ARWR - NASDAQ

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Thank you, Justin. Good afternoon, and thank you for joining us today to discuss Arrowhead's results for its fiscal fourth quarter and year ended September 30, 2023. With us today from management are President and CEO, Dr. Chris Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our mid and later-stage clinical pipeline; Dr. James Hamilton, our Chief of Discovery & Translational Medicine, who will provide an update on our earlier stage programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. In addition, Tracy Oliver, our Chief Commercial Officer; and Patrick O'Brien, our Chief Operating Officer and General Counsel, will both be available during the Q&A portion of the 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 are forward-looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our 10-K filed today and our quarterly reports on Form 10-Q. I'd now like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

Thanks Vince. Good afternoon everyone and thank you for joining us today. Arrowhead made significant progress toward reaching our “20 in '25” goal to grow our pipeline of RNAi therapeutics to a total of 20 clinical stage or marketed products by the year 2025. With yesterday’s announcement of a CTA filing for ARO-DM1, our newest skeletal muscle targeted program being evaluated as a treatment for type 1 myotonic dystrophy, we now have 15 clinical stage programs: 10 are wholly-owned and 5 are being developed with partners. We expect these 15 clinical programs to grow to 16 over the next month, with the addition of 1 more CTA this year. This will complete an extraordinarily productive year on the development front. In 2023 we will have nominated 9 new potential clinical candidates using our TRiM platform across 4 different tissues: liver, pulmonary, CNS, and skeletal muscle. In addition, we will have filed 4 CTAs for new clinical candidates during the calendar year. We believe this type of productivity is simply unmatched in our field, and it is particularly impressive given the size and market capitalization of our company. Even so, we expect more in 2024. To understand these 15 clinical programs now, the 20 we will shortly have, the new targets we are planning to address, and the new cell types we will target over the years, is to understand the magnitude of patients we expect to treat and the value we can create over the long term. Of course there is too much there to discuss in this setting, so today we will focus on some of the accomplishments, events, and considerations that may drive and unlock value in the near term. I see three primary areas: First, we are de-risking our pulmonary platform with knock-down and safety data in our clinical trials and toxicity data from our chronic tox studies. These enable us to move toward mid-stage studies addressing three main categories of chronic lung disease: inflammation, muco-obstruction, and interstitial lung disease; each of which have unmet treatment needs. Second, we are making good progress toward becoming a commercial company. We expect our initial commercial product to be plozasiran, formerly ARO-APOC3, in the treatment of familial chylomicronemia syndrome for which we will complete a Phase 3 study in Q2 2024, followed by our anticipated second indication for treating patients with severe hypertriglyceridemia or sHTG, and a later potential indication for treating the broad population of patients with mixed dyslipidemia and atherosclerotic cardiovascular disease. And lastly, we have directional guidance toward strengthening our balance sheet in shareholder friendly ways. Let’s start with the pulmonary platform. We believe that Arrowhead is the first and only company to show clinically that RNAi can be harnessed to silence gene expression in the human lung. This is important and marks the accomplishment of a key long-term goal we set for ourselves several years ago. We have always thought that once we have human safety and activity proof of concept with one candidate, it will unlock value in the entire platform and provide confidence that other programs could work similarly, much like our current expectations for new liver programs. So, let’s talk about important de-risking steps. First, we think we have confirmation that we have adequately addressed the chronic GLP toxicology issues of our first-generation ARO-ENaC candidate. In that program, we saw findings of local lung inflammation in chronic rat and monkey toxicology studies. We determined that this result was consistent with macrophage overload syndrome, and thus we needed to make next generation candidates with improved potency and enhanced duration of effect so we could stretch out the dosing interval and reduce exposure. I think we are now over that initial hurdle. We’ve received chronic toxicology results in both rodent and primate species for ARO-RAGE and ARO-MMP7. James will talk about the specifics, but the takeaway is that the NOAELs or No Observed Adverse Effect Levels suggest sufficient safety margins to move confidently into Phase 2 studies. These were welcomed results and, I believe, represent substantial de-risking for the entire pulmonary platform. Once we select a dose and dose interval for each candidate, we plan to interact with regulatory authorities in 2024 to discuss all results to date, including toxicology, and our plans for further clinical development. Next, we want to ensure that clinical safety and tolerability are acceptable. We now have three pulmonary programs in first-in-human studies and safety results have been consistent with no concerning safety signals across all three programs in 145 patients or healthy volunteers on active drug. Third, we need to ensure that our pulmonary drug candidates are doing what they are intended to do. We still need patient data in ARO-MMP7 and ARO-MUC5AC to understand this, but ARO-RAGE data have been very encouraging. Normal healthy volunteers showed 89% mean max knockdown and 95% max knockdown of circulating sRAGE after 2 doses of 184mg ARO-RAGE. At 92mg, healthy volunteers showed a mean max knockdown of 80% and max knockdown of 90% after 2 doses. We are still collecting data from asthma patients, but so far they are mapping on top of those from normal healthy volunteers, as we expected. Together, I believe these data are important for the ARO-RAGE program and, more broadly, serve to de-risk the entire pulmonary franchise. These data give us confidence that: 1, we have chronic tox coverage to move confidently into Phase 2 studies for ARO-RAGE and ARO-MMP7; 2, the drug candidates have been generally well tolerated in humans; and 3, we are seeing deep and durable knockdown in the ARO-RAGE clinical program that tracks what we saw in animal studies. The next step is to interrogate whether RAGE knockdown leads to a favorable clinical effect in