Arrowhead Pharmaceuticals, Inc. (ARWR) Earnings Call Transcript & Summary

Thank you, everyone. My name is Gena Wang. I'm SMID-cap biotech analyst at Barclays. I first hope everyone stay healthy, and I would like to thank all the participants, investors, companies and especially our event team and corporate access team who made this virtual health care conference possible. With that, I would like to introduce our next speakers from Arrowhead. We have Bruce Given, Chief Operating Officer. We also have Vince Anzalone, VP, Head of Investor Relations. Bruce, I will hand over to you.

Good morning, everyone, and thank you for being here. We don't have much time, so let's just go right to the second slide, the classic forward-looking statement slide, just to remind any of you that would be considering investing that you can access all of our materials through the SEC website. Next slide, please, Slide 3. So those of you who aren't familiar with us, our goal here is to treat intractable medical conditions by silencing individual genes through RNA interference or otherwise known as RNAi. We have a quite flexible platform that I'll show you in cartoon version in a few slides. But the key thing here is that we're looking to silence genes across diverse tissue types, not just hepatocytes, which the field has largely been focused on in the last decade or so. We have a broad pipeline already. We have 7 clinical programs at this point, and 2 of those are partnered, 5 are wholly owned. And we're anticipating 3 more CTAs this year. Next slide, please. Needless to say, we have not escaped the coronavirus infection of our markets. And at this point, we are right around a $3 billion market cap company. Next slide, please. This is our pipeline. The top drug there, ARO-AAT, is listed here in Phase II. It's actually a Phase II/III adaptive design study that is potentially pivotal. If you go further down, you'll see JNJ-3989 in hepatitis B. That's our licensed RNAi drug for hepatitis B that is deep into Phase II with Janssen. The rest of our drugs are all in first-in-human trials. And AMG 890, our Lp(a) drug, licensed to Amgen. They said publicly that they expect to enter Phase II this year with that drug. So they should soon be graduating into Phase II as well. If you look at the far left, one thing you'll notice about all of our drugs, we're either the first RNAi or we are, in the case of HBV, the leading RNAi in all of these disease states and all -- against all of these targets. And that's one of the hallmarks of our company. So we're very much innovators as opposed to followers. Next slide, please. So you should be on Slide 6. And this is the promised cartoon of our molecules. As you can see, the TRiM platform is designed for simplicity as well as specificity and deep activity. The backbone here is the double-stranded small interfering RNA molecule, heavily modified both for stabilization but also to prevent innate immune activation, which was a problem in the early days of RNAi but has now been seemingly solved. This double-stranded RNA is then linked to a targeting chemistry. In the case of liver, of course, this is the famous GalNAc, N-acetylgalactosamine, a simple sugar. In the case of our nonhepatic drugs, we are targeting different receptors with different targeting ligands. With respect to either our liver drugs or with respect to our emerging pulmonary platform, we don't need to -- we do not need to do any further modification both for cancer or, for instance, for the emerging muscle platform. We also need to add some sort of PK enhancers to allow these molecules to circulate longer and, therefore, have a greater opportunity to be taken up in the cell of interest. Next slide, please. This is our last slide. And just what we're expecting here in 2020, we expect it to be a productive year. The ARO-HSD study actually has already begun. So patients have received ARO-HSD at this point -- or normal volunteers, I should say. We are hopeful that we will be dosing our first cancer patients in the ARO-HIF2 program in coming weeks. We also have guided that we expect 3 new CTAs in 2020, including our first pulmonary drug, which is ARO-ENaC, and our first muscle-targeted program where we have not yet divulged that target. We also, of course, expect to continue with our potentially pivotal study for ARO-AAT, and we're hoping to be able to initiate also potentially pivotal studies in ANG3 and APOC3 later in the year. Our partner programs, as I said, J&J has been moving very aggressively with JNJ-3989, our former ARO-HBV, and Amgen has announced that they anticipate going into Phase II with AMG 890 against Lp(a). And then overall, we expect by the end of the year to have 10 TRiM-enabled clinical programs by the end of 2020 and to be targeting 4 different cell types. And we should be the only RNAi company in the world that's taking on so many different cell types at that point. So with that, Gena, I'll turn it back to you for questions.

