Arrowhead Pharmaceuticals Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 14 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. To ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw your question, I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead.

Operator

Please go ahead, Vince.

Speaker 1

Thank you. Good afternoon, everyone, and

Speaker 2

thank you for joining us today to discuss Arrowhead's results for its fiscal 2024 Q2 ended March 31, 2024. With us today from management are President and CEO, Doctor. Chris Anzalone, who will provide an overview of the quarter Doctor. Bruce Given, our Interim Chief Medical Scientist, who will provide an update on our cardiometabolic pipeline Doctor. James Hamilton, our Chief of Discovery and Translational Medicine, will provide an update on our earlier stage programs and Ken Myszkowski, our Chief Financial Officer, will give a review of the financials.

Speaker 2

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

Speaker 3

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. As we discussed in our last conference call, AROED has reached a point where our business requires a greater degree of focus. We are in the process of building out our expertise within the cardiometabolic space and focusing more of our spend in that area. These are wholly appropriate actions because our cardiometabolic programs represent a substantial amount of potential near, mid and long term value.

Speaker 3

We need to ensure that they are properly resourced both from a financial and human capital standpoints and that they are at the center of investor analysis of our business. This is a good thing for Arrowhead. We have 2 late stage drug candidates with data across diverse populations

Speaker 1

from

Speaker 3

ultra rare to highly prevalent spanning over a 1,000 human subjects. We see a train of potential value creation with Clozasiran and zogasiran and expect to file NDAs or supplements to expand those labels almost every year over the next 5 to 6 years. This is a pipeline within just 2 drugs and I believe we will start unlocking value in the very near term. Further, we expect to expand our cardiometabolic reach into obesity and metabolic disease with 2 additional drug candidates reaching the clinic this year. The plazasiran PALISADE Phase 3 study in patients with familial chylomicronemia syndrome or FCS is clinically complete.

Speaker 3

The last patient's last visit occurred last week. The database should be locked over the next 2 weeks and I expect to disclose top line data at our cardiometabolic webinar in June with a fuller dataset hopefully presented this year at an appropriate medical conference. We believe that plazasiran will become our first commercial product and we are preparing for an NDA submission for use in FCS patients by the end of the year with a potential launch in 2025. To this end, our commercial preparations are well underway. We have begun building our commercial team including people with deep expertise in cardiometabolic marketing, commercial operations and market access.

Speaker 3

We're also in the later stages of solidifying a specialty pharma and patient hub system that will be ready to help ensure FCS patients get plazasiran soon after its anticipated approval. Beyond our commercial infrastructure, we have begun building out our medical affairs team with a focus on field support to help clinicians better understand APOC3 inhibition. Additionally, we have begun helping physicians who request early access to plazasiran to do so for appropriate FCS patients prior to approval. We are also studying plazasiran in the broader severe hypertriglyceridemia or FHTG population. Toward that end, we have begun screening patients in 2 Phase 3 studies, SHASTA 3 and SHASTA 4 and are preparing a 3rd Phase 3 in SHASTA 5.

Speaker 3

Of course, it is early, but our aggressive goal is to complete enrollment of those studies in 2025. CHESTA-three and CHESTA-four are 52 week studies and SHASTA 5 is an acute pancreatitis study that will follow patients until a set number of pancreatitis events is reached. Turning to zidasiran, we submitted briefing documents including Phase 3 study designs for patients with homozygous familial hypercholesterolemia or HoFH to the FDA and expect an end of Phase 2 meeting this month. We hope to initiate Phase 3 soon after we receive regulatory feedback. We have also completed our analysis of how to move forward in the large mixed dyslipidemia population with a cardiovascular outcomes trial or CBOT.

Speaker 3

We have submitted our proposal to the FDA and expect feedback over the next month and then we'll seek input from the EMA and other regulatory authorities. We will provide detailed information about our plans, expected timing and costs once we know we have regulatory alignment on design. Plodasiran and zidasiran are important candidates for us because they offer new and expanding commercial opportunities over the next several years and because clinical data have suggested that they have a high probability of success. Bruce will talk more specifically about results, but a lot of data have been presented recently we have been encouraged by the safety and tolerability, target engagement and downstream changes in lipids and lipoproteins across multiple patient populations. As I mentioned, over a 1,000 people have enrolled in a plazasiran and zodasiran clinical studies.

Speaker 3

Safety and tolerability data have given us confidence that these could be appropriate therapeutics not only for small and medium sized populations, but also importantly broad mixed dyslipidemia populations. Target engagement measured by circulating protein knockdown of APOC3 for rozasiran and ANGPTL3 for zodasiran have been impressive and consistent. Exact numbers will vary a bit depending on the study population, duration of treatment, dose level and measurement time point. However, we are consistently seeing mean max knockdown exceeding 75% to 90% with a long duration of effect that supports a quarterly dosing interval for pleodasiran and The downstream change in various lipids and lipoproteins have been favorable and consistent with published genetic data in APOC3 and ANGPTL3 deficient humans and consistent with experimental data in animals receiving APOC3 and ANGPTL3 inhibitors. Similar to target engagement, the exact changes varied I'm sorry, the exact changes varied a bit between different study populations, but generally speaking, subjects treated with posasiran and orzodasiran showed improvements in multiple atherogenic lipid and lipoprotein levels, including remnant cholesterol, which is increasingly viewed as an important target for new therapies to address atherosclerotic cardiovascular disease or ASCVD.

Speaker 3

Numerous epidemiologic studies have shown an association between higher triglyceride rich proteins or TRLs and an increased risk of ASCVD. Despite potent LDL cholesterol lowering therapies, residual ASCVD risk persists due in part to high levels of atherogenic TRLs. Remnant cholesterol is also believed to be a major contributor to the residual risk of atherosclerotic cardiovascular disease after LDL is well controlled. We believe plazasiran and zodasiran represent significant opportunities to help a lot of patients. For all the reasons I mentioned, we are moving as quickly as possible toward treatments in FCS, HoFH, SHCG and the very large population of patients with ASCVD due to mixed dyslipidemia.

