ULTRAGENYX PHARMACEUTICAL INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

ULTRAGENYX PHARMACEUTICAL INC.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying unaudited
Condensed Consolidated Financial Statements and related notes in Item 1 and with
the audited Consolidated Financial Statements and the related notes included in
our Annual Report on Form 10-K for the year ended December 31, 2021 ("Annual
Report").

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. 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. Our strategy, which is
predicated upon time- and cost-efficient drug development, allows us to pursue
multiple programs in parallel 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, gene therapy, and nucleic acid
product candidates. See section entitled "Recent Program Updates" below for a
description of recent updates to certain of our approved therapies and
clinical-stage pipeline products.

Our biologics include approved therapies Crysvita® (burosumab), Mepsevii® (vestronidase alfa), and Evkeeza® (evinacumab) and UX143 in clinical development:

Crysvita is an antibody administered via subcutaneous injection that targets
fibroblast growth factor 23 (FGF23), developed for the treatment of XLH, a rare,
hereditary, progressive, and lifelong musculoskeletal disorder characterized by
renal phosphate wasting caused by excess FGF23 production. There are
approximately 48,000 patients with XLH in the developed world, including
approximately 36,000 adults and 12,000 children. Crysvita is the only approved
treatment that addresses the underlying cause of XLH. Crysvita is approved in
the U.S. and Canada for the treatment of XLH in adult and pediatric patients six
months of age and older. In the European Union, or the EU, and the United
Kingdom, Crysvita is approved for the treatment of XLH with radiographic
evidence of bone disease in children one year of age and older, adolescents, and
adults. In Brazil, Colombia, Mexico, Chile, Peru, and Argentina, Crysvita is
approved for treatment of XLH in adult and pediatric patients one year of age
and older. We have submitted regulatory filings in various other Latin American
countries.

Crysvita is also approved in the U.S, Canada, and Peru for the treatment of
FGF23-related hypophosphatemia in tumor-induced osteomalacia, or TIO, associated
with phosphaturic mesenchymal tumors that cannot be curatively resected or
localized in adults and pediatric patients 2 years of age and older. 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.

Mepsevii is an intravenous, or IV, enzyme replacement therapy, developed for the
treatment of Mucopolysaccharidosis VII, also known as MPS VII or Sly syndrome, a
rare lysosomal storage disease that often leads to multi-organ dysfunction,
pervasive skeletal disease, and death. MPS VII is one of the rarest MPS
disorders, affecting an estimated 200 patients in the developed world. Mepsevii
is approved in the U.S. for the treatment of children and adults with MPS VII.
In the EU and the United Kingdom, Mepsevii is approved under exceptional
circumstances for the treatment of non-neurological manifestations of MPS VII
for patients of all ages. In Italy, Mepsevii received reimbursement approval for
the treatment of pediatric and adult patients with MPS VII. In Brazil, Mexico,
and Japan, Mepsevii is approved for the treatment of MPS VII for patients of all
ages.

Evkeeza is a fully human monoclonal antibody that binds to and blocks the
function of angiopoietin-like 3 (ANGPTL3), a protein that plays a key role in
lipid metabolism. Evkeeza is an approved therapy for the treatment of homozygous
familial hypercholesterolemia, or HoFH, a rare inherited condition. HoFH occurs
when two copies of the familial hypercholesterolemia (FH)-causing genes are
inherited, one from each parent, resulting in dangerously high levels (>400
mg/dL) of LDL-C, or bad cholesterol. Patients with HoFH are at risk for
premature atherosclerotic disease and cardiac events as early as their teenage
years. Evkeeza is approved in the U.S., where it is marketed by our partner
Regeneron Pharmaceuticals (Regeneron), and the European Economic Area (EEA) as a
first-in-class therapy for use together with
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diet and other therapies to lower low-density lipoprotein cholesterol (LDL-C) to treat adults and adolescents aged 12 years and older with HoFH. There are approximately 3,000 to 5,000 HoFH patients in countries outside the U.S

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. Setrusumab is
being studied for the treatment of osteogenesis imperfecta (OI) and has received
orphan drug designation from the U.S. Food and Drug Administration (FDA) and
European Medicines Agency (EMA), rare pediatric disease designation from the
FDA, and was accepted into the EMA's Priority Medicines program (PRIME).
Setrusumab is subject to our collaboration agreement with Mereo Biopharma 3
(Mereo), and the lead clinical asset in our bone endocrinology franchise. There
are an estimated 60,000 patients in the developed world affected by OI.

