Arrowhead Pharmaceuticals - Earnings Call - Q3 2018

Transcript

Speaker 0

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. I would now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead,

Speaker 1

Thank you, Sarah. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal twenty eighteen third quarter ended June 3038. With us today from management are 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'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, including without limitation those with respect to Arrowhead's goals, plans and strategies are forward looking statements. These include statements regarding efficacy of our drug candidates, projected cash runway and expected future development activities. These statements represent management's current expectations and are inherently uncertain.

Thus, results may differ materially. Arrowhead disclaims any intent and 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 subsequent quarterly reports on Form 10 Q for additional matters to be considered in this regard, including risks and other considerations that could cause actual results to vary from the presently expected results expressed in today's call. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?

Speaker 2

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Our goal with respect to our pipeline of RNAi therapeutics and the broader TRiM platform that enables it is to be best in the field. We seek to develop effective medicines to work within timelines that others cannot to have a validated platform that provides a level of derisking before clinical studies even begin to have the ability to target many cell types and therefore a wide variety of diseases and to be the partner of choice for RNAi therapeutics. We have made important progress on all these fronts and our accomplishments during the prior quarter and the period since our last conference call include the following: One, we made multiple presentations at the EASL International Congress.

This included preclinical data for both ARO AAT, our second generation candidate for the treatment of alpha-one antitrypsin deficiency liver disease and ARO HBV, our third generation clinical candidate for the treatment of chronic hepatitis B infection and additional clinical data on ARK520, our prior generation compound for HBV. Two, we presented preclinical data on our growing pipeline at several medical meetings, including data on our cardiometabolic candidates ARO APOC3 and ARO ANG3 and our first candidate targeting the lung ARO ENaC. Three, we completed enrollment and dosing of the single ascending dose portion of the ongoing Phase onetwo study of ARO HBV and began dosing HBV patients in the multiple ascending dose portion of the study. Four, we completed enrollment of the Phase one study of ARO AAT. Five, we received a positive EMA opinion on orphan designation for ARO AAT.

This follows orphan designation that was previously granted by the U. S. FDA. Six, we presented early clinical data on ARO AAT at the Alpha-one National Education Conference. This was the first clinical data presented on our TRiM platform.

Seven and most recently we announced that Amgen had administered the first doses of AMG eight ninety in a Phase one clinical study, which earned us a $10,000,000 milestone payments. We have continued to execute at a high level and we feel well positioned for some key events during the second half of this year and into 2019. Let's drill down on a few of the events during the quarter. Last week, we announced that we earned a $10,000,000 milestone from Amgen following administration of the first dose of AMG eight ninety, formerly referred to as ARO LPA in a clinical study. Amgen is evaluating AMG eight ninety in a Phase one study in approximately 90 subjects to assess safety, tolerability, pharmacokinetics and pharmacodynamic effects.

The study will be performed in two phases, a single ascending dose phase and a multiple ascending dose phase in subjects with elevated Lp delay. The estimated primary completion date of the Phase one study is in the second half of twenty nineteen. Following the primary completion, Amgen will share the data in the appropriate scientific forums. AMG eight ninety is the third drug candidate enabled by TRiM to enter clinical development this year following ARO AAT and ARO HBV. We view this step in our collaboration with Amgen generally as further validation of our proprietary TRiM platform.

Under the terms of the two cardiovascular agreements with Amgen announced in September 2016, Arrowhead is eligible to receive up to $617,000,000 in option payments, development, regulatory and sales milestone payments. Arrowhead is further eligible to receive up to low double digit royalties for sales of products under the AMG eight ninety agreement and single digit royalties for sales of products against an undisclosed target. In addition to the progress on this partnered program, we continue to advance our wholly owned candidates ARO HPV and ARO AAT through first in human studies very rapidly. Bruce will give specific details in a moment about where we are in each study, but I want to talk briefly about our strategy, execution and early evidence of activity and tolerability. Both the ARO HBV and ARO AAT studies include a single ascending dose phase and a multiple ascending dose phase that are intended to rapidly get to meaningful readouts on safety and tolerability as well as a robust view of the drug's activity.

