U.S. Markets closed

Edited Transcript of ARWR earnings conference call or presentation 5-Aug-19 8:30pm GMT

Q3 2019 Arrowhead Pharmaceuticals Inc Earnings Call

PASADENA Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Arrowhead Pharmaceuticals Inc earnings conference call or presentation Monday, August 5, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Bruce D. Given

Arrowhead Pharmaceuticals, Inc. - COO

* Christopher R. Anzalone

Arrowhead Pharmaceuticals, Inc. - CEO, President & Director

* Kenneth A. Myszkowski

Arrowhead Pharmaceuticals, Inc. - CFO

* Vincent Anzalone

Arrowhead Pharmaceuticals, Inc. - Head of IR & VP

================================================================================

Conference Call Participants

================================================================================

* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Elemer Piros

Cantor Fitzgerald & Co., Research Division - Analyst

* Keay Thomas Nakae

Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Mayank Mamtani

B. Riley FBR, Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Vincent Anzalone, Arrowhead Pharmaceuticals, Inc. - Head of IR & VP [2]

--------------------------------------------------------------------------------

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2019 third quarter ended June 30, 2019. With us today from management are our 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 company's -- 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?

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [3]

--------------------------------------------------------------------------------

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. We made substantial progress during the quarter toward our short-term and longer-term goals. In particular, we took some very important regulatory and clinical steps that I'll discuss in a moment. We now have a good mix of early-, mid- and later-stage programs, both wholly-owned and partnered, and soon, we will add candidates targeting cell types outside of the liver. This will be a big step for Arrowhead and, more broadly, for the entire RNAi field. In addition, we have multiple years of cash on our balance sheet and, potentially, access to more nondilutive capital through milestone payments from our 2 external partnerships. Taken together, we have 3 critical components of success for a company like ours: one, a platform on which to build a variety of important new medicines; two, a pipeline of potential medicines spanning early discovery to later-stage clinical trials; and three, the capital to fund development and further innovation.

The fourth critical component is effective and rapid execution. I believe we have clearly demonstrated this over the past few years and during the last quarter. Our overriding focus is on bringing important new medicines to patients who need them. And if we're able to do that, we will continue to build long-term value.

Before I give a review of some of the highlights of the quarter, I want to make a couple of announcements. First, I am proud to announce a previously undisclosed program for which we expect to file a CTA at the end of this year and begin first-in-human studies shortly thereafter. We have never discussed this program publicly. The target is HSD17B13, and potential indications we could address are alcohol-related and non-alcohol-related liver disease. The candidate is called ARO-HSD, and it is currently in IND-enabling GLP toxicology studies.

HSD17B13 is a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids. In humans, it is intensively expressed in hepatocytes. Human genetic studies indicate that loss-of-function mutations in HSD17B13 are protective against development of both alcohol-related and non-alcohol-related liver disease with approximately 30% to 50% risk reduction compared to noncarriers. Carriers of this variant show lower transaminase levels, both ALT and AST, compared to noncarriers. This protective effect has inspired therapeutic interest in the treatment of liver disease. We are excited about the program, and I expect that not only will we have the first RNAi candidate against this target in the clinic, but I expect we'll be the first to bring any candidate using any modality into the clinic against this target. We have a large and exciting pipeline, and it is now larger and more exciting.

Second, Arrowhead will hold an Analyst Day in New York on October 18 to give a more in-depth review of some of our programs, including the new ARO-HSD program. We have come so far so fast, so I think it will also be helpful for us to take a step back and give investors a more long-term view of where we see the company over the coming years. We plan on having presentations from folks at Arrowhead as well as some external experts in addition to panel discussions and interactive question-and-answer sessions. The event will be open to analysts and institutional investors by invitation, and there will also be a live webcast. We're planning an engaging event with various presentation formats, so we hope many of you can join us in person or by webcast. Additional details will be available on our website as we approach the event.

Let's now turn to our preclinical programs. I want to give a brief update on the timing of ARO-HIF2 and ARO-ENaC, the first 2 TRiM-enabled candidates targeting tissues outside the liver. As I mentioned, being able to effectively target tissues outside the liver is a big step forward for us. Broadly, it opens up a vast set of diseases that may not be addressable with small molecule and/or antibody drugs and makes them accessible to Arrowhead. This can drive significant value for us and, more importantly, give us the opportunity to provide hope for many patients without adequate options.

We have believed all along that for to RNAi to reach its true potential as a paradigm-shifting new modality medicine, it must be able to address diseases outside of hepatocytes. Because of this belief, we have spent the last several years improving our technology in finding solutions to the many technical challenges that exist beyond hepatocyte delivery. We think we are there. This gives us a distinctive strategic and technical advantage over other RNAi companies.

ARO-HIF2 is being developed as a promising new drug candidate for the treatment of the clear cell form of renal cell carcinoma or ccRCC. ARO-HIF2 is designed to inhibit the production of HIF-2 alpha, which has been linked to tumor progression and metastases in ccRCC. We believe it is an attractive target for intervention because the overwhelming majority of ccRCC tumors are thought to express a mutant form of the Von Hippel-Landau protein that is unable to degrade HIF-2 alpha, leading to its accumulation during tumor hypoxia and promoting tumor growth.

We are still on schedule to file a CTA for HIF-2 -- ARO-HIF2 this year. Similar to ARO-HSD, we are currently conducting IND-enabling GLP toxicology studies. The anticipated completion of these studies should support a CTA filing by the end of the year.

