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 over to Vince Anzalone, Vice President of Finance and Investor Relations for Arrowhead. Please go ahead, Vince..

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its Fiscal 2022 Third Quarter ended June 30, 2022. 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 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 earlier stage program and Ken Myszkowski, our Chief Financial Officer, will give a review of the financials.

In addition, Tracie Oliver our newly appointed Chief Commercial Officer and Patrick O'Brien, who is recently promoted to Chief Operating Officer and General Counsel, will both be available during the Q&A portion of the call.

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

All statements other than statements of historical fact are forward-looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements.

For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q. With that said, I'd like to turn the call over to Chris Anzalone, President and CEO of the Company.

Chris?.

Thanks, Vince. Good afternoon everyone and thank you for joining us today. Before I cover key events and progress during the previous quarter, I want to talk about some recent management additions that make us a stronger company today and importantly, as we grow into a vertically integrated commercial stage pharmaceutical company.

We are currently conducting one Phase 3 study for a wholly-owned drug candidate, and I expect us to begin one or two additional Phase 3 studies next year. As such, there are important strategic decisions we need to begin considering that will affect how we ultimately commercialize these drug candidates.

We are thrilled to welcome Tracie Oliver as our Chief Commercial Officer, to start to build out our commercial infrastructure and more immediately contribute to the planning of our late-stage programs to ensure that our future commercial requirements are harmonized with clinical datasets and ultimate drug labels.

Tracie has over 30 years of global experience in the biopharmaceutical industry, leading both R&D and commercial organizations.

Prior to join Arrowhead, she had her own consulting practice focused on providing guidance to small emerging commercial stage biotech companies on the proper strategy, timelines, methods, and ultimately the build out of new commercial organizations.

Those skills and experience are critical there in as we look to take the next steps in our growth as a company. Prior to her consulting business, Tracie was with Shire Pharmaceuticals through the acquisition of Baxalta and was Global Head of New Product Planning and Device Strategy.

Prior to that, she held several commercial roles at Baxter and Baxalta including establishing a new oncology franchise and leading the North America Immunology Business Unit and Autoimmune Franchise.

Tracie began her career in the biopharmaceutical industry with Johnson & Johnson and served as Head of Ortho Biotech Nephrology Business Unit in Canada, Ortho McNeil Neurologics, and McNeil Pediatrics in the USA.

As we continue with this type of growth in personnel and departments, we need to be more deliberate in our drive to continue operational excellence. There can be a tendency toward an inverse relationship between the size of an organization and its ability to operate efficiently, creatively, and rapidly.

It is important to us that we maintain our operational excellence as we grow, and Patrick O’Brien, our General Counsel, will now also take on the role of Chief Operating Officer to help ensure this. I will now move on to review some of our recent progress.

We view setbacks as a normal part of innovation and if we can learn something from them, they may serve as an investment in the future. The recent progress we’ve made in our pulmonary platform is a good example of this, and a powerful illustration of how fast Arrowhead can move.

As you know, our first candidate in the clinic using the pulmonary targeted TRiM platform was ARO-ENaC for the treatment of cystic fibrosis.

Last year, we decided to pause enrollment in the ARO-ENaC first-in-human clinical study as we further investigated some findings from a nonclinical toxicology study that suggested some local lung inflammation after chronic treatment at certain high doses. Many open questions remained.

James will speak to what we learned in more detail later in the call, but after extensive investigation, consultation with internal and external toxicology experts, and additional studies, it appears that findings were consistent with what is called lung macrophage overload.

Essentially, the volume of material, not necessarily the specific drug or target, was swamping the lungs’ clearance mechanisms and causing an inflammatory response.

So, the clear way to move forward is to understand the amount of material that triggers this phenomenon and develop more potent, longer acting candidates to stay below the assumed cumulative dose threshold. I believe we have done that for our next generation candidates, ARO-RAGE and ARO-MUC5AC, resulting in three important improvements.

First, we think we can now achieve better knockdown with less exposure. Second, we think we can give a single dose as opposed to our previous need to dose on three consecutive days. And third, we believe we can now stretch the dose interval substantially.

For example, ARO-ENaC was going to be dosed three times every two or three weeks, and ARO-RAGE has duration that potentially lasts multiple months after a single dose. Each of these improvements are important on their own but together we believe they dramatically change the profile of our next generation pulmonary candidates.

So, where are we now? The work and lessons that went into this happened over an extended period, culminating this quarter – this last quarter in two important events.

