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

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its 2021 fiscal year ended September 30th, 2021. With us today for management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter, Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our pipeline, and Ken Muskowski, our Chief Financial Officer, who will give a review of the financials. In addition, Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine, 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 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. 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-K. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Before I review the last quarter, I want to discuss the announcement this afternoon regarding our license agreement with GlaxoSmithKline for AeroHSD, our investigational therapeutic, in a Phase I-II study that is currently being developed as a treatment for patients with NASH. Upon closing, GSK will receive an exclusive license to develop and commercialize AeroHSD in all territories except Greater China, which will be retained by Arrowhead. GSK will be wholly responsible for further clinical development and commercialization outside of Greater China. Partnership is a great fit for us because GSK has articulated a clear commitment to genetic medicine. It has substantial capabilities to clinically develop AeroHSD for NASH and has impressive commercial infrastructure and expertise to bring this potentially important medicine to the tens of millions of patients who need it. This is also an important transaction because it enables us to take a large spend over the next several years off our books and focus our development capital on programs that we may commercialize ourselves. In addition, it brings in substantial non-dilutive capital while providing us with exposure to future success should this drug candidate offer patients the kind of benefits we believe possible. Arrowhead will receive an upfront payment of $120 million and is eligible for the following additional payments. $30 million at the start of Phase 2, $100 million at the start of Phase 3, up to $190 million at launch in the U.S. and major markets, and up to $590 million at for key sales milestones. Taken together, Arrowhead stands to receive up to $1.03 billion. Arrowhead is further eligible to receive tiered royalties of mid-double digit to 20% on net product sales. From a strategic standpoint, this deal is another demonstration of our ability to use partnering selectively in areas that are outside of our commercial focus. this also feels like the right time to partner because we believe our clinical data from the Phase I-II study demonstrate proof of concept for inhibiting the liver production of HSD17β13. We presented data at AASLD earlier this month showing deep dose-dependent reductions of intrahepatic mRNA and protein levels and a marked reduction in ALT. We believe these are compelling results. The next steps for this program, if we had decided to retain global product rights, would have been to initiate a placebo-controlled Phase II study to evaluate whether HSD17-beta-13 inhibition over time would lead to clinically significant improvements in NASH. The published genetic data suggests that people with loss-of-function mutations in HSD17-beta-13 have some level of protection against fibrosis associated with NASH and other liver diseases. We think we have shown that AeroHSD does what it is designed to do, However, there have not been any prior HSD17 beta-13 inhibitors studied in clinical trials, so human proof of concept of a clinical benefit needs to be established in future clinical studies. This is where GSK steps in. They have a global reach and extensive experience and resources in clinical, regulatory, medical affairs, and commercial. They are in a strong position to pick up the program and advance it efficiently. As I mentioned, We think this deal is a net positive for the AeroHSD program and the patients with NASH. We are confident that GSK is the right company to take the next steps in clinical development and to chaperone the program through regulatory and commercial opportunities that lie ahead. We are thrilled to welcome GSK as our newest partner and look forward to working with them to advance this potentially important new medicine toward patients in need. I'll now move on to some of the recent highlights and accomplishments during the prior quarter and the period since our last call. Our collaboration and license agreement with Janssen, which we signed in 2018, covered our Hepatitis B program, previously called Arrow HPV and now called J&J 3989, and three potential additional programs that we would develop pre-clinically for Janssen. J&J 75220795 is the first program for which Janssen exercised its option to take an exclusive license, which earned Arrowhead a $10 million milestone payment earlier in the year. J&J 75220795, currently in a Phase I clinical study, is an investigational RNAi therapeutic developed using Arrowhead's proprietary trim platform and is designed to reduce expression in the liver of PNPLA3 as a potential treatment for patients with NASH. PNPLA-3 has strong genetic and preclinical validation as a driver of liver fat accumulation and damage. During the quarter, Arrowhead earned an additional $10 million milestone payment after Janssen dosed the fifth patient in a Phase I clinical study. Staying with the Janssen collaboration, data was presented at AASLD from REAF-1, a Phase IIb study to assess the efficacy and safety over 48 weeks of monthly subcutaneous injections of JNJ3989, at a dose of 40, 100, or 200 milligrams. This was used on top of daily nuke therapy, with or without daily oral J&J 6379, one of Janssen's capsid assembly modulators, or CAMs. J&J 3989 is an investigational RNAi therapeutic that targets all HPV RNAs, thereby intended to reduce levels of all viral HPV proteins. The primary endpoint of the study is the proportion of patients meeting NUC stopping criteria, which is ALT levels less than three times the upper limit of normal, HBV DNA less than the lower limit of quantitation, HBE antigen negative, HBS antigen less than 10 IU per ml at the end of treatment. Data from 24 weeks off treatment was also presented at ASLD. The data were very encouraging to us. the greatest reduction in S antigen was observed in J&J 3989 200 mg with new cohort. A dose-dependent response was observed in other cohorts and didn't appear that adding the CAM had any beneficial effect. At week 48, the mean reduction in S antigen from baseline was 2.6 logs, and 74.7% of patients achieved S antigen less than 100 IU per ml. 19.1% of patients met NUC stopping criteria, the primary endpoint. Up to week 72, an additional 10.6% of patients met stopping criteria for a total of 29.7%. This is an important finding. Additional patients continued to meet stopping criteria six months after therapy was removed. We are eager to see data with longer follow-up and individual patient profiles for the study. If you recall, the studies with our first-generation compound, ARK520, in which some patients went on to achieve functional cures, the S-antigen clearance didn't happen within six months of therapy being removed. Some patients took 9, 12, 18 months or longer to clear S-antigen, so we are excited to see additional results from Reef1. We are also eager to see data from the various other studies that Janssen is conducting. These include the ongoing Reef 2 study, where patients come off all therapy as they achieve new stopping criteria, an ongoing study in patients with HPV and the hepatitis delta virus, which is a patient population in desperate need of therapeutic options due to the rapid progression of the disease, and various studies with immunomodulatory agents added. There are currently multiple studies ongoing with pegylated interferon, called Penguin, and a study called Osprey, which is with a DNA vaccine J&J 64300535. We have been extremely impressed with how comprehensive the development program is for J&J 3989, and we believe it has the potential to play a central role as a backbone therapy for chronic HPV. Staying with AASLD, we also presented additional data on Arrow AAT, also called TAC999, our investigational candidate designed to treat liver disease associated with Alpha-1 antitrypsin deficiency, which received breakthrough therapy designation from the FDA during the quarter and is being co-developed with Takeda. We presented additional interim clinical data from the ongoing AeroAAT 2002 study, an open-label Phase II clinical study to assess the response of AeroAAT in approximately 16 patients with AATD-associated liver disease and baseline liver fibrosis. We think the data continue to reflect that AeroAAT is highly active against its target. Specifically, the data suggest that AeroAAT strongly inhibits production of the mutant ZAAT protein, which we believe has been well established as a clear