Our second extrahepatic program to leverage the TRiM platform is ARO-ENaC. ARO-ENaC is an inhaled RNAi-therapeutic candidate designed to reduce production of the epithelial sodium channel alpha subunit, or alpha ENaC, in the airways of the lungs. In cystic fibrosis patients, increased ENaC activity contributes to airway dehydration and reduced mucociliary transport. ENaC inhibitors have been tried previously in cystic fibrosis but have not been able to get enough reduction in the lung while sparing the kidney. ENaC inhibition in the kidney can lead to high levels of potassium in the blood called hyperkalemia that can be dangerous and potentially life-threatening.

Consistent with other targets in our pipeline, this is another case where RNAi using our TRiM platform may have a distinct mechanistic advantage over prior small-molecule approaches, and thus, ENaC is an attractive target for us. We have demonstrated in multiple preclinical studies that we can selectively silence pulmonary ENaC expression with no effect on renal expression or serum potassium levels. In addition, RNAi appears to have a much longer duration of effect, which has been a limiting factor for inhaled small-molecule inhibitors.

Needless to say, we are very excited about the program. We previously presented data at the 2018 North American Cystic Fibrosis Conference, among others. We anticipate additional data presentations at future conferences.

Because of the specialized nature of inhalation studies, there are a small number of high-quality facilities capable of doing activity and toxicology work for ARO-ENaC. This has affected our ability to get studies scheduled and has slowed the program a bit. We expect to begin IND-enabling GLP toxicology studies for ARO-ENaC next quarter, but they will not be done in time to file a CTA before the end of the year. So we are adjusting guidance on our CTA filing to the first half of 2020. Keep in mind that this is our first inhaled RNAi therapeutic candidate and the first to target the lung. So while we are disappointed that the program was delayed by about a quarter, it is a small price to pay to ensure that we going into the clinic with a substantial amount of preclinical data and that the animal studies are done well.

Further, the new ARO-HSD CTA filing by the -- further, sorry, with the new ARO-HSD CTA filing by the end of this year, we continue to build our clinical pipeline at a speed that meets or exceeds our own aggressive expectations. As we get clinical experience and validation with this first lung-targeted program, we anticipate that new programs will follow more quickly and we will be able to achieve the same high level of speed that everybody has come to expect from Arrowhead.

Moving on, I want to review some important progress in our clinical-stage programs. I will start with ARO-AAT, our later-stage RNAi therapeutic candidate being developed to treat a rare genetic liver disease associated with alpha-1 antitrypsin deficiency. We achieved 2 important regulatory milestones during the quarter. First, we announced that following the filing of an IND, we received FDA clearance to begin the SEQUOIA Phase II/III trial with the potential to serve as a pivotal registrational study. Importantly, this is the first potentially pivotal study for a compound using Arrowhead's TRiM platform. We also secured Fast Track destination for ARO-AAT from the U.S. FDA. Fast Track is designed to facilitate the development and expedite the review of drugs to treat serious conditions that fill an unmet medical need. The purpose is to get important new drugs to the patient earlier. We intend to utilize a number of the important advantages that Fast Track provides. You may also recall that we previously announced that ARO-AAT received orphan designation in both the EU and the U.S.

In addition to these key regulatory achievements, we have also pushed forward with the clinical studies. We have multiple sites that are operational with patients already enrolled. We expect dosing to begin this week. The 2002 open-label study is also moving along well, where we continue to open sites. We expect enrollment to begin shortly. Bruce will talk about the status of these studies in a moment.

I want to mention a few things about the ARO-HBV program being developed in collaboration with Janssen and now called JNJ-3989. The clinical development program has continued to advance. In April, we announced that the AROHBV1001 study was expanded to include a new triple combination cohort, cohort 12, in 12 patients with chronic hepatitis B infection. All 12 patients have been enrolled and have received all planned doses of JNJ-3989. This cohort includes JNJ-3989, JNJ-6379, Janssen's investigational orally administered capsid assembly and modulator of the class that forms normal capsid adventures, and a NUC. In connection with the start of dosing of cohort 12, Arrowhead earned a $25 million milestone payment.

In addition to the AROHBV1001 study, Janssen is currently initiating a Phase IIb study called REEF-1, of different combination regimens, including JNJ-3989 and/or a JNJ-6379 and/or a NUC for the treatment of chronic hepatitis B virus infection. The study will include up to 450 patients who will be randomized to receive up to 48 weeks of treatment. Arrowhead is eligible to receive an additional $25 million milestone payment from Janssen upon the dosing of the fifth patient in REEF-1. The study is on clinicaltrials.gov if you want additional information.

Part of our October 2018 agreement with Janssen included a research collaboration and an option agreement to potentially collaborate for up to 3 additional RNAi therapeutics against new targets to be selected by Janssen. We are actively working on the first candidate, now referred to as ARO-JNJ1, against an undisclosed liver-expressed target. These potential new candidates leverage Arrowhead's proprietary TRiM platform and do not include targets in our current pipeline. Arrowhead is responsible to perform discovery, optimization and preclinical development entirely funded by Janssen, sufficient to allow the filing of a U.S. IND or equivalent, at which time Janssen will have the option to take an exclusive license. If the option is exercised, Janssen will be wholly responsible for clinical development and commercialization. This is an important opportunity to create novel medicines by leveraging Arrowhead's speed and expertise in RNAi drug discovery and Janssen's clinical development and commercial of capabilities. We have made rapid progress on this program, and we look forward to working with Janssen further on ARO-JNJ1 and, potentially, 2 other programs.

