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

For your continued patience, your meeting will begin shortly. assistance at any time, please press star zero and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you. Hello and welcome everyone joining today's Arcturus Therapeutics second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. you will have an opportunity to ask questions during the question and answer session to register to ask a question at any time please press star 1 on your telephone keypad please note this call is being recorded and we are standing by should you need any assistance it is now my pleasure to turn the meeting over to Netta Safazadeh vice president head of investor relations.

public relations and marketing. Please go ahead. Thank you, operator. Good afternoon and welcome to Arcturus Therapeutics quarterly financial update and pipeline progress call. Today's call will be led by Joe Payne, our president and CEO, Dr. Alan Cohen, our chief medical officer, and Dennis Mulroy, our chief financial officer. Dr. Pat Chivis-Ross, Kula, our CSO and COO, will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statement. Please see the forward looking statement disclaimer on the company's press release issued earlier today, as well as the risk factor section in our most recent form 10-K and in subsequent filings with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements.

And with that, I will now turn the call over to Joe. Thank you, Netta, and it's good to be with you again, everybody. The second quarter of 2026 was marked by continued execution across our rare disease pipeline and important strategic developments for Arcturus' vaccine franchise. Today, I'll provide updates on our rare disease programs, ARCT 032 and ARCT 810, and summarize today's good news regarding our vaccine enterprise. I will then turn the call over to Alan for additional clinical updates and to Dennis to review our financial results. Starting with ARCTO32, our inhaled mRNA therapeutic candidate for CF. During the quarter, our phase two study continued to advance on schedule with active screening and enrollment ongoing across sites in the United States, Israel, and Turkey. international sites are important for our recruitment strategy, given the higher prevalence of individuals living with Class 1 CF in Israel and Turkey. As a reminder, Cohort 4 is evaluating 10 milligrams of ARCTO32 administered daily by inhalation over a 12-week treatment period. The study is monitoring for safety and evidence of early clinical benefit, including pulmonary function measures such as percent predicted FEV1 and lung clearance index, or LCI. In addition, quality of life measures and high-resolution CT imaging data are being collected. The decision to advance our CF program into Phase III is expected in the fourth quarter, or Q4 2026. Barcturus decides to proceed into a Phase III trial, this decision triggers additional and very meaningful contributions from Thermo Fisher, including manufacturing support, clinical research, and related services. Turning to ARC-TA10, this is our mRNA therapeutic candidate for ornithine transcarbamylase deficiency or OTC deficiency. We are pleased to update the market today that we've completed enrolment in our ongoing Phase 2 study, and all enrolled subjects have completed study drug dosing. This represents an important operational milestone for our OTC program. And with the dosing phase of the study completed, our team is now evaluating the Phase II clinical data, along with the supplementary data requested by the FDA in the Type C meeting earlier this year. These data will inform upcoming regulatory discussions across both adult and pediatric development. We expect to communicate the Phase 2 clinical study data later this year in Q3 2026, current with the data readout, we will provide additional details regarding the regulatory path forward for our OTC deficiency program. Now on to our vaccine division. Today we announced the conclusion of our SA mRNA collaboration with CSL Securus. And on behalf of Arcturus, I wanted to express sincere gratitude to the outstanding team at CSL. They've been a great partner to help shepherd this first in class next generation SA mRNA technology to where it is today. A validated platform with approvals in over 30 countries. We are pleased to regain global rights to our commercial COVID vaccine product, CoStave, and to our self-amplifying mRNA platform. Having strategic control of this validated vaccine platform is an exciting opportunity for our company. The Arcturus SA mRNA platform is validated. It's proven to be efficacious. with an immune response that is durable and superior in comparative studies. It's been reviewed by several regulatory agencies to be safe and well-tolerated. manufacturing process is commercial ready, scalable, fast, with lower COGS attributed to a significantly lower dose level. Several global regulatory agencies have reviewed and approved Arcturus' SA mRNA vaccine platform as represented by COSTAVE, which has been approved for licensure in Europe, Japan, and more recently the United Kingdom, with the regulatory path forward into the United States also clearly understood. The Arcturus vaccine platform is pandemic ready. The US government is keenly aware of this next generation SAMRNA platform. It is likely not a matter of if, but rather a matter of when this platform will be called upon to address future epidemics of infectious disease. Under the agreement, Arcturus regained global rights to CoStave and the broader infectious disease vaccine portfolio, including seasonal influenza, pandemic influenza, RSV, and EBV vaccine programs. The agreement also resolves the arbitration related to European regulatory approval milestone payment. WSL Securus wired a one-time cash payment of $12 million to Arcturus, and Arcturus is released from liabilities, including those associated with an R&D credit, with an aggregate value of approximately $16 million. With strategic control of the portfolio returned to Arcturus, we are evaluating opportunities to maximize its future value, including further commercialization and partnering pathways. With that, I'll turn the call over to Alan for a more detailed update on our clinical programs.

