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

Great. Well, thanks, everyone, for joining us for the last session of the third day of our conference. I'm pleased to be joined by Chris Anzalone, CEO of Arrowhead. Thanks so much for joining us.

Thanks very much for having us.

Maybe let's just get started with your cardiometabolic vertical. You had some really nice data only last week, but maybe talk us through that and contextualize the results that you've seen there, maybe with respect to the clinical benefit that can be afforded to patients from plozasiran as well, as you think about differentiation versus the competitive landscape, namely Ionis' olezarsen.

Yes. So look, we expected good data there. We have treated now several hundred patients with plozasiran and it has worked consistently in all patients. We've seen good deep knockdown of APOC3 of triglycerides, et cetera. So we expect a good data. But this is a small Phase III study and funny things can happen in small Phase IIIs, so you never know until you know. Even given our expectations, we were really pleased with results. We just hit every check mark that we were hoping to hit. We were seeing APOC3 reduction in 90% to 95% range, substantially higher than olezarsen. We were seeing triglyceride reductions in the 80% or so range, substantially, substantially larger than olezarsen. We saw a statistically significant improvement in pancreatitis events. That was a key secondary endpoint and so we hit that. That was great. Safety profile continues to be positive. We're dosing this once a quarter, not once a month. We're just very pleased with this. It's difficult to see how olezarsen will compete with that. We don't seem to have left an opening for that. And so we're excited about this. We're excited by addressing this market. About half of the patients that we treated were genetic FCS patients, these patients had the mutation generally accepted for FCS. And then about half did not have that mutation, but were we call phenotypic FCS patients. So these are patients with triglycerides above 880 and history of pancreatitis. We saw essentially equal efficacy among the 2 groups. And importantly, it allows us to treat, we believe, a broader swathe of patients. These are the patients we studied, and so we'll see what our label ultimately says, but our expectation is that we can treat who we studied and that's what we studied.

Maybe I can ask you one follow-up on your top line results and recognizing we'll likely see additional data, maybe even at the cardiometabolic series, summer series day or at other medical meetings. But the decision to report a median reduction in TGs versus maybe your competitors have said a mean reduction. How should we think about that?

Yes. So it's a good question. We reported that because that was the primary endpoint. And in fact, that was at the suggestion of the FDA, median rather than mean. It turns out that they were essentially the same. We reported that because that was the primary endpoint.

Got it. Okay. And then just in terms of thinking about which dose to bring forward, are you thinking that you're going to choose one? Are you thinking there's a possibility you'll take 2 into the market? Help us understand that.

That's good question. Look, the 25 milligrams and 50 milligrams performed essentially the same. And while we didn't see any safety issues in either, less drug is always better than more drug. And so we expect to move 25 milligrams into commercial.

And when you think about the profile here, granted, we've only seen data now for a pooled population here of the genetically defined as well as the phenotypically defined. But has the FDA specified to you, maybe a profile that they would want to see with respect to either a population in order to bring it forward? Or is the pool data set sufficient to move.

We believe it's sufficient. Our expectation is that the approval endpoint there simply is lowering triglycerides. We did that. And so we think we have achieved everything we need to achieve to have this approved. We will file an NDA towards the end of this year. And so of course, we'll find out then. But we feel pretty confident that we have achieved everything we needed to achieve here.

Anything you can share on, maybe any differences you saw across those 2 subgroups or too early to say until we see the subgroup analysis?

Yes. The short answer is, it's probably too early to say. At least I have not waited through all that, but at the face of it, they seem to be the same. And we expected that also. In our Phase I, we had, I think, 4 genetic FCS patients, and they responded in essentially the same manner as a high triglyceride nongenetically FCS patients. We're also really -- there's, of course, a whole host of data that will come out in medical conferences. And we're looking forward [Technical Difficulty] a class of that data that we're really looking forward to is percentage of patients that got below 880 and percentage of patients that got below 500. I think these are critical data points for physicians. And again, we just wanted to top line this, so we can show investors and physicians and other interested parties that the drug is working the way we anticipated it to work. But those sorts of details are going to be very important. We look forward to getting those out.

As you think about filing the NDA, finishing this by end of the year, any gating steps ahead of being able to do that.

