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

Okay. It looks like we're getting started. Good afternoon, everyone. I'm Ellie Merle, one of the biotech analysts here at UBS. Very happy to have Arrowhead here with us for a fireside chat. Joining us from Arrowhead is Chris Anzalone, Chief Executive Officer. Chris, thank you so much for joining us.

Maybe to kick it off, you guys have a platform technology, a lot of programs in development. Can you frame for us maybe some of the key milestones, upcoming or data readouts over, say, the next 12 months?

Sure. First, thanks for having us. It's really great to be here. It's great to see all you here, and our meetings have been fantastic. We have a lot going on. We have, broadly, a large RNAi platform. Within that, we have multiple platforms underneath it that allow us to address multiple different tissue types. So we've got a lot going on, for good or for bad. And so we have a number of, I think, catalysts in the next 12 months. I'm sure I will forget some of these. But first, we expect to file our first NDA in the next couple of weeks or so. By this month, we will file an NDA for plozasiran in the FCS market. This is importantly, not only genetic FCS, but what we call clinically defined FCS. And so these are patients with triglycerides at 880 or above with history of pancreatitis. So that's important. We expect to have pulmonary data from our 3 clinical programs, MMP7, RAGE and MUC5AC, and these are addressing COPD, asthma and IPF, I guess, not in that order. We should have data from those in the first half of the year, probably more like first quarter. That's important for us. I expect to have data from our 2 muscle programs, DM1 and DUX4 in the -- certainly in '25, maybe around the middle of the year. I expect to have data from our 2 complement programs, C3 and Factor B in the first half of the year, maybe first quarter. We will start dosing our first obesity program, that's ARO-INHBE against inhibin E, probably in the January or so time frame. And so I think there's a good chance we have some data towards the end of 2025. That's a really interesting program, and I think will be core to our portfolio going forward. Our first adipose targeted program, ARO-ALK7, also an obesity program. We filed an IND -- or CTA for that. And so I expect that to be dosing patients sometime in the first quarter. We may have some data by the end of the year there. That's important. We have a CNS program against ATXN2. That could be in the clinic -- we filed a CTA for that already. That could be in the clinic in the first quarter. We expect to have our first 2 systemically delivered CNS drugs in the clinic next year. That's a huge leap forward for us. The targets there are MAPT and alpha-synuclein. But just from a technical standpoint, the ability to get into deep brain regions via subcu injection, we think, is wildly disruptive. We have -- we've seen great animal data so far. We are hopeful that it translates into humans. And so we expect that to be in the clinic -- those to be in the clinic also next year. So we have a ton going on. And then, oh, by the way, we will be launching our first drug sometime in the middle of 2025. We're excited about that and -- and so while we continue to move forward aggressively with our R&D organization, we are now also ramping up our commercial organization.

Exciting, busy time for you guys.

It is busy.

And we were talking about this before, but maybe just before we dive into the specific programs, how are you thinking about business development in terms of your priorities around cardiometabolic? And I guess, just specifically across all the other programs, muscle, pulmonary, what we can perhaps expect from a partnership perspective in the near term or sort of midterm?

Sure. So let's start with that philosophically. We've got this broad RNAi platform that has been extraordinarily productive for us. I'm going to get the number wrong, but we've pushed something, like, 16 drugs in the clinic over the last 4 years, something like that, and we can continue to do that. And so our model has been, if we can do it, let's do it. We do everything and push everything that we can into nonclinical studies and everything that works out into clinical studies with the knowledge that there's no way we can commercialize all those. No company can commercialize all these. But we always figured we're adding value, we're creating value. And most of these drugs, we have an expectation of success. So we figured when the time comes, we can partner these as necessary. And we've been very successful at that. We've got partnerships with GSK on a NASH target, HSD as well as hepatitis B that started with J&J. We got a partnership with Takeda for fazirsiran. That's our drug against liver diseases associated with alpha1-antitrypsin deficiency. And we've got a partnership with Amgen for Lp(a), now olpasiran. So we've been very successful at that. That's the good news. The bad news is we've had this desert of -- on the business development side for the last 2.5 years. We've continued to be highly productive. And so what that has created is a company out of balance. We have created this ability to build drugs quickly and push them into the clinic, but we've got now this over -- this excess capacity, both on the discovery side as well as on the clinical and nonclinical asset side. And so it's critical, now and sometime in the fairly near term, that we get out of that desert, that we do some business development. And we think that is really transformational for us because what are we missing right now? We're missing 2 things or the Street is asking 2 things: one, "Your technology works, but how are you going to pay for it." So we need to show more capital and access to a lot more capital. And two, the Street doesn't know where to look. We've got all these disparate programs across a variety of therapeutic areas. And so we need to show some focus of an investment thesis. And so this business development, whether it's one strategic deal or a cluster of deals that fit together, have those dual purposes to provide the capital that we need and to show the Street a more focused pipeline. And that focus is cardiometabolic. We have really good assets there. We've got really good growth opportunities there. So it makes sense for us to build out a commercial infrastructure there, to build out a regulatory infrastructure that knows those spaces, to build out development infrastructure that knows those spaces. And then we love all of our children. And so these other assets are important, and we are excited about them, but we need to find the right homes for some of those.

