Arrowhead Pharmaceuticals Inc (ARWR) 2014 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Arrowhead Research fiscal 2014 fourth-quarter year-end financial results conference call.

(Operator Instructions)

I will now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Thank you. Good afternoon everyone, and thank you for joining us today to discuss Arrowhead's results for its FY14 fourth quarter and year ended September 30, 2014. With us today from Management, our President and CEO, Dr. Christopher Anzalone; Chief Operating Officer and Head of R&D, Dr. Bruce Given; Chief Financial Officer, Ken Myszkowski. Management will provide a brief overview of the quarter and will then open up the call to your questions.

Before we begin, I would like to remind you that comments made during today's call may contain certain forward-looking statements with 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 but are not limited to statements regarding the anticipated safety and/or efficacy of ARC-520 and our other clinical programs, as well as anticipated timing for study enrollment and completion. They represent Management's current expectations and are inherently uncertain. Thus actual results may differ materially.

Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today's call. You should refer to the discussions under risks factors in Arrowhead's annual report on Form 10-K and Company's quarterly reports on Form 10-Q for additional matters to be considered in this regard. That said, I'd like to turn the call over to Dr. Christopher Anzalone, President and CEO of the Company. Chris?

Thanks, Vince. Good afternoon everyone, and thank you for joining us today. The 2014 fiscal year was one of progress and expansion for Arrowhead.

We pushed our first candidate, ARC-520, into the clinic. We began a rapid pipeline expansion with the introduction of our next candidate, ARC-AAT. And we made important corporate progress on multiple fronts, such as strengthening our balance sheet.

Let us begin with ARC-520. We completed a first demand, Phase 1 study in nine cohorts that assess safety and tolerability of doses ranging from 0.01 mgs to 4 mgs per kg in a total of 54 subjects. There were no dropouts for adverse events, no serious adverse events, or adverse events rated as severe.

Neither the incidents nor severity of AEs was different between the treatment groups and placebo. And we did not see any dose limiting toxicities. ARC-520 and the underlying DPC delivery system appears to be well-tolerated at all dose levels studied.

This is a strong and important statement. A substantial unknown for any new candidate and platform entering clinical studies is whether a safety signal will emerge that was not predicted in animal models. The positive safety profile we have seen represents a significant derisking event for ARC-520 and a broader DPC platform.

With confidence in the safety and tolerability of ARC-520, we moved into a Phase 2a dose-finding study in order to characterize single-dose activity in chronic HBV patients. Specifically, we are learning the safety profile of ARC-520 in HBV patients and how deeply various doses of ARC-520 will suppress a specific viral protein, the surface antigen, or S-antigen.

This study is ongoing, but we have completed dosing 24 patients in three initial cohorts, 1, 2, and 3 mgs per kg. We have presented data from 1 and 2 mgs per kg. And we are still following patients from the 3 mg per kg cohort, which is still blinded.

We have begun screening patients for enrollment in an additional cohort of eight patients at 4 mgs per kg. Several important findings are emerging. First, the safety profile of ARC-520 appears to be similar in patients as in healthy volunteers.

Second, ARC-520 is clearly active in decreasing production of S-antigen. And third, the duration of effect is longer than we expected, which has very positive implications for upcoming multidose Phase 2b studies.

These are good data. As far as we know, this is the first reliable report demonstrating clear reduction of S-antigen in humans after a single dose. As such and because many believe that decrease in S-antigen could lead to a functional cure of chronic HBV, physicians and HBV experts we spoke with at the recent AASLD liver meeting shared our excitement.

We reported mean peak knockdown of 39% with 1 mg per kg of ARC-520 and 51% with 2 mg per kg. Simply put, this has been a lofty and unmet goal in the HBV field for years. And we just accomplished it.

With these preliminary data, let me tell you why we are so confident about the program. Our goal is not to clear S-antigen directly with ARC-520, but rather to decrease it to a level that derepresses the immune system, such as it may take over and control the virus.

If successful, this is potentially a route to functional cure. Because no drug has been able to do this consistently, the precise level of reduction required to enable this process is unknown.

