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

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2022 first quarter, ended December 31st, 2021. With us today for management, our 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 mid and later stage clinical pipeline. Dr. James Hamilton, our senior vice president of discovery and translational medicine. will provide an update on our pulmonary platform, and Ken Miszkowski, our Chief Financial Officer, will give a review of the financials. We will then open up the call to your questions. 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-K. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company. Christopher.

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. The biotech market has been a difficult place of late. In 2021, the XBI biotech index was down 21%, and during the first month of 2022, the index was down a further 18%. My goal today is not to fight market cycles, but rather to articulate where we are as a company to help you assess Arrowhead's true value. We are here to create innovative new medicines for the millions of patients who desperately need them, And if we stay focused on that important mission, we will continue to create substantial value for our shareholders. That is the lens through which you should view our update today. As Javier, James, and I speak about our continued progress across our programs, think about what those programs will mean to patients and where those programs will take us as a company. There is much that currently excites me about this great company. We had another strong quarter executing on our strategy with respect to platform extension, pipeline expansion, and business development. We continue to make tangible progress across all our programs. Early in the quarter, we hosted a key opinion leader webinar on Arrow C3, our newest clinical stage investigational therapeutic designed to reduce production of complement components three, or C3, as a potential therapy for various complement-mediated diseases. We also filed a CTA to begin clinical studies and have been activating sites for first in human studies. As with all other drug candidates currently in our pipeline, we expect AeroC3 to be the first RNAi candidate against this target to reach the clinic. We see substantial unmet medical need we could address across a variety of indications, including PNH, autoimmune hemolytic anemia, C3 glomerulopathy, IgA nephropathy, and lupus nephritis. Our preclinical data have been encouraging and given that this will be our eighth hepatocyte-directed trim candidate in clinical studies, we have a high expectation of success. This program is also a good example of our speed. We went from idea to initiating clinical studies in approximately 12 months. We expect to move at similar speed for future hepatocyte-directed candidates, and as the extrahepatic platforms mature, we have the potential to move at a similar level of efficiency. During the quarter, we and our partners also presented encouraging clinical data on multiple programs, including AeroHSD for NASH, AeroAAT, also called TAC999, for liver disease associated with Alpha-1 antitrypsin deficiency, AeroApoC3 for hypertriglyceridemia, and J&J3989 for hepatitis B virus infection. Without exception, all of those candidates appear to be doing what they are designed to do and have been generally well-tolerated. We look forward to continued clinical development and learning more about the potential disease-modifying capabilities of those agents. We also signed a license agreement with GlaxoSmithKline for AeroHSD that just recently closed. We are happy to bring on a new partner and look forward to working closely with GSK as they prepare to start a Phase 2 study. Under the terms of the agreement, GSK received an exclusive license to develop and commercialize AeroHSD in all territories except Greater China, which was retained by Arrowhead. Arrowhead received an upfront payment of $120 million and is eligible for a $30 million milestone at the start of Phase 2, a $100 million milestone at the start of Phase 3, up to $190 million in milestones at launch in the U.S. and major markets, and up to $590 million for key sales milestones. Arrowhead is further eligible to receive tiered royalties of mid-double digit to 20% on net product sales. I expect GSK to be a great partner for this exciting genetically validated candidate. They have a clear commitment to genetic medicine and to finding an effective treatment for NASH, which could include a staggering number of patients. Understanding the complicated biology of this disease and addressing a potentially very large global market are substantial challenges indeed, and we believe that GSK will be a powerful partner to complete clinical development and ultimately deliver a potentially important medicine to the tens of millions of patients who need it. Moving to our cardiometabolic programs, we recently initiated Arrowhead's first Phase III study, which I see as a key milestone event and indicative of a maturing company. The Palisade study is a Phase III clinical study to evaluate the efficacy and safety of AeroApoC3 in adults with familial chylomicronemia syndrome, or FCS. AeroApoC3 is our investigational RNAi therapeutic designed to inhibit the production of apolipoprotein C3, or ApoC3, a key regulator of triglyceride metabolism. Prior studies have been very encouraging, where we have seen greater than 90% triglyceride reduction in some patient populations. This type of dramatic effect could really move the needle for FCS patients who have very little in the way of therapeutic options at present. We also made good progress on patient enrollment for the two AeroApoC3 Phase IIb studies in severe hypertriglyceridemic patients, the SHASTA2 study, and those with mixed dyslipidemia, the Muir study. These are populations that we believe have few therapeutic options, and data from our prior studies suggest that AeroApoC3 could be highly meaningful by lowering triglycerides and raising HDL. Progress on the AeroAns3 Phase IIb study in mixed dyslipidemia, the Arches II study, has been rapid, and I expect enrollment to be complete in the coming months. We continue to see a big opportunity to help the millions of patients with elevated triglycerides and LDL cholesterol, and we are optimistic that AeroAng3 could be an important future medicine given our prior data and exciting work done by others to validate the target. As has been our consistent practice at Arrowhead of bringing the first RNAi compound into the clinic against specific gene targets, AeroAng3 was the first RNAi compound in clinical studies that targets AngPTL3. Further, the competitive landscape seems to have shifted even further in our favor with the recent announcement that Pfizer has discontinued its partnership with Ionis on its antisense approach to AngPTL3. Of course, we do not have deep knowledge of data coming out of that program, and it is always difficult to compare results across different studies. But given what we have seen publicly, we continue to be confident in our candidates. For instance, data from our Phase I-II study indicated the following. AeroAng3 has demonstrated very deep and durable activity, enabling quarterly or less frequent dosing. AngPTL3 levels were reduced in a dose-dependent fashion from 78 to 90% after 100, 200, or 300 milligrams of AeroAng3. We saw mean triglyceride reductions up to 73.5% and mean non-HDL cholesterol reductions up to 50%. Only two patients had elevated ALTs, and in both cases, There were concomitant medications associated with increases in ALTs, and in both cases, the elevation was transient and not associated with increases in bilirubin. And we have seen no indication that AeroAng3 led to any increase in liver fat. Let's now move to our pulmonary platform. James will give a fuller review during this call, but I wanted to highlight a few developments. First, we continue to make progress on the ENAC target, but will likely not continue with aeroENAC, the candidate that we are testing in a phase one, two study last year. We have two to three next generation compounds that appear to have favorable pharmacologic properties compared to aeroENAC. A step behind this, we are also exploring ways to deliver pulmonary targeted drug candidates via subcutaneous administration, which we believe would be a true breakthrough and are testing this for ENAC as well. But we are likely changing horses in the ENAC program but we have not yet settled on which new horse. We've also discussed our plans to file two new pulmonary CTAs this year, but had not previously disclosed the targets or disease areas. I'm excited to announce these programs formally as AeroRage and AeroMuck5AC, each being developed for various mucoobstructive and inflammatory pulmonary conditions. We are on track to file CTAs for both of these over the next quarter. We will be presenting preclinical data at the American Thoracic Society meeting next in May, and we also plan to host a KOL webinar or pulmonary-specific R&D day this year. At the latter event, we intend to go into detail on the biology of the targets, present preclinical data, introduce the commercial market opportunity, explain our plans for the clinical studies, and have an outside KOL describe the clinical presentation of the disease and unmet medical need. We are pleased that we expect to file two new pulmonary CTAs in the first half of 2022 and are also on track to file a third by the end of this year. That target and disease area remain undisclosed. While still on the pulmonary platform, we continue to make progress in COVID and are currently testing compounds that are leading to substantially decreased lung inflammation and viral expression in animal models. This is exciting for what they may mean for the current SARS-CoV-2, but also potentially for other SARS-based coronaviruses. As you may recall, we are working to develop antiviral agents by targeting regions that are well-conserved across known SARS coronaviruses, with the hope that we could treat current and future novel infections. Our