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, Vince.

Thank you, Stephen. Good afternoon, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2023 third quarter ended June 30, 2023. With us today for management, our president and CEO, Dr. Chris 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 chief of discovery and translational medicine, who will provide an update on our earlier stage programs. and Ken Muskowski, our Chief Financial Officer, who will give a review of the financials. In addition, Tracy Oliver, our Chief Commercial Officer, and Patrick O'Brien, our Chief Operating Officer and General Counsel, will both be available during the Q&A portion of the 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 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 and our quarterly reports on Form 10-Q. I'd now like to turn the call over to Chris Anzalone, President and CEO of the company. Chris.

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Our industry is built on promise. Sometimes this promise can be stunning and carry with it the possibility of saving the lives of some and drastically improving life for others. Arrowhead's mission is to bring important new medicines to the people who need them and save lives and alleviate suffering where we can. While this is our guiding principle and focusing on this promise has given us purpose and the motivation to, I believe, innovate at industry-leading levels and operate at speeds not seen before, it is not the only important focus for us. Another is risk. Our industry swims in a sea of risk. We recognize that in order to succeed, we need to appreciate the great promise in front of us, but focus on all the risks between the idea and the medicine ultimately given to a patient. We are idealists, but we are not naive. One of our most important jobs is to mitigate and decrease risk where we can. We have made great progress on this broad front since our last call, and this is how I would like to frame our discussion today. Let's begin with pulmonary. We believe we've taken an important step toward further de-risking the entire pulmonary franchise with the first chronic GLB toxicology results starting to come in. For Arrow MMP7, the no AAL, or no observed adverse effect level, was the highest dose we tested in our chronic rat study. In other words, even at the highest dose tested, we are not seeing anything that is deemed adverse. The highest dose represents what we believe would be substantially greater exposure than would be applied to humans. We're waiting for final rat data from the arrow rage chronic GLP TOC study, but that also is looking like the no AEL will be the highest dose we tested. We are still waiting for the nine month monkey data in both candidates, but our experience with arrow ENAC leads us to believe that the rat is the more sensitive species for these pulmonary TOC studies. So it is very encouraging to us that the rodent studies look so positive. This is potentially a big step forward for the platform. As you may recall, we saw lung inflammation in some of the chronic GLP-TOX doses for arrow ENAC in 2021. Based on our analysis of those results, we concluded that we needed to increase the potency of our pulmonary candidates, and we clearly did that with arrow MMP7, arrow RAGE, and arrow MUC5AC. We were optimistic that these improvements would translate into better chronic TOX results, but of course we couldn't know until the data came in. As we are now seeing preliminary data from those studies come in, we are increasingly confident the arrow MMP7 and likely arrow RAGE may have substantially wider tox windows than arrow ENAC did. And I believe this represents a significant de-risking event for the pulmonary franchise. We look forward to having complete rat and monkey chronic GLP tox data for arrow RAGE and arrow MMP7 in coming months. and expect to have chronic GLP-TOX data for arrow MUC5AC next year. Encouraging preliminary chronic GLP-TOX data follow prior de-risking events in the pulmonary franchise over the past quarter. Specifically, I believe the arrow rage clinical data indicate three important things. First, the safety and tolerability reports to date have been good and nothing surprising has emerged. This is always a critical first step for a new platform and every new drug. The activity data we have seen thus far have been impressive and showed continued dose response through the top dose level. After a single inhaled dose of 184 milligrams of AeroRage, we saw up to 95% knockdown with a mean of 90% in that cohort. Not only is this a high level of target gene knockdown, but it was extraordinarily consistent across participants in the cohort. Each subject had a good response. This is in the same ballpark as what we now expect with optimized liver targeted programs, and this is an important point. I think it is generally accepted that RNAi is a reliable modality to safely reduce expression of a target gene, and that when Arrowhead introduces a new liver program, there is high expectation, both internally and externally, that the drug candidate will reduce expression of the target protein as designed. I am hopeful that each new data set we are approaching with each, I'm sorry, I am hopeful that with each new data set that we are approaching this expectation in pulmonary. That is a giant leap forward and an important value inflection point. Lastly, we think the data also show that the duration of effect with arrow rage supports a dosing interval of two months or more. This is an important de-risking event because it limits accumulated drug exposure, increasing our confidence that the good safety profile seen thus far may continue during chronic treatment. It would also be a very patient-friendly dosing regimen. Derisking the pulmonary platform is important for its own sake. As we have said in the past, we see many potential drugs coming out of the franchise that could address a number of unmet medical needs, and we appear to be the only company able to effectively use RNAi in the lungs. The pulmonary franchise alone could be the basis of a large company. But it's also important as an example of how we seek to derisk our broader business. From our perspective, a one or two drug company is a bet, not a business. From the beginning, we have sought to create a broadly diversified business to increase the number of patients we serve, but also importantly, as a hedge against the unpredictability of biology. In our industry, the risk of failure is substantial, and our mitigation strategy has been part innovation and part brute force. We have sought to create a technological platform that works reliably and then move as fast as we can to create as many well-thought-out drug candidates as possible. We built and continue to refine