Arcturus Therapeutics Holdings Inc (ARCT) 2021 Q4 法說會逐字稿

Greetings. Welcome to the Arcturus Therapeutics Fourth Quarter and Full Year 2021 Earnings Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Deepankar Roy, Senior Director of Investor Relations. You may begin.

Thank you, Kyle. Good afternoon, and welcome to Arcturus Therapeutics Fourth Quarter and Full Year 2021 Financial Results and Corporate Update Call. Thank you all for joining us. Today's call will be led by Joseph Payne, President and CEO; Andy Sassine, our CFO; and Dr. Pad Chivukula, our CSO and COO.

Before we begin, I would like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of performance, and they involve known and unknown risks, uncertainties and assumptions that may cause actual results to vary. So performance and achievements differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today as well as the Risk Factors section in our Form 10-K filed with the SEC.

In addition, any forward-looking statements represent our views only as of the date such statements are made, February 28, 2022. And Arcturus specifically disclaims any obligation to update such statements to reflect future information, events or circumstances.

With that, I will now turn over the call to Joe. Joe?

Thank you, Deepankar. Good afternoon to all. Thank you for joining Arcturus' quarterly call today. Before we begin, I would just like to acknowledge that today is National Rare Disease Day, February 28. And given that 2 of our pipeline programs are rare diseases, that is OTC Deficiency, a rare liver disease and Cystic Fibrosis, a rare lung centric disease, I wanted to publicly express my gratitude to all those working diligently on these programs here at Arcturus and to the clinicians and patients and families on this national day of recognition.

Now on to our update about our recent progress. We have continued to make excellent progress advancing our mRNA-based vaccines and therapeutic candidates. I'll begin with a discussion of our vaccine programs targeting COVID-19.

So let's begin with ARCT-154, our most advanced program and a vaccine that is designed to protect against the SARS-CoV-2 variance of concern. This program is supported by encouraging clinical data, including the recent booster data we reported showing that a low dose of only 5 micrograms of ARCT-154 boosted or increased neutralizing antibody activity against the SARS-CoV-2 ancestral D614G and Omicron strains by 28 and 54 folds, respectively.

We are excited to announce today that our collaborator Vinbiocare, has completed an Emergency Use Authorization filing with the Vietnam Ministry of Health for ARCT-154. This represents a very important milestone for our company as we mature and strive towards becoming an integrated commercial stage global biopharmaceutical company.

ARCT-154 is a product of our self-amplifying mRNA technology or the trademark STARR platform. In addition, this vaccine includes an optimized mRNA sequence with multiple proprietary modifications to improve its stability half-life and increase its translation.

We believe that these modifications and others incorporated into ARCT-154, improve the immunogenicity profile of this vaccine candidate and may enable high levels of clinical efficacy, especially as a booster. ARCT-154 is designed to extend the duration of antigen expression, and this platform has shown robust T cell responses and high levels of humoral immunity in multiple preclinical models.

We've also been efficient in progressing 154 in clinical studies. We designed and developed this vaccine very rapidly based on our understanding of mutations in the clinically relevant variants circulating across the world. And we expeditiously move this program into the clinic in a combined Phase I, II, III study.

Earlier in this quarter, we announced highly encouraging immunogenicity Phase I/II booster data from our ARCT-154 program as well as our alternative ARCT-165 vaccine candidate. These data showed that when administered at low 5-microgram doses, at least 5 months following initial vaccination with Comirnaty, we observed robust increases of 54 and 47 fold, respectively, in neutralizing antibody responses against the Omicron variant for these 2 booster vaccine candidates in an exploratory microneutralization assay.

This is in addition to the data that showed broad coverage and encouraging neutralizing antibody activity of these candidates against the D614G ancestral beta, delta, and several other variants of concern and variants of interest using validated and exploratory neutralization assays.

