Arrowhead Pharmaceuticals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2023

There are 13 speakers on the call.

Operator

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference over One moment, I will now hand the conference over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Speaker 1

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2023 Q2 ended March 31, 2023. With us today from management are President and CEO, Doctor. Christopher Anzalone, He will provide an overview of the quarter Doctor. Javier San Martin, our Chief Medical Officer, who will provide an update on our mid and later stage clinical pipeline Doctor.

Speaker 1

James Hamilton, our Chief of Discovery and Translational Medicine, who will provide an update on our earlier stage programs And Ken Miskowski, our Chief Financial Officer, who will give a review of the financials. In addition, Tracey Oliver, our Chief Commercial Officer And Patrick O'Brien, our Chief Operating Officer and General Counsel will be available during the Q and A portion of the call. Before we begin, I would like to remind you that comments made during today's call contain certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including Our most recent annual report on Form 10 ks and our quarterly reports on Form 10 Q.

Speaker 1

I'd now like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

Speaker 2

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. In 2017, we introduced our proprietary TRiM platform. We believe then that it could become an industry leading RNAi platform for hepatocyte focused therapies and importantly one that could bring RNAi outside the liver. This was based entirely on our confidence and the potential of the science.

Speaker 2

At the time, we had no clinical programs, a single partner and our stock was trading for less than $2 6 years later, we have 12 individual drug candidates in clinical studies targeting 2 different organ systems, 3 ongoing Phase 3 studies, Five strong partners, a healthy balance sheet and a reason to believe that the next 6 years will be characterized by even more rapid growth.

Speaker 3

We expect to have

Speaker 2

at least 14 drug candidates in clinical trials by the end of this year targeting 3 different organ systems: liver, lung and CNS. Skeletal muscle targeting programs could grow this to 16 individual drug candidates across 4 different organ systems in 2023, The partnering opportunities make that a bit more difficult to predict and I will touch on that later in the call. We are well on our way to reach our 2020 and 25 goal to grow our pipeline of RNAi therapeutics to a total of 20 clinical stage or marketed products in the year 2025. I do not believe there is a company on the planet that can match this. We've made substantial progress over the past quarter and since our last call.

Speaker 2

Let's start with pulmonary. We recently disclosed early top line data for ARROW RAGE in normal healthy volunteers. The data were very encouraging and indicated a high level of target gene knockdown with a long duration of effect in a well tolerated manner. James will talk about these data in a moment, but I want to put this into context. I believe that Arrowhead is the 1st company to ever show RNAi mediated target gene knockdown in the lung.

Speaker 2

Even more impressive was the magnitude of response. We didn't just get on the board. We saw up to 90% knockdown in serum after just 2 inhaled doses at the 4th of 5th of 5 planned doses. We do not yet have data from the highest single or multiple dose cohorts. It appears that the pulmonary platform is doing what it was designed to do and ARO rage appears to be highly posed.

Speaker 2

I expect the durability to enable monthly or less frequent dosing. We've often said that clinical validation of the lung platform could mark the beginning of a second rapid wave of growth for our company. Cells don't care what the sequence of an RNAi drug is. Once we find the reducing expression of a specific target gene can be done in a well tolerated manner, We have a high degree of confidence we can replicate it with any number of new gene targets, much as we have done in the liver. That is where we may be with the pulmonary franchise.

Speaker 2

I think the data we reported and the additional data we expect to present at the R and D Day on June 1 represent the initial clinical validation we were hoping for. This is a big deal. I fully expect that in the near to midterm, we will have several potentially important new drug candidates targeting the lung that could address grinding unmet medical needs. ARO MUC5AC will be our next pulmonary And I expect that we will have some normal healthy volunteer data by the R and D Day. These two programs continue to move forward and have both progressed into Part 2 of the Phase onetwo studies where asthma patients are treated.

Speaker 2

We hope to have some data from the patient portion of these studies by the end of the year. Rounding out our current pulmonary pipeline is ARO MMP7. During the last quarter, we initiated a Phase III study for the treatment of idiopathic pulmonary fibrosis and we are currently dosing normal healthy volunteers. So where do we go next? The central nervous system.

Speaker 2

There are a number of untreatable and poorly treated CNS conditions and many genes that could serve as powerful targets for RNAi therapeutics. We have spent a substantial amount of time developing the CNS focused TRiM platform and are just about ready to bring our 1st drug candidate to the clinic. As we announced a couple of weeks back, ARO SOD1 is our 1st CNS targeted drug candidate to be nominated. It will be investigated as We have already completed disease model work and CTA enabling toxicology studies and are now on track to file a CTA next quarter. You will hear more about the platform and the candidates at the June 1 Analyst Day and we see these as powerful tools for a new set of patients we seek to serve.

Speaker 2

Importantly, as with liver, pulmonary and skeletal muscle delivery, We expect to follow AROSADA-one with several additional drug candidates. In addition, we have made impressive progress on different modes of administration. And while we are not quite there yet, we believe we are approaching the day where we may administer RNAi CNS drug candidates systemically across the blood brain barrier. This would be a truly disruptive leap forward and our data suggests that we are close. We look forward to discussing this as well at the Analyst Day.

Speaker 3

We have

Speaker 2

said in the past that we are committed to bringing RNAi to where unmet medical need is, And this means constantly expanding TRiM. We believe we can address a new cell type every 18 to 24 months and while our CNS franchise meets this, It is not the only new organ system we are exploring. I believe we can now also deliver to adipose tissue and have demonstrated in non human primates Target gene silencing of greater than 90% with over 6 months of duration after a single subcutaneous injection using what we believe are clinically relevant dose levels. Adipose tissue is the largest endocrine organ in the body and we believe there are many targets to address and many potential patients You will hear more about this new platform next month at the Analyst Day. Let's now turn to our more established clinical programs.

