Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. 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..

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2022 first quarter ended December 31, 2021. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr.

Javier San Martin, our Chief Medical Officer, who will provide an update -- will provide an update on our mid- and later stage clinical pipeline. Dr.

James Hamilton, our Senior Vice President of Discovery and Translational Medicine will provide an update on our pulmonary platform; and Ken Myszkowski, our Chief Financial Officer, will give a review of the financials. We will then open up the call to your questions.

Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

All statements other than statements of historical fact are forward-looking statements and are subject to numerous risks and uncertainties and 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 most recent annual report on Form 10-K. That said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the Company.

Chris?.

ARO-ANG3 has demonstrated very deep and durable activity, enabling quarterly or less frequent dosing. ANGPTL3 levels were reduced in a dose-dependent fashion from 78% to 90% after 100, 200 or 300 milligrams of ARO-ANG3. We saw mean triglyceride reductions up to 73.5% and mean non-HDL cholesterol reductions up to 50%.

Only two patients had elevated ALTs and in both cases, there were concomitant medications associated with increases in ALTs and in both cases, the elevation was transient and not associated with increases in bilirubin and we have seen no indication that ARO-ANG3 led to any increase in liver fat. Let's now move to our pulmonary platform.

James will give a fuller review during this call, but I wanted to highlight a few developments. First, we continue to make progress on the ENaC target, but will likely not continue with ARO-ENAC, the candidate that we are testing in a Phase 1/2 study last year.

We have two to three next-generation compounds that appear to have favorable pharmacologic properties compared to ARO-ENaC. A step behind this, we are also exploring ways to deliver pulmonary targeted drug candidates via subcutaneous administration, which we believe would be a true breakthrough and are testing this for ENaC as well.

We are likely changing horses in the ENaC program, but we have not yet settled on which new horse. We've also discussed our plans to file two new pulmonary CTAs this year but had not previously disclosed the targets or disease areas.

I'm excited to announce these programs formerly as ARO-RAGE and ARO-MUC5AC, each being developed for various muco-obstructive and inflammatory pulmonary conditions. We are on track to file CTAs for both of these over the next quarter.

We will be presenting preclinical data at the American Thoracic Society meeting in May, and we also plan to host a KOL webinar or pulmonary specific R&D day this year.

At the latter event, we intend to go into detail on the biology of the targets, present preclinical data, introduce the commercial market opportunity, explain our plans for the clinical studies and have an outside KOL describe the clinical presentation of the disease and unmet medical need.

We are pleased that we expect to file two new pulmonary CTAs in the first half of 2022 and are also on track to file a third by the end of this year. That target and disease area remained undisclosed.

While still on the pulmonary platform, we continue to make progress in COVID and are currently testing compounds that are leading to substantially decreased lung inflammation in viral expression in animal models. This is exciting for what they may mean for the current SARS CoV-2, but also potentially for other SARS-based coronaviruses.

As you may recall, we are working to develop antiviral agents by targeting regions that are well conserved across known SARs coronaviruses with the hope that we could treat current and future novel infections. Our progress here has also opened doors for us in other respiratory viruses where we now have active programs.

We could see that becoming a substantial sub franchise, if you will, within our pulmonary platform. These are exciting opportunities for us, and we look forward to updating you on our progress.

In addition to the two new pulmonary CTAs in the first half of this year, we are on track with ARO-DUX4, our first skeletal muscle targeted candidate against FSHD. Consistent with our prior guidance, we expect to file that CTA by the end of the first half of this year.

This represents a leap forward with the addition of another cell type we can target clinically. And more specifically, ARO-DUX4 may offer us the ability to help a group of patients with no real therapeutic options.

Recent failures and setbacks in the field have underlined the unmet medical need that currently exists and we are moving as fast as we can for the FSHD patients who need us. Our partner programs have also made good progress. J&J continues its Phase 1 progress in JNJ-75220795, our partner NASH therapeutic, and JNJ-3989, our partnered HBV Therapeutic.

The latter is in multiple Phase 2b studies that have started to read out, and I would expect regular data from them over the next few years. As we discussed on our last earnings call, JNJ-3989 is doing exactly what it was designed to do, and we look forward to seeing how it performs over time and in combination with different agents.

Olpasiran, the candidate against cardiovascular disease that we licensed to Amgen continues in a Phase 2 study. Amgen has said publicly that they expect to complete the Phase 2 in the first half of this year. Data from the Phase 1 were impressive, and we look forward to seeing Phase 2 data and the initiation of a Phase 3.

ARO-AAT has an ongoing Phase 2b study that is currently starting to read out PK data at three different dose levels and will read out biopsy data in the third or fourth quarter. We continue to work closely with Takeda and expect to continue discussions with regulators this year about our data and plans for a pivotal study.

Our work with Horizon continues to move rapidly in the area of chronic gout and I will defer to them to provide guidance and future plans and timing.

Lastly, we completed a transaction to purchase 13 acres of land in Verona, Wisconsin, which is planned to be the site of a new GMP drug manufacturing facility and an associated laboratory and office facility. Construction is starting this quarter.

Completion of the lab and office space is anticipated in early to mid-2023 and completion of the manufacturing facility is expected in late 2023. We will continue to operate additional research and development facilities in Madison, Wisconsin and San Diego, California.

We also signed a lease to what will allow us to substantially expand our research laboratories and administrative offices in San Diego in the first half of 2023.

