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

Good morning, everybody. Thank you so much for joining us on the last day of the Bank of America Annual Healthcare Conference in Las Vegas. My name is Jason Gerberry. I'm one of the biotech analysts at BofA, and I am pleased to be introducing our next company presenter for a fireside chat, Arrowhead Pharmaceuticals and CEO, Chris Anzalone. So Chris, first off, thank you for joining us.

Thanks very much. It's great to be here.

Yes. Great. So maybe first off, just coming off of the quarter update, few pipeline updates, few updates just regarding maybe manufacturing. I don't know if you have any prepared remarks or just want to maybe kind of run through the latest highlights on Arrowhead before we jump into maybe more specific questions.

Sure. I have no prepared remarks. We are a bit of a difficult company to follow, I think, because we have an awful lot of things going on. We've got multiple clinical programs across therapeutic area. We have -- some of these are partnered, some are wholly owned. Our base model here is to bring RNA interference to diseases that need it. And historically, this has been in hepatocytes, and we're quite good at delivering to hepatocytes. And I think we've got a good understanding and good expectation of success whenever we go into a new hepatocyte target. But we always thought that the real value of RNAi lied in getting outside the liver. And so we spent an awful lot of time on that. We have a pulmonary program. We expect 2 candidates to be dosing patients over the next month or so. We're excited about that. We've got some core assets internally in the cardiometabolic space. Those are big opportunities for us, I think. Of course, we've got -- we also address orphan indications, like alpha-1 antitrypsin deficiency. We're doing that with Takeda. In any event, we have a broad -- we are a broad-based company for a company our size.

Yes. Okay. So I guess, one of the updates was on the oncology front and with the HIF program, and so it sounds like encouraging and that you're able to get to the site of proof of delivery. But obviously, it's maybe in terms of an unmet need, dynamic, an assessment in terms of what you're kind of seeing clinically, the decision was to kind of move off of that as a target and consider other targets down the line. So maybe just talk about how focused you are in oncology. It's obviously a really tough iterative space to do drug development in, and I imagine it would take a lot of resources for the company to really kind of master that. And we hear a lot of different approaches on the RNA front, even like microRNA like that are deficient, and multi microRNAs. Like are these sorts of approaches that you guys are interested in? Or maybe if you can just kind of give the overarching view on oncology coming out of the 1Q update.

Sure. Oncology is hard. We're not an oncology company. I don't foresee us being an oncology company anytime soon. Having said that, we think that RNAi can play a role in certain cancers. And so we started thinking about that about a decade ago. And our reason for dabbling, if you will, in oncology is threefold. One, with that target, with HIF-2 alpha, we saw an undruggable target at the time that had good support for the idea that if you can knock down HIF-2 alpha, you can address the clear cell form of renal cell carcinoma. And so that was intriguing to us. Second, we viewed getting into solid tumors as a way of better understanding how we can optimize our platforms for getting into any other tissue types, right? Getting into the solid tumor is difficult, and we thought that this would enable -- this will teach us to make certain modifications that we can then apply to other platforms, whether it's pulmonary or CNS or what have you, right? And then third, we thought that, broadly speaking, RNAi should play a role in oncology, that there will be gene targets outside of HIF-2 alpha or [ inhibition ] of the HIF-2 alpha that if you can knock it down, you can treat oncology. So those are all the reasons, and 2 of those 3 are still in play. What has changed is that the HIF-2 alpha environment has changed. And now there are good drugs that address that target. And so there's less of the space for that target. But what we saw in this clinical program was, I think, success in the other 2. It taught us an awful lot about how to manipulate our broad platform to get into other cell types, and we use that for pulmonary and other things right now. Second, we're on the board. We had clear target engagement. We had clear knockdown of HIF-2 alpha in these solid tumors. And so we can bring RNA interference to solid tumors today. That's a breakthrough. No one has really done that before, and we can do that. Now is it as good as we can make it? No, we can tune this, we can optimize this, and we're going to do that. But to your earlier point about oncology being difficult, we would rather not do that alone. We'd like to do that in partnership with a company that focuses on oncology, that can help us address the right targets, whether it's KRAS or something else; and second, can help us with targeting ligands maybe or other ways of finely tuning our ability to deliver to solid tumors. And so this was a good first step to oncology, and we're not done yet. But we're done with that specific program of HIF-2 alpha.

