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, Amy. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2024 first quarter, ended December 31st, 2023. With us today for management are President and CEO, Dr. Chris Anzalone, who will provide an overview of the quarter. We also welcome back Dr. Bruce Gibbon, who previously served as Arrowhead's Chief Operating Officer and Head of R&D, and who has rejoined the company on an interim basis as Chief Medical Scientist. Bruce will provide an update on our cardiometabolic pipeline. Dr. James Hamilton, our Chief of Discovery and Translational Medicine, will provide an update on our earlier stage programs. And Ken Muskowski, our Chief Financial Officer, will give a review of the financials. In addition, Patrick O'Brien, our Chief Operating Officer and General Counsel, will 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 10K and our quarterly reports on Form 10Q. I'd now like to turn the call over to Chris Angeloni, President and CEO of the company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Arrowhead has made a name for itself as a company capable of rapid innovation and development that is building a broad-based, diverse business. This is exemplified by our 20 and 25 initiative where we expect to grow our pipeline of RNAi therapeutics to at least 20 clinical stage or marketed products by the year 2025. This commitment to creating a large number of new medicines as quickly as we can speaks to our dual mandate to maximize the number of patients we can help and to maximize our ability to create durable value for our shareholders. These mandates can be entirely aligned during early development. We decrease biology risk by focusing on well-validated targets and our proven delivery platforms. At this stage, the cost of discovery and early development are relatively low, particularly when considering the potential value we can create with novel medicines. In short, we can do many things at this stage without spending too much money and without building large teams with deep therapeutic area expertise. However, As our pipeline grows and we enter later stage expensive and complex clinical studies requiring significant capital, deeper domain expertise, and ultimately commercial infrastructure, we need to prioritize what we do internally. That is where we are now, and we are currently building out late stage development and commercial infrastructure to serve the cardiometabolic vertical. This is the primary engine of our near-term value proposition. We expect to follow that up and add a pulmonary vertical as our long targeted platforms and candidates mature and we have the data we need to make a commitment to build out specialized commercial infrastructure. So does this mean that we will slow down or stop early development outside our focus areas? It does not. We will continue to develop new candidates outside these verticals because A, we have confidence in our ability to find appropriate partners to continue development and commercialize programs that are non-core for us. And B, we anticipate adding new verticals in the future. Think of this part of our business as generating capital to support our internal programs and as a farm system to create additional focus areas that could create long-term value as platforms and candidates mature. Let's start with our cardiometabolic vertical. Our lead program is Plavaciran, which targets apolipoprotein C3 or ApoC3. This is potentially a big year for Plavaciran and for the cardiometabolic vertical broadly. The Palisade Phase III study of plasaciran in patients with genetically or clinically confirmed familial chylomicronemia syndrome, or FCS, is on schedule for the last patient to have their last study visit in the second quarter of this year. This would be the first complete Phase III data set for Arrowhead that potentially would allow us to file our first NDA and launch our first commercial product. FCS is a severe disease in which patients have extraordinarily high triglyceride levels, often in the thousands of milligrams per deciliter. Many of these patients experience painful and recurrent bouts of severe abdominal pain, pancreatitis, and hospitalization. These patients have inadequate treatment options, and we believe that Plozaciran could represent a significant leap forward. We see the data from the phase two studies as compelling. Plozaciran has been generally well tolerated and consistently did what it was designed to do. we have a high degree of confidence that this will be a powerful drug for this patient population with very high unmet medical needs. We believe Plozaciran could also help a broader population of patients. Therefore, we plan to initiate phase three studies in patients with severe hypercholesterolemia or SHTG. These studies will likely begin next quarter and are aimed at addressing a larger patient population that we believe totals three to four million in the US alone. As with the FCS population, Our SHASTA-2 study gives us confidence that plasasteran will do exactly what it is designed to do. We believe it will be a powerful and welcome to leap forward for patients. Bruce will discuss study designs for SHTG in a moment. We are still considering whether we also want to study plasasteran in the broader atherosclerotic cardiovascular disease or ASCVD population, but have not yet made a final decision on that. We will be completing our analysis this quarter. and we'll communicate our plans after they are finalized and we have had some regulatory interactions. If our cardiometabolic vertical represents the foundation of our value proposition, Flosasserin is the bedrock of that foundation for the following reasons. The target APOC3 is well validated across a variety of genetic studies. Our data across hundreds of human subjects indicates consistent target engagement with deep and durable APOC3 silencing. Triglyceride levels were deeply reduced in patients and healthy volunteers treated with plazacirin. We know that elevated triglyceride levels in certain patient populations can lead to severe abdominal pain, acute pancreatitis, hospitalizations, and other difficult downstream effects, and even in rare cases, deaths. There is currently no FDA-approved therapy that lowers triglycerides by more than 20 or 30%, and plazacirin has been generally well-tolerated in prior studies. Together, these set up an attractive opportunity. We just need to get to market. We expect to launch Zodaciran as early as next year in FCS. We would hope to follow that relatively quickly by launching into larger SHTG markets, and we will see if we follow that with an even larger ASCVD market. This brings me next to Zodaciran, which targets angiopoietin-like protein 3, or AngPTL3. As we've discussed, We are assessing both the Zodaciran and Plozaciran to determine which may be better suited for investment in a cardiovascular outcome study in patients with ASCVD. The data we presented at AHA in November on Zodaciran's ability to reduce remnant cholesterol, which is believed to be a major contributor to the residual risk of ASCVD after LDL cholesterol is well controlled, was very encouraging. In fact, we have not seen any other therapy capable of the type of reductions seen after Zodaciran treatment in the Phase II study. Just as available drugs have shown only modest lowering of triglycerides, available therapies have similarly produced only modest reductions in remnant cholesterol. Zodaciran has also shown promising results in a Phase II study in patients with homozygous familial hypercholesterolemia, or HOFH. We are currently preparing materials for an end of Phase II meeting with the FDA and intend to begin a Phase III study in HOFH after we have regulatory feedback on our plans. We could also expand into the much larger heterozygous or HEFH population. If we decide to conduct a Phase III study of Zodaciran in ASCBD, the commercial plan will likely follow a similar path as Plozaciran. That plan is to launch in a rare population and continue to build out commercial infrastructure and capabilities to support larger patient populations while the additional Phase III studies are being conducted. For sedaceran, that could mean addressing the small HOFH population relatively quickly, then expanding into HEFH, and ultimately the very large ASCVD market as we get each approval. This path makes a lot of sense for us as an emerging commercial company and would allow us to grow in a measured, stepwise fashion. We believe that plesaceran and sedaceran clearly warrants investment into cardiometabolic infrastructure. I'm sorry, cardiometabolic commercial infrastructure. Those outlays become increasingly cost efficient as we increase the number of drugs that infrastructure manages. Therefore, it makes sense to expand the cardiometabolic protocol to include additional complementary medicines in the portfolio, and we have several in mind. One is based on our adipose targeting trim platform, which has shown impressive preclinical data. We have seen target gene silencing with this platform in excess of 90% after a single dose in animal models with the activity that lasted over six months. Adipose tissue is the largest endocrine organ in the body, and there are multiple attractive metabolic targets that may be amenable to an RNAi-based knockdown strategy. We are not prepared to disclose the first gene target we are addressing, but it is in the metabolic space. Another program we are adding to the cardiometabolic vertical is aeroINHBE. This utilizes the liver-targeted TRMM platform and targets the INHBE gene, which encodes inhibin subunit beta E. James will talk about the target in a moment, but the intention is to study this in an obesity and metabolic disease population. Both programs fit well in our cardiometabolic vertical and are on schedule for CTI filings as early as the end of this year. It is difficult to overstate the importance of our cardiometabolic vertical in driving our value proposition. We have near-term commercial opportunities in plazaciran and zodaciran, a high expectation of success surrounding the programs, and longer-term opportunities with future drug candidates. The next vertical we expect to invest in late-stage clinical studies and commercialization is pulmonary. There are only about 16,000 pulmonologists in the United States and we believe it's an attractive prospect to build a specialized commercial sales organization to support a growing pipeline of medicines that addresses various respiratory diseases. We currently have three programs in clinical studies that collectively address three major components of chronic lung disease, inflammation, mucoobstruction, and interstitial lung disease. We also see the pulmonary space as a target-rich environment where we believe we can advance and ultimately bring to market a number of different drugs for various diseases treated by a relatively small number of physicians. We like the leverage this creates. The current program, the current programs in clinical studies are AeroRage, Aeromuck 5AC, and arrow MMP7. We expect to have multiple clinical readouts for these programs this year and intend to start at least one phase two study in 2024. We also expect additional targets potentially this year. Cardiometabolic and pulmonary are where we are focusing a lot of our attention and will represent quite a bit of our spend moving forward. So what does that mean for the rest of our existing and future pipeline? As I mentioned, we are not slowing down our discovery organization and will not limit growth in our early stage pipeline. For example, in 2023, we nominated nine new clinical candidates and filed four new CTAs. These are promising programs, so the question is where do they fit strategically and what role do each play in our business? I think of three primary categories that the new programs can slot into. One, new candidates that fit into existing verticals. Aero-ion HPE is a good example of this. It fits neatly into the cardiometabolic vertical. Two, new candidates that pending clinical proof of concept could warrant an expansion into a new vertical. Our work in CNS is very early, but given the vast unmet medical needs and the broad target-rich environment, this could be an area we build out should clinical data support it. And three, new candidates that are interesting from a medical and commercial standpoint but may not fit into one of our verticals. This is an important category for us and can serve as a substantial source of capital to fund the other two categories. We brought in close to a billion dollars in partnering capital over the past seven years, and we anticipate this will be an increasingly important piece of our financing plan going forward as existing partnerships mature and we continue to do new deals. Our partnership with Amgen on Old Passaran formerly Arrow LPA, is a good example of what we can do after even a modest investment in discovery. In late 2016, when we partnered with Amgen, Arrow LPA was still an early preclinical program. Since then, we have received around $362 million in cash and are still eligible to receive another $535 million in potential payments as certain clinical and commercial milestones are achieved. In fact, we are eligible to receive $50 million when the El Paso Rand Phase III study is fully enrolled, which Amgen recently publicly guided could be in the first half of this year. Business development is an important source of capital, but of course, not the only source we will rely on. Last month, we announced a $450 million equity financing, the first such deal we have done in approximately four years. That transaction was confidentially marketed to just a handful of funds, and we were pleased with the result. It was substantially oversubscribed and saw terrific participation from high quality investors. We viewed that as the first step in substantially increasing our balance sheet. We expect the second step to be a structured finance transaction that could be based around taking in capital in return for royalties on one of our future products that is capped at some return. This could also have a debt component to it. We anticipate executing such a transaction in the coming months. We expect the third step to be one or more partnership transactions, and while we cannot control the exact timing of these, our goal is to do one or more economically meaningful deals this year. Together, we expect these multiple steps to provide a strong financial base on which we may continue to invest in our core programs and new innovations. There's also a cost management side to creating a strong financial base. As I discussed, we have reached the point where we need to be more strategic about the particular drug candidates we take into late stage studies and ultimately to commercialization. It is simply not economically feasible to do everything on our own past a certain stage of development. That means looking more vigorously for partners and potentially pausing or even culling some programs that are outside our chosen verticals. To that end, we've recently conducted a portfolio review. We are moving forward with clinical studies for our complement programs, ARO-C3 and ARO-CFB, and our muscle targeted programs, ARO-DUX4 and ARO-DM1. We're continuing to assess the clinical path and designing phase 1B2A studies for our NASH candidate, ARO-PNPLA3. The gout candidate, HZN457, which was returned to us by Amgen after its Horizon acquisition, is being terminated and will not move forward. In addition, ERO-SOD-1, our CNS candidate against SOD-1 ALS, will not move forward. We are continuing to work on additional CNS programs and expecting new candidates against a different target to begin clinical studies later this year. It is more commercially attractive than ERO-SOD-1 while still serving as a good proof of concept for the CNS platform. Our portfolio review also affected some undisclosed preclinical programs. We have revised our budget to reflect an anticipated reduction in growth of our spend over this fiscal year and beyond. Ken will talk about specifics in a moment, but we are reducing our guidance on fiscal year operating burn by approximately $100 million. We are achieving these estimates while importantly continuing to fully fund our core pulmonary and cardiometabolic verticals and innovative new technologies and programs. Continuously assessing our anticipated uses and sources of capital and ensuring that they align with the overall goals of the business is, of course, a critical exercise. I think our revised budget puts us in a stronger position strategically as well as financially. With that overview, I'd now like to turn the call over to Dr. Bruce Gibbon. Bruce?

