Arrowhead Pharmaceuticals, Inc. ($ARWR)

Good morning, and thank you for joining us on day 3 of the 47th Annual Goldman Sachs Global Healthcare Conference. I'm Paul Choi, and I cover the mid-cap biotech sector here at the firm. It's our pleasure to have Arrowhead Pharmaceuticals here for our first session today. But before we begin, I'm required to make certain disclosures. These disclosures relate to investment banking and other relationships that we may have with companies discussed here today. I'm prepared to read out a lot of these disclosures to you. However, these disclosures are available to you as clients of the firm on our research portal. But otherwise, we'll go ahead and start. To my immediate left is Vince Anzalone, who -- with Arrowhead. And then we also have, to my far left, Dan Apel, who is CFO. What we'll do is turn it over to Vince, maybe to give some high-level comments on the company's strategic priorities for the remainder of 2026 and going into 2027. And then we'll go to Q&A. If there are any questions along the way in the audience, please feel free to raise your hand, and we'll try and get a mic to you. But otherwise, I'll turn it over to Vince to kick it off.

Sure. Thanks, Paul. And thanks everyone at Goldman for having us today. So 2026 is -- feels like another big year for Arrowhead. We've made a ton of progress over the last few years, moving from a strictly R&D organization into a now commercial organization, but also expanding the size and the breadth of our clinical portfolio and more importantly, focusing really our late-stage R&D spend and our commercial build-out on the cardiometabolic space. And just to review, we're an RNAi therapeutics company. We have a proprietary platform that delivers siRNA to several different cell types, seven different cell types, with five of them represented with clinical stage drugs. So for 2026, our real focus is commercial execution. And as I'm sure we'll talk about later in this talk, the readout of our upcoming Phase III studies, for SHTG for our drug plozasiran, which is marketed as Redemplo. And then also a couple of key readouts in the earlier-stage portfolio, namely the obesity programs, a tau program for Alzheimer's, that uses a new delivery system that crosses the blood-brain barrier after a subcutaneous injection and systemic administration, which I think could be really transformational and revolutionary for the field of CNS diseases and specifically for oligonucleotides in CNS. And then also we're going to have our first readout for the world's first dual functional siRNA or dimer. We've created a separate technology that can deliver two therapeutic siRNAs to simultaneously silence the expression of two genes expressed in the liver. That drug is called ARO-DIMER-PA. It silences the PCSK9 gene for LDL lowering, and also the APOC3 gene for triglyceride and triglyceride-rich lipoprotein lowering. And again, I don't want to overstate, but I feel like for a first-in-man study, this data set also could really be transformational. Because the field of ASCVD has really been focused on LDL lowering and getting more convenient ways to do that and longer-acting therapies for PCSK9 inhibition. But it's really -- it hasn't focused on the other side of the equation, which is triglycerides, triglyceride-rich lipoproteins. And if we can simultaneously do both of those, we think we can have a big effect in ASCVD, which is really an enormous opportunity. Patients with mixed hyperlipidemia, meaning elevations on both sides of that, are probably around 20 million people in the U.S. And again, I think this -- it's an early data set, but it could be transformational for the field. And so those are our main priorities. But again, I think we're -- the real main event this year is our upcoming Phase III readout for the SHASTA-3 and -4 studies, which again, I'm sure we will talk about in depth later today.

Sounds good. Maybe we'll start with the commercial side of the company and talk about FCS. Maybe just for those who may be unfamiliar with FCS, can you maybe give us a rough sense of maybe Dan, how these patients are identified? Is this part of the standard cholesterol and cardio screening panel? And just sort of what is the potential market opportunity here in FCS?

Yes. So just starting with the market opportunity. We've -- this is an ultra-rare indication. It's been varying levels of estimates about the population. So our initial estimates were, we had ranges from 1 in 1 million to 2 in 1 million to even 10 in 1 million based on genetic and then we're approved for both genetic as well as phenotypic, and so the phenotypic was even less precise. So we had come out with initial market projections around 6,000. Our current estimates are that it's actually well north of 6,000. And so we've seen that through the success of our initial launch as well as that of our Ionis, who's come out with Tryngolza about a year ago. So -- and then first part of your question was the...

