Arrowhead Pharmaceuticals Inc (ARWR) 2018 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals 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, Sarah.

Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2018 third quarter ended June 30, 2018.

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 clinical programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

We will then open up the call to your questions.

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

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

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

These statements represent management's current expectations and are inherently uncertain, thus, 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 the presently expected results expressed in today's call.

With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company.

Chris?

Thanks, Vince.

Good afternoon, everyone, and thank you for joining us today.

Our goal with respect to our pipeline of RNAi therapeutics and the broader TRiM platform that enables it is to be best in the field.

We seek to develop effective medicines; to work within time lines that others cannot; to have a validated platform that provides a level of derisking before clinical studies even begin; to have the ability to target many cell types and therefore, a wide variety of diseases; and to be the partner of choice for RNAi therapeutics.

We have made important progress on all these fronts, and our accomplishments during the prior quarter and the period since our last conference call include the following: One, we made multiple presentations at the EASL International Congress.

This included preclinical data for both ARO-AAT, our second-generation candidate for the treatment of alpha-1 antitrypsin deficiency liver disease, and ARO-HBV, our third-generation clinical candidate for the treatment of chronic hepatitis B infection; and additional clinical data on ARC-520, our prior generation compound for HBV.

Two, we presented preclinical data on our growing pipeline at several medical meetings, including data on our cardiometabolic candidates, ARO-APOC3 and ARO-ANG3, and our first candidate targeting the lung, ARO-ENaC.

Three, we completed enrollment and dosing of the single ascending dose portion of the ongoing Phase I/II study of ARO-HBV and began dosing HBV patients in a multiple ascending dose portion of the study.

Four, we completed enrollment of the Phase I study of ARO-AAT.

Five, we received a positive EMA opinion on orphan designation for ARO-AAT.

This follows orphan designation that was previously granted by the U.S. FDA.

Six, we presented early clinical data on ARO-AAT at the Alpha-1 National Education Conference.

This was the first clinical data presented on our TRiM platform.

Seven and most recently, we announced that Amgen had administered the first doses of AMG 890 in a Phase I clinical study, which earned us a $10 million milestone payment.

We have continued to execute at a high level, and we feel well positioned for some key events during the second half of this year and into 2019.

Let's drill down on a few of the events during the quarter.

Last week, we announced that we earned a $10 million milestone from Amgen following the administration of the first dose of AMG 890, formerly referred to as ARO-LPA, in the clinical study.

Amgen is evaluating AMG 890 in a Phase I study in approximately 90 subjects to assess safety, tolerability, pharmacokinetics and pharmacodynamic effects.

The study will be performed in 2 phases: a single ascending dose phase and a multiple ascending dose phase in subjects with elevated Lp(a).

The estimated primary completion date of the Phase I study is in the second half of 2019.

Following the primary completion, Amgen will share the data in the appropriate scientific forums.

AMG 890 is the third drug candidate enabled by TRiM to enter clinical development this year following ARO-AAT and ARO-HBV.

We view this step, and our collaboration with Amgen generally, as further validation of our proprietary TRiM platform.

Under the terms of the 2 cardiovascular agreements with Amgen announced in September 2016, Arrowhead is eligible to receive up to $617 million in option payments, developments, regulatory and sales milestone payments.

Arrowhead is further eligible to receive up to low double-digit royalties for sales of products under the AMG 890 agreement and single-digit royalties for sales of products against an undisclosed target.

In addition to the progress on this partnered program, we continue to advance our wholly owned candidates, ARO-HBV and ARO-AAT, through first-in-human studies very rapidly.

Bruce will give specific details in a moment about where we are in each study, but I want to talk briefly about our strategy, execution and early evidence of activity and tolerability.

Both the ARO-HBV and ARO-AAT studies include a single ascending dose phase and a multiple ascending dose phase that are intended to rapidly get to meaningful readouts on safety and tolerability as well as a robust view of the drug's activity.

For RNAi drugs in general and for our TRiM-enabled drugs specifically, the duration of effect can be quite long.