For RNAi drugs in general and for our TRiM enabled drugs specifically, the duration of effect can be quite long. It's conceivable that in humans we may see sixty or even ninety days of duration. So in the cohorts of our first in human studies that are receiving three monthly doses, we may see activity that lasts as long as six months. It is rare to generate that much meaningful data in a first in human study. So how are the studies progressing?

We believe our execution has been best in class. Both studies started in March and by the May we were well into the SAD portion of the ARROW HBV study and began dosing HBV patients in the MAD portion. Then at the May, we completed enrollment and dosing of the entire SAD portion of the study in healthy volunteers. Two weeks later in the June, we announced that we had completed enrollment in both the SAD and MAD portions of the ARO AAT study. I want to thank our program management and clinical operations groups who continue to work tirelessly to maintain this pace.

I would also like to acknowledge the clinical investigators who have been equally motivated and extremely successful at enrolling these studies. Our longstanding relationships and experience from studies of prior generation compounds make the process quite reliable and to date has yielded highly streamlined studies. So what does the data look like so far? We presented a quick snapshot of some initial clinical data from the ARO AAT study at an Alpha-one patient meeting at the June and the data were very encouraging. At a somewhat low dose of one hundred milligrams, which equates to between one point zero and one point six mgs per kg in the subjects studied, we achieved a maximum serum AAT knockdown of ninety three percent a mean maximum knockdown of eighty seven percent after a single dose.

Based on our experience in primates and prior human clinical studies, we believe this represents near complete suppression of the liver production of AAT. In addition, at eight weeks post dose, the mean serum AAT knockdown remained at eighty three percent. ARO AAT has been generally well tolerated at all doses studied with no serious or severe adverse events. These are great data and we are excited to see what the rest of the study look like. Importantly, these are very encouraging for the ALPHA-one community that has no treatment option for serious liver disease associated with ALPHA-one antitrypsin deficiency short of liver transplant.

We have not presented any data from the ARO HBV study, but to date sixty three subjects have received at least one dose. Thirty healthy volunteers and thirty three patients with chronic HBV infection have received a total of 104 injections of ARO HBV. It has been generally well tolerated at all doses studied with no serious or severe adverse events. In addition, early data in patients indicate that the drug is clearly active. Importantly, we believe these data suggest that ARO HBV is active in silencing S antigen production from both HBV CCC DNA and viral DNA that has integrated into host DNA.

This would represent a large step forward from our first generation candidate ARK520, which did not address S antigen transcripts from integrated DNA. Our plan is to submit late breaker abstracts for ARO AAT and ARO HBV and if accepted to present at the AASLD Liver Meeting in November. As I mentioned, the studies are moving forward rapidly, so we should have robust data sets at that time. During the last quarter, we presented some clinical data on our prior generation HBV compound ARK520 at the EASL International Liver Congress. These data included follow-up for eight patients that received up to nine monthly doses of four mgkg ARC520 with dalientecevir in the HepARC2001 multi dose extension study.

As I mentioned, a key limitation of this candidate was that it only targeted HBV CCC DNA and did not address S antigen transcribed from integrated DNA. We discovered that this can be a substantial source and sometimes the primary source of circulating S antigen. Even so, half of these patients experience a sustained host response where it appears that ARK-five twenty triggered something that enabled the body to fight the virus. This was the intended mode of action for ARK-five twenty and is the intended mode of action for ARO HBV. It has been our theory that if an RNAi therapeutic can reduce viral antigens sufficiently and decrease immunosuppressive forces, the immune system may reawaken to control the virus and enable a durable functional cure.

One e antigen negative patient that received ARK520 treatment while remaining on Entecavir is serial cleared for all measurable viral markers including S antigen, core related antigen, HBV RNA and HBV DNA. We believe this will represent a functional cure. Two additional patients that experienced sustained host responses, but had not yet seroclear appear poised to potentially seroclear if the trends in the decrease of viral markers continues. We and many key opinion leaders in HBV see these data as the first proof of concept that an RNAi compound can potentially lead to an awakening of the immune system in HBV patients and eventual functional cure. This has long been our belief and it is highly encouraging that our previous generation HBV candidate has provided what we think is the first clinical evidence supporting this.