We held a pulmonary R&D day to go over our findings and present nonclinical data for our next generation candidates ARO-RAGE and ARO-MUC5AC, and then shortly after, we began dosing patients in two clinical studies. As I said, I think this is a great example of what Arrowhead is capable of.

We went from pausing enrollment of the ARO-ENaC clinical program to initiating clinical studies and dosing human subjects with next generation candidates that potentially have dramatically improved profiles in about 12 months. There was an enormous amount of work, thought, creativity, technology, and innovation that enabled this result.

The pulmonary TRiM platform is an important expansion of our technology that we expect will help a large number of patients and create a substantial amount of value, but it is just one example of how we are growing our platform. We expect many more going forward.

Another set of key accomplishments during the quarter relate to execution on our later stage programs for our cardiometabolic candidates, ARO-APOC3 and ARO-ANG3. Between the two candidates, we have five active clinical studies that range from ultra-rare disease populations to high prevalence diseases.

The design and execution of clinical studies for diseases on opposite ends of the size spectrum typically have different tactics and require specialized expertise. I’m happy to report that our clinical development and clinical operations teams have been successfully running all these studies.

On the rare disease side, the Phase 3 PALISADE study of ARO-APOC3 in patients with FCS is efficiently enrolling patients and we have worked hard during the quarter to identify and open new countries and sites that should contribute to rapid enrollment of the study.

In addition, during the quarter we initiated the Phase 2 GATEWAY study of ARO-ANG3 in patients with HoFH. This study is also enrolling patients efficiently and we look forward to seeing data in the future. On the high prevalence disease side, we have three ongoing studies.

For ARO-APOC3 we are running the SHASTA-2 Phase 2 study in patients with severe hypertriglyceridemia and the MUIR Phase 2 study in patients with mixed dyslipidemia. We have executed well on both studies, and we believe we are on schedule for readouts in both studies in 2023. In fact, we recently reached total planned enrollment for MUIR.

For ARO-ANG3, there is one high prevalence disease study, the Phase 2 ARCHES-2 study in patients with mixed dyslipidemia. This study was fully enrolled earlier in the year and should be complete at the end of the year and enable a readout in the first half of next year.

The other two accomplishments from the recent quarter that I want to highlight are related to corporate goals that aim to maximize the value of our technology over the long term.

First, we announced that we broke ground on the construction of a new commercial scale manufacturing facility and received awards of up to $18.5 million in incentives to invest in the local region and create new jobs. This is an important investment in Arrowhead’s future as a vertically integrated commercial stage pharmaceutical company.

It helps us control the manufacturing process both operationally and strategically for our wholly-owned programs and potentially for our partnered programs in the future. It potentially reduces the cost of our clinical and commercial drug supply and, importantly, helps eliminate any future bottlenecks related to drug manufacturing.

Lastly, related to corporate goals, during the last quarter we also announced that Arrowhead formed Visirna Therapeutics, a joint venture with Vivo Capital in which Arrowhead is a majority shareholder, to expand the reach of innovative medicines in Greater China.

Arrowhead licensed four investigational RNAi therapeutics to Visirna for cardiometabolic diseases in mainland China, Hong Kong, Macau, and Taiwan. Vivo Capital provided $60 million in initial funding to Visirna.

This transaction potentially allows us to expand our reach into geographies that are beyond our core focus while retaining a substantial economic interest.

So in summary, Arrowhead had a productive quarter where we saw progress in our pipeline of industry leading RNAi therapeutics, our wide reaching and expanding TRiM technology platform, and our corporate goals. With that overview, I’d now like to turn the call over to Dr. Javier San Martin.

Javier?.

two Phase 2 studies; SHASTA-2 in patients with severe hypertriglyceridemia, or sHTG; and MUIR in patients with mixed dyslipidemia; and the Phase 3 PALISADE study in patients with familial chylomicronemia syndrome, or FCS. MUIR has now reached the total planned enrollment of 320 patients.

We have a number of patients still in screening, so we will allow some additional patients to join the study but are not screening any new patients. SHASTA-2 has enrolled over 80% of the planned number of patients and we anticipate full enrollment this year. This would allow for both studies to be completed in 2023.

PALISADE is planned to enroll approximately 72 patients with FCS. We continue to open new clinical sites around the world and enroll new patients into the study. We are still on schedule and anticipate that PALISADE will reach full enrollment in the middle of 2023 which would allow for study completion in 2024. I will now turn the call over to Dr.

