Arrowhead Pharmaceuticals Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2023

There are 15 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 call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Speaker 1

Thank you, Stephen. Good afternoon, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2023 Q3 ended June 30, 2023. With us today from management are President and CEO, Doctor. Chris Anzalone, who 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 Myszkowski, 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 both be available during the Q and A portion

Speaker 2

of the call. Before we

Speaker 1

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

Speaker 2

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Our industry is built on promise. Sometimes this promise can be stunning and carry with it the possibility of saving the lives of some and drastically improving life for others. Arrowhead's mission is to bring important new medicines to the people who need them and save lives and alleviate suffering where we can.

Speaker 2

While this is our guiding principle and focusing on this promise has given us purpose and the motivation to, I believe, innovate at industry leading levels and operate at speeds not seen before. It is not the only important focus for us. Another is risk. Our industry swims in a sea of risk. We recognize that in order to succeed, we need to appreciate the great promise in front of us, but focus on all the risks between the idea and the medicine ultimately given to a patient.

Speaker 2

We are idealists, but we are not naive. One of our most important jobs is to mitigate and decrease risk where we can. We have made great progress on this broad front since our last call, And this is how I would like to frame our discussion today. Let's begin with pulmonary. We believe we've taken an important step toward further derisking the entire pulmonary franchise with the first chronic GLP toxicology results starting to come in.

Speaker 2

For ARO NNP7, the no AEL or no observed adverse effect level with the highest dose we tested in our chronic rat study. In other words, even at the highest dose tested, we are not seeing anything that is deemed adverse. The highest dose represents what we believe would be substantially greater exposure than would be applied to humans. We're waiting for final RAB data from the ARROW RAGE chronic GLP tox study, but that also is looking like the no AEL will be the highest dose we tested. We are still waiting for the 9 month monkey data in both candidates, But our experience with ARO ENAC leads us to believe that the rat is the more sensitive species for these pulmonary tox studies.

Speaker 2

So it is very encouraging to us that the ROADON study looks so positive. This is potentially a big step forward for the platform. As you may recall, we saw lung inflammation in some of the chronic GLP tox doses for ARO ENAC in 2021. Based on our analysis of those results, We concluded that we needed to increase the potency of our pulmonary candidates and we clearly did that with ARO MMB7, ARO RAGE and ARO MUC5AC. We were optimistic that these improvements would translate into better chronic tox results, but of course we couldn't know until the data came in.

Speaker 2

As we are now seeing preliminary data from those studies come in, we are increasingly confident that ARO MMP7 and likely ARO RAGE May have substantially wider tox windows than ARO Enac did. And I believe this represents a significant derisking event for the pulmonary franchise. We look forward to having a complete rat and monkey chronic GLP talks data for ARO RAGE and ARO MMP7 in coming months and expect to have chronic GLP talks data for ARO MUC5AC next year. Encouraging preliminary chronic GLP talks data follow prior de risking events in the pulmonary franchise over the past quarter. Specifically, I believe the ARROWAGE clinical data indicate 3 important things.

Speaker 2

First, the safety and tolerability reports to date have been good and nothing surprising has emerged. This is always a critical first step for a new platform and every new drug. 2nd, the activity data we have seen thus far have been impressive and showed continued dose response through the top dose level. After a single inhaled dose of 184 milligrams of ARO ANG, we saw up to 95% knockdown with a mean of 90% in that cohort. Not only is this a high level of target gene knockdown, it was extraordinarily consistent across participants in the cohort.

Speaker 2

Each subject had a good response. This is in the same ballpark as what we now expect with optimized liver targeted programs and this is an important point. I think it is generally accepted that RNAi is a reliable modality to safely reduce expression of a target gene and that when Arrowhead introduces a new liver program, There is high expectation both internally and externally that the drug candidate will reduce expression of the target protein as designed. I am hopeful that each new dataset we are approaching with each I'm sorry, I am hopeful that with each new dataset that we are approaching this expectation in pulmonary. That is giant leap forward and an important value inflection point.

Speaker 2

Lastly, we think the data also showed that the duration of effect with ARO RAGE supports a dosing interval of 2 months or more. This is an important de risking event because it limits accumulated drug exposure increasing our confidence that the good safety profile seen thus far may continue during chronic treatment. It would also be a very patient friendly dosing regimen. De risking the pulmonary platform is important for its own sake. As we have said in the past, we see many potential drugs coming out of the franchise that could address a number of unmet medical needs and we appear to be the only company able to effectively use RNAi in the lungs.

Speaker 2

The pulmonary franchise alone could be the basis of a large company, but it's also important as an example of how we seek to de risk our broader business. From our perspective, a 1 or 2 drug company is a bet, not a business. From the beginning, we have sought to create a broadly diversified business to increase the number of patients we serve, but also importantly as a hedge against the unpredictability of biology. In our industry, the risk of failure is substantial and our mitigation strategy has been part innovation and part brute force. We have sought to create a technological platform that works reliably and then move as fast as we can to create as many well thought out drug candidates as possible.

Speaker 2

We built and continue to refine and expand The reach of our TRiM platform. This is a modular, structurally simple system to one address multiple cell types, which allows our therapies to go where a disease is in a way that other RNA companies do not 2, move rapidly from IDEA to the clinic and then efficiently through mid and late stage clinical studies. And 3, provide platform continuity and confidence, which gives us an enhanced expectation of success for new candidates that we believe far exceeds that of Biotech broadly. Lessons learned developing each informs the development of future candidates. So our expectation of success grows stronger over time.