Speaker 3

We believe we can help a large number of patients and create a substantial amount of value with posasiran and zidasiran alone. However, it makes sense to leverage our growing cardiometabolic capabilities by expanding the vertical. We expect to introduce 2 new candidates into the clinic in the 4th quarter aimed at obesity and metabolic disease. These are ARO INHBE, a liver directed candidate targeting INHIBIN E and an undisclosed candidate targeting adipose directly. We will discuss those in more depth during a focused webinar in the summer.

Speaker 3

We continue to make progress beyond the cardiometabolic vertical as well. Within pulmonary, the ARO MMP7 and ARO MUC5AC Phase 1 studies continue to enroll patients and the ARO RAGE Phase 1 study is enrolling high FeNO patients with moderate to severe asthma. The FeNO cohorts have been slow to enroll because the high baseline FeNO required of the study has led to a high screen fail rate. We believe in the candidate and the target engagement data has been what we had hoped for. So we are not going to wait for that to read out before progressing to a Phase 2 study.

Speaker 3

We have designed a Phase 2 study in asthma patients and are moving toward launching that in the Q4. ARROW RAGE tolerability has been good in the Phase 1 study. We have seen clear evidence of substantial target engagement in the Phase 1 and data in animal models were very encouraging. The RAGE pathway has also generated a good amount of KOL interest, so we are excited to move forward as quickly as we can. Moving to our new programs, during the last quarter, we began dosing in 2 new clinical programs ARO CFV for the treatment of diseases associated with activation of the complement pathway and ARO DM1 for the treatment of Type 1 myotonic dystrophy or DM1.

Speaker 3

These programs put well with ARO C3 and ARO DUX4 respectively. The former is enrolling the patient portion of a Phase onetwo study and together with ARO CFB provides a focused portfolio in complement mediated diseases. ARO DUX4 is enrolling FSHD patients in a Phase onetwo study and together with ARO DM1 creates a focused skeletal muscle portfolio. We now have 14 clinical stage programs, 10 of which are wholly owned. I expect we could have 18 clinical programs by the end of the year.

Speaker 3

This is a lot and they certainly can be difficult to track and properly value by investors. We think of our wholly owned assets in a series of verticals. As we have discussed, the cardiometabolic vertical is our primary focus. But beyond that, we have a pulmonary vertical, a complement vertical, a muscular disease vertical and by the end of the year CNS vertical. We expect to partner within these 4 verticals in order to limit our spend and bring in capital to properly fund our cardiometabolic vertical and our other research programs, but we believe this is the way investors should look at our pipeline.

Speaker 3

Understanding and properly valuing these assets can still be difficult, so we recently announced the upcoming 2024 summer series of R and D webinars to highlight some of our work. Starting this month and continuing each month through September, we will host 5 webcast events. Each event will feature presentations by Arrowhead team members and external key opinion leaders who will discuss disease areas and treatment landscapes. We will talk about Arrowhead's candidates, the biological rationale and preclinical data supporting each candidate and our clinical development strategy for each pipeline program. The series is designed to highlight important value drivers in a focused way.

Speaker 3

The summer series schedule is as follows. May 23 is Muscle Vertical Day where we will cover ARO DM1 and ARO DUX4. June 25 is Cardiometabolic Day, where we will give an overview of blazasiran and zodasiran data to date, including Phase 3 PALISADE's FCS data and talk about the future of the programs and the diseases we aim to treat. July 16 is pulmonary day, which includes ARO RAGE, ARO MUC5AC and ARO MMP7. August 15 is Obesity and Metabolic Disease Day, where we will talk about ARO I and HBE and the undisclosed adipose candidates.

Speaker 3

And September 25 is CNS Day, where we will highlight our central nervous system programs including updates on the platform and on a specific undisclosed candidate plans to enter clinical development later this year. In addition to the summer series, we also recently announced a busy month of presentations at medical and scientific meetings. These include presentations at TIDES USA, the American Thoracic Society 2024 International Conference, the International Conference on Antiviral Research, European Atherosclerosis Society Congress and the National Lipid Association Scientific Sessions. These are all planned for May. In addition, we plan to present on many of our programs at several medical meetings throughout the year.

Speaker 3

They have a lot going on including a lot of exciting results to talk about. During the last few months, we've also strengthened our balance sheet with 2 inflows. The first was out in January when we announced an equity financing with gross proceeds of $450,000,000 The second was just announced last week. That was a $50,000,000 milestone payment that we received from Royalty Pharma following the completion of enrollment of the Phase 3 OCEAN A outcomes trial of opaciran being conducted by Amgen. We originally licensed opaciran previously called ARO LPA to Amgen in 2016 and then monetized our future royalty stream and a transaction with Royalty Pharma in 2022.

Speaker 3

Arrowhead is further eligible to receive up to an additional $375,000,000 from Amgen and $110,000,000 from Royalty Pharma in aggregate development, regulatory and sales milestone payments associated with opaciran. This is a good example of how we use partnering and creative financing structures as important parts for our long term financing strategy. We are always working on potential future deals and NOW is no exception. We are confident that we can complete additional transactions this year to further strengthen our balance sheet, support future clinical development and commercialization of our wholly owned programs. With that overview, I'd now like to turn the call over to Bruce.

Speaker 3

Bruce?

Speaker 1

Thank you, Chris. Good afternoon, everyone. Chris discussed plazasiran and zodasiran at a high level, but I want to spend some time going over a few specific things. First, the data on the SHASTA-two study of plazasiran that we presented at ACC and simultaneously published in JAMA Cardiology 2nd, the design and status of SHASTA-three, four and five 3rd, expectations for our upcoming EAS and NLA presentations and lastly, a review of the soon to report PALISADE study of plazasiran in familial chylomicronemia syndrome or FCS. Let's jump right in with the SHAFTA 2 study of plazasiran.