These results provide us with confidence in the potential for ARCT-154 and to provide substantial clinical efficacy against a wide range of circulating variants. So supported by the strong data, our goal is to develop ARCT-154 as a broadly immunogenic vaccine that can be used for primary and booster vaccination. We aim to explore its potential use in populations currently seeking vaccination for initiation of or continuation of protection against severe COVID-19 disease.

We are working closely with our collaborator Vinbiocare to operationalize the Phase I/II/III study of ARCT-154 in Vietnam. The study objectives include the evaluation of safety, immunogenicity and efficacy of ARCT-154 against SARS-CoV-2 infection. All of the cohorts in the study, meaning Phase I, II, IIIa, IIIb and IIIc have all completed 2 doses of ARCT-154 or comparator given 28 days apart.

The safety and immunogenicity data from the first 1,000 participants of the Phase I/II/IIIa cohorts are included in the EUA application that was submitted today. Efficacy data from the pivotal trial will be subsequently submitted to the Ministry of Health in application for a potential full approval.

In addition, our global manufacturing footprint continues to mature and our technology transfer to Vinbiocare's manufacturing facility in Hanoi, Vietnam continues to progress toward anticipated production capacity of 200 million doses per year. We remind everyone that this trial and the development of the Hanoi manufacturing facility is fully sponsored and funded by Vinbiocare, and we are indeed grateful for their support.

I will now turn to ARCT-810, our therapeutic candidate for ornithine transcarbamylase deficiency, or OTC deficiency. OTC is a rare and serious disease with no approved treatments, that address the root cause of the disease. Our therapeutic candidate aims to restore expression of the normal ornithine transcarbamylase's enzyme in the liver of patients with OTC deficiency. ARCT-810 has the potential to restore urea cycle activity, prevent neurological damage and prevent the need for liver transplantation.

We previously completed a Phase I healthy volunteer dose escalation study with ARCT-810 and demonstrated that ARCT-810 administration was associated with favorable tolerability and an attractive pharmacokinetic profile. Lipid excipients were no longer observed in the plasma after 48 hours.

The doses we are now clinically evaluating are within the anticipated therapeutic range that we have estimated based upon our preclinical studies. I'm happy to report that the Phase Ib trial for adults with OTC deficiency is now identifying additional patients for screening after COVID-related delays, and we expect to complete dosing in the first cohort in the second quarter.

We have obtained approval from the United Kingdom Health Research Authority as well as from Belgium and Spain to initiate a Phase II multiple-dose clinical trial for ARCT-810. And we continue to conduct site start-up activities while seeking authorization in additional European countries. This is a randomized placebo-controlled double-blind study with a nested single and multiple ascending dose design that would enroll 24 adolescents and adults with OTC deficiency. We anticipate that Phase II screening will commence in the second quarter, and we expect to obtain interim data in the second half of 2022 in a subset of participants.

Moving now to our Cystic Fibrosis program. We have continued to progress the necessary preclinical studies to enable ARCT-032. This is our mRNA therapeutic candidate for Cystic Fibrosis to move into clinical studies. We anticipate the submission of a clinical trial application for ARCT-032 in the third quarter of 2022.

Our flu vaccine program, termed LUNAR-FLU, also continues to progress toward candidate selection and clinical development. We believe that self-amplifying mRNA vaccines have tremendous promise to address the gaps with the current flu vaccines, which often suffer from suboptimal efficacy and required lengthy manufacturing and release. In addition, mRNA-based vaccines potentially have the advantage of being able to be adapted through much more rapid mRNA manufacturing processes to target currently circulating flu strains.

We expect to make a final selection of our LUNAR-FLU development candidate this year with a self-amplifying STARR platform candidate and advance toward a clinical trial application in 2023.

In addition to these internally developed programs, Arcturus has also partnered several of our LUNAR therapeutic programs with some of the leading biopharmaceutical companies, including Ultragenyx and J&J and Takeda. The most advanced of these programs is a very promising therapeutic candidate for glycogen storage disease, which is currently being evaluated by Ultragenyx in a Phase I/II study.

