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

We are here with our next company presenter at the BofA Annual Healthcare Conference. My name is Jason Gerberry. I cover Pharma and Biotech here, and I am joined by CEO, Chris Anzalone of Arrowhead Pharmaceuticals. So Chris, thanks for joining us.

Thank you. It's great to be here.

So Arrowhead has had a pretty interesting pivot point as a company. Historically, a lot of earlier-stage R&D efforts, establishing siRNA therapies for different tissue types and figuring out where your next shot on goal would be. Now you're at a point where you're pivoting to commercial, but you still have a lot going on in the pipeline. So maybe we can just start there as how you're managing that transition as a company to now becoming a commercial organization and how that altered your focus as a CEO?

Sure. So we're an And company. We're not an Or company. And commercial is critical, obviously. This is why we're all here. R&D is great, but unless you can bring the medicines to patients, then there's no point in that, right? So we've had a huge -- it's been a big transition for us to build -- to start to build out this commercial force, and it's been successful so far. But in our core, we are an R&D company, and we needed to make sure that, that drive didn't slow down and it has not. In fact, it's even sped up. We are now able to address, I think, 7 different cell types, 5 of those are in clinical studies as we speak. We are now on the cusp of blowing out our dimer or bispecific approach. We've got an increasingly validated platform there. And so there's a ton of good opportunity there to knock down multiple genes with the same single molecule. We'll have our first data coming out of the dimer platform later this year, I guess, in the third quarter. That's our PCSK9-apoC-III dimer. We think we can address the 20 million or so patient population in the U.S. that's mixed hyperlipidemia. Of course, our CNS platform now, we'll have our first data come out at the end of Q3, early Q4. So this is still an important part of our growth, of course, and an important part of the culture of this company, and we continue to be, I think, at the forefront of RNAi innovation.

Okay. So let's maybe start with REDEMPLO, given you recently had your quarterly earnings call that was a focus of the discussion as you -- at your commercial intro, and then we can get in the pipeline. So you've launched REDEMPLO now for FCS, and you've got pivotal data in 3Q for the larger commercial market that will drive future revenue for REDEMPLO, which is severe hypertriglyceridemia. Maybe talk about the early FCS launch, what you've learned from that, how you're able to carry forward those learnings into the eventual launch into SHTG?

Sure. So the launch has gone well so far. As we mentioned on our conference call last week, we've had more than 400 scripts in the next -- just one full quarter, I guess, of sales. And so adoption has been a bit more rapid than we expected even. This is an education market. Even FCS is an education market. Of course, the genetic FCS population, many of those folks are diagnosed, but that's, we think, quite a small portion of the overall FCS population. As you recall, in our Phase III study, we studied both clinical FCS as well as genetic FCS. And the clinical FCS are those patients that don't have the known genetic mutations associated with traditional FCS, but still have very high triglycerides, a substantially increased risk of pancreatitis. And we -- again, we view that as the lion's share of that market. And so many of those folks will be undiagnosed or misdiagnosed. So it's incumbent on us to educate the community that those folks need to be treated. And we had -- we've been pleased with our progress in buying those patients and helping those patients. And frankly, that bleeds into SHTG a little bit. So a lot of that a portion of the high-risk SHTG population, we think can be and frankly, should be diagnosed as FCS. These are clinical FCS patients. And so it is -- I think we will be getting into what is the traditional SHTG market right now because we think those folks have been misdiagnosed as having severe hypertriglyceridemia and where they should be diagnosed with having FCS.

Okay. So with FCS, my sense was some of it was patient identification and then the other part was, as you alluded to, maybe educating the doctor. As we think about SHTG and the challenges, my sense is it's less about patient identification and perhaps more educating the health care provider on the importance of treating and preventing acute pancreatitis. Do I have that distinction correct?