Speaker 2

We've shared some early data from the Phase onetwo study of ARO C3 for complement mediated diseases and they are compelling. We are seeing deep and durable knockdown in healthy volunteers and have progressed to the patient portion of the study. We also shared liver data that Janssen generated in a Phase onetwo study of ARO PNPLA3 for NASH in patients with PNPLA3 mutations. Those 2 were quite encouraging and demonstrated deep reductions in liver fat after only a single dose of ARO PNPLA-three. We plan to move that into a multi dose Phase 2 study in NASH patients late this year.

Speaker 2

Moving on to our later stage We continue to enroll patients in the Phase 3 PALISADE study of ARO APOC3 in patients with familial chylomicronemia syndrome or FCS and expect to meet our enrollment goal of 72 patients tomorrow. There are also some additional patients that have passed screening And who will likely be randomized over the next 2 weeks. At that point, enrollment will be complete and I suspect that we will have closer to 80 patients in the study. We also received fast track designation from the FDA for ARO APOC3 for reducing triglycerides in adult patients with FCS, which will be helpful as we advance the program rapidly. Javier will talk about this in a moment, but I expect this to be our 1st drug to complete a Phase 3 study And if efficacy and safety are established, could be the 1st NDA that we file.

Speaker 2

This could be next year and it would represent an important step for us. Of course, that is not the only population of patients we intend to treat with ARO APOC3. Rather, I expect us to take steps toward pivotal studies in patients with severe hypertrophysteremia and those with mixed dyslipidemia later this year. The ARO ANG3 Phase 2 study in mixed dyslipidemia patients is complete as is the Phase 2 study in patients with homozygous familial Hypercholesterolemia or HoFH. I expect that both of these will move toward Phase 3 studies later this year.

Speaker 2

Both ARO ANG3 and ARO APOC3 appear to be potentially powerful drug candidates. We have included nearly 900 patients in the basket of Phase 2 and Phase 3 studies of ARO ANG3 and ARO APOC3 over the past couple of years and continue to be encouraged by the drug candidates activity and safety profiles. I believe that both of these will ultimately be important drugs for many patients. Also during the quarter, we announced that our partner Takeda I treated the first patient in the Phase 3 REDWOOD study of azirasiran being investigated as a potential treatment for alpha-one antitrypsin deficiency liver disease. This is the 3rd TRIM enabled candidate to reach a Phase 3 setting, which earned Arrowhead a $40,000,000 milestone payments.

Speaker 2

We also received a $30,000,000 milestone payment from GSK after the start of GSK's Phase 2b trial of GSK-four fifty three 2,990, formerly called ARO HSD, an investigational RNAi therapeutic for the treatment of patients with NASH. These milestone payments are helpful for our balance sheet, but also represent 2 more important things. First, they are a confirmation that our strategy to have a healthy mix of both wholly owned And partner programs is playing out as intended. And second, they indicate that important new medicines that Arrowhead discovered are getting closer to patients who need them. Before I hand off to Javier, let me say a few words about the skeletal muscle franchise and DUX4 I'm sorry and ARO DUX4 specifically.

Speaker 2

We completed everything required for a CTA, including regulatory filing preparation, acute and even chronic GLP toxicology studies. We are prepared to file the CTA and begin a Phase III study, but several companies have expressed interest in potentially partnering on the development of ARO DUX4 And potentially our next skeletal muscle targeted drug candidates that will be CTA ready in Q4. As such, we pause filing while we explore these options. Of course, I do not know if any of these will translate into license agreements and partnerships, but I expect we will either complete a deal or move forward with the Aerodex IV clinical program over the next couple of months. Arrowhead is executing at a very high level.

Speaker 2

Our platform is expanding into new areas. Our early pipeline has generated impressive results. Our mid and later stage pipeline are giving us line of sight to when we may be able to make the transition into a commercial stage company and our business development activities continue to bear fruit. With that overview, I'd now like to turn the call over to Doctor. Javier Sanamarti.

Speaker 2

Javier?

Speaker 4

Thank you, Chris, and good afternoon, everyone. Before I go into the mid and late stage cardiometabolic studies, I want to quickly review the status of the fasusiran, our investigation RNAi therapeutics Being developed in partnership with Takeda for the treatment of liver disease associated with alpha-one and beta-fifteen deficiency. During the last quarter, we reported data demonstrating that patients receiving 25, 100 or 200 milligrams of varsiran Who have baseline fibrosis achieved a dose dependent mean reduction in serum ZAAT concentration at week 48 of 74%, 89% 94%, respectively, leading to dramatic reductions in total liver CAAT and past the global burden, A histological measure of CAAT accumulation. In addition, 42% of patients showed an improvement in portal inflammation And 50% of patients achieve an improvement in fibrosis of at least one point by metaverse stage. These data were very consistent with the prior data generated from the 2,002 open label study.

Speaker 4

Subsequently, Takeda initiated and began dosing in the red blood clinical study. It is a randomized, double blind, placebo controlled Phase 3 trial to evaluate the efficacy and safety of Fasiliran in the treatment of AATD liver disease. Approximately 160 adult patients with metavir stage F2 to F4 fibrosis will be randomized 1 to 1 to receive Fasuziran or placebo. The primary endpoint of the study is a decrease from baseline of at least one stage of histological fibrosis Metavir staging in the centrally rare liver biopsy than at week 106 in patients with Metavir Stage F2 and F3 fibrosis. Additional information on the Redwood study can be found at www I also want to give a brief update on where we are with our cardiometabolic candidates, I will start with 808-forty three, our investigational RNAi therapeutics being developed as a treatment for patients with mixed dyslipidemia, severe hypertriglyceridemia and FCS.