Our small molecule products include the approved therapy Dojolvi® (triheptanoin):

Dojolvi is a highly purified, synthetic, 7-carbon fatty acid triglyceride
specifically designed to provide medium-chain, odd-carbon fatty acids as an
energy source and metabolite replacement for people with long-chain fatty acid
oxidation disorders, or LC-FAOD, which is a set of rare metabolic diseases that
prevents the conversion of fat into energy and can cause low blood sugar, muscle
rupture, and heart and liver disease. Dojolvi is approved and commercially
available in the U.S. and Canada as a source of calories and fatty acids for the
treatment of pediatric and adult patients with molecularly confirmed LC-FAOD. We
have received marketing authorization from the Brazilian Health Regulatory
Agency (ANVISA) and are in the process of seeking reimbursement approval. There
are approximately 8,000 to 14,000 patients in the developed world with LC-FAOD.

Our clinical-stage gene therapy product line includes UX111, DTX401, DTX301 and UX701:

UX111 (formerly ABO-102) is an adeno-associated virus 9, or AAV9, gene therapy
product candidate for the treatment of patients with Sanfilippo syndrome type A
(MPS IIIA), a rare lysosomal storage disease with no approved treatment that
primarily affects the central nervous system (CNS). There are approximately
3,000 to 5,000 patients in the developed world affected by Sanfilippo syndrome
type A. The UX111 program has received Regenerative Medicine Advanced Therapy
(RMAT), Fast Track, Rare Pediatric Disease, and Orphan Drug designations in the
U.S., and PRIME and Orphan Medicinal Product designations in the EU.

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. GSDIa is the most common genetically inherited glycogen
storage disease, with an estimated 6,000 patients in the developed world
affected by GSDIa. A Pediatric Investigation Plan, or PIP, was accepted by the
EMA. The DTX401 program has received RMAT, Fast Track, and Orphan Drug
designations in the U.S., and PRIME and Orphan Medicinal Product designations in
the EU.

DTX301 is an AAV8 gene therapy product candidate designed for the treatment of
patients with ornithine transcarbamylase, or OTC, deficiency. OTC is part of the
urea cycle, an enzymatic pathway in the liver that converts excess nitrogen, in
the form of ammonia, to urea for excretion. 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.

UX701 is an AAV type 9 gene therapy product candidate designed to deliver stable
expression of a truncated version of the ATP7B copper transporter following a
single intravenous infusion to patients with Wilson disease. Wilson disease
affects more than 50,000 individuals in the developed world. UX701 has received
Orphan Drug Designation in the U.S. and in the EU.

Our clinical-stage nucleic acid pipeline includes GTX-102 for the treatment of Angelman syndrome and UX053 for the treatment of GSDIII:

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 has received Fast Track designation, Orphan Drug
Designation and Rare Pediatric Disease Designation from the FDA.

UX053 is an mRNA product candidate designed for the treatment of patients with
GSDIII, a disease caused by a glycogen debranching enzyme (AGL) deficiency that
results in glycogen accumulation in the liver and muscle. GSDIII affects more
than 10,000 patients in the developed world. UX053 has received Orphan Drug
Designation in the U.S. and in the EU.
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The following table summarizes our approved products and our pipeline of clinical product candidates:

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Recent Developments: Clinical Product Candidates

GTX-102 for the treatment of Angelman Syndrome


In July 2022, we exercised our option to acquire GeneTx Biotherapeutics LLC
(GeneTx) and closed on the acquisition for an option exercise price of $75.0
million plus net working capital adjustments and transaction expenses of $0.6
million and future milestone and royalty payments as further described above in
Note 6.

In July 2022, we also provided an interim data update on patients treated in
Canada, the U.K., and the U.S. under each region's amended protocol for the
phase 1/2 study of GTX-102. As of the data cut-off for this update, a total of
11 patients had reached at least the Day 128 evaluation, with three patients
reaching the Day 170 Pre-Maintenance Dose (PMD) evaluation. We evaluated
patients across various clinical measurements, including AS Change Scale, AS
Severity Scale, the Bayley Scales of Infant and Toddler Development (Bayley-4),
the Vineland-3 adaptive behavior scale, and the Observed Reported Communication
Ability (ORCA). Early
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and some statistically significant changes in quantitative measures appear to show a dose-dependent effect that will require continued follow-up of these patients in the maintenance phase.


As of the date of this filing, 13 patients have received cumulative doses of 20
mg or higher, and 14 patients have over 132 days of exposure to treatment, which
was the minimum cumulative dose and maximum exposure after the first dose that
led to the lower extremity weakness seen in the five patients treated in the
U.S. under the original study protocol in 2020. As of the date of this filing,
there have been no treatment-related serious adverse events of any type or
adverse events related to lower extremity weakness observed to date in these
patients. No clinically-significant elevations of cerebrospinal fluid protein
level have been observed as of the date of this filing. Two of the five patients
treated in the U.S. under the original protocol in 2020 have now restarted
treatment in Canada and have received two or more doses with no
treatment-related serious adverse events of any type or adverse events related
to lower extremity weakness observed in these patients to date.