Speaker 1

To review, plazasiran is designed to reduce production of apolipoprotein C3 or apoc3, a component of triglyceride rich lipoproteins, TRS and a key regulator of triglyceride metabolism. APOC3 increases plasma triglyceride levels by inhibiting breakdown of TRLs by lipoprotein lipase. It also inhibits uptake of remnant cholesterols derived from TRLs by hepatic receptors in the liver. The SHASTA-two study was a double blind placebo controlled Phase 2b study in adults with severe hypertriglyceridemia or SHTG. Three dose levels of plazasiran, 10 milligrams, 25 milligrams and 50 milligrams were evaluated against placebo in 229 participants with fasting triglycerides of greater than or equal to 500 milligrams per deciliter at screening.

Speaker 1

Each participant received subcutaneous injections on day 1 and at week 12 with subjects that followed all the way out to week 48. The primary objective of the study was to evaluate the safety and efficacy of plazasiran in adults with SHTG and to select the dosing regimen for later stage clinical studies in this patient population. SHTG is characterized by triglyceride levels greater than 500 milligrams per deciliter and is known to significantly increase the risk of ASCVD and acute pancreatitis, often with recurrent attacks requiring repeat hospital admissions and worsening outcomes. Pancreatitis risk is proportional to the number, characteristics and concentrations of TRLs and increases as triglycerides increase. Currently available drug therapies generally don't sustainably reduce triglycerides below the pancreatitis risk threshold.

Speaker 1

In addition to SHASTA-two, there is also an open label extension study that is ongoing. So final data from the double blind treatment period of SHASTA-two were presented at ACC and published in JAMA Cardiology. These were exciting data, which received a lot of attention and were well received at ACC and in subsequent discussions with physicians. With respect to pharmacologic activity, treatment with plazasiran led to dose dependent placebo adjusted reductions in triglycerides at 24 weeks, which was the primary endpoint. The reductions observed were minus 49%, minus 53% and minus 57% for the 10, 25 and 50 milligram doses respectively.

Speaker 1

For perspective, currently available drugs usually would be expected to produce reductions of maybe 20% or so. As expected, these triglyceride reductions were driven by corresponding placebo adjusted reductions in APOC3 of minus 68%, minus 72%, minus 70% at week 24. All these measures were highly statistically significant. Week 24 measurements represent the point of minimal efficacy referred to as trough measurements just prior to the next planned quarterly dose. Mean maximum non placebo adjusted reductions from baseline and triglycerides at APOC3 were up to 86% 90% respectively and typically occurred around week 16 or week 20.

Speaker 1

Importantly, we also looked at the percentage of patients who met the goal of reducing triglyceride levels below 500 milligrams per deciliter, a level above which the risk of acute pancreatitis meaningfully increases. Among subjects treated with plazasiran at the week 24 trough time point, greater than 90% receiving the 25 or 50 milligram doses achieved a triglyceride level less than 500 milligrams per deciliter. In addition, around half of the subjects at these doses achieved normal triglyceride levels of less than 150 milligrams per deciliter at week 24, which is surprising given the mean starting levels of almost 900 milligrams per deciliter. In addition to reductions in triglycerides, subjects treated with plazasteride also showed improvements in multiple atherogenic lipid and lipoprotein levels, including remnant cholesterol, HDL cholesterol and non HDL cholesterol. Clozasir demonstrated a favorable safety profile at Shasta 2, observed adverse events generally reflected the comorbidities and underlying conditions of the study population.

Speaker 1

The adverse event and serious adverse event profiles were generally similar across treatment groups, although worsening of diabetes did appear more frequently in the 50 milligram dose. All serious treatment emergent adverse effects were deemed not related to plazesseride. Overall then the deep consistent and sustained reductions in APOC3 and triglycerides and improvement in multiple atherogenic lipoprotein levels gives us a level of confidence as we initiate Phase 3 studies in patients with SHTG. These 3 Phase 3 studies are called SHASTA-three, SHASTA-four and SHASTA-five. I will start with descriptions of SHASTA-three and SHASTA-four since they are very similar to each other and are being initiated now.

Speaker 1

Both studies are global, randomized, double blind, placebo controlled Phase 3 studies to evaluate and safety of plazasiran in adult subjects with SHTG. Eligible subjects will be randomized to receive either posasiran at 25 milligrams or placebo. The double blind treatment period duration will be 1 year, where subjects receive a total of 4 quarterly doses. After month 12, eligible subjects will be referred I'm sorry, will be offered an opportunity to continue in an optional open label extension. The primary endpoint for the studies is placebo adjusted percent change in fasting triglyceride levels at month 12.

Speaker 1

SHASTA-three is planned to include approximately 400 subjects and Shasta IV is planned to include approximately 300 subjects. We've begun activating sites for these studies and we'll activate others as quickly as possible. There are already patients in screening, so we expect to have the first patients dose soon. This has moved very rapidly and I'm proud of the work done by all of the Arrowhead teams involved, our CRO and the investigators and institutions that are participating in the studies. I also want to give a quick update on Shasta V.

Speaker 1

We are still finalizing some details about the study, but it is currently planned as a multi center, randomized, double blind, placebo controlled Phase 3 study to evaluate plazasiran versus placebo in approximately 140 adult subjects with SHTG at high risk of pancreatitis. Subjects must have triglyceride levels greater than 8 80 milligrams per deciliter and a history of acute pancreatitis events that will be randomized in a one to 1 ratio to receive either posasirate 25 milligrams or placebo dosed quarterly. The primary endpoint of the study is incidence of adjudicated acute pancreatitis events compared with placebo. Now that SHASTA-three and SHASTA-four have been initiated, the plazasiran clinical development team is finalizing the SHASTA-five design and working to initiate the study as soon as possible. We think performing a dedicated study in this high risk population, if successful, will be useful for payers on a global basis.

Speaker 1

Next, I want to highlight some upcoming presentations on plazasirad and zodasirad. At the European Atherosclerosis Society or EAS on May 28 29, we will be presenting final results from the MIRROR study of plazasiran and the ARCHES II study of zodasiran. Both of these studies are in mixed hyperlipidemia populations recruited with identical enrollment criteria. For clarity, this field is moving away from the term mixed dyslipidemia to the term mixed hyperlipidemia. So expect to see and hear the 2 terms used synonymously in the short term, but in the longer term expect to hear mixed hyperlipidemia used more frequently.