Absolutely. Well, maybe first, we'll talk about some of the cardiometabolic programs, but then I want to make sure that we touch on muscle and pulmonary as well. Just starting with FCS, how are you thinking about the commercial opportunity? How many patients from your commercial [ prep ] are currently diagnosed in the U.S.?

Sure. So FCS is -- traditional FCS, if you will, the genetically defined FCS is an ultra-orphan indication. There's -- we think there are about 1,000 of those in the United States. Those people have really no good therapies. There's no good way to really reduce triglycerides. You can use fibrates or fish oils and that may lower your triglycerides by 20-or-so percent. But these are people with triglycerides in the thousands. And so that doesn't move the needle. They still have to have this extraordinarily strict diet. They still have repeated bouts of pancreatitis. They end up -- many of them get diabetes. And so it is a population that we are committed to serving and we will -- and we expect to serve them. But there's also another population that clinically look just like them. It's people with triglycerides in the thousands, above 880 at least, with a history of pancreatitis, but they just may not have the specific genetic mutations that are associated with FCS. And from our perspective, look, if a patient needs help and we can help them, we should help them. And so really, with the guidance by the FDA, in conjunction with the FDA, we studied both those populations. In fact, our Phase III was about half genetically confirmed and about half clinically confirmed. And sure enough, the drug, as we expected, works about the same in both. And so we think that the population that we can help is substantially larger than just genetic FCS. We think that the clinically defined population may be 5 or tenfold that. And so look, we'll see what's on our label. The population we studied were both those populations. We are hopeful that both will be on our label and that we can bring the drug sometime in the middle of the year to both populations.

Makes sense. And you're obviously in a competitive market with Ionis also bringing in APOC3 to market for FCS next year. Maybe just talking about the molecule specifically and how you think you stack up in the competition?

Sure. Look, we feel good about that. I'll preface this by saying it's always, of course, difficult to compare 2 different drugs in 2 different clinical studies. But from the data we've seen from our -- for our own Phase III as well as our Phase II studies and what we've seen Ionis has presented, we don't see substantial openings for their drug, to be honest. We will dose quarterly, they dose monthly. That's a benefit, certainly. In the Phase III studies, we were lowering triglycerides by around 80%. They were by about 40%. We are well tolerated. They have reported that they're well tolerated. Importantly, we look at these important levels, 880 and 500 are important levels. I think that in our Phase III, over 75% of our patients got below 880. And I want to say that for -- that Ionis had something in the 10- to 14-or-so percent range, something like that. The point is I think we can really move the needle. And also, look, our drug works in essentially everybody. We don't have nonresponders, really, and that consistency of action is a benefit to us. The depth of knockdown is a benefit to us. The dosing schedule is a benefit to us. So we are happy to have them at market as well because this market needs a lot of education. Often, people don't measure what they can't change. And these will be the first drugs that really can move triglycerides. And so to have them out there and helping to educate the market is a good thing for all patients and a good thing for us as well.

Absolutely. It makes sense. And you have a much broader development program here as well. Can you sort of walk us through the different studies across SHTG and the various studies you have and the time lines for those?