Yes. So where would it make sense to bring a partner on board? And where you -- presumably you want to create some value in terms of elucidating maybe the next target and ability to achieve tissue -- or tumor penetration, right, and then bring a partner in when more of the cost burden comes into the equation and of the cost risk? Or how do you think about kind of moving forward in the space? And -- or do you just wait for a partner to come on board who says, "Hey, we're intrigued by the technology, and let's start a partnership in a cautionary model that way?"

Yes. I think that sort of strategy makes sense to us. We're still working a bit on the platform. But candidly, we're not spending a ton of resources on it because we've got other areas that we're focused on. And we're still keeping it warm. It would be great to have a partner come in, and we could do a deal whereby, I don't know, I'm just making stuff up, they bring in one or 2 targets, and we'll make drugs for those targets, and we partner that. But that partnership enables us to optimize the greater oncology platform that we own, and then we can use that for other partners or for ourselves as well. I kind of like that concept of that type of platform partnership. It makes great sense for the partner because they get economically attractive partnership for their one or 2 targets, and we get a platform that we can continue to develop and continue to sell.

Yes. Great. Okay. Maybe shifting gears to AAT through your partnership with Takeda. You've got some data coming up. You've got, I think, a regulatory interaction on the horizon. So maybe just stepping back, you've shown some data already for the approach, and it's had good data on biomarker basically of the disease. And what's the historical sort of context here in terms of regulatory view on a pathway? If you can talk a little bit about that, just kind of heading into all these events kind of in the remainder of the year.

Sure. So there's a lot in that question. Let me see if I can unpack that. First, let's start with the partnership. This is a partner program, but it is economically meaningful to us. We have 50-50 profit share with Takeda in the U.S., for instance. And so it made sense for us to partner with them because they're already in this market in the enzyme replacement -- on the enzyme replacement side. And so I think they can enroll a Phase III quickly, and they can certainly tap their existing sales channels. So it makes great sense to us. Now about the need, there is a substantial unmet medical need here. There is no way of treating the liver disease associated with alpha-1 antitrypsin deficiency. And there's nothing really on the horizon other than what we're developing. And so we see that as a big opportunity to help an awful lot of patients who just don't have anything right now. And Takeda can help us do that. So does this drug work? The answer is I think it does. Our data so far have been compelling. It's been well tolerated. We know, to your point, that we knocked down the biomarker. We knocked down the circulating levels of AAT substantially. I think we nearly completely suppressed it in the liver. And so that appears to work. Then the question is, okay, how does that help these individuals with this disease? And we have some tantalizing data towards that, that we generated over the last couple of years. We had an open label study where we did biopsies pre and during treatment. And what we found was that, sure enough, we do reduce the hepatic production. So if you look at hepatic burden of AAT, it was decreased by nearly over 90%. So we expected that. But second, what we didn't know was how much can we get at the metabolism of the polymer. So when these proteins are produced, the liver makes about 2 grams a day. They polymerize, and the mutant protein causes these globules. It wasn't clear how fast those globules could be clear because no one knew about the metabolism. And what we found was that after only about 6 months, they're almost completely gone. And so the drug is really working on 2 levels now, knocking down the monomer and enabling the metabolism of the polymer. So that's great news. And then the third, okay, so what kind of -- what sort of physiological effect is that going to have? And what we saw again that was shocking to us but exciting was that after only 6 months of therapy, we see -- we saw -- in a small number of patients, mind you, but we saw a clear reduction in fibrosis. And we also saw that again in a cohort that was treated for a year. And so that tells us that we are absolutely on the right track here. And so our Phase II study, which we call SEQUOIA, has 2 components. One is just monitoring circulating levels of AAT. That portion of it has read out. And so we are -- we and Takeda are now able to choose a dose for a Phase III. We are -- I expect Takeda to have an end of Phase II meeting with the FDA over the next month or 2, where we'll hopefully gain alignment on what that Phase III looks like, how many patients. The approval endpoint, I suspect is going to be the reduction in fibrosis, how long treatment is, et cetera, et cetera. I expect that to happen relatively quickly because I don't think there's -- I don't think it's very -- I don't think those issues are terribly controversial. And then the flyer is sometime in the fall, I think we will have the biopsy data portion of that Phase II study, of the SEQUOIA study, where we took biopsies before treatment and then after a year of treatment. And it will be interesting to see what -- certainly what the globules look like. But more understandably, it will be interesting to see what that fibrosis looks like because, again, that open-label study that I mentioned that we -- that read out last year and the year before was very small. And so this will just give us more patients. It will be interesting to see what it looks like. We have breakthrough therapy designation with the FDA. And so should those be interesting data, we can have a dialogue with the agency about what that means to our program.

