Arrowhead Pharmaceuticals - Earnings Call - Q4 2020

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,

Speaker 1

Thank you, Chris. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal year ended 09/30/2020. With us today from management are President and CEO, Doctor. Christopher Anzalone, who will provide an overview of the quarter Doctor. Javier San Martin, Chief Medical Officer, who will discuss our clinical programs and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

In addition, James Hazard, our Chief Commercial Officer and Doctor. James Hamilton, who was recently promoted to Senior Vice President and Head of Discovery and Translational Medicine, will both be available during the Q and A session of today's call. Before we begin, I would like to remind you that comments made during today's call contain certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, 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 and commercialization 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 Chris Anzalone, President and CEO of the company.

Chris? Thanks, Vince.

Speaker 2

Good afternoon, everyone, and thank you for joining us today. This is our final earnings call of 2020. So in addition to discussing our progress for the quarter and plans for 2021, I would also like to speak a bit more broadly about our philosophy and model. We're building a different kind of biotech company. We are not focused on a single therapeutic area, but rather on any disease with unmet medical need that is addressable with our technology.

We are not focused solely on rare diseases, but rather address large and small populations. We do not rely solely on partners for late stage clinical development and commercialization, but rather we use partnering strategically and judiciously to enable us to build substantial value by commercializing our own drugs. We are fast, probably the fastest in the business from idea to the clinic and we intend to remain fast as we grow. That devotion to speed also applies to the pipeline expansion. I believe we have the fastest growing pipeline in our field and we do not intend to slow that input just because studies.

We are not in the me too product business where we only provide incremental benefit to patients, rather we seek to be pioneers. We believe that everything in our clinical pipeline represents the first RNAi approach to each target in humans. We don't operate like a normal pharmaceutical company. We are not burdened by endless gating committees, but rather empower our people to make decisions. Operationally, think of us as a startup in $7,000,000,000 market cap clothing.

And we intend to continue in this nimble and creative fashion even as we become a substantially larger and more valuable company. We see this as the most effective way to build a business and most importantly to serve our patients. Every day that we can shave off the development process puts our patients one day closer to a new treatment they need. This is a powerful motivator indeed for us because the value of our work depends on the number of lives we touch. I mention all of this now because we are at a moment of transition for our company.

We have created a lot of value to this point by building what we believe will soon be the largest RNAi based clinical pipeline in biopharma. As we move into later stage clinical studies, our focus needs to expand to include commercial planning. Ultimately, is the reason we're in this business and we need to do that well. However, we also need to continue to do the things in discovery and early development that have made us successful while we build our commercial presence. On average, we expect to continue to introduce three new drug candidates into the clinical studies every year and we expect to be able to address a new cell type every eighteen to twenty four months.

Think of the potential value embedded in those statements. I expect that we will have 10 clinical programs by summer, spanning four different cell types. That could grow to 20 clinical programs spanning five or six cell types just four years from now. We expect this to drive substantial value because we expect some of those to become products that we will commercialize ourselves and some can be partners to fund development and commercial endeavors. Our ability to rapidly grow our pipeline enables this hybrid model of establishing a limited number of partnerships in order to fund wholly owned programs.

We see this as a powerful model because it allows for the rapid value creation associated with commercializing wholly owned drugs, while financing this expensive endeavor largely through non dilutive capital from partnered programs. So even as we approach and ultimately expand our commercial presence, our pipeline strategy should continue to be an important part of our value proposition. This is not only due to the brute force of the large numbers of potential drugs in our clinical studies, but should also reflect our expectations of success. There are two components to this. First, we seek to choose only well validated targets.

These are gene targets where a consensus of experts agree that reducing expression will likely have positive therapeutic benefits. By focusing on this, we believe we enter clinical studies with reduced biology relative to other candidates. Second, the RNAi mechanism and experience with the TRiM platform can provide additional wind at our back. As we continue to treat more patients with drug candidates built on the TRiM platform and see consistent activity and positive safety profile, our confidence increases that other candidates targeting different genes will also be successful. RNAi doesn't care what gene is being silenced.

Once we validate our ability to reduce expression of a given gene in a given cell type, we have confidence that we can replicate that in other gene targets. We believe this is a powerful and scalable concept that gives us confidence that a larger percentage of our candidates entering the clinic will ultimately become drugs compared to traditional small molecules. We hope that as we approach and become a commercial company, the market will properly value our growing pipeline. As I mentioned, it will continue to be an important part of our value proposition and we expect it to remain a substantial differentiator versus our competitors. With that, let's move into an overview of the last quarter.

During the last few months, our accomplishments included the following. One, we hosted a KOL seminar on ARO ENaC, our first lung targeted candidate to treat cystic fibrosis and we initiated dosing in a Phase III clinical study. Two, we earned a $20,000,000 milestone payment from Amgen following the start of a Phase II study of AMG eight ninety, now called opaciran, which a partner program targeting Lp to treat cardiovascular disease. Three, we initiated a Phase Ib study for ARO HIF2, our first tumor targeted candidate to treat renal cell carcinoma. Four, we presented new data on Phase onetwo studies of both of our wholly owned cardiometabolic candidates ARO APOC3 and ARO ANG3 at multiple medical meetings, including the European Society of Cardiology and the American Heart Association meetings, and subsequently hosted KOL webinars to discuss the data and our plans for their future development.

Five, we presented Phase II data at AASLD on ARO AAT, our candidate against liver disease associated with alpha-one antitrypsin deficiency, showing that ARO AAT strongly reduced the production of mutant Z AAT protein and led to improvements in multiple biomarkers of alpha-one liver disease. And six, we signed an agreement with Takeda to co develop and co commercialize ARO AAT, which includes $300,000,000 upfront, dollars $740,000,000 in milestone payments, a fifty-fifty profit sharing agreement in The U. S. And 20% to 25% royalties on sales outside The U. S.

This is a lot of progress in a short period of time and even more impressive with the backdrop of disruptions caused by COVID-nineteen. Let's take a look at the Takeda deal. It's a good example of our selective partnering strategy. We expect ARO AAT to benefit from Takeda's global footprint, existing infrastructure, expertise and eighteen year history in the AAT market to enable a rapid launch. If approved, ARO AAT will join Takeda's global commercially available products including GLASSIA, ERALAST, ENTYVIO and our growing GI pipeline.

Takeda is clearly invested and committed to these areas and has a proven track record of success. The deal is also important in terms of capital. In addition to the $300,000,000 upfront, we have potential access to substantial capital in the near, mid and long term with a possible stream of milestone payments, profit sharing and royalties. When this is added to the potential milestone payments and royalties from our partnerships with Amgen and Janssen, we feel our balance sheet is in very strong position. This allows us to confidently move our wholly owned programs into later stage development and ultimately commercialization.

