What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-02-21 compared with 2023-02-17 · 118 added, 124 removed, 241 unchanged (50% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock has been traded on The Nasdaq Global Select Market since January 31, 2014 under the symbol “RARE”.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock has been traded on The Nasdaq Global Select Market since January 31, 2014 under the symbol “RARE”.

As of February 15, 2024, we had 8 holders of record of our common stock.

Certain shares are held in “street”

name and, accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

Certain shares are held in “street” name and, accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

STOCK PRICE PERFORMANCE GRAPH

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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”

or be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

$100 Investment in Stock or Index

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Unregistered Sales of Equity Securities

Issuer’s Purchases of Equity Securities

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

Issuer’s Purchases of Equity Securities

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Our Annual Report on Form 10-K for the year ended December 31, 2022 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2021 in "Part II, Item 7.

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.

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

Ultragenyx Pharmaceutical Inc., we or the Company, are a biopharmaceutical company committed to bringing novel products to patients for the treatment of serious rare and ultrarare genetic diseases.

We have built a diverse portfolio of approved therapies and product candidates aimed at addressing diseases with high unmet medical need and clear biology for treatment, for which there are typically no approved therapies treating the underlying disease.

Our strategy is predicated upon time- and cost-efficient drug development, with the goal of delivering safe and effective therapies to patients with the utmost urgency.

Approved Therapies and Clinical Product Candidates

Our current approved therapies and clinical-stage pipeline consist of four product categories:

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

biologics, small molecules, AAV 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, or HoFH.

Please see “Item 1.

Business”

above for a description of our approved products and our clinical stage pipeline products.

Please see “Item 1.

Business” above for a description of our approved products and our clinical stage pipeline products.

Financial Operations Overview

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Our net losses were $606.6 million and $707.4 million for the years ended December 31, 2023 and 2022, 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, 2023, our total revenues increased to $434.2 million, compared to $363.3 million for the same period in 2022.

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.

The increase in revenue was driven by higher demand for our approved products.

As of December 31, 2023, we had $777.1 million in available cash, cash equivalents and marketable debt securities.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

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Revenue Recognition

Collaboration and License Revenue

Product Sales

We sell our approved products through a limited number of distributors.

Under ASC 606, revenue from product sales is recognized at the point in time when control is transferred to these distributors.

We also recognize revenue from sales of certain products on a “named patient” basis, which are allowed in certain countries prior to the commercial approval of the product.

Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that is subject to a constraint.

Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved.

Product sales are recorded net of estimated government-mandated rebates and chargebacks, estimated product returns, and other deductions.

Provisions for returns and other adjustments are provided for in the period the related revenue is recorded, as estimated by management.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are reviewed periodically and adjusted as necessary.

Our estimates of government mandated rebates, chargebacks, estimated product returns, and other deductions depends on the identification of key customer contract terms and conditions, negotiated pricing, as well as estimates of sales volumes to different classes of payors.

If actual results vary, we may need to adjust these estimates, which could have a material effect on earnings in the period of the adjustment.

Collaboration, License and Royalty Revenue

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

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.

We record our share of collaboration revenue, net of transfer pricing related to net sales in the period in which such sales occur, if we are considered as an agent in the arrangement.

We record our share of collaboration revenue, net of transfer pricing related to net sales in the period in which such sales occur, if we are considered as an

agent in the arrangement.

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.

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

Funding received related to research and development services and commercialization costs is generally classified as a reduction of research and development expenses and selling, general and administrative expenses, respectively, in the Consolidated Statement of Operations, because the provision of such services for collaborative partners are not considered to be part of our ongoing major or central operations.

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

If we do not have any future performance obligations for these license or collaboration agreements, royalty revenue is recorded as the underlying sales occur.

In order to record collaboration revenue, we utilize certain information from our collaboration partners, including revenue from the sale of the product, associated reserves on revenue, and costs incurred for development and sales activities.

We utilize certain information from our collaboration partners to record collaboration revenue, including revenue from the sale of the product, associated reserves on revenue, and costs incurred for development and sales activities.

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 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.