Thank you, Bruce. So maybe I will just start with the key differences in terms of your RNAi technology platform, your TRiM technology, versus some other competitors such as Alnylam.

Well, maybe the easiest way to explain this would be to go back to Slide 6, the immediate previous slide with the cartoon. So Alnylam's GalNAc in cartoon form would look very much like this cartoon here. So we both do relatively straightforward what would be referred to in the field generally as canonical or near-canonical siRNA molecules. We will tend to use relatively similar stabilization chemistries. They do have some proprietary chemistries as do we. But generally, we don't find it necessary to use those. We only use them on occasions when it's to our advantage. In the case of GalNAc, the targeting chemistry is the simple sugar, N-acetylgalactosamine. So we use the same targeting chemistry. But the linker chemistries are proprietary. They have their own, we have our own. But the general molecule looks pretty similar. Now Dicerna's molecules are much more complex and probably very difficult to manufacture. But in the case of both Alnylam and us, our molecules would look very similar to this. Now we've done more outside the liver than at least publicly has been stated by our competitors, and we're the first to be filing outside of the liver in this modern era of these direct conjugates. As I said before, we use PK enhancers when we're certainly doing systemic delivery outside the liver. And we would expect that, that will bring some more diversity into the field. But in the most general sense, we're really quite similar.

Okay. That's very helpful. Like beyond the liver, what other ligands have you disclosed?

So far, we've disclosed that we're targeting integrin receptors in all 3 of those programs, in the cancer program, the pulmonary program and the muscle program at this point. So integrin receptors are also fairly ubiquitous. They also internalize and recycle quickly enough to be useful. So, so far, that's what we're using in our first 3 new target tissues outside of hepatocytes. We do, however, and have, however, worked with a variety of other ligands and receptor classes as well.

Okay. For the integrin receptor, is it -- what kind of tissues will express that?

Well, there is some tissue specificity. So it really depends on which receptor we're targeting. So obviously -- or maybe not so obviously, in the case of our pulmonary program, we have been targeting integrated receptors on respiratory epithelium. And that program has -- is obviously advancing to the point that we've said that we expect to file a CTA this half, and that has not changed. It's looking good. So it looks like that's going to happen for sure. Since -- never say for sure until it happens. But we feel very comfortable that, that's likely to happen. And with respect to the cancer and the muscle program, they're targeting a different integrin receptor that tends to be more in tissues, in close juxtaposition to the vasculature and especially that may be present in settings where there's inflammation, which happens to suit both of those class of targets.

Okay. So does that mean the conjugate will modify, depends on each indication accordingly?

Absolutely. As -- each tissue type will have obviously its best ligand receptor pair. And the goal for every new tissue we'd go into is to try to locate the best possible ligand receptor for delivery of our RNAs into the tissue.

Okay. Very helpful. And now I'll go to the specific programs. First, I wanted to ask a few questions regarding the AAT program. How do you view the competitive landscape in terms of the -- your approach and versus we have gene therapy, we have oral small molecule and -- which could address both lung and liver functions? So how do you see yours fitting into the whole landscape?