Speaker 2

We believe this translates to the potential for more candidates to become approved therapies than industry average. Our 2025 initiative follows this platform development and represents to some extent the brute force component of our broader risk mitigation strategy. We have platforms that appear to work well, so we have the responsibility to our patients and stakeholders to build as many new drugs as fast as we can. It is our goal to have 20 clinical stage or marketed products by the year 2025. Somewhat paradoxically, building such a large pipeline is part of our strategy to mitigate balance sheet risk.

Speaker 2

We are in a very expensive business and one could argue that the best way to ensure we are properly capitalized to bring drugs to market is to have a small focused pipeline. We reject that. Rather, we believe that well thought out drug candidates with greater than industry average chances of success and always find homes in partner companies' pipelines. As we mentioned at our Analyst Day in June, we have brought in nearly $1,000,000,000 in partnering capital over the past 6 years and have not raised equity capital for over 3.5 years. In fact, GSK recently initiated a Phase 2b study of GSK-four fifty three 2,990, formerly called ARO HSD, for the treatment of NASH, which earned us a $30,000,000 milestone payment.

Speaker 2

In addition, Takeda initiated the Phase 3 REDWOOD study of vosysiran being developed as a potential treatment for alpha-1 antitrypsin deficiency liver disease, which earned Arrowhead a $40,000,000 milestone payment. We believe that partnering is a good cornerstone of a broader financing strategy and one that our platforms are uniquely suited for because of the quality of the candidates coming out of them and the scarcity of the companies that are skilled at generating RNAi based therapeutics. Our partnering strategy includes existing partnerships that are maturing and therefore are listing higher new potential partnerships that could combine our platforms with a partner's target or set of targets and new partnerships on existing programs in our pipeline. Regarding the latter, on our last earnings call, I discussed that at the time we had paused the CTA filing because of some inbound interest in partnering Aerodex IV. We continue to explore those options.

Speaker 2

However, we decided to move forward with the Aerodex IV CTA filing ourselves. Partnering discussions This can take time and we don't ultimately know if they will translate into license agreements. We felt that it did not make sense to further delay the CTA filing in the Phase 1 study. While partnering continues to be a cornerstone of our financing model, we are certainly cognizant of the risk of over partnering. We believe the best way to build a lot of value quickly is to retain some wholly owned candidates and drive toward commercialization.

Speaker 2

Of course, there is substantial risk with this course, but over the past quarter, we believe we have taken some off the table. We completed enrollment in the Phase 3 PALISADE study of ARO APOC3 and patients with familial chylomicronemia syndrome or FCS. This is an important milestone for Arrowhead because it will likely be the 1st candidate and indication but we will seek regulatory approval for. The final study visit for the last patient in is scheduled for Q2 of 2024, We expect to start the NDA process next year. In addition to FCS, we are currently working on the Phase 3 plans for severe hypercholesterolemia and mixed dyslipidemia, which we will be discussing with regulators this year.

Speaker 2

Shortly after those discussions, we plan to start Phase 3 studies for those larger indications. Our other wholly owned cardiometabolic candidate, ARO ANG3 also had an important milestone during the quarter. We presented data at the European Atherosclerosis Society Congress demonstrating that ARO ANG3 achieved LDL C reductions of 44% to 48% when added to existing standard of care treatments. These results are similar to results seen in studies of an approved monoclonal antibody targeting ANGPTL3 in patients with HoFH. These are important de risking data as we move toward 1 or more Phase 3 programs, which we are currently designing.

Speaker 2

We are actively working on go to market strategies for multiple candidates. We expect to have 4 drug candidates in Phase 3 studies by the end of the year. 2 of these are currently wholly owned, ARO APOC3 and ARO ANS 3 and a third, Fazisiran, is partnered with a fifty-fifty profit share in the U. S, we have retained substantial economics. As I mentioned, we will have our 1st Phase 3 registrational study readout mid next year for our ARO APOC3 program in FCS and expect an NDA soon thereafter.

Speaker 2

As we look at our pipeline, we expect additional NDA filing opportunities on a very regular basis going forward. Moving to our earlier stage pipeline, we filed 2 CTAs for 2 new programs targeting gene expression in 2 different tissue types. I already mentioned ARO DUX4 and skeletal muscle for the treatment of FSHD and the other is ARO SOD1 in the central nervous system for the treatment of ALS. We expect additional CTAs over the next few quarters using both the CNS and skeletal muscle platforms. Of course, these are early, they represent important de risking events for potential CNS and skeletal muscle franchises.

Speaker 2

As with our advances in pulmonary, These are also illustrative of our desire to expand the reach of our technology and decrease the overall risk of our business by creating value across many different channels. Lastly, before handing the call over to Javier, I want to highlight the R and D Day that we hosted in June. During that presentation, which is still available to view on our website, we gave updates and had external KOLs, talk about some existing clinical programs in cardiometabolic and pulmonary disease and discuss what's next for us in CNS tissue including potentially systemic delivery and delivery to adipose tissue. The R and D Day had a lot of detail. We are constantly pushing our technology forward and expanding its reach.

Speaker 2

With that overview, I'd now like to turn the call over to Doctor. Javier San Martin. Javier?

Speaker 3

Thank you, Chris, and good afternoon, everyone. The design, planning and preparation of the late stage studies of our cardiometabolic candidate, AEROA plus C3 and AEROH3 is well underway. We're making good progress towards our goal of conducting multiple end of Phase 2 meeting with regulators this year and initiated multiple Phase 3 study late this year early next year. We also intend to present final Phase 2 data at the American Heart meeting in November, pending after acceptance for multiple studies for both, HERO APOC3 and HERO ANG3. Let's take a moment to review the various studies we have conducted and then I will provide our current thinking around the Phase 3 studies, how the Phase 3 studies may look like for each clinical indication.