It's conceivable that in humans we may see 60 or even 90 days of duration.

So in the cohorts of our first-in-human studies that are receiving 3 monthly doses, we may see activity that lasts as long as 6 months.

It is rare to generate that much meaningful data in a first-in-human study.

So how are the studies progressing?

We believe our execution has been best-in-class.

Both studies started in March, and by the middle of May, we were well into the SAD portion of the ARO-HBV study and began dosing HBV patients in the MAD portion.

Then at the end of May, we completed enrollment and dosing of the entire SAD portion of the study in healthy volunteers.

Two weeks later, in the middle of June, we announced that we had completed enrollment in both the SAD and MAD portions of the ARO-AAT study.

I want to thank our program management and clinical operations groups who continue to work tirelessly to maintain this pace.

I would also like to acknowledge the clinical investigators who have been equally motivated and extremely successful at enrolling these studies.

Our long standing relationships and experience from studies of prior generation compounds makes the process quite reliable and to date, has yielded highly streamlined studies.

So what do the data look like so far?

We presented a quick snapshot of some initial clinical data from the ARO-AAT study at an Alpha-1 patient meeting at the end of June, and the data were very encouraging.

At a somewhat low dose of 100 milligrams, which equates to between 1.0 and 1.6 mg/kg in the subjects studied, we achieved a maximum serum AAT knockdown of 93% and a mean maximum knockdown of 87% after a single dose.

Based on our experience in primates and prior human clinical studies, we believe this represents near-complete suppression of the liver production of AAT.

In addition, at 8 weeks post dose, the mean serum AAT knockdown remained at 83%.

ARO-AAT has been generally well tolerated at all dose levels studied with no serious or severe adverse events.

These are great data, and we are excited to see what the rest of the study looks like.

Importantly, these are very encouraging for the Alpha-1 community that has no treatment options for serious liver disease associated with alpha-1 antitrypsin deficiency short of liver transplant.

We have not presented any data from the ARO-HBV study, but to date, 63 subjects have received at least 1 dose.

30 healthy volunteers and 33 patients with chronic HBV infection have received a total of 104 injections of ARO-HBV.

It has been generally well tolerated at all dose levels studied with no serious or severe adverse events.

In addition, early data in patients indicate that the drug is clearly active.

Importantly, we believe these data suggest that ARO-HBV is active in silencing s-antigen production from both HBV cccDNA and viral DNA that has integrated into host DNA.

This would represent a large step forward from our first-generation candidate, ARC-520, which did not address s-antigen transcripts from integrated DNA.

Our plan is to submit late-breaker abstracts for ARO-AAT and ARO-HBV and if accepted, to present at the AASLD Liver Meeting in November.

As I mentioned, the studies are moving forward rapidly, so we should have robust datasets at that time.

During the last quarter, we presented some clinical data on our prior generation HBV compound, ARC-520, at the EASL International Liver Congress.

These data included follow-up for 8 patients that received up to 9 monthly doses of 4 mg/kg ARC-520 with daily entecavir in the Heparc-2001 multi-dose extension study.

As I mentioned, a key limitation of this candidate was that it only targeted HBV cccDNA and did not address s-antigen transcribed from integrated DNA.

We discovered that this can be a substantial source and sometimes the primary source of circulating s-antigen.

Even so, half of these patients experienced a sustained host response, where it appears that ARC-520 triggered something that enabled the body to fight the virus.

This was the intended mode of action for ARC-520 and is the intended mode of action for ARO-HBV.

It has been our theory that if an RNAi therapeutic can reduce viral antigens sufficiently and decrease immunosuppressive forces, the immune system may re-awaken to control the virus and enable a durable, functional cure.

One e-antigen negative patient that received ARC-520 treatment while remaining on entecavir serocleared for all measurable viral markers, including s-antigen, core-related antigen, HBV RNA and HBV DNA.

We believe this will represent a functional cure.

Two additional patients that experienced sustained host responses but had not yet serocleared appeared poised to potentially seroclear if the trends in the decrease of viral markers continues.