cause of progressive liver disease. Further, the data suggest that livers in these patients are clearing the accumulated ZAAT and may be showing signs of healing. In this study, AeroAAT treatment led to a 72 to 100% reduction of liver Z-AAT protein. Aero-AAT treatment reduced histologic globule burden in all patients, with 13 of 13 patients having a one-point or greater reduction in the PASD globule burden. Aero-AAT treatment also may have improved liver fibrosis. Six patients had a one-point or greater improvement in metavera fibrosis stage from baseline to week 24 or 48. Since the presentation, we analyzed an additional 12-month paired biopsy that showed improvement in fibrosis, giving us 7 of 15 with fibrosis improvement now. When looking only at the 200-milligram cohorts, we saw 7 of 12 patients with improved fibrosis. AeroAAT treatment also improved multiple biomarkers of liver health. The mean reduction of ALT from baseline ranged from 42% to 56%, and from 33% to 54% for GGT at week 28 and week 72. Importantly, all groups showed normalized ALT and GGT following treatment. We believe these are all encouraging data. The program is on schedule, and we continue to be confident about its potential. We have begun a productive dialogue with the FDA about approval endpoints and the potential for an accelerated approval pathway. We look forward to continuing this dialogue as the Sequoia study continues. We expect to have data on the reduction of circulating levels of AAT from Sequoia over the next few months, which should allow us to select a dose to move forward with. We should also be collecting the last 12-month biopsy from the last patient enrolled sometime in the summer of 2022. Let's now move on to Arrow HSD, which is our investigational candidate designed to treat NASH that we announced today has been licensed. to GSK. We presented data at AISLD on the pharmacodynamic effect of AeroHSD and safety of various dose levels. In AeroHSD 1001, a Phase 1-2 clinical study, we observed a dose-dependent pharmacodynamic effect on hepatic HSD17-beta-13 mRNA in all patients. At the 200-milligram dose, all patients showed greater than 90% mRNA reductions. Hepatic HSD 17 beta 13 protein levels were reduced in all aero HSD dose levels with multiple measurements below the assay's lower limit of quantitation. Decreases in ALT and AST were observed at doses of 100 milligram aero HSD and greater. Aero HSD was well tolerated in all patients with no drug-related serious adverse events reported, no adverse events leading to drug use continuations, and no drug-related clinically significant adverse laboratory trends observed. We believe these data suggest that AeroHSD is highly active at silencing liver production of HSD17 beta-13. There is clearly an enormous unmet medical need for patients with NASH, and we look forward to GSK designing future studies to evaluate the compound in a phase two and beyond. Moving to our wholly-owned cardiometabolic pipeline, Javier will give an update in a moment on the studies that are ongoing and their status, but I wanted to highlight another recent data presentation. At AHA last week, we presented additional Phase I-II clinical data on AeroApoC3, Arrowhead's investigational therapeutic targeting apolipoprotein C3, or ApoC3, being developed as a treatment for patients with hypertriglyceridemia, severe hypertriglyceridemia, and familial chylomicronemia syndrome, or FCS. The presentation was assessing four genetically confirmed FCS patients and 26 patients with multifactorial chylomicronemia, which we refer to as MCM or non-FCS. The latter patients tend to have extraordinarily high triglycerides and exhibit the same or similar phenotype as genetically defined FCS. We wanted to evaluate whether there is a different response to AeroApoC3 in these two groups. This is important because we are now initiating a phase three study of AeroApoC3, which Javier will describe. In our study of patients with FCS compared with non-FCS, AeroApoC3 achieved similar levels of reduction of ApoC3, similar changes in QLIVET parameters, and similar and comparable safety parameters. ApoC3 was reduced by 98% in FCS patients and 96% in MCM patients. Both groups showed similar maximum median reductions in triglycerides of 91% and 90%, respectively. Non-HDL cholesterol was reduced by 58% and 49%, respectively. and HDL cholesterol was increased by 152% and 111%, respectively. Across our programs, preclinical data have been largely predictive of early clinical data, and early clinical data has been predictive of later stage clinical data. We see this with respect to pharmacodynamic response and safety and tolerability. I believe this is part of what makes RNAi and Arrowhead special, and one of the main reasons we can go into early clinical development with confidence that we have a good idea about what to expect. In our view, this serves to increase the probability of success and potentially reduce risk. That brings me to our newest clinical program. Arrow C3 is an investigational therapeutic designed to reduce production of complement component three, or C3, as a potential therapy for various complement mediated diseases. During the quarter, we announced the previously undisclosed candidate, we filed a CTA to begin clinical studies, and hosted a key opinion leader webinar to discuss the complement pathway and the diseases we will initially focus on. These include IgA nephropathy, complement III glomerulopathy, and paroxysmal nocturnal hematuria. There are also other renal and hematologic diseases that we intend to evaluate in the future. The complement pathway is complex, and we did our best in the webinar to explain why we think A C3-targeted drug has the potential to address multiple complement-mediated or complement-associated diseases. We in the KOLs also explained the theoretical advantages that an RNAi therapeutic like Arrow C3 may have over other mechanisms and other complement targets. If you haven't listened to the webcast, I recommend you view it on our website for more information about Arrow C3. This is an early clinical program, but as I mentioned, we have a good track record of preclinical data translating well to clinical studies for investigational medicines developed with the TRMM platform. I'd like to provide a quick update on our pulmonary programs, including aeroENAC, which is currently voluntarily paused to new enrollment as we assess some potential preclinical toxicology findings. We are still conducting studies internally to understand the toxicology findings, and we don't have clarity yet on the path forward. While we conduct those studies, we continue to make progress on our two new pulmonary programs, which are on track for CTA filings in the first half of 2022. In addition, we are working on a next generation ENAC candidate in parallel, should that prove to be helpful or necessary. We believe in ENAC as a target for cystic fibrosis and are confident that our pulmonary targeted trim platform has the potential to address multiple diseases in the lung without adequate treatment options. We have less clinical experience applying the trim platform to pulmonary tissue, so we don't yet have the predictability that we see when we apply the trim platform in the liver. But we are committed to getting there, and we are convinced that we can. Before turning it over to Javier to discuss the status of our mid- and later-stage cardiometabolic programs, I would like to discuss our growth plans. We now have 10 clinical-stage programs and intend to expand our pipeline by two to three new programs per year. To support this growing pipeline, We are in the planning stages of expanding our R&D footprint in San Diego and Madison. We will be leasing a new space in San Diego that is scheduled to be built over the coming year. In Wisconsin, we are in discussions with local and state government authorities and economic development agencies to explore potential tax and other incentives to build a new facility. Should those discussions be successful, we intend to build an Arrowhead campus in Wisconsin with two new facilities. These facilities will house expanded R&D and a GMP drug manufacturing plant. Our pipeline is advancing both in size and proximity to commercialization to the point where our buy versus build analysis indicates that the internal control of manufacturing now makes a lot of sense. This is true financially and, importantly, strategically. We value speed at every stage of development and in every function. Building out drug manufacturing capabilities for preclinical, clinical, and commercial drug product will give us more control over timing, process, and cost. We have not yet closed on the purchase of the land, so we have not yet started to incur significant costs. But Ken will talk later about our estimates for CapEx should we move forward with this plan expansion. With that overview, I'd now like to turn the call over to Dr. Javier San Martin. Javier?