Speaker 3

I will start with ARO APOC3, our investigational RNAi therapeutic Being developed as a treatment for patients with mixed dyslipidemia, severe hypertriglyceridemia and familial thalomicronemia syndrome. ADO APOC3 is designed to reduce production of Apolipoprotein C3 or APOC3, a component of triglycerides rich lipoproteins, including Proteins including very low density lipoproteins or PLLDL and chylomacrons and is a key regulator of triglycerides metabolism. Knocking down the hepatic production of APOC3 but RNAi results in reduced VLDL synthesis and assembly, Enhanced breakdown of triglycerides rich lipoproteins and better clearance of VLDL and calumetrorem and via LPL dependent and independent pathway. We view ARO APOC3 as having the potential to address Many patients population with various sleepy disorders that can lead to different clinical complications and phenotypes. Familial hyalomechronemia syndrome or FCS is characterized by extremely high TEG levels, typically Over 1,000 milligrams per deciliter and as high as 5,000 milligrams per deciliter leading to high risk of acute pancreatitis that usually requires Hospitalization can be fatal.

Speaker 3

Patients with SCS may also experience chronic abdominal pain and they had to adhere The very strict diet with very low fat content didn't impair their quality of life. FCS is severe and ultra Creality genetic disease that affect 100 to a few 1000 patients in the U. S. Severe hypertriglyceridemia or SHPG is characterized by a marked elevation in tissue levels, typically over 500 milligrams per deciliter, which can lead to increased risk of acute pancreatitis as well as an increased risk of cardiovascular disease. This condition is estimated to affect several million patients in the U.

Speaker 3

S. Lastly, misdyslipidemia is defined as a presence of High LDL cholesterol combined with CGs, remand cholesterol and low HDL. The lipid profile is a major component of the risk factor for atherosclerosis cardiovascular disease. There are likely tens of 1,000,000 for this cardiovascular disease. There are likely tens of 1,000,000 of patients in the U.

Speaker 3

S. With mixed dyslipidemia who are not adequately controlled with current standard of care. The studies of ARO APOC3 that we have conducted or are planning to conduct for each population are as follows. For FCS, we're conducting the PALISADE study, which is a Phase 3 placebo controlled study to evaluate the efficacy and safety of 808 plus 3 in adults with FCS. The primary endpoint for the study is percent change from baseline in fasting TG at month 10.

Speaker 3

The study was fully enrolled in May with a total of 75 subjects distributed across 39 different sites in 18 countries who were randomized to receive 25 milligrams of AEROAeposit3, 50 milligrams of fredo XCT or matching placebo once every 3 months. This puts us on schedule for study completion in Q2 of 2024, a data readout shortly thereafter and then NDA preparation for regulatory filings. Participants who complete the randomized portion of Palisades are also eligible to continue in an extension period, where all participants will receive ARO APOC3. For SSTG, we're conducting the SHASTA-two Phase 2 study in 229 patients randomized 3:1 to receive 10, 25 or 50 milligrams 8 0 APOC3 All placebo on day 1 week 12. Patient with FCS were excluded from this study.

Speaker 3

The primary endpoint is percent change from baseline fasting TG at week 24. SHASTA-two was the study that enabled us and we plan to present results at the American Heart Association in November. The current Phase 3 plan for SHASTA-three includes 2 separate studies, which will be called Shasta 3 and Shasta 4. The idea behind the 2 studies is to have first A faster path to regulatory submission with the Shasta 3 study, a double blind 12 months randomized controlled study of approximately 600 patients with TICHE is greater than 500 milligrams per deciliter. We believe this study plus the large safety database from our Phase 1 and 2 study will be an appropriate package for an initial filing for the SSTG indication.

Speaker 3

The second study, SHASTA-four, is designed to investigate the effect of ARO APOC3 in a more severe population at High risk of developing pancreatitis. SHASTA-four will include patients with TIG greater than 8 80 milligrams per deciliter and recent history of pancreatitis. The duration of the double blind portion of the study will be 2 years and it will be powered to detect difference in the incidence of pancreatitis. This data could enable label expansion to include the indication statement of pancreatitis risk reduction, a key clinical outcome relevant to patients and reimbursement authorities. We have made a lot of progress on the planning and design of these And intend to have discussion with regulators this year and move forward roughly with studies initiation.

Speaker 3

We will provide more details on the study when they begin. In the broader mixed dyslipidemia population, we are conducting the new Phase 2 study in 353 patients randomized 321 to receive 10, 25 or 50 milligrams 808 plus 3 or placebo on day 1 and at week 12. We include an additional cohort of participants receiving 50 milligrams on day 1 week 24. The primary endpoint is percent change from baseline in Fast MTG at week 24 with additional assessment of the changes in various Lipid parameters such as LDL cholesterol, non HDL C, HDL, APO V and VLDL and other biomarkers. Similar to the SDG study results, we believe the Phase 2 data from the Muir study strongly support advancement into a Phase 3 study, and we also plan to present these results at the American Heart.

Speaker 3

The Phase 3 program for this population will be a cardiovascular outcome trial called Cascade. Aerohaposi 3 has demonstrated positive effect on several liquid parameters that represent residual risk Factor for atherosclerosis cardiovascular disease even after LDL is well controlled. The cascade study will select the patient population. We have high risk driven by the high DGs, red man cholesterol and low HDL, all of which are effectively addressed by ARO APOC3. The study will be designed in collaboration with an academic research organization or ARO.

