $16.9 million for the year ended December 31, 2023, compared to the same period in 2022.
There are a number of factors that could materially affect the amount and timing of royalty payments from KKC in the applicable territories, most of which are not within our control.
Our effective annual interest rates were 6.2% and 7.8%, for RPI and OMERS, respectively, as of December 31, 2023. There are a number of factors that could materially affect the amount and timing of royalty payments from KKC in the applicable territories, most of which are not within our control.
We target diseases for which the unmet medical need is high, the biology for treatment is clear, and for which there are typically no approved therapies treating the underlying disease.
We have built a diverse portfolio of approved therapies and product candidates aimed at addressing diseases with high unmet medical need and clear biology for treatment, for which there are typically no approved therapies treating the underlying disease.
The fair value of our investments in Arcturus and Solid common stock decreased by $8.4 million and $10.9 million, respectively, for the period. The change in fair value of Arcturus included a realized gain on the sale of all our remaining shares of common stock for net proceeds of $10.1 million.
The change in fair value of Arcturus included a realized gain on the sale of all our remaining shares of common stock for net proceeds of $10.1 million. As of December 31, 2022, we had sold all our remaining equity investments in Arcturus.
We expect selling, general and administrative expenses to moderate in the future as we continue to support our approved products and multiple clinical-stage product candidates, with expected decreases in commercial activities due to transition of Crysvita to our partner in the profit-share territory.
The increases in selling, general and administrative expenses were primarily due to increases in commercialization costs, and professional services costs, as well as a one-time legal settlement of $6.2 million for the year ended December 31, 2023. 75 We expect selling, general and administrative expenses to continue to moderate in the future as we continue to support our approved products and multiple clinical-stage product candidates, with expected decreases in commercial activities due to transition of Crysvita commercial responsibilities to our partner in the Profit-Share Territory.
Cash used in operating activities for the year ended December 31, 2022 was $380.5 million and primarily reflected a net loss of $707.4 million and $21.7 million for non-cash collaboration royalty revenues related to the sale of future royalties to RPI, offset by non-cash charges of $130.4 million for stock-based compensation, $75.0 million for acquired in-process research and development expense, $2.7 million for the amortization of the premium paid on marketable debt securities, $18.2 million for depreciation and amortization, $19.3 million primarily for the net change in fair value of equity investments from Arcturus and Solid, and $43.0 million for non-cash interest expense incurred on the liabilities for sales of future royalties to RPI and OMERS, net of capitalized interest.
The change in operating assets and liabilities also reflected a net use of cash of $15.1 million, primarily due to an increase in accounts receivable primarily related to an increase in sales of our approved products, partially offset by a net decrease in other assets primarily in prepaid manufacturing. 77 Cash used in operating activities for the year ended December 31, 2022 was $380.5 million and reflected a net loss of $707.4 million partially offset by non-cash items of $266.7 million, net, which consisted primarily of non-cash collaboration royalty revenues, interest expense related to the sale of future royalties to RPI and OMERS, net of amounts capitalized, stock-based compensation, acquired in-process research and development relating to our acquisition of GeneTx, the change in fair value of equity investments, primarily for the net change in fair value of equity investments from Arcturus and Solid, and depreciation and amortization.
These decreases were offset by a $3.8 million increase in prepaid expenses and other assets primarily due to a decrease in prepaid fixed assets, and a $87.4 million increase in accounts payable, accrued liabilities, and other liabilities primarily due to timing of payments and receipt of invoices, as well as an increase in manufacturing accruals related to manufacturing and clinical expenses, an increase in accrued bonus due to an increase in headcount, and an increase in accrued development costs owed to a collaboration partner.
The change in operating assets and liabilities also reflected net cash provided of $60.2 million, primarily due to an increase in accounts payable, accrued, and other liabilities, primarily due to timing of payments and receipt of invoices, as well as an increase in manufacturing accruals related to manufacturing and clinical expenses, an increase in accrued bonus due to an increase in headcount, and an increase in accrued development costs owed to a collaboration partner, partially offset by an increase in accounts receivable primarily related to an increase in sales of our approved products.