James Hamilton.

James?.

Thank you, Javier. Some updates on some of our earlier stage development programs. Let’s start with the pulmonary platform. As Chris mentioned, we hosted an R&D day on our emerging pipeline of pulmonary targeted RNAi therapeutics and the technology platform that these candidates are built upon.

We have learned a great deal about the platform with details provided in the archived pulmonary R&D Day web cast available on our website.

In summary, we believe that we now have improved siRNA triggers with longer pharmacodynamic duration allowing less frequent dose administration, which are less likely to overload lung clearance mechanisms and/or are less likely to induce pulmonary inflammation.

This gives us increased confidence in the platform as we move forward with current and planned future clinical studies and additional toxicology studies.

We also presented preclinical data on the development of our next generation pulmonary candidates, ARO-MUC5AC and ARO-RAGE, which have recently begun dosing in clinical studies, and on ARO-MMP7, which will be approaching clinical studies later this year.

ARO-MUC5AC is the first investigational medicine to directly silence expression of pathologic MUC5AC, a mucin protein with upregulated expression in the asthmatic airway, and potentially address muco-obstructive disease, characterized by mucus hypersecretion, in a fundamentally different way than current therapies.

Preclinical results have shown deep silencing of up to 70% to90% of induced MUC5AC expression in mice and primates. In a sheep model of allergic asthma, ARO-MUC5AC effectively preserved airway function.

ARO-RAGE is an investigational medicine designed to reduce expression of the receptor for advanced glycation end products that aims to achieve broader antiinflammatory effects compared to current biologics and with a more convenient inhaled mode of administration.

Preclinical studies have shown that single inhaled doses of ARO-RAGE in rats and primates led to reductions of greater than 90% in lung RAGE mRNA and in serum sRAGE protein, a circulating biomarker for RAGE target engagement in the lung. Pharmacodynamic response appears to be highly durable enabling bimonthly or quarterly dosing.

Earlier this month we announced that we had dosed the first subjects in Phase 1/2a clinical trials of both ARO-MUC5AC and ARO-RAGE. We have since completed dosing the first cohort of healthy volunteers in both studies.

Both studies have three parts consisting of single ascending and multiple ascending doses in normal healthy volunteers, and multiple dose cohorts in asthma patients with dose levels selected for patient cohorts based on data from normal healthy volunteers.

The third pulmonary program we discussed at the R&D day is ARO-MMP7, our newest and previously undisclosed candidate designed to the reduce expression of matrix metalloproteinase 7, or MMP7, as a potential treatment for idiopathic pulmonary fibrosis, or IPF.

MMP7 plays multiple roles in IPF pathogenesis, including promoting inflammation and aberrant epithelial repair and fibrosis. Silencing MMP7 expression in a rat IPF model reduced inflammatory cell infiltration, limited lung fibrosis, and preserved pulmonary function.

We are conducting CTA-enabling work and preparation now, and we are on track to file this year to initiate first-in-human clinical studies.

14 Our last early-stage clinical program is ARO-C3, our investigational RNAi therapeutic designed to reduce production of complement component 3, or C3, as a potential therapy for various complement mediated diseases. We are approaching the final healthy volunteer cohort in Part 1 of a Phase 1/2 study.

Data from Part 1 will inform dose selection for Part 2, which will include eligible subjects with paroxysmal nocturnal hemoglobinuria, or PNH, and complement-mediated renal diseases, including IgA nephropathy and C3 glomerulopathy. We anticipate that Part 2 of the study will start before the end of the year.

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 three months ended June 30, 2022 was $72.0 million or $0.68 per share based on 105.8 million fully-diluted weighted average shares outstanding.

This compares with a net loss of $29.9 million, or $0.29 per share based on 104.1 million fully-diluted weighted average shares outstanding, for the three months ended June 30, 2021. Revenue for the quarter ended June 30, 2022 was $32.4 million, compared to $45.9 million for the quarter ended June 30, 2021.

Revenue in the current period primarily relates to our collaboration agreements with Takeda and Horizon. Revenue 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 $142.1 million of revenue to be recognized associated with the Takeda collaboration which we 15 anticipate will be recognized over approximately 2 years, and there remains $13 million of revenue to be recognized 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 and Takeda. Total operating expenses for the quarter ended June 30, 2022 were $105.3 million, compared to $77.8 million for the quarter ended June 30, 2021.