We and many key opinion leaders in HBV see these data as the first proof of concept that an RNAi compound can potentially lead to an awakening of the immune system in HBV patients and eventual functional cure.

This has long been our belief, and it is highly encouraging that our previous generation HBV candidate has provided what we think is the first clinical evidence supporting it.

This gives us additional confidence in ARO-HBV as we move forward with the Phase I/II study this year and then a planned Phase IIb study next year.

With our clinical programs progressing well, our confidence in the broader pipeline grows.

We have several candidates that we expect to enter the clinic over the next 18 months, so it makes sense for us to have a broad R&D day to discuss these candidates, our rationale for pursuing them and our anticipated clinical timelines.

I am pleased to announce our plan to host an R&D day on October 16 in New York.

The event will be open to analysts and institutional investors by invitation, and there will also be a live webcast, so those unable to attend in person can view the presentations.

Included in the R&D day presentation will be ARO-APOC3 and ARO-ANG3, our most advanced wholly owned preclinical candidates.

They are targeting apolipoprotein C-III or apoC-III and angiopoietin-like protein 3 or ANGPTL3, respectively.

They are designed to address multiple cardiometabolic diseases and may offer various development paths targeting both mass market and/or orphan indications.

These candidates are moving ahead according to plan, and we continue to be excited about the opportunities that they represent.

We are on schedule to file CTAs for both candidates around the end of the year.

Our ability to efficiently target solid tumors has grown substantially over the past year, so we will also discuss this in some depth.

We will also present data on ARO-ENaC, our first inhaled, lung-targeted candidate for the treatment of cystic fibrosis.

We have been presenting select data on this candidate at various medical meetings throughout 2018.

We have made great strides recently in optimizing the TRiM-based pulmonary delivery platform, which has led to a greater than two-fold improvement in potency over our prior recent constructs and solid improvements in the safety profile.

In addition, we have started using newer ligands that have distinct advantages and have discovered ways to eliminate the use of PK enhancing structures, which makes for a smaller and more structurally simple molecule.

Because of these improvements, the ARO-ENaC CTA is being pushed into 2019 to allow more time to fully optimize the compound.

We view the pulmonary programs as substantial value drivers over the long term, so we're being a bit less aggressive on the timeframe to the clinic for the first product and focusing more on identifying the optimal structures.

Our goal is to ensure that we move forward with the best drug possible, and our recent advancements have dramatically improved the next generation of ARO-ENaC.

With that overview, I'd now like to turn the call over to Bruce Given, our COO and Head of R&D.

Bruce?

Thank you, Chris.

Good afternoon, everyone.

On our last quarterly call, I described the design of our 2 clinical studies for ARO-AAT and ARO-HBV.

They both continue to move forward rapidly.

To review, for both studies, the primary outcome measures are safety and tolerability.

For ARO-AAT, secondary outcome measures include pharmacokinetics, percent change in serum alpha-1 antitrypsin levels and duration of response.

For ARO-HBV, secondary outcome measures include pharmacokinetics and an assessment of the change in all measurable viral markers, including s-antigen DNA, RNA, e-antigen and core-related antigen.

I thought it would be helpful today to go through a review of specifically where we are with each study and what data may be available for the AASLD late-breaker abstract submission deadline in September and then what data may be available to present at the meeting in November should our abstracts be accepted.

Let's start with ARO-AAT.

The Phase I study called AROAAT1001 started enrolling and dosing subjects around the middle of March.

In the middle of June, we announced that the study had been fully enrolled, and all subjects had received at least their first dose.

We also announced at that time that 2 planned cohorts at a dose of 400 milligrams were eliminated because maximal activity appeared to occur at lower doses than expected.

So where are we today?

45 subjects have been enrolled and dosed across all cohorts with 20 in the single-dose cohorts and 25 in the multiple-dose cohorts.

The single-dose cohorts at doses of 35, 100, 200, and 300 milligrams will have as much as 6 months of follow-up for the earliest cohort and approximately 3 months of follow-up for the last cohort at the time of the late-breaker deadline.