Interest Income (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Interest income $ 11,074 $ 1,928 $ 9,146 474% Interest income increased $9.1 million for the year ended December 31, 2022 compared to the same period in 2021, primarily due to increases in interest rates and higher average marketable debt securities balances.
Interest Income (dollars in thousands) Year Ended December 31, Dollar Percent 2023 2022 Change Change Interest income $ 26,688 $ 11,074 $ 15,614 141% Interest income increased $15.6 million for the year ended December 31, 2023 compared to the same period in 2022, primarily due to increases in interest rates.
If actual results vary, we may need to adjust these estimates, which could have a material effect on earnings in the period of the adjustment. Inventory We expense costs associated with the manufacture of our products prior to regulatory approval. Typically, capitalization of such costs begins when we have received the regulatory approval of the product.
If actual results vary, we may need to adjust these estimates, which could have a material effect on earnings in the period of the adjustment.
We will continue to use judgment in evaluating the expected volatility, expected terms, and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis and will revise in subsequent periods, if actual forfeitures differ from those estimates.
We will continue to use judgment in evaluating the expected volatility, expected terms, and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis and will revise in subsequent periods, if actual forfeitures differ from those estimates. 72 For restricted stock units, or RSUs, and performance stock units, or PSUs, the fair value is based on the market value of our common stock on the date of grant, except for certain PSUs with a market vesting condition, for which fair value is estimated using a Monte Carlo simulation model.
Conversely, if sales of Crysvita in the relevant territories are more than expected, the non-cash royalty revenue and the non-cash interest expense recorded by us would be greater over the term of the arrangements. 74 Stock-Based Compensation Stock-based compensation costs related to equity awards granted to employees are measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures.
Conversely, if sales of Crysvita in the relevant territories are more than expected, the non-cash royalty revenue and the non-cash interest expense recorded by us would be greater over the term of the arrangements.
The increase in Crysvita non-cash collaboration royalty revenue of $3.7 million for the year ended December 31, 2022, compared to the same period in 2021, was primarily due to the launch progress by our collaboration partner in European countries and an increase in the number of patients on therapy.
Our Crysvita collaboration revenue in the Profit-Share Territory and royalty revenue increased by a net $15.6 million for the year ended December 31, 2023, compared to the same period in 2022; this increase in Crysvita revenue is primarily due to an increase in the number of patients on therapy.
For the year ended December 31, 2021, we recorded a net decrease in the fair value of our equity investments of $42.1 million. The fair value of our investment in Solid common stock decreased by $45.6 million for the period.
For the year ended December 31, 2022, we recorded a net decrease in the fair value of our equity investments of $19.3 million. The fair value of our investments in Arcturus Therapeutics Holdings Inc., or Arcturus, and Solid common stock decreased by $8.4 million and $10.9 million, respectively, for the period.
We estimate the grant date fair value of options, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.
The grant date fair value of the stock-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. We expect to continue to grant equity awards in the future, and to the extent that we do, our actual stock-based compensation expense will likely increase.
To the extent such payments are greater or less than our initial estimates or the timing of such payments is materially different than its original estimates, we will prospectively adjust the amortization of the liabilities and the effective interest rate. Our effective annual interest rate was approximately 9.3% and 8.4%, for RPI and OMERS, respectively, as of December 31, 2022.
To the extent the royalty payments are greater or less than our initial estimates or the timing of such payments is materially different than our original estimates, we prospectively adjust the effective interest rate.
The timing and amount of expenses incurred will depend largely upon the outcomes of current or future clinical studies for our product candidates as well as the related regulatory requirements, manufacturing costs, and any costs associated with the advancement of our preclinical programs. 77 Selling, General and Administrative Expenses (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Selling, general and administrative $ 278,139 $ 219,982 $ 58,157 26% Selling, general and administrative expenses increased $58.2 million for the year ended December 31, 2022, compared to the same period in 2021.
The timing and amount of expenses incurred will depend largely upon the outcomes of current or future clinical studies for our product candidates as well as the related regulatory requirements, manufacturing costs, and any costs associated with the advancement of our preclinical programs.