We believe the new Arrowhead campuses will allow us to support our growing pipeline, and we think positions us well to advance the manufacturing process, including our commercial scale of our TRiM-enabled drug candidates.

We view this as a strong competitive advantage as we approach potential commercialization of our rapidly progressing clinical candidates. So in summary, our pipeline is expanding and maturing.

Our platform is providing additional opportunities to discover and develop new investigational medicines in areas where Arrowhead has unique capabilities and expertise.

We are using business development selectively to maximize the value of our technology and to bring in non-dilutive capital to support our internal development programs, and we are investing to expand our R&D footprint and take more control of the drug manufacturing process to support clinical and ultimately commercial supply needs.

We believe all of this puts Arrowhead in a very strong competitive position. 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 will provide status updates on three of our later-stage clinical programs, ARO-APOC3, ARO-ANG3, our investigational cardiometabolic medicine and ARO-AAT also called TAK-999, our investigational medicine designed to treat alpha-1 liver disease, which is being co-developed with Takeda.

First, ARO-APOC3 is our investigational medicine targeting apolipoprotein C-III being studied in patients with various lipid disorders. Collectively, the mid- and late-stage clinical study for ARO-APOC3 are called the SUMMIT program.

We made good progress bringing on new sites for each of the studies, and we're very pleased with the pace of patients' enrollment. I will discuss each study individually. SHASTA-2 is a double-blind, placebo-controlled Phase 2b study of ARO-APOC3 in adults with severe hypertriglyceridemia or SHTG.

This population is defined as having triglycerides greater than 500 million per deciliter. The primary objective of the SHASTA-2 study to evaluate the safety and efficacy of ARO-APOC3 and to select a dosing regimen for the later-stage clinical studies in this patient population, approximately 216 patients will be enrolled in this study.

Moving on to the MUIR study, which is a double-blind, placebo-controlled Phase 2b study of ARO-APOC3 in adults with mixed dyslipidemia, this population is defined as having triglycerides between 150 and 500 milligrams and non-HDL cholesterol greater than 100 milligrams or LDL-cholesterol greater than 70 milligrams per deciliter.

The primary ejective of the MUIR study is to evaluate the safety and efficacy of ARO-APOC3 and to select a dose and dosing regimen for later stage clinical studies in patients with mixed dyslipidemia. A total of approximately 320 patients will be enrolled in this study.

The most recent study initiated in the SUMMIT program is PALISADE, a Phase 3 study to evaluate the efficacy and safety of ARO-APOC3 in adults with familial chylomicronemia syndrome or FCS.

These are patients with fasting triglycerides greater than 880 milligrams per deciliter that are refractory to standard lipid lower therapy and have a diagnosis of FCS because they tend to have extremely high triglycerides, patients with FCS have an elevated risk of recurrent and painful bouts of pancreatitis.

These patients currently have very limited treatment options. The primary endpoint of PALISADE is a percent change from baseline at month 10 in fasting triglycerides. Additional secondary and exploratory endpoints include the change in other lipid parameters, incidence of acute pancreatitis and other measures.

Approximately 60 patients will be enrolled in this study. I will now move on to ARO-ANG3. Our investigational medicine designed to reduce production of angiopoietin-like protein three, ANGPTL3 as a potential treatment for patients with mixed dyslipidemia. The set of mid and late-stage studies for ARO-ANG3 is called the VISTA program.

The VISTA program has on active study and one additional planned study that I will describe briefly in a moment. The currently active study is ARCHES-2, a double-blind, placebo-controlled Phase 2b study of investigational ARO-ANG3 in adults with mixed dyslipidemia. This population is defined the same way as in the ARO-APOC3 MUIR study.

This patient had triglycerides between 150 and 500 milligrams per deciliter and non-HDL cholesterol greater than 100 milligrams per deciliter or LDL cholesterol greater than 70 milligrams per deciliter.

The primary objective of the ARCHES-2 study is to evaluate the safety and efficacy of ARO-ANG3 in adults with mixed dyslipidemia and select a dosing regimen for later stage clinical studies in this patient population. Total of approximately 180 patients will be enrolled in this study.

The next study plan for the VISTA program is GATEWAY, a Phase 2 study of ARO-ANG3 in patients with homozygous familial hypercholesterolemia or HoFH. Studying PCSK9 inhibitors can inhibit cholesterol synthesis and enhance hepatic clearance of LDL cholesterol through up regulation of the hepatocyte LDL receptor.

Patients with HoFH can have this functional or absent LDL receptor and thus can be resistant to statins and even resistance to alternatives such as PCSK9 inhibitors. Patients with HoFH, are therefore a population with a particularly high need for additional therapies with a mechanism that works outside of the LDL receptor, such as ANGPTL3 inhibition.

GATEWAY is an open-label study that will be conducted in subjects with documented HoFH based on genotype or clinical criteria up to approximately 16 subjects who meet eligibility criteria will be randomized in a 1:1 ratio to receive two doses of 200 or 300 milligrams of ARO-ANG3 on Day 1 and Day 84 and will be evaluated over a 36-week period.

We're getting up to initiate this study in the first half of 2022, and we'll provide an update when the first patients have been enrolled.

Consistent with the other Phase 2 studies in both the VISTA and the SUMMIT programs, we want to give Arrowhead maximum flexibility to initiate Phase 3 studies in multiple patient populations, if the data warranted.