Before we started the single-dose II-A study in patients, our goal was to find a dose in humans that peaks at 90% reduction. This somewhat arbitrary goal was set because we expected a U-shaped knockdown curve, characterized by rapid reduction, followed by equally rapid release, such that 30 days after dosing S-antigen levels would be approaching baseline.

We reasoned that as long as S-antigen levels had not returned to baseline by the time of the next dose, we might achieve an additive dynamic over time that, over time, would give us a sustained reduction profile. What we are seeing, however, is a more drawn out L-shaped knockdown curve, where reduction in S-antigen is sustained over a relatively long period of time.

In fact, mean peak knockdown at 2 mgs per kg did not even occur until after 30 days postdosing. Therefore, we expect monthly dosing to produce a stepdown or additive effect because subsequent dosing will be acting on top of sustained activity from prior doses.

We have seen this additive dynamic in animal models and expect to see it with repeat dosing in humans. In fact, other RNAi companies have used daily so-called loading doses in humans to create an additive stepdown effect on gene knockdown.

Our monthly dosing could give us a similar effect, but with far less frequent dosing, given our long duration of action. This provides us with the potential ability to achieve exactly what our experts believe is important. That is, sustained and deep reduction of S-antigen over time.

In addition, remember that 1 and 2 mgs per kg are just the first two doses of an ongoing dose escalation study. We have already completed dosing the 3 mgs per kg cohort and are screening for the 4 mgs per kg cohort.

Therefore, we have two powerful tools to achieve sustained and deep knockdown, the additive effect we expect to see upon multi-dosing, and deeper knockdown we expect to see as we increase dose. This may be viewed in the context of a favorable safety profile that has not produced dose limiting toxicities in any dose studied. We believe this is a good position to be in.

We plan to complete the Phase 2a, which we now expect to include 3 and 4 mgs per kg dose cohorts and present a full picture of the study results when they are available. Depending upon the pace of enrollment, this may be available around the time of EASL conference in April of 2015. But that will depend on enrollment speed, which we do not control.

There is much we do not know about ARC-520 and how to optimize its effectiveness as a therapy. We are just now starting to scratch the surface. The best way to begin chipping away at how to address chronic HBV is to move into multidose studies as soon as we can.

We plan to begin regulatory submissions before the end of this year in support of these studies. We will have clinical sites in the US, Western Europe, and Asia in order to gain access to a large number of patients and a variety of HBV genotypes.

Multiple parallel studies are currently contemplated, including ARC-520 in combination with entecavir or tenofovir, as well as combination studies with different immunostimulatory agents and various dosing regimens. We are pioneers in this field, so I expect that each study will open new questions and present new possible strategies to attack the virus.

As such, the multiple Phase 2b studies will be necessarily iterative. Consider our addition of new studies that today we may not even imagine as indicative of strength not of weakness.

We are looking for functional cures during the Phase 2b studies. And the way to unlock as much value as possible for ARC-520 is to follow the data and build as large and diverse a data set as possible.

Let's now move to ARC-AAT. During the year, we expanded our pipeline and nominated ARC-AAT as our next candidate for the treatment of liver disease associated with a genetic mutation that causes Alpha-1 Antitrypsin Deficiency.

According to the patient advocacy group, the Alpha-1 Foundation, there may be as many as 100,000 potential patients in the US. So this could represent a relatively large orphan drug population.

Further, there is no current treatment for liver disease associated with Alpha-1 Antitrypsin Deficiency. At AASLD, we presented pre-clinical data showing that ARC-AAT can induce deep levels of target knockdown in established animal models.

The interest in this approach was such that we were assigned a plenary session spot and highlighted as one of only 11 most important abstracts at the meeting by the association president. We also demonstrated that ARC-AAT could maintain 80% to 90% knockdown in non-human primates when dosed every six weeks. We recently filed in Australia for approval to begin a Phase 1 study of ARC-AAT.

Moving from our pipeline progress to corporate progress, during FY14, we strengthened our balance sheet with equity financings totaling approximately $172.6 million in net proceeds. This allows us to expand the scope of ARC-520 Phase 2b and conduct several studies in parallel that answer key questions about the drug.

More broadly, a strong balance sheet allows us to move our candidates forward independently and retain more of the economics for our shareholders than if we were forced to seek a partner at an early stage. We also hired additional staff in key areas, including manufacturing, toxicology, chemistry, biology, quality assurance, regulatory and clinical operations, to support rapid development of ARC-520, ARC-AAT, and additional clinical candidates.