By the November meeting, there will be approximately 5 to 8 months of follow-up for the single-dose cohorts.

We are scheduled to complete the third and final dose for the final subject in the multiple-dose portion of AROAAT1001 over the next 10 days.

The earliest multiple-dose cohort received the final dose during the 2nd week of June, so by the late-breaker deadline, we will have up to 3 months of follow-up for the earliest cohort and 1 month of follow-up for the last subject.

By the November meeting, there will be approximately 3 to 5 months of follow-up for the multiple-dose cohorts.

We anticipate, based on the data that we presented for the 100-milligram cohort at the Alpha-1 patient meeting, that 3 months may not be long enough to see a full recovery of serum AAT back to baseline levels, so there will likely still be additional follow-up needed.

However, this will be a helpful dataset and should show what peak knockdown levels are and what the duration of effect and recovery curves look like for the different dose levels.

This will help to inform our decision about what dose level or levels to select for the Phase II study and what the dosing interval should be.

Moving on to ARO-HBV and the Phase I/II study called AROHBV1001.

63 subjects had been enrolled and dosed across all cohorts with 30 healthy volunteers in the single-dose portion and 33 chronic HBV patients in the multiple-dose portion.

The single-dose portion of the study completed dosing at the end of May, so we will have a full dataset on safety and tolerability for that group in time for the late-breaker deadline.

The multiple-dose portion of the study is a little more complicated because we have cohorts that are open to all comers, cohorts that are specific to e-antigen status and cohorts for NUC treatment experienced versus not on NUC treatment.

While most cohorts received 3 monthly doses, we were also investigating biweekly and weekly loading dose schedules.

Designed to explore dose response, 3 of the 4 monthly dosing interval all comer cohorts at doses of 100, 200 and 300 milligrams have already received their third and final dose and the fourth cohort, at 400 milligrams, is scheduled to receive their final dose over the next 10 days.

We anticipate that all remaining subjects in the other cohorts will have received all doses by mid- to late September.

By the November AASLD meeting, we anticipate that data showing multi-month host dose -- post-dose levels of s-antigen, e-antigen and HBV DNA, where applicable, should be available for all cohorts.

In addition, multiple-dose HBV RNA and core-related antigen data, where measurable, should also be available for all cohorts.

Similar to ARO-AAT, we will not have data for all the final study visits for all patients, so there will still be additional follow-up and data collection after November.

This is, however, an impressive amount of data for a first-in-human study, and we look forward to giving the highly anticipated first readout for ARO-HBV should our abstract be accepted at AASLD.

With that brief review of our clinical programs, I'd like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer.

Ken?

Thank you, Bruce, and good afternoon, everyone.

As we reported today, our net loss for the quarter ended June 30, 2018, was $15.6 million or $0.18 per share based on 87.6 million weighted average shares outstanding.

This compares with a net loss of $5.5 million or $0.07 per share based on 74.8 million weighted average shares outstanding for the quarter ended June 30, 2017.

Revenue for the quarter ended June 30, 2018, was $700,000 compared with $9.3 million for the quarter ended June 30, 2017.

Revenue was lower because revenue from the $30 million upfront payment received from Amgen for the ARO-LPA, now AMG 890, agreement was fully recognized in October 2017.

Revenue in the current period primarily relates to the recognition of a portion of the $5 million upfront payment received from Amgen for the ARO-AMG1 agreement.

Of the total upfront payments of $35 million, all but $600,000 have -- has been recognized as revenue to date.

The remainder is estimated to be recognized in the next quarter.

Total operating expenses for the quarter ended June 30, 2018, were $16.6 million compared to $15.1 million for the quarter ended June 30, 2017.

This increase primarily is due to toxicity studies -- study costs for ARO-AAT and ARO-HBV candidates.

Net cash used in operating activity during the quarter ended June 30, 2018, was $14.4 million compared with net cash used by operating activities of $10.4 million during the quarter ended June 30, 2017.

This increase was due to the progression of our ARO-AAT and ARO-HBV candidates into Phase I clinical studies as well as for manufacturing payments related to our other candidates.