progress here has also opened doors for us in other respiratory viruses, where we now have active programs. We could see that becoming a substantial sub-franchise, if you will, within our pulmonary platform. These are exciting opportunities for us, and we look forward to updating you on our progress. In addition to two new pulmonary CTAs in the first half of this year, we are on track with AeroDUX4, our first skeletal muscle targeted candidate against FSHD. Consistent with our prior guidance, we expect to file that CTA by the end of the first half of this year. This represents a leap forward with the addition of another cell type we can target clinically, and more specifically, AeroDUX4 may offer us the ability to help a group of patients with no real therapeutic options. Recent failures and setbacks in the field have underlined the unmet medical need that currently exists, and we are moving as fast as we can for the FSHD patients who need us. Our partner programs have also made good progress. J&J continues its Phase I progress, and J&J 75220795, our partnered NASH therapeutic, and J&J 3989, our partnered HPV therapeutic. The latter is in multiple Phase IIb studies that have started to read out, and I would expect regular data from them over the next few years. As we discussed on our last earnings call, J&J 3989 is doing exactly what it was designed to do, and we look forward to seeing how it performs over time and in combination with different agents. We'll pass around the candidates against cardiovascular disease that we licensed to Amgen continues in a Phase II study. Amgen has said publicly that they expect to complete the Phase II in the first half of this year. Data from the Phase I were impressive, and we look forward to seeing Phase II data and the initiation of a Phase III. Arrow AAT has an ongoing Phase 2B study that is currently starting to read out PK data at three different dose levels and will read out biopsy data in the third or fourth quarter. We continue to work closely with Takeda and expect to continue discussions with regulators this year about our data and plans for a pivotal study. Our work with Verizon continues to move rapidly in the area of chronic gout, and I will defer to them to provide guidance in future plans and timing. Lastly, we completed a transaction to purchase 13 acres of land in Verona, Wisconsin, which is planned to be the site of a new GMP drug manufacturing facility and an associated laboratory and office facility. Construction is starting this quarter. Completion of the lab and office space is anticipated in early to mid-2023, and completion of the manufacturing facility is expected in late 2023. We will continue to operate additional research and development facilities in Madison, Wisconsin and San Diego, California. We also signed a lease to what will allow us to substantially expand our research laboratories and administrative offices in San Diego in the first half of 2023. We believe the new Arrowhead campuses will allow us to support our growing pipeline, and we think positions us well to advance the manufacturing process, including a commercial scale of our trim-enabled drug candidates. We view this as a strong competitive advantage as we approach potential commercialization of our rapidly progressing clinical candidates. So in summary, our pipeline is expanding and maturing. Our platform is providing additional opportunities to discover and develop new investigational medicines in areas where Arrowhead has unique capabilities and expertise. We are using business development selectively to maximize the value of our technology and to bring in non-dilutive capital to support our internal development programs. And we are investing to expand our R&D footprint and take more control of the drug manufacturing process to support clinical and ultimately commercial supply needs. We believe all of this puts Arrowhead in a very strong competitive position. 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 will provide status updates on three of our later stage clinical programs, Arrow EPOC-3, Arrow ANGE-3, our investigational cardiometabolic medicine, And AeroAAT, also called TAC999, our investigational medicine designed to treat alpha-1 liver disease, which is being co-developed with Takeda. First, AeroApoC3 is our investigational medicine targeting apolipoprotein C3 being studied in patients with various lipid disorders. Collectively, the mid- and late-stage clinical studies for AeroApoC3 are called the SUMMIT program. We made good progress bringing on new sites for each of the studies and were very pleased with the pace of patients' enrollment. I will discuss each study individually. TASTA-2 is a double-blind, placebo-controlled, phase IIb study of ROA-pos-C3 in adults with severe hypostric glyceridemia, or SHTG. This population is defined as having triglycerides greater than 500 milligrams per deciliter The primary objective of the SHA-STAT-2 study is to evaluate the safety and efficacy of aeroeposy-3 and to select a dose enrichment for the later stage clinical studies in this patient population. Approximately 216 patients will be enrolled in this study. Moving on to the MIR study, which is a double-blind placebo-controlled Phase IIb study of aeroeposy-3 in adults with mixed dyslipidemia. This population is defined as having triglycerides between 150 and 500 milligrams and non-HDL cholesterol greater than 100 milligrams or LDL cholesterol greater than 70 milligrams per deciliter. The primary objective of the MEAR study is to evaluate the safety and efficacy of aeroeposite 3 and to select a dose and dosing regimen for later stage clinical studies in patients with mixed dyslipidemia. A total of approximately 320 patients will be enrolled in this study. The most recent study initiated in the SAMI program is Pallisade, a Phase III study to evaluate the efficacy and safety of aeroeposy-3 in adults with familiar chylomethrinemia syndrome, or FCS. These are patients with fasting triglycerides greater than 880 mg per deciliter that are refractory to standard lipid-lowered therapy and have a diagnosis of FCS. Because they tend to have extremely high triglycerides, patients with FCS have an elevated risk of recurrent and painful bouts of pancreatitis. These patients currently have very limited treatment options. The primary endpoint of palisade is a percent change from baseline at month 10 in fasting triglycerides. Additional secondary and exploratory endpoints include the change in other lipid parameters, incidence of acute pancreatitis, and other measures. Approximately 60 patients will be enrolled in this study. I will now move on to AeroAng3, our investigational medicine designed to reduce production of angiopoietin-like protein 3, HPTL3, as a potential treatment for patients with mixed dyslipidemia. The set of mid- and late-stage studies for ROH-3 is called the VISTA program. The VISTA program has one active study and one additional planned study that I will describe briefly in a moment. The currently active study is ARCOS-2, a double-blind placebo-controlled phase 2B study of investigational ROH-3 in adults with mixed dyslipidemia. This population is defined the same way as in the aero-apocytremia study. This patient had triglycerides between 150 and 500 milligrams per deciliter and non-HDL cholesterol greater than 100 milligrams per deciliter or LDL cholesterol greater than 70 milligrams per deciliter. The primary objective of the ARCHES II study is to evaluate the safety and efficacy of aero-AH3 in adults with mixed dyslipidemia, and select a dosing measurement for later stage clinical studies in this patient population. A total of approximately 180 patients will be enrolled in this study. The next study plan for the VISTA program is GATEWAY, a Phase II study of ROH3 in patients with homozygous familial hypercholesterolemia, or HOFH. Statins and PCSK9 inhibitors can inhibit cholesterol synthesis and enhance hepatic clearance of LDL cholesterol through upregulation of the hepatocyte LDL receptor. Patients with HOFH can have dysfunctional or absent LDL receptor and thus can be resistant to statins and even resistant to alternatives such as PCSK9 inhibitors. Patients with HOFH are therefore a population with a particularly high need for additional therapies with a mechanism that works outside of the LDL receptor, such as NHPTL3 inhibition. Dayway is an open-level study that will be conducted in sapshas with documented HOFH based on genotype or clinical criteria. Up to approximately 16 sapshas who meet eligibility criteria will be randomized in a one-on-one ratio to receive two doses of 200 or 300 milligrams of ROH3 on day one and day 84, and will be evaluated over a 36-week period. We're getting up to initiate this study in the first half of 2022, and we'll provide an update when the first patient has been enrolled. Consistent with the other Phase II studies in both the VISTA and the SAMI programs, we want to give Arrowhead maximum flexibility to initiate Phase III studies in multiple patient populations if the data warrant it. At the end of these Phase II studies, we hope to have a good understanding of the pharmacodynamic effect of both investigational medicine in various patient populations with different baseline lipid profiles. We believe that this will inform our development strategy and also help shape our commercial strategy in both well-defined rare diseases as well as larger high-prevalence diseases. I also want to give a brief update on ARO-AAT, also called TAC999. After receiving breakthrough therapy designation, we began a productive dialogue with the FDA about the program. We expect to have data on the reduction of circulating level of AAT from sequoia in the first half of this year, which will be used to select the dose for phase three. We should also be collecting the last 12-month biopsy from the last patients enrolled sometime in the summer of 2022. Together with Takeda, we look forward to continuing the dialogue with the FDA after one or both of these data readouts. I will now turn the call over to Dr. James Hamilton. James.