We took steps to improve our exposure to institutions by upgrading our NASDAQ listing, the NASDAQ global select market. And during the year, we were also added to the broad-market Russell 3000 Index and the small-cap Russell 2000 Index.

We are very pleased with the progress and results from the ARC-520 clinical studies and the ARC-AAT preclinical studies. As a product and a platform Company, lessons learned from one drug candidate helped to inform development and derisk additional candidates.

We believe we are moving past some of the key early risks of drug development, which bodes well for us and for our shareholders as we enter mid-stage studies of ARC-520, and as we embark on a period of pipeline expansion that starts with ARC-AAT. With that overview, I would now like to turn the call over to our COO and Head of Development, Dr. Bruce Given. Bruce?

Thanks, Chris, and good afternoon, everyone. We made a lot of progress in 2014 in our lead candidate ARC-520 in addition to expanding our pipeline to include ARC-AAT.

It's a testament to the potential of both product candidates that we were selected to present data on ARC-520 in a late breaker poster session and on ARC-AAT in a plenary session at AASLD earlier this month. The following has reviewed these data.

We completed nine dose cohorts in our Phase 1 trial of ARC-520. The study was designed to characterize the safety profile of ARC-520 across a range of doses and to evaluate pharmacokinetics. It was a randomized, double-blind, placebo-controlled, single-dose escalation, first-in-human study of ARC-520 administered intravenously to healthy adult volunteers.

All subjects received either placebo or ARC-520 in doses ranging from 0.01 to 4 mgs per kg. The study successfully enrolled 54 subjects in a single center, with 36 receiving ARC-520 and 18 receiving placebo. There were no reports of serious AEs, no dose-limiting toxicities, no discontinuations due to AEs, and a modest overall rate of AEs without a clear dose-related increase in frequency or severity.

There was a modest occurrence rate of non-clinically significant abnormal laboratory tests in placebo and ARC-520 treated subjects. There were no reported drug-related or clinically significant differences for vital signs or ECGs between subjects receiving drug versus placebo.

One occurrence in each of moderate flushing and urticarial rash seen at dose levels of 0.3 mgs per kg and 2 mgs per kg, respectively, led to the subsequent reduction in infusion rate of ARC-520, as well as the introduction of pretreatment with an oral over-the-counter antihistamine. Since the introduction of these mitigations, no signs of hypersensitivity or infusion reactions have been seen.

There were no changes in ALT, AST, or CK considered to be clinically significant by the study investigator. So in conclusion, ARC-520 when administered as a single dose up to 4 mgs per kg to healthy volunteers appears to be well-tolerated.

In March 2014, we began a Phase 2a multi-center, randomized, double-blind, placebo-controlled, dose escalation study to determine the depth and duration of Hepatitis B surface antigen reduction after a single intravenous dose of ARC-520 in combination with entecavir in patients with chronic HBV infection. We are also accessing safety and tolerability in multiple additional secondary and exploratory end points.

At each dose level to be evaluated, a cohort of eight patients are enrolled with six being dosed with ARC-520 and two being dosed with placebo. Single doses of ARC-520 are being evaluated at, to-date, three ascending doses 1, 2, and 3 mgs per kg have been completed. And screening for dose escalation of 4 mgs per kg is actively underway.

In the first three dose cohorts, 24 patients were successfully dosed, 18 of which received drug and six received placebo. And unblinded data is available for the first two cohorts. So end-term results for 1 and 2 mgs per kg and partial, still blinded safety results from the 3 mg per kg cohort were reported at the AASLD liver meeting earlier this month.

To date there have been no serious AEs, no dose-limiting toxicities, no discontinuation, and a modest overall occurrence rate of AEs. All reported AEs were either deemed unrelated to study drug or unlikely related by the principal investigator.

Safety labs continued to lack indication of end-organ toxicity with the lowest occurrence rate of abnormal laboratory tests in ARC-520 and placebo-treated patients and no observed relationship to timing or dose. ARC-520 activity is assessed by measuring percent change of S-antigen from baseline.

