Morgan Stanley: Ultragenyx cuts R&D and pivots to commercialization; profitability in 2027 depends on new product launches

Where did third-quarter sales fall short of expectations?

Ultragenyx reported third-quarter revenue of $173 million, below the market consensus of $182.2 million. Crysvita revenue was $109 million, below the consensus of $123.9 million; Dojolvi revenue was $30 million, above the consensus of $28 million.
The company reiterated its total revenue guidance for 2026 at $730 million to $760 million, excluding revenue that may come from new product launches; its guidance is $500 million to $520 million for Crysvita and $100 million to $110 million for Dojolvi.
Management said potential demand for Crysvita continues to grow steadily: about 60 patients in Latin America began commercial treatment in the third quarter, up from about 50 in the second quarter; the total number of treated patients in the region exceeded 1050.

The company expects R&D expenses in 2027 to be below $350 million and selling, general and administrative expenses to be below $375 million, and reiterated its target of achieving full-year profitability under US generally accepted accounting principles (GAAP) in 2027. R&D spending is expected to decline by at least 50% from 2025.
Cost-saving measures include cutting about 20% of the workforce, bringing headcount to about 1000, with the plan expected to be substantially completed by the end of 2026. The company will also end all ongoing trials of the Angelman syndrome drug GTX-102 and discontinue UX701 after it failed to meet its study objectives.
Management expects most R&D funding in 2027 to support commercial products, while retaining key late-stage programs and early research. Morgan Stanley is focused on whether the company can execute a leaner spending plan while maintaining about 5 programs per year.

The existing commercial team will handle the launches of the two gene therapies, Fayuvi and Genglycos. Management believes the team’s existing relationships with medical geneticists and treatment centers will help drive the products’ uptake.
The two therapies will be administered at qualified treatment centers. As of the end of October, 35 centers were operational, exceeding the target of more than 40 by year-end. The company said it had received a substantial number of patient registration forms, indicating unmet need.
The company plans to announce year-end revenue in early January and disclose the number of operational treatment centers and patient start forms. Morgan Stanley believes the launch growth trajectories for both products will take time to develop.

Morgan Stanley updated its model based on third-quarter results, expense guidance and priority review voucher pricing, raising its price target from $20 to $22 while maintaining an Equal-weight rating.
The firm raised its 2027 GAAP earnings-per-share forecast from $1.65 to $3.64, but expects a per-share loss of $1.32 in 2028; its free cash flow model also shifts from positive $505 million in 2027 to negative $162 million in 2028.
In R&D, data for the primary response endpoint in the Phase III DTX301 trial are expected in the first half of 2027. The company is still discussing a potential filing pathway for its osteogenesis imperfecta program, setrusumab, with regulators, and said the related investment must be considered within the framework of its profitability target for the following year.