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

Okay. Thank you. Good afternoon, everyone. And welcome to Barclays Global Healthcare Conference. It is my great pleasure to introduce our next presenting company, Arcturus Therapeutics. With us today, we have both Joe Payne, President and Chief Executive Officer; and also Andy Sassine, Chief Financial Officer. With that, I will hand over to Joe to give introduction slides.

All right. Thank you, Gena. It's good to be with you. It's good to be at a face-to-face conference, it's been a while. And I'm happy to introduce Arcturus Therapeutics to you. First of all, I think it's helpful. It says on the introductory slide, but this is next-generation RNA medicine. So Arcturus is a messenger RNA vaccines and therapeutics company. So both vaccines and therapeutics. And the critical issue, we believe, for vaccines right now, is addressing the dose level, which we believe is too high for messenger RNA vaccines. And we have a technology that addresses that critical issue. And on the therapeutic side, there's -- the critical issue there is delivery, and we have a technology that addresses that as well. But it's good to be with you. First of all, I just want to -- as I summarized in my introduction, we have the STARR technology. This is self-transcribing and replicating RNA. This -- we have IP here with respect to not only the chemistry, but the design and modification of these molecules and the manufacturing process. We remind people that self-amplifying mRNA is 3x larger than conventional messenger. So that implies manufacturing challenges to make the molecule, to purify it, to formulate it and to lyophilize it. And that's a significant learning curve that we've gone through, and we consider ourselves one of the leaders in self-amplifying mRNA vaccines. The LUNAR delivery is different from others in that it's known to be biodegradable, non-accumulating. And this is important with respect to systemic applications or inhaled applications of messenger RNA on the therapeutic side. So we apply these technologies to drive our therapeutic programs and vaccines and in therapeutics of the liver and lung. Our pipeline is summarized here. We have a near-term anticipated milestone that I'd like to address right off the bat and that's ARCT-154 at the top of this slide. This is a COVID-19 vaccine that's -- we've submitted an emergency use authorization approval in Vietnam, and we're waiting to hear back this month on a decision. So that's a near-term milestone for that program. We have ARCT-021, which was our earlier, an earlier technology that we've partnered with a global entity that's looking at developing nations for that vaccine. LUNAR-FLU, as we're following the COVID-19 franchise with a self-amplifying mRNA candidate to be selected later this year for LUNAR-FLU. Clearly, self-amplifying mRNA as something that has applicability beyond just COVID, especially in endemic booster markets, something I want to emphasize is that self-amplifying mRNA because it is a technology that's a much lower dose technology that expresses more protein, it has applications in endemic booster markets. So as these markets mature, they tend to go from specific vaccines to combined vaccines. You've seen this in MMR, you saw this in the flu space, and no doubt we expect to see that in the COVID space. So no more variant-specific vaccines, but multi-variant vaccines and the COVID and the flu and combinations of this. And this bodes well for self-amplifying mRNA technology. And so we have a LUNAR-FLU program that we're excited about that we're selecting a candidate in '22. Moving on to the LUNAR-OTC program. This is in our therapeutics franchise, the liver program, a rare liver disease called OTC deficiency, ornithine transcarbamylase deficiency. So the protein or the enzyme, in this case, it's being replaced in the liver. It is part of the urea cycle. And we're excited to establish proof of concept this year. We've initiated a Phase II trial and opened that up in Europe, and we have multiple sites now recruiting patients in Europe. And so we hope to have an interim data later this year. And then finally, on the bottom, we have a CF program, cystic fibrosis. This is for inhaled messenger RNA. We have a delivery technology that's ideally suited for the bronchial epithelial cells after delivery there, and we're filing a CTA in Q3. So just some data to share or first question is how does our COVID-19 vaccine? How is it different from the many vaccines out there? Well, it is touched on the self-amplifying mRNA. So our dose level is much lower. It's only 5 micrograms, not 30, 50 or 100. And so that has manufacturing benefits, potential safety benefits associated with that lower dose level. But because it's self-amplifying mRNA, we're seeing encouraging booster numbers as well. So it's -- potentially, it could be a longer-lasting vaccine, a more durable vaccine. We have a global manufacturing footprint here in the United States, in Europe, in Japan and Vietnam. And I touched on that our vaccine is a lyophilized version of the vaccine. All the other messenger RNA vaccines were developed as frozen liquids. We're developing ours as a lyophilized version, which means the water has been removed, has a different supply chain profile and cold chain profile. So as we move on to the global manufacturing footprint, just a little extra detail there. We've contracted relationships with Aldevron and Catalent domestically here and Recipharm and Polymun in Europe. We have a joint venture with ARCALIS, which is affiliated with Hitachi in Japan. And we have a team that was just over there this week doing a ribbon-cutting that was exciting for them as we open up the process for a manufacturing facility there. And then finally, in Vietnam, we have a state-of-the-art facility getting built. Fortunately, we're not funding the process, but