Arrowhead Pharmaceuticals Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 14 speakers on the call.

Operator

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in listen only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Speaker 1

Thank you, and good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2024 Q3 ended June 30, 2024. With us today from management are President and CEO, Doctor. Chris Anzalone, who will provide an overview of the quarter Doctor. Bruce Given, Interim Chief Medical Scientist, who will provide an update on our cardiometabolic pipeline Andy Davis, Senior Vice President and Head of Global Cardiometabolic Franchise, who will provide an update on commercial activities and Ken Myszkowski, Chief Financial Officer, who will give a review of the financials.

Speaker 1

Doctor. James Hamilton, Chief of Discovery and Translational Medicine and Patrick O'Brien, COO and General Counsel will also be available during the Q and 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 ks and our quarterly reports on Form 10 Q.

Speaker 1

I'd now like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

Speaker 2

Thanks, Vince. Good afternoon everyone and thank you for joining us today. Arrowhead has spent a substantial amount of time building a scalable platform on which a large number of diverse and innovative new medicines have been and will continue to be built. This is the basis of our 2020 initiative where we expect to grow our pipeline to at least 20 clinical stage or marketed products by next year. Think about what that means for any company much less one of our size.

Speaker 2

This initiative represents our commitment to reduce the overall risk profile of the company while expanding our upside potential and this is important for our long term value creation. In the short term, however, we need to balance our platform development work with intense focus on bringing our first wholly owned drug candidate to market as quickly and efficiently as possible. We expect that candidate will be plazasiran and we expect the initial launch to be next year if approved for use in familial chelomicroinemia syndrome or FCS. We're working hard to ensure the posaciran moves rapidly through regulatory NDA and MA filings for FCS while executing Phase 3 clinical studies for SHTG, the second potential indication and our cardiovascular outcomes trial or CVOT for mixed hyperlipidemia, the 3rd potential indication. We believe that pazasiran represents a pipeline within a single drug given the multiple patient populations we can address with it.

Speaker 2

Bruce will talk about the progress in this program in a moment. We are currently building out our commercial infrastructure to enable an initial launch in 2025 and then scale to support progressively larger patient populations over the coming years. Andy will talk about where we are with this process in a moment. On September 1, 1987, the first statin was approved by the FDA. This event changed the world because it ushered in an era during which physicians would appreciate the risks associated with high LDL cholesterol and importantly would have the tools to lower it.

Speaker 2

It feels to us like we are at a similar point with triglycerides with a few notable differences. First, we have the luxury of being able to grow our way into a large market. We expect to begin commercializing posasiran in the small FCS market then grow into the large SHTG market around 2027 and ultimately serve the very large mixed hyperlipidemia market after a CVOD is complete. 2nd, we feel like we are virtually alone in our ability to drastically lower triglycerides and therefore serve these markets appropriately. While there have been 8 FDA approved statins to compete to lower LDL, our data suggest to us that there is simply no other near term therapy that can match plazasteran's activity.

Speaker 2

If triglycerides are bad actors, wouldn't patients and physicians want to lower them as much as possible? We believe they will. This is a big commercial opportunity and we believe Arrowhead has the most promising medicine that is poised to make a big impact over the coming years. Before discussing other progress we've made recently, I want to talk about the announcement we made this afternoon. I think it's clear that we have dramatic upside opportunities in plazasiran in the near term and in multiple other programs over the medium and long term.

Speaker 2

What was less clear to investors was how we would finance these development programs until we get to a point where commercial revenue becomes a significant source of capital and ultimately brings us to cash flow positive position. To that end, today we announced a transaction with 6th Street that provides an immediate and meaningful strengthening of our balance sheet with long term, low cost, non dilutive capital to fund innovative I'm sorry, to fund innovation and growth opportunities across Arrowhead's pipeline. The $500,000,000 senior secured credit facility includes $400,000,000 funded at close with an additional $100,000,000 available at Arrowhead's option subject to mutual agreement between 6th Street and Arrowhead during the 7 year term of the agreement. This is debt, but the risk sharing structure is very attractive to us. There are no scheduled amortization payments during this term and no scheduled cash pay coupon interest payments.

Speaker 2

In addition, it has an attractive 7 year term during which we hope to be building our commercial revenue substantially. It has other risk sharing characteristics where payments are to be made to partially repay loans under the credit facility with a portion of the proceeds from certain transactions such as future inflows from partnerships and collaborations and commercial revenue. So we don't really have cash outflow obligations unless we have cash inflows from other sources. This deal makes a lot of sense for us and the great team at Sixth Street has been creative in building a custom structured product that is appropriate for Arrowhead. This growth capital comes at a perfect time.

