Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals conference call. . I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, sir..

Thanks, Aldan. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2021 first quarter ended December 31, 2020. With us today from management are President and CEO, Dr. Christopher Anzalone; who will provide an overview of the quarter; Dr.

James Hamilton, our Senior Vice President of Discovery and Translational Medicine, who has graciously agreed to sub in for Dr. Javier San Martin while he is out ill today; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

In addition, James Hassard, our Chief Commercial Officer, will be available during the Q&A portion of today's call. .

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. The last quarter was an important period for us and our shareholders because we demonstrated clear advances in multiple development programs that we believe represent key value drivers to their respective product candidates and our proprietary TRiM platform.

We see this as positioning us well to build substantial value throughout 2021. We seek to create value in 2 primary ways. First, we push RNAi and our platform forward to address new diseases, therapeutic areas and organisms. This is fundamentally difficult and uncertain because it relies on innovation.

Second, we drive our existing pipeline into later-stage clinical studies toward eventual commercialization. This can be more straightforward and, we believe, increasingly predictable as we generate large amounts of data regarding how well the TRiM platform works.

We would expect the progress in either of these areas would drive value for us, but our goal is to show measurable progress in both. As we look at 2021, we expect substantial progress on both fronts, with several opportunities in the first half of the calendar year alone.

For instance, by the middle of the year, we could have clinical proof of concept for our ability to bring RNAi outside the liver, opening a whole new range of addressable diseases without adequate treatments.

We also expect to begin 3 large Phase IIb studies and a Phase III study during this time frame, and we may also have a better idea about how we and Takeda may be able to streamline the ARO-AAT clinical program to accelerate that drug candidate to market. .

2 with 6 patients each, and one with 12 patients. This was the initially planned design. We intend to make protocol changes shortly that will add an additional 12 healthy volunteers who will undergo bronchoscopy with bronchial brushing and bronchoalveolar lavage, or BAL, to evaluate ENaC knockdown in the lung.

We are also considering expanding the CF patient cohorts as well. We've completed dosing in all initially planned single-dose healthy volunteer cohorts, and we have been pleased with the safety and tolerability results to date.

We believe this is an important finding for ARO-ENaC and for the pulmonary TRiM platform as we begin to expand our pipeline into additional diseases in the lung.

This is particularly relevant to drugs inhibiting ENaC as many of the small molecule ENaC inhibitors have been dose limited by toxicity We are now dosing CF patients in the first cohort, which we expect to be fully enrolled before the end of next month, at which time we plan to begin enrolling the second patient cohort.

So what data do we expect from this study? First, and most importantly, we are assessing safety and tolerability in all cohorts. In the expanded healthy volunteer cohort, as I mentioned, we will be conducting bronchial brushings and BAL. This method may give us a signal on target engagement and a better understanding of pharmacologic activity.

Remember that ENaC is not secreted, so we are not able to measure target engagement in the blood as we are typically able to do for our liver-targeted programs. In addition, in CF patients, we will be measuring changes in FEV1 and in lung clearance index or LCI.

These would be indications of functional improvements in mucociliary clearance and lung function. There is clearly a lot of data coming out of this first-in-human study, so we are eager to see the ARO-ENaC results. The next program I'd like to highlight is ARO-HIF2.

ARO-HIF2 is designed to treat clear cell renal cell carcinoma or RCC, and we are currently dosing RCC patients in a Phase Ib dose-finding clinical study in 3 cohorts of at least 6 patients each for a total of 18 patients with advanced clear cell RCC.

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 as well as post-dose tumoral expression of HIF-2 alpha and HIF-associated genes.

We are dosing the second cohort at this time, which we expect to be fully enrolled this month. The patients in the study are heavily pretreated and have failed multiple lines of therapies. So a positive result for this first-in-human study would include data suggesting delivery to tumors as well as measurable levels of HIF2 knockdown.

Similar to ARO-ENaC, we are also looking to characterize safety and tolerability and to select a dose for further phase -- further studies in Phase II. The last program I'd like to describe is ARO-HSD, our investigational candidate for the potential treatment of alcohol and non-alcohol-related liver disease.

There is strong genetic data supporting HSD17B13 as a target for NASH and alcoholic liver disease. 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 completed the single dose portion of the study in healthy volunteers. We are currently enrolling and dosing the multiple dose patient portion of the study in NASH or suspected NASH patients. We have completed the first patient cohort and expect to complete enrollment of the second patient cohort this month.

After that is complete, there are 2 more patient cohorts to enroll sequentially. This target is also not secreted. So in order to assess target engagement, we utilize liver biopsies. It's important to mention that this study only involves 2 doses, which, relative to other later-stage NASH studies, is only a short duration of exposure.

