Arrowhead Pharmaceuticals, Inc.

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 Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Thanks, Sydney. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal first quarter ended December 31st, 2019. With us today for management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter, Dr. Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our clinical programs, and Ken Muskowski, our Chief Financial Officer, who will give a review of the financials. In addition, we welcome three new members to the management team. Jim Hazard, our Chief Commercial Officer, Dr. Javier San Martin, our Chief Medical Officer, and Dr. Kurt Bradshaw, our Chief Scientific Officer. Dr. San Martin and Mr. Hazard will be available during the Q&A session of today's call. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27 of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact including, without limitation, those with respect to Arrowhead's goals, plans and strategies are forward-looking statements. These include statements regarding our expectations around the development, safety and efficacy of our drug candidates, projected cash runway and expected future development and commercialization activities. These statements represent management's current expectations and are inherently uncertain. Thus, actual results may differ materially. Arrowhead disclaims any intent and undertakes no duty to update any of the forward-looking statements discussed on today's call. You should refer to the discussions under risk factors in the Arrowhead's annual report on Form 10-K and the company's subsequent quarterly reports on Form 10-Q for additional matters to be considered in this regard, including Risks and other considerations that could cause actual results to vary from the presently expected results expressed in today's call. With that said, I'd like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. We've made a lot of progress over the last two years as we've built clinical validation of our TRIM platform. Early in 2018, we predicted that moving Trim into the clinic could drive substantial value for us, and that came to pass. We initiated clinical studies with Arrow HBV, now J&J 3989, and Arrow AAT. That same year, Amgen initiated clinical studies with AMG 890, formerly Arrow LPA. Together, we see these as first clinical proofs of concept for the Trim platform and represent what we believe to be promising future drugs. We sought to accomplish even more in 2019, We thought we could build shareholder value by continuing development of existing programs and introducing into the clinic two potentially powerful cardiometabolic drug candidates. As with our goals for 2018, these two were accomplished. We launched a potentially pivotal Phase 2-3 study with Arrow AAT, Janssen launched two large Phase 2 studies with J&J 3989, and Amgen continued their study with AMG 890. Importantly, we also expanded our clinical pipeline by launching Phase I-IIa studies for cardiometabolic drug candidates AeroApoC-3 and AeroAng3, and we reported initial data from these studies at the American Heart Association Scientific Sessions in November. This would have represented a very productive year for any company in our industry, but we were not finished. We also filed to begin clinical studies for our first tumor-targeted drug candidate, AeroHIF-2, and the first ever candidate against the highly anticipated NASH target, AeroHSD. So how do we keep up this productive value creation? What is the growth story for 2020? We think of three broad value drivers. First, 2020 is the year of bringing RNAi outside the liver to address a raft of new unmet medical needs. We are clear leaders in this endeavor, and I believe we will have clinical proof of concept to silence target genes in lung and solid tumors by the end of the year. Just look at what we have done in hepatocytes, and we believe we can do the same in lung and solid tumors. This model of rapidly expanding our pipeline in new cell types could offer powerful new options for countless patients and enable the promise of continued value growth. Second, we are looking to advance multiple liver targeted programs into mid and late stage studies, including up to three potentially pivotal clinical trials. And third, we expect to continue to expand the reach of the TRMM platform and enable access to an important new cell type, skeletal muscle. It will mean a lot to our business if we are able to execute in these areas. By the end of the year, we could have 10 trim-enabled drug candidates in the clinic, eight of which could be wholly owned, targeting up to four different cell types with up to three candidates in potentially pivotal studies. Let those numbers sink in for a moment. I don't believe there is a company our size anywhere with this type of reach, and remember that this is all built on a single scalable platform. As you know, however, we are only getting started. I believe those 10 clinical candidates could double to 20 just a few years later. This pipeline has a healthy mix of early, mid, and later stage candidates designed to address both small, well-defined, rare disease populations, as well as high prevalence diseases. This gives Arrowhead and our shareholders a couple key features. First, it provides diversification where risk is spread out across the portfolio. Second, and maybe more importantly, it enables a consistent flow of data readouts to help demonstrate that our candidates are on the right path. But 2020 and beyond is not just a pipeline expansion story for Arrowhead. We are also making an orderly transition from a discovery and early clinical stage company into a late stage clinical and emerging commercial organization backed by a powerful discovery engine. We want to build this out in a way that values speed and execution, but also in a way that is efficient and capital conscious. We intend to partner strategically and selectively to manage risk, source capital to develop and commercialize wholly owned programs, and maximize