patients. Upstream of hard clinical outcomes or FEV1, there are biomarkers that can inform on whether ARO-RAGE is engaging inflammatory pathways. We are approaching a time during the coming months, where we may have data on ARO-RAGE in asthma patients to make that assessment. We are currently dosing mild-to-moderate asthma patients and enrolling patients with high baseline FeNO to potentially enrich for an anti-inflammatory signal. I believe that signal would represent a significant further de-risking event so we are working quickly to get high FeNO patients enrolled. The next area where I think we are creating substantial value, is our progress toward becoming a commercial company. Our Phase 3 study of plozasiran in patients with familial chylomicronemia syndrome is approaching completion and we expect the last patient visit to be in the second quarter of 2024. That is a big step for a development stage biotech company. We are carefully considering launch strategies for plozasiran and look forward to speaking more about those soon. So where do we go after FCS? Data from Phase 2 studies of both plozasiran and zodasiran, formerly ARO-ANG3, have been very compelling, and our presentations and webcast around the American Heart Meeting earlier this month were well received by physicians, industry, and the investment community. For plozasiran, we see a clear opportunity to treat patients with severe hypertriglyceridemia, or sHTG. We believe there are 3 million to 4 million people in the US with triglycerides over 500 mg/dl, with approximately 1 million of them with TGs greater than 880. There are very limited treatment options for these patients. Further, we anticipate an sHTG approval based upon studies demonstrating a lowering of triglycerides during 1 year of treatment, with an adequate safety profile. In Phase 2 studies, plozasiran reduced TGs to lower than 500 in virtually all patients, and many had TGs fall to normal levels. We are presented with a compelling set of facts: A large pool of patients without adequate treatment options; a clear and relatively short regulatory pathway, and a drug candidate that has been consistent and very effective in Phase 1 and Phase 2 studies with good tolerability. We have had productive interactions with FDA, including an end of P2 meeting, to discuss the design of a Phase 3 clinical program in sHTG patients. We are finalizing planning, and I expect we will launch the studies early in 2024. Beyond FCS and sHTG, we continue to see attractive opportunities to help a broader population of patients with plozasiran or with zodasiran. Both candidates have shown to substantially reduce remnant cholesterol, an increasingly appreciated risk factor of cardiovascular disease. I expect that we will conduct a cardiovascular outcome trial, or CVOT, and that we will launch it by the middle of 2024. We have been planning to run a CVOT with plozasiran, but given the exciting data we presented at AHA in mixed dyslipidemia patients, we are now considering whether plozasiran or zodasiran would be the better candidate. We expect to decide which is better suited for this patient population over the coming months. This is a good problem to have, as both appear to be potentially powerful agents in this large market, and we simply want to try to ensure we are moving the best candidate forward in this space. Also on the late-stage side of our business, Takeda is enrolling patients in the Phase 3 study of fazirsiran. It is my understanding that they intend to open approximately 90 sites world-wide to help ensure the program moves quickly to an approvable endpoint that could be met after 2 years of treatment. Our wholly-owned programs, discovery engine, and bourgeoning commercial presence are all exciting components of our business that, we believe, will create substantial value going forward. They will also require significant capital over the coming years, and we are focused on building out our balance sheet to ensure that we can make these important investments. To that end, we are actively working on opportunities to bring in capital in shareholder friendly ways, and we believe there are several good options in front of us. For instance, we are exploring specific product financing for the plozasiran sHTG P3 study and separately a possible CVOT, whether done with plozasiran or zodasiran. We believe we could source sufficient capital for those studies in return for limited royalties on those products. In addition, we have discussed business development in the past. We now have 5 different platforms that incorporate the design of high-quality RNAi molecules that target 5 different cell types: hepatocytes, skeletal muscle, pulmonary, adipose, and CNS. We believe this broad ability to deliver highly potent RNAi molecules to a variety of tissues is both scarce and valuable, and could enable dozens of new drugs. We believe there is ample room to work with partners and also continue to build an extensive wholly-owned pipeline. That is intended to continue to let our discovery engine move quickly while ensuring that: 1, we focus on a more limited set of wholly-owned assets that provide our commercial team with a level of synergy and efficiency; 2, we continue to have access to necessary capital outside the capital markets; 3, we can continue to build more passive value as our partners invest in development and commercialization; and 4, we can continue to serve patients. As we are able to provide better clarity relating to the sources and magnitude of new capital, I believe a clear overhang in our stock may be removed. There is a lot of high-quality work going on at Arrowhead, and substantial potential value to be unlocked as we solidify our balance sheet. Stay tuned for details when we’re able to talk more about it. I want to highlight one last event from the quarter that is important. We announced that GSK reached an agreement with Janssen to transfer exclusive worldwide rights to further develop and commercialize JNJ-3989 to GSK. If you recall, Janssen announced that they were discontinuing hepatitis B research and later announced that they were winding down most of their infectious disease and vaccine programs. JNJ-3989 was one of the discontinued programs of this strategic decision. That created uncertainty about its future. Janssen was a good partner and we are confident that GSK will continue the diligent work Janssen started. This transaction also builds on Arrowhead’s relationship with GSK, which includes the 2021 exclusive license of GSK4532990, formerly ARO-HSD, an investigational RNAi therapeutic currently in a Phase 2 study as a potential treatment for patients with alcohol-related and non-alcohol related liver diseases. We look forward to continuing our productive relationship with GSK. With that overview, I’d now like to turn the call over to Dr. Javier San Martin. Javier?