Speaker 2

During the quarter, we also announced a $50,000,000 milestone payment that we received from Royalty Pharma following the completion of enrollment of the Phase 3 OCEAN A outcomes trial of opaciran being conducted by Amgen. These are important steps to build our balance sheet, but not the last. We view our capital needs through the lens of plazasiran development and see the potential for significant revenues coming out of the SHTG market. As such, we want to ensure that we have a financial bridge to that market, which we believe we could launch into in 2027. We have many tools to fund operations over those 3 years, including potential milestone payments from our existing 4 partnerships, new partnerships and license agreements, possible financing in return for capital royalties on plazasiran sales and revenue from commercializing into the FCS market, which we expect to begin next year.

Speaker 2

Before turning the call over to Bruce to discuss the plazasiran clinical programs and data, I want to review a few other key accomplishments from the recent period. First, we announced top line results from the pivotal Phase 3 PALISADE study of plazasiran in patients with FCS. The study met its primary endpoint in all key secondary points. We see these data as best in class. This is Arrowhead's first therapy to show clinical efficacy in a Phase 3 study, which represents validation of all the hard work from so many talented Arrowhead employees, our collaborators and the FCS community over the years.

Speaker 2

Also during the quarter, we presented new interim clinical data on ARO RAGE, our investigational RNAi based medicine for the treatment of inflammatory lung diseases such as asthma at the American Thoracic Society 2024 International Conference. These were important data as they represent not only translation of preclinical data to clinical data in normal healthy volunteers, but also to an asthma patient population. We are currently working on the design of a Phase 2 study of ARO RAGE. Turning to the earlier side of our pipeline, we presented preclinical data on ARO INHVE at the American Diabetes Association or ADA 84th Scientific Sessions. INHBE is an investigational RNAi based medicine that we are studying for the treatment of obesity and metabolic diseases.

Speaker 2

Pharmacological studies in obese and diabetic mouse models, INHVE siRNA administration resulted in multiple promising findings including the following: 95% reduction in INHBE mRNA expression, 19% suppression of body weight compared to saline controls, 26% loss of fat mass and importantly preservation of lean mass. Our preclinical data presented at ADA suggests that INHBE reduction with siRNA is a promising new approach to address obesity and metabolic diseases and we think support advancing AROI and HBE into clinical trials. We will be discussing these data and also announcing a new program that directly targets adipose tissue next week at our R and D webinar on obesity and metabolic diseases. These are exciting additions indeed to our cardiometabolic franchise. Please note the new date of this event is August 14.

Speaker 2

It was originally planned for August 15, but the date was changed to accommodate the schedule of an external speaker who will be joining us. Be sure to listen in as these early stage programs in our cardiometabolic pipeline are particularly interesting and fit well with our growing development and commercial presence in the space. Lastly, since we have so much going on in our broad pipeline during the quarter, we launched the 2024 summer series of R and D webinars to highlight some of our work. Each month starting in May and ending in September, we highlight different therapeutic areas and programs in our pipeline. We have now completed webinars on our muscle programs, our late stage cardiometabolic programs and our pulmonary programs.

Speaker 2

As I mentioned, next week on August 14, we will cover our obesity and metabolic programs and in September, we will cover our CNS programs, including updates on the delivery platforms and on undisclosed candidates planned to enter clinical development this year. Clearly, there's a lot going on and a lot to be excited about at Arrowhead. With that overview, I'd now like to turn the call over to Bruce. Bruce?

Speaker 1

Thank you, Chris.

Speaker 3

Good afternoon, everyone. We've been very impressed with the clinical data generated with plazasiran in each patient population we've studied, and we believe it is best in class across the board. Starting in healthy volunteers and moving to patients with mixed hyperlipidemia and severe hypertriglyceridemia or SHCG and on to patients with genetically or clinically diagnosed FCS, we have seen very consistent high levels of target engagement and downstream changes to lipids and lipoproteins. This makes sense and was our expectation, but it's still gratifying to see data meet or exceed expectations. To review, APO lipoprotein C3 or APOC3 is the gene target for plazasiran.

Speaker 3

It is a component of triglyceride rich lipoproteins or TRLs and a known regulator of triglyceride metabolism. APOC3 inhibits the breakdown of TRLs by lipoprotein lipase and inhibits uptake of remnant cholesterols in the liver. The goal of treatment plazasteride is to reduce the level of APOC3, thereby reducing triglycerides and restoring lipids to more normal levels. Over the past few months, we have been presented we have presented and published Phase 2 data on plazasiran in patients with mixed hyperlipidemia in the MIRROR study and in patients with SHTG in the SHASTA-two study. We have also reported top line results from the PALISADE Phase 3 study in patients with FCS.