Turning to our balance sheet.

Our cash and investments totaled $78.2 million at June 30, 2018, compared to $65.6 million at September 30, 2017.

Our common shares outstanding at June 30, 2018, were 87.9 million.

With that brief overview, I will now turn the call back to Chris.

Thanks, Ken.

At the outset of the call, I said that our goal for our drug candidates and underlying platform is to be the best in the field.

I mentioned several parameters that we are focused on within this goal, and we have clear evidence for progress in each.

Let's review them: one, develop effective medicines.

We have a good start in both ARO-AAT and ARO-HBV and are optimistic that they could eventually become powerful medicines.

Two, work within timelines that others cannot.

We started developing TRiM-based ARO-HBV and ARO-AAT in the fourth quarter of 2016.

If we are accepted at AASLD, we will have gone from concept to presentation of meaningful clinical data in just 2 years for 2 different programs.

We believe this is virtually unheard of, and we have several additional candidates to follow.

Three, have a validated platform that provides a level of derisking before clinical studies even begin.

This is an area that just requires time.

But given the safety and activity profiles, thus far, with ARO-AAT and ARO-HBV, we feel increasingly confident about future hepatocyte-targeted TRiM-based candidates.

Four, have the ability to target many cell types and therefore, a wide variety of diseases.

In addition to hepatocyte-targeted candidates, we have good proof of concept in TRiM-based lung targeting and solid tumor targeting now and continue to work toward additional cell types.

Five, be the partner of choice for RNAi therapeutics.

Everything we have discussed today from our development speed to our encouraging early clinical data and ability to target a variety of tissues reinforces our belief that we can be a powerful partner in RNAi.

In addition, we believe that our continued progress with the Amgen partnership serves as a good proof of concept for this aspect of our business strategy.

We believe Arrowhead is on solid footing today and has much more on the horizon.

We think we are just in the early stages of a period where we see substantial opportunities to build value through rapid pipeline growth, key data readouts in the near term and mid-term and by exploring opportunities to expand our reach through business development and partnering.

We look forward to giving a meaningful update on our progress and plans for our emerging pipeline, including ARO-APOC3, ARO-ANG3, our TRiM-enabled inhaled pulmonary platform, including ARO-ENaC, and our TRiM-enabled solid tumor platform, including ARO-HIF2 at our R&D day in October.

Thanks again for joining us today, and I would now like to open the call for questions.

Operator?

(Operator Instructions) Our first question comes from the line of Ted Tenthoff with Piper Jaffray.

Excited to see the progress and looking forward to a lot of good data readouts in the back half.

I want to focus in on HBV if I may just with respect to what we could be expecting in terms of readouts, and then also how quickly we could move to combination study and maybe a preliminary glimmer of what that might look like.

Bruce, you want to take that?

Sure.

Well, Ted, as we laid out there, by AASLD, we'll have pretty significant multi-dose data.

Our first-in-human trial here only allows a maximum of 3 doses, but most of the patients will have received 3 doses, maybe -- actually, we predict all of them will have received 3 doses, and we could have significant follow-up for the early cohorts.

So there's a -- potentially a lot of data at AASLD, assuming they accept the abstract.

With respect to going into combination trials, we think the plan would be to go right into long-term combination trials with the goal of trying to find recipes that could start showing some s clearance.

And the only thing holding us back from that right now is the need for long-term tox.

So our 6-month rat and our 9-month monkey studies for both ARO-HBV and ARO-AAT are ongoing right now and will finish basically around the end of the year.

So with respect to when we could start combination therapy trials in HBV with the intent of finding regimens that can actually give seroclearance, we would expect that would be in the first half of next year.

Our next question comes from the line of Maury Raycroft with Jefferies.

First, Chris, you commented that ARO-HBV is clearly active in s-antigen suppression from ccc and integrated DNA.

I think I heard that correctly.

And so I'm wondering if you can contextualize this observation and say if what you're seeing is anecdotal from a few patients, the magnitude of changes of s-antigen and potentially the kinetics around that as well.

I don't want to go in depth on that.

