Sometimes a promising drug just doesn't deliver when it counts. Ultragenyx Pharmaceutical Inc. (RARE) learned that lesson the hard way Monday when shares cratered 42% following disappointing Phase 3 results for setrusumab, a treatment for a rare bone disease developed alongside partner Mereo BioPharma Group plc (MREO).
The two companies released results from their Phase 3 Orbit and Cosmic studies evaluating setrusumab (also known as UX143) in Osteogenesis Imperfecta, a genetic disorder that causes fragile bones. The verdict? Neither study hit its primary endpoint of reducing the annualized clinical fracture rate compared to placebo or bisphosphonates, the current standard treatment.
There was a silver lining, though it's a thin one. Both studies did achieve secondary endpoints showing improvements in bone mineral density compared to the control groups. The safety profile remained unchanged, meaning no new concerning side effects emerged.
What the Analysts Are Saying
William Blair didn't hide their disappointment. The firm said Monday they were both surprised and let down by the results, especially given how well setrusumab performed in the Phase 2 portion of the Orbit study. The analysts had expected better outcomes since the Phase 3 trial enrolled more patients with severe disease subtypes, which theoretically should have produced a higher fracture rate in the placebo group and made any treatment effect easier to detect.
Analyst Sami Corwin remains cautious about setrusumab's future prospects. The limited information in the press release leaves too many unanswered questions, Corwin notes. Did pediatric patients in the Orbit study show a larger treatment effect? What did patient-reported outcomes look like? And perhaps most puzzling: why was the fracture rate in the placebo arm so low?
Looking Past the Disappointment
Here's the interesting part. After Monday's selloff, Ultragenyx is now trading at roughly the combined value of its already approved products. That's it. The market is essentially pricing in zero value for the rest of the pipeline.
William Blair isn't buying that pessimism. The firm maintains its Outperform rating, arguing there's meaningful upside potential over the next year. The catalyst list includes a pivotal Angelman syndrome readout expected in the third quarter of 2026 and potential approvals for two gene therapies that would also come with priority review vouchers (which can be quite valuable).
Price Action: On Tuesday, Ultragenyx Pharmaceutical shares were up 1.42% at $20.00 at the time of publication. Mereo BioPharma Group shares climbed 3.89%.