Speaker 3

I want to spend a moment going over the highlights from these studies. Starting with mixed hyperlipidemia in the MIRROR study, treatment with plazasiran in mixed hyperlipidemia achieved reductions in triglyceride rich lipoproteins, a genetically validated target associated with increased risk of atherosclerotic cardiovascular disease. These data were presented in an oral presentation at the European Atherosclerosis Society 92nd Congress and simultaneously published in the New England Journal of Medicine. At week 24, representing trough effect after 2 quarterly doses, plazasirad treatment was associated with placebo adjusted reductions in triglycerides of up to minus 62%. Fasting triglyceride levels were normalized, which means patients achieved levels below 100 and 50 milligrams per deciliter in 79% to 92% of patients randomized to a treatment arm.

Speaker 3

Commensurate reductions in APOC3 of up to 79% were observed with strong positive correlations with changes in triglyceride levels. There were other important changes in other atherogenic lipoprotein parameters, including non HDLC, apolipoprotein B and remnant cholesterol, with strong correlations with the reductions in triglyceride levels. Plazasiran demonstrated a favorable safety profile in the MIRROR study. The overall rates of occurrence of treatment emergent adverse events and discontinuations were similar for plazasiran and placebo throughout the 48 weeks of observation. Mixed hyperlipidemia also called mixed dyslipidemia is a highly prevalent disorder characterized by elevated LDL cholesterol and triglyceride levels.

Speaker 3

Despite the efficacy of LDL lowering therapies and reducing atherosclerotic cardiovascular disease and mixed hyperlipidemia, there remains substantial residual risk attributed to elevated non HDL cholesterol, driven by remnant cholesterol and triglyceride rich lipoproteins. Genomewide association and Mendelian randomization studies also support a causal role for triglyceride richlipoproteins in atherosclerotic cardiovascular disease. Based on the promising results from the MIRROR study, we are now gearing up to initiate the Phase 3 CAPITAN cardiovascular outcomes trial, which is designed to enroll patients with mixed hyperlipidemia and who have had or are at risk for a cardiovascular event. Moving on to the SHTG population, there are patients with much higher triglyceride levels than generally seen in the mixed hyperlipidemia population. For SHTG, we presented data from the SHASTA-two study at the American College of Cardiology meeting the spring and simultaneously published the results in the journal JAMA Cardiology.

Speaker 3

In SHASTA-two, treatment with plazasiran led to dose dependent placebo adjusted reductions in week 24 in triglycerides of up to minus 57%, driven by reductions in APOC3 of up to minus 77%. Mean maximum non placebo adjusted reductions from baseline of triglycerides in APOC3 were up to -86% and -90% respectively and typically occurred around week 16 or week 20. Among subjects treated with flazasiran at the week 24 trough time point, greater than 90% achieved receiving the 25 or 50 milligram doses achieved triglycerides less than 500 milligrams per deciliter, an important threshold associated with increased risk of acute pancreatitis. In addition, around half of the subjects at these doses achieved normal triglyceride levels of less than 150 milligrams at week 24, which is surprising given the mean high starting levels of almost 900 mgs per deciliter. In addition to reduction in triglycerides, subjects treated with lazasiran also showed improvements in multiple atherogenic lipid and lipoprotein levels, including remnant cholesterol, HDL cholesterol and non HDL cholesterol.

Speaker 3

Losasiran demonstrated a favorable safety profile in Shasta2. Observed adverse events generally reflected the comorbidities and underlying conditions of the study population. SHTG is characterized by triglyceride levels greater than 500 mgs per deciliter and is known to significantly increase the risk of atherosclerotic cardiovascular disease and acute pancreatitis, which can occur with recurrent attacks requiring repeat hospitalization admissions and worsening outcomes. Pancreatitis risk increases as triglyceride levels increase. Currently available drug therapies generally don't sustainably reduce triglycerides below the pancreatized risk threshold in this patient population.

Speaker 3

Based on the promising SHASTA-two data, we have initiated and started dosing in both the SHASTA-three and SHASTA-four Phase 3 studies in patients with SHTG. We are also working towards initiating SHASTA-five, a Phase 3 study in patients with SHTG that are at high risk of acute pancreatitis. SHASTA-five will have a primary endpoint of incidence of new episodes pancreatitis compared with placebo. We do not see this study as necessary for regulatory approval in SHCG, but we do see it as an important study to potentially show the value of treatment with blazasiran in reducing the risk of acute pancreatitis. If positive, these results should be helpful for all stakeholders, including patients, healthcare providers and payers.

Speaker 3

Lastly, during the quarter, we gave a top line report on the Phase 3 PALISADE study in patients with genetically confirmed or clinically diagnosed FCS. The strong results from PALISADE significantly build upon the promising results from the Phase 2 SHASTA-two and MIRROR studies. The primary endpoint for the PALISADE study was placebo adjusted median change in triglycerides in month 10. At that time point, patients treated with quarterly doses of 25 50 milligrams plazasiran achieved median triglyceride reductions These compared with the median triglyceride reductions in placebo treated patients of -17% at month 10 and -7% at month 12. Mean reductions in APOC3 at month 10 were -88% and -94% at 25 mg 50 mg plazasiran respectively.

