Arcturus Therapeutics Holdings Inc. (ARCT) Earnings Call Transcript & Summary

Welcome everyone. I'm pleased to welcome Frank DeRosa and Joe Payne. Frank is joining us from Translate Bio. Joe is joining us from Arcturus Therapeutics. And we're going to kick it off with just kind of an open discussion on their 2 vaccine candidates as well as kind of the landscape as a whole. So to kick it off here -- my name is Michael Guba. I am the -- I am Citi's health care sector specialist within the sales and trading division. But yes, just to kick it off, I think, let's open it up with just some general comments from both of you guys on updates as of late and touch points and anything you would like to kind of give a heads up for the broader investment community. I want to start with Joe, and then kick it over to Frank.

Sure. Thanks, Michael, and hello all on the call. Arcturus has had some recent developments. It seems like everyone's having recent developments in this COVID era. We, no doubt, have some as well. We recently published a preprint paper summarizing all of our preclinical data with respect to neutralizing antibody titers and T cells and the avidity of these antibodies and also this very aggressive, stringent challenge model, this genetically engineered challenged data that we share as well. Very promising, and it just shows more promising data around a single administration concept, perhaps more durable RNA vaccine technology. So it's good to be with you there. And with everyone to discuss that development. Our vaccine is also in the clinic, and I'm more than happy to provide some updates and provide some guidance with respect to the COVID-19 vaccine. Behind the scenes, in our pipeline, we also have a an intravenously dosed messenger RNA protein replacement program for ornithine transcarbamylase deficiency and happy to provide any updates there as warranted. But I'll turn the time back over to you, Michael.

So Joe, why don't you kind of just give us a general update, background, everything there before we start diving into kind of the data and everything you guys have pulled out.

All right. Well, thank you very much. I'm Frank DeRosa, Chief Technology Officer for Translate Bio. Hello, everyone. Just to give a little background of our company. Of course, we're in the mRNA space. We're an mRNA therapeutics company that's actually using messenger RNA for therapeutics as well as vaccines with our partner, Sanofi Pasteur. On the therapeutic side, we currently are a clinical-stage company conducting a Phase I/II trial for the treatment of cystic fibrosis. So this is actually the first inhaled messenger RNA for cystic fibrosis or actually even any chronic disease. So we are really excited about that, and we're proud of that, and we just recently put out a press release stating that we have restarted enrollment of that. There was a bit of a pause there, of course, because of COVID-19. So we're excited to kick that off again and get going for that. So what we're doing now, building our pipeline, of course, leveraging that lung delivery expertise in a whole host of other pulmonary applications and diseases with that. But today's focus is, of course, on the vaccine side. And Translate Bio's role in the vaccine field really stems from an early partnership for the last couple of years with Sanofi Pasteur, just a great partner, to work with a vaccine global leader there, focused on a number of different disease targets. And of course, with the pandemic coming upon us, it was just a natural extension to move into that as well. And so we've been generating a lot of preclinical data. A little bit of that was presented a week or 2 ago by Dr. John Shiver at Sanofi Pasteur, showing some nonhuman primate data, but we look to publish some of that in the very near future as well, and we're excited to be here today.

Great. Thank you to both of you. So I think I just open it up at a very high level here. Starting very broadly, the time line of a potential vaccine approval has obviously come into focus. So kind of any thoughts that you guys are willing to share? There's been numerous articles from the media on pressures there, obviously, I'm not asking you to comment in any way on the pressures that you've received or anything along there or not. But yes, just any high-level comments, we can start with Frank this time and then maybe go to Joe. We'll go back and forth, play old tennis.

