Arrowhead Pharmaceuticals Inc (ARWR) 2017 Q1 法說會逐字稿

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals conference call.

(Operator Instructions).

I will now hand the conference over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead.

Please go ahead, Vince.

Good afternoon, everyone.

Thank you for joining us today to discuss Arrowhead's results for its fiscal-2017 first quarter ended December 31, 2016.

With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our late-stage research programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

Before we begin, I would like to remind you that comments made during today's call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.

All statements other than statements of historical fact, including, without limitation, those with respect to Arrowhead's goals, plans, and strategies, are forward-looking statements.

These include statements regarding our expectations around the development, safety, and efficacy of our drug candidates, projected cash runway, and expected future development activities.

These statements represent management's current expectations and are inherently uncertain; thus, actual 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-K, 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 those presently expected results expressed in today's call.

With 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.

Drug development rarely moves in a straight line.

We saw this clearly last year when we were forced to make the difficult decision to halt the ARC-520, ARC-521, and ARC-AAT clinical programs that utilize the EX1 delivery vehicle.

Our job is to navigate these unexpected turns and focus on our primary purpose as a Company: bringing new medicines to patients who need them.

While these candidates will not make it to the market, they have advanced our ability to eventually help patients.

These programs substantially expanded our understanding of the underlying diseases and provided key insights into how they could be treated.

Importantly, we are now even better positioned to design high-quality RNAi therapeutics against HBV and AAT liver disease; design and prosecute focused clinical studies quickly; and, ultimately, provide treatment for patients with few options.

We have good options and opportunities because we have always thought broadly about treating HBV, AAT liver disease, and other important unmet medical needs.

We have never been content with current standards, even when they were the best the world had to offer.

And we have always pushed science for better solutions.

When we purchased the Roche RNAi assets just over five years ago, delivery was the greatest challenge in the field.

And the difficulty of getting intact RNAi triggers out of the endosome and into the cytoplasm had stymied most efforts.

Our intravenously delivered DPC technology turned out to be the most powerful approach to this question, and demonstrated what was possible to accomplish with RNAi in humans.

This was quite an accomplishment, but we are not finished innovating.

Our research team was hard at work at a follow-on, next-generation approach.

This involved sophisticated RNA chemistry modifications that held the promise of enabling deep and durable gene silencing without the need for active endosomal escape.

Importantly, this could also enable subcutaneous rather than intravenous administration, and this was very attractive, especially for certain indications.

Our deal last fall with Amgen involves our new subcutaneous platform, and we think provides external validation for our efforts.

We believe this partnership is evidence that the next-generation platform our team had been working so diligently on for years had matured to a point of being ready for application into clinical programs.

As such, we have viewed 2017 as the year we would create multiple candidates on this platform.

2017 is off to a good start.

We have made some significant recent progress on our liver-targeted subQ delivery platform.

Our extra-hepatic platforms are also showing great promise and have the potential to bring RNAi therapeutics to diseases outside of the liver.

This would represent a large step forward for the field, and would vastly increase the number of diseases potentially addressable with RNAi.

In addition to platform advances, we are also making progress with our pipeline of products that are enabled by these technologies.

To review, our current disclosed pipeline includes the following development programs.

ARO-HBV is being developed as a key tool in the exciting effort to develop curative therapies for patients with chronic hepatitis B infection.

ARO-HBV silences all HBV gene products and intervenes upstream of the reverse transcription process, where current standard of care nucleotide and nucleoside analogues act.

We hypothesize that this will allow the body's natural immune defenses to clear the virus and lead to a functional cure.

ARO-AAT is being developed to treat the liver disease associated with alpha-1 antitrypsin deficiency, a rare genetic disorder that severely damages the liver and lungs of some affected individuals.

ARO-AAT is designed to knock down the hepatic production of the mutant alpha-1 antitrypsin protein.

Reducing production of the mutant protein is expected to halt the progression of liver disease, and potentially allow it to regenerate and repair.

ARO-F12 is in development as a potential treatment for factor XII mediated diseases.

Factor XII initiates the intrinsic clotting pathway.

And reducing its production using Arrowhead's RNAi technology is particularly attractive as a prophylactic treatment for thromboembolism.

We are developing ARO-F12 to potentially reduce clot formation without the significant increased bleeding risk of currently available drugs.

ARO-HIF2 is being developed as a promising new drug candidate for the treatment of clear cell or renal cell carcinoma, or ccRCC.

ARC-HIF2 is designed to inhibit the production of HIF-2 alpha, which has been linked to tumor progression and metastasis in ccRCC.

Arrowhead believes it is an attractive target for intervention, because over 90% of ccRCC tumors express a mutant form of the von Hippel-Lindau protein that is unable to degrade HIF-2 alpha, leading to its accumulation during tumor hypoxia and promoting tumor growth.

