Biotech Stock Ultragenyx Is Falling on Unsatisfying Trial Update

Ultragenyx Pharmaceutical headquarters (Dreamstime)

Shares of two rare disease biotechs were falling hard on Thursday, on hints that a trial of their new treatment for an uncommon genetic bone condition might not be going as well as investors had hoped.

Ultragenyx Pharmaceutical and its smaller partner, London-based Mereo BioPharma Group, late Wednesday rolled out what seemed like a rather ho-hum announcement: Their late-stage trial of a drug called setrusumab, a treatment for the genetic disorder known as brittle bone disease, would continue on as planned.

It didn’t sound like much. For investors, it was a bombshell.

Investors had been hoping that the scientists monitoring the trial would see strong enough interim efficacy data to stop the study early at a predeterimed check-in point.

Instead, the interim results from the trial missed the statistical bar to end the study. That doesn’t mean the final analysis won’t ultimately show that the drug works. But the stocks were falling sharply early Thursday.

Ultragenyx shares were down 27%, while Mereo’s American depositary receipt was down 33.7%.

Analysts who cover the stock argued the selloff was overdone.

“We see the market reaction (down 27% after hours) as severely overdone and still believe there is high likelihood that the final analysis in the fourth quarter will be positive, given there will be a longer duration of follow-up and a lower threshold for statistical significance,” William Blair analyst Sami Corwin wrote in a note published early Thursday. Corwin rates Ultragenyx stock at Outperform.

The update is the latest twist for the Ultragenyx study. Back in January, the company said that the trial had not been stopped at its first predetermined check-in point, called the first interim analysis. Wall Street analysts said at the time that the predetermined statistical efficacy bar for stopping the trial after the first interim analysis had been very high, but that it would likely be stopped at the second interim analysis.

Scientists monitoring clinical trials can stop a study early if the drug is working very well, both to speed the drug toward approval and to allow patients in the placebo arm to receive the therapy.

Leerink Partners analyst Joseph P. Schwartz wrote in a separate note late Wednesday that he still expects data from the trial to eventually turn out positive. But he said that investors’ thinking on the stock will likely change. “We understand that the Street will begin to question the opportunity for setrusamab,” he wrote. Schwartz rates both Ultragenyx stock and Mereo ADRs at Outperform, and has price targets of $90 and $8, respectively.

Brittle bone disease, officially known as osteogenesis imperfecta, is a genetic disorder that causes bones to break easily. Symptoms range widely, and the disease can range from mild to severe. Ultragenyx and Mereo’s drug, setrusamab, is a monoclonal antibody that works by blocking a protein that slows bone formation. An earlier study suggested the drug could have significant benefits for osteogensis imperfecta patients.

In its press release late Wednesday, Ultragenyx said the final analysis of the trial data would come at the end of this year. The company said that it had not yet seen data from the trial, but that the data-monitoring committee had said that the drug’s safety profile remained acceptable.

“While we had hoped to be able to stop the study early, we look forward to having results from both Orbit and Cosmic around the end of this year,” said Ultragenyx’s CEO, Emil Kakkis, in a statement, using the names of two ongoing trials of the drug.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com