Let's now move to our Amgen partnership. Amgen continued to make progress on AMG 890, formerly called ARO-LPA, that targets lipoprotein(a), also known as Lp(a). AMG 890 is being investigated as a potential treatment for cardiovascular disease. Amgen has been enrolling patients with elevated Lp(a) in a Phase I study and expects to share the initial data late this year or early next year. Amgen also anticipates launching the next phase of development of AMG 890 in the first half of 2020, which would trigger development milestone payment. We share Amgen's excitement in this program and believe that AMG 890 could one day be an important new treatment for cardiovascular disease.

Under the terms of our September 2016 agreement, Amgen also received an option to a worldwide excessive license for an RNAi therapy against an undisclosed cardiovascular target, which we subsequently called ARO-AMG1. In August 2018, Arrowhead delivered to Amgen a candidate that met or exceeded the activity and safety requirements stipulated in the elaboration agreement. The option period expires on August 7, 2019, and Amgen has advised us that they do not intend to exercise the option. Consequently, we will be removing ARO-AMG1 from our development pipeline.

Let's move to our 2 wholly-owned cardiometabolic candidates, ARO-APOC3 and ARO-ANG3. These targets both provide some optionality with respect to which patient populations and indications we will pursue. For each target, there may be opportunities to treat well-defined orphan diseases, such as familial chylomicronemia syndrome and homozygous familial hypercholesterolemia as well as higher-prevalence diseases. In addition, the Phase I study for both candidates are designed to provide a readout on safety and tolerability as well as a robust look at the pharmacologic activity and duration of effect in both healthy volunteers and various patient populations, further enhancing our optionality at quite an early stage. To that end, we secured orphan drug designation from the FDA for ARO-APOC3 for the treatment of familial chylomicronemia syndrome, or FCS, and for ARO-ANG3 for the treatment of homozygous familial hypercholesterolemia or HoFH. Our intention is to pursue these orphan indications immediately and potentially initiate pivotal studies for both ARO-APOC3 and ANG3 next year.

Beyond these rare disease populations, we also plan to pursue a staged clinical development and go-to-market approach where we study larger indications in parallel, involving larger studies that will take longer to mature. We like this model. It allows us -- it allows for the possibility of getting to market quickly while also enabling growth into other markets.

From a chemical entity standpoint, of course, APOC3 and ANG3 candidates are just one drug each. From an economic and market standpoint, however, these single drugs could behave like multiple drugs. As we do multiple studies to support treatment for and marketing to different indications, we expect to substantially increase our total addressable markets. Importantly, the addition of each new indication area benefits the others because they will all contribute to a single safety database for each candidate, so there's clear leverage here.

So what are some of these larger market opportunities? For ARO-APOC3, it could simply be patients with elevated triglycerides with some history of pancreatitis. For ARO-ANG3, there are many possibilities. For instance, we could look to treat heterozygous FH patients or those who are not meeting their LDL cholesterol goal while on statins. Because we expect ARO-ANG3 may decrease liver fat and help with insulin resistance, among other things, we could also look to treat patients with NASH, NAFLD and those with metabolic syndrome. We believe we have a substantial opportunity to help a large number of diverse patients and that ANGPTL3 is a uniquely powerful target. As a reminder, we are developing the first and, I believe, only clinical RNAi candidates against both APOC3 and ANGPTL3.

These 2 programs are essentially on the same schedule and at the same stage currently. We completed dosing in the single-ascending dose portions of both studies and are now enrolling the multiple-dose portions in various patient populations. We are still on schedule for potential data readouts starting this year and likely containing into next year. Specifically, Bruce will be a keynote speaker at the Global Summit on Cardiology and Heart Diseases taking place in Dubai on September 16 and 17. He will be talking about our ANG3 and APOC3 programs and will include some top line clinical data we have generated. Later this month, we will submit a late-breaker abstract for the American Heart Association conference in November. If accepted, we expect to present a fuller data set from the ANG3 and APOC3 clinical programs. These are data-rich studies, so we believe we will have additional readouts through the November AHA office. We would, therefore, expect to submit aspects to present more data at the EASL International Liver Conference and/or the American College of Cardiology meeting in April.

At our R&D Day last year, we mentioned a breakthrough in targeting skeletal muscle cells. We have continued down this path and are getting closer to designating our first target and entering the clinic. We are not prepared to discuss data today, but we see the potential to enter the clinic with our first muscle-targeted in candidate next year.

With that overview, I'd now like to turn the call over to Dr. Bruce Given. Bruce?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [4]

--------------------------------------------------------------------------------

Thank you, Chris. Good afternoon, everyone. We have made solid progress in all of our development programs during the recent period. I will begin with a status update on our 2 wholly-owned cardiometabolic candidates, ARO-ANG3 and ARO-APOC3. ARO-ANG3 is Arrowhead's subcutaneous-delivered RNAi therapeutic targeting angiopoietin-like protein 3, or ANGPTL3, being developed as a potential treatment for patients with dyslipidemias and, possibly, metabolic diseases.

