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Edited Transcript of ARWR.OQ earnings conference call or presentation 23-Nov-20 9:30pm GMT

·63 min read

Q4 2020 Arrowhead Pharmaceuticals Inc Earnings Call PASADENA Nov 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Arrowhead Pharmaceuticals Inc earnings conference call or presentation Monday, November 23, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Christopher R. Anzalone Arrowhead Pharmaceuticals, Inc. - CEO, President & Director * James Hassard Arrowhead Pharmaceuticals, Inc. - Chief Commercial Officer * Javier San Martin Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer * Kenneth A. Myszkowski Arrowhead Pharmaceuticals, Inc. - CFO * Vincent Anzalone Arrowhead Pharmaceuticals, Inc. - VP of IR ================================================================================ Conference Call Participants ================================================================================ * Alethia Rene Young Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research * Edward Andrew Tenthoff Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Luca Issi RBC Capital Markets, Research Division - Research Analyst * Madhu Sudhan Kumar Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Mani Foroohar SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst * Maurice Thomas Raycroft Jefferies LLC, Research Division - Equity Analyst * Mayank Mamtani B. Riley Securities, Inc., Research Division - Research Analyst * Patrick Ralph Trucchio H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst * Salveen Jaswal Richter Goldman Sachs Group, Inc., Research Division - VP * Shawn Michael Egan Citigroup Inc., Research Division - Senior Associate ================================================================================ 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. - VP of IR [2] -------------------------------------------------------------------------------- Thank you, Chris. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal year ended September 30, 2020. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, Chief Medical Officer, who will discuss our clinical programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. In addition, James Hassard, our Chief Commercial Officer; and Dr. James Hamilton, who was recently promoted to Senior Vice President, and Head of Discovery and Translational Medicine will both be available during the Q&A session of today's call. 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 and commercialization 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 Chris 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. This is our final earnings call of 2020, so in addition to discussing our progress for the quarter and plans for 2021, I would also like to speak a bit more broadly about our philosophy and model. We're building a different kind of biotech company. We are not focused on a single therapeutic area, but rather on any disease with unmet medical need that is addressable with our technology. We are not focused solely on rare diseases, but rather address large and small populations. We do not rely solely on partners for late-stage clinical development and commercialization, but rather we use partnering strategically and judiciously to enable us to build substantial value by commercializing our own drugs. We are fast, probably the fastest in the business from idea to the clinic, and we intend to remain fast as we grow. That devotion to speed also applies to the pipeline expansion. I believe we have the fastest growing pipeline in our field, and we do not intend to slow that input just because we are entering later-stage clinical studies. We are not in the me-too product business where we only provide incremental benefit to patients. Rather, we seek to be pioneers. We believe that everything in our clinical pipeline represents the first RNAi approach to each target in humans. We don't operate like a normal pharmaceutical company. We are not burdened by endless gating committees, but rather empower our people to make decisions. Operationally, think of us as a startup in $7 billion market cap clothing, and we intend to continue in this nimble and creative fashion even as we become a substantially larger and more valuable company. We see this as the most effective way to build a business and, most importantly, to serve patients. Every day that we can shave off the development process puts our patients 1 day closer to a new treatment they need. This is a powerful motivator in deed for us because the value of our work depends on the number of lives we touch. I mention all of this now because we are at a moment of transition for our company. We have created a lot value to this point by building what we believe will soon be the largest RNAi-based clinical pipeline in biopharma. As we move into later-stage clinical studies, our focus needs to expand to include commercial planning. Ultimately, this is the reason we're in this business and we need to do that well. However, we also need to continue to do the things in discovery and early development that have made us successful while we build our commercial presence. On average, we expect to continue to introduce 3 new drug candidates into the clinical studies every year, and we expect to be able to address a new cell type every 18 to 24 months. Think of the potential value embedded in those statements. I expect that we will have 10 clinical programs by summer, spanning 4 different cell types. That could grow to 20 clinical programs spanning 5 or 6 cell types just 4 years from now. We expect this to drive substantial value because we expect some of those to become products that we will commercialize ourselves and some can be partnered to fund development and commercial endeavors. Our ability to rapidly grow our pipeline enables this hybrid model of establishing a limited number of partnerships in order to fund wholly-owned programs. We see this as a powerful model because it allows for the rapid value creation associated with commercializing wholly-owned drugs while financing this expensive endeavor largely through non-dilutive capital from partnered programs. So even as we approach and ultimately expand our commercial presence, our pipeline strategy should continue to be an important part of our value proposition. This is not only due to the brute force of the large numbers of potential drugs in our clinical studies, but should also reflect our expectations of success. There are 2 components to this. First, we seek to choose only well-validated targets. These are gene targets where a consensus of experts agree that reducing expression will likely have positive therapeutic benefits. By focusing on this, we believe we enter clinical studies with reduced biology and target risk relative to other drug candidates. Second, the RNAi mechanism and experience with the TRiM platform can provide additional wind at our back. As we continue to treat more patients with drug candidates built on the TRiM platform and see consistent activity and positive safety profile, our confidence increases that other candidates targeting different genes will also be successful. RNAi doesn't care what gene is being silenced. Once we validate our ability to reduce expression of a given gene in a given cell type, we have confidence that we can replicate that in other gene targets. We believe this is a powerful and scalable concept that gives us confidence that a larger percentage of our candidates entering the clinic will ultimately become drugs compared to traditional small molecules. We hope that as we approach and become a commercial company, the market will properly value our growing pipeline. As I mentioned, it will continue to be an important part of our value proposition and we expect it to remain a substantial differentiator versus our competitors. With that, let's move into an overview of the last quarter. During the last few months our accomplishments included the following. One, we hosted a KOL webinar on ARO-ENaC, our first lung targeted candidate to treat cystic fibrosis, and we initiated dosing in a Phase I/II clinical study. Two, we earned a $20 million milestone payment from Amgen following the start of a Phase II study of AMG 890, now called Olpasiran, which is a partnered program targeting Lp(a) to treat cardiovascular disease. Three, we initiated a Phase Ib study of ARO-HIF2, our first tumor targeted candidate to treat renal cell carcinoma. Four, we presented new data on Phase I/II studies of both of our wholly-owned cardiometabolic candidates, ARO-APOC3 and ARO-ANG3, at multiple medical meetings, including the European Society of Cardiology and the American Heart Association meetings, and subsequently hosted KOL webinars to discuss the data and our plans for their future development. Five, we presented Phase II data at AASLD on ARO-AAT, our candidate against liver disease associated with alpha-1 antitrypsin deficiency, showing that ARO-AAT strongly reduced the production of the mutant Z-AAT protein and led to improvements in multiple biomarkers of alpha-1 liver disease. And, six, we signed an agreement with Takeda to co-develop and co-commercialize ARO-AAT, which includes $300 million upfront, $740 million in milestone payments, a 50/50 profit sharing agreement in the U.S., and 20% to 25% royalty on sales outside the U.S. This is a lot of progress in a short period of time, and even more impressive with the backdrop of disruptions caused by COVID-19. Let's take a look at the Takeda