Thank you, Javier. There are a lot of exciting new programs in discovery and early stage clinical development. Our R&D organization is operating at an impressive pace and making important progress in multiple areas. Today, I would like to focus on the pulmonary platform the planned expansion of the pulmonary pipeline, and provide an update on where we are with Arrow ENAC. As Chris mentioned, our newest pulmonary candidates are Arrow RAGE and Arrow MUC5AC. They are both on schedule to have CTA filings during the first half of this year. Additionally, we plan on filing a third pulmonary CTA in Q4 of this year. The target for this third program will remain undisclosed at this time. The first program, ARROW MUC5AC, targets expression of MUC5AC in bronchial epithelium. MUC5AC is a mucin protein with upregulated expression in the asthmatic airway. MUC5AC is not normally required for bacterial defense or mucociliary clearance in healthy individuals. However, in asthmatic patients, Its upregulation and enhanced secretion can lead to a mucoobstructive disease state, which is not directly addressed by currently available therapies. The degree of mucus obstruction in the asthmatic airway is highly correlated with poor asthma control and increased disease severity. Additionally, multiple genome-wide association studies have demonstrated a correlation between enhanced MUC5AC expression and the development of asthma. Similarly, mice with genetic deletion of MUC5AC are protected from airway hyperreactivity in the setting of allergic stimuli, again supporting the concept that MUC5AC-driven mucus plugging plays a central role in allergen-induced airflow obstruction. Aeromuc5AC is an extremely exciting program in part because it represents a fundamentally new way of treating asthma. By targeting the mucus, we have a unique and potentially very powerful tool. An abstract summarizing preclinical data leading to the nomination of this clinical candidate will be presented at the American Thoracic Society meeting this spring. The second program, AeroRage, targets expression of the receptor for advanced glycation end products, or RAGE, which is primarily expressed by alveolar and bronchial epithelium. RAGE is a transmembrane receptor that binds to numerous pathogen-associated and cell damage-associated ligands to activate various components of the innate immune system. RAGE represents an upstream mediator of the inflammatory cascade in asthma, as it is required for allergen-induced release of IL-33 into the airway and acts upstream of type 2 cytokines including IL-4, IL-5, and IL-13. Importantly, a soluble component of RAGE known as SRAGE can be followed as a serum biomarker of gene target knockdown. This is a very important point that I want to highlight. The availability of a circulating biomarker will teach us a lot about the candidate, and importantly, may inform on the pulmonary platform broadly. Our hepatocyte-directed trim system has proven to translate very predictably from preclinical models to human results. And over the last few years, that predictability has increased the speed of our new programs and our expectation of success. We hope to get to the same point with pulmonary directed trim system and the availability of SRAGE circulating biomarker data informing on depth and duration of gene target knockdown using an inhaled route of administration could get us closer to that point. Animal data suggests that RAGE signaling plays a critical role in the pulmonary inflammatory responses to inhaled stimuli. Rage knockout mice show a markedly attenuated response to allergen exposure. In animals, rage is necessary for activation of airway inflammatory pathways relevant to both type 2 high and potentially type 2 low asthma phenotypes. Further studies have indicated that rage knockout mice are protected from allergen-provoked increases in IL-33 and TSLP which represent key upstream drivers of asthmatic type 2 inflammation. Thus, we believe RAGE inhibition offers the possibility of arresting the most proximal components of airway inflammation and asthma with potentially broad effects on a wide range of downstream inflammatory mediators. In rats using a tool trigger targeting RAGE mRNA, single inhaled doses of 0.5 milligrams per kilogram induce S-RAGE reduction of over 90% for approximately three months. Like our MUC5AC program, an abstract has been accepted for oral presentation at ATS this spring, which will summarize preclinical data for our RAGE program. Inhibition of both the MUC5AC and RAGE targets may have clinical utility in severe asthma, COPD, cystic fibrosis, and other mucoobstructive or inflammatory pulmonary conditions. Additional target background, data, and clinical plans will be discussed in the future as we approach the start of the clinical studies. We are also making good progress on two additional pulmonary programs that are being developed to address respiratory viruses. One is our COVID program that targets highly conserved sequences in essential viral mRNAs which may address SARS-CoV-2 and potentially other future coronavirus outbreaks. In a hamster SARS-CoV-2 infection model, our current lead candidate reduced viral load in the lung by 80%, reduced histological indices of pulmonary inflammation by 50%, and prevented body weight loss. We are currently in the lead optimization stage and will provide additional updates when we can. The other is a new program for an undisclosed viral infection. In a mouse model of infection, the current lead compound reduced viral gene expression in the lung by 90% and prevented body weight loss. This is an early program, but we are seeing what we believe are very promising results. Moving to Arrow ENAC. As Chris mentioned, we have decided to focus our resources on next generation candidates. We previously announced that the clinical study was voluntarily paused after findings of local lung inflammation in a rat chronic GOP toxicology study. We have since seen some local inflammatory findings in chronic GOP monkey studies. It is certainly possible that we are overdosing the animals and by simply changing the dose level and or dose intervals, we would see a cleaner tox profile. That could provide a faster path back to the clinic but we decided that the better long-term path is to focus on next-generation ENAC candidates. We are currently interrogating several next-generation ENAC candidates that appear to be substantially more potent than aeroENAC. It should be noted that the drug exposure levels used in the CTA-enabling GLP studies supporting the new pulmonary programs, including the MUC5AC and RAGE programs, are significantly lower than those used in support of our first-generation ENAC program. Thus, we expect an ability to use less drug and less frequent dose administration with second-generation programs compared to what was used in the Arrow ENAC chronic toxicology studies and anticipate overall enhanced toxicology species safety margins with second-generation compounds. The last update I'd like to provide on the pulmonary platform is about future opportunities and the potential to add additional flexibility with regards to route of administration. We've been working on addressing pulmonary tissues via subcutaneous administration. These are still early days, but we have recently generated some very promising preliminary data with the AeroRage program using subcutaneous administration. Again, this is early, but we view this as a potential breakthrough if this line of discovery bears fruit. We intend to provide some data on these efforts when we go into more detail about the Arrow Rage and Arrow MUC5AC candidates at the appropriate forum. This will likely take the form of a KOL webinar or an in-person and webcast pulmonary R&D day in the first half of this year. This is all very exciting progress, and we look forward to discussing details publicly. I will now turn the call over to Ken Muszkowski. Ken?