Just the -- how are these patients identified?

Oh, how do they...

Part of the standard cholesterol or other kind of screening?

Yes. So we won't give out too many details about that. It's kind of proprietary. We do have sort of the classical physician ID where we look at physicians who are treating FCS-like characteristics. And so that's a pretty easy way to determine some targeting there. We also have some consumer-based marketing to go out and identify these patients. It is very, very much an underdiagnosed condition. And then we do have a number of very proprietary, and I would call them innovative ways that we're interacting with health systems and other areas to basically help identify those that might benefit from this therapy.

Can I add something on to that? So historically, and Dan mentioned this, that it's underdiagnosed. Historically, it's really been tough to diagnose these patients because the way the disease works is that there is a problem in these patients' bodies with triglyceride metabolism. And it might be a single gene mutation, which is kind of classical FCS, or it might be multiple gene mutations, as well as lifestyle that causes these patients' triglycerides to be extremely elevated, in the thousands. A normal triglyceride panel or reading is 150 milligrams per deciliter. These patients are in the thousands. And so they present with chronic abdominal pain and brain fog and acute pancreatitis of undefined origin. And to Dan's point earlier, our original estimate was it might be 1,000 people or maybe 3,000 or so in the U.S. And now as disease education work that we have done as well as our competitor has done, a lot of patients are being identified earlier, and referred into specialty care. And your question is right. You can identify these just on a standard lipid panel. It's just triglyceride reading. And then for FCS specifically, you have to look at either -- you have to genotype the patients, and they have to have one of those traditional canonical gene mutations, or they can be diagnosed clinically. So they have the same syndrome without the gene signature. And that's really the new learning that we've had is that the size of that opportunity is much larger than we originally expected. And between we and Ionis, there's probably about 1,000 patients already that are on drug after just over a year of this class being in the market. And we're not 33% penetrated in this market. We're probably -- we're less than 10%, maybe 5% penetrated. And so the disease education work is still ongoing, and that'll also be important for SHTG. But we have made the decision to start to expand our commercial footprint a bit, because the early results with commercial have been really promising.

Great. I want to talk a little bit about your early learnings from the launch here. Specifically, maybe what are you hearing with -- back from payers? What is -- what are sort of the necessary steps to get patients on drug? And in terms of your early launch, I think you've identified several hundred scripts are written so far, some of which include switches from the competitors. And on that particular point, what is sort of motivating physicians to drive switches given that the other therapy in itself is relatively new?

Yes. Yes. So I'll start and then Vince can add on to that as well. So on the payer side, I think, very good discussions, very open discussions with. I think important there is that they have all shown, or the majority have shown, willingness to have policies that basically align with our clinical criteria. So rather than coming out and looking at diagnostic scoring tools or some other sort of hurdles that might be there. They're very much having discussions, or we're very much having discussions where those policies are aligned to what we have in the label and the clinical criteria there. In terms of switches, we talked about that on the earnings call as well, slightly over 10% currently switches, and that's really coming from a diverse set of reasons that range the gamut from efficacy to tolerability to convenience. So on efficacy, we do believe we have the more potent molecule. You probably recall that under the BALANCE trial, they had a certain number of nonresponders. So it's natural to see some switches just from nonresponse or desire to get to go on triglycerides. Convenience or quarterly versus monthly dosing. And then on the safety side, our label has no warnings, no precautions, no contraindications. And theirs has hypersensitivity and thrombocytopenia. So it's really a mix of issue. I wouldn't pinpoint to one, but we are seeing the switches.

Great. Maybe one more just on the early launch in terms of what you're hearing from your sales force in terms of feedback. What is driving potential preference share here, versus the other products? Are patients speaking to symptomatic relief? You talked earlier about brain fog, things like pancreatitis without an identifiable source. Just sort of curious what is driving, in your opinion, based on the early launch data, patient preference and behavior here.