Thank you, Chris, and good afternoon, everyone. I want to focus on the significant progress we’ve made on plozasiran, formerly ARO-APOC3, and zodasiran, formerly ARO-ANG3. This includes presentations at the American Heart Association meeting with Phase 2 data on the MUIR and SHASTA-2 studies of plozasiran and the ARCHES-2 study of zodasiran, a KOL webinar on the significance of these data, and recent interactions we’ve had with the FDA on our plans for Phase 3 studies. Let’s start with a review of what plozasiran is and then discuss the data presented at AHA. Plozasiran is designed to reduce production of Apolipoprotein C-III, or APOC3, a component of triglyceride rich lipoproteins, or TRLs, and a key regulator of triglyceride metabolism. APOC3 increases plasma TG levels by inhibiting breakdown of TRLs by lipoprotein lipase and uptake of TRL remnants by hepatic receptors in the liver. Plozasiran is being developed as a treatment for patients with familial chylomicronemia syndrome, severe hypertriglyceridemia, and mixed dyslipidemia. These are three distinct patient populations with very different phenotypes. Familial chylomicronemia syndrome, or FCS, is a severe and ultrarare genetic disease characterized by extremely high TG levels, typically over 1000 mg/dL, leading to high risk of acute pancreatitis that usually requires hospitalization and can be fatal. We are currently conducting the PALISADE Phase 3 study in 75 patients with FCS. The primary endpoint of the study is percent change from baseline in fasting TG. PALISADE is on schedule to complete in Q2 of 2024. Severe hypertriglyceridemia, or SHTG, is characterized by marked elevations in TG levels, typically over 500 mg/dL, which can also lead to increased risk of acute pancreatitis, as well as an increased risk of cardiovascular disease. We conducted the Phase 2 SHASTA-2 study and reported data at AHA. We are also working on initiating Phase 3 studies, SHASTA-3 and SHASTA-4 in early 2024. I will discuss the AHA data and Phase 3 study design in a moment. Lastly, mixed dyslipidemia is the presence of high TGs, and remnant cholesterol, often with low HDL. Remnant cholesterol is believed to be a major contributor to the residual risk of atherosclerotic cardiovascular disease after LDL is well controlled. We conducted the Phase 2 MUIR study in patients with mixed dyslipidemia and reported those data at AHA. We are currently working on key features of the study design including patient population selection for a potential Phase 3 study in patients with ASCVD and mixed dyslipidemia. We presented data at AHA for these last two patient populations: SHTG and mixed dyslipidemia. In the Phase 2 SHASTA-2 study of plozasiran in 226 subjects with SHTG who had baseline TGs greater than 500 mg/dL, two doses of 10, 25, or 50 milligram of plozasiran once every 12 weeks reduced TGs to near normal levels and more than 90% of patients achieved TG levels below 500 mg/dL, which is the risk threshold for acute pancreatitis. Plozasiran achieved mean maximum reductions of up to 90% in APOC3 and 87% in TGs. At 24 weeks, 12 weeks after the second dose, serum APOC3 remained 79% below baseline, and TGs were 74% below baseline, with reduction in remnant cholesterol of 63%, while HDL-cholesterol increased 68% above baseline. In the Phase 2 MUIR study of plozasiran in 353 subjects with mixed dyslipidemia who had fasting TGs between 150 and 499 mg/dL and either LDL-cholesterol greater than 70 mg/dL or non-HDL-cholesterol greater 100 mg/dL, subjects in the study received two doses of 10, 25, or 50 mg of plozasiran at baseline and at week 12 or two doses of 50mg at baseline and week 24. Plozasiran-treated subjects demonstrated a mean maximum reduction in APOC3 of up to 89% and robust reductions in atherogenic lipoproteins. At 24 weeks, plozasiran reduced TGs by 64%, remnant cholesterol by 54%, ApoB by 19%, and Non-HDL-cholesterol by 27%, while increasing HDL-cholesterol by 51%. These were very encouraging results, and they received a lot of attention at AHA. After the presentations, we hosted a webcast featuring three experts in the treatment and management of lipid and lipoprotein disorders: Daniel Gaudet, Professor of Medicine at Université de Montréal, who discussed plozasiran in the context of the current treatment landscape for severe hypertriglyceridemia; Børge Nordestgaard, Professor & Chief Physician, Copenhagen University Hospital, University of Copenhagen, Denmark, who discussed the emergent role of remnant cholesterol in cardiovascular disease; And, Steven Nissen, Chief Academic Officer for the Heart and Vascular Institute at the Cleveland Clinic, who discussed why the decrease in atherogenic lipoproteins observed with Plozasiran has the potential to prevent CV outcomes. A replay of the webcast is available on our website if you missed it. My takeaway was that all three experts agreed that plozasiran has a unique profile and great potential in FCS, SHTG, and in patients with ASCVD and mixed dyslipidemia. The support of these notable experts gives us additional confidence as we embark on Phase 3 studies to further evaluate plozasiran. So, what will the SHTG Phase 3 studies look like? We had an end of Phase 2 meeting with the FDA, and our plan is to do two similar studies: SHASTA-3 and SHASTA-4 that, together will be composed of approximately 700 patients, all with TGs greater than 500 mg/dl. The primary endpoint is lowering TGs after 1 year. We will include a subset of patients at higher risk of acute pancreatitis events. We will provide more detail on that as we get the studies initiated in early 2024. We will also have a third study that enrolls patients with moderately elevated TGs to add to our safety database. We expect these studies to all be completed around the same time. All in all, our interactions with FDA have been productive and helpful. We believe that we have incorporated their feedback and look forward to continued dialogue with the agency as we get closer to an NDA filing following completion of the PALISADE study in patients with FCS and as we move forward with additional Phase 3 studies in SHTG and mixed dyslipidemia. We also presented data at AHA on zodasiran, which received a lot of attention.