At the end of these Phase 2 studies, we hope to have a good understanding of the pharmacodynamic effect of both investigational medicine in various patient population with different baseline lipid profiles.

We believe that this will inform our development strategy and also help shape our commercial strategy in both well-defined rare diseases as well as large high-prevalence diseases. I also want to give a brief update on ARO-AAT also called TAK-999.

After receiving breakthrough therapy designation, we began a productive dialogue with the FDA about the program. We expect to have data on the reduction of circulating level of AAT from SEQUOIA in the first half of this year, which will be used to select a dose for Phase 3.

We should also be collecting the last 12-month biopsy from the last patients enrolled sometime in the summer of 2022. Together with Takeda, we look forward to continuing the dialogue with the FDA after one or both of these data readouts. I will now turn the call over to Dr. James Hamilton.

James?.

Thank you, Javier. There are a lot of exciting new programs in discovery and early-stage clinical development. Our R&D organization is operating at an impressive pace and making important progress in multiple areas.

Today, I would like to focus on the pulmonary platform, the planned expansion of the pulmonary pipeline and provide an update on where we are with ARO-ENaC. As Chris mentioned, our newest pulmonary candidates are ARO-RAGE and ARO-MUC5AC AC. They are both on schedule to have CTA filings during the first half of this year.

Additionally, we plan on filing a third pulmonary CTA in Q4 of this year. The target for this third program will remain undisclosed at this time. The first program, ARO-MUC5AC targets expression of MUC5AC in bronchial epithelium. MUC5AC is a mucin protein with upregulated expression in the asthmatic airway.

MUC5AC is not normally required for bacterial defense or mucociliary clearance in healthy individuals. However, in asthmatic patients, its upregulation and enhanced secretion can lead to a muco-obstructive disease state, which is not directly addressed by currently available therapies.

The degree of mucus obstruction in the asthmatic airway is highly correlated with poor asthma control and increased disease severity. Additionally, multiple genome-wide association studies have demonstrated a correlation between enhanced MUC5AC expression and the development of asthma.

Similarly, Mice with a genetic deletion of MUC5AC are protected from airway hyperreactivity in the setting of allergic stimuli, again, supporting the concept that MUCAC-driven mucus plugging plays a central role in allergen induced airflow obstruction.

ARO-MUC5AC is an extremely exciting program, in part because it represents a fundamentally new way of treating asthma. By targeting the mucus we have a unique and potentially very powerful tool.

An abstract summarizing preclinical data leading to the nomination of this clinical candidate will be presented at the American Thoracic Society Meeting this Spring. The second program, ARO-RAGE, targets expression of the receptor for advanced glycation end products or RAGE, which is primarily expressed by alveolar and bronchial epithelium.

RAGE is a transmembrane receptor that binds to numerous pathogen-associated and cell damage associated ligands to activate various components of the innate immune system.

RAGE represents an upstream mediator of the inflammatory cascade in asthma as it is required for allergen-induced release of IL-33 into the airway and acts upstream of type 2 cytokines, including IL-4, IL-5 and IL-13. Importantly, a soluble component of RAGE, known as S-RAGE can be followed as a serum biomarker of gene target knockdown.

This is a very important point that I want to highlight. The availability of a circulating biomarker will teach us a lot about the candidate and importantly, may inform on the pulmonary platform broadly.

Our hepatocyte-directed TRiM system has proven to translate very predictively from preclinical models to human results and over the last few years, that predictability has increased the speed of our new programs and our expectation of success.

We hope to get to the same point with pulmonary directed TRiM system and the availability of S-RAGE circulating biomarker data informing on depth and duration of gene target knockdown using an inhaled route of administration could get us closer to that point.

Animal data suggests that RAGE signaling plays a critical role in the pulmonary inflammatory responses to inhaled stimuli. RAGE knockout mice to a markedly attenuated response to allergen exposure. In animals, RAGE is necessary for activation of airway inflammatory pathways relevant to both type 2 high and potentially type 2 low asthma phenotypes.

Further studies have indicated that RAGE knockout mice are protected from allergen provoked increases in IL-33 and TSLP which represent key upstream drivers of asthmatic type 2 inflammation.

Thus, we believe RAGE inhibition offers the possibility of arresting the most proximal components of airway inflammation in asthma with potentially broad effects on a wide range of downstream inflammatory mediators.

In rats, using a tool trigger targeting RAGE mRNA, single inhaled doses of 0.5 milligrams per kilogram induced S-RAGE reduction of over 90% for approximately three months. Like our MUC5AC program, an abstract has been accepted for oral presentation at ATS this spring, which will summarize preclinical data for our RAGE program.

Inhibition of both the MUC5AC and RAGE targets may have clinical utility in severe asthma, COPD, cystic fibrosis and other muco-obstructive or inflammatory pulmonary conditions. Additional target background, data and clinical plans will be discussed in the future as we approach the start of the clinical studies.

We are also making good progress on two additional pulmonary programs that are being developed to address respiratory viruses. One is our COVID program that targets highly conserved sequences in essential viral mRNAs, which may address SARS-CoV-2 and potentially other future coronavirus outbreaks.

In a hamster SARS-CoV-2 infection model, our current lead candidate reduced viral load in the lung by 80%, reduced histological indices of pulmonary inflammation by 50% and prevented body weight loss. We are currently in the lead optimization stage, and we'll provide additional updates when we can.