This deal is also a step in an ongoing process toward rationalizing our growing pipeline, where we look to build commercial infrastructure in areas where we expect multiple drugs such as cardiometabolic and pulmonary. We will look for synergy and leverage when deciding where to focus commercial build out. So let's take a look at the cardiometabolic pipeline. We presented data recently at and also held two KOL webinars to discuss these programs. Javier will discuss these specifically in a moment, but I want to talk about where we are with these programs at a high level.

The data across single and multiple doses and in healthy volunteers as well as various patient populations has been very strong and highly consistent. In addition, ARO APOC3 and ARO ANG3 are showing unique profiles. What I mean by that is that we believe each drug may ultimately give cardiologists more tools to tailor their treatments to the specific lipid profiles of their patients. We also think they will fill holes in the current treatment paradigm and may potentially address lipid targets that have not been adequately addressed. For instance, there are more than four million patients in The U.

With severe hypertriglyceridemia and given published data, we would expect the overwhelming majority of them would not reach normal triglyceride levels with currently available treatments. There are also approximately thirty million to forty million addressable patients in The U. S. With mixed dyslipidemia, which is elevated triglycerides and elevated LDL cholesterol. We have become increasingly confident that these programs we have become increasingly confident in these programs and in our ability to move them to commercialization.

We've also been able to move forward in our other clinical programs. ARO HSD, our drug candidate against NASH and alcoholic hepatitis is now in the patient portion of the Phase onetwo study. ARO HIF2, our candidate against renal cell carcinoma and ARO ENaC, our candidate against cystic fibrosis are both being dosed in patients as well. Progress in ARO HIF2 and ARO ENaC is particularly important because it has been our goal to gain clinical proof of concept and then move into a rapid pipeline expansion phase for tumor and pulmonary tissue types. We think we are just on the cusp of that phase now.

To that end, we continue to work in parallel on multiple additional targets in tumor and pulmonary and also to expand our reach into new tissue types beyond these. Before I move on to 2021, I'd like to say a few words about the novel coronavirus. As with the rest of the world, we were excited to see the interim results from some of the COVID-nineteen vaccine studies. Multiple safe and effective vaccines will be a humanitarian triumph and we applaud the impressive work done by several companies. From an Arrowhead standpoint, some may ask if progress on the vaccines affects our internal program.

The answer is not really. We continue to make progress on an antiviral approach that is designed to work across different coronaviruses. The history of SARS, MERS and now the current coronavirus suggests that the world should expect some type of coronavirus outbreak approximately every seven years. As such, we are studying conserved regions in known coronaviruses with the goal of creating an inhalable antiviral that could be applied to future outbreaks as well as the current virus should there be blind spots with the vaccines. We are still in early animal studies, but I hope that we will have an idea about the feasibility of this approach in 2021.

Moving to the future, there's a lot you should expect from us during the final month of the year and into 2021. Our expectations include the following: one, we are on track to file a CTA for ARO Lung two at the end of this year. This is the second program in our pulmonary franchise and is designed to treat COPD by inhibiting an undisclosed target in pulmonary epithelia. Two, we are on pace to potentially have preliminary data readouts by the middle of twenty twenty one for ARO HSD, ARO HIF2 and ARO ENaC. Three, during the first half of twenty twenty one, we also intend to engage with the FDA and other regulators to discuss pivotal trial study design and endpoints for ARO AAT.

Based on the impressive data that came out of our 2002 open label study, it appeared that patients had large reductions in Z AAT monomer, which we expected, but also had improvements in other downstream markers such as polymer, globules, LFTs and others. These discussions may allow us to find a more streamlined and accelerated path to a potential approval. There also may be additional open label data in 2021 for patients with twelve month and eighteen month repeat biopsies. Four, we also intend to initiate multiple studies in the first half of twenty twenty one for both of our cardiometabolic programs. For ARO ANG3 in mixed dyslipidemia patients, we are working on a Phase 2b dose finding study.

For ARO APOC3, we are working to start three studies.

Speaker 0

A

Speaker 2

Phase a Phase 2b dose finding study in patients with triglycerides ranging

Speaker 3

from 150

Speaker 2

to four ninety nine, a Phase 2b dose finding study in patients with triglycerides over 500, and a Phase three study in patients with familial chylomicronemia syndrome or FCS. Five, in the second half of twenty twenty one, we intend to file a CTA for our first muscle targeted RNAi therapeutic. That program has moved forward very nicely, and we are eager to talk more about that and what the data look like. Six, for our partnered programs with Amgen and Janssen, we can't provide specific guidance on timing, but we continue to be pleased with their progress and look forward to additional future progress. Seven, lastly, we are working on several other undisclosed programs and will likely have another CTA filed for another program in 2021.

With that overview, I'd now like to turn the call over to Doctor. Javier San Martin. Javier?

Speaker 4

Thank you, Chris, and good afternoon to everybody on the call. I want to highlight data from the ARO AAT, ARO APOC3 and ARO ANG3 programs since we had important readouts for each during the last quarter. Before I do that, I will give a very quick review of the status of the earlier stage clinical program. ARO HSC is our investigational candidate for the potential treatment of alcohol and non alcohol related liver disease. The genetic validation is strong for inhibiting the target HSD17B13 in NASH cirrhosis, alcoholic hepatitis and cirrhosis patients.

We're conducting a Phase onetwo single and multiple multiple dose escalation study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamic effect of ARO HSD in normal healthy volunteers as well as in patients with NASH or suspected NASH. We have complete single dose escalation in healthy volunteers and are currently enrolling the multiple dose patient portion of the study in NASH or suspected NASH patients. This study includes liver biopsy to assess drug activity. ARO HIF2 is designed to treat clear cell renal cell carcinoma and we're currently dosing patients in the Phase 1b dose finding clinical study in up to eighteen patients with advanced renal cell carcinoma. The study is designed to evaluate the safety of ARO HIF2 and to determine the recommended Phase two dose, but also assessing pharmacokinetics and preliminary efficacy based on RECIST and post dose tumor expression of HIF2 alpha and HIF associated genes.

