Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) Q2 2023 Earnings Call Transcript
Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) Q2 2023 Earnings Call Transcript August 7, 2023
Operator: Greetings, and welcome to Arcturus Therapeutics Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations, and Marketing. Please go ahead.
Neda Safarzadeh: Thank you. operator. Good afternoon, and welcome to Arcturus Therapeutics Second Quarter 2023 Financial Update and Pipeline Progress Call. Today's call will be led by Joseph Payne, our President and CEO; and Andy Sassine, our CFO. Dr. Pad Chivukula, our CSO and COO will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statements.
Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factors section in our most recent Form 10-K and in subsequent filings with the SEC. In addition, any forward-looking statements represent our view only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements to reflect further information, events, or circumstances. And with that, I will now turn the call over to Joe.
Joseph Payne: Thank you, Neda. It's good to be with you again, everybody. We look forward to providing our updates today on our quarterly investor call. I will begin my remarks by highlighting our progress with our ARCT-154 COVID-19 vaccine Phase 3 program. We're pleased with the rapid development and regulatory process -- progress recently made with our alliance partner Meiji Pharma toward the approval of ARCT-154 by the Japanese regulatory authorities. The ARCT-154 submission is supported by an active-controlled Phase 3 booster vaccine study that was executed during a period when multiple COVID variants were circulating. Initial ARCT-154 Phase 3 booster study results were released as pre-print last month in Med Archive. The study achieved its primary endpoint, demonstrating non-inferiority of neutralizing antibody response against the SARS-CoV-2 ancestral strain when compared to Comirnaty.
The study also demonstrated superiority of ARCT-154 in neutralizing antibody response against the Omicron BA.4/5 variant as a key secondary endpoint. The results of this trial indicate increased immunogenicity associated with ARCT-154 at 28 days following booster administration. For the ancestral strain, the geometric mean ratio of neutralizing antibodies between ARCT-154 and Comirnaty was 1.43-fold indicating elevated neutralizing antibodies against the vaccine strain versus the comparator. Based on available Phase 3 clinical data at the time of interim analysis, ARCT-154 continues to demonstrate a favorable safety and tolerability profile with no additional safety concerns identified. In today's earnings release, we also included new ARCT-154 Phase 1/2 clinical study data, which suggested durable immune response up to one year following booster administration notably neutralizing antibody levels remained greater than 10-fold above baseline across a panel of variants including Omicron during the one-year observation -- and this is during the entire one-year observation period.
In summary, ARCT-154 has shown broad neutralizing capability against multiple variants of concern and has the potential to offer not only effective, but also a longer-lasting immune response that may suggest durable protection against COVID-19. We're very pleased with the ARCT-154 clinical data and now believe that this next-generation self-amplifying mRNA platform is meaningfully different than conventional currently approved mRNA vaccines. I will note that the ARCT-154 dose is very much lower. In our head-to-head study, ARCT-154 was dosed at only five micrograms. This is an 83.3% lower dose than Comirnaty and at least 90% lower than other approved mRNA vaccines. As previously reported, in April Meiji submitted a new drug application in Japan to support potential initial approval of ARCT-154 as a primary immunization vaccine, and in June, we were pleased to hear that Meiji filed the NDA for the booster and included the relevant data to support that booster application.
The review process with the PMDA is ongoing with Japanese NDA approval being our next targeted milestone. A positive PMDA decision would represent Arcturus’ first product approval a tremendous achievement for our company. And approval or unapproval along with the promising data that we've collected is indicative of the broader opportunity for Arcturus' mRNA technology platform. I'll now move on to provide an update on ARCT-810. This is our messenger RNA therapeutic candidate for ornithine transcarbamylase or OTC deficiency. This investigational medicine is designed to functionally replace the deficient OTC enzyme in the liver and thereby restore urea cycle activity and prevent metabolic crises that cause neurological damage. ARCT-810 could potentially reduce the need for ammonia scavengers and ease the rigid dietary protein restrictions that OTC patients face today, thus improving quality of life for those living with this disease.
In June, we announced that the FDA had granted ARCT-810 with Fast Track designation. The company has also recently received Rare Pediatric Disease Designation from the FDA for ARCT-810. Rare Pediatric Disease designation is designed to recognize those rare diseases in children in which serious or life-threatening manifestations primarily affecting patients from birth to 18-years of age. Now, due to this designation, if ARCT-810 achieves approval for a pediatric indication, Arcturus will receive a voucher for priority review of a subsequent marketing application for a different product. ARCT-810 is currently being evaluated in two ongoing clinical studies in patients. A Phase 1b study in adults and a multi-dose Phase 2 study in adolescents and adults with OTC deficiency.