Sure. So yes, we are excited to bring plozasiran to FCS patients, whether they're genetically confirmed or clinically confirmed. We are also excited to bring plozasiran to the broader SHTG or severe hypertriglyceridemia populations. These are people with triglycerides above 500. We think there are 3 million to 4 million of those and about 1 million of those are above 880, who are really at risk for pancreatitis. And so this, for us, is a stepwise approach. We will get into the FCS market. We'll help those patients. We have ongoing Phase III studies in the SHTG populations. We think that we'll be fully enrolled around the middle of '25. It's a year-long study. And so completing in the middle of '26, sNDA sometime at the end of '26 and then launching in '27, into that broader market. We're excited to do that. Now upstream of that, we have a lot of work to do in educating physicians and the community on the importance of lowering triglycerides in that population. And what is sort of helpful about our approach is that, look, the FCS -- plozasiran initially will only be approved, we expect, in FCS. And so that will be priced as an ultra-orphan. And so I think that we would feel comfortable really talking about the potential benefits of plozasiran in the broader SHTG market without looking like we are promoting this off-label because I just don't think that price is amenable to the SHTG market. And so I think that we can do that with relative clarity. And so it allows us, once we get into the SHTG market, to sort of hit the ground running. And so you'll see us starting -- well, starting now, not only educating the FCS market, but also the broader SHTG market. And so look, that's a much larger market. And so if we are lucky enough to have positive Phase III studies there and the FDA approves the sNDA, we would certainly lower the price to make that more commensurate with that much broader population.

Makes sense. And thinking about the broader population, both, say, if we're talking nongenetically confirmed FCS or if we're talking SHTG, how -- maybe just from any initial conversations or your commercial work, are the payers viewing triglyceride-lowering in terms of an outcome ahead of running a larger outcome study?

Yes. So we are having those discussions now. We did see a statistically significant improvement in incidence of pancreatitis in our small Phase III study in FCS. And so we are hopeful that, that will be on the label. For the broader SHTG market, we have a separate study looking at pancreatitis. And so that's a hard outcome. It's an outcome study and the outcome there being pancreatitis events. And so the reason that we have that as a separate study rather than nested within the other SHTG Phase IIIs is that from a regulatory standpoint, our understanding is all we need is to show a reduction in triglycerides as an approval endpoint for SHTG. And we're way overpowered for that, of course, because this drug just works in everybody and quite strongly. So we don't want to slow that down. And then we'll have a separate study that is looking at high-risk pancreatitis patients. That will be an event-driven study. And that has -- we have initiated that. And I believe that we have -- that we are just about to begin dosing patients. I don't think we started dosing quite yet.

Got it. That makes sense. And SHTG from a...

I think in that broader population, the convenience of once a quarter versus a once a month administration is helpful. But ultimately, the biggest differentiator is just how much we can lower triglycerides. We look around and if you have triglycerides of 880 or above and you're taking fibrates and you may decrease your triglycerides by 20%, you're not out of the woods. You're still high risk. And so it's just -- it's a completely different value proposition if you can lower triglycerides in the 78% range. And look, the market -- this is a med affairs play in that we have -- it's incumbent upon us to help the community understand the importance of lowering triglycerides. But we're not starting from scratch. We think that there are about 2.5 million people in the U.S. who are on some form of triglyceride-lowering therapy, whether it's fish oils or fibrates or what have you. And so there is -- to us, that says that there is an appreciation that triglycerides are a bad actor, at least for some patients. And so we like our ability, we like our chances of going into that environment and say, "Okay, we've got something that you've never seen before that can really, really take your triglycerides down."

All right. Great. And sort of with all these Phase IIIs ongoing or initiating, how should we think about the overall, like, cost of this Phase III program?

Yes. So for SHTG, look, this is manageable. We'll have our earnings call in a couple of weeks. So we may be able to be a bit more granular there. But these are not thousands of people with cardiovascular outcome trials. These are expensive and will represent a pretty large portion of our R&D spend, but they're certainly manageable by us. Look, one of the big reasons, as I said earlier, that it's time for us to get some BD done to bring in capital and to focus in one sort of broad therapeutic area, if you will, in cardiometabolic. One reason is for the Street to understand our investment thesis. But another one is to manage our costs, right? We have talked in the past about doing a cardiovascular outcomes trial for plozasiran. We continue to believe that's a really important opportunity. We think there's 20-or-so million people who could benefit from this. And we just need better clarity on capital before we start that. So we've got a protocol. I think we can do that cheap -- relatively cheaply compared to the way big pharma has done CVOTs in the past, but it doesn't make any sense for us to launch that until we have better clarity on what our capital looks like.