Thank you, Chris, and good afternoon, everyone. I want to focus on the status of our most advanced wholly-owned cardiometabolic programs, AeroApoC-3 and AeroAge-3. Between these two programs, there are several clinical studies that are either active now or will be active soon. I will start with AeroApoC3. This is our investigational medicine targeting apolipoprotein C3 being studied in patients with various lipid disorders, including hypertriglyceridemia, severe hypertriglyceridemia, mixed lipidemia, multifactorial chylometronemia, and familial chylometronemia syndrome. The set of mid- and late-stage studies of aeroeposy 3 is called the SAMIC program, with each study named for a mountain peak. We currently have three open studies. 2001 is a phase 2 study in patients with severe hyperthyroidemia, which we are calling SHASTA2. 2002 is a phase 2 study in patients with mixed dyslipidemia, which we are calling MURE. And 2001 is a phase 3 study in patients with FCS, which we are calling PALACES. I will describe each of these studies briefly and give current status for each. TASTA-2 is a double-blind, placebo-controlled, Phase IIb study to evaluate the efficacy and safety of AeroApoC-3 in adults with severe hypertriglyceridemia, or SHTG. Three dose levels of AeroApoC-3, 10 milligrams, 25 milligrams, and 50 milligrams, will be evaluated against placebo in participants who have mean fasting triglycerides of greater than or equal to 500 milligrams per deciliter at screening. A total of approximately 216 participants will be enrolled in the study. All those cohorts will enroll in parallel with 72 participants per dose cohort randomly assigned in a three-to-one ratio to receive aeroeposy-3 or placebo. Each participant will receive subcutaneous injections on day one and week 12. The duration of the study is approximately 54 weeks from screening to the week 48 end-of-study examination. The primary objective of the SHASTA-2 study is to evaluate the safety and efficacy of aeroeposy-3 in adults with SHTG and to select the dosing regimen for later stage clinical studies in this patient population. SHASTA-2 has enrolled 40 of the planned 216 patients with an additional 56 patients currently in screening to potentially be enrolled. We have activated 60 of the planned 80 sites, and our goal is to have the study fully enrolled around Q3 of 2022. Moving on to the new study, it is a double-blind, placebo-controlled, Phase IIb study to evaluate the efficacy and safety of aeroeposy-3 in adults with mixed dyslipidemia. All those cohort of aeroeposy-3 will be evaluated against placebo in participants who had the following screening. Elevated triglycerides greater than or equal to 100 milligrams per deciliter, but less than 500 milligrams per deciliter, and known HDL cholesterol greater than or equal to 100 milligrams per deciliter, or LDL cholesterol greater than or equal to 70 milligrams per deciliter. A total of approximately 320 participants will be enrolled in this study. All those cohorts will enroll in parallel with approximately 80 participants per-dose cohort randomly assigned in a 3-to-1 ratio to receive AeroApoC-3 . In three cohorts, 10 milligrams, 25 milligrams, and 15 milligrams. Each participant will receive a subcutaneous injection on day one and week 12 for a total of two injections. In one additional 50 milligrams cohort, each participant will receive a subcutaneous injection on day one and week 24 for a total of two injections. The duration of the study is approximately 54 weeks for screening to the week 48 end-of-study examination. The primary effect of the MIR study is to evaluate the safety and efficacy of aeroeposy-3 in adults with mixed dyslipidemia and to select the dose and dose regimen for later stage clinical study in this patient population. The new study has enrolled 22 of the planned 320 patients with an additional 38 patients currently in screening to potentially be enrolled. We have activated 15 of the planned 32 sites, and our goal is to have the study fully enrolled in Q4 of 2022. The last active study for aeroeposy 3 is PALACE. PALACE is a phase 3 study to evaluate the efficacy and safety of aeroeposy 3 in adults with familiar calomicronemia syndrome. Two-dose level of AeroApoC3, 25 and 50 milligrams, will be evaluated against placebo in participants with fasting triglycerides greater than 880 milligrams per deciliter that are refractory to standard lipid-lowering therapy and diagnosis of FCS. Approximately 60 participants will be randomized in two-to-one ratio to receive four total doses of AeroApoC3 or placebo administered subcutaneously once every three months. The duration of the study is approximately 56 weeks from screening to month 12, end of study examination. After month 12, participants will be eligible and invited to consent and continue in an open-level extension study. All participants in the placebo group who opt to continue will switch to active drug during the extension study. And the primary objective of the PALAXase studies to evaluate the efficacy and safety of AeroApoC-3 in adults with FCS. The primary endpoint is presentation from baseline and month 10 in fasting triglycerides. Additional secondary and exploratory endpoint includes the change in other lipid parameters, incidence of acute pancreatitis, and other measures. We have activated three of the Plan 55 sites globally while working hard to activate additional sites, There are currently patients in active screening, and we anticipate the first patient to be enrolled and those before the end of the year. I will now move on to AERO-ENG3, our investigational medicine designed to reduce production of angiopoietin-like protein 3. HPTL-3 has a potential treatment for patients with mixed dyslipidemia. The set of mid- and late-stage studies for AERO-ENG3 is called the VISTA program, with each study named for a national park. We currently have one open study in the VISTA program. ARO-H3, 2001, a Phase II study in patients with mixed dyslipidemia, which are calling ARCHES-II. ARCHES-II is a double-blind, placebo-controlled, Phase IIB study to evaluate the efficacy and safety of investigational ARO-H3 in adults with mixed dyslipidemia. Three dose levels of ARO-H3, 50 milligrams, 100 milligrams, and 200 milligrams, will be evaluated against placebo in participants who had the following screening. LDL cholesterol greater than or equal to 70 mcg per deciliter or non-HDL cholesterol greater than or equal to 100 mg per deciliter. And mean fasting triglycerides between 150 and 500 milligrams per deciliter. A total of approximately 180 participants will be enrolled in the study. All those cohorts will enroll in parallel with 60 participants per cohort randomly assigned in a three-to-one ratio to receive a subcutaneous injection of aero-H3 or placebo on day one and week 12. The duration of the study is approximately 42 weeks from screening to the week 36 end of study examination. After completing the week 36 visit, participants will be eligible to continue in an open-level suspension study. The primary objective of the ARCHES II study is to evaluate the safety and efficacy of ROH3 in adults with mixed dyslipidemia and selected dosing regimen for later stage clinical study in this patient population. The ARCHES III study has reached 50% enrollment with 90 of the planned 180 patients enrolled and those with an additional 58 patients currently in the screening to potentially be enrolled. We have activated all 25 of the initial planned 25 sites, and our goal is to have the study fully enrolled in Q2 of 2022. I will now turn the call over to Ken Miszkowski, ROHS Chief Financial Officer. Ken.