Speaker 4

The SHASTR-two Phase 2 study in 229 patients with severe hypertriglyceridemia and the MIR Phase 2 study in 353 patients The MYC's dyslipidemia are both on schedule for data readout later this year. This data will enable us to request End of Phase 2 meeting with regulators to discuss and get feedback on our plans for Phase 3 studies. PALISADE Phase 3 study in 72 patients with SCS is ongoing. We have enrolled 70 of the planned 72 patients and we believe we will reach planned enrollment tomorrow. This is a 48 week study with primary endpoint of percent change from baseline In fasting triglycerides, this put us on schedule for study completion in Q2 of 2024, A data readout shortly after that and then NDA preparation.

Speaker 4

I'm also pleased to announce that during last quarter, 80843 was granted fast track designation by the U. S. FDA for reducing triglycerides in adult patients with SCS. ARO EPO CP3 was previously granted orphan drug designation by the FDA and the European Union for the same indication. Fast Track is a process designed to expedite the development and review of drugs to treat serious or life threatening conditions and fulfill unmet medical need.

Speaker 4

The purpose is to get important new drugs to patients earlier. This designation makes AroHealth eligible for multiple potential benefits, including more frequent interaction with the FDA, eligibility for priority review and eligibility for rolling review of the NDA. Once we have complete data from the Phase 3 PALISSA study in 2024, we intend to utilize all available mechanisms to get this potentially important drug to patients as quickly as possible. This will be the 1st Phase 3 readout of Arrowhead And our pipeline of RNAi therapeutics that utilize our proprietary 3 platform that represents a significant milestone for the company. Moving on to the 2nd wholly owned cardiometabolic candidate, ARO ANG3, which is our investigational RNAi serapeptide being developed as a treatment We have completed the ARKES II Phase II study in 204 patients with mixed dyslipidemia, and we're currently in the process of generating and analyzing The second Phase 2 study for ARO ANG3 is the GATEWAY study In 18 patients with HoFH, this study is in open label and was fully enrolled previously.

Speaker 4

I'm happy to report that LDL reduction in this difficult to treat population with limited treatment options appear to be competitive With evinocumab, a monoclonal antibody that targets the same HPT L3 protein, which is currently approved for HoFH patients. We will present interim data from the Gateway study at the 91 European Anterior Proteus Society Congress on May 23. This will welcome results and thus we're working we're currently working on the Phase 3 study design and plan for ADO H3 in HoFH. We will also talk in more detail about the unmet need in cardiovascular disease, the results from our cardiometabolic programs, our clinical development plans and our commercial strategy at the upcoming R and D Day in June. I will now turn the call over to Doctor.

Speaker 4

James Hamilton. James?

Speaker 5

Thank you, Javier. We have demonstrated significant progress across discovery and early development. We continue to extend the reach of our TRiM platform to new tissue types and expand our pipeline into new disease areas in which patients have inadequate treatment options. We've also rapidly and efficiently advanced multiple clinical stage programs and continue to generate highly encouraging data using various versions of the TRiM platform, each optimized for a different cell type. I'd like to focus today on a few different areas.

Speaker 5

The pulmonary platform with recent top line data announced for ARO RAGE ARO C3, our candidate for complement mediated diseases And our emerging CNS platform with the first candidate being ARO SOD1. Let's start with pulmonary. We have 3 candidates in the clinic now, ARO RAGE, ARO MUC5AC and ARO MMP7, which all use the same TRiM conjugate that targets the alpha Vbeta-six integrin for delivery to pulmonary epithelial cells. I will talk about each individually, But we think one of the benefits of gaining an RNAi therapeutic delivery platform with increasing validation is that learnings from each platform program and directly inform advances in the others. So we view derisking events for 1 program such as the data we saw with ARO RAGE as potentially derisking to some extent to the others.

Speaker 5

ARO RAGE is our investigational RNAi therapeutic Designed to reduce expression of the receptor for advanced glycation end products or RAGE as a potential treatment for inflammatory pulmonary diseases Such as asthma. We are currently conducting a Phase 1, 2a randomized double blinded placebo controlled study in normal healthy volunteers, which is Part 1 and in patients with mild to moderate asthma, which is Part 2. The single ascending dose portion of the study includes 5 sequentially enrolled NHB cohorts with escalating single dose levels. The multiple ascending dose portion of the study includes 5 NHP cohorts and 3 asthma patient cohorts. We have fully enrolled and dosed all SAD cohorts and the final NAG cohort is anticipated to be fully enrolled in the coming weeks.

Speaker 5

We've also opened the patient cohorts with enrollment of the 1st cohort nearly complete. We reported very encouraging top line results from 4 of the 5 SAD and MAD cohorts in NHBs. We do not yet have data from the 5th and highest dose level, but we plan to report those results when they are available later this year. 1st, safety and tolerability assessments have been encouraging. Overall, there were no patterns of adverse Changes in any clinical safety parameters, no reported serious or severe adverse events and no dropouts related to drug or related to adverse events.

Speaker 5

In addition to safety and tolerability, ARO RAGE demonstrated a strong pharmacodynamic effect. The mean maximum reduction in soluble RAGE or SRAGE at the 92 milligram dose as measured in serum After 2 doses on day 1 and day 29 was 80% with a maximum reduction of 90%. The lower doses of 10, 20 and 44 milligrams also showed a dose response ranging from 31% to 59%. Serum SRAGE was also reduced after a single dose with a mean maximum reduction at the 92 milligram dose of 56 and a maximum reduction of 68%. Reductions in SRAGE as measured in bronchoabiola lavage fluid On day 31, after a single dose were also observed with a mean reduction at 92% of 70 at 92 milligrams of 75 percent and a maximum reduction of 92%.