Speaker 3

We're working on all The study design including selection of the patient population, understanding and modeling background events rates, The potential effect size and with that information, we'll define the sample size and duration of exposure to be able to detect a clinically meaningful reduction in cardiovascular events. We are finalizing agreement with the selected CRO and ARO to help us conduct this important We are scheduled to engage with regulators later this year and plan to initiate the CASK study in 2024. Our strategy for HERIO plus C3 is to progressively study in larger and longer studies to potentially bring it to very high prevalence This population that currently do not have adequate treatment options. Our strategy for AeroH3 is more focused on smaller well defined populations, Aero and Streeds being developed as a treatment for homozygous familial hypercholesterolemia or HoFH and potentially in the future subsets of heterozygous familiar hypercholesterolemia or Phase 2 program for 8OSG involved 2 studies. The ARCHES-two Phase 2 study in 204 patients with myxis and the GATEWAY study in 18 patients with HoFH.

Speaker 3

Entering data from the GATEWAY Study was presented at the 91st European Arteriosclerosis Society Congress in May of 2023. A study week 20 administration of 200 milligrams or 300 milligrams ARO ANG3 on day 1 and day 84 led to mean reductions in LDL cholesterol of 48.1% and 44% respectively. These reductions were achieved on top of continuous standard of care including statins, cetaminib, PCSK9 inhibitors and apheresis. These results were on par with an approval monoclonal antibody that also targets ANGPTL3. 803 has a much more convenient and patient friendly dosing regimen of 1 subcutaneous injection every 3 months versus the antibody which requires an intravenous infusion once a month.

Speaker 3

We're currently working on a Phase 3 study design and plan for ARO ANG3 in HoFH and assessing potential other population for future studies. I spoke in a bit more detail on both A08 plus 63 and A083 during our R and D Day in June. I recommend you view the archived webcast or presentation slides on our website if you want more background on the biology of the target, some of the clinical data, the rationale for our belief in their potential and more specific The other late stage program we're working on with our partner Takeda is Assisted on for the treatment of AATD liver disease. In June, updated Phase 2 clinical data from the SEQUOIA study were presented at EASL Congress 2023 and an oral presentation. The clinical results from the Phase 2 Sequoia study Of pacirsilone were clear and compelling.

Speaker 3

Pacirsilone treatment demonstrates substantial effect on severe key market of liver disease. Takeda has taken the lead in conducting the Phase 3 Redwall clinical study. It is designed to enroll 160 adult patients with F2 to F4 fibrosis. The primary endpoint of the study is to decrease from baseline of at least one stage at week 106 in patient with F2 and F3 fibrosis. Aqida is doing an outstanding job of bringing global sites online for the Redwood study and enrolling patients efficiently.

Speaker 3

Additional information on the Redwood study can be found at theredwoodliverstudy.com. I will now turn the call over to Doctor. James Hamilton. James?

Speaker 4

Thank you, Javier. Our pipeline of early stage clinical candidates now includes 8 programs addressing various diseases with gene expression in 4 tissue types, including liver, lung and now muscle and CNS. Of these 8 programs, most are wholly owned And in our core areas of focus, they are in pulmonary, ARO RAGE, ARO MUC5AC, ARO MMP7, In cardiometabolic, ARO PNPLA3, in neuromuscular, ARO DUX4 and ARO SOD1. And we also have ARO C3 for complement mediated diseases and HZN-four fifty seven partnered with Horizon for gout. In addition, we have many undisclosed preclinical programs that should continue to feed our pipeline for years to come.

Speaker 4

We are increasingly looking for opportunities to focus around core areas and we are fortunate that our platform provides us with so many opportunities. Our discovery and clinical development teams continue to be highly productive and efficient. One main benefit of drug development based on our proprietary technology platform is that it allows us to apply learnings from prior programs to each new program. This makes us faster, more precise, and I believe yields drug candidates with a higher probability of success. The TRU platform has given us that advantage for liver directed programs for a few years now.

Speaker 4

We believe we are now in a period where those same advantages exist for lung directed programs and we have the potential to get there over the next couple of years for Muscle and CNS. We held a very comprehensive R and D Day during the quarter, so I'm not going to review all of Arrowhead's I'd like to focus on some important potentially de risking data from our ARO RAGE program. ARRAGE is our RNAi therapeutic candidate 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 Clinical trial in normal healthy volunteers and in patients with mild to moderate asthma. We have also recently filed an amendment to add a cohort of asthma patients with high baseline levels of fractional exhaled nitric oxide or FeNO, which is a biomarker for the degree of IL-thirteen driven type 2 inflammation in the lung.

Speaker 4

Let's talk briefly about what data we generated and reported at the R and D Day. First, with respect to safety and tolerability, to date there No reported serious or severe adverse events, no study withdrawals or drug discontinuations due to adverse events, and safety labs have shown no pattern of adverse changes. There have also been no change has also been no change in the pattern of airway Immune cells and all chest X rays have been read as normal. These encouraging results have also been generally consistent in the ARO MMP7 and ARO MUC5AC programs. With respect to activity, the results to date, especially at the highest dose level, have exceeded our estimates and really represent a best case scenario for target engagement.

Speaker 4

We are measuring soluble RAGE protein or SRAGE in serum after multiple doses in both healthy volunteers and in patients and in BALF after a single dose in healthy volunteers and after multi doses multiple doses at the top dose level. The mean maximum reduction in SRAGE at the 92 milligram dose level at Two doses on Phase 129 was 80% with a maximum reduction of 90% with a long duration of effect that supports every other month dosing. At the highest dose of 184 milligrams, we achieved A similar result after just a single dose with mean SRAGE reduction of up to 76% and maximal reduction of 91%. We also observed continued dose response in BALF with a single inhaled dose of 184 milligrams, achieving mean reduction of 90% and maximal reduction of 95%. We are still collecting data that we intend to report on later this year, including presentations at the European Respiratory Society International Congress in September.