I will now pass the call on to Andy, our CFO.

Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the fourth quarter and fiscal year 2021 and provides a summary and analysis of the year-over-year and sequential financial performance. Please reference our 10-K for more details on the financial performance.

I will go over our financials and present some operating metrics as we continue to transition to a late-stage clinical company with several assets in our pipeline. I will also provide some details regarding our manufacturing strategy as we prepare for the potential of Emergency Use Authorization in Vietnam. Finally, I will provide some insights regarding our cash position and expected run rate.

As you heard Joe mention, we had a very productive Q4 and 2021, including the completion of our clinical trial in Vietnam and encouraging human trial results in our ARCT-154 Booster program in Singapore and the [U.S.A.]

As you know, we partnered our ARCT-154 next-generation LUNAR-COV19 vaccine candidate in Vietnam with Vinbiocare. Vinbiotech is a part of the Vingroup, which is one of Vietnam's largest corporations. Vinbio is sponsoring and funding our Phase I, II, III study in Vietnam targeting COVID-19 and variants of concern. This partnership, including the trial and the collaboration around building a vaccine manufacturing facility in Hanoi resulted in significant cost savings of well over $200 million for Arcturus.

Our technology transfer activities remain on track for the facility to become operational later this year, with a capacity of over 200 million doses annually. We are also continuing to work with other manufacturing partners to mature our global footprint, including Europe, Japan, and the U.S.A.

Revenues from strategic alliances and collaboration for the fourth quarter of 2021 was $5.8 million, which increased sequentially by $3.4 million. This increase was due to the partial recognition of the $40 million payment we received from Vinbiocare for the manufacturing technology transfer agreement.

Total operating expenses for the fourth quarter were about $43 million, which declined approximately $10 million sequentially. This decline was primarily due to a sequential decline of $12.8 million in research and development expenses for the fourth quarter of 2021, which was $32.6 million. The decline was due to the reduction in manufacturing and clinical costs primarily associated with the LUNAR-COV19 program, including CMC requirements necessary for regulatory filings.

Net loss for the fourth quarter of 2021 was approximately $39 million or $1.47 per basic and diluted share. For the year, we reported a net loss of approximately $204 million or $7.74 per basic and diluted share. Our cash balance at the end of the fourth quarter was $370.5 million. And based on our current pipeline, our cash position is expected to be sufficient to support operations into late 2023.

I will now pass the call back to Joe.

Thanks, Andy. As we can see, we've had another productive quarter advancing our pipeline of messenger RNA vaccines and therapeutics. I guess, now is the right time to turn -- I guess, to turn the time over back to you, Kyle, our operator, to field questions.

(Operator Instructions) Our first question is from Yasmeen Rahimi with Piper Sandler.

Congrats on the emergency authorization being filed. So now with that behind you, can you maybe give us some color on when you should -- when you would be have the opportunity to present the data to us? And then have you had a chance to review the data so far with your partner Vinbiocare?

Great question, Yasmeen, thanks for calling in. As we realize that the data is owned by Vinbiocare and so we want to acknowledge that. We have had access to some clinical trial blinded data, but we have no access to unblinded data and no access to any data of any kind on the Phase IIIb portion of the trial and beyond. So that's where we are. There may be opportunities in the future to share the data publicly but after we get clearance from Vinbiocare and after they share that data with the Vietnam Ministry of Health.

Joe, maybe just to drill down because this is a question we get, like what's the timing process? Like now it has been filed, how long does it take for the review process? And then how many days or weeks can you wait before releasing it? So just kind of give us an idea of like each of these steps before you could share it with us?

Well, now that EUA has been submitted successfully, there's a period of time, of course, before that gets approved. We are guiding this quarter for the approval of the EUA. At that point of approval, that presents the first opportunity to share additional data pertaining to this program. So I think those would be the near-term order of events.

Just to make sure I understand, so let's say, on March 30, you get the EUA as accepted. Is it just a matter of a few days as soon as it's accepted that you could disclose the data to us?