So we don't expect to see substantial signs of disease improvement, but rather we are focused on selecting the dose level and regimen achieving optimal gene target silencing. However, we know the platform is highly effective at silencing hepatocyte express genes, so we would expect a high level of target engagement.

In addition, we are the first to study inhibition of this target in humans, so we will see if there are any early encouraging signs of efficacy, even though this would be unexpected. As mentioned earlier, we expect all 3 of these programs to have preliminary data readouts around the middle of the year.

It's too early to know in which order they will come, but we expect this to be an exciting period with all these potential data reports coalescing roughly around the same time. Our intention would be to report top line data highlights in a press release and then further present a fuller data set at an appropriate medical meeting.

I will now turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer.

Ken?.

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended December 31, 2020 was $20.7 million or $0.20 per share based on 102.8 million fully diluted weighted average shares outstanding.

This compares with a net loss of $2.7 million or $0.03 per share based on 97.1 million fully diluted weighted average shares outstanding for the quarter ended December 31, 2019. Revenue for the quarter ended December 31, 2020, was $21.3 million compared to $29.5 million for the quarter ended December 31, 2019.

Revenue in both periods relates to the recognition of a portion of the upfront payments and milestones received from our license and collaboration agreements with Janssen, and revenue in the current period also includes the recognition of a portion of the $300 million upfront payment due upon the signing of the collaboration agreement with Takeda.

This payment was received in January. Revenue for the Janssen and Takeda agreements will be recognized as we continue to work toward completing our performance obligations of managing clinical trials, the clinical trials in process and certain manufacturing-related services.

We anticipate the remaining deferred revenue of $6.7 million associated with the Janssen collaboration will be recognized in the next fiscal quarter. The remaining $292 million of revenue associated with the Takeda collaboration is anticipated to be recognized over approximately 2 years.

Any additional milestones achieved with our collaboration partners would be additive to this projection. Total operating expenses for the quarter ended December 31, 2020, were $45.4 million compared to $34.3 million for the quarter ended December 31, 2019.

This increase is primarily due to increased personnel costs and noncash stock compensation and R&D as our head count continues to grow. The increase is also due to increased candidate-specific and discovery R&D costs.

Net cash used in operating activities during the quarter ended December 31, 2020, was $38.9 million compared with net cash used in operating activities of $23.5 million during the quarter ended December 31, 2019. The key driver of this change was the increased R&D costs discussed.

We continue to estimate our full year cash burn to be between $200 million and $250 million. Turning to our balance sheet. Our cash and investments totaled $416.2 million at December 31, 2020, compared with $453 million at September 30, 2020. The decrease in our cash and investments is primarily due to cash used for operating activities.

With the collection of the $300 million upfront payment in January 2021, our cash -- our current cash and investments total approximately $700 million. Our common shares outstanding at December 31, 2020, were 103.2 million. With that brief overview, I will now turn the call back to Chris..

Thanks, Ken. We have a lot in front of us this year. We expect waves of clinical data readouts throughout the year from ARO-HSD, ARO-ENaC, ARO-HIF2, ARO-APOC3, ARO-ANG3 and ARO-AAT. We expect to gain clarity on potentially streamlining and accelerating the ARO-AAT development program.

We expect to initiate multiple Phase IIb studies for ARO-HSD, ARO-APOC3 and ARO-ANG3 and possibly for ARO-ENaC and ARO-HIF2. We also expect to initiate a Phase III study for ARO-APOC3 and FCS patients. We expect to file at least 3 new CTAs this year, including our first for candidate targeting skeletal muscle.

And by the end of the year, I expect Arrowhead to have at least 11 clinical programs targeting 4 different cell types, and 8 of those clinical programs could be wholly-owned. This is indeed a substantial amount of potential value creation. We feel great about where Arrowhead is today, and we're confident about what we can accomplish going forward.

It seems like all the pieces are in place for scalable and sustainable growth. We have a strong balance sheet and are disciplined in our use of cash, which allows us to move forward rapidly in a capital-efficient manner.

We also are eligible for substantial nondilutive capital in the form of milestone payments from Amgen, Janssen and Takeda as our partner programs continue to advance. And ultimately if any of the products are commercialized, we will be eligible for royalties on sales.

We have an increasingly validated technology platform in TRiM, and we believe TRiM is on the verge of potentially showing that RNAi can be a powerful therapeutic mechanism for diseases throughout the body. We have a large and rapidly growing pipeline of differentiated product candidates addressing diseases without adequate treatment options.

