What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-17 compared with 2022-02-15 · 112 added, 129 removed, 253 unchanged (49% of the section changed)

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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.

The figures represented below assume an investment of $100 in our common stock at the closing price of $70.31 on December 31, 2016 and in the Nasdaq Composite Index (IXIC) and the Nasdaq Biotechnology Index (NBI) on December 31, 2016 and the reinvestment of dividends into shares of common stock.

The comparisons in the table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.

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 comparisons in the table are required by the SEC and are not intended to forecast or be indicative of the possible future performance of our common stock.

This graph shall not be deemed “soliciting material”

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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.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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.”

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.

Impact of COVID-19 Pandemic

Our business operations have been and continue to be affected by the COVID-19 pandemic.

In addition to some impact on our preclinical manufacturing activities and certain regulatory interactions, we have experienced interruptions to our clinical trial activities, primarily due to delays or disruptions to patient enrollment and dosing as a result of the diversion of clinic and hospital staff and resources to COVID-19 patients.

The continuing outbreak has caused delays in delivery of ancillary clinical trial materials as certain of our third-party manufacturers or suppliers prioritized and allocated more resources and capacity to supply drug product or raw materials to other companies engaged in the study or manufacture of treatments or vaccinations for COVID-19.

Social distancing measures and travel limitations in response to the pandemic have also made it difficult for us to identify new patients for our commercialized products, which may result in loss of revenue.

As the COVID-19 global pandemic continues, we may experience lower revenue and increased expenses as a result of disruptions to our clinical trial, commercialization and regulatory activities, in addition to delays or shortages of drug product and raw materials.

The magnitude and extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are very uncertain and cannot be predicted with confidence.

As a result, we cannot reliably estimate the extent to which the COVID-19 pandemic will impact our financial statements in 2022 and beyond.

"Risk Factors" for additional details.

Approved Therapies and Clinical Product Candidates

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biologics, small molecules, gene therapy, and nucleic acid product candidates.

We have four commercially approved products, consisting of Crysvita® (burosumab) for the treatment of X-linked hypophosphatemia, or XLH, and tumor-induced osteomalacia, or TIO, Mepsevii® (vestronidase alfa) for the treatment of mucopolysaccharidosis VII, or MPSVII or Sly Syndrome, Dojolvi® (triheptanoin) for the treatment of long-chain fatty acid oxidation disorders, or LC-FAOD, and Evkeeza® (evinacumab) for the treatment of homozygous familial hypercholesterolemia (HoFH) and we anticipate having six product candidates in the clinical pipeline in 2022.

Please see “Part I.

Please see “Item 1.

Business”

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We have incurred net losses in each year since inception.

Our net losses were $454.0 million and $186.6 for the years ended December 31, 2021 and 2020, respectively.

Net loss for the years ended December 31, 2021 and 2020 included a $42.1 million loss and a $170.4 million gain, respectively, resulting from changes in fair value of our investments in Arcturus Therapeutics Holdings Inc.

(Arcturus) and Solid Biosciences Inc.

(Solid) equity securities.

Our net losses were $707.4 million and $454.0 million for the years ended December 31, 2022 and 2021, respectively.

Net loss for the years ended December 31, 2022 and 2021 included losses of $19.3 million and $42.1 million, respectively, resulting from changes in fair value of our investments in Arcturus Therapeutics Holdings Inc., or Arcturus, and Solid Biosciences Inc., or Solid, equity securities.

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.

The increase was driven by higher Crysvita collaboration revenue in the profit-share territory, increase in revenue for our approved products, and an increase in collaboration royalty revenue.

The increase was driven by higher Crysvita collaboration revenue in the profit-share territory, increase in revenue for our approved products, and an increase in collaboration royalty revenue, partially offset by a decrease in collaboration and license revenue from the Daiichi Sankyo arrangement.

As of December 31, 2022, we had $896.7 million in available cash, cash equivalents and marketable debt securities.

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We believe the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments are as follows:

Valuation of Acquired Intangible Assets

Intangible assets with definite useful lives are amortized over their estimated useful lives or other systematic basis and reviewed for impairment if certain events occur.

Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment.

Impairment testing is performed at least annually in the fourth quarter or when a triggering event occurs that could indicate a potential impairment.

If the carrying value of the assets is not expected to be recovered, the assets are written down to their estimated fair values with the related impairment charge recognized in our Consolidated Statements of Operations in the period in which the impairment occurs.