Thank you, Javier, and good afternoon, everyone. As we reported today, our net loss for fiscal 2021 was $140.8 million, or $1.36 per share, based on $103.7 million fully diluted weighted average shares outstanding. This compares with the net loss of 84.6 million or 84 cents per share based on 100.7 million fully diluted weighted average shares outstanding for 2020. Revenue for fiscal 2021 was 138.3 million compared to 88 million for 2020. Revenue in the current period primarily relates to the recognition of a portion of the 300 million upfront payment received under our collaboration agreement with Takeda. Revenue for the Takeda agreement will be recognized as we continue to work toward completing our performance obligations of managing clinical trials in process and certain manufacturing related services. There remains $209 million of revenue to be recognized associated with the Takeda collaboration and it is anticipated to be recognized over approximately two to three years. Any additional milestones achieved with our collaboration partners would be additive to this projection. During fiscal 2021, we also entered into a new collaboration agreement with Horizon to develop a drug candidate to treat uncontrolled gout. We received a $40 million upfront payment for this agreement. A portion of this amount was recognized in fiscal 2021, and we expect the balance to be recognized by the end of 2022. as our performance requirements are completed. Revenue in the prior period primarily related to the recognition of a portion of the milestones received from the license and collaboration agreements with Janssen. We also announced a new licensing agreement with GSK today for Arrow HSD candidate. This agreement will result in an upfront payment of 120 million to Arrowhead. We anticipate the substantial majority of this to be recognized as revenue in fiscal 2022. Total operating expenses for fiscal 2021 were $287.3 million compared to $181.2 million for 2020. This increase is primarily due to increased candidate-specific and discovery R&D costs as the company's pipeline of clinical candidates has both increased and advanced, as well as additional non-cash stock compensation expense. Net cash provided by operating activities during fiscal 2021 was $171.2 million compared with net cash used by operating activities of $95.4 million in 2020. The key driver of this change was the $340 million in total upfront payments received from Takeda and Horizon in fiscal 2021. Including any potential milestone payments received from our collaboration partners, we estimate our operating cash burn to be $60 to $80 million per quarter in fiscal 2022. In addition, we are planning to expand our manufacturing capabilities and expand our R&D facilities. These capital projects, along with routine capital expenditures, will add an incremental cash outlay of $80 to $90 million for full year fiscal 2022. Turning to our balance sheet, our cash and investments totaled $613.4 million at September 30, 2021, compared to $453 million at September 30, 2020. The increase in our cash investments was primarily due to the $340 million in total upfront payments received from Takeda and Horizon offset by cash used for operations. Our common share is outstanding at September 30, 2021, where $104.3 million. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken, and thanks to all for joining us today. We are executing on our strategy with respect to platform extension, pipeline expansion, and business development. Arrowhead's opportunities in the near term and long term are vast and continue to grow each day. The data from our clinical programs continue to be encouraging and strongly support further development of our investigational medicines. Lastly and importantly, we see the potential in the not-too-distant future where important medicines discovered and developed by Arrowhead start to get to patients who need them. This is why we invest in R&D and why we are building manufacturing capabilities now to support clinical and commercial supply needs. I'd now like to turn the call over to your questions. Operator?