It's a fair and appropriate question, but that would be ultimately under the responsibility of Vinbiocare. Of course, we'd like to work with them and share what's appropriate.

Our next question is from Brian Cheng with Cantor Fitzgerald.

For the 154 program (technical difficulty) kind of an expectation or any feedback from the regulators (technical difficulty)

Hey, Brian, you're breaking in and out a little bit.

So can you provide some color on whether you have any feedback from other regulators (technical difficulty) booster (technical difficulty)? And Singapore (technical difficulty) data from (technical difficulty) sufficient for you to get a green light as a booster (inaudible).

Sure. So I'm just going to repeat your question because it broke up a little bit, but I believe you're just trying to understand the regulatory approval strategy for boosters. And we're in the process of engaging and aligning multiple regulatory authorities around the globe, frankly. And we're determining trial requirements in real time for that. So once we have that feedback, that information and we have alignment there, then we'll be able to communicate that.

Okay. Just 1 quick 1 on stockpiling. Will the Hanoi facility that's operated by Vingroup be operational by the time your EUA comes through? And can you comment where you are in terms of stockpiling? Because it seems that your R&D expense this quarter have come down a fair bit.

Sure. So -- well, Vingroup is definitely funding the manufacturing facility, and I can comment that we are continuously assisting them in that effort. But the state-of-the-art facility is continuously being built. But with respect to specific updates on timing, it would be inappropriate for us to provide guidance for their facility that they're paying for and building.

But I can comment that we're actively helping them and assisting them in the process, and it's progressing. In terms of a specific date of when it will launch, we'd be looking to them to provide that guidance. It would just be inappropriate for us to do that. And then Andy, do you have another comment?

No. I did provide some color in my commentary that the facility should be operational sometime later this year. So hopefully, that will help give you some guidance with respect to when they anticipate going into production.

Our next question is from Seamus Fernandez with Guggenheim Securities. (Operator Instructions) And our next question will come from Nick Abbott with Wells Fargo.

Congratulations to you and your partners on the EUA. So obviously, the approval would be for a prime series. And you mentioned, Joe, the global booster strategy. But presumably, Vinbio has a booster strategy in mind for the local market. Can you talk about their plans for a booster approval strategy in Vietnam as well as perhaps adolescents and adults?

Yes. Vietnam has vaccinated the majority of their population with approximately 8 vaccines that have been approved locally. They've really -- it's been a concerted effort, as you can appreciate this past year or 2 to do so. But now it provides an opportunity to boost these folks, right?

So we haven't disclosed any details with respect to our booster strategy in Vietnam, but we have shared that we're actively engaged with the Vietnam Ministry of Health in an EUA application process. And we've also disclosed that we're working with the -- Vinbiocare on the development of a manufacturing facility. So there's some indirect implications of that. But we haven't provided any direct guidance as to the timing of any sort of boosters being manufactured or distributed.

So is it reasonable to assume that Vinbiocare could be conducting a booster trial in Vietnam?

Yes. What we've disclosed is that we are talking with multiple regulatory authorities, including the Vietnam Ministry of Health. We have active trials with 154 in the U.S. and Singapore, and there's other regulatory agencies that we're communicating with, right, and determining trial requirements and trying to harmonize and get alignment there. Once we have that information collected, we'll be better suited to communicate it.

We plan on providing some more clarity...

Andy has a comment, too.

Yes. We plan on providing more clarity for our booster strategy later on this quarter. So stay tuned.

Okay. And then, Joe, you've mentioned the fact that data is sort of owned by -- the Phase III data is owned by Vinbio. What is the process for you to share that data with potential partners outside of Vietnam?

Well, we haven't seen any of the unblinded or blinded data pertaining to a Phase IIIb or beyond. But we've had the opportunity to see some of the blinded data for the earlier clinical trials that remain to be encouraging. And we have the freedom to share that with potential partners, for example. Is that what you're asking?