Speaker 3

All of these changes were highly significant when comparing plazasiran to placebo. PALISADE successfully met the primary endpoint in all key secondary endpoints, including reducing the incidence of acute pancreatitis compared to placebo. There were 4 multiplicity controlled key secondary endpoints. Percent change from baseline in months 10 to 12 averaged in fasting triglycerides percent change from baseline in month 10 in fasting APOC3 percent change from baseline in month 12 in FASCE and APOC3 and finally, incidence of positively adjudicated events of acute pancreatitis during the randomized period. Plazasiran demonstrated a favorable safety profile in the PALISADE study.

Speaker 3

The number of subjects reporting emergent adverse events were similar in the plazasiran and placebo groups. Severe and serious AEs were less common with plazasiran than with placebo. The most common AEs reported were abdominal pain, COVID-nineteen, nasopharyngitis, headache and nausea. This study was accepted as a late breaker oral presentation at the European Society of Cardiology 2024 coming up on September 2, 2024 in London. Since that's Labor Day in the U.

Speaker 3

S, we also plan to have an investor call the following day on September 3, 2024. Doctor. Gerald Watts, a Principal Investigator for PALISADE and the presenter of the data at the European Society of Cardiology, will join the investor call to present the data and discuss the exciting results. I'll now turn the call over to Andy to give a few remarks on where we are with commercial planning and readiness. Andy?

Speaker 4

Thank you, Bruce. We're on track with our launch preparations for pizaciran in familial chylomicronemia syndrome or FCS. Let me begin by talking a little bit about our expanded access program or EAP. We initiated the EAP to ensure patients who roll off our PALISADE trial, maintain access to plazacin and to make investigational plazacin available outside of a clinical trial for other patients with FCS who meet certain program eligibility criteria if requested by their treating physician. We've fielded requests for additional information about the EAP from physician societies and treating physicians who may have appropriate FCS patients.

Speaker 4

And our medical affairs team is already out in the field engaging with these individuals to help them understand the program. As you know, this would be Arrowhead's 1st commercial product. So we're building a best in class organization that will support the patients who we hope will benefit from plazasiran. This is obviously a big task, but we're up to the challenge. The build out of our medical affairs and commercial infrastructure is right where it needs to be at this time in commercialization.

Speaker 4

Our entire medical affairs and commercial leadership team is solidly in place and the team we've assembled has deep experience in the cardiometabolic and lipid therapeutic areas. We've already done extensive mapping of the healthcare professionals or HCPs most likely to treat FCS patients and prescribe plazasiran if approved. Our market research leads us to believe these HCPs have been impressed with the top line results from our PALISADE trial with particular note of the unprecedented triglyceride lowering and statistically significant reduction of acute pancreatitis risk. As Bruce mentioned, plazasterin achieved deep and durable reductions in triglycerides of approximately minus 80% from baseline, demonstrating for the first time the real possibility for FCS patients to lower their triglycerides below important guideline directed thresholds of acute pancreatitis risk. Finally, our best in class patient and caregiver support program is taking shape.

Speaker 4

We've selected an exclusive specialty pharmacy and patient hub with expert support for patients with rare conditions and we're presently crafting the finer details of our patient and caregiver support ecosystem to ensure patients can easily start and stay on therapy. I look forward to talking more with you in the future about how we see the commercial market opportunity and how we intend to bring plazasiran to the many patients who could benefit from this new therapy. I'll now turn the call over to Ken.

Speaker 5

Thank you, Andy, and good afternoon, everyone. As we reported today, our net loss for the quarter ended June 30, 2024 was 170,800,000 dollars or $1.38 per share based on 124,200,000 fully diluted weighted average shares outstanding.

Speaker 3

This compares with a net loss

Speaker 5

of $102,900,000 or $0.96 per share based on 107,000,000 fully diluted weighted average shares outstanding for the quarter ended June 30, 2023. No revenue was recorded in the quarter ended June 30, 2024. Revenue of $15,800,000 was recorded in the quarter ended June 30, 2023. Revenue is recognized as we complete our performance obligations or key developmental milestones are reached. Revenue in the prior period primarily related to the recognition of payments received from our license and collaboration agreement with Takeda.

Speaker 5

Total operating expenses for the quarter ended June 30, 2024 were $176,100,000 compared to $118,500,000 for the quarter ended June 30, 2023. The key drivers of this change were increased research and development costs, primarily discovery and candidate costs as the company's pipeline of discovery candidates has advanced into novel therapeutic areas and tissue types and clinical candidates has increased and progressed into later stages of development. Net cash used in operating activities during the quarter ended June 30, 2024 was $115,400,000 compared with $21,400,000 for the quarter ended June 30, 2023. The increase in cash used in operating activities is driven primarily by higher research and development expenses as well as lower cash revenue versus the prior year. Our footprint expansion is mostly complete with final payments to be made over the next several months totaling about $30,000,000 after which we expect capital expenditures to be nominal.