This increase is driven by higher employee compensation expense including stock compensation expense, as well as higher R&D discovery expense. Net cash used by operating activities during the quarter ended June 30, 2022 was $68.9 million, compared with net cash used by operating activities of $29.6 million during the quarter ended June 30, 2021.

The increase in cash used by operating activities is driven by higher expenses in research and development expenses. We expect our operating cash burn to be $70 million to $80 million next quarter and I will provide additional guidance during our year end conference call.

Turning to our balance sheet, our cash and investments totaled $582.4 million at June 30, 2022, 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, mostly offset by cash inflows from GSK and by the cash investment in our Joint Venture, Viserna.

Our common shares outstanding at June 30, 2022, were 105.8 million. With that brief overview, I will now turn the call back to Chris..

one, Biopsy data from the SEQUOIA study in AAT with fazirsiran; two, Phase 1/2 data from ARO-C3 in healthy volunteers and different patient populations; three, Phase 1/2 data from ARO-RAGE in healthy volunteers and patients; four, phase 1/2 data from ARO-MUC5AC in healthy volunteers and patients; five, phase 2 data from olpasiran in Amgen’s LP(a) study; six, phase 2 data from the ARO-ANG3 ARCHES-2 study in mixed dyslipidemia; seven, phase 2 data from the ARO-ANG3 GATEWAY study in HoFH; eight, phase 2 data from the ARO-APOC3 MUIR study in mixed dyslipidemia; nine, phase 2 data from the ARO-APOC3 SHASTA-2 study in severe hypertriglyceridemia; ten, phase 1 data from ARO-MMP7 in healthy volunteers and possibly IPF patients; eleven, phase 2 data from various Janssen studies of JNJ-3989 in HBV patients, and twelve, phase 1 data from Janssen’s NASH study with JNJ-0795.

We are excited about these and other programs and look forward to updating you on our progress. Thank you for joining us today and I would now like to open the call to your questions.

Operator?.

Our first question comes from Luca Issi with RBC..

Thanks so much for taking my questions, I have two quick ones. Maybe one Javier, congrats on publishing obviously, in the New England Journal of Medicine. I think the 100 milligram dose and the 200 milligram dose have essentially hyper imposable PD curves in the serum.

However, the improvement in fibrosis only occurred in the high dose and not in the low dose. So just wondering, what's the best way to rationalize that difference? And then maybe quickly on the cash position, you're obviously still fairly well capitalized, whoever your OpEx and CapEx are both going up.

So wondering how you're thinking about options to extend your runway. Thanks so much..

Thank you Luca for the question. This is Javier. So if you think about the 2002 study, we enrolled 12 patients in the 200 milligram dose, four of them had a biopsy at six months, and eight of them at 12 months. And we only enrolled four patients in the 100 milligram dose, and they all had a square biopsy in between six month.

With a carrier that one of the four patients, the 100 milligram, we know had the square biopsy, so we can report in those patients.

So we only had three patients in the 100 milligrams that has very robust effect on the C-protein, ALT, liver C-protein, globule and inflammation, but we didn't see a change in fibrosis at that early point in those three patients. So I think it's a little bit about the small numbers.

In contrast, as you say, in the first patient that received 200 million, we saw all the improvement in the different biomarkers and parameters. We also saw 7 out of 12 improvement in fibrosis. I think the reason here is likely to be the small sample size, the variability of – within fibrosis, which is well known.

And you're right, that the PD effect is very consistent between the 100 and 200 milligrams. But we believe that when you put all the data together, absence of any safety issue between 100 and 200, very consistent suppression of the C-protein. When you look at the PK and PD, there are small differences that I think favor the 200 milligram dose.

So I think when you put all the information together, the efficiency to 200 milligrams as -- they start to move forward. And as I say the difference in fibrosis is likely to be variability in a small sample size..

AndLuca, I'll take the cash question. So I agree, I feel comfortable with our cash position right now, in large part because we have right now six partnerships with five different companies, if I have my math right, and those partnerships are maturing.

I think that we have access to a substantial amount of capital across all those partnerships over the next 12 to 24 months. So we feel good about that inflow. But also, as you know, Luca, we're really good at pushing new drug candidates into clinic. We've got a pipeline -- a clinical pipeline right now, 10 or 11 candidates.

And I think that grows to 20 in the next few years. And I think that's important ammunition to do to the future deals. Now, I think we'll be pretty choosy about that. And I think that ultimately the majority of our pipeline will be wholly-owned, we’ll commercialize ourselves, but we will have access to other noncore assets that we can partner.