Speaker 1

I already described plazasiran mechanistically, but to review zodasiran is designed to reduce production of angiopoietin like protein 3 or ANGPTL3, which like APOC3 is a hepatocyte expressed regulator of triglyceride metabolism. However, ANGPTL3 while similar to APOC3 and having an effect on lipoprotein lipase also impacts endothelial lipase and non LDL receptor mediated uptake of LDL. As such, by reducing ANGPTL3, sodaciran causes some downstream changes in atherogenic lipids and lipoproteins that are different than those produced by plazasiran. These include additional reductions in LDL C and apolipoprotein B, while also driving similar reductions in triglycerides, remnant cholesterol and non HDL cholesterol as those see with plazasirac. This is why we are taking a very close look at the various options for Phase 3 clinical development in an ASCVD population with mixed hyperlipidemia, a population of patients estimated to be around 20,000,000 in the U.

Speaker 1

S. Alone. We've engaged with external advisors and have completed exhaustive analysis of potential designs and studies. We have recently completed a submission to the FDA on a potential study design and we'll have additional interactions on the specifics over the coming 30 to 60 days. We will talk more about our plans after we receive feedback from FDA and other key agencies.

Speaker 1

Upstream of that, the coming EAS presentations will be a good way for folks outside the company to see some of the data that have gone into our thinking. We and our KOL advisors believe that there really is not a bad choice between the 2. As you will see results from both Muir and Arches 2 look compelling. Now moving to the PALISADE study of plazasiran in patients with FCS. PALISADE included FCS patients who were genetically confirmed and somewhere around half who were clinically diagnosed.

Speaker 1

FCS is a severe and ultra rare genetic condition often caused by various monogenic mutations. FCS leads to extremely high triglyceride levels, which can lead to various serious signs and symptoms, most notably including acute and potentially fatal pancreatitis. Currently, the available therapeutic options leave most FCS patients persistently vulnerable to pancreatitis. The PALISADE study is a Phase 3 placebo controlled study to evaluate the efficacy and safety of plazasiran in adults with FCS. The primary endpoint of the study is percent change from baseline in fasting triglycerides at month 10.

Speaker 1

A total of 75 subjects were randomized to receive 25 milligrams of plazasiran, 50 milligrams of plazasiran or matching placebo once every 3 months. Participants who completed the randomized period are eligible to continue in a 2 part extension period where all participants are receiving plazasiran. The last study visit for the last patient enrolled in PALISADE occurred about a week ago. This will be Arrowhead's 1st completed Phase 3 study and represents a significant milestone for the company. Importantly, it brings plazasiram potentially closer to the FCS patients that may benefit.

Speaker 1

Our goal now is to work efficiently to generate initial study results and provide a top line data readout as soon as our Cardiometabolic Webinar next month and subsequently present a fuller dataset at an appropriate medical meeting. This is an exciting time at Arrowhead as we eagerly await these results. I'll now turn the call over to James.

Speaker 3

Thank you, Bruce. The discovery and early development teams made some notable progress over the last quarter and we also have a busy several months ahead of the summer series of R and D webinars that Chris mentioned earlier. We do an enormous amount of work in seeking to innovate new medicines that is often only recognized once there is a clinical candidate. So I wanted to talk for a moment about how we see our priorities and the goals of the team. Number 1 is to push TRiM, the TRiM platform to new cell types and continually seek to optimize the safety and activity of each construct.

Speaker 3

Number 2 is to develop new candidates against attractive gene targets where using RNA interference is the only or best method to inhibit the target. Number 3 is to conduct IND enabling non clinical studies and 1st in human clinical studies in the most efficient manner possible to get meaningful readouts that accelerate mid and late stage development. And number 4 is to develop assets which can be readily partnered and support business development activities, which remains a key strategic focus as our pipeline has continued to grow. I think we've made good strides in these areas recently. So let's talk about a few examples.

Speaker 3

We've continued to expand the reach of the TRiM platform. We now have clinical programs in 3 different tissue types, including liver, lung and muscle. We also expect in the very near future to have clinical programs in 2 additional tissues, specifically CNS and adipose. Each one of these expands the universe of diseases we can address and the number of patients that we can potentially help. During the CNS R and D webinar scheduled for September, we plan on giving an update on a specific candidate that is currently undisclosed and highlight the significant progress we're making on a subcutaneously administered construct designed to deliver siRNA across the blood brain barrier to the CNS without the need for intrathecal administration.

Speaker 3

This is a much more patient friendly mode of administration and may be able to access tissues in the deep brain that have been difficult to access with IT injections. This is potentially a big step forward for us and the field overall and we are excited about the progress. During the Obesity and Metabolic R and D webinar currently scheduled for August, we will also talk about platform advancements and pipeline expansion. The pipeline is expanding by 2 programs and we will talk about the addition of adipose sites as a new cell type we can access with the TRiM platform. As you all know, the obesity space has recently gained a lot of attention with the success of GLP-one agents.

Speaker 3

However, we see clear areas that remain underserved. We have not disclosed much publicly about the development of our 2 obesity programs. So this event will be a good opportunity to get people up to speed on where we are and where we see the clinical development programs going. Moving on to current clinical development programs, during the last quarter, we brought 2 new agents into the clinic. First, ARO CFB is designed to reduce hepatic expression of complement factor B, which plays an important regulatory role in amplifying complement alternative pathway activation and has been identified as a promising therapeutic target.

Speaker 3

Para CFB is being developed as a potential treatment for complement mediated kidney diseases such as IgA nephropathy, which is the most common glomerular disease worldwide and carries a high lifetime risk of progression to end stage renal disease. Additionally, ARO CFP may have clinical applications in non renal diseases involving complement activation. Last month, we announced that we had dosed the first subjects in a Phase 1, 2a clinical trial of ARO CFB designed to enroll up to 66 healthy volunteers and patients with complement mediated kidney disease. A second new clinical program ARO DM1 is designed to reduce expression of the dystrophia myotonic protein kinase or DMPK gene in the muscle as a potential treatment for patients with Type 1 myotonic dystrophy or DM1. Pathogenesis of DM1 is driven by abnormal DMPK transcripts that cause misregulated splicing known as spliceopathy for certain messenger RNAs which are directly linked to the clinical manifestations of DM199.

