What happened

After disclosing the latest data for its gene therapy DTX301 in ornithine transcarbamylase (OTC) deficiency, Ultragenyx Pharmaceutical (NASDAQ:RARE) saw its shares gain 13.4% on Friday.

So what

Ultragenyx is a biotech stock focused on developing new treatments for rare diseases, such as OTC. 

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An uncommon condition, OTC deficiency is caused by a genetic defect in a liver enzyme tasked with detoxifying ammonia. The inability to detoxify ammonia results in a dangerous buildup of it in the bloodstream, leading to neurological problems and other toxicities. Worldwide, it's estimated over 10,000 people have OTC deficiency.

On Friday, Ultragenyx reported that two of three patients receiving the highest dose of DTX301 administered to date had responded to treatment. One was a complete responder who was able to discontinue alternative pathway medications while also liberalizing her protein-restricted diet. The second patient had a 90% reduction in ammonia levels, which fell to the normal range. The third patient was categorized as a "potential responder" because of a significant increase in ammonia metabolism, suggesting DTX301 helped all three of the patients in this cohort, rather than just the two confirmed responders.

Ultragenyx also provided an update for cohort 2 patients, who received a smaller dose of DTX301. In 2018, Ultragenyx reported one of three patients had a complete response to DTX301. Today, it reported that a second patient has responded because of a 218% improvement in ammonia metabolism and a 74% reduction in ammonia levels. 

The phase 2 study is ongoing, so the results aren't final. Nevertheless, the update is encouraging because it suggests a phase 3 trial of DTX301 is warranted. According to management, discussions with regulators on the design of a phase 3 trial are underway.

Now what

DTX301 data suggests Ultragenyx could have another potential winner on its hands. The company already markets two drugs, including Crysvita, a treatment that won approval in 2018 for a form of rickets. In Q3 2019, $22.6 million in Crysvita revenue resulted in Ultragenyx's total revenue improving 119% year over year to $25.8 million.

That's solid growth, but operating expenses were $144 million in the third quarter, so the company is going to need a few more wins, including DTX301, if it hopes to become profitable someday.

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