Arrowhead Pharmaceuticals - Earnings Call - Q1 2016

Transcript

Speaker 0

Ladies and gentlemen, welcome to the Arrowhead Research Corporation Fiscal twenty sixteen First Quarter Financial Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Amsellini, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Speaker 1

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal twenty sixteen first quarter ended December 3135. With us today from management are our President and CEO, Doctor. Christopher Anzalone, who will provide an overview of the quarter Doctor. Bruce Given, our Chief Operating Officer and Head of R and D, who will discuss our clinical programs and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

We will then open up the call to your questions. Before we begin, I would like to remind you that comments made during today call may 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, including without limitation those with respect to Arrowhead's goals, plans and strategies are forward looking statements. These include, but are not limited to statements regarding the anticipated safety and or efficacy of ARK-five twenty, ARK-five twenty one, ARK AAT, ARK F12 and our other programs as well as anticipated timing for study enrollment and completion and the potential for regulatory and commercial success. They represent management's current expectations and are inherently uncertain.

Thus, results may differ materially. Arrowhead undertakes no duty to update any of the forward looking statements discussed on today's call. You should refer to the discussions under Risk Factors in Arrowhead's Annual Report on Form 10 ks and the company's quarterly reports on Form 10 Q for additional matters to be considered in this regard. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company.

Speaker 2

Chris? Thanks, Vince. Good afternoon, everyone, thank you for joining us today. I'd like to start the call by addressing the weakness we have seen in the broader markets and in particular within the biotech sector. It has been a difficult start of the year for the overwhelming majority of biotech companies and we at Arrowhead have been frustrated that our stock price does not properly reflect what we see as our true value.

That is unfortunate and currently uncomfortable, but this is a cyclical issue, not a structural problem in our view. There have always been cycles in the biotech capital markets and while the field is in a difficult cycle now, this will pass. This is a normal part of working in the sector and as long as we plan for such disruptions, have a flexible cost structure and are going after important diseases in novel ways, we can build value during these times. I've always thought that we could get through anything as long as we could say four things. They are: one, our technology works two, we are working to solve real medical problems three, we have capital now and four, we have access to additional growth capital.

We believe that all of these are true today. Let us look at the past quarter and the period since our last conference call through that lens. This was a pivotal period for Arrowhead in terms of providing further validation of our technology and setting up the rest of the year with multiple milestones and therefore value inflection points. We presented important data from our ARK-five twenty, our drug candidate against chronic hepatitis B infection showing that it does what it is designed to do and more broadly that our proprietary DPC delivery platform can effectively and consistently silence target genes in humans. This is a critical step for us and allows us to enter the next stage of growth for Arrowhead.

The next step for ARK-five twenty is multiple dose Phase two studies. We have begun five separate Phase two studies at 25 sites and counting spanning four continents. During 2016, we expect to have over 200 patients on various multiple dose regimens. We also intend to add cohorts including at least one clinical collaboration with an additional novel agent. This is a large number of patients.

So if ARK-five twenty is ultimately helpful in enabling functional cures, I believe we have a good chance of seeing evidence this year. Now, what are the chances that we see something exciting? I believe quite good. Based on human and animal data we presented over the last few months at our Analyst Day at AASLD and Hep DART, ARK-five twenty is highly active against cccDNA derived mRNA transcripts and thus can dramatically reduce the production of all HBV proteins. In fact, I believe we set a new single dose knockdown record for RNAi.

In addition, our long term study in chimpanzees showed that after repeat dosing, seven of nine animals treated with ARK520 exhibited signs of immune reactivation. Interestingly, it took as few as three doses of ARK520 to begin to see these signs. Further, given ARK520's mode of action, it makes intuitive sense that it could be part of a therapy that leads to functional cures. Evolution drives toward efficiency, so we think that expression of all HBV proteins is likely important for normal function of the virus and maintenance of chronicity. Put another way, we would expect the silencing all viral proteins would make it increasingly difficult for the virus to continue to evade immune control, particularly with an otherwise healthy immune system or one that is stimulated by another agent.

