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

Good morning, and welcome to the Arrowhead Pharmaceuticals' Virtual KOL event. [Operator Instructions]. As a reminder, this call is being recorded, and a replay will be available on the Arrowhead website following the event. I'll now turn the call over to Vincent Anzalone, Arrowhead's Vice President of Finance and Investor Relations. Please go ahead, Vince.

Thanks so much, Wilson, and thanks, everybody, for joining us today. We are excited to talk about our first interim results from our 2 obesity candidates, ARO-INHBE and ARO-ALK7. The press release went out this morning. So I'd like for all of you to refer to that. In addition, we will be making forward-looking statements today. So please refer to the risk factors in our SEC filings. So what we're trying to accomplish today is we have an external obesity and metabolic disease expert, Dr. Carel Le Roux, who will join us. He's going to talk about what we see and what he sees as the next in obesity treatment in areas of unmet need that still need to be addressed. James Hamilton, our Chief Medical Officer and Head of R&D will talk about the therapeutic rationale for targeting the Activin E/ALK7 pathway. We'll move on to interim results from the Phase I/II studies of both ARO-INHBE as well as ARO-ALK7. And then our CEO, Dr. Chris Anzalone, will talk about some key takeaways from the presentation. And then the whole panel will be available for a Q&A session following that. As I mentioned, Dr. Carel Le Roux is with us. He is -- he's the Chair of Metabolic Medicine at the University College Dublin, School of Medicine. And again, he is an expert in metabolic medicine and obesity. And we're very lucky to have him today. So I'd like to turn the call over to Dr. Le Roux. Thank you.