Thank you, Chris, and good afternoon, everyone. It's great to be back helping Arrowhead move forward in the most effective and efficient way possible. I've been doing a good amount of work getting up to speed with the cardiometabolic clinical development teams, which are operating at a very high level. We are doing important design and analysis work to ensure our studies are world class. Shortly, we will be getting centers initiated so additional phase three studies can get up and running rapidly. Chris mentioned that we are in the middle of a process to assess which program, plazaciran or zodaciran, we want to take forward into an ASCVD population. and we have nothing new to update on that front today. So I will focus my time today on where we are with plasaciran and the progress we've made. To review, plasaciran is designed to reduce production of ApoC3, a component of triglyceride-rich lipoproteins, or TRLs, and a key regulator of triglyceride metabolism. ApoC3 increases plasma triglyceride levels by inhibiting breakdown of TRLs by lipoprotein lipase, and uptake of TRL remnants by hepatic receptors in the liver. We've studied plazaciran in multiple clinical studies in different patient populations with several hundred patients having been dosed. We have been consistently encouraged by safety and tolerability results with treatment emergent adverse events reported to date that generally reflect the comorbidities and underlying conditions of each study population. This is encouraging and consistent with our expectations of a properly designed RNAi therapeutic that leverages our proprietary trim platform. In addition, plasaciran has demonstrated a high level of pharmacodynamic activity with a mean maximum reduction in ApoC3 of around 90%, give or take, regardless of the patient population studied. This is also consistent with our expectations and speaks to the consistency of the RNAi mechanism. This was a hallmark of arrowhead candidates in our earlier days in the HBV and AAT space, and continues to be the case as we have developed new candidates targeting diverse genes. So, where is Plazasarin going, and what has changed over the last couple months? First, and most critically in the short term, we are making some changes to the proposed design of the suite of Phase III Shasta studies for patients with SHTG. Our goal with these changes, which I will discuss in a moment, is twofold. First, we want to accelerate enrollment and enable regulatory filings in the U.S. and other key markets as quickly as possible. And second, we want to maximize the probability to show an effect on severe abdominal pain and acute pancreatitis, which could be a significant differentiator from other triglyceride-lowering therapies and could aid in value and access discussions with payers. So what are we doing towards those ends? Our plan was to conduct two similar phase three studies, Shasta 3 and Shasta 4, in approximately 700 patients with triglycerides greater than 500 milligrams per deciliter across the two studies combined, with a primary endpoint of lowering triglycerides after one year of treatment. This general design remains largely unchanged. But we have streamlined several features of the study to potentially speed up time to NDA submission in Europe and the U.S. We also intended to include a predefined number of patients at higher risk of severe abdominal pain and acute pancreatitis events, with the goal of potentially characterizing an expected reduction in risk of these events in SHTG patients treated with Plozaciran. This remains an important goal, but we believe the best way to assure ourselves of adequate power to show this effect is to run a separate study designed specifically for that purpose. This separate study will be called SHASTA-5, and we will provide more details in the design, sizing, and inclusion criteria when we initiate the study. This separate study strategy could potentially do two things. It gives us the best chance of showing a reduction in events versus placebo. And second, removing the predefined number of high-risk patients in Shasta 3 and Shasta 4 is expected to further speed enrollment for these studies. Between these changes and a handful of others, we estimate that we can get to full enrollment for Shasta 3 and Shasta 4 more rapidly and potentially get to an NDA 6 to 10 months faster than the original plan. This is a significant advance if our predictions are correct. We are actively working on getting these studies ready to go. We estimate Shasta 3 and Shasta 4 will begin next quarter and Shasta 5 shortly thereafter. Plozaciran has demonstrated best-in-class data at each prior step of the clinical development process, and we're eager to move more rapidly through these Phase III studies. The next important event for Plozaciran is the completion and readout of the Phase III Palisade study. This is in patients with genetically confirmed or clinically diagnosed familial chylomicronemia syndrome, or FCS. This is a severe disease of extremely high triglyceride levels that puts patients at high risk of episodes of severe abdominal pain, acute pancreatitis, hospitalization, and it can be fatal. There are no adequate treatment options for these patients. Palisade is a one-year study with a primary endpoint of triglyceride lowering versus placebo. We enrolled 75 patients globally, and the last patient is scheduled to have their last visit in May. After that visit, we will work quickly to complete sample analysis and data collection, preparation, and analyze the data. We intend to report top-line results from the study in the third quarter and begin work toward filing Arrowhead's first NDA. That will likely be at the end of the year or into the first quarter of 2025. This is an exciting time, and I'm thrilled to be back and to be part of this next big milestone for Arrowhead. I'll now turn the call over to Dr. James Hamilton. James?

