Cowen and Co. analyst Eric Schmidt summed up the consensus of analysts on the phase III failure of Ultragenyx Pharmaceutical Inc. candidate aceneuramic acid extended release (Ace-ER) in patients with GNE myopathy (GNEM) as "disappointing, but not surprising." A win would have been a stunner, given tepid phase II findings and the company's withdrawal of a marketing authorization application (MAA) for the candidate in the fourth quarter of 2016. Still, the miss on primary and key secondary endpoints and the subsequent decision to terminate development "will leave a hole in Ultragenyx's pipeline and embolden the company's critics," Schmidt concluded.

The failure was a bigger loss for patients. Ace-ER was the only asset in development targeting GNEM, also known as hereditary inclusion body myopathy, according to Cortellis Competitive Intelligence. The ultra-rare condition typically presents in early adulthood and causes progressive muscle wasting and weakness.

The double-blind Ace-ER study enrolled 89 adults with GNEM who were able to walk at least 200 meters in the six-minute walk test. Patients were randomized 1:1 to Ace-ER dosed at 6 g/day or placebo for 48 weeks of treatment. The study missed the primary endpoint of statistically significant improvement from baseline in upper extremity muscle strength composite score; Ace-ER treated patients (n=45) saw a reduction of 2.25 kg compared to a reduction of 2.99 kg in patients who received placebo (n=43), a difference of +0.74 kg (p=0.5387).

The study included 10 secondary endpoints, according to Cortellis Clinical Trials Intelligence. Of these, three – lower extremity muscle strength composite score as measured by hand-held dynamometry, physical functioning using the mobility domain of the GNE myopathy-functional activity scale and muscle strength in knee extensors also as measured by dynamometry – were pre-specified as key secondary endpoints. Without providing details, Ultragenyx said none were met in the study.

The company said Ace-ER was well-tolerated overall, with slightly more patients on the study drug than on placebo experiencing treatment-emergent adverse events (AEs) and related treatment-emergent AEs. Three serious AEs occurred during the trial – two on Ace-ER and one on placebo – but none were deemed related to treatment. No study discontinuations due to treatment-emergent AEs occurred, and no deaths were reported.

Ultragenyx, of Novato, Calif., said it will halt development of the internally discovered asset and work with investigators and patient groups to make natural history data and development tools available for potential advancement of other therapies. The company also will work with investigators and patients on a transition plan for individuals still on Ace-ER.

Emil Kakkis, the company's president and CEO, did not respond to BioWorld but said in a statement that the outcome "does not affect our overall strategy as the company moves forward with multiple preclinical and clinical programs and regulatory filings."

On last month's quarterly earnings call, Kakkis mentioned Ace-ER almost as an aside, noting that data from the fully enrolled phase III were due in the second half and, if positive, would support submission of a new drug application and MAA. In response to a question from Jefferies Group LLC analyst Maury Raycroft at the end of the call, Kakkis shed a bit of light on the trial design strategy, explaining that "our expectation is we only need to show an effect in the upper extremity to be able to file, and getting an effect to lower extremity would be beneficial but not required. So we're looking to see a supportive statistical significant result."

Based on the study's powering, Ultragenyx was seeking to demonstrate comparability to earlier findings, "and we think that would be sufficient to file," he added, citing an expected regulatory submission in early 2018.

'Setback removes a potential source of upside'

With such a plan for Ace-ER out the window, Raycroft lowered the company's price target to $62 from $69 but said other programs remain on track, including an FDA filing for burosumab (UX-023, KRN-23) in X-linked hypophosphatemia (XLH) in adults and children, expected this month, and a pediatric opinion from the EMA's Committee for Human Medicinal Products, anticipated by year-end.

In his company update, Schmidt pointed out that Ace-ER program in GNEM was always a long shot, "based upon phase II data that were less than compelling." Investors, he said, showed little interest in the asset, and meetings with management in late June suggested all eyes were on the anti-FGF23 antibody, burosumab.

Sales potential for Ace-ER in GNEM also was deemed modest, at approximately $200 million. Nevertheless, news of the phase III failure was unwelcome "as it comes on the heels of negative data on triheptanoin in Glut1 deficiency syndrome, and is likely to elicit criticism from bears about the company's clinical execution capabilities," Schmidt wrote, suggesting the company's shares (NASDAQ:RARE) could trade down more on the news "than might otherwise be viewed as justifiable."

Although Schmidt didn't define a "justifiable" drop, Wednesday's decline was $7.83, or 13.3 percent, for a close of $51.02. Volume of nearly 1.6 million shares was five times the company's three-month moving average.

Schmidt indicated strong belief in a rebound for Ultragenyx, adding, "While the company will need to replenish its pipeline of clinical stage assets and restore a bit of investor confidence, we believe these are relatively easy things to accomplish, and expect continued progress on burosumab (a de-risked drug with $1.5B sales potential shared with [Kyowa Hakko Kirin] KHK) to help a great deal in this regard."

Ultragenyx and Tokyo-based KHK inked their collaboration and license agreement on burosumab in 2013. In April, Ultragenyx said data from a phase III study testing the recombinant fully human monoclonal IgG1 antibody were sufficient to support a BLA filing this year in XLH. (See BioWorld Today, April 20, 2017.)

The partners are set to share commercial responsibilities in the U.S. and Canada while KHK markets the drug in Europe and Ultragenyx develops and commercializes it in Mexico, Central and South America.

Leerink Partners LLC's Joseph Schwartz also focused on the positive, calling the sell-off in the company's shares "a buying opportunity." With Ace-ER in the rear-view mirror, "investors can look forward to upcoming catalysts that are more likely than not to provide upside to the stock," Schwartz said. He cited not only the expected regulatory milestones for burosumab but also a fourth quarter PDUFA date for vestronidase alfa (UX-003). An enzyme replacement therapy, the recombinant human beta-glucuronidase, or rhGUS, is in development to treat mucopolysaccharidosis 7 or MPS 7, also known as Sly syndrome. Approval, Schwartz added, "can transition Ultragenyx into a commercial-stage company in 2018." (See BioWorld Today, July 18, 2016.)

Ultragenyx also would have a long corner on that market. A single additional agent – a beta-glucuronidase inhibitor – remains in discovery in the indication, according to Cortellis.

But Evercore ISI, which initiated coverage on Ultragenyx just last week, was more cautious on the Ace-ER miss.

"We had always viewed this program as speculative given complex biology that was not particularly well defined, in addition to the mixed benefit in the prior phase II study," the Evercore ISI team reported in a flash note. "That said, the latest setback removes a potential source of upside from the stock and highlights a pipeline with meaningful, and underappreciated, clinical risk."

Analyst Steven Breazzano and colleagues noted that phase III studies of triheptanoin (UX-007) in patients with glucose transporter 1 deficiency (glut1ds) and in those with long chain fatty acid oxidation diseases were just getting underway. Similar to Ace-ER, "we view the biology here as complex, and the recent miss in the phase 2 study in glut1ds patients with the seizure phenotype highlights the clinical risk."

Acknowledging that vestronidase alfa is approaching its November PDUFA date and citing optimism on approval, Breazzano and colleagues nevertheless noted that the rhGUS asset "only adds an incremental $40-60M opportunity."

The Evercore ISI team reiterated its in-line rating on Ultragenyx shares, "as we continue to see the valuation anchored by burosumab in XLH and view the pipeline as speculative, and one that is now without Ace-ER."