Taken together, these and other evidence give us confidence that ARK-five twenty will play a role in enabling functional cures. If we do see encouraging data in 2016 and beyond, when can investors expect to see this? This of course is a difficult question because if we do see functional cures, we do not know how long patients will need to be on therapy to experience them. However, the 2001 extension study, which is open to most of the patients in the 2,001 single and two dose study and the Monarch study are both open label. We see unblinded data in nearly real time and have flexibility as to how and when we communicate them.

We intend to present data at relevant medical meetings, but upstream of that we will look for opportunities to give updates on what we are seeing which may happen at any time. Tuned. Remember that there are no available therapies that lead to a reasonable number of functional cures and consequently even relatively infrequent functional cures during the early exploratory phases of our studies will be very exciting for Arrowhead and for approximately three fifty million to four hundred million patients worldwide who are chronically infected with HBV. What about competitors? As with any clear unmet medical need, there is now meaningful competition in this space and big pharma has recently focused on the opportunity.

However, we are substantially ahead of our competitors. We have the strong advantage of data from the long term Chimp study and dozens of patients. Our safety profile has looked good and we do not require steroid pretreatment that brings its own AEs and immunosuppresses the patient at the exact time that a therapy is trying to enable the immune system to reconstitute itself. Given where we are in multiple Phase two studies now, we believe that if a breakthrough in HBV is going to happen in the next twelve months, it should come from us. Turning to ARK-five twenty one, the second drug in our HBV portfolio, we intend to accomplish some important steps during 2016.

We previously reported that our clinical studies and our chimpanzee study showed the E antigen negative patients and those on chronic antiviral therapy tend to have lower levels of viral cccDNA. We also learned that DNA that integrates into the patient's genome can become a significant source of S antigen production. ARK-five twenty one is designed to hit mRNA transcripts derived from both HBV cccDNA and integrated HBV DNA. This means that ARK-five twenty may be optimal in patient populations with higher levels of cccDNA such as e antigen positive nuc naive patients and ARK-five twenty one may be optimal in patients with lower levels of cccDNA. We'll have to see what the various clinical studies show, but we think having both drugs should allow us to address all of the HBV market in a powerful way.

ARK-five twenty one uses the same DPC delivery vehicle as ARK-five twenty and ARK AAT, so we have good amount of experience with it clinically. To date, has well tolerated at all dose level study, which gives us great confidence as we prepare to initiate clinical studies of ARK-five twenty one during 2016. We have an aggressive plan for the development of ARK-five twenty one that includes an accelerated first in man Phase onetwo design intended to get us into multiple dose study in patients quite rapidly. We will talk more about this design as we get closer to the initiating the study, which has planned regulatory submissions toward the end of the second quarter twenty sixteen. In addition to ARK-five twenty and ARK-five twenty one, we have an equally eventful year plan for ARK AAT, our drug against liver disease associated with a rare genetic disorder that causes alpha-one antitrypsin deficiency or AATD.

We recently announced that AARC AAT was granted orphan drug designation in Europe and previously was granted the same designation in The U. S. In 2015. We are currently conducting a Phase one single ascending dose study that consists of Part A in healthy volunteers and Part B in patients with AATD. During 2015, we achieved a predetermined level of AAT knockdown in healthy volunteers, which triggered the study to transition into patients.

We have since been enrolling patients at several sites in Australia and Europe. We decided that it would be useful to compare AAT knockdown in healthy volunteers at the same therapeutic dose levels as patients are or will be receiving. Because of this, we have added additional cohorts in Part A of the Phase one in parallel with Part B and we have continued to dose escalate in healthy volunteers alongside patients. We intend to complete enrollment and release top line results from the expanded Part A and Part B this year and then report full data at a relevant medical meeting. We think that AATD is a great target for an RNAi based intervention and one that has relatively low target risk.

AATD is caused by a genetic mutation that leads to the production of a misfolded AAT produced primarily in the liver. This misfolded protein is not efficiently secreted and accumulates in hepatocytes, which is thought to be the cause of progressive liver disease. Patients with mutations that make no AAT have normal livers. It seems like a very straight line between knocking down production of this protein in the liver and an ultimate clinical benefit for patients. We are preparing to begin a pilot Phase 2a multiple dose study that we expect to initiate and hopefully fully enroll this year.