The Phase 1b single ascending dose study is being conducted in the United States and has completed dosing of all planned cohorts in a total of 16 subjects. The ARCT-810 Phase 2 study is being conducted in the United Kingdom and Europe and plans to enroll up to 24 adolescents and adults with OTC deficiency. The ongoing study is evaluating two dose levels and includes up to six by-weekly administrations for each participant. We expect to share interim data on biological activity from a subset of patients in the coming months. Now, I'll move on to ARCT-032. This is our inhaled messenger RNA-therapeutic for cystic fibrosis. This program is designed to express fully functional CFTR protein in the lungs of individuals with CF, utilizing our LUNAR delivery technology that has been highly optimized for inhaled delivery to the lungs.
Our approach is agnostic to the underlying mutations associated with the disease. And as a result, this program could provide clinical benefit across a wide range of those living with CF, including those that are not well served by currently approved CFTR modulators. In June, at the European CF Society Conference in Vienna in collaboration with the University of Alabama Birmingham lab, we reported promising data demonstrating that ARCT-032 fully restore CFTR expression and function in vitro and bronchial epithelial cells from CF donors. In the past, improvement in chloride transport in these human bronchial epithelial cells treated with CFTR modulators has been associated with improved clinical outcomes. In the ARCT-032 clinical development program continues to advance according to plan.
We're pleased to report today the successful completion of dosing in our Phase 1 study. The study includes 32 healthy participants, including eight subjects in each of four dose cohorts being tested. We look forward to reporting interim safety and tolerability study results later this year. We received regulatory approval of a protocol amendment to allow the transition to a Phase 1b clinical study of ARCT-032 in up to eight cystic fibrosis patients. The study will be conducted in New Zealand and continuing to advance this important investigational medicine. Our strategic collaboration with CSL Seqirus and this is Arcturus' exclusive global licensee is focused on the development and commercialization of next-generation mRNA vaccines and continues to make strong progress.
Our Lunar-Flu program, for example, continues to progress with funding and operational support from CSL Seqirus. Lunar-Flu utilizes Arcturus' validated next-generation STARR mRNA platform. And with that, I will now pass the call to Andy.
Photo by Mohammad Shahhosseini on Unsplash
Andy Sassine: Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the second quarter and six months ended June 2023 and provides a summary and analysis of year-over-year financial results. Please also reference our most recent Form 10-Q for more details on the financial performance. We are very pleased with the ARCT-154 new drug application to the PMDA in Japan and we believe that this product could represent an improved vaccine option for patients, as well as an important source of potential future revenues for our organization. Furthermore, the development and manufacturing plans supporting ARCT-154 was carried out in a financially disciplined and efficient manner.
I will remind you that the Phase 3 Japanese booster study, as well as product manufacturing-related to this collaboration are being funded by Meiji Seika Pharma and the Japanese government. Also, in April Meiji Seika Pharma entered into an agreement with CSL Seqirus whereby Meiji will be responsible for the regulatory approval, marketing, distribution, and sales of ARCT-154 in Japan, as well as coordinating manufacturing of COVID vaccine products with ARCALIS for the Japanese market. We are thrilled to announce the completion of a state-of-the-art mRNA drug substance manufacturing facility in Japan with our partner ARCALIS. A team of delegates from Arcturus led by our senior executives and scientific team attended the grand opening ceremony of the cutting-edge cGMP facility in Tokyo, Japan this past week.
The ceremony with the celebration of collaboration and partnership as Arcturus joined forces with Japanese healthcare leaders and senior government officials to inaugurate the first mRNA manufacturing facility in Japan. Located in a strategic hub for biomedical research and development, ARCALIS is poised to become a key player in the global mRNA drug manufacturing landscape. ARCALIS' new plant meet current good manufacturing practice and is equipped with the world's most advanced manufacturing control and quality control system to efficiently manufacture high-quality substance for mRNA Pharmaceuticals. In April 2023, we received an advanced payment of $23.6 million for the manufacturing and supply of ARCT-154 booster vaccines from CSL. The advanced payment is for specified manufacturing runs of ARCT-154, which includes the drug substance as well as the reservation fees and related manufacturing requirements.