Thank you, Bruce. As you know, we have a very robust pipeline of early clinical stage programs and even more robust pipeline of discovery stage programs, most of which we haven't disclosed yet. I want to talk about a few of the newer programs and give an update on where we are with some of the clinical programs that are approaching readouts. First, Chris mentioned two programs that we've added to our cardiometabolic pipeline. One utilizes our new adipose delivery platform, and the other utilizes our liver targeted platform. We intend to talk more about the adipose platform program later in the year, so I will focus on the liver-targeted program. This new liver-targeted program is called aeroinhibin E. Inhibin E is a gene that codes for a serum-measurable protein, activin E, which is primarily synthesized by the hepatocytes. Increased circulating activin E levels signal adipose tissue to store excess nutrients as fat. Inhibini expression is increased in obesity, and inhibini loss of function variants identified in human genetic databases are protective of type 2 diabetes and are associated with reduced visceral fat and a reduced waist-to-hip ratio. We've conducted studies in mouse obesity models where inhibini silencing with siRNA reduced weight gain by over 20% compared to controls Importantly, the difference in weight gain was primarily due to changes in fat mass with no difference seen in lean mass. We hope that inhibiny therapeutic silencing could be an interesting adjunct to GLP-1 agonists. We think the potential benefits of combination therapy could include the ability to use a lower dose of the GLP-1 agonist, which might result in reduced lean mass loss, reduced gastrointestinal side effects, and prevention or slowing of weight regain post cessation of GLP-1 agonist therapy. We have selected a clinical lead and are on schedule to file a CTA by the end of 2024. Moving on to our two muscle targeted programs, ARO-DUX4 for patients with fascioscapular humeral muscular dystrophy, or FSHD, and ARO-DM1 for patients with type 1 myotonic dystrophy, or DM1. Both of these programs are in phase 1, 2A dose escalating studies to evaluate the safety, tolerability, and PKPD profiles of single and multiple ascending doses. Both studies have ethics and regulatory clearance to initiate, and we expect first patient in for both in Q1 or Q2 of this year. To review, AeroDux4 is designed to target the gene that encodes human double homeobox4 or Dux4 protein as a potential treatment for patients with FSHD. FSHD is an autosomal dominant disease associated with the failure to maintain complete epigenetic suppression of Dux4 expression in differentiated skeletal muscle. Overexpression of DUX4 is myotoxic and can lead to muscle degeneration. ARO-DM1 is designed to reduce expression of the dystrophy of myotonic protein kinase or DMPK gene. DM1 is the most common adult onset muscular dystrophy and there is currently no approved disease modifying therapy. I also want to give a status update on our two complement programs. At the end of last year, we filed a CTA to begin a phase one 2 study of AeroCFB for the treatment of various complement-mediated diseases and possibly geographic atrophy, or GA. AeroCFB is designed to reduce hepatic expression of complement factor B, which has been identified as a promising therapeutic target. Our preclinical studies have demonstrated that AeroCFB can achieve deep and durable reductions in liver production of complement factor B. which plays a key role in the activation of the alternative complement pathway involved in the pathogenesis of renal diseases, such as IgA nephropathy, as well as other conditions like GA. We anticipate that first patient in for the Phase I-II study will occur in Q2 of this year. Our more advanced complement program is AeroC3. As you may recall, Arrow C3 is designed to reduce production of complement component three, or C3, as a potential therapy for various complement-mediated diseases. We previously presented data from our part one, from part one of the study in Healthy Volunteers, an ongoing phase one, two study that demonstrated the following promising results. A dose-dependent reduction in serum C3 with 88% mean reduction at the highest dose tested a dose-dependent reduction in AH50, a marker of alternative complement pathway hemolytic activity with 91% mean reduction at the highest dose tested, and duration of pharmacologic effect supportive of quarterly or less frequent subcutaneous dose administration. These results made us confident to move on to part two in patients with IgA nephropathy and C3 glomerulopathy. We are currently enrolling that part of the study and intend to present patient data around year-end 2024. Lastly, the three clinical stage pulmonary programs continue to progress efficiently and are all on schedule for clinical readouts this year. These pulmonary programs are as follows. AeroRage, which is designed to reduce expression of the receptor for advanced glycation end products, or RAGE, as a potential treatment for inflammatory pulmonary diseases. For the Phase 1-2 study, we have fully enrolled and dosed all healthy volunteer cohorts and the mild to moderate asthma patient cohorts as well. We should have additional PD data by the end of the first quarter for both of these. We are also in the process of enrolling three cohorts of asthma patients with high baseline levels of fractional exhaled nitric oxide, or Pheno, which is a biomarker for IL-13-driven type 2 inflammation in the lung. We believe we will have initial results from these high-phenol cohorts in the third quarter of this year. The biology of RAGE and where it sits in the inflammatory cascade, as well as our own preclinical studies, have suggested that RAGE inhibition may provide potent anti-inflammatory effects with impacts on an array of cytokines, including IL-13, IL-5, TSLP, IL-18, IL-33, IL-1B, and IL-6. In addition to Pheno, we're assessing other potential biomarkers of anti-inflammatory effect, including sputum and blood cytokines in the asthma patient cohorts. The next two programs are Aeromuc 5AC, which is designed to reduce production of Mucin 5AC or Muc 5AC as a potential treatment for mucoobstructive pulmonary diseases and Aero-MMP7, which is designed to reduce expression of matrix metalloproteinase 7, or MMP7, as a potential treatment for idiopathic pulmonary fibrosis, or IPF. In both programs, we are conducting Phase I, II studies in healthy volunteers and then in patients. Both programs require patient data to assess PD, unlike Aero-RAGE, which has the benefit of a readily available and measurable PD biomarker in healthy volunteers. Both ARROW MOC 5AC and ARROW MMP7 have already enrolled and dosed healthy volunteers, and we anticipate that patient cohorts will be enrolled and dosed in time to enable initial clinical readouts in the second half of the year. 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, was $132.9 million or $1.24 per share based on 107.4 million fully diluted weighted average shares outstanding. This compares with the net loss of 41.3 million or 39 cents per share based on 106 million fully diluted weighted average shares outstanding for the quarter ended December 31st, 2022. Revenue for the quarter ended December 31st, 2023 was $3.6 million compared to $62.5 million for the quarter ended December 31, 2022. Revenue in the current period primarily relates to our collaboration agreements with GSK, while revenue in the prior period primarily related to recognition of revenue from our license and collaboration agreements with Takeda and Amgen. All upfront payments from existing agreements have now been fully recognized. Total operating expenses for the quarter ended December 31, 2023 were $140.1 million compared to $104.7 million for the quarter ended December 31, 2022. The key drivers of this change were increased candidate costs and salaries as the company's pipeline of clinical candidates has both increased and advanced into later stages of development. Net cash used by operating activities during the quarter ended December 31, 2023 was $117.8 million compared with $75.5 million for the quarter ended December 31, 2022. The increase in cash used by operating activities is driven primarily by higher research and development expenses and lower cash revenue in the period. We have reviewed our cash forecast and would like to provide additional guidance on our expected cash burn. For the next several quarters, we expect operating burn to be 80 to $100 million per quarter. Our footprint expansion is mostly complete with the final payments to be made over the next several months, totaling about $70 million, after which we expect capital expenditures to be nominal. Breaking the operating burn a bit further, our cash burn related to GNA has been about 10% of costs. So think of that as about $10 million of G&A each quarter, which is expected to grow slowly going forward as we continue to advance commercialization efforts. We expect quarterly R&D expenditures to be about $80 million this year, increasing modestly next year as our registrational studies advance. Turning to our balance sheet, our cash and investments totaled $220.3 million at December 31, 2023. Pro forma cash and investments accounting for the recent capital raise would be approximately $649 million. Our common shares outstanding at December 31st, 2023 were $107.5 million, and pro forma shares outstanding accounting for the capital raise would be $123.8 million. With that overview, I will now turn the call back to Chris.