And thank you. As a reminder to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. We do ask that you limit yourself to one question and one follow-up. Again, that's one question, one follow-up. Please stand by while we compile the Q&A roster. And our first question is going to come from Luca Isi from RBC Capital. Your line is now open.

Oh, great. Thanks so much for taking my questions, and congrats on the progress. I'll ask two, both the main question and the follow-up, I guess. So on A1AT, it sounds like you had a productive dialogue with the FDA here. Can you expand a little bit more on that conversation here? and what was their level of receptivity on the idea of getting approved on just liver A1AT level? That's question one. Then question two on GSK, wondering if you can comment on why you decided to retain sizable economics in the U.S. with 50-50 profit split for A1AT, but obviously here we have a very different structure for NASH, so any color on that would be great. Thanks so much.

Sure. So I'm going to take the first one first, which is, straightforward. There's not much we can tell you. Look, we had a very encouraging and productive discussion with the FDA, in fact, just this last week. I think that we are moving in the right direction, and it was a good collaborative interaction. We look forward to continued discussions. This is an ongoing dialogue, and we've just begun this, and so I expect to have, you know, a continued dialogue in 2022, particularly as we have additional data. So, you know, there's not much I can tell you right now other than that. Again, so far, so good. I think it's been a good conversation so far. With respect to the different field structures for AAT and for HSD, you know, it's – I think that just reflects the state of – the development of the two programs. AAT was, of course, you know, farther advanced than HSD. That's first. Second, AAT, I think the biology there is quite clear. HSD, we still need to suss that out. You know, there's really good genetic validation for that target, but as we talked about earlier in the call, you know, there's been no inhibitors of of this protein that have been tested. And so while the genetic data look encouraging, we still need human proof of concept. And so I fully trust that we'll show that, or at least JSK will show that, but it's just a different state of progress between AAT and HSD. And finally, these are two very different diseases. HSD is a very large disease tens of millions of people in the U.S. are likely potential patients for that, whereas AAT is an orphan indication. We think that there's maybe 100,000 to 120,000 potential patients in the U.S. And so given all of that, you know, we would look for different economics and different structures for those two programs. We're very happy with both of them. I think we have the right partner for AAT and Takeda who is committed, and we are really working together with them to bring this important medicine to these patients. And similarly, I think we have got the right partner in GSK for NASH. They appear to be committed to the program, and we are impressed with their ability to move that program forward.