So I think that's right. Although those are related, of course. I think there's tons of patients walking around who should be treated, who should get their TGs in under control, and they have no idea that they're at risk. And frankly, their physicians may have no idea that they need to get them under control. And so the sharpen the spear there is are those physicians. This is a brand-new market. Folks aren't used to think about triglycerides as bad actors. This is a bad analogy because it's ASCVD. But think of this almost as monitoring LDL decades ago before there were statins. People didn't know that they should be looking at their LDL and then statins came around and [indiscernible] this is something that we should all be thinking about. We think that elevated triglycerides are similar in that and that they have -- people have not monitored their TGs, even physicians haven't really monitored TGs. But at least for the severe population above 500, they should be looking at that, and we think they should all get under control. Now this is a multistep process, right? The first step, I think, has been to help the community understand the severity of FCS and get those patients treated, both genetic FCS and clinical FCS. The next step is SHTG more broadly. These are the high-risk FCS patients -- I'm sorry, high-risk SHTG patients. And so these are folks with triglycerides above 880 with or without a history of pancreatitis. We think there's 750,000 or maybe 1 million of those folks in the United States -- there's increasing data from our competitor as well as from our own studies that those folks are at high risk of pancreatitis. And so we need to help the community understand that we absolutely need to get their TGs under control. I think the next step then is the less severe SHTG population. These people who treat with triglycerides at 700 milligram per deciliter or 600 milligram per deciliter. We are really looking forward to seeing what our pancreatitis data look like in SHASTA-3 and SHASTA-4. Our competitor showed very good data, very promising data, and most of those acute pancreatitis events were in the very high-risk population. We're looking forward to seeing whether or not you see events in those less-traditional severe population. If that's the case, then that is the third step in this market where physicians start to understand, you know what, it's not just the high-risk folks who need to get under control. It's anybody who has trigs above 500 that we need to get under control.

Okay. And so as you mentioned, this is a 2-player market in APOC3-modulating drugs with Ionis's Tryngolza. As we look ahead to the SHASTA-3, SHASTA-4 study readouts based on some of the Phase II work that you've done, FCS work, what do you think, a, in terms of potential clinical differentiation for REDEMPLO in SHTG and does it ultimately matter? Or is this a big category, 2 players can grow it and 2 players can kind of enough to feed?

Yes. Look, this is -- it's a big category. There's a lot of patients who need treatment, and there's a lot of education to be had. And I just think that this is better served, frankly, by 2 players than payer -- one player. And has a good drug, and that's helpful. And so I think that we will grow this market much more rapidly, much more completely with 2 of us rather than one of us. And again, there's plenty of room for both of us to be successful there. Now with regard to what we're going to see, who knows? This will read out in the third quarter. Last patient, last visit in SHASTA-3 and SHASTA-3 is towards the end of June. And so once we lock the database and analyze data in action. We can at least topline this. We expect a good safety profile. We have seen that now in many, many patients, we expect that to continue. We don't see hypersensitivity. We don't see thrombocytopenia. The question here is, I guess, do we see an increase in liver fat. We don't expect to see that, but our competitor has seen that. And so we'll see if that is another differentiator for us. I just don't know at this point. With triglycerides, that is the approval endpoint, lowering triglycerides. We've seen that in spades. This essentially works in 100% of people. We had no nonresponders in our FCS Phase III study. Our competitor had about 20% nonresponders. And so we expect that to continue. This is not one of those, I don't think, scary binary Phase III readouts where drug is either worth a lot or worth 0, depending upon what the data show; the drug appears to work well and consistently. And so I think it's going to work, and we'll see very good -- my expectation is we'll see very good reductions of triglycerides. Now, will we see an improvement in pancreatitis? We will see. We were really pleased to see that Ionis showed that. Those data were good. And historically, we've seen, frankly, better TG reduction than Ionis. And so we would expect that, based on that, we've got a good chance. These are still small-ish numbers, and there's funny things can happen with small numbers, and so you never know until you know. But we are cautiously optimistic that we will see an improvement in pancreatitis once we have the full datasets.

Yes. Okay. So you guys have been vocal about that this is a category and a value proposition of drug that's worth a price premium. I think you've talked a lot about in the past about MASH drugs. You priced at a slight premium to Tryngolza presumably on the quarterly convenience dynamic, I would assume. I know you don't want to specifically comment on gross-to-net, but from everything I hear from you guys, it sounds like you don't think this is a category where you need to offer huge concessions in terms of rebates and discounts. Mindful that there are some things that perhaps are a little bit out of your control, probably and that's what limits your ability to guide to it today because you have a competitor that still has to go through those negotiations and that kind of impacts how you kind of have to respond. Is that a fair summary of the pricing dynamics because it is a very topical aspect of the story right now with investors.