Thanks, Ken. This is an important year for Arrowhead. in five primary areas. First, we expect a lot of activity within our cardiometabolic vertical. We will have our first phase three readout for Pladaciran and plan to file our first NDA. We plan to initiate several additional phase three studies in patient populations, including HOFH, HEFH, SHTG, and potentially ASCVD across two different drug candidates, Pladaciran and Zodaciran. We also intend to expand the cardiometabolic vertical to include two additional candidates, arrow INHBE, and an undisclosed adipose targeted candidate. Second, we plan to have multiple clinical readouts in our pulmonary vertical across three different drug candidates and initiate at least one phase two study. Third, we intend to continue to strengthen our balance sheet with a structured finance transaction and one or more business development transactions. Fourth, Our other clinical programs continue to move forward. These include continuing enrollment of the PCSORAN Phase 3 study with Takeda, Amgen potentially completing enrollment of its Phase 3 study of Olpaceran, progress in Phase 2 studies in HBV with GSK, progress in Phase 2 studies of GSK4532990 in NASH, planning for Phase 2 studies in PN-PALE- an arrow, PN-PALE-3, progress in phase one studies for our neuromuscular candidates, ARO-DUX4 and ARO-DM1, and progress in phase one studies of our complement-based candidates, ARO-C3 and ARO-CFB. And fifth, we are not done innovating. As I mentioned, we expect to bring our first adipose-targeted candidate to the clinic and initiate clinical studies for an undisclosed CNS candidate this year. Thanks for joining us today, and I would now like to open the call to your questions. Operator?