Yes. So I think the biggest challenge is around identifying them and then ensuring that the physicians are completely familiar with the therapies that are available. In terms of physician preference, I think,they will -- they would naturally prefer a molecule that is more effective, that is more convenient for you. But both are actually, at the end of the day, very effective tools. And so it's really identifying the patients, understanding that this is the right therapy for them, and going from there.

And that's the really important part here. It's not -- we can all argue over incremental benefit of Redemplo over Tryngolza. The truth is that this class is really transformational for these patients. These are patients who've been suffering for decades with nothing. And physicians who have just been at their wit's in with no way to support these patients. And this class, the APOC3 class just changes their lives dramatically. If you think about what they have to do to manage their disease before an APOC3 inhibitor was available, they'd have to have a severely -- or a very low fat diet, something that's totally unsustainable. And even with that, they'd still have these dramatic and severe spikes in trigs that put them in the hospital. Typically for FCS patients, maybe multiple hospitalizations per year, and these can last anywhere from a week to two weeks -- it's very expensive to the health care system. And SHTG -- and you haven't asked this question, but I think this is important. High-risk SHTG and FCS, whether you call it a clinical FCS or genetic FCS or multifactorial chylomicronemia syndrome, these are all different ways to describe the exact same syndrome with the same clinical sequelae. They aren't different diseases. They're the same disease. Patients can't metabolize triglycerides. They spike, and they get hospitalized. And that's really what we're trying to do here is for FCS, we are approved here. For SHTG, we'll be making the same pitch, and we think that class share should get pretty high, because I think it's a no-brainer with physicians. If your patients have trigs that are above 500, certainly if they're above 880, certainly if they've had acute pancreatitis, you should put them on therapy.

Great. I want to turn for a moment to the European market. Your competitor is approved there, but for the genetic population, you recently had positive EMA feedback on both the genetic and population, as well as patients who present clinically for Redemplo. Can you maybe first update us on what is sort of the timing for a potential final EU decision? And then as you think about the EU market and just sort of the commercial opportunity there, how does it compare to the U.S. market? And just how do you think about the launch trajectory over time in EU, just given the historical reimbursement challenges for various drugs?

Yes. So as you mentioned, we have a positive CHMP opinion. So we are hopeful to get -- usually leads to EMA approval. We're hopeful to get that actually this month. And then we should get, following the CHMP approval for genetic as well as for clinical FCS. So we'll be sort of the only provider in Europe that has clinical FCS under its label. So in terms of how that works in Europe, obviously, it's a slower system. So it's country by country. Each member state will go through a separate pricing reimbursement. Germany will be first because they allow for that. We think with the label that we have on expanding to genetic FCS as well, we think that'll be an added benefit in most payers' perspective in terms of it's treating a population that has no other available treatment. And so that should help with uptake. But the -- it's sort of a country-by-country process over the next 12 months, starting first with Germany.

Let's turn to the clinical side and talk about SHASTA-3 and -4. I think the consensus expectation is that the study should be positive, and we're really mostly looking at the magnitude of clinical benefit or TG reduction here. Can you frame for us how the company is thinking about that? What is needed to suggest clinical differentiation versus the competition? Is parity in the 60% to 70% range versus what Ionis has shown historically the appropriate benchmark in your mind? Or just how do you think about the potential for incremental differentiation here?

Sure. So both Tryngolza and Redemplo are both APOC3 inhibitors which use RNA. So the Tryngolza uses an antisense oligo, and we use an siRNA. The gene target is the same. And so it really comes down to downstream PD effect from knocking down that gene. And we have -- Redemplo has historically, and when I say historically, it's always hard to make cross-trial comparisons. But when we start with healthy volunteers going to patients with moderately elevated TGs, going to patients with SHTG, and then ultimately patients with FCS, we have always had, as Dan mentioned, we think a more potent molecule. So better reduction of the gene target and better downstream PD. And the downstream PD would be triglyceride lowering, and then really the clinical benefit behind that, the risk of acute pancreatitis reduction. And so what do we need to show? I don't want to put a number on it. But we would like to continue to see the same path as we've seen in all of our clinical studies up to date, which is very potent APOC3 reduction, very potent TG reduction. And then now -- and I won't go through all the different studies, but between Arrowhead and Ionis, we've now shown in three or four different clinical studies that if you do that in a high-risk population, that meaning reduced TGs, you will reduce the risk of acute pancreatitis. Now these -- the SHASTA-3 and -4 studies weren't specifically prospectively powered to show an acute pancreatitis benefit. But what I think we learned and the field learned from the Ionis CORE and CORE 2 studies is that the background event rate is likely a bit higher than any of us really expected, and that you should see more events on placebo than we had originally modeled. And so I think that generally, we want to see good TG lowering, somewhere in line with what we've seen previously, and we'd like to see a benefit with AP. So go ahead.