Speaker 4

We believe this is the 1st compelling clinical evidence of gene target silencing in the lung using siRNA. We also believe that these clinical results have a good chance of being predictive of clinical results in other pulmonary programs, including ARO MUC5AC And ARO MMP7, an additional undisclosed preclinical programs. And lastly on RAGE, What data are we generating over the coming months? We will have the chronic monkey GLP toxicology results before the end of the year, which will be needed prior to Phase 2 initiation. We will be getting additional longer term follow-up and multiple dose data at the highest doses in healthy volunteers and in patients later this year and into next year.

Speaker 4

Lastly, we will be getting data from the high FeNO cohorts, which is designed to assess if RAGE knockdown leads to an IL-thirteen specific anti inflammatory effect. This study is not long enough or large enough to expect and efficacy signal, but signals of inflammatory pathway inhibition after short course of exposure would be a welcome result. We expect these data in 2024. I also want to provide an update on our earliest clinical candidates. During the last quarter, we filed CTAs for our 1st muscle CNS candidates, ARO DUX4 and ARO SOD1, respectively.

Speaker 4

ARO DUX4 is the 1st clinical candidate utilizing the TRiM platform to target disease associated genes in skeletal muscle. ARO DUX4 is an investigational RNAi therapeutic designed to reduce expression of the gene that encodes the human double homeobox4 or DUX4 protein as a potential treatment for fascia scapulohumeral muscular dystrophy or FSHD. Ending regulatory clearance, we intend to proceed with a Phase 1, 2a dose escalating study to evaluate ARO DUX4 in adult patients with FSHD Type 1. The study is designed to enroll up to 52 patients. The other CTA filed during the quarter was for ARISTADA 1, the first therapeutic candidate designed for delivery to the CNS, again leveraging the TRiM platform.

Speaker 4

ARRISOD1 is designed to reduce expression of superoxide dismutase 1 or SOD1 and CNS as a potential treatment for patients with amitrophic lateral sclerosis or ALS caused by SOD1 mutations. Pending regulatory clearance, we intend to proceed with a Phase 1 dose escalating study to evaluate ARO SOD1 in adult patients With ALS harboring the SOD1 mutation, which is considered to be causative of ALS. The study is designed to enroll up to 24 patients. I will now turn the call over to Ken Moskowske. Ken?

Speaker 5

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended June 30, 2023 was $102,900,000 or $0.96 per share based on 107,000,000 fully diluted weighted average shares outstanding. This compares with a net loss of $72,000,000 or $0.68 per share based on 105,800,000 fully diluted weighted average shares outstanding for the quarter ended June 30, 2022. Revenue for the quarter ended June 30, 2023 was $15,800,000 compared to $32,400,000 for the quarter ended June 30, 2022. Revenue in the current period primarily relates to our collaboration agreement with Takeda.

Speaker 5

Revenues recognized as we complete our performance obligations, which include managing the ongoing AAT Phase 2 clinical trials for Takeda. There remains $17,000,000 of revenue to be recognized associated with the to collaboration, which we anticipate will be recognized over the next year. Total operating expenses for the quarter ended June 30, 2023 were $118,500,000 compared with $105,300,000 for the quarter ended June 30, 2022. The key drivers of this change were increased candidate costs, partially offset by lower stock compensation expense. Increased candidate costs were primarily due to the progression of the company's pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial, toxicity study and manufacturing costs.

Speaker 5

Net cash used in operating activities during the 3 months ended June 30, 2023 was $21,400,000 compared with net cash used and operating activities of $68,900,000 for the 3 months ended June 30, 2022. We expect our operating cash burn to be $80,000,000 to $90,000,000 next quarter. We expect to spend between 160 and $180,000,000 over the next three quarters to complete our GMP manufacturing facility and related laboratories in Verona, Wisconsin. Turning to our balance sheet, our cash and investments totaled $494,500,000 at June 30, 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 as well as other licensing cash inflows, offset by our operating cash burn along with continuing capital projects.

Speaker 5

Our common shares outstanding at June 30, 2023 were 107,100,000. With that brief overview, I will now turn the call back to Chris.

Speaker 2

Thanks, Ken. We are well on our way to reaching our 2025 goal to grow our pipeline of RNAi therapeutics to a total of 20 clinical stage or marketed products in the year 2025. However, pipeline expansion is just a means to an end. The ultimate goal and the reason we continue to invest in expanding our platform, discovering new candidates, advancing our clinical programs and streamlining the drug manufacturing process, as it allows us to get important new medicines to patients in need as quickly and efficiently as possible. Doing this will also create a sustainable business and provide a steady stream of commercial revenue, which we now have a better line of sight on and a plan that we are executing to get there.

Speaker 2

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

Operator

Thank you. We will now conduct a question and answer session. Our first question comes from Luca Iffy of RBC Capital.

Speaker 6

Great. Thanks so much for taking my question.

Speaker 2

Just a

Speaker 6

quick one here. Wondering if you can comment on what was your reaction to the Roche And on Alim's deal, I guess two questions there. Is AGT a target that you may be willing to pursue? And 2, how should we think about read through to your cardiovascular franchise? And then maybe super quick one for Javier for severe hypertriglyceridemia.