Speaker 5

We have additional planned cohorts in which valve will be collected at later time points to quantify the additional lung level knockdown after 2 doses. Lastly, the duration of pharmacologic effect persisted for at least 6 weeks after the second administration of the 92 milligram dose. This is the last time point currently available and additional follow-up is ongoing. This suggests that monthly, Bimonthly or less frequent dosing may be possible with ARO RAGE. All in all, we believe these data show good translation of preclinical results to humans.

Speaker 5

Moving on to ARO MUC5AC, our investigational RNAi therapeutic designed to reduce Production of Mucin 5AC or MUC5AC as a potential treatment for various mucobstructive pulmonary diseases. We are currently conducting a Phase IIIa study similar in design to the ARO RAGE study and we have begun enrollment of the asthma patient cohorts. Sample processing and analysis for the NHP cohorts is ongoing and we intend to report on initial data when available. The 3rd pulmonary program in the clinic is ARO MMP7, which is designed to reduce expression of matrix metalloproteinase 7 or MMP-seven as a potential treatment for idiopathic pulmonary fibrosis or IPF. During the last quarter, we initiated a Phase 1, 2a Single ascending dose and multiple ascending dose study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of ARO MMP7 in healthy volunteers and in patients with IPF.

Speaker 5

Dose escalation in this study is ongoing. Now let's discuss initial results with ARO C3, Our investigational RNAi therapeutic targeting hepatic C3 expression as a potential treatment for complement mediated hematologic and renal diseases. Substantial unmet medical need remains in the treatment of multiple complement mediated diseases, including IgA nephropathy, C3 glomerulopathy and additional renal and hematologic indications. We are conducting a Phase 2, placebo controlled dose escalating study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics, ARO C3 in adult healthy volunteers and patients with complement mediated renal disease. We originally planned to also include patients with PNH in the study, but we have since decided to eliminate these cohorts.

Speaker 5

We may decide to study PNH patients in the future, but we believe we can generate the data we need in the other populations. During the quarter, we reported Top line interim data and presented additional data at the 7th complement U. K. Training course and symposium in April. In Part 1 of the study in NHVs, ARO C3 demonstrated a dose dependent reduction in serum C3 with 88% Mean reduction after 2 doses at the highest dose tested.

Speaker 5

A dose dependent reduction in Ah-fifty, a marker of alternative complement pathway hemolytic Activity was also observed with a 91% mean reduction at the highest dose tested. SEROC3 had a long duration of pharmacologic effect and we think This suggests quarterly or less frequent subcutaneous dose administration is possible. Lastly, I'd like to briefly mention our announcement that CNS is the next area of focus in the TRiM platform. We've been working on CNS delivery for some time, but have not discussed these efforts publicly until now. Our TRiM platform now includes a construct optimized for intrathecal administration to the central nervous system with good distribution throughout the brain and in all relevant brain cell types.

Speaker 5

ARO SOD1, the first program to use this new delivery platform is designed to reduce Expression of superoxide dismutase 1 or SOD1 and the CNS as a potential treatment for patients with amatrophic Lateral sclerosis or ALS caused by SOD1 mutations. ARISTADA1 was highly active against its target The long duration of effect in multiple preclinical models that we believe suggest it may be administered quarterly or less frequently. In preclinical studies, ARO SOD1 achieved 95% spinal cord tissue mRNA knockdown after a single intrathecal dose and maintain greater than 80% spinal cord tissue mRNA knockdown 3 months after a single Ecal dose in non human primates. ARO SOD1 is on track for a CTA filing in the Q3 of 2023. We will talk more about our CNS platform and about ARO SOD1 at the R and D Day in June.

Speaker 5

But I wanted to introduce the program because we are very excited about I will now turn the call over to Ken Myszkowski. Ken?

Speaker 6

Thank you, James, and good afternoon, everyone. As we reported today, our net income for the quarter ended March 31, 2023 was $48,700,000 or $0.45 per share based on 108,100,000 fully diluted weighted average shares outstanding. This compares with net income of $44,400,000 or $0.41 per share based on 107,900,000 Fully diluted weighted average shares outstanding for the quarter ended March 31, 2022. Revenue for the quarter ended March 31, 2023 was $146,300,000 compared to $151,800,000 for the quarter ended March 31, 2022. Revenue in the current period primarily relates to our collaboration agreements with Takeda and GSK.

Speaker 6

Revenue is recognized as we complete our performance obligations, which include managing the ongoing AAT Phase 2 clinical trials for Takeda. There remains $31,000,000 of revenue to be recognized associated with the Takeda collaboration, which we anticipate will be recognized over the next year. Additionally, in the quarter ended March 31, 2023, Takeda dosed the first patient of its Phase 3 Redwood clinical study of fisiran triggering a $40,000,000 milestone payment and GSK dosed The first patient in its Phase 2b trial of GSK 4fivethree-two thousand nine hundred and ninety, formerly known as ARO HSD, in March, triggering a $30,000,000 milestone payment. Revenue for these milestone payments will be reflected in fiscal Q2, while cash receipt will be in fiscal Q3. Revenue in the prior period, primarily related to the recognition of $120,000,000 associated with the upfront payment received from GSK in addition to a portion of the payments received from our license and collaboration agreements with Takeda and Horizon.

Speaker 6

Total operating expenses for the quarter ended March 31, 2023 were 98,100,000 compared to $110,300,000 for the quarter ended March 31, 2022. The key driver of this change was decreased candidate costs and lower stock compensation expense. The decreased Candidate costs were primarily due to the reduction in outsourced manufacturing and toxicity studies study costs relating to our cardiometabolic studies as the company's pipeline of candidates progress through clinical trials in 2022. Net cash used by operating activities during the quarter ended March 31, 2023 was 107,200,000 compared with net cash provided by operating activities of $1,400,000 for the quarter ended March 31, 2022. Prior period includes $120,000,000 cash inflow from GSK from the GSK licensing and collaboration agreement.