The biology of the disease is clear, so we believe that AHRQ AAT Phase IIa study combined with the results from the Phase I study may represent clinical proof of concept. Once that is achieved, we can discuss with regulators the potential endpoints of a pivotal study. Having orphan drug designation in The U. S. Europe allows us to have expanded interaction with regulators, which we intend to leverage to identify the best path to marketing authorization and ultimately to patients with AATD.

As you've heard, there are a lot of potentially impactful events for our lead clinical programs planned for 2016 and many more beyond that. It is our greatest priority to ensure that these are properly resourced because they are our key near term value drivers. We have clear leadership positions in HBV and liver disease associated with AATD and we have the potential to be both first and best in class. We are building on on this success through a pipeline that includes ARKF12, ARKF2 and ARKLTA that address other high impact diseases. In order to support the development of these drugs and continued improvements to our underlying platforms, which now includes subcutaneous and extrahepatic delivery constructs, we have expanded the company and our capabilities over the last few years in terms of headcount, facilities and equipment.

We have taken these steps because we are confident that our DPC and all the nucleotide platforms will give us numerous opportunities to create drugs that change the way important diseases are treated and at the same time create lasting value for our shareholders. We have not only had our foot on the gas over the past few years, we've had it on the floor. Our lead programs ARK-five 20, ARK AAT and ARK-five 21 are now at important points in their development when substantial value inflections are possible. Pushing through those points is critical to us as a company and we want to ensure that we have the capital for this, particularly during this time of uncertainty in the broader markets. In order to keep our foot on the gas with these more mature programs, we are easing up a bit on some of our earliest stage programs.

We created a flexible cost structure that enables us to move quickly, but also to dial down spending on a program by program basis. And we are taking advantage of that now in order to fully resource HBV and AAT. All earlier programs continue to move forward, but some will just move at a slower pace for now. This is a good strategy and we are quite confident that there will be ample opportunities to fully fund these and other programs through various shareholder friendly methods. So what do we have now and where does it get us?

Today we reported total cash resources of $76,600,000 at the end of fiscal twenty sixteen first quarter. We expect this gives us sufficient liquidity to fund our programs as described above through at least twelve months from now. This is important because we have many important milestones we expect to reach within this window. With that overview, I'd now like to turn the call over to Doctor. Bruce Given, our COO and Head of R

Speaker 3

and D. Bruce? Thank you, Chris, and good afternoon, everyone. On our last call in December, I highlighted some of the data that we presented on ARK-five twenty last quarter at our Analyst Day at AASLD and at Heptart. There was a good amount of data that describes some new concepts in unappreciated biology that we discovered through our clinical studies and through a long term study conducted in chimpanzees with chronic HBV.

Specifically, patients have become e antigen negative and patients that receive chronic antiviral treatment with NUCs appear to have reduced cccDNA. Consequently, HBV DNA that has integrated into the host genome can become an important source of production for HBV surface antigen or S antigen in these patient populations. We presented data showing that because of this, there was a differential response to ARK-five twenty with respect to S antigen in these various patient populations. Importantly, we demonstrated the log reductions with E antigen and correlated antigen were similar across these different patient populations. And we would anticipate that the same would be true for polymerase and the viral X antigen as well.

In an unexpected surprise, we also presented data showing that in chimpanzees seven of nine animals that received multiple dose treatment with ARK-five twenty showed signs indicative of immune reactivation. This occurred in all of the E antigen positive animals and half of the E antigen negative animals. One of the chimps had a therapeutic viral flare and had large persistent reductions in S antigen and viral DNA as far out as six months following discontinuation of all therapy and six months was the last time point measured. I'm not going to go through all the data, but I want to review some key findings, so that I can provide some context and how you should view the studies we have going on and those that are planned in the future. Before I do that, let's quickly review the intended mechanism of ARK-five twenty treatment.

ARK-five twenty is designed to silence the production of all proteins produced by HBV. The virus produces multiple proteins in excess of what is needed to fully form viral particles, some of which are secreted into the bloodstream and some proteins remaining in hepatocytes. It is believed that many, if not all of these proteins play a critical role in the viral life cycle and allow the virus to evade immune control and clearance. The idea behind ARK-five 20 is that if you reduce the production of these proteins, you may tip the scales if you will, so that the immune system has a chance to control the virus and potentially get to a functional cure for patients. As I mentioned in our chimpanzee study, we saw signs that the immune system was reawakening in all the antigen positive animals and half the antigen negative animals.