Yes, I think that's fair. I don't know what the gross-to-net is going to be, but qualitatively, we don't expect to aggressively even discount this. Think of the way I think about this is not as necessarily a triglyceride-lowering drug. I think about this as a pancreatitis drug. Our goal here is to lower -- substantially, hopefully, lower the risk of pancreatitis in patients with severe hypertriglyceridemia. And as you point out, that feels to me more analogous to a MASH market. And so this to me feels like it should be a premium-priced product. Now as it relates to our competitor, we're comfortable with a list price that is a slight premium to theirs because we think we've got -- we think that the data support that, right? It's more convenient dosing once a quarter rather than once a month. The safety profile is substantially cleaner, and at least historically, our TG reduction has been better. Again, not to wipe my feet on Tryngolza, I think that's a good drug. I think that their data have been impressive and have been really helpful for a lot of patients. I just think that we can -- that we should price a slight premium to that given these other benefits.

Yes. Okay. So the SHTG pivotal, the primary endpoint of triglyceride lowering, that seems like a very highly de-risked endpoint. Thus, the focus is on the key secondary endpoint, which is acute pancreatitis benefit, which is important, I think, across all geographies. Our general sense is if your event rate was similar to core, you've got a very good chance of showing stats as long as nothing in the statistical hierarchy gets in the way. If it's kind of mid-teens number of events in absolute numbers, then you just need to show a really high absolute reduction, but could still hit stats. Is that sort of a general sense? And ultimately, I do wonder how much of this matters if your benefit on trigs and apoC-III is as good or better, and it's just a function of trial design where maybe there are some differences in either percentage of AP reduction or the statistical parameters.

I think that's all fair. And we do have belt-and-suspenders here. We designed SHASTA-5 a while ago that is powered to show an improvement in pancreatitis, and that's ongoing, and it's an event-driven study. And so that will -- assuming that we continue with that study. And we'll see when SHASTA-3 and SHASTA-4 readout if we hit on acute pancreatitis, it could be that we decide to shut down that study. But it's ongoing. And so one way or the other, I think we will have this on the label. I think our lives are easier; we can show it with SHASTA-3 and SHASTA-4. But ultimately, to your point, these are still small-ish numbers, and funny things can happen in the small numbers. And if that's the case, then fine. Our commercial team is going to have to work a bit harder. But as long as we're seeing very good TG reduction and good apoC-III reduction, this -- we still would expect to see good adoption.

What's the time line for SHASTA-5 in a scenario where you do have to roll that out to completion and get those data from the outcomes trial versus, say, your pooled SHASTA-3, SHASTA-4?

It's a bit hard to say because it's an event-driven study; as I said, it's accruing patients now. We've seen events. And so it's ongoing. I can't give you a good idea about when that could read out. I just don't know.

Okay. And to your point, in a scenario where if you didn't have it from the initial pooled analysis, just makes life a little bit harder. Is that more commercially with doctors and in those discussions with payers? Or is it all about OUS and the pathway there?

Yes. It's a good question. I think it's not about payers in the United States. I don't think that showing AP is gating for payers in the United States. We feel good about that. It will require our commercial team to talk a bit more with providers potentially about the drug and show our data. And our commercial team likes to say that if you're explaining, you're losing. And so it will take an extra step or 2 for them. But look, we have a drug that works. And so I think that we can get around that. I think your point is a good one about ex-U.S. I think that in some geographies, we're going to truly need to have AP on the label in order to get reimbursed. And so again, hopefully, we see it in SHASTA-3, SHASTA-4. But if not, we have SHASTA-5 where we're quite confident that we would see it.

Yes. And I hate to belabor the point, but I just wanted to make sure, if you think about SHASTA-3, SHASTA-4, the main differences or uncertainties as you think about projecting the number of events? Is it that it's 25% smaller study? Is it that we just don't have a lot of data around AP events, and we're talking small numbers. And so perhaps that's a little bit tricky or maybe any slight differences in baseline characteristics, say, versus the core study? How would you kind of rank order those uncertainties?

Yes, I think it's 1, 2, not 3. So our baseline characteristics are quite similar to CORE and CORE2. So I feel good about that. But it's -- I think maybe these numbers are wrong, but we have around 750 people. And so that's not a huge number. And small numbers can have funny effects. So it's really just that. It's only a 1-year study, right? If we are carrying this out for more than a year, for 2 years or 3 years, for sure, we'd be quite confident. But let me take a step back. So when we first designed SHASTA-3 and SHASTA-4, it was not powered to show AP. That's why we decided to design SHASTA-5. And when -- and so we didn't have any expectation at all of showing any improvements in AP in SHASTA-3 and SHASTA-4. And then when people would ask us about the own studies, CORE and CORE2, they would ask us if we thought they would show AP in those. And we said, absolutely not. This pancreatitis event is severe, but it is -- it doesn't happen every day. And so we didn't think they were going to show it. Well, they did show it. And we are seeing events in SHASTA-3 and SHASTA-4. What we learned and the field has learned is that pancreatitis -- TG-related pancreatitis is a lot more common than we all used to think it was. And so it just underlines the fact that these patients really do need to be treated, not just those severe patients above 880 with history of pancreatitis, but really anybody with substantially elevated triglycerides. So we are now, again, cautiously optimistic that SHASTA-3 and SHASTA-4 will show it. And we are also much more confident that this is -- these are important drugs that need to get to patients.