Our last early stage clinical program is ARO ENaC designed to treat cystic fibrosis. ARO ENaC is in a Phase onetwo dose escalation study to evaluate the safety, tolerability and pharmacokinetic effect of ARO ENaC in up to 24 normal healthy volunteers and to evaluate safety, tolerability and efficacy in up to thirty patients with cystic fibrosis. We have dose escalated multiple times as planned in healthy volunteers and so far we're pleased with the safety and tolerability results. This is always an important finding for a new investigational drug and even more so for a new platform. We're now enrolling sixty five percent patients in the multiple dose portion of the study.

Now I will move on to the recent data readouts. For ARO AAT, our investigational RNAi therapeutic being developed as a treatment for the rare genetic liver disease associated with alpha-one antitrypsin deficiency. We presented data at ASLD on our 2002 open label study. To review the study fully enrolled with 16 participants in three cohorts. Four patients in cohort one received two hundred milligrams of ARO AAT and will have a repeat biopsy after six and eighteen months of treatment.

Cohort 1b is the same, but patients received a one hundred milligram dose. And eight patients in Cohort two received two hundred milligrams of ARO AAT and we have repeat biopsy after twelve twenty four months of treatment. At HLD, we reported on six months results from Cohort one. We think the data strongly suggest that ARO AAT is doing what it's designed to do, which is reduce the production of the misfolded mutant Z AAT protein. The results also indicate that the liver may have the ability to clear out accumulated CAAT and begin to heal itself faster than anticipated.

Importantly, we saw the following: eighty six percent to ninety three percent reduction in serum CAAT protein. All patients demonstrated greater than 80% reduction in liver CAAT monomers. Three zero four patients had decreasing liver global involvement. And three zero four patients demonstrated reduction in CAAT polymers with a range of 68% to 97%. All patients showed ALT reduction ranging from 36% to 66%.

So we think that these are all positive indication of a strong pharmacodynamic response and improvement in liver health following just three doses of AAT. As Chris mentioned, we are currently preparing to engage with FDA and other regulatory agencies in the first half of twenty twenty one to discuss areas where the ARO AAT program may potentially be streamlined and accelerated. Let's now move to our cardiometabolic programs, ARO APOC3 and ARO ANG3. We held two KOL webinars last week to discuss the data and these programs in some depth. We were fortunate to have Doctor.

Christy Valentine from Baylor College of Medicine and Doctor. Ira Goldberg from the NYU School of Medicine join us and provide their perspective and valuable insights. Replace of these events are available on the Investors section of our website for those who missed the late presentation. Let's start with ARO APOC3, our candidate targeting lipoprotein in C3 being developed as a potential treatment for patients with hypertriglyceridemia. The current clinical study is in Phase onetwo single and multiple dose study to evaluate safety, tolerability, pharmacokinetics and pharmacodynamic effects of ARO APOC3.

There is a single dose and a multiple dose portion of the study in adult healthy volunteers and a multi dose proportion of the study in patients with hypertriglyceridemia, including ECOHOR enrolling up to twenty pyelomicronemia patients. At the American Heart Association, reported data from the multiple dose patients portion of the study. The results were very impressive and highly encouraging to us as we prepare to begin the next stage of development for the program in the first half of year. In patients with hypertriglyceridemia, ARO APOC3 treatment resulted in robust and sustained reduction in triglycerides and non HDL cholesterol with increase in HDL cholesterol. Specifically, we observed maximum mean reduction of 80% to 99% in APOC3, maximum mean reduction of 74% to 92% in TG or triglyceride and 39% to 62% reduction in non HDL cholesterol.

And maximum mean increase of 95% to 115% in HDL cholesterol. In patients with chylomicronemia, fifty milligrams of ARO APOC3 achieved similar levels of reduction of APOC3 and changes in key lipid parameters. We observed maximum mean reduction of 98% in Apoc3, maximum mean reduction of 88% in TG and 59% in non HDL cholesterol and a maximum increase of 120% in HDL cholesterol. Importantly, the effect of ARO APOC3 were maintained for greater than twelve weeks post second dose regardless of the patient population. We think this indicates that once quarterly or less frequent dose might be possible.

Our other wholly owned cardiometabolic candidate is ARO ANG3 targeting angiopoietin like protein three or ANGPTL3 and is being developed as a potential treatment for patients with mixed dyslipidemia. The current clinical study is a Phase onetwo single and multiple dose study to evaluate safety, tolerability, pharmacokinetics and pharmacodynamics effect. At the American Heart Association and the recent webinar, we also presented data on the multiple dose patient portion of the ARO ANG3 study. As with ARO APOC3, we were thrilled with the clinical results and move forward with a program with a lot of confidence in its potential to help patients with mixed dyslipidemia. The data shows that in heterozygous familial hypercholesterolemia and patients with non FH and non FH patient, ARO ANG3 resulted in mean reduction of seventy eight percent to ninety percent of ANGPTL3, reduction of 29% to 47% on triglycerides, 29% to 35% in LDL cholesterol and a reduction of 31% to 35% on non HDL cholesterol.

In high triglyceride patients, ARO ANG3 resulted in mean reduction of 83% for HPT L3, 75% for triglycerides and 56% for non HDL cholesterol. As we ARO APOC3, the effect of ARO ANG3 was maintained for greater than twelve weeks post second dose regardless of patient population. We believe this indicates that once quarterly or less frequent dosing might be processed. These results provide further support that the RNAi mechanism in general and more specifically, therapy developed using our CLEAN platform tend to perform very consistently regardless of the gene type. So far, we have experienced very good translation of preclinical data to human clinical data with respect to safety, tolerability and activity.

This gives us great confidence in each new program we develop even at very early stages. The next steps are to study in larger and longer clinical trials where the inhibition of the respective gene targets leads to the desired clinical benefit in specific patient population. As Chris mentioned earlier, we try to select targets at the discovery stage with generally well understood biology and strong support from human genetic studies. This provides us with even more confidence that we're reducing risk to the extent possible and maximizing our probability of success. I will now turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer.

Ken?

Speaker 5

Thank you, Javier, and good afternoon, everyone. As we reported today, our net loss for fiscal twenty twenty was $84,600,000 or $0.84 per share based on 100,700,000.0 weighted average diluted shares outstanding. This compares with net income of $68,000,000 or $0.69 per share based on 98,600,000.0 weighted average diluted shares outstanding for fiscal twenty nineteen. Revenue for fiscal twenty twenty was $88,000,000 compared to $168,800,000 for fiscal twenty nineteen. Revenue in both periods primarily relates to the recognition of a portion of the upfront payments milestones for our license and collaboration agreements with Janssen.