No. What is gating there is simply our stability testing. So we just need the passage of time. At least that I can think of, there doesn't seem to be anything else that we're waiting on.

Awesome. And so I guess maybe if you file by the end of this year, presumably launch next year, how are you thinking and maybe what efforts are being put into place right now to prepare for a launch? And help us understand the infrastructure that would be required to really bring this to bear as you enter the market?

Sure. So we are frantically building out our commercial presence as we speak. We have leadership there. We have a good core group there. We have not started, of course, bringing in sales reps. We won't do that likely until early next year sometime. We have not guided to how many reps we're thinking of, but we think this is a small population. And we think this is easily manageable by us in the United States. We'll probably have a bit of help in Europe. But we think we can handle it ourselves. What's really one of the great things about this drug, plozasiran, is that it allows us to learn how to become a commercial entity in a stepwise fashion. We start with FCS. It's a small population. It's one that we think we can make large impacts in the lives of these patients. And so it's an important drug for these folks, but relatively easy, straightforward to commercialize. So we can make our mistakes there. We can build out our infrastructure there and create our commercial culture there. And then, as you know, and I assume we'll be talking about this in a second, we have begun 3 additional Phase III studies in a broader market of severe hypertriglyceridemia or SHTG. We think that's a very exciting market. We think there are 3 million to 4 million people with trigs above 500. About 1 million of those are above 880. There's no good treatment for them. The approval endpoint there is simply lowering triglycerides. So that's a really attractive next step for us. As I said, we've begun those Phase IIIs, but I don't think we'd be in a position to broaden out that label for probably a few years still. And so it allows us to learn how to be a commercial entity with FCS and then graduate into SHTG and then potentially the broader population of ASCVD that could be 20 million or 30 million people.

For FCS, what is the strategy for the target prescriber initially here? Are they the cardiologist? I think Ionis has talked about endocrinologists maybe being a more favorable prescriber base. How are you thinking about that?

Yes. I think it's cardiologists and lipidologists and endocrinologists, I think it's all of those.

What is your understanding, maybe across those 3 different types, their receptivity to prescribing this, I think maybe [indiscernible] there.

Yes. So the way I view this is receptivity starts with genetic FCS patients. We've spoken with a number of physicians who are treating genetic FCS patients. And there is such a desire to have some kind of treatment because these patients are on very restrictive diets. There's not much else you can do. Fibrates and fish oils can lower triglycerides by a little bit, but doesn't really move the needle. And so there is a real desire to put those patients on a drug like this, that can lower the triglycerides and help to prevent pancreatitis. So they are the most receptive. Next would be those patients who may not be genetic FCS, but have triglycerides above 880 and history of pancreatitis. They've seen the dragon. Pancreatitis is a bad event and they're highly motivated to keep their patients from experiencing that again. And so they would be the next level. Beyond that, going forward, as we get into the SHTG market, it would be, I think -- those patients with trigs above 880 but have not yet had pancreatitis, they're clearly at high risk and then step down to 500. That's sort of the way I see the spectrum of the SHTG market.

But maybe that spectrum, where are they sitting across the cardiologists, lipidologists, endocrinologists.

So I would agree that many of those genetic FCS patients are with endocrinologists. But there will also be cardiologists and lipidologists, I believe, in FCS. As you step down to the broader SHTG market, there will likely be more lipidologists and cardiologists. And a lot of this next step, the SHTG step, hopefully, once we're finished there, we can widen out the label. There will be a lot of Medfair's work there because there has been no good way to lower triglycerides in patients. And so there will be a lot of education as to why triglycerides are on that after. And we would expect that diagnosis rates will go up, like it always does when something is introduced that can treat a disease that heretofore didn't have a good treatment.

Maybe off the back of your PALISADE data, and you've referred to this having a superior profile to plozasiran, but clearly, they probably will be on the market ahead of...

Yes, they will be. Yes, it's true.

How do you expect these 2 agents to coexist? I mean, I guess maybe, how significant is the first mover advantage in this market? Or do you think that once you're on the market, you will automatically become the preferred agent?