The other is a new program for an undisclosed viral infection. In a mouse model of infection, the current lead compound reduced viral gene expression in the lung by 90% and prevented body weight loss. This is an early program, but we are seeing what we believe are very promising results. Moving to ARO-ENaC.

As Chris mentioned, we have decided to focus our resources on next-generation candidates. We previously announced that the clinical study was voluntarily paused after findings of local lung inflammation in a rat chronic GLP toxicology study. We have since seen some local inflammatory findings in chronic GLP monkey studies.

It is certainly possible that we are overdosing the animals and by simply changing the dose level and/or dose intervals we would see a cleaner tox profile. That could provide a faster path back to the clinic, but we decided that the better long-term path is to focus on next-generation ENaC candidates.

We are currently interrogating several next-generation ENaC candidates that appear to be substantially more potent than ARO-ENaC.

It should be noted that the drug exposure levels used in the CTA-enabling GLP studies supporting the new pulmonary programs, including the MUC5AC and RAGE programs are significantly lower than those used in support of our first-generation ENaC program.

Thus, we expect an ability to use less drug and less frequent dose administration with second-generation programs compared to what was used in the ARO-ENaC chronic toxicology studies and anticipate overall enhanced toxicology species safety margins with second-generation compounds.

The last update I'd like to provide on the pulmonary platform is about future opportunities and the potential to add additional flexibility with regards to route of administration. We've been working on addressing pulmonary tissues via subcutaneous administration.

These are still early days, but we have recently generated some very promising preliminary data with the ARO-RAGE program using subcutaneous administration. Again, this is early, but we view this as a potential breakthrough if this line of discovery bears fruit.

We intend to provide some data on these efforts when we go into more detail about the ARO-RAGE and ARO-MUC5AC candidates at the appropriate forum. This will likely take the form of a KOL webinar or an in-person and webcast pulmonary R&D Day in the first half of this year.

This is all very exciting progress, and we look forward to discussing details publicly. 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 the quarter ended December 31, 2021 was $62.9 million or $0.60 per share based on 104.5 million fully diluted weighted average shares outstanding.

This compares to a net loss of $20.7 million or $0.20 per share based on 102.8 million fully diluted weighted average shares outstanding for the quarter ended December 31, 2020. Revenue for the quarter ended December 31, 2021, was $27.4 million compared to $21.3 million for the quarter ended December 31, 2020.

Revenue in the current period primarily relates to the recognition of a portion of the $300 million upfront payment received under our collaboration agreement with Takeda and the $40 million upfront payment received under our collaboration agreement with Verizon.

Revenue for each agreement will be recognized as we complete our performance obligations which include managing the ongoing AAT Phase 2 clinical trials for Takeda and delivering a Phase 1 ready candidate to Horizon.

There remains $188 million of revenue to be recognized associated with the Takeda collaboration, which we anticipate will be recognized over approximately two to three years, and there remains $27 million of revenue for Horizon which we anticipate will be recognized by the end of calendar 2022.

Revenue in the prior period primarily related to the recognition of a portion of the milestones received from our license and collaboration agreements with Janssen. Finally, our license agreement with GSK for ARO-HSD resulted in a $120 million upfront payment to Arrowhead, which was collected in January 2022.

We anticipate the majority of this to be recognized as revenue in fiscal second quarter 2022. Any additional milestones achieved from our collaboration agreements would be additive to these amounts. Total operating expenses for the quarter ended December 31, 2021, were $90.8 million compared to $45.4 million for the quarter ended December 31, 2020.

This increase is primarily due to increased clinical candidate costs that our pipeline has expanded and advanced to our clinical and advanced through clinical trial stages as well as increased noncash stock compensation costs.

Net cash used by operating activities during the quarter ended December 31, 2021, was $61.3 million compared with net cash used by operating activities of $38.9 million during the quarter ended December 31, 2020. Key driver of this change was the increased candidate costs.

We continue to estimate our operating cash burn to be $60 million to $80 million per quarter in fiscal 2022, excluding any income incoming milestone payments from our partners. In addition, we are planning to expand our manufacturing capabilities and expand our R&D facilities.

We continue to estimate these capital projects along with routine capital expenditures will add an incremental cash outlay of $80 million to $90 million for full year fiscal 2022. Turning to our balance sheet. Our cash and investments totaled $547.7 million at December 31, 2021, compared to $613.4 million at September 30, 2021.

The decrease in our cash and investments was primarily due to cash used for operating activities. With the collection of the $120 million upfront payment in January 2022, our current cash and investments totaled approximately $650 million. Our common shares outstanding at December 31, 2021, were $104.8 million.

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

Thanks, Ken, and thanks to all of you for joining us today. As you've heard, our early pipeline is starting to grow rapidly. Our mid- and later-stage pipeline is advancing on schedule, and we are working hard to continue to expand the reach of our TRiM platform to enable more growth in the future.

These are all critical parts of building a sustainable business and growing shareholder value. I want to take a moment to review what we see on the horizon as potential milestones for the business this year. There's a lot going on, so this list is certainly not exhaustive, but include some of the key events that we will be tracking.

I'll start with our partner programs. ARO-AAT also called TAK-999, for alpha-1 liver disease with Takeda. We expect data from the SEQUOIA study on reductions in circulating AAT levels and 12-month biopsy data, and we will continue discussions with the FDA. ARO-HSD for NASH with GSK, we expect a Phase 2 study to begin this year.