Well, thank you very much. I really appreciate that. And I start with this famous painting from Joseph Wright of Derby, The Alchemist, and just how he discovered these new things. And I think this is Arrowhead and their scientists making these discoveries. And you can see yourself maybe there in the background, keeping careful notes of what's happening. And of course, I think this is the exciting bit about moving forward with what's now available to us. These are my conflicts of interest, and we work with lots of different companies: with nutrition companies, with pharmaceutical companies and surgical companies because we do not think obesity is one disease. And therefore, we will need multiple different treatments, especially that we can use in combination. But one of the things that we don't ask our patients to do anymore is illustrated by Sisyphus on the right there, which we don't ask people with obesity to eat less and move more anymore. Because what we do is we're just to remove the rock. We take the rock away because we can treat this disease now effectively. But we also need to remain a bit humble when we actually look at the difference in what we can achieve in people with or without diabetes. Here, I'm showing you the reduction in cardiovascular death over the last 20 years. And you can see we've made great improvements, but there remains an unmet need. People with type 2 diabetes continue to do less well than our patients that don't have type 2 diabetes. So it's really a paramount that we are able to make this gap less and actually understand what we can do in this instance. And I think that's just understanding the anatomy and the differences between visceral adiposity and subcutaneous adiposity. Visceral adiposity, far less in absolute amounts, but really driving a lot of the problems because it sits around the organs, it sits inside the organs, inside the liver, inside the pancreas, and that is where a lot of problems are harbored. And if we can reduce the visceral adiposity, then we're going to see massive improvements in our metabolism. And that's what we've seen many of our different treatments so far. So let me come back to this concept of obesity and whether or not it's one disease or multiple diseases. If you look at the x-axis, what you can see there is any measurement of obesity. It could be adiposity size, it could be BMI. But the heaviest somebody becomes, if you now look at the Y-axis and here I have cardiovascular risk, you can see that most people behave in a linear fashion. So the heavier they are, the sicker they are. However, you can also see that there are patients who are discorded, there are people that are very heavy but not sick at all. And there's other people who are less heavy, but very sick. So is this, in fact, one disease that just have heterogeneity or are we, in fact, dealing with multiple different diseases. And that's what we're trying to do in the SOPHIA study sponsored by the European Union together with many industry partners and academic partners by trying to understand if obesity is at least has multiple subtypes, and what we've been able to do here is say that, yes, the majority of patients are concordant. They behave -- the heavier they become, the sicker they become. But you can see those spikes here. There are patients who are discordant for hypertension, discordant for transaminases in the liver, discordant for lipid profiles, discordant for glycemia as well as discordant for inflammation. And then if you look at how these patients behave, what you then see, if I highlight those patients who are discordant for hyperglycemia, they have a much higher risk of having cardiovascular disease or strokes. They have a much higher risk also of having liver failure. So we can see that this cohort behaves in a different way, and we also understand that visceral adiposity is a major challenge for them. So how well have we done over the last 70 or 80 years? In fairness, if you had a diet approach in the 1960s, you would have lost somewhere between 5% and 10% of your weight. And if you have a diet approach today with all the apps known to man, you're going to lose about 5% to 10% of your weight. Equally so, if you had an open gastric bypass operation in the 1960s, you would have lost about 25% to 30% of your weight. If you have a laparoscopic gastric bypass today, which is much safer, you could be done almost a day case, but you're going to lose about 25% to 30%. So we haven't changed the efficacy of those treatments. However, if you look at the bars, and you look at pharmacotherapy, what you can see here is we have a scalable treatment that is substantially improving. So now we are actually able to do much better in that instance. But let's now look at our scalable treatments. And here, I'm showing you 2 different treatments, semaglutide and tirzepatide in the SURMOUNT-5 study published in the New England Journal. And what we've done is we've shown that if you do this head-to-head study, both of these compounds behave almost exactly the same as they did in the studies done by Novo Nordisk with semaglutide or Lilly with tirzepatide. So we get about 15% weight loss with semaglutide, about 21% weight loss with tirzepatide over a 72-week period. So this has really changed the way we are treating the disease of obesity. However, if we now look at the treatment targets that we are achieving with this, and remember, if we think about any other chronic disease, be it hypertension or dyslipidemia or type 2 diabetes, we don't talk about the percentage reduction in fasting glucose or the percentage reduction in systolic blood pressure or the percentage reduction in LDL cholesterol. We talk about how many patients got to the target for diabetes, 6.5%; for blood pressure, 130 over 80; for dyslipidemia, we're talking about 2 millimoles per liter for LDL. So we're talking about how many patients can we get to the target. And if we think about obesity right now, we are still talking about percentage weight loss, and that may not be valuable in the future. So here, we just looked at targets, either body mass index targets or waist-to-height ratio target. Again, waist-to-height ratio talks to us about visceral adiposity. And what you see now when you look at the SURMOUNT study: blue, semaglutide; in the green, tirzepatide, the SURMOUNT-5 study, you could see that although more patients achieve the targets with tirzepatide, only about 14% or 23% of patients achieved both the hemoglobin -- both the BMI target and the waist-to-height ratio target. So it tells you that we have very good drugs right now, but we are not hitting the targets the way we want to be doing that. And if we even look about how many patients when they actually hit these targets have normalization of the cardiovascular risk factors. Here, I'm showing you the baseline data of the SURMOUNT-5. And I only want you to focus on the far right, all of the targets. So we're talking about people who are both normoglycemic and have normal lipids and have normal blood pressures. And you can see at baseline, about 8% of patients reached that. But if you now fast forward and see how many people reach those outcomes once you hit the BMI and the waist-to-height ratio targets, that jumps to 62% or 52% of the patients. So reaching those targets is going to get us a lot more health gain in the future. Now our problem is that not only we're not doing well enough from a cardiovascular outcome point when it comes to treating our patients with type 2 diabetes and obesity, even when we just look at percentage weight loss, we see that with tirzepatide, we're not getting as much weight loss as we do in patients with type 2 diabetes in comparison to our patients that don't have type 2 diabetes. So that means that our patients with type 2 diabetes are not achieving our targets, again, coming to this idea that we need to do something extra for our patients who have more visceral adiposity and especially those patients with visceral adiposity who also have the manifestation of complications such as diabetes. Now what is the mode of action and in the future, where are we going to go? And no doubt that the gut hormone classes, so GLP-1 -- combinations of GLP-1, GIP combinations with glucagon, amylin, FGF21, these are very exciting and very, very fruitful it's going to be in the future. But we also need other modes of action to complement these. And that's, I think, when we look at the Activin E story, I think here, we have a novel target where we are able to actually add to our patients who have metabolically unhealthy adiposity. Those patients who also can't have as frequent administration. So that's why an RNAi-based approach can be helpful, and of course, potential to complement other weight loss therapies. Because as a clinician, when I treat people with hypertension, I don't rely on just one class of treatment. If I treat people with diabetes, I don't rely on just one class of treatment or dyslipidemia. So it's the combination of approaches that I think is going to hold so much value for our patients in the future. So allow me to conclude and suggest to you that the future of obesity care will include recognizing the different subtypes of the disease of obesity. Reducing visceral fat to achieve better cardio-kidney metabolic outcomes is going to be key for us to achieve. And ultimately, combining our therapies to achieve a lower cardiovascular risk state is where we, as clinicians want to go. So I am handing back and we'll be able to address some questions later on in the session.