I would expect, on average of around a deal a year – a new deal a year to be about the right cadence. That may change from year to year. But I think on average, that's probably the way to think about it. And I just think that gives us access to as much capital as we need in the near-term..

Our next question comes from Maury Raycroft with Jefferies..

This is on for Maury.

Can you set some expectations for the Phase 2 AAT - SEQUOIA and the effect size you'd expect there too?.

I don't think we're going to want to get into to frontline that. We haven't seen those data yet. But we feel -- we are looking forward to seeing those data. The data so far that we've seen have been consistent, as Javier said.

We've seen a circulating AAT levels, and it's consistent across patients, we've seen in a handful of patients in the open label study, we're good, it's a logical response in 6 to 12 months. So we expect -- we're looking forward to seeing this data. I don't want to put any expectations around them. But I wouldn't expect the basic story to change.

And I just think my hope is that just SEQUOIA data just reinforce the existing story..

Our next question comes from Ted Tenthoff with Piper Sandler..

I guess, picking up a little bit on the last question and again, appreciating that.

Walk us through sort of how you guys are seeing the potential paths forward, how you and Takeda are sort of discussing it following the data, for AAT?.

I'm a middle child, and I like to give people what they want, but I can't give you that. We are in -- Takeda is in discussions with the FDA, and we're just going to have to wait and see to see where those go.

We feel comfortable that the FDA -- we are aligned with the FDA in appreciating the importance of this disease and the fact that there's no good treatment for it right now, liver disease associated with AAT. We've got I think the only thing in the clinic that really offers these patients hope.

And so my hope is that we can get to alignment reasonably soon with the regulators. But I can't really give you an idea about where that's going. Now SEQUOIA data, I think we'll be -- it could be helpful because it just gives us more numbers. And hopefully we see what we've been seeing in the smaller open label study.

But that should -- my hope is that, that will help the discussions along. But yeah, we'll see how it goes..

Our next question comes from Ellie Merle with UBS..

Just on the pulmonary franchise, if I heard correctly, you've completed dosing in the first cohort in healthy volunteers for MUC5AC and RAGE.

I guess, I know that we're starting with sort of single ascending dose here in healthy volunteers, but I guess we're sort of circulating biomarkers or measures of these protein levels to get a new healthy volunteers and any kind of initial data points in terms of target engagement here? And then I guess, as you move into the multiple finding dose for --- into patient dosing, I mean, even I guess, early on, and even just healthy than that dosing, could we potentially get some of these biomarkers as well just in terms of target engagement? And I guess first if you're measuring it, but then also thinking about from our perspective, where we set the timeframe, under which we could potentially learn about this.

Thanks..

James, why don't you talk about what we're measuring and then I'll address the question about information flow..

Sure. So both, you're right, we've completed the first cohort for both ARO-MUC5AC and ARO-RAGE, it's an ascending -- single ascending dose study, we start with the lowest dose, of course, and we measure -- in the MUC5AC study, we must measure MUC5AC serum levels.

And then we will also in that study measure an expression of MUC5AC in bronchial lavage fluid. So there's not a blood biomarker for MUC5AC, but it's a serum and BAL base. And those have been drawn but we haven't -- there's a lag. We haven't seen any of that yet.

And similarly, for RAGE, there is a valid -- blood biomarker S-RAGE, which is drawn in all -- that will be drawn in all the healthy volunteer cohorts as well as in the patient cohorts. We will also look at serum RAGE level and RAGE in the BAL fluid as well. So there's several different biomarkers that we can look at in both studies..

And regarding data flow. So my opinion is that certainly in '23, we will have results from those studies.

If we -- to be more granular, are there opportunities for us to release data earlier than when the entire studies are completed, that's a possibility, but we just don't have any visibility on that right now, because it is still ongoing and they're still fairly early studies.

So that's the best guidance I can give you that I do expect full data in '23. And I just don't know about partial data upstream of that..

But I guess in terms of internally for you guys, even if these are healthy patients -- healthy volunteers, you at least will, from these markers maybe get a bit of a sense in terms of whether or not you're engaging the target, perhaps even in the near-term?.

I think that's fair. I think that data from healthy volunteers will teach us a lot. As James said, we have taken -- we have samples, we haven't seen anything yet. So we have no data at this point. And of course, these are very low doses, I believe. So I don't even know if we would see any knock down at these doses. But your point is a good one.