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended December 31st, 2021 was 62.9 million, or 60 cents per share, based on 104.5 million fully diluted weighted average shares outstanding. This compares with the net loss of 20.7 million or 20 cents per share based on 102.8 million fully diluted weighted average shares outstanding for the quarter ended December 31st, 2020. Revenue for the quarter ended December 31st, 2021 was 27.4 million compared to 21.3 million for the quarter ended December 31st, 2020. Revenue in the current period primarily relates to the recognition of a portion of the 300 million payment received under our collaboration agreement with Takeda and the $40 million upfront payment received under our collaboration agreement with Horizon. Revenue for each agreement will be recognized as we complete our performance obligations, which include managing the ongoing AAT Phase II clinical trials for Takeda and delivering a Phase I ready candidate to Horizon. There remains $188 million of revenue to be recognized associated with the Takeda collaboration, which we anticipate will be recognized over approximately two to three years. And there remains $27 million of revenue for Horizon, which we anticipate will be recognized by the end of calendar 2022. Revenue in the prior period primarily related to the recognition of a portion of the milestones received from our license and collaboration agreements with Janssen. Finally, our license agreement with GSK for Arrow HSD resulted in a $120 million upfront payment to Arrowhead, which was collected in January 2022. We anticipate the majority of this to be recognized as revenue in fiscal second quarter 2022. Any additional milestones achieved from our collaboration agreements would be additive to these amounts. Total operating expenses for the quarter ended December 31st, 2021, 0.8 million compared to 45.4 million for the quarter ended December 31st, 2020. This increase is primarily due to increased clinical candidate costs. Our pipeline has expanded and advanced through clinical trial stages, as well as increased non-cash stock compensation costs. Net cash used by operating activities during the quarter ended December 31st, 2021 was $61.3 million compared with that cash used by operating activities of $38.9 million during the quarter ended December 31, 2020. Key driver of this change was the increased candidate costs. We continue to estimate our operating cash burden to be $60 to $80 million per quarter in fiscal 2022, including any incoming milestone payments from our partners. In addition, we are planning to expand our manufacturing capabilities and expand our R&D facilities. We continue to estimate these capital projects along with routine capital expenditures. We'll 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 $547.7 million at December 31st, 2021, compared to $613.4 million at September 30th, 2021. The decrease in our cash and investments was primarily due to cash used for operating activities. With the collection of the $120 million upfront payment in January 2022, our current cash and investments total approximately $650 million. Our common shares outstanding at December 31st, 2021 were 104.8 million. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken, and thanks to all of you for joining us today. As you've heard, our early pipeline is starting to grow rapidly, our mid and later stage pipeline is advancing on schedule, and we are working hard to continue to expand the reach of our Trim platform to enable more growth in the future. These are all critical parts of building a sustainable business and growing shareholder value. I want to take a moment to review what we see on the horizon as potential milestones for the business this year. There's a lot going on, so this list is certainly not exhaustive, but include some of the key events that we will be tracking. I'll start with our partner programs. Arrow AAT, also called TAC999, for Alpha-1 liver disease with Takeda. We expect data from the Sequoia study on reductions in circulating AAT levels and 12-month biopsy data, and we will continue discussions with the FDA. Arrow HSD for NASH with GSK. We expect a Phase II study to begin this year. Arrow XDH for Gout with Horizon. We hope to complete preclinical studies this year. J&J 3989 for HBV with Janssen. We would expect additional clinical readouts from various ongoing studies. J&J 75220795 for NASH with Janssen. We expect progress on the phase one study. Olpaceran, formerly called AMG890 for cardiovascular disease with Amgen. Amgen is guided to a phase two study readout this year. I'll now talk about potential milestones for our wholly-owned programs. AeroApoC3 for hypertriglyceridemia. We expect to fully enroll the SHASTA2 and MIRROR Phase 2 studies and make progress toward full enrollment on the Palisade Phase 3 study. AeroAng3 for mixed dyslipidemia. We plan to fully enroll ARCHES2 Phase 2 study and initiate the Gateway Phase 2 study. Arrow C3 for complement-mediated diseases. We expect to initiate a Phase I study and potentially have an initial data readout from the single ascending dose portion of the study in healthy volunteers and initiate the multiple dose portion in various patient populations. Pulmonary programs. We plan to file CTAs and initiate clinical studies for arrow RAGE, arrow MUC5AC, and file a CTA for one additional undisclosed pulmonary program. We also have some early clinical data from the AeroRage program. We also could have some early clinical data from the AeroRage program. AeroHIF-2 for renal cell carcinoma. We intend to report additional Phase I data at ASCO GU in February. AeroDUX-4 for FSHD. We plan to file a CTA and initiate a Phase I-II clinical study. This is a big year by any measure. We plan to push four new drug candidates into clinical studies and possibly a fifth if AeroXDH with Horizon makes it this year. We hope to have some data released from six different programs. We hope to fully enroll three Phase IIb studies. Arrowhead has a lot going on, and we look forward to numerous opportunities to show progress across the pipeline throughout the coming year. Thank you for joining us today, and I would now like to open the call to your questions. Operator? 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 please ask that you limit yourself to one question and one follow-up. Again, we please ask that you limit yourself to one question and one follow-up. And our first question comes from Adul Kamar from Goldman Sachs. Your line is now open.