When development of the project is complete, which generally occurs when regulatory approval to market a product is obtained, the associated assets are deemed finite-lived and are amortized over a period that best reflects the economic benefits provided by these assets.

If projects are not successfully developed, our sales and profitability may be adversely affected in future periods.

Additionally, the value of the acquired intangible assets, including IPR&D, may become impaired if the underlying projects do not progress as we initially estimated.

We believe that the assumptions used in developing our estimates of intangible asset values were reasonable at the time of the acquisition.

However, the underlying assumptions used to estimate expected project sales, development costs, profitability, or the events associated with such projects, such as clinical results, may not occur as we estimated at the acquisition date.

Accrued Research and Development, and Research and Development Expenses

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Collaboration and License Revenue

We have certain license and collaboration agreements that are within the scope of Accounting Standards Codification (ASC) 808, Collaborative Agreements , which provides guidance on the presentation and disclosure of collaborative arrangements.

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.

Generally, the classification of the transactions under the collaborative arrangements is determined based on the nature of contractual terms of the arrangement, along with the nature of the operations of the participants.

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We are considered an agent when the collaboration partner controls the product before transfer to the customers and has the ability to direct the use of and obtain substantially all of the remaining benefits from the product.

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.

Operations, because the provision of such services for collaborative partners are not considered to be part of our ongoing major or central operations.

We also record royalty revenues under certain of our license or collaboration agreements in exchange for license of intellectual property.

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For the periods covered in the financial statements presented, there have been no material changes to prior period estimates of revenues and expenses.

We sold the right to receive certain royalty payments from net sales of Crysvita to RPI Finance Trust (RPI), an affiliate of Royalty Pharma, as further described in “Liability Related to the Sale of Future Royalties”

We record the royalty revenue from the net sales of Crysvita in the applicable European territories on a prospective basis as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the arrangement.

We sold the right to receive certain royalty payments from net sales of Crysvita in certain territories to RPI Finance Trust, or RPI, an affiliate of Royalty Pharma, and to OCM LS23 Holdings LP, an investment vehicle for Ontario Municipal Employees Retirement System, or OMERS, as further described in “Liabilities for Sales of Future Royalties”

We record the royalty revenue from the net sales of Crysvita in the applicable territories on a prospective basis as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the applicable arrangement.

The terms of our collaboration and license agreements may contain multiple performance obligations, which may include licenses and research and development activities.

We evaluate these agreements under ASC 606, Revenue from Contracts with Customers (ASC 606), to determine the distinct performance obligations.

We evaluate these agreements under ASC 606, Revenue from Contracts with Customers, or ASC 606, to determine the distinct performance obligations.

We analogize to ASC 606 for the accounting for distinct performance obligations for which there is a customer relationship.

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We expense costs associated with the manufacture of our products prior to regulatory approval.

Typically, capitalization of such costs begin when we have received the regulatory approval of the product.

Prior to the FDA approval of Mepsevii in November 2017, Crysvita in April 2018, and Dojolvi in June 2020, manufacturing and related costs were expensed;

Typically, capitalization of such costs begins when we have received the regulatory approval of the product.

Prior to the FDA approval of our products, manufacturing and related costs were expensed;

accordingly, these costs were not capitalized and as a result are not reflected in the costs of sales after the regulatory approval date.

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We periodically review our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to the estimated net realizable value.

Liability Related to the Sale of Future Royalties

Liabilities for Sales of Future Royalties

In December 2019, we entered into a Royalty Purchase Agreement with RPI.

Pursuant to the agreement, RPI paid us $320.0 million in consideration for the Company’s right to receive royalty payments on the net sales of Crysvita in the European Union, 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 EU, the United Kingdom, and Switzerland, effective January 1, 2020, under the terms of our Collaboration and License Agreement with KKC.

The agreement with RPI will automatically terminate, and the payment of royalties to RPI will cease, in the event aggregate royalty payments received by RPI are equal to or greater than the capped amount of $608.0 million prior to December 31, 2030, or in the event aggregate royalty payments received by RPI are less than $608.0 million prior to December 31, 2030, when aggregate royalty payments received by RPI are equal to $800.0 million.

Proceeds from the transaction was recorded as a liability related to sale of future royalties on the balance sheet.

We will amortize $320.0 million, net of transaction costs of $5.8 million using the effective interest method over the estimated life of the arrangement.

In order to determine the amortization of the liability, we estimate the total amount of future royalty payments to be received by us and paid to RPI, subject to the capped amount, over the life of the arrangement.