ARO-HIF2 is Arrowhead's first therapeutic candidate using a new extra-hepatic delivery vehicle.

Lastly, we have ARO-LPA and ARO-AMG1.

These are development programs against cardiovascular diseases partnered with Amgen.

ARO-LPA is designed to reduce production of apolipoprotein A, a defining component of lipoprotein(a), which has been genetically linked with increased risk of cardiovascular diseases, independent of cholesterol and LDL levels.

ARO-AMG1 is being developed against an undisclosed genetically validated cardiovascular target.

As you've heard, we have a rather full pipeline.

In addition to these programs, there are a number of other targets that we are working on, using both our liver-targeted subQ technologies and our extra-hepatic delivery systems.

I want to talk for a moment about what you can expect from Arrowhead this year, and when we will be releasing data and providing guidance on timelines for our various programs.

First, regarding data releases, for our previous clinical programs -- ARC-520, ARC-521, and ARC-AAT -- our plan is to present select data this year at various medical meetings.

We learned a great deal about both diseases that will help us design highly efficient studies with ARO-HBV and ARO-AAT.

We intend to strike a balance between releasing some key data that investors, patients, and KOLs are eagerly awaiting, and retaining some findings for competitive advantage.

To start with, we have approved abstracts for presentations on ARC-520 and ARC-521 at EASL in April.

We will provide an update in the future about where we intend to present data on ARC-AAT.

Regarding our existing pipeline, we plan to present some of the preclinical work we have done on the various platforms and product candidates at various medical meetings over the coming months.

We also intend to hold an Analyst R&D Day later this year, during which we will give more comprehensive updates on the platforms and product candidates.

We will have relevant KOLs discuss the current treatment landscapes, and give guidance on the sequence of when candidates will enter the clinical studies.

We are not prepared today to give an estimate about when we will hold the R&D Day.

We want this to occur at a time when our data across multiple programs have sufficiently matured, and when we are in reasonable proximity to filing with the regulators to start first-in-human studies.

We have some work to do to get there, but we feel very encouraged by the progress to date.

With that overview, I would now like to turn the call over to Dr. Bruce Given, Arrowhead's COO and Head of R&D, to provide a bit more color on our late-stage research programs.

Bruce?

Thanks, Chris.

As Chris described, we considered the DPC delivery technology to have been a great breakthrough that raised the bar significantly for what could be expected in the field of RNA interference.

Our progress has pushed everyone else in the field to work harder to show the level of knockdown that we achieved.

While the animal toxicology data at the end of last year brought an abrupt and unexpected end to our DPC technology, despite good tolerability in humans, we had seen the requirement for IV dosing to be a limitation in the longer term from a clinical perspective, and had already pivoted in our research labs.

Because of this pivot, while the loss of our clinical programs was unfortunate, we think the setback will be shorter than most observers probably expect.

I'd like to talk a bit about some of our announced programs and help explain why we are enthusiastic despite last year's events.

ARO-HBV and ARO-AAT build upon Arrowhead's clinical experience in these diseases, with previous-generation candidates ARC-520, ARC-521, and ARC-AAT.

Those programs validated the potential of using RNAi in HBV and AATD.

And what we learned over multiple clinical studies is helping to inform and potentially accelerate the development path of ARO-HBV and ARO-AAT.

First, regarding ARO-HBV: we will have abstracts at EASL in April describing our clinical work with ARC-520 and ARC-521.

I'm not going to front-run the data.

But I will say that we remain convinced that RNAi will join nucs as centerpieces in combination regimens going forward in HBV.

We also presented important data regarding ARC-AAT and the liver disease associated with AAT last fall at AASLD.

One of our scientists, Dr. Chris Wooddell, presented compelling data from the transgenic mouse model in an oral session demonstrating normalization of fibrosis gene expression with treatment.

We also presented clinical data demonstrating effective and well-tolerated knockdown.

This ARO-AAT subQ program, as with its ARO-HBV cousin, is closing in on declaration of a clinical candidate.

Thus, we think we are clear leaders in both programs, and are eager to get back to patients as quickly as we can.

We've had less to say in the past about ARO-F12.

It is apparent to us that prevention of thromboembolism is a major clinical challenge, and one that will only increase as the population ages.

Current agents, while being effective for preventing many recurrent clots, still carry significant bleeding risks.

Therein lies the opportunity.

Factor XII is a very interesting target.

In our preclinical studies, we have seen that factor XII inhibition led to reduced clotting without the unwanted increase in bleeding risk.

In addition, some humans make no factor XII, and mice can have the gene knocked out without sequelae.

Notably, these mice and humans don't tend to develop thromboemboli, but they also don't tend to show increased bleeding risk.