Yes. So it sounds like you're being conservative on the assumption of Phase III that includes some sort of biopsy-related endpoint, but there's a range of scenarios on the table, one of which could include something more accelerated.

Sure, sure. And then the question is what does accelerated look like? People -- you want to imagine that if these biopsy data that we see in the fall are stupendous that you can make an argument that we should have accelerated approval based on that. I think that's unlikely just because there's just not a lot of patients there. It's going to be interesting, and I look forward to seeing that. But I don't want anyone to be assuming that we're going to -- that we expect that because, again, we haven't seen the data yet. I think that a more likely accelerated approach could be in the Phase III if there is an engineered interim analysis after some number of patients. You take a look at those biopsies and look at fibrosis reduction, that could be a real viable way of accelerated approval. So we'll see how the discussions go with the FDA, but that feels to me like a reasonable approach.

Yes. I guess, thinking back to other categories where fibrosis was an issue and biopsies were taken, one of the challenges was comparing to baseline and getting -- sampling at the same location and just sort of discordant results. So is that a theoretical risk factor here as you kind of embark upon this? And then secondarily to that, thinking ahead, from a clinical trial enrollment perspective, can you speak to sort of the burden in trying to do multiple biopsies, even in an interim like getting patients to sign up for that?

Yes, yes. Those are all concerns. Fibrosis is going to be a bit of a noisy endpoint. Ultimately, it's important. If we're going to have -- if you're going to have payers pay for it, I think we're going to need to have that on the label. And so it's -- that's just a necessary evil. And so you just have to have the power for it. We're going to have a large number of patients that we can see the difference because we're convinced that we will see that improvement. We just have to show it. Then the question is finding those patients who are willing to do this. I think that's going to be less of an issue because these patients just don't have any other options. It's a well-tolerated drug, at least so far. It's a well-tolerated drug. And so for those who have the disease, I think it's not a crazy expectation. And also remember, this is not an ultra orphan. It's thought that there are probably 100,000 to 120,000 people with AAT deficiency in the U.S. and probably a similar number, maybe a bit more, in Europe. And so they're out there. And Takeda, again, is a great partner here because they're in this market. They know where these patients are. Now there may be a concern about -- so what do you do with those patients that come in, their screen failed because they don't have fibrosis or they have a low level of fibrosis? I think we still keep them in the study because we're going to want to beef up our safety database. We could put them on drug, but then you have them in a separate study where we're not looking to decrease fibrosis in somebody who's an F0, for instance.

Yes, yes. So I imagine there's also, I guess, the challenges, the natural history and the progression in terms of what the liver biopsy would show over kind of some measurable period, right? So that becomes an unknown and could -- but the thinking is perhaps to capture true value in terms of pricing, you need to have a biopsy that's saying kind of benefit demonstrated.

Yes. So historically, there has been precious little data on the liver disease associated with alpha-1 antitrypsin deficiency. And the reason is because people were dying early of the pulmonary disease. As people are smoking less, they're living long enough. So now we are understanding that this is a real problem. It has not been studied very well yet. Historically, the -- again, people were dying at an earlier age. And so we just thought of it as almost biphasic disease where there are some infants who would get into trouble quickly, and it's not clear why that was the case. But some would get in trouble. And if not, then they wouldn't see liver disease until later in life. So the only thing we knew for years was there was a study done in Scandinavia that looked at autopsies of people who died with AAT, and something like 2/3 of them died with liver disease. Not all that -- most of that was undiagnosed. But it was clear that there was something going on there that was potentially dangerous. And then there were -- and then recently, there have been 2 natural history studies that have been done on people with AAT with 0 biopsies, looking at the progression of the disease. And so some of those data have come out, and some are still waiting to come out. But I think that will give us the baseline, and that's helpful to us.

Yes. Got it. Okay. And then I guess, just last question on this before we jump into cardiometabolic. But the nature of the arrangement, I assume that you're able to disclose to shareholders sort of some of the takeaways from regulatory interactions. Or does Takeda control that? Just kind of thinking about the information flow that will come out over the next 6 to 9 months.