This suggested ARK-five twenty may be doing exactly what it is designed to do. So what does this mean for the design of our clinical program? We see patients as being in one of four main groups based on their e antigen status and whether they have received chronic therapy with NUCs. These are NUC naive e antigen positive, NUC naive e antigen negative, NUC experienced e antigen positive and NUC experienced e antigen negative. Our clinical program is enrolling patients from all of these quadrants.

Based solely on S antigen reduction, the first quadrant may be predicted to see the highest level of activity. However, our chimpanzee study suggests that ARK-five twenty is hitting the virus at multiple points beyond just S antigen production, which may be relevant to reawakening the immune system. We intend to enroll over 200 patients this year across the various global multiple dose and combination Phase 2b studies. These are the 2000 extension, 02/2002, 02/2003, 2004 and 02/2008, which that study is also called Monarch, you may know it better by that name. These are enrolling and dosing as we speak and we are pleased with the pace of patient accrual so far.

Including the Phase one studies, ARK-five twenty has now been administered to well over 100 people to date. It continues to be well tolerated across all studies. The most common AEs reported in subjects completing treatment were respiratory tract infection and headache. For ARK-five twenty one, the second drug in our HBV portfolio, we are working on completing GLP toxicology studies to support a regulatory submission to begin the first in man study. Our goal is to have an accelerated Phase onetwo development path that can get us to multiple dose data in patients rather quickly.

We have some ideas about a trial design that would accomplish this, which we will share more about when the study gets started. We continue to plan for a late second quarter twenty sixteen regulatory submission time. RKAT is our drug candidate for the treatment of liver disease associated with a rare genetic disorder called alpha-1a trypsin deficiency, which we abbreviate as AATD. As Chris mentioned earlier, we are conducting a Phase one single ascending dose study both healthy volunteers and patients. Part A of the study in healthy volunteers has dosed up to five mgkg and we are not precluded from going higher.

It is likely that Part A in healthy volunteers will complete before Part B in patients. So we may report top line data from Part A later in the year and prior to Part B. The timing of this release will depend on the number of dose levels that we decide to study. While the Phase one continues, we are also preparing to begin pilot Phase 2a multiple dose study. This study will look at the effect on circulating levels of AAT after multiple doses of ARK AAT.

But very importantly, we also intend to take biopsies to determine the effect at the hepatocyte level. This study should also get underway this year. So with all these studies going on, our clinical team is very busy. As you can see, we have several studies that have potentially yield interesting data throughout 2016 and beyond. We are looking to transform the treatment of both HBV and the liver disease associated with AATD, thus making a critical difference in patients' lives, which is when being a drug developer is most rewarding.

With that, I'd like to turn the call over to Ken Biszkowski, Arrowhead's Chief Financial Officer. Ken?

Speaker 4

Thanks, Bruce, good afternoon, everyone. As we reported today, our net loss for the three months ended December 3035 was $19,300,000 or $0.32 per share based on 59,500,000.0 weighted average shares outstanding. This compares with a net loss of $22,600,000 or $0.41 per share based on 54,700,000.0 weighted average shares outstanding for the three months ended December 3134. Total operating expenses for the three months ended December 3135 were $19,400,000 compared to $25,300,000 for the three months ended December 3134. Net cash used in operating activities during the three months ended December 3135 was $21,200,000 compared with $24,200,000 during the three months ended December 3134, a change of $3,100,000 primarily due to reduced expenses associated with the drug manufacturing campaign to support our Phase 2b studies for ARK-five twenty.

The manufacturing campaign for this clinical trial for ARK-five twenty is largely complete. However, as other clinical candidates are nominated and other clinical trials advance, further expenditures will be incurred. Turning to our balance sheet. Our cash and investments of cash were $76,600,000 at December 3135, compared with $98,600,000 at September 3035. The decrease in our cash and investments balance is primarily related to the $21,100,000 cash used in operating activities.

Our common shares outstanding at December 3135 were $59,600,000 and would be $62,300,000 assuming conversion of the preferred shares outstanding at December 3135. With that brief overview, I'll turn the call back to Chris.