Speaker 5

Turning to our balance sheet, our cash and investments totaled $436,700,000 at June 30, 2024 compared to $403,600,000 at September 30, 2023. The increase in our cash and investments was primarily related to $450,000,000 equity issuance, partially offset by ongoing cash burn. Today, we announced a financing agreement with 6th Street for significant long term non dilutive capital. The $500,000,000 senior secured credit facility includes $400,000,000 funded at close and an additional $100,000,000 available at Arrowhead's option subject to mutual agreement between 6th Street and Arrowhead. Inclusive of the upfront cash from 6th Street before deducting fees, our pro form a cash balance is approximately $840,000,000 and significantly enhances our liquidity toward our global commercial launch of plazasiran, while also supporting advancement of our late stage clinical trials and other discovery efforts.

Speaker 5

Our common shares outstanding at June 30, 2024 were 124,200,000. Dollars With that brief overview, I will now turn the call back to Chris.

Speaker 2

Thanks, Ken. We had a highly productive quarter and feel that all pieces are now in place to begin the transition into a commercial stage company. We completed Phase 3 study in PALISADE that we intend to use to file for regulatory approval to launch bloodasiran in patients with FCS. The Summit suite of clinical studies including PALISADE and the Shasta, Muir and Capitan studies are all underway or at advanced stages and are designed to show the value of podasiran in multiple patient populations. As I mentioned, we view plazasiran as a pipeline within a single drug and these studies have the potential of enabling that.

Speaker 2

Our commercial organization is taking shape and we have a thoughtful strategy to grow in support of plazasiran as the clinical studies and ultimately the product label grows into progressively larger patient populations. And lastly, we have taken the next steps to execute on our long term financing strategy and now have a stronger balance sheet enabling us to better fund innovation and growth opportunities across Arrowhead's robust and diverse pipeline of RNAi therapeutics. We have focused most of this call on plazasiran, but of course we have a large stable of value drivers under it that continue to move forward. Our pulmonary franchise with 3 current clinical candidates, our muscle franchise with 2 current clinical candidates and our complement franchise with 2 current clinical candidates, all continued to progress over the quarter. By the end of the year, we expect to file CTAs in support of 2 obesity candidates and 2 CNS candidates, and you will hear more about those programs at our webinars on August 14 and September 25, respectively.

Speaker 2

Our partnering programs also made progress as the elpasiran Phase 3 against Lp is fully enrolled and the fasizeran Phase 3 against AAT continues to enroll patients. Our HBV and HSD programs with GSK are both in Phase 2 studies and we continue to weigh our options with the PMPALI-three program that we started with J and J and we now wholly own. We think these potential value drivers will play an important role in the future of Arrowhead either as marketed products themselves or part of the steps that we take to bridge Posastran into commercialization. Thank you for joining us today and I would now like to open the call to your questions. Operator?

Speaker 5

Thank

Operator

Our first question comes from Maury Raycroft from Jefferies. Please go ahead.

Speaker 6

Hi, congrats on the quarter and thanks for taking my questions. I'm going to start off with SCS. Just wondering if you can provide more perspective on what additional details we should expect to see at the ESC meeting? And the study hit STAT SIG on reducing acute pancreatitis in the small sample size, whereas Ionis didn't show STAT SIG difference. What are your latest thoughts on how your SCS label could look like versus Ionis' olitarsen?

Speaker 3

Well, so let's take the first question first. I do expect that the presentation will give much more detail, especially on the primary and secondary endpoints, but I think also on more broadly on some of the more exploratory or secondary endpoints. But focus, I think, will be on the primary and alpha controlled secondaries, all of which were statistically significant, but most of which haven't really been fully exposed to the investor and scientific communities. As far as pancreatitis goes, I mean, that's obviously exciting for us. And we're really happy to have achieved statistical significance there.

Speaker 3

And it's going to be obviously an important part of our filing with the FDA as well. And it will be interesting to see how they view the data, but we're certainly excited about it.

Speaker 6

Got it. And maybe one more quick one. Just are you saying how many patients are enrolled in the Expanded Access program?

Speaker 2

No, we have not

Speaker 6

said. Okay. Thanks for taking my questions. I'll hop back in the queue. Thanks.

Operator

Thank you. One moment for our next question. Our next question comes from Ellie Merrell from UBS. Please go ahead.

Speaker 7

Hey guys, thanks so much for taking the question. Just what's your latest thinking on the Phase 2 initiation for ARO RAGE and asthma and the gating factors to getting that started? And can you just remind us the latest time lines for when we can expect to see additional data or any of the pulmonary programs in terms of the clinical studies you have ongoing? Thanks.

