Arrowhead Pharmaceuticals - Earnings Call - Q3 2019
August 5, 2019
Transcript
Speaker 0
Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Anzalone, 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 nineteen third quarter ended June 3039. 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 our expectations around the development, safety and 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.
Speaker 2
Chris? Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. We made substantial progress during the quarter toward our short term and longer term goals. In particular, we took some very important regulatory and clinical steps that I will discuss in a moment.
We now have a good mix of early, mid and later stage programs, both wholly owned and partnered. And soon we will add candidates targeting cell types outside of the liver. This will be a big step for Arrowhead and more broadly for the entire RNAi field. In addition, we have multiple years of cash on our balance sheet and potentially access to more non dilutive capital through milestone payments from our two external partnerships. Taken together, we have three critical components of success for a company like ours: one, a platform on which to build a variety of important new medicines Two, a pipeline of potential medicines spanning early discovery to later stage clinical trials.
And three, the capital to fund development and further innovation. The fourth critical component is effective and rapid execution. I believe we have clearly demonstrated this over the past few years and during the last quarter. Our overriding focus is on bringing important new medicines to patients who need them. And if we're able to do that, we will continue to build long term value.
Before I give a review of some of the highlights of the quarter, I want to make a couple of announcements. First, I am proud to announce a previously undisclosed program for which we expect to file a CTA at the end of this year and begin first in human studies shortly thereafter. We have never discussed this program publicly. The target is HSD17B13 and potential indications we could address are alcohol related and non alcohol related liver disease. The candidate is called ARO HSD and it is currently in IND enabling GLP toxicology studies.
HSD17B13 is a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids. In humans it is extensively expressed in hepatocytes. Human genetic studies indicate that loss of function mutations in HSD17B13 are protective against development of both alcohol related and non alcohol related liver disease with approximately thirty percent to fifty percent risk reduction compared to non carriers. Carriers of this variant show lower transaminase levels, both ALT and AST, compared to non carriers. This protective effect has inspired therapeutic interest in the treatment of liver disease.
We are excited about the program and I expect that not only will we have the first RNAi candidate against this target in the clinic, but I expect we'll be the first to bring any candidate using any modality into the clinic against this target. We have a large and exciting pipeline and it is now larger and more exciting. Second, Arrowhead will hold an Analyst Day in New York on October 18 to give a more in-depth review of some of our programs, including the new Arrow HSD program. We have come so far so fast, so I think it will also be helpful for us to take a step back and give investors a more long term view of where we see the company over the coming years. We plan on having presentations from folks at Arrowhead as well as some external experts in addition to panel discussions and interactive question and answer sessions.
The event will be open to analysts and institutional investors by invitation and there will also be a live webcast. We're planning to engage an event with various presentation formats, so we hope many of you can join us in person or by webcast. Additional details will be available on our website as we approach the event. Let's now turn to our preclinical programs. I want to give a brief update on the timing of ARO HIF2 and ARO ENaC, the first two TRiM enabled candidates targeting tissues outside the liver.
As I mentioned being able to effectively target tissues outside the liver is a big step forward for us. Broadly it opens up a vast set of diseases that may not be addressable with small molecule and or antibody drugs and makes them accessible to Arrowhead. This can drive significant value for us and more importantly give us the opportunity to provide hope for many patients without adequate options. We have believed all along that for RNAi to reach its true potential as a paradigm shifting new modality medicine it must be able to address diseases outside of hepatocytes. Because of this belief we have spent the last several years improving our technology and finding solutions to the many technical challenges that exist beyond hepatocyte delivery.
We think we are there. This gives us a distinctive strategic and technical advantage over other RNAi companies. ARO HIF2 is being developed as a promising new drug candidate for the treatment of the clear cell form of renal cell carcinoma or CCRCC. ARO HIF2 is designed to inhibit the production of HIF2 alpha which has been linked to tumor progression and metastasis in CCRCC. We believe it is an attractive target for intervention because the overwhelming majority of CCRCC tumors are thought to express a mutant form of the von Hippel Lindau protein that is unable to degrade HIF2 alpha leading to its accumulation during tumor hypoxia and promoting tumor growth.
We are still on schedule to file a CTA for ARO HIF2 this year. Similar to ARO HSD we are currently conducting IND enabling GLP toxicology studies. The anticipated completion of these studies should support a CTA filing by the end of the year. Our second extrahepatic program to leverage the TRiM platform is ARO ENaC. ARO ENaC is an inhaled RNAi therapeutic candidate designed to reduce production of the epithelial sodium channel alpha subunit or alpha ENAC in the airways of the lungs.
In cystic fibrosis patients increased ENAC activity contributes to airway dehydration and reduced mucociliary transport. ENaC inhibitors have been tried previously in cystic fibrosis but have not been able to get enough reduction in the lung while sparing the kidney. ENaC inhibition in the kidney can lead to high levels of potassium in the blood called hyperkalemia that can be dangerous and potentially life threatening. Consistent with other targets in our pipeline, this is another case where RNAi using our TRiM platform may have a distinct mechanistic advantage over prior small molecule approaches and thus ENaC is an attractive target for us. We have demonstrated in multiple preclinical studies that we can selectively silence pulmonary ENaC expression with no effect on renal expression or serum potassium levels.