Thank you, Javier. I believe the productivity of our discovery organization is unrivalled. This is partly due to the efficiency and scalability of siRNA therapeutics and specifically of our proprietary TRiM platform, but more importantly a product of the culture of speed and innovation at Arrowhead. We continue to find ways to outperform others in the RNA therapeutics space with a highly productive and lean organization. In 2023 alone, we completed discovery and optimization work across 5 different delivery platforms and nominated 9 clinical candidates. Each then may go on to the IND-enabling phase, including GLP toxicology studies, clinical supply manufacturing, as well as preparation and submission of regulatory filings. We are also working on a discovery pipeline of similar size for 2024. This high level of productivity is how we intend to reach our “20 in '25” development goal. Our discovery stage pipeline is, for the most part, kept confidential until we are approaching a CTA, or at times until we file a CTA. So, you will likely start hearing more about the newly nominated clinical candidates over the coming quarters. For example, yesterday we announced that we filed a CTA for ARO-DM1, our clinical candidate for the treatment of patients with type 1 myotonic dystrophy, or DM1, and our second clinical program using the TRiM platform for delivery to skeletal muscle. The Phase 1/2a dose-escalating study will evaluate the safety, tolerability, and PK/PD profile of single and multiple ascending doses of ARODM1 compared to placebo in up to 48 patients with DM1. ARO-DM1 is designed to reduce expression of the dystrophia myotonica protein kinase or DMPK gene. DM1 is the most common adult-onset muscular dystrophy and there is currently no approved disease-modifying therapy. Treatments have focused on symptomatic management, including physical therapy, exercise, anklefoot orthoses, wheelchairs, and other assistive devices. ARO DM1 represents a novel approach to treat DM1 by silencing aberrantly transcribed DMPK mRNA, which could lead to improvements in multiple symptoms, including muscle strength and function. We have several exciting early-stage clinical programs that target genes expressed in the liver, lung, muscle, and CNS, each of which is moving toward proof-of-concept data. However, I will focus on our three pulmonary programs. Specifically, I’d like to review safety and tolerability data to date, recent chronic toxicology results that I think help to de-risk the pulmonary platform broadly, as well as some new PD data that further support our plans to rapidly move all programs forward. To review, our three clinical stage pulmonary programs are the following: ARO-RAGE is designed to reduce expression of the receptor for advanced glycation end products, or RAGE, as a potential treatment for inflammatory pulmonary diseases. ARO-MUC5AC is designed to reduce production of mucin 5AC, or MUC5AC, as a potential treatment for muco-obstructive pulmonary diseases. And, ARO-MMP7 is designed to the reduce expression of matrix metalloproteinase 7, or MMP7, as a potential treatment for idiopathic pulmonary fibrosis, or IPF. All three of these programs are in Phase 1/2a clinical trials evaluating single and multiple doses in normal healthy volunteers and in patients. Across the three programs, 145 total subjects, both normal healthy volunteers and patients, have received active drug via inhalation, with another 31 receiving ARORAGE via the subcutaneous route. There have been no serious adverse events deemed to be related to drug. There have been no patterns of drug related adverse events, pulmonary adverse events such as cough or shortness of breath, or adverse changes in lab or spirometry values. There has also been no evidence of local lung inflammation based on BALF cell count evaluation and all chest X-rays have been read as normal. These safety and tolerability results have largely been consistent across the three programs and are highly encouraging for the pulmonary platform. Next, I’d like to cover the chronic toxicology results for ARO-RAGE and AROMMP7, which we recently received. These results are also highly encouraging and suggest that we have sufficient safety margins to proceed confidently to Phase 2. Specifically, for ARO-RAGE the no observed adverse effect level, or NOAEL, in the six-month rat study was the mid dose and in the nine-month monkey study it was the highest dose studied. For ARO-MMP7 the rat NOAEL was the highest dose, and the monkey NOAEL was the mid dose. Keep in mind that dose levels selected for GLP toxicology studies are high multiples of the desired clinical dose, so some findings in a toxicology study are expected. The results for both ARO-RAGE and ARO-MMP7 suggest that the learnings and improvements we have made since our first-generation pulmonary candidate, ARO-ENaC, have improved the therapeutic index for our inhaled siRNA programs. Pending feedback from regulatory authorities, we are confident that we will have the required safety margins to begin Phase 2 studies. This is an important step for the pulmonary platform at an important time as we look to design and initiate Phase 2 studies in 2024. Now, moving on to new pharmacodynamic data, ARO-RAGE continues to yield promising dose-dependent target engagement results. We previously reported impressive reductions of soluble RAGE protein, or sRAGE, in serum and in bronchoalveolar lavage fluid, or BALF, in healthy volunteers. Previously reported at our June Analyst R&D Day, after two doses of 92 mg given on days 1 and 29, serum sRAGE mean maximum reduction was 80% with a maximal knockdown of 90%. After a single dose of 184 mg, we observed a mean reduction of 90% and maximal reduction of 95% in BALF sRAGE, with mean maximum serum sRAGE reduction of 76% and maximal reduction of 91%. We have since received additional sRAGE data after two doses of 184 mg in healthy volunteers. After a second dose of 184 mg, serum sRAGE mean maximum reduction was 89% with a maximal knockdown of 96%. Additionally reduction of serum sRAGE was similar in healthy volunteers and in patients with asthma at the 44 mg dose level. So, what are the next data points that we are watching? We are currently enrolling the top dose cohort in mild-to-moderate asthma patients and have initiated a cohort of asthma patients with high baseline levels of fractional exhaled nitric oxide, or FeNO, which is a biomarker for the degree of IL-13 driven type 2 inflammation in the lung. These are both important to watch. If we continue to see consistency of PD effect in asthma patients, that would be encouraging. Also, it would be highly encouraging if RAGE lung knockdown leads to an anti-inflammatory effect, via the FeNO biomarker, in either the mild-to-moderate asthma patient cohorts or, more likely, in the high FeNO cohort. The former should have data available during the coming months and the latter will have data around Q3 of 2024. I will now turn the call over to Ken Myszkowski. Ken?