Lastly, we believe that long-acting subcutaneous injections may reduce compliance risk, since current agents typically require daily dosing to be effective.

Thus, we believe that using RNAi to silence factor XII could represent the next major advance in the field of thromboembolism prevention.

Our program has been the subject of presentations at cardiology meetings, and you should expect to hear more this year.

We are also excited about our Lp(a) program that was licensed by Amgen last fall.

This target has been studied extensively by geneticists who have documented that elevated levels of Lp(a) are associated with increased cardiovascular risk, independent of levels of LDL cholesterol.

With cardiovascular disease remaining the number-one cause of death in the world, even after all of the major advances of the last few decades, with control of blood pressure and the development of statins and PCSK9 inhibitors, this will be recognized as a very important new target in coming years.

We are proud to have been out front in this area, but this is an arena unsuitable for a small biotech company.

And we don't believe that we could have found a better partner than Amgen for carrying forward this crucial work.

We also have active announced programs in clear cell renal cell carcinoma and the undisclosed target from Amgen.

However, these programs are further from the clinic, and we we?ll save updates for those and perhaps some of our unannounced projects for a later time.

So in summary, we are moving aggressively toward the clinic with several programs, and look forward to sharing more as the year progresses.

With that overview, I would like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer.

Ken?

Thank you, Bruce, and good afternoon, everyone.

As we reported today, our net loss for the three months ended December 31, 2016, was $12.1 million or $0.17 per share, based on 71.4 million weighted average shares outstanding.

This compares with a net loss of $19.3 million or $0.32 per share, based on 59.5 million weighted shares outstanding for the three months ended December 31, 2015.

Revenue for the three months ended December 31, 2016, was $4.4 million compared to $43,750 for the three months ended December 31, 2015.

This increase is driven by the upfront payments received from our collaboration agreements with Amgen, and these payments will be recognized as revenue over the next 1 to 2 years.

Total operating expenses for the three months ended December 31, 2016, were $19.3 million compared to $19.4 million in the three months ended December 31, 2015.

Net cash provided by operating activities during the three months ended December 31, 2016, was $10 million compared with net cash used of $21.2 million during the three months ended December 31, 2015.

The key driver of this change was the $30 million upfront payment received from Amgen associated with ARO-LPA collaboration agreement.

Turning to our balance sheet, our cash was $102.1 million at December 31, 2016, compared to $85.4 million at September 30, 2016.

The increase in our cash was primarily driven by the upfront payment and equity investment totaling $42.5 million during the quarter.

This was offset by cash used for operating activities.

Our common shares outstanding at December 31, 2016, were 74.4 million.

This includes the preferred shares that were converted during the quarter.

No preferred shares were outstanding at December 31, 2016.

With that overview, I'll turn the call back to Chris.

Thanks, Ken.

Everything we do at Arrowhead is driven by a desire to bring important new medicines to patients without adequate treatment options.

That has not changed.

Our disappointment about having to halt the development of prior-generation candidates last year has become a renewed drive this year to make potentially better solutions for patients and to get back into the clinic as quickly as possible.

Our current resources provide operating runway into 2019, and we believe this is sufficient to reach several clinical readouts across multiple programs.

Simply put, we have the technology, experience, and capital to make important strides in multiple disease areas.

I began today's call with the concept that drug development rarely moves in a straight line, and I will end on the same note.

In this complicated business, we try to control that which can be controlled; we create contingencies for challenges we can imagine; we build capabilities to address challenges we may not imagine; and we continue to push science toward better solutions.

We do all this to arrive at a single destination: creation of new medicines for people who need them.

The route to get there will have twists and turns.

But at the end of the day, the route is not important; the outcome is what matters.

We are creating great new medicines right now, and look forward to sharing our progress along the way, and, ultimately, helping patients.

I'd like to open the call for questions.

And actually, before I do, let me just clarify one thing.

I think that when I was talking about the HIF-2 alpha program, I mistakenly once or twice -- mistakenly referred to the candidate is ARC-HIF2.

And what I meant was ARO-HIF2.

Our current candidate in that program is ARO-HIF2, not ARC-HIF2.

So I apologize for that confusion.

With that, I will open the question to -- I will open the call to questions.

Operator?

(Operator Instructions).

Ted Tenthoff, Piper Jaffray.

I just wanted to check: at this point, which do you think is the most likely of the subQ assets to enter into the clinic first?

And is the AAT program still -- are you still working with the Alpha-1 Antitrypsin Association?

I will let Bruce handle that.

I'll take your second question first.

Sure, we still have a good relationship with the Alpha-1 (technical difficulty) and I don't expect that will change at all.

We remain good friends.

And they will be important when we get back (technical difficulty) for sure.