In addition RNAi appears to have a much longer duration of effect which has been a limiting factor, for inhaled small molecule inhibitors. Needless to say, we are very excited about the program. We previously presented data at the twenty eighteen North American Cystic Fibrosis Conference among others. We anticipate additional data presentations at future conferences. Because of the specialized nature of inhalation studies there are a small number of high quality facilities capable of doing activity and toxicology work for ARO ENaC.
This has affected our ability to get studies scheduled and has slowed the program a bit. We expect to begin IND enabling GLP toxicology studies for ARO ENaC next quarter, but they will not be done in time to file a CTA before the end of the year. So we are adjusting guidance on our CTA filing to the first half of twenty twenty. Keep in mind that this is our first inhaled RNAi therapeutic candidate and the first to target the lung. So while we are disappointed that the program is delayed by about a quarter, it is a small price to pay to ensure that we go into the clinic with a substantial amount of preclinical data and that the animal studies are done well.
With the new ARO HSD CTA filing by the end of this year we continue to build our clinical pipeline at a speed that meets or exceeds our own aggressive expectations. As we get clinical experience and validation with this first lung targeted program we anticipate that new programs will follow more quickly and we will be able to achieve the same high level of speed that everybody has come to expect from Arrowhead. Moving on, I want to review some important progress in our clinical stage programs. I will start with ARO AAT, our later stage RNAi therapeutic candidate being developed to treat a rare genetic liver disease associated with alpha-one antitrypsin deficiency. We achieved two important regulatory milestones during the quarter.
First, we announced that following the filing of an IND we received FDA clearance to begin the SEQUOIA Phase IIIII trial with the potential to serve as a pivotal registrational study. Importantly, this is the first potentially pivotal study for a compound using Arrowhead's TRiM platform. We also secured Fast Track designation for ARO AAT from the U. S. FDA.
Fast Track is designed to facilitate the development and expedite the review of drugs to treat serious conditions that fill an unmet medical need. The purpose is to get important new drugs to the patient earlier. We intend to utilize a number of the important advantages that Fast Track provides. You may also recall that we previously announced that ARO AAT received orphan designation designation in both The EU and The U. S.
In addition to these key regulatory achievements, we have also pushed forward with the clinical studies. We have multiple sites that are operational with patients already enrolled. We expect dosing to begin this week. The 2002 open label study is also moving along well where we continue to open sites. We expect enrollment to begin shortly.
Bruce will talk about the status of these studies in a moment. I want to mention a few things about the ARO HBV program being developed in collaboration with Janssen and now called JNJ-three thousand nine hundred eighty nine. The clinical development program has continued to advance. In April we announced that the ARO HPV 1,001 study was expanded to include a new triple combination cohort, Cohort 12, in 12 patients with chronic hepatitis B infection. All 12 patients have been enrolled and have received all planned doses of JNJ-three thousand nine hundred eighty nine.
This cohort includes JNJ-three thousand nine hundred eighty nine, JNJ-six thousand three hundred and seventy nine, Janssen's investigational orally administered capsid assembly and modulator of the class that forms normal capsid structures, and a NUC. In connection with the start of dosing of Cohort 12, Arrowhead earned a $25,000,000 milestone payment. In addition to the ARO HBV 1,001 study, Janssen is currently initiating a Phase 2b study called REEF1 of different combination regimens including JNJ-three thousand nine hundred eighty nine and or JNJ-six thousand three hundred and seventy nine and or NUC for the treatment of chronic hepatitis B virus infection. The study will include up to four fifty patients who will be randomized to receive up to forty eight weeks of treatment. Arrowhead is eligible to receive an additional $25,000,000 milestone payment from Janssen upon the dosing of the fifth patient in Reef one.
The study is on clinicaltrials.gov if you want additional information. Part of our October 2018 agreement Janssen included a research collaboration and option agreement to potentially collaborate for up to three additional RNAi therapeutics against new targets to be selected by Janssen. We are actively working on the first candidate, now referred to as ARO J and J1, against an undisclosed liver expressed target. These potential new candidates leverage Arrowhead's proprietary TRiM platform and do not include targets in our current pipeline. Arrowhead is responsible to perform discovery, optimization and preclinical development entirely funded by Janssen sufficient to allow the filing of a U.
S. IND or equivalent at which time Janssen will have the option to take an exclusive license. If the option is exercised Janssen will be wholly responsible for clinical development and commercialization. This is an important opportunity to create novel medicines by leveraging Arrowhead's speed and expertise in RNAi drug discovery and Janssen's clinical development and commercial capabilities. We have made rapid progress on this program and we look forward to working with Janssen further on ARO JNJ1 and potentially two other programs.