Dosing in the U.K. and Canada is ongoing under a protocol amendment approved in
May 2022 to add dose-selection cohorts at incrementally higher starting doses
based on age, followed by two, larger expansion cohorts (n = 20) in each age
range. Discussions with the FDA to harmonize the three regions are currently
ongoing.

We currently expect to begin enrollment of the expansion cohorts in the first half of 2023. We also hope to provide the next data update when we have substantive data on a larger number of patients in the program.

DTX401 for the treatment of glycogen storage disease type Ia or GSDIa

In September 2022, DTX401 received the PRIME designation from the EMA. This designation will allow for earlier and more frequent interactions with the agency and places DTX401 on an expedited review track.


We are currently enrolling and dosing patients in the Phase 3 GlucoGene study of
DTX401. The Phase 3 study has a 48-week primary efficacy analysis period and we
plan to enroll 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. The last patient is expected to be enrolled in the
baseline screening phase of the Phase 3 study of DTX401 around the end of the
year.

DTX301 for the treatment of ornithine transcarbamylase deficiency or OTC


We continue to be in the process of initiating the Phase 3 Enh3ance study that
will include a 64-week primary efficacy analysis period and plan to enroll
approximately 50 patients 12 years of age and older, randomized 1:1 to DTX301
(1.7 x 10^13 GC/kg dose) or placebo. The co-primary endpoints are the percentage
of patients who achieve a response as measured by discontinuation or reduction
in baseline disease management and the 24-hour plasma ammonia levels. The first
patients in the U.S. are expected to enter an approximate 4-to 8-week baseline
screening period around the end of 2022, after which they are expected to
receive a single dose of DTX301 or placebo.

UX701 for the treatment of Wilson’s disease

We are currently enrolling and dosing patients with Wilson’s disease in the first stage of the Cyprus2+ study of UX701.


During the first stage of the study, the safety and efficacy of up to three dose
levels of UX701 will be evaluated over the course of 52 weeks and a dose will be
selected for further evaluation in stage 2. The sequential doses to be evaluated
are 5.0 x 10^12 GC/kg, 1.0 x 10^13 GC/kg, and 2.0 x 10^13 GC/kg. A protocol
amendment for stage 1 has been approved that removes the use of placebo from
this stage of the study. In stage 2, a new cohort of patients will be randomized
2:1 to receive the selected dose of UX701 or placebo. The primary safety and
efficacy analyses will be conducted at Week 52 of stage 2. The primary efficacy
endpoints are change in 24-hour urinary copper concentration and percent
reduction in standard of care medication by Week 52. After the initial 52-week
study period, we expect that all patients will receive long term follow up in
stage 3.

Enrollment in Stage 1 is expected to be completed in mid-2023 with data on safety and early signs of clinical activity expected in late 2023 or early 2024.

UX143 (setrusumab) for the treatment of Osteogenesis Imperfecta (OI), in collaboration with Mereo BioPharma 3 limited or Mereo


We are currently dosing patients in a pediatric and young adult Phase 2/3 study.
The objective of the Phase 2/3 study will first focus on determining an
effective dose based on increases in collagen production using serum P1NP levels
and an acceptable safety profile. A protocol amendment for the Phase 2 study
will remove the placebo arm and continue evaluating the same two dose levels of
setrusumab as in the original protocol. We currently expect to complete
enrollment in this portion of the study in early 2023. Data from the Phase 2
study and determination of the Phase 3 dose is currently expected mid-2023.
Following determination of the dose,
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we intend to adapt the study into a pivotal Phase 3 stage, evaluating fracture
reduction over an estimated 15 to 24 months as the primary endpoint, subject to
regulatory review. Separately, we currently plan to initiate a Phase 2 study of
patients under age five with OI in the first half of 2023.

UX053 for the treatment of glycogen storage disease type III or GSDIII


We are dosing patients in a Phase 1/2 study of UX053 for the treatment of GSDIII
and we currently expect preliminary data from Part 1 of the study in the first
half of 2023.

Other Developments

Partial North American Royalty Sale Crysvita


In July 2022, we sold 30% of our royalty interest in Crysvita in the U.S. and
Canada beginning in April 2023 to Ontario Municipal Employees Retirement System
(OMERS) for $500.0 million, subject to a cap of $725.0 million.

Modification of the Collaboration Agreement with KKC


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. As a
result, KKC will continue to support our commercial field and marketing efforts
through a cost share arrangement through April 2024, subject to the limits and
conditions set forth in the amendment. After April 2024, our rights to promote
Crysvita in the U.S. will be limited to medical geneticists and we will solely
bear the cost of our own expenses related to the promotion of Crysvita in the
profit-share territory.