I was just going to ask on that point, since the trial is not specifically designed for that clinical endpoint, how do you think about sort of the numerical differences? What sort of maybe statistical assumptions are built into the study given, what you just said earlier about sort of higher natural background rates.? And so what would sort of be truly viewed as a, let's say, call it a good scenario versus a great scenario?

Gosh, I can bookend that. I think a good scenario would be a numerical benefit, right? So we are reducing AP risk versus placebo, and a great or a home run scenario would be statistical significance. I think the exact number, the risk reduction number, is less important than having clinical data that can make its way to Section 14 of the label somehow. And something that we can publish and that physicians can wrap their head around. The truth is, with this population, especially the high-risk SHTG population, physicians who treat these patients, and it's a specialty market. This is not a primary care market, but the specialists that treat these patients -- they know that their AP is solely driven by elevations in TG and kind of the postprandial spikes in TGs after they have a large meal or drink an alcoholic beverage or something that lands them in the hospital. And so it's not a controversial statement for them to say that if you reduce TGs to reasonable levels, to low-risk thresholds, then you will reduce AP risk. And so I'm not sure that the exact number is critical here for uptake. It would be certainly helpful. And we're at an investor conference, and so it would be helpful for investor conversations. But I think for treating and prescribing behavior, we just need to continue to show what we have shown all along with this program.

Great. Can you maybe remind us, between your SHASTA study and the historical CORE study, what are some of maybe the patient baseline differences, however minute they may be, or just sort of background therapies that may influence the sort of shape of the outcomes that you read out here in the coming quarter?

Sure. I'm sure you can't hear that in the audience, but we have a very loud phone that just went off. So the patient population is very similar. And the baseline characteristics are really very similar between the two programs. You mentioned background therapies. This is a heavily pretreated population because, again, lipids or TGs show up on a standard lipid panel. A lot of the TG-lowering therapies, the omega-3s,...

That's a couple [indiscernible]

Exactly. They're generic. And they're somewhat well tolerated, and so physicians prescribe these as first and second-line treatment. So I want to say, I don't remember the exact numbers, but we're looking at probably 70% to 90% of these patients are on background therapies and probably the same things. So that shouldn't be different. The baseline characteristics you should be thinking about when you're trying to predict AP risk reduction or the background AP event rate is two things: TG levels above 880, that tends to be the threshold at which AP risk starts to get very steep, or the curve of AP risk starts to get very steep. And then also patients who have a prior medical history of acute pancreatitis. So the numbers there are in our studies between the two, we had somewhere between 30% and 40% of the patients who had trigs above 880. So it's a really substantial part of the study that are at high risk. And we had almost 20%, I want to say it was 17% to 19%, had a prior medical history of AP. And those are really the two predictors. And if you look at CORE and CORE 2, it's almost carbon copies. It's very similar to that population. The baseline triglyceride level is similar. I think we're within 100 mgs per deciliter with mean or median. I can't remember the measure we were using. But interestingly, when we published our baseline characteristics about a year or so ago, we showed both screening levels and then baseline levels. And so patients come in for screening, and then they get -- I think it's three reads before first dose. And so the baseline level is actually an average of those. Screening level is the first read. There was about a 200 mg per deciliter difference in between screening and baseline of just a few months. And these patients didn't change diet. They didn't change therapy. It's just...

A fluctuation.