Speaker 2

Thanks, Ken. These are challenging times in the financial markets. While it's easy to say and somewhat more difficult to do, we try not to use the day to day movements in the stock price as an indication of the true fundamental value we are creating. We focus on how far we've come in the last year and how far we will go in 2016. And when we look beyond the next twelve months to the next few years, we see dramatic potential for Arrowhead as our mid stage pipeline matures and our early and preclinical stage pipeline start to show clinical proof of concept across multiple disease areas.

Just like every market cycle before this, this cycle too will pass. Innovative drugs like the ones we are developing at Arrowhead will always have great value. At the beginning of the call, mentioned four things that we believe are true and it will enable us to build value through a difficult market. Let's take another look at those now. Does our technology work?

Yes. Data in CHIMS indicate that ARK-five twenty and ARK-five twenty one are capable of deep target knockdown. Substantial clinical data with ARK-five twenty and ARK-eighty indicate that deep knockdown translates well from non human primates to humans. Between ARK-five twenty and ARK-eighty, we have seen DPC exposure in well over one hundred and fifty people and the safety profile has been promising. In fact, I do not believe there is an RNAi delivery platform with a cleaner safety profile in humans than ours.

Are we working to solve real medical problems? Yes. Between three fifty million and four hundred million people worldwide or approximately one in twenty people on the planet have chronic HBV infection and there is no cure. Approximately one hundred thousand people in The U. S.

And a similar proportion in Europe suffer from AATD and there is no treatment for liver disease associated with this. Do we have capital? Yes. We have enough to run through at least the next twelve months while pushing our lead programs as fast as possible and continuing to work on our pipeline. Do we have access to additional capital?

Yes, through a number of sources. We have clearly demonstrated ARC-five twenty and ARC AAT are active well tolerated in humans and twenty sixteen is full of value inflection points. These include treating over 200 patients in multiple Phase two studies of ARK-five twenty, some of which are open label, the introduction of ARK-five twenty one into the clinic and expected quick progression of Phase onetwo studies, the release of ARK AAT healthy volunteer and patient data and progression into Phase two studies. These are important for rapid value creation and therefore important to investors. We are also at a point in development and platform validation that we are an increasingly attractive partner to larger companies.

Many companies looking for exposure to the areas we are addressing with current candidates would be interested in our ongoing programs. Similarly, companies looking to address areas in which we do not have active programs will find Arrowhead an attractive discovery and development partner. We have broad IP coverage through internal development, the Novartis transaction and the Roche transaction. We have a delivery platform that has demonstrated extremely deep target knockdown in humans and arguably the best safety profile in the field. We are capable of addressing both hepatic and extrahepatic targets.

We are capable of both IV and subcutaneous administration and we have demonstrated very rapid development timelines. As we have mentioned, 2016 is set up to be an exciting year for us across multiple fronts. I think we will start to see answers to questions that have vexed medicine for some time now and we look forward to regular communication with The Street. I think 2016 is a big year for us and I also think we will surprise some people. I would now like to open the call to questions.

Operator?

Speaker 0

Thank you. And our first question comes from the line of Michael Yee with RBC Capital Markets.

Speaker 5

Like your comments, Chris. That was refreshing about the capital markets. Three quick ones. One is, you have all these ongoing studies going on, the 2,000 series and then Monarch. Can you be specific about where we are in enrollment specifically in the NUC naive E positive patients, which I think is the most important group?

At what point would be a trigger point to release data? Is that like having a serial conversion, something like that? Well, talk a little bit about that and what you'd want to see to disclose some data? Second question is, in terms of the collaboration, which you've mentioned a few times here, are we talking about combining you're looking for a partner with something like an oral, small molecule, in the clinic and you'd want to partner with that and run a collaboration? Is that what we should be thinking about?

And then third, for the financial side, I think you burned around $20,000,000 I think, give or take this quarter. So if you have $77,000,000 in cash, help me with that math to make it through twelve months? Or is it I should be taking expenses down, which seems odd if you run a noise trial. So help me walk through the math on how you get to twelve months. Thanks.

Speaker 2

Thanks, Michael. So tell me if I forget any of these here. So the first one with respect to progress in Monarch, I don't want to go down the rabbit hole of providing below by below updates on all these studies. Here's what I can tell you though. I agree with you that the NUCAN IE B positive cohorts are quite interesting.