Financial Operations Overview

We are a biopharmaceutical company with a limited operating history. To date, we
have invested substantially all of our efforts and financial resources in
identifying, acquiring, and developing our products and product candidates,
including conducting clinical studies and providing selling, general and
administrative support for these operations. 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 loss was
$245.1 million and $555.6 million for the three and nine months ended September
30, 2022, respectively, and $73.0 million and $331.6 million for the three and
nine months ended September 30, 2021, respectively. Net loss for the three and
nine months ended September 30, 2022 included losses of $1.6 million and $21.1
million, respectively, resulting from changes in fair value of our investments
in Arcturus Therapeutics Holdings Inc. (Arcturus) and Solid Biosciences Inc.
(Solid) equity securities. In the three and nine months ended September 30,
2021, we had included a gain of $25.7 million and a loss of $26.0 million,
respectively, resulting from changes in the fair value of our investments in
Arcturus and Solid. Other than changes in the fair value of our investments,
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 three and nine months ended September 30, 2022 our total revenues were
$90.7 million and $260.0 million, respectively, compared to $81.6 million and
$268.0 million for the three and nine months ended September 30, 2021,
respectively. Revenues for the three and nine months ended September 30, 2022
included $1.5 million and $6.2 million, respectively, from our collaboration and
license agreement with Daiichi Sankyo Co., Ltd. (Daiichi Sankyo), as compared to
$12.1 million and $76.8 million for the three and nine months ended September
30, 2021, respectively. The decrease in collaboration revenue with Daiichi
Sankyo was partially offset by higher revenue from Crysvita collaboration
revenue in the profit-share territory, an increase in revenue for our approved
products, and an increase in collaboration royalty revenue.

From September 30, 2022we had $996.2 million in available cash, cash equivalents and negotiable debt securities.

Critical accounting estimates


Our management's discussion and analysis of our financial condition and results
of operations is based on our Condensed Consolidated Financial Statements, which
have been prepared in accordance with U.S. generally accepted accounting
principles, or GAAP. The preparation of these Condensed Consolidated Financial
Statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported expenses incurred during the reporting periods. Our estimates are based
on our historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis

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for making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. There have been no material
changes in our critical accounting policies during the nine months ended
September 30, 2022, as compared to those disclosed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Critical
Accounting Policies and Significant Judgments and Estimates" in our Annual
Report.

Results of Operations

Comparison of the three and nine months ended September 30, 2022 at three and nine months ended September 30, 2021:

Income (dollars in thousands)


                                 Three Months Ended September 30,          Dollar              %
                                    2022                  2021             Change           Change
Collaboration and license
revenue:
Crysvita collaboration revenue
in profit-share
  territory                    $        51,348       $        42,971     $     8,377                19 %
Crysvita royalty revenue in                  -
European territory                                                16             (16 )            -100 %
Daiichi Sankyo                           1,479                12,061         (10,582 )             -88 %
Total collaboration and
license revenue                         52,827                55,048          (2,221 )              -4 %
Product sales:
Crysvita                                13,184                 7,378           5,806                79 %
Mepsevii                                 6,045                 3,918           2,127                54 %
Dojolvi                                 13,274                10,654           2,620                25 %
Total product sales                     32,503                21,950          10,553                48 %
Crysvita non-cash
collaboration royalty revenue            5,373                 4,649             724                16 %
Total revenues                 $        90,703       $        81,647     $     9,056                11 %



                                   Nine Months Ended September 30,           Dollar              %
                                     2022                   2021             Change           Change
Collaboration and license
revenue:
Crysvita collaboration revenue
in profit-share
  territory                    $        148,121       $        120,987     $    27,134                22 %
Crysvita royalty revenue in                   -
European territory                                                 244            (244 )            -100 %
Daiichi Sankyo                            6,207                 76,767         (70,560 )             -92 %
Total collaboration and
license revenue                         154,328                197,998         (43,670 )             -22 %
Product sales:
Crysvita                                 34,980                 16,150          18,830               117 %
Mepsevii                                 15,839                 12,924           2,915                23 %
Dojolvi                                  39,200                 27,735          11,465                41 %
Total product sales                      90,019                 56,809          33,210                58 %
Crysvita non-cash                        15,634                 13,210
collaboration royalty revenue                                                    2,424                18 %
Total revenues                 $        259,981       $        268,017     $    (8,036 )              -3 %


For the three and nine months ended September 30, 2022, our share of Crysvita
collaboration revenue in the profit-share territory increased by $8.4 million
and $27.1 million, respectively, as compared to the same periods in 2021. The
increase primarily reflects the continuing increase in demand for Crysvita due
to an increase in the number of patients on therapy.

In March 2020, we executed a license agreement with Daiichi Sankyo. For the
three and nine months ended September 30, 2022, the collaboration and license
revenue from this arrangement decreased by $10.6 million and $70.6 million,
respectively, as compared to the same periods in 2021. The decrease was due to
completion of the technology transfer as of March 31, 2022.