ARO XDH for gout with Horizon. We hope to complete preclinical studies this year. JNJ-3989 9 for HBV with Janssen, we would expect additional clinical readouts from various ongoing studies. JN-75220795 for NASH with Janssen, we expect progress on the Phase 1 study. Olpasiran formerly called AMG 890 for cardiovascular disease with Amgen.

Amgen has guided to a Phase 2 study readout this year. I'll now talk about potential milestones for our wholly owned programs. ARO-APOC3 for hypertriglyceridemia, we expect to fully enroll the SHASTA-2 and MUIR Phase 2 studies and made progress toward full enrollment on the PALISADE Phase 3 study.

ARO-ANG3 for mixed dyslipidemia, we plan to fully enroll ARCHES-2 Phase 2 study and initiate the GATEWAY Phase 2 study.

ARO-C3 for complement-mediated diseases, we expect to initiate a Phase 1 study and potentially have an initial data readout from the single ascending dose portion of the study in healthy volunteers and initiate the multiple dose portion in various patient populations.

Pulmonary programs, we plan to file CTAs and initiate clinical studies for ARO-RAGE, ARO-MUC5AC and file a CTA for one additional undisclosed pulmonary program. We also have some early clinical data from the ARO-RAGE program -- we also could have some early clinical data from the ARO-RAGE program.

ARO-HIF2 for renal cell carcinoma, we intend to report additional Phase 1 data at ASCO GU in February. ARO-DUX4 for FSHD, we plan to file a CTA and initiate a Phase 1/2 clinical study. This is a big year by any measure. We plan to push four new drug candidates into clinical studies and possibly a fifth if ARO-XDH with Horizon makes it this year.

We hope to have some data released from six different programs. We hope to fully enroll three Phase 2b studies. Arrowhead has a lot going on, and we look forward to numerous opportunities to show progress across the pipeline throughout the coming year. Thank you for joining us today. I would now like to open the call to your questions.

Operator?.

And our first question comes from Madhu Kumar from Goldman Sachs. Your line is now open..

Yes. So first one on ARO-AAT. Maybe we can dig in a little bit on how we should think about the discussions you've had so far.

And what potentially regulators need to see from the SEQUOIA circulating AAT data and from the liver biopsy follow-up data?.

So let me first answer the last part of that question with regards to the serum Z-AAT values. We're looking at that data to really do the dose selection, but of course, that's not going to be the only parameter. We have data from liver C protein and of course, fibrosis changes and, of course, safety as well.

So the dose selection, we're going to make along with Takeda over the next few months will come out of all the data set. With regard to conversation with regulatory agents, I prefer to not get into any details other than we had a very good introduction about 1.5 months ago.

Under the Breakthrough Therapy designation, we have planned a number of interactions this year to again define the Phase 3 study or the registration study that will incorporate, of course, the dose selection..

And I think it's important to point out that, look, this division has not considered to our knowledge, any other drug candidates against this disease. And so our first meeting was really to make sure that we're level set that we're all on the same page. And you know what we really are.

There is broad understanding and appreciation for the unmet medical need of this disease. There's broad appreciation, I believe, for the fact that this appears to be a disease of growing incidents as people are living longer because they're not smoking, et cetera.

I think that that the world is starting to see that while historically, this has been viewed as primarily a pulmonary disease and maybe secondarily as a liver disease, as people are living longer. As they're not smoking, I think we're seeing greater focus on liver a portion of that.

So I think that we've been really -- we've had a great relationship so far with the FDA on this, and we look forward to taking the next steps..

Okay. So second question relates to the cardiometabolic field for you all.

So how do you think about the launch of Novartis' Leqvio and how that influences how you think about kind of the larger ambitions for drugs like ARO-APOC3 and ARO-ANG3?.

No, that's going to be interesting. As you know, of course, those -- the Leqvio markets are sort of orthogonal to the markets we're going after. There is overlap, of course, but it's not the same market. I think that what we've seen there is that -- I think what we will see is that there is acceptance for a subcutaneously administered CV drug.

Leqvio appears to be a good drug. There's clearly -- continues to be unmet medical need there. But that's sort of, I think, as far as as interpretation will go from watching what happens with that launch to what our expectations are, we're really focused on the markets that we think we can address here for APOC3. It is FCS.

It is severe hypertriglyceridemics, which we think is several million people. The regulatory pathway is clear. The markets are clear and then possibly mixed dyslipidemia we'll see. For ANG3, there is clearly, we think, an opportunity for treating those patients who still have elevated LDL and elevated triglycerides.

So, we are we will be watching the Leqvio launch, but I wouldn't say that we are dependent upon a blockbuster launch there to be confident in the future of these two drugs..

Thank you. And our next question comes from Maury Raycroft from Jefferies. Your line is now open..

I'll do a two-part question.

So for the two new pulmonary programs announced today, are you using the same approach as ENaC with targeting integrin alpha-v beta-6 on lung epithelial cells? And if so, how consistent or variable is this target in the new indications? Then can you talk more about why the new programs will require less total drug?.

Yes, sure. So the answer to the first part is yes. We're still using the same targeting ligand approach, and there's no reason to believe that, that would be any different across those two patient populations -- across the various populations that we intend to address with ARO-RAGE and MUC5AC. And so the second part of the question was....

Why are we confident that we'll be able to use less drug with the new programs..