Thank you, James, and good afternoon everyone. As we reported today, our net loss for fiscal 2023 was $205.3 million or $1.92 per share based on 106.8 million fully-diluted weighted average shares outstanding. This compares with net loss of $176.1 million or $1.67 per share based on 105.4 million fully-diluted weighted average shares outstanding, for 2022. Revenue for fiscal 2023 was $240.7 million, compared to $243.2 million for 2022. Revenue in the current period primarily relates to our collaboration agreements with Takeda, GSK and Amgen. Revenue is recognized as we complete our performance obligations or key developmental milestones are reached. For Takeda, Revenue is recognized commensurate to our performance obligation, which includes managing the ongoing AAT Phase 2 clinical trials. There remains $866,000 of revenue to be recognized associated with the Takeda collaboration which will be recognized in the next fiscal quarter. Revenue in the prior period primarily related to the recognition of payments received from our license and collaboration agreements with GSK and a portion of payments received from our license and collaboration agreements with Takeda and Horizon. Total operating expenses for fiscal 2023 were $445.7 million, compared to $421.7 million for 2022. [Technical Difficulty]

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Sorry, folks. We lost our Internet connection. We're calling in on the cell phone, and I'll continue where I think we, left off. Total operating expenses for fiscal 2023 were $445.7 million, compared to $421.7 million for 2022. This increase is driven primarily by increased candidate specific and discovery R&D costs as the company’s pipeline of clinical candidates has both increased and advanced into later stages of development. Net cash used by operating activities during fiscal 2023 was $153.9 million, compared with net cash used by operating activities of $136.1 million during 2022. The increase in cash used by operating activities is driven primarily by higher research and development expenses. We expect our operating cash burn to be $110 million to $130 million per quarter in fiscal 2024 and we expect full year capital expenditures of approximately $150 million as we near completion of our GMP manufacturing facility. Turning to our balance sheet, our cash and investments totaled $403.6 million at September 30, 2023, compared to $482.3 million at September 30, 2022. The decrease in our cash and investments was primarily due to cash used for operating activities and capital expenditures, partially offset by cash inflows from financing activities. Our common shares outstanding at September 30, 2023, were 107.3 million. With that brief overview, I will now turn the call back to Chris.

Thanks Ken. Arrowhead had another productive quarter and we see wide open space to accelerate our growth over the coming year. We expect 2024 to be a data and event-rich year with many expected opportunities to create value including: Readout of the plozasiran FCS P3; filing our first NDA; launching a P3 for sHTG with plozasiran; launching a P3 CVOT with either plozasiran or zodasiran; readout in various patient populations with ARO-C3; initial CNS data in patients with ARO-SOD1; ARO-RAGE FeNO and knockdown data in asthma patients; ARO-MMP7 knock down data in IPF patients; ARO-MUC5AC knock down data in asthma and COPD patients; an initiation of first-in-human studies with our first adipose-targeting candidates. Thank you for joining us today and I would now like to open the call to your questions. Operator?

[Operator Instructions] And our first question comes from Edward Tenthoff from Piper Sandler.

I'm excited about all the progress on the cardiovascular side. I wanted to ask about the DM1 filing today, because now with this, I think you guys also recently maybe filed on DUX4, if I'm remembering correctly. So this is really a franchise you're starting to build in muscle. Is this going to be a core area or could this be one of the areas for potential partnership that you were highlighting? Thanks.

I think you're right. We view skeletal muscle as potentially another vertical, another franchise. We think both DM1 and DUX4 are good targets. We think these are 2 large numbers of patients who desperately need treatment options, and so we're excited about these. We are looking at some additional targets as well, and so we'll see if this can grow be something as large as we foresee pulmonary being, for instance. At this point, it's a little bit too early to tell, but I would agree that right now, it appears to be pretty interesting, burgeoning franchise for us.

And our next question comes from Ellie Merle from UBS.

Thanks so much for taking the question and, all the color on the timelines for the pulmonary program. Maybe just in terms of understanding the biology of RAGE, particularly in the high FeNO cohorts. I guess, what are you looking to see there? And what would you view as clinically meaningful?

James, do you want to start this?

Sure. We would expect to see the reductions in FeNO, primarily based on our animal data, the work we did in the alternate area model showed steep reductions in IL-13. We can't measure FeNO in the rats, but a large reduction in IL-13 should translate into a reduction in FeNO. And in terms of what would be clinically meaningful based on what we're seeing with tezepelumab or Dupixent, I think something in the 30% or so range would put us in the range of what those other molecules have been able to show.

And our next question comes from Maury Raycroft from Jefferies.

I was going to ask 1 on ARO-RAGE, too. You mentioned that in patients, the data is mapping with what you observed in healthy volunteer data. Can you elaborate on whether you're seeing this for your 92 and 184 mg asthma patients? And could you have the FEV1 data from these non-FeNO patients, potentially even by year-end or first quarter of next year. I guess maybe if you could provide more granularity on the timeline there. And also, you talked a little bit about the subcu ARO-RAGE data. Can you remind -- or can you talk about what you're seeing there and remind what the purpose is of assessing that round of administration?