Let's now move to our Amgen partnership. Amgen continued to make progress on AMG eight ninety, formerly called ARO LPA, that targets lipoprotein A also known as Lp. AMG eight ninety is being investigated as a potential treatment for cardiovascular disease. Amgen has been enrolling patients with elevated Lp in a Phase I study and expects to share the initial data late this year or early next year. Amgen also anticipates launching the next phase of development of AMG eight ninety in the first half of twenty twenty, which would trigger development milestone payments.
We share Amgen's excitement in this program and believe that AMG eight ninety could one day be an important new treatment for cardiovascular disease. Under the terms of our September 2016 agreement Amgen also received an option to a worldwide exclusive license for an RNAi therapy against an undisclosed cardiovascular target which we subsequently called ARO AMG1. In August 2018, ARO had delivered to Amgen a candidate that met or exceeded the activity and safety requirements stipulated in the collaboration agreement. The option period expires on 08/07/2019 and Amgen has advised us that they do not intend to exercise the option. Consequently, we will be removing ARO AMG1 from our development pipeline.
Let's now move to our two wholly owned cardiometabolic candidates, ARO APOC3 and ARO ANG3. These targets both provide some optionality with respect to which patient populations and indications we will pursue. For each target there may be opportunities to treat well defined orphan diseases such as familial chylomicronemia syndrome and homozygous familial hypercholesterolemia, as well as higher prevalence diseases. In addition, the Phase I study for both candidates are designed to provide a readout on safety and tolerability as well as a robust look at the pharmacologic activity and duration of effect in both healthy volunteers and various patient populations, further enhancing our optionality at quite an early stage. To that end we secured orphan drug designation from the FDA for ARO APOC3 for the treatment of familial chylomicronemia syndrome or FCS and for ARO ANG3 for the treatment of homozygous familial hypercholesterolemia or HoFH.
Our intention is to pursue these orphan indications immediately and potentially initiate pivotal studies for both ARO APOC3 and ANG3 next year. Beyond these rare disease populations we also plan to pursue a staged clinical development and go to market approach where we study larger indications in parallel involving larger studies that will take longer to mature. We like this model. It it allows for the possibility of getting to market quickly while also enabling growth into other markets. From a chemical entity standpoint, of course, APOC3 and ANG3 candidates are just one drug each.
From an economic and market standpoint however these single drugs could behave like multiple drugs. As we do multiple studies to support treatment for and marketing two different indications we expect to substantially increase our total addressable market. Importantly, the addition of each new indication area benefits the others because they will all contribute to a single safety database for each candidate. So there is clear leverage here. So what are some of these larger market opportunities?
For ARO APOC3 it could simply be patients with elevated triglycerides with some history of pancreatitis. For ARO ANG3 there are many possibilities. For instance, we could look to treat heterozygous FH patients or those who are not meeting their LDL cholesterol goal while on statins. Because we expect ARO ANG3 may decrease liver fat and help with insulin resistance among other things, we could also look to treat patients with NASH, NAFLD and those with metabolic syndrome. We believe we have a substantial opportunity to help a large number of diverse patients and that ANGPTL3 is a uniquely powerful target.
As a reminder, we are developing the first and I believe only clinical RNAi candidates against both APOC3 and ANGPTL3. These two programs are essentially on the same schedule and at the same stage currently. We completed dosing in the single ascending dose portions of both studies and are now enrolling in the multiple dose portions in various patient populations. We are still on schedule for potential data readouts starting this year and likely continuing into next year. Specifically, Bruce will be a keynote speaker at the Global Summit on Cardiology and Heart Disease taking place in Dubai on September 1617.
He will be talking about our Ang3 and ApoC3 programs and will include some top line clinical data we have generated. Later this month we will submit a late breaker abstract for the American Heart Association Conference in November. If accepted, we expect to present a fuller data set from the ANG3 and APOC3 clinical programs. These are data rich studies, so we believe we will have additional readouts through the November conference. We would therefore expect to submit abstracts to present more data at the EASL International Liver Conference and or the American College of Cardiology meeting in April.
At our R and D Day last year we mentioned a breakthrough in targeting skeletal muscle cells. We have continued down this path and are getting closer to designating our first target and entering the clinic. We are not prepared to discuss data today, but we see the potential to enter the clinic with our first muscle targeted candidate next year. With that overview, I'd now like to turn the call over to Doctor. Bruce Given.
Bruce?
Speaker 3
Thank you, Chris. Good afternoon, everyone. We have made solid progress in all of our development programs during the recent period. I'll begin with a status update on our two wholly owned cardiometabolic candidates ARO ANG3 and ARO APOC3. ARO ANG3 is Arrowhead subcutaneous delivered RNAi therapeutic targeting angiopoietin like protein three or ANGPTL3 being developed as a potential treatment for patients with dyslipidemias and possibly metabolic diseases.
The ARO ANG3 first in human study which began dosing in quarter one is called ARO ANG one thousand and one. It is a Phase I single and multiple dose study to evaluate the safety, tolerability, pharmacokinetic, and pharmacodynamic effects of ARO ANG3 in up to 70 subjects. The single dose portion of the study is in adult healthy volunteers. And the multiple dose portion is in patients with various types of dyslipidemia, including patients with non alcoholic fatty liver disease, patients on a stable statin treatment regimen with persistently elevated LDL cholesterol, patients with heterozygous or homozygous familial hypercholesterolemia, and patients with hypertriglyceridemia. We have completed dosing in all of the single dose cohorts at thirty five, one hundred, two hundred, and three hundred milligrams.