These are all innovative first-in-class molecules; not fast follower, incremental or me-too products. And lastly, we have the right team in place and our unwavering culture of challenging the norms of drug development. Arrowhead always finds a way to be better, faster and more efficient than others in the field.

This is a powerful combination, and it gives us the opportunity to make a difference in the way numerous diseases are treated. Thanks again for joining us today. I would now like to open the call to your questions.

Operator?.

. Our first question comes from the line of Salveen Richter from Goldman Sachs..

So just one on the ENaC program, could you help us understand kind of the threshold knockdown that you want to see here and what you saw preclinically that could translate? And then on the HIF-2 program, what gives you confidence or optimism with regard to the translation in man?.

Salveen, thanks very much. So let me start with ENaC. That's a tricky question. There's good experimental evidence, there's good genetic evidence on the possibility of knocking out ENaC and helping that mucociliary clearance in these types of patients.

But the fact of the matter is no one has been able to create a therapeutic that can do that safely, and so we are true pioneers here. So it's hard to say what sort of knockdown could be helpful.

The best idea we've got, I suppose, is if you look at the genetic analysis, heterozygotes, essentially heterozygote ENaC knockouts in humans do see a clinical benefit, we think. And so it feels like if we can reach 50-or-so percent knockdown, we could see something helpful.

There's an awful lot of green between where we are in the pocket, as they say in billiards, and so we still have a lot to learn. But that sort of feels like the bogey to us right now, is 50% knockdown could be helpful. with respect to HIF-2 alpha, that's also a hard one.

We have done as much as we have could -- as we've been able to do in animal models, but as you know, translation is always a trick with oncology. And so we're just waiting to see -- we're looking forward to seeing the data over the next couple of months, and we'll see where we are. The animal data have been good.

We feel confident that we'll see knockdown. We don't have a good idea about how much knockdown you really need to see to see a clinical benefit. But similar here, I think we would call a win 50% or so knockdown. That's a bit arbitrary, but that feels reasonable to us, and so we'll see how we stack up against that over the next few months..

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

So I just wanted to do a quick check on timing for the 3 Phase I readouts. It sounds like you can't predict the order of the readouts but, Chris, I think you mentioned by end of 2Q in your prepared remarks.

So just checking if the guidance is for end of 2Q? Or is it softer and a possible update could come in 3Q?.

No, we're shooting for the end of the second quarter. It's -- these are ongoing studies, and so nothing is going to be finished by then. And so we'll see what we have in hand, and we'll see if we can make an interpretable -- and we'll see if we have an interpretable data. That's going to really be the kicker for us.

I think that we can hit that by the end of the second quarter, that's our goal..

Got it. Okay.

So you'll report the data by the end of the second quarter then? That's the goal?.

Yes, yes. Again, it's going to be a subset of data. It'll be just top line. As we -- as James mentioned in the prepared remarks, our goal here is to show a fuller data set at appropriate medical meetings.

So it will -- our goal here is to give you a taste to show you whether or not it appears the drugs are working, and then we'll disclose more going forward..

Got it. Okay.

And then for the ENaC data, can you clarify how many subjects you plan on reporting there? And with the additional 12 subjects that you're planning on enrolling, do you have an idea of what the doses and dose range will be?.

So let's see if we're going to unpack that. I don't -- I can't tell you how many patients we're going to be reporting on because I just don't know. As I said, I think we'll be talking about this sort of midstream, but my hope is that we'll have some data from the first and maybe the second dose cohort in the patient population.

With respect to the healthy volunteers and the bronchial brushing and lavage, James, do you want to address what those doses are?.

Yes, sure. So that dose is actually up to us to select based on what we see in the previous cohorts and the healthy volunteer cohorts. It's likely that will -- since the safety profile has been favorable, we'll go with the highest dose, so the highest dose cohort, and give us the best chance of showing knockdown either in bronchial brushings or BAL..

Okay. Okay. Fair enough.

And last quick question just for the HIF-2 patients, can you say how many biopsies you have already and maybe give a sense of what baseline HIF-2 expression levels look like?.

So we haven't seen the data yet. Those are -- these are going to be patched, and so we haven't seen any data yet.

Although James, do you want to talk about how many biopsies we've had so far?.

Yes, sure. So we've completed pre- and post-dose biopsies in all 6 of the cohort I patients and then pre-dose in 5 of the cohort II patients. And now we won't know about viability of those until we start staining the slides. So how many of those we'll be able to analyze, we don't know that yet, but that's how many biopsies have been completed..