our partners Vingroup is funding state-of-the-art facility in Hanoi, Vietnam with the capacity for 200 million doses. So this footprint is significant, especially when you take into consideration the dose level of 5 micrograms. So we have the capacity to meet hopefully a demand for our vaccines. Now in terms of the clinical trial update of ARCT-154, I mentioned that we have an emergency use approval in Vietnam. That's going to be based on the Phase I, II and IIIa portion of our clinical trial there. So approximately 1,000 subjects participated in those cohorts or those trials. We've opened up a Phase IIIb trial as well with greater than 16,000 participants, placebo-controlled that's been ongoing since November. And that -- the Phase IIIb data will be incorporated into a full approval process after the emergency use approval decision later this month. We have an ongoing booster trial in the U.S. and Singapore as well. Everyone wants to know, now that the majority of people in United States for example have been vaccinated, so people are more interested in how our vaccine behaves as a booster. So I'd like to show some key data here. We've collected human data now in Phase I/II in U.S. and Singapore. We -- this slide shows on the left side, you see ARCT-154 showing a 28 to 30fold increase in antibodies and this is in a validated pseudovirus microneut assay. So because of this, this assay has been utilized by many vaccines. So it allows scientists and analysts to compare our vaccine to others, and this compares favorably. And so we view this as highly promising data, especially, again, when you take into consideration this is a 5-microgram injection. With respect to the other variants, you see we saw broad activity against every variant that we tested, every variant of interest, every variant of concern. At the time, Beta and Delta were being discussed. And so we shared that data and focused it on the right. And then Omicron came out. And you see we saw a 54-fold increase that exceeded our expectations. There's something special about self-amplifying mRNA, and we're learning with every week that goes by with this technology. And people I think are getting more and more excited about it. So we're seeing this broad spectrum activity against all variants of concern, including the latest. And so we're looking forward to getting that emergency approval, hopefully, later this month. Now on to LUNAR-OTC, ARCT-810. This is on the therapeutics arm of the company. So this is where the LUNAR delivery technology that Arcturus owns. This proprietary delivery technology can be systemically administered through an IV administration and deliver messenger RNA to the liver. And OTC deficiency is the #1 urea cycle disorder, an attractive commercial opportunity for a company like Arcturus for sure. And we're looking to restore the urea cycle. When the urea cycle is dysfunctional, ammonia levels rise. Ammonia is a bad character across the blood brain barrier and causes a lot of serious issues. And so there's significant unmet medical need for a product like this that could functionally restore activity and functionally cure and prevent the need for liver transplantation. We've shown results in Phase I already with healthy volunteers in New Zealand. We dosed it up to 0.4 mg per kg without steroid treatment. This is an important stress point for OTC deficiency. Steroids is something we avoid because it can cause serious adverse events in these patients. So the fact that we have a steroid-free treatment potentially here is exciting. And we confirmed that our lipids biodegrade. And after 48 hours, there is no lipids remaining in the plasma. And so it was a very successful Phase I trial. We've now -- have ongoing Phase Ib recruitment in the United States, which has picked up, thankfully, since the COVID restrictions have reduced. And like I mentioned in the introduction or on the pipeline slide, we've had approval to proceed in Europe in Phase II in adolescents and adults. We have multiple countries like U.K., Spain and Belgium already approved to proceed, and we're recruiting additional countries in Europe as we speak. We're looking at biological proof of concept here, guys. There's multiple biomarkers associated with this disease, ammonia in the blood, orotic acid in the urine and urea itself. This is a urea cycle disorder. So we're looking at ureagenesis. And so we're looking forward to data in the second half of this year some sort of biological proof of concept could be really exciting for us and for the field, frankly, it'd be great. So LUNAR-CF is the other program I'll touch on before we go to Q&A. But cystic fibrosis is a well understood even though it's a rare disease. And all of these CF patients want a normal transporter in their lung. And the messenger RNA therapeutic is -- could be an excellent way to solve this issue. And so this is an inhaled therapeutic, and we properly modify the messenger RNA. We suitably purify it, which is very, very important for lung applications to remove on the undesired inflammation or immune responses to the therapeutic and we've optimized our delivery technology for bronchial epithelial cells. In fact, we've shown the activity in mice, in rats, in ferrets and primates. And I just want to emphasize the ferrets and primates are excellent predictors of human lung disease. And surprisingly, even ferrets are known to be the best predictor for human lung disease. So the fact that we have excellent data in each of these models is exciting. And you combine that, that we've shown stability of our therapeutic and actual CF [ speed ]. So we're excited to transition this program into the clinic with the CTA in Q3, which is just around the corner. So rather than the summary slide or conclusion slide, I'm just going to go right back to the pipeline to serve as a reference as we enter Q&A with Gena, if that's okay.

Thank you, Joe, also Andy. So maybe I will start with the 154. It seems that has quite some improvement compared to the first-generation vaccine. And regarding the Vietnam EUA approval, can you give us what kind of outcome that could be? And then what would be your next step regarding different outcome?

Yes, yes. So of course, we want to achieve emergency use approval status and then have the Phase IIb data read out. This is the placebo-controlled data efficacy data -- vaccine efficacy data readout and then achieve full approval. I think that's the -- that's where our attention lies right now. In parallel, we're looking at regulatory paths to the booster, given the data I shared just recently there, there's a lot of promise with these booster numbers, we call it, these 30- to 50-fold increases that we're observing and different variants of concerns is very promising, especially because it shows that across all variants and at this very low dose level.

And we're kind of incurred because we mentioned in our call that Vietnam continues -- venBio, continues to expand a lot of resources in getting the factory up and running, and we articulated that it should be online sometime in the second half of this year. So the sooner we can get it online, the more opportunistic we can be with respect to production of booster dosing.

Okay. Can you remind us the economics that you can collect through this collaboration?

The shared economics of the deal, well, we haven't -- we can't give you the specifics in general. But what we can say is that when we produce a drug acceptance and we ship it to Vietnam to be authorized, we would get what you would call a single-digit kind of per dose payment. And so that would effectively cover our cost and some. And then we would get a royalty on the back end when they sell it to the Vietnamese government. And so it's strictly a contract for Vietnam and the Vietnamese government. And so if we're in a situation where they have enough vaccines or enough boosters for that matter, we could amend the agreement and potentially enable them to export and generate opportunities in Southeast Asia, for example, where other countries may need a booster.

So we sell them the drug substance, make the profit and then there's a back-ended royalty on the product if they successfully transact it to Vietnam.

And the royalty rate, is that in the low single-digit range?

Well, that -- with the royalty rate, it's low single digit. Remember, Vietnam, venBio $50 million to $100 million for the trial, and they also spent $50 million to $100 million for building the factory. So to be fair and to be a partner, the economics are attractive to us, but also reasonable for the Vietnamese people and the government to be able to procure the sizable number of vaccines that are very reasonable price.

In addition to the $40 million tech transfer fee that was associated with that. So they've invested a lot into this, and no doubt they're excited.

So another question is regarding the booster strategy. You did show very encouraging early data. So what will be the regulatory path from here? And assuming like would that be do you need to show primary series data? Or would the booster the data will be sufficient and that will apply to not just only to Vietnam also the other parts of the world?

Absolutely. And that's a great question because that's where we are right now. We are actively engaged with multiple regulatory agencies globally. We're trying to understand how many patients, how many subjects are required. Is there a path to an emergency use approval for a booster label? Can we forgo with emergency use and go straight to full approval, right? And these questions are being asked and what's the comparator. So we're getting this detailed advice from multiple -- written advice from multiple regulatory agencies, and we're compiling our strategy as we speak. We're not quite ready to share it today, but it's becoming more and more clear. And so we look forward to providing that guidance as soon as we can.

When do you think it will be realistic that you can share that like feedback with us? And would that be second quarter or...

That's a good question. And we would share it by press release. It's a good question. We're very close. We've mentioned earlier that this quarter, we'll solidify our strategy and then how that's communicated we'll see. But this quarter, we're -- that's just a couple of weeks left. I think we're just finishing -- we want to get 1 or 2 more written advices in from the many that we sent out. And then we'll be prepared to do it. So I'd say this quarter is when we'll have internally our strategy. How we communicate that, we haven't shared yet. But clearly, it's business essential for us to have clear regulatory path for the booster label. That's the largest commercial opportunity for sure, that's great.

So Joe, do you think there will be one approach or you think it will be more like a different regulatory path depends on different geographies?

That was one of the questions. We didn't know if different countries would have different feedback. So far, we are seeing some nuances and differences. But I think we're confident that it's consistent feedback. So we're getting to see that's generally consistent. But yes, there is nuances depending because some countries, for example, have more familiarity with other vaccines versus some vaccines. So the comparator sometimes is preferred differently. But overall, we're comforted is the word as we're getting clarity. And thankfully, it's not too dynamically different. It's not. We're getting consistent advice.

Thank you. So we have a few more minutes. I do want to touch on your therapeutics area. So for the OCT program, I know your partner Ultragenyx will also have a gene therapy there. So maybe talk a little bit about the market dynamics there. And then also the second half this year, the biomarker data, you mentioned a little bit, if you can give us like some kind of a threshold you are looking for in the second half this year to move this program forward?

Yes, sure. So a threshold is any sort of biological proof of concept, I think, would be exciting. There is 3 biomarkers, ammonia in the blood, orotic acid in the urine and urea itself. So I think if we show any sort of biological activity, that would be exciting because this sort of data has never been established before. It would open up a lot of opportunity in the liver. How we're -- in the OTC deficiency field itself, there's increased sensitivities about steroids. And so we're appreciating that and noticing that that's a differentiator that there's no steroid co-treatment with these -- with the LUNAR technology, at least up to 0.4 mg per kg, we haven't required that in healthy volunteers. Of course, we hope that repeats and as that database grows. But there's some promise there, too. Did I address your question?

Yes. And I think that gene therapy, maybe have an existing neutralizing antibody and this could be the initial population can go up.

And we're hoping to see improved consistency. We find that whenever you see variability in data, that's a delivery issue. So whether -- there's programs that might have seen variable data in the lungs or variable data in the liver, from my experience, our team's experience, that's because of delivery. And we think LUNAR checks that box nicely. So I think we're not just accessing the liver, we're accessing liver we are accessing the periportal portion of the liver in all our preclinical models. So if that's indeed the case with human beings, then we're not just getting to the liver, but we're warmly and generously delivering messenger RNA to the periportal hepatocytes, and that's where the urea cycle is and doing it without steroid treatment is -- would be exciting.

So this Ultragenyx OCT program regarding their primary endpoint and the regulatory path, also Phase III trial with them and Phase I, would that be a good comp for you moving forward? Or you think because that's gene therapy and yours multiple therapy, RNA therapy will be for...

We don't consider ourselves direct competitors because it is a different technology. At the end of the day, I mean there might be a competing technology like a viral vector that is effective in the subpopulation of the disease population of the patient population, but a transient biodegradable meta particle mRNA that's [ attenuatable ] and adjustable without steroid pretreatment may be more accessible to the young where there's the highest unmet medical need. And so any nonresponders to the bio vectors may be well suited for us. At the same time, if we're ultimately successful, we may usurp the entire market. Yes.

Okay. And lastly, quickly on the CF, there will be very interesting approach, and we know that Vertex also will move forward. And so maybe like with your animal data, like how confident you are when you -- how you can translate that data into a human that's able to say, cross the mucus barrier in the cystic fibrosis patient?

Yes, I am. So nanoparticle, mRNA therapeutics have had inconsistent results in human clinical trials to date. And we've addressed 3 of those key issues. We properly modified the messenger RNA. Unmodified messenger RNA has had challenges in multiple clinical trials. We're properly modifying it to extend that therapeutic index. And we apply Arcturus' proprietary purification process. And I know impurity sound -- may not be a big deal, but in inhaled messenger RNA therapeutics they are, and it's very important that you reduce the impurity content and we do so with the proprietary process. So we properly modify and suitably purify the construct. And then our LUNAR technology is the latest generation of lipid technology that we're very proud of. And this is a benign biodegradable technology. So a non-accumulating inhaled technology is key as well. So I think we apply those 3 things to advance. And hopefully, we will not just address those issues that have been established by previous attempts, but that will have legs and get to the finish line.

Thank you. Thank you, Joe. Thank you, Andy, and we are running out of time. Thank you for that discussion.

Yes. Thank you for having us. Thank you.

Thank you, everyone.