deal. It's a good example of our selective partnering strategy. We expect ARO-AAT to benefit from Takeda's global footprint, existing infrastructure, expertise, and 18-year history in the AAT market to enable a rapid launch. If approved, ARO-AAT will join Takeda's global commercially available products, including Glassia, Aralast, Entyvio and their growing GI pipeline. Takeda is clearly invested and committed to these areas and has a proven track record of success. The deal is also important in terms of capital. In addition to the $300 million upfront, we have potential access to substantial capital in the near, mid, and long-term with a possible stream of milestone payments, profit sharing, and royalties. When this is added to the potential milestone payments and royalties from our partnerships with Amgen and Janssen, we feel our balance sheet is in very strong position. This allows us to confidently move our wholly-owned programs into later stage development and ultimately commercialization. This deal is also a step in an ongoing process toward rationalizing our growing pipeline, where we look to build commercial infrastructure in areas where we expect multiple drugs, such as cardiometabolic and pulmonary. We will look for synergy and leverage when deciding where to focus commercial buildout. So let's take a look at the cardiometabolic pipeline. We presented data recently at AHA and also held 2 KOL webinars to discuss these programs. Javier will discuss these specifically in a moment, but I want to talk about where we are with those programs at a high level. The data across single and multiple doses and in healthy volunteers as well as various patient populations has been very strong and highly consistent. In addition, ARO-APOC3 and ARO-ANG3 are each showing unique profiles. What I mean by that is that we believe each drug may ultimately give cardiologists more tools to tailor their treatments to the specific lipid profiles of their patients. We also think they will fill holes in the current treatment paradigm and may potentially address lipid targets that have not been adequately addressed. For instance, there are more than 4 million patients in the U.S. with severe hypertriglyceridemia, and given published data, we would expect the overwhelming majority of them would not reach normal triglyceride levels with currently available treatments. There are also approximately 30 million to 40 million addressable patients in the U.S. with mixed dyslipidemia, which is elevated triglycerides and elevated LDL cholesterol. We have become increasing confident that these programs in -- we have become increasing confident in these programs and in our ability to move them to commercialization. We have also been able to move forward in our other clinical programs. ARO-HSD, our drug candidate against NASH and alcoholic hepatitis, is now in the patient portion of the Phase I/II study. ARO-Hif2, our candidate against renal cell carcinoma; and ARO-ENAC, our candidate against cystic fibrosis, are both being dosed in patients as well. Progress in ARO-Hif2 and ARO-ENAC is particularly important because it has been our goal to gain clinical proof-of-concept and then move into a rapid pipeline expansion phase for tumor and pulmonary tissue types. We think we are just on the cusp of that phase now. To that end, we continue to work in parallel on multiple additional targets in tumor and pulmonary and also to expand our reach into new tissue types beyond these. Before I move on to 2021, I'd like to say a few words about the novel corona virus. As with the rest of the world, we were excited to see the interim results from some of the COVID-19 vaccine studies. Multiple safe and effective vaccines will be a humanitarian triumph and we applaud the impressive work done by several companies. From an Arrowhead standpoint, some may ask if progress on the vaccines affects our internal program. The answer is not really. We continue to make progress on an anti-viral approach that is designed to work across different corona viruses. The history of SARS, MERS, and now the current corona virus suggests that the world should expect some type of corona virus outbreak approximately every 7 years. As such we are studying conserved regions in known corona viruses with the goal of creating an inhalable anti-viral that could be applied to future outbreaks, as well as the current virus, should there be blind spots with the vaccines. We are still in early animal studies, but I hope that we will have an idea about the feasibility of this approach in 2021. Moving to the future, there is a lot you should expect from us during the final month of the year and into early 2021. Our expectations include the following. One, we are on track to file a CTA for ARO-LUNG2 at the end of this year. The second program -- this is the second program in our pulmonary franchise and is designed to treat COPD by inhibiting an undisclosed target in pulmonary epithelia. Two, we are on pace to potentially have preliminary data readouts by the middle of 2021 for ARO-HSD, ARO-HIF2, and ARO-ENaC. Three, during the first half of the 2021 we also intend to engage with the FDA and other regulators to discuss pivotal trial study design and endpoints for ARO-AAT. Based on the impressive data that came out of our 2002 open-label study, it appeared that patients had large reductions in Z-AAT monomer, which we expected, but also had improvements in other downstream markers, such as polymer, globules, LFTs and others. These discussions may allow us to find a more streamlined and accelerated path to a potential approval. There also may be additional open label data in 2021 for patients with 12-month and 18-month repeat biopsies. Four, we also intend to initiate multiple studies in the first half of 2021 for both of our cardiometabolic programs. For ARO-ANG3 in mixed dyslipidemia patients, we are working on a Phase IIb dose finding study. For ARO-APOC3, we are working to start 3 studies: a Phase IIb study -- a Phase IIb dose finding study in patients with triglycerides ranging from 150 to 499; a Phase IIb dose finding study in patients with triglycerides over 500. And, a Phase III study in patients with familial chylomicronemia syndrome, or FCS. Five, in the second half of 2021, we intend to file a CTA for our first muscle targeted RNAi therapeutic. That program has moved forward very nicely and we are eager to talk more about that and what the data look like. Six, for our partnered programs with Amgen and Janssen, we can't provide specific guidance on timing, but we continue to be pleased with their progress and look forward to additional future progress. Seven, lastly, we are working on several other undisclosed programs and will likely have another CTA filed for another program in 2021. With that overview, I'd now like to turn the call over to Dr. Javier San Martin. Javier? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [4] -------------------------------------------------------------------------------- Thank you, Chris, and good afternoon to everybody on the call. I want to highlight data from the ARO-AAT, ARO-APOC3, and ARO-ANG3 programs since we had important readouts for each during the last quarter. Before I do that, I will give a very quick review of the status of the earlier stage clinical programs. ARO-HSD is our investigational candidate for the potential treatment of alcohol and non-alcohol-related liver disease. The genetic validation is strong for inhibiting the target HSD17B13 in NASH cirrhosis, and alcoholic hepatitis and cirrhosis patients. We are conducting a Phase I/II single and multiple dose-escalating study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamic effects of ARO-HSD in normal healthy volunteers as well as in patients with NASH or suspected NASH. We have complete single dose escalation in healthy volunteers and are currently enrolling the multiple-dose patient portion of the study in NASH or suspected NASH patients. This study includes liver biopsies to assess drug activity. ARO-HIF2 is designed to treat clear cell renal cell carcinoma, and we are currently dosing patients in a Phase IIb dose-finding clinical study in up to 18 patients with advanced renal cell carcinoma. The study is designed to evaluate the safety of ARO-HIF2 and to determine the recommended Phase II dose. We are also assessing pharmacokinetics and preliminary efficacy, based on RECIST, and post-dose tumoral expression of HIF2-alpha and HIF-associated genes. Our last early-stage clinical program is ARO-ENaC, designed to treat cystic fibrosis. ARO-ENaC is in a Phase I/II dose-escalating study to evaluate the safety, tolerability, and pharmacokinetic effects of ARO-ENaC in up to 24 normal healthy volunteers and to evaluate the safety, tolerability, and efficacy in up to 30 patients with cystic fibrosis. We have dose-escalated multiple times, as planned, in healthy volunteers and so far we are pleased with the safety and tolerability results. This is always an important finding for a new investigational drug and even more so for a new platform. We are now enrolling cystic fibrosis patients in the multiple dose portion of the study. Now I will move onto the recent data readouts. For ARO-AAT, our investigational RNAi therapeutic being developed as a treatment for the rare genetic liver disease associated with alpha-1 antitrypsin deficiency, we presented data at AASLD on our 2002 open label study. To review, the study is fully enrolled with 16 participants in 3 cohorts. 