Our next question comes from the line Shawn from Citi..

Thank you for the comprehensive update. Are you able to provide any more details on the safety update you provided to the new update? Just how many patients? Is it just healthy volunteers? Is there -- they actually see patients in there as well? And then I have one follow-up on the skeletal muscle program..

Sorry, you broke up there a little bit.

So you're asking how many patients have been treated so far with ENaC between healthy volunteers and patients? Is that -- was that the question?.

Just the safety update you gave today that everything looks good so far.

How many patients did that include?.

Sure. That includes all the healthy volunteers in the first 4 patients in the study. That's all four true..

And you want to go into how many healthy volunteers that is?.

Yes, sure. So that's a total of 24 healthy volunteers, 6 per cohort, and then we'll add that additional 12 for the BAL studies..

Great, great. And then for the skeletal muscle, it seems like it's an area of active area for RNAi and antisense oligo.

Are there gating steps for that program? Is it compound optimization at this point? Or is it more about being strategic for the indication that you're going after?.

For the first one, we're just on the conveyor belt now. Once you got -- once you have nomination insights, there's just sort of a time it takes to get through GLP talks and the like, and we're just in that right now. And so we feel comfortable that we've got drug candidates.

We just need to complete the IND-enabling steps, and we are in that process right now. We feel comfortable that we are on track to file that CTA sometime in the summer..

Our next question comes from the line of Luca Issi from RBC Capital..

Terrific. Congrats on all the progress. Maybe one on A1 AAT. I think you mentioned optionality to streamline the SEQUOIA trial and the upcoming FDA meeting. Can you just give us a sense of what's on the agenda for that meeting? And what are some of the key goals that you're hoping to achieve during that meeting? So that's one.

And then the second on HIF-2 alpha, maybe bigger picture. Can you expand a little bit more on what the bogey for success here? I understand this is a trial primarily dose escalation, and you're looking at PKs.

But what are some of the key biomarkers that you really focus on to know whether this is a molecule that is worth further pursuing?.

safety and tolerability, of course, and so far that's been acceptable; and second, knockdown. And as I mentioned there, we just haven't seen data yet. Those biopsies are going to be batched, and we'll have an idea over the next several months what kind of knockdown it gets.

But we're really focused on knockdown, not only for the drug for ARO-HIF2, but also for the franchise. If we see that we are getting consistent and good knockdown. And what does good mean, it's hard to say. But it sort of feels like if we are in the 50-or-so percent knockdown range, we feel pretty good about that.

If we can hit that, then we think we've got a drug, and we think we've got a franchise. HIF-2 alpha, as you know, is well-validated target. There have been other -- there's another drug right now in development that looks quite good. And so we think that as long as we can show reasonable knockdown, there's a place for us with this drug.

And then again, we see a lot of upside. If we can knock down HIF-2 alpha in solid tumors, we can knock generally, we think, a whole host of other cancer targets. And so fill in the blank, there's a number of targets that we're going to want to go after, maybe ourselves, maybe in partnership with others, against various tumors.

So we're in a really interesting, really exciting spot right now, where we're just waiting for data. And if those data look positive, then I think we're off to the races..

Our next question comes from the line of Esther Rajavelu from UBS..

I have a couple on APOC3 and then one on AAT. So in the past, you've talked about initiating a Phase III registrational trial in FCS. And your comments today seem to suggest that that's a potential.

Am I reading too much into it? Or are you still sort of going strong with the FCS? And then with regards to the Phase II trial, the 2 Phase II trials that you're going to start in patients with -- I believe what you said in the past with severe hypertriglyceridemia and those with levels greater than 150.

But I noticed that the trial in the severe Phase II patients, you're excluding patients who had recent pancreatitis. So why is that? That two questions in there..

Sure. So with respect to FCS, yes, you are reading too much into that. We are going full speed ahead on a pivotal study for -- in those patients.

The -- our timing of this is we plan to file an IND for APOC3 first and then follow that up with plans for that pivotal study, but it is still our intention to move forward as quickly as we can on that population. We think it's a strong unmet medical need.

We think that ARO-APOC3 is going to be a really important drug for those patients, and so we are full speed ahead there. With respect to APOC3, I'll just say a couple of things, and I'll hand it over to James. So the 2 Phase IIb studies, as you know, are going to be in patients with severe hypertriglyceridemia, so those patients above 500.

We view that as kind of our fat market, right? We think it's a grossly underserved market. And the regulatory pathway there, we think, is reasonably clear, and we think it's a pretty large population. So it's one that we're really focused on.

Now we also want to look at, in the Phase IIb study, those patients who have elevated triglycerides, so say between 150 and 499. We think that, that is also an unmet medical need that we think would require a more comprehensive Phase III study, probably an outcome study. I don't know that we're going to do that, but we want to retain the optionality.

And so we want to do that Phase IIb study right now just in case in the future, we're going to want to expand into that patient population. So with that, anyway, I'll hand it over to James..

Sure.

The question was about excluding patients with pancreatitis in the APOC3, is that right?.

Yes, that's right..

Yes. So we actually don't exclude patients with pancreatitis in either of those Phase IIb studies and either the severe hypertriglyceridemic or the kind of middle of the road, greater than 150 hypertriglycerides study. We do have an exclusion for any patients with active pancreatitis within the last 12 weeks.

So we just don't want anyone in the study who has recently had pancreatitis and may still be suffering from associated sequelae. So we actually have some endpoints in the severe hypertriglyceridemic study, looking at rates of pancreatitis and things like that. So we don't exclude those patients..

Got it. So it's only they've had it within the last 12 weeks or so that you're not going to include them..

Right, prior to their first dose. So we just don't -- excluding patients who have very recently had pancreatitis..

Okay. Okay. And then on AAT, you have a few readouts in 2021.

And can you frame for us some of the scenarios for that 12-month readout and what the read-through could be for the Phase III trial? It sounds like in your response to a prior question, you seem to have more confidence, Chris, that you may not need that 2-point reduction in fibrosis for registration.

So how are you thinking about it? I mean is it -- are you going for that polymer reduction rate and maybe tying that to other studies that have shown a link between polymer reduction and fibrosis?.

Yes. Again, I don't want to speak too much on this because I don't want to get out ahead of our discussions with the FDA. But in a nutshell, yes, I think that it's clear that the accumulation of the Z protein is what causes alpha-1 liver disease. I think it's clear as day.

And so we think that we can make an argument that, that could be an approval endpoint or at least part of a composite endpoint that we might -- that we shouldn't have to show a reduction in fibrosis. I mean you don't -- if that's not an approval endpoint for NASH, we don't think that should be an approval endpoint for this kind of rare disease.

So it will be -- and frankly, the SEQUOIA study wasn't looking -- wasn't dependent upon resolution of fibrosis either. It was improvement in a histologic rating scale without worsening of fibrosis.

Our hope is that we can move that a bit as well because we -- again, we think that the biology is increasingly clear on these folks, and that simply reducing the burden could be a good marker..

Our next question comes from the line of Ted Tenthoff from Piper Sandler..

Great. Kind of changing topics a little bit, I mean so much going on here. You guys have had a lot of success with partnering assets, both hepatitis B and obviously AAT.

As we kind of look forward, what are -- what is Arrowhead going to be when you grow up? Like, are you going to be a targeted cardiovascular company? When someone's going on in oncology with respect to combos, is that something that might be a partnerable asset? Liver disease, similarly? Give us kind of a broader sense for how you're looking at these different assets, and what do you think is going to be core in the future..

Yes. Thanks, Ted. That's a great question, and it's a dynamic question because what we are capable of focusing on will, of course, change as we grow and such. Here's what we're seeing broadly.

We, as you know, Ted, you followed us for quite some time, even when we were a $40 million company, we never saw ourselves in the future as a company that focused only on a specific therapeutic area. We just thought this technology was too powerful, and we thought there was too much value to create to focus that narrowly.

And so we've done an awful lot of work over the last decade, and again you've seen most of that, looking to push this technology into other cell types. And we're now just on the cusp of that. So then it gets to the question.

Okay, with this embarrassment of riches that we've talked about a lot, what do we keep in-house and what do we look to partners on? As we said in the past, at least for right now, cardiovascular and pulmonary make a lot of sense to us. We like the synergy of those 2 areas. We've got an awful lot to offer those types of physicians.

Those will not be the last areas we're going to focus on. That, I can virtually guarantee you. As we build up other franchises, I am quite certain that we will build out sales infrastructure and marketing infrastructure in other areas as well. Will that be oncology? It could be. In the near term though, look, oncology is hard.

My hope is that we see some good positive data in ARO-HIF2 that would enable us to bring in a good partner to start to really blow out that franchise.

It doesn't mean that we won't have our own wholly-owned offerings, but at some point, it would be -- we'd be certainly open to working with a broad-based oncology company with deep expertise to help us prioritize targets and such. We're not there yet. We want to generate some data first. But at some point, that probably makes some sense for us..

Our next question comes from the line of Alethia Young from Cantor..

Yes, this is Li on for Alethia.