The aggregate future estimated royalty payments, less the $314.2 million of net proceeds, will be recorded as non-cash interest expense over the life of the arrangement.

Consequently, we estimate an imputed interest on the unamortized portion of the liability and record interest expense relating to the transaction.

We will continue to record the royalty revenue arising from the net sales of Crysvita in the applicable European territories as non-cash royalty revenue in our Consolidated Statements of Operations over the term of the arrangement.

In July 2022, we entered into a Royalty Purchase Agreement with OMERS.

Pursuant to the agreement, OMERS paid $500.0 million to us in consideration for the right to receive 30% of the future royalty payments due to us from KKC based on net sales of Crysvita in the U.S.

and Canada under the terms of the KKC Collaboration Agreement.

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.

Proceeds from these transactions were recorded as liabilities (specifically, liabilities for sales of future royalties on the Consolidated Balance Sheets).

We are amortizing $320.0 million and $500.0 million, net of transaction costs of $5.8 million and $9.1 million for RPI and OMERS, respectively, using the effective interest method over the estimated life of the applicable arrangement.

In order to determine the amortization of the liabilities, we are required to estimate the total amount of future royalty payments to be received by us and paid to RPI and OMERS, subject to the capped amount, over the life of the arrangements.

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.

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.

To the extent future expected royalty 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 liability and the effective interest rate.

Our effective annual interest rate was approximately 9.6% as of December 31, 2021.

There are a number of factors that could materially affect the amount and timing of royalty payments from KKC in the applicable European territories, most of which are not within our control.

Such factors include, but are not limited to, the success of KKC’s sales and promotion of Crysvita, changing standards of care, the introduction of competing products, pricing for reimbursement in various European 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 (USD) while significant portions of the underlying European sales of Crysvita are made in currencies other than USD, and other events or circumstances that could result in reduced royalty payments from European sales of Crysvita, all of which would result in a reduction of non-cash royalty revenues and the non-cash interest expense over the life of the arrangement.

Conversely, if sales of Crysvita in Europe are more than expected, the non-cash royalty revenues and the non-cash interest expense recorded by us would be greater over the term of the arrangement.

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.

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.

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.

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.

Stock-Based Compensation

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The expected volatility is based on historical volatility over the look-back period corresponding to the expected term.

Strike price for options, including performance stock options, or PSOs, is equal to the closing market value of our common stock on the date of grant.

In addition to the assumptions used in the Black-Scholes option-pricing model, we also estimate a forfeiture rate to calculate the stock-based compensation for our awards.

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.

For restricted stock units (RSUs) and performance stock units (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.

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.

Stock-based compensation expense for RSUs is recognized on a straight-line basis over the requisite service period.

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The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards.

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.

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 annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization.

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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 increase primarily reflects the continuing increase in demand for Crysvita due to an increase in the number of patients on therapy.

Beginning in 2020, we recorded the Crysvita royalty revenue from sales in the European territory as non-cash royalty revenues.

During the years ended December 31, 2021 and 2020, there were changes in the estimate of revenue reserves related to sales made prior to January 1, 2020, and as a result, we recorded $0.2 million and $1.5 million, respectively, as royalty revenue in the European territory .

In March 2020, we executed a license agreement with Daiichi Sankyo, pursuant to which we granted Daiichi Sankyo a non-exclusive license to intellectual property, including know-how and patent applications, with respect to our PCL and HEK293 transient transfection manufacturing technology platforms for AAV-based gene therapy products.

Pursuant to the agreement, we are also continuing to provide certain technical assistance and technology transfer services during the technology transfer period of three years to enable Daiichi Sankyo to use the technologies for its internal gene therapy programs.

For the year ended December 31, 2021, the collaboration and license revenue from this arrangement decreased by $4.2 million as compared to the same period in 2020, due to the relative progress toward complete satisfaction of the individual performance obligation using an input measure as we near the completion of the technology transfer.

The remaining revenue allocated to the intellectual property and the technology transfer services is expected to be recognized in the first quarter of 2022.

The increase in product sales of $38.3 million for the year ended December 31, 2021 compared to the same period in 2020 was primarily due to the commercial launch of Dojolvi in the U.S.

in the third quarter of 2020, the continued increase in demand for our approved products, and an increase in sales of our products under our named patient program in certain countries.

