Ultragenyx Pharmaceutical: A Contrarian Play on Rare Disease Innovation Amid Setbacks

The recent setbacks for Ultragenyx Pharmaceutical (NASDAQ: RARE) have sent its stock spiraling—down 22% in the past week following a FDA regulatory delay for its lead gene therapy, UX111, and an interim miss in its setrusumab trial for osteogenesis imperfecta (OI). Yet beneath the noise of these near-term challenges lies a compelling contrarian opportunity. For investors willing to look past the headlines, Ultragenyx's pipeline remains one of the most promising in rare disease therapeutics, with two therapies targeting unmet needs in devastating conditions. Here's why the current dip could mark a buying opportunity for long-term investors.

The Setbacks, Decoded

The FDA's Complete Response Letter (CRL) for UX111—the company's gene therapy for Sanfilippo syndrome type A (MPS IIIA)—was the immediate catalyst for the stock's decline. The agency cited unresolved manufacturing and controls (CMC) issues, delaying approval until 2026. Critically, however, the FDA did not question the therapy's efficacy or safety. Clinical data showing neurodevelopmental stabilization in patients and supportive biomarker evidence were acknowledged as “robust.” The company has already begun addressing the CMC concerns, which it describes as resolvable and unrelated to product quality.

Meanwhile, the setrusumab trial for OI missed its interim statistical threshold (p<0.01), prompting a 26% intraday drop in June. Yet this disappointment was overblown: the interim analysis was designed with an unusually stringent p-value to enable early termination, not the standard p<0.05 threshold used in the final readout. The Data Monitoring Committee confirmed the drug's safety profile, and final results for both the Orbit and Cosmic trials—expected by December 2025—are far more likely to meet the lower statistical bar.

Why the Market Overreacted

Investors appear to have conflated these setbacks as terminal blows rather than manageable hurdles. Here's why the negatives are overstated:

1. UX111: A Resolvable Manufacturing Hiccup, Not a Death Knell
2. The CMC issues stem from facility inspections, not product defects.
3. The therapy retains Breakthrough Therapy, Fast Track, and Rare Pediatric Disease designations, which could accelerate its post-resubmission review.

4. With no approved treatments for MPS IIIA—a fatal lysosomal storage disease—Ultragenyx's therapy remains the closest candidate to market.

5. Setrusumab: Safety First, Data Still Intact

6. The interim miss was against an over-ambitious threshold. Final analyses use standard p-values (p<0.04 for Orbit, p<0.05 for Cosmic).
7. Phase 2 data showed a 67% fracture reduction (p=0.0014) and improved bone density. Clinicians report “transformative” outcomes in patients.

8. OI affects ~60,000 people globally, with no FDA-approved treatments. Success here could yield $1.6 billion in annual sales, per Goldman Sachs.

9. Financial Resilience Amid R&D Investment

10. The company ended Q3 2024 with $825 million in cash, and revenue grew 33% YoY to $590 million, driven by existing products like Crysvita and Dojolvi.
11. A 2.4 current ratio signals strong liquidity to navigate setbacks and fund ongoing trials.

The Contrarian Case: Why Now is the Time to Buy

At $30.60—a 30% drop from its 52-week high—Ultragenyx trades at a 12-month forward price-to-sales (P/S) ratio of 2.5x, below the rare disease sector average of 4–5x. This discount reflects fear of binary events (setrusumab's final readout, UX111's resubmission), but it ignores the asymmetric upside:

Note: A chart here would show RARE's decline relative to peers with stable pipelines, underscoring its undervalued status.

Catalysts to Watch

• Q4 2025 Setrusumab Final Results: Positive data could propel the stock to $80–$136 (per analyst targets). Even a partial win (e.g., fracture reduction) could validate the therapy's mechanism.
• 2026 UX111 Resubmission & Approval: A 6-month review post-resubmission sets the stage for a transformative approval in a $0 market.
• DTX401 BLA Submission (Q2 2025): This gene therapy for glycogen storage disease type Ia showed a 60% reduction in cornstarch dependency in Phase 3—a life-altering outcome for patients.

Risk-Adjusted Opportunity

The downside scenario—a setrusumab failure—could push shares to $20–$25. However, even then, the company's existing revenue streams and UX111's eventual approval would provide a floor. The upside potential, however, is asymmetric: success in either program could double or triple the stock.

Investment Thesis

Ultragenyx is trading as if it's a speculative biotech with no near-term wins. In reality, it's a rare disease leader with two therapies targeting $0 markets and a strong balance sheet to weather setbacks. The FDA's UX111 delay is a speed bump, not a roadblock, while setrusumab's final data has a high probability of success given its mechanism and Phase 2 results.

For contrarians, this is a rare chance to buy a pipeline-driven innovator at a 30% discount to its peak valuation. The stock's current price reflects binary risk but not the intrinsic value of its therapies. Investors with a 2–3 year horizon—and the stomach for volatility—should consider adding positions here.

Final Call

Buy on dips below $30, with a target of $85–$100 by end-2026 if setrusumab succeeds and UX111 advances. Set a stop-loss below $25 to protect against total trial failure.

Disclosure: This analysis is for informational purposes only. Consult a financial advisor before making investment decisions.