Speaker 6

We expect our cash we expect our operating cash burn to be at the lower range of $70,000,000 to $90,000,000 per quarter in fiscal 2023. We expect capital expenditures of approximately $90,000,000 in the second half of fiscal twenty twenty three as we near completion of our footprint Expansion projects, including GMP Manufacturing. Turning to our balance sheet. Our cash and investments totaled $559,800,000 at March 31, 2023 compared to 482 $300,000 at September 30, 2022. The increase in our cash and investments was primarily related to The $250,000,000 payment from Royalty Pharma offset by our operating cash burn along with continuing capital projects.

Speaker 6

Our common shares outstanding at March 31, 2023 were 106,900,000. With that brief overview, I will now turn the call back to Chris.

Speaker 2

Thanks, Ken. We've already had a busy 2023 and have made a great deal of progress on many fronts. However, we anticipate that the middle and into the second half of the year will be even busier and offer even more opportunities to demonstrate what our pipeline can bring to patients. We've always been clear that we believe for RNAi to reach its full potential as a revolutionary therapeutic modality, It needs to be able to address gene targets wherever they are. That is no longer a long term goal between the liver franchise, The pulmonary franchise, the skeletal muscle franchise, the CNS franchise and the adipose franchise, we have the opportunity to help a lot of people and create a substantial amount of value.

Speaker 2

But this is just the start. I expect us to blow through 202025 And build a uniquely large and diverse pipeline of important medicines across multiple therapeutic areas. I have never been more Excited about our near term prospects and we're proud of this amazing team. When you combine a technology that works with talented innovators who are aligned as to mission and empowered to make decisions and push science, incredible things can follow. We hope you can join us on the June 1st We hope you can join us on June 1 at our R and D Day to hear more.

Speaker 2

Thank you for joining us today. And I would now like to open the call to your questions. Operator?

Operator

All right. Can you hear me okay?

Speaker 1

Yes.

Operator

All right. Just to make sure you can hear me okay. Thank you all. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1, 1,000,000 and wait for your name to be announced.

Operator

To withdraw your questions,

Speaker 1

I also want to just remind analysts that we in the interest of time, we'd like to limit the questions to one question and one follow-up.

Operator

Our first question comes from the line of Murray Raycroft with Jefferies.

Speaker 7

Thank you for taking my question. I was going to ask if you can provide some additional detail on what new data we will see at The R and D day from the cardiometabolic and pulmonary program specifically. And as follow-up for the Phase 3 PALISADE study, You mentioned readout in Q2 of 2024. I'm just wondering if you will report on patient baseline characteristics at the R and D Day or potentially at a medical meeting this year?

Speaker 2

Thanks, Maury. So there's let's see, there's several questions in there. What are we going to be talking about at the R and D Day? We'll be overviewing the pulmonary programs of course and we'll give you what data we will have at the time. We expect, as we mentioned in the prepared remarks, we expect to have some early normal healthy volunteer data from MUC5AC.

Speaker 2

I don't expect that we'll have MMP7 data, but we'll also likely have a bit more of ARORAGE. We also we'll talk about those indications or those targets as well as the indications. On the cardiometabolic side, It will be a good chance for us to talk broadly about how we see ARO ANG3 and ARO ANG3 fitting Into treatment paradigms, we'll talk a bit about a more recent data as well. We'll talk about The new CNS platform will probably go into a little bit of the adipose platform a bit. We'll talk about SOD1.

Speaker 2

We'll talk about the portion of ALS that we'll be addressing with SOD1. I'm sure I'm forgetting some things. It will be a bit of a busy day. We have a lot going on as you know Maury and we hope to touch on most of what we're doing.

Speaker 7

Got it. And anything additional you could say about the PALISADE study? It sounds like that's moving along and you'll have that readout Q2 of next year. Will you Provide more on the types of patients that you've enrolled into the study, is that something we can learn more about this year?

Speaker 4

Sure. I think we will review the entry criteria and that will give you a really good idea, but I don't think we're going to look at the baseline characteristics and report that ahead of The end of the study, this is a Phase 3 registration study. It's going really well. So I will review the key inclusion criteria, so you get a sense of the patient population.

Speaker 7

Got it. Okay. Thanks for taking my questions.

Speaker 2

Okay.

Operator

All right. Thank you. For our next caller, we have Eliana Merle with UBS. Please go ahead. Your line is now open.

Speaker 8

Hey, guys. Thanks so much for taking the question and congrats on the recent pulmonary data. Maybe just in terms of the I guess, how should we think about what endpoints in particular you'll be reporting out, I guess, between like FeNO, FEV1 And what you'll be looking to see in some of that early data? Thanks.

Speaker 2

James, do you want to address that?

Speaker 5

Sure. Yes. So For RAGE, we're enrolling patients with mild to moderate asthma and I think these are relatively small cohorts. So not powered for FEV1, although we will be measuring FEV1. Some of the key biomarkers That I think could be indicative of pathway engagement that knocking down RAGE is Affecting the inflammatory pathways are things like FeNO, which is an IL-thirteen driven parameter.

Speaker 5

We're also measuring blood and sputum eosinophils. I think that that'll be interesting As well and Peri Austin is also IL-thirteen driven. And then as you mentioned FEV1 and spirometry.

Speaker 8

Great. Thanks. Just a quick follow-up. I mean, maybe just what's your latest thinking around what The clinically meaningful level of target knockdown as you look to sort of select the go forward doses, and how this could differ between RAGE and MUC5AC?

Speaker 2

Yes. So that's a really good question, but it's one that we just can't answer. No one's been able to reduce expression of MUC5AC or RAGE in the past or MMB7 for that matter. And so there's just We don't have a good mile marker for what that bogey could be. We will say, however, though, for Range, for instance, We were seeing MEAN MAX knockdown after 2 doses in the serum at least at around 80%.