We actively enrolling patients right now. And so we are in those studies. We are seeing patients. We're recruiting additional patients. Those are ongoing.

How many patients we have dosed? Again, I don't want to I think it's a bad precedent for us to start talking about that on a real time basis. But rest assured that we have a number of sites open and we actively recruiting that study. Although I will say, while I think that's a very attractive quadrant, if you will, I'm really interested to see the E negatives and also the new experience patients as well. Because remember with those chimps, we saw seven of nine chimps experience immune reactivation or at least signs of immune reactivation.

All of the E positive chimps showed signs of immune reactivation, but half of the negative chimps also showed signs of immune reactivation. So I'm bullish that five twenty will not only be active for NUC naive positive patients, but also other patient populations.

Speaker 5

I guess to be clear on this just to be clear just on this first one, to get a clear answer. If you look at the timelines, it's months of dosing and then follow-up, but that could go out for a while. So in terms of getting data this year on any of these cohorts, would you want to see seroconversion to announce data? Is that something that you would trigger an announcement if you're seeing a real time seroconversion for example?

Speaker 2

Yes. So the short answer is I don't know the answer to that. We don't have a set criteria for what would trigger an announcement to be honest with The studies that are placebo controlled will be difficult to have data from those this year. I think there's a better likelihood of having data in those open label studies, the 2001 extension where I think we've got something like 55 possible patients who could enroll in that. And then of course Monarch, which will be a larger number.

Those are open label and so we have good flexibility on when and how we present data. So I don't again, I can't give you a hard and fast rule as to what would trigger an announcement. We'll just have to see what those data look like when they come in. But again, we see them in almost real time. And so stay tuned.

We could certainly have data this year as those studies roll out.

Speaker 5

Okay. And then collaboration?

Speaker 2

So collaboration, sure, we'd be interested in collaborating on an oral small molecule, but we'd also be interested in collaborating on other modes of administration and other types of drugs. As Bruce has talked about in the past, we view Monarch as our test kitchen. And right now, the only ingredients in that test kitchen are ARK-five twenty, interferon and NUCs. And so the first cohorts are designed to look at combinations of those. Now keep in mind, we're also looking at monotherapy because again, I think that the five twenty is going to be a powerful drug in and of itself.

But in terms of combinations, that's all we've got. Now there are other experimental drugs that we are talking to other people about including in a cohort or two Monarch and oral would be fine, but IV or subcu or what have you would be okay with us. We just want to find we want to find a recipe that gives us a cure consistently and then blow that study out.

Speaker 5

But you said you feel confident about a collaboration this year. You have an active dialogue, you feel Okay.

Speaker 2

Yes, I do.

Speaker 5

Okay. Then third on the financials.

Speaker 2

Yes. So the financials are going to be bumpy because what we said in the past is that we spend now, gosh, closer to 3,000,000 about $3,000,000 a month on our base burn. This is all internal R and D. It's called corporate costs and then layer on top of that clinical costs. And those clinical costs are bumpy because they will include manufacturing runs, they will include set up costs for sites, etcetera.

So yes, the trend will be higher as we go deeper into studies and as we bring in more space in the clinic. But on a quarter by quarter or on a month by month basis, those numbers will differ. Thanks. And Bruce, do you want to add anything to that?

Speaker 3

Yes. I would just say that one

Speaker 5

of

Speaker 3

the things that Chris did imply is that we could have this year if we kept the pedal to the floor on our earlier stage products, there would be manufacturing costs and toxicology costs and things of that sort, which can be quite substantial. And we have elected to, as Chris said, take the foot off the gas a little bit on those and slow some of those costs down. And I think that's the biggest element in allowing us to feel comfortable that we can go twelve months.

Speaker 0

And our next question comes from the line of Yun Yang with Jefferies. I

Speaker 6

just want to clarify the potential collaboration for this year for ARCOD-five twenty. Does that mean it's a partnership for like a development and commercialization partnership or a clinical program collaboration?

Speaker 2

Thanks very much, Judah. I'm glad you asked that. It's really what we're talking about in the near term is just a clinical collaboration. What we have is we think is something of great value to potential partners. We've got we are in now multiple Phase two studies with a drug that clearly knocks down the whole HBV genome that is well tolerated.