Speaker 3

In March, we announced that we had initiated and dosed the first subjects in a Phase 1, 2a double blinded placebo controlled dose escalating study to evaluate single and multiple ascending doses of ARO DM1 in up to 48 subjects with DM1. Moving on to our clinical stage pulmonary programs ARO RAGE, ARO MUC5AC and ARO MMP7. We continue to enroll patients across all three programs and are confident that we will have multiple opportunities for clinical readouts this year. The first of these will occur at ATS later this month. We were scheduled to present a poster on ARROWAGE, which will include data from mild to moderate asthma patient cohorts that we have not reported on previously.

Speaker 3

To review, ARO RAGE is designed to reduce expression of the receptor for advanced glycation end products or RAGE as a potential treatment for inflammatory pulmonary diseases. We are currently enrolling asthma patients with high baseline levels of fractional exhaled nitric oxide for FeNO, which is a biomarker of IL-thirteen driven Type 2 inflammation in the lung. We are expecting to have high FeNO cohorts enrolled and dosed late this year. Next programs are ARO MUC5AC, which is designed to reduce production of mucin5AC or MUC5AC as a potential treatment for mucobstructive pulmonary diseases and ARO MMP7, which is designed to reduce the expression of matrix metalloproteinase 7 or MMP7 as a potential treatment for idiopathic pulmonary fibrosis or IPF. Both ARO MUC5AC and ARO MMP7 have already enrolled and dosed healthy volunteers and we anticipate the patient cohorts will be enrolled and dosed in time to enable initial clinical readouts in the second half of this year.

Speaker 3

Our pulmonary R and D webinar scheduled for July will review these programs in more detail. I will now turn the call over to Ken.

Speaker 4

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended March 31, 2024 was $125,300,000 or $1.02 per share based on 123,300,000 fully diluted weighted average shares outstanding. This compares with net income of 48 point $7,000,000 or $0.45 per share based on 108,100,000 fully diluted weighted average shares outstanding for the quarter ended March 31, 2023. No revenue was recorded in the quarter ended March 31, 2024, revenue of $146,300,000 was recorded in the quarter ended March 31, 2023. Revenue is recognized as we complete our performance obligations or key developmental milestones are reached.

Speaker 4

Revenue in the prior period primarily related to the recognition of payments received from our license and collaboration agreements with Takeda and GSK. Total operating expenses for the quarter ended March 31, 2024 were $126,200,000 compared to 98 $100,000 for the quarter ended March 31, 2023. The key drivers of this change were increased research and development costs, primarily compensation costs and candidate costs as the company's pipeline of clinical candidates has increased and advanced into later stages of development. Net cash used in operating activities during the quarter ended March 31, 2024 was $92,400,000 compared to with $31,700,000 during the quarter ended March 31, 2023. The increase in cash used in operating activities is primarily driven by higher R and D expenses as well as the prior period including $40,000,000 cash receipt of revenue milestones.

Speaker 4

Construction of our Verona facility is effectively complete. We are currently undertaking commissioning and qualification activities, which puts us on track for manufacturing drug material to support our clinical trials later this year. We expect final payments to be made over the next several months totaling $50,000,000 after which we expect capital expenditures to be nominal. Turning to our balance sheet. Our cash and investments totaled $523,100,000 at March 31, 2024, compared to $403,600,000 at September 30, 2023.

Speaker 4

The increase in our cash and cash excuse me, the increase in our cash and investments was primarily related to the $450,000,000 equity issuance, partially offset by our ongoing cash burn. Our common shares outstanding at March 31, 2024 were $124,100,000 With that brief overview, I will now turn the call back to Chris.

Speaker 3

Thanks, Ken. This has been another quarter of solid execution for Arrowhead. Our Phase 3 PALISADE study of plazasiran is clinically complete, which sets us up to take the next step in growth for Arrowhead as we make the transition into a commercial organization, provided we receive regulatory approval. We also initiated the SHASTA 3 and 4 Phase 3 studies of blazastran in patients with FHTG and are finalizing the design and preparations to initiate SHASTA 5 in patients with FHTG at high risk of acute pancreatitis. We are waiting for FDA feedback on a Phase 3 program to address ASCVD, which we will discuss after we reach regulatory alignment.

Speaker 3

In addition to progress in Cardiometabolic, we have been very productive in platform development and pipeline expansion. Our TRiM platform can now deliver to CNS and adipose tissue and we will soon have new clinical programs targeting those tissues. We also initiated clinical studies during the quarter for 2 new candidates, ARO DM1 and ARO CFB. Thank you for joining us today, and I would now like to open the call to your questions. Operator?

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. Our first question comes from the line of Luca Issey from RBC Capital. Your line is now open.

Speaker 5

Great. Thanks so much for taking my question. Congrats on the progress. Maybe on CINO, sounds like the high FeNO cohort for RAGE has been slow to enroll. Can you maybe just expand on it?

Speaker 5

When is the earliest we can actually see that data? And maybe what are the bogeys in term of FeNO reduction that are below, on par or above your expectations? And then maybe second on LPLA, what was your reaction to Lilly starting a cardiovascular outcome trial that is way bigger than your trial than Novartis' trial. I think Novartis' has a 7,000 patients trial, you have an 8,000 patients trial versus Lilly starting at 13,000 patients trial here for LPLA. Does that mean that your trial is underpowered?

Speaker 5

Any thoughts there, much appreciated. Thanks so much.

Speaker 3

Thanks, Luca. So I can address the Fina question. It's look, it's just been slow to enroll because we are requiring high FeNO in these patients with moderate to severe asthma. So that so I don't have good visibility on when that could be complete. I think our take home message there was that we were sick of waiting around.

Speaker 3

We think this is a good drug and we want to move expeditiously into a Phase 2 and so we're going. We've got a Phase 2 design and we are moving towards that. I think we'll start that in the Q4. And so we are looking forward to seeing the FeNO data of course, but it's not rate limiting. I think the drug is too important to wait for that.

Speaker 3

Bruce, do you have anything to add about the Lp?