Revenue from the Janssen agreement is being recognized based on our estimate of the proportion of effort expended towards fulfilling our performance obligations, primarily overseeing the completion of the Phase onetwo HBV clinical trial. We expect the remaining $19,000,000 of deferred revenue to be recognized in the first half of fiscal twenty twenty one. Any additional milestones achieved with Janssen or Amgen would be additive to this projection. In addition, current period revenue also included the $20,000,000 milestone payment we received from Amgen upon the initiation of their Phase two clinical trial for AMG eight ninety, which is now referred to as olpasiran. Total operating expenses for the year ended 09/30/2020 were $181,100,000 compared to $107,600,000 for the year ended September 3039.

This increase is primarily due to increased non cash stock compensation expense. Stock compensation expense has increased because the valuation of new stock option and restricted stock award grants has increased with the growth of our stock price. Additionally, stock compensation expense increased due to the timing of the achievement of certain performance based awards in each period. The increase in total operating expenses was also driven by increased clinical trial cost as our pipeline of clinical candidates has increased and increased personnel costs in both R and D and G and A as our headcount continues to grow. Net cash used by operating activities in fiscal twenty twenty was $95,400,000 compared with net cash provided by operating activities of $173,000,000 in fiscal twenty nineteen.

The operating cash generated in fiscal twenty nineteen reflects the $175,000,000 upfront payments and $225,000,000 milestone payments received from Janssen, offset by cash used for operations. Turning to our balance sheet. Our cash and investments balances totaled $453,000,000 at 09/30/2020 compared to $302,900,000 at September 3039. The increase in our cash and investments was primarily due to the December 2019 equity financing we completed, which generated $250,500,000 in net cash proceeds to the company. In addition to the cash and investments, assets discussed as of 09/30/2020, we also anticipate receiving $300,000,000 from the upfront payment from Takeda by the end of this calendar year or shortly thereafter.

Similar to our agreement with Janssen, we anticipate recognizing this upfront payment as revenue over the course of completing our performance obligations within the deal, which primarily consists of managing the ongoing ARO AAT clinical studies and providing certain manufacturing services. Looking ahead to 2021, we expect our full year cash burn to be in the range of 200,000,000 to $250,000,000 This increase is due to growth throughout the company. Our program costs are expected to increase as ARO ANG3 and ARO APOC3 begin larger Phase II clinical trials and our newer programs continue to advance. Our headcount increased in 2020 and we expect continued increases in 2021, which drives increases in payroll related facility costs, discovery R and D and G and A expenses. Our common shares outstanding at 09/30/2020 were $102,400,000 With that brief overview, I will now turn the call back to Chris.

Speaker 2

Thanks, Ken. There's no question we've had a productive recent period. The more clinical experience we gain with the TRiM system, the more confident we become that we are on the path to providing physicians with potentially transformational therapies that may make a big difference in the lives of millions of That's important and gratifying. We also feel confident that we have the right strategy. We believe the combination of focusing on well validated targets, our speed from ideas to the clinic, our ability to address a new cell type every eighteen to twenty four months, the rapid nature of our pipeline expansion and our selective partnering model together provide our shareholders with the potential for rapid value creation.

So what's next for us? We think our initial commercial focus on cardiometabolic and pulmonary will allow us to build out the necessary infrastructure over the coming years in a focused and effective manner, but also in a way that is ever conscious of capital efficiency. That has been an Arrowhead hallmark, and we intend for that to continue. And lastly, we are eager to gain clinical validation for our platform's ability to target tissues outside the liver. This includes lung, tumor, muscle and other tissue types that we have not yet disclosed.

RNAi works well in hepatocytes, we know that. But our goal has never been simply to address liver based disease. Rather, we have always worked to bring RNAi wherever it is needed, and we are on the brink of demonstrating that right now. We are indeed building a different kind of biotech company, and we look forward to continuing to share our progress. Thanks again for joining us today.

I would now like to open the call to your questions. Operator?

Speaker 0

Thank you. And our first question comes from the line of Sean Egan with Citi. Your line is now open.

Speaker 6

Hi, guys. Thank you for the updates today and for taking my question. As investors start to do work for 2021, can you maybe set expectations for the ENaC program in regards to what data endpoints there'll be? I know FEV1 has come up a few times. I guess what level of benefit there would give you confidence?

Speaker 2

And do you

Speaker 6

guys also plan to test for ENaC knockdown? Or are there any other approaches you can use to validate proof of concept?

Speaker 2

Sure. Javier, would you like to address that?

Speaker 4

Yes. So let me start with the

Speaker 3

comment about by when we're going

Speaker 4

to have data next year, 2021. And it's likely to be either at the end of the first half or maybe early Q3 of twenty twenty one. With regard to what we think will be success, well, as you know, one of the key efficacy endpoint is FEV1. And we have a study that is large enough that hopefully, we'll be able to see a change from baseline in the range of anywhere between, I would say, five percent and fifteen percent. The first drug that was approved in this disease was with an increase in FEV1 of approximately five percent.

The more current drugs approved, as you know, is more in the range of ten percent or thirteen percent. So we're looking for that proof of concept. Seeing a movement in FEV1 in a Phase I study, I think, will be considered success in our mind.

Speaker 2

And let me also expand upon that. So when we look at our FEV1 results, we are not comparing those to TRIKAFTA. At least our initial patient populations that we're going after will be those patients who are not eligible for TRIKAFTA. Either they are null, null patients and so they have no CFTR to correct or they are refractory to TRIKAFTA or the like. So the bar here is really nothing, right?

These patients have very limited therapeutic options. And so I think that if we can show a five percent improvement in FEV1, that's a big thing for those patients. And I think that suggests that we've got a drug.

Speaker 6

Great. Maybe one follow-up question on the ARO ENaC program. Like when you consider the physical barrier present in CF patients, I guess what gives you confidence that the drug will get to the target epithelial cells?

Speaker 4

Well, so of course, we don't have preclinical data in this model. So we cannot answer the question definitively. One of the things that we're doing to prevent that to happen is the approach to dosing that we will dose or we are dosing patients with three consecutive days every three weeks. So that allow us to hopefully see that the drug reach out to the anatomical areas in the lung where it's necessary. So I think that is one of the things that we're doing to really try to maximize that the drug will reach the target tissue.

Speaker 2

And when we first got into pulmonary, our first question or among our first questions was whether or not we're able to get through the mucus. And our KOLs were nonplussed by that. They said, you know what, given the size and charge of that molecule, we don't expect any problem to get to the mucus. And sure enough, in animal models, whether it be rodents or NHPs or sheep, we found that to be the case. And so that was heartening.