The increase in product sales of $10.6 million and $33.2 million for the three
and nine months ended September 30, 2022, respectively, compared to the same
periods 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.
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The increase in Crysvita non-cash collaboration royalty revenue of $0.7 million
and $2.4 million for the three and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily reflects the launch
progress by our collaboration partner in European countries and an increase in
the number of patients on therapy.

Cost of sales (dollars in thousands)

                  Three Months Ended September 30,          Dollar         %
                    2022                     2021           Change       Change
Cost of sales $          8,631         $          4,175     $ 4,456          107 %



                 Nine Months Ended September 30,         Dollar         %
                   2022                  2021            Change      Change
Cost of sales $        23,001       $        12,499     $ 10,502          84 %


Cost of sales increased by $4.5 million and $10.5 million for the three and nine
months ended September 30, 2022, respectively, compared to the same periods in
2021. The increase was due to increased demand for our approved products and
amortization of the intangible asset for Evkeeza from our license agreement with
Regeneron. The increase in cost of sales was also impacted by excess inventory
write-downs of $0.3 million and $1.6 million recorded for the three and nine
months ended September 30, 2022, compared to nil and $1.7 million recorded for
the three and nine months ended September 30, 2021, respectively.

Research and development expenses (dollars in thousands)


Research and development expenses include internal and external costs incurred
for research and development of our programs and program candidates and expenses
related to certain technology that we acquire or license through business
development transactions. 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.

Commercial programs include costs for disease monitoring programs and certain
regulatory and medical affairs support activities for programs after commercial
approval. 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.
Infrastructure costs include direct costs related to laboratory, IT, and
equipment depreciation costs, and overhead allocations for human resources, IT
and other allocable costs.

The following table provides a breakdown of our research and development expenses by major program type and business activities:

                                  Three Months Ended September 30,           Dollar              %
                                     2022                   2021             Change           Change
Commercial programs            $         24,923       $         12,696     $    12,227                96 %

Clinical Programs:

  Gene therapy programs                  34,498                 28,039           6,459                23 %
  Nucleic acid and other
biologic                                 26,325                 13,137          13,188               100 %
    programs
Translational research                   22,486                 16,101           6,385                40 %
Upfront license, acquisition,                                                                        100 %
and milestone fees                       75,234                      -          75,234
Infrastructure                           17,672                 14,748           2,924                20 %
Stock-based compensation                 20,251                 15,366           4,885                32 %
Other research and development           15,908                 13,330           2,578                19 %
Total research and development $        237,297       $        113,417     $   123,880
expenses                                                                                             109 %



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                                   Nine Months Ended September 30,           Dollar              %
                                     2022                   2021             Change           Change
Commercial programs            $         54,266       $         38,998     $    15,268                39 %

Clinical Programs:

  Gene therapy programs                 110,521                 79,136          31,385                40 %
  Nucleic acid and other
biologic                                 68,651                 32,732          35,919               110 %
    programs
Translational research                   64,128                 45,361          18,767                41 %
Upfront license, acquisition,
and milestone fees                       75,234                 50,000          25,234                50 %
Infrastructure                           51,739                 43,984           7,755                18 %
Stock-based compensation                 57,588                 43,949          13,639                31 %
Other research and development           52,854                 39,980          12,874                32 %
Total research and development $        534,981       $        374,140     $   160,841
expenses                                                                                              43 %


Total research and development expenses increased $123.9 million and $160.8
million for the three and nine months ended September 30, 2022, respectively,
compared to the same periods in 2021. The change in research and development
expenses was primarily due to:

for commercial programs, an increase of $12.2 million and $15.3 million for the
three and nine months ended September 30, 2022, respectively, primarily related
to collaborative cost sharing with Regeneron for Evkeeza and increased R&D
personnel allocations to commercial programs;

for gene therapy programs, an increase of $6.5 million and $31.4 million for the
three and nine months ended September 30, 2022, respectively, primarily related
to increases in clinical manufacturing and clinical trial expenses for the
DTX401 and DTX301 Phase 3 programs and the in-licensing of the UX111 program
from Abeona Therapeutics;

for nucleic acid and other biologic programs, an increase of $13.2 million and
$35.9 million for the three and nine months ended September 30, 2022,
respectively, primarily related to the addition of clinical trial and
manufacturing 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 in $6.4 million Y $18.8 million for the three and nine months ended September 30, 2022respectively, primarily related to IND-enabling development costs for multiple research projects;

for upfront license, acquisition, and milestone fees, an increase of $75.2
million and $25.2 million for the three and nine months ended September 30,
2022, respectively, due to $75.2 million recognized from the GeneTx acquisition
during the three and nine months ended September 30, 2022, as compared to nil
and $50.0 million recognized from the upfront fee for the Mereo license for the
three and nine months ended September 30, 2021;

for infrastructure, an increase of $2.9 million and $7.8 million for the three
and nine months ended September 30, 2022, respectively, 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 in $4.9 million Y $13.6 million for the three and nine months ended September 30, 2022, respectively, mainly related to increases in the number of employees; Y

for other research and development expenses, an increase of $2.6 million Y
$12.9 million for the three and nine months ended September 30, 2022respectively, primarily related to increased staffing to support in-house manufacturing, increased travel, and increased administrative and general support.