Exactly. Like I don't think people appreciate how variable that reading is and how much trigs fluctuate based on diet and lifestyle and also just basic triglyceride metabolism. And that's, again, why these patients get into trouble, because they get these wild swings because their body just processes TGs differently. So it's a long way of saying we feel comfortable that the population that we have in the studies are very similar to Ionis. And so our assumptions on powering really have just looked at their results from CORE and CORE 2 and kind of imputed that on our studies, and we feel comfortable that we'll have a reasonable number of events.

Great. Maybe two more quick ones for me, and then I'll see if anyone in the audience has a question. First, you talked earlier about that sort of 880 benchmark as sort of a key population to focus on. Just curious, are you seeing different responder rates at or above that level versus below that level? And just how do you think about that influencing the outcome? And secondly, are there different responder rates in those patients who have, let's say, a single AP event versus recurrent events? And does that potentially affect the outcome? Is there a different response profile in patients with repeated events?

Gosh, I guess my answer to that would be probably. And the answer to the first part about what we're seeing is that we're blinded to these, and so we have very little access to what's actually going on in the clinical study. So I can't really talk about that. We will be having last patient, last visit for both of the studies in the next couple of weeks, I think. And so at that point, we have to do some QC, and then lock the database. And then we can take a look, and then we'll have our top line readout sometime this summer, over the next couple of months. So we will know and you will know at that point.

Great. You have a second study running as well, SHASTA-5, and that, I believe, is slated for next year. In a scenario where the upcoming data readout is maybe numerically beneficial, but not statistically significant, what does that mean, I guess, and what sort of onus does that put on you guys for SHASTA-5 to be positive? Because how important, in your opinion, is that to driving prescriber behavior down the road ultimately?

Yes. So SHASTA-5 was originally designed and sequenced, the timing of it, was designed to read out right about the time that we would be launching for SHTG in Europe. Because some of the payer feedback that we had gotten was that they wanted to see a clinical benefit in that population, first, to have a reasonable reimbursement rate; and second, to gain access. And as I mentioned before, we -- and I think Ionis was in the same camp, too, didn't believe that the SHTG studies writ large would show that, were really sized or powered or designed to show that benefit. And so SHASTA-5 was the way for us to interact with European payers. Now if we get an AP -- a clear AP signal, numerical and/or statistical, for SHASTA-3 and -4, that's the time that we kind of rethink what the value of SHASTA-5 is. I would say that just getting a positive result in 3 and 4 doesn't necessarily mean that SHASTA-5 is useless. It would be a prospective study with a primary endpoint of AP risk reduction that's event driven as opposed to time bound. And specifically in the high-risk population. And that study doesn't exist anywhere other than in SHASTA-5. So there still might be some benefit internationally, specifically with some of the European payers. But again, that -- we would have to reassess this summer what the value of that is. And we're pretty far along in it. It's not like it's a brand-new study.

So sort of makes sense to run to completion.

Could be. But again, we would have to do that analysis after we have all the data. And also after we see what the Tryngolza label might look like, because we don't know that either for SHTG. Where does AP risk reduction show up in the label? Again, it's not the primary endpoint, so it likely won't be part of the indication statement. But how is it represented in the clinical study section of the package insert? So those will all be part of the analysis.

Great. I want to take a moment to see if there are any questions in the audience. If so, please feel free to raise your hand and we'll get a mic to you. I want to talk a little bit about pricing here in this area on SHTG. You made a price change recently the Ionis pricing announcement. And so just sort of curious, what was sort of the background behind that? And if you see the Ionis label down the road and you have a clinically differentiated result, how does that inform your view on potentially the longer-term pricing here of Redemplo? Do you want to take that, Sam (sic) [Dan]?

Sure. Yes. So yes, as you mentioned, we recently repriced down to the WAC of $45,000. I think from the payer perspective, that was very well received, it removed uncertainty, right? So we're in ongoing, active discussions with them. And it kind of brought it down to a level that is -- where they would view it as cost comparable. So anywhere -- our research is anywhere between 15% and 20%, they're going to view it as cost comparable. And so it took out a lot of noise around those ongoing discussions. I think we clearly priced it at a premium. We indicated that as well. For all the reasons we've talked about at this fireside here, which is essentially around the efficacy, essentially around the convenience and the safety. So we do view that as kind of the price that we would move forward with. So we've mentioned one Redemplo price. So we do not plan to change that moving into SHTG. We do have an upcoming data readout, and we'll see what that looks like. But in terms of our intention right now and our expectation would be we keep it at that price, and it's well priced for the indications to come.