As for which drug will get into the clinic first, it's kind of a horse race, at this point.

And I think there are several candidates.

And which candidate is going to finish first, I think internally we could probably place bets as well.

Okay.

We'll keep posted.

Thanks.

Katherine Xu, William Blair.

Sorry if I missed it; did you mention whether there is going to be candidates entering the clinic in 2017?

We've not mentioned that.

We're going to wait until our Analyst Day sometime this year, where we can give you more granular guidance on when to expect candidates into the clinic.

Part of that is related to, as Bruce says, it's not clear to us which program is going to make it to the clinic first.

I think we're moving pretty well on multiple fronts.

So, we're not yet prepared to give guidance on that.

We'll do that at the Analyst Day.

Can you comment on the stake Silence Therapeutics takes to you?

I'm sorry; can you repeat that?

The Silence Therapeutics took some stakes in Arrowhead (multiple speakers) that?

To be honest, there's not much we know about that.

We do know that Silence has taken a position in Arrowhead.

They bought stock on the open market.

There are no current discussions about any sort of transaction, about any -- even license agreement.

There's nothing really going on right now.

Again, we understand that they acquired some stock, and that's as much as we know right now.

I guess we will see the data of course at EASL.

But I'm just curious, in your last press release, you talked about with either ARC-520 or ARC-521, you actually saw some significant knockdown of s-antigen, and also some patients were on track to clearance.

Can you just explain that a little bit -- what you meant by that, to the extent that you can?

Yes.

Well, I don't want to front-run the data presentation at EASL; but we saw patients that had quite low levels of s-antigen that looked like they were moving in the right direction.

So, obviously that was a prospective statement of what we thought could happen.

But the reality is, seroclearance is something that -- it's an individual patient response.

Even as a field, we don't understand very well what happens if patients seroclear versus those that don't.

It's one of the things that I think we'll learn about in the next few years; but now that we're going to have agents I think that are going to make seroclearance a more frequent event at some point in the future.

But that statement, I think, does represent what we thought.

It certainly represents what we felt.

That doesn't necessarily mean that any of those patients will seroclear.

Thank you.

Carmen Augustine, Jefferies.

So, when do you think we could expect the next update on the Amgen partnership?

And do you expect to announce additional partnerships this year?

Unfortunately, I can't answer either of those questions.

We really can't give any guidance on the Amgen partnership because, A, our visibility on that is incomplete, of course.

We are working diligently with them, and it's not clear how fast either of those programs are going to move.

But more importantly, we don't know what Amgen wants to talk -- wants to include publicly on that.

So we really have nothing to offer at this point.

With respect to new partnerships, we certainly think that we are a good partner.

And we think we've got an awful lot to offer to partners, and we believe we're in a good position to be -- to help companies who want to create RNAi therapeutics against certain indications.

And so it is our hope that we enter into new partnerships.

We've not given any guidance on when that may be; of course, in large part, because we can't control that.

But we certainly hope that the Amgen partnership is not our last partnership.

Okay, got it.

And then in light of the recent workforce reduction and redeployment of resources, what do you expect the cash runway to be through 2017?

And on a related note, of the potential $617 million in milestone and equity payments from Amgen, how much is allocated to preclinical, clinical, and regulatory milestones?

We haven't given any more granular guidance on the breakdown of those milestone payments.

With respect to cash forecast, we have also not given guidance on cash burn in 2017.

We have said, now, on a couple of occasions, that we have plenty of runway right now.

We have plenty of resources right now, without any additional Amgen milestone payments, without any additional partnerships.

We have enough cash right now to operate into 2019.

And we think that that is a good, long runway, given where we are with our various programs.

But we've not given more granular financial guidance beyond that, at this point.

Okay, thanks.

(Operator Instructions).

Madhu Kumar, Chardan.

So, what is the latest with the Spring Bank collaboration?

Bruce, do you want to address that?

Yes, that collaboration had two parts; so a preclinical part and a clinical part.

The preclinical part is still moving along.

The clinical part was to join MONARCH and be in conjunction with ARC-520.

And of course, ARC-520 has left the clinic now.

So, ultimately, we think there will still be a place for doing work combining the Spring Bank compound with ARO-HBV.

But whether or not that will continue to that point is a little bit hard to see, at this time.

But they continue to be supportive.

We continue to feel that they are an intriguing compound for combination with RNAi.

And it would still be, I think, our intention to at some point get -- see what the combination does in the clinic.

Okay.

Thanks, guys.

And I'm showing no further questions.

I would now like to turn the call back over to Chris Anzalone for any further remarks.

Thanks, everyone, for your attention, and we'll see you next quarter.

Ladies and gentlemen, thank you for participating in today's conference.

You may all disconnect.

Everyone, have a great day.