Speaker 6

I was under the impression that you were planning a single pivotal trial with triglyceride as the primary endpoint and pancreatitis as the secondary endpoint. However, it sounds today like you're planning 2 separate studies. So wondering what drove that change? Thanks so much.

Speaker 2

Sure. So I don't know that we have really a position on the El Nihon Roche deal good for them. We are not working on that target. It didn't fit into where we see opportunities in the space. And I don't think it reads through to our cardiometabolic assets.

Speaker 2

I think those are really orthogonal to each other. Javier, do you want to address this?

Speaker 3

Yes. So, hi, Luca. I think when we presented the Clinical program for A0843 at the R and D day. I think I mentioned that we're doing 2 studies. The first one, which is The one that would be the primary source of registration is the SHASTA-three, which is 600 patients approximately with TG higher than 5 100.

Speaker 3

We will start in parallel the study SHASP-four in patients with higher Tg levels and Recent past history of pancreatitis, that study would be approximately 200 patients and that will not be part of the initial filing, There will be a subsequent interaction with the agency, hopefully to get pancreatitis risk reduction in that study And eventually add that to the label. So it was planned, but there is a sequence here. 1st Shafter 3 Registration and second, Shasta IV label expansion.

Operator

Our next questions come from Maury Raycroft of Jefferies.

Speaker 7

Hi, congrats on the progress and thanks for taking my questions. For your pulmonary platform, you've got the late breaker title for your range program at ERS How much asthma patient data can we expect in this update? Or will it be longer term follow-up from this ad and mad healthy volunteer part of the study. And then separately, wanted to clarify for the preclinical tox studies, are those 6 months or 12 months? And it sounds like you're somewhat beyond where you were, with Enoch on safety.

Speaker 7

Can you just, elaborate more on that as it relates to the preclinical and clinical data that you've got so far.

Speaker 4

Yes, sure. I can take the first part of the question. The data that will be presented at European Respiratory is primarily an update on the healthy volunteers satin mab Duration, we may have a little bit more duration data from the 1st patient cohort, the asthmatic patient cohort, but we won't have additional patient data at that time. And then regarding the tox studies, this is the 6 month rat TOX study that Chris was referring to for both RAGE and MMP7.

Speaker 2

Yes. So we're still waiting on the 9 month monkey talks. And you mentioned that it sounds like we are Beyond where we were with the AROENAK and I think that is true. We are using substantially Less material, in all of these candidates and the chronic tox studies and that appears to

Speaker 4

be bearing fruit for us.

Speaker 7

Got it. Okay. Thanks for taking my questions.

Speaker 3

You're welcome.

Operator

All right. Thank you. One moment for our next question. Our next question comes from Patrick Trucchio of H. C.

Operator

Wainwright and Company.

Speaker 8

Thanks and good afternoon. Just a few follow-up questions. The first one is just Around the ARROWAGE chronic tox data, can you just clarify, is this data, would it be expecting Q3 or Q4 of calendar 2023. And how would you expect it to differ for that, which was Reported from ARO ENAC, just in terms of how are the doses for these compounds, compared to ENAC In these studies specifically. And then separately, just also regarding the pulmonary programs in clinical development, There are several 3 programs in clinical development, at least one in preclinical development.

Speaker 8

Can you give us an idea of what targets you could include for your pulmonary platform as it expands. And to what degree would you be looking at targets with genetic or clinical validation as you look to build out this pulmonary pipeline going forward.

Speaker 2

I'll take the second and Jim can take the first. I've got the easy one. The answer is we can't give you too much guidance on undisclosed targets. We are I get your point that of course we will be looking at genetically validated targets Clinically validate targets and that is always our preference. You've heard us say before, our goal here is to take as little Target risk as we can.

Speaker 2

And one way to do that is to work on the most validated targets that we can. So we will certainly be doing that. Will we expand beyond that into some targets that have less validation? Probably. But my hope is that we will Is it in the near to midterm at least?

Speaker 2

The targets we're focusing on will be well validated. James, you want

Speaker 4

to address Yes, sure. Hi, Patrick. Thanks for the question. Regarding tox, so the doses are across the board lower for the new pulmonary programs, lower in terms of exposure. I think most importantly, less frequent.

Speaker 4

If you recall, we used A day 1, 2, 3 every 2 week dosing regimen for Enac. And then for our current programs, the dose frequency is Spread out much less frequent. We're dosing either monthly or every 2 months in the chronic tox studies.

Speaker 2

And if you look if you compare the exposure, I want to say it spans From ENAC being 4 times to ENAC being 20 times the amount of material compared to the various Newer compounds we're working on and that is entirely a testament to how much more potent these follow on compounds are.

Speaker 9

Great. Thank you so much. You're welcome.

Operator

Thank you. One moment while we queue our next question. Next question is from Keay Nakae of Chardan.

Speaker 9

Hi, thanks. Question about partnering specifically for the CV assets. You're going to Go it alone initially with some of these Phase 3s, but you do have an outcome study out there planned. If you see success going it alone, Does that make it more or less likely that you want to partner to do an outcome study?

Speaker 2

So we are planning on doing the outcome study for ARO APOC3 by ourselves. We see that as a very interesting asset and the data have been very compelling. So we are happy to take that on ourselves. Doesn't mean that we're not going to partner that at some point geographically, potentially, who knows, but we are happy to take on the CBOT risk ourselves. And so that's our plan right now.

Speaker 3

Okay. Thanks.

Speaker 4

You're welcome.

Operator

Thank you. One moment for our next question. Our next question comes from Edward Tenthoff of Piper Sandler.