Speaker 2

In the animal models that we have studied, that was more than enough to affect phenotype. These are severe models. And so that gives us some confidence. But again, they're just models. And so we really have to wait to see in humans what this looks like.

Speaker 2

We are excited about that level of knockdown. It's a good deep knockdown and it appears to be durable. And so we are optimistic that, that will be That we are on the board for RAGE and for MUC and for MMP7, and as well as for future targets. We believe that because this is a target rich environment, It is it feels likely to us that if you can knock a gene product down by 80 or so percent, then you're going to affect Disease stage in the least some of these targets.

Speaker 8

Awesome. Thanks guys.

Speaker 2

Thank

Operator

you. Our next question comes from the line of Joel Beatty with Baird. One moment.

Speaker 3

The first one is, how could the profile of ARO SOD1 potentially compare with tofersen? Then second question is, can you provide a little more color on why I think eliminating the study of some of the PNH patients from the ARO C3 study?

Speaker 6

Thanks. Yes, sure. Thanks for

Speaker 5

the question. So with regards to SOD1, I think that we will be Competitive and likely better in terms of depth of gene target knockdown and extremely importantly for this route of administration, intrathecal route of administration duration, which is key if we can do Intrathecal administration every 3 or even every 6 months, I think that would be much preferable for patients Compared to every 2 weeks or every month dosing with tofersen. And then with regards to PNH, It was really a matter of competition that PNH is a small market that's reasonably well addressed With a lot of ongoing competing clinical trials and competing marketed or soon to be marketed Therapeutics. So we thought that we have limited resources and best to put those resources to work elsewhere.

Speaker 4

Great. Thank

Operator

you. All right. Thank you Our next question comes from the line of Mani Faroohar. I'm sorry, did I say your name properly?

Speaker 3

Close enough. Thanks for taking the question.

Operator

With SBB, go ahead. Sorry.

Speaker 3

So I want to dive in a little bit on some of the modeling impact financially of the updates you've given us. Obviously, you've got The NASH program back in your hands, how does the HBV remains in J and J's hands? You talked about moving a number of other assets forward, CNS. How should we think about what this means for the tempo of CapEx and OpEx going forward from here? And to what extent is that already contemplated in the commentary you gave us last quarter and prior around ramping CapEx and OpEx spend to drive growth?

Speaker 6

Sure.

Speaker 2

I don't This was already factored into our plans over the next few years. I don't think anything that's happened over the last Couple of quarters has materially changed those things. We are growing so fast now, Manny, as you know, And we've got 12 clinical programs, 7 of them are wholly owned. I think we'll have 14 to 16 clinical programs by the end of this year. We have an awful lot of opportunity to Partnered judiciously.

Speaker 2

As you know, that's an important part of our model. I believe that we are going to have Clinical programs or marketed products by 2025. And no company, I don't think, certainly not a company our size Commercialize all of those. And so we have an awful lot of ammunition to find good partners to bring in non dilutive capital and that continues to be an important part Our ongoing financial planning. I think that that job gets even easier as we expand these platforms To include CNS, to include skeletal muscle, pulmonary, adipose.

Speaker 2

We've got an awful lot of opportunity to find good partners. But while still Holding on to a very large number of we think potentially important medicines to drive value for us.

Speaker 3

Okay. That makes a lot of sense. Thank you. Sure.

Operator

All right. Thank you so much. One moment. Our next question comes from Mayank Mamtani with B. Riley Securities.

Operator

Your line is now open.

Speaker 9

Good afternoon. Thanks for taking Question, just maybe on MUC5 and ARAGE, just can you clarify how long or is the chronic tox data Available from that, from the preclinical study standpoint. And then at a high level, like The differences between the candidate design delivery, I know the PD market is clearer for RAGE, but is there Anything that we can glean from the different programs that help us think about the de risking that is underway for the pulmonary delivery? And then I have a quick follow-up.

Speaker 2

Sure. The CronkToks is not complete. Those are ongoing. And then the next question is what is derisking events? Well, James, do you want to address Want to address more data through this year?

Speaker 2

We'll have we will look at we will have more data On knockdown healthy volunteers shortly, we'll have patient data late this year And then we'll have the Cronotox data. I guess all of those are somewhat are incrementally derisking. We feel really good about the changes we've made in AeroRage, AeroMUC 5AC, AeroMMP 7 compared to AeroEnac a year ago. These are substantially more potent constructs. We're using in broad terms And James correct me if I'm wrong here, around 1 mgkg is at this 4th dose that we reported on.

Speaker 5

A little less. A little

Speaker 2

less than 1 mg per kg. And as you may recall, Mayank, in the pulmonary day a year plus ago, Around a year ago, I guess. We graphed The various top studies and where we started to see local lung inflammation and over 6 months. And The cumulative dose is around 100 mgs per kg where we started to see that inflammation. And so we feel like we are in good shape here that we should be Underneath that, for RAGE, we'll see where we are with MMP7 and with MUC, but at least so far the data we've seen It's encouraging to us that we have something extraordinarily more potent than the ARO ENAC.

Speaker 2

And again, remember, and again, I know you will recall this, our dosing for ARO ENAC With 3 daily doses every 2 weeks, for ARO RAGE, we are once a month. And as James pointed out, we have data out through 6 weeks and We're still seeing a deep knockdown. And so this may not be once a month dosing, it may be once 2 month dose and maybe once every 3 month dose. So we feel like we're in good shape here.

Speaker 9

Great. Yes, look forward to seeing more at the R and D Day. And then just another high level question. As you've decided on DUX4 muscle For externalization and not maybe on SOD1 and CNS. So I mean, how are you thinking about which muscle types to go Forward with internally versus externally.