I think that we can learn something from the healthy volunteers..

Our next question comes from Joel Beatty with Baird..

What's the outlook currently for your platform for oncology programs?.

So I definitely learned a lot this year and last year with the ARO too. As we said in the past, I think there is two market has changed a bit. And so it didn't make sense for us to push that candidate forward. I also think that we learned a lot about knockdown in oncology, the good news was, I think we saw it and I think we can do better.

And so it's, we are looking to continue to develop that platform. We have nothing in the near-term and don't expect anything this year in oncology, but we'll see where that goes going forward. It's not a real core of ours, but we do think there's value there and we do think that RNAi may play a role in oncology at some points.

So we're still working on it..

Our next question comes from Madhu Kumar with Goldman Sachs..

One on AAT and one on the pulmonary program. So on AAT, I just got a question we get a lot from people.

What do you think is the effective placebo rates of fibrosis improvements, and do you think you can use the fraction of patients that are “worsening of fibrosis”, in the Phase 2 open label extension study as an effective proxy for kind of slanting variability style placebo effects on kind of liver fibrosis improvement and worsening? And then on the pulmonary programs, we mentioned the idea of biomarker changes in healthy volunteers, and in patience.

I guess one question we get from people is when you set to see kind of assessments of clinical benefit in the MUC5AC and RAGE programs, kind of clinical proof of concept metrics for those pulmonary RNAi programs?.

Javier, you want to take this?.

So as you know, neither biopsies -- histology is very viable, particularly the fibrosis core systems and you normally require two pathologies within the biopsies and then actually cater which is what we did in both 2002 SEQUOIA studies.

So, based on this interesting variability and the data from some natural history studies, about 20% of people may have a regression without any treatment and about 20% could have 30% progression in about two to three year’s time. That's what least one relatively small study shows. When you look at NASH, the numbers are kind of similar.

You see a 20% decrease without seeing, that’s why sometimes it's difficult to cover those studies.

And I think the second part of your question had to do with how many people have an increased score in the 2006 study, and two of the 15 patients have an increase -- at one point, both of them have a very significant reduction in C-protein in the liver, globule burden.

Actually, both of them went to zero, one of which started with nine, which is the highest score. So the drop in starting was designed to do across the board, those patient decreasing inflammation and yet they have a one point progression in fibrosis.

So I think that sticks to a reality, fact, which is reason liver biopsies is challenging and the consequence of that, that you need to do a proper study with the appropriate methodology to assess histology. And that's what we're doing..

And then on the pulmonary front, I think for MUC5AC, if you look at the levels of MUC5AC expression in patients in the asthmatic versus expression in a healthy volunteer, they probably needs significant knock down. So to start to see a change in phenotype based on MUC5AC knockdown, you're probably looking at 70% plus knockdown.

And then there's not the similar correlate for RAGE based on our animal data in the two different rodent models. Again, you need to achieve significant knockdown, good magnitude of knockdown. So probably better than 70% to 75% knockdown, but I think the more is better for both of those..

On the on timing, like when can we expect data that testing like for its vital capacity and things, and trials disease trials?.

Of course, we'll look at that in our current study. But that's not the focus of the current studies, that are really more focused on biomarkers. So I don't know, we've talked timing on functional readouts like that..

Yeah. We have not. My expectation is that, to really looking at those functional changes, you have to rely on the Phase 2 studies. And so I don't think you'll, as James said, we'll be looking for those things. But my expectation is that is that we're not -- we don't really see those until Phase 2..

Our next question comes from Patrick Trucchio with HC Wainwright..

Good afternoon and congrats on all the progress. I have a couple of follow-up questions. So first is on ARCHES-2 the top line data is expected in the first half of next year. I'm wondering if you can discuss what you'd be looking for in this data and discuss the anticipated differentiation from ANG3 from.

And why we should not expect ANG3 to have a similar outcome that came from that Phase 2b translate trial?.

So the first part of a question, yes, we has taken trial data in the first half of next year. That means we are starting to work on the next step, Phase 2. So this will enable a Phase 3 study. So I think I want to emphasize the relevance of this data in the first half of next year.

So the comparison I don't think is possible, two different drugs, two different technologies. We haven't seen in our Phase 1 study any of this, I mean it's not very clear yet reported from them. So at this point, we have no concern with regards to seeing any unexpected safety findings with no collaboration..