This gives us additional confidence in ARO HBV as we move forward from the Phase onetwo study this year and then a planned Phase 2b study next year. With our clinical programs progressing well, our confidence in a broader pipeline grows. We have several candidates that we expect to enter the clinic over the next eighteen months, so it makes sense for us to have a broad R and D Day to discuss these candidates, our rationale for pursuing them and our anticipated clinical timelines. I'm pleased to announce our plan to host an R and D Day on October 16 in New York. The event will be open to analysts and institutional investors by invitation and there will also be a live webcast, so those unable to attend in person can view the presentations.

Included in the R and D Day presentation will be ARO APOC3 and ARO ANG3, our most advanced wholly owned preclinical candidates. They are targeting apolipoprotein C3 or APOC3 and angiopoietin like protein three or ANGPTL3 respectively. They are designed to address multiple cardiometabolic diseases and may offer various development paths targeting both mass market and or orphan indications. These candidates are moving ahead according to plan and we continue to be excited about the opportunities that they represent. We are on schedule to file CTAs for both candidates around the end of the year.

Our ability to efficiently target solid tumors has grown substantially over the past year, so we will also discuss this in some depth. We will also present data on ARO ENaC, our first inhaled lung targeted candidate for the treatment of cystic fibrosis. We have been presenting select data on this candidate at various medical meetings throughout 2018. We have made great strides recently in optimizing the TRiM based pulmonary delivery platform, which has led to a greater than twofold improvement in potency over our prior recent constructs and solid improvements in the safety profile. In addition, we have started using newer ligands that have distinct advantages and have discovered ways to eliminate the use of PK enhancing structures, which makes for a smaller and more structurally simple molecule.

Because of these improvements, the ARO ENaC CTA is being pushed into 2019 to allow more time to fully optimize the compound. We view the pulmonary programs as substantial value drivers over the long term. So we're being a bit less aggressive on the timeframe to the clinic for the first product and focusing more on identifying the optimal structures. Our goal is to ensure that we move forward with the best drug possible and our recent advancements have dramatically improved the next generation of ARO ENaC. With that overview, I'd now like to turn the call over to Bruce Given, our COO and Head of R and D.

Bruce?

Speaker 3

Thank you, Chris. Good afternoon, everyone. On our last quarterly call, I described the design of our two clinical studies for ARO AAT and ARO HBV. They both continue to move forward rapidly. To review for both studies, the primary outcome measures are safety and tolerability.

For ARO AAT, secondary outcome measures include pharmacokinetics, percent change in serum alpha-1a trypsin levels and duration of response. For ARO HBV, secondary outcome measures include pharmacokinetics and an assessment of the change in all measurable viral markers, including S antigen, DNA, RNA, E antigen and core related antigen. I thought it would be helpful today to go through a review of specifically where we are with each study and what data may be available for the AASLD Late Breaker Abstract submission deadline in September, and then what data may be available to present at the meeting in November should our abstracts be accepted. Let's start with AAT. The Phase one study called ARO AAT1001 started enrolling and dosing subjects around the March.

In the June, we announced that the study had been fully enrolled and all subjects had received at least their first dose. We also announced at that time that two planned cohorts at a dose of four hundred milligrams were eliminated because maximal activity appeared to occur at lower doses than expected. So where are we today? 45 subjects have been enrolled and dosed across all cohorts with 20 in the single dose cohorts and 25 in the multiple dose cohorts. The single dose cohorts at doses of thirty five, one hundred, two hundred and three hundred milligrams will have as much as six months of follow-up for the earliest cohort and approximately three months of follow-up for the last cohort at the time of the late breaker deadline.

By the November meeting, there will be approximately five to eight months of follow-up for the single dose cohorts. We are scheduled to complete the third and final dose for the final subject in the multiple dose portion of ARO AAT1001 over the next ten days. The earliest multiple dose cohort received the final dose during the June. So by the late breaker deadline, we will have up to three months of follow-up for the earliest cohort and one month of follow-up for the last subject. By the November meeting, there will be approximately three to five months of follow-up for the multiple dose cohorts.