But in the meantime, you do have the 2 SHTGs...

Those are going, right. And look, and that story just makes too much sense. It is a relatively straight and clear regulatory pathway. Simply lowering triglycerides is an approval endpoint. That's important. Second, the drug works. We've now been in, I don't know, in low thousands of people and it works essentially universally, and we lower triglycerides by a ton. So we just need to do those studies. And once we get there, again, that's not a small market. We think 3 million to 4 million people have triglycerides above 500. And the idea that we can lower it in this population is really compelling. And I view this sort of in tiers, right? The easiest slice of that population is those -- are those patients with triglycerides above 880 and a history of pancreatitis. They've been to the abyss. They know what pancreatitis is. They don't want to be there again. And so getting them to take plozasiran to substantially, I think, decrease the risk of pancreatitis is a fairly straightforward value proposition. The next segment would be those with triglycerides above 880 but have not yet had pancreatitis. We think that's a ticking time bomb. And so to the extent that we can help physicians and patients understand that risk, we think that's a relatively straightforward value proposition. And then those from 500 to 880 will take more education.

Absolutely. Makes sense. Well, exciting progress, particularly ahead of the commercial launch next year.

Yes.

Maybe turning to some of your other programs. You mentioned that you expect to have data from 3 of the pulmonary programs potentially in the first half of next year?

Yes.

Can you walk us through specifically what data we can be expecting just in terms of the cohorts? Are we looking at potential reads to efficacy? Or more around target engagement delivery?

It's really target engagement. None of these studies are long enough or large enough to show clinical efficacy in asthma or COPD or IPF. But I think the target engagement data are compelling. You take RAGE, we've already seen that we see good, deep knockdown in healthy volunteers. We see very similar knockdown in patients. These are patients with mild to moderate asthma. RAGE, as a target, is well validated. It's been undruggable, but well validated as something that could help these asthmatics, potentially COPD patients. And so we'll have some FeNO data as well. That could be helpful as well. But the big leap forward has been had, which is we see good reduction in RAGE in patients and healthy volunteers. With MUC5AC, we've gone through healthy volunteers. We are now in patients. You really can't measure MUC5AC in healthy volunteers, you really need patients. And so we're doing that now, and we'll see what that looks like, and I expect that to read out in the first half of the year. And MMP7 against IPF, again, as with MUC5AC, you really can't measure that in healthy volunteers. We are now in patients, and so we'll be measuring that, I believe, in the BALF. And that's a well-validated target, has been also undruggable, and so we're excited about that, too.

And I guess, what data do you need to see in order to make a decision about whether or not you move forward? Or maybe asking another way, what data do you think a potential partner would want to see from these programs?

Sure. I think target engagement is the key there. The next -- so we'll start with RAGE. I think that we have enough there that if we were to hold on to it to move into a Phase II, we're excited about the program. And as we said in our last earnings call and elsewhere, that we have been designing a Phase II for a while, and we are ready to go on that. Let's see if we can find the right partner to take that forward. But the point is, at least from our perspective, that has shown itself as a potentially high-quality drug, and we're prepared to go into Phase II. With MUC5AC and MMP7, we need to see what the patient data look like. But as long as we see good knockdown, we'd be thrilled to move into Phase II studies there. But there's a little bit of a value creation gap now because the -- we will have seen everything we can see, I think, in these Phase I/II studies in terms of biomarkers and in terms of target knockdown and such. The next great step is clinical efficacy. And that's just going to take larger studies that will take longer. And so that's why we are considering a partnering strategy there because it will take real investments to show that. Now we're confident that we'll see that because the drugs have been well tolerated and appear to be doing what they're designed to do, but it'll just take a bit to show conclusively that they are doing what they're designed to do.

Any target of those 3 that you're the most excited about or that you might think a potential partner might be the most excited about?

Yes. So RAGE is the clearest just because we have most data there. And we're seeing good, good, deep knockdown. And so I would say that is probably the most attractive. Again, nothing against MUC5AC or MMP7. We just have more data there. And those data look just consistently good. We're just a step behind on MUC5AC and MMP7. We'll see how that looks in patients.