Yeah, thanks for taking our question. So first one on Arrow AAT, maybe we can dig in a little bit on how we should think about the discussions you've had so far and what potentially regulators need to see from the sequoia circulating AAT data and from the liver biopsy follow-up data.

Yeah, so let me first answer the last part of that question with regard to the serum ZAAT values. We're looking at that data to really do the dose selection, but of course that's not going to be the only parameter. We have data from liver Z protein and of course fibrosis changes and of course safety as well. The dose selection we're going to make along with Takeda over the next few months will come out of all that dataset. With regards to conversation with regulatory agencies, I would prefer to not get into any details other than we had a very good interaction about a month and a half ago. And under the breakthrough therapy designation, we have planned a number of interactions this year too again. define the phase three study or the registration study that will incorporate, of course, the dose selection.

And I think it's important to point out that, look, this division has not considered, to our knowledge, any other drug candidates against this disease. And so our first meeting was really to make sure that we're all level set, that we're all on the same page. And you know what? We really are. There is broad understanding and appreciation for the unmet medical need of this disease. There's broad appreciation, I believe, for the fact that this appears to be a disease of growing incidence as people are living longer because they're not smoking, et cetera. I think that the world is starting to see that while historically this has been viewed as a disease and maybe secondarily as a liver disease, as people are living longer, as they're not smoking, I think we're seeing, you know, greater, greater focus on the liver portion of that. So I think that, you know, we've been, we've been really, we've had a great relationship so far with the FDA on this and, and, and, you know, we look forward to taking the next steps.

Okay. So second question relates to the cardiometabolic medication. field for you all. So how do you think about the launch of Novartis and Lectio and how that influences how you think about kind of the larger ambitions for drugs like AeroApo C3 and AeroA3?

That's going to be interesting. As you know, of course, the Lectio markets are sort of orthogonal to the markets we're going after. There is overlap, of course, but it's not the same market. You know, I think that what we've seen there is that, or I think what we will see is that there is acceptance for a subcutaneously administered CVE drug. Lefio appears to be a good drug. There's clearly, continues to be unmet medical need there. But that's sort of, I think, as far as... as interpretation will go from watching what happens with that launch to what our expectations are. You know, we're really focused on the markets that we think we can address here. For APOC3, it is, you know, FCS. It is severe hypertriglyceridemics, which we think is, you know, several million people. The regulatory pathway is clear. The markets are clear. And then possibly mixed dyslipidemia, we'll see. For ANG3, you know, there is clearly, we think, you know, an opportunity for treating those patients who still have elevated LDL and elevated triglycerides. So, you know, we are, we'll be watching the Delectio launch, but I wouldn't say that we are dependent upon, you know, a blockbuster launch there to be confident in the futures of these two drugs.