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

And our first question comes from Luca Isi with RBC Capital.

Your line is open.

Oh, great. Thanks so much for taking my question. Two quick ones here. Maybe James first on phenol. I know the data for the high phenol cohort is in the third quarter. However, I was under the impression that you were planning to show us the phenol data from the mild to moderate patients potentially ahead of that. Is that no longer the plan? And if so, what drove that decision? And then maybe second, either Chris or Ken, I think it's the first time I'm hearing you directly talking about potentially using debt. Given the broader macroeconomic environment and where the rates are, why do you think that adding debt is the right strategic decision at this point? Thanks so much.

Sure, Luca. Thanks for the question. I'll take the first one. In the mild to moderate asthma patient cohorts, we didn't have a pheno cutoff, so it was sort of an all-comers asthma. series of cohorts, and we just don't have the numbers. I think in the top dose cohort, we have one patient with high Fino, so just not enough to make a call based on or present data based on. That's why we're waiting for the high Fino cohorts.

Yeah, so even though interest rates are higher than they have been historically, the cost of debt is certainly lower than our cost of equity capital. And it's, we think, an important part of non-pollutive financing. So that's why we're looking at that possibility.

And I think that we're at the stage of this company where we can consider that. We are close enough to commercialization that it makes sense, I think, to start exploring those options.

Got it. Thanks so much. You're welcome.

One moment for our next question.

And our next question comes from Ted Tenthoff with Piper Sandler. Your line is open.

Great. Thank you very much, and thanks for the thorough update. It's going to be an exciting year. You know, as you're getting ready for Palisade data, and again, fingers crossed assuming success based on the mechanism and data you've shown in the past, how do you start to think about the commercial build-out for that indication of, You know, especially in the U.S., obviously. I know it's not a huge indication, but it would be the company's first commercial build-out. And then you discussed partnerships. Is this something where you would envision seeking distribution partners overseas, or what's sort of the thinking OUS? Thanks a ton.