Speaker 9

Great. Thank you very much. So much going on and excited about the progress. As we look at the pipeline, What should we be expecting from C3? I know that we're in these Patient cohorts now of these 3 glomerulopathy and maybe IgA nephropathy.

Speaker 9

When could we get data from those? And what would be your ultimate view for advancing ARO C3 further. Thanks.

Speaker 4

Yes. In terms of when we should get data, we're probably looking at End of next year, so end of 2024. And what was the other part of the question?

Speaker 9

Just how would you anticipate progressing from there?

Speaker 4

Yes. I mean, I think it Depends on what the data show us. I think there are several other examples out there of Phase Three programs that are ongoing for IgA nephropathy and C3 glomerulopathy with biomarkers as primary endpoints. So I think our late stage programs would probably look something similar to those.

Speaker 9

Okay, great. Thank you. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from Mani Foroohar of Leerink Partners.

Speaker 9

Hey, guys. Thanks for taking the question. A quick one around how you think about building The CD side of the franchise, could you lay out what your estimation is for what is that C BOT Should cost and probably cascade now. Presumably given that you plan to go it alone, I would assume that you've got A reasonable budget estimate for what that might cost. And can you walk us through sort of how we should think about sort of expansion in OpEx As you build out the infrastructure to support, what will be a larger study than you guys have ever done standalone before?

Speaker 2

Sure. So we can't give you yes, we are putting together estimates about what that's going to cost. However, we still haven't had our end of Phase 2 meeting with the FDA, we are putting together our proposal. And so I expect that we'll be speaking with them this year. Until we have that conversation, until we have feedback It's going to be very difficult for us to give you good numbers just because we want better clarity.

Speaker 2

We will be happy to give you some estimates, Some guidance once we have those discussions, but at this point, it's a bit premature.

Speaker 9

Okay. So we should expect We should expect some numerical guidance around that. Post the end of Phase 2 meeting, is that a reasonable expectation for us to have?

Speaker 2

Yes. I think that's reasonable. We need to have feedback from the FDA. We need to incorporate that into our plans And then have that that filled down into our budget. So sometime over the next couple of quarters, We should have a good estimate for you and then we will be happy to chat about it at that point.

Speaker 3

Okay. That's helpful. Thanks guys. You're welcome.

Operator

Next question comes from Mike Puls of Morgan Stanley.

Speaker 10

Hey guys, thanks for taking the question. Maybe just Follow-up on the pulmonary program, specifically to the MMP-seven program. Can you just remind us when we might see the initial clinical data there? And Should the focus be just on target knockdown or are there other data points that we should be focused on as well? Thank you.

Speaker 4

Yes, I think so that as we had stated at the Analyst Day meeting, we really think the focus There should be on the patients since those are the population that has upregulated MMP7 in the valve And then the serum. So that's what we'll be focusing on. We're still in the healthy volunteer component of the study. And so we don't know how the patient cohorts will enroll just yet. Depending on enrollment, it's conceivable we could have some data by end of next year.

Speaker 11

Got it. Thank you.

Operator

Thank you. One moment for our next question. Our next question is from Mayank Mamtani of B. Riley Securities.

Speaker 12

Good afternoon, team. Thanks for taking our questions. So maybe just on the FeNO high asthma patient cohorts That you're just starting to enroll. Could you clarify the dose levels being looked at and sort of what Initial number of patients you intend to have before you may look to disclose something externally. And If you could comment how this could be same or different relative to your execution on the mild to moderate as of MAB patient cohort?

Speaker 12

And then I have a quick follow-up.

Speaker 4

Sure. So there are the 2 highest dose levels What we're looking at in the Pheno cohort, so that's the 92 and the 184 milligram dose levels that we studied in the healthy volunteers. We'll investigate those doses in the Pheno cohorts as well. And we're doing a 16 Per cohort. In terms of how many we'd have to have enrolled before we disclose data, I can't really give you a clear answer to that.

Speaker 2

Yes. So let's just assume that we'll disclose those once those cohorts are complete. It wouldn't make much sense for us to feed that out dribs and drabs. I think we'll wait until that study is over.

Speaker 12

Got it. And in terms of your Asmog cohort data before the end of the year, could you just clarify, would you also include some valve bronchoscopy data Also in addition to serum data on the higher dose levels, just clarify that.

Speaker 4

The asthma patients actually don't undergo bronchoscopy. So we don't have a BALF data from the asthma patients. It's only the only SRAGE Measure we get is from the serum in the asthma patients.

Speaker 12

Got it. And just lastly on the financials, the Two milestones earned from GS Chem. Could you just clarify how they will be sort of modeled On your P and L in terms of recorded revenues, amortization schedule, etcetera?

Speaker 5

So those milestones have already been recorded in revenue. They are not amortized over time. We actually recorded those the quarter before last we received the cash in this past quarter.

Speaker 12

Understood. Thanks for taking our questions.

Speaker 3

Thank you.

Operator

Okay. Thank you. One moment for our next question. Next question comes from Ellie Merle of UBS.

Speaker 13

Hey guys, thanks so much for taking the question. Just a follow-up on the pulmonary patient cohort timing. I guess for RAGE, just where are you in the enrollment of those high Pheno cohorts? I think you just mentioned you had 16 per cohort. And then for MUC X5AC, I guess, where are you in enrollment of the asthma patient cohorts?

Speaker 13

And have you started enrolling in the COPD cohorts? And then just for MUC5AC, what should we expect in terms of the timing of potential patient data there? Thanks.