Speaker 1

I don't think there's a problem with the Novartis or the Amgen study being underpowered. I don't really know what's driving that very large study size for Eli Lilly. The devil may be in the details there, but I don't worry about the power of either the Novartis or the Amgen studies. Guys, thanks so much. Thank you.

Operator

Thank you for your questions. Please stand by for our next question. Our next question comes from the line of Edward Tintoff of Piper Sandler. Your line is now open.

Speaker 6

Great. Thank you very much. So many things going on, tough to decide where to start. But with the Phase 3 PALISADE data coming up, top line data at your cardiovascular event, again, what kind of expectations should we look for in the TRIG lowering, especially with data already out from the earlier studies. And how will this really compare, do you think, with the Ionis program, which is a little bit ahead of you guys, how do you expect to compete for this small patient population?

Speaker 6

Thanks.

Speaker 1

Well, as far as expectations go, that's you're asking me for a crystal ball. I think that our indication so far is that plus Asiran is a very powerful drug when it comes to knocking down APOC3 and APOC3 seems to be very important for this patient population. But that said, I mean, I don't have any insight into at this point what the PALISADE data will show. So, hopes are hopes, but in reality, you guys see the data. That said, I don't have any reason to believe that we won't expect a good outcome, but these trials are it's a 75 patient trial.

Speaker 1

So we'll have to see how the trial goes, how the placebo group has performed because that oftentimes has a lot to do with what happens in these trials. So I can't really give you a forecast on that, Ted. I mean, we're excited to see the change.

Speaker 6

Just to clarify, Bruce, I'm so sorry to cut out, but just to clarify, with kind of the reductions that you've seen with the prior reductions in other studies and severe hypercholesterolemia patients, etcetera or hypertriglyceridemia patients. Where do you think how do you think that will play in these FCS patients? Sorry, that was more my question.

Speaker 1

Yes. I guess, what I can say is we've had a smattering of FCS patients in the SHTG study. We've had a few patients in Phase 1. So far in that small number of patients, we've seen essentially similar results from the perspective of percent reductions in triglycerides between the FCS patients and the and for instance what we saw in the regular SHTG patients. If that holds in this larger patient population, we should be in good shape.

Speaker 1

But as I said, each clinical study is its own clinical study. But we don't have reason from what we've seen so far to go in expecting a different result. But we'll have a much larger patient population here to look at.

Speaker 6

And again, how do you guys expect that's helpful. How do you guys expect to compete with Ionis as a little further ahead? Thank you.

Speaker 3

Yes. So of course that's going to depend upon our data. Here's what I believe. I believe that we will have an advantage in dosing intervals. I think we'll be dosing once a quarter rather than once a month.

Speaker 3

And then as Bruce says, we'll see if the data holds with what we've seen in the past. My hope is that we continue to have a more powerful drug that is better tolerated, but we'll have to wait to see what these data look like in this relatively small study. I'll also say one more thing. You mentioned a very small population of FCS Ted and of course genetic FCS is not a very large population. But the population that we studied was genetic FCS and phenotypic FCS, if you will.

Speaker 3

So those patients with trigs above 880 and history of pancreatitis. And it turned out to be about half and half in our study. And so we'll see what makes it to the label. But that's the population that we studied and that is a substantially larger population than simply genetic FCS.

Speaker 1

Yes, fair point. Appreciate it. Sure.

Operator

Thank you for your question. Please standby for our next question. Our next question comes from the line of Ellie Merle of UBS. Your line is now open.

Speaker 7

Hi, this is Jasmine on for Ellie. Thanks so much for taking our question. So when we get updates from patient cohorts from Moxi VC and MMP-seven later in the year, can you give any color on the number of patients that we might see and anything on specifically what endpoints we'll get? Thank you.

Speaker 3

Yes, sure. So the number of patients it depends on enrollment. We're doing about we're doing 7 per cohort in the IPF patient cohort. So a single digit number of patients, call it less than 10, assuming we report maybe the first dose of IPF patients. And then the endpoint for that would be MUC5 or MMP7 levels in the valve that we're measuring in all IPF patients.

Speaker 3

And then for MUC5AC, we probably have a little bit more in terms of number of patients, 20 or so that we have available to report on. And that would be MUC-five AC protein levels from sputum. That's the primary biomarker that we're looking at.

Speaker 7

Okay, great. And just a quick follow-up if I could. At ATS, on REACH, can you give any specifics on what we can expect there in the new data?

Speaker 3

Yes, sure. So we'll be presenting the healthy volunteer RAGE data and then the RAGE, the serum RAGE knockdown data in the patient cohorts that we have available.

Speaker 7

Great. Thank you.

Operator

Thank you for your questions. Please stand by for our next question. Our next question comes from the line of Jason Gerberry of Bank of America. Your line is now open.

Speaker 8

Hi, good evening. This is Dina on for Jason. Congrats on the progress this quarter and thank you so much for taking our question. I just had a quick one on placatharen, just in terms of thinking about the PALISADE data. I believe your data will include FCS patients and high TG patients with functional LPL activity.

Speaker 8

I'm just curious how you see inclusion of the patients with the LTL activity enriching your data set? And do you plan to break out clinical activity of these 2 subgroups to maybe inform comparisons with Ionis' olefarsen? Thank you.

Speaker 1

Well, as Chris said, I mean that the patients that are not genetically proven FCS at the point they enroll are phenotypically FCS patients. So they're not just high triglyceride patients. They're patients that really look and feel like FCS, but they just have not had the genetics done at the time of enrollment. And as Chris said, that's a fairly large population. And they tend to be some of them are undiagnosed FCS patients, but oftentimes they're compound heterozygous, which may or may not include LPL, but then have other genetic abnormalities as well.

Speaker 1

And the compound effect winds up having them phenotypically look like they have SCS. So it's a heterogeneous group. And at this point, again, when we haven't seen the data, everything's blinded, can't really say how that might play into the results. That's going to be one of the really interesting things to see in the data is, do the genetic FCS patients look and behave the same. We'll see.

Speaker 1

We'll know more once we have all the data in our hands.