We selected the two hundred milligram dose to move forward with in the multiple dose patient cohorts And subsequently received Drug Safety Committee and IRB clearance to begin enrolling and dosing patients. Three of the multiple dose cohorts are fully recruited and dosing has begun. The recruiting process is in full swing in the other patient cohort. As we look toward the possibility to accelerate the development program, we've decided to expand the trial, adding dose ranging multi dose healthy volunteer cohorts to give us multi dose PK and pharmacodynamic data. And also some dose ranging multiple dose cohorts in patients with heterozygous or homozygous familial hypercholesterolemia.
This amendment should be submitted shortly. As
Speaker 4
for what we
Speaker 3
have learned to date, we have seen indications of activity based on reductions in plasma ANGPTL3 concentrations and changes in lipid parameters. The safety and tolerability profile has not set up red flags and caused any protocol changes. Moving on to ARO APOC3 which began dosing later in quarter one. ARO APOC3 is ARO has subcutaneously administered RNAi therapeutic targeting apolipoprotein C3, better known as APOC3, being developed as a potential treatment for patients with hypertriglyceridemia. The ARO APOC3 first in human study is called ARO APOC3-one thousand and one.
It is a single I'm sorry, a phase one single and multiple dose study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamic effects of ARO APOC3 in up to 63 subjects. The single dose portion of the study is in adult healthy volunteers. And the multiple dose portion is in patients with severe hypertriglyceridemia and familial chylomicronemia syndrome. The study was originally designed to include doses of twenty five, fifty, one hundred and two hundred milligrams. We've been pleasantly surprised by activity of the drug at lower doses than expected.
So we have amended the protocol to eliminate the two hundred milligram dose and have added a ten milligram dose instead. We have now completed dosing in all of the ARO APOC3 single dose cohorts including the new ten milligram cohort. I want to be clear that this protocol amendment was based solely on positive pharmacodynamic activity and not due to any concern or finding with respect to safety or tolerability. The ten milligram cohort potentially gives us more detail on the dose response relationship of ARO APOC3, which is helpful as we move forward with patient dosing in this study and ultimately as we design the next clinical studies. We are now in the process of screening and scheduling patients for the multiple dose portion of the study.
And we anticipate dosing will begin shortly. Both first in human studies of ARO ANG3 and ARO APOC3 are designed to provide a readout on safety and tolerability as well as a robust look at pharmacologic activity and duration of effect. Included in the readout of activity are changes in APOC3 and ANGPTL3 protein levels, triglycerides, LDL C, VLDL C, HDL C, and other lesser known lipid parameters. At Arrowhead we always strive to find innovative designs that get the most data as quickly as possible. And these studies are no exception.
We are excited about these data and look forward to sharing them publicly in an appropriate forum. The single dose portion of both ARO APOC3 and ARO ANG3 studies we hope will have mature enough data to share in the fourth quarter of the year. Our intention is to submit abstracts and if accepted present at the American Heart Association Scientific Sessions twenty nineteen. These take place in November. We will see how quickly the multiple dose cohorts enroll before providing guidance on when those will be available to discuss publicly.
I would now like to give an update on where we are with the ARO AAT program. ARO AAT is Arrowhead's second generation subcutaneously administered RNAi therapeutic being developed as a treatment for a rare genetic liver disease associated with alpha-one antitrypsin deficiency. We are in the process of initiating two studies. The first to start is the SEQUOIA Phase twothree study and then shortly after that will be the 2002 open label study. These two studies together are designed to strike a balance between the maximum speed to a potential NDA with the desire to see mid term confirmation that ARO AAT is doing what it is designed to do.
Let me talk about these designs for a moment. SEQUOIA is a multicenter, multi dose, placebo controlled adaptive Phase twothree study to evaluate the safety, efficacy, and tolerability of ARO AAT administered subcutaneously to patients with alpha-1a trypsin deficiency. The multi dose placebo controlled Part A component of the study is designed to select a single dose level for use in Part B. This will then feed seamlessly into a two arm placebo controlled Part B component. In total, SEQUOIA is designed to enroll 120 patients who will receive at least nine doses or approximately two years of treatment with ARO AAT or placebo.
The primary objective for Part B is to evaluate efficacy as assessed by the proportion of ARO AAT treated patients relative to placebo achieving a two point improvement in the histological grading scale of alpha-1a trypsin deficiency associated liver disease and no worsening of liver fibrosis on the end of study biopsy. The ARO AAT 2,002 study is a pilot open label multi dose Phase two study to assess changes in a novel histological activity scale in response to ARO AAT over time with alpha-1a trypsin deficiency associated liver disease. In total, the 2,002 study is planned for up to approximately 12 participants in two sequential cohorts. All 12 patients will also be eligible to participate in an extension cohort. Between cohort completion and then including the extension, if patients elect to participate in the extension, we plan to conduct a pre dose liver biopsy and then repeat biopsies after six, twelve, eighteen, and twenty four months of treatment.