You're going to have wait to see the fuller dataset, hopefully, at AASLD.

I did want to be clear that we are seeing activity and we feel good about the drug.

But we're not going to go in depth on midstream data at this point.

Got it.

Understood.

And for both HBV and AAT, based on what you're seeing so far, any thoughts on how potential dosing could work for either program?

Go ahead, Bruce.

Yes.

Well, I think, clearly, monthly is frequent enough.

I think it's possible that we could be looking at every other month or even quarterly, and I don't want to speculate beyond that.

But we're getting very good duration with this TRiM platform.

It really gives us good durability, and we just -- we haven't been able to follow these patients out long enough yet to know just how good that durability is going to turn out to be.

But it won't shock me at all if we wind up with quarterly dosing.

And just on ARO-HBV, as Bruce mentioned in the prepared remarks, we have a couple cohorts where we're testing weekly dosing as well as biweekly dosing, in both those, still just 3 doses because that's what you have tox coverage for.

But we were interested in that, not necessarily because we didn't have confidence in the durability of that drug, but we were interested in seeing what happens if you just crush the virus out of the gate because since we don't know what the best strategy is to get to seroclearance, it'll be interesting to see what happens with that frequent dosing compared to less frequent dosing.

Got it.

That's helpful.

And the last question is just on AAT and what your thoughts are on potential endpoints that could be used for a potential approval.

Yes.

We still think the most likely situation is that we'll be using a biopsy endpoint similar to what people are doing in diseases like NASH.

There are some other potential ideas that we have that we're thinking about, but I think the most likely situation and certainly, the first trial that we're contemplating doing next involves biopsies to look at the ability to change the liver histology.

But that's, I think, the most likely case of where the endpoint is going to wind up.

Our next question comes from the line of Madhu Kumar with B Riley.

This is Jennifer on for Madhu.

Three questions for you guys.

One, based on the Phase I healthy volunteer data for ARO-AAT, should we expect similar circulating AAT results from AAT patients in the potential data at AASLD?

And second question, can you provide visibility on the timing of IND filings for additional internal cardiovascular programs beyond Lp(a)?

And third, in light of data to date from ARC-520, what are your expectations for ARO-HBV activity in the potential HBV patient data at AASLD?

Okay, it's a lot of questions.

I'm sorry, what was the first one again?

Sure.

The first one was that just based on the Phase I healthy volunteer data from ARO-AAT, should we expect similar circulating AAT results from the AAT patients in the potential AASLD?

Right.

So to be clear, in this Phase I study, we are -- for AAT, we are not -- we are not treating patients.

We're only treating healthy volunteers.

And so the only data you'll see at AASLD will be healthy volunteer data.

The reason for that is that what we found in our prior generation AAT program, the knockdown profile was essentially the same between patients and healthy volunteers.

And so in other words, 90% knockdown or 80% knockdown in healthy volunteers would generally equate to 80% or 90% knockdown in patients, even though the absolute values, of course, were different.

So we view that as predictive, and it made sense just to run quickly through this Phase I healthy volunteers and then use patients for the more meaningful Phase II/III study.

So we expect that study to start in the first quarter or so of 2019 once we have tox coverage for it.

So again, we won't have any patient data this year.

Yes.

That was for both depth and duration.

They really -- at the same dose, the curves really overlapped each other remarkably well for the patients versus normal volunteers, so we felt quite comfortable in that regard.

Your second question had to do with filing CTAs for our cardiovascular drugs.

We expect to file CTAs for both ARO-APOC3 and ARO-ANG3 around the end of the year.

Our guidance hasn't changed on that.

And third, you asked about ARC-520 and what we're going to see at AASLD.

So here's what was important about the ARC-520 data, the extension data.

It was important that we're starting to prove this theory that the field it had, that if you can remove or substantially decrease these immunosuppressive forces through RNAi that you could reawaken the immune system and enable the body to control the virus and enable this functional cure.

So that was a very important study from that standpoint.