Okay, great. Thank you.

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

Hi. Thanks for taking my questions. I'll do a two-part question. So, for the two new pulmonary programs announced today, are you using the same approach as ENAC with targeting integrin AB-6 on lung epithelial cells? And if so, how consistent or variable is this target in the new indications? And then can you talk more about why the new programs will require less total drug?

James? Yeah, sure. So the answer to the first part is yes. We're still using the same targeting ligand approach, and there's no reason to believe that that would be any different across those two patient populations, across the various populations that we intend to address with ARROW-RAGE and ARROW-MUG5AC.

And so the second part of the question was, why are we confident that we'll be able to use less drug with the new programs?

Yeah, sure. So I think there's two reasons for that. One is the availability of readily measurable biomarkers for both of those programs, for AeroMonk 5AC and AeroRage, that will allow us to I think better understand where we are in terms of knockdown. That has always been a challenge for ENAC, that there's not a great biomarker to measure. I think the other aspect is that as we've learned more about the pulmonary platform, we have continued to gain an understanding how much drug we can give and not see a tox signal. So relative to the dosing regimens we were using in the ENAC program, and if you might remember, we were using a day one, two, three cycle in both the clinical program and the tox program. We're confident based on what we've seen that we can dose at lower levels and lower intervals and achieve the same level or better knockdown of the gene target.

Yeah, I think that's the big take-home message, that we expect to use substantially less drug and administer it less often. with these two drug candidates. And also, as James said, we'll have a better idea about defundration of knockdown. We were a bit blind-blind with ENAC, and so we were probably in those tox species. We're probably pushing too much drug in there, and I think we'll have a much better time here titrating that in humans as we can see what knockdown looks like.

Got it. Okay, thanks for taking my questions.

Welcome.

And thank you. And our next question comes from Ted Temthoff from Piper Sandler. Your line is now open.

Great. Thank you very much, and thanks for all the updates. I want to get a sense for what we should be expecting on HIF-2-alpha at ASCO-GU coming up. Thanks, guys.

Yeah, so that study is fully enrolled. And all patients are through their second biopsy, their post-dose biopsy. So they get biopsy, pre-dose, and post-dose. So we will share an update on, of course, safety and changes in a resist criteria, as well as gene target knockdown. So that's what we'll be sharing at ASCO GU.

And the highest dose level, I think, was double from the dose that we had previously presented. And so this was the highest dose that we intended to go to. Yeah, this will be all three cohorts.

And what's the total number of patients?

We ended up enrolling 27. Great.

Perfect. Thanks, guys. Looking forward to the data.

Thank you. And our next question comes from Bianc. Mom Tani from B Riley securities. Your line is now open.

Good afternoon. Thanks for taking our questions and congrats on the progress. So just maybe if I could clarify on the, on the preclinical work on the rodent and monkey studies for age two and new five or eight, have you conducted the same sort of studies where you saw the signal for. Did you say that work has already been done?

Yes, or is ongoing.

Okay.

And just maybe a follow-up there, is that information you'd have before you get into the clinic?

We would certainly have to have toxicology studies that support the phase one dosing regimen. So to answer your question, yes.

And on the chronic side, Mayank, we have some ideas about, you know, what doses would provide, you know, what knockdown and over what period of time. But, again, here with RAGE and with MUC5AC, we have the luxury of knowing that in humans. And so, you know, we have the luxury of waiting to see what the depth and duration look like before we – before we design those chronic tox studies and make sure that we are not administering substantially more drug than we would be in humans.

Thank you. And then a financial question I had was about milestones that we could expect this year. And specifically from J&J and Amgen, if they do decide to move into a next study, does

two-part question like how much would be the milestone and then the timing of that if you could remind us that would be great yeah we can't remind you because we never told you the the we are as you can imagine Mike the the our partners are sensitive about making those, or can be sensitive about making those milestones too granular. And so we've not been able to say publicly what various milestone levels are. And I apologize, but I really don't feel comfortable giving you guidance on when those could hit because those are J&J and Amgen's programs at this point.

Understood. Thanks for taking that question.

You're welcome.

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

Hi, good afternoon. Just a follow-up on the APOC3 and ANG programs. I'm wondering if there's a possibility of evaluating these compounds in a combination treatment. And secondly, can you tell us your latest thoughts on the potential for partnering these programs and what form that could take?

Sure. We are not currently considering combining the two drug candidates. We think that could be done, but we haven't done any non-clinical work by combining them, and we're just not considering, at least right now, clinical work combining them. With respect to partnering, look, we think, and I don't want to overstate this, but these two drug candidates almost feel like once-in-a-career opportunities. These really do feel to us like drugs. Our data from the Phase 1-2 studies were quite good. The markets that these could help to address are clear. The regulatory pathways are clear. These are, we think, important new medicines, and so we intend to hold on to these. these will be expensive, particularly Ang, because we do recognize that Ang is going to require an outcome study. But given where we are now as a company, we are comfortable taking that burden on, given that we think the likelihood of success is high and these are important. So at least right now, we are planning on holding on to these and building a commercial force to sell both drugs eventually.

That's helpful. Thank you very much.

Welcome.

And thank you. And our next question comes from Luca Icy from RBC Capital. Your line is now open.

Oh, great. Thanks so much for taking my question. Congrats on all the progress. Just a few quick ones. One, maybe circling back on ENAC, it sounds to me that the safety signal that you've seen in rats was actually replicated in non-human primates. So I wonder if you can talk a little bit more about that and why you ultimately decided to switch horses, so to speak, here. And then maybe on A1AQ, I want to make sure I'm clear, is there a scenario where you can possibly file ahead of running a Phase III, or do you think at this point running a Phase III is a must? And then maybe last one, on mixed dyslipidemia, Why going after these indications for both H3 and ApoC3 and not maybe prioritizing one versus the other? Thanks so much.