We then asked what about CF mucus? We know that's dehydrated. We know that that's a bit different. Unfortunately, as Javier says, there's not a good animal model for that. However, we have done in vitro analysis using actual CF mucus and it does appear that we're able to get through that.

So we're optimistic. You never know until you know. And so look, this first study will tell us an awful lot about the translatability of this platform. But we go into this reasonably confident given good preclinical data.

Speaker 6

Great. Thank you so much.

Speaker 2

You're welcome.

Speaker 0

Thank you. And our next question comes from the line of Mario Raycroft with Jefferies. Your line is now open.

Speaker 7

Hi, everyone. Congrats on the progress and thanks for taking my questions. First one is also on ENaC and HIF2 alpha also. So for both programs, can you provide more specifics on where you're at with dosing? Are you at a therapeutically relevant dose?

And is there anything else you can say on safety at this point?

Speaker 2

Yes. So there's not so much we can say on that. It's been our policy, as you know, Maury, not to give blow by blow. We have given some interim data before, but in a more in different sort of environment. So we can tell you that we are dosing patients in the ARO ENaC study.

We are at that portion of the study. So that is encouraging. GIV2Alpha, of course, we're dosing patients. There's not much else I can tell you at this point, don't think. With ARO HIF2, we have not seen any data yet.

Those data are batched. And so at some point, I hope in the near future, we will see some early data that will indicate whether or not we're seeing knockdown at these first doses. But at this point, we just don't even know internally. With ARO ENaC, we have just begun the patient portion. And so we don't have data there yet to know if we are in a therapeutic range.

That's the big unknown for both of these. We have a good idea about what the therapeutic range would be in animal models, but we'll just see how this translates. And this really is uncharted territory for us. We have a good idea about how things translate from rodents to NHP to humans in hepatocytes. This, of course, is our first foray into solid tumors and pulmonary epithelial cells.

So we'll learn a heck of a lot over the next few months.

Speaker 7

Got it. That's helpful perspective. And then for the initial data updates midyear twenty twenty one, have you decided if you're going to report at a conference or in a press release? And then any thoughts on the amount of patients that you're going to include in those initial data updates?

Speaker 2

Yes. It's really too early to tell there, unfortunately. When we look at the calendar, we it appears that we will have some of these preliminary data by the middle of the year. But how much we're going to have is not clear. And therefore, what sort of venue that we can share these data are not clear.

And so unfortunately, I can't give you a good answer for that at this point.

Speaker 7

Okay. Understood.

Speaker 4

Thanks,

Speaker 2

Yes, you're welcome. We appear to be having some technical difficulties and the question queue has disappeared. So we'll give everyone a few minutes to get back into that queue because right now

Speaker 4

it seems to be gone.

Speaker 2

Okay. It's now reconstituting itself. Go ahead, You can move on to the next question.

Speaker 0

Our next question comes from the line of Alicia Young with Cantor. Your line is now open.

Speaker 8

Hey, guys. Thanks for taking my question. I thought the whole thing went dead for a second, but I'm glad to see that we're all back up and running. I just want to talk a little bit about and it's a little bit big picture just how you're kind of outside the extrahepatic liver approach differs from some of your competitors. I know you don't want give away the whole secret sauce, but I guess what are some inherent like big picture differences and things that you think about?

I mean many companies say it is something they're pursuing. You guys are pursuing it in a very robust way. So I just wanted to I've gotten this question before, so I just wanted to pose it to you guys. And then also can you talk a little bit about your confidence on going after HIF, I mean, as those studies get going? I know it's sometimes been a little tricky in RNA and kind of in that world of hemoch, but just wanted to get kind of your perspective with your technology.

Speaker 2

Sure. So the first question, let's see. We have been thinking about as you know, Alethia, you have followed us for a bit. We've been thinking about and working on bringing RNAi outside the liver for probably a decade now. This spans our even our prior platform that we were developing.

Always knew this was going to be an important value inflection point. So we wanted to be there. So a lot of this is just brute force. We've been working on this for a decade now. And so we look like an overnight success, except for it's a bit of ten year overnight.

So that's more broadly. More specifically, of course, part of that is building a library of linker chemistries that we can use to optimize delivery. It involves establishing a library of targeting moieties that we can use. And maybe most importantly, it involves our ability to design these very potent RNAi triggers. Again, as you've heard us talk about in the past, Alethia, we have a set of algorithms and rules that are proprietary that enable us to design triggers that may not be potent in vitro, but will be potent in vivo.

And look, that's important as it relates to getting to hepatocytes because it does allow us to make more potent hepatocyte directed constructs. Look at the Lp data that Amgen showed, that was a very potent appears to be a very potent sequence. But it's absolutely critical when you're looking at going outside the liver because we know that there's no GalNAc analog, if you will, in other cell types. There's nothing there's no front door like that in other cells that we've ever found. And so we need to squeeze all the potency we can out of these constructs.

So that ability has been just critical in our ability to rapidly expand into lung and solid tumor and next year muscle cells. We hope to continue that. As we talked about, this is a big part of our value proposition. This is a big part of our model. Now the next question was around HIF-two alpha.

So are you asking about what we need to show vis a vis the Peloton Merck drug? Is that what you're curious about?

Speaker 8

Well, a little bit, yes. Kind of just to get a flavor and context of that, yes.

Speaker 2

Sure. So look, that's been a great program. Data have looked pretty good, and that has helped to further validate a target that we've been excited about also for, gosh, almost a decade. There is an opening, however. They have seen some anemia that we may see less of.

It's too early to tell, but we may see less of because we're targeted. But at the end of the day, I think we just need to show a well tolerated and active drug. That's a big enough market that there's plenty of room for a couple of us. I don't I'm not absolutely focused on showing X percentage better responsiveness than the competitor drug. I think we just need to be on the board.

And we're hopeful we can be there. Because as again, as we've talked about in the past, that program has value for us in two ways. One, we think it's a good drug and we think it could be a helpful drug in renal cell carcinoma. We think it could play well with others, because we don't expect a lot of overlapping AEs. So that is exciting to us.

But second, it's a good proof of concept. If we can show that we can knock down HIF2 alpha in these metastases, it will suggest to us that we have a platform, that we have a franchise. And then we can go after other gene targets and potentially other solid tumor types. As we said in the past, our targeting strategy here is not specific to RCC metastases, but rather we believe it could allow us to get into solid tumors more broadly.

Speaker 8

Great. Thanks.

Speaker 2

Sure. Thank you.

