Arrowhead Pharmaceuticals - Earnings Call - Q4 2018
December 11, 2018
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 Anselloni, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.
Speaker 1
Thanks, Carmen. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for 2018 fiscal year ended September 3038. With us today from management are our President and CEO, Doctor. Christopher Anzalone, who will provide an overview of the year 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.
Chris?
Speaker 2
Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. 2018 was an important year for Arrowhead. Unveiling the new TRiM platform toward the end of 2017 served to frame our technological focus, and we recognized that execution would then be critical to demonstrate that we could create real value with it. We needed to push our two lead candidates, ARO HBV and ARO AAT, through first in human studies in order to confirm our high safety and activity expectations.
And we needed to advance our preclinical pipeline toward the clinic to better demonstrate the breadth of the TRiM platform. I believe that we have accomplished both of these, and that they, along with our success in business development, have put us in a strong position for substantial growth and stability as a company. Let's go through some key accomplishments that helped us get to where we are today, and then I will discuss a few of these in more detail. We hosted an analyst R and D day in September 2017 to introduce the TRiM platform, which utilizes ligand mediated delivery and stringent bioinformatics, and is designed to enable tissue specific targeting while being structurally simple. The TRiM platform offers several potential competitive advantages, including a sophisticated RNAi trigger selection and screening process that identifies potent sequences rapidly in locations that RNAi competitors may miss.
Multiple routes of administration, including subcutaneous, intravenous, and inhaled, potentially faster time to clinical candidates, optimal pharmacologic, activity and long duration of effect, potentially wide safety margins, simplified manufacturing at reduced cost, and the promise of taking RNAi to tissues beyond the liver. This event was intended to provide information on the technological foundation of the company and to set expectations as to capabilities and development timing. We then presented clinical data at HepDART twenty seventeen and at the EASL International Liver Congress twenty eighteen, demonstrating that four out of eight patients with chronic hepatitis B infection achieved a sustained host response after receiving up to nine doses of ARK520, our first generation compound, in combination with dalientecevir. One of these patients seroclear all viral markers, including surface antigen, or S antigen, which we believe represents a functional cure. We believe these data represent the first clinical evidence that an RNAi based approach can lead to the type of favorable sustained host response that we have always believed is possible.
Achieving this result with ARK520, which was not designed for activity against S antigen produced by integrated DNA, provided us with further confidence that our current generation RNAi based compound, ARO HBV, which is designed to silence the production of all HBV gene products, including transcripts derived from integrated DNA, has the potential to be a backbone therapy for combinations intended to functionally cure chronic HBV. This compound was partnered with Janssen Pharmaceuticals in a deal that I will describe in a moment. With these encouraging data in hand, and promising preclinical results for our new TRiM enabled candidates, we moved quickly toward first in human clinical studies. Before the end of twenty seventeen, we filed for regulatory clearance to begin a Phase I study of ARO AAT, our candidate against Alpha-one liver disease, and a Phase III study of ARO HBV. Both of these submissions were substantially ahead of schedule, thanks to the great work of our discovery program management and clinical teams.
We then began dosing in both ARO AAT and ARO HBV clinical studies in the first quarter of twenty eighteen. Bruce will describe the studies in a moment, but it's important to mention that they both included single ascending and multiple ascending dose bases designed to generate meaningful readouts on tolerability and activity very rapidly. We continued to execute well on both studies, and by the second quarter we had already completed enrollment for the entire ARROW AAT study and the single ascending dose portion of the ARROW HBV study, and had begun dosing HBV patients in the multiple ascending dose portion of that study. This was impressive speed indeed. In addition to our lead candidates, there was also good progress made on our first partner program using the TRiM technology.
In August we announced that we earned a $10,000,000 milestone payment from Amgen following the 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 I 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. The estimated primary completion date is currently expected in late 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 the clinical development this year, following ARO AAT and ARO HBV. We view this step and our collaboration with Amgen generally as further validation of our proprietary TRiM platform. The second half of twenty eighteen continued to be very active and highly productive for AROHEAD. We presented a snapshot of early data for ARO at the Alpha-one National Educational Conference and ARO HBV at the World Gastroenterologist Summit. Both presentations demonstrated that the candidates were generally well tolerated at all dose level studies, and importantly, that they were both highly active against their respective targets.