Speaker 2

Yes. Thanks very much for the question. We've not given any more guidance on when we'll have additional data. We'll just see when we can complete those studies and then we will present those when we can. Regarding the Phase 2, we are developing those plans right now.

Speaker 2

And so stay tuned on more information on that. There are a number of of factors that we're weighing about what type of patients we'll be treating and how long we'll be treating, etcetera. So we are still in the process of working that out right now. Now.

Speaker 8

Great. Thanks. You're welcome.

Operator

Thank you. One moment for our next question. Our next question comes from Luca Issey from RBC Capital. Please go ahead.

Speaker 9

Great. Thanks so much for taking my questions. Maybe 2 quick ones. Maybe Chris or Ken, can you just expand why you think the deal announced today was struck on favorable economics? Can you just maybe help us contextualize the 15% annual interest rate and maybe how you negotiated that?

Speaker 9

And then maybe on FCS, Bruce, I appreciate you have a differentiated approach here. You're including both genetically as well as clinically confirmed patients in Palisade. But how should we think about payers? Is it possible that payers would at least initially restrict access to just patients that are genetically confirmed before maybe broadening also to clinically confirm? Any color there, much appreciated.

Speaker 9

Thanks so much.

Speaker 2

Sure. So I'll start with the deal and Ken can add, if you'd like. Look, the take home message for us on that was that we are at the point of development in this company that I think we can take on debt, broadly speaking, but it's got to be the right kind of debt. We have an awful lot to do in the coming years to build out our commercial infrastructure before we start to see substantial revenue come in. And so any kind of debt that made sense to us was going to have to be long dated.

Speaker 2

The 7 year term makes a lot of sense to us. It gives us plenty of room to bridge. I talked about this bridge to Posastar and SHTG market. I think that could be in the 2027 or so time frame. And so the 7 year term gets us deep into that.

Speaker 2

That's comfortable for us. There's also really attractive risk sharing components here. There's not a coupon here that we need to be paying on a regular basis. We'll be paying this if and only if certain external funds come in. And so it does not put constraints on us that would have been problematic.

Speaker 2

And so this to us feels like a very comfortable and appropriate structure. Ken, you have anything else you want to add on that?

Speaker 5

No. I just wanted to say that it is non dilutive. So we like that aspect of it. And the cost of capital is reasonable, given what our cost of equity capital would be.

Speaker 2

Yes, yes. Actually, let me underline that. I think that's a great point. When we look at what we can be achieving over the coming years, the cost of equity capital at this point feels quite expensive. And this is a very different value proposition for us.

Speaker 2

Bruce? Yes.

Speaker 3

Luca, you asked a very good question. The interesting thing about the way Talisade was constructed is that if you didn't know the genetics on any of these patients, they'd all look the same. So what we really have here is we have a group of patients that happen to have a narrow set of genetics that characterize them as familial chylomicronemia syndrome, FCS. And then we have a group of patients that basically look the same, but happen to have different genetic makeup, but clinically they're the same. And that's what's interesting about this.

Speaker 3

So my expectation is that, it will really probably come down to what the package insert says. And of course, we don't know that at this point. But I think that the payers will go along with the package insert. And assuming that we get approved and assuming that the agency patients that match our entry criteria, if you will, I think will be covered. But that will of course be payer to payer.

Speaker 3

But it feels like overall, as one of the physicians, one of the investigators said to me, the patients look the same. Whether they have the genetics or not, they're still the same problem I have in my clinic of patients with very high triglycerides, at risk for pancreatitis and many of them having pancreatitis, recurrent pancreatitis and dangerous pancreatitis. So from the physician perspective, the patients are very much the same. And that's these are adult patients, mind you, but there's pretty good reason to think that the payers will go along with the package insert here.

Speaker 9

Got it. Thanks so much.

Operator

Thank you. One moment for our next question. Our next question comes from Edward Tenthoff from PASB. Please go ahead.

Speaker 10

Great. Thank you very much. And congrats on all the progress. Just a little bit more on plazasiran with respect to what needs to be done for the NDA filing. Where are you guys in the process?

Speaker 10

And how are things progressing on the CMC side? What are the big steps that still need to be done? Thanks.

Speaker 3

Let's see. Well, I mean, we're busily writing. We will have our pre NDA BD with the FDA and that will give us more insight into whether there's anything special they would like us to do that we're not already doing. CMC is moving along as well. So I mean, we're just in the pre submission phase, I guess, Ted.

Speaker 3

I don't know how to give you more than that at this point, but we're deep in it.

Speaker 10

And just remind me, the goal is to follow by year end?

Speaker 3

Yes, that's been the guidance so far.

Speaker 10

Thank you. And then follow-up question, if I may, just on the muscle programs. What should we be expecting for in terms of future data in terms of readouts from your muscle programs? Thanks.

Speaker 2

Yes. So we've not given any guidance on that. These are still early ish programs. We are treating patients. We'll see how fast we can treat.

Speaker 2

We'll see how fast we can generate data that is interpretable. So in other words, don't expect to have a drip, drip of data of 1Z, 2Zs patients, we need to put something together that would be helpful to investors once we have it. So I don't I would not expect data this year. And so we'll see next year when we could have something. We just don't we don't know the answer to that at this point.

Speaker 2

Do you have anything to add on that James?

Speaker 3

No, I think Great. Thank you.

Speaker 10

It sounds

Speaker 11

right on timing. Suffice it to say that the readouts, I think, will be substantially the same as what others have shown in terms of DMPK, knockdown, splice correction, tissue concentrations, that sort of thing.

Speaker 10

Great. Looking forward to all that. Thanks.

Operator

Thank you. One moment for our next question. Our next question comes from Jason Garberry from Bank of America. Please go ahead.

Speaker 12

Hey guys, thanks for taking my questions. My first is just on the facility you announced this evening. So is the right way to think about it? I mean, you have a business model or you have this unpredictable flow of milestone in the door, so to speak. So this gives you like the flexibility to draw from the facility.

Speaker 12

But once those milestone payments come in, you can retire that or repay and avoid the 15% cost, but it just kind of gives you operational flexibility. At that point 1? And then the second question is just on ARO T SLIP. I'm wondering, this mechanism, I guess, would seem somewhat redundant with AeroRage. And so just curious, I imagine some investors may read through to this impact to your confidence or should it read across your confidence in ARO RAGE?

Speaker 12

And just in general, like what's your hypothesis around ARO T SLP differentiating from biologic approaches? Thanks.

Speaker 2

So let me give you the short answer on TSLP and I'll hand it over to James to give more insight on that. Look, the reason that we were interested in TSLP to be totally honest was not necessarily to have a monomer of TSLP, but we thought it could be a very interesting part of a dimer. As you know, we've been developing our ability to deliver dimers to various tissues. And so we did it for that reason. And so it may be part of a dimer at some point.

Speaker 2

We are still exploring that. But that was the primary reason. I don't we were not planning on bringing that in as a monomer necessarily.

Speaker 11

I think that's right. We were not planning on bringing the ARO TSLP program forward by itself. And then mechanistically, I mean, RAGE, if you look at the cascade, inflammatory cascade, RAGE sits upstream of PSLP. But there's in terms of the disease indications, at least for asthma that you could go after and they're very similar.

Speaker 2

And regarding the facility, I'm sure it gives us flexibility, but really it's a piece of this bridge that we're talking about. We need to bring in enough capital to allow us to continue to build over the next few years while we're waiting to hopefully address the SHTG market with plodesserin. I think we'll be we'll bring with the substantial revenue. And this is just one of those pieces. It's not the only piece.

Speaker 2

We still expect to do business development deals. Some of those may be partially used to pay off facility, but a good chunk of it may not be. We may just be using that for operational purposes. So think of it that way that it's one of many ways that we or one of many tools that we expect to use to build that bridge.

Speaker 12

Got it. Thanks a lot.

Speaker 2

You're welcome.

Operator

Thank you. One moment for our next questions. Our next question comes from Mayank Mamtani from B. Riley Financial. Please go ahead.

Speaker 8

Hey, guys. Madison Nolan for Matt. Thank you for taking our questions. So a couple of quick ones from me. Is there anything you're closely monitoring within the neuromuscular landscape that may influence your development plans for ARO DM1 or DUX4, especially kind of on the regulatory front?

Speaker 8

And then secondly, regarding the dimers, is there, I guess, timeline to when something like that could be in the clinic? And is there an indication or target where you think this is better suited than others?

Speaker 12

Thank you.

Speaker 2

James, do you want to address the muscular question?

Speaker 11

Yes, sure. I mean, I don't know that there's any specific one item from a regulatory standpoint or neuromuscular developments that we're following. Suffice it to say that we follow all of the other programs that are out there very closely and use the data that come out in the literature and from our competitors to guide our own programs.

Speaker 2

Yes. Look, our position there from my perspective is a real pleasure to be totally honest. Between HBV and AAT and so many others, we are the first ones blaze a trail. And so there are certain advantages to being first, but there are certain vulnerabilities as well. And so we get to learn from competitors' interactions with the regulatory agencies, etcetera.

Speaker 2

And so our look, our job is to be best in class. Presumably, we'll have a roadmap that's sort of laid out for us and our job is just to have better drugs and we are hopeful that we can have those. Regarding the dimers, we haven't given any real guidance on dimers other than during the cardiometabolic day we talked about or what I expect will be our first dimer in the clinic, the PCSK9 APOC3 dimer. And we're excited about that. That will not be in the clinic this year, but I would expect that to be in the clinic next year.

Speaker 2

We've not talked about where else we are going with dimers in the near term. As you can imagine, the lower hanging fruit with dimers of course is delivery to hepatocytes. And so I would expect those to be first. And then as our technologies mature, we can start to think about that type of strategy for other tissue types.

Speaker 8

Got it. Thank you. If I could squeeze into the on your adipose tissue targeting, is there a timeline on that? Could you remind us of that timeline?

Speaker 2

Well, so tune into our webinar on August 14, 14. You'll hear our first adipose target that we're going after and we expect that to be we expect to file a CTA for that this year. We have not given guidance on what those are yet, but you'll hear at least that one next week, I guess.

Speaker 8

Got it. Congrats on the progress, guys.

Speaker 2

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from Mani Foroohar from Leerink Partners. Please go ahead.

Speaker 12

Hi, good afternoon, everyone.

Speaker 13

This is Vijay on for Mani. My question is on the credit facility with Sixth Street. I understand there's no scheduled amortization payment, but could you give a little detail on what proportion of future upfront payments, milestones or royalties from partnerships or ClassMe have to go towards repaying the loan? Any color there would be appreciated.

Speaker 1

Sure. Yes, I can take that. So it depends on which particular asset it is. This is a very custom structure that we went through and so we kind of bucketed different assets and each of those has different payback economics. So the philosophy here is that we wanted the flexibility to spread out repayment of this over time.

Speaker 1

And we also didn't want to have too much of a cash outlay obligation unless we were going to have a significant cash inflow with that corresponded with what you're talking about with potential upfront payments from new deals or milestone payments or royalties from existing deals. So there's various different levels for different assets.

Speaker 2

Okay. And some are 0. There will be some transactions where we aren't required to pay any portion of that to 6 Street.

Speaker 1

That's right. And we pre negotiated the carve outs for a handful of things that we think are likely over the coming years.

Speaker 13

Got it. Would you be able to disclose whether these tend to be more like

Speaker 12

front loaded or back loaded

Speaker 13

in terms like the proportion of those future collections that would have to go to repaying the loan?

Speaker 1

No, we're not giving more guidance on that at this point. We will file a redacted version of the contract at some point. But at this point, we're just disclosing what was in the press release.

Speaker 13

Okay. Sounds good. Thanks so much for taking your question.

Operator

Welcome. Thank you. One moment for our next question. Our next question comes from Brennan Schmidt from TD Cowen. Please go ahead.

Speaker 12

Hi, guys. Thanks for taking the questions. Just a quick one for me. Kind of given this latest financing, can you give us a sense of how you're thinking about additional partnerships this year? Should we expect you'll announce a commercialization partner sometime in 2024?

Speaker 12

Or is that maybe a

Speaker 5

next year event at

Speaker 8

this point?

Speaker 12

And then just really quickly, I wanted to ask if you're still planning to release Phase 1 data with that ARROW CFV this year and just how you're thinking about next steps and potential indications for that one? Thanks.

Speaker 11

Jamie, do you want to talk about Factor B? Sure. Yes. We should be in a position to release data from the CFB program later this year. And then the primary additional indications that we're looking at, of course, the study starts in healthy volunteers, but we will also be looking at ARO CFD in patients with IgA nephropathy in this study.

Speaker 2

Sorry, what was the first question?

Speaker 1

Timing on partnerships.

Speaker 2

Yes, that's easy. I can't predict timing on partnerships. We are as one can imagine, we have a lot going on and so we are actively speaking with companies all the time, who knows how fast those go, who knows that's our timing. So look, these are priorities for us, but I can't give you a timing.

Operator

Thank you. One moment for our next question. Our next question comes from William Pickering from Bernstein. Please go ahead.

Speaker 12

Hi, good afternoon. Thank you so much for taking my question. I noticed there was about a $50,000,000 sequential increase in the R and D this quarter. Could you just give a bit more color on what's in there? And how would you expect the R and D line for the next few quarters compare to that number this quarter?

Speaker 12

Thank you.

Speaker 5

So the increase in R and D, it's been increasing all year, as we move these assets further into later stages. And you will expect those to continue to increase, into next year. We are going through our budgeting process right now and we will provide additional guidance at our next earnings call to give you more information on that.

Speaker 13

Thank you.

Operator

Thank you. I am showing no further questions at this time. I will turn it back over to Chris Anzalone for closing remarks.

Speaker 2

Thanks everyone for joining us today, and I hope you have an enjoyable rest of your summer.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker 7

Goodbye.

Powered by Quartr
Earnings Conference Call
Arrowhead Pharmaceuticals Q3 2024
00:00 / 00:00