Sure. Well, the first thing you have to do with AAT is you have to separate the lung disease from the liver disease because they're likely to have very different treatment approaches. The disease gets its name, alpha-1 antitrypsin deficiency, from the fact that, generally, there is a deficiency in the circulation of alpha-1 antitrypsin, and that plays a very important role in the lung to prevent overactive inflammation in the lung as the lung carries out its normal function to get rid of the things we inhale like pathogens and different sort of toxins that we inhale from the air. The lung normally has a delicate balance of dealing with those insults while at the same time not getting overly aggressive in harming the lung tissue, and alpha-1 antitrypsin plays a critical role in that. So gene therapy, for instance, is aimed at replacing that alpha-1 antitrypsin, and gene therapy will do nothing of value in the liver. It really will have no place there. Now we could talk about gene therapy in the lung, but it's really off-target -- off-topic for us. It's a very hard thing because the liver makes about 2 grams of alpha-1 antitrypsin every day. So it's the second most highly produced protein in the body behind albumin. So we make a ton of this stuff. So in the liver, the problem in alpha-1 antitrypsin deficiency is that the liver is making plenty of the AAT protein, but it's a mutant protein. Generally, in over 95% of the cases, it's a particular point mutation, which results in a protein that's called the Z, Z as in zed, allele, and this protein misfolds in the endoplasmic reticulum. And not only does it misfold so it doesn't get secreted properly, but it also tends to associate with other alpha-1 antitrypsin molecules, forms polymers and then these polymers get wall-docked into globules and these globules produce inflammation and liver disease. So there -- so basically, the approach that's being taken with RNAi where we are the clear leader probably by 1.5 years to 2 years, the approach that's being taken here with RNAi is simply just to stop the production of that Z protein and then allow the livers to heal themselves, which they will over time. That's the expectation anyway. That's what happens in the animal model. They do show healing over time if you stop the insult, much like happens, for instance, in viral hepatitis and what people are trying to accomplish in NASH, for instance. So the goal here is to shut off the production. Now you mentioned the one other approach, which is to try to take a page out of the CF book and to try to help with these misfolded Z proteins, get them out of the liver and in so doing, perhaps help the lung disease and help the liver disease. It will probably take more time than we have here to explain. I don't think that approach is likely to work in alpha-1 antitrypsin for one reason, because, again, instead of the very tiny amounts of protein that are being made in the lung and have to get exported to the surface of the epithelium in the lung, here, we have this protein that's made in huge amounts in liver, 2 grams. And it's unlikely that we're ever going to be successful in getting a very large amount of this out of the liver. It's just a -- it's a mass problem of getting enough material into the liver to get that much protein out. The -- so being unable to get enough out, it's unlikely that these livers are going to be able to repair themselves sufficiently because the insult is going to remain. Now it may be possible that you would slow the appearance of the liver disease or you may be able to slow the progression, but that, of course, becomes a very long drug development program, very complicated, very difficult, probably run out of patent life before you would actually be able to demonstrate something in clinical trial. Likewise, in the lung, the Z protein is not very effective. It's about half as effective as normal AAT. And even full replacement in normal AAT has not been able to differentiate itself from placebo in the lung. So partial replacement of a relatively ineffective AAT protein against is probably very difficult to actually show a treatment benefit in the lung either. So I think that's going to be an extremely difficult clinical program, unlikely to be successful and certainly not in any reasonable time period. So I don't actually consider that to be a very meaningful competitor. At a clinical development perspective, I get it, the market's been somewhat convinced. But from a drug development perspective, that seems like a very hard path.

That's very informative. So regarding your AAT Phase II/III trial, you follow very unique adaptive design. Could you give us a quick overview of this adaptive design?

Right. First, I'll just say that the reason we took this approach was that we felt that to do a Phase II trial and gather the information, get it all, go to the regulatory authorities before starting Phase III would put a huge block of time in the middle that was really sort of waste of time. We felt that we could design a program that would be acceptable to regulators, that would not have that sort of start-stop aspect that's so common in drug development. So we came up with this approach of doing a run-in period with 3 different doses of ARO-AAT versus placebo and do an interim biopsy in a manageable number of patients, and based on that interim biopsy, choose one dose for the patients all to continue on and for any new patients to go on. That would be the single dose that we carry through all the way to the end with a biopsy basically out at week 96. And that's the approach we took to the FDA. The FDA liked that approach. We talked over some of the details, but basically, the approach we went in with was the approach we came out with. The way we've designed it, we do not take a statistical hit for the run in so that the p-value at the end of the trial is still a 0.05 p-value rather than having taken a statistical hit. So it's really quite a novel approach, quite a nice approach, and the agency was very receptive.