Yes. Sure. So I think there's two reasons for that. One is the availability of readily measurable biomarkers for both of those programs for ARO-MUC5AC and ARO-RAGE that will allow us to I think better understand where we are in terms of knockdown that has always been a challenge for ENaC that there's not a great biomarker to measure.

I think the other aspect is that as we've learned more about the pulmonary platform, we have continued to gain an understanding of how much drug we can give and not see a tox signal.

So relative to the dosing regimens we were using in the ENaC program and if you might remember, we were using a day one, two, three cycle in both the clinical program and the tox program. We're confident based on what we've seen that we can dose at lower levels and lower intervals and achieve the same level or better knockdown from the gene target..

Yes. I think that's the big takeaway message that we expect to use substantially less drug and administer it less often with these two drug candidates. And also, as James said, we'll have a better idea about depth and duration of knockdown. We are a bit flying blind with ENaC. And so we are probably in those tox species.

We're probably pushing too much drug in there. And I think we'll have a much better time here, titrating that in humans as we can see what knockdown looks like..

Thank you. And our next question comes from Ted Tenthoff from Piper Sandler. Your line is now open..

I want to get a sense for what we should be expecting on HIF2 alpha at ASCO GU coming up?.

Yes. So that study is fully enrolled and all patients are through their second biopsy post-dose biopsy. So they get a biopsy pre-dose and post-dose. So we will share an update on, of course, safety and changes in a RECIST criteria as well as gene target knockdown. So that's what we'll be sharing it ASCO GU..

And the highest dose level, I think, was double from the dose that we had previously presented. And so this was the highest dose that we intended to go to..

Yes, this will be all three cohorts..

And what's the total number of patients?.

We ended up enrolling the 27?.

Great. Perfect. Thanks, guys. Looking forward to the data..

Thank you. And our next question comes from Mayank Mamtani from B. Riley Securities. Your line is now open..

Congrats on the progress. So just maybe if I could clarify on the preclinical work on the rodent and monkey studies for RAGE 2 and MUC5AC.

Have you conducted the same sort of studies where you saw the signal for -- did you say that work has already been done?.

Yes or is ongoing..

Okay. And just maybe a follow-up there.

Is that information you have before you get into the clinic?.

We would certainly have to have toxicology studies that support the Phase 1 dosing regimen. So to answer your question, yes..

And on the chronic side, Mike, we have some ideas about what doses would provide what knockdown and over what period of time. But again, here, with RAGE and with MUC5AC, we have the luxury of knowing that in humans.

And so, we have the luxury of waiting to see what the depth and duration look like before we design those chronic tox studies and make sure that we are not administering substantially more drug than we would be in humans..

And then a financial question I had was about milestones that we could expect this year. And specifically, from J&J and Amgen, if they do decide to move into a next study, like a two-part question, like how much would be the milestone and then the timing of that, if you could remind us that would be great..

Yes. We can't remind you because we never told you. We are -- as you can imagine, Mayank, our partners are sensitive about making those or can be sensitive about making those milestones too granular. And so we've not been able to say publicly what various milestone levels are.

And I apologize, but I really -- I don't feel comfortable we've given you guidance on when those could hit because those are J&J and Amgen's programs at this point..

Thank you. And our next question comes from Patrick Trucchio from H.C. Wainwright. Your line is now open..

Just a follow-up on the APOC3 and ANG programs. I'm wondering if there's a possibility of evaluating these compounds in a combination treatment.

And secondly, can you tell us your latest thoughts on the potential for partnering these programs and what form that could take?.

Sure. We are not currently considering combining the two drug candidates. We think that could be done, but we haven't done any nonclinical work by combining them and we're just not considering at least right now. Clinical work combining them.

With respect to partnering, look, we think -- and I don't want to overstate this, but these two drug candidates almost be like once in career opportunities. These are -- these really do feel to us like drugs. Our data from the Phase 1/2 studies were quite good. The markets that these could help to address are clear -- the regulatory pathways are clear.

These are, we think, important new medicines. And so we intend to hold on to these. Now these will be expensive, particularly -- and because we do recognize that ANG is going to require an outcome study.

But given where we are now as a company, we are comfortable taking that burden on, given that we think the likelihood of success is high and these are important. So at least right now, we are planning on moving on to these and building a commercial force to sell both drugs eventually..

Thank you. And our next question comes from Luca Issi from RBC Capital. Your line is now open..

Great. Congrats on the progress. Just a few quick ones. One, maybe circle back on ENaC. It sounds to me that the safety signal that you've seen in rats was actually replicated in nonhuman primate.

So wondering, if you can talk a little bit more about that and why you ultimately decided to switch horses, so to speak here? And then maybe on A1AT, I want to make sure I'm clear.

Is there a scenario where you can possibly file ahead of running a Phase 3? Or do you think at this point running a Phase 3 is a must? And then maybe last one on mixed dyslipidemia.

Why going after this indication for both ANG3 and APOC3 and not maybe prioritizing one versus the other?.

Okay, there's a lot there. So let me start with AAT. I don't want to speculate on that. we are interacting with the FDA. We've had a -- we still far we've had a good relationship with them. We will continue to share data with them and have a discussion about what the fastest and best way to bring this important medicine to these patients is going to be.

So stay tuned on that. We'll let you know as soon as we know what that is. With respect to the mixed dyslipidemia and both APO and ANG, so let me be clear on that.