We anticipate based on the data that we presented for the one hundred milligram cohort at the Alpha-one patient meeting that three months may not be long enough to see a full recovery of serum AAT back to baseline levels. So there will likely still be additional follow-up needed. However, this will be a helpful data set. It should show what peak knockdown levels are and what the duration of effect and recovery curves look like for the different dose levels. This will help to inform our decision about what dose level or levels to select for the Phase II study and what the dosing interval should be.

Moving on to ARO HBV in the Phase III study called ARO HBV 1,001, 63 subjects have been enrolled and dosed across all cohorts with 30 healthy volunteers in the single dose portion and 33 chronic HBV patients in the multiple dose portion. The single dose portion of the study completed dosing at the May, so we will have a full data set on safety and tolerability for that group in time for the late breaker deadline. The multiple dose portion of the study because we have cohorts that are open to all comers, cohorts that are specific to E antigen status and cohorts for NUC treatment experienced versus not on NUC treatment. While most cohorts receive three monthly doses, we are also investigating biweekly and weekly loading dose schedules. Designed to explore dose response, three of the four monthly dosing interval all comer cohorts at doses of one hundred, two hundred and three hundred milligrams have already received their third and final dose.

And the fourth cohort at four hundred milligrams is scheduled to receive their final dose over the next ten days. We anticipate that all remaining subjects in the other cohorts will have received all doses by mid to late September. By the November AASLD meeting, we anticipate that data showing multi month post dose levels of S antigen, E antigen and HBV DNA where applicable should be available for all cohorts. In addition, multiple dose HBV RNA and core related antigen data where measurable should also be available for all cohorts. Similar to ARO AAT, we will not have data for all the final study visits for all patients.

So there will still be additional follow-up and data collection after November. This is however an impressive amount of data for a first in human study and we look forward to giving the highly anticipated first readout for ARO HBV should our abstract be accepted at AASLD. With that brief review of our clinical programs, I'd like to turn the call over to Ken Biszkowski, Arrowhead's Chief Financial Officer. Ken?

Speaker 4

Thank you, Bruce, good afternoon, everyone. As we reported today, our net loss for the quarter ended June 3038 was $15,600,000 or $0.18 per share based on 87,600,000.0 weighted average shares outstanding. This compares with a net loss of $5,500,000 or $07 per share based on 74,800,000.0 weighted average shares outstanding for the quarter ended June 3037. Revenue for the quarter ended June 3038 was $700,000 compared with $9,300,000 for the quarter ended June 3037. Revenue was lower because revenue from the $30,000,000 upfront payment received from Amgen for the ARO LPA, now AMG eight ninety agreement was fully recognized in October 2017.

Revenue in the current period primarily relates to the recognition of a portion of the 5,000,000 upfront payment received from Amgen for the ARO AMG one agreement. Of the total upfront payments of $35,000,000 all but $600,000 has been recognized as revenue to date. The remainder is estimated to be recognized in the next quarter. Total operating expenses for the quarter ended June 3038 were $16,600,000 compared to $15,100,000 for the quarter ended June 3037. This increase primarily is due to toxicity studies study costs for ARO AAT and ARO HBV candidates.

Net cash used in operating activity during the quarter ended June 3038 was $14,400,000 compared with net cash used by operating activities of $10,400,000 during the quarter ended June 3037. This increase was due to the progression of our ARO AAT and ARO HBV candidates into Phase clinical studies as well as for manufacturing payments related to other candidates. Turning to our balance sheet. Our cash and investments totaled $78,200,000 at June 3038 compared to $65,600,000 at September 3037. Our common shares outstanding at June 3038 were $87,900,000 With that brief overview, I will now turn the call back to Chris.

Speaker 2

Thanks, Ken. At the outset of the call, I said that our goal for our drug candidates and underlying platform is to be the best in the field. I mentioned several parameters that we are focused on within this goal and we have clear evidence for progress in each. Let's review them. One, develop effective medicines.