Speaker 0

Thank you. And our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

Speaker 9

Thank you. Just another question here on extrahepatic tissues you plan on targeting. Could you just walk us through your thoughts beyond lung and muscle with your strategy? And on the skeletal muscle targeted asset, which is entering the clinic in mid-twenty twenty one, when we might get to see preclinical data here? And any thoughts you could provide us on the initial indications that you may be targeting?

Speaker 2

Boy, You asked a lot of questions there, and I really can't answer any of those. Again, we've talked about solid tumor, of course, and skeletal muscle and lung. We are working on other cell types. We've not disclosed any of those yet.

And so we're not prepared to disclose any of those at this point. But we clearly have others that we're working on. As we talked about, this is a big part of our growth strategy. What we have done for hepatocytes, we want to do for lung and solid tumor and muscle and for fill in the blank number of additional cell types. With respect to gosh, I'm sorry, was the other question?

For Muscle. Targeted muscles, sorry, yes, right. Again, we haven't talked about that yet. We gave some we have mentioned some early data, I think, at our R and D Day last year. We haven't really shared any non clinical data since then.

I do expect that we will do it, but we're just not prepared to do it quite yet. And I'm not being coy. I don't know when we're going to do it. We feel confident that sometime in the summer, I believe, we will be filing a CTA for that asset. And so some similar upstream of that, we'll talk about it in more depth.

But at this point, we're just not quite prepared to do that yet.

Speaker 9

Thank you.

Speaker 2

Sure.

Speaker 0

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

Speaker 5

Great. Thanks guys. And congrats on all the progress. Really exciting just to see how far the platform has come along and see the recognition. My question is really had to do with the cardiovascular program.

So it's interesting to see Amgen mention LPI on a in a press release this morning. I'm trying to get a sense for what the costs of these Phase three and Phase 2b could be appreciating that you gave the guidance of 200,000,000 to $250,000,000 next year. When it comes to an outcome study, what of cost should we be thinking? Thanks very much.

Speaker 2

Yes. Again, I apologize, Ted. These are important questions, but I can't answer them. We've not given guidance on what we think those costs are going to be. At this point, we've talked about how large we think those studies could be the Phase 2b studies for the large outcome study for ARO ANG3, it's not even clear what the number of those patients are going to be yet.

They probably range anywhere from eight thousand if you look at Amarin studies or medicines company studies all the way up to maybe 15,000. And so we need to see what our Phase 2b data look like before we determine how large that study is going have to be. And then at that point, we might be able to give you a bit of guidance on what we think that's going to For your model right now, I think you could plug in what those costs generally are for a company like us, for the Amarin type study or the medicines company type study. But I can't give you better guidance than that, unfortunately.

Speaker 5

No, that's okay. I think that makes sense with the potency of the molecule. Great. Thank you very much. Looking forward to exciting, 2021.

Speaker 2

You're welcome. Thanks, Ted.

Speaker 0

Thank you. And our next question comes from the line of Mali Fuhr with SVB Leerink. Your line is now open.

Speaker 4

Hey, guys. Thanks for taking

Speaker 7

the question. I guess building off of what Ted asked earlier. So I know you can't give specific guidance around the cost of some of these trials, some of which are a few years away. So of course, pretty tough to make estimates that far out. But you've got a lot of trials going through early, mid, late stages.

As you think about some of these assets moving forward, give us a sense of what your metrics are in terms of gating to move assets forward as opposed to deprioritizing or shutting down programs? And how do you think about that at each stage of development?

Speaker 2

Sure. So I think the real question there is strategic, right? I don't think that have I don't think that we're considering shutting down any of the programs right now. I think the question is do we partner these programs or do we hold on to them internally? Right now, it feels like we can build out a commercial infrastructure for pulmonary and cardiometabolic.

We have a good line of sight, I think, on half a dozen potential pulmonary drugs that we can develop. There are 16,000 pulmonologists in The U. S. And so we like that leverage of addressing a fairly large market with only about 16,000 touch points where we can sell any number drugs into it. That makes sense to us.

Cardiometabolic as well. Look, we think ARO ANG3 and ARO APOC3 are potentially big drugs. And we could see ourselves building a sales force addressing cardiologists and lipid clinics to sell those two drugs. That makes sense to us. As we go forward, those will not be the last two areas that we're going to build commercial infrastructure around.

I think that's for sure. But right now, our current clinical pipeline, we can make that forecast. As we bring in additional candidates into the clinic and as we address new cell types, we can expand that going forward. But right now that makes sense to us. So then when you look at our assets outside of that, it doesn't mean that we're going to partner all those.

It just means that we've got a little bit of a higher bar, I suppose, when we think about building another sales force there. So say, take for instance, HIF-two alpha. If that's our only oncology drug, it makes no sense for us to build a whole sales force to sell one drug. If that becomes a franchise like we think it could, that could make sense for us to add on a commercial franchise there. It could also make sense to do a hybrid approach of finding the right oncology partner to help us build that out and also establish commercial chops.

It's it's a bit too early to tell at this point.

Speaker 0

And our next question comes from the line of Luca Izzi with RBC Capital.

Speaker 3

Terrific. Just two quick ones. The first one, I think I saw on clinicaltrials.gov that the size of the HIF-two ALPHA trial has been recently reduced from 40 patients to 18 patients. So wondering if you have any color there. And maybe more broadly thoughts on partnering, I think you just articulated, but any thoughts there or big picture thoughts would be helpful.

And then the second is, I think we've seen some data for Ionis on the ENaC, of course, antisense oligonucleotide. Again, wondering if you have any thoughts on that data set. Thank you.

Speaker 2

Sure. Javier, do you want to take the clinical trials as well as the ENaC and then

Speaker 4

I'll circle back. Sure. So the HIF-two study, correct. We changed and amended protocol early this year. I think it was March or April.

And the reason was to reassess really what we wanted to learn from that study. And there's two really things that we care about. Number one, safety. And number two, if we're able to get into the cells and knock down HIF2. In order to do that, we didn't need really 40 patients.

Initially, it was, I guess, very ambitious program to really evaluate different doses of sequences. And then we made the decision to say, let's do the first thing first, which is prove the concept that we get to the tumor. And we knock down the gene as we done with all the liver targets. So that's the reason to do that, get to proof of concept and safety read as early as possible.

Speaker 2

Okay. And so I'll think about then I'll piggyback on that for the HIF2 partnering. So look, we're excited about that franchise and about that platform. Having said that, oncology is hard. And so in a perfect world, we can achieve proof of concept for HIF2 alpha to show that we can do this, and then bring in the right oncology partner to help us prioritize our next set of targets and then do some with that partner and then maybe some by ourselves.