and expand the reach of our TRMM platform. This is a modular, structurally simple system to one, address multiple cell types, which allows our therapies to go where a disease is in a way that other RNA companies do not. Two, move rapidly from idea to the clinic and then efficiently through mid and late stage clinical studies. And three, provide platform continuity and competence which gives us an enhanced expectation of success for new candidates that we believe far exceeds that of biotech broadly. Lessons learned developing each candidate informs the development of future candidates, so our expectation of success grows stronger over time. We believe this translates to the potential for more candidates to become approved therapies than industry average. Our 20 and 25 initiative follows this platform development and represents, to some extent, the brute force component of our broader risk mitigation strategy. We have platforms that appear to work well, so we have the responsibility to our patients and stakeholders to build as many new drugs as fast as we can. It is our goal to have 20 clinical stage or marketed products by the year 2025. Somewhat paradoxically, building such a large pipeline is part of our strategy to mitigate balance sheet risk. We are in a very expensive business, and one could argue that the best way to ensure we are properly capitalized to bring drugs to market is to have a small, focused pipeline. We reject that. Rather, we believe that well-thought-out drug candidates with greater than industry average chances of success can always find homes in partner companies' pipelines. As we mentioned at our analyst day in June, we have brought in nearly $1 billion in partnering capital over the past six years and have not raised equity capital for over three and a half years. In fact, GSK recently initiated a Phase IIb study of GSK4532990, formerly called AeroHSD, for the treatment of NASH, which earned us a $30 million milestone payment. In addition, Takeda initiated the Phase III Redwood study of Vizisoran, being developed as a potential treatment for Alpha-1a trypsin deficiency liver disease, which earned Arrowhead a $40 million milestone payment. We believe that partnering is a good cornerstone of a broader financing strategy and one that our platforms are uniquely suited for because of the quality of the candidates coming out of them and the scarcity of the companies that are skilled at generating RNAi-based therapeutics. Our partnering strategy includes existing partnerships that are maturing and therefore eliciting higher payments, new potential partnerships that could combine our platforms with a partner's target or set of targets, and new partnerships on existing programs in our pipeline. Regarding the latter, on our last earnings call, I discussed that at the time we had paused the CTA filing because of some inbound interest in partnering Aeroducts 4. We continued to explore those options. However, we decided to move forward with the Aeroducts 4 CTA filing ourselves. Partnering discussions can take time, and we don't ultimately know if they will translate into license agreements. We felt it did not make sense to further delay the CTA filing and the Phase 1 study. While partnering continues to be a cornerstone of our financing model, we are certainly cognizant of the risk of over-partnering. We believe the best way to build a lot of value quickly is to retain some wholly owned candidates and drive toward commercialization. Of course, there is substantial risk with this course, but over the past quarter, we believe we have taken some off the table. We completed enrollment in the Phase III Palisade study of AeroApoC3 in patients with familial chylomicronemia syndrome, or FCS. This is an important milestone for Arrowhead because it will likely be the first candidate and indication that we will seek regulatory approval for. The final study visit for the last patient in is scheduled for Q2 of 2024, so we expect to start the NDA process next year. In addition to FCS, we are currently working on the phase three plans for severe hyperglyceridemia and mixed dyslipidemia, which we will be discussing with regulators this year. Shortly after those discussions, we plan to start phase three studies for those larger indications. Our other wholly-owned cardiomyobolic candidate, AeroAng3, also had an important milestone during the quarter. We presented data at the European Atherosclerosis Society Congress demonstrating that AeroAng3 achieved LDL-C reductions of 44% to 48% when added to existing standard of care treatments. These results are similar to results seen in studies of an approved monoclonal antibody targeting AngPTL3 in patients with HOFH. These are important de-risking data as we move toward one or more phase three programs, which we are currently designing. we are actively working on go-to-market strategies for multiple candidates. We expect to have four drug candidates in phase three studies by the end of the year. Two of these are currently wholly owned, AeroApoC3 and AeroAng3, and a third, Vazisaran, is partnered with a 50-50 profit share in the U.S., so we have retained substantial economics. As I mentioned, we will have our first phase three registrational study readout mid-next year. for our AeroApoC3 program in FCS and expect an NDA soon thereafter. As we look at our pipeline, we expect additional NDA filing opportunities on a very regular basis going forward. Moving to our earlier stage pipeline, we filed two CTAs for two new programs targeting gene expression in two different tissue types. I already mentioned AeroDUX4 in skeletal muscle for the treatment of FSHD. and the other is aerosol 1 in the central nervous system for the treatment of ALS. We expect additional CTAs over the next few quarters using both the CNS and skeletal muscle platforms. Of course, these are early, but they represent important de-risking events for potential CNS and skeletal muscle franchises. As with our advances in pulmonary, these are also illustrative of our desire to expand the reach of our technology and decrease the overall the overall risk of our business by creating value across many different channels lastly beforehand the call over to javier i want to highlight the r d day that we hosted in june during that presentation which is still available to boot to view on our website we gave updates and had external kols talk about some existing clinical programs in cardiometabolic and pulmonary disease and discuss what's next for us in CNS tissue, including potentially systemic delivery and delivery to adipose tissue. The R&D day had a lot of detail. We are constantly pushing our technology forward and expanding its reach. With that overview, I'd now like to turn the call over to Dr. Javier San Martin. Javier?