patient access to our drugs worldwide. We will approach this phase in typical Arrowhead fashion with innovation in mind. This is a big opportunity and a big step for us as a growing platform pharmaceutical company. Let's now take a closer look at some of our progress during the last quarter and the period since our last earnings call and how this is preparing us for this next phase of growth. As I mentioned, we reported initial clinical results for our two wholly owned cardiometabolic candidates, AeroApoC3 and AeroAng3 at the American Heart Association Scientific Sessions and back-to-back plenary presentations. These results were from the single ascending dose portions of First in Human Studies. They demonstrated robust, durable and dose-dependent reductions in ApoC3 and AngPTL3 proteins leading to impressive changes in triglycerides and various other lipid parameters. This is an important accomplishment by virtue of the quality of the data, the remarkable durability of the effects shown and the power of the targets. We are now treating patients in the multiple dose portion of these studies and, while they are still ongoing, I can give you an idea of what we are seeing. In addition, Bruce will provide a bit more detail when he speaks. At a 50 milligram dose of AeroApoC3, we are seeing reductions of around 95% in circulating triglycerides in patients with severe hypertriglyceridemia. This is, quite frankly, astonishing. To put this into perspective, one patient started the study with 4,818 milligrams per deciliter of triglycerides, and this fell to just 231 just 29 days after the first dose of AeroApoC3. In fact, the mean absolute reduction for the three patients with at least 29 days of data in this cohort was minus 3,183 milligrams per deciliter. We would expect this type of reduction to have substantial clinical and quality of life impacts, particularly in patients with a history of pancreatitis. We are talking about patients with severe hypertriglyceridemia moving to relatively normal triglyceride levels extremely rapidly. This supports our plan to develop AeroApoC3 as a focused triglyceride-lowering drug, and we expect dosing to be every four months or potentially less frequent. While we believe this could be a powerful drug for patients with familial chylomicronemia syndrome, or FCS, we plan to develop this more broadly to also treat patients with polygenic hypertriglyceridemia and History of Pancreatitis. This is still a rare indication, but KOLs tell us that the affected population is approximately 100-fold that of FCS, representing about 30,000 potential patients in the U.S. alone. We are also seeing promising data in the ongoing studies with AeroAng3. For instance, in patients who already are on statins but unable to reach their LDL cholesterol goal, we have seen a further reduction in LDL cholesterol of around 40% after short exposure to AeroAng3 and in patients with triglycerides greater than 300 milligrams per deciliter, we saw a 79% reduction in circulating triglycerides. One of the cohorts, Still Blinded, is also evaluating the effect of AeroAng3 on insulin sensitivity and liver fat. As with AeroApoC3, we expect dosing to be every four months or less frequent. While we view AeroApoC3 as a rifle shot against severe symptomatic hypertriglyceridemia, we are developing AeroAng3 as a broader market drug where genetic studies indicate it could have a profound impact even in the age of statins and PCSK9 inhibitors. Because we expect it to hit multiple pathways in pathologies, we view this as a potentially important medicine against metabolic syndrome and dyslipidemias, fellow travelers in creating cardiovascular risk. AeroAns3 and AeroApoC3 appear to be powerful medicines indeed, and there still haven't been any reports of drug-related AEs rated as serious or severe, and no discontinuations due to drug. We expect to present data throughout 2020 at various scientific conferences as the studies read out. These data are providing further clinical validation for the TRMM platform broadly and hepatocyte targeted programs specifically. We believe Arrowhead is achieving benchmark activity, durability and tolerability. So far, we have enjoyed very consistent and reliable translation of preclinical results in animals to Human Clinical Studies, and this speaks to the scalability and predictability of the platform. This gives us confidence as we move into the clinic with our latest hepatocyte targeted candidate, AeroHSD. We expect AeroHSD to be the first drug candidate of any modality targeting HSD17B13 to reach human testing. Published human genetic data indicate that a loss of function mutation in HSD17B13 provides strong protection against NASH, cirrhosis, and alcoholic hepatitis and cirrhosis with approximately 30% to 50% risk reduction compared to non-carriers. This target has generated a great deal of unsolicited inbound interest from multiple potential partners. In December, we filed a CTA for this program and I'm happy to report that we now have regulatory and IRB approval to begin clinical studies. I expect the dosing will begin this quarter and it is possible that we could have some data by the end of the year. I would now like to talk about what to expect with the Arrow AAT program. We are enrolling patients and continue to activate sites in North America and Europe in the potentially pivotal Sequoia study. That is a blinded placebo-controlled study in which the last patient is to receive approximately two years of treatment. Because of this, it will be some time before there are any data to share, but we believe that Sequoia's structure provides us with the fastest possible path to registration. Last month we began dosing AeroAAT 2002, an open label phase two study with liver biopsies at baseline and after six months, 12 months, 18 months, and 24 months of treatment. The first cohort is fully enrolled, so we expect to have the first six month repeat biopsy data by fall, and we hope to share at least some aspects of those data publicly by the end of the year. As we've