The ARO-ANG3 first-in-human study, which began dosing at quarter 1, is called AROANG1001. It is a Phase I single- and multiple-dose study to evaluate the safety, tolerability, pharmacokinetic and pharmacodynamic effects of ARO-ANG3 in up to 70 subjects. The single-dose portion of the study is in adult healthy volunteers, and the multiple-dose portion is in patients with various types of dyslipidemia, including patients with nonalcoholic fatty liver disease, patients on a stable statin treatment regimen with persistently elevated LDL cholesterol, patients with heterozygous or homozygous familial hypercholesterolemia and patients with hypertriglyceridemia.

We have completed dosing in all of the single-dose cohorts, at 35, 100, 200 and 300 milligrams. We selected the 200 milligram-dose to move forward within the multiple-dose patient cohorts and subsequently received drug safety committee and IRB clearance to begin enrolling and dosing patients. Three of the multiple-dose cohorts are fully recruited, and dosing has begun. The recruiting process is in full swing in the other patient cohort.

As we look toward the possibility to accelerate the development program, we've decided to expand the trial, adding dose-ranging, multidose healthy volunteer cohorts to give us multidose PK and pharmacodynamic data, and also some dose-ranging multiple-dose cohorts in patients with heterozygous or homozygous familial hypercholesterolemia. This amendment should be submitted shortly. As for what we have learned to date, we have seen indications of activity based on reductions in plasma ANGPTL3 concentrations and changes in lipid parameters. The safety and tolerability profile has not set up red flags and caused any protocol changes.

Moving on to ARO-APOC3, which began dosing later in quarter 1, ARO-APOC3 is Arrowhead's subcutaneously administered RNAi therapeutic targeting apolipoprotein C-III, better known as APOC3, being developed as a potential treatment for patients with hypertriglyceridemia. The ARO-APOC3 first-in-human study is called AROAPOC31001. It is a single -- I'm sorry, a Phase I single- and multiple-dose study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamic effects of ARO-APOC3 in up to 63 subjects. The single-dose portion of the study is in adult healthy volunteers, and the multiple-dose portion is in patients with severe hypertriglyceridemia and familial chylomicronemia syndrome.

The study was originally designed to include doses of 25, 50, 100 and 200 milligrams. We've been pleasantly surprised by the activity of the drug at lower doses than expected. So we have amended the protocol to eliminate the 200-milligram dose and have added a 10-milligram dose instead. We've now completed dosing in all of the ARO-APOC3 single-dose cohorts, including the new 10-milligram cohort. I want to be clear that this protocol amendment was based solely on positive pharmacodynamic activity and not due to any concern or finding with respect to safety or tolerability. The 10-milligram cohort potentially gives us more detail on the dose-response relationship of ARO-APOC3, which is helpful as we move forward with patient dosing in the study and, ultimately, as we design the next clinical studies.

We are now in the process of screening and scheduling patients for the multiple-dose portion of the study, and we anticipate dosing will begin shortly. Both first-in-human studies of ARO-ANG3 and ARO-APOC3 are designed to provide a readout on safety and tolerability as well as a robust look at pharmacologic activity and duration of effect. Included in the readout of activity are changes in APOC3 and ANGPTL3 protein levels, triglycerides, LDL-C, VLDL-C, HDL-C and other lesser-known lipid parameters.

At Arrowhead, we always strive to find innovative designs that get the most data as quickly as possible, and these studies are no exception. We are excited about these data and look forward to sharing them publicly in an appropriate forum. The single-dose portion of both ARO-APOC3 and ARO-ANG3 studies we hope will have mature enough data to share in the fourth quarter of the year. Our intention is to submit abstracts and, if accepted, present at the American Heart Association's Scientific Sessions 2019. These take place in November. We will see how quickly the multiple-dose cohorts enroll before providing guidance on when we would -- those would be available to discuss publicly.

I would now like to give an update on where we are with the ARO-AAT program. ARO-AAT is Arrowhead's second-generation subcutaneously administered RNAi therapeutic being developed as a treatment for a rare genetic liver disease associated with alpha-1 antitrypsin deficiency. We are in the process of initiating 2 studies. The first to start is the SEQUOIA Phase II/III study and then shortly after that will be the 2002 open-label study. These 2 studies together are designed to strike a balance between the maximum speed to a potential NDA with the desire to see midterm confirmation that ARO-AAT is doing what it is designed to do.

Let me talk about these designs for a moment. SEQUOIA is a multicenter, multidose, placebo-controlled, adaptive Phase II/III study to evaluate the safety, efficacy and tolerability of ARO-AAT administered subcutaneously to patients with alpha-1 antitrypsin deficiency. The multidose, placebo-controlled Part A component of the study is designed to select a single-dose level for use in Part B. This will then feed seamlessly into a 2-arm placebo-controlled Part B component. In total, SEQUOIA is designed to enroll 120 patients who will receive at least 9 doses, or approximately 2 years of treatment, with ARO-AAT or placebo.

The primary objective for Part B is to evaluate efficacy as assessed by the proportion of ARO-AAT-treated patients relative to placebo achieving a 2-point improvement in a histological grading scale of alpha-1 antitrypsin deficiency associated liver disease and no worsening of liver fibrosis on the end of study biopsy.

The AROAAT 2002 study is a pilot open-label multidose Phase II study to assess changes in a novel histological activity scale in response to ARO-AAT over time with alpha-1 antitrypsin deficiency associated liver disease. In total, the 2002 study is planned for up to approximately 12 participants in 2 sequential cohorts. All 12 patients will also be eligible to participate in an extension cohort. Between cohort completion and then including the extension, if patients elect to participate in the extension, we plan to conduct a predose liver biopsy and then repeat biopsies after 6, 12, 18 and 24 months of treatment. The primary objective is to evaluate the effect of ARO-AAT on the liver scale over time.