Thanks, Ted. Yeah, we're really excited to make this transition. We're excited about seeing those data. The phase two data were compelling, and so we are optimistic that those data are going to continue to look good. Look, we like the way this transition into a commercial company is panning out. We are not a commercial company right now, and so it can be jarring. One could imagine going from zero to a very large market that could be a bit diffuse. And so we get to take this baby step, if you will, in FCS. You know, the way I sort of segregate the triglyceride market is, you know, there are those genetically defined FCS patients. Those patients are known. The physicians who treat them know where they are. They're relatively easy to address. You take one step down, if you will, say patients who are not genetically FCS but have triglycerides over 880 and history of pancreatitis, Again, those patients are relatively well-known and relatively easy to address. It is those populations that we will be addressing initially. And so it's a nice entry, if you will, into commercial. As we grow and as we continue the other phase three studies, will be increasing our ability to go after those harder to find patients, you know, those on triglyceride side, those patients, you know, who have triglycerides above 500 and who may not have history of pancreatitis. That's a very large number, we believe, but we'll take some education of the market and we'll take some digging, of course. And so we've got extra time to develop our ability to do that. So that's domestically. Internationally, We feel like we can handle the FCS markets, you know, in certain ex-U.S. markets, and so we intend to do that. Longer term, I would expect for us to find good local partners for SHTGs. You know, we'll see where we are with ASCVD, with HEFH and the like, but at least for SHTG, it would probably make some sense for us to find the right local partners in other countries.

Great.

Thanks for the update.

You're welcome.

One moment for our next question. And our next question comes from Ya Yang Mamtani with B Reilly Securities. Your line is open.

Hey team, thanks for taking our questions and good to have Bruce back on the call. So on the outcome trial consideration and deliberations for Zodaciran. Bruce, could you point to any meta-analysis informing correlation of PRL percent reduction or cumulative lowering that informs event rate with outcomes? I believe you and possibly another peer might be doing a similar exercise in coming months. And like you said, there might be additional external partners involved as you look to do a structured financing process. Would love to hear your thoughts, and I have a quick follow-up after that.

Well, you know, there's a lot of interest in the remnant cholesterol, you know, concept. You know, a lot of Mendelian randomization data and other data pointing to these remnant cholesterols being highly atherogenic. You know, in some of these analyses, they're even more atherogenic than you know, ApoB and, you know, LDL on a milligram per milligram basis. It's as yet, you know, unproven in clinical trials because, frankly, there just haven't been good enough drugs, you know, for treating these. And so it has been untestable. You know, they were waiting for the good drug to come along that you could, you know, you could test this remnant cholesterol hypothesis. And both sodaciran and plosaciran are really you know, incredibly good drugs, you know, from a pharmacologic perspective. So, you know, they offer that opportunity. And it's not actually an easy choice between the two because they're, you know, they're both equivalent in a lot of ways with respect to their ability to address that particular, you know, question. So I think it's, you know, it's, there's plenty of, you Plenty of paper out there, plenty of genetic studies that point us this way, that give us reason to be hopeful as a field, let alone as a company. But ultimately, we have to prove it. We have to do the old fashioned thing. We have to actually do the clinical trials and prove it.

Got it. And then on the phenohyde cohort, James, I heard sputum and blood biomarker data will also be part of the 3Q analysis. Could you just maybe talk to the significance of that? And broadly, in your pulmonary pipeline for MUC5 and other patient cohorts, are you also assessing that? And what's the relevance of that as you look to make some go-no-go decisions this year? Thanks for taking our questions.

Sure, right. So the additional biomarker data, specifically the cytokines I mentioned, I mean, I think that those are an important piece of the readouts that, you know, that we'll have this year in addition to Pheno. We are not assessing those in the level of detail that we're doing in the RAGE cohorts with the other pulmonary programs like MUC5AC or MMP7. not as relevant. We do measure cell counts on BALF for all the pulmonary programs just to get an indication of if we're seeing any kind of pro-inflammatory effect, and we've not seen such an effect to date in the BALF for any of those three programs.

Got it.

Thanks for taking your question.

One moment for our next question. And our next question comes from Jason Burberry with Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. One for me on RAGE. Can you just remind us, you know, what your cutoff is for hyphenol and, you know, will there, you know, there'll be placebo patients that you're actually comparing Again, with that data update in 3Q, and what I'm trying to get at is, you know, thinking about your confidence, you can derive from about 25 patients of data here with respect to, like, phenol variability as a measure. You know, and just lastly, do you think there's a chance that, you know, arrow rage could achieve, you know, higher than this 30% to 40% bogey set by biologics? on the phenol measure, just given it targets multiple interleukins involved in the type 2 inflammatory pathway. Thanks.

Sure. I can't really comment on the magnitude question of what we expect or if we think we can have a higher phenol reduction compared to the biologics. The phenol cutoff is 35, and there are, I think, 38 total patients across the hyphenol cohort, so we should have a pretty good number, and that includes placebo patients. So, you know, we'll be able to compare the active treatment arm to a placebo group.

Got it. Okay. Thank you.

One moment for our next question. And our next question comes from Patrick Truccio with HC Wainwright. Your line is open.

Thanks. A couple of follow-up questions. The first is just on the CMO role. You can maybe discuss the reasoning behind the decentralizing the chief medical officer function and what impact this is expected to have, as well as potential advantages of this decentralized approach. And then secondly, just on the CNS platform, Can you talk a bit more about what went wrong with ARISOD1 more specifically? You know, was it a decision based on market potential or with the SRA or something else? And maybe just give us an idea of how you expect this platform to build out going forward.

Sure. So so with the with the slight restructuring of R&D, we just thought that we that we needed, you know, good, good leaders with deep expertise in our chosen verticals. So far, that's going to be cardiometabolic. We expect pulmonary to be the next vertical. We just needed deep expertise there. We expect those not to be the last verticals that we're going to create. We're probably going to have, you know, several others going forward. And they just needed their own leaders. And so, for us, it made sense to restructure towards that. Regarding SOD 1, look, there's nothing within ERO SOD 1 that pushed us off it, to be honest. We liked it. We liked AeroSat-1. We liked the opportunity because it gave us a good chance to interrogate the platform. It was going to give us a good, I think, we thought, proof of concept that the platform is working or is not working. The problem with Sat-1 is that it was appearing to be increasingly commercially unviable. So the good news is we could see if it's working. The bad news is it didn't make economic sense to develop that drug, we thought. And we had, you know, a fast follower, at least one, that we think, you know, at once gives us the ability to, you know, to interrogate the platform and gives us good proof of concept of the platform, but also will be a more commercially viable drug. So it just made sense to allocate resources to it and to others. So it was less of a SOD1 failing than a lack of confidence in the SOD1 ALS market.