Speaker 14

So

Speaker 4

on the Pheno cohorts, those the amendments to add those cohorts, I think are just They've been filed and so they're working their way through the various regulatory bodies and ethics Committees and we haven't enrolled any hypheno patients just yet. And then the MUC5AC patient cohorts We're enrolling into the this actually all the cohorts are open so that all of the asthma patient cohorts are currently open for MUC5AC and we'd be looking Assuming enrollment goes well, probably having data mid to late next year as well. And then your last question, I believe was on the COPD cohorts for Mokwaile AC, that's a similar situation to the Pheno cohorts. We've got the amendments filed and so those are working their way through to get ethics and regulatory approval. So we'd expect to have those being enrolled later this year aiming to have data maybe end of next year.

Speaker 13

Great. Thanks very much.

Operator

All right. Thank you so much. One moment for our next question. Next question is from William Pickering of Bernstein.

Speaker 11

Good afternoon. Thanks for taking my question. So on adipose, you gave a really interesting update at the R and D Day, but you didn't disclose the Target. I was wondering what the next steps on that program are and when we might learn more about it. Thank you.

Speaker 2

Yes, we have not disclosed targets. We are still in the early days a bit with Adabos. We have some ideas or targets, but we are not prepared to show any more data there Quite yet. My hope is that you'll start to hear more about the clinical plan for adipose in 2024.

Speaker 11

Got it. Thanks. And then on HEFH, it sounds like you've become less definitive on the path forward for ANG3 3 in that indication versus last year. I was wondering if you could just talk about sort of what aspects of your thinking have evolved and how sure you are that you will in fact take it forward to Phase 3?

Speaker 3

Yes. So I think the issue here is whether we can develop The indication of hgfh without a full cardiovascular outcome trial. And there is Some presidents support that and some others don't. So we are working our way to understand if there is a subpopulation of h efh That can be pushed forward into a regulatory path without the requirement of a cardiovascular ARGON trial. So that's kind of where we're right now.

Speaker 11

Got it. Thank you so much.

Speaker 6

Great. Thanks so much. Just going to make it in again. Maybe circling back on RAGE, James or Javier, What are you hoping to see for the initial readout for Pheno? I understand the follow-up will be short, but what levels do you anticipate a baseline?

Speaker 6

And what kind of Are you hoping to see there? Again, just trying to understand what's the bogey for initial success there? And then maybe Ken, if I may, I think your prior 10 Q suggested that the build of the facility in Verona, Wisconsin was going to cost $200,000,000 to $260,000,000 However, the 10 Q today Suggested that number has gone up to 260 to 280. 1, is that correct? And if 2, what drove that change?

Speaker 6

Thanks so much.

Speaker 2

Ken, do you want to start with that?

Speaker 5

So we have seen certain cost increases as well as about a quarter of a delay in that project. So you will see that that total cost comes in a bit higher than we had originally estimated. That's really good.

Speaker 3

Yes. So Luca, we do have a good point of reference for the phenol therapeutic affair and that's the dupilumab and Trilumab programs in which they saw somewhere between 40% 48% reduction. I think it's either let me call which one, but that's the range I think we believe we'll be convincing that the range inhibition, it does work through the IL-thirteen. So that's the range that we're seeing. I think

Speaker 2

the baseline is 20. Great.

Speaker 3

Greater than 20. Pheno and people with eosinophilos greater than 200. So it's the same population very much of those point of reference if you will Studies and we expect to see something similar. Thanks so much.

Operator

All right. Thank you. One moment for our last question. This question is from Brennan Smith of TD Cowen.

Speaker 14

Hi guys. Thanks for taking my questions. Maybe a couple

Speaker 11

of quick ones from us.

Speaker 14

Really, I guess, how are you kind of thinking about which indications to move there? Are you really thinking to focus more on final indications given that the tissue is a little bit easier to get to? Or really what is kind of your strategy in deciding where to go there? Kind of just trying to understand where you think is especially right for RNAi. And then if I could just really quickly, I wanted to ask a little bit more about kind of your financing plan.

Speaker 14

Obviously, you have decent balance sheet for now. But I mean to your point, you haven't raised equity in a few years, but you have a fair number of important readouts coming up and a lot of studies going on. So as we're kind of just looking at cash Over the next few years, well, really it's kind of your strategy for the next 18 months, 24 months.

Speaker 2

Sure. I'll take that and then I'll let Javier and James Take a private one. So look, as I mentioned in the prepared remarks, partnering It's really a cornerstone of our financing strategy. And so we are exploring a number of different options Really as we speak that are important for us. There are also other avenues.

Speaker 2

We are also exploring the possibility of doing some specific product Financing for APOC3, we know that's going to be CBOT, we know that's going to be expensive. And we are exploring The cost of capital for financing that in return for some royalties on that product for some period of time, Things of that nature. And I think that we can get a long way to our financing needs through those levers and we are looking to pull those levers Certainly in the near to midterm, I think it's important for us.

Speaker 4

And then in regards to the CNS targets, We're interested in targets that may involve the spinal cord, as you mentioned, but also targets in the cortex. We can get good knockdown in various parts of the cortex. And we're looking at Some targets in the deeper brain, although that can be a little bit more challenging to achieve the same level of knockdown. And then we like as we do for other tissue types targets with a degree of genetic validation that are either genetically defined or have some level of genetic validation behind them and preferably a degree of clinical validation with other modalities that are out there that have shown success that we could follow on.

Speaker 14

Great. Thanks, guys.

Operator

Okay. Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Chris Anzalone for closing remarks.

Speaker 4

Thanks everyone for joining us today and

Speaker 2

I hope you have an enjoyable summer and we

Speaker 3

look forward to talking to you soon.

Operator

All right. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Arrowhead Pharmaceuticals Q3 2023
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