The primary objective is to evaluate the effect of ARO AAT on the liver scale over time. So where are we with initiating these studies? I will start with SEQUOIA because that is slightly further ahead. We have received regulatory clearance in The US and one site has begun screening patients for enrollment and we anticipate additional sites will also begin screening shortly. It is likely that the first patient on study will be in The US.
But we are also in the process of pursuing regulatory and IRB clearances in multiple European countries and Canada and several of the country clearances have already been secured. We are targeting approximately 40 sites in North America and Europe. So we anticipate that over the coming months there will be progressively more site screening and enrolling patients. For the 2002 study, we have secured national regulatory clearance in The United Kingdom and are pursuing regulatory clearance in multiple other countries as well. Sites are not yet open for screening and enrollment but we are working diligently on that.
The 2002 open label study will only be in Europe. The data on ARO AAT have been highly encouraging. We believe the results suggest that RNAi and by extension ARO AAT holds great promise for the treatment of patients with AATD associated liver disease. Notably, we presented preclinical data at EASL this year showing that we were able to prevent further liver damage and reverse existing damage in the PIC mouse model that harbors a human Z AAT gene and recapitulates many features of human AATD liver disease. This makes us excited about embarking on the 2002 study and on SEQUOIA which is Arrowhead's first potentially pivotal study.
We also look forward to talking about these programs and some of our less mature development programs at our Analyst Day in October. 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, and good afternoon, everyone. As we reported today, our net income for the quarter ended June 3039 was $20,300,000 or $0.21 per share based on 98,900,000.0 fully diluted weighted average shares outstanding. This compares with a net loss of $15,600,000 or $0.18 per share based on 87,600,000.0 weighted average shares outstanding for the quarter ended June 3038. Revenue for the quarter ended June 3039 was $42,700,000 compared with $727,000 for the quarter ended June 3038. Revenue in the current period relates to the recognition of a portion of the upfront payments and milestone from our license and collaboration agreements with Janssen, while revenue in the prior period related to recognition of a portion of the upfront payments from our license and collaboration agreements with Amgen.
Revenue from the Janssen agreement will be recognized based on our estimate of their proportion of effort expended toward fulfilling our performance obligations, primarily overseeing the completion of the current Phase onetwo HBV clinical trial. We expect the majority of the revenue to be recognized in this fiscal year, but we also expect revenue in fiscal twenty twenty as we continue to perform certain follow-up activities through 2020. Total operating expenses for the quarter ended June 3039 were $24,100,000 compared to $16,600,000 for the quarter ended June 3038. This increase is primarily due to increased drug manufacturing, toxicology and clinical trial costs as our pipeline and clinical candidates has increased. Net cash provided by operating activities during the quarter ended June 3039 was $10,800,000 compared with net cash used in operating activities of $14,400,000 during the quarter ended June 3038.
The operating cash generated in the current period reflects the $25,000,000 milestone payment we received from Janssen, offset by cash used to fund our operations. Turning to our balance sheet, our cash and investments totaled $295,500,000 at June 3039, compared to $76,500,000 at September 3038. The increase in our cash and investments is primarily due to the cash received from Janssen. Our common shares outstanding at June 3039 were 95,200,000.0. With that brief overview, I will now turn the call back to Chris.
Speaker 2
Thanks, Ken. We continue to demonstrate Arrowhead's ability to execute with speed and precision. We gained clinical experience and validation with our TRiM platform for liver delivery and then rapidly expanded our pipeline to include five programs, which will soon be six when we file a CTA for ARO HSD by the end of this year. We also expect to have a seventh clinical program this year when we file an IND for ARO HIF2 and an eighth when we file a CTA for ARO ENaC in the first half of next year. This would be a big position for a company twice our size.
Two partnered and six wholly owned clinical programs spanning three cell types in the near term. Further, we expect to be in three pivotal studies and have no less than 10 clinical programs based on the TRiM platform by the end of next year. We think we are now on the cusp of the next stage of growth for the company, whereby we expect to rapidly build our pipeline in tumor, lung, muscle and eventually additional tissue types. The opportunities in front of us feel limitless if we can continue to achieve our long term strategic goals to do the following. One, file two to three new CTAs every year.
Two, target a new cell type with the TRiM platform every eighteen months. Three, have 10 TRiM enabled candidates in clinical studies by the end of twenty twenty and '4, have three active pivotal studies in 2020. With all of these programs people ask us about our development and partnering plans. Simply put, we have no appetite to partner any part of our pipeline right now. Should this change in the future, I expect it to be opportunistic rather than driven by necessity.
We have indeed come far and there is still substantial value for us to create by developing and ultimately marketing these important medicines. Together our strong balance sheet and access to approximately $4,000,000,000 of non dilutive capital via potential development and commercial milestone payments enable us to pursue this strategy at this time. We are building a large but nimble long term pharmaceutical company and the current pipeline is the core of
Speaker 5
that
Speaker 2
transition. Thanks for joining us again today. This is a uniquely exciting time for us, our shareholders and the patients we hope to serve. I would now like to open the call to your questions. Operator?