Speaker 9

And for DUX4 muscle skeletal muscle, are there like kind of deal analogs that exist out there

Speaker 2

Sure. So let me be clear, we've not made a decision on partnering Aerodex IV. We were gearing up to file CTA. We are ready to go. We even had chronic talks done, as I mentioned.

Speaker 2

And we had Substantial interest from several companies and we decided to press pause and see where those go. And so that's where we are right now. We'll see if those if any of those turn into an actual deal. If they do, that's great. Hopefully, we'll find the right partner for that.

Speaker 2

If not, that's great too because we believe in the drug, we believe in the platform and we'd be happy to push that into the clinic ourselves. It just made sense for us to wait a couple of months to see where these things go. We are in a good spot, I think, for not only EROTEX IV, but also the follow on Clinical candidates that as I mentioned, we think will be CTA ready in the Q4. We're in a good spot where we are almost agnostic. I'm happy to bring both those to the clinic Ourselves, but also I'm happy to listen to offers and that there are good companies who can who have experience In these types of in developing these types of drugs and come up with proper value, then we're happy to

Speaker 1

talk about that as well.

Speaker 9

Got it. High class problem to have. Thanks for taking my question.

Speaker 2

You're welcome.

Operator

All right. Thank you so much for that. And a quick note, you all please do not spot your questions. I'll let you know that your line is now open. Our next question comes from Patrick Trocchio with H.

Operator

C. Wainwright and Company. Patrick, your line is now open.

Speaker 3

Thanks and good afternoon. Just a follow-up question on the CNS platform. I'm wondering if you can discuss The preclinical data that's been generated to date and the level of confidence in the safety profile of these siRNA constructs And delivery methods as you transition to human trials. And then secondly, I'm wondering if there's an update on the HBV program and what that collaboration may look like going forward?

Speaker 2

Sure. So let me I'll give you the high level answer to the C and S question and then And James can give you more granular answer if necessary. So we have done the GLP tox studies and we feel comfortable about the margins there, we've done exhaustive non GLP tox studies with AROSOD-one as well as other potential candidates, and we feel good about what we're seeing. With respect to HBV, I don't have anything to update you on now. I believe that Janssen is running their process.

Speaker 2

And so I don't have any information Where that's going to be in the next over the next several quarters?

Speaker 5

Yes. I think I would just add on the CNS Platform will share more of the specific data at the Analyst Day in June. But the And we're seeing 80% to 90% reduction in various brain regions in both rodents and non human primates with good duration, a duration that should support at least Q3 month dose administration and We'll share more early next month.

Speaker 3

That's helpful. Thank you very much.

Speaker 2

You're welcome.

Operator

All right. Thank you so much, Patrick. Our next question comes from the line of Keay Nakae with Chardan.

Speaker 5

Thank you. Question on SaaS. Anything you have learned from Biogen's development The person that you think you might be able to learn from and benefit from as you proceed into the clinic. Yes. I mean, it's very helpful to have Another asset out there that's hitting the same gene target that's kind of gone through the whole process.

Speaker 5

And I think Learned a lot from what they did in their early clinical studies, their Phase III design and then their pivotal as well.

Speaker 4

Yes. And I would like to add that the regulatory presentation is very, very important and the accelerated approval based on a validated Biomarker for a disease like this, I think it's huge for the field. It's really important for our program. It will enable us to go a lot faster. I think in this condition and thanks to their work, there is a very good data of what the natural history of this SOD1 ALS patient looks like And also with a benchmark efficacy both in neurofilament, which and also clinically.

Speaker 4

So I think this success

Operator

All right. Thank you so much. And our next question comes from Pragar I'm sorry for messing your last name up, was Cantor Fitzgerald. One moment. Your line is opening up now.

Operator

One moment.

Speaker 10

Thanks for taking my questions and congrats on the quarter. The first question is on asthma for targets such as RAGE. Given you're testing it in a broad population, how much benefit on lung function endpoints such as FEV1 You think you need to show to give you confidence on moving it into later stage trials, trying to better understand what benchmarks are you looking at? And I had a quick follow-up.

Speaker 4

Yes. So James already made the point that we're not looking at efficacy data in this Phase 1 study. So this program will require a Proper Phase 2 study to show efficacy and probably FEV1. If you look at the benchmark with the biologics that are already approved, either to We are looking about 100 milliliters improvement, approximate FEV1. So that's the benchmark, I think, for a Phase 2 study.

Speaker 4

And that's also something that we will discuss at the Analyst Day in June 1.

Speaker 10

Thank you. And just curious as to the broader long term strategy in asthma given you have 2 targets, Is the plan to continue developing both assets into Phase II, Phase III? Or you could make a decision to prioritize one over the other at a certain time? And What drives that decision? Thank you.

Speaker 2

Data. As with ANG3 and APOC3, look these are 2 targets that are Interesting. And they will be addressing asthma in 2 different ways. And so we look forward to seeing how they how patients respond to each of them. It could be that there are populations of patients who respond better to one than the other.

Speaker 2

It could be That one is superior in all patient populations. We're just going to have to wait and see. It's a good problem to have because we think we have a good opportunity for both of them to be important medicines. And so let's just see what the data show over the next couple of years.

Speaker 4

Yes. The other thing I would say is remember MAG5aC is a very new constructive type of drug And there are other new construction diseases that are very prevalent and the American need is very significant. So as Chris said, we will evaluate

Operator

All right. Thank you so much. Our next question comes from Luca Iffy with RBC Capital. One moment for your line.

Speaker 2

Thanks so

Speaker 11

much for taking my question. I have a few. Maybe, Chris, now that you have proof of concept here, I would say For target engagement, I should say, in line, how are you thinking about business development? Is this a good time to find a partner? Are you hoping to further de risk the platform your entertaining PD discussions or are you planning to keep pulmonary in house full stop?