Thank you, Joe, and good afternoon, everyone. From a clinical development perspective, the second quarter represented meaningful progress for both ARCT 032 and ARCT 810. Beginning with our CF program, ARCTO32, our ongoing phase two study continues to enroll people living with cystic fibrosis who have class one mutations. Enrollment remains on schedule. With active screening and enrollment underway across sites in the United States, it is Israel, and Turkey. The study is designed to evaluate daily inhaled dosing of 10 milligrams over a 12-week treatment period. It continues to assess safety as well as evidence of early clinical benefit, including pulmonary function measures such as changes in percent predicted FEV1 and lung clearance index, quality of life measures, and high-resolution CT scan imaging. One important development this quarter was the expansion of screening and enrollment activities beyond the United States into the Eastern Mediterranean region. Israel and Turkey are geographies with a high prevalence of individuals with CF class 1 or null mutations, which will meaningfully support our recruitment efforts and efficiencies for this study. Unlike the United States, where up to 10% of people with CF are ineligible for modulators due to no mutations, up to 30% to 40% of people with CF have no mutations and are eligible for consideration of enrollment in our ARCT 032 study from Turkey and Israel, respectively. Clinical execution remains on schedule and we are laser focused on generating the data needed to support the phase 3 decision expected in Q4 2026. Turning to our OTC deficiency program, ARCT 810. Within the quarter, we completed enrollment of the ongoing Phase 2 study, and all enrolled subjects completed study drug dosing. This is an important operational milestone and allows us to now focus on evaluating the supplementary data generated from the enrolled study population. We remain grateful for the continuing support, ongoing encouragement, and strong engagement on behalf of our ARCT 810 OTC Deficiency Study by the patients, their families, and the rare disease care community. Thank you for your collective help and interest in our development program. Our current efforts are focused on data review, preparation for upcoming regulatory interactions, and planning for an end-to-phase two meeting regarding the path forward across both adult and pediatric development. We expect to communicate both the data and regulatory plan for OTC deficiency program in Q3, 2026. Across both our rare disease programs, our focus remains on disciplined clinical execution, quality data generation, and productive regulatory engagement to support efficient development decisions.

With that, I will turn the call over to Dennis. Thanks, Alan, and good afternoon, everyone. Our press release issued earlier today includes financial statements for the three and six months ended June 30, 2026, and provides a summary and analysis of year-over-year performance. Please also reference our Form 10-Q for more details on our financial performance. Cash and cash equivalents were $191.5 million as of June 30, 2026, and $230.8 million on December 31, 2025, for a decrease of $39.3 million over the first half of 2026. Revenue was $3 million and $5 million for the three and six months ended June 30, 2026, compared to $28.3 million and $57.7 million in the comparable periods last year. Lower revenue was recognized under the CSL collaboration as our tourists progressed towards termination of the agreement and regaining rights to COSTAVE and its broader infectious disease vaccine portfolio. Research and development expenses were $17.5 million and $39 million for the three and six months ended June 30, 2026, compared with $29.6 million and $64.5 million for the corresponding periods in 2025. The decreases were primarily driven by lower research and development spending, including reduced salaries, wages, benefits, and facilities costs as the company continues to advance its CF and OTC programs while maintaining its disciplined approach to capital allocation. General and administrative expenses were $11 million and $20.5 million for the three and six months ended June 30, 2026, compared with $10.3 million and $21.7 million in the comparable periods last year. Overall, general and administrative expenses remained relatively consistent across periods with a slight quarter-to-quarter increase due to legal fees partially offset by reduced spending in salaries, wages, benefits, and facilities costs. We remain focused on disciplined execution and capital allocation as we advance our rare disease programs. The CSL Secure Risk Termination and Settlement Agreement strengthens our financial position as we regain control of those assets, and the Thermo Fisher Collaboration funds and supports execution of late stage development of our CF program. We continue to maintain a strong balance sheet and cash runway of over two and a half years through year-end 2028, allowing the company to reach import political and regulatory milestones for its rare disease pipeline.