These were the first clinical data released for candidates using the TRiM platform. TRiM is the basis of all of our development programs, so it was very encouraging to see that positive preclinical data could translate well in human clinical studies. ARO AAT and ARO HBV are proving to be highly potent molecules with a long duration of effect. It bodes well for these candidates, and potentially for the rest of our TRiM enabled pipeline. We presented additional data at the AASLD Liver Meeting in November that further supported the continued development of both ARO AAT and ARO HBV.
Let's start with some highlights of the ARO AAT data. Three monthly doses of three hundred milligrams of ARO AAT led to reductions in serum alpha-one antitrypsin to below the level of quantitation in one hundred percent of subjects. These reductions were sustained for greater than fourteen weeks, indicating that quarterly or less frequent dosing appears feasible. In addition, single and multiple doses of ARO AAT appear to be well tolerated at all doses tested. These were highly encouraging data that give us confidence to move into a planned Phase II study in 2019.
Moving on, to some of the HPV data presented at AASLD. ARO HPV achieved high levels of activity across all HPV patients and patient types, and appeared to be well tolerated at single and multiple doses up to four hundred milligrams, which was the highest dose tested in the ARO HBV 1001 study. The mean reduction of S antigen was 1.9 logs, or 98.7%, with a range of 1.3 logs, or 95%, to 3.8 logs, or ninety nine point nine eight percent. We were thrilled to see these results, and look forward to continued development in partnership with Janssen. I would now like to discuss the deal with Janssen and what it means to Arrowhead.
In October we reported that Arrowhead and Janssen Pharmaceuticals Incorporated, part of the Janssen Pharmaceuticals companies of Johnson and Johnson, signed a license agreement for ARO HBV and a collaboration agreement for up to three RNAi therapeutic candidates that use our proprietary TRiM platform against new targets to be selected by Janssen. The total potential deal value is approximately $3,700,000,000 plus royalties on commercial sales. Under the terms of the HPV license agreement, Arrowhead received $175,000,000 as an upfront payment. In addition, Arrowhead received $75,000,000 in the form of an equity investment by Johnson and Johnson Innovation, JJDC Incorporated, at a price of $23 per share of Arrowhead common stock. Arrowhead is eligible to receive up to approximately $1,600,000,000 in milestone payments the HPV license agreement, including a $50,000,000 near term milestone payment after initiation of a phase two study.
Arrowhead is also eligible to receive approximately $1,900,000,000 in option and milestone payments for the collaboration agreement related to up to three additional targets. Arrowhead is further eligible to receive tiered royalties up to mid teens on product sales. I believe this partnership maximizes the chances of success for ARO HPV. I view ARO HPV as a very exciting experimental agent against chronic HPV infection, and our early data indicate that we may be silencing the virus deeper than has ever been reported, even in hard to treat patients such as HPV negative patients, that are increasingly predominating in many regions. As I mentioned, we saw good activity in all patients, and the safety profile was quite good.
So we think we squeezed a substantial amount of risk out of the program already. However, we have not yet seen functional cures, and much work remains. For instance, the right Phase 2b studies will be large, expensive, and complicated. Combinations with different compound classes should be interrogated, and the permutations are extensive because many different dosing schedules for each compound are possible. Beyond phase two, pivotal studies would be large and multinational, and ultimately commercial rollout would require global infrastructure and experience with diverse reimbursement paradigms almost immediately.
I have great faith in Arrowhead and believe we can do anything we put our minds to, but Janssen has all of these capabilities today. It has expansive resources and a demonstrated commitment to these types of programs and commercial launches. So we see Janssen as the ideal partner to potentially accelerate our goal of bringing a functional cure to patients with chronic hepatitis B infection. Outside of HBV, this deal helps us further build out the TRiM platform and create value in two concrete ways. First, it provides the possibility of Janssen funding the development of up to three additional programs against novel targets outside of our pipeline that could become important new medicines.
Second, it provides us with a substantial amount of capital to develop a number of new medicines in our current and future pipeline that we may potentially commercialize ourselves. This last point is a very important one. We hosted an R and D Day in October to discuss in more detail our emerging pipeline. In those presentations we demonstrated the progress being made on our two new cardiometabolic candidates, ARO APOC3 for hypertriglyceridemia, for which we plan to file a CTA in the next three weeks, and ARO ANG3 for dyslipidemia and metabolic diseases, for which we filed a CTA in October and are planning to start clinical studies in early twenty nineteen. We also discussed our extrahepatic programs, ARO ENaC for cystic fibrosis, and ARO HIF2 for clear cell renal cell carcinoma.