Super.

Thanks so much. You're welcome.

Thank you. And our next question comes from Alethea Young from Kantor. Your line is now open.

Hey, guys. Thanks for taking my questions. One, I just wanted you to talk a little bit about your perspective on the capsid and SRNA data, ASLD. I mean, do you feel like combination is the way to go? It's kind of interesting, the capsidential activity. And then I think my second question is just on whether you guys would ever, you know, kind of think about maybe potentially doing something in, like, neuro... Since I know some of your competitors are now talking about that, thanks.

Sure. Thanks, Leithia. It's good to hear from you. So with respect to combination for HPV, look, I think that I was very encouraged by Janssen's data. You know, our drug is doing what it's designed to do. You know, we saw deep reductions of S antigen. We are, I assume that we are seeing, you know, good reductions in all viral antigens. We saw a good percentage of patients who got S below 100 IU. I think it was 75 or so percent during treatment. That's impressive, and we think that that number, that 100 IU, is an important number. It's been shown in the past that patients who can get below 100 IU have a better chance of seroclearing. Then, of course, the primary endpoint looked good. We saw a lot of patients who achieved new stopping criteria and even more patients who achieved that criteria even after they came off therapy. We're really encouraged by that start and we're looking forward to watching these patients continue off therapy and seeing if we can get some functional cures. Now, with respect to combinations, we've always believed that this is a tough virus and that we were hopeful that our drug, you know, could be a backbone approach, and nothing we have seen so far has pulled us from that thought. We still think it's going to be the backbone approach, and we still think that to get, you know, wide-ranging, consistent functional cures, that you may need a combination approach. I think that... that a CAM is probably not the preferred combination going forward, but J&J or Janssen is going about this in the right way. They have a number of studies ongoing. We look forward to seeing what the immunomodulatory studies look like and beyond. So, you know, I think that we are still in the early part of trying to figure out what the correct therapy is for HPV, but I think that we're on the right track, and I think those data support that.

Any plans for now?

Sorry, CNS, right. Sorry, CNS. Look, we don't have any stated programs in CNS right now, but you're right. We have competitors who have been working on that for some time now for good reason. There's a lot of unmet medical need there, and there are clearly some indications that there could be addressed using RNAi, and so we wish them good luck. I think that at some point we will be there because it's important for us to be there. To date, we have focused on other cell types. As you know, we've got programs in pulmonary and solid tumor, skeletal muscle by the middle of next year. We didn't talk about that in the call, but we're still on track for skeletal muscle. But, yeah, eventually, you know, at some period, we will likely have a program in CNS. We just don't have one right now. Great. Thank you. You're welcome.

And thank you. And our next question comes from Mari Raycroft from Jefferies. Your line is now open.

Hey, congrats on the update, and thanks for taking my questions. I was just going to ask a question on HSD. Congrats on that update. Wondering if you can say if the process to partner the HSD asset was competitive. And since you're pursuing PMPLA-3 in Nash with J&J, did J&J have any option or right of refusal for HSD?

Thanks very much. It's good to hear from you, Mari. Yes, we did run a competitive process. We spoke with with a number of companies about the asset, and GSK seemed to be the best partner. J&J did not have a right of first refusal or anything like that for HST.

Got it. Okay. And also one quick question for AAT. Just wondering, of the 16 patients, if you can clarify how many of those patients will have 12-month biopsy and how many will have 18-month biopsy? Pierre, do you want to address that? Yeah.

So 12-month biopsy have all eight patients on cohort two that received 200 milligrams. 18 months, right now we had two, and it's likely to be few patients that we had a 24-month biopsy. But because it's not mandatory, not all patients will accept or have accepted to go through the third biopsy. And that's the case in the first cohort. That was the six months, 200 milligrams. Two of the four patients accepted to have the follow-up biopsy, and two of them did not. So we don't know how many would accept from the other cohorts that the post-baseline biopsy was a week, sorry, a month 12. Got it.

Okay. Okay. Thanks for taking my questions.

Thank you. And our next question comes from Esther. Roger Vugler from UBS. Your line is now open.

Hey, thank you for taking my question. I have just two. First, on the AERO APOCT program, if the magnitude of the APOCT reduction is similar between the FCS and MCM patients, can you share your thoughts on what the implications for therapeutic benefit and outcomes could be for the FCS patients? And then my follow-up is on manufacturing, which I'll ask in a second.

Sure. Javier, would you like to ask? Sure.

Yes. So that's the data we presented, you know, this past week at AHA, in which we show that the FCS population and the MCM population have very much the same response with regard to the target, ApoC3, and to the magnitude of decrease in triglycerides, which is in the range of 80 to 90%. So what that means for patients with SPS is that many of them, depending on their baseline, will achieve a level beyond which the likelihood or risk of pancreatitis will be very, very low, which is the goal of therapy. So we're very encouraged by these results. And again, right now, the majority of patients, depending on their baseline, will be in a healthy range of triglycerides.