So I'll take those in reverse order. Subcu, we're still about halfway through that study, the study is fully enrolled, but with healthy volunteers over just collecting the data from some of the earlier cohorts. So we're not ready to share the sRAGE data from those studies yet. The idea there is that based on the animal work we've done, we were able to see significant levels of knockdown in both rodents and in monkeys with subcu administration. So we wanted to we view that as a potential additional option, an optional route of administration it could be different from an inhaled route of administration. Then the next question, I think was on FEV1. We've seen those data as they come in and that's primarily in there as safety endpoint and the cohort sizes are very small. We've not analyzed those data in the patient cohort that we have fill at this time, so I think it's too early for us to say anything about FEV1 changes. Suffice it to say that the cohort sizes are single digits and PD-1 can be a noisy metric. And then the first question was?

Timeline and mapping of…

Okay, that's right. We only have the s-antigen data or the sRAGE reduction data from the 44 milligram dose level in the patients. So we've not seen the sRAGE reduction data from 92 milligrams or 184 milligrams.

Got it. Okay. And for FEV1 at baseline, is that something you could comment on for the asthma cohorts, the higher dose cohorts?

Yes. Again, I think we don't have all of the aggregated data as of yet, but…

The cohorts for the RAGE study were all mild asthma patients, so it's expected to have relatively normal based on it as well. Asthma grows more substantially for the FeNO cohorts, I mean the MUC5AC program. But in the RAGE, asthma, they are mild patient by definition.

Got it. So more mild patients and the asthma patients for those 2 higher dose cohorts. Okay. Thanks for taking my question.

And our next question comes from Mani Foroohar from Leerink Partners.

I guess, I'm going to do out on an ultimately more macro and philosophical question. You talked about monetize some type of synthetic royalty or royalty sale monetization. You talked about a couple of different approaches to finance the ongoing CVOT, that in my mind raises two questions. One, that is by definition anything that's royalties has a fairly high duration financing instrument and that it's essentially a form of synthetic debt. How do you think about timing a royalty or, I guess, convert any type of debt, any type of rate dependent transaction given how volatile the funding rates of anyone who would be buying that royalty from you would be? You do want to wait until rates come down, see if you could potentially get a tighter spread, et cetera? Just how do you think of that from a purely financial CFO macro perspective? And then secondarily -- I'm going to stop. I'll ask my follow-up afterwards.

Sure. So the short answer is no. We would not wait for macro environments to change, who knows where those are going to go. There are several funders, multiple funders that do this kind of work, and we have been chatting with some of them, for a bit now and we believe that there are, there could be attractive opportunities there, that are not dependent upon fundamental changes in the macro environment. So we feel comfortable that there are, that there is capital there at a reasonable rate for us to finance these in this kind of manner. Will we ultimately pull that lever? We haven't made that decision, but we just wanted to make clear that that is a lever and potentially an attractive lever that we could pull as part of an overall financing strategy.

And I guess my follow-up is, if you're going to be selling part of the economics of an asset that you're going into a CVOT. How do you think about that versus partnering the asset entirely rather than the CVOT yourself? Presumably, a large pharma partner, would ascribe a lower operational discount to their own carrying out of a CVOT versus you guys doing your first CVOT, implying more a more attractive NPV if they were to acquire the asset from you in a partnership. Whether 100% purchase, royalty, 50-50, under any terms, by definition, the economics of a partnership would be better than doing raising capital during itself. So like how do you, so is there a reason why you see retaining it and then raising at an implied higher cost of capital as a better strategy rather than selling it at an implied lower or partnering it at an implied lower cost of capital and eliminating the operating risk of having to do a CVOT yourselves?

Yes, look, those are all things that we consider as we look at the array of funding opportunities ahead of us. The paying some amount of royalties on these is relatively cheap for us because we're not stacking royalties. We don't owe royalties on any of these assets. And so -- and presumably also those royalties will be capped, presumably they would not go, indefinitely. But you're right, as we look at all these opportunities, we need to take all those things into consideration. Look, we see ourselves as a commercial company and we think we can create a lot of value as a commercial company. And so assuming that the relative cost of capital while holding on to these assets is reasonable, then that's something that we would do.

And our next question comes from David Lebovitz from Citi.

Just piggybacking on the last question. As far as any licensing agreements you're looking at, are you planning to wait until after the pivotal data? And also, what activity level are you intending to really take within the partnership? Is this something where you're going to be very active licensing to kind of one of these royalty companies? Or would this be something more specific where you're basically giving control of the asset to a larger pharmaceutical player?

The answer to that just depends upon the asset, of course. We have done and will continue to do asset licenses like we do with HSD or HBV or AAT. Well, I guess AAT is a little bit different, because we definitely need to profit share there. But -- or Lp(a), we will do those going forward, depending upon the asset. Look, here's our goal. We have a very large pipeline and it's only going to get larger, and so we've got plenty of room to license out some individual assets. What we wanted to be -- what we want to end up with is a series of verticals where we can concentrate commercial build out, and we can give our commercial team, several drugs to hold in the bag to sell into various channels. I think we can do that, you know, given our franchises with pulmonary muscle, cardiometabolic, CNS, et cetera, adipose, et cetera. So I think we can do that. And as we look at how to cluster those, we will find that there are some outliers, if you will, some that may not fit well into a commercial strategy, and those would be the easy ones those would be the easy ones to license out. We also have the opportunity to do platform deals. We talked about this in the past, I like that a lot. We now have 5 platforms, 5 different cell types that we can address. I like the idea of working with partners who can bring in targets to us and we can help to create drugs for those partners. That for me is found value as long as those targets are not what we're working on right now. And so maybe it's an unsatisfying answer because we'll be doing a number of different things, but that's the way we see the waterfront. And again, if we are 1 or 2 asset company then the answer would be much simpler. But we are a 20 plus asset company. And so we have the ability to structure a number of different partnerships and go-to-market strategies for ourselves.