As you think about the upcoming PDUFA for your competitor, maybe from your perspective, what do you think is likely to be on label? And also downstream, how are you thinking about potential society guidelines in this area affecting and driving uptake of your product and the competitor's product? Do you anticipate that guidelines might have something like what's [ Audio Gap ] and so forth versus just more like symptomatic management for things like [ Audio Gap ] in that regard?

Yes. This is a space that has not had active pharmaceutical promotion for many, many years, decades, really. And so the guidelines have stayed pretty static. So right now, SHTG is defined as Trigs above 500 mg per deciliter. We have -- and our competitor in the field has kind of viewed high-risk SHTG as patients who have one of a few things. Trigs over 880 or above 500 and a history of pancreatitis. And I think that from an uptake perspective, those would be -- those high-risk patients would be the first really to be treated.

That first tier. Yes.

The first tier. But to your question about guidelines, as with any growing market that needs disease education work, as physicians bring patients in, as they understand treatment paradigms are changing, as they understand symptomatology, guidelines certainly will change over time. And we will be working with societies to make them appropriate. And what that might mean is that the spectrum of elevated TG patients, you might focus initially on that high risk and then as guidelines tell physicians treat to goal. And that it's easier to say that than actually in practice because what is goal, right? Is to get patients below 880? Is it to get them below 500 or is it to normalize them at 150? We don't really know that yet. And so I think that the guidelines will certainly change. And that's why I think that we feel comfortable that this is a much larger commercial opportunity than really people appreciate, because there's 3 million to 4 million people in the U.S. with Trigs above 500. probably 750,000 to 1 million of those would be considered high risk. And I think that historically, people have thought of TGs as being not really commercially attractive. You and I, right before we started here, talked about what another TG-lowering therapy, which was approved maybe 10 years ago, that had decent uptake but really didn't change the market all that much. we think that we are right now in the era where that changes dramatically. Now over -- from today to the next 10 years, I think a lot more patients will be on TG-lowering therapy, specifically APOC3 inhibitors.

We have a few minutes left, so let's maybe turn to your other pipeline assets and talk about maybe what you've recently showed at EASL and sort of benefits on reducing liver fat there. Can you maybe just talk a little bit about your efforts and which sort of pipeline candidate you view as most promising in this area?

Sure. So I'm looking at the clock, we have two minutes left to talk about the other 20-plus clinical stage drugs that we have. That's one of the challenges with Arrowhead, and I get it, that we are a very broad platform and clinical portfolio company. We talk a lot about Redemplo and about plozasiran because it's our first commercial product. But the truth is that we really have an enormously promising pipeline behind it. The programs you're mentioning are ARO-INHBE and ARO-ALK7, which are obesity-targeted drugs. The data that we presented last month at EASL was specifically on INHBE inhibition leading to liver fat reductions, which was something that I think that we expected, but I think the magnitude of it was a bit surprising. To review the data or first to review the mechanism. This INHBE-ALK7 axis, it's a way for bodies to regulate fat storage. So the idea is if you inhibit the INHBE gene, it stops the Activin E protein from being produced in the liver, and it stops signaling adipocytes to store fat. And what we saw in our interim early clinical data is that specifically in patients with type 2 diabetes in combination with tirzepatide, that led to a doubling of weight loss and a tripling of fat loss. And then in patients with or without type 2 diabetes, we saw a really dramatic reduction in liver fat, somewhere in the 40% to 70% liver fat reduction range with just 2 doses, I believe it was. And so those are the data that we presented. We're starting to look at that the INHBE program as kind of potentially having two different diverging paths. One would be for MASH, that we're looking at. We're already doing design work on Phase IIs there and starting to interact with regulators on what the path would be there. And then the second would be combination therapy, add-on therapy with -- with GLP-1s for -- potentially for obesity