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 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 10-K and our quarterly reports on Form 10-Q. 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 a 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 competence 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. palisade phase 3 study plus assaran in patients with genetically or clinically confirmed familial color micro anemia 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 3 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 plazaciran 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 will 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, plazaciran 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 Plazaciran. 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 Plazaciran 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. Zodasteran 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 vertical 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 I and 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 competentially 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 now like to turn the call over to Dr. Bruce Gibbon. Bruce?