And the latest on what we should look for in the FeNO data? Or is that -- it's too early to make a read?

It's too early to make a read. We were -- that has moved more slowly than we expected because we got a lot of screen fails. We were bringing in high FeNO patients at baseline. And so we just haven't -- we are still enrolling that study. So stay tuned on that.

Great. And turning to muscle, maybe starting with DUX4. Can you sort of remind us of the design here and when we can potentially see data?

Sure. So both DUX4 and DM1 have similar design. It's only in patients, FSHD patients and DM1 patients. It's single dose and multiple ascending dose. We are taking muscle biopsies, and so we can look at drug concentration. We can look at knockdown. We can look at a variety of endpoints there. Both are on similar track. I think DUX is a little bit ahead, but I expect that we can have data certainly in 2025 out of both. And we're excited about both of those. Look, I think they're positioned well in the market. Our animal data give us confidence that those are going to be good drugs. I think they're both potent. And so we're excited to see how that looks.

So when you say data, I mean, can you be any more specific on like number of cohorts or like length of follow-up that we could be seeing?

Yes, no. No, I don't know the answer to that. It's too early. No, no. I think it's just too early. We would not -- so here's our balance. We want to provide data as quickly as we can to our stakeholders. But we also want to provide interpretable data. I don't -- never say never, but I don't think that I would ever show you data from a single patient that doesn't make much sense. Even though RNAi as a modality is generally pretty consistent. And so you can draw, I think, some conclusions from a small number of patients. But we want to make sure that we've got enough data that we can say that we can interpret those data. And so whatever the smallest amount of data that is interpreted by us we will -- we'd be motivated to push that as quickly as we can.

Got it. So sometime next year, I think before you said maybe middle of the year?

That feels about right. Yes. So there's something -- that's something between guidance and a hope. It may be an expectation. So yes, that's what it feels like to me. I think that's not unreasonable.

Okay. Got it. And maybe just a little bit on DM1. I know you've spoken about this in the past, sort of how you think your program compares to others in the space.

Yes. So you know what, we'll see. Our animal data suggests to us that we could have best-in-class in both DM1 and DUX4. But you never know until you get into humans. Let's just see how well this translates into humans. These are our first 2 muscle-targeting programs. And so we -- this is the first time we've been in humans and we'll see how those go. Again, it worked well in animal models. We think that we have constructs that are substantially more potent than competitors, at least in animals. We'll see if it translates into humans. We are using a drug conjugate with a peptide. We have nothing against antibodies. But with the peptide approach, we can use substantially smaller amount of material. And I think that's helpful. So we look forward to seeing what the data look like and see how they compare to competitors.

Great. And turning to obesity, maybe can you give us an overview of some of the programs that you have and what's so unique about these targets?

Sure. We're really excited about obesity. Our first 2 obesity targets are inhibin E, ARO-INHBE and ALK7, ARO-ALK7. Inhibin E targets hepatocytes, ALK7 targets adipose. It's the same pathway. It's essentially the ligand and the receptor. And both targets are well validated genetically. It's thought that this pathway essentially tells adipocytes to store calories as fat. And so the theory is if you can turn that off, you can -- we enable a person to burn that rather than store fat. And so what we've seen in animal models, both of them have -- we've seen good weight loss. That's intriguing. But more importantly, the weight loss that we've seen has been high-quality weight loss. It's been exclusively or essentially exclusively fat loss and not muscle mass loss. We know with the GLP-1s, this lean muscle mass loss is a real issue. And so we're excited that we -- at least in animals so far, we don't see that sort of thing. So that's cool. Second, we have used this in conjunction with tirzepatide in animal models, and we could use much lower doses of tirzepatide in conjunction with either inhibin E or ALK7 and see similar weight loss with higher doses of tirzepatide, but that weight loss is higher quality, right, less lean muscle mass loss, more fat loss. That's interesting. And so look, our goal here is not to put GLP-1s out of business, but we think there is a good place -- if this translates into humans. We think there's a good place for these -- for 1 of these 2 or both these drugs to be either maintenance therapy or to be used in conjunction entirely with the GLP-1s. And so we are excited to get into the clinic. I think I mentioned our ARO-INHBE, I think we'll be dosing patients in January or so. I think we'll be the first ones on the planet to have a clinical program against that target. And I think we should have some data in '25. ARO-ALK7 is our first adipose targeted construct. And I think it's going to be the first on the planet RNAi construct that is targeting adipose, certainly the first targeting ALK7. That will be dosing patients, I think, sometime in the first quarter or so. And so my hope is that we have data there as well. And sorry, one more thing. So the way those Phase 1s right now are designed is that we'll have -- both of them will have SAD and MAD components as monotherapy. And then also both will have MAD components with tirzepatide. And so I think we'll have -- I think we can generate an awful lot of data in this Phase I/II study.