In addition, we announced initial data showing good knockdown in muscle. The TRiM platform is enormously flexible, and we have numerous and growing opportunities to develop innovative new medicines. Swapping control of ARO HPV for the financial resources to develop and potentially commercialize a large portion of our growing pipeline while retaining upside exposure in HPV is a good trade for us. With that overview, I'd now like to turn the call over to Doctor. Bruce Given, our COO and Head of R and D.
Bruce?
Speaker 3
Thank you Chris, and good afternoon everyone. I want to describe the clinical studies for ARO AAT and ARO HBV and give a little more detail about the data that we presented at AASLD last month. They both were highly encouraging, and I really could not have been more pleased with the results. Let's start with ARO AAT. ARO had second generation subcutaneously administered RNAi therapeutic being developed as a treatment for a rare genetic liver disease associated with alpha-1a trypsin or AAT deficiency.
A genetic mutation causes improper AAT folding and impaired secretion by hepatocytes leading to accumulation in the liver of AAT aggregates known as globules. Accumulated misfolded AAT can lead to a recurrent cycle of hepatic injury leading to fibrosis, onto cirrhosis, and then in the worst cases hepatocellular carcinoma or the need for liver transplant. ARO AAT is designed to silence production of the mutant AAT protein with the intent to first and most directly prevent accumulation of disease causing protein in the liver. The second goal is to allow clearance of accumulated protein already in the liver. This should lead to prevention of repeated cycles of cellular damage, which is what leads to fibrosis and then on to cirrhosis.
The fourth goal is reversal of fibrosis associated with prior damage. We believe that the damage cycle seen in AAT liver disease is quite similar to the damage cycle seen in other fibrosian liver diseases such as viral hepatitis. It is now well established that fibrosis that has not reached end stage can show clear improvement after the insult is removed. As such, we have high hopes that reversal is possible in AAT. ARO AAT1001 is a Phase I randomized double blind placebo controlled single ascending dose or SAD and multiple ascending dose or MAD studied to evaluate the safety, tolerability, pharmacokinetics, and effective subcutaneous doses of ARO AAT on serum alpha-one antitrypsin levels in healthy adult volunteers.
The SAD portion of the study included four cohorts at dose levels of thirty five, one hundred, two hundred, and three hundred milligrams. And the MAD portion of the study included three cohorts at dose levels of one hundred, two hundred, and three hundred milligrams. Additional cohorts were planned at a dose of four hundred milligrams but were deemed unnecessary based on observed activity at lower doses. Excuse me. ARO AAT 1,001 enrolled 45 healthy volunteers.
We presented data at AASLD demonstrating that ARO AAT at single and multiple doses produced robust and consistent reductions in serum AAT levels. Single doses of two hundred and three hundred milligrams resulted in greater than 91% serum AAT reduction with three or four subjects having concentrations below the level of quantitation. In the two hundred and three hundred milligram single dose cohorts, an average serum AAT reduction of greater than 90% was sustained for six weeks. In the multiple dose cohorts of two hundred and three hundred milligrams for patients receiving all three doses, an average of greater than 90% reduction in serum AAT was sustained for longer than fourteen weeks. The maximum nadir reduction was 94%.
Monthly serum AAT follow-up is ongoing with nine of 10 subjects below the level of quantitation in the multiple dose cohorts, including one hundred percent of subjects from the three hundred milligram group. We believe this represents near full suppression of the liver production of AAT. Duration of response indicates that quarterly or less frequent dosing appears feasible. ARO AAT was well tolerated at all doses tested with the most common adverse events or AEs being upper respiratory tract infection in thirty nine percent and headache in thirty two percent. Fifty doses of ARO AAT were administered with six or twelve percent associated with an AE at the injection site.
We are currently designing a Phase II study of ARO AAT that we intend to start in 2019 pending completion of chronic GLP toxicology studies, is expected next month, and pending completion of discussions with regulatory authorities on study design and endpoints. Moving on to ARO HBV and the data from the ARO HBV 1,001 study presented at AASLD. ARO HBV is a third generation subcutaneously administered RNAi therapeutic candidate being developed as a potential treatment for patients with chronic hepatitis B virus infection. As Chris mentioned, Arrowhead recently entered into a license agreement with Janssen Pharmaceuticals Inc, part of the Janssen pharmaceutical companies of Johnson and Johnson, to develop and commercialize ARO HBV. ARO HBV 1,001 is a Phase onetwo clinical study evaluating safety, tolerability and pharmacokinetic effects of single ascending doses or SAD of ARO HBV in healthy adult volunteers as well as the safety, tolerability and pharmacodynamic effects of multiple ascending doses or MAD of ARO HBV in patients with chronic HBV.
Dosing in the SAD portion of the study is complete and included five cohorts at dose levels of thirty five, one hundred, two hundred, three hundred, and four hundred milligrams. Dosing in the MAD portion of the study is ongoing and includes cohorts receiving three monthly subcutaneous injections of ARO HBV at doses of twenty five, fifty, one hundred, two hundred, three hundred, and four hundred milligrams. The twenty five and fifty milligram dose cohorts were recently added and cohort sizes were increased to N equal eight in the dose escalation HBV patient cohorts to better characterize ARO HBV dose response. The study is also evaluating whether there is added benefit with weekly or biweekly loading doses. The interim analysis at AESLD reported an all single dose healthy volunteer cohorts and initial HBV patient cohorts that received monthly doses of ARO HBV and had greater than six weeks of surface antigen assay results.
We reported on safety and tolerability in all healthy volunteers and safety, tolerability, and virological assessments in HBV patient cohorts 2b through 5b, eight and nine. Cohorts 2b through 5b were HBV antigen positive or negative, NUC naive or NUC experienced at baseline. And cohorts eight and nine were HBV antigen positive, treatment naive, or NUC experienced respectively. NUC experienced patients continued their daily NUC throughout the study and NUC naive patients started daily NUC on day one. Virological, results reported were through fifty six days after the third dose, which would be day 113 when available, if not most frequent.
The data presented at ASLD can be summarized as follows. ARO HPV administered subcutaneously appears to be well tolerated at single or multiple monthly doses up to four hundred milligrams. Mild injection site reactions were observed with approximately twelve percent of subcutaneous injections. Strong S antigen responses were observed in all HBV patients with a mean nadir of 1.9 logs and a range of 1.3 to 3.8 logs. S antigen reductions were similar in hepatitis B E antigen or HBV antigen positive patients.
The mean S antigen nadir in HBV antigen positive patients was 2.1 logs. And the mean S antigen nadir in HBV antigen negative patients was 1.8 logs. Thus, there was less than a 1% difference in the two populations. S antigen reductions were also similar for Nuc naive patients in cohort eight and Nuc experienced patients in cohort nine. The mean S antigen reductions on day 57 for cohort eight was 1.7 logs.
And the mean S antigen reduction on day 57 for cohort nine was 1.9 logs. This study highlighted an improvement over results from Arrowhead's first generation compound ARK520, which targeted only HBV transcripts derived from cccDNA. The S antigen responses observed with ARO HBV are consistent with its ability to silence HBV mRNA from cccDNA and host integrated viral DNA, which is believed to be a major source of S antigen production in certain patient populations. Responses were also observed in all other virological parameters, including HBV DNA, HBV RNA, HBV antigen, and correlated antigen in those patients that had measurable levels. These were really exciting results for us.
We are also thrilled to now have Janssen as a new partner for the future development and potential commercialization of ARO HBV. Both of our organizations share the aim to advance transformational medicines that achieve higher rates of functional cure with a finite treatment duration for patients with chronic hepatitis B viral infection. Lastly, I want to give a quick update on ARO ANG3 and ARO APOC3. As Chris mentioned, we already filed a CTA for ARO ANG3. And I am pleased to report that we have the regulatory approvals necessary to begin recruiting subjects.
In the first quarter of twenty nineteen, we intend to begin dosing for ARO ANG1001, a Phase I single and multiple dose study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamic effect of ARO ANG3 in healthy volunteers and dyslipidemic patients. We will give more details once the study starts.
Speaker 4
For
Speaker 3
APOC3, we are working on a CTA filing now that we intend to submit in the next month. Additional details on that study will also be available when it starts. With that brief review of our clinical programs, I'd like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer. Ken?
Speaker 5
Thank you, Bruce, and good afternoon, everyone. As we reported today, our net loss for fiscal twenty eighteen was $54,500,000 or $0.65 per share based on 83,600,000.0 weighted average shares outstanding. This compares to the net loss of $34,400,000 or $0.47 per share based on 73,900,000.0 weighted average shares outstanding for fiscal twenty seventeen. Revenue for fiscal twenty eighteen was $16,100,000 compared to $31,400,000 for fiscal twenty seventeen. The decrease is driven by the timing of our revenue recognition of upfront payments received from our collaboration agreements with Amgen, of which approximately $30,000,000 was recognized during fiscal twenty seventeen and the remaining $5,000,000 was recognized during fiscal twenty eighteen.
During fiscal twenty eighteen, we also recognized revenue for the $10,000,000 milestone payment we received from Amgen in August as Amgen initiated a Phase I clinical trial for AMG eight ninety. Total operating expenses for the year ended September 3038 were $72,100,000 compared to $68,400,000 for the year ended September 3037. This increase is primarily due to toxicity, study costs, drug manufacturing costs for ARO AAT and ARO HBV candidates. Net cash used in operating activities in fiscal twenty eighteen was $47,200,000 compared to $23,900,000 in fiscal twenty seventeen. Our R and D and G and A cash expenditures were relatively consistent in each period.
The driver of the change in operating cash was cash received from Amgen in each period. In fiscal twenty eighteen, we received a $10,000,000 milestone payment, while in fiscal twenty seventeen, we received the $30,000,000 upfront payment associated with AMG eight ninety. Turning to our balance sheet. Our cash and investments in cash balances totaled $76,500,000 at September 3038, compared to our cash balance of $65,600,000 at September 3037. The increase in our cash and investments balances was driven by $56,500,000 of net cash proceeds received from our equity financing in January, along with the $10,000,000 milestone payment received from Amgen in August.
These receipts more than offset cash used in operations and capital expenditures. We anticipate our cash and investments balance at December 3138 to be about $3.00 $5,000,000 reflecting both the $175,000,000 upfront payment and the $75,000,000 equity investment from Janssen and JJDC, as Chris discussed previously. In October, we issued 3,300,000.0 shares to JJDC for their equity investment at a price of $23 per share. We anticipate recognizing approximately $198,000,000 of revenue, which includes the upfront payment, the premium JJDC paid for the common stock and estimated payments for ARO HBV drug material on hand and to be manufactured. This revenue will be recognized over the course of completing our management and oversight of the ongoing Phase onetwo clinical study for ARO HBV and of delivery of the drug material.
Our common shares outstanding at 09/30/2018 were 88,500,000.0. With that brief overview, I will turn the call back to Chris.
Speaker 2
Thanks, Ken. It's clear we've made great progress as a company in a short amount of time. Last year at this time, we were just preparing to file CTAs for the first product candidates leveraging the TRiM platform. Today there are three candidates in the clinic, ARO HPV, ARO AAT, and AMG eight ninety. Two of those, ARO HBV and ARO AAT, have already shown encouraging first in human readouts with mid stage studies on the horizon.
We also have two additional candidates, ARO ANG3 and ARO APOC3, approaching first in human studies, and additional candidates, ARO ENaC and ARO HIF2, planned for 2019. Looking forward, have equally ambitious goals for the future. We want to, 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.
I think we have proven that Arrowhead can execute with speed and precision, so I fully expect to accomplish these goals and more. Thanks again for joining us today. I would now like to open the call to your questions. Operator?
Speaker 0
Thank And our first question comes from the line of Maury Raycroft with Jefferies. Please go ahead.
Speaker 6
Hi, good afternoon and congrats on the progress. First question is just on AAT. Just clarifying, are you in the middle of ongoing pre IND discussions with FDA? And can you provide any insights into what you're considering or leaning toward for the endpoints, dosing and then the trial size?
Speaker 2
Sure. Bruce, do want to take that?
Speaker 3
Yeah, hi Maury. We are in discussions at, you know, certainly in the process of being in discussions with FDA. I really would never want to discuss any sort of specifics about what we or they are thinking about endpoints or even trial size. But we like the nature of the discussions and they're ongoing.
Speaker 6
Okay. And should we think about as far as timing goes, we think about the starting in first half of 'nineteen or second half? Any additional clarity there?
Speaker 2
Go ahead. Yes, sure. It's fair to expect an IND filing in the first quarter of twenty nineteen.
Speaker 6
Got it. Okay. And then just based on the maturing Phase I data that you've shown well, actually, I guess the data from ASLD for both AAT and HPV, just wondering if you're going to provide an update on that data at any later stage and when that could happen.
Speaker 3
Well, know, we will, I'm sure, continue to file abstracts with meetings like EASL and AASLD. I would expect that we'll continue to do It's always up to those organizations, of course, whether they accept those abstracts. But assuming they do, I think you can expect to see us, you know, at those meetings.
Speaker 6
Okay. And the last question is just on APOC3. You reported some preclinical data recently at the meeting. Just wondering if you can give a quick recap of the data. And it seems like you took biopsies from NHPs in the study to evaluate the APOC3 knockdown.
Would that be something that you'd have to do in the clinic as well?
Speaker 3
No. We'll be able to measure it in the periphery in the clinic. What we showed is, you know, first of all APOC3 is a small gene. It has poor homology between rodents and NHPs in humans. So to develop our trigger, we first of all had to have a transgenic mouse that incorporated the human APOC3 transgene.
And we showed very deep knockdown and a strong dose response in that transgenic mouse model. We then went into nonhuman primates. And the interesting thing there was that the knockdown that we saw was on the order of about 60% or so. And we had a couple possible explanations for this. You know, one is that it is known that APOC3 is made both in the intestine and the liver.
In humans, probably something on the order of 80 to 9090% of the APOC3s made in the liver. But it was unclear whether that ratio was different in the nonhuman primates. And in fact when we did the biopsy we were able to show that we were getting a ninety percent knockdown in the liver of the cinnows. And it basically demonstrated that in cinnos, and this is probably similar in rodents as well, probably 40 to 50% of the APOC3 comes from the intestine. But you know, that's a different ratio than in humans.
So in humans we're going to be able to measure the circulating APOC3. And of course we can also measure their triglycerides. So we will not have to do biopsies.
Speaker 6
Got it. Very helpful. Thank you very much.
Speaker 3
You're welcome.
Speaker 0
You. And our next question comes from Catherine Xu with William Blair. Please go ahead.
Speaker 7
Good afternoon. I have a couple questions. So last week, Spring Bank kind of revealed, a discovery program they have which is, some chirally pure anti science agent against the X protein specifically. So I'm just wondering, for ARO HBV, have you assayed activity against, the X, specifically? Just curious on that.
I know you have some data, but would love to hear your thoughts in light of that. And with regard to the AAT program, so assume that your toxicology, is six months, that is wrapping up, right now or next month. So the Phase II likely will be a six month in duration. I'm just wondering, is it possible or do you have the program going in a way that it can be followed up beyond that or, you know, extended into a longer term study? And also within six months, do you think you'll start to see histological reversal of the disease?
Speaker 4
Chris, Yeah, do want me to handle go ahead.
Speaker 3
Yeah, just in case people are confused, I'm actually at a different location. So first of all, with AAT, to answer that question first, Catherine, We did six month rat and nine month monkey in our chronic tox studies. And in fact, that's the duration required to be able to treat for an unlimited period of time. So we are not limited to six months or nine months of treatment. You know, assuming those studies are successfully reported out and acceptable to regulatory agencies, we could treat for as long as we want.
So six months is not a limitation for us once these studies are completed and accepted by regulatory authorities. You know, to the other part of that question, do we think six months is enough? That feels pretty short to me, to be honest with you. I think in six months it's possible that some of the changes that occur in the liver could improve. But it would be highly unlikely to see improvements in things of course like fibrosis.
But it probably is too fast even to have, you know, very complete improvement in globules for instance. So I think these studies are going to have to go longer than six months to really show the benefits in the liver that we want to see. So that's regarding AAT. Regarding X protein, so X protein is very hard to measure and study in vivo in whole animals. It's a little more straightforward to study in in vitro cell systems.
But we believe X protein is very important. We agree with Springbank in that regard. We designed our RNAi trigger in the X region to be able to hit X. That's clearly one of our targets. But it's not possible, at least currently, to study the X protein clinically.
It's really only studyable under relatively constrained preclinical, situations at this point.
Speaker 0
Thank you.
Speaker 3
You're welcome.
Speaker 0
Thank you. And our next question is from Ted Tenthoff with Piper Jaffray. Please go ahead.
Speaker 4
Great. Thank you very much. So a lot of my questions were answered. I wanted to come back to this revenue recognition. I think you said it would be about $190,000,000 basically through what period would that be recognized?
Speaker 5
It's going to be about $198,000,000 We are going to be recognizing that we anticipate over the next three quarters. So the first quarter of the fiscal year, October through June 30 of next year. So for your purposes, you can assume that it's basically going to be recorded ratably over that period.
Speaker 4
Great. Thank you very much.
Speaker 0
Thank you. And ladies and gentlemen, this concludes our Q and A session for today. I would like to turn the call back to Chris Antaloni for his final remarks.
Speaker 2
Thanks everyone for your attention today. And I wish you a happy holidays. And we look forward to seeing you in 2019.
Speaker 0
And with that, ladies and gentlemen, we appreciate you calling in on our conference today. You may now disconnect. Have a great day.