That's where we are right now. Do we have to partner HIF to the candidate itself? Not necessarily, but I do hope that the data will be compelling enough to enable us to blow out that platform, if you will. And the best way to do that would be at least in part with a partner. And so Javier, you want to talk about the ENaC with Ionis?

Speaker 4

Yes. So we look at that data carefully when they disclosed that a month or so ago. And my opinion on the data is that it's not as consistent as initially I think we thought because it is four dose groups and only one show a movement within about 50% node down. And that wasn't the highest dose. It was the second highest dose.

So I think first class, it's interesting. It got our attention, and we're working on it. We decided to really work on see if we can replicate and show our data. So we're in that process to think about or work on the development of the proper assay. And we're thinking about how to do this in the clinical trial, whether it's going to be normal healthy volunteers and or patients.

So we're working on it. It was interesting. But again, as I said, I have my question mark about that data at this point.

Speaker 3

Terrific. Thank you.

Speaker 2

You're welcome.

Speaker 0

Thank you. And our next question comes from the line of Madhu Kumar with Baird. Your line is now open.

Speaker 3

Hey, everyone. Thanks for taking our questions. So I guess our first one is kind of the elephant in the room, which is the REEF-one trial with J and J and hepatitis B. So kind of by our back of the envelope calculations near the end of last year is when we might expect kind of the forty eight weeks of treatment from that trial to kind of conclude plus some degree of number crunching. Do we expect to get visibility from J and J about the kind of timing for the release of at least the forty eight week treatment data from REEF-one?

Like how should you think about any kind of data cadence from that hepatitis B trial?

Speaker 2

Thanks, Buddy. So it's funny. So you asked about you mentioned the elephant in the room. I was thinking, which elephant is that? And the REAP1 was not it didn't even come to my mind.

Okay. So I can't give any guidance on that. You'll have to look at J and J for that. As I recall, it was forty eight weeks of treatment and then six months of follow-up. And so that's the best I can give you at this point.

I can tell you, and we've talked about it in the past, we're really excited about that drug candidate. We're really excited about J and J. We think that they have been extraordinarily fast and thoughtful about all these trials that they're starting. It's multinational. And so all that makes us really excited to be their partner, but I can't give you any guidance on when those data might come out.

Speaker 3

Okay. And then moving on to AAT. So you mentioned here, you mentioned before this idea of streamlining kind of clinical development of AAT based on the effects you've seen in the open label extension. So I mean, how are you thinking about that? Are there some kind of like nominal precedents we should be looking at for kind of endpoint comparisons or kind of composite endpoints that might come to play in a trial in ALPHA1 antitrypsin liver disease?

Speaker 2

So Javier is probably dying to answer that question, but I can't let him answer it at this point. Here's the We were so excited about those data for a lot of reasons, the least of which is that suggest that this drug is doing what we wanted it to do, in fact, it faster than we expected. And so we are going with those data and probably some additional data to the FDA to talk about changing endpoints and changing size and maybe changing the duration of the study. Until we have those discussions, it's probably not appropriate for us to speculate on the specifics of what those changes could be. I don't want to get out in front of this conversation.

We've had a very good collaborative relationship with the FDA as it relates to this program. We expect this to continue to be collaborative. And I just don't want to jeopardize that. I want to have that discussion, an open discussion with them and then come back to you and tell you what we have decided together.

Speaker 3

Macro. So you mentioned at the beginning of the call the idea of going after targets where there is kind of validation from the outside scientific community. So what does that exactly mean? Are we talking kind of genetic validation? Are we talking like earlier kind of iterations of therapy?

And like how do think about that moving forward, kind of what you need for a given target to get you all excited about it?

Speaker 2

Yes. I think it's all those things, right? I think it is early data from some other drugs that looks good, but because of safety reasons off target safety reasons, they couldn't go forward. I think a GWAS analysis with all of the increasing amount of GWAS data that are coming out, there's an awful lot of important genetic data that can validate a target. Think HSD, think to a lesser extent, but still ENaC.

And also experimental data, there are a number of targets that have been studied in animal models, but for one reason or another, couldn't be druggable in humans. So look, we're just looking this is a very as you know, this is a business full of risk and we're just looking where we can lop off risk. And we think if we can remove or at least limit target risk, that's a good thing for us. And so we don't you've heard me say this before, we should not be in the target validation business. When we are, you need to shake me by the lapels and remind me of that because I think this is an important thing.

This is an important luxury that we have at least at this point, especially given that we can go outside the liver. We've got all these new tissues now. And so we can go through an awful lot of validated targets before we have to start taking target risk, I think.

Speaker 3

Okay. And one last one. How do you think about multi organ targeting and what the opportunity space is where you could go after targets that are expressed for more than one tissue?

Speaker 2

Multi organ targeting? So with one construct addressing different cell types, is that the question?

Speaker 3

Maybe not one. Maybe it would be the same target by targeting but going after knockdown of that gene across multiple different tissue types at once?

Speaker 2

Sure. We're not doing that, not right now. But yes, for some diseases, certainly, that would be of interest. That's we to limit complexity. What you talk about is elegant, but complex.

So I don't think that again, I think that there are enough good targets out there right now that we don't have to introduce that level of complexity. That may change at some point. But right now, that's not a real focus of ours.

Speaker 3

Got you.

Speaker 2

Okay. Thanks very much. Thank you.

Speaker 0

And our next question comes from the line of Mayank Mamtani with B. Riley Securities. Your line is now open.

Speaker 10

Hey, good afternoon, team. Thanks for taking our question and congrats on a productive quarter. So if I may ask another friend in the room type of question. So Chris, which program you think is going to be the first to market in your view? And how does Zhiyun think about building a commercial organization across cardiometabolic and pulmonary franchises?

Like which program are you thinking would get would cross the finish line first given all the different Gantt charts you guys are looking at?

Speaker 2

Yes, that's a good question. APOC3 against FCS could be a relatively near or relatively speaking, near term market opportunity. As talked about on the KOL webinar, we're thinking that could be a 60 or so patient pivotal study. We're a bit ahead of ourselves now because we haven't even started that study yet. But that feels to me like that could be near ish term.

A wildcard here could be ARO ENaC. Again, don't want to get out of my skis because we haven't seen any data yet. But should those data be exciting? Should the data in this Phase onetwo study suggest that we have something here? It could be that we could move directly into a Phase twothree study.

The earliest that could be, would be the end of next year because we don't have tox coverage until then, but that's a possibility. Sorry, the other wildcard here would partnered programs, of course AAT. A big possibility here is we'll see how good Javier is. Once we have those discussions with the FDA and other regulators, have a good idea about whether or not we can shorten up that time to market. I think that we can make a very compelling argument as to why we could do that.