Yes. So we'll see about that. We need to do our work. We need to spread the word on our data. Our data are good, and we just need to bring that to physicians. But look, it is somebody with a rare disease who is being treated with a drug that appears to be working is pretty sticky. And so changing those people is not straightforward. That's all about education. How much do you want to lower triglycerides, do you think it's better to lower triglycerides by more, do you think it's better to have a once-a-quarter injection rather than once-a-month injection. I think we have good arguments here, but we need to bring those arguments to the patients and the physicians.

And how are you thinking about maybe the payer discussion? How that landscape will, maybe, ultimately shake out here?

Yes. Yes. So we've had discussions with payers, and we'll continue to do that. This is a small population, and we would expect to price this as the ultra orphan that it is. I think this is potentially revolutionary to these patients who need it because they just don't have anything that can do this right now. And our value proposition initially is that we believe that we can decrease the risk of pancreatitis for these FCS patients. That's a big thing. In the SHTG Phase III studies, we will have patient-reported outcomes as well to try to fill in some of the gaps as to symptoms that are upstream of pancreatitis, right? We don't believe that this is an asymptomatic disease [indiscernible] pancreatitis. We think there's a spectrum here. And my hope is that our value proposition for the broader SHTG market is, a, we can help to decrease the risk of your pancreatitis, but also, b, we can make you feel better.

Maybe to that point, SHASTA-5, which is designed to show that very benefit. Where do you stand with that in terms of initiating it, enrolling it and remind us the trial design there?

Sure. So first, more broadly, the SHTG studies are SHASTA-3, 4 and 5. 3 and 4 are essentially the same. They are looking at simply lowering triglycerides. Those are year long studies. SHASTA-5 is the acute pancreatitis study, where we'll be enrolling patients generally with a history of pancreatitis. And that will be an event-driven study rather than a time-driven study. We have begun that as well, and we'll just see how long it takes to enroll that. But I think it's important. From a regulatory standpoint in the United States, we do not believe that we need that. We just need to simply lower triglycerides. We can do that. But from a payer standpoint, from a value standpoint, I think it's very helpful for us to show that we hopefully can decrease the incidence of bouts of pancreatitis. I think that's even more important in Europe for reimbursement than in United States, but still important in United States.

When you think about, say, PCSK9s and the analogs there where cardiovascular outcomes trials were really necessary to enable access and enable uptake essentially. Do you think that, that could be a potential dynamic that you see in SHTG, where pancreatitis events really drive the uptake and physicians will wait for that outcomes to prescribe the drug.

It could be. And look, I think the biology here is pretty clear. It's quite clear that in these patients with severe hypertriglyceridemia, they have a substantial increased risk of having pancreatitis. And once they have pancreatitis, they have even heightened risk of having pancreatitis again. And so I think that lipidologists, cardiologists and certainly endocrinologists appreciate that. And if they're watching the triglycerides of these patients, they'll appreciate that somebody with trigs above 880 really should get that, really should lower that. Even, frankly, those patients with trigs between 500 and 880, they'll recognize that. Now the pancreatitis data are certainly helpful, but I don't think they're critical.

And then you've laid out the landscape or maybe the market opportunity for FCS. When you think about SHTG, to remind us that the incremental opportunity is much larger. Just what are those numbers again? .

Yes. Yes. So we think there are 3 million to 4 million people with triglycerides above 500 and about 1 million of those are above 880 million. So it's a very large patient population, we think.

And Arrowhead's dedication to maybe seeing that through in terms of a commercial presence. Is it fair to assume you would then also expand into that indication? Or would you look to...

No. That's fair to assume that. We view plozasiran as an anchor drug for us. We're hoping to build a long-term, broad-based large biotech company with offerings in a number of different therapeutic areas and a number of different drugs. The way to get there is to start with a drug that works, and that's important. We think the plozasiran is that first drug.

Maybe talk to us about zodasiran, your second asset there. Obviously, you guys have been talking about advancing it to HOFH, but I think the broader question then is, which asset are you going to bring forth to a Phase III cardiovascular outcomes trial. Any updates that you can share here?