Speaker 8

Thank you. And I just had a quick follow-up. Apologies if I missed this in your prepared remarks, but for the ARROWAGE Phase II asthma trial that you're planning to initiate later this year, Is that in all comers population or is that going to be in just the eosinophilic high type 2 patients? Thank you.

Speaker 3

Yes. We're still waiting on feedback from regulatory agencies. So we'll talk more about the design later once it's clear to us.

Speaker 8

Got it. Thank you so

Speaker 1

much. Sure.

Operator

Thank you for your questions. Please stand by for our next question. Our next question comes from the line of Maury Raycroft of Jefferies. Your line is now open.

Speaker 9

Hi. Congrats on the progress and thanks for taking my question. I was going to ask one on FCS to follow-up some of the others. Assuming the genetic and clinical patients perform the same in the PALISADE's FCS study, and that study is successful, What are your expectations for a label? What the label would look like?

Speaker 9

And how could that play into the commercial opportunity? And then as follow-up, can you comment on baseline pancreatitis in this study and what do you expect to see on that measure?

Speaker 1

Okay. Well, let me take the pancreatitis question first. There was a significant history of pancreatitis in the patient population. And we have had some events. There's still a few events to be adjudicated that are I think are being adjudicated maybe this week or next.

Speaker 1

So I don't know what the total number of pancreatitis events in the study will be in the end. But it's a number. It's enough that we'll be able to hopefully see something, but we don't know at this point. So that's on pancreatitis. With respect to labeling, of course, we don't make that decision, the agency does.

Speaker 1

But the decision to look at either genetic FCS patients or if you will phenotypic FCS patients is something that the agency bought into. Certainly historically, when there's been agreement between the agency and a company, historically the agency tends to give you labeling that reflects the population that you studied. Obviously, any individual situation can vary, but our certainly expectation going in would be that labeling would reflect the patient population we studied. And that would have an impact obviously with respect to potentially a different there could be a differential label between us and olozarsen. We won't know until we get there, but it could we could see a distinction.

Speaker 9

Got it. That's really helpful. And maybe one last follow-up for a number of patients out there that would be clinically defined with FCS. Do you guys have any bookends on that? What that could look like?

Speaker 3

So we've gone at that by from a number of ways. And it's in the 1,000. We haven't set on an exact number, but it feels like it's in the 1,000. Beyond that, it's hard to tell at this point.

Speaker 9

Okay. Okay. Understood. Thanks for taking my questions.

Operator

Thank you

Speaker 6

so much.

Operator

Our next question comes from the line of Mayank Mamtani from B. Riley. Your line is now open.

Speaker 10

Hello. This is Kevin on for Mayank from B. Riley. Thanks for taking our question. I have a question about the future strategy in terms of you have both potent drugs, posasiran and zodasiran.

Speaker 10

Could you elaborate on how you would go carve the target population given that there are specific distinction in terms of mechanism or clinical effects by these 2 compounds? Thanks.

Speaker 1

So Kevin, the way I tend to think of it, if you think of sort of lipid and lipoproteins as a bit of a continuum. And on one end, you have familial hypercholesterolemia, a very LDL dominated sort of disease, if you will, which then comes down into HEFH and patients that for other reasons just have very high cholesterol, but maybe normal triglycerides. And then you come into the middle where you have a mix, what used to be called mix dyslipidemia now called mixed hyperlipidemia that in an untreated state, patients are maybe a combination of LDL and triglycerides often with a lot of metabolic syndrome, obesity, diabetes, etcetera, about 20,000,000 patients in the U. S. And a lot of those patients are already on statins and already have some level of control of their LDL.

Speaker 1

So from what's left untreated, it's largely in this triglyceride rich lipoprotein remnant sort of phenotype, if you will. And then going further up that side, you get into the severe hypertriglyceridemia and at the outer end of that when you have SCS. So if you think of it that way, almost I almost think of it like a U shape where one end of the U is familial hypercholesterolemia and the other end of the U is FCS and you come down and in the middle you have this 20,000,000 patients with mixed hyperlipidemia. So on that on the one end that's cholesterol, that's a very healthy place for ANGPTL3. And we've already seen that to an extent for instance with Regeneron's multiple antibody works well on that side of the spectrum.

Speaker 1

And then on the far side of the other spectrum with FCS and SHTG and the phenotypic FCS, you have plazasiran. So the real question is in the middle where you've got a mix of LDL and triglycerides in the phenotype. And both drugs look to be very interesting drugs in that mixed dyslipidemia or mixed hyperlipidemia population. So what it means to us is that on the two ends of the spectrum, the drugs have target markets that make a lot of sense. And in the middle, both drugs look like they could be a major improvement over what's been available to practicing physicians for the last 30 years.

Speaker 1

So that's kind of how we see it. I hope Kevin that that makes some sense to you.

Speaker 10

Yes, it does. Thank you so much.

Operator

Thank you for your question. Please standby for our next question. Our next question comes from the line of Brendan Smith of TD Cowen. Your line is now open.

Speaker 9

Cohen.

Speaker 11

Maybe just another quick one on pulmonary and then I have a broader follow-up. So first, I actually just wanted to see if there's anything else specifically that you're seeing in the asthma patient data that's giving you more confidence to move into Phase 2? Maybe more to the point, if you've seen any of the high FeNO patient data yet, like if you're seeing good FeNO knockdown or anything like that? And then more broadly, I just wanted to check and see if there's any update on potential licensing or commercialization partnerships or maybe when we might get an update there and what that's looking like? Thanks very much.

Speaker 3

Sure. Look, I think the biggest driver in moving in not waiting and moving towards that Phase 2 is the safety and tolerability that we've seen so far and the target engagement. We're seeing good rage knockdown. We've seen a lot of excitement from KOLs for the RAGE pathway and so it just makes sense.

Speaker 1

So we're moving as quickly as

Speaker 3

we can there. On the partnering side, we have we are always or virtually always in discussions as you can imagine. We have no control over timing. And so I have nothing to report at this point other than the fact that this is an important part of our business and we do expect to execute additional transactions.

Speaker 11

Okay. Thanks very much.

Speaker 3

You're welcome.