Have a good start in both ARO AAT and ARO HBV and are optimistic that they could eventually become powerful medicines. Two, work within timelines that others cannot. We started developing TRiM based ARO HBV and ARO AAT in the fourth quarter of twenty sixteen. If we are accepted at ASLD, we will have gone from concept to presentation of meaningful clinical data in just two years for two different programs. We believe this is virtually unheard of and we have several additional candidates to follow.

Three, have a validated platform that provides a level of derisking before clinical studies even begin. This is an area that just requires time, but given the safety and activity profiles thus far with ARO AAT and ARO HBV, we feel increasingly confident about future hepatocyte targeted TRiM based candidates. Four, have the ability to target many cell types and therefore a wide variety of diseases. In addition to hepatocyte targeted candidates, we have good proof of concept in TRiM based lung targeting and solid tumor targeting now and continue to work toward additional cell types. Five, be the partner of choice for RNAi therapeutics.

Everything we have discussed today from our development speed to our encouraging early clinical data and ability to target a variety of tissues reinforces our belief that we can be a powerful partner in RNAi. In addition, we believe that our continued progress with the Amgen partnership serves as a good proof of concept for this aspect of our business strategy. We believe Arrowhead is on solid footing today and has much more on the horizon. We think we are just in the early stages of a period where we see substantial opportunities to build value through rapid pipeline growth, key data readouts in the near term and mid term and by exploring opportunities to expand our reach through business development and partnering. We look forward to giving meaningful update on our progress and plans for our emerging pipeline including ARO APOC3, ARO ANG3, our TRiM enabled inhaled pulmonary platform including ARO ENaC and our TRiM enabled solid tumor platform including ARO HIF2 at our R and D Day in October.

Thanks again for joining us today and I would now like to open the call for questions. Operator?

Speaker 0

Thank Our first question comes from the line of Your line is now open.

Speaker 5

Thanks very much guys. Thanks for the update. Excited to see the progress and looking forward to a lot of good data readouts in the back half. I want to focus in on HBV, if I may, just with respect to what we could be expecting in terms of readouts and then also how quickly we could move to combination studies that may be a preliminary glimmer of what that might look like.

Speaker 2

Bruce, you want to take that?

Speaker 3

Sure. Well, Ted, we laid out there, by AASLD, we'll have pretty significant multi dose data. Our first in human trial here only allows a maximum of three doses. But most of the patients will have received three doses. Maybe actually we predict all of them will have received three doses and we could have significant follow-up for the early cohort.

So there's potentially a lot of data, at AASLD assuming they accept, the abstract. With respect to going into combination trials, we think the plan would be to go right into long term combination trials with the goal of trying to find recipes that could start showing some S clearance. And the only thing holding us back from that right now is the need for long term tox. So our six month rat and our nine month, monkey studies for both ARO HBV and ARO AAT are ongoing right now and will finish basically around the end of the year. So, with respect to when we could start combination therapy trials in HBV with the intent of finding regimens that can actually give a seroclearance, we would expect that would be in the first half of next year.

Speaker 5

Excellent. That's a really helpful update. Thanks so much guys. You bet.

Speaker 0

Thank you. Our next question comes from the line of Murray Raycroft with Jefferies. Your line is now open.

Speaker 6

Hi, guys. Congrats on the progress and thanks for taking my questions. First, Chris, you commented that ARO HBV is clearly active in S antigen suppression from CCC and integrated DNA. I think I heard that correctly. And so I'm wondering if you can contextualize this observation and say if what you're seeing is anecdotal from a few patients, the magnitude of changes of S antigen and potentially the kinetics around that as well.

Speaker 2

I don't want to go in-depth on that. You're going have to wait to see the fuller dataset hopefully at ASLD. I did want to be clear that we are seeing activity and we feel good about the drug, but we're not going to go in-depth on midstream data at this point.

Speaker 6

Got it. Understood. And for both HBV and AAT based on what you're seeing so far, any thoughts on how potential dosing could work for other program?

Speaker 2

Go ahead, Bruce.