4 patients in Cohort 1 receive 200 mg of ARO-AAT and will have a repeat biopsy after 6 and 18 months of treatment. Cohort 1b is the same, but patients receive the 100 mg dose and 8 patients in Cohort 2 receive 200 mg of ARO-AAT and will have repeat biopsies after 12 and 24 months of treatment. At AASLD, we reported on 6-month results from Cohort 1. We think the data strongly suggest that ARO-AAT is doing what it's designed to do, which is reduce the production of the misfolded mutant Z-AAT protein. The results also indicate that the liver may have the ability to clear out accumulated Z-AAT and begin to heal itself faster than anticipated. Importantly, we saw the following: 86% to 93% reduction in serum Z-AAT. All patients demonstrated greater than 80% reduction in liver Z-AAT monomer. 3 of 4 patients had a decrease in liver globule involvement. And 3 of 4 patients demonstrated reductions in Z-AAT polymer with a range of 68% to 97%. All patients showed ALT reductions ranging from 36% to 66% So we think these are all positive indications of a strong pharmacodynamic response and improvement in liver health, following just 3 doses of ARO-AAT. As Chris mentioned, we are currently preparing to engage with FDA and other regulatory agencies in the first half of 2021 to discuss areas where the ARO-AAT program may potentially be streamlined and accelerated. Let's now move to our cardiometabolic programs, ARO-APOC3 and ARO-ANG3. We held 2 KOL webinars last week to discuss the data and these programs in some depth. We were fortunate to have Dr. Christie Ballantyne from the Baylor College of Medicine and Dr. Ira Goldberg from the NYU School of Medicine join us and provide their perspective and valuable insights. Replays of these events are available on the Investors section of our website for those who missed the live presentations. Let's start with ARO-APOC3, our candidate targeting apolipoprotein C-III, being developed as a potential treatment for patients with hypertriglyceridemia. The current clinical study is in Phase I/II single and multiple dose study to evaluate safety, tolerability, pharmacokinetics, and pharmacodynamic effects of ARO-APOC3. There is a single-dose and a multiple-dose portion of the study in adult healthy volunteers and a multiple-dose portion of the study in patients with hypertriglyceridemia, including a cohort enrolling up to 20 chylomicronemia patients. At American Heart Association, we reported data from the multiple dose patient portion of the study. The results were very impressive and highly encouraging to us as we prepare to begin the next stage of development for the program in the first half of next year. In patients with hypertriglyceridemia, ARO-APOC3 treatment resulted in robust and sustained reductions in triglycerides and non-HDL cholesterol, with increases in HDL cholesterol, specifically, we observed: maximal mean reduction of 80% to 99% in APOC3, maximal mean reduction of 74% to 92% in TG or triglycerides and 39% to 62% reduction in non-HDL cholesterol, and, maximal mean increase of 95% to 116% in HDL cholesterol. In patients with chylomicronemia, 50 milligrams ARO-APOC3 achieved similar levels of reduction of APOC3 and changes in key lipid parameters. We observed: maximal mean reduction of 98% in APOC3, maximal mean reduction of 88% in TG, a 9% in non-HDL cholesterol, and a Maximal mean increase of 120% in HDL cholesterol. Importantly, the effects of ARO-APOC3 were maintained for greater than 12 weeks post second dose regardless of the patient population. We think this indicates that once quarterly or less frequent dosing may be possible. Our other wholly-owned cardiometabolic candidate is ARO-ANG3, targeting angiopoietin like protein 3, or ANGPTL3, and is being developed as a potential treatment for patients with mixed dyslipidemia. The current clinical study is a Phase I/II single- and multiple-dose study to evaluate safety, tolerability, pharmacokinetic, and pharmacodynamic effects. At American Heart Association and the recent webinar, we also presented data on the multiple-dose patient portion of the ARO-ANG3 study. As with ARO-APOC3, we were thrilled with the clinical results and move forward with that program with a lot of confidence in its potential to help patients with mixed dyslipidemia. The data showed that in heterozygous familial hypercholesterolemia patients and non-FH patients, ARO-ANG3 resulted in mean reductions of 78% to -90% for ANGPTL3, reduction of 29% to 47% of triglycerides, 29% to 35% in LDL cholesterol and a reduction of 31% to 35% for non-HDL cholesterol. In high triglyceride patients, ARO-ANG3 resulted in mean reductions of 83% for ANGPTL3, 75% for triglyceride and 56% for non-HDL-cholesterol. As with ARO-APOC3, the effect of ARO-ANG3 was maintained for greater than 12 weeks post second dose regardless of patient population. We believe this indicates that once quarterly or less frequent dosing may be possible. These results provide further support that the RNAi mechanism in general and more specifically therapeutics developed using our TRiM platform, tend to perform very consistently regardless of the gene target. So far, we have experienced very good translation of preclinical data to human clinical data with respect to safety, tolerability, and activity. This gives us great confidence in each new program we develop, even at very early stages. The next steps are to study in larger and longer clinical trials whether inhibition of the respective gene targets leads to the desired clinical benefit in specific patient populations. As Chris mentioned earlier, we try to select targets at the discovery stage with generally well understood biology and strong support from human genetic studies. This provides us with even more confidence that we are reducing risk to the extent possible and maximizing our probability of success. I will now turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer. Ken? -------------------------------------------------------------------------------- Kenneth A. Myszkowski, Arrowhead Pharmaceuticals, Inc. - CFO [5] -------------------------------------------------------------------------------- Thank you, Javier, and good afternoon everyone. As we reported today, our net loss for fiscal 2020 was $84.6 million, or $0.84 per share based on 100.7 million weighted average diluted shares outstanding. This compares with net income of $68 million, or $0.69 per share based on 98.6 million weighted average diluted shares outstanding, for fiscal 2019. Revenue for fiscal 2020 was $88 million compared to $168.8 million for fiscal 2019. Revenue in both periods primarily relates to the recognition of a portion of the upfront payments and milestones from our license and collaboration agreements with Janssen. Revenue from the Janssen agreement is being recognized based on our estimate of the proportion of effort expended toward fulfilling our performance obligations, primarily, overseeing the completion of the Phase I/II HBV clinical trial. We expect the remaining $19 million of deferred revenue to be recognized in the first half of fiscal 2021. Any additional milestones achieved with Janssen or Amgen would be additive to this projection. In addition, current period revenue also included the $20 million milestone payment we received from Amgen upon the initiation of their Phase II clinical trial for AMG 890, which is now referred to as Olpasiran. Total operating expenses for the year ended September 30, 2020 were $181.1 million compared to 107.6 million for the year ended September 30, 2019. This increase is primarily due to increased non-cash stock compensation expense. Stock compensation expense has increased because the valuation of new stock option and restricted stock award grants has increased with the growth of our stock price. Additionally, stock compensation expense increased due to the timing of the achievement of certain performance-based awards in each period. The increase in total operating expenses was also driven by increased clinical trial costs as our pipeline of clinical candidates has increased, and increased personnel costs in both R&D and G&A as our headcount continues to grow. Net cash used by operating activities in fiscal 2020 was $95.4 million compared with net cash provided by operating activities of $173 million in fiscal 2019. The operating cash generated in fiscal 2019 reflects the $175 million upfront payment and 2 $25 million milestone payments received from Janssen, offset by cash used for operations. Turning to our balance sheet, our cash and investments of cash balances totaled $453 million at September 30, 2020, compared to $302.9 million at September 30, 2019. The increase in our cash and investments was primarily due to the December 2019 equity financing we completed, which generated $250.5 million in net cash proceeds to the company. In addition to the cash and investments assets discussed as of September 30, 2020, we also anticipate receiving $300 million, the upfront payment from Takeda by the end of this calendar year or shortly thereafter. Similar to our agreement with Janssen, we anticipate recognizing this upfront payment as revenue over the course of completing our performance obligation within the deal, which primarily consists of managing the ongoing ARO-AAT clinical studies and providing certain manufacturing services. Looking ahead to 2021, we expect our full year cash burn to be $200 million to $250 million. This increase is due to growth throughout the company. Our program costs are expected to increase as ARO-ANG3 and ARO-APOC3 begin