Sure. I mean, in terms of timing, obviously, there's a number of players out there. We're rooting for them all. We think it's going to take multiple players here actually to be successful to treat this global pandemic. So mRNA is clearly in the limelight here, and that's great because we think it's a fantastic technology. And I know Joe agrees with that, of course, as well. And so in terms of timing for our own programs, what we've publicly stated, I'll just repeat in which we anticipate being in the clinic, Q4 of this year, filing an IND and started dosing patients both in Q4, and we're nearing the end of Q3 here. So a lot of momentum and a lot of movement will be happening soon, I think. And with an anticipated, if all goes well on an accelerated path, we hope to have an approval by second half of next year, of course. But that's pending everything goes well with that. So again, we're excited about where the technology is in the field, certainly, and we are hoping for success across the board there. And we think it's going to take multiple people, potentially even multiple modalities to do this.

Great. Joe? Yes.

Yes. With respect to -- I can add some additional color. The political pressures that we're experiencing and observing and seeing here and the United States is -- not just here in the U.S. as we've interacted with many countries globally, we're seeing that this -- the political environment and the pressures upon these ministries of health globally is significant that everybody wants to see a vaccine approved as soon as possible. And we're also noticing that depending on the regulatory agency we're talking to, that they're more open to accelerated approvals than others, and that's interesting, too, that dynamic. And ultimately, it's their call. And as scientists and as companies with innovative vaccines, we're here to support them. And you just heard from Frank that there's going to be multiple companies that definitely help out in this pandemic. And that the RNA vaccines are definitely getting increased attention and deservedly so for the preclinical and clinical data that the community is collecting, showing considerable promise. But with respect to approval, we're presently in the clinic in the Phase I/II and actively engaged in collecting human data in trials here in Singapore. And we hope to transition to a Phase III or registrational study this year with approval as soon as possible next year.

Got it. That's helpful. I guess just on kind of some of that commentary in terms of the accelerated approval. Obviously, the Astrazeneca hold has been in focus a lot here. So Frank, maybe just given your experience kind of working with Sanofi in the vaccine space, how common are these type of clinical holds? And just any kind of high-level commentary you have there. And Joe, I would love to get your thoughts as well.

Yes, sure. So I mean I won't obviously speak directly towards the Astrazeneca situation. This is for them to speak about. I don't think a lot is known right now with respect to that. But what I can say is what you're seeing here with the COVID-19 disease and the efforts associated with that is everything is sped up, and everything is under a very large magnifying glass, if you will. Typically, the normal process is 8 to 10 to 12 years to drive a vaccine from start to finish. And now you're seeing this done in a year or less. And so I think traditionally, yes, you would see some AEs and SAEs associated with different modalities. And you might see those through your Phase I, through your Phase II and maybe even in a Phase III, and it wouldn't even make the news. This is, I think, really part of the process, and you expect to see that, always wish it, of course, but that's what these clinical trials are for, to be able to learn that and develop the best drug possible. So there's, I think, just a heightened awareness of it right now with that being that the whole globe is watching and that these are in a really tight time lines. So everybody is looking at this now. I don't think it's out of the ordinary for that at all with respect to what you're seeing there. And what that allows you to do is, again, you have multiple players out there. You have multiple technologies out there. Let's see where they end up with this. We want the safest and the most effective possible vaccine out there. What I can say, though, is being partnered with Sanofi Pasteur, you're talking about global leaders in the vaccine field for -- God, they've been doing this for decades and decades. It's 16,000 people strong. They're dedicated to this. So they've got extensive experience in how to set up these clinical trials, large clinical trials, conduct these clinical trials. And it's really just great to have them as a partner to help push this drug product through.

That's helpful context for sure.

Yes. We'll definitely let Astrazeneca speak to the recent developments there. I think it bodes well for RNA vaccines when the discussion of safety comes forward. I think the RNA vaccines as a whole are relatively simple. They're completely devoid of viruses or any sort of viral vectors or adjuvants. So by removing these variables out of the equation, safety becomes more easily understood and more rapidly discerned. So I think that, that bodes well for the RNA vaccine field. We consider that one of the advantages. So as these events occur, as people are evaluating several different vaccines, as these safety events may or may not occur, I think it's always helpful for people to discuss the concept to the topic of safety and how RNA vaccines can advance that concept and make it -- as we're aiming to provide safer vaccines.

For sure. And that actually kind of led me right into my next question there. So I mean, for a lot of the investors on this, who are probably more generally focused, not necessarily going to be as deep in the understanding of the science behind each of these different approaches. So if you don't mind, I would love kind of just get some high-level thoughts on the landscape that we're seeing in terms of approaching this. And then from there, we can kick it into more detail on your individual mRNA approaches and then what you see as differentiated about both translates and then our targets. So Joe, why don't we go kick off with you? And then Frank, we'll kick it to you.

Well, it's the overall landscape, I always like to just set the stage that there's 250-plus vaccines out there being evaluated and tracked by the WHO and other tracking services. And about 10% of these have matured into the clinic. Some of these are unpartnered academic institutions and foreign institutions that are less familiar. But out of these group, there appears to be a dozen that are gaining really some significant traction in the clinic. We'd like to consider Arcturus is one of them. We view that as positive. With respect to this horse race that people are referring to, there's individual companies in their vaccines, but there's also scientific franchises, a scientific horse race. And that's the RNA vaccines and the protein -- adjuvanted protein vaccines and the viral vector vaccines and others. And it looks like the RNA vaccines have really made a name for themselves with respect to neutralizing antibody titer levels as a class, and that's very important for protection and efficacy. And the viral vector vaccines have really been touting their T cell data. This is cellular immunity. And that's where durability is found. So they're touting their strengths there. And it's been fun to watch these classes and different technologies showcase what they do best. And then really bringing it down a little to Arcturus, we're an RNA vaccine, but we're a self-replicating messenger RNA, and that's different. And we utilize a delivery technology called LUNAR that's different, and we're hoping to combine our delivery technology in the self-replicating aspect to bring additional benefits or features to our -- the profile of our vaccine that we can capture not only neutralizing antibody titers, but also T cells, and do so in a manner with a very low dose and a potential single administration with the supply chain that's reasonable. And I'll pause now, and I'd like to hear thoughts from Frank.

Certainly. I echo everything Joe said there. With respect to the different modalities, there's certainly pros and cons to each of those, whether it be DNA-based or mRNA-based or subunit-based and different viral vector. There's certainly differences and similarities associated with those with, as Joe had mentioned, no need for an adjuvant per se with an RNA type approach, specifically with the lipid nanoparticle base, which is an advantage once there. I think something for the RNA field that has caught a lot of attention, of course, mRNA in particular, is the speed with which you can do this with messenger RNA. In terms of getting the sequence and being able to have a drug product very fast. I mean this is, of course, was demonstrated by Moderna with COVID and taking all the competitiveness out of the arena, fantastic job getting that sequence within early January, having a drug product shipped out a month later in February is a fantastic demonstration of what messenger RNA can do and what this technology can do overall. And so it's certainly a huge advantage for that. And that comes down also with respect to the manufacturing. I mean one thing that Translate Bio is really focused on over the years is very large scale manufacturing, single batch production of both mRNA and the lipid nanoparticle, the LNP, and to be able to do that to provide, yes, these millions and millions of doses per batch is really coming into the forefront now that we're under this pandemic. It's something we've always been focused on, really, on the therapeutic side and more in particular, on the pulmonary-based applications where there is a greater demand for that in terms of large amounts of mRNA. And so I think, again, with respect to TBIO's experience in this, having large-scale manufacturing already established is just -- we hope can make a significant impact for this pandemic. But the speed with which to manufacture mRNA and your LNP and then the flexibility of it, meaning you've developed a manufacturing process, you can use that same process for a new target, for a new disease, maybe for the next pandemic. You don't need to come up with a new cell line derivation, a new purification process, et cetera, that some of these other modalities need to do. So very flexible and very scalable in my opinion as well.

And that's also interesting because the next major focus, I think, we've seen is on kind of just from a distribution standpoint, right? So Frank, to your point, your ability to kind of -- or manufacture, right, and then you move over to the distribution side. So over the long run here, I guess this type of focus on developing that distribution channel could only likely be more advantageous down the line. So kind of moving over to there, I'd say, any commentary that either you have on kind of the overall questions on distribution, on storage, on everything we're seeing there that kind of is brought up continuously across every news article you read?

Yes. I could start with that, and then I'll pass it off to Joe. A couple of things with that. So yes, we've got the large scale manufacturing, which is great, and we love that, and we're always going for the lowest dose possible, certainly. So you have the most doses you can get out of each batch. With respect to distribution, this is really, I think, where we are fortunate to have a fantastic partner to work with, again, with global reach and global experience in terms of not only do, of course, conducting those clinical trials, but commercial product, commercial distribution across the globe and as well as handling and storage and everything that goes along with that. They are just set up wonderfully to do this. And it's amazing having partners that we can work so closely with to be able to execute on that. From a storage point and a stability standpoint, this has come up a lot with different modalities, and particularly with mRNA. I think a lot of companies start with frozen, particularly minus 80, just because of the ease on a preclinical stage from there. We've certainly have moved towards minus 20 and even lyophilized versions of our drug products at 4 degrees. We've shown tremendous stability there as well. So there are a lot of options when you put in the research and you put in the development to do that. It is certainly feasible and definitely possible with messenger RNA as well. And so I think you'll see a lot of the field moving towards that way, of course, just because of ease of shipping and ease of handling to potentially third world countries and things of that nature.

That leads perfectly over to you, Joe, the lyophilization standpoint.

Yes, sure. We -- this concept of supply chain, cold chain is a concern to everybody, to countries, their taxpayers with respect to costs and complications associated with distributing something that requires extraordinary freezers at minus 60 or minus 70, minus 80 centigrade or handling these vaccines with dry ice handling at the point of care. So this has come to a forefront. And when we're -- the Arcturus vaccine candidate, we intend to use a lyophilized formulation for Phase III that was referenced by Frank and their development activities. By removing the water out of these frozen liquid formulations, water is the culprit for degrading messenger RNA. So by removing it, you improve the shelf life, and we are intending to use a lyophilize formulation for our registration study. And this means that we will not have that requirement of using these expensive freezers for our storage or distribution, and that will be viewed as a benefit. With respect to distribution, what we found in our experience at Arcturus is that for the pandemic phase of this process, this initial phase in 2020 and early 2021, especially that governments will be the buyers and the distributors will be their militaries, respectively, and that's what we've experienced so far. So we've -- have a contracted relationship with Singapore that's maturing. We're very happy with our progress there in that country. We executed a supply agreement with Israel. And we look forward to playing a key role in their vaccine strategy in Israel. As we're looking beyond that, we're engaged in multiple, many, many conversations with several countries with respect to who's in line for the Arcturus vaccine candidate after Singapore and Israel, and it will be interesting to see how that develops. But the reason I'm bringing that forward is that it's just -- it's an unusual commercial strategy that's very unique when you're dealing with a pandemic. Again, the buyers are countries and the distributors are militaries. As the pandemic shifts and people start getting vaccinated and it goes into an endemic phase, where we'll now enter a more traditional commercial model, we'll -- Arcturus will seriously consider, of course, partnering with a global leader in vaccines. Just as TBIO successfully did. They got an extraordinary collaboration with Sanofi, and that looks like it's going to be very successful. So we will likely transition at that time when it's an appropriate time to identify the right partner for Arcturus for the vaccine candidate, assuming, of course, it's successful in the clinic. So that's our approach.

Got you. That's interesting. And that's actually the question that I get or we get frequently on, it's just on that partnership for you guys. So it's interesting to take here those comments. So yes, I'd love to kind of dive deeper into kind of individual data at this point, now that we've kind of covered the broad base, I'd say, of mRNA. So I'd like to give this opportunity. Why don't we start with you, Frank, just giving kind of the time line of what was discussed from Sanofi? I think, as you said, a couple of weeks back. Would you mind kind of diving into it on any review of the nonhuman primate data that came out that was so promising?

Certainly. So again, this is just a small snippet of what we publicly released so far. So I'll only be referring to that for today. But in a grander scheme, we've conducted multiple studies in both rodents and nonhuman primates and looking at multiple different constructs. So we've made quite a large number of different constructs encoding different antigens or different forms of antigens for this disease, even in a couple of different carrier systems. So we've selected a lead candidate, certainly, some of the data that was presented earlier was in nonhuman primates. Now that was both immunogenicity in terms of binding antibodies as well as neutralization and neutralizing titers for that. This is over a dose range from 15 micrograms to 135. We saw excellent responses across the board leading us to believe that there may be even some dose sparing capabilities there with that. The second piece of data that was released of those studies was your Th1 and Th2 ratios associated with that in nonhuman primates. And what we saw as expected, because we've seen this prior, was a heavily skewed Th1 response, which is advantageous, of course, for your -- to mitigate any enhanced disease associated with these vaccines. So that is what's been released. We have a plethora of data associated with these candidates and with our lead candidate, in particular, and we are looking to release that in the near future also, potentially in the form of a publication and/or presentation as well.

Got you. That's helpful. And now moving over to Joe. So actually just getting a couple of questions on -- just on overall clarity in terms of that partnership statement. Investor questions, so again, don't shoot the messenger here. But people are interested in understanding where you are in that type of process, if you are engaged in those discussions or if you plan on engaging in those discussions later. If you have no comment, that's fine too.

No, wait. Arcturus has been very open with our strategy here. We're a company with an exciting technology -- a suite of technologies with a potentially exciting vaccine or vaccine candidate that's presently in the clinic. And so we're -- how we monetize this and when and how we partner it is always up for discussion. Folks that have talked with Arcturus in the past understand that we're very collaborative. We've engaged in several collaborations in the past, and I assume we'll continue to do so in the future. So we're very open to this concept. The timing of it, of course, will depend on so many other factors. So I can't give any more details than that, but -- which -- but as we engage investors, they always want to know when is the time lines around data and deals, right, because those are the key value inflectors. And we've messaged already on this call, some of our next milestones with respect to data for the COVID-19 vaccine. But with respect to partnering activities, we're in discussions with several countries that I've mentioned with respect to potential supply agreements. But also, I've alluded to the fact that at some point, it may be a wise course to partner our vaccine or a vaccine franchise, and we'll seriously consider any of those opportunities at the right time if it makes sense for our investors and our company. So that's where we are.

That's helpful. Thanks for the clarification there. Yes. Now if [indiscernible] I'd just kind of dive into the LUNAR update that you gave. I think it was published last week or last Friday?

Yes, yes. So the publication was significant. We had 3 prior press releases sharing our preclinical data, kind of piecemealing it over a stage at a time. But this paper that we've just published or a preprint of it bolted on our challenged data as well and avidity data. And this challenge model is a very aggressive one. This is a genetically engineered mouse with the ACE2 receptors built into their lungs, so they're very, very susceptible to COVID-19 virus infections. In fact, after they're exposed to the virus, all of these animals in the control group die within 7 days. We know what the statistics are for humans. And it's a very small percentage who actually die from COVID-19 infection. But in this case, these animals are genetically engineered to be very susceptible. And what we showed is 100% protection of these very susceptible animals to COVID-19 infection. So very, very promising data. And how it's different? Other vaccines have shown success in is the exact same model, but we did it with a single administration at 2 micrograms. So a very low dose, single administration, showing 100% protection in the most aggressive challenge model that I've personally been familiar with. So this is very promising data from a preclinical perspective that we included in this recent data set, and it's differentiating from the other vaccines that have shown success in that model. So of course, we consider this encouraging. And we hope that we can replicate elements of this or all of this data in humans that we're presently engaged in. I think that addresses your question with respect to the recent paper.