And our next question comes from Luca Issi from RBC Capital.

I have a quick one, maybe Javier, if I may. I was under the impression that you were planning a cardiovascular come trial with APOC3. While it sounds to me that you're not planning cardiovascular come trial either with APOC3 or ANG3. Assuming that that is correct? What drove the change in strategy? Was this informed by conversations with the FDA? And is this related in any sort, form or shape with the numerical worsening in glycemic control that we've seen for APOC3? Any color there much appreciated. Thanks so much.

Thank you for that question. It's really important. And I think this highlight how dynamic is drug development today, how fast science change and advance. If we go back, I would say, 6 to 9 months when we already were thinking and working on a simple trial design for plozasiran or ARO-APOC3, the focus was triglycerides and the field was focused on triglyceride as a key component of the receivable base. In the last 6 months, I think that focus changed, and I'm saying in the last 6 months because I don't know if you call into the KOL webinar at the American Heart Association of Dr. [indiscernible] showed a slide when you see the number of publications in remnant cholesterol as a company of residual risk in the last 10 years, which was 10 or 20 paid procedure versus 1,000 in the last one year. That means the change in this field is happening as we speak, and the understanding that it's not just PG, but it's remnant cholesterol in its the totality of the atherogenic lipoprotein. It's a new development. And frankly, 6 months ago or 9 months ago, it wasn't a key component of our decision making, and it is now and it's been in the last 3 months. So now when you look at the 2 molecules and you focus on the concept of totality of atherogenic lipoproteins, not TG or no TG only, because remember for TGA proceed has better efficacy than H2, but when you look at the totality of atherogenic lipoproteins, it will H3 reduce LDL cholesterol by 20-plus percent, reduce remnant cholesterol by 80%, so it is substantially different. The population that we should address may not be exactly the same, and that's something that we're thinking and talking to experts right now. So I think we're changing following the science. We did have conversation with some experts. We did not have any conversation about this with the FDA yet, and within the next month or so, we're going to be close to make a decision and start to define our next step from the regulatory perspective and from the clinical trial design perspective.

And I don't think this was, I don't think you are getting towards this, but let me just say. Our increasing interest in ANG3 that doesn't reflect a lack of confidence in APOC3. We were moving forward to that forward on that as you point out for CVOT. But as the science has been moving, as Javier said, over the last 6 months, we've had this growing wait a minute moment, where we should be looking also at ANG3. Just to ensure that we are pushing the best candidate that we can into a specific type of CVOT. We are still moving as quickly as we can. Obviously, with FCS, we'll be finished with that Phase 3, I think, in the second quarter. We'll be starting the sHTG Phase 3 early 2024. Now we've got a little bit of time to figure out kind of where we're going to place our bet with the CVOT.

And our next question comes from Brendan Smith from TD Cowen.

Just a couple of quick ones, if I could. I also want to have a follow-up just on the timing to pulmonary data. Is it fair to say we'll see the high dose RAGE data in asthma patients by Q2 of next year, with the high FeNO data in Q3? And then really just any color you can give us on MUC5AC, MMP7, maybe when we might see some of that data next year would be great. And then quickly, I just wanted to see if there's any updates on the ARO-C3 program and if there's any plans to put out any data from that next year either? Thanks.

Sure. James?

Sure. Yes, the intention would be to release the sRAGE data from the asthma cohorts When it becomes available to us, so probably, middle of the first half of next year, I think for the asthma, the high dose asthma sRAGE data. And then in terms of FeNO in the high FeNO cohorts, we're looking at Q3 for FeNO data in those patients. And then, MUC5AC has been a little more challenging to enroll some protocol requirements in there and then the requirement of those patients being severe asthmatics, but likely towards the middle of the year for ARO-MUC5AC data we still need to enroll the highest dose cohort of those patients. And in terms of C3, we are in the process of enrolling the patient cohorts, the IgA nephropathy patients as well as the C3G patients. So probably the second half of 2024 for proteinuria data.

And our next question comes from Mayank Mamtani from B. Riley Securities.

So maybe James, if you could dive a bit deeper on the safety margin difference that you've seen between MUC5 versus RAGE in the recent preclinical data that you received? And if you're able to comment on how the NOAEL doses for MUC5 correlate the top dose that's being tested in the clinic? And maybe a high-level question on like what, for MUC5 would be, human proof of concept like investors think about for outer age in terms of the higher asthma patients? Like you just commented, it's severe asthmatic patients, but what sort of biological signal would be relevant here given, obviously, this is more downstream physiology to IL-4 efficacy?

Yes, I think on the last question, it's a bit tough to pin down what's clinically relevant in terms of MUC5AC knockdown since there's not a great correlate out there from other drugs. So I can't give you an exact number on that. In terms of the safety margins comparing MMP7 or RAGE with ENaC, I guess it depends on the dose level, we used a low, mid and high dose level for all of those chronic tox studies in the rats. If you compare the cumulative dose given over a 6-month rat study at the high dose level for RAGE, we had there's a sevenfold difference between the high dose level used in ENaC and in RAGE and the 4 to 5 full difference for MMP7 in the rat, so it's significant difference between the total cumulative doses that were administered in those 2, with those 2 different molecules.

And then just on the muscle targeting programs that's for DM1, could you just remind us the targeting receptor ligand approach here? And as obviously you guys know, it's an active field, there are alternative antibody ASO approaches. Maybe how does sort of your preclinical data inform, what you've seen? And maybe related to that, is there a plan to secure non-dilutive capital for that no longer a near-term event, Chris, or, you're just going to be opportunistic, recognizing that there might be some more clinical data coming from these targets from any of your peers?