We expect our annual research and development expenses to moderate in the future
as we advance our product candidates through clinical development. 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.

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Selling, general and administrative expenses (dollars in thousands)


                                      Three Months Ended September 30,          Dollar              %
                                         2022                  2021             Change           Change

General and administrative salesman $69,841 $53,883

  $    15,958                30 %



                                        Nine Months Ended September 30,           Dollar              %
                                          2022                   2021             Change           Change

General and administrative salesman $205,290 $160,551

     $    44,739                28 %


Selling, general and administrative expenses increased by $16.0 million and
$44.7 million for the three and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. The increases in selling,
general and administrative expenses were primarily due to increases in personnel
costs resulting from an increase in the number of employees in support of our
commercial activities, commercialization costs, and professional services costs.

We expect SG&A to moderate in the future to support our approved products and multiple clinical-stage product candidates.

Interest income (dollars in thousands)

                   Three Months Ended September 30,         Dollar         %
                       2022                    2021         Change       Change
Interest income $            3,483         $        408     $ 3,075          754 %



                     Nine Months Ended September 30,          Dollar         %
                      2022                     2021           Change       Change
Interest income $          4,876         $          1,488     $ 3,388          228 %


Interest income increased by $3.1 million and $3.4 million, for the three and
nine months ended September 30, 2022, respectively, compared to the same periods
in 2021, primarily due to increases in interest rates and higher average
marketable debt securities balances.

Change in fair value of equity investments (dollars in thousands)


                                 Three Months Ended September 30,          Dollar              %
                                    2022                  2021             Change           Change
Change in fair value of equity
investments                    $        (1,626 )     $        25,702     $   (27,328 )            -106 %



                                   Nine Months Ended September 30,           Dollar              %
                                     2022                   2021             Change           Change
Change in fair value of equity
investments                    $        (21,139 )     $        (25,963 )   $     4,824               -19 %


For the three and nine months ended September 30, 2022, we recorded a net
decrease in the fair value of our equity investments of $1.6 million and $21.1
million, respectively, due to unrealized losses on our investments in Arcturus
common stock of $0.5 million and $11.1 million during the three and nine months
ended September 30, 2022, respectively, and unrealized losses on our investments
in Solid common stock of $1.1 million and $10.0 million during the three and
nine months ended September 30, 2022, respectively.

For the three months ended September 30, 2021, we recorded a net increase in
fair value of equity investments of $25.7 million. The fair value of our
investment in Arcturus common stock increased by $35.6 million during the
period, which included a realized gain on the sale of a portion of common stock
for net proceeds of $43.2 million. This increase was partially offset by a $9.9
million decrease in fair value of our investment in Solid common stock,
resulting in a net increase of $25.7 million.

For the nine months ended September 30, 2021, we recorded a net decrease in fair
value of equity investments of $26.0 million. The fair value of our investment
in Arcturus common stock increased by $14.7 million during the period, which
included a realized gain on the sale of a portion of common stock for net
proceeds of $43.2 million. The increase was offset by $40.6 million decrease in
fair value of our investment in Solid common stock resulting in a net decrease
of $26.0 million.

Given the historic volatility of the publicly traded stock price of Arcturus and
Solid, the fair value adjustments of our equity investments may be subject to
wide fluctuations which may have a significant impact on our earnings in future
periods.
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Non-cash Interest Expense on Liabilities Related to the Sale of Future Royalties
(dollars in thousands)

                                  Three Months Ended September 30,           Dollar              %
                                     2022                   2021             Change           Change
Non-cash interest expense on
liabilities related to the
  sale of future royalties     $         (14,505 )     $        (8,683 )   $    (5,822 )              67 %



                                   Nine Months Ended September 30,           Dollar               %
                                     2022                   2021             Change            Change
Non-cash interest expense on
liabilities related to the
  sale of future royalties     $        (27,141 )     $        (25,618 )   $    (1,523 )                 6 %


The non-cash interest expense on liabilities related to the sale of future
royalties increased by $5.8 million and $1.5 million for the three and nine
months ended September 30, 2022, respectively, compared to the same periods in
2021. This was primarily due to the partial sale of North American Crysvita
royalty to OMERS in July 2022, which resulted in an increase in liabilities
related to the sale of future royalties by $491.0 million and higher interest
expense, partially offset by the capitalization of interest related to the
construction-in-progress for the gene therapy manufacturing plant. 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.