So just wondering if the HIF-2 program looks successful, what other targets might be of interest to you in oncology? And then how are you thinking about the other companies with similar NASH targets?.

Sorry. So the question was other oncology targets and then how do we fit....

Yes..

Okay.

And then the other one was how do we fit with other NASH strategies? Is that where we're going?.

Yes..

Okay. Yes, I don't have much to tell you on the oncology targets. We are working with some other targets. We haven't disclosed anything there, but we are -- we do have some internal programs. As I mentioned just a second ago, we would like to bring in a partner at some point. I don't know when the right time is.

I don't know if it's this year or next year or some other time. But to the extent that we have positive data, we would like to do this to do at least part of oncology with the partner. And so I don't have much to offer on other targets we're thinking about right now. With respect to NASH, boy, NASH is hard. We like the genetic data for HSD.

It is compelling that if you can knock down HSD, it does seem to have a bit of a protective effect against NASH. It doesn't mean that, that should be a silver bullet. In fact, I would expect that NASH is going to be more like HBV in that it's going to be a combination approach. I have no idea what the right combination is.

And frankly, it's probably a different combination for different patient populations. I think we're learning that it's probably a number of different diseases. We think that HSD could be a really nice backbone and could help a variety of these patient populations, and then you can layer on top of ARO-HSD some other compounds.

It's too early for us to tell right now because again, we haven't even seen any data yet. But that's sort of how we see it. We've also said in the past that we like the idea of HSD for alcoholic hepatitis as well. The genetic data there were at least as exciting as they were for NASH.

And so while we're not doing anything right now in those patient populations, I could foresee us getting into that at some point in the future. So sorry, that's sort of a non-answer answer, but that's how we are thinking about NASH right now..

Our next question comes from the line of Patrick Trucchio from H.C. Wainwright..

I have a follow-up on the cardiometabolic programs.

So I'm wondering what questions you're looking to answer in the smaller open-label studies with ARO-APOC3 and ARO-ANG3? Secondly, how many studies would you anticipate? And how many patients would you anticipate enrolling in these studies? And when would the data from these studies be expected?.

Yes. Thanks. I'm glad you picked that up. I think it's an important point. We've talked in the past about 2 Phase IIb studies for APOC3 and the one Phase IIb study for ARO-ANG3, and of course the Phase III in APOC3 for FCS patients. We've talked about those a lot. We are now just starting to explore some other questions for these smaller studies.

We haven't set on those yet. I assume that by our next conference call, we'll have set those and probably set those motion a bit, so I can talk about that more then. But at this point, we are exploring what those mean. There's going to be a handful of these things. Our goal here was twofold.

One is to answer as many questions as we can during this time frame because look, these Phase IIb studies are going to be blinded. And they're going to be not long, but say a year of exposure.

And so there's going to be a time that we just -- that we can't -- the time frame that we can't move into a pivotal study until those are finished, and so we might as well take advantage of that time to answer some other questions. We're looking to do that. I think these are going to be shorter studies.

Many of them or some of them can be open label, and so it gives us a chance to report on these -- on some of these studies while the longer ones are still in process. And so it allows us to continue to talk about these and tell you about what we're seeing. But I really can't give you specifics yet because we're still sort of in the tranches on that.

I expect that we'll have those set over the next couple of months or so..

Got it. And then just a few on the lung programs follow-ups. First on ARO-ENaC, what drove the decision for the protocol changes? Is that something FDA asked for? Or what specifically is a driver of those changes? And then on ARO-COV, a competing RNAi program had been delayed because of the need to conduct more work in a hamster model.

So I'm wondering how things are progressing for ARO-COV and if this program could begin human trials in 2021.

And then secondly, to what extent are the new emerging variants impacting this program should we expect for more RNAi triggers to avoid resistance? And how do you view RNAi antiviral positioning as compared to the monoclonal antibody, several of which have the EUA authorization -- emergency use authorizations in the U.S.

but they appear to have some resistance issues with these new variants?.

Okay. There's a lot of questions there. So let's start with ENaC. The changes in the protocol were driven entirely by our desire to see -- to look at knockdown healthy volunteers. It wasn't required by anybody. It wasn't included in the first protocol because, frankly, we didn't have an assay yet. We weren't really sure we can measure it.

Since then, we have developed this assay and we're ready to go, and so now we want to look at bronchial brushing and bronchial lavage in order to see knockdown in healthy volunteers. That's going to be a really important measure for us. Because as I mentioned in the prepared remarks, this is a small study in patients.