Got it. That's helpful. Thank you very much. You're welcome.

One moment for our next question. And our next question comes from Manny Baruhar with Lee Ring Partners. Your line is open.

Hey, guys. Thanks for the questions. A couple of quick ones. You talk about $100 million step down in operating expenses, which obviously buys a lot of wiggle room for the company and and allows you to maximize your chart investment. Could you give us any sort of color on the tempo at which we'll see that flow into OPEX over the course of this year, just for our own modeling? And then I've got a couple of quick pipeline questions to follow.

So, I think you should expect those results immediately. If you look at what our burn was, In the current quarter, it was high compared to previous quarters, but we think it will go back to a normalized spend, like I had mentioned before, of about $80 to $100 million, and you could expect that beginning the second fiscal quarter.

Okay. And hopping over to the pipeline, for Arrow INHBE, or INHBE, however we're going to pronounce That's a target for which we've seen some evidence in broad human population studies, et cetera, for a change in adipose phenotype in terms of distribution, in terms of hip-to-waist ratio, even after one accounts for BMI. So should we be thinking of that as a place where we're going to eventually see data that targets weight loss, adipose distribution? Like, what are the endpoints we should be thinking about in humans? And then what are the endpoints we should be thinking about in earlier stage studies as we sort of, as this aspect is progressively de-risked?

Yeah, sure. I think all of the above, for at least in terms of our initial clinical study, we'll look at all of that and investigate the not just changes in body weight loss, but we'll evaluate body composition, loss of lean mass, distribution of adipose tissue, you know, are the visceral fat stores shrinking? What happens to lean mass? And we're also interested in what happens to measures of glycemic control like, you know, A1C or oral glucose tolerance testing. So I think there are quite a few endpoints that we can study. in even a phase one study and learn a lot about our drug and about that particular target.

Great. And as a follow-up, is there an opportunity in the initial human data set to see this asset tested both in patients who are on and off GLP-1, the GLP-1, given how broadly they're taken amongst the population of the U.S. and other places where you guys have done clinical trials?

Yeah, I think so. I think that would be, you know, we're still a little ways away from the clinic, but would anticipate a study design that first starts in, you know, obese patients that are not on those drugs and then also investigates the combination of the GLP-1 agonists with inhibine knockdown and see how the combination plays out.

Great. I'm going to hop off. I know Ellie and a couple of others are still waiting on the queue. Thanks, guys.

One moment for our next question. And our next question comes from Brendan Smith with TD Cowan. Your line is open.

Hi. This is Jaina on for Brendan. Thanks for taking our question. I just wanted to ask, which of your non-sport participants are using adipose tissues against your renal development commercialization partnership and which would be the highest priority thank you yeah sorry sorry you're you're breaking up can you repeat that of your non-core pipeline programs would you consider for a development commercialization partnership and which of these would be the highest priority for you yeah so unfortunately we don't choose that entirely you know we need a counterparty that's going to be interested as well but look there are um

We would certainly be happy to talk about C3, for instance. We'd be happy to talk about the muscle assets. We think those are all good assets, but at least right now, don't fit neatly into a planned vertical. One would think that muscle would be a natural vertical for us, and it could morph into that. But right now, we are happy to talk to the right partner about one or both of those assets. PMPLA-3 potentially, you know, could be something that we are interested in. You know, NASH is a bit in flux right now, but that's something that we could consider discussing, you know, as we partner with HSD to GSK. We could talk about that as well. That's sort of what it feels like right now in our existing clinical pipeline.

All right.

Thank you so much.

You're welcome.

One moment for our next question. And our next question comes from Mike Alls with Morgan Stanley. Your line is open.

Hey, guys. Thanks for taking the question. And maybe just a quick follow-up here in terms of BD.

You mentioned maybe one or two potential deals this year.

Could they potentially include the core areas like cardiometabolic and pulmonary, or are those going to be excluded from potential royalty deals? Thanks.

Let's deal with those separately. So, cardiometabolic, we are full speed ahead with Zodaciran and Plozaciran right now, and so we are not actively looking to partner those. On the pulmonary side, we are not actively seeking partners for our three clinical assets. We would be happy to discuss with a potential partner, a platform partnership whereby somebody would bring in a target that we may not be working on for us to together build a drug candidate. But at least right now, we are not looking at partnering those existing clinical assets.

That's helpful. Thank you.

You're welcome.

One moment for our next question. And our next question comes from Ellie Merle with UBS. Your line is open.

Thanks for squeezing me in. Just in the past on RAGE, you had mentioned a sub-Q program. I guess just what's the latest on the status and timelines there and just the focus of that program? And then just on a related note, as you think about planning a larger phase two study in asthma, what are the considerations there and the design and what you're looking to see in the high-fetal cohort later this year? And just, you know, would anything from the sub-Q program perhaps play into some of the considerations in the design? Thanks.

Sure. So, the sub-Q program, we were seeing a range of knockdown. That's the good news. We just weren't seeing as deep a knockdown as we were seeing with the inhaled. So, we are really focusing our future development on the inhaled. But again, but it did work. It just was not, you know, as strong as the inhaled version. James, you want to? I don't have anything to add to that. I don't think it will play into our Phase II plans, though. And so what's the second question about abasma again? Can you repeat that one?