Other expenses (dollars in thousands)

                  Three Months Ended September 30,          Dollar         %
                     2022                     2021          Change       Change
Other expense $           (1,105 )       $         (415 )   $  (690 )        166 %



                 Nine Months Ended September 30,        Dollar         %
                   2022                  2021           Change      Change
Other expense $        (1,746 )     $        (1,277 )   $  (469 )        37 %


Other expense increased by $0.7 million and $0.5 million, respectively, for the
three and nine months ended September 30, 2022, compared to the same periods in
2021. These changes were primarily due to fluctuations in foreign exchange
rates.

Provision for Income Taxes (dollars in thousands)

                                   Three Months Ended September 30,            Dollar             %
                                      2022                     2021            Change          Change
Provision for income taxes     $           (6,287 )       $         (182 )   $    (6,105 )        *
* not meaningful



                              Nine Months Ended September 30,         Dollar         %
                                2022                  2021            Change       Change
Provision for income taxes $        (7,147 )     $        (1,024 )   $ (6,123 )        598 %


The provision for income taxes increased by $6.1 million for the three and nine
months ended September 30, 2022, compared to the same periods in 2021. 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. 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 tax expense
of $5.9 million for the three and nine months ended September 30, 2022. The
discrete tax expense is for state taxes we anticipate paying as a result of
statutory limitations on our ability to offset expected taxable income with net
operating loss carry forwards in certain states. We realized no benefit for
current year losses due to a full valuation allowance against the U.S. net
deferred tax assets.
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Liquidity and Capital Resources


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.

As of September 30, 2022, we had $996.2 million in available cash, cash
equivalents, and marketable debt securities. 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. Cash in excess of
immediate requirements is invested with a view toward liquidity and capital
preservation, and we seek to minimize the potential effects of concentration and
credit risk.

In May 2021, we entered into an Open Market Sale Agreement with Jefferies LLC,
(Jefferies), pursuant to which we may offer and sell shares of our common stock
having an aggregate offering proceeds up to $350.0 million, from time to time,
in at-the-market (ATM) offerings through Jefferies. As of September 30, 2022,
net proceeds from shares sold under the arrangement were approximately $78.9
million. No shares were sold under this arrangement for the three and nine
months ended September 30, 2022. In July 2022, we received net proceeds of
$491.0 million from the sale of certain future royalties to OMERS.

The following table summarizes our cash flows for the periods indicated (in
thousands):

                                                             Nine Months Ended September 30,
                                                               2022                   2021
Cash used in operating activities                        $       (290,123 )     $       (284,351 )
Cash used in investing activities                                (120,053 )             (264,429 )
Cash provided by financing activities                             499,326                 32,827
Effect of exchange rate changes on cash                            (2,427 )                 (802 )

Net increase (decrease) in cash, cash equivalents and restricted cash

                                          $         86,723   

$(516,755)

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. Due to our significant
research and development expenditures, we have generated significant operating
losses since our inception. Cash used to fund operating expenses is affected by
the timing of when we pay these expenses, as reflected in the change in our
outstanding accounts payable and accrued expenses.

Cash used in operating activities for the nine months ended September 30, 2022
was $290.1 million and primarily reflected a net loss of $555.6 million and
$15.6 million for non-cash collaboration royalty revenues related to the sale of
future royalties to RPI Finance Trust (RPI), an affiliate of Royalty Pharma,
offset by non-cash charges of $101.0 million for stock-based compensation, $75.2
million for acquired in-process research and development expense, $4.3 million
for the amortization of the premium paid on purchased marketable debt
securities, $13.3 million for depreciation and amortization, $21.1 million for a
change in fair value of equity investments in Arcturus and Solid, and $27.1
million for non-cash interest incurred on the liabilities related to the sale of
future royalties to RPI and OMERS. Cash used in operating activities also
reflected a $3.0 million decrease due to an increase in accounts receivable
primarily related to order timing, a $5.5 million decrease due to an increase in
inventory primarily for Mepsevii and Dojolvi, and a decrease of $6.1 million in
contract liabilities, net, related to the revenue recognized from the license
agreements with Daiichi Sankyo, offset by a $52.4 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 and income taxes payable, partially offset by the payout of the 2021
annual bonuses, and a $0.6 million increase due to a net decrease in prepaid
expenses and other assets.