Interesting. And so presumably, we would get weight loss data next year?

Yes. So we'll see where that goes. It's a small study. And so it's really designed to look at safety. But these will be healthy volunteers with a BMI above something. And so there's certainly the possibility of seeing weight loss. But I want to temper expectations a little bit just because it may be difficult to tease out weight loss in a small study because these can be a bit noisy.

Yes, of course. And how long is the dosing in the multiple ascending dose portion?

So there'll be 2 doses. I don't recall off the top of my head how long they're spaced. We -- my expectation is for the INHBE, it's a hepatocyte-directed construct. We have a ton of experience with these kinds of drug candidates. And so my expectation is that'll be dosed quarterly. The adipose target for ALK7 as well as for other new targets in adipose is really interesting. We see good long durability. And so that could be every 6-month dosing or even less frequent than that. And so it'll be really interesting to watch how long we see knockdown in ARO-ALK7.

Yes, certainly interesting on the durability and the infrequent dosing.

Super cool, right? Yes.

Maybe turning to -- briefly to the neuro franchise. Can you tell us a little bit how you've been able to pull off the systemic delivery into the CNS through systemic dosing?

Yes. So look, so let's see how that translates into humans. We're really excited about it. Our animal data have been quite good and promising. I think if that translates into humans, it is highly disruptive. And so we're excited about that. We have not given too many details on that targeting. We talked about it some at a webinar we had recently, but we haven't given too many details beyond that. We expect to have 2 in the clinic next year. As I mentioned, MAPT for Alzheimer's and alpha-synuclein potentially for Parkinson's. Importantly, those, particularly MAPT, are pretty well-validated targets. The challenge there has been getting into deep brain regions. And so yes, you can administer both those intrathecally and you can get some knockdown, assuming that you construct these sequences correctly. But you'll get very little knockdown in deep brain regions, and that's going to be important, particularly for both of these -- and so I think, not only is it more convenient, but it's just more -- it's potentially more efficacious if we can get the systemic to work. And we also have a program against Huntington's. And so that, I think, should be in the clinic also next year. And so it's a big year to see how well we are doing in CNS. And we've got a number of follow-on targets after that, that I think we'll be pushing.

Great. And with 1 minute left, maybe can you tell us a little bit about your commercial preparation for FCS and sort of the type of infrastructure that you've been building out?

Sure. So we are in it right now. We are frantically building out that infrastructure. We have med affairs in place. We are communicating with KOLs and with the market. And so we have begun that process. One of the things that was really attractive about plozasiran. When we were developing both plozasiran and zodasiran, there's clearly a lot of overlap with these 2 drug candidates. And we believe in both of them, and I think that we will bring zodasiran into the clinic, into Phase III studies still. But plozasiran felt like a really good bet for us because it allowed us to sequentially get into increasingly large markets, right? And so it allowed us to build out our commercial infrastructure in a more measured fashion. Because look, as an institution, this is our first commercial launch, right? And so we're going to make stupid mistakes, and I'd rather make dumb mistakes in small markets and then learn from that and have a more sophisticated offering once we get into larger markets and it allows us to do that. Now if any of our commercial folks are listening, it is not that I don't believe in you. I do. And I think we're going to have -- we have a very talented commercial team, and I expect us to execute extraordinarily well. But going from 0 to 100 miles an hour is difficult. And so starting with FCS allows us to have a manageable commercial organization and then leg into SHTG in the next couple of years.

Great. Well, Chris, thank you so much for joining us.

Sure. Thank you.

Awesome. Thanks, everyone in the room.