And so it is likely that it's going to be difficult to see FEV1 changes in 4 patients in a given cohort just because it's too small, and so this gives us a better measure on how well this drug is working and how well it's delivering to pulmonary epithelial cells. So that was the rationale for change in the protocol and including those folks.

Now with respect to COVID, COVID has -- we've not been able to move as fast as we wanted to on COVID, in large part because the animal models are just -- we don't control the animal models, and it's been hard to get slots to do these animal studies.

So we have not been as fast as we have been in other areas where we can do our own studies or we've got a larger variety of CROs that we can work with. So it's lagged a bit because of that. We're still excited about it, of course. You mentioned the new variants that people are talking about.

That does not -- has not affected our program, but it has just reinforced our belief that there is a real role here for RNAi-mediated antivirals, all right? It is certainly possible that at some point, this virus is going to mutate around the vaccines.

And so our goal here was to make a broad-based antiviral that, not only could work against this current coronavirus, but also potentially future coronaviruses. And so this is sort of playing out the way we thought it might play out. And again, it just underlines the need for our kind of therapeutic.

As we've shown with HBV, we know we're pretty good at playing in antivirals. And your point is a good one about multiple triggers. The way we view this is probably multiple triggers is going to be better than it would be a single trigger but the same reason that it was for HBV. As you may remember, our HBV compound has two different triggers.

One reason is to guard against mutation, but the other reason is to give you broader coverage across genotypes. That will be the case here as well for a wide variety of coronaviruses that are out there..

Our next question comes from the line of Mayank Mamtani from B. Riley Securities..

Congrats on a productive 2020, and it seems like even a busier 2021 ahead for you. So a quick follow-up on ENaC.

Is there anything you've learned on a -- from a PD standpoint or anything from an alternative approach, antisense, that gives you confidence at this point on target engagement? And anything you can comment on that?.

Yes, that's a good question. It's hard for us to interpret the antisense data that we've seen. So there's been no bad news there for us, but there's been no good news either, the way we look at it. And so no, unfortunately. We'll have to wait and see what those data look like. And we're, of course, anxious to see what our data look like.

We're going to know a heck of a lot more over the next couple of months, that's for sure..

Okay. And then just a quick follow-up on the biopsy duration for the HSD program. And anything, if at all, we learned from the 6-month biopsy we got from the AAT program? Is there any read-through to -- again I understand it's different proteins. We are talking about different types of knockdown complicated disease.

Any read-through you guys think internally about -- as you think about the NASH program?.

I don't know that there's read-through. What we've learned in all these programs is that all these proteins are different. And so -- and all the triggers are different. Depending upon the trigger and the protein knockdown, depth and duration are going to be different.

And so we are confident that we will see good, deep and durable knockdown in ARO-HSD because of our experience with HBV and AAT and APOC3 and ANG3 and Lp(a) and others. But I don't know that we learned anything in particular with AAT that we can apply to HSD. We are -- I think success here is pretty narrow.

We're just really looking at adept integration of knockdown. As we mentioned, we're not really looking for alleviation of disease in this very short study. We don't expect it. And so we're just looking at -- we're trying to pick a dose.

And unfortunately, since there's -- since we don't know of a circulating biomarker, the only way to choose a dose is to get in there and take a biopsy and see how deep and durable the knockdown is. And then we'll take that into a larger Phase IIb study that would -- that may give us some idea about disease progression.

But we don't expect to learn anything about that at this point..

And to clarify, 6-month duration biopsy, right, or 12 months?.

Yes, so we do two different post-dose biopsy time points. One is at day 71 post-dose and the other is after the last dose. These patients get 2 doses. And the other is at day 169. So we stagger them to get a better idea of duration..

Okay. Great. And my final question on -- as you think about cash flows, and you obviously have some partners coming in, J&J, Amgen and Takeda. How should we think about your burn rate for opportunities there? Also, keeping in context some of the near-term....

I think we might have lost you here. You're very quiet, Mayank..

Can you hear me now? Can you hear me now?.

Yes, you're back. So go ahead..

Yes. So final question was on cash flows. As you think about 2021 and think about the different partner milestones from J&J, Amgen and Takeda, how should we think about your burn rate? Again, in the context of some of the commercial stage programs might be getting pushed out a little bit like APOC3 and AAT obviously being partnered out.

How should we think about the expense for 2021?.

Well, so we reiterated today that we expect to burn between $200 million and $250 million in fiscal 2021. We've got plenty of cash to afford that. And that's -- and I do think that we have a chance of triggering some milestone payments during that time.