And so we think it's going to be quite attractive to those companies with experimental agents to combine with ours. I think it's too early to start talking about partnership. I think that it's better for us, better for our shareholders to get into these studies together to let those companies better understand our drug to see if our drug works well with theirs. And then we can always talk about a partnership, a larger partnership after that. But I think that the way to do that is really to do it sequentially.

Speaker 6

Given that private hep B company Noveira got acquired by JJ, are you seeing interest from potential partners on your program? And is that the reason why you are saying that it's not this is not the right time is because you want to create more value before you form a partnership? Or I mean, I'm trying to gauge the interest levels that you are receiving from a potential partnership down the road.

Speaker 2

So let me say two things on that. Number one, big pharma has clearly woken up to this opportunity. When we first started developing ARK-five twenty, we were out there alone banging the drum that HBV is an ex HCV. And we truly believe there was a massive unmet medical need and that somebody could conquer this disease, was going to be an awful lot of value to create. But we were alone then, we are not alone now.

Big Pharma has woken to it's not just J and J, but it's really all Big Pharma. And we talk to these people on a regular basis. We see an awful lot of interest in finding a consistent functional cure. And I just think that we are the closest thing to that at this point. We'll see if we can make it there.

But as I said in my prepared statements, I think that if there's going to be a breakthrough in HBV this year, it's going to come from us just by virtue of our mode of action and just by virtue of how deep we are in the clinic. Now with respect to when is the right time to do a partnership, if we were to do a partnership, I think there's still an awful lot of value to create before one would want to have those discussions. I think that we need to get into these 200 plus patients with various regimens this year start to see what we're going to see.

Speaker 6

Thanks. In the earlier portion of your prepared remarks, you said that you have access to the capital. Now you have about twelve months to cash run rate. Can you kind of provide us a little bit more details on what you mean by access to capital?

Speaker 2

Yes, look, sure. I think we have access to a variety of capital sources. As I mentioned, we have something that is of value here and I think that in 2016 we have many inflection points where we have the potential of showing large increases in value and these are always interesting to investors. But even beyond that, we are now to a point where I think could be of interest to larger companies in terms of partnerships, not only for our current candidates, but for new novel candidates, if you will. We have largely crossed and we continue to cross, I guess, the bridge of platform validation.

We've been now in, gosh, well over 100 people with our first DPC delivery construct and the safety profile is quite good and our activity is quite good. So I think that we have answered a lot of questions in companies' minds. And so now I think that we've got access to that capital from partnerships as well. So my point was this, that we've made an awful lot of progress in the last few years and I'm quite comfortable that we will have access to capital to continue to grow this company. I would be more I would like it better if our stock price is higher at this point, but I'm comfortable that there's an awful lot of pent up value that we've created and that will be that could be expressed later in the year.

Speaker 6

Thank you.

Speaker 3

Thank

Speaker 0

you. And our next question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.

Speaker 7

Great. Thank you very much. Thanks for the update. I wanted to just make sure I heard something correctly. Bruce, did you say that you would anticipate registering or seeking registration for ARC five twenty in the 2018 timeframe.

Did I hear that correctly?

Speaker 3

No. I don't think I said about registration and certainly nothing about a timeframe. So no, I don't think so, Ted.

Speaker 7

Okay, good. I just want make sure. And I guess a lot of data to come out of the clinical studies this year. I know that you're pushing out some of the earlier stage programs. Does this mean we should still anticipate an IND this year or would that slip into 2017 as well?

Speaker 2

Yes, that's a great question, Ted. I don't have a good answer for you at that point. We are as I mentioned, we are certainly not stopping our progress in any program. In fact, we're continuing to move rapidly, just a little bit less rapidly, if you will, than two months ago than a month ago even. So it's not clear how much this is going to change those kind of time frames.

And so stay tuned on that. We'll let you know as we continue to build those programs out.

Speaker 3

Yes. I mean, we certainly expect ARK-five 21

Speaker 2

to So

Speaker 3

I mean, we'll have an IND equivalent for ARK-five 21. Our announced expectation is to have that submission before midyear, right around midyear, but on this side of the halfway point. What I think your question is aimed at and what Chris was saying is that the next one after fivetwenty one at this point would be somewhat dependent on something breaking in the way of capital in one way or the other.