Thanks, Dr. Le Roux. And just to reemphasize, as Dr. Le Roux had stated, obesity and more specifically, visceral adiposity are associated with the sequelae of metabolic disease, including type 2 diabetes. atherosclerosis and hepatic steatosis as well as all-cause mortality. And visceral fat reduction leads to improvement in risk factors for metabolic disease. So far, the GLP-1 agonists have shown the ability to reduce visceral fat, but also reduce lean mass and have certain tolerability issues as well as a high rate of discontinuation. Therapies that facilitate fat loss with a specific -- specificity for visceral fat may have additive cardiovascular benefits. The Activin E/ALK7 pathway stimulates fat storage in adipocytes and is an important regulator of visceral adiposity. In the liver, the INHBE gene codes for the Activin E protein, which is secreted into the blood and binds to its receptor, ALK7, on the surface of the adipocyte, thereby slowing lipolysis and stimulating adipocyte hypertrophy. Loss of function variants in both INHBE and ALK7 are associated with an improved waist-to-hip ratio adjusted BMI, reduced risk of ASCVD as well as a reduced risk for type 2 diabetes and a reduced ApoB hemoglobin A1c and reduced visceral fat volume. Of course, the therapeutic hypothesis here is that silencing expression of either INHBE or ALK7 could phenocopy the favorable phenotype seen in the loss of function variant carriers. And to test this hypothesis, we launched 2 separate but similar clinical trials, and I'll first cover the ARO-INHBE-1001 study. This study initiated in healthy volunteers with a BMI of 30 or greater who received either single or multiple escalating doses of ARO-INHBE as a monotherapy. We also enrolled cohorts of nondiabetic and diabetic obese participants who initiated combination therapy with tirzepatide plus ARO-INHBE at the beginning of each cohort, and we are pleased to report that all cohorts are now fully enrolled. The primary and secondary endpoints of the study were safety and PK and key efficacy and pharmacodynamic endpoints included changes in Activin E, body weight change, changes in body composition as well as changes in lipid and glycemic control parameters. Here, we show the baseline characteristics of the monotherapy cohorts. Baseline mean body weight was over 100 kilograms with mean BMIs of greater than 35. Participants had minimal hepatic steatosis at baseline, normal hemoglobin A1cs and baseline Activin E levels in the 450 to 500 picogram per ml range. Turning to target knockdown and pharmacodynamic data. Here, we show a dose response and Activin E reduction with increasing dose levels of ARO-INHBE. We achieved a mean maximal Activin E reduction of 85% at the 400-milligram dose with a duration of activity lasting beyond 3 months after a single dose. Importantly, this single-dose target knockdown translated into key improvements in body composition, including a reduction in visceral fat of about 10%, relative reductions in liver fat of about 38%, a modest increase in lean mass of about 2% and a reduction in muscle fatty infiltration. Here, we show that repeated doses of ARO-INHBE further improved visceral fat reductions with placebo-adjusted mean improvements of up to 15.6%. Now transitioning to the combination cohort data with an emphasis on the obese type 2 diabetic combination cohorts. We are highlighting this population as obesity and diabetics represents an area of unmet need. This population loses less weight on GLP-1 therapies and may have an overly dysregulated Activin E pathway. We also studied combination therapy in nondiabetic cohorts, and these data will be shared at a later date. First, the baseline characteristics of the obese type 2 diabetic cohorts. These patients were older with a mean age of 52 and still obese with a mean weight of 103 kilograms and a mean BMI of 36.6. This group had a mean baseline liver fat based on MRI-PDFF of 17.1% with an elevated mean hemoglobin A1c of 7.4. And importantly, this group had an elevated mean baseline Activin E of about 661 picograms per ml, which is higher than the baseline Activin E levels in the monotherapy obese healthy volunteer cohorts. This uniquely elevated Activin E level in the diabetics is something others have described in the literature as shown on the left panel, where INHBE-mRNA expression from liver biopsies correlates strongly with levels of insulin resistance. This is also something we've seen in our own nonclinical work with diabetic nonhuman primates having higher baseline Activin E levels compared to nondiabetic animals. And on the right panel, we show that baseline Activin E levels from the diabetic cohorts in this Phase I study show a statistically significant elevation at baseline compared to the nondiabetic cohorts. In our own study, we've confirmed the correlation of Activin E levels with worsening insulin resistance. And additionally, Activin E levels are strongly correlated with measures of obesity such as BMI and waist circumference as seen in the red line in the middle and right panel, with much less correlation seen in the nondiabetics represented by the blue line. In total, Activin E levels are higher in obese diabetics and the levels correlate most strongly with measures of obesity in the diabetic population. Critically, in multiple clinical trials, the obese diabetics lose less weight on incretin therapy and are less likely to reach weight loss targets. Thus, there remains an unmet need for combination therapies that can synergize with incretins to enhance weight loss in this incretin-resistant population. Recall that in preclinical studies, we demonstrated synergistic weight loss in obese diabetic mice, combining INHBE siRNA with tirzepatide as shown in the orange line compared to the purple line representing tirzepatide alone. In fact, the enhanced weight loss seen in the diabetic mice with combination therapy was a key reason why we opted to study obese diabetic patients separately in this study. In the diabetic obese patients in the clinical trial, ARO-INHBE plus tirzepatide combination therapy achieved up to 84% reduction in Activin E levels after 2 doses. No Activin E reductions were seen with tirzepatide alone. In the combination cohorts, all participants received weekly tirzepatide through week 24 with the addition of ARO-INHBE 200 milligrams, ARO-INHBE 400 milligrams or placebo. Preliminary data in the obese diabetics indicate the addition of ARO-INHBE