Okay. Last question, just -- do you think this is a category that ramps and launches fast, given some of the patients who are high risk, who've had past AP events, I presume that they would be highly motivated to treat and I think Ionis has guided to like a $3 billion in peak. Is that a rough proxy of how you see REDEMPLO peak in the U.S.

Yes. I'll be a bit more aggressive on that. I think the peak for us is $3 billion to $4 billion, but that peak is not going to happen in the first 6 months. This is an education market. And so I do expect a bit of a -- boy, slow is a strong word. I wouldn't use the word slow, but I'll use the word slow. I expect a bit of a slow adoption curve because this really is an education play. Again, I'm glad that there are 2 good drugs out there, and there are 2 companies that are bringing the story to providers and to payers, but that will take a bit of time.

Yes. Okay. And then maybe shifting gears to obesity in the last 10 minutes, I got a couple of pipeline topics to hit INHBE plus tirzepatide, more data this year. I think the goal is to improve the weight reduction, maybe 5% versus tirzepatide alone. Maybe the additional data you expect to generate here, how that will inform your confidence level on a go-forward strategy, I imagine in type 2 obese patients would be a play for INHBE. Is that right?

Yes, yes. So we've thought all along, even before we started clinical studies for ARO-INHBE, we always thought that the play here, if there's a play, if this translates from animals to humans, the play is in combination with the GLPs. Those -- that's a good class of drugs. There's no reason to try to make this a monotherapy. And frankly, I think the biology doesn't support that. But we always thought that this could be a powerful addition to GLPs to increase weight loss potentially and more importantly or equally importantly, to make that high-quality weight loss. And we saw that in the early data. And we really saw that in this obese diabetic population. We saw a doubling of fat reduction and a tripling of liver fat reduction. And so that was really eye-opening to us. It wasn't entirely shocking to us, but it was eye-opening and important. And so we are designing Phase II studies as we speak. I expect to start those this year, where we will be looking at that population, and we'll be looking at INHBE to contribute to -- as a MASH therapy as well as potentially obesity therapy. Okay. And sorry, one more thing on that. And there are additional good targets in the liver against obesity. And so we talked about or I mentioned earlier, this burgeoning platform we have in dimers, and we have an awful lot of interesting ideas about what we can combine in a dimer or bispecific with INHBE to make it an even more complete and powerful drug class. And so I think you'll hear more about that into '27 and beyond.

Yes. And so if we were to think ahead, the 5% seems very relevant to the regulatory bar. What else in terms of composition or blood sugar, do you feel like is table stakes to having a differentiated product that can compete given just how competitively intense obesity is, and we know that Lilly's retatrutide can push the boundary even further for weight loss reduction. So I imagine how are you thinking about some of those other aspects of the profile?

Yes. We'll see. I don't know if INHBE is -- will be helpful with blood sugar. I just don't know; it's too early to tell with our data now. But what appears to be good at is moving fat around in a healthier fashion, getting fat out of -- decreasing liver fat, decreasing visceral fat and liver fat. I think that's important and retaining lean muscle mass. Look, if we have something that could enable patients to use a relatively low-dose of a GLP, tirzepatide or standard GLP-1 and get better weight loss with a lower dose of those and have that a higher-quality weight loss, and potentially treat a fatty liver, I think that's a really compelling set of possibilities.

Yes. And so then what would you be looking for ALK7? Is it maybe proof of principle on adipose targeting and that opens up the door for a lot of other things that could be interesting? Or hey, we don't know. We just want to see what the data is and then we'll kind of inform you on maybe the strategy on how to utilize this tool and what it may be beneficial for.