Speaker 11

Any thoughts there would be much appreciated. And maybe on SOD1 ALS, Can you just talk about why going after this indication? Obviously, you're a few years behind Biogen. There are only 200, 300 patients in the United States. So why not going There are other targets with bigger TAMs like Baby Cow or ATAX 1 or other.

Speaker 11

So again, any thoughts there. Appreciate it. And then last one quickly on CapEx. If I recall it correct, the last time you mentioned that you were expecting to invest up to $200,000,000 in CapEx to build the facility in Verona, Wisconsin. However, I think the 10 Q suggests that the number is now between $202,000,000 So wondering if

Speaker 2

you can clarify that. Thanks so much. Sure. Thanks, Luca. Ken, you want to address the last first?

Speaker 6

Sure. The $200,000,000 that we mentioned was the amount that we thought we were going to This year, the total project was anticipated to be $280,000,000 $290,000,000 in total. We have spent less than the $200,000,000 this year. We expect to spend probably around $90,000,000 more in the second half and probably about $100,000,000 toward that in fiscal 2024.

Speaker 2

Okay. So the other two questions. The first one was around pulmonary partnering. So look, we aren't rushing to partner the current three assets Anytime soon or frankly even the broader platform right now. We want to learn more.

Speaker 2

We want additional data. We're I don't think that we should be in a hurry to do that. This is an important space for us. As we've said in the past, we don't see 2 or 3 or 4 drugs here. We see 8 or 9 or 10 drugs coming out of the pulmonary platform.

Speaker 2

There are 16,000 or pulmonologists in the U. S, we like the idea of building a commercial infrastructure to address that market with several drugs in our own bag. Having said that, it's probably not going to be 10, 11, 12 drugs. So there will be partnering within This platform, I think, at some point doesn't I don't think it makes sense to spend too much time on it at this point because we're still early days. But this is a good opportunity for us.

Speaker 2

Again, internally to create value and to serve patients ourselves, but also To find additional partners in order to really extract proper value from this part of the TRiM platform. The second question I do is SADA 1. Why are you going after SOD1 instead of something else? Well, I'll tell you. We are also going after something else.

Speaker 2

We're an and company. We're not an or company. It just so happened that SOD1 popped 1st and we think it's a good place for us to be. We think we'll stack up well against Tilfersen. As we talked about, It's nice to learn from somebody and accelerate our pathway Because somebody went ahead of us.

Speaker 2

And then if we have a better drug for those patients, it's been so much better. We believe in SODA-one, we believe in helping those patients who need it, but that's just the first of We think many. Like the pulmonary space, CNS is a target rich environment and there's no shortage of important targets that we will be going after.

Operator

All right. Thank you so much, Luca. Our Last question is coming from the line of Madhu Kumar with Goldman Sachs. One moment while your line opens.

Speaker 12

Hey, thanks for taking our questions. So one kind of science question and then one big picture strategy question. So The science question is, what do you think is the fundamental floor for SRAGE in the serum from extra Pulmonary disorders. Basically, how far do you think serum SRH can potentially get to if you really were to just wipe it out in a lung? And then conversely, what is the floor in the lung, at least maybe bronchial alveolar lavage For Esrij as well.

Speaker 12

And then kind of the big picture strategy question is kind of related to Luca's question. Effectively, like what would you need to see to really reposition the company to focus on these 8, 9 or 10 lung indications Relative to the kind of current menagerie of liver directed drugs?

Speaker 5

Sure. Yes. So the floor of SRAGE, maybe the second part of that question It's easier. I think, again, measuring

Speaker 2

if

Speaker 5

you assume that the BALF SRH is exclusively coming from the lung, I mean the floor would be close to 0 that you maybe get a small amount of SRH coming from endothelium or Some of the other cell types, but really the most of the S range in the valve should be coming From the type 2, ebular epithelial cells, that doesn't mean that we'd be able to get 99.9% Knockdown, I think even with our best triggers in the liver, we're getting 95% plus knockdown. So that's just not the way RNAi tends to work. In the serum,

Speaker 2

I don't think

Speaker 5

we know the answer to that Really, I think the best indication or the data that we've shared so far that you can achieve 90% reduction in the blood. It's not entirely clear how much SRH In the blood is coming from extra pulmonary sources, although I think it is clear that most of it is coming from the lung. So and that number may vary from person to person or either in between healthy volunteers and asthma patients. So I think we're still trying to sort that out with the floor in SRH in the blood. It was one of the reasons why we added An additional dose level to this healthy volunteer study?

Speaker 4

I think we're getting very close. I think we've already seen 90% if you look at APOS 3% 80%, that's what you see 80%, 85%. So I think we're getting very close to the floor. It's almost complete

Speaker 2

And Madhu, I'll address the second question. So I'm just curious, so when you talk to J and J, Pfizer and Others, do you refer to their large pipeline as menagerie of drugs? So look, We're not going to refocus this company to be a pulmonary company. I think there's no reason to do that. We actually like The strategy of having a broad pipeline across therapeutic areas.

Speaker 2

I think we can do it in part, but I think we can do it because we are relying on well validated targets and hopefully we stay disciplined and we continue to do that. And so ultimately, I think That we can create the most value by being a relatively diversified company. Pulmonary is a nice deep well. And so that is a place I think that where we will have several or more of our wholly owned drugs, but that won't be the only one.

Speaker 12

Thanks very much.

Speaker 2

Thanks, Manu.

Operator

All right. Thank you all so much for your questions. I would now like to turn it back To Chris Anzalone for closing remarks.

Speaker 2

Thanks very much for joining us today and we look forward to speaking with you on June

Powered by Quartr
Earnings Conference Call
Arrowhead Pharmaceuticals Q2 2023
00:00 / 00:00