I'm sorry. I misunderstood the -- what kind of capital and say that again?

Yes. I think I think you had plans for non-dilutive capital, at some point, which delayed the DUX4 program. So I'm just curious if you're no longer, going to do anything strategically there for the muscle in the near-term?

Yes. That ran its course for now. We are happy to run the DUX4 as well as DM1 clinical programs and then and which did not mean that we will never partner them, but we were exploring as you know, we are exploring potentially partnering DUX4, and it just made sense to us to stop those discussions and we're moving ourselves for right now. James, do you want to?

Sure. And then on the comparison with the other muscle targeting platforms that are out there. For DM1, we've looked at knockdown in the [siRNA] and have achieved -- it's a comparative -- similar knockdown or similar duration of effect with what's been published, for example, the transfer and targeted platforms. We use the peptide targeting the alpha-v beta-6. So it's a different way of getting the sRNA into the cell. I think in terms of total drug dosage or dosages should be much lower compared to the transferring conjugates, which of course conjugating sRNA to a monoclonal antibody. And then I'd also anticipate that we would not expect to see some of the transferring related safety issues that have been out there. Of course, the time will tell and the data will tell us, but something we did not anticipate.

And our next question comes from Patrick Trucchio from H.C. Wainwright & Company.

Just regarding the 2025 targeting goals, can you give us a sense of from which platforms the 20 drug candidates are expected emerge from understanding several have been announced this year and if along with CNS pulmonary liver, adipose and muscle, additional tissues may be targeted with TRIM?

I don't have any guidance to tell you on additional cell types other than the fact that we will be in new cell types. We've said publicly that we think we can be into a new cell type every 18 to 24 months. I think that continues. Look, I expect by the year 2025, we will have new or additional candidates in every one of those verticals.

And then just a few follow-ups on the pulmonary compounds. Just first regarding Initial chronic tox results for the ARO-RAGE and ARO-MMP7. I'm wondering if you can tell us if or when further chronic tox data is expected and the level of confidence that data should continue to support advancement of those programs and when you might have similar data for ARO-MUC5AC in 2024? And just to follow-up on ARO-RAGE, if you can discuss the targeting mechanism of the subcu administration and advantages that would be expected for this route relative to the inhaled route.

Yes. Sure. So in terms of the chronic rat, or the chronic tox data for the pulmonary programs, that's it. I mean, that's the final, that's from the final report. So there's no more expectations. We won't be getting any more data around chronic talks for MMP7 or RAGE. From MUC5AC that we're still planning the chronic tox study. We wanted to get some biomarker data from the clinical study to better inform on the dose frequency for the chronic tox studies, since frequency of administration seems to be really important to avoid entering into dose levels where we see toxicity. We really wanted to nail down dose frequency. So we need to get a duration of effect from the clinical studies before we finalize the chronic tox study for MUC5AC.

And regarding the subcu, I think and there was twofold. One, there could be other targets and other indications where subcu administration is just preferred to inhaled. And second, that could potentially also broaden or widen out our therapeutic index.

And our next question comes from Prakhar Agrawal from Cantor Fitzgerald.

So on your ARO-XDH program that was partnered with Horizon, it seems that Amgen has decided to terminate this agreement. Was there any data generated by XDH program or was it just part of the recent strategic overhaul by Amgen after Horizon deal close? And what are your plans for this asset now develop internally or will you be looking for a partner again?

So it's early to say on that. We haven't seen data. I don't know that we will, but at least so far, we haven't seen any of the clinical data. And we've not been told why that was being discontinued, whether it's strategic or something else. We have some theories. James, do you want to talk about the [indiscernible] program for instance?

Sure. Yes. I think another company had an siRNA targeting the same gene target XDH. It was also discontinued due to lack of decline in uric acid in the blood with immunity knockdown, all of the XDH in the liver, there are still dramatic sources. So liver knockdown might not have been enough.

Our next question comes from Mike Ulz from Morgan Stanley.

Maybe just the quick one on ARO-RAGE. Just in terms of timing of a potential Phase II study there. Now that the clinical the chronic tox studies are done for ARO-RAGE. Do you have enough data to now start to engage with the FDA? Or is the plan more to wait for some of the other cohort data like the asthma patients or high FeNO before you start to do that? Thanks.

We're thinking about, starting Phase 2 to 2024 for sure, and there's already work going into that, that we design, patient populations, selection of CROs. So we are already planning. As the data is coming in it will help us to decide the dose and the dose frequency, but we are already planning on the next stage development for the AO range.

And our next question comes from William Pickering from Bernstein.

I had a few follow ups on the DM1 announcement. So how is the drug designed to get your siRNA inside the nucleus where the mRNA is accumulating? And maybe can you share any more color on what endpoints you'll be measuring that could suggest early of efficacy, for example, splicing assessment or any functional endpoints?

Sure. Yes. So we will look at some of the same endpoints that other companies have looked at and we'll look at total DMPK knockdown, changes in spliceopathy and we'll also look at the video hand opening time as well as some of the other functional endpoints. And so your other question on knocking down siRNA in the nucleus. We've done some work in animals. We haven't published this yet or shared it publicly via poster of presentation, but we've shown at doses similar to what we had plan on administering in the clinic that we are able to get a level of knockdown of nuclear RNA and that translates into improvements in spliceopathy. So that was the impetus for us moving this program into the clinic that we could get even with modest levels of nuclear RNA knockdown, we could get improvements in spliceopathy.

And I would now like to turn the call back over to Chris Anzalone for closing remarks.

Thanks very much everyone for joining us today, and I wish you all a happy holiday season.