Ultragenyx: Multiple Potential Catalysts Ahead

Ultragenyx (RARE) is on the cusp of transforming itself from a developmental stage entity into a stable, rare-drug behemoth along with industry pioneer Biomarin (BMRN). The parallels here are stunning, as RARE is expertly guided by Emil Kakkis, one of the original members of the BMRN stable.

Early Success

Success in the labs may not necessarily lead to commercial approval as the process is full of pitfalls, most often from an unexpected side effect that scuttles the project. For a rare-drug company to morph from the developmental stage, an approved, commercially viable product is necessary.

RARE’s development team is extraordinarily productive, with the company boasting three commercially approved products since its inception in 2010. The latest hit is Dojolvi, a treatment for patients who suffer from long-chain fatty acid oxidation disorders. RARE now targets disorders with a higher developed world prevalence than its initial hit Mepsevii, which has a target patient population of an estimated 200 patients.

The pivot towards a larger patient population is intentional. An example of this trend is the fight Novartis (NVS) has on its hands in gaining widespread reimbursement of its Zolgesma product, which was designed to treat spinal muscular atrophy.

Zolgesma carries a price tag of $2.1 million per treatment, with reimbursement paid throughout five-year installments. Innovative states such as Massachusetts are negotiating directly with NVS to pay if the treatment works as advertised. The battle lines drawn are instructive for RARE as it moves its next two candidates, DTX 301 and DTX-401, into expected Phase 3 testing in the first half of 2021.

Gene therapies as a class are expected to provide long-lasting relief from a particular disease, with the potential for a lifetime cure not out of theoretical reach. This promise coupled with the breathtaking expected cost has payers and providers at loggerheads.

What is the Key for RARE?

The key for RARE investors is the data set, which remains murky as the company continues to gather results. RARE has entered the hot field of mRNA research, with a candidate for the treatment of Angelman disease. RARE is expected to release preliminary Phase 1/2 data for its candidate, which will likely have a meaningful impact on the share price if RARE can post positive effects and a benign side effect profile. In that case, the sheer number of available patient population augurs well for a blockbuster drug to the tune of $1 billion in revenue.

However, the drug did suffer a clinical hold in December due to muscle weakness in the patient population. That said, RARE’s management team believes that the drug proved to be far more potent than expected, with dose adjustments set to alleviate the problem. The need for a treatment is great, with a recent competitor suffering Phase 3 trial failure. Therefore, the path is clear for RARE if the drug is proven efficacious.

Analysts Weigh In

As RARE has received 6 Buys and 6 Holds in the past three months, the word on the Street is that the stock is a Moderate Buy. With the average analyst price target clocking in at $157.58, upside potential of 10% could be in store. (See Ultragenyx stock analysis on TipRanks)

Conclusion

RARE has the hallmarks of the next great rare drug franchise if its lab can keep up its recent string of success. A few more wins in the lab and RARE could double its market cap, surpassing BMRN as king of the rare drug space. It will be interesting to watch events unfold.                

Disclosure: On the date of publication, Alexander Poulos did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.