Yes. Yes. I mean with them owning the data, obviously, that you don't perhaps have the free hand that you would otherwise to share the data. So it's encouraging that you can. But can you update us on perhaps discussions outside of Vietnam with potential partners?

Well, it's challenging always to give specific guidance on that. Arcturus has always been active in its strategic discussions with potential partners, right? But we don't provide specific guidance on that.

Our next question is from Kumar Raja with Brookline.

I'm (inaudible) for Kumar. So with regards to the Omicron trial, could you provide us some color on the ongoing enrollments in Europe? And also, do you think the current unfortunate war situation that is ongoing there might impact enrollment? And how are you preparing for it?

Are you speaking to the enrollment of our therapeutics programs or rare disease programs or for OTC deficiency?

Yes. Right.

Yes. Well, what's unique about this Phase II trial is that it's a multidose trial. So it's -- because of that, the participants are looking to have something significant to happen, right, potentially or functionally curing their disease because it's a multiple dose trial. So it's easier to recruit people for that reason. At least that's our thinking at this point.

We have 3, I think it's United Kingdom and Belgium and Spain. We're looking to add additional countries, as we've mentioned in the guidance. As long (inaudible) no surprising waves of COVID that can interrupt things, we should be okay with respect to recruitment. So that's what we're guiding, and we're still well on track for sharing some interim clinical data for our OTC program in the second half of this year.

Okay. Great. So you don't think the current war situation will spill over to impacting the recruitment process?

No, no. Yes. So we don't have any recruitment going on in Ukraine or neighboring countries or anything like that. So we're fine there.

Excellent. Okay. With regards to the Cystic Fibrosis program, could you indicate what remains to be done for the CTA applications?

Yes. So we're in the process of doing all the tox studies, the IND, or in this case, the CTA-enabling studies for that program. And now we have tighter guidance there for Q3 for a CTA to be filed. So we're just in the final steps that we've gone through previously and other programs in terms of just establishing the appropriate -- the support of toxicology data that's required for these submissions.

So we feel very comfortable and confident that we can meet that Q3 guidance for filing the CTA for Cystic Fibrosis. But there's nothing atypical about the data being collected.

Our next question is from Seamus Fernandez with Guggenheim.

This is Evan Wang for Seamus. Congrats on the EUA submission. Sorry, I got a little disconnected earlier, but maybe this was already asked, but can you talk about next events within the ARCT-154, Vietnam trial? And when -- I guess, what the emphasis on the Phase IIIb and IIIc programs. When may be -- when those programs or portions be complete and when may be a perfect time where Vinbio or Arcturus may share data? Another question is, I guess, how confident is Arcturus in bringing forward ARCT-154 in ex Vietnam markets? And then I have a follow-up.

Okay. Well, with respect to timing of what's next milestones in Vietnam, we've just filed an EUA application, right, or Vinbiocare did on our behalf. And so we're looking to have that approved. Our guidance that we're providing is the approval of the EUA in the first quarter of this year by the -- sometime next month.

And then looking beyond that, the Phase IIIb data or efficacy data, that is expected to be included or anticipated to be included in some sort of full approval application that will be later this year. Once we have that bolted on with an EUA approval that can be combined for a full approval application. And we haven't provided tight guidance, except just later this year as soon as we can, of course.

With respect to what other countries will honor and respect an emergency use approval and/or full approval from Vietnam, that's a great question. We're looking into that, of course, whether it's other Southeast Asian countries or developing nations or Vietnam is well networked with the WHO and all those nations as well. So we're looking into those opportunities. And then we're developing a booster regulatory strategy with multiple regulatory agencies globally, not only with Vietnam but with other -- we're collecting information to try to gain alignment with our regulatory strategy for the booster label as well. Did that address your question, Seamus?

Yes, that's helpful. And can you talk on the OTC program? I know that Phase II has been authorized since, I think, mid last year. How has patient identification efforts been since authorization? And how is the company prioritizing enrollment in the Phase Ib in the Phase II study?