larger Phase II clinical trials, and our newer programs continue to advance. Our headcount increased significantly in 2020 and we expect continued increases in 2021 which drives increases in payroll, related facility costs, discovery R&D and G&A expenses. Our common shares outstanding at September 30, 2020, were 102.4 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. There's no question we have had a productive recent period. The more clinical experience we gain with the TRiM system, the more confident we become that we are on the path to providing physicians with potentially transformational therapies that may make a big difference in the lives of millions of patients. That's important and gratifying. We also feel confident that we have the right strategy. We believe the combination of: focusing on well-validated targets, our speed from idea to the clinic, our expected ability to address a new cell type every 18 to 24 months, the rapid nature of our pipeline expansion, and our selective partnering model together provide our shareholders with the potential for rapid value creation. So, what's next for us? We think our initial commercial focus on cardiometabolic and pulmonary will allow us to build out the necessary infrastructure over the coming years in a focused and effective manner, but also in a way that is ever conscious of capital efficiency. That has been an Arrowhead hallmark and we intend for that to continue. And, lastly, we are eager to gain clinical validation of our TRiM platform's ability to target tissues outside the liver. This includes lung, tumor, muscle, and other tissue types that we have not yet disclosed. RNAi works well in hepatocytes: we know that. But our goal has never been simply to address liver-based disease. Rather, we have always worked to bring RNAi wherever it is needed, and we are on the brink of demonstrating that right now. We are, indeed, building a different kind of biotech company, and we look forward to continuing to share our progress. Thanks again for joining us today. I would now like to open the call to your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from the line of Shawn Egan with Citi. -------------------------------------------------------------------------------- Shawn Michael Egan, Citigroup Inc., Research Division - Senior Associate [2] -------------------------------------------------------------------------------- As investors start to do work for 2021, can you may be set expectations for the ENaC program in regards to what data endpoints will be? I know FEV1 has come up a few times. And I guess what level of benefit there would give you confidence? And do you guys also plan to test for ENaC knockdown? Or are there any other approaches you can use to validate proof-of-concept? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [3] -------------------------------------------------------------------------------- Sure. Javier, would you like to address that? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [4] -------------------------------------------------------------------------------- Yes. So let me start with the comment about by when we're going to have data next year, 2021. And it's likely to be either at the end of the first half or maybe early Q3 of 2021. With regard to what we think will be success. As you know, one of the key efficacy endpoint is FEV1 and we have a study that is less enough hopefully we'll be able to see a change from baseline in the range of anywhere between, I would say, 5% and 15%. The first drug that was approved in this disease was with an increase in FEV1 of approximately 5%. The more current drugs approved, as you know, is more in the range of 10% or 13%. So we're looking for that proof-of-concept. Seen a movement in FEV1 in a Phase I study, I think, will be considered success in our mind. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [5] -------------------------------------------------------------------------------- And let me also expand upon that. So when we look at our FEV1 results, we are not comparing those to Trikafta. At least our initial patient populations we're going after will be those patients who are not eligible for Trikafta. Either they are no null patients. And so they have no CFTR to correct or they are refractory to Trikafta with the like. So the bar here is really nothing, right? The -- these patients have very limited therapeutic options. So I think that if we can show a 5% improvement in FEV1, that's a big thing for those patients. And I think that suggests that we've got a drug. -------------------------------------------------------------------------------- Shawn Michael Egan, Citigroup Inc., Research Division - Senior Associate [6] -------------------------------------------------------------------------------- Great. Maybe one follow-up question. The ARO-ENaC program. Like when you consider the physical barrier of present in CF patients, I guess, what gives you confidence that the drug will get to the target epithelial cells? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [7] -------------------------------------------------------------------------------- Well, so of course, we don't have preclinical data in this model. So we cannot answer the question definitively. One of the things that we're doing to prevent that to happen is the approach to dosing that we will dose -- or we are dosing patients with 3 consecutive days every 3 weeks. So that allow us to hopefully see that the drug reach to the anatomical areas in the lung where it's necessary. So I think that is one of the things that we're doing to really try to maximize that the drug will reach the target tissue. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [8] -------------------------------------------------------------------------------- And when we first got into pulmonary, our first question -- or among our first questions was whether or not we're able to get through the mucus. And our KOLs were not impressed by that. They said, you know what, given the size and charge of the molecule, we don't expect any problem to get to mucus. And sure enough, in animal models, whether it be rodents or NHPs or sheep, we found out that to be the case. And so that was heartening. We then asked what about CF mucus. We know that's dehydrated. We know that that's a big difference. Unfortunately, as Javier said, there's not a good animal model for that. However, we have done in vitro analysis using actual CF mucus. And it does appear we're able to get through that. So we're optimistic. You never know until you know. And so look, the -- this first study will tell us an awful lot about the translatability of this platform. But we go into this reasonably confident, given our good preclinical data. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- And our next question comes from the line of Maury Raycroft with Jefferies. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [10] -------------------------------------------------------------------------------- Congrats on the progress. And first one is also on ENaC and HIF-2 alpha also. So for both programs, can you provide more specifics on where you're at with dosing? Are you at a therapeutically relevant dose? And is there anything else you can say on safety at this point? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [11] -------------------------------------------------------------------------------- Yes. So there's not so much we can say on that. It's been our policy, as you know, Maury, not to give blow by blow. We have given some interim data before, but in a more -- a different sort of environment. So we can tell you that we are dosing patients in the ARO-ENaC study, we are at that portion of the study. So that is encouraging. HIF-2 alpha, of course, we're dosing patients. It's not much else I can tell you, at this point, I don't think. With ARO-HIF2, we have not seen any data yet. Those data are batch. And so at some point, I hope in the near future, we will see some early data that will indicate whether or not we're seeing knock down at these first doses. But at this point, we just don't even know internally. With ARO-ENaC, we have just begun the patient portion. And so we don't have data there yet to know if we are in a therapeutic range. That's the big unknown for both of these. We have a good idea about what the therapeutic range would be in animal models, but we'll just see how this translates. And this really is uncharted territory for us. We have a good idea about how things translate from rodents to NHP to humans in hepatocytes. This, of course, is our first foray into solid tumors and pulmonary epithelial cells. And so we'll learn a heck of a lot over the next few months. -------------------------------------------------------------------------------- Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [12] -------------------------------------------------------------------------------- Got it. That's helpful perspective. And then for the initial data updates midyear '21, have you decided if you're going to report at a conference or in a press release? And then any thoughts on the amount of patients that you're going to include in those initial data updates? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [13] -------------------------------------------------------------------------------- Yes. It's really too early to tell there, unfortunately. When we look at the calendar, we -- it appears that we will have some at least preliminary data by the middle of the year, but how much we're going to have is not clear. And therefore, what sort of venue we can share these data are not clear. And so unfortunately, I can't give you a good answer for that at this point. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from the line of Alethia Young with Cantor Fitzgerald. -------------------------------------------------------------------------------- Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [15] -------------------------------------------------------------------------------- I thought the whole thing went dead for a second, but I'm glad to see that we're all back up and running. I just wanted to talk a little bit about, and it's a little bit big picture, just how you're kind of outside the extra hepatic liver approach differs from some of your competitors, I know you don't want to give away the whole secret sauce. But I guess, what are some inherent like big picture differences and things that you think about. I mean, many companies say it's something they're pursuing. You guys are pursuing in a very robust way. So I just wanted to -- I've gotten this question before, so I just wanted to pose it to you guys. And then also, can you talk a little bit about your confidence on going after HIF, I mean, as those studies get going. I know it's sometimes it's been a little tricky in RNA and kind of in that world of hem-onc, but just wanted to get kind of your perspective with your technology. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [16] -------------------------------------------------------------------------------- Sure. So the first question, let's see. We have been thinking about -- as you know, Alethia, you have followed us for a bit, we've been thinking about and working on bringing RNAi outside the liver for probably a decade now. This spans even our prior platform that we are developing. We always knew this is going to be an important value inflection point. So we wanted to be there. So a lot of this is just brute force. I mean we've been working on this for a decade now. And so we look like an overnight success, except for it's been a 10-year overnight. So that's more broadly. More specifically, of course, part of that is building library of linker chemistries that we can use to optimize delivery. It involves establishing a library of target MOIDs that we can use. And maybe most importantly, it involves our ability to design these very potent RNAi triggers. Again, as you've heard us talk about in the past, Alethia, we have a set of algorithms and rules that are proprietary that enable us to design triggers that may not be potent in vitro, but will be potent in vivo. And look, that's important as it relates to getting to hepatocytes because it does allow us to make more potent hepatocyte directed constructs. Look at the LP(a) data that Amgen showed, that was a very potent -- appears to be a very potent sequence. But it's absolutely critical when you're looking at going outside the liver because we know that there's no GalNAc analog, if you will, in other cell types. There's nothing -- there's no front door like that in other cells that we've ever found. And so we need to squeeze all the potency we can out of these constructs. So that ability has been just critical in our ability to rapidly expand into lung and solid tumor and next year muscle cells. We hope to continue that. As we talked about, this is a big part of our value proposition. This is a big part of our model. Now the next question was around HIF-2 alpha. So are you asking about what we need to show vis-à-vis the Peloton Merck drug? Is that what you're curious about? -------------------------------------------------------------------------------- Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [17] -------------------------------------------------------------------------------- A little bit, yes. Kind of just to get a flavor in context of that, yes. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [18] -------------------------------------------------------------------------------- Sure. Sure. So look, so that's been a great program. The data have looked pretty good, and that has helped to further validate a target that we've been excited about also, for gosh, almost a decade. There is an opening, however. They have seen some anemia that we may see less of. It's too early to tell, but we may see less of because we're targeted. But at the end of the day, I think we just need to show a well-tolerated and active drug. That's a big enough market that there's plenty of room for a couple of us. I don't -- I'm not absolutely focused on showing x percentage better responsiveness than the competitor drug. I think we just need to be on the board. And we're hopeful we can be there. Because as -- again, as we talked about in the past, that program has value for us in 2 ways. One, we think it's a good drug. And we think it could be a helpful drug in renal cell carcinoma. We think it could play well with others because we don't expect a lot of overlapping AEs. So that is exciting to us. But second, it's a good proof-of-concept. If we can show that we can knock down HIF-2 alpha in these metastases, it will suggest to us that we have a platform, that we have a franchise. And then we can go after other gene targets and potentially other solid tumor types. As we said in the past, our targeting strategy here is not specific to RCC metastases, but rather, we believe it could allow us to get into solid tumors more broadly. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- And our next question comes from the line of Salveen Richter with Goldman Sachs. -------------------------------------------------------------------------------- Salveen Jaswal Richter, Goldman Sachs Group, Inc., Research Division - VP [20] -------------------------------------------------------------------------------- Just another question here on extrahepatic tissues you plan on targeting. Could you just walk us through your thoughts beyond lung and muscle with your strategy? And on the skeletal muscle targeted asset, which is entering the clinic in mid '21, when we might get to see preclinical data here? And any thoughts you could provide us on the initial indications that you may be targeting? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [21] -------------------------------------------------------------------------------- Boy, I apologize, you asked a lot of questions there, and I really can't answer any of those. Again, we've talked about solid tumor, of course, and skeletal muscle and lung. We are working on other cell types we've not disclosed any of those yet. And so we're not prepared to disclose any of those at this point. But we clearly have others that we're working on. As we talked about, this is a big part of our growth strategy. What we have done for hepatocytes, we want to do for lung and solid tumor and muscle and for fill in the blank number of additional cell types. With respect to -- gosh, I'm sorry, so what was the other question? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [22] -------------------------------------------------------------------------------- Target for muscle. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [23] -------------------------------------------------------------------------------- Target muscles. Sorry, yes, right. Again, we haven't talked about that yet. We gave some -- we have mentioned some early data, I think, at our R&D Day last year. We haven't really shared any nonclinical data since then. I do expect that we will do it, but we're just not prepared to do it quite yet. And I'm not being coy, I don't know when we're going to do it. We feel confident that sometime in the summer, I believe we will be filing a CTA for that asset. And so some more upstream of that, we'll talk about it in more depth. But at this point, we're just not quite prepared to do that yet. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Our next question comes from the line of Ted Tenthoff with Piper Sandler. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [25] -------------------------------------------------------------------------------- Congrats on the progress. Really exciting just to see how far the platforms come along and see the recognition. My questions really had to do with the cardiovascular program. So it is interesting to see Amgen mentioned LP(a) in press release this morning. I'm trying to get a sense for what the costs of these Phase III and Phase IIbs could be appreciating that you gave the guidance of $200 million to $250 million next year. When it comes to an outcome study, what kind of costs should we be thinking? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [26] -------------------------------------------------------------------------------- Yes. Again, I apologize, Ted, these are important questions, but I can't answer them. We've not given guidance on what we think those costs are going to be. At this point, we've talked about how large we think those studies could be -- the Phase IIb studies for the large outcome study for ARO-ANG3, it's not even clear what the number of those patients are going to be yet. They probably will range anywhere from 8,000 if you look at Amarin studies or Medicines Company studies all the way up to maybe 15,000. And so we need to see what our Phase IIb data look like before we determine how large that study is going to have to be. And then, at that point, we might be able to give you a bit of guidance on what we think that's going to cost. For your model right now, I think you could plug-in what those costs generally are for a company like us for the Amarin-type study or the Medicines Company-type study. But I can't give you better guidance than that, unfortunately, I apologize. -------------------------------------------------------------------------------- Edward Andrew Tenthoff, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [27] -------------------------------------------------------------------------------- No, that's okay. I think that makes sense with the potency of the molecule Great. Looking forward to exciting 2021. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [28] -------------------------------------------------------------------------------- You're welcome. Thanks, Ted. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- And our next question comes from the line of Mani Foroohar with SVB Leerink. -------------------------------------------------------------------------------- Mani Foroohar, SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst [30] -------------------------------------------------------------------------------- I guess building off of what Ted asked earlier. So I know you can't give specific guidance around the cost of some of these trials, some of which are a few years away. So of course, pretty tough to take estimates that far out. But you've got a lot of trials going through early, mid, late stages. As you think about some of these assets moving forward, give us a sense of what your metrics are in terms of gating to move assets forward as opposed to deprioritizing or shutting down programs? And how do you think about that at each stage of development? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [31] -------------------------------------------------------------------------------- Sure. So we -- so I think the real question there is that is strategic, right? I don't think that we have -- I don't think that we're considering shutting down any of the programs right now. I think the question is, do we partner these programs or do we hold on to them internally. Right now, it feels like we can build out a commercial infrastructure for pulmonary and cardiometabolic. We have a good line of sight, I think, on half a dozen potential pulmonary drugs that we can develop. There's 16,000 pulmonologists in the U.S. And so we like that leverage of addressing a fairly large market with only about 16,000 touch points where we can sell any number of drugs into it. That makes sense to us. Cardiometabolic as well. Look, we think ARO-ANG3 and ARO-APOC3 are potentially big drugs, and we could see ourselves building a sales force addressing cardiologists and lipid clinics to sell those 2 drugs. That makes sense to us. As we go forward, those will not be the last 2 areas that we're going to build commercial infrastructure around. I think that's for sure. But right now, given our current clinical pipeline, we can make that that forecast. As we bring in additional candidates into the clinic and as we address new cell types, we can expand that going forward. But right now that makes sense to us. So then when you look at our assets outside of that, it doesn't mean that we're going to partner all those. It just means that we've got a little bit of a higher bar, I suppose, when we think about building another sales force there. So say take, for instance, HIF-2 alpha. If that's our only oncology drug, it makes no sense for us to build a whole sales force to sell 1 drug. If that becomes a franchise like we think it could, that could make sense for us to add on a commercial franchise there. It could also make sense to do a hybrid approach of finding the right oncology partner to help us build that out and also establish commercial jobs. It's a bit too early to tell at this point. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- And our next question comes from the line of Luca Issi with RBC Capital. -------------------------------------------------------------------------------- Luca Issi, RBC Capital Markets, Research Division - Research Analyst [33] -------------------------------------------------------------------------------- Terrific. Just 2 quick ones. The first one I think I saw on clinicaltrials.gov that the size of the HIF-2 alpha trial has been recently reduced from 40 patients to 18 patients. So wondering if you have any color there. And maybe more broadly, saw some partnering. I think you just articulated, but any thoughts there or big picture thoughts would be helpful. And then the second is I think we've seen some data for Ionis on the ENaC of course, antisense oligonucleotide. Again, wondering if you have any thoughts on that data set. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [34] -------------------------------------------------------------------------------- Sure. Javier, do you want to take the clin trials as well as the ENaC, and then I'll circle back. -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [35] -------------------------------------------------------------------------------- Sure. So the HIF-2 study, correct, we changed and amended protocol early this year, I think, it was March or April. And the reason was to reassess really what we wanted to learn from that study. And there's 2 really things that we care about. Number one, safety; and number two, if we're able to get into the cells and knock down HIF-2. In order to do that, we didn't need really 40 patients. Initially, it was, I guess, very ambitious program to really evaluate different doses or sequences. And then we made the decision to say, let's do the first thing first, which is proof-of-concept that we get to the tumor. And we knock down the gene as we've done with all the liver targets. So that's the reason to do that, get to proof-of-concept and safety rate as early as possible. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [36] -------------------------------------------------------------------------------- Okay. And so I think of it and then I'll piggyback on that for the HIF-2 partnering. So look, we're excited about that franchise and about that platform. Having said that, oncology is hard. And so in a perfect world, we can achieve proof-of-concept for HIF-2 alpha to show that we can do this and then bring in the right oncology partner to help us prioritize our next set of targets and then do some with that partner and then maybe some by ourselves. That's where we are right now. Do we have to partner HIF-2 the candidate itself? Not necessarily, but I do hope that the data will be compelling enough to enable us to blow out that platform, if you will. And the best way to do that would be, at least in part with a partner. And so Javier, you want to talk about the ENaC with Ionis? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [37] -------------------------------------------------------------------------------- Yes. So we look at that data carefully when we disclosed that a month or so ago. My opinion on the data is that it's not as consistent as initially, I think we thought because it is 4 dose groups and only 1 show a movement within about 50% knock down and that wasn't the highest dose, it was the second highest dose. So at first glance, it's interesting, it got our attention and we're working on it. We decided to really work on -- see if we can replicate and show our data. So we're in that process to think about or work on the development of the proper assay and we're thinking about how to do this in the clinical trial, whether it's going to be normal healthy volunteers and/or patients. So we're working on it. It was interesting. But again, as I said, I had my question mark about that data at this point. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- And our next question comes from the line of Madhu Kumar with Baird. -------------------------------------------------------------------------------- Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [39] -------------------------------------------------------------------------------- So I guess our first one is kind of the elephant in the room, which is the REEF-1 trial with J&J and hepatitis B. So kind of by our back of the envelope calculations, near the end of last year is what we might expect kind of the 48 weeks of treatment from that trial to kind of conclude plus some degree of number crunching. Do we expect to get visibility from J&J about the kind of timing for the release of at least the 48-week treatment data, from REEF-1? Like how should we think about any kind of data cadence from that hepatitis B trial? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [40] -------------------------------------------------------------------------------- Thanks, Madhu. So it was funny. So you asked about -- you mentioned the elephant in the room. And I was thinking which elephant is that. And the REEF-1 was not -- didn't even come on my mind. Okay. So I can't give you any guidance on that. You'll have to look at J&J for that. As I recall, it was 48 weeks of treatment and then 6 months of follow-up. And so that's the best I can give you at this point. I can tell you, and we've talked about it in the past, we're really excited about that drug candidate, we're really excited about J&J. I think that they have been extraordinarily fast and thoughtful about all these trials that they're starting. It's multinational. And so all that makes us really excited to be their partner, but I can't give you any guidance on when those data might come out. -------------------------------------------------------------------------------- Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [41] -------------------------------------------------------------------------------- Okay. And then moving on to AAT. So you mentioned -- here, you mentioned before, this idea of streamlining kind of clinical development of AAT based on the effects you've seen in the older label extension. So I mean, how are you thinking about that? Are there some kind of like nominal precedence we should be looking at or kind of endpoint comparisons or kind of composite endpoints that might come to play in the trial in alpha-1 antitrypsin liver disease? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [42] -------------------------------------------------------------------------------- So Javier is probably dying to answer that question, but I can't let him answer it at this point. Here's the deal. We were -- we have -- we were so excited about those data for a lot of reasons. I believe -- which is that, it suggested this drug is doing what we wanted it to do. In fact, doing it bit faster than we expected. And so we are going with those data and probably some additional data to the FDA to talk about change in endpoints and changing size and maybe changing the duration of the study. Until we have those discussions, it's probably not appropriate for us to speculate on the specifics of what those changes could be. I don't want to get out in front of this conversation. We've had a very good collaborative relationship with the FDA as it relates to this program. We expect this to continue to be collaborative and I just don't want to jeopardize that. I want to add that discussion, an open discussion with them and then come back to you and tell you what we have decided together. -------------------------------------------------------------------------------- Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [43] -------------------------------------------------------------------------------- Okay. And then stepping back on the macro. So you mentioned at the beginning of the call, the idea of going after targets where there is kind of validation from the outside scientific community. So what does that exactly mean? Like are we talking kind of genetic validation, are we talking like earlier kind of iterations of therapy? And like how do you think about that moving forward? Kind of what you need for a given target to get you all excited about it. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [44] -------------------------------------------------------------------------------- Yes, I think it's all those things, right? I think it is early data from some other drugs that looks good, but because of safety reasons -- off-target safety reasons, they couldn't go forward. I think at GWAS analysis, with all of the increasing amount of GWAS data that are coming out, there's an awful lot of important genetic data that can validate targets. Think HSD, think to a lesser extent, but still ENaC and also experimental data. There are a number of targets that have been studied in animal models, but for one reason or another, couldn't be druggable in humans. So we're just looking -- this is a very, as you know, this is a business full of risk, and we're just looking at where we can lap off risk. And we think if we can remove or at least limit target risk, that's a good thing for us. And so we don't -- you've heard me say this before, we should not be in the target validation business. When we are, you need to shake me by little lapels and remind me of that because I think this is an important thing. This is an important luxury that we have, at least at this point. Especially given that we can go outside the liver. We've got all these new tissues now. And so we can go through an awful lot of validated targets before we have to start taking target risk, I think. -------------------------------------------------------------------------------- Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [45] -------------------------------------------------------------------------------- Okay. And one last one. How do you think about multi-organ targeting? And what the opportunities piece is where you could go after targets that are expressed from more than 1 tissue type? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [46] -------------------------------------------------------------------------------- Multi-organ targeting. So with one construct addressing different cell types, is that the question? -------------------------------------------------------------------------------- Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [47] -------------------------------------------------------------------------------- Maybe not one, maybe it would be take the same target, but targeting, but going after knockdown of that gene across multiple different tissue types and ones? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [48] -------------------------------------------------------------------------------- Sure. We're not doing that. Not right now. But yes, for some diseases, certainly, that would be of interest. That's -- we try to limit complexity. What you talk about is elegant, but complex. And so I don't think that. Again, I think that there are enough good targets out there right now that we don't have to introduce that level of complexity. That may change at some point. But right now, that's not a real focus of ours. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- And our next question comes from the line of Mayank Mamtani with B. Riley Securities. -------------------------------------------------------------------------------- Mayank Mamtani, B. Riley Securities, Inc., Research Division - Research Analyst [50] -------------------------------------------------------------------------------- And congrats on a productive quarter. So if I may ask another elephant in the room type of question. So Chris, which program do you think is going to be the first to market in your view? And how does do you think about building a commercial organization across cardiometabolic and pulmonary franchises, which program are you thinking would get -- would cross the finish line first, given all the different gyan charts you guys are looking at? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [51] -------------------------------------------------------------------------------- Yes, that's a good question. So APOC3 against FCS could be a relatively near or relatively speaking, near term market opportunity. As we talked about on the KOL webinar, we're thinking that could be a 60-or-so patient pivotal study. We're a bit ahead of ourselves now because we haven't even started that study yet. But that feels to me like that could be in nearest term. A wildcard here could be ARO-ENaC. I don't -- again, I don't want to get out over my SKIs because we haven't seen any data yet. But should those data be exciting, should the data in this Phase I/II study suggest that we have something here, it could be that we could move directly into a Phase II/III study. The earliest that could be would be the end of next year because we don't have tox coverage until then, but that's a possibility. And -- sorry, and the other wildcard here will be partnered programs. Of course, AAT, a big possibility here is we'll see how good how the area is. But once we have those discussions with the FDA and other regulators, we'll have a good idea about whether or not we can shorten up that time to market. I think that we can make a very compelling argument as to why we could do that. And so that's another possible one. I don't know if you're talking only about wholly owned or more broadly speaking, but I guess that runs the gamut of partnered and wholly owned. -------------------------------------------------------------------------------- Mayank Mamtani, B. Riley Securities, Inc., Research Division - Research Analyst [52] -------------------------------------------------------------------------------- And also how you build the commercial organization. I guess the data and some of these inflection points will drive a lot of that. Is that kind of -- is that kind of fair? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [53] -------------------------------------------------------------------------------- Is the question about when we start to build the commercial organization? -------------------------------------------------------------------------------- Mayank Mamtani, B. Riley Securities, Inc., Research Division - Research Analyst [54] -------------------------------------------------------------------------------- Yes, essentially. Like I'm thinking more about the spend, right, how to think about 2021, 2022 SG&A? And how should we think about that? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [55] -------------------------------------------------------------------------------- Yes. I can't give any guidance on that at this point. Let us get into the Phase III study with FCS. Let's see how fast that can enroll, and then we can have a better idea about what we're looking at. Of course, AAT, we're not going to build commercial organization there. We'll be working with the caters to work to commercial organization. And then ENaC, again, it's just a bit too early. Let's give us a bit of time. Hopefully, next year, we can have a better idea of that time frame and then have a better idea about spend for the commercial build-out. -------------------------------------------------------------------------------- Mayank Mamtani, B. Riley Securities, Inc., Research Division - Research Analyst [56] -------------------------------------------------------------------------------- Understood. And then just 2 quick follow-ups. Could you address the ARO-HSD trial progress and your in-patient cohort. But I'm assuming you're seeing some liver enzyme data at the minimum. What is the data cadence disclosure and confirm if only NASH cirrhosis patients are in there? There's no alcoholic cirrhotics. And my final question, if you've narrowed down your 3-pronged R&D effort and COVID to just direct antiviral? Or are you doing other approaches also in COVID? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [57] -------------------------------------------------------------------------------- Sure. Thanks for those questions. So let me start with COVID and go backwards. So we are still interrogating some anti-inflammatory strategies, in large part because that coincides with developing these anti-inflammatory medicines for other disease areas. And so that just works well. So we're still pursuing that as we pursue the antiviral approach for -- hopefully for broader coronaviruses. Now son of a gun, what was the first question... -------------------------------------------------------------------------------- Mayank Mamtani, B. Riley Securities, Inc., Research Division - Research Analyst [58] -------------------------------------------------------------------------------- HSD. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [59] -------------------------------------------------------------------------------- HSD. Sorry, you're right. Okay. So HSD, that's a tough one. As you may know, there's no known circulating biomarker. And so we are really -- so we have to rely on biopsies and we're just looking for gene knockdown. This in most of our, as you know, most of our Phase I/II studies, we're looking for not just safety and finding a dose, but we're looking for other activity measures. Here, we're just looking to find a dose. And so we'll be taking biopsies and looking at knockdown. And then based on that, we can -- we will take a dose or 2 forward into a study. -------------------------------------------------------------------------------- James Hassard, Arrowhead Pharmaceuticals, Inc. - Chief Commercial Officer [60] -------------------------------------------------------------------------------- And for enrollment, that's just NASH, suspected NASH. No alcohol gets added. -------------------------------------------------------------------------------- Operator [61] -------------------------------------------------------------------------------- And we have time for 1 more question. So our last question comes from the line of Patrick Trucchio with H.C. Wainwright. -------------------------------------------------------------------------------- Patrick Ralph Trucchio, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [62] -------------------------------------------------------------------------------- I have a few follow-ups. First one is on NASH. So just regarding the Phase I/II trial in NASH, can you remind us as participants in this study are expected to be confirmed NAFLD or NASH patients? And if it is to be confirmed by fiber scan or biopsy or some other methodology? And then secondly, can you tell us how you think about the regulatory bar in NASH, specifically as it regards to 2018 guidance in Phase IIb and III trials against the backdrop of some of these recent challenges in drug development in the space? And then finally, can you talk about what mechanisms do you believe, if any, could be synergistic with ARO-HSD and potential combination treatment of NASH? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [63] -------------------------------------------------------------------------------- Javier? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [64] -------------------------------------------------------------------------------- Just repeat the first one of the 3 questions. -------------------------------------------------------------------------------- Patrick Ralph Trucchio, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [65] -------------------------------------------------------------------------------- Yes. The first one is just on the Phase I/II trial in NASH. If you can remind us if the participants in the study are expected to be confirmed NAFLD or confirmed NASH patients? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [66] -------------------------------------------------------------------------------- Got it. So thank you. We are enrolling patients that we have suspected NASH. And that's a broad definition that includes the MRI so that other scan -- the MRI data in terms of liver fat and metabolic syndrome and baseline LSD. So it's a combination of those 3 things that would not require to have confirm NAFLD or NASH. But most of people who have those clinical features are likely to have NAFLD. If someone had a biopsy prior to the study that define as NASH, then that patient will be enrolled in the study. Well, the broader question about clinical development in NASH, of course, it's a very complex situation. And as you know, many, many large pharma companies or mid size pharma company are working on this. The development of the guidance took easily a year -- 10 years or so to get to where they are right now. And it is complex. The whole endpoint that they are asking for to be approved, it's complex because the way people read this biopsy, the category of fibrosis level and all those complexities. So we're at the very beginning of our journey. We're looking at the proof-of-concept that ARO-HSD is doing what it's supposed to. And at that point, we need to think carefully how to develop a drug for NASH. And as we understand better, perhaps the mechanism of action, we may be able to select that patient population in a more smart fashion. But with regard to the overall development plan, Phase II, Phase III biopsies and what is necessarily to be approved, for now, we may need to follow what has been proposed as guideline. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [67] -------------------------------------------------------------------------------- Last question on synergy with other mechanisms or agents? -------------------------------------------------------------------------------- Javier San Martin, Arrowhead Pharmaceuticals, Inc. - Chief Medical Officer [68] -------------------------------------------------------------------------------- Well, NASH seems to be a disease that can start up in different starting point and evolve via different mechanism. And when you look at broadly all the drugs in development, you can try to target different aspect of the disease, those who are more metabolic oriented, more inflammation oriented or more fibrotic oriented. Where are we in that mix? We don't know. We don't think that maybe we're in the metabolic side. So that could be an interesting and clinically, like, in my opinion, like a scenario, how to go about this. But I think we need to wait. We need to learn more about our own growth and how they feel of NASH evolves in the next couple of years. -------------------------------------------------------------------------------- Patrick Ralph Trucchio, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [69] -------------------------------------------------------------------------------- Yes. And if I may, just 1 follow-up on the imaging and biopsy and evaluation of patients for NASH. Can you talk about the advances in evaluation of noninvasive imaging or biomarkers that can enable potentially quicker enrollment of mid- and later stage NASH studies as compared to what we have been accustomed to historically and where we are in that process? -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [70] -------------------------------------------------------------------------------- James, would you like to stab at that question? -------------------------------------------------------------------------------- James Hassard, Arrowhead Pharmaceuticals, Inc. - Chief Commercial Officer [71] -------------------------------------------------------------------------------- Sure. Sure. I can take a stab at that. Certainly, if there is another option, an alternative to liver biopsy, something like MRI-PDFF or MRE, that would be preferable. Those -- at least in the setting of MRE, that may not be something that's quite ready for prime time as an approvable endpoint. But looking down the road, I mean, MRI-PDFF is already used a lot in clinical studies, Phase II clinical studies. And I would suspect that MRE will become more commonly looked at as a key endpoint in NASH studies or other studies of liver disease broadly down the road. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- And this does conclude today's question-and-answer session. I'd now like to turn the call back to Chris Anzalone for any closing remarks. -------------------------------------------------------------------------------- Christopher R. Anzalone, Arrowhead Pharmaceuticals, Inc. - CEO, President & Director [73] -------------------------------------------------------------------------------- Well, thanks, everyone, for participating today and listening to the call. I hope that you all have a happy and safe Thanksgiving weekend. -------------------------------------------------------------------------------- Operator [74] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.