Speaker 3

Yes. Well, I think clearly monthly is frequent enough. I think it's possible that we could be looking at every other month or even quarterly. And I don't want to speculate beyond that, but we're getting very good, duration with this TRiM platform. It really gives us good durability.

And we just we have been able to follow these patients out long enough yet to know just how good that durability is going to turn out to be. But it won't shock me at all if we wind up with quarterly dosing.

Speaker 2

And just on ARO HBV, as Bruce mentioned in the prepared remarks, we have a couple of cohorts where we're testing weekly dosing as well as biweekly dosing. In both those still just three doses because that's what we have tox coverage for. But we were interested in that not necessarily because we didn't have confidence in the durability of that drug, but we were interested to see what happens if you just crush the virus out of the gate. Since we don't know what the best strategy is to get to sera clearance, it'll be interesting to see what happens with that frequent dosing compared to less frequent dosing.

Speaker 6

Got it. That's helpful. And last question is just on AAT and what your thoughts are on potential endpoints that could be used for a potential approval?

Speaker 3

Yes. We still think the most likely situation is that we'll be using a biopsy endpoint similar to what people are doing in diseases like NASH. There are some other potential ideas that we have that we're thinking about. But I think the most likely situation and certainly the first trial that we're contemplating doing next involves biopsies to look at the ability to change the liver histology. But that's I think the most likely case of where the endpoint is going to wind up.

Speaker 6

Got it. Okay. Congrats again.

Speaker 2

Thanks,

Speaker 0

Thank you. Our next question comes from the line of Nadu Kumar with B. Riley. Your line is now open.

Speaker 7

Hi, thanks. This is Jennifer on for Nadu. Three questions for you guys. One, based on the Phase one healthy volunteer data for RO AAT, should we expect similar circulating AAT results from AAT patients in the potential data at AASLD? And second question, can you provide visibility on the timing of IND filings for additional internal cardiovascular programs beyond Lp?

And third, in light of data to date from ARK-five twenty, what are your expectations for RO HBV activity in the potential HBV patient data at AASLD? Thanks.

Speaker 3

Okay. It's a lot of questions.

Speaker 2

I'm sorry, what was the first one again?

Speaker 7

Sure. The first one was that just based on the Phase one healthy volunteer data from ROAAAT, should we expect similar circulating AAT results from the AAT patients in the potential AASLD?

Speaker 2

Right. So to be clear in this Phase one study we are for AAT we are not treating patients, we're only treating healthy volunteers. And so the only data you'll see at ASLD will be healthy volunteer data. The reason for that is that what we found in our prior generation AAT program, the knockdown profile was essentially the same between patients and healthy volunteers. So in other words, 90% knockdown or 80% knockdown in healthy volunteers would generally equate to 80% or 90% knockdown in patients even though the absolute values of course were So we view that as predictive and it made sense just to run quickly through this Phase one healthy volunteers and then use patients for the more meaningful Phase twothree study.

So expect that study to start in the first quarter or so of twenty nineteen once we have tox coverage for it. So again, we won't have any patient data this year.

Speaker 3

Yes, that's for both depth and duration. They really, at the same dose, the curves really overlapped each other remarkably well, for the patients versus the normal volunteers. So we felt quite comfortable in that regard.

Speaker 2

Your second question had to do with filing CTAs for our cardiovascular drugs. We expect to file CTAs for both ARO APOC3 and ARO ANG3 around the end of the year. Our guidance hasn't changed on that. And third, you asked about ARK-five twenty and what we're going to see at ASLD. So here's what was important about the ARK-five 20 data, extension data.

It was important that we're starting to prove this theory that the field has had that if you remove or substantially decrease these immunosuppressive forces through RNAi that you could reawaken the immune system and enable the body to control the virus and enable this functional cure. So that was a very important study from that standpoint. Our hope has been that ARO HBV is going to be a more complete and more powerful drug than ARK-five twenty in part because not only silencing or it's designed not only to silence the CCC DNA, but also it's designed to silence the integrated DNA or the viral DNA that integrates into host DNA. So think of surface antigen as coming out of two spigots. ARK-five twenty turned off one spigot, but did not turn off the other.