Yeah, and I just want to underline that. I think that is... That's one of the things that's so exciting about that candidate, that we are really moving the needle on triglycerides. We can really think about now normalizing many patients' triglyceride level, and I think that's a big thing.

Got it. And then on the manufacturing investment, do you expect, once you have your facility up and running, that it may change the economics of your existing partnerships, assuming those assets progress to commercialization? Or do you expect that, you know, that could change potential terms for future deals?

That's a good question. You know, I don't think they will materially change the economics of existing deals. You know, we could be a supplier, you know, to those partners. You know, no one has to use us, but they may want to use us. And so that – their economics there – Going forward, I think your point's a good one. It could be that it makes sense for future partners to take advantage of our manufacturing capabilities. We spend a lot of time these days working on process development, and I think that we have discovered new ways of manufacturing that could lead to better purity, could lead to lower costs. And I think that could be something that's helpful for our partners.

Great. Thank you.

And thank you. And our next question comes from Joel Beattie from Baird. Your line is now open.

Hi. Great. Congrats on the progress. I have two questions on the ENAC program. The first is, what's the latest on the timing of an update on that going ahead on the NHP study and anything else that maybe needed to be looked at for the program going ahead. And then the second question on ENAC is, well, just on the lung programs, is what gives you confidence that the two non-ENAC programs with a TTA filing can go ahead even if the data doesn't look good for the ENAC NHP study?

Sure. Thanks for those questions. So with respect to timing of of how we move forward and when we move forward on ENAC as a target. I can't give you specific timing because this is all kind of real time right now. I do believe, though, that in the first quarter of next year, we'll know where we're going. We're waiting for the NHP chronic docs, as you point out, and I think that should be in sometime by the end of December. We're also doing a number of non-clinical studies internally to try to understand the basis of that local inflammatory response that we saw in the rats. So beyond that, I can't give you much more granularity. But I do believe, though, that at some point in that first quarter, we'll have either a path forward to restart Arrow ENAC, or we may decide to switch horses and move to this next generation. As I mentioned in the preparative marks, we have been working on a next generation in-house program. and I think we have a couple of potential candidates. Nothing's been nominated yet, but we have a couple that are substantially more potent or at least appear so far to be substantially more potent than AeroENAC, and that could help out with an overloading issue if, in fact, that was the reason for the tox issue we saw in the rats. So I just say stay tuned on that. We'll know a lot more in the next couple of months, I think. Regarding... What gives us confidence about the new pulmonary programs? Look, I think that the more potent we can make these constructs, the better. We know that overloading could be an issue, at least in rats. And so we're focused on making these constructs as potent as we can. And our next two are also substantial. that that may work well but look at the end of the day you know you don't know until you know and so we have to run you know chronic tox programs and we'll see where those go but at least so far what we have uh in those in the two newer programs we feel pretty good about and we're on track to file ctas in the first half of next year great thank you oh and and and one more thing uh I was just given a note on this to remind me. It's a good point. One of the two next programs has a circulating biomarker. That's going to be helpful to us to give us an idea about how much knockdown we're getting. You know, what's tough about ENAC is that to understand how much knockdown you're getting, it's just technically difficult. And so I think we have a leg up on this next program.

Thank you. And our next question comes from Patrick Truccio from HC Wainwright. Your line is now open.

Thanks. Good afternoon. Just a couple of follow-up questions from me. The first one is I'm wondering if you can discuss the impact, if any, from the recently announced acquisition of a competitor's platform in terms of partnering discussions on your various programs. I'm wondering if you've seen an increased level of interest since that deal was announced and which programs could be next to partner in your pipelines.

Boy, you're a master of the unanswerable questions on this one. I don't know that we've seen any increased partnering interest in the last week or so. I will tell you this. Here's what we can control. Our job is to make medicines that are safe and that can help patients in ways that other medicines can't. To the extent that we can focus on that and we can succeed at that and we can do that rapidly, everything else will sort of follow. And so, you know, I kind of view this M&A, the recent M&A, the recent acquisition as a bit of noise because it doesn't really affect our day-to-day business. We need to remember, you know, why we're here every day, which is to make important medicines, and that's what we're doing. Yep.

Yep, that's helpful. And then just with the understanding that AMG 980 is being developed by Amgen, I'm wondering if you could discuss expectations around the Phase 2 trial. And assuming it's on track for Phase 2 top-line data in the first half of 2022, I'm wondering what level of LP little a knockdown would give confidence to move forward to a pivotal program?

Sure. I don't think I know any more than you do, to be honest. My understanding is that Amgen has guided that they will have data in the first half of next year. I haven't heard that that's changed, so that's my understanding. And frankly, my expectation would be then that they would move into a pivotal study thereafter. I don't know how long it will take them to do that. The data that we've seen so far, the data that have been presented, boy, are really good. That is a potent drug candidate. they're seeing very deep knockdown, you know, with a very small amount of drug in LP little a. And I think that the genetic validation of that target clear. So my expectation is that they will have data in the first half of the year, and then we'll just see how fast they can move to a pivotal. I can't really give you an idea about what would make them happy in terms of reduction of LP little a levels. I can tell you, though, that at least internally, we have been impressed with what they've shown so far. And if this was our program, I certainly wouldn't be slowing down. I'd be moving into a phase three, given what we've seen so far at least.