The increase in Crysvita non-cash collaboration royalty revenue of $5.0 million for the year ended December 31, 2021 compared to the same period in 2020 primarily reflects the launch progress by our collaboration partner in European countries and an increase in the number of patients on therapy.

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.

The decrease was due to the completion of the technology transfer as of March 31, 2022.

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 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.

Cost of Sales (dollars in thousands)

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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.

The increase in cost of sales for the year ended December 31, 2021 compared to the same period in 2020 was due to an increase in demand for our approved products, including Dojolvi, which launched in the third quarter of 2020 and a credit for the manufacturing of future inventory batches of $4.6 million due to certain inventory batches that did not meet specified quality standards which was recorded during the year ended December 31, 2020.

The increase in cost of sales was partially offset by lower reserves of $1.8 million for excess inventory write-downs recorded during the year ended December 31, 2021, compared to $3.0 million recorded during the year ended December 31, 2020.

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, which began in January 2022.

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 breakout of our research and development expenses by major program type and business activities:

Year Ended December 31,

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Nucleic acid and other biologic programs

Small molecule programs

Translational research

Upfront license and milestone fees

Upfront license, acquisition, and milestone fees

Infrastructure

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Total research and development expenses

Research and development expenses increased $85.1 million for the year ended December 31, 2021 compared to the same period in 2020.

The increase in research and development expenses was primarily due to:

for commercial programs, an increase of $7.2 million, primarily related to the continued launch of Dojolvi and the TIO indication for Crysvita following their respective FDA approvals in June 2020;

for clinical gene therapy programs, an increase of $29.9 million, primarily related to the addition of clinical study start-up expenses for UX701 following its IND approval in January 2021 and increases in expenses related to DTX401 and DTX301 Phase 3 trial preparation;

for clinical nucleic acid and other biologic programs, an increase of $40.5 million, primarily related to the addition of expenses related to UX053 following its IND approval in March 2021 and UX143 due to entry into a License and Collaboration Agreement with Mereo BioPharma 3 Limited, or Mereo, to collaborate on the development of UX143 effective January 2021;

partially offset by the classification of expenses for the TIO indication for Crysvita to commercial programs subsequent to its approval in June 2020;

for clinical small molecule programs, a decrease of $7.4 million, primarily related to the classification of expenses for Dojolvi to commercial programs subsequent to its approval in June 2020;

for translational research, a decrease of $16.0 million, primarily related to the classification of expenses for UX053 to nucleic acid and other biologic programs and UX701 to gene therapy programs as a result of their IND approvals in March 2021 and January 2021, respectively, net of increased spending on new translational research projects;

for upfront license and milestone fees, an increase of $16.8 million, primarily due to the $50.0 million upfront payment to Mereo for the year ended December 31, 2021, as compared to payments for the year ended December 31, 2020 related to the $25.0 million option extension to GeneTx and the $8.2 million in license payments to REGENXBIO, Inc.

pursuant to a license agreement;

for infrastructure, an increase of $8.8 million, primarily related to increased expenses for support of our clinical and research program pipeline, expansion of laboratory space, implementation of COVID-related policies and safety protocols, depreciation of laboratory-related leasehold improvements and equipment, and IT-related expenses;

for stock-based compensation, an increase of $11.1 million, primarily related to an increase in employee headcount as well as the higher valuation of stock-based awards granted to employees;

for other research and development expenses, a decrease of $5.8 million, primarily related to increased research and development allocations to the programs represented in the commercial, clinical, and translational science programs

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

Total research and development expenses increased $208.6 million for the year ended December 31, 2022 compared to the same period in 2021.

The 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;

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.

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 increased $58.2 million for the year ended December 31, 2022, compared to the same period 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 to support our commercial activities, commercialization costs, and professional services.

We expect selling, general and administrative expenses to continue to increase in the future to support our organizational growth related to our approved products and multiple clinical-stage product candidates.

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 to support our commercial activities, commercialization costs, and professional services costs.

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.

Interest Income (dollars in thousands)

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Interest income

Interest income decreased $5.1 million for the year ended December 31, 2021 compared to the same period in 2020, primarily due to lower portfolio yields as a result of a decrease in interest rates, partially offset by higher average balances of marketable debt securities.

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.

Change in Fair Value of Equity Investments (dollars in thousands)

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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 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.

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.

This was offset by an increase in the fair value of our investment in Arcturus common stock of $2.9 million for the period, which included a realized gain on the sale of a portion of Arcturus common stock for net proceeds of $79.8 million, as well as an increase of $0.6 million related to the conversion of the convertible note in a private pharmaceutical company to its preferred shares, resulting in a net decrease in the fair value of equity investments of $42.1 million.