We can't give any guidance on any of that because, A, it's uncertain; and B, even if it was certain, I can't tell you until we get it. But I think it's possible. But again, worst case is we don't trigger any others this year. That's okay. We have plenty of cash right now to absorb that kind of burn.

And then next year again, I feel quite comfortable that we can have access to additional milestone payments. And so look, I feel good about our balance sheet right now. I feel good about our access to additional capital between all 3 partnerships..

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

Chris, with respect to HIF, if your working thesis right now is that 50% knockdown could have an effect on the disease, should that prove to be too low based on your current dose levels and dose intervals? Do you believe you could go higher than that to achieve a higher knockdown if needed?.

Yes. We'll see. It'll be really helpful to see what the dose response looks like if, in fact, we see 50% knockdown at the highest dose we're giving. At least from what we've seen so far, we see no signs that we can't escalate more.

This is not -- it's not a traditional cancer trial, right, where we dose as high as we can until we get people sick and then we knock those down. We don't respect those living toxicities. And so to your point, sure, it is certainly possible that we get 50% knockdown and we still think that there's more knockdown to be had.

And as long as we're not seeing DLTs, we're happy to escalate. And like I said, in neither HIF-2 alpha nor in ENaC so far have we seen evidence that we've got a safety issue..

Our next question comes from the line of Mani Foroohar from SVB Leerink..

I want to quickly follow up on -- so I think it was Maury who actually touched base on this. Around the ENaC readout, you mentioned in your prepared comments it's reasonably possible to see an uninterpretable or unclear FEV benefit while seeing a very substantial knockdown benefit in the healthy normal volunteers.

Should you see that data set, which is one that's -- profiles that was seen in the early data sets from Vertex, Translate Bio, et cetera, many others.

How do you interpret that as either A, the target isn't effective; or B, you need to dose higher? Like how do you choose to move forward from a data set that doesn't necessarily deepen your relationship between knockdown and dose and efficacy?.

Yes. So look, there's a lot of -- it's hard to play that game until we see the data. But I guess the broad answer would be, look, if we saw good knockdown but in those 4 patients, we can't discern FEV1 changes, I don't think that we're so worried at this point. We said to ourselves this is good news.

We've got a drug that is working the way we want it to. We've got a franchise certainly that we can -- we think that we can go into other disease areas. And so now with CF, look, let's treat some more patients because 4 is not a very large number in a cohort. Let's see if we can start to see an FEV1 change if we get to 10 or so patients. That's one.

Second is, look, this is -- it's a pretty short study as well. And so we'd be happy to say -- to assume we're getting good knockdown. Maybe we just need a bit more in the way of dosing to start to see those manifest in FEV1 changes. So all is not lost if we cannot register an FEV1 change, but we see good knockdown.

To the contrary, I think that suggests that we have something that's really powerful. And we've got plenty of time this year to treat some more patients as well as treat them a bit longer or at least monitor them longer to see if we can see some FEV1 changes..

Great. that's helpful..

The cohorts we'll have middle of the year will be the 2 lower dose cohorts. So we still have the top dose in CF patients to go..

And also it would be the baseline characteristics of the patients. When you're talking about small ends like this, that may make a difference. It shouldn't matter theoretically what the genotype is or background therapy, but this is a small end. So I think the main point here is that we get knocked down, we get functional delivery, and we're safe.

And then that's a win..

the knockdown data and, of course, the safety and tolerability of the drug. If both of those are positive, we are off to the races, and we'll continue to look at patients going forward..

That's really helpful. And then hopping over to NASH, there have been a couple of other companies that also commented on the genetic data. Obviously, there's some evidence, unclear if it's correlative or positive, in terms of the potential benefit in both alcoholic and nonalcoholic steatohepatitis.

What kind of datasets would you need to see, maybe in later-stage studies from you guys, to parse that out and say, okay, this is really positive, and a knockdown of HSD is going to be reasonably expected to show a benefit at a longer-term pivotal trial? Are there biomarkers you're tracking? Are there early clinical datasets that we might see as early as 2022 to sort of parse out that causation correlation issue?.

Yes, sure. I'll take that one. I mean the easy one for this target is ALT that -- and that's been correlative to the loss of function mutation that those individuals tend to have lower ALTs, and so that's an easy biomarker for us to read out in early stage studies and beyond.

Beyond that, there's not a whole lot else from a biomarker standpoint in terms of imaging or other blood tests. I think then you're looking at Phase IIb biopsy studies to show proof of pharmacologic effect and benefit..

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Chris Anzalone for any further remarks..

Thanks, everyone, for joining us today. It's been a pleasure to speak with you, and we'll talk to you next quarter..

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..