So this is referring to the OTC deficiency program. And so we're starting to -- as you can understand, now that COVID is being controlled in many of these countries where we're doing trials, we're starting to recapture momentum and success on the recruitment side of things. And so we've provided some guidance there with not only Phase Ib, we're starting to reinvigorate recruitment efforts and screening efforts on the Phase Ib trial.

But also in Phase 2 in Europe, in the United Kingdom, Spain and Belgium and some additional countries that we guided towards that we're going to be adding. So I think we're well -- not just I think, we're guiding as a company, as a corporation that we are going to be having some interim data in the second half of this year. I hope that will be biological proof of concept for the OTC program.

Our next question is from Steve Seedhouse with Raymond James.

This is Ryan Deschner on for Steve Seedhouse. I wanted to ask you guys, is the vaccine efficacy event-based study for 021, still feasible or a possibility in Singapore given the high primary vaccination rate there? And would you consider event-based studies in other potential geographies at this point?

No. I think for -- placebo-controlled vaccine efficacy trials, I think, are trial design of the past going forward. But with respect to -- that question is a complicated one because it depends on the regulatory agency or the country we're talking to.

So we've completed a vaccine efficacy trial for 154 but with respect to 021, we're look -- we've partnered that with a global entity that's standing sort of late-stage clinical trial efforts there, and we'll be looking to them with respect to the Phase 3 trial and the respective design of that trial.

Our next question is from Ed Arce with H.C. Wainwright.

Congratulations on the progress this quarter. This is Thomas Yip asking a couple of questions for Ed. So given that data for your 154 vaccine program, it sounds like it's mostly in the hands of Vinbio. And as you just pointed out, our 021 development is still ongoing with a global entity. Can you discuss what geographical area would this upcoming study be? And then I have 1 more question.

The geographical area for which study? For 154?

For 021, we know 154 is primarily in Vietnam.

Yes. The 021 study, that's -- all sort of future updates with respect to the clinical trial design and location of that study is going to be provided by the global entity. And so we'll be looking to them for that.

154 is more advanced, of course. We announced today an emergency use approval filing in Vietnam. So that one is closer to reaching approval. But that's where our preliminary focus is going to be on with respect to our vaccine franchise, will be around 154.

Understood. And then perhaps 1 question about the OTC program. You outlined the interim data in the second half of this year is still on target. Can you describe what kind of data should we expect? Is it a safety data or perhaps some efficacy data?

Yes. I hope all of the above, right? All we've guided is interim data in a subset of the participants. Of course, we're going to be looking not only at safety in OTC division patients. but there's multiple biomarkers associated with that disease, including ammonia and the plasma and orotic acid in the urine. And urea itself or ureagenesis can be tracked. This is a urea cycle disorder. So if any of that data proves out the concept, we'll be excited to share it. But interim data is what we've guided for the second half of this year.

Our next question is from Yasmeen Rahimi with Piper Sandler.

This is directed to Andy. Andy, can you comment on whether Vinbiocare has scaled up manufacturing now as they have seen the data and filed? Do you see those activities still being ramped up?

No. Thanks for coming back on and asking that question. As we alluded to in our commentary, we had indicated that we needed to get CMC approval in manufacture of some of these runs. So you would have to assume that we're trying to remain consistent here in the U.S. with the 154 production and also in Europe with our partners.

And so hopefully, as we alluded to, we expect the facility in Vietnam to be able to start production later this year. We haven't been able to get specific guidance as to when this year, but they're on that path to hopefully getting it done, and we continue to work very closely with them in sharing the technology transfer information with their team.

We have reached the end of the question-and-answer session. And I will now turn the call over to Joseph Payne, President and CEO, for closing remarks.

Just thanks, everyone, for calling in, and we look forward to reconnecting either at a conference or as always, you can reach out to IR, and we can address any follow-up questions you have, if you couldn't think of it at this time. So it's bye for now until we meet again. Bye.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.