Speaker 0
Your first question comes from the line from Ted Tenthoff from Piper Jaffray. Your line is open.
Speaker 5
Great. Thanks. Can you guys hear me okay?
Speaker 2
Hi Ted. Yes, we sure can.
Speaker 5
Fantastic update. Really excited to see all the progress. Just a great job and looking forward to seeing you guys in New York on the eighteenth in October. Quick question, if I may. Just one on the HBV with respect to Reef one.
How quickly should we expect that to be going? And what would expectations be for additive activity of 3,989 or ARO HBV on top of the J and J compounds? And then I have one quick follow-up for Sunday.
Speaker 2
Bruce?
Speaker 3
Okay, so, how quickly can we expect to get going? Of course, it's not our study. So we can't really guide on that. I mean, I know that they've been working hard on it. So I don't think it'd be a surprise if they got going this quarter.
But I can't really guide for them. As for what's the likelihood of additive activity, it's really a hard call I would say, Ted. Just because it you know, the data so far with the CAMS, you know, they reduce DNA, they reduce HBV RNA. But they haven't impacted S antigen or E antigen really at all, even with six months of use. So the real question here is, you know, will we get some sort of additive or even synergistic activity when combining with RNAi?
And that currently is unknown in the field. And you know, Chris said, the real game here is it's a forty eight week trial. So almost a year. And you know, there's no experience with that at all. So I think it's kind of anybody's guess.
And my whole take on this, as you know Ted all along, has been that, you know, there will be many different recipes tried over the coming years in HPV. And, you know, no one knows the optimal recipe yet. So you know, I don't know how to really handicap it any better than that for eutectics. We just have to wait and see. It's going to be a very exciting time.
Speaker 2
Yeah, so I will say on it's a relatively large study. It's four fifty people. We expect this to be a multinational study and so we expect Janssen to have sites across multiple countries and they'll have access to a lot of patients. But I think given what we know about the field, this feels to me like, I don't know, maybe if not the most interesting current study pretty close to it given the combination approach, given that it's on top of our RNAi therapeutic which looked to be quite active and quite well tolerated last year. So it feels to me like Janssen has a pretty good shot of enrolling this thing at a reasonable clip.
Speaker 5
Yes, makes a lot of sense. Okay, excellent. And then just quick with HSD kind of comes out of nowhere, but we've certainly been hearing about the genetic validation around this target. Where do you think you guys are differentiated? And how quickly do you think we could see Phase II plans sort of elucidated?
Thank you very much.
Speaker 2
Yes, so slow down on that one yet. We're not in the Phase I yet. We've moved very quickly on this. We think we're excited about the target. The GWAS data were are powerful I think.
As to how we differentiate ourselves with other folks it's hard to say because I think we're going to be the first in. And so we'll see how those data look and we'll see who joins us in the clinic at some point.
Speaker 5
Thanks so much. Keep up the great work guys.
Speaker 2
Thank you.
Speaker 0
Your next question comes from the line of Keith McCabe from Chardan. Your line is open.
Speaker 5
Hi, thanks.
Speaker 6
For HSD in terms of the patient population you might go after how easily are these patients diagnosed especially with the particular marker that you think you would be targeting here?
Speaker 3
Yes, so first of all, I mean the HSD was discovered in GWAS through this variant that actually has loss of activity. So it's not just loss of activity, but it's also very rapidly metabolized. So essentially, you know, it winds up being a sort of loss of function variant. So, you know, I guess the only patients you would say that would be inappropriate for treatment would be the people that already have that variant. So, yeah, we would be looking for the wild type normal population for treating.
And as for which population or populations we will go after, I think, you know, it's probably premature to talk about that. I think that's a good target for discussion on October 18. You know, this is a relatively young target. You know, that seminal paper in the New England Journal of Medicine only came out March of twenty eighteen. So it was not previously identified as really an important target in fibrosine, you know, liver diseases.
So you know, I think this one we're going to be learning as we go as an industry. And it's going to be fun to watch develop, I would say.
Speaker 6
Okay. I guess if I can just dig into that a little deeper. You know, patient is exhibiting some symptoms. How does the clinician discriminate, you know, what the exact cause is and makes them appropriate for this approach?
Speaker 3
Well, you know, so far it seems to, it seems to that the non functioning allele is associated with a substantially lower risk of developing NASH or substantially lower risk of developing alcoholic related liver disease including cirrhosis. So, you know, whatever the underlying causes of those are, it seems to heavily ameliorate, you know, those patients as far as we understand today. So it doesn't seem, you know, at this point like you would go in thinking that you needed to eliminate certain etiologies. As you know, the understanding of what causes NASH is not all that great anyway. So I would say that right now you wouldn't be all that selective other than determining that the patient already didn't have the variant.
Wasn't already essentially the equivalent to being knocked down.
Speaker 6
Okay, well very good. Excited to hear more about this going forward.
Speaker 3
You bet.
Speaker 0
Your next question comes from the line of Malik Raycroft from Jefferies. Your line is open.