Cash used in operating activities for the year ended December 31, 2021 was $338.7 million and primarily reflected a net loss of $454.0 million and $18.0 million for non-cash collaboration royalty revenues related to the sale of future royalties to RPI, offset by non-cash charges of $105.0 million for stock-based compensation, $13.2 million for depreciation and amortization, $6.6 million for the amortization of the premium paid on marketable debt securities, $42.1 million primarily for the net change in fair value of equity investments from Arcturus and Solid, and $29.4 million for non-cash interest expense incurred on the liability for sales of future royalties to RPI, net of capitalized interest.
Cash used in operating activities for the year ended December 31, 2023 was $474.8 million and primarily reflected a net loss of $606.6 million, partially offset by non-cash items of $146.9 million, net, which consisted primarily of non-cash collaboration royalty revenues, interest expense related to the sale of future royalties to RPI and OMERS, net of amounts capitalized, stock-based compensation, amortization of discounts on marketable debt securities, and depreciation and amortization.
In order to record collaboration revenue, we utilize certain information from our collaboration partners, including revenue from the sale of the product, associated reserves on revenue, and costs incurred for development and sales activities. For the periods covered in the financial statements presented, there have been no material changes to prior period estimates of revenues and expenses.
We also record royalty revenues under certain of our license or collaboration agreements in exchange for license of intellectual property. We utilize certain information from our collaboration partners to record collaboration revenue, including revenue from the sale of the product, associated reserves on revenue, and costs incurred for development and sales activities.
Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that is subject to a constraint.
We also recognize revenue from sales of certain products on a “named patient” basis, which are allowed in certain countries prior to the commercial approval of the product. Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that is subject to a constraint.
Approved Therapies and Clinical Product Candidates Our current approved therapies and clinical-stage pipeline consist of four product categories: biologics, small molecules, gene therapy, and nucleic acid product candidates.
Our strategy is predicated upon time- and cost-efficient drug development, with the goal of delivering safe and effective therapies to patients with the utmost urgency. Approved Therapies and Clinical Product Candidates Our current approved therapies and clinical-stage pipeline consist of four product categories: biologics, small molecules, AAV gene therapy, and nucleic acid product candidates.
Change in Fair Value of Equity Investments (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Change in fair value of equity investments $ (19,299 ) $ (42,063 ) $ 22,764 (54%) For the year ended December 31, 2022, we recorded a net decrease in the fair value of our equity investments of $19.3 million.
Change in Fair Value of Equity Investments (dollars in thousands) Year Ended December 31, Dollar Percent 2023 2022 Change Change Change in fair value of equity investments $ 397 $ (19,299 ) $ 19,696 (102%) For the year ended December 31, 2023, we recorded a net increase in the fair value of our equity investments of $0.4 million due to an increase in the fair value of our investments in Solid Biosciences Inc., or Solid, common stock for the period.
The increase in product sales of $41.9 million for the year ended December 31, 2022, compared to the same period in 2021 was primarily due to an increase in demand for Crysvita in Latin America due to an increase in the number of patients on therapy, continued momentum from the commercial launch of Dojolvi in the U.S., continued increase in demand for our other approved products, and an increase in sales of our products under our named patient program in certain countries.
The increase was primarily due to an increase in demand for Crysvita in Latin America resulting from an increase in the number of patients on therapy, continued increase in demand for our other approved products, and increases in revenue under our named patient programs.
The following table provides a breakout of our research and development expenses by major program type and business activities: Year Ended December 31, Dollar Percent 2022 2021 Change Change Commercial programs $ 75,683 $ 52,015 $ 23,668 46% Clinical programs: Gene therapy programs 153,754 108,217 45,537 42% Nucleic acid and other biologic programs 97,268 50,681 46,587 92% Translational research 81,431 62,207 19,224 31% Upfront license, acquisition, and milestone fees 75,033 50,000 25,033 50% Infrastructure 71,657 59,294 12,363 21% Stock-based compensation 74,464 59,097 15,367 26% Other research and development 76,499 55,642 20,857 37% Total research and development expenses $ 705,789 $ 497,153 $ 208,636 42% Total research and development expenses increased $208.6 million for the year ended December 31, 2022 compared to the same period in 2021.