Okay. So just wondering, how would you select the dose, my understanding, all the trial remain blinded?

Right. So the dose will actually be selected by a DSMB, which is AAT experts. They will see the data in an unblinded way. And what they will be looking for here is they will be looking for the lowest dose that maximizes the reduction in monomer production with, of course, appropriate safety. And that will be their goal, which is basically what you're always doing at the end of Phase II for any program. And then that dose will be the dose that goes into the Phase III. So all of the patients that were in the original Part A will converge on that dose, and any new patients will go on that dose. As the patients in Part A got placebo, they converge on placebo. But that's basically how it works. And it's -- and we will be blinded. So we will not see that data that drives that decision. But we think it's a fairly straightforward decision, and we're confident that the DSMB will make the right choice.

Okay. And then does DSMB has a sense, like a certain level of reduction they will be looking for?

Yes. Well, we want near-complete or complete reduction basically. So the goal here will be certainly to have something probably greater than 90% reduction in monomer, I would say, but certainly something in that ballpark. Essentially, you would like to get the monomer production as low as possible to really take that burden off of the liver so the liver can turn its attention to trying to get rid of the polymer that's there.

Okay. Very helpful. And then just quickly on your ANG3 for dyslipidemia. I think at the AHA '19, you presented the data that showed dose-dependent ANGPTL3 knockdown, and we saw triglyceride reduction of 80%, but LDL-C reduction was only like 9% to 30%. So there are 2 layers of question like -- the first is the translation between these 2, and then what level of LDL reduction that will be clinically meaningful for you, like with your goal to move forward?

Well, we view both ANGPTL3 and APOC3 as primarily triglyceride-lowering drugs primarily. Now ANGPTL3 also happens to have non-LDL receptor-mediated activity against LDL, but it's not as dominant as the reductions that you see in triglycerides. Now what's interesting about that because it's LDL independent, you would expect ANGPTL3 to be especially helpful in patients with familial hypercholesterolemia, who have problems with their LDL receptors, who not only have trouble responding to statins but also would be expected to have trouble responding to PCSK9 inhibitors. So these drugs may well turn out to have important roles in LDL, but they should not be considered as necessarily substitutes for statins or PCSK9. They likely will work in some populations where those don't work, and they'll be helpful even in addition to those agents potentially in populations that are indicated for those therapies. So we see the LDL-lowering effects as valuable and important, but that's not the primary driver behind ANGPTL3 in a general sense. There are about 12 million patients or so in the U.S. with combined hyperlipidemia that have both elevated triglycerides and elevated LDL. And ANGPTL3, for instance, could turn out to be quite helpful in those patients, even in addition to the typical LDL-reducing drugs.

Okay. Great. Last question, just wondering if you could provide some initial thoughts on the pivotal trial design for ANG3 program.

Well, there are 2 ways that you could go with ANGPTL3. You could either go into those patients with LDL receptor issues, which would be an orphan approach, or you can view it for its broader applicability in patients with combined dyslipidemias or even just moderate hypertriglyceridemia, for instance, in which case, that's a broader approach and in all likelihood would require some sort of outcome study. So it's -- there are choices to be made. We are leaning, I would say, toward more of the large market opportunity for ANGPTL3. But at this point, we're still collecting data. We're in our multiple-dose patient work. And that, I think, will really drive the decision as we go forward.

Thank you very much. Thank you, Bruce and Vince. I think we already run out of time. I also wanted to thank everyone for listening. Thank you.

Okay. Thank you for the invitation, and I hope everybody has a good day. Thank you much.

Thank you. This concludes our call.