Our hope has been that ARO-HBV is going to be a more complete and more powerful drug than ARC-520, in part, because it is -- it's not only silencing -- or it's designed not only to silence the cccDNA but also designed to silence the integrated DNA or the viral DNA, the integrated host DNA.

And so think of surface antigen as coming out of 2 spigots.

ARC-520 turned off 1 spigot but did not turn off the other.

ARO-HBV should turn off both spigots.

And so our hope is that we can see what we saw with the extension study in ARC-520 with ARO-HBV but hopefully, in a more consistent manner and maybe in a faster time frame, given that we expect this to be a more complete and powerful drug.

And across a broader patient population.

That's right.

ARC-520 was really limited in the patient population it could serve.

We tried to design ARO-HBV to really be relatively agnostic as to the patient subgroup, and we designed this first study to actually give us information across all of those various patient populations.

That's what's really going to be fun to see in AASLD.

And it's hard to forecast exactly how that's going to look because we're -- we really only just started dosing patients not so many weeks ago.

So we have enough data now to have come to the conclusion that the drug is active.

I don't think we have enough data now to know exactly what things are going to look like in November, so that's something we really can't forecast.

Our next question comes from the line of Keay Nakae with Chardan.

Yes.

Just wondering if you can give us a little more info on the design changes you're seeing with ARO-ENaC.

Is it in terms of the delivery system, the ability to achieve better PK, better tolerability?

And is that allowing for design changes in the payload that maybe would facilitate lower doses?

Can you just help us understand that a little better?

Yes.

So I'll answer that broadly, of course, because we're not -- we have not disclosed the basics -- the specifics of the structures at this point.

So all those changes that we've made -- and we've really made sort of leaps forward over the last few months.

All of those changes have been aimed at increasing potency.

Our goal here is to use as little amount of material as we can -- it would be for any drug but even more so for an inhaled drug.

So we have made great strides in potency.

And we've been able to achieve good knockdown without using PK enhancers, and so it just makes the molecules more structurally simple, easier to manufacture and potentially safer.

So we've seen -- again, we've seen good leaps forward in both -- in potency and safety profile.

So, in saying 2019, can you be any more specific?

Is that first half or second half to start that?

Not at this point.

We -- we'll -- we can give -- we'll give more granular guidance at the R&D day.

(Operator Instructions) Our next question comes from the line of Elemer Piros with Cantor.

A lot of the questions have been answered.

Maybe I have a housekeeping question to Ken and a strategic question as well.

So I'm almost certain that you will recognize the $10 million milestone payment from Amgen next quarter, but I just wanted to verify that.

That's where -- we expect to recognize the $10 million as revenue next quarter.

And on the operating expense side, Chris or Ken, if you could comment on how -- to what extent do you see it accelerating beginning in 2019, when you have the multiple advanced stage programs in the clinic and some new ones as well.

You know what, our -- so our expenses will go up, but they're not going to go crazy because these are still relatively early-stage programs.

So I think we've been -- we have generally been between -- burning between $12 million and $15 million a quarter.

I think we stay pretty close to that.

And Chris, how do you think at this stage on partnering opportunities, which of these programs may be more suitable for a larger company with a broader reach to eventual markets?

Yes.

That's a harder question.

Let's say, we can go through them individually.

So ARO-ENaC, that's something that we would be happy to commercialize ourselves.

ARO-AAT, we'd be happy to commercialize that ourselves.

ARO-APOC3, we'd be happy to commercialize that ourselves.

We think there are good orphan opportunities there.

But it could also be a mass marketed product, and so we can go either way on that.

ARO-ANG3, similar, we could go either way on that.

It's that -- with a slight bias towards larger markets that really could be addressed maybe better with a larger partner.

And then HBV, HBV is probably, at least geographically, is a partner play.

We're not going to build sales force in China to go commercialize that.

So at the very least, that makes sense to partner geographically and maybe worldwide.

We'll just see how that goes.

There are no further questions at this time.

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

Thanks very much, everyone.

We look forward to seeing you in October for the R&D day.

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

This does conclude today's program.

You may all disconnect.

Everyone, have a great day.