Right. So Takeda will manage the regulatory interactions. We will be involved, but it's their interactions. We're not going to disclose a blow-by-blow of those discussions. But certainly, once we have alignment on what a Phase III looks like, we'll update the Street on that. And my expectation is that, that is this year. Hopefully, sooner than later, but that's this year at some point.

Yes, yes. Got it. Okay. So cardiometabolic, you've got ANGPTL3. You've got APOC3. These are both programs that you want to keep internal and take the goal line. And do you see kind of development more in some of the more narrow, nicher applications if you kind of brought them to market yourself, so that you're not having to run the mega outcomes trials like for the larger market opportunities and then have the big commercial build-out? Can you maybe talk through some of those considerations?

Right. So the way that we are addressing that is we are approaching this as an and company, not an or company. We think there's value in all those, and we expect to get into all those markets ourselves. These are drug candidates that feel to us like almost a once in a career opportunity. These drugs just work. They do things that no other drug is able to do right now, lower triglycerides, lower LDL, increased HDL and the like. Safety profile has been good. Dosing schedule should be good. So we think this is a big opportunity for us. Now the way to get in that, we think, is -- particularly for APOC3, is via a staged approach. And so what we are doing right now for APOC3 is we've got multiple Phase II studies ongoing and a Phase III. The Phase III is an FCS, familial chylomicronemia syndrome, right? It's an ultra orphan, but these patients have very limited clinical options. There's no FDA approved treatment for FCS right now in the U.S. And so that Phase III is ongoing, and I think we can get to market relatively quickly there. It's a year-long study once it's fully enrolled. And so that gets us in the market, allows us to start to think about being a commercial organization. And then the next step will be to broaden that label out in those severe hypertriglyceridemics. We have a Phase II study going on right now to support that. These are patients with trigs above 500. And we know that the approval endpoint there is simply lowering triglycerides. It's not an outcome study. And so that's a really interesting opportunity where we think there are several million of those patients out there with a fairly clear and short regulatory pathway. We think that's a -- I think it's a yearlong Phase III study. And so I think we can start that Phase III next year sometime. And then, ultimately, we could broaden out further if we decide to do a CVOT in APOC3 against mixed dyslipidemia. We're doing a Phase II right now that will support that where we're looking at patients with elevated LDL and elevated triglycerides. And I think that we're going to learn a lot from that study. What's intriguing about APOC3 is not just that it lowers triglycerides by 90% to 95%. I mean, it's a game changer, I think, for that. In some patients, it also lowers LDL. But also in patients, it increases HDL. And I had thought for years that, that story is over. But I don't think it is. What we're learning is that we can increase HDL by between 100% and 150%, and so it's a greater increase than has been done pharmacologically in the past. But also, more importantly, the question is, what type of HDL is being increased? My understanding is that based on the structure of that HDL, it has a lesser -- or better ability to get rid of cholesterol. One of the determinants of how efficient HDL is, is the quantity of APOC3. The more APOC3 in that particle, the less efficient it is. And of course, we're knocking down APOC3. And so we're interrogating that right now. We're trying to learn a bit more about that story. But to the extent that there is a play there, I think one could make a good argument that we should do a CVOT in APOC3. Now even if we don't do that, I think there's a big opportunity in severe hypertriglyceridemics and an important opportunity in FCS. So that's APO. ANGPTL3, is a similarly, I think, interesting drug candidate. It lowers triglycerides and also lowers LDL. And so we are doing -- we have just started a small open-label study in homozygous familial hypercholesterolemia, HFH. But we're also doing a larger Phase II study that's fully enrolled that would support a CVOT. And we're excited about that. We see a big opportunity there for those patients with mixed dyslipidemia, those patients who are not meeting LDL goal and have elevated triglycerides.

Yes. So on ANGPTL3, you get a lot of questions about was it vupanorsen -- Pfizer's vupanorsen which was discontinued. I believe there was some talks, even though like all talks that's always talked down, but there's some talks coupled with maybe not enough of a clinical signal. RNAi and ASOs have sometimes had discordant results as well, so I think the messaging is just different approaches, different drugs. Maybe talk about the level of maybe target knockdown that's achieved with your approach say versus vupanorsen. And what gives you that confidence that you're heading down the right path?

Right. So we just haven't seen -- with ARO-ANG3, we haven't seen the type of data that they have said they've seen. I don't think we've seen all the data yet, but what they told us. We haven't seen liver fat increases. And my understanding is they saw that. We haven't seen any of that.

I think that was on target, too, right?

It's not our target. We haven't seen any of that. And we've dosed an awful lot of patients, and we haven't seen any of that. We haven't seen concerning ALT increases. And we've seen substantial LDL and ANG3 decreases that seemed to be just better than what they've seen. So we're full speed ahead. We think this is a big opportunity. We think this is a good drug, and we're just going.

Yes. Okay. And then on APOC3, this is for FCS. You mentioned no U.S. approvals. This is -- Waylivra is approved for that OUS, right, and the approval in U.S. was kind of confounded by some toxicity issues, if I recall.

That's right. Yes. So it is -- I think it's approved in Germany. The issues that they saw, my understanding at least, is all off-target effects, right? They've had -- they've seen thrombocytopenia. That's a class effect of antisense, all of those. We haven't seen that in any of our drug candidates. And I don't think our competitors have either. So that -- we don't think that's an issue. They've had a number of dropouts. I think they've got pretty grinding injection site reactions and such. We haven't seen any of that stuff. So what we have seen is a more potent knockdown of APOC3 than they have and also a more durable response. This is what we would expect in antisense versus RNAi. I think this is going to be a once every 6-month subcu injection. At least, the data so far would support that.

Yes. Okay. That will make you keep defending your approach versus ASO because, clearly, the ASO approaches have run into some tox issues. So on APOC3, can you just remind us of the clinical data flow over the next 12 months and what we should learn there?

Sure. So let's see. We've got multiple Phase IIs ongoing right now. I don't want to -- we will not have any data readouts this year, but I expect data readouts next year on those Phase IIs. We'll see how fast we can enroll the FCS Phase III. We are enrolling that now. My hope is that, that will be fully enrolled by, say, first half of next year. But we'll just see how that goes.

Right. So on FCS, it's more about execution over 2023 in terms of the Phase III in enrollment and then the possible data would be in which population?

In -- not the FCS. So we'll have data in the mixed dyslipidemia group as well as the severe hypertriglyceridemics next year some time.

Okay, okay. And the market opportunities tied to those are clearly much bigger than FCS. And can you give a little bit of a sense of sizing on those?

Sure. So the severe hypertriglyceridemia market feels to us like several million people in the U.S. And then, of course, mixed dyslipidemia will be -- can be 30 million people. That's a very large opportunity.

Yes. And the endpoints of focus here are going to be on, I guess, lipid parameters and/or those measures and not outcomes in 2023.

That's exactly right.

Okay. And you mentioned for those populations, what would represent, perhaps in your view, kind of an important clinically meaningful signal and really give you kind of high conviction that you're on the right path because as you flip into Phase III post those results, I presume?

Yes, yes. So for both APO and ANG, we're not relying on a surprise to be bullish about those. If we -- if in these multiple Phase II studies we just see what we have seen in the past, then we're good. The safety profile has been good. The PD has been phenomenal. If we just continue to see those things, then we've got drugs. Again, what's compelling about these is that these pathways are clear. The populations that we will be treating are clear, with elevated triglycerides, low HDL, elevated LDL. They're clear. The regulatory pathways for all these are clear. They're well worn. They can be expensive and long, but they're well worn. And so as long as there are no substantial surprises in these Phase IIs, we see big opportunities over the next several years.

Good, good. So we have like a little less than a minute to go, but just your inhalation programs. You're going to be moving into Phase I. I think you have an investor event here in the next month or so. Maybe just set the tone for what you plan to talk about. Is it more going to be about trial design, market opportunity and kind of pathway and some data updates?

Right. So this is an area I'm really excited about, and I've got 20 seconds, unfortunately. So we're going to have a pulmonary R&D Day the week after next in New York, where we'll be talking about these first 2 targets. We'll be talking about the rationale for these targets. We'll have KOLs there. We'll be giving some preclinical data and then a strategic roadmap from a regulatory standpoint, from a clinical standpoint. And we'll also be disclosing our next pulmonary target that we've not yet discussed. But look, we're excited about the whole platform. The lung is a target-rich environment. There's a lot we can go after in IPF, in COPD, in asthma. And MUC5AC and RAGE, we think, are 2 really exciting targets to go after. So we're looking forward to that. I think that we can have data by the end of this year. Both of these -- both MUC and RAGE have circulating biomarkers. And so we can see depth and duration of knockdown, I think, this year.

Good, good. All right. Well, sorry we couldn't spend more time on the inhalation programs. We're looking forward to the updates later this month.

Thanks so much.

All right.