So where are we with initiating these studies? I will start with SEQUOIA because that is slightly further ahead. We have received regular clearance in the U.S., and one site has begun screening patients for enrollment, and we anticipate additional sites will also begin screening shortly. It is likely that the first patient on study will be in the U.S., but we are also in the process of pursuing regulatory and IRB clearances in multiple European countries and Canada, and several of the country clearances have already been secured. We are targeting approximately 40 sites in North America and Europe. So we anticipate that over the coming months, there will be progressively more sites screening and enrolling patients.

For the 2002 study, we have secured national regulatory clearance in the United Kingdom and are pursuing regulatory clearance in multiple other countries as well. Sites are not yet open for screening and enrollment, but we are working diligently on that. The 2002 open-label study will only be in Europe.

The data on the ARO-AAT have been highly encouraging. We believe the results suggest that RNAi and, by extension, ARO-AAT holds great promise for the treatment of patients with AATD-associated liver disease. Notably, we presented preclinical data at EASL this year showing that we were able to prevent further liver damage and reverse existing damage in the PiZ mouse model that harbors a human Z-AAT gene and recapitulates many features of human AATD liver disease. This makes us excited about embarking on the 2002 study and on SEQUOIA, which is Arrowhead's first potentially pivotal study.

We also look forward to talking about these programs and some of our less mature development programs at our Analyst Day in October.

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?

--------------------------------------------------------------------------------

Kenneth A. Myszkowski, Arrowhead Pharmaceuticals, Inc. - CFO [5]

--------------------------------------------------------------------------------

Thank you, Bruce, and good afternoon, everyone. As we reported today, our net income for the quarter ended June 30, 2019, was $20.3 million or $0.21 per share based on 98.9 million fully diluted weighted average shares outstanding. This compares with a net loss of $15.6 million or $0.18 per share based on 87.6 million weighted average shares outstanding for the quarter ended June 30, 2018.

Revenue for the quarter ended June 30, 2019, was $42.7 million compared with $727,000 for the quarter ended June 30, 2018. Revenue in the current period relates to the recognition of a portion of the upfront payments and milestone from our license and collaboration agreements with Janssen, while revenue in the prior period related to the recognition of a portion of the upfront payments from our license and collaboration agreements with Amgen. Revenue from the Janssen agreement will be recognized based on our estimate of their proportion of effort expended toward fulfilling our performance obligations, primarily, overseeing the completion of the current Phase I/II HBV clinical trial. We expect the majority of the revenue to be recognized in this fiscal year, but we also expect revenue in fiscal 2020 as we continue to perform certain follow-up activities through 2020.

Total operating expenses for the quarter ended June 30, 2019, were $24.1 million compared to $16.6 million for the quarter ended June 30, 2018. This increase primarily -- is primarily due to increased drug manufacturing, toxicology and clinical trial costs as our pipeline of clinical candidates has increased.

Net cash provided by operating activities during the quarter ended June 30, 2019, was $10.8 million compared with net cash used in operating activities of $14.4 million during the quarter ended June 30, 2018. The operating cash generated in the current period reflects the $25 million milestone payment we received from Janssen, offset by cash used to fund our operations.

Turning to our balance sheet. Our cash and investments totaled $295.5 million at June 30, 2019, compared to $76.5 million at September 30, 2018. The increase in our cash and investments is primarily due to the cash received from Janssen. Our common shares outstanding at June 30, 2019, were 95.2 million.

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

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [6]

--------------------------------------------------------------------------------

Thanks, Ken. We continue to demonstrate Arrowhead's ability to execute with speed and precision. We gained clinical experience and validation with our TRiM platform for liver delivery and then rapidly expanded our pipeline to include 5 programs, which will soon be 6 when we file a CTA for ARO-HSD by the end of this year. We also expect to have a seventh clinical program this year when we file an IND for ARO-HIF2 and an eighth when we file a CTA for ARO-ENaC in the first half of next year. This will be a big position for a company twice our size: 2 partnered and 6 wholly-owned clinical programs, spanning 3 cell types in the near term. Further, we expect to be in 3 pivotal studies and have no less than 10 clinical programs based on the TRiM platform by the end of next year. We think we are now on the cusp of the next stage of growth for the company whereby we expect to rapidly build our pipeline in tumor, lung, muscle and eventually, additional tissue types.

The opportunities in front of us feel limitless if we can continue to achieve our long-term strategic goals to do the following: one, file 2 to 3 new CTAs every year; two, target a new cell type with the TRiM platform every 18 months; three, have 10 TRiM-enabled candidates in clinical studies by the end of 2020; and four, have 3 active pivotal studies in 2020. With all of these programs, people ask us about our development and partnering plans. Simply put, we have no appetite to partner any part of our pipeline right now. Should this change in the future, I expect it to be opportunistic rather than driven by necessity. We have indeed come far, and there is still substantial value for us to create by developing and ultimately marketing these important medicines. Together, our strong balance sheet and access to approximately $4 billion of non-dilutive capital via potential development and commercial milestone payments enable us to pursue this strategy at this time. We are building a large but nimble long-term pharmaceutical company, and the current pipeline is the core of that transition.