Yeah, just the timeline for the Phase II start and the design considerations and, like, what you're looking to see from the high phenyl cohort and how that might inform some of the design decisions. Thanks.

Yeah, so we're tossing around and thinking about a lot of different designs right now. I think a design we would certainly want to be able to study both the high type 2 and the non-type 2 patients in a single design. And I think, you know, the Pheno readout Q3 may inform on, you know, which patient population we want to favor one more than the other. but I think we'll want to plan to study both. Yeah, and keep in mind, you know, with the pheno data, look, we're looking forward to seeing that, of course, but it really only reflects, you know, moving a single pathway. You know, as James mentioned his paragraph marks, RAGE, we expect RAGE to move a number of different cytokines, and pheno is only really, you know, detecting movement of one of those. And so while it's helpful, it's certainly not the only important data point.

Got it. Thanks. That's helpful. One moment for our next question.

And our next question comes from Mari Raycroft with Jefferies. Your line is open.

Hi. Thanks for taking my questions. I was going to ask one about RAGE, too. So for the higher dose PD asthma patient data that you're collecting, can you clarify if you'll do a public update on that at the end of this quarter on those data? And will that only include knockdown or will that include cytokine and other PD biomarkers as well?

So it will include knockdown for sure. And, you know, I'm not sure if there's going to be a you know, a good venue in the near term to report those. I can tell you that what we have seen so far, and it's still an incomplete data set, what we've seen so far is consistent with what we said in the past, which is what we're seeing in knockdown in patients is really mapping on top of what we have seen, the knockdown profile in healthy volunteers. And so that continues. You know, once we have a full data set, you know, given that, again, I expect that to continue. I don't know that we'll rush out and have a press release based on that. I think we'll probably have that as part of a, you know, some presentation at a conference or what have you. But to be honest, we really haven't put much thought into how we're going to disseminate those data. Because, again, you know, we expect those to be, we expect the knockdown in patients to be quite similar to health volunteers. That's what we've seen so far. James, do you have anything else? No. Thanks.

Got it. Okay, that's helpful. And then maybe one follow-up just for DUCS4 or DM1. Could you potentially have data updates from either of those programs this year?

Yeah, I think that's, depending on how enrollment goes, we could have some early data by end of the year, but very enrollment contingent.

Got it. Okay, thanks for taking my question. Thanks, Brian.

One moment for our next question. And our next question comes from Prakhar Agarwal with Kantor Fitzgerald. Your line is open.

Hi, thanks for taking my questions. Number one on inhibitor E, preclinically, how does your candidate's profile differ versus some of your competitors on NILAM and WAVE in terms of the level of knockdown you're seeing? I think you had mentioned 20% weight loss in DIO models, so maybe if you can compare and contrast that. And then I had a follow-up.

Sure, yeah, I think that that level of differential in weight gain between the control animals and the animals receiving drug is similar to what others have reported. And in that study, we were seeing 90-plus, I think 96% knockdown in that obesity mouse model, which is, I believe, more than what others have reported.

I think that's probably the best I can tell you. Got it.

And on the CV side, what are the key questions do you need answers from the FDA to make a decision on which CV asset to move forward into the outcomes trial for the broader population, or is it just mostly an internal decision at this point?

Yeah, I mean, we haven't gone to the – it's Bruce Gibbon again. We haven't gone to the FDA – at this point on that um at some point uh you know we will of course go to the fda we can start a trial like that without their input but we're we're not at the point yet that we've engaged them in in the discussion okay thank you for the questions sure one moment for our next question and our next question comes from david leibowitz with city your line is open

David Leibowitz, your line is open.

Hello. Hi. Can you hear me now? Yes, we can.

Yes.

Hi. Hi. This is Devanjana on for David. Thanks for taking our questions. So maybe regarding the FPS readout of losacirin, you mentioned that the last patient is scheduled for the visit in second quarter. We were wondering if you could give us a little more color in terms of the data readout timeline, and maybe what data points can we expect to see at the readout?

Well, I think, you know, We would again be looking to present, I would think, in a meeting. I actually haven't spoken with Chris on this. Maybe we would top line in some way once we did that, but we'd want to do that in such a way to not present a fulsome presentation in an academic meeting at some point. I think it's kind of the same sort of question, the same answer we had before. At this point, it's hard to predict, you know, what meeting that would be and when that would occur. But, yeah, I suspect we would, in some way, get some top-line information. But, you know, most of the fulsome data would come out later, I would expect.

Thank you. And maybe just one follow-up. Assuming that losacirin and oligacin are both approved, how do you think clinicians would choose between the two therapies?

It's hard to answer that question in a setting where actually we don't have the comparative results of the two agents at this point on either efficacy or safety in the SCS population. So it'd be wildly speculative at this point to try to make a call on that.

Yeah, I don't think that we've seen triglycerides levels from that Phase III at, you know, when we look at the available data from their Phase IIs versus our Phase IIs, we are comfortable that our dosing interval will be longer. And it appears, at least according to the Phase II data, it appears that our ApoC3 knockdown is greater and our triglyceride lowering is greater, but again, as Bruce says, we don't on their side or on our side, frankly.

Thank you. That's helpful.

And our final question comes from the line of William Pickering with Bernstein. Your line is open.

Hi, good evening. Thank you for taking my question. You've estimated the addressable FCS population at 70 to 100,000, which sounds like a pretty large population to get approved based on a single 75-person study. So can you just remind us of your agreement with the FDA on the exact definition of that FCS population for which they agreed to accept just a single trial? Thank you.

In that phase three study, we are studying people with genetically confirmed FCS, and those patients with clinical FCS, if you will, which is patients with triglycerides above 880 and history of pancreatitis. That's the population we are studying. Thank you. You're welcome.

And I would now like to turn the conference back to Chris Anzalone for closing remarks.

Thanks very much for tuning in today. We look forward to speaking with you over the next quarter. And those of you who are in Southern California, I hope you stay dry.

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