enhanced weight loss compared to tirzepatide alone with a mean weight loss of 9.4% in the high-dose combination group compared to 4.8% in the tirzepatide plus placebo group at 16 weeks. Additionally, there does seem to be a dose response with lower dose ARO-INHBE combination therapy also showing a degree of enhanced weight loss, but to a lesser magnitude. In this population, combination therapy shows a dose response of enhanced mean reduction in visceral fat of 23.2%, a 15.4% reduction in total fat and up to 76.7% relative reductions in liver fat, all at the 400-milligram dose level on the week 12 MRI. These reductions represent approximately a threefold enhancement compared to tirzepatide alone. I'd like to emphasize that these are week 12 MRI data with the 5-milligram dose of tirzepatide, which is one of the more commonly used doses but is not the highest dose available. And in fact, while these data are preliminary, some of the week 12 combo therapy reductions we are seeing such as the large reduction in visceral fat, the large reductions in the visceral fat to abdominal fat ratio and the liver fat reductions are already on track to meet or beat the reductions seen in the SURPASS-3 study after 52 weeks of tirzepatide in an obese diabetic population. Our initial results have shown some interesting signals in diabetics, and we think there is a physiologic explanation for this. Specifically, in normal individuals, insulin is the key regulator of lipolysis in adipose tissue. In conditions of insulin resistance or lack of insulin secretion, other regulators, such as the Activin E pathway may play a more important role in regulating fat storage. Silencing Activin E may result in enhanced fat loss in the diabetic population, a population that may rely more on Activin E as a regulator of lipolysis. Now turning to safety. ARO-INHBE was well tolerated both as a monotherapy and in combination with tirzepatide. Most TEAEs were mild and no AEs led to discontinuation. Injection site AEs were mild and self-limited, and there were no differences in GI AEs with combination therapy versus tirzepatide monotherapy. One SAE of limb abscess was reported, which was not related to drug. And there were no clinically significant adverse trends in labs, including transaminases, glycemic indices and lipid parameters. And this is supported by the data on the next slide. Here, we show that in the monotherapy cohorts, both the SAD and the MAD cohorts, ALT and hemoglobin A1c were stable throughout the study. In the obese type 2 diabetes cohorts, we saw a decrease in ALTs, likely due to the large reductions in liver fat in the combination therapy arms compared to the tirzepatide monotherapy arms. Hemoglobin A1c was reduced for all groups reserving tirzepatide, including the combination cohorts. In summary, ARO-INHBE has been well tolerated and achieves robust and sustained reductions in Activin E. Monotherapy ARO-INHBE leads to favorable changes in body composition and combination therapy in obese diabetics enhances weight loss and fat loss compared to tirzepatide alone. This represents an opportunity for additive therapy in a population that has more difficulty hitting weight loss targets. In terms of next steps, we are currently in the planning stages of various potential additions to this Phase I study and Phase II study is intended to confirm the signals identified in Phase I. So now let's switch gears to discuss the ARO-ALK7 program. As a reminder, this study is about 2 quarters behind the INHBE program. Recall that ALK7 is the receptor on the surface of the adipocyte, which binds to Activin E as well as other ligands such as Activin B, C, GDF11 and others and activation of the ALK7 pathway inhibits lipolysis. The study design is almost identical to the INHBE study design. We enrolled, again, obese healthy volunteers to receive either single or 2 doses of drug, followed by combination multi-dose cohorts in nondiabetic and diabetic patients. One key difference is that adipose biopsies are used to measure knockdown of ALK7 mRNA pre-dose and post-dose in this study, and this is in contrast to the INHBE study where there's a serum measurable biomarker. Also in this study, the multi-dose interval is 3 months, whereas in the INHBE study, we dosed on day 1 and day 29. This 3-month interval was selected based on the long duration of activity we saw in nonhuman primates. The obese healthy volunteer cohorts are now fully enrolled and enrollment of the combination cohorts has initiated. Again, endpoints are largely the same with the exception that measuring PD effect requires adipose biopsies. And then for the baseline characteristics of the obese healthy volunteer cohorts, baseline body weights were about 105 kilograms with mean BMIs of greater than 36. And right now, we only have single-dose ALK7 knockdown data at the 200-milligram dose level, which is the second to highest dose planned. We are seeing mean knockdown of 88% and maximal knockdown in any individual of 96% after a single dose with an effect that appears to last at least 12 weeks. Achieving this level of knockdown is important as it helps to validate the platform. And to our knowledge, this is the first clinical trial data demonstrating siRNA-mediated gene silencing with a platform targeting adipocytes. This level of knockdown translates well into changes in body composition with an observable dose response in visceral fat reduction and a mean placebo-adjusted reduction of 14.1% at the 200-milligram dose level and this was achieved after only 8 weeks of exposure on the week 8 MRI. Preliminary safety data indicate that ARO-ALK7 has been well tolerated as a monotherapy. Most TEAEs have been mild with no TEAEs leading to discontinuation and no reported SAEs. As is the case with INHBE, no meaningful pattern of adverse lab value changes have been reported, which includes liver enzymes and glycemic control parameters. Overall, ARO-ALK7 has been well tolerated, and the knockdown data confirms translation of our animal pharmacodynamic data into humans and validates the ability of the platform to deliver siRNA to adipocytes. Healthy obese cohorts are fully enrolled with combination cohorts currently enrolling, and we expect to release additional data throughout 2026. Lastly and most importantly, we'd like to thank all the healthy volunteers, patients, investigators and site personnel who participated in these studies, and I'd like to hand the floor over to Chris.