Speaker 7
Hi everyone. Congrats on the progress and thanks for taking my questions. Apologies if I missed this earlier but I was wondering for the HBV triple data, do you think there's a pretty good chance that the data could be at ASLD this year? Or is that more likely a 2020 update? And then I'm wondering if you can provide any perspective on what would be evidence for synergy or lack thereof with the triple combo?
Speaker 2
So there'll be zero chance that the triple combo data I think could be presented at ASLD.
Speaker 3
I don't think that's right Chris. I mean there'll be a late breaker abstract submitted. Whether it gets accepted or not We won't know until there. So it's not zero. But whether they'll accept it or not who knows.
Speaker 7
Okay. Okay. And then any thoughts on just synergy and what we should be looking for there with the triple?
Speaker 3
Well, it's kind of like the answer earlier. It's really the reason it may get accepted as a late breaker even though it's only 12 subjects is because it's really the first important triple therapy trial that's been done in HBV in the current era. So the answer is that people will really be fascinated to see. Although it's short term therapy, you know. I mean it's only twelve weeks.
And what's going to be a, you know, probably a urotherapy, you know, is what people are sort of targeting in HBV. But it'll be the first inkling. And the other thing is it'll be the first shot that anyone's ever seen at knowing whether there are any safety concerns to think about. At least concerns that are mechanistically based and would show up even with 12 subjects. So you know, I think it's important work.
But whether or not will accept it, that's a question you can't answer.
Speaker 7
Got it. And so for the 12 subjects, you think you'll have twelve weeks of data for all 12 of those patients?
Speaker 3
By the time we get there.
Speaker 2
By time
Speaker 7
of the LBA Yes, but
Speaker 3
not for the abstract itself. That's part of what always makes it a little bit uncertain. Not everybody is that far along at this point. But remember, they get dosed with the RNAi agent on day one, day 29, and day 57. And all 12 have received all three doses, to date.
They also get, you know, a full twelve weeks of the CAM. And not everybody has received all twelve weeks of their CAM yet. It. Let alone them having longer term follow-up.
Speaker 7
Makes sense. And then for AERO AAT, just wondering if there's any update on the activity scale design and if you can provide any perspective on the conversation with regulators on that. And is it possible that we could see data from the open label study by mid-twenty
Speaker 2
twenty?
Speaker 3
Well, me take the second one first. Possible, you know, so EASL is in April. So I think there's just probably not enough calendar to get anything into EASL. So the more likely case I would say would be that there'd be a shot that you would have data at AASLD or at least an abstract submitted. We can never guarantee they'll accept it. An
abstract submitted, you know, for AASLD I think would be more likely, timing wise. And then I'm sorry, the first question was?
Speaker 7
Just, any update on the conversation with regulators on the activity scale design?
Speaker 3
Right, so first of all, the activity scale design is a protocol driven thing where there are multiple steps that are driven by a protocol to refine this. And it's actually, believe it or not, statistically driven, to really find what the components are that everybody agrees would be the right sort of components and the right weighting of those components. When I say everybody, I mean all of the pathologists, experts that are involved with establishing the scale. So it's very much the same way they established the NASH scale, for instance. And it's a formal process, you know, protocol driven.
So certainly when we're done with that process, you know, the regulators are going to be very interested to see the outcome. And that's not something we're going to keep hidden from them. Once we have a full report and they can dive into all the statistics and everything else, they're anxious to do that. Because this is something brand new that no one else in the world has ever done before. At least not that we know of.
Speaker 7
Okay. And last question is just on ANG3 and APOC3. I know you mentioned earlier that you're not going to provide any data updates on what you're seeing, but I don't know if you can provide any qualitative perspective on it. And I think you guys have mentioned that you're seeing good responses to go with an even lower dose for APOC3. And so maybe if you can just provide some additional perspective on that.
Speaker 2
So Bruce will some top line data in the Dubai Conference in September and then of course a fuller data set hopefully at American Heart. So just wait on that. Hopefully you'll have that in your hands pretty soon.
Speaker 7
Okay. Okay, thank you very much.
Speaker 2
Thank you. You bet.
Speaker 0
Your next question comes from the line of Mehmetani from B. Riley. Your line is open.
Speaker 8
Thanks for taking my question and congrats on the progress and looking forward to the IND day on October 18 as well. I have three questions, mostly a follow-up. For REIF one for Hep B, could you I see on venetoclax, there are three dose levels for three thousand nine hundred eighty nine. And really why I asked that is, is there anything we could learn from the twelve week readout, the twelve patient readout that could also inform some of the doses that you're testing in the Phase two four fifty patient study?
Speaker 3
I don't think so. I mean I actually think that the, you know, that the dose ranging data really relates to the RNAi component. And I think that, you know, they were able to make that, you know, choice based on, you know, our 1,001 study. I don't think there's really anything in those 12, you know, patients that would, you know, that would inform on that. I think the most important part of the 12 patients was an opportunity, you know, to really learn about, you know, the safety of finding the three together in preparation for one, which is, you know, going to, you know, have quite a few patients in the combination
Speaker 2
learn.
Speaker 3
So I think it was more important there than necessarily to try to inform. And it's that dose response. 12 patients all are getting the same dose of three thousand nine hundred eighty nine and whatever the number of the CAM is, six 39 maybe, I can't remember. Then so no, it doesn't really I don't think it will alter. It only would have altered Reef one if we ran into some sort of safety issue or something.
But absent that, I don't think there was really any chance it was gonna alter reef one per se.
Speaker 8
Gotcha. And do you, confirm it's also day one, day twenty nine, and day fifty seven dosing for, for this reef one?
Speaker 3
No. Reef one doses all the way through forty eight weeks. So Reef one is the first real modern, combination study in HBV curative intent, you know, trying to create a functional cure. Remember, you know, the 1001 study didn't have curative intent. It was just to get safety and activity and dose ranging.
It was really a first in human study. We got a lot of information out of it, but it was never a curative intent study. But REEF-one really trying to see whether four to eight week combination therapy can give us functional cures.
Speaker 4
The purpose
Speaker 3
of what doses.
Speaker 8
Thanks for clarifying that. And then on the AAT, ARO AAT, is there any difference in guidance from US or FDA and EMA? Just trying to understand is there any particular reason why 2002 is focused on the EU sites or is that mostly because of the homogenous population in the Scandinavian countries?
Speaker 2
Just
Speaker 3
Yeah, don't think that was the influence. I just think we thought that we had some investigators over in Europe who really wanted to do this trial. It's only 12 patients and you know, so we thought we could do it without really interfering at all with 02/2001, you know, with Sequoia. And it was really important to get Sequoia, you know, fully enrolled obviously So we just estimated that Europe was maybe a bit better place to do that trial, than The U.
S. And that's why we did it there.
Speaker 8
Okay, great. And then last question, I have to ask on ANS-three and APOC3. I understand you wait for the data disclosure at the Dubai conference. But just as you think about the orphan and think about the higher prevalent indications, is there could you pursue a different dose level for orphan including maybe a different dose level and importantly frequency of administration for the highly prevalent population?
Speaker 3
Those are two different questions. I think it would be unlikely that the dose would be different just because, you know, we're acting through the RNAi mechanism. And, you know, it doesn't, you know, tend to vary all that much, you know, from a disease to disease, even subgroup to subgroup basis. Now the frequency of dosing's a little bit different question. Because, you know, with treating these orphan patients who really have very high circulating levels of these sort of, you know, lipids, you probably want to maintain full, full activity all the time.
Whereas in a, let's say a secondary prevention setting, for instance, you know, you might be able to have less frequent dosing even if you had a little bit of recovery, at the end of the dosing interval. So I think it'd be unlikely that the dose would necessarily be different. But I think I could imagine that it'd be possible that the dosing interval might be stretched a little bit in some of the other indications. But that's speculation at this point. I want to be very clear, that's purely speculation at this point.
And we're a ways from being able to make that call.
Speaker 8
Great, thanks for taking my questions.
Speaker 0
Your next question comes from the line of Almer Pirosh from Cantor. Your line is open.
Speaker 2
Yes. Good afternoon, gentlemen. I just like this is a financial question. We understand that $25,000,000 of the revenue recognized in this quarter comes from Janssen. How was the other half or the amount was made up of?
And if you were to project out for the next year how much of the revenue that you would receive would be recognition of previously received upfront payment for example? And what would be the rough division between revenue from Amgen and from Janssen for R and D reimbursement?
Speaker 4
Okay. So first of all, the $25,000,000 that we received from Janssen wasn't entirely recognized during the quarter. The way that works is we estimate what the total revenue is from the origination of the contract and that gets put into a pool. And that is that large amount, which is about $227,000,000 is the pool of revenue that's recognized over the course of delivering our work on that project, which is going to last through 2020. So we take that amount and we estimate what our progress is over each quarter.
And so to date, we have recognized about $125,000,000 of that. When the second $25,000,000 is recognized or when it's achieved, we then take that into the pool and apply whatever percentage we are up to that. So it's sort of caught up to where we are on the rest of the revenue amounts. So like I said earlier, expect to have the majority of this recognized by the end of next quarter, but still a good portion of it. That Next quarter or next year?
No, by the end of next quarter. So by the end of ninethirty, the majority of the total revenue will be recognized. But it still will go on for another four quarters or so to the end of fiscal twenty twenty.
Speaker 7
Does that make Yes.
Speaker 2
Roughly how much would that be for the next fiscal year?
Speaker 4
Well, we've recognized $125,000,000 So we've got, based upon where we are now, about $100,000,000 to go. We will add to that $25,000,000 when we achieve the next milestone. So about $125,000,000
Speaker 2
$175,000,000
Speaker 3
Thank you very much.
Speaker 2
Sure.
Speaker 0
I'm showing no further questions at this time. I would now like to turn the conference back to you Mr. Chris Anzalone.
Speaker 2
Thanks everyone for joining us today and we hope to see you in October.
Speaker 0
Ladies and gentlemen this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.