Terrific. Thank you very much.

You're welcome.

And thank you. And our next question comes from Manny Fuller from SVP Learing. Your line is now open.

Hey, thanks. A follow-up question regarding some other questions about the EMAX program. You talked a little bit about this mouse signal counterparty related but not at all identical technology in ASO, had early human data and saw perhaps related or not tox signal in non-human primates, discontinued their program but did release that early human data. Should we expect that you'll be releasing some patient data with aeroENAC, or is that something that you think you'll just put away and we'll never see? And I have one follow-up.

Sure. You know, I just don't know at this point. let's see where that program is going to go. I don't know if we're going to restart that. I kind of don't want to get into hypothetical at this point. that will stay paused. Once we have an idea about how we go forward, either restarting enrollment of that or switching to a new construct, at that point then we can have a better discussion about what we do with the data that have been collected so far.

Great. And as you said, you guys spend a lot of time talking about extrahepatic programs, obviously a place where RNAi is still earlier in development than liver targeting for you and all companies, broadly speaking. Is there a timeline we should expect an update on the oncology program that you gave us a first look at? And do you continue to see oncology or, broadly speaking, other kidney diseases as an area of growth for you? Or is that more of a one-off experiment?

No, I would not call that a one-off experiment. It is the first experiment in solid tumor targeting. And I think we're off to a good start there. I think we've seen clear target engagement. That's important. We've seen clear knockdown. That's important. And so now we just need to see, you know, if that particular drug is a drug. You know, we'll look at longer-term response rates, and we'll make that decision. But I think from a platform standpoint, we are on the right track. Is this the last iteration of our oncology platform? Absolutely not. We will certainly continue to advance it, but at least from my perspective, it's a good start. Now, and to be clear, you know, this program is designed to, you know, to to address solid tumors really kind of broadly. We don't yet have a platform that is designed to address kidney indications. That may happen at some point in the future, but right now we don't have that. I don't know if I have a good prediction about when we're going to have our next slug of data for HIF-2. We are fully enrolled, and so I think we're just following patients. James, do you have anything to add on that? No, I think that's about right.

Yeah, the study's fully enrolled, and so all the patients on drug are just in the follow-up period. Great. Thanks, guys. You're welcome.

Thank you. And our next question comes from , from B. Riley Securities. Your line is now open.

Good afternoon, team. Congrats on the pipeline progress and also on the GSK deal. And thanks for squeezing us in. Just have a few clarifying questions, just quick ones. So on the J&J refund study, just any idea on at what time points the follow-ups might come and when can we see the patient level analysis? Is there any insight you have on how J&J might be thinking of communicating going forward?

I really can't give you that information. Because I just don't know. In fact, we haven't seen, I don't believe at least, I don't think we've even seen the individual patient data. As I said earlier, look, we're really encouraged by those data. You know, I think they're good data. You know, our drug is doing what it's designed to do. And so now, look, we just need to kind of sit back and see how this goes. As I mentioned in the prepared remarks, you know, ARC-520, for those patients on ARC-520 who was serocleared for S, it didn't happen in six months. It happened, you know, as early as nine months or as long as two years or so, as I recall, after a drug was removed. And so, you know, we look forward to watching continued follow-up. I think that we are. We have just entered a prolonged data-rich period with Janssen, given Reef 1, Reef 2, Reef D, you know, the interferon studies and others. I think that there will be I think that there should be regular data released from various, you know, parts of, parts of these studies going forward. And so, you know, I think the 22 is probably going to be substantially more data rich than 21 was.

Looking forward to that. Understood. And then on AAT, can you remind us how you're tracking with the CEQA, you know, phase two, three data package, I think about 40 subjects. Yeah. and what might be the expectations in a placebo-controlled setting relative to what you've shown in an open-label format?

Yes, sure. So as you know, we have completed the enrollment of 40 patients. The next data log where we're going to work on dose selection will occur in the first half of 2022, and that will be probably our next interaction with the agency to discuss the dose. And the pair biopsies will be finished by July, August of next year. So last patient, second, or post-basement biopsy will be in that timeframe. So add to that the timing for data log and evaluation. So I would say towards the end of 2022, we'll have the placebo-controlled pair biopsies resolved from Sequoia.

Great. Thank you. And just on the cardiometabolic process, wholly owned portfolio. I heard, you know, appreciate the level of detail on ANTS 3 and APOC 3. And can you just put it together, like how in 2023 we will, you know, see some of the data generation activities? And I didn't, I think, catch on the enrollment for FCS study, the phase three study. Could you just remind me on that?

So it's hard to guide to data release at this point, particularly for FCS, because we haven't even dosed the first patient yet there. All the studies we talked about are year-long studies, and so the unknown here is how fast we can get these enrolled. So give us some more time here at enrollment, and then I think we'll have better visibility on when we can start to have data release. Do you have anything else to add on that, Javier?

No, I don't think that's fair.

And the question on the phase three for FCS. So the study is up and running. We have patients in screening. We've already activated sites, and we anticipate dosing before the end of the year, first dosing.

Great. Thanks so much for taking our question.

And thank you. And I'm showing no further questions. I would now like to turn the call back to Chris Angeloni for closing remarks.

Thanks, everyone, for joining us today, and we wish you a happy and safe Thanksgiving weekend.

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