And then just with the GATEWAY program with HoFH, this study is fully enrolled with the data to follow in 2023.

I'm wondering, if you can discuss the anticipated paths for approval in HoFH and what you would need to demonstrate in this GATEWAY program from safety and efficacy perspective? And is there a potential for an accelerated review? And finally, what would the potential commercialization look like in this patient population? Would you look to launch this on your own or with a partner? And just lastly, I guess how large of an indication could this ultimately be?.

Well, so HoFH is a rare condition. There is a drug approved with a similar pathway -- with the same pathway with an antibody. We're doing our first study proof-of-concept, of course that will be our point of reference, how we compare with the antibody to ANGPTL3.

We know that we do have an advantage right away, because the voting will be every three or six months, who knows subcutaneously. So we do have an advantage there. So we need to see, and we will compare that data with them and say, are we competitive for the antibodies in terms of efficacy, safety and tolerability, those regime and so forth.

So we'll see, we're going to go look at that data. As you know, the market is relatively small, there will be competition against the antibody, and I think we feel that we have a very good profile to compete against them. We're going to move forward, the development process, our program for this indication is well established.

So, it will be a relatively small study, placebo controlled. And like I said, the profile is as good as we expected and competitive to the original antibody, then we’re going to move forward. We think that there is a very unmet medical need, and this can offer a more friendly approach to these treatments..

And also, I want to say the GATEWAY is not fully enrolled. So we’ve said we were enrolling efficiently, but it's not yet fully enrolled..

Our next question comes from Keay Nakae with Chardan..

Question about PALISADE. Last quarter, you talked about some trouble with some of the plant sites in Eastern Europe. Just wondering now what the outlook is in terms of how you're set up to enroll these patients.

Again, how difficult are they to find?.

The only reason -- we didn't have any travel in Europe other than -- this is a Phase 3 study with no Phase 2 study. So regulatory agencies and some ERDs raised that concerns, they will have -- that there may be gaps in data to move from where you are to Phase 3 study. And we address all those comments and questions.

And I think we're in very good shape now getting in many countries around the world approved to run this study. And it's important to recognize and we said that to regulatory agencies said, by the time that the Phase 3 study, PALISADE study will be done, we're going two relatively large Phase 2 studies that will be part of that regulatory process.

So I think the good news is yes, we get some pushback from regulatory agencies and all of them so far accepted and understood the plan, and the study is getting approved around the world, including Japan, that we have similar meetings with them.

And the study is now approving final negotiation we decided and ready to start enrollment in Japan within a month or so. So, not any unexpected delay other than more regulatory work to testify that we weren't ready for the Phase 3 study..

And I just want to say to your point about sites in Eastern Europe. Look, our clinical and regulatory teams have done incredible work here. We have a number of sites that are planned for Belarus, Ukraine, and Russia. And in one fell swoop, we lost all those, of course.

But they've done a great job finding additional sites and we are on track with all of those studies, thanks to their work..

Our next question comes from Mani Foroohar with SVB Securities..

I'm wondering, we've been at the topic about a couple of times around the pulmonary platform, the clarity you gave around macrophage overloads really helpful.

As you pursue more effective, more potent approaches to allow lower absolute dose, what metrics will you be tracking? And what will your bar be to disclose further evidence of macrophage activation, any additional toxicology signals that pop-up as you track how effectively or ineffectively you're threading the needle on delivered dose and macrophage activation?.

I think we've already discussed the acute tox results at the Analyst Day a while back. And as a reminder, in the acute IND-enabling or CTA-enabling studies that the tox dose was the for both MUC5AC and for RAGE. And there were no adverse findings in either of those tox studies.

And then we will, in the near future initiate chronic tox studies as also described during the Analyst Day event, I think we can really spread the doses out in those chronic tox studies. So just overall less exposure to those studies compared to what we did in ENaC.

And then in terms of results of those studies, I don't know if we've guided on timing to disclose chronic tox study results –.

It's not generally our -- we generally don't disclose tox results. But you know, as those come in, we'll know more about what sort of TI to expect.

But we had I think some good slides in the analysts -- in the pulmonary R&D day where we showed what we believe now is sort of the threshold above which we don't want to go for in terms of volume of material and we feel good that in the MMP7, MUC5AC and RAGE are substantially below that that line.

If you're looking to compare, what our expected dosing is for instance, MUC and RAGE which are in the clinic now as you know, compare that to ARO-ENaC. So not only are we providing less drug but we're also providing that less frequently.

That was three consecutive days every two weeks, and now we're looking at one dose every month or less frequently and a lower dose on top of that. So we feel good that we can thread this needle. And frankly, I don't think – the eye of that needle was terribly, terribly narrow.

But look, we'll know more as we start to see knocked down and as we see chronic tox data..

Our next question comes from Mayank Mamtani with B. Riley FBR..

So just a strategy question for ARO-ANG3? Will you wait for the GATEWAY study results before determining next steps for ANG3 on the dyslipidemia indication based on ARCHES? And the reason I ask is that Lilly has a similar study like ARCHES listed on clinical trials.gov that could make it a very competitive situation now that earlier forms like the antibody or the less safe modality has cleared out.

So just curious, will you wait out for your HoFH results?.

Yes. We have some ideas about what Phase 3 will look like. But, of course, we need to see what those data look like before we design those studies. We feel -- with respect to the competitive question, we feel good about where we sit competitively in terms of our lead with RNAi and certainly, over antigens as well as antibody competitors.

But anyway, but I guess the short answer is yes, we have we have a lot of ideas about what a Phase 3 was going to look like. But we're not going to make any real decisions until we can shift through the data.

And my expectation is that those patients do come forward, we're curious to see if pockets of populations present themselves as a result of this. Do we find certain populations that respond better than others. There's just no substitute for data. So we'll wait to see that..

And I would add also that we're not -- we wouldn't have -- we're not going to have to wait for GATEWAY. So GATEWAY and ARCHES should readout right around the same time. So GATEWAY is an open label study, ARCHES-2 is fully enrolled, and it will complete right around the end of the year. So we should have both of those available at the same time..

And then on average, have you disclosed the specific dose levels, you're going up during the NAV because you say through the end lower than ENaC, but I don't know how that cuts across absolute dose levels and frequency?.

I think we’ve disclosed the actual dose levels yet, and then with the simple study design --.

It showed, there was a --.

I think, we did..

There was a slide that showed kind of the magnitude of dose levels in the tox studies. But I don't think there was -- the exact doses weren't disclosed..

In any case, the dose frequency is certainly less than what we were doing with ENaC..

ENaC was staying 1, 2, 3 every two weeks. And here it's just one day, every two or four weeks..

Single dose for day 1, day 29..

And then my final question, just curious about the milestone payment structure with the Amgen LP(a).

Is there anything specifically structured around them initiating or along the way of executing our CV outcome studies in any, is there any milestones associated there?.

Unfortunately, we can't give you any guidance on magnitude milestones or individual triggers. Although I think it would -- it's quite common that there is a milestone payment for Phase 3 initiations..

Our next question comes from Prakhar Agarwal with Cantor..

So I had two. First a clarification on AAT.

Is the biopsy sampling and the reading protocol between 202 and Phase 2 SEQUOIA trial similar or are there any changes that we should be aware of? And second, on long-term strategy for the CV portfolio, recent CV launches continue to be slow, even for companies with strong existing infrastructure in the space, had 35 million in sales in first half and Novartis is still working through some of the logistical hurdles.

So how much of these are the slow CV launches shaping your view about keeping the different assets in house versus looking for partners who already have the infrastructure? Thank you..

So with the AAT program, the biopsy assessment is identical for both studies. As two pathologist who we’re training -- trained together to read this, if they agree that's the end of the process, if they disagree, there is a third pathology, deciding which one of the two ways is the one that is considered the final result.

So that's a procedure, the process is exactly the same. The pathologists are the same. So I expected a consistent out of these study..

And regarding our competence or a willingness to commercialize our CV assets on our own, that hasn't changed for us. We think these are drugs, the data have been consistent, they've been good. I think there are clear places for both of these -- for both of these drug candidates.

If you look at triglycerides, look, I think there's increasing evidence that elevated triglycerides at least for some patients are going to affect outcomes. And there historically hasn't been a way to modulate triglycerides very much.

If we look at fish oils, you know, maybe 18% to maybe 30% reduction, we'll compare that to for instance, APOC3 where we're seeing reductions as high as 90%, sometimes even more than that, where we really move the needle. I think these are big opportunities for us.

And I think that -- I think these amount a lot of patients, and so we are -- we are owning this ever to commercialize these on our own..

This concludes the question-and-answer session. I would like to turn the conference back over to Chris Anzalone for closing remarks..

Thank everyone for joining today. We look forward to talking to you again next quarter..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..