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The standalone selling price is generally determined based on the prices charged to customers or using expected cost-plus margin.

We estimate the efforts needed to complete the performance obligations and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligations using input measures.

Product Sales

We sell our approved products through a limited number of distributors.

Under ASC 606, revenue from product sales is recognized at the point in time when the delivery is made and when title and risk of loss transfers to these distributors.

We also recognize revenue from sales of certain products on a “named patient”

basis, which are allowed in certain countries prior to the commercial approval of the product.

Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that is subject to a constraint.

Product sales are recorded net of estimated government-mandated rebates and chargebacks, estimated product returns, and other deductions.

Provisions for returns and other adjustments are provided for in the period the related revenue is recorded, as estimated by management.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are reviewed periodically and adjusted as necessary.

Our estimates of government mandated rebates, chargebacks, estimated product returns, and other deductions depends on the identification of key customer contract terms and conditions, as well as estimates of sales volumes to different classes of payors.

If actual results vary, we may need to adjust these estimates, which could have a material effect on earnings in the period of the adjustment.

We estimate the efforts needed to complete the performance obligations and recognize revenue by measuring the progress towards complete satisfaction of the performance obligations using input measures.

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

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

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.

Prior to the approval of our products by the U.S.

Food and Drug Administration, or FDA, manufacturing and related costs are expensed.

As of December 31, 2023, we do not hold a material amount of previously expensed inventory for our approved products.

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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 our right to receive royalty payments on the net sales of Crysvita in the EU, the United Kingdom, and Switzerland, effective January 1, 2020, under the terms of our Collaboration and License Agreement with KKC.

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

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.

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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.

The calculation of royalty payments to OMERS

is based on net sales of Crysvita beginning in April 2023 and continuing until expiration, which is the earlier of the date on which aggregate payments received by OMERS equals $725.0 million or the date the final royalty payment is made to us under the KKC Collaboration Agreement.

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

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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.

The excess of future estimated royalty payments (subject to the capped amount) to RPI and OMERS, in excess of the net proceeds received of $314.2 million and $491.0 million, respectively, is recorded as non-cash interest expense over the life of the arrangements.

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

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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.

Our effective annual interest rates were 6.2% and 7.8%, for RPI and OMERS, respectively, as of December 31, 2023.

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

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.

Such factors include, but are not limited to, the success of KKC’s sales and promotion of Crysvita, changing standards of care, macroeconomic and inflationary pressures, the introduction of competing products, pricing for reimbursement in various territories, manufacturing or other delays, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of Crysvita, significant changes in foreign exchange rates as the royalty payments are made in U.S.

dollars, or USD, while significant portions of the underlying sales of Crysvita are made in currencies other than USD, and other events or circumstances that could result in reduced royalty payments from sales of Crysvita, all of which would result in a reduction of non-cash royalty revenue and the non-cash interest expense over the life of the arrangement.

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The Black-Scholes option-pricing model requires the use of certain subjective assumptions which determine the estimated fair value of stock-based awards.

Expected Term —

The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).

Expected Volatility—

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

• Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).

• Expected Volatility— 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.

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

PSUs are subject to vest only if certain specified criteria are achieved and the employees’

continued service with the Company after achievement of the specified criteria.

PSUs are subject to vest only if certain specified criteria are achieved and the employees’ continued service with the Company.

For certain PSUs, the number of PSUs that may vest are also subject to the achievement of certain specified criteria, including both performance conditions and market conditions.

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A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

In conjunction with the Dimension acquisition in 2017, we recorded a deferred tax liability reflecting the tax impact of the difference between the book basis and tax basis of acquired IPR&D.

In conjunction with the acquisition of Dimension Therapeutics, or Dimension, in 2017, we recorded a deferred tax liability reflecting the tax impact of the difference between the book basis and tax basis of acquired IPR&D.

Such deferred income tax liability was not used to offset deferred tax assets when analyzing our valuation allowance as the acquired IPR&D is considered to have an indefinite life until we complete or abandon development of the acquired IPR&D.

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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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Year Ended December 31,

Product sales:

Total product sales

Crysvita royalty revenue

Collaboration and license revenue:

Crysvita collaboration revenue in Profit-Share

Crysvita royalty revenue in European territory

Daiichi Sankyo

Total collaboration and license revenue

Product sales:

Total product sales

Crysvita non-cash collaboration royalty revenue

Total revenues

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 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.

* not meaningful

Our product sales increased $61.5 million for the year ended December 31, 2023, compared to the same period in 2022.

The increase was primarily due to an increase in demand for Crysvita in Latin America resulting from an increase in the number of patients on therapy, continued increase in demand for our other approved products, and increases in revenue under our named patient programs.

Our Crysvita collaboration revenue in the Profit-Share Territory and royalty revenue increased by a net $15.6 million for the year ended December 31, 2023, compared to the same period in 2022;

this increase in Crysvita revenue is primarily due to an increase in the number of patients on therapy.

We transitioned commercial responsibilities to KKC in the Profit-Share Territory in April 2023.

Post transition, we recognize our revenue share for Crysvita sales in the Profit-Share Territory as royalty revenue, which was recorded as collaboration revenue prior to the transition.

Our revenue from the Daiichi Sankyo arrangement decreased by $6.2 million for the year ended December 31, 2023, compared to the same period in 2022.

The decrease was due to the completion of the technology transfer and the technology transfer period as of March 31, 2023.

Cost of Sales (dollars in thousands)

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Cost of sales

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 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.

Cost of sales increased by $16.9 million for the year ended December 31, 2023, compared to the same period in 2022.

The increase in cost of sales was due to increased demand for our approved products, partially offset by a decrease in the Crysvita transfer price on sales of the product in Latin America from 35% prior to December 31, 2022, to 30% in 2023.

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.

These expenses consist primarily of clinical studies performed by contract research organizations, manufacturing of drug substance and drug product performed by contract manufacturing organizations and at our gene therapy manufacturing facility, materials and supplies, fees from collaborative and other arrangements including milestones, licenses and other fees, personnel costs including salaries, benefits and stock-based compensation, and overhead allocations consisting of various support and infrastructure costs.

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.

Upfront license, acquisition, and milestone fees include any significant expenses related to strategic licensing agreements.

Approved products include costs for disease monitoring programs for post-marketing clinical studies, medical affairs activities to support scientific discovery efforts on

existing programs, and regulatory costs for unapproved regions.

Infrastructure costs include direct costs related to laboratory, IT, and equipment depreciation costs, and overhead allocations for human resources, IT, and other allocable costs.

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Year Ended December 31,

Commercial programs

Clinical programs:

Gene therapy programs

Nucleic acid and other biologic programs

Biologic and nucleic acid programs

Translational research

Upfront license, acquisition, and milestone fees

Approved products

Infrastructure

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Total research and development expenses

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

Total research and development expenses decreased $57.3 million for the year ended December 31, 2023 compared to the same period in 2022.

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 gene therapy programs, an increase of $15.0 million, primarily related to the addition of the development costs for the UX111 program acquired from Abeona Therapeutics in May 2022, and an increase in production materials purchases for internal manufacturing, partially offset by decreases in external clinical manufacturing expenses for DTX401;

• for biologic and nucleic acid programs, an increase of $11.6 million, primarily related to the continued clinical progress of the UX143 and GTX102 programs and associated clinical development and manufacturing expenses, partially offset by a reduction in development expense on UX053 for the treatment of Glycogen Storage Disease Type III;

• for translational research, a decrease of $9.6 million, primarily related to decreases in manufacturing and headcount expense for IND-stage projects;

• for upfront license, acquisition, and milestone fees, a decrease of $66.0 million, due to $9.0 million related to payment for achievement of a clinical enrollment milestone for the UX143 program recognized during the year ended December 31, 2023, as compared to $75.0 million recognized from the GeneTx acquisition for the year ended December 31, 2022;

• for approved products, a decrease of $22.2 million, primarily due to transition of Crysvita commercialization responsibilities in North America to KKC and realized cost efficiencies for Dojolvi, partially offset by reimbursement of Regeneron collaboration expenses and increased personnel and launch costs for Evkeeza;

• for infrastructure, an increase of $7.3 million, primarily related to increased expenses for support of our clinical and research program pipeline, expansion of laboratory space, depreciation of laboratory-related leasehold improvements and equipment, and IT-related expenses;

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.

• for other research and development expenses, an increase of $6.6 million, primarily related to increased staffing and material costs to support internal manufacturing and increased administrative and general support.

We expect our annual research and development expenses to continue 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 $31.7 million for the year ended December 31, 2023, compared to the same period in 2022.

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.

The increases in selling, general and administrative expenses were primarily due to increases in commercialization costs, and professional services costs, as well as a one-time legal settlement of $6.2 million for the year ended December 31, 2023.

We expect selling, general and administrative expenses to continue to moderate in the future as we continue to support our approved products and multiple clinical-stage product candidates, with expected decreases in commercial activities due to transition of Crysvita commercial responsibilities to our partner in the Profit-Share Territory.

Interest Income (dollars in thousands)

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Interest income

Interest income increased $9.1 million for the year ended December 31, 2022 compared to the same period in 2021, primarily due to increases in interest rates and higher average marketable debt securities balances.

Interest income increased $15.6 million for the year ended December 31, 2023 compared to the same period in 2022, primarily due to increases in interest rates.

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

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Change in fair value of equity investments

For the year ended December 31, 2023, we recorded a net increase in the fair value of our equity investments of $0.4 million due to an increase in the fair value of our investments in Solid Biosciences Inc., or Solid, common stock for the period.

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 fair value of our investments in Arcturus Therapeutics Holdings Inc., or Arcturus, and Solid common stock decreased by $8.4 million and $10.9 million, respectively, for the period.

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.

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.

As of December 31, 2022, we had sold all our remaining equity investments in Arcturus.

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

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Our non-cash interest expense on liabilities for sales of future royalties increased by $23.0 million for the year ended December 31, 2023, compared to the same period in 2022.

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.

This was primarily due to the partial sale of North American Crysvita royalties to OMERS in July 2022, with a full year of interest expense in 2023.

To the extent the royalty payments are greater or less than our initial estimates or the timing of such payments is materially different than our original estimates, we prospectively adjust the effective interest rate.

Other Expense (dollars in thousands)

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

Provision for income taxes

Benefit from (provision for) income taxes

Year Ended December 31,

Provision for income taxes

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.

Benefit from (provision for) income taxes

For the year ended December 31, 2023, we recognized an income tax benefit of $4.8 million attributable to modifications in our state apportionment methodology.

We realized no benefit for current year losses due to a full valuation allowance against the U.S.

net deferred tax assets.

The benefit was offset by an income tax expense of $3.0 million from foreign jurisdictions.

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 state tax expense of $6.1 million for the year ended December 31, 2022.

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 recorded a one-time discrete 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.

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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 October 2023, we completed an underwritten public offering in which 9,833,334 shares of common stock were sold, including the exercise in full by the underwriters of their option to purchase an additional 1,500,000 shares, at a public offering price of $30.00 per share.

In connection with the offering, we sold to certain investors pre-funded warrants, in lieu of common stock, to purchase 1,666,722 shares of common stock at a purchase price of $29.999 per pre-funded warrant, which equals the public offering price per share of common stock less the $0.001 exercise price per share of each pre-funded warrant.

The total proceeds that we received from the offering were $326.5 million, net of underwriting discounts and commissions.

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.

There were 1,175,584 shares sold under this arrangement for the year ended December 31, 2023, for net proceeds of $53.3 million.

No shares were sold under this arrangement for the year ended December 31, 2022.

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.

As of December 31, 2023, net proceeds from shares sold under the arrangement were $132.2 million.

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

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Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Effect of exchange rate changes on cash

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

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

restricted cash

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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, 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 expenses, compensation related expenses, collaboration expenses and income taxes payable.

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 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 used in operating activities for the year ended December 31, 2023 was $474.8 million and primarily reflected a net loss of $606.6 million, partially offset by non-cash items of $146.9 million, net, which consisted primarily of non-cash collaboration royalty revenues, interest expense related to the sale of future royalties to RPI and OMERS, net of amounts capitalized, stock-based compensation, amortization of discounts on marketable debt securities, and depreciation and amortization.

The change in operating assets and liabilities also reflected a net use of cash of $15.1 million, primarily due to an increase in accounts receivable primarily related to an increase in sales of our approved products, partially offset by a net decrease in other assets primarily in prepaid manufacturing.

Cash used in operating activities for the year ended December 31, 2022 was $380.5 million and reflected a net loss of $707.4 million partially offset by non-cash items of $266.7 million, net, which consisted primarily of non-cash collaboration royalty revenues, interest expense related to the sale of future royalties to RPI and OMERS, net of amounts capitalized, stock-based compensation, acquired in-process research and development relating to our acquisition of GeneTx, the change in fair value of equity investments, primarily for the net change in fair value of equity investments from Arcturus and Solid, and depreciation and amortization.

The change in operating assets and liabilities also reflected net cash provided of $60.2 million, primarily due to an increase in accounts payable, accrued, and other liabilities, primarily due to timing of payments and receipt of invoices, as well as an increase in manufacturing accruals related to manufacturing and clinical expenses, an increase in accrued bonus due to an increase in headcount, and an increase in accrued development costs owed to a collaboration partner, partially offset by an increase in accounts receivable primarily related to an increase in sales of our approved products.

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities for the year ended December 31, 2023 was $168.0 million and was primarily related to $219.8 million from net activities in marketable debt securities, offset by purchases of property, plant, and equipment of $44.3 million, primarily related to the fit-out of our gene therapy manufacturing facility.

Cash used in investing activities for the year ended December 31, 2022 was $291.7 million and was primarily related to purchases of property, plant, and equipment of $116.1 million, primarily related to the construction of our gene therapy manufacturing facility, the acquisition of GeneTx for $75.0 million, net of cash acquired, $79.8 million from net activities in marketable debt securities, and the payment to Regeneron for intangible assets of $30.0 million, offset by proceeds from the sale of Arcturus common stock of $10.1 million.

Cash Provided by Financing Activities

Cash provided by financing activities for the year ended December 31, 2023 was $388.1 million and was primarily comprised of $326.5 million in net proceeds from the sale of common stock in our October 2023 underwritten public offering and $53.3 million in net proceeds from the issuance of common stock from our ATM.

Cash provided by financing activities for the year ended December 31, 2022 was $501.2 million and was primarily comprised of $491.0 million in net proceeds from the partial sale of future North America Crysvita royalties to OMERS and $10.8 million in net proceeds from the issuance of common stock upon the exercise of stock options, net of taxes withheld from the vesting of restricted stock units.

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.

We may require additional capital to fund our operations, to complete our ongoing and planned clinical studies, to commercialize our products, to continue investing in early-stage research capabilities to promote our pipeline growth, to continue to acquire or invest in businesses or products that complement or expand our business, including future milestone payments thereunder, and to further develop our general infrastructure and such funding may not be available to us on acceptable terms or at all.

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 scope, rate of progress, results and cost of our clinical studies, nonclinical testing, and other related activities;

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

• the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates, products that we have begun to commercialize, and any products that we may develop in the future;

• the cost of operating our GMP gene therapy manufacturing facility;

• the number and characteristics of product candidates that we pursue;

the cost, timing, and outcomes of regulatory approvals;

• the cost, timing, and outcomes of regulatory interactions and approvals;

• the cost and timing of establishing our commercial infrastructure, and distribution capabilities;

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

• the impact of macroeconomic conditions, including the general economic slowdown, inflationary pressure, high interest rates, a potential U.S.

federal government shutdown, and potential recessionary environment on our business operations and operating results, as described in “Part I, Item IA.

Risk Factors " and

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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 and Commitments

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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, 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.

Volatile market conditions arising from the macroeconomic environment (including financial conditions affecting the banking system and financial institutions), inflation, or global political instability may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S.

dollar may negatively affect our revenue and operating income as expressed in U.S.

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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