Sure. So the real update will be in 2 weeks during our cardiometabolic webinar, at which point, we'll disclose which one we're choosing and what the basic plans are there. But here's what I can tell you. So plozasiran has a very nice stepwise approach, as I mentioned, we start with FCS. We hopefully expand into SHTG and then could expand to the larger ASCVD population. Now without that ASCVD population, this is still a very interesting and important drug for us. Simply FCS and SHTG alone is a big opportunity. Look, we think the SHTG market at peak sales is a $2 billion a year market for us, just SHTG. And so we can make a good argument even without the ASCVD opportunity to develop plozasiran. Zodasiran is a little bit different. Without the ASCVD opportunity, we likely would not do an HoFH Phase III study. It's a bit of a complicated market. It's a small market, of course. It will make great sense to do that as a prelude to a broader ASCVD opportunity. But if we decided not to do a CVOT within zodasiran, we probably would seek to license that out or something.

Got it. Just stay tuned for 2 weeks.

Stay tuned.

Okay. Maybe we'll jump to the pulmonary vertical then. You have 3 different programs, high level, wherever you'd like to start, maybe start with Arrow Rage. How are you thinking about both the high FeNO group. There had been, I think, a lot of focus there on seeing that data. But yes, now that you've talked about some enrollment challenges there. Help us understand what maybe the dynamics that are playing out that you're seeing?

Sure. Yes, so that enrollment has taken us a bit longer than we expected. It's not catastrophic. We're enrolling that, and we'll have those data, but we expected to have at least some of those data in the September or so time frame, and it appears that we're not going to have that by then. And so we just wanted to be out in front of that. And so at the last earnings call, we mentioned that we're still committed to that, we're still enrolling that, and we will still have those data. We just won't have it quite that early. The challenge there were twofold. One, the top of the funnel was a bit more crimped than we had expected and maybe we should have expected it. We are competing with a number of different drugs for moderate-to-severe asthmatics. And this is a Phase Ib study that without expected therapeutic benefit, right? So it's easy for somebody to choose a Phase II or Phase III study if they have a choice. So we lost some patients there. But the biggest challenge has been in screen fails. We are requiring people to have baseline FeNO levels of 35. And so we've just seen a lot of screen fails there. We'll get there. We just haven't gotten there quite yet. And so that will take, I don't know, a quarter or 2 longer than we expected. No big deal. Our thinking, though, is that -- and we wanted to stress this on the conference call, we'll want to continue to stress this, that we believe in this drug and this is not slowing down the drug development. We've seen enough out of Arrow Rage. We see very good knockdown in healthy volunteers. We just presented data at ATS a month ago or so, I'm showing knockdown in patients as well, the tracks. And so we're seeing very good activity with this drug. We've seen a good safety profile. We've got chronic tox done. We think this will be dosed once every 2 months. We've seen everything we need to see to push us into a Phase II study. And so we are moving as quickly as we can to design that Phase II and my expectation is that we would start a Phase II or a move to launch a Phase II by the end of this year. The question now is what that looks like, how large is it? And we're going through that process right now.

If something emerges when you do see this high FeNO cohort, would you be in a position to be able to maybe alter that trial design, whether it's the dosing that you're using, the specific patient population you're studying.

Sure. We certainly could. We don't expect any of these FeNO data to affect certainly our desire to move into a Phase II study and maybe not the designed, but we're certainly open to that, of course.

And maybe based off of the mechanism, the preclinical data and even some of the early clinical Phase I data that you've had from some of these other cohorts. What level of FeNO reduction do you think is maybe realistically, you could see here?

Yes. So that's a hard question because FeNO at the end of the day is a biomarker with a biomarker, right? It relates to IL-13 mediated inflammation. What is exciting about the rage pathway is that it should tickle a number of different pathways. IL-13 is one of them. In animals, we crushed IL-13, but other ones as well. so it's hard to say. I don't think that there is a threshold number that we would have to see to be excited about the pathway.

Maybe MUC5AC or MMP7, high-level thoughts here on where these programs stand, your level of excitement for them and the path forward?