Sure. Okay, there's a lot there. So let me start with AAT. You know, I don't want to speculate on that. You know, we are interacting with the FDA. So far, we've had a good relationship with them. We will continue to share data with them and have a discussion about what the fastest and best way to bring this important medicine to these patients is going to be. So stay tuned on that. We'll let you know as soon as we know what that is. With respect to the mixed dyslipidemia and both APO and ANG, so let me be clear on that. So first, with ANG, this was always a focus for ANG. Given what we saw in the Phase I-II study, given what we saw in non-clinical studies, and given what we've seen in GWAS analysis, we know, or at least we think we know, that this drug candidate is good at lowering LDL and lowering triglycerides, and there's a clear need for that. So we always saw a big opportunity going after that very large market. Now, with ApoC3, we are doing a Phase IIb study in that population. We don't yet know if we're going to do a... you know, an outcome study to address that very large population. But what we wanted was optionality. And so we're going to do the Phase IIb study. We're going to see what it looks like. And then we can – and then if we do decide to do an outcome study, we can go ahead and do it rather than waiting a couple years while we have to do the Phase IIb study. I think that optionality is important. I think it's worth, you know, the money we're spending on that Phase IIb study. Now, you know, should that sort of come to pass that we do want to address that same general market with these two drugs, I think it's a real benefit, to be honest, to have those two drugs because I think we're going to learn a heck of a lot in these Phase IIb studies and potentially in Phase III studies about how these drugs work and what kinds of patients they can help. And so ultimately, we're going to provide to cardiologists and lipid clinics, you know, potentially at least, you know, tools that they can use according to their patients' needs. And so they can really provide specialized, personalized healthcare. This is sort of the dream, right, of healthcare. And so having those two tools and using them, you know, as they see fit, we think is a really important thing. So we see a big opportunity there. And also, look, we want to take that market share. There may be other, you know, APOC3 or ANG3 inhibitors at some point in the future, and we see no reason why we shouldn't take as much of that market share as possible. And I'm sorry, what was the first question?

What did you see in monkey? Go ahead.

Oh, yeah. Yeah. Okay. So, so look, we, we, you know, I don't want to go too much on that because we don't generally talk about, about Jibby talk findings, but we, we did see some, we didn't see exactly what we saw in, in rats, but we did see some signs of, of some, of some local lung inflammation. And as we talked about, you know, what, what I think was happening is, is we were just, I think we're giving more drug than we have to, to be honest, you know, with this, this once a day for three days, you know, cycle and, um, was, uh, was designed because we wanted to make sure that we had, we had, you know, pretty wide birth. Um, once we see, you know, what definition of the, of the, of the knockdown was, we've learned a lot since then. Um, and I think that that's pro that we probably don't require that amount of drug and we probably don't require that frequent of dosing. Um, so it gives us, it gives us confidence that, that for, for rage and muck and potentially, you know, ENAC too, um, you know, not only do we have, I think more potent drugs, but we have better understanding about, about how efficient it can be to deliver the drugs. And so, again, you don't know until you know. We don't know until we're in the clinic, but we do feel, given the data we've got, both clinical and non-clinical, we feel optimistic, at least, that this platform, that these drug candidates will be well-tolerated and important potential drugs. Got it.

Super helpful. Thank you, Chris.

You're welcome. And thank you. And our next question is from Alethea Young from Cantor Fitzgerald. Your line is now open.

Hey, guys. Thanks for taking my question. They're kind of two of the similar types of questions. But, you know, on this pulmonary franchise, it seems like you're kind of branching out potentially into, you know, bigger indications. So I just want to know kind of, you know, how you're thinking about building out a pulmonary business is going to be pretty similar to kind of you know, partnerships and collaborations, or now that you guys are larger and hopefully, you know, capital markets open up one day, you can get capital and do what you want to do for even big indications. And that kind of just broadens it out to the larger strategic question here. You have a lot of programs. You have a lot of collaborations. You know, you're moving forward in many different ways, and I just want to know if the strategy is the same, or do you guys think about keeping more of your, you know, kind of core assets in-house, and do you also think about kind of building with bigger potentially, you know, albeit commercial opportunities where it may take a bigger investment on, you know, your expense side, but, you know, something that could yield like, you know, much bigger opportunities too. Thanks.

Right. Sure. Thanks, Alicia. You know, it's still early with pulmonary, but we like the space and we like the idea of building out commercial for pulmonary. I think there are around 16,000 pulmonologists in the U.S., And when we look at that, when we look at what we think our pulmonary platform can do, we don't see two or three drugs. We see, you know, eight or nine drugs. And so we like the idea of building a sales force to address those 16,000 pulmonologists who have eight or nine drugs in the bag. That's an efficient way, I think, to build a commercial force. So right now, we like the idea of holding on to those, you know, to those assets. Look, you know, The lung is a target-rich environment, and so it is certainly conceivable that enough targets will come up that we may want to partner one here or there. But strategically, that's how we're thinking about it. You've heard us talk about this before, that if we're going to build a company that I think that we should be building, we need to have a relatively large number of important drugs that we commercialize ourselves. And so we're cognizant of that. We're not going to over-partner. We partner in order to you know, to A, get drugs to patients that we can't get them to very well, and B, to provide us capital so we can afford to run our own programs. And we'll continue to use that partner strategy, you know, in that kind of way.

All right. I appreciate that. You're welcome. Thank you.

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

Hi, congrats on the progress and thanks for taking the question. First question is on arrow rage. How close is the relationship between the circulating S-rage biomarker and activity in the lungs to be able to really help with pinpointing the dosing?

Yes, so the S-rage comes from two different origins. It's a splice variant. that is secreted, or it's cleaved off of the actual RAGE receptor. It's a transmembrane receptor. So, by measuring the S-RAGE, we should have a very good idea of what knockdown of that receptor is. I hope that answers your question.

Yeah, thanks. As a follow-up,

How closely behind could the subcutaneous lung programs be to the lung administered programs?