Operator

Thank you for your question. Please stand by for our next question. Our next question comes from the line of Keay Nakae from Chardan. Your line is now open.

Speaker 12

Thank you. First question, is there a rationale for the different sample sizes between Shasta 34 is one deliberately oversampled?

Speaker 1

Not really. The so the design of the SHTG program was in many ways a result of our discussions with FDA about their overall expectations for what they wanted to see in efficacy database, safety database, etcetera. And it just turned out that, Shasta it could have been 350 in both. In the end, it practically it made sense to have 1 be 400 and 1300. But it's really largely just driven by practicalities to get the patient population that the agency was requesting.

Speaker 1

So it really is accidental. You might say that they're different size. Okay.

Speaker 12

And then in terms of the

Speaker 1

Yes, they're both way overpowered for efficacy. If you saw the results from Shasta 2, they're both way overpowered for efficacy.

Speaker 12

Okay. Well, that's great to hear. Just in terms of the mix, cVAT, since you have a design, you're ready to submit for review. Have you selected 1 of the 2? And then based on the feedback, you still, I guess, have the option to switch?

Speaker 12

Or how should we be thinking about where you're at with this?

Speaker 3

Yes. So until we get until we have feedback in alignment with the regulators, it makes sense for us just to stand pat on this. We'll give you, of course, all the information that we can once we have confirmation from the regulators that we are all aligned on what this study looks like. So stay tuned on that. We're still working.

Speaker 12

Okay. Thanks.

Operator

Thank you for your question. Please standby for our next question. Our next question comes from the line of William Pickering of Bernstein. Your line is now open.

Speaker 13

Hi, good evening. Congrats on the progress and thank you for taking my question. On SHTG, in CHOSTA2, you had a fairly sizable placebo effect of 17% at 24 weeks. Could you comment on whether you think that's a reasonable proxy for what to expect in the pivotal? And if there are any strategies to potentially limit that?

Speaker 1

Yes. Well, it's kind of interesting because if you actually look at the data, placebo was essentially plugging along at right around 0 change. And then at week 20, it was like 0. And then at week 24, it dips down to whatever minus 17, I guess. And then it was halfway back up to 0, 4 weeks later and then 8 weeks later it was right back to where it had been for the 1st 20 weeks.

Speaker 1

So it's just one of those weird deals that this is what makes it hard to do placebo controlled studies. Your placebo just behaves strangely at unpredictable times. And all of us just have to put up with that. We did things in the trial to try to minimize placebo changes in placebo. But in the end, it's always difficult to really manage that.

Speaker 13

And if I could just squeeze in a very quick follow-up, what led you to pick the 25 milligram instead of the 50? And do you think that you'll be able to demonstrate a more compelling efficacy profile versus olefarsen at that dose?

Speaker 1

Yes. Well, 5025 were very similar with respect to activity, with respect to efficacy. And that was not only in Shasta 2, but that was also in MIRROR. They just looked really close and yet there was a difference in tolerability. And so it really was a benefit risk decision in the parlance of the regulatory parlance, but in our parlance as well.

Speaker 1

You look for we put up with side effects in this business when we have to. But if in fact there's a dose available that essentially gives you full efficacy and has better safety and tolerability, you take that one. I mean, our overall assessment at the 25 milligram dose in both of those 2 large Phase IIs in which it was in is that it's kind of indistinguishable from placebo. The difference between active and placebo is so small as to be not convincingly different at the 25 milligram dose. In terms of safety.

Speaker 1

In terms of safety and tolerability, right. And that mattered a lot when the efficacy looked basically the same. And 50 milligrams looked a little different from placebo. So we took advantage of the fact that we were at the top of the dose response curve for efficacy and we had better safety and tolerability profile.

Speaker 13

Makes sense. Thank you very much.

Speaker 9

You bet.

Operator

Thank you for your question. Please stand by for our next question. Our next question comes from the line of William Pickering. I'm sorry. Our next question comes from the line of Patrick Trucchio of H.

Operator

C. Wainwright and Company. Your line is now open.

Speaker 6

Thanks. Good evening. Just a couple of follow-up questions on the complement programs. Just first, I appreciate that dosing in the Phase 1stray trial began last month. I'm wondering though if you can talk about potential timing of initial data in this trial evaluating ARO CFD and kind of what you'd be looking for in that initial data and later data give confidence in advancing this program?

Speaker 6

And then secondly, if you can talk more broadly about the potential advantages of CFB relative to existing treatments for various complement mediated disease and how you envision CFD fitting in these the different treatment paradigms? And then lastly, how should we think about this complement program relative to ARO C3? And can you talk in more detail how these programs may progress in parallel?

Speaker 3

Sure. Maybe I'll take the last one first. Thanks for the question. So I think we will make a data driven decision for C3 versus CFD. We think there are maybe some indications where C3 might work better, something like C3 glomerulopathy where the disease is really driven by the accumulation of excessive C3 and then others where CFD might work better, but I think that will be really data driven.

Speaker 3

And then in terms of advantages over some of the other therapeutics out there, I mean, I think the dosing advantage is really significant that we would have for both of these in terms of duration of effect for ARO we're getting 88% knockdown that can be essentially maintained for 3 to 4 months after a single dose. So I think if you're again looking at dosing quarterly versus other therapies that require either daily oral dosing or frequent subcutaneous dosing. I think there's a big advantage there. We'll see what the dosing regimen looks like for ARO CFD, but based on preclinical data, that's a very potent molecule. And so I'd expect something similar in terms of duration of effect.

Speaker 3

And then data timing, the CFB study just got started. It's a healthy volunteer study. And so the biomarker knockdown of circulating plasma CFB, that's the main efficacy or activity biomarker of interest. And we could potentially have something by year end for that.

Speaker 6

Great. Thanks so much.

Operator

Thank you for your question. This does conclude our question and answer session. I would now like to turn the call back over to Chris Anzalone for some closing remarks.

Speaker 3

Thanks everyone for joining today and we look forward to seeing you at the summer series starting later this month.

Operator

This does conclude today's conference. You may now disconnect.

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Earnings Conference Call
Arrowhead Pharmaceuticals Q2 2024
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