So first, with ANG, this was always a focus for ANG given what we saw in the Phase 1/2 study, given what we saw in nonclinical studies and given what we've seen in GWAS analysis we know -- or at least we think we know that this drug candidate is good at lowering LDL and lowering triglycerides, and there's a clear need for that.

So we always saw a big opportunity going after that very large market. Now with APOC3, we are doing a Phase 2b study in that population. We don't yet know if we're going to do a an outcome study to address that very large population. But what we wanted was optionality. And so we're going to do the Phase 2b study, we're going to see what it looks like.

And then we can -- and then if we do decide to do an outcome study, wouldn't go ahead and do it rather than waiting in a couple of years while we have to do the Phase 2b study. I think that optionality is important. I think it's worth the money we're spending on that Phase 2b study.

Now should that sort of come to pass that we do want to address that same general market with these two drugs.

I think it's a real benefit to be honest, to have those two drugs because I think we're going to learn a heck of a lot in these Phase 2b studies and potentially in Phase 3 studies about how these drugs work and what kinds of patients they can help.

And so ultimately, we're going to provide the cardiologists and lipid clinics potentially at least tools that they can use according to their patients' needs. And so they can really provide specialized, personalized health care. This is sort of the dream, right, of health care.

And so having those two tools and using them as they see fit, we think is a really important thing. So we see a big opportunity there. And also, look, we want to take that market share. There may be other APOC3 or ANG3 inhibitors at some point in the future, and we see no reason why we shouldn't take as much of that market share as possible.

And sorry, what was the first question?.

ENaC, what did you see in monkey?.

Go ahead. Yes, yes. Okay. So look, we -- I don't want to go too much on that because we don't generally talk about GLP tox findings. But we did see some -- we didn't see exactly what we saw in rats. But we did see some signs of some local lung inflammation.

And as we talked about, what I think was happening is we were just -- I think we're giving more drug than we have to, to be honest. This once a day for three days cycle was designed because we wanted to make sure that we had a pretty wide berth once we see what depth and duration of the knockdown was. We've learned a lot since then.

And I think that, that's -- we probably don't require that amount of drug and we probably don't require that frequent of dosing. So it gives us confidence that for RAGE and MUC and potentially ENaC2. Not only do we have, I think, more potent drugs, but we have better understanding about how efficient it can be to deliver the drugs.

And so again, we -- you don't know until you know, we don't know until we're in the clinic, but we do feel, given the data we've got, both clinical and nonclinical, we feel optimistic at least. But that this platform -- that these drug candidates will be well tolerated and important potential drugs..

Super helpful..

Thank you. And our next question is from Alethia Young from Cantor Fitzgerald. Your line is now open..

There are kind of two other similar types of questions. But on this pulmonary franchise, it seems like you're kind of branching out potentially into bigger indications.

So I just wanted to know kind of how you're thinking about building out some, like businesses is going to be pretty similar to kind of partnerships and collaborations are now that you guys are longer -- are larger and hopefully, capital markets open up one day, you can get capital and do what you want to do for even big indications? And that kind of just broadens it out to a larger strategic question here.

You have a lot of program. You have a lot of collaborations. You're moving forward in many different ways. And I just want to know if the strategy is the same.

Or do you guys think about keeping more of your kind of the core assets and how often do you also think about kind of building with bigger potentially, albeit commercial opportunities where it may take a bigger investment on your expense side, but something that could yield like much bigger opportunities, too?.

Thanks Alethia. It's still early with pulmonary. But we like the space, and we like the idea of building out commercial for pulmonary. I think there are around 16,000 pulmonologists in the U.S. And when we look at that, when we look at what we think our pulmonary platform can do. We don't see two or three drugs. We see eight or nine drugs.

And so we like the idea of building out of sales force to address those 16,000 pulmonologists who have eight or nine drugs in the bag, that's an efficient way, I think, to build a commercial force. So right now, we like the idea of holding on to those assets.

Look, the lung is target-rich environment, and so it is certainly conceivable that enough targets will come up that we may want to partner on here or there. But strategically, that's how we're thinking about it.

You've heard us talk about this before that that if we're going to build a company that I think that we should be building, we need to have a large -- a relatively large number of important drugs that we commercialize ourselves. And so we're cognizant of that. We're not going to over partner.

We partner in order to, a, get drugs to patients that we can't get them to very well; and b, to provide us capital so we can afford to run our own programs. And we'll continue to use that partner strategy in that kind of way..

Thank you. And our next question comes from Joel Beatty from Baird. Your line is now open..

Congrats on the progress. First question is on ARO-RAGE.

How close is the relationship between the circulating S-RAGE biomarker and activity in the lungs to be able to really help with pinpointing the dosing?.

Yes. So the S-RAGE comes from two different origins. It's a splice variant that is secreted or it's cleaved off of the actual RAGE receptor that's transmembrane receptor. So by measuring the S-RAGE, we should have a very good idea of what knockdown of that receptor is. I hope that answers your question..

Yes.

And as a follow-up, how closely behind could subcutaneous lung programs be to the lung administered programs?.

It's too early to tell on that. These are early programs, and we are excited about it because, again, if we can make this thing work and make it scalable, it's a real breakthrough. So it's a real focus of ours. We're not quite there yet. So it's hard to tell how far away we are.

I do expect that we will do -- we'll see what COVID looks like, but hopefully an in-person, pulmonary-focused R&D day or at least a webinar at that point, I think we'll be able to share some of our data. Again, it's -- we're excited about it, but we're still working on it..