We believe this is the first time that a reduction in S-antigen mediated through RNA interference has been reported in chronic HBV patients. Initial results indicate that a single injection of ARC-520 results in significant reduction in S-antigen for up to 43 days.

In cohort 1, the mean nadir of S-antigen was minus 39% with a range of minus 22% to minus 57%. In cohort 2, the mean nadir of S-antigen was minus 51%, with a range of minus 46% to minus 59%.

For cohort 2, the percent reduction in S-antigen was statistically significant versus placebo for days 3 through 43 post dose. Per cohort 2 the mean day of S-antigen nadir was day 33.

Turning to ARC-AAT, we also presented data from this product at AASLD this month. ARC-AAT is our clinical candidate for the treatment of liver disease associated with Alpha-1 Antitrypsin Deficiency, a rare genetic disease that severely damages the liver and lungs of affected individuals.

These patients synthesize a mutant form of AAT called ZAAT, greater than 90% of which is produced in the liver, which is poorly secreted and accumulates in the liver, resulting in injury. The goal of treatment with our ARC-AAT is to silence production of ZAAT production in the liver, thereby preventing further accumulation of ZAAT and potentially reversing pre-existing liver disease and fibrosis.

In preclinical studies with PiZ mice, which are genetically modified to produce the mutant human ZAAT, ARC-AAT induced a greater than 95% reduction in circulating AAT after a single dose with a long duration of effect. The area covered by ZAAT globules and globule size within the liver were significantly reduced after a single dose of ARC-AAT at day 15 postdose and at day 29 postdose, the two time points measured.

Multidose studies in PiZ mice showed that at week 13 of the study, after four biweekly doses, the ARC-AAT treated group showed 99% less soluble ZAAT, which is the monomer form of the proteins synthesized by the liver, and 79% less insoluble ZAAT, which is the polymer that forms when the monomers cannot be normally secreted.

It is this polymeric form that is contained in the globules. Thus, injection of ARC-AAT in transgenic mice expressing human ZAAT resulted in prevention of formulation of new globules and then reduction in size and number of pre-existing ZAAT globules and, importantly, associated liver inflammation.

In primate studies, a greater than 90% reduction of AAT and serum was observed after a single injection, which persisted for over 10 weeks, with greater than 80% knockdown observed at the six-week time point. Multidose studies in primates showed a sustained reduction of AAT with once every six week dosing, suggesting that once monthly, or even less frequent dosing, may be sufficient to maintain approximately 80% to 90% knockdown in humans.

The treated animals showed no changes in clinical chemistry, including ALT, AST, BUN, and creatinine, indicating that ARC-AAT appeared to be well-tolerated at these optimal therapeutic dose levels. As Chris mentioned, we recently filed for permission to begin a Phase 1 study of ARC-AAT.

Pending approval, we intend to proceed with a double-blind, placebo-controlled, dose escalation Phase 1 study to determine the safety, tolerability, pharmacokinetics, and effect on circulating Alpha-1 Antitrypsin levels, following a single dose of ARC-AAT. The study is planned to start in Australia in healthy volunteers and will dose escalate until predetermined levels of Alpha-1 a-trypsin reduction are reached.

Once these levels of protein knockdown are achieved, the study will transition into a population of patients with ZZ genotype Alpha-1 antitrypsin deficiency to further evaluate escalating doses of ARC-AAT. The study is designed to enroll up to 48 subjects, including healthy volunteers and patients.

So with that update, I would now like to turn the call over to our CFO, Ken Myszkowski, to review our financials for the period. Ken?

Ken, are you there?

(Technical difficulty) year ended September 30, 2014, was [$58.6 million], or $1.25 per share, based on 47 million weighted average shares outstanding. This compares with a net loss attributable to Arrowhead of $31.1 million, or $1.30 per share, based on 24 million weighted average shares outstanding for the year ended September 30, 2013.

Total operating expenses for the year ended September 30, 2014, were $53.5 million compared to $24.9 million for the year ended September 30, 2013. Net cash used in operating activities in FY14 were $35.4 million, compared with $19 million in the prior-year period.

The increase in operating expenses and cash used in operating activities, as compared to the prior fiscal year, reflects costs associated with the progress achieved on our lead candidate ARC-520, as well as our recently announced second candidate, ARC-AAT. These costs include manufacturing of clinical supplies for clinical trials, toxicology studies, and the costs associated with administration of clinical trials, as well as increased headcount as compared to last year.

Turning to our balance sheet, our cash and investments of cash were $177.3 million at September 30, 2014, compared to $29.8 million at September 30, 2013. The increase in our cash balance reflects [$172.6 million] in cash from financing during FY14.

Our cash resources keep us on solid financial footing and provide ample runway to support the needs of our operation. Our common shares outstanding at September 30, 2014, were 54.7 million and would be 58.6 million assuming conversion of the preferred shares outstanding at September 30, 2014. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken. We have always believed that believe that the DPC delivery platform and RNAi in general have some very attractive features that will allow us to rapidly expand our pipeline once we have proof of concept for the underlying technologies. In its most basic form, the technology platform enables the Company to build multiple products in a cost-effective way and should have a progressively lower risk profile.

We believe emerging ARC-520 Phase 2a data, as well as upcoming Phase 2b data and ARC-AAT Phase 1 data can give us that proof of concept and technology validation. We are seeing scientifically important and potentially meaningful results. We hope to provide additional data throughout 2015 that support this position.

So what are some of the key events that you should expect? As mentioned, we have filed to begin a Phase 1 study of ARC-AAT in up to 48 subjects, including healthy volunteers and AATD patients. We plan to initiate this study shortly after receiving regulatory approval and believe we can achieve clinical proof of concept in 2015.

We plan to file with the regulatory authorities this quarter to begin a series of Phase 2b studies of ARC-520. Our goal is to develop a comprehensive data set on ARC-520's activity in various patient populations, using various combinations and different dosing regimens. Expect to see additional details as we initiate these studies throughout 2015.

We'll continue the dose finding Phase 2a study of ARC-520 and present a full data set once it is complete. We are also working on additional drug candidates based on various formulations of the DPC delivery system.

We expect filings for our next clinical candidate in calendar 2015. And we hope to provide updates about progress on DPCs that can be administered subcutaneously and DPCs targeting extrahepatic tissues in calendar 2015.

We feel confident about where we are with ARC-520. We believe that it carries substantially lower risk now that we have established a base safety profile and have demonstrated that it is effectively hitting its target with a long duration of effect. The next step is to establish that ARC-520 can lead to a clinical benefit in patients and enable functional cures.

We also hope to demonstrate clinical activity with ARC-AAT as we enter clinical trials shortly. We expect 2015 to be an exciting year indeed.

So thanks for joining us on our call today. And we look forward to continued progress in FY15. I would now like to open the call up to your questions. Operator?

(Operator Instructions)

Thomas Wei, Jefferies.

Thanks. Just a couple of questions. First on the renal and the liver toxicity that was seen in the animal studies, could you just help us understand was that something that was associated with the dose level given or the number of doses? And how quickly was that seen in animals? Just wanted to get a sense of how much we should interpret from this early human data?

Bruce, do you want to take that?

Sure. I mean we haven't spoken much about it before, Chris. How much would you like me to cover here?

Well, you can talk about, generally, what we have seen in GLP talk studies and non-GLP studies. Not necessarily doses, but you can give an idea about what you see in acute talks.

Okay. So, Thomas, what we see once you get to doses that produce toxicity is that the first sign is just [trans-aminase] increases in the liver, and for the kidney, it would be BUN and creatinine. And the corresponding toxicity related to that is in the liver hepatocyte damage.

And in the kidney, its proximal tubular damage that we see that corresponds to those chemistries. One encouraging thing about our product is that it's cleared from the circulation quite quickly. So in fact, when you see that toxicity, you see it early.

You see it in the first 24 or 48 hours. And if you don't see any toxicity then, you won't see it later. And of course, we're talking about dosing monthly or maybe even less frequently. So what's good about that is that with chronic dosing we don't see an increase in toxicity.

When you're at the dose level that you get findings, they tend to be the same after the first dose, if you will, as after multiple months of dosing. They don't increase.

And basically, the organs recover in the interval between dosing. So hopefully that answers your question.

That's helpful. And then my second question was just on the duration of effect here. You had shown in the poster that the mean nadir was achieved at day 33 in the 2 mgs per kg cohort. It's not the median.

But, presumably, that means that around half of patients have their surface antigen start rebounding before day 30, and the other half are after day 30. When we think about your multidose study, are there any dosing or efficacy or safety implications around that? The fact that half of patients might have a duration of effect that's less than 30 days?

Do you want me to handle that, Chris?

Sure. Go ahead.

Yes. Thomas, it's really a pretty flat post-response curve. It's kind of what Chris said. It's not a U-shape or a V-shaped sort of curve, where you go to your nadir and you come right back up.

It really was much more of a flat sort of curve and the nadir, by definition, is the lowest value. But overall, it was not a sharp loss of activity.

So we were still statistically significant at day 43 and, frankly, probably would have been at day 57, except that we had an odd individual in the placebo group that caused a strange data point at day 57. So it's really not a situation where any of those patients in the 2 mg per kg dose were flying back up after day 30, for instance.

They're all up, I would say, suppressed about the same. And it's -- so the notion of if we dose it at day 30 for instance, are we really dosing at a point of still very significant knockdown? I think the answer is going to be yes, and I don't think there's going to be a lot of individual variability affecting that.

And let me say two things on both those questions. First, regarding tox. So as Bruce mentioned, we've done an awful lot of work on driving tox with high doses in animal models, because we want to understand what that looks like when you start to approach a toxic dose. And so I think we have a good idea what that looks like across multiples species.

And importantly, we're just not seeing any signs of that at the doses we're studying right now in humans. As we've talked about, we've seen no DLTs. We've seen a very well-tolerated drug so far.

So I don't -- it does not feel like we're terribly close to where things might start to become a bit toxic. And second, let me just add on the dosing on top of prior doses. So keep in mind also, as you know, Thomas, that as you increase dose -- as we increased dose, we expect to see deeper knockdown.

And there's, generally, at least in animal models and in humans with other companies, it's generally a correlation between depth and duration of knockdown. And so as we get deeper knockdown with 3 mgs per kg and 4 mgs per kg, I expect that we'll get a longer duration of knockdown as well.

And that should give us plenty of room to be dosing right on top of the prior dose, and maybe even on top of the dose prior to that as well, if we're dosing every 30 days. And so we think we should get a really strong additive effect with multiple doses. Not just a second dose, but maybe the third dose and beyond.

Great. Thanks for taking my questions.

Sure. Thank you, Thomas.

Michael Yee, RBC Capital Markets.

Hey, thanks. A couple questions. First on the Hepatitis B program, do you have the medians for cohort 1 and cohort 2? And do you know if there was any relationship to amount of knockdown in baseline S-antigen? That's the first question.

Second one is on, thinking about all these phase 2s that are starting up in 2015, do you legitimately think we'll get data on these? Or do you think we need to wait for the Phase 2b program to get a better read on whether greater knockdown actually leads to seroconversion? And then I have one AAT question.

All right, Bruce, do you want to take the first question? And I can speak to the second one?

Yes. Michael, I don't have the median data in front of me. It's a fairly small group. It's six subjects.

So I'm not sure that the median would help us a lot. I don't think the data was generally driven by outliers. So I don't think the median data would be very much different than the mean data, but that said, I don't have it in front of me to look at.

It's not the way we've been reporting the data or graphing it for that matter. So I don't have a good -- I can't give you an answer for that.

And then baseline? Do we know anything (inaudible) to baseline S-antigen levels?

Yes. So the baseline varied in these patients from a low that was fairly close to 1,000 international units and the high, if I remember right, was up around 15,000 or so. And again, it's a fairly low number of patients. Between the 1 and 2 mgs per kg, you have 12 patients total, so it was a pretty good spread.

It was not obvious that response varied by baseline. But again, it's a very small data set to try to draw any inferences. And keep in mind, that cutoff level of 1,000, that's still a decent amount of S-antigen. So these are not patients that were low because we wanted to have enough dynamic range to be sure that we could really see things.

So these all have pretty healthy amounts of S-antigen. And frankly, we haven't noticed a difference at this point. But I think that'll be easier for us to look at at the end of Phase 2b, when we have a lot were data points to look at.

Of course, the reason I ask is, I would think that a lower baseline, you might get a greater effect, if you're, obviously, testing the same dose. So one would think --

Yes. These are all fairly high baselines in a way. So you might be right. But we haven't had the ability to test that yet in the program.

Okay. And then data readouts for 2015? Or any data that would give [street] or you the answer that knockdown is leading to share conversion?

Yes. So of course, we wouldn't expect that with the single-dose. And so we really have to see that in the multiple-dose studies. And we'll have two anchor studies, as you know.

One in E-negative patients, and one in E-antigen positive patients, and those are placebo-controlled. I expect that we'll have several additional Phase 2b studies that are open label.

And so it'll be easier to talk about those data throughout 2015. So I feel like we should have some updates on those. And then we'll see what kind of updates we can give on the larger anchor studies.

Okay. Okay, I'll wait for that. And then my last question was on AAT. Remind me, do we know here, similarly, when you start to test in these patients, what amount of knockdown should lead to clinical meaningful liver outcome changes?

Obviously, there's a long-term question, I think, we've all been asking, which is, it's going to take a long time to get liver benefit data on liver efficacy. That's going to be a long time. So what type of knockdown should we be thinking about that would lead to clinically meaningful liver changes?

Bruce, do you want to speak to that?

Sure. Well, it's a really important question. And one, of course, that we don't know with certainty. We were, I think, really very pleasantly surprised by what we saw in the PiZ mice.

And obviously, so were the abstract reviewers at AASLD because that's, I think, what caught their eye, that even with a single-dose with what is very complete knockdown, we saw morphological changes in that model. And with multiple doses, we really saw a lot of clearance.

And the thing about it is that the liver is very -- the liver is the body's main detoxifying organ. So it handles all the toxins in the body. And it gets injured quite a bit in the process, so it is very much designed to deal with its own injury and to heal itself.

The kidney is kind of that way too. The kidney is pretty good at healing itself from acute insults as well. So I think what's really happening here is that the liver, normally, is doing a reasonably good job of trying to handle this excess production of this mutant protein that it can't get rid of.

And the disease happens because it just overwhelms the liver's ability to heal. So when you knock down the AAT, you take away that production of new monomer, the liver actually surprised us with how quickly it started to heal itself in these mice.

Now mice are not humans, of course. But we're thinking that with knockdown of 90% or more, that the liver could well do a lot of self-healing, which is part of why we're thinking that the dosing interval in AAT might turn out to be six weeks or even longer in humans once we get in there and see the data.

Because, of course, the knockdown in HBV has been longer than we expected in humans versus animals, so we don't know what we're going to see with AAT. But I think, we generally think somewhere around 90% plus. And keep in mind, we're talking about what we're measuring in the plasma.

And somewhere around 93% to 95% or so of circulating AAT comes from the liver. The rest is coming from outside the liver. So if you're seeing a big reduction, the liver production may be down even more. So you'll see 90% reduction in the plasma may really be 95%, or 98%, or 99% in the liver.

Got it. Okay. Got it. Very helpful. Thanks, guys.

Thank you.

Ted Tenthoff, Piper Jaffray.

Great. Thanks. Can you hear me okay?

Yes.

Excellent. So appreciate the update. Quick question just with respect to what you have seen, not in non-human primates, but more other animal models with respect to higher doses and multiple doses? Is there any way those models correlate to human exposure with respect to S-antigen or HBV models?

I forget if it's the woodchuck or which, which is the one that is the standard. But what kind of dosing curves have you seen at higher ARC-520 doses and repeat dosing? And is there any way to model that or extrapolate how far you think you might actually be able to go with 3 mg per kg, 4 mg per kg and/or multiple doses in man?

So, Ted, thanks for that question. We don't have data in the woodchuck model. That's a different virus. It's similar but it's different. And so that would require different sequences. And it's not clear how illuminating that model would be, so we didn't look at that. Generally, we see the additive effects in multiple animal models across, really cross target.

And so we take a lot of solace in that, in believing that we'll see this additive or step-down approach on multiple dosing. And of course, we look to what other companies have done in RNAi. And you've seen the similar thing where you get an additive or step-down approach.

And so we expect that, but at the end of the day, we need to see that in humans. And that's why we are moving as quickly as we can into the Phase 2b studies. Even while we are working on the 4 mgs per kg single dose study, we are moving into the Phase 2b multiple-dose studies because that's where we start to learn a lot about our drug, that's where we start to learn a lot about how we might optimize the therapy.

Yes. Fair enough. Okay. Good. And when will you be able to articulate in more detail, more clarity, what some of those studies are going to look like and when they'll be starting?

Some of that, as I mentioned, is really an iterative process. And so while we have ideas for several of them, I think that as data come in, in the multiple-dose studies, we will see things that will surprise us. And will, frankly, surprise the whole field because we'll be doing something that the field has never been able to do before. And so new ideas will come.

I think that we'll start to give some guidance in early 2015 as we start to submit filings for some of those parallel studies. And then we'll keep you up to date in as real-time a basis as we can. Again, I suspect that in the first half of 2015, we will start to add additional parallel studies.

And as we talked about, they are ones that you can imagine of different dosing schedules. We always thought that we wanted to look at dosing ARC-520 every two weeks in addition to every month. But now, given the duration of knockdown, I think that we may try longer dosing intervals.

And then, of course, we'll be interested in looking at combination with interferon, as well as other immune stimulatory agents. And so once we get our two big anchor studies underway, we can focus on some of those smaller studies. And we'll let you know the specific design of those as we apply for them.

Okay. Good. That's helpful. Thanks.

Yes. You're welcome. Thank you, Ted.

Alethia Young, Deutsche bank.

Great. Thanks for taking my question, a couple ones. One, are you leaving the protocol open in Phase 1b?

Bruce, do you want to talk to that?

You mean the Phase 2, the 2a study? Is that what you mean?

Yes. Sorry. 2a, yes.

We (technical difficulty) talk about that. So far our plan is to stop at 4 mgs per kg. And then, of course, we'll have 85 days. So I guess, there's always the possibility we could go higher, but it's not our plan at this point, if that's really your question.

Yes. And then, what would influence your -- what would be the factors that would make you go out and leave it open? Are there any at this point?

It's always hard to speculate. I suppose if we saw something in the knockdown that made us think we wanted to try our higher dose and our investigators were game for it, I suppose we might. But it's purely speculative.

I mean, it's not our expectation that we'll need to go higher, or want to go higher. But I suppose we could.

And importantly, there has been no data to limit our ability to do that. The safety profile has been so good that if we wanted to go higher, we haven't seen anything that would keep us from doing that. We just, at this point, we're not planning on that.

Okay. And then just thinking a little bit about flipping these studies -- getting the go-ahead to do the United States and Europe and different areas. How do you think about the risk of that as far as what you'll need, what the FDA needs.

Is it different than anything else we've seen in RNA? Or just if you can help characterize that timeline risk and just risk in general of submitting that package?

Sure. Bruce, do you want to speak with that?

Yes. Alethia, as you know, it's always an unknown. I mean, we like the data package. We think it's very solid and very complete.

But one variable is that until the first time you submit to the FDA, it's the first time you submit. And it's hard, really, for me to gauge that risk.

We feel like the clinical data is very strong. We feel like the tox data is good and everything else, but ultimately they -- as we always say, we submit. They review. They decide. And that's always the case.

And what are the timelines for submitting again? Or have you kind of characterized more specifically that?

Before the end of the year.

Okay. And you guys don't have any sort of fast track or anything?

Not at this point. No. We haven't asked for it either. Haven't asked and haven't received.

And that's a really good question, Alethia. We've thought about that. And we have spent an awful lot of time working on our manufacturing and making sure that we're able to scale this up quickly should we get lucky and see functional cures early.

Because I think that if we were to see that, I think regulatory agencies would get excited quickly. And we can move, I think, fairly quickly into a Phase 3.

And we want to make sure that our manufacturing is not going to slow us down for that. So hopefully we can explore that possibility in the future.

Okay. Great. Thanks, guys. Happy Thanksgiving.

Yes. You too, thank you.

Thank you. I'm showing no one else in queue at this time. I'd like to hand the conference back over to Mr. Chris Anzalone for closing remarks.

Thank you, everyone. And I wish you all a happy Thanksgiving and happy holiday season.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.