With that, I'll pass the call back to Joe. Thank you, Dennis. Arcturus continues to execute across our rare disease therapeutics portfolio while strengthening the long-term strategic position of the company. With enrollment progressing in our Phase 2 ARCTO32 study and completion of enrollment and dosing of ARCT810 and the return of strategic control of our vaccine portfolios, We remain focused on advancing important clinical, regulatory, and corporate milestones through the remainder of 2026. And with that, let's turn the call over to the operator for questions.

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question. We'll take our first question from Lily Noso with Lyric Partners. Please go ahead. Your line is now open.

Hi, good afternoon. Thank you for the update on the quarter. Just thinking about the OTC program, could you maybe provide us a little bit of detail and an overview of the data we should expect at the upcoming readout later this quarter? Would it be solely the U.S. pediatric or U.S. adolescent and adult patient or would we also.

a longer-term update from the European patients. Hi, Lily. Thanks for the question. Yes, with dosing completed, you're right. We are preparing for this data a disclosure later this quarter. We're evaluating the phase two clinical data, which includes the U.S. and European data set. The new data, of course, will be the most recent patients that have added and completed dosing here in the United States. But it will also include supplementary data that was requested by the FDA in the Type C meeting earlier this year. And so we just intend to share a fulsome update on the OTC program That includes not only the Phase II data, but the requested Type C data, and providing additional detail with respect to the regulatory path forward.

I'll leave it at that. Great, thank you. Maybe as a follow-up, still staying with OTC, do you view diet liberalization as the bar for success or should we be looking maybe at the biomarker level?.

With respect to biomarker levels, yes. Well, I know the biomarkers being evaluated and measured are ammonia and glutamine and, of course, urea itself.

But maybe, Alan, you can comment or address the rest of the question. Yes, great question. I think the two elements that are going to be most important are not just the biomarkers. They're certainly important because it speaks to mode of action, but also how these patients feel as well as function. So it'll be the totality of the data that we've been able to generate. up to this point, not only relating to safety and tolerability, but also biomarkers, as Joe just mentioned, most notably ammonia levels and glutamine, but also the additional quality of life and functional measures that we're collecting. So it really will be the totality of all the data is what the agency is interested in wanting to see and which is obviously important to move our program forward. Thank you.

Thank you. We'll take our next question from Pete. Pete Starvopoulos with Cantor Fitzgerald, please go ahead. Your line is now open.

Thank you very much. Hi, Joe and team. Congrats on the progress. I have a couple questions on the CF program. First one is, how has the cadence of enrollment been? And will you wait for all the patients to complete the study before data disclosure, or is there a possibility of an interim look? And are there plans to adjust the protocol to allow dosing past 12 weeks or three months?.

Okay, there's a few questions there, but thanks, Pete, for joining the call. With respect to the cadence of enrollment, we touched on that we've expanded our footprint to ex-US sites in Israel and Turkey that are assisting with that challenge. With all rare disease programs, it's all about the cadence of enrollment, and we feel confident. In fact, we've expressed considerable or a high level of confidence with respect to the cadence of enrollment rate now that Israel and Turkey are.

are participating in this trial. With respect to the remainder of the questions, I can turn the time over to Alan. Sure. I think, Pete, the essence of what you're asking is, when do we know that we can draw a line and total up the cumulative nature of the data we've generated and that we're satisfied that it's sufficient? to make a decision. I think the data is going to drive that. But certainly we believe that at the rate we're currently enrolling and the quality and nature of the data that we're generating, particularly now that we've added Israel and Turkey to the mix, which have such a larger preponderance of the patients we're most interested in identifying and enrolling, we believe that the time should be sufficient through a balance of Q4 to be able to accumulate the necessary data to make an informed decision on what's best for the program and for these patients moving forward.

And just to add to that, if you notice our new guidance is focusing on the decision to proceed rather than a data share or completion of enrollment. And this is simply because the next meaningful event for this program is that decision, which is guided for Q4. The decision. to proceed triggers significant and meaningful contributions from Thermo in our recent deal that we announced. And so that's what we're focused on is getting sufficient data for that decision to proceed in Q4.

All right, thank you for that. I do have one question on LCI. being used for CF, the Phase II study. Can you just talk a little bit about this test, sort of how sensitive is it, and how variable is one close reading to another?.