Thanks very much, James. Thank you for joining us today and hearing about these exciting programs. They are the result of years of research by countless dedicated individuals, but represent only the first steps in our drive to create innovative obesity therapeutics with a focus on weight loss, metabolic disorders, diabetes and body composition. Today's data are still quite early, but there are some key takeaways that will help guide our future development and that make us cautiously optimistic that these first 2 candidates may play a role in future obesity therapeutic paradigms. ARO-INHBE demonstrated dose-dependent reductions in serum Activin E levels with mean max reductions of minus 85% and maximum observed reductions of minus 94% after a single 400-milligram dose. This was associated with reduced visceral fat when used as a monotherapy of minus 9.9% after a single dose at week 16 and minus 15.6% after 2 doses at week 24. Combining ARO-INHBE with tirzepatide doubled the weight loss seen in obese diabetic patients compared to treatment with tirzepatide alone. The combination resulted in minus 9.4% weight loss at week -- I'm sorry, at week 16 compared to just minus 4.8% with tirzepatide monotherapy. Importantly, this appears to be high-quality weight loss. Obese diabetic patients showed a minus 23.2% reduction in visceral fat, minus 15.4% reduction in total fat and a whopping minus 76.7% reduction in liver fat when treated with ARO-INHBE plus tirzepatide. These were approximately threefold higher reductions than with tirzepatide alone in all 3 measures. We believe these are truly stunning results. Turning to ARO-ALK7. We saw a mean reduction of minus 88% ALK7 mRNA and max reduction of minus 94%. We believe this is the first human demonstration of RNAi-mediated knockdown targeting adipocytes and represents an important proof of concept for our ability to address the cell type. Adipose is the largest endocrine organ in the body, and we believe there are many additional cardiometabolic targets we may now go after. This early POC could unlock a number of new drug candidates for us. Regarding ARO-ALK7 specifically, the minus 14% placebo-adjusted reduction in visceral fat we saw after a single monotherapy dose at just week 8 is exciting. The study is still quite early, but we have reason to believe that ARO-ALK7 may be even more active than ARO-INHBE, so we are looking forward to seeing more complete SAD and MAD monotherapy data and certainly combination data with tirzepatide. We still have more to do in the current Phase I/IIa studies but have already accomplished much. For ARO-INHBE, we've established a very strong safety and tolerability profile in SAD, MAD and combination studies with tirzepatide. The ARO-ALK7 studies still require more time, but the SAD portion of the studies give us confidence in a good safety and tolerability profile and early time points in the other portions of the study look encouraging. We demonstrated deep and durable knockdown of Activin E and ALK7. We have clear signals that the Activin E/ALK7 pathway is translating in humans. We have seen strongly favorable changes in body composition, and we've seen good weight loss in obese diabetic patients, a population that responds relatively poorly to GLP therapies and one that also has arguably the greatest unmet medical need. In addition to completing the current studies and reporting those results, there are a number of next steps we are focused on. First, we are expanding existing studies in a number of ways, including increasing numbers of patients to increase power, extending follow-up to better understand drug durability and activity out to a year. We are initiating monotherapy cohorts in obese diabetic patients, and we are initiating additional combination cohorts with other GLP drugs. Second, we are moving as quickly as possible to Phase II studies. Importantly, we believe we know enough now to get these processes moving so the current and additional Phase I/IIa studies are not gating. The Phase II studies will be starting -- the Phase II studies we will be starting are combination studies with tirzepatide as well as other GLP drugs in obese diabetic patients and studies aimed at interrogating ARO-INHBE and ARO-ALK7 as maintenance therapy after GLPs are removed. Third, we are focused on expanding the obesity pipeline. We have a number of new liver and adipose targets we plan to address, and we are also planning to develop liver dimers and adipose dimers capable of silencing 2 genes with a single drug. We are also planning on leveraging our new systemically delivered CNS platform to address brain targets using a simple subcutaneous injection. Our work in obesity fits well with our cardiometabolic launch plans. In November, we launched Redemplo to treat FCS patients. Our Phase III study supporting label expansion to include a broader severe hypertriglyceridemia population will read out in Q3 2026, and we would hope to launch in Q4 2027. Zodasiran, our ANGPTL3 drug, is being developed to treat homozygous familial hypercholesterolemia, and we believe that could be launched a year later in Q4 2028. Our first dimer, ARO-DIMER-PA, is designed to silence both PCSK9 and APOC3 and therefore, reduce both triglycerides and LDL cholesterol. We hope to have initial data in Q3 2026, and that will tell us much about how powerful a drug that could be for the 20 million people in the U.S. with mixed hyperlipidemia. And we hope the first of our obesity assets could follow that. 2026 is set up with substantial growth drivers for us. We have our first commercial sales of Redemplo in the FCS patient population, and this transition to a commercial company cannot be overstated. Our Phase III studies designed to support label expansion to include a broader severe hypertriglyceridemia population should read out in Q3. We believe this market represents a multibillion-dollar per year opportunity. ARO-DIMER-PA, which, as I mentioned, is designed to silence both PCSK9 and APOC3 to treat the large mixed hyperlipidemia market, should have its first clinical readout in Q3. Our obesity franchise will continue to grow this year with new targets, including liver dimers and adipose dimers. We will also be presenting additional data from our ARO-INHBE and ARO-ALK7 studies throughout 2026. Our emerging CNS pipeline could also be an important story. We are dosing patients in our Phase I/IIa study of ARO-MAPT. This uses our new platform that in animal studies across multiple species led to broad distribution of our RNAi molecules throughout the CNS via subcutaneous injection. ARO-MAPT targets tau, arguably the most validated Alzheimer's target and could also be used against various tauopathies. We expect to have our initial clinical data at the end of Q3. I believe we have the most productive discovery engine in the field, so this is just a narrow snapshot of what we are working on in 2026. Importantly, we have the capital, infrastructure and talent to move all these and more programs forward. Thank you for joining us today. And I would now like to open the call to your questions.

[Operator Instructions] So our first question comes from Prakhar Agrawal from Cantor Fitzgerald.

Hopefully, you can hear me. Congratulations on the data update today. Maybe first question on the lack of weight loss with the INHBE monotherapy arm. Biologically, what could be the reason on why the monotherapy is not seeing weight loss while you are seeing good weight loss with the combo arm, especially in the obesity plus type 2 diabetes cohort? And maybe just a quick clarification. For INHBE, when I look at the tirzepatide combo, the Activin E reduction across the 2 MAD doses is similar, but the weight loss trajectory is a little bit different and it starts happening around week 16. So maybe if you can confirm if there were any outliers in the 400-milligram cohort asking just because it's a small sample right now?

Yes, I can take that one, Prakhar. The first part of your question, I think this is still at the hypothesis stage, but I would wager a guess that in the nondiabetics, their Activin E regulatory system is not as ramped up or as dysregulated as what we're seeing in the diabetic patients. And that may be why we're seeing more of a signal in the diabetics. That's our explanation right now. I think that probably needs to be more thoroughly tested, but that's the best answer I can give you right now for why we're seeing more of a signal in the diabetics. Then your second question, yes, the lack of a knockdown dose response, I guess, at least based on the serum levels, it doesn't always tell us what's going on in the liver. There may be other mechanisms at play beyond just measuring the serum Activin E levels. I mean we've seen that in some of our other programs, and I'm thinking about our ANGPTL3 program, where the serum level of knockdown with dose escalation didn't really change that much, but there was a dose response for the meaningful biomarker for LDL cholesterol. So I just think there's still more that we need to sort out there.

Our next question comes from Jason Gerberry from Bank of America.

Congrats on the data. My question is just on the imaging work. I'm curious when you see such a large reduction in liver fat. Just maybe can you elaborate a little bit more the work you've done to characterize that this was fat burn and not redistributed to other tissues? And then on the DEXA scans, just wondering any work you've done to further confirm that this is an increase in lean muscle mass and not driven by any increase in water in the muscles. So just any commentary on that and just variance may be seen across -- at the intrapatient level, that would be great?

Yes, I can take the -- so first of all, we did MRI, not DEXA and we did look at -- look for changes in fat in other compartments. And what we were seeing, particularly in the diabetic cohorts was the kind of the reduction across the board in liver fat, in the subcutaneous fat, in the visceral fat as well and no increase in muscle fatty infiltration, which is one of the main reasons we looked at that parameter. So it's not like the fat was being redistributed into the muscle or other locations. And those were really the main compartments that we looked at. And sorry, what was the other question about?

Just the quality of the muscle impact. I assume that, that was more the question I was asked. Did you do DEXA for measuring impact on muscle and lean muscle and whether that was truly kind of more of an increase in muscle mass as opposed to like water increase in the muscle?

Yes, right. So we saw a modest increase in the lean mass in the healthy obese patients or volunteers rather. And then in the diabetic patients, we're still getting some of those data in. There wasn't, based on what we've seen so far, really not much of a difference in lean mass changes between the combo arm and the tirzepatide alone. But I think we're still analyzing some of that, and I think we'll report that down the road.

Our next question comes from Luca Issi from RBC. Luca, you may be on mute.

You guys hear me okay?

Yes.

Congrats on the data. Maybe just 2 quick ones for James. How are you thinking about the regulatory path from here? So assuming that this reduction in weight loss is observed only as add-on to tirzepatide, but not as monotherapy, are you planning to just get the cabo approved based on weight loss? Or are you still hoping to get maybe the monotherapy potentially approved, maybe in another endpoint like visceral stat? Like just walk us through kind of big picture, how you're thinking about the regulatory path from here to get these drugs over the finish line? And then maybe just related, it seems this is pretty safe all the way to 400 milligrams. Is there a plan to go higher? I know your competitor, I think, are going to higher doses. So just kind of love to pick your brain on how you're thinking about potentially going to higher dose?

Yes, sure. Thanks, Luca. I think I'll take the second question first. It's something that we're discussing. We haven't decided definitively if we're going to go higher. We certainly have room to go higher based on our tox data or NOAELs. And it would be interesting to just push the dose a little more and see if you could squeeze out any more PD effect or efficacy. So we'll see. We haven't ruled it out yet. Then in terms of the regulatory pathway, I think it still remains to be seen. We have not had any discussions with FDA or EMA about a regulatory pathway here. The pathway as a combination therapy with -- in the diabetics with the GLP-1s with an endpoint of additive weight loss, I think, seems like one of the more likely paths that we might take. But again, we'd have to discuss that with regulators and get their feedback on the details, like how much more weight loss do you need on top of standard of care.

And we'll also be -- in the Phase II, we'll also be looking at the possible use of INHBE or ALK7 as maintenance therapy. And while that could start as a combination with the GLPs, at some point, the GLPs would be withdrawn. And so at least going forward, that could be a monotherapy. Again, once the GLPs are withdrawn, that's a possibility.

And I would add one more thing. Chris mentioned this, too, that we are looking at monotherapy cohorts in diabetics, which we didn't look at in the initial SAD and MAD portion.

Our next question comes from Madison El-Saadi from B. Riley.

Congrats on this data. So we now have data from INHBE and ALK7 approaches. Wondering if there's a scenario where you may combine these or would advance both of them in separate subtype populations? And then secondly, maybe I missed it. Did you report baseline TAT, total adipose tissue?

Yes. We did not report baseline total adipose tissue in this presentation. I think we'll probably report that down the road, either at a scientific conference or another data release. In terms of the combo of both INHBE and ALK7, I'd say we haven't ruled it out yet. Of course, they're both on the same axis. So maybe you could get some additive effects. We did look at that in animals in the DIO model and really didn't see any additive effect when we combined INHBE knockdown with ALK7 knockdown, but that doesn't mean we might not study that at least in a cohort down the road.

Yes. And when you talk about combinations, we're really excited about using our dimer approach to knock down 2 genes at once with the same drug either in the liver or in adipose. And so those are also -- those combinations are quite likely going forward. With respect to whether we take both an INHBE and ALK7 into Phase II or just one of those, many of you have heard me talk over the last year about choosing one to go forward into Phase II. And right now, both are looking attractive to us. And so I think it is certainly quite possible, maybe even probable that we will continue to develop both of these at this point.

Our next question comes from Mani Foroohar from Leerink.

Congrats on the data. A couple of quick ones on sort of plans forward. I know people have talked about the diabetic versus nondiabetic dynamic. When you think about moving forward, when should we expect to see a more fulsome disclosure around baseline characteristics for various subpopulations, diabetic, nondiabetic, et cetera? And separately, when you think about moving into potentially a Phase II, a more targeted study, how should we think about the selection of the baseline tirzepatide dose moving up or down from where it is here in combination? And would you potentially move that as well as moving the dose for ARO-INHBE? Would this be a multi-arm study? Like how do you evaluate all those potential places that you could go given that you have a number of doses for 2 different agents in combination?

Yes, I can take that one. In terms of the rest of the data, I think we'll probably present that at a conference this year. We haven't decided when or where, but I think that would be the best forum for us to share the details of the baseline characteristics. Then for Phase II, we haven't really decided yet if -- how we would handle the dose titration for the GLP, if we would continue to titrate up to 15 milligrams for tirzepatide or the highest dose of semaglutide. I think we would opt to study both of those agents in combination with ARO-INHBE, maybe others as well to see if there's any difference if it depends on the GLP used, but have not decided on how we would do the dose titration.

Okay. And as a quick follow-up, the other question that I've gotten from a number of investors since this morning when the data was released preopen, is whether or not given liver fat reduction signal, you would explore one or the other of these assets in MASH, does it make sense to have a separate MASH study? And how to think about that opportunity, if that's something that's in your strategic calculus?

It's certainly something that we thought about and actually something our KOLs have brought up and have recommended as well the liver fat reductions that we're seeing actually at both dose levels, the 400 and the 200-milligram dose levels are substantial. It's probably something you could build into a Phase II. I mean, that would be my initial take that you could do some more extensive MRI-PDFF or maybe even MRE evaluations, evaluate some noninvasive biomarkers for MASH. Of course, we probably have to do a biopsy study down the road at some point for approval. But who knows? It seems like the approvable endpoints in that indication are a moving target as well. In any case, I think it's something that we would look at in a Phase II, haven't definitively decided if there's a separate MASH pathway for this drug as of yet.

Our next question comes from Maury Raycroft from Jefferies.

Congrats on the update. For both INHBE and ALK7 combos with tirzepatide, could you talk more about what the maintenance cohort study design would look like? And what are the doctors' expectations for what would happen with GLP-1 withdrawal? Maybe if you can comment on that. And maybe along the lines of Luca's question earlier, what are some of the precedent examples for the regulatory path that you would leverage going forward?

Yes. I think on the first one, I don't have a clear answer. We haven't definitively decided on the design of that study yet. I think we'll probably discuss the details of the Phase II designs down the road later this year. And then the regulatory precedent, I don't think there's a whole lot out there yet in terms of what magnitude of additional weight loss would need to be achieved with combination therapy? Would you have to study the monotherapy of the investigational therapy separately? So I think that still all remains to be determined when we have discussions with regulators.

Got it. And can the doctor comment just on perspective of like a maintenance use or a maintenance approach here and what would happen with GLP-1 withdrawal?

Yes. So it's unlikely that if you withdraw any one treatment, you're going to maintain all of the benefits. So -- because that's what we see with blood pressure, that's what we see with lipids, that's what we see with diabetes, et cetera. So although it's an important study to do and for us to get clarity on that, my expectation would be in the long term that we will continue with combination therapies because that's exactly what we do with all chronic diseases.

Our next question comes from Mike Ulz from Morgan Stanley.

Congratulations on the data as well. And maybe just a follow-up on the prior question for Dr. Le Roux. Maybe you can just comment at a high level on your view of this early data maybe for both INHBE and ALK7. And then I know it's early, but where do you see these assets potentially fitting into your practice? Is it more combination, maintenance, all the above?

So I would certainly think the combination approach is certainly the first thing that I would think of. And especially because it's a completely different mechanism, it's likely, as you have seen, the initial data would suggest that it's going to be additive or even actually amplify some of the benefits. Now just remember that we have very, very small amounts of absolute visceral adiposity, maybe 1.5 kilograms, et cetera, in people with diabetes. Of course, it will be more. So it's not surprising that you don't see an overall reduction in weight loss, but you see this very impressive improvements in visceral adiposity as well as adipocytes that penetrate organs such as the liver, et cetera. And it's -- and ultimately, when we are treating the disease of obesity, it's no longer about weight loss, it's about health gain. And this is exciting because you can amplify the health gains that we are seeing already from the GLP-1 type of medications.

Our next question comes from Patrick Trucchio from H.C. Wainwright.

Congrats on the data. I guess just a couple of follow-ups from us. Just the first is, I think you said that Phase II is not gated by ongoing Phase I/IIa work. So I'm wondering what specific effect size are you powering Phase II for in diabetics? Would it be incremental weight loss, visceral fat reduction or composite endpoint? And did today's data change that assumption?

Yes, I can take that one. Patrick, I think, again, when we say that this is not gating that to me means that we're planning the studies now, designing the studies, and we'll submit those studies. I think we'll disclose the details in study design and powering down the road, probably once we submit those studies. So I can't give you a definitive answer now on that.

And just based on what you're seeing so far, would you expect an incremental benefit versus GLP [Technical Difficulty] beyond week 24? And what biological signal gives you confidence in that trajectory?

Well, I don't think we know the answer to that. It's one of the reasons why we wanted to extend the follow-up in these studies. Right now in the combination cohorts, we go out through week 24, and we'd like to amend and increase the size of those cohorts. So we get a little bit more power, a little more end there to confirm the signal and then follow them out longer, maybe through a year to see if do they plateau or do they continue to lose fat mass. Because right now, I think we just -- we don't know the answer.

Our next question comes from Andrea Newkirk from Goldman Sachs.

Maybe just a quick follow-up for Dr. Le Roux. Just based on the initial data here and the benefit observed in the diabetic subpopulation, can you just remind us what proportion of the overall obesity market this represents? And then, Chris, I'd be curious how you're thinking about continued development of ARO-INHBE or ARO-ALK7. Just more specifically, if you believe Arrowhead has the capacity to bring this forward independently? Or would you look to out-license this in some manner, either wholly as an asset or potentially even based on geography?

So maybe if I can start. So just to give you broad numbers. So in the Western world, we have about 25% to 35% of the population that have the disease of obesity. The total percentage of people that have diabetes is approximately 8% to 10%. Now that's much higher if you go to the Middle East, where the percentage of patients with type 2 diabetes can be as high as 24%, 25%, et cetera. But it's also important to understand that, especially when it comes to public payers, they are far more likely to pay for medications in people that have type 2 diabetes in comparison to people that have the disease of obesity, but don't have type 2 diabetes. So the population is smaller, but the chances for reimbursement for people with type 2 diabetes is always higher.

And regarding your question on taking this forward, we do have the capacity, and it is our intention to continue to develop these and future obesity assets ourselves. I think these are important drugs, and I think we have additional important drugs that we'll be developing in the near to midterm that we should hold on to and we should develop ourselves. The fact that at least out of the gate, this -- the obese diabetic population is a specific population and makes these -- the next level studies a bit simpler, more straightforward because it's a bit more targeted, at least initially.

Our next question comes from Joseph Thome from TD Cowen.

Congrats on the data. Maybe the first one for Dr. Le Roux. Apologies if I missed this, but what proportion of your diabetic patient population that's obese that's on a GLP-1, do you think would be interested in an additive therapy like either the ALK7 or INHBE assets? And then I know you mentioned payers as well. I guess, for combination approaches, do you expect that you would get any pushback without hard outcomes data? Or will the increased reduction in fat and weight loss be sufficient to allow for combination use? And any thoughts from either you on that or the company?

So what we see at the moment is there's about 20% of patients, we call them the enthusiasts who are really moving very rapidly to take on new medications. And you could imagine that, that leaves 80% of patients out there that's currently not taking on really good medications such as the GLP-1-based therapy. So there's a huge amount for that to grow. But for those patients who are enthusiasts, we see that they take on new treatments very rapidly. So there's already a substantial number of patients that I think would be very interested in this. And of course, the fact that you can provide the treatment at a pretty infrequent time, that also makes it very attractive because patients, for example, when they come to clinic, they can get the medications. When it comes to reimbursement, you are correct that it will be difficult for new medications to displace treatments with existing cardiovascular benefits and existing kidney benefits. But what we see is there remains an unmet need in that population. And as I've shown, patients with type 2 diabetes still have higher cardiovascular morbidity and mortality in comparison to patients that don't have type 2 diabetes. And I think it's that health gain that could be driven by the reduction in visceral adiposity that may be very attractive to both clinicians, to patients, but also to payers.

Our next question comes from William Pickering from Bernstein.

Congrats on the data. For ALK7, I understand you're just presenting the visceral fat data today, but could you maybe speak in qualitative terms about how the data looked for total fat and whether that measure also supports your view that ALK7 might be a better target than INHBE?

Yes. I think at this point, we don't have all the data available. So we're going to have to punt on that one, and we'll disclose the rest of the ALK7 data when it's all been sort of cleaned and analyzed probably at a meeting down the road.

I will now turn it over to Vince to close out the call.

Great. Thanks so much, and thanks, everybody, for joining us today, and we will talk soon.