The following table provides a breakout of our research and development expenses by major program type and business activities: Year Ended December 31, Dollar Percent 2023 2022 Change Change Clinical programs: Gene therapy programs $ 168,705 $ 153,754 $ 14,951 10% Biologic and nucleic acid programs 108,914 97,268 11,646 12% Translational research 71,820 81,431 (9,611 ) -12% Upfront license, acquisition, and milestone fees 9,000 75,033 (66,033 ) -88% Approved products 53,478 75,683 (22,205 ) -29% Infrastructure 78,929 71,657 7,272 10% Stock-based compensation 74,531 74,464 67 0% Other research and development 83,072 76,499 6,573 9% Total research and development expenses $ 648,449 $ 705,789 $ (57,340 ) -8% Total research and development expenses decreased $57.3 million for the year ended December 31, 2023 compared to the same period in 2022.
The increase was primarily due to continued increase in demand for Crysvita due to an increase in the number of patients on therapy. For the year ended December 31, 2022, the collaboration and license revenue from our license agreement with Daiichi Sankyo decreased by $77.3 million, as compared to the same period in 2021.
Our revenue from the Daiichi Sankyo arrangement decreased by $6.2 million for the year ended December 31, 2023, compared to the same period in 2022. The decrease was due to the completion of the technology transfer and the technology transfer period as of March 31, 2023.
Cash used in investing activities for the year ended December 31, 2021 was $195.4 million and was primarily related to purchases of property, plant, and equipment of $73.1 million and purchases of marketable debt securities of $1,012.2 million, offset by the sale of marketable debt securities of $92.9 million, proceeds from the sale of Arcturus common stock of $79.8 million, and proceeds from maturities of marketable debt securities of $718.1 million.
Cash Provided by (Used in) Investing Activities Cash provided by investing activities for the year ended December 31, 2023 was $168.0 million and was primarily related to $219.8 million from net activities in marketable debt securities, offset by purchases of property, plant, and equipment of $44.3 million, primarily related to the fit-out of our gene therapy manufacturing facility.
We record the royalty revenue arising from the net sales of Crysvita in the applicable territories as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the arrangements. We periodically assess the expected royalty payments using a combination of historical results, internal projections and forecasts from external sources.
Consequently, we estimate an imputed interest on the unamortized portion of the liabilities and record interest expense relating to the transactions. We record the royalty revenue arising from the net sales of Crysvita in the applicable territories as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the arrangements.
We estimate the efforts needed to complete the performance obligations and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligations using input measures. Product Sales We sell our approved products through a limited number of distributors.
We estimate the efforts needed to complete the performance obligations and recognize revenue by measuring the progress towards complete satisfaction of the performance obligations using input measures. Inventory We expense costs associated with the manufacture of our products prior to regulatory approval. Typically, capitalization of such costs begins when we have received the regulatory approval of the product.
We periodically review our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to the estimated net realizable value. Liabilities for Sales of Future Royalties In December 2019, we entered into a Royalty Purchase Agreement with RPI.
Liabilities for Sales of Future Royalties In December 2019, we entered into a Royalty Purchase Agreement with RPI.
As of December 31, 2022, net proceeds from shares sold under the arrangement were approximately $78.9 million. No shares were sold under this arrangement for the year ended December 31, 2022. In July 2022, we received net proceeds of $491.0 million from the sale of certain future royalties to OMERS.
There were 1,175,584 shares sold under this arrangement for the year ended December 31, 2023, for net proceeds of $53.3 million. No shares were sold under this arrangement for the year ended December 31, 2022. As of December 31, 2023, net proceeds from shares sold under the arrangement were $132.2 million.
As of December 31, 2022, we do not hold a material amount of previously expensed inventory for our approved products. 73 Inventory that is manufactured after regulatory approval is valued at the lower of cost and net realizable value and cost is determined using the average-cost method.
Inventory that is manufactured after regulatory approval is valued at the lower of cost and net realizable value and cost is determined using the average-cost method. We periodically review our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to the estimated net realizable value.