As Joe mentioned, the Lunar-flu program continues to progress with funding and operational support from CSL and additional updates will be provided soon. I will now provide a summary of our financial results for the second quarter of 2023. Our primary source of revenues were from license fees, consulting. and related technology transfer fees, reservation fees, and collective collaborative payments received from research and development arrangements with pharmaceutical and biotechnology partners. With the three months ended June 30, 2023, we reported revenues of $10.5 million compared with $27.1 million for the three months ended June 30, 2022. The decrease was primarily attributable to a decrease in revenues of $12.7 million related to the termination of the agreement with Vinbiocare and a decrease in revenues of $12.5 million related to the agreement with the Israeli Ministry of Health.
The decrease was primarily offset by an increase in revenue of $8.6 million related to the collaboration agreement with CSL and the grant agreement with BARDA, which were both executed in the second half of 2020. Revenue increased by $58.5 million during the six months ended June 30, 2023, compared to the prior year period. The increase was primarily attributable to an increase in revenue of $87.6 million related to the collaboration agreement with CSL Seqirus and the grant agreement with BARDA. Total operating expenses for the three months ended June 30, 2023, was $65.9 million compared with $49.2 million for the three months ended June 30, 2022. Total operating expenses for the six months ended June 30, 2023, were $131.4 million compared with $104.8 million for the six months ended June 30, 2022.
Our research and development expenses consist primarily of external manufacturing costs, in vivo research studies, and clinical trials performed by contract research organization, clinical and regulatory consultants, personnel-related expenses, facility-related expenses, and laboratory supplies related to conducting R&D activities. R&D expenses were $52.7 million for the three months ended June 30, 2023, compared with $38.2 million in the comparable period last year. Primarily reflecting increased clinical research and manufacturing costs of $11.4 million and an increase of $2.9 million in personnel-related expenses. R&D expenses were $104.4 million for the six months ended June 30, 2023, compared with $83.1 million in the comparable period last year, primarily reflecting increased manufacturing and personnel costs.
General and administrative expenses primarily consist of salaries and related benefits of our executive administrative legal and accounting functions and professional service fees for legal and accounting services, as well as other general and administrative expenses. G&A expenses were $13.2 million and $27 million for the three and six months ended June 30, 2023 respectively, compared with $11 million and $21.7 million in the comparable period last year. The increases resulted primarily from personnel expenses due to increased headcount and salaries, increased travel and consulting expenses, as well as an increased rent expense associated with the new headquarters facility. For the three months ended June 30, 2023, Arcturus reported a net loss of approximately $52.6 million or $1.98 per diluted share, compared with a net loss of $21.6 million or $0.82 per diluted share in the three months ended June 30, 2022.
For the six months ended June 30, 2023, Arcturus reported a net loss of approximately $1.8 million or $0.07 per diluted share, compared with a net loss of $72.7 million, or $2.75 per diluted share in the six months ended June 30, 2022. Cash and cash equivalents and restricted cash were $380.6 million as of June 30, 2023, and $394 million on December 31, 2022. We have collected approximately $300 million in upfront payments and milestones from CSL as of June 30, 2023. Additionally, in the second quarter, we received $23.6 million under the manufacturing and supply of ARCT-154 from CSL. We expect to continue receiving future milestone payments from CSL that will support the ongoing development of the Covid and Flu programs. Finally, I am happy to report the cash runway remains extended through the beginning of 2026 based on the current pipeline and programs.
In summary, we believe the company remains in a strong financial position and has the resources needed to achieve multiple near-term value-creating milestones for the vaccine and therapeutic programs. Furthermore, with the anticipated ARCT-154 product approval later this year in Japan, we look forward to beginning to report potential commercial sales in the next few years. I will now pass the call back to Joe.
Joseph Payne: Hey, thanks, Andy. We've continued to make excellent progress and advanced our proprietary messenger RNA, and lunar delivery platform technologies toward later stages of clinical development. It was great to hear the progress of our catalyze and our partner there on the manufacturing facility in Japan and we are especially excited about the progress toward our first product approval potentially later this year with ARCT-154, the achievement would definitely mark a critical milestone for the platform and for Arcturus. So with that, I’d like to turn the time over to the operator for questions.
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