For the year ended December 31, 2020, we recorded a net increase in the fair value of our equity investments of $170.4 million.

The fair value of our investment in Arcturus common stock increased by $137.9 million for the period, which included a realized gain on the sale of a portion of Arcturus common stock for net proceeds of $79.8 million.

The fair value of our investment in Solid common stock increased by $32.5 million during the same period.

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.

Non-cash Interest Expense on Liability Related to the Sale of Future Royalties (dollars in thousands)

Given the historic volatility of the publicly traded stock price of 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.

Non-cash Interest Expense on Liabilities for Sales of Future Royalties (dollars in thousands)

Year Ended December 31,

Non-cash interest expense on liability related to the

sale of future royalties

The decrease in the non-cash interest expense on liability related to the sale of future royalties of $3.9 million for the year ended December 31, 2021, compared to the same period in 2020 was due to the capitalization of interest related to the construction-in-progress for the gene therapy manufacturing plant, slightly offset by the increase in the liability related to the sale of future royalties for net sales of Crysvita in the European territory.

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 will prospectively adjust the effective interest rate.

Other Income (Expense) (dollars in thousands)

Non-cash interest expense on liabilities for

sales of future royalties

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.

This was primarily due to the partial sale of North American Crysvita royalties to OMERS in July 2022, which resulted in an increase in liabilities for sales of future royalties by $491.0 million and higher interest expense, partially offset by an increase of $6.7 million in the capitalization of interest related to the construction-in-progress for the gene therapy manufacturing plant, compared to the same period in 2021.

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 Expense (dollars in thousands)

Year Ended December 31,

Other income (expense)

Other expense increased $2.3 million for the year ended December 31, 2021, compared to the same period in 2020.

The fluctuations were primarily due to fluctuations in foreign exchange rates.

Other expense

Other expense decreased $0.1 million for the year ended December 31, 2022, compared to the same period in 2021.

These changes were primarily due to fluctuations in foreign exchange rates.

Provision for income taxes

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Provision for income taxes

The provision for incomes taxes decreased by a nominal amount for the year ended December 31, 2021, compared to the same period in 2020.

The provision for incomes taxes increased by $4.7 million for the year ended December 31, 2022, compared to the same period in 2021.

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.

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.

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.

Liquidity and Capital Resources

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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.

For the year ended December 31, 2021, the Company sold 1,050,372 shares under the arrangement, resulting in net proceeds of approximately $78.9 million.

As of December 31, 2021, $269.5 million remained available under our ATM facility.

For the year ended December 31, 2021, we sold 1,700,000 shares of Arcturus common stock and received net proceeds of $79.8 million.

In May 2021, we entered into an Open Market Sale Agreement with Jefferies LLC, or 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, or ATM, offerings through Jefferies.

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.

For the year ended December 31, 2022, we sold all of our remaining 500,000 shares of Arcturus common stock for net proceeds of $10.1 million.

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

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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 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 incurred on the liability related to the sale of future royalties to RPI, net of capitalized interest.

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.

Cash used in operating activities also reflected a $12.1 million decrease due to an increase in accounts receivable primarily related to an increase in sales of our approved products, a $9.7 million decrease due to an increase in inventory for Mepsevii and Dojolvi, a decrease of $7.6 million in contract liabilities, net, related to the revenue recognized from the license agreements with Daiichi Sankyo, and a decrease of $1.6 million due to a decrease in deferred tax liabilities, related to certain changes in tax law requiring capitalization of research and development expenses combined with taxable income generated by our sale of future royalties to OMERS.

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.

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 also reflected a $5.4 million decrease due to an increase in accounts receivable primarily related to higher revenues, a $3.1 million decrease due to an increase in inventory for Dojolvi, a $29.5 million decrease due to an increase in prepaid expenses and other assets primarily due to an increase in prepaid manufacturing expenses, prepaid clinical expenses, and prepaid fixed assets as well as an increase in receivables from our collaboration partner, and a decrease of $57.5 million in contract liabilities, net, related to the revenue recognized from the license agreements with Daiichi Sankyo.

These decreases were offset by a $32.3 million increase in accounts payable, accrued liabilities, and other liabilities primarily due to an increase in accruals related to manufacturing and clinical expenses.