And so that's another possible one. I don't know if you're talking only about wholly owned or more broadly speaking, but I guess that runs the gamut of partnered and wholly owned.

Speaker 10

And also how you build the commercial organization. I guess the data and some of these inflection points will drive a lot of that. Is that of fair?

Speaker 2

Is the question about when we start to build the commercial organization?

Speaker 10

Yes, essentially. Like I'm thinking more about the spend, right? How to think about 2021, 2020 SG two and A and how should we think about that?

Speaker 2

Yes, I can't give any guidance on that at this point. Let us get into the Phase three study with FCS. Let's see how fast that can enroll and then we can have a better idea about what we're looking at. Of course, AAT, we're not going build a commercial organization there. We'll be working Takeda's commercial organization.

And then Enac, again, it's just a bit too early. Give us a bit of time. Hopefully, next year, we will we can have a better idea about time frame and then have a better idea about spend for the commercial build out.

Speaker 10

Understood. And then just two quick follow ups. Could you address the ARO HSD trial progress and you are in patient cohort, but I'm assuming you're seeing some liver enzyme data at the minimum. What is the data cadence disclosure and confirm if only NASH cirrhosis patients are in there, there's no alcoholic cirrhotics? And my final question, if you've narrowed down your three pronged R and D effort in COVID to just direct antiviral?

Or are you doing the are you doing other approaches also in COVID? Sure.

Speaker 2

Thanks for those questions. So let me go let me start with COVID and go backwards. So we are still, interrogating some anti inflammatory strategies, in large part because that coincides with developing these anti inflammatory medicines for other disease areas. And so that just works well. And so we're still pursuing that as we pursue the antiviral approach for hopefully for broader coronaviruses.

Now, someone have gone. What was the first question? HSD. HSD, sorry, you're right. Okay.

So HSD, that's a tough one. As you may know, there's no known circulating biomarker. And so we are really so we have to rely on biopsies, and we're just looking for gene knockdown. This in most of our as you know, most of our Phase III studies, we're looking for not just safety and finding a dose, but we're looking for other activity measures. Here, we're just looking to find a dose.

And so we'll be taking biopsies and looking at knockdown. And then based on that, we can we will take a dose or two forward into a patient study.

Speaker 1

And for enrollment, that's just NASH, expected NASH, no alcoholic hepatitis.

Speaker 2

Right. Thank you.

Speaker 3

Great. Thank you.

Speaker 2

You're welcome.

Speaker 0

Thank you. And we have time for one more question. So our last question comes from the line of Patrick Trujillo with H. C. Wainwright.

Your line is now open.

Speaker 11

Thanks. Good afternoon. I have a few follow ups. First one is on NASH. So just regarding the Phase onetwo trial in NASH, can you remind us if participants in this study are expected to be confirmed NAFLD or NASH patients and if it is to be confirmed by FibroScan or biopsy or some other methodology?

And then, secondly, can you tell us how you think about the regulatory bar in NASH, specifically as it regards to 2018 guidance in Phase 2b and three trials against the backdrop of some of these recent challenges in drug development in the space? And then finally, can you talk about what mechanisms do you believe, if any, could be synergistic with ARO HSD and potential combination treatment of NASH?

Speaker 4

Javier? Just repeat the first one of the three questions.

Speaker 11

Yes. The first one is just on the Phase III trial in NASH. If you can remind participants in the study are expected to be confirmed NAFLD or confirmed NASH patients?

Speaker 4

Got it. So thank you. We are enrolling patients that we have suspected NASH and that's a broad definition that includes the MRI. So the FibroScan the MRI data in terms of liver fat and metabolic syndrome and baseline LST. So it's a combination of those three things, but we do not require to have confirmed an FLD of NASH.

But most of people who will have those clinical features are likely to have an FLD. If someone have a biopsy prior to the study that's defined as NASH, then that patient will be enrolled in the study. Well, the broader question about clinical development in NASH, of course, is a very complex situation. And as you know, large pharma companies or mid sized pharma companies are working on this. The development of the guidance took easily a year ten years or so to get to where they are right now.

And it is complex. The whole endpoint that they are asking for to be approved is complex because the way people read this biopsy, the category of fibrosis level and all those complexities. So we're at the very beginning of our journey. We're looking at the proof of concept that ARO HST is doing what it's supposed to. And at that point, we need to think carefully how to develop a drug for NASH.

And as we understand better, perhaps the mechanism of action, we may be able to select the patient population in a more smart fashion. But with regard to the overall development plan, Phase II, Phase III biopsies and what is necessary to be approved, from now we may need to follow what is being proposed as guidance.

Speaker 1

Last question is on synergy with other mechanisms or agents.

Speaker 8

Well,

Speaker 4

NASH seems to be a disease that can start up with different starting point and evolve via different mechanism. And when you look at broadly all the drugs in development, you can try to target different aspects of the disease, those who are more metabolic oriented, more inflammation oriented or more fibrotic oriented. Where are we in that mix? We don't know. We don't think that maybe we're in the metabolic side.

So that could be an interesting and clinically like in my opinion like a scenario how to go about this. But I think we need to wait. We need to learn more about our own growth and how the field of NASH evolves in the next couple of years.

Speaker 11

Yes. And if I may, just one follow-up on the imaging and biopsy and evaluation of patients for NASH. Can you talk about the advances in evaluation of non invasive imaging or biomarkers that can enable potentially quicker enrollment of mid and later stage NASH studies as compared to what we've been accustomed to historically and where we are in that process?

Speaker 4

James, would you like to sort of answer that question?

Speaker 12

Sure, sure. I can take a stab at that. Certainly, if there is another option, an alternative to liver biopsy, something like MRI PDFF or MRE that would be preferable. Those at least in the setting of MRE, that may not be something that's quite ready for prime time as an approvable endpoint. But looking down the road, I mean, MRI PDFF is already used a lot in clinical studies, Phase II clinical studies.

And I would suspect that MRE will become more commonly looked at as a key endpoint in NASH studies or other studies of liver disease broadly down the road.

Speaker 11

That's helpful. Thank you very much.

Speaker 0

Thank you. And this does conclude today's question and answer session. I would now like to turn the call back to Chris Anzalone for any closing remarks.

Speaker 2

Okay. Well, thanks, everyone, for participating today and listening to the call. I hope that you all have a happy and safe Thanksgiving weekend.

Speaker 0

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.