Speaker 2

Yes. I think it's probably fair to say that if we were sitting on $1,000,000,000 of cash right now, I don't think that 05/20 or 05/21 or AAT would move any faster. We are those are fully resourced and our foot is on the floor with those programs.

Speaker 7

Excellent. Good. All right. Thanks, guys.

Speaker 2

Yes. Thanks, Ted.

Speaker 0

Thank you. And our next question comes from the line of James Gash, a Private Investor. Your line is now open.

Speaker 8

Hello.

Speaker 2

Hi, James.

Speaker 8

You mentioned that we're not alone in HBV. I believe the same is true for the ATD. Could you discuss the orphan drug designation and for instance how the seven year exclusivity might apply?

Speaker 2

Sure. That's a great question. Thank you. Bruce, you want to address that?

Speaker 3

Sure. Well, so the in The U. S, the orphan drug designation gives you exclusivity for the chemical entity itself. So we would have a minimum of seven years exclusivity now. Hopefully, we would reach the market such that we would have longer patent life than the seven year minimum.

But the other advantage for orphan drugs is it just gives you better access to the agency. It reduces fees associated with the drug development process at the level of the agency. So there are advantages there as well. But hopefully, we'll have patent coverage that stretches beyond seven years exclusivity anyway.

Speaker 8

So it's not really exclusivity say for the only RNAi drug?

Speaker 3

It is not an exclusivity for the indication. Now Europe is a different story. Europe, there can be exclusivity for the indication, although sometimes the indications get a little bit sliced and diced. But in Europe, can see exclusivity for the indication. Europe, you also get a cut with fees from orphan exclusivity.

And in Europe, orphan exclusivity is actually for ten years with the possibility of picking up an extra year if one gets another indication for the drug. And also in both in The U. And Europe, can get some extension for pediatric approvals as well. So orphan drugs in The U. S.

And Europe are a bit different.

Speaker 8

So first to market in Europe might actually constitute a real advantage?

Speaker 3

Yes. First to market in Europe in orphan drugs is important.

Speaker 8

Okay. Thank you.

Speaker 2

You're welcome.

Speaker 0

Thank you. And our next question comes from the line of Mark Puckett, a Private Investor. Your line is now open.

Speaker 9

Thank you very much. Hey, good job. I want to congratulate you on the science. I think my question on additional capital has been answered. But with respect to that, can you expand a little bit on what your strategies are for expanding that capital?

I know a lot of us are out here that are playing with their own money and we're certainly attuned to the interest. It's certainly been unfortunate, the stock price behavior of the last year. But I think I can speak for many of us that you've done a great job with the science. We need to do a little bit more with the capital markets. Thank you.

Speaker 2

Sure. There's not much I can say on that. Here's what I can tell you. We are we're focused on building these programs out and pushing five twenty, five '21 and AAT through the clinic as quickly as we can. As we talked about, I think that 2016 is full of important milestones that are real value drivers for us.

And so I think that our access to capital and our appetite for taking capital changes dramatically as we hit some of those milestones. And so we feel quite comfortable. We've got plenty of runway to hit a lot of those milestones. And so from a capital market standpoint, we feel quite good and we feel confident. It's just not something that I would sleep about at this point.

And then on the partnership side, as I mentioned, we have now matured to a point where I think that we can be a true credible partner with a larger company, not just for the candidates that we have in development right now, but for novel candidates, some that they may be interested in that we have the ability to help them get into. We've always thought that we would get there and we've always been quite confident in our technology. But now we've got good proof of concept in humans, a good safety profile in humans. As I mentioned, I think we've got the record in single dose knockdown using RNAi in humans. I think that we have the cleanest safety profile in the field in humans.

I think these sorts of things and our flexibility with respect to delivery in terms of hepatic versus extrapatic, in terms of IV versus subcu, I think all of these things make us comfortable that we can credibly compete for non dilutive capital via partnerships.

Speaker 0

Thank you. And I'm showing no further questions at this time. I would like to turn the conference back over to Chris Anzalone for any closing remarks.

Speaker 2

Okay. Thank you everyone for tuning in today and we look forward to an exciting 2016. We'll talk to you later.

Speaker 0

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.