Yes, LCI is definitely a different lung function measurement, Alan. Maybe you can comment on some key differences there with sensitivity, etc. Yes, sure. I think the biggest unknown and the biggest challenge for using Lung Clearance Index in adults with CF has been the lack, as you know, of normative data among the population. That's of most interest. Fortunately, as you're probably aware, the CF Foundation funding the REACH study, and that study is, we're going to get an update on that at the upcoming Cystic Fibrosis meeting in Atlanta in October. And the foundation has been kind enough to offer to make that data available, especially for companies like ours. than others that are working in this space, so that we can have access to that data and use it as a natural control. So the short answer is, is that the sicker that patients are performing this test, the more challenging it is. But we're focusing in on a mix of patients within a range that we believe we should be able to get highly reproducible, mean meaningful data that's not only reproducible, but also is giving us a much more sensitive measure of changes in the smallest airways where the earliest changes of lung disease occur in this population. So it's adding additional nuanced information that spirometry and pulmonary function testing traditionally doesn't give us. So we think it's actually... better for the patient population. It's better for our understanding of the disease itself. And we think it might lead to another pathway forward for showing an ability to stabilize and improve lung function in this very vulnerable patient population.

All right. Thank you very much for that, Kaldur, and congrats once again on the quarter. Thank you. Thanks, Pete.

Thank you. We'll take our next question from Yanan Vu with Wells Fargo. Please go ahead. Your line is now open.

Hi, thanks for taking our question. This is Kuan-Nan for Yanan, and congrats on the quota. on the CF program. Can you share by 4Q what kind of data set do you expect to have collect to help you make a decision? And given that this is an open label study, are you seeing the data in real time? Any safety update you can give us? Thank you.

Yes, the data we're collecting is FEB and LCI data for pulmonary lung function data, and that's supplemented with high-res CT scan data and validated quality of life measures and surveys. So that's going to be the collective data that's going to be under consideration when Arcturus makes its decision to proceed. And then with respect to the open label nature of the study, absolutely. It's an open label study. Arcturus and the team will have access to data on an ongoing basis.

Oh, so any safety signal you have observed or any comments on that?.

Yes, with respect to CF safety, the ARCTO32 is the name of our CF candidate. And this candidate, or ARCTO32, has been in over 50 participants to date, relatively. ranging from all the way up to 15 milligrams for 28 days of daily dosing. And we've done so without steroid treatment before, during, or after. And this whole time being permitted by regulatory agencies to self-administer in their home, not necessarily required for these people to do so in a clinic. And we're presently active in a 12-week study. So this is, I guess, a longer way of saying that we have a high level of confidence in our safety and tolerability of this platform, given the dose levels and the duration we've collected so far. And we hope that that continues. But it is a key differentiator for our programs. So thank you for the question. You know, it's been decades of failures of inhaled therapeutics, and it's always been attributed to failures in toxicology and tolerability. Humans just don't like to inhale foreign substances. So we've overcome those challenges over the last decade of R&D.

Got it. And a quick question on OTCD. Has the EOP2 meeting with FDA been scheduled? And what are the potential outcomes from the meeting? Thank you.

Yes, we've already highlighted and guided that we're going to have a fulsome data and regulatory path update later this quarter, and that will be the opportunity to provide some more details about that EOP2 meeting. And so that will be the appropriate time to do so.

Got it. Thank you for all the callers. Thanks for your questions.

We'll take our next question from Yajel Nakomovic with Citigroup. Please go ahead. Your line is now open.

Hi, this is Joanne Kim on For Your Goals. Thanks so much for taking our questions. I'm just curious, but I'd love to hear a little bit more about the collab with Thermo. Can you tell us a little bit about how that came about and have they seen any interim phase two data or 15 milligram data ahead of you guys making that deal?.

Yes, it's a great question. So there was significant interest from multiple large manufacturers in the CF product because it's a very unique product. Unlike our vaccine, our CoState vaccine that we just regained rights and control, that vaccine is dosed at 5. micrograms once a year. It's a very infrequent, long-duration acting product. Unlike that product, the CF product is 10,000 micrograms daily. So because it's a significant commercial manufacturing product, a deal, then you can understand the level of competitive interest from large manufacturers. As they came together, we put forward a deal that made sense to all parties involved, and Thermo Fisher ultimately became our exclusive partner for commercial manufacturing of the CF product through that path. Did I address your question?.

Yes, and I was just wondering, did they happen to see the internal safety data? Yes, absolutely.