Infrastructure costs include direct costs related to laboratory, IT, and equipment depreciation costs, and overhead allocations for human resources, IT, and other allocable costs.
Approved products include costs for disease monitoring programs for post-marketing clinical studies, medical affairs activities to support scientific discovery efforts on 74 existing programs, and regulatory costs for unapproved regions. Infrastructure costs include direct costs related to laboratory, IT, and equipment depreciation costs, and overhead allocations for human resources, IT, and other allocable costs.
Provision for income taxes Year Ended December 31, Dollar Percent 2022 2021 Change Change Provision for income taxes $ (5,696 ) $ (1,044 ) $ (4,652 ) 446% The provision for incomes taxes increased by $4.7 million for the year ended December 31, 2022, compared to the same period in 2021.
Benefit from (provision for) income taxes Year Ended December 31, Dollar Percent 2023 2022 Change Change Benefit from (provision for) income taxes $ 1,825 $ (5,696 ) $ 7,521 (132%) For the year ended December 31, 2023, we recognized an income tax benefit of $4.8 million attributable to modifications in our state apportionment methodology.
Under ASC 606, revenue from product sales is recognized at the point in time when the delivery is made and when title and risk of loss transfers to these distributors. We also recognize revenue from sales of certain products on a “named patient” basis, which are allowed in certain countries prior to the commercial approval of the product.
Revenue Recognition Product Sales We sell our approved products through a limited number of distributors. Under ASC 606, revenue from product sales is recognized at the point in time when control is transferred to these distributors.
Results of Operations Comparison of Years Ended December 31, 2022 and 2021 Revenues (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Collaboration and license revenue: Crysvita collaboration revenue in profit-share territory $ 215,024 $ 171,198 $ 43,826 26% Crysvita royalty revenue in European territory — 244 (244 ) (100%) Daiichi Sankyo 7,686 84,996 (77,310 ) (91%) Total collaboration and license revenue 222,710 256,438 (33,728 ) (13%) Product sales: Crysvita 42,678 21,422 21,256 99% Mepsevii 20,637 16,035 4,602 29% Dojolvi 55,612 39,560 16,052 41% Total product sales 118,927 77,017 41,910 54% Crysvita non-cash collaboration royalty revenue 21,692 17,951 3,741 21% Total revenues $ 363,329 $ 351,406 $ 11,923 3% For the year ended December 31, 2022 , our share of Crysvita collaboration revenue in the profit-share territory increased by $43.8 million, as compared to the same period in 2021.
The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization. 73 Results of Operations Comparison of Years Ended December 31, 2023 and 2022 Revenues (dollars in thousands) Year Ended December 31, Dollar Percent 2023 2022 Change Change Product sales: Crysvita $ 75,697 $ 42,678 $ 33,019 77% Mepsevii 30,441 20,637 9,804 48% Dojolvi 70,633 55,612 15,021 27% Evkeeza 3,642 — 3,642 * Total product sales 180,413 118,927 61,486 52% Crysvita royalty revenue 182,652 21,692 160,960 742% Collaboration and license revenue: Crysvita collaboration revenue in Profit-Share Territory 69,705 215,024 (145,319 ) -68% Daiichi Sankyo 1,479 7,686 (6,207 ) -81% Total collaboration and license revenue 71,184 222,710 (151,526 ) -68% Total revenues $ 434,249 $ 363,329 $ 70,920 20% * not meaningful Our product sales increased $61.5 million for the year ended December 31, 2023, compared to the same period in 2022.
To the extent royalty payments are greater or less than our initial estimates or the timing of such payments is materially different than our original estimates, we will prospectively adjust the effective interest rate. 78 Other Expense (dollars in thousands) Year Ended December 31, Dollar Percent 2022 2021 Change Change Other expense $ (1,566 ) $ (1,687 ) $ 121 (7%) Other expense decreased $0.1 million for the year ended December 31, 2022, compared to the same period in 2021.
We periodically assess the expected royalty payments using a combination of historical results, internal projections and forecasts from external sources. To the extent such payments are greater or less than our initial estimates or the timing of such payments is materially different than its original estimates, we will prospectively adjust the amortization of the liabilities and the effective interest rate.

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