Thanks for joining us again today. This is a uniquely exciting time for us, our shareholders and the patients we hope to serve. I would now like to open the call to your questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line from Ted Tenthoff from Piper Jaffray.

--------------------------------------------------------------------------------

Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [2]

--------------------------------------------------------------------------------

Can you guys hear me okay?

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [3]

--------------------------------------------------------------------------------

Hi, Ted. Yes, we sure can.

--------------------------------------------------------------------------------

Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [4]

--------------------------------------------------------------------------------

Fantastic update. Really excited to see all the progress. Just great job and looking forward to seeing you guys in New York on the 18th in October. Quick question, if I may. Just one on HBV with respect to REEF-1. How quickly should we expect that to be going? And what would expectations be for additive activity of 3989 or ARO-HBV on top of the JNJ compounds? And then I have a follow-up, if I may.

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [5]

--------------------------------------------------------------------------------

Bruce?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [6]

--------------------------------------------------------------------------------

Okay. So how quickly can we expect to get going? Of course, it's not our study, so we can't really guide on that. I mean I know that they've been working hard on it, so I don't think it'd be a surprise if they got going this quarter. But I can't really guide for them. As for what's the likelihood of additive activity, it's really a hard call, I would say, Ted, just because it -- the data so far with the chems, they reduce DNA. They reduce HBV RNA, but they haven't impacted s antigen or e antigen really at all even with 6 months of use.

So the real question here is will we get some sort of additive or even synergistic activity when combining with RNAi, and that currently is unknown in the field. And the -- as Chris said, the real game here is it's a 48-week trial, so almost a year, and there's no experience with that at all. So I think it's kind of anybody's guess. And my whole take on this, as you know, Ted, all along has been that there will be many different recipes tried over the coming years in HBV and no one knows the optimal recipe yet. So I don't know how to really handicap it any better than that for you, Ted, except we just have to wait and see. It's going to be a very exciting time.

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [7]

--------------------------------------------------------------------------------

Yes, so I will say on that, it's a large -- it's a relatively large study. It's 450 people. We expect this to be a multinational study. And so we expect Janssen to have sites across multiple countries and they'll have access to a lot of patients. But I think given what we know about, about the field, this feels to me like, I don't know, maybe if not the most interesting current study, pretty close to it given the combination approach, given that it's on top of our RNAi therapeutic, which looked to be quite active and quite well tolerated last year. So it feels to me like, like we have -- like Janssen has a pretty good shot of enrolling this thing at a reasonable clip.

--------------------------------------------------------------------------------

Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [8]

--------------------------------------------------------------------------------

Yes. Makes a lot of sense. Okay. Excellent. And then just quickly, I think HSD kind of comes out of nowhere but we've certainly been hearing about the genetic validation around this target. Where do you think you guys are differentiated? And how quickly do you think we could see Phase II plans sort of elucidated?

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [9]

--------------------------------------------------------------------------------

Yes. Slowdown on that one. We're not in the Phase I yet. We are -- we move very quickly on this. We think -- we're excited about the target. The GWAS data were -- are powerful, I think. As to how we differentiate ourselves with other folks, it's hard to say because I think we're going to be the first in. And so we'll just -- we'll see how those data look, and we'll see who joins us from the clinic at some point.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Your next question comes from the line of Keay Nakae from Chardan.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [11]

--------------------------------------------------------------------------------

For HSD, in terms of the patient population you might go after, how easily are these patients diagnosed, especially with the particular marker that you think you would be targeting here?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [12]

--------------------------------------------------------------------------------

Yes, so first of all, I mean, HSD was discovered in GWAS through this variant that actually has loss of activity. So it's not just loss of activity, but it's also very rapidly metabolized. So essentially, it winds up being a sort of loss of function variant. So I guess the only patients you would say that would be inappropriate for treatment would be the people that already have that variant. So we would be looking for the wild type normal population for treating.

And as for which population or populations we will go after, I think it's probably premature to talk about that. I think that's a good target for discussion on October 18. This is a relatively young target. That seminal paper in the New England Journal of Medicine only came out March of 2018. So it was not previously identified as a -- as really an important target in fibrosin liver diseases. So I think this one, we're going to be learning as we go as an industry, and it's going to be fun to watch it develop, I would say.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [13]

--------------------------------------------------------------------------------

Okay. I guess if I can just dig into that a little deeper. Patient is exhibiting some symptoms. How does the clinician discriminate what the exact cause is and makes them appropriate for this approach?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [14]

--------------------------------------------------------------------------------

Well, so far, it seems to -- the nonfunctioning allele is associated with a substantially lower risk of developing NASH or a substantially lower risk of developing alcoholic-related liver disease, including cirrhosis. So whatever the underlying causes of those are, it seems to heavily ameliorate those patients as far as we understand today. So it doesn't seem at this point like you would go in thinking that you needed to eliminate certain etiologies. And as you know, the understanding of what causes NASH is not all that great anyway. So I would say that -- right now, you wouldn't be all that selective other than determining that the patient already didn't have the variant and wasn't already essentially equivalent to being knocked down.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

Your next question comes from the line of Maurice Raycroft from Jefferies.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [16]

--------------------------------------------------------------------------------

Congrats on the progress. Apologies if I missed this earlier, but I was wondering for the HBV triple data, do you think there's a pretty good chance that the data could be at AASLD this year? Or is that more likely a 2020 update? And then I'm wondering if you can provide any perspective on what would be evidenced for synergy or lack thereof with the triple combo?

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [17]

--------------------------------------------------------------------------------

So there'll be 0 chance that the triple combo data, I think, could be presented at AASLD.

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [18]

--------------------------------------------------------------------------------

I don't think that's right, Chris. I mean there will be a late breaker abstract submitted. Whether it gets accepted or not, we won't know until there. So it's not 0. But whether they'll accept it or not, who knows.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [19]

--------------------------------------------------------------------------------

Okay. And then any thoughts on just synergy and what we should be looking for there with the triple?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [20]

--------------------------------------------------------------------------------

Well, it's kind of like the answer earlier that it's really -- the reason it may get accepted as a late breaker, even though it's only 12 subjects, is because it's really the first important triple therapy trial that's been done in HBV in the current era. So the answer is that the people will really be fascinated to see, although it's quite -- it's short-term therapy. I mean it's only 12 weeks in what's going to be a probably a year of therapy is what people are sort of targeting in HBV. But it will be the first inkling. And the other thing is it will be the first shot that anyone's ever seen at knowing whether there are any safety concerns to think about, at least concerns that are mechanistically based and would show up even with 12 subjects. So I think it's important work. But whether or not AHA will accept it, that's a question I can't answer.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [21]

--------------------------------------------------------------------------------

Got it. And so for the 12 subjects, do you think you'll have 12 weeks of data for all 12 of those patients?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [22]

--------------------------------------------------------------------------------

By the time we get...

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [23]

--------------------------------------------------------------------------------

By the time of the LBA filing?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [24]

--------------------------------------------------------------------------------

Yes, but not for the abstract itself. That's part of what always makes it a little bit uncertain. Not everybody has -- is that far along at this point. But remember, they get dosed with the RNAi agent on day 1, day 29 and day 57, and all 12 have received all 3 doses to date. They also get full 12 weeks of the chem, and not everybody has received all 12 weeks of their chem yet. Let alone been having longer-term follow-up.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [25]

--------------------------------------------------------------------------------

Makes sense. And then for ARO-AAT, just wondering if there's any update on the activity scale design and if you can provide any perspective on the conversation with regulators on that. And is it possible that we could see data from the open-label study by mid-2020?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [26]

--------------------------------------------------------------------------------

Let me take the second one first. Possible. So EASL is in April. So I think there's just probably not enough calendar to get anything into EASL. So the more likely case, I would say, would be that, that there'd be a shot that you would have data at AASLD or at least an abstract submitted. You could never -- we could never guarantee they'll accept it. But an abstract submitted for AASLD, I think, would be more likely timing-wise. And then I'm sorry, the first question was...

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [27]

--------------------------------------------------------------------------------

Just any update on the conversation with regulators on activity scale design.

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [28]

--------------------------------------------------------------------------------

Right. So first of all, the activity scale design is a protocol-driven thing where there are multiple steps that are driven by a protocol to refine this. And it's actually, believe it or not, statistically driven to really find what the components are that everybody agrees would be the right sort of components and the right weighting of those components. When I say everybody, I mean, all of the pathologists, experts that are involved with establishing the scale. So it's very much the same way they establish the NASH scale, for instance, and it's a formal process, protocol-driven.

So certainly, when we're done with that process, the regulators are going to be very interested to see the outcome, and that's not something we're going to keep hidden from them. Once we have a full report and they can look -- they could dive in to all the statistics and everything else, they're anxious to do that because this is something brand-new that no one else in the world has ever done before, at least not that we know of.

--------------------------------------------------------------------------------

Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [29]

--------------------------------------------------------------------------------

Okay. And last question is just on ANG3 and APOC3. I know you mentioned earlier that you're not going to provide any data updates on what you're seeing, but I don't know if you can provide any qualitative perspective on it. And I think you guys have mentioned that you're seeing good responses to go with an even lower dose for APOC3. And so maybe if you can just provide some additional perspective on that.

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [30]

--------------------------------------------------------------------------------

So Bruce will have some top line data in the Dubai conference in September and of course, a fuller data set hopefully at American Heart. So just wait on that. Hopefully, you'll have that in your hands pretty soon.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

(Operator Instructions) Your next question comes from the line of Mayank Mamtani from B. Riley.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [32]

--------------------------------------------------------------------------------

Congrats on the progress and looking forward to the R&D Day on October 18 as well. I have 3 questions, mostly follow-up. For REEF-1 for hep B, could you -- I see (inaudible) 3 dose levels for 3989. And really why I ask that is, is there anything we could learn from the 12-week readout -- the 12-patient readout that could also inform some of the doses that you're testing in the Phase II 450 patient study?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [33]

--------------------------------------------------------------------------------

I don't think so. I mean I actually think that the dose-ranging data really relates to the RNAi component. And I think that they were able to make that choice based on -- from our 1001 study. I don't think there's really anything in those 12 patients that would inform on that. I think the most important part of the 12 patient (inaudible) was an opportunity to really learn about the (inaudible) binding the 3 together in preparation for what is going to have quite a few patients in the combination arm.

So I think it was more important there than necessarily to try to inform, and it's not dose responsive. 12 patients all are getting the same dose of 3989. And whatever the number of the chem is, [6 39] maybe, I can't remember, (inaudible). So no, it doesn't really -- I don't think it will alter -- it only would've altered REEF-1 if we ran into some sort of safety issue or something. But absent that, I don't think there really any chance it was going to alter REEF-1 per se.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [34]

--------------------------------------------------------------------------------

Got you. And do you confirm it's also day 1, day 29 and day 57 dosing for this REEF-1?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [35]

--------------------------------------------------------------------------------

No. REEF-1 doses all the way through 48 weeks. So REEF-1 is the first real modern combination study in HBV curative intent, trying to create a functional cure. Remember, the 1001 study didn't have curative intent. It was just to get safety and activity and dose ranging. It was really a first-in-human study. We got a lot of information out of it, but it was never a curative intent study. But REEF-1, really trying to see whether 48 weeks of combination therapy can give us functional cures. That's the purpose [of knowing what] dose is.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [36]

--------------------------------------------------------------------------------

Got you. Great. And then on the AAT -- ARO-AAT, is there any difference in guidance from U.S. and -- or FDA and EMA? Just trying to understand, is there any particular reason why 2002 is focused on the EU side? So is that mostly because of the homogeneous population in the Scandinavian countries?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [37]

--------------------------------------------------------------------------------

Yes, I don't think that was the influence. I just think we thought that we had some investigator over in Europe that really wanted to do this trial and it's only 12 patients. And so we thought we could do from here without really interfering at all with 2001 with SEQUOIA. And it was really important to get SEQUOIA fully enrolled obviously as quickly as we can. So we just estimated that Europe was maybe a bit better place to do that trial than the U.S., and that's why we did it there.

--------------------------------------------------------------------------------

Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [38]

--------------------------------------------------------------------------------

Okay. Great. And then last question I have to ask on ANG3 and APOC3. I understand you're waiting for the data disclosure at the Dubai conference. But just as you think about the orphan and think about the higher prevalent indications, is the -- could you pursue a different dose level for orphan include -- and maybe a different dose level and importantly, frequency of administration for the highly prevalent population?

--------------------------------------------------------------------------------

Bruce D. Given, Arrowhead Pharmaceuticals, Inc. - COO [39]

--------------------------------------------------------------------------------

So those are 2 different questions. I think it would be unlikely that the dose would be different just because we're active through the RNAi mechanism and it doesn't -- or tend to vary all that much from disease to disease, even subgroup to subgroup basis. Now, the frequency of dosing is a little bit different question because with treating these orphan patients who really have very high circulating levels of these sort of lipids, you probably want to maintain full, full activity all the time. Whereas in a, let's say, a secondary prevention setting, for instance, you might be able to have less frequent dosing even if you had a little bit of recovery at the end of the dosing interval.

So I think it'd be unlikely that the dose would necessarily be different. But I would -- I think -- I could imagine that it'd be possible that the dosing interval might be stretched a little bit in some of the other indications. But that's speculation at this point. I want to be very clear, that's purely speculation at this point, and we're a ways from being able to make that call.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

Your next question comes from the line of Elemer Piros from Cantor.

--------------------------------------------------------------------------------

Elemer Piros, Cantor Fitzgerald & Co., Research Division - Analyst [41]

--------------------------------------------------------------------------------

I just like -- this is a financial question. We understand the $25 million of the revenue recognized in this quarter comes from Janssen. How would -- how was the other half of the amount was made up of? And if you were to project that for the next year, how much of the revenue that you would receive would be recognition of previously received upfront payment, for example? And what would be the rough division between revenue from Amgen and from Janssen for R&D reimbursement?

--------------------------------------------------------------------------------

Kenneth A. Myszkowski, Arrowhead Pharmaceuticals, Inc. - CFO [42]

--------------------------------------------------------------------------------

Okay. So first of all, the $25 million that we received from Janssen wasn't entirely recognized during the quarter. The way that works is we estimate what the total revenue is from the origination of the contract and that gets put into a pool, and that is -- that large amount, which is about $227 million, is the pool of revenue that's recognized over the course of delivering our work on that project, which is going to last through 2020.

So we take that amount, and we estimate what our progress is each quarter. And so to date, we have recognized about $125 million of that. When the second $25 million is recognized -- or when it's achieved, we then take that into the pool and apply whatever percentage we are up to that. So it's sort of caught up to where we are on the rest of the revenue amounts. So like I said earlier, we expect to have the majority of this recognized by the end of next quarter, but still a good portion of it's...

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [43]

--------------------------------------------------------------------------------

Third quarter next year.

--------------------------------------------------------------------------------

Kenneth A. Myszkowski, Arrowhead Pharmaceuticals, Inc. - CFO [44]

--------------------------------------------------------------------------------

No, by the end of next quarter. So by the end of 9/30, the majority of the total revenue will be recognized, but it still will go on for another 4 quarters or so to the end of fiscal 2020. Does that make sense?

--------------------------------------------------------------------------------

Elemer Piros, Cantor Fitzgerald & Co., Research Division - Analyst [45]

--------------------------------------------------------------------------------

Yes. And roughly how much would that be for the next fiscal year?

--------------------------------------------------------------------------------

Kenneth A. Myszkowski, Arrowhead Pharmaceuticals, Inc. - CFO [46]

--------------------------------------------------------------------------------

Well, we've recognized $125 million. So we've got, based upon where we are now, about $100 million to go. We will add to that $25 million when we achieve the next milestone, so about $125 million.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

I'm showing no further questions at this time. I would now like to turn the conference back to you, Mr. Chris Anzalone.

--------------------------------------------------------------------------------

Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [48]

--------------------------------------------------------------------------------

Thanks, everyone, for joining us today, and we would hope to see you in October.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.