Thank you. And our next question comes from Mani Foroohar from SVB Leerink. Your line is now open..

So I'm digging through this ANGPTL3 data from Ionis, which we also cover. They have previously shown 62% knockdown with their 80-milligram dose. We don't actually know what the 320-milligram Phase 2b knockdown really look like. We haven't seen that full data.

But with you guys at 388% knockdown, some of nuances around dosing, obviously, in terms of frequency, et cetera, given the commentary from Pfizer that suggests that perhaps despite seeing impressive knockdown, they hadn't seen that translate to reproducing the level of clinical benefit on triglycerides, non-HDLC, et cetera.

Are there specific data sets that you guys look at that suggest the knockdown that you're seeing will translate to those clinical benefits when they did not in the larger clinical trial that Pfizer showed? And I have a quick follow-up..

Well, we have what we presented the LDL and non-HDL data and triglycerides data with that level of knockdown in the 80% to 90% range, from the 200 and 300 milligrams dose. So the non-HDL and LDL data is clearly superior to what Ionis had presented in the past. But we don't know what is current data exactly.

So, we do believe that there is at least three different sources that speak to the correlation between the level of knockdown or the level of suppression of ANGPTL3 and the pharmacodynamic effect, that you will study the Regeneron data and the comparison so far between the Ionis and our data.

If you look at the Regeneron data, they do need to dose pretty high to get to the level of suppression to achieve the pharmacodynamic effect. And we did see a dose response in our case as well. And again, as I said, we'll study the differentiation between the heterozygous and homozygous is quite clear.

So, I think this is a target where the magnitude of the target suppression correlate with the clinical or the pharmacodynamic effect.

And I think -- so if you look, again, it's very difficult to compare these because we haven't seen their data really in these two separate studies. But you look at their dosing once every two weeks or once every month, we're dosing it every quarter and potentially less frequently. Second, you look at ALT increases.

We had two patients with ALT increases, and we think we know why that was. So we think it was related to other medications. Those two patients we're on. So we think that that's difference. Third, we haven't seen increases in liver fat. It sounds like they did. And so I think this is a good example broadly of the advantages of RNAi over antisense.

I think whenever you can compare those two modalities, RNAi is -- leads to deeper and more durable knockdown. The safety profile, if the sequences are chosen correctly, it can also be favorable. So we feel great about the candidate. We still feel great about the target as Javier points up at the GWAS data as well as other data..

Yes. So that makes sense to me. But what I'm trying to understand, so the -- what we have is limited to a press release, obviously, from Pfizer, they did the formal events. The commentary around what they saw as clinically justifying going into a large complex, Phase 3.

How do you think about what your threshold would be around what would be a number that justifies going in a Phase 3 in a broad patient population as opposed to something like a more narrow and niche-defined population.

Like what are the -- do you think the numbers that you previously showed adequate? Or do you think pursuing a higher deeper, more aggressive knockdown even than what you've seen so far is necessary?.

Look, we'll see -- we'll take a look at our Phase 2b data. We've seen LDL reduction of as much as 50%, mean reduction as much as 50%. We've seen triglyceride reduction and I think in the 70-or-so percent range, something like that. Those are substantial. Now we're not going to see clinical outcomes in a short study.

And so I don't -- so we're dependent upon these surrogate endpoints, but I think those are substantial. You look around at other triglycerides-lowering agents, and there's just not much out there.

And I think that that if our data -- put it this way, I think if our data continue to roll out the way we've seen them so far in the Phase 1/2 study, I think that, that would be -- that, that would give us good confidence to go into an outcome study..

Great. That makes sense to me..

Thank you. And our next question comes from Keay Nakae from Chardan. Your line is now open..

Two questions. First, subcu admin to the lung.

Are you using the same conjugate targeting ligand for Integrin or you evaluating something different? And is the primary performance objective a better safety profile?.

Yes. So I can answer the first question because we are playing around with various ways to do this. And so hold off and when we present, we can talk more about it. So I want to say that we're looking for a better safety profile. That's -- it's a good question. It's not as though we are afraid of the inhaled route.

But it just makes our life simpler, right? If we can administer this via subcu, there are unknowable questions that you don't have any longer about -- or unanswerable questions that we don't have any more with respect to a safety profile in tox animals. So it does make our lives easier.

But also, look, it's an easier mode of administration for or potentially all indications rather than using a nebulizer, which is still relatively light touch, but still requires having a machine and require some time.

That's just more cumbersome than a simple subcu injection that could be who knows once every two weeks, once a month, once every three months, whatever that's going to be. That's just a more convenient mode of administration. We think that would be just a massive breakthrough in this field.

And again, I don't want to oversell it because we're not there yet. But what we've seen so far has told us that we want to continue to explore this..

Okay. Great. And just a clarification on the upfront from GSK, the $120 million you received in January.

How much of that will be recognized as revenue in fiscal Q2? And how much might be amortized over some period of time?.

Sorry, can you repeat that?.

The $120 million upfront from GSK received in January.

How much will be recognized as revenue in fiscal Q2 versus how much might be amortized period of time?.

Probably all of it will be recognized in fiscal Q2. Our performance obligations are basically complete for that milestone that we received..

And thank you. And I am showing no further questions. I would now like to turn the call back over to Chris Anzalone for closing remarks..

Thanks very much for joining us today. It's always a pleasure to speak with you, and we look forward to talking to you next quarter..

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect..