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

[Audio Gap] All in the event. I would now like to turn the call over to your host, Vince Anzalone, Vice President of Investor Relations at Arrowhead Pharmaceuticals. Please go ahead, sir. [Technical Difficulty]

Okay. Thanks so much, and sorry for the delay. Sara, if you can switch to the next slide. Okay, and thanks, everybody. Before we start, I just want to remind you that we will be making forward-looking statements on today's presentation. So please refer to risk factors in our regulatory filings. Next slide, please. Next slide. So we are very lucky today to have a great panel to talk about ENaC, our first pulmonary TRIM-enabled candidate targeting cystic fibrosis. And the key opinion leader that we have joining us today is Dr. Marcus Mall, who is the Professor and Director of the Department of Pediatric Pulmonology and Immunology at the Charité University Medical Center in Berlin. He is a world expert in CF and on alternative target to CF like, such as ENaC. From Arrowhead, we have myself, Vince Anzalone, Vice President, Investor relations; Dr. Erik Bush, who is the Vice President of Biology and primary driver for the ENaC program and other pulmonary programs with his team; and Dr. Javier San Martin, our Chief Medical Officer, who is driving the clinical program. Next slide, please. So what we're going to go over today is Dr. Mall will take this first. He'll talk about ENaC as a potential therapeutic target in cystic fibrosis post CFTR modulator world. He'll talk about the unmet need in CF and theoretical experimental basis for ENaC as a potential new solution to patients that are currently not adequately treated with standard of care. Dr. Bush will take the preclinical pharmacology section, where we'll talk about some of the work we've done in various animal models with ENaC and why we think that the data and the genetics support our -- support the advancement of that program. And then again, Dr. San Martin will talk about the clinical program and delve a little deeper into where we see opportunities in CF and specific patient populations that we think really are in desperate need of new therapeutic options. And then we'll have a little bit of time for Q&A at the end. Next slide, please. So I will turn the call over now to Dr. Marcus Mall. Go ahead.

Yes. Thank you, Dr. Anzalone. So I'm a pediatric pulmonologist, as you mentioned, and a physician scientist with 25 years of experience in patient care in cystic fibrosis but also CF-related research with a focus on pathophysiology and new therapeutics, and it's a real pleasure to present my perspective here on ENaC as a therapeutic target in cystic fibrosis, and the potential role in the era of emerging CFTR modulators. Next slide, please. And the next slide. So I want to start with introducing the audience to the clinical problem we are still facing in cystic fibrosis. So cystic fibrosis is a multi-organ disease, a complex multi-organ disease caused by mutations in the so-called CFTR gene. It remains the most common fatal genetic disease in Caucasian population. So on average, about 1 in 3,000 newborns is affected by the disease. And although it affects many epithelial organs, lung disease, chronic progressive lung disease still determines most of the morbidity and the mortality of our patients. And as you can see in the image on top that's taken from a lung [ X plant ] of a patient who received a lung transplantation, chronic airway mucus obstruction, obstruction of the airways with highly viscous mucus, as you can see there, is a key problem in cystic fibrosis that leads to infection with bacteria like pseudomonas and other pathogens that then drives an ongoing and nonresolving inflammation that causes chronic, progressive and irreversible lung damage that leads to respiratory failure and death in our patients. The estimated global patient population is around 90,000 patients worldwide with the majority of them living in North America, Europe and Australia. And current life expectancy with the current treatments we have is around 40 years. The next slide summarizes key aspects of the pathophysiology of CF lung disease. So CFTR forms a chloride channel that is expressed in the apical membrane of airway epithelial cells. And as I mentioned, many other epithelia, and genetic studies identified a spectrum of molecular mechanisms that can cause CFTR dysfunction. We know probably more than 2,000 variants of mutations that can cause that problem. And they fall, they broadly fall into several classes, including the problem of lack of protein formation, problems with protein trafficking to the apical membrane and the most common mutation, F508del belongs to that group as well as the spectrum of mutations, where the protein is expressed in the aluminum membrane, but the chloride channel function is reduced. Now when we look at the lower panel at the role of CFTR in physiology in health, CFTR in airway epithelial cells is expressed together with the epithelial sodium channels, ENaC. CFTR is really key in regulated secretion of salt and water, and ENaC is really the limiting pathway for absorption of salt and water. The tight regulation of these processes is really key for proper hydration of the mucus that covers airway surfaces, the viscoelastic properties of that mucus and proper mucociliary clearance to remove inhaled pathogens and other noxious agents that we inhale all the time from the lung. In cystic fibrosis, irrespective of the underlying molecular defect, lack of CFTR, lack of CFTR function causes an imbalance between the CFTR-mediated secretion and ENaC-mediated absorption of salt and water, and that results in mucus dehydration on airway surfaces, which in turn results in impaired mucociliary clearance, incapacitating a key defense mechanism of the lung leading to mucus plugging, infection and inflammation that is the key trigger of this chronic disease process. On the next slide, next slide, please. I briefly want to summarize the evolution of specialized CF care and the impact this has had on clinical outcomes of our patients as well as the unmet medical needs in this area. So as you can see on the left, for a very long time for decades, therapy was actually purely based on symptomatic therapy, including airway clearance techniques, the use of inhaled mucolytics and antibiotics. And since 2011, we've seen the introduction of CFTR modulators as the first therapies targeting basic CF, [ ion ] transport the effect that is now -- that are now becoming available for an increasing number of patients with cystic fibrosis. So as you can see, these therapies have had a tremendous effect on the survival of CF patients with cystic fibrosis as well as quality of life. And on the right-hand side, you can see that this is also had tremendous effects in terms of improvement of lung function. However, if you look at the trajectories of lung function, lung function decline that is taken from the cystic fibrosis registry report, you can also see the lung function decline on progression of CF lung disease has not changed that much in patient cohorts that were born since the late 1980s. So progression of lung disease continues despite these improvements in therapies, clearly showing that there's an unmet need for further improvement. Next slide, please. So the key to further improvement will be probably not to further improve the symptomatic therapies, but to improve the targeted therapies for the [ CF ion transplantation ]. And the current strategies for this are summarized on this slide, according to CFTR mutation class or genotype groups. So if we look at patients with so-called Class I mutations that do not form CFTR protein, these patients cannot benefit from current CFTR modulators, and therefore, obviously, alternative targets, including ENaC as well as alternative chloride channels, highly attractive approaches for this patient group. Other patients with minimal function mutations, including a common F508del allele as well as gating in residual function mutations that are expressed in the luminal cell membrane can now be treated with CFTR modulators. However, the rescue achieved with CFTR modulators remains partial. And therefore, there's an opportunity to further improve therapeutic benefits, i.e., hydration of airway surface and mucus clearance by combining CFTR modulators with targeting -- with modulating alternative targets. Next slide. So then summarizes the role that ENaC plays in this setting. So ENaC really is the best and most validated alternative targets in cystic fibrosis pathophysiology. And again, patients with -- that do not form CFTR protein concurrently not benefit from CFTR modulators, we expect that it's at least a 15% of the total patient population that could immediately benefit from a strategy that can inhibit ENaC activity. Again, with the emergence of triple-combination CFTR modulator therapy, we expect that up to 85% of patients with a single F508del allele can be treated in the future with modulators. However, the rescue remains partial. So I think that potential synergy between CFTR modulation and ENaC inhibition is very promising to further improve benefits for patients for this large patient group. And how this synergy works is summarized on the next slide that is based on electrophysiological studies in airway epithelial cells, and it's a complicated slide but I'll try to take you through so -- which is based on -- which these studies found that the reversal potential of chloride in CF airway epithelial cells is around minus 30 millivolt. And what that means is that a membrane potential that is more negative than this reversal potential, i.e., more negative than minus 30 millivolts will improve the driving force for chloride secretion including chloride secretion that happens through CFTR. However, these studies also found that the membrane pretension CF airway epithelial cells is determined by ENaC. And ENaC depolarizes the cell. So they have a membrane potential of around minus 10 millivolts which is less negative than what is required. And these studies also show the ENaC inhibition with an inhibitor, Amiloride, changes the membrane potential from less negative, i.e., 10 millivolts to more negative, i.e., 60 -- minus 60 millivolts of the reversal potential of chloride. And therefore improves the electrochemical driving force for chloride secretion mediated by mutant CFTR, also mutant CFTR rescued by CFTR modulator. So in this context, durable and efficient inhibition of ENaC [and next ] we'll have a dual mechanism of action: one, improving airway surface hydration by inhibiting absorption through ENaC; and second, actually improving or potentiating, if you will, the effect of CFTR modulators by improving the driving force for CFTR-mediated secretion. The next slide. So an obvious question is, is this synergy, can this be clinically relevant? And to address that question, I -- this slide first shows the relationship between CFTR function and clinical CF phenotypes across patients or in patients with a large spectrum of CFTR genotypes that have been collected over the past decades. And that shows that no or very little CFTR function is associated with severe cystic fibrosis phenotype, whereas 10% and more CFTR function are associated with milder phenotype, including exocrine pancreatic sufficiency (sic) [ insufficiency. ] And the more CFTR function that can be added then results in increasingly milder disease presentations. However, we currently estimate that 80% of CFTR function are important to achieve or maintain complete health. Now if we look at what we can achieve with current CFTR modulators, as shown by the arrows, you can see that there's substantial improvement of CFTR function. But currently, this remains partial. So therefore, the prediction is that further improvement, of airway surface hydration by adding or targeting ENaC as an alternative target would have substantial added therapeutic benefits for the patients. Next slide, please. So here towards the end, I briefly want to mention that ENaC may not be -- may not only be potentially helpful in cystic fibrosis but also a spectrum of other muco-obstructive lung diseases. So emerging evidence shows that airway mucus plugging is not only an important trigger for chronic inflammation and infection in CF that causes remodeling in lung damage, but also a spectrum of other rare lung diseases as well as common lung diseases such as COPD and there, interestingly, it's been shown over the past years that cigarette smoke can actually degrade CFTR and cause an acquired form of CFTR dysfunction of CF, if you will, that also results in airway surface dehydration and reduced mucociliary clearance, really providing the rationale that ENaC is also potentially interesting targets in COPD and lung diseases. So with this on the last slide, I would like to summarize, briefly summarize, that ENaC plays an important role in the pathophysiology in CF lung disease and constitutes promising alternative targets to improve airway surface hydration and mucus clearance in patients. And I think that's important, independent of their CFTR genotype. A substantial number of CF patients, and these are the patients without the F508del allele, can currently not be treated with CFTR modulators and could immediately benefit from ENaC inhibition. Partial rescue of CFTR with current CFTR modulators does not prevent progression of CF lung disease, demonstrating an unmet medical need for further improvement of targeted CF therapies. And in this context, ENaC inhibition has a rare potential to act synergistically CFTR modulators by improving the driving force of chloride and fluid secretion mediated by mutant CFTR that is rescued by modulators, in addition to preventing absorption, liquid absorption [ in the cell ]. And finally, ENaC inhibition also has a potential as a nontherapeutic approach to improve mucus clearance and provide clinical benefits to patients with other muco-obstructive lung diseases that have very little therapeutic options currently, including patients with COPD. So therefore, I believe that it's safe, and durable strategy to inhibiting [ air ] in the airways will be a real asset as a novel therapeutic for CF as well as other lung diseases. With this, I'd like to stop here. Thank you for your attention and hand over to Dr. Erik Bush, who will now present the ARO-ENaC preclinical pharmacology.

Thank you, Marcus. I appreciate that. Next slide, please. So just a brief review, reminding everyone that ENaC is an exceptionally well-validated target from the human clinical genetics standpoint. We know that excess ENaC activity worsens the cystic fibrosis phenotype. So normally, CF patients, you need 2 mutant alleles to the CFTR chloride channel in order to have the disease. Carriers that are heterozygous for loss of function, alleles are normal. However, in rare cases, patients that are heterozygous can develop atypical CF and genetic sequencing in 2010 has confirmed that some of these patients actually possess ENaC-activating mutations. Conversely, individuals that lack ENaC activity, having 2 mutant loss of function alleles for ENaC channel subunits, develop a condition known as primary pseudohypoaldosteronism. And among their symptomatic phenotypes is that they have overhydrated airways, and mucociliary clearance in these patients is dramatically accelerated up to fourfold normal. And then finally, we also know that partial ENaC activity can rescue the cystic fibrosis phenotype. There are rare patients that have 2 mutant alleles but have a very mild or nonprogressive form of cystic fibrosis. And in 2017, it was found that these patients harbor heterozygous loss of function of ENaC subunit genes. And so therefore, the speculation here is that perhaps a 50% reduction in expression of ENaC subunits could be disease-modifying for CF. Next slide, please. So ENaC is a very well-validated target. And obviously, large pharma has been working on this for a number of years, largely from an inhaled small molecule approach using Amiloride pharmacophores or related structures, and these have encountered a number of challenges from the efficacy and safety standpoint. First of all, inhaled small molecule ENaC inhibitors do improve lung clearance transiently, but they're rapidly absorbed into circulation and have a very short duration of action. And once in circulation, they can engage ENaC channels in the kidney, where ENaC plays a key role in sodium reabsorption in the distal nephron and manifest as electrolyte imbalances and perhaps most worryingly as hyperkalemia. And so we believe, and the data here where we will show you, is that targeted RNAi approaches will overcome these efficacy and safety challenges encountered by small molecules. Next slide, please. So ARO-ENaC is a fairly simple molecule, as shown on the left-hand panel here and it's comprised of 2 major components: a highly stabilized and potent RNAi trigger to the alpha ENaC subunit that is attached to an epithelial targeting ligand that facilitates internalization and uptake into pulmonary epithelial cells after inhalation, as shown in the central panel here, the lower panel with [ SI 3 ] label trigger internalized by the lung epithelium. In vivo, this manifests as increased potency. So shown in the right in a dose response study, we're looking at rat whole lung alpha ENaC mRNA expression in animals that received a single inhaled dose of aerosolized ARO-ENaC on day 1. A week later, lungs are harvested. And as we see here, while naked trigger by itself does mediate silencing of ENaC mRNA, ARO-ENaC increases potency by approximately fivefold, showing the utility of the pulmonary delivery platform. Next slide. So this whole lung gene silencing of ENaC is quite durable. This is a time course study in which rats received inhaled doses of ARO-ENaC on days 1 and 2, and then cohorts of animals were sacrificed weekly thereafter. And as you can see, by 2 weeks post dose, we see maximum gene silencing in the lung with slow recovery towards baseline over the following weeks, and we believe this will represent and support perhaps every other week or less frequent dose regimens, minimizing treatment burden on a patient population that already has quite substantial burdens. Next slide. So we've also been quite careful to study renal function with ARO-ENaC. On the left, we're looking at tissues harvested from rats one week after inhalation of a therapeutic dose of ARO-ENaC. In the lung on the left, you can see the selective inhibition of the alpha ENaC subunit. Other nontargeted mRNAs, such as other ENaC isoforms or the CFTR channel, are not affected. And importantly, when we look at kidney gene expression, alpha ENaC is not reduced. But we've also tried to deliberately overexpose kidneys by systemic administration of very high doses of ARO-ENaC. And on the right-hand panel, we gave rats a 20 mg per kg intravenous dose of ARO-ENaC, sacrificed them a week later. And as you can see, there's no reduction of ENaC expression either in lung or critically in kidneys at these very high exposure levels. We see no changes in serum electrolytes or no other evidence of hyperkalemia suggesting that we're impacting renal ENaC expression or function. Next slide, please. So we're interested in studying the effect of ENaC inhibition on airway physiology, as Marcus presented. Inhibition of airway ENaC activity increases airway surface liquid improving mucus hydration, and mucociliary clearance improves as a result. So mucociliary clearance, shown on the top, can be done clinically. Subjects inhale a radio label and are monitored in the gamma camera over a period of time, and the clearance of the label from the lungs can be quantified. This can be done preclinically in sheep, as we'll see in a minute, but there are only a limited number of centers that can really do this effectively, clinically. So as Javier will point out here shortly for our initial clinical trials, we'll be looking for other evidence of improvements in mucociliary clearance and muco-obstruction, namely using the lung clearance index, which is a multiple-breath washout measure and an index of muco-obstruction as well as classical measures of pulmonary function via spirometry. Next slide. So back to mucociliary clearance as a readout on airway hydration and physiology. So we've been using the gold standard model of mucociliary clearance here in large animals, the sheep. And in these studies, the sheep are provided a baseline scan where they inhale a radio label to sulfur colloid that deposits in the lung, and then we gamma image those animals over a period of 2 hours. And once animals have received a baseline scan, they then received 3 daily doses shown in the cartoon to the right of ARO-ENaC days 1, 2 and 3. Then we wait 2 weeks for maximum pharmacodynamic effect in gene silencing and the animals receive a follow-up scan on day 17, 2 weeks post dose. Next slide. So representative data from a sheep study is shown here. What we're looking at is percent of the initial inhaled Technetium label cleared as a function of time over the 2-hour imaging window with 5-minute or 10-minute increments. What we see at baseline prior to dosing is that normal sheep here in the black line, clear about 10% to 12% of the radio label. However, animals that received 3 daily doses of inhaled ARO-ENaC, 2 weeks prior to reimaging are maintaining accelerated mucociliary clearance rates in a dose-dependent fashion, where animals that received a 0.04 mg per kg dose had clearance rates about 50% above their baseline values, whereas animals that received 0.5 mg per kg doses were continuously maintaining, double the mucociliary clearance rates where they started at baseline. Next slide. We also explored higher doses at single dose regimens. Here, a single dose on day 0 with day 14 follow-up. Again, animals cleared 10% to 12% at baseline. And then animals receiving 1.7, 3.4 or 5.2 mg per kg single doses of ARO-ENaC had 2 to 2.5 fold increases above baseline at day 14. And if we follow those same animals out -- an additional week out to day 21, you can see that animals receiving the lowest dose of 1.7 mg per kg were beginning to trend back towards their mucociliary baseline clearance levels, whereas the higher exposure levels were continuing to maintain accelerated clearance. Next slide. So finally, we're also interested in studying the effect of ENaC inhibition in a model of impaired mucociliary clearance, a surrogate for CF lung disease. And so the way that this is routinely done in the sheep is that they're provided an inhaled aerosolized dose of neutrophil elastase. And this enzyme cleaves ENaC channels and activates them. So we have an acute ENaC-mediated airway dehydration, coupled with mucus secretion, which causes immediate mucostasis in the sheep lung, and that's shown in the lower right-hand panel here. If we look at the dotted line, animals that are treatment naive, if they receive an inhaled neutrophil elastase dose, there is no clearance of that radio label over the 2-hour imaging window. However, if animals received ARO-ENaC inhalation 2 weeks prior to the neutrophil elastase challenge, they had no change in their mucociliary clearance rates. There were resistance to elastase mucostasis and, in fact, maintained clearance rates slightly above their baseline values. Next slide. So in effort to understand what this twofold increase of clearance in the sheep might mean, we've looked to a paper published towards the end of 2018 by Scott Donaldson, Steve Rowe and Bill Bennett in JCI Insight. And in this paper, the authors were seeking to explore mucociliary clearance as perhaps a more routine measure in the clinic for CF patients. And here, they studied treatment-naive G551D CF patients and their treatment with ivacaftor. And so shown in the upper right-hand panel, you can see that in human CF patients that were treatment-naive, in the black line, over a 90-minute scan, they cleared about 10% of the inhaled radio label. After they have been on treatment with twice daily 150 milligrams oral ivacaftor they were rescanned. And as you can see here, again, in the upper right-hand panel, their clearance rates were about twice their initial baseline values. So keep in mind that ivacaftor corrects CFTR function approximately 50%. This is the same rough percent correction that is seen with the triple combination in other CF patients like the F508del. So we'd expect the triple therapies to have perhaps a similar effect. Importantly, in this study, these improvements in MCC were correlated with improved FEV1s. So in the bottom right-hand panel, again, it's the same data, reminding us that these 3 inhaled doses of 0.5 mg per kg ARO-ENaC maintained 2 weeks post dose, a doubling of mucociliary clearance in the sheep. So this gives us some confidence that this level of silencing of ENaC will be therapeutically meaningful in a variety of CF patients. Next slide, please. So in summary, ENaC is a very well-validated target in CF as well as other muco-obstructive lung diseases, as Marcus mentioned. And this targeted RNAi delivery approach overcomes the critical limitations of small molecule inhibitors from a safety and efficacy standpoint. ARO-ENaC inhalation silences expression selectively in the lung, doubling clearance for weeks post dose and preserving clearance in a disease model of mucostasis with no evidence of systemic activity, namely electrolyte imbalances or hyperkalemia. And in alignment with that, we've seen very promising results so far in a number of preclinical toxicology studies that have enabled us to move forward with our clinical plans. So with that, we'll go to our next slide, and I will introduce Javier San Martin, who will discuss ARO-ENaC clinical development plans. Thank you.

Hello, everyone. Thank you, Erik. So first, I'll comment and present the detail of the AROENaC1001 study design, followed by our current thinking on how to develop ARO-ENaC in different patient populations. I'll finish with some details about time lines and our also current regulatory thinking of potential strategy. This is a Phase I study, first in human, but also has a component of a Phase II study in patients with cystic fibrosis. It's a randomized, double-blind study. Of course, the key objectives are the classic on Phase I study, primarily safety, tolerability, pharmacokinetics, and we'll take the advantage to evaluate efficacy in the patient with cystic fibrosis. In total, we will enroll 54 subjects, 24 of them will be normal healthy volunteers. All of them will be enrolled in New Zealand. And then 30 subjects will be patients with cystic fibrosis, and they would be enrolled in 6 sites between New Zealand and Australia. So ARO-ENaC will be administered by inhalation of nebulized solution and the same will happen with the saline placebo nebulization. On the next slide, I wanted to walk you through the study schema of AROENaC1001. And as I said before, this study has a Phase I component, which is in normal healthy volunteers, in which patients would see one dose cycle of 3 days of nebulization followed by 29 days. Of course, the key output here is safety, tolerability and PK. On the right-hand side, you see the repeat dose in light blue that correspond to the patient with cystic fibrosis. Patients then will receive 2 dose cycles, the first one, at day 1, 2, 3. And then 21 days later, they will receive another cycle of 3 doses, and they will follow this patient over 16 weeks. And then after that, we'll have a long-term safety observation. So how we're going to run this study? We start with the healthy volunteers, and this is dose range study, and we will start with the lowest dose, 20 milligrams and go all the way to the highest dose that we're going to test at 180 milligrams and [ the cohort 4 ]. As we've typically been doing at Arrowhead to maximize efforts and try to run the studies as fast as possible, we'll enroll cohorts in the following way. First, cohort 1 in the lower dose, that would be 4 normal, healthy volunteer in active and 2 in placebo. After the last subset completed 21-day safety evaluation, the DSMB will meet, evaluate the data and enable the next dose for the normal healthy volunteers, 40 milligrams. When we do the same procedure, that cohort will enable the next dose in this healthy volunteer but also will enable the first group of patients with cystic fibrosis that will be dosed at the 40-milligram level. And then we'll continue on the same approach until the very last cohort in the normal health is of 180 milligrams. At the end of that cohort, we'll enable the higher dose for patients with cystic fibrosis, and these patients will receive the higher dose. And the group here will be 13 patients in total, 9 of them will be active and 3 will be on placebo. Next slide, please. As I said before, the key primary end point in this study, of course, is safety, as assessed by the frequency of adverse events, including the possible and probably related adverse event. Key secondary end points, and I want to highlight the first one here, which is the change from baseline in serum electrolyte in both normal healthy volunteers and CF patients. This is just to replicate what Erik and Erik's group shows in the preclinical work that the effect of ARO-ENaC is really local at the pulmonary level and probably is not measurable at the renal level, and therefore, we won't see what others seen with small molecules, the effect in hyperkalemia. And then I want to measure the 2 key exploratory end point with regard to efficacy. The first one is the change from baseline in lung clearance index in patients with cystic fibrosis. And then the other one, which is the well-known spirometry or FEV1 that will be applicable to all patients in this study. And so next slide, please. A few comment about spirometry. I think most of you know that is the gold standard in care of patient with muco-obstructive disease and definitely with cystic fibrosis. The way to measure FEV1 is really the maximum volume of air exhaled in the first second of a forced exhalation that follows the full inspiration and is expressed in liter. Importantly, this FEV1 is the key primary end point most registration study over the last about 20 years. So reliable, well-known and can be done and where essentially. And approximately 15 to 20 patients in this study will be part of the assessment of FEV1. We think that, that number may be sufficient to say it needs to accelerate initial signal of efficacy and also the duration of time with regard to the assessment also will be sufficient to evaluate effective changes in pulmonary function. The next slide, I'll mention briefly the lung clearance index, which is the other pharmacodynamic parameter that we want to use. LCI essentially is a measure of ventilation in homogeneity, and that drives this calculation from the multiple breath washout test. This test has 2 different phases, the wash-in and the washout phase. During the wash-in phase, the subject, and you can see that in the graph on the right-hand side of this slide, the [ subsea breath ], combination of air and a tracer gas -- inert tracer gas for a period of time until the concentrations in exhalation and inhalation is the same. At that point, the patients continue -- the subject continue to breathe into the system, and the computer measure breath by breath, both concentration of the gas and the vital flow. And therefore, the calculation of all these parameters really demonstrate or calculate the functional residual capacity, which is an expression of ventilation in homogeneity. This is a relatively new technique. It's been initially developed for pediatric population because it does not require any specific effort, just breathe in to the system. It's considered a good surrogate, and it's been developed as a good surrogate for cystic fibrosis clinical trials. And the reason is because it's very precise and very sensible to the detect small changes, and also it's very important that this assessment correlate fairly good with FEV1 and also with other clinical outcomes, including quality of life. So we're very interested in this technology. And again, the number of patients that we have to evaluate this and the duration at which we will evaluate this effect is appropriate to really be able to show proof-of-concept data with this methodology. Next slide. So why is this really important? Despite the significant advance in the care of patients with cystic fibrosis, still a huge unmet medical need remain. This is data from the cystic fibrosis patient registry published in 2018. The panel on the left-hand side shows in the y-axis, the number of individuals with cystic fibrosis and the pulmonary function. And the x-axis show the frequency of this different age point. When I look at this figure and I look about the age 25, you can see a sharp decline in survival, number one, so this disease still has a very significant mortality. But also as they age, they start to have a higher proportion of patients with moderate or severe disease. And of course, a consequence of this is what you see on the right-hand side panel, in which you can tell that as patient age and the disease is more severe, they have higher level of exacerbations, and in this case, defined as the need for IV antibiotic therapy. Most of these patients get hospitalized and the average duration of hospitalization, it is approximately 8 days. It's a substantial burden of the disease to the patients, the families, to the health system. And therefore, we think that it's imminent that we need to develop drugs to improve clinical outcome in to the patients. Next, please. So who we are trying to help and how we're thinking about the different patient populations? And I will follow what Dr. Mall already present. As you know, about with the totality of patients with cystic fibrosis, there is about 15% that based on their genetic mutation, are not eligible for the modulators and treatment therapy. That account for about 7,700 patients. Now let's talk about the other 85% of patients that are eligible for triple therapy. Based on the data published in the New England Journal, Dr. Middleton, the Phase III registration study with TRIKAFTA, we know now about this 85% of patients, 20% of them have an improvement in FEV1 that is less than 5%. Another 13% of patients have an appropriate increase in FEV1, but still have an FEV1 below 70%. So still considered moderate or severe disease. And we do believe that those patients need help and could be good candidate for ENaC inhibition. So we put this together, it's about 14,000 patients that are purely we can address because the unmet medical need is obvious. Now there is also this other population of about 2/3 of the patients eligible for triple therapy that have an appropriate response and have an FEV1 higher than 70%, but these patients now are going to live a longer life. And as Dr. Mall said, this treatment, although are very effective, do not completely prevent disease progression. So some of these patients over time will have decrease in FEV1, quality of life and need more help. Of course, this is early, but we think that this is something that eventually could happen. So when we think about how we develop ARO-ENaC, yes, we're going to have priorities in terms of focus on those patients who will benefit -- may benefit the most. But also, we're going to consider all the populations without any limitation with regard to the genetic background. Next slide, please. The other important thing that changed in the landscape in cystic fibrosis is a number of new events that changed the way people treat the disease and the survival of patients with cystic fibrosis. First point in the upper left-hand side, in 2010, we have here in the United State, a universal newborn screening. That allowed for early diagnosis and therefore, early intervention. And early intervention figure, better outcomes long term. And the other thing that is happening is the treatment has been improving over the last 10, 15 years. And as we know, it continued to improve, and therefore, the survival is improving quite significant. As you can see here, from 2003, 33 years old, the average survival increased to 44 in 2018. And I think as more effective treatment are available to patients, the survival will continue to improve. And therefore, the prevalence of the disease will be much higher as we go along since the incidence is the same per year. So this is very important information. It's very good news for the community of patients with cystic fibrosis, and we need to pay attention to this. So with that, I wanted to finish with the next slide that gives you an idea of what to expect within the next few weeks or a couple of years. First, I'm excited to announce that in a couple of weeks, in the month of August, we will dose our first patient in New Zealand, our first normal healthy volunteer rather. We want to engage with the U.S. FDA this year towards the end of the year and in a way to initiate conversations via pre IND meeting. And this is critical to me because coming from a rare disease background, cystic fibrosis is a rare disease. Within the total population of cystic fibrosis, there are subset of patients. For example, the Class 1 we mentioned before, all those patients who -- the subset of patients who have insufficient response are desperately need of better treatment. So I do believe that we want to work in collaboration with the agency, with the FDA, and they do have in these circumstances, ways to accelerate clinical trials, clinical programs and eventually go into registration mode. The other important milestone of this year -- of next year is that the potential result for Phase I/II study, both the safety, normal healthy volunteers and the efficacy in patients will be likely available at some point in the first half of 2021. So with this, I will pass this into back to Vince Anzalone. Vince?

Thank you, Javier. Next slide, please. One more. Thanks. Okay. So first, I wanted to thank all the panelist who we've heard a lot of really great information today. I thought it was important for us to recheck in with everybody on ARO-ENaC. We haven't have presented any data publicly for quite some time, and I think it's timely. As Javier mentioned, we should shortly be initiating our Phase I/II study, and this is a program that we're really, really excited about for a number of reasons. First, there is good genetic and experimental validation for ENaC as a target. It's been an area of great interest for biotech and pharmaceutical companies for some time. And consistent with our strategy, we like to select targets or using our technology, where we're taking less biology risk. And what I mean by that is that we want to have as many points of validation for the target as possible. Because as a platform company, we work across therapeutic area. And we think ENaC fits that bill very, very well. As Erik showed, we have very promising preclinical data in multiple models. We're showing we're getting very good target engagements. And then in sheep models, we're showing that we're getting a functional improvement in mucociliary clearance. And as Erik and Dr. Mall mentioned also that mucociliary clearance tends to correlate very well with FEV1 improvements. So we're confident in the clinical programs we can engage in that target that we should see benefits in pulmonary function in patients. Next, we think that ARO-ENaC solves some of the very critical challenges that have played the field with small molecule inhibitors previously, and namely, that we don't think that we'll see changes in electrolytes, and we think there's a low-risk of hyperkalemia. And secondly, the RNAi mechanism is long acting, and we tend to have a long tail. As some of the data that Erik showed indicates that we may have 2 weeks of activity, 3 weeks or even longer. We'll have to see how that translates from animals into humans, but that's a very attractive dosing regimen. Daniel? For the clinical program... Sorry about that. [Technical Difficulty] Okay, I'm back. Sorry. We had some technical difficulties here. So the in -- the belong duration is very attractive, we think, for patients with CF because we don't want to have something that's adding a treatment burden to patients who are already taking a handful of different medications for this disease. Next, we think that CF is -- there is a large and growing population of patients that don't currently have adequate treatment options. There is undoubtedly been great advances in the treatment of patients with CF over the last decade or 2, and many are very well treated with the current CFTR modulators. But as Javier showed, there's still a substantial number of patients who just don't have adequate options or are not seeing adequate response to therapy. Third -- or actually let's say, 1, 2, 3, 4, fifth, we think there's a potential for an accelerated development pathway since this is a rare disease. And again, there's these patient subsets that are clearly in need of new therapy. And lastly, and this is kind of an overall corporate benefit of the ENaC program. We think that ENaC could be a very good solution for CF patients. But more broadly, this can provide some validation to our new pulmonary platform that uses the TRIM system. This is our first candidate using the pulmonary targeting strategy. And once we have validation that we're getting target engagement and that we have good, safety and tolerability, then we'll enter this phase of pipeline expansion. We hope similar to, as we did with the liver-directed TRIM system in the last couple of years. We think there's some very attractive targets in the pulmonary space, and we think that the TRIM platform can solve some challenges, where there have been undruggable or not adequately druggable targets in the lung. But in the end, our goal with this and all of our programs, is to help improve quality of life and survival for patients. And in CF, that is still needed. And so we are very confident in the program. We're very excited about starting. We're eager to share the release when we start dosing our first patients. And also, as Javier mentioned, we have the potential for an early readout on the Phase I/II in the first half of 2021. So we have a little bit of time for questions. So Sara, can you give instructions?

Great. Thanks, Vince. [Operator Instructions]

Okay. The first question comes from Maury Raycroft at Jefferies.

Great. Yes. So first, I'm just wondering what types of patients would be optimal to enroll in the initial study to figure out if ARO-ENaC works. So I guess, will it be patients who are not eligible or not responding to CFTR modulator? Or will you aim to treat in combo with the CFTR modulators, say you can show the synergy or added benefit?

Okay. So it's good question. This study is now going to be conducting in Australia and New Zealand. So the triple therapy is now approved or reimbursed at this point. So it's unlikely that we will see any patient that will be on triple therapy. We're not excluding those who might be on other modulators. So it's likely to be a combination of both groups. So we're not excluding those patients who are in approved therapies breaking up.

Got it. And then the other question I had was just -- if you could talk more about the formulation you're using. And if you've quantified how much of the dose gets into the tissue. And then for the doses that you've outlined for the initial study, if you can talk about where you anticipate seeing efficacy.

I can answer the first part. Erik, if you wanted to say how you did the calculation in animals. It's not quite exactly the same because the way that you administer the dose to sheep is with the tracheal tube and in patient, of course, we do the nebulization. So the way we calculate this, based on a number of data that the team is being working, is that approximately 20% to 25% of the drug that is nebulized will actually reach the lab. So that's how -- and this is based on the number of calculations and data. And Erik, I don't know if this is relatively equivalent to what you see in the sheep model.

That's correct. These are standard depositional calculations for inhaled drugs.

And the second part of the question was?

I think he was asking about biodistribution, which I guess you covered. Then also the -- what dose do we think is going to be therapeutic. And I guess that's always...

That's why we do this study.

That's why we do the study. That's the challenge. And just to keep in mind, as I mentioned, this is the first candidate using our new pulmonary TRIM platform. And so that's a big question that we'd like to answer. And in the other liver programs, there tends to be a good relationship between dose in rodents and primates and then in humans. And we just have to see if that same relationship holds for [indiscernible]

And also if you look at the preclinical data that Erik showed, there is a very meaningful response of 0.04 mg per kg all the way to 0.5 mg per kg. So the [indiscernible] range in terms of efficacy, at least in the sheep model, is quite broad. So I don't know how that will translate in humans. But that, to me, was always a very good signal that this drug is very potent, and you can achieve meaningful results with actually very low doses.

So next question is from Alethia Young at Cantor.

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Yes.

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We can hear you.

Oh, cool. All right. A question for you. One, can you talk a little bit about like -- we know where Vertex is at with like a 10% FEV, but maybe just talk about how much you think like ENaC could add on top of that? That's one question. Two, is can you talk a little bit about how do you work through the particle size of being in health particle size? And how much of a factor that plays? And then three, I think you talk a little bit about, obviously, if there's any kind of toxicity that you would think about that would be perceived risk here. I know it's inhaled and not -- it's probably clear through the kidney pulling, but just talk a little bit about that as well.

Okay. Why don't I feel the first one, and then I can turn it over to Erik and Javier. So the first question was on what sort of FEV1 improvement are we shooting for? And we want to be a little conservative right now because, again, this is our first program with the new TRIM platform. And so we'd like to start the clinical study before we provide any kind of guidance on numerically what we expect. But as Erik and Dr. Mall indicated, there should be a good correlation between mucociliary clearance of an FEV1 improvement. So our expectation is that we will see an improvement. But at this point, we don't really want to guide on what the number is going to be. Your second question was on the particle side and how we figure that out. Erik, go ahead.

Sure. I can -- sorry, there's a lot of noise in the background. So we take very standard approaches here. We're no different than any other company developing inhaled drugs. ARO-ENaC is formulated in a very simple formulation of sterile isotonic saline. Its aerosol characteristics are quite reproducible at the dose ranges we need to give therapeutically. We ensure that everything is in the respirable range preclinically. So there's been quite a bit of work done behind the scenes to standardize that. But we don't need to do anything special in terms of formulation to get everything in the respirable range.

Thanks. And then the third question was on what areas of tox are we going to look at?

Yes. Well, so of course, we're going to look at carefully pulmonary function. What I would say at this point is that from the preclinical tox data, we don't have any specific concern. We haven't seen any adverse event that we should be concerned about at this point. So we don't have any specific with regard to that. But we're going to measure FEV1 often during the study for both normal, healthy volunteers and patients. And as we said before, electrolyte, which is the obviously off-target potential issue, we're going to measure that carefully. And the good news is that we have answers very soon.