It's too early to tell on that. You know, these are early programs, and we are excited about it because, again, if we can make this thing work and make it scalable, you know, it's a real breakthrough. So it's a real focus of ours. We're not quite there yet. So it's hard to tell how far away we are. I do expect that we will do, you know, we'll see what COVID looks like, but hopefully an in-person, you know, pulmonary-focused R&D day or at least a webinar. At that point, I think we'll be able to share some of our data. Again, we're excited about it, but we're still working on it.

Great. Thank you. Thank you.

And our next question comes from Manny from SVB Lyric. Your line is now open.

Thanks, guys. So I'm digging through this ANCH-PTL-3 data from IONIS, which we also cover. They have previously shown 62% knockdown with their 80-milligram dose. We don't actually know what the 320-milligram Phase IIb knockdown really looks like. We haven't seen that full data yet. But with you guys at 300, you showed 88% knockdown. Subtle nuances around dosing, obviously, in terms of frequency, et cetera. Given the commentary from Pfizer that suggests that perhaps despite seeing impressive knockdown, they hadn't seen that translate to reproducing the level of clinical benefit on triglycerides, non-HDLC, et cetera. Are there specific data sets that you guys look at that suggests the knockdown that you're seeing will translate to those clinical benefits when they did not in the larger clinical trial that Pfizer showed. And I have a quick follow-up.

Well, we have what we presented, the LDL and non-HDL data and triglycerides data with that level of knockdown in the 80% to 90% range from the 200 and 300 milligrams range. So the non-HDL and LDL data is clearly superior to what Ionis had presented in the past, but we don't know what is this current data exactly. So we do believe that there is at least three different sources that speak to the correlation between the level of knockdown or the level of suppression of NHPTL3 and the pharmacodynamic effect. the Regeneron data and the comparison so far between the ionis and our data. If you look at the Regeneron data, they do need to dose really high to get to the level of suppression to achieve the pharmacodynamic effect. And we did see those response in our case as well. And again, as I said, the GWAS study, the differentiation between the heterozygous and combozygous is quite clear. So I think this is a target where the magnitude of the target suppression correlate with the clinical or the pharmacodynamic effects?

Yeah, and I think, so if you look, again, it's very difficult to compare these because we haven't seen their data really in these two separate studies. But, you know, you look at their dosing once every two weeks or once every month. We're dosing it every quarter and potentially less frequently. Second, You look at ALT increases. We had two patients with ALT increases, and we think we know why that was. We think it was related to other medications those two patients were on. So we think that that's a difference. Third, we haven't seen increases in liver fat. It sounds like they did. And so I think this is a good example broadly of the advantages of RNAi over antisense. I think whenever you can compare those two modalities, RNAI leads to deeper and more durable knockdown. The safety profile, you know, if the sequences are chosen correctly, can also be favorable. So we feel great about the candidate. We still feel great about the target, as Javier points out, because the GWAS data as well as other data.

Yeah. So that makes sense to me. But what I'm trying to understand, so the what we have is limited to a press release, obviously, from Pfizer in a formal event. The commentary around what they saw as, you know, clinically justifying going into a large complex phase three, how do you think about what your threshold would be around what would be a number that justifies going in a phase three in a broad patient population as opposed to, like, something like a more narrow and niche-defined population. Do you think the numbers that you previously showed are adequate, or do you think pursuing a higher, deeper, more aggressive knockdown, even though what you've seen so far is necessary?

We'll take a look at our Phase 2b data. We've seen LDL reduction of as much as 50%, mean reduction of as much as 50%. We've seen We've seen triglyceride reduction, you know, and I think in the 70 or so percent range, something like that. You know, those are substantial. Now, we're not going to see clinical outcomes, you know, in a short study. And so, you know, we're dependent upon these surrogate endpoints. But I think those are substantial. You know, you look around at other triglyceride lowering agents and there's just not much out there, you know. And I think that if our data, put it this way, I think if our data continue to you know, to roll out the way we've seen them so far in the Phase I-II study, I think that that would be – that that would give us good confidence to go into an outcome study.

Great. That makes sense to me. Thanks for taking the questions, guys.

You're welcome.

Thank you. And our next question comes from Ki Nakai from Chardon. Your line is now open.

Yes, thank you. Two questions. First, sub-Q admin to the lung. Are you using the same conjugate targeting ligand for integrin? Are you evaluating something different? And is the primary performance objective a better safety profile?

Yeah, so I can't answer the first question because we are, you know, we are playing around with various ways to do this. You know, hold off, and when we present, we can talk more about it. So I wouldn't say that we're looking for a better safety profile. That's a good question. It's not as though we're afraid of the inhaled route, but it just makes our life simpler, right? You know, if we can administer this via sub-Q, there are, you know, unknowable questions that you don't have any longer. or unanswerable questions that we don't have anymore with respect to a safety profile in tox animals. So it does make our lives easier. But also, look, it's an easier mode of administration for potentially all indications. Rather than using a nebulizer, which is still relatively light touch, but still requires having a machine and and requires some time, that's just more cumbersome than a simple sub-Q injection that could be, you know, who knows, once every two weeks, once a month, once every three months, whatever that's going to be. That's just a more convenient mode of administration. We think that that would be just a massive breakthrough in this field. And again, I don't want to oversell it because we're not there yet, but what we've seen so far has told us that we want to continue to explore this.

Okay, great. And just clarification on the Upfront from GSK, the $120 million you received in January, how much of that will be recognized as revenue in fiscal Q2 and how much might be amortized over some period of time? Thanks.

Sorry, can you repeat that?

The $120 million upfront from GSK you received in January, how much will be recognized as revenue in fiscal Q2 versus how much might be amortized over some period of time?

Probably all of it will be recognized in fiscal Q2. Our performance obligations are basically complete for that milestone that we received.

Okay, great. Thank you.

Thank you.

And thank you. And I am showing no further questions. I would now like to turn the call back over to Chris and Lonnie for closing remarks.

Thanks very much for joining us today. It's always a pleasure to speak with you, and we look forward to talking to you next quarter.

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