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?