Right. Yes. So we think this Activin E-ALK7 axis is really interesting biology. And so interrogating ALK7 is really essentially a different way of interrogating this axis. And we think it's interesting. And so I look forward to seeing what that looks like. But you're right, the value here is at least, well, I guess, threefold. One, let's see what ALK7 does in terms of weight loss. We are a bit -- we are, what, 2 quarters behind Activin E with ALK7, but also the MAD portion of that study, the doses are separated by 3 months rather than 1 month. So it just takes us a bit more time to generate those data. So you'll see more data second half of this year. Let's see what that looks like. We're excited to see what that looks like. So that's value -- potential value, number one. Potential value number two is, as you mentioned, this opens the door to our ability to deliver to adipose. We've seen really good data in animal studies. Let's see if it translates into humans. If it does, there's a number of good targets that we can go after. And so I think that is a value-creation event. And the third is, as with INHBE, this is a potential component of a dimer approach. What if you can knock down ALK7 and something else. And there's several good targets that we like in adipose that we can think of pushing in the clinic sometime in '27, maybe even beyond. So we look forward to seeing these data, and we look forward to this being potentially a franchise of its own.

Okay. So I imagine between the work you're doing on your PCSK9-apoC-III dimer, if that looks good, if the obesity assets look interesting, companies in your space eventually do need to consider partnering at a time just given constraint of resources and the ability to maximize what you're working on. So I think you moved off of obesity as a partnership candidate. Could that be revisited? I'm just curious, I imagine anything can be revisited.

Yes, anything can be revisited. Look, we reported on our last conference call -- Form 10-Q last week, about $1.8 billion of cash. And so we're well capitalized. We are positioned to take all of these forward ourselves, and that's our posture right now. I think there's a ton of value there. That may change at some point in the future, but right now, at least we really like blowing out obesity ourselves, not just INHBE and ALK7, not just the dimers that could be made with those 2 candidates, but other ones. I mentioned CNS. They're really interesting obesity candidates in the brain, and we'll have data from ARO-MAPT, our first subcu administered CNS drug. And we'll have data later this year. And if that's positive, then that opens up a whole new area for obesity, talking about obesity. So we want to hold on to that. Cardiometabolic between plozasiran and zodasiran. Zodasiran is our ANGPTL3 program where we're treating HoFH patients. We have no interest in partnering either of those. We're going to bring those forward ourselves. The dimer safety PCSK9, apoC-III, that has a big opportunity to treat the 20 million or so people with mixed hyperlipidemia; we want to hold on to that ourselves. And then, let's see where we sit with the broader CNS platform.

Yes. Okay. So we only have like 2 minutes. So I'm going to lump these 2 assets together in one question, which is your MAPT and your ALK7 data updates this year. Right to think about these as primarily safety and you just want to see deep target knockdown, and that's going to be the key learning that will inform, hey, we got something here. Let's keep going.

Yes, I think that's fair, particularly for MAPT. The data we'll have this year is just in healthy volunteers. I think that's important. Let's see if this translates from NHPs to humans; let's see if we get good knockdown of tau. Let's see if we -- this is well tolerated. If those are the case, it opens up a lot of opportunities for us in CNS and beyond. And we're preparing for that. We've got a number of CNS programs behind that, that should this initial readout be positive, we're going to push as quickly as we can. And so I think you'll see a number of new CNS candidates in clinical studies in 2027, and you might see the first one at the end of 2026. So certainly MAPT. For ALK7, same thing. We are really interested in safety. We're really interested in knockdown. But look, let's -- we're also interested to see if this Activin E/ALK7 axis translates from animals to humans that we do see some effects in terms of maybe weight loss, but also in terms of fat distribution.

Okay. So if we think about MAPT and if you do validate systemic delivery, some of the opportunities that may open up? Or should we be thinking about that as some of the areas where maybe intrathecal ASOs have been studied, but like Huntington's that -- or even ALS or different Alzheimer's settings or targets, I should say, like what does the menu of options start to look like?

It's a large menu. So certainly, all those things. But there are other conditions. I don't want to pick on obesity, and that's not our sole focus, obviously. But let's talk about obesity. It's inconceivable to me that an obesity therapy could be administered via intrathecal injection. It is certainly conceivable that an obesity therapy could be a simple subcu injection at home once every 2 or 3 months. And so it opens up less severe, if you will, diseases if we can -- if we really can translate the systemic delivery from animals to humans. And so it runs the gamut from grindingly awful neurodegenerative conditions to things like obesity that are less severe.

Okay. Well, we're out of time, and there's a lot we didn't get to cover, but I appreciate your time and the insights as always.

Of course, thank you.