discussed extensively in the past, we believe that for RNAi to truly transform medicine, It needs to be applied in tissues outside the liver. We made important progress over the past months, and as I stated earlier, we see 2020 as the year we establish clinical proof of concept for trim-enabled RNAi beyond hepatocytes. In December, we filed an IND for ArrowHIF-2, our first tumor-targeted candidate against renal cell carcinoma. HIF-2-alpha is a well-validated target for the clear cell form of RCC. So we are very excited about AeroHIF-2 and what it can mean for patients. The delivery technology we are employing is designed to get into other solid tumors as well, rather than specifically RCC. As such, establishing clinical proof of concept that we are silencing HIF-2-alpha in the current study could represent an important value inflection point. It could mean that we have a potentially important drug for RCC and a platform that can be used against numerous targets across multiple solid tumor types. Once we achieve clinical proof of concept, our model is to rapidly expand our pipeline with additional candidates focused on new tumors against a variety of oncology targets, some of which may be heretofore undruggable. This is a potentially powerful and scalable model. So then the question is, when we could achieve clinical proof of concept? I believe this answer is as early as this year. I'm happy to report that we now have clearance from the FDA to begin the Phase 1 study, and we hope to begin dosing patients this quarter. Let's now move to the lung. As you know, we have been developing our ability to deliver to pulmonary epithelial cells via inhalation for some time now, with an initial focus on silencing the pulmonary epithelial sodium channel, or ENAC, for the treatment of cystic fibrosis. Last quarter, we presented preclinical data at the North American Cystic Fibrosis Conference on AeroENAC. We remain on schedule for a CTA filing in the first half of 2020 for this candidate. As with AeroHIF-2, We view establishing clinical proof of concept as a potentially important value inflection point. ENAC is a well-validated CF target that has been undruggable due to systemic toxicity, so we believe positive data would be a big step for CF patients with potentially any genotype. More broadly, it could serve as an important validation for our pulmonary delivery system. Once we have data demonstrating the relationship of how animal data translate to humans, we will be aggressive in pipeline expansion. There are a large number of potential opportunities in such areas as COPD, asthma, pulmonary fibrosis, and others. We are clearly creating a lot of value with our hepatocyte-directed TRMM platform, and we believe we can do the same with solid tumor and lung-directed TRMM platforms. Needless to say, everything I have described will take a tremendous amount of creative and highly integrated work. For instance, during the remaining 11 months of 2020, we hope to have up to three end-of-Phase II meetings with FDA and EMA for Arrow AAT, AeroAng3, and AeroApoC3, file two to three new CTAs, have clinical data readouts across most of our existing clinical programs, create our first program targeting skeletal muscle cells, continue working on next-generation undisclosed programs, and start to build out a pre-commercial infrastructure. Toward these ends, we expanded our senior management team with the hiring of seasoned biotech and pharma leaders, Dr. Javier San Martin as chief medical officer, Dr. Kurt Bradshaw as Chief Scientific Officer and Jim Hazard as Chief Commercial Officer. These additions have already been impactful to Arrowhead and give us confidence that we can maintain our innovative culture as we continue to grow. We wanted leaders with proven track records of running effective discovery, development, and commercial programs in rare and high prevalence disease areas. Together, they have been responsible for dozens of INDs, small and large clinical studies, NDAs, commercial launches, and product marketing campaigns. Kurt joined us from Toll9, a company he co-founded to develop novel antibody conjugates for immuno-oncology. Prior to that, he was with Solstice Biologics, Traversa Therapeutics, Covix Research, Ligand Pharmaceuticals, and Abbott Laboratories. Javier joined us from Ultragenyx, where he was Senior Vice President and Head of Global Clinical Development. Prior to that, he held clinical development roles at Alder Biopharmaceuticals, Amgen, and Eli Lilly, after beginning his career at CMIC University Hospital in Buenos Aires as attending physician in internal medicine. Jim joined us from Coharis Biosciences, where he was Senior Vice President of Marketing and Market Access. Prior to that, he was with Medivation, Amgen, and Shearing Plow. We also appointed Dr. Marianne DeBacher as a new independent director. She is currently Executive Vice President, Head of Global Business Development and Licensing, and a member of the Executive Committee of the Pharmaceuticals Division of Bayer AG. We got to know Dr. DeBacker when she was Global Head of Business Development at Janssen and we were negotiating our partnership with them. Her passion for finding new innovative medicines for patients, broad technical background, and deep experience in hundreds of transactions make her a great fit as part of our board of directors. Of course, in addition to great talent, our work requires capital. Toward that end, we improved our balance sheet and extended our cash runway with the financing last quarter with gross proceeds of approximately $267 million. Clearly, there's a lot going on at Arrowhead, and we had another quarter of impressive execution. Even after much progress made in 2018 and 2019, we feel that we are still in the very early stages of growth for our company and for the RNAi Therapeutics field broadly. We view Arrowhead as a clear leader in the field, and we intend to keep our foot on the gas to maintain that position. With that overview, I'd now like to turn the call over to Dr. Bruce Given. Bruce?