ARO HBV should turn off both spigots. And so our hope that we can see what we saw with the extension study in ARK-five twenty with ARO HBV, but hopefully in a more consistent manner and maybe in a faster timeframe given that we expect this to be a more complete and powerful drug.

Speaker 3

And across a broader patient population. That's right. ARK-five twenty was really limited in the patient population it could serve. We tried to design ARO HBV to really be relatively agnostic as to the patient subgroup. And we designed this first study to actually give us information across all of those various patient populations.

That's what's really going to be fun to see in ASLD. And it's hard to forecast exactly how that's going to look because we're we really only just started dosing patients, not so many weeks ago. So we have enough data now to have come to the conclusion that the drug is active. I don't think we have enough data now to know exactly what things are going to look like in November. So that's something we really can't forecast.

Speaker 7

Great. Thank you so much.

Speaker 2

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Kihei Nakae with Chardan. Your line is now open.

Speaker 8

Yes. Just wondering if you can give us a little more info on the design changes you're seeing with ARO ENaC. Is it in terms of the delivery system, the ability to achieve better PK, better tolerability? And is that allowing for design changes in payload that maybe would facilitate lower doses? Can you just help us understand that

Thanks.

Speaker 2

Yes. So I'll answer that broadly of course because we're not we have not disclosed the basics the specifics of the structures at this point. So all of those changes that we've made and we've really made sort of leaps forward over the last few months, all those changes have been aimed at increasing potency. Our goal here is to use as little amount of material as we It would be for any drug, but even more so for an inhaled drug. So we have made great strides in potency and we've been able to achieve good knockdown without using PK enhancers.

And so it just makes the molecules more structurally simple, easier to manufacture and potentially safer. So we've seen again, we've seen good leaps forward in both in potency and safety profile.

Speaker 8

So in saying 2019, can you be any more specific as that first half or second half to start that?

Speaker 2

Not at this point. We can give we'll give more granular guidance at the R and D Day.

Speaker 8

Okay. Fair enough. Thank you.

Speaker 2

Sure.

Speaker 0

Thank you. Our next question comes from the line of Elamir Piras with Cantor. Your line is now open.

Speaker 9

Yes, good afternoon gentlemen. Lot of questions have been answered. Thank you for that. Maybe I have a housekeeping question to Ken and a strategic question as well. So I'm almost certain that you will recognize the $10,000,000 milestone payment from Amgen next quarter, but I just wanted to verify that.

Speaker 4

That's where we expect to recognize the $10,000,000 of revenue next quarter.

Speaker 9

And on the operating expense side, Chris or Ken, if you could comment on how to what extent do you see it accelerating beginning in 2019 when you have multiple advanced stage programs in the clinic and some new ones as well?

Speaker 2

You know what, so our expenses will go up, but they're not going go crazy because these are still relatively early stage programs. So I think we've been we have generally been between burning between 12,000,000 and $15,000,000 a quarter. Think we stay pretty close to that.

Speaker 9

Okay. Thank you. And Chris, how do you think at this stage on partnering opportunities, which of these programs may be more suitable for a larger company with a broader reach to eventual markets?

Speaker 2

Yes, that's a harder question. Let's say we can go through them individually. So ARO ENaC that's something that we would be happy to commercialize ourselves. ARO AAT would be happy to commercialize that ourselves. ARO 3, we'd be happy to commercialize that ourselves.

We think there are good orphan opportunities there, but it could also be a mass marketed product and so we can go either way on that. AeroAnge three similar, we could go either way on that. It's that with a slight bias towards larger markets that really could be addressed maybe better with the larger partner. And then HBV, HBV is probably at least geographically is a partner play. We're not going to build sales force in China to go commercialize that.

So at the very least that makes sense to partner geographically and maybe worldwide. We'll just see how that goes.

Speaker 9

Okay. Thank you very much, Chris. Sure.

Speaker 0

Thank you. There are no further questions at this time. I would now like to turn the call back to Chris Anzalone for any further remarks.

Speaker 2

Thanks very much, everyone. We look forward to seeing you in October for the R and D Day.

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.