Cash used in operating activities for the nine months ended September 30, 2021
was $284.4 million and primarily reflected a net loss of $331.6 million and
$13.2 million for non-cash collaboration royalty revenues related to the sale of
future royalties to RPI, offset by non-cash charges of $78.1 million for
stock-based compensation, $4.5 million for the amortization of the premium paid
on purchased marketable debt securities, $9.7 million for depreciation and
amortization, $26.0 million for a change in fair value of equity investments in
Arcturus and Solid, and $25.6 million for non-cash interest incurred on the
liability related to the sale of future royalties to RPI. Cash used in operating
activities also reflected a $2.4 million decrease due to an increase in accounts
receivable primarily related to higher revenues, a $2.1 million decrease due to
an increase in inventory for Dojolvi, a $7.0 million decrease due to an increase
in prepaid expenses and other current assets primarily due to an increase in
prepaid subscriptions, prepaid manufacturing and prepaid insurance, and a
decrease of $74.4 million in contract liabilities, net, related to the revenue
recognized from the license agreements with Daiichi Sankyo, offset by a $1.9
million increase in accounts payable, accrued liabilities, and other liabilities
primarily due to an increase in accruals related to the construction of the gene
therapy manufacturing plant, partially offset by a decrease in accrued bonus due
to the payout of the 2020 annual bonuses.
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Cash used in investing activities


Cash used in investing activities for the nine months ended September 30, 2022
was $120.1 million and was primarily related to purchases of property, plant,
and equipment of $89.2 million, primarily related to purchases for our gene
therapy manufacturing plant, the acquisition of GeneTx of $75.4 million, net of
cash acquired, purchases of marketable debt securities of $416.2 million, and
the payment to Regeneron for an intangible asset of $30.0 million, offset by
proceeds from the sale of marketable debt securities of $83.0 million and
maturities of marketable debt securities of $407.9 million.

Cash used in investing activities for the nine months ended September 30, 2021
was $264.4 million and was primarily related to purchases of property, plant,
and equipment of $57.0 million and purchases of marketable debt securities of
$917.4 million, offset by proceeds from the sale of marketable debt securities
of $83.3 million, maturities of marketable debt securities of $584.0 million,
and proceeds from the sale of equity investments of $43.2 million.

Cash Provided by Financing Activities


Cash provided by financing activities for the nine months ended September 30,
2022 was $499.3 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 $8.8 million in net proceeds from the issuance of common stock
pursuant to equity plan awards.

Cash provided by financing activities for the nine months ended September 30, 2021 I was $32.8 million and was mainly made up of $33.2 million in the net proceeds from the issuance of common shares pursuant to stock plan awards.

Funding Requirements


We anticipate that, excluding non-recurring items, we will continue to generate
annual losses for the foreseeable future as we continue the development of, and
seek regulatory approvals for, our product candidates, and continue with
commercialization of approved products. 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.

If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may be required to delay, limit, reduce the scope of, or
terminate one or more of our clinical studies, research and development
programs, future commercialization efforts, or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market
ourselves.

Our future funding requirements will depend on many factors, including the following:

the scope, rate of progress, results and cost of our clinical studies, non-clinical trials and other related activities;

the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates, products we have begun to commercialize, and any products we may develop in the future, including the construction of our own GMP gene therapy manufacturing facility;

the number and characteristics of candidate products we are looking for;

the cost, timing and results of regulatory approvals;

the cost and timing of establishing our business infrastructure and distribution capabilities;

the magnitude and extent to which the COVID-19 pandemic impacts our business
operations and operating results, as described in "Risk Factors - Risks Related
to Our Business Operations;" and

the terms and timing of any collaboration, licensing, marketing, distribution, acquisition and other agreements we may enter into, including any required initial milestones, royalties, rebates or other payments thereunder.

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We expect to meet future cash needs through existing capital balances, revenues from our commercial products, and through some combination of public or private equity offerings, debt financing, royalty sales, collaborations, strategic alliances, licensing agreements. and other marketing and distribution agreements. See “Risk Factors: Risks Related to Our Financial Condition and Capital Requirements.”

Contractual Obligations and Commitments

Significant contractual obligations arising in the normal course of business consist primarily of operating and finance leases, manufacturing and service contract obligations, and building construction and improvement agreements.


Future minimum lease payments under non-cancellable leases as of September 30,
2022, were approximately $62.2 million, of which $13.7 million are due within
one year.

Manufacturing and servicing contract obligations primarily relate to the manufacturing of inventory for our approved products. From September 30, 2022we had obligations of approximately $31.0 millionof which $26.7 million they expire within a year.


Building construction and improvement agreements relate to the construction and
fit-out of the Company's leased properties. As of September 30, 2022, we had
obligations of approximately $9.9 million, of which $0.1 million are expected to
be due within one year.

We generally expect to satisfy these commitments with cash on hand and cash
provided by operating activities. The terms of certain of our licenses,
royalties, development and collaboration agreements, as well as other research
and development activities, require us to pay potential future milestone
payments based on product development success. The amount and timing of such
obligations are unknown or uncertain.

Off-Balance Arrangements

We have not participated in any off-balance sheet agreements, as contemplated in the rules and regulations of the SECOND.

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