Cash used in operating activities for the year ended December 31, 2020 was $132.2 million and reflected a net loss of $186.6 million, $170.4 million for a net change in fair value of equity investments from Arcturus and Solid, and $13.0 million for non-cash collaboration royalty revenues related to the sale of future royalties to RPI, offset by non-cash charges of $85.7 million for stock-based compensation, $12.3 million for depreciation and amortization, $0.8 million for the amortization of the premium paid on marketable debt securities, and $33.3 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 $1.3 million decrease due to an increase in inventory for Mepsevii and Dojolvi.

These decreases were offset by a $9.8 million increase due to a decrease in accounts receivable primarily related to change in the timing of billing to a collaboration partner, a $2.7 million increase due to decrease in prepaid expenses and other assets primarily related to a change in the timing of billing to a collaboration partner, a $26.9 million increase in accounts payable, accrued liabilities primarily due to an increase in annual accrued bonus due to higher employee headcount and attainment of company goals, and an increase of $66.6 million in contract liabilities, net, related to the license agreements with Daiichi Sankyo.

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, 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 used in investing activities for the year ended December 31, 2020 was $179.1 million and was primarily related to purchases of property, plant, and equipment of $43.9 million, purchases of marketable debt securities of $813.2 million, purchases of equity investments of $37.1 million, including $26.8 million for the purchase of Solid shares and $9.6 million for the exercise of the option to purchase additional Arcturus shares, and other activities of $5.6 million, including $3.3 million for the purchase of a convertible notes receivable and the milestone payments of $2.3 million recorded as an intangible asset resulting from the FDA approval of Dojolvi, offset by proceeds from maturities of marketable debt securities of $589.8 million, the sale of Arcturus common stock of $79.8 million, and the sale of marketable debt securities of $51.0 million.

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.

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, 2020 was $600.3 million and was comprised of $435.6 million in net proceeds from the sale of common stock in our underwritten public offering, $55.3 million in net proceeds from the sale of common stock in connection with the license agreement with Daiichi Sankyo in March 2020, $20.4 million in net proceeds from the sale of common stock from our ATM offering, and $89.3 million in net proceeds from the issuance of common stock upon the exercise of warrants and stock options, net of taxes withheld from the vesting of restricted stock units.

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, 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 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.

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

and “Risk Factors –

Risks Related to Our Business Operations," and

the terms and timing of any collaborative, licensing, marketing, distribution, acquisition (including whether we exercise our option to acquire GeneTx pursuant to the terms of our Unitholder Option Agreement with them) and other arrangements that we may establish, including any required upfront milestone, royalty, reimbursements or other payments thereunder.

We expect to satisfy future cash needs through existing capital balances, revenue from our commercial products, and through some combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and other marketing and distribution arrangements.

the magnitude and extent to which the COVID-19 pandemic impacts our business operations and operating results, as described in “Part I, Item IA.

Risk Factors " and

the terms and timing of any collaborative, licensing, marketing, distribution, acquisition and other arrangements that we may establish, including any required upfront milestone, royalty, reimbursements or other payments thereunder.

We expect to satisfy future cash needs through existing capital balances, revenue from our commercial products, and a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and other marketing and distribution arrangements.

Please see “Risk Factors—Risks Related to Our Financial Condition and Capital Requirements.”

Contractual Obligations

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

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.

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Recent Accounting Pronouncements

Off-Balance Sheet Arrangements

Since our inception in April 2010, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures About Market Risk

We have exposure to equity risk with respect to the equity investments that we hold in Arcturus and Solid.

During the year ended December 31, 2021, we sold 1,700,000 shares of Arcturus common stock for net proceeds of $79.8 million.

The carrying value of our equity investments held in Arcturus and Solid were $18.5 million and $13.7 million, respectively, as of December 31, 2021.

A hypothetical 10 percent decrease in the market price for our equity investments in Arcturus and Solid as of December 31, 2021 would decrease the fair value by $3.2 million.

Given the historic volatility of the publicly traded stock price of Arcturus and Solid, the fair value of our investments in Arcturus and Solid is subject to wide fluctuations which may have a significant impact on our net income (loss) in future periods.

Interest Rate Risk

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The securities in our investment portfolio are classified as available for sale and are subject to interest rate risk and will decrease in value if market interest rates increase.

A hypothetical 100 basis point change in interest rates would not have had a material impact on the fair market value of our cash equivalents and marketable debt securities as of December 31, 2021.

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.

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.

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All foreign transactions settle on the applicable spot exchange basis at the time such payments are made.

Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity