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

Well, thank you to Barclays for the invitation to present in here in Miami. I'm happy to give an update of where Arcturus is. Arcturus Therapeutics is a messenger RNA therapeutics and vaccine company. But we're based in San Diego, and we have about 180 employees. And we have 3 divisions of the company. We have a vaccine division, a liver division and a lung division that each have a flagship asset that leads each of those auxiliaries of the company. Our OTC program is a rare liver disease. That's our flagship for the liver franchise. We have a CF program called ARCT-032 that leads our lung franchise. And we also have several partnerships, as you saw on the screen, including CSL. We have a lot of significant technologies in the company. We have mRNA technology, specifically a next-generation mRNA technology called self-amplifying mRNA. And we have a lipid nanoparticle delivery technology called LUNAR that's different from what others are using, the thiocarbamate-based lipid technology, the biodegradable delivers messenger RNA. We have 3 different LUNAR delivery technologies for hepatocyte or intravenous delivery, muscle cell or myocytes or intramuscular delivery and finally, through inhalation to bronchial epithelial cells. We've acquired a significant amount of manufacturing know-how in the recent years as we went through the pandemic and have made millions and millions of doses of our COVID vaccine. We now have the ability for drug substance production and purification, which is very important in the mRNA space and also the drug product formulation process, bringing these lipids and RNA together is a very sophisticated process, and we now know how to do that on scale, including fill/finish and lyophilization, which is a unique know-how to the field. All of the approved COVID vaccines are frozen liquids, and lyophilization is the process of removing water. And so doing that on scale is also very meaningful. We combine all these technologies and our know-how and apply them to our Arcturus owned mRNA therapeutics pipeline shown here. Our hepatic franchise is led by ARCT-810. For ornithine transcarbamylase deficiency, it's the #1 urea cycle disorder. And we have a Phase II interim data readout. Later this year is what we're aiming for. And the respiratory franchise is led by our cystic fibrosis program, ARCT-032, and that's also presently in the clinic, and we're excited to provide an update on that on our next quarterly call. Our partner programs are also very meaningful to us. We have a rare liver disease partnership with Ultragenyx. They have GSD type III or glycogen storage disease type III program that's presently in Phase I/II. And we've entered into an agreement with CSL. And those 2 most advanced programs are summarized there. It's a COVID vaccine that's in Phase III and a seasonal flu vaccine that's presently in the preclinical stage. Also, it's helpful to be made aware that BARDA right here in the United States is supporting us for pandemic flu, and we announced that last year, and they're funding that program. At the end of last year, it was a very meaningful partnership. I think it's worthwhile just to summarize that. It was a multibillion-dollar deal. The deal value is up to $4.5 billion, $200 million of that came upfront. It includes $1.3 billion in development milestones and $3 billion in commercial milestones. 40% profit sharing for the COVID vaccines. One of the COVID portion of this partnership. And then with respect to the flu shot and other respiratory infectious disease vaccines, we get up to double-digit royalties on miles. That $1.3 billion of development milestones is very meaningful to us. It's spread across 5 programs. And if we can execute and live into those, that would, of course, be fantastic. I'd like to give an update on what's happening in Meiji. They've been doing an exceptional job at recruiting and for our Phase III immunogenicity trial. The reason why this trial that's sponsored and funded by Meiji, is very important to Arcturus. Because it's the first Phase III trial ever that's comparing the next-generation mRNA technology to the conventional mRNA Comirnaty vaccine. And it involves approximately 780 adult participants. Half are going to receive the Arcturus vaccine and half are going to receive the conventional mRNA vaccine. And we'll be able to provide data for that later this year. The study initiated in December, the last update we provided for enrollment was in January. Our next update for that will be in our conference call later this month. We look forward to providing an update there. But if this Japanese Phase III trial is successful, the opportunity for PMDA or the Japanese NDA approval in 2023 is an exciting potential outcome for this vaccine. This trial, again, is very important for not only our asset but also for the franchise and for the platform for self-amplifying mRNA in this next-generation mRNA platform. Now on to ARCT-810, which is our flagship asset for our liver franchise. This is a systemically administered messenger RNA. It's injected intravenously. This is a different product in many respects. And it utilizes the LUNAR delivery technology for intravenous applications. We've designed this lipid nanoparticle to safely protect the mRNA as it's transported through the bloodstream to access the liver and specific cells within the liver called hepatocytes. What sets this delivery technology apart from everybody else is and why it's proprietary is the structure of the lipids involved. They're intended to be biodegradable and nonaccumulating. You can imagine, if you're doing a regular dosing of a lipid nanoparticle systemically, the last thing you want is accumulating lipids, man-made lipids in your liver. We were very happy to see that this technology degrades rapidly. And in clinical trials, we saw that after 48 hours, there is no longer measurable lipids in the blood. Ornithine transcarbamylase deficiency is a significant commercial opportunity, especially for a company of our size. It's the most common urea cycle disorder. It's a very clear unmet medical need. The present products are scavenge the ammonia. However, they may do a great job of reducing ammonia levels but not preventing spikes of ammonia. If someone eats the wrong food, there's a spike of ammonia and those hyperammonemic events is what results in hospitalization, coma and death. And also puts in the requirement for liver transplantation. What does our product do that's different? Is we simply the messenger RNA goes into these hepatocytes and replaces what is missing or what is dysfunctional. And that's that enzyme is part of the urea cycle. If you can replace that enzyme, then you will no longer have elevated ammonia and all the issues associated with that. Ammonia, of course, is a bad actor. It crosses the blood brain barrier, and it's very serious. The ability to show that our technology control levels of ammonia this way will be very exciting for the platform. How much ornithine transcarbamylase do you need? You can't see the fine print at the bottom there, but there's been some excellent work in the field right now, understanding that if you have approximately 5% of normal functional ornithine transcarbamylase in your liver that you'll survive and live beyond your first couple years. But if you have a 16% or 17% of normal activity of your ornithine transcarbamylase, then you will not even need ammonia scavengers you'll consider yourself normal. You won't even know that you have OTC deficiency. The objective here is, if we can establish 5%, just a little bit of the healthy enzyme, we're going to have potentially an excellent drug. And if we elevate that level to 16% even more. And you can see where on this slide, what we've shown preclinically is that we can establish levels even up to 110%, 120%. Where is ARCT-810 in the clinic? We completed a Phase I study in New Zealand. It was successful. We dosed it up to 0.4 mg/kg. These were healthy volunteers, 24 of them. Generally safe and well tolerated. We moved into a Phase 1b trial, and this is in patients in the United States. It was a single ascending dose study. Again, we dosed up to 0.4 mg/kg in November. We had no serious or severe adverse events. We had some extra patients available. We asked to see if we can continue to proceed. Presently, we're recruiting folks at the 0.5 mg/kg level. And we've also had received approval to proceed in Phase II trials. This is a multiple ascending dose trial. Why that's significant is when you're injecting lipid nanoparticle systemically, there's a concern, all the regulatory agencies are concerned about accumulation of the lipid nanoparticle in the liver. And if you can show that the lipids degrade and are no longer there, like we've shown in our Phase I trial, then we received approval to proceed into a multiple ascending dose trial. And it also includes adolescents. This is an adolescents and adult trial. We have received approval to proceed in Europe. We're presently enrolling up to 24 subjects across a couple of cohorts. We received approval in multiple countries, and we have several sites onboarded that are presently going through the recruiting process for this rare disease. We're guiding interim data this year in 2023. This is a 6 dose study, every 2 weeks. If we can get through this successfully, then we may be able to establish biological proof of concept, which would be a big deal, not only for this asset again, but for the entire platform. There are dozens of opportunities in the liver to pursue if ARCT-810 works well. Now moving on to our lung franchise, which is led by our CF program, ARCT-032. Cystic fibrosis is again an enormous market opportunity for a company of our size. There's approximately 100,000 folks with CF worldwide. It's a well-known even though it's a rare disease, it's a very well-known disease in the field. And again, all the present therapies are modulating the receptor or dealing with inflammation or swelling or pain associated with it. And our approach is quite simple. We're just simply replacing what's missing or what's dysfunctional. And that's the opportunity of messenger RNA is to be very disruptive in an exciting opportunity for us. And this time, we're inhaling the messenger RNA and accessing bronchial epithelial cells. What does the data suggest? Well, in healthy animals, whether it's mice, rats, ferrets or primates, we've shown outstanding data that after inhalation that we can successfully deliver and functionally deliver messenger RNA to the appropriate cell types. However, the CF Foundation, who helped support this trial through funding and also a key opinion leaders wanted us to try the CF Ferret Model. And that's data you see here. Now this data is very exciting for us because it is the first time we've shown that functional delivery of messenger RNA in diseased lungs, lungs that were covered in phlegm and sputum. You may or may not be aware of this, but if you genetically engineer mice with cystic fibrosis, they do not develop phlegm or sputum in their lungs, same with rats. But in ferrets, they do. They're a better predictor of what's of the human condition because in humans, of course, the CF patients have sputum covering their bronchial epithelial cells. Even in this model, we showed really nice functional delivery of messenger RNA. And also, we received samples of these bronchial epithelial cells from actual patients and we compare them to control samples. And we've shown high expression levels of the actual protein in these cells, and we've shown that we can restore chloride activity with these cells. This data set that's showing on this slide now combining with the biodistribution and functional delivery of messenger RNA through inhalation and the CF Ferret Model. Taking those together, it increases our likelihood of success in the clinic. We're definitely looking forward to that. Now where we are in the clinic is our cystic fibrosis program is, we guided that. We'd be initiating Phase I earlier this year and guiding that we'll be initiating that trial this quarter. We'll be providing an update on the CF program at our quarterly call later this month, and we'll be excited to do that. Our first Board of Directors is on this slide. I just wanted to inform everyone that just a couple of months ago, John Markels, who was the President of Merck Vaccines joined our Board. We're happy to have him join us. I'll now turn the time over to the group for some questions, and thank you for your time.

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If you noticed, there was a very successful pandemic market for conventional mRNA vaccines, very successful. I'm going to rephrase your question, what does the endemic COVID vaccine market look like? And at presently, I think the only expectation that can guide us is that it will mirror or be very similar to the flu. And so in the flu, there's 500 million doses distributed annually, a couple hundred of those, what would be called attractive commercial markets. We're closely working with Meiji and CSL in Japan. And in Japan, Meiji happens to be the #1 flu shot company, and they distribute over 75 million doses, I mean the total amount of doses for the flu shot in Japan is $75 million and Meiji distributes over $20 million of those annually. If we can emulate that success in Japan, it will be very meaningful. The price point is great. Japan is considered by some to be the #2 market in the world for vaccines due to their high percentage of people that get vaccinated. The outlook starts in Japan. And then going from there, CSL is going to help us drive and develop COVID vaccines, this next-generation mRNA technology in Europe and the U.S. And why do I say next generation? It means it's a lower dose technology, our vaccine is 5 micrograms instead of 30 or 50 or 100 micrograms. If we show even equivalents of immunogenicity in a Phase III trial in Japan, we have a superior platform full stop. Because it's dramatically less dose and less dose level means higher profit margins, potentially faster time to accessing and distributing it.

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In terms of adaptability of this technology, it's a messenger RNA vaccine, even though it's a next-generation low-dose technology. It means that we have all the benefits of mRNA. The reason why mRNA won the pandemic market is because of clock speed. That's the terms utilized in the field, right? The faster you can get this technology over the finish line, the faster you can make it and distribute it, and you can get ahead of the mutating virus. Some technologies take 6, 9 years, 2 years to make and COVID is mutating all the time. You need something that's very fast. And at the recent VRBPAC meeting, the mRNA vaccine companies said that they can make their vaccine in 3 months. Now we'll ultimately see what that's like for the next-generation mRNA technology. But if anything, it could be faster because our dose level, again, is lower. When part of the speed to distribution is how many doses can you make per run. And so if you can make more doses per run, per site, then you may have a minor edge in getting it distributed even faster. But if you take a step back, this next-generation mRNA technology would be similar to the conventional mRNA in terms of clock speed.

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The government of Japan released a statement recently saying that they intend to purchase vaccines well into 2024. They're still closely monitoring this. They're not letting the privatization occur there. Every country is different. As long as the countries are maintaining tight control over the purchasing and distribution of this, I think there could be some emergency-related elements associated with it. And of course, it depends on any new variants that arise. If any new variant becomes challenging, then of course the governments and the regulatory agencies will tighten there, grip on that.

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Yes, all good questions. And anyway, we're definitely excited about, we have a lot of data this year. For the first time in the history of the company, we have significant and important clinical data in all 3 auxiliaries. Phase III data in vaccines, Phase II data in the liver program and Phase I data in our lung program. 3 different platform opportunities all in one year. It's going to be a big year for us if we're successful. Thanks, everyone.