Sure. So we are in patients for both MMP7 and MUC5AC. Unlike Rage, we have not been able to gauge activity in healthy volunteers, just because of the biology. We have to do that in patients. And so my hope is that we can have an idea of that, I don't know, over the next few quarters because, again, we are dosing patients. We're excited about both of those. Those are IPF, of course, for all the reasons, IPF has been so difficult to treat, and there are so few good treatment options for these patients. MMP7 has been a validated target, an exciting target, but that has been undruggable. And so it made sense to us. Our KOLs are excited about that. We look forward to move that forward. And MUC5AC is fascinating because if we are able to knock that down, and we would really be addressing one of the root causes of COPD, right? And that also has been undruggable. So we're excited to see what those data look like.

Maybe I can ask you a question there. Obviously, there's been a lot of interest in the pulmonary space on the back of Insmed's brensocatib data. In bronchiectasis, neutrophil-mediated diseases, they've talked about potential expansion into COPD and asthma. How do you expect that an asset like bronchiectasis on the market will maybe interface with some of your assets?

It's too early to tell for us. I don't really answer that. But you bring up a broader important question which is, it's probably time for us to bring in a good partner in pulmonary. We always expected to partner or at least part of the pulmonary franchise at some point, because it was so broad. There are so many good targets. There's plenty of room for us and a partner. And as we look at our spend going forward in these cardiometabolic trials and such, we certainly like the idea of somebody helping us out with complicated and large and expensive for instance, asthma studies. So my hope is that at some point, we can bring in the right partner who can help us ask these questions and shoulder some of the financial burden.

Got it. So maybe related to that, maybe related to both those points, these indications are crowded. They have a lot of agents that are out there. What is the bar then, truly to have a differentiated profile, to make it work that the resources that you're putting forth into these programs to continue their development because these are lengthy trials, they're costly trials or large.

Yes. So the course that bar is different from indication to indication. The bar is high and this is a good thing for patients. The bar is higher in asthma than it ever has been. There are some very good biologics. There are still a lot of opportunities that we see. If you look at COPD, the bar is lower. There's a smaller number of agents that are really affecting COPD. If you look at IPF, even smaller. And so it really depends upon the space. I would view the necessity of partners in that order as well. Complicated, expensive, somewhat crowded space, asthma. We would really like partners help there. On the other end of the spectrum, if we needed to, we could really handle IPF ourselves. I think it's an important opportunity. And I think we have an agent that is potentially important there.

Do you feel like you have the capacity to run a Phase II trial on your own? So with the partnership coming on the back of the Phase II? Or would you look even earlier.

That's a good question. I would rather have the right partnership pre-Phase II, but I can't control that. So if we don't have the right partner at that time, then we are happy to move forward ourselves with Phase II. Now I expect that Phase II will be a bit different than the Phase II would be with a larger partner. There's 2 ways you can do that. One is, a large true dose finding study that will allow you to move directly into a Phase III study. It's expensive. And another way to look at that is to do a smaller, less extensive study to give us proof of concept to show that knocking down Rage does have a disease-modifying effect. That's probably more like something we would do if we did that on our own.

When you think about partnerships, I mean, it can range whether it's an out-licensing, if it's a codevelopment. Do you have a preference as to the type of maybe transaction you would look for from a partner?

Yes. That's hard to say. It depends on the company. We'd like to have a discovery piece to a partnership. A broader partnership is better than a narrow partnership, I think, if we could find the right one. Again, because there are also a lot of good targets and we know some, but there's a lot we don't know. And to the extent that we can bring in a good partner experience in the space to help to feed us, new targets would be great, and we'd like to do that in conjunction with somebody rather than just by ourselves.

Got it. Well, as you think about your portfolio, it's obviously very, very broad. You're well on track for your 2025 goal. Maybe we can touch on some of the other programs. I wanted to ask you about muscle. Obviously, we've seen today data from [indiscernible] just early thoughts here on the data you saw there and maybe any read-through that you see in your own program?

Yes. Good for them. We are happy to see those data, the data on the face of it. I've been in the room in meetings all day, but what I've seen has been very encouraging. For FSHD for DUX4, what Fulcrum showed us a few years ago was that the expression of DUX4 is pulsatile, right? So even though we are doing muscle biopsies, it could be very difficult to show knockdown because of this inconsistent expression. Now we have identified a number of downstream genes that are affected by the expression of DUX4. So the hope was that we could surmise DUX4 knockdown by looking at these downstream genes. But I was always worried about that. Given their data today, it looks like you can. And so that's very heartening. I was also pleasantly surprised to see -- again, the numbers are small, and so we'll see the whole, but it looks like they were seeing functional changes after a pretty short period of time. That was exciting for patients and exciting for those of us who are looking to treat those patients. So I don't know about read-throughs, but those are encouraging. I think that we are well positioned. I think we have at least very competitive compounds in both FSHD as well as DM1. We're dosing patients. And so my hope is that we have some data that we can start to talk about by the end of the year. And we'll just see where we stack up.

The extended data that you expect to maybe have by the end of the year?

And that's hard to say. We'll see how fast we can enroll in these studies. I'll tell you, if you had asked me 2 days ago, I would have said we've got a much better chance of having some DM1 data by the end of the year than DUX4 for the reasons that I just mentioned. I wasn't sure if we could see PD in any other way than functional changes, now it looks like maybe we can. So it's possible to have both of those, if not by the end of the year, in the first part of next year. It feels like that time frame, we should have some data.

Maybe what other vertical would you like to highlight here?

So we have an exciting new vertical in obesity [Technical Difficulty] I think we'll be the first company to have [Technical Difficulty] genetic data had been compelling and our animal data had been very compelling. We also have another obesity candidate that will be in the clinic this year as well. That will be our first adipose targeted construct. We haven't disclosed what that target is. We will on the obesity webinar a day, which is, I believe, in August. We will also show some of these animal data, but we're really excited about it because I think that we are -- there's an awful lot of room for obesity medications that are not GLP-1 agonists. And we have animal data comparing these 2 candidates to GLP-1s in animals. We also have them on top of GLP-1s. Anyway, there's an awful lot of interesting comparisons. For instance, we've seen good weight loss, but more importantly, good high-quality weight loss that appears to be virtually exclusively fat and not lean muscle mass, that's interesting. It appears that these animals aren't eating less, that's interesting. So we like the targets a lot, and we look forward to getting into the clinic and seeing what we see there.

Maybe in the last couple of minutes, I can ask you, if you don't mind, remind us on your balance sheet. You've talked in the past about augmenting it through a variety of means. What is the latest thinking?

Yes. Look, shame on us for not augmenting the balance sheet by now. And our stock price has suffered because of that. We have a number of levers to pull on. I think that you'll start to see those levers be pulled in the near term and then throughout the rest of the year. One is business development. We've spent an awful lot of time over the last several quarters, trying to understand what our opportunities are in various areas, [indiscernible] partner. We wanted to do that in a systematic fashion as we can because you can't un-partner something. We want to piece together a group of assets that we hold on to that makes sense together. And I think we are now at a point where we can start to pull the trigger on some of these deals. That's important. Second, we have legacy business development deals with Takeda, with Amgen and with GSK. They will continue to bear fruit, I think, and bring in substantial capital. That's important. Third, I think that we are at a point in [Technical Difficulty] right kind of debt, longer-dated debt [Technical Difficulty]. I think that makes sense, and we are on the cusp of being commercial. I think that makes sense to us. Fourth, we've talked in the past about royalty deals where we could bring in some bolus of capital in return for royalties on a certain product that will be capped at some return. That makes sense to us. We're not paying royalties on any of these products. And so that's a relatively cheap capital to us. These are all important levers that we can pull. And again, we just need to start pulling those for our stock price to be, I think, more properly indicative of our value.

Last 5 seconds that [Technical Difficulty] will be on the lookout for over the next 12 months. You have a lot.

Goodness. So these webinar days are important. We had a couple of weeks ago, our muscle webinar Day. In 2 weeks, we'll have our cardiometabolic webinar. After that, we'll have our pulmonary webinar. After that, we'll have our obesity webinar. And after that, we'll have our CNS webinar. We haven't talked about CNS. But we are ready for prime time there. We'll be in the clinic this year, we'll be talking about our blood-brain barrier approaches. I think we'll be in the clinic next year with the systemic delivered candidate. We're excited about that. We'll have a full data set for the FCS Phase III study at medical conferences, probably in the fall at some point. And we've got several ongoing Phase III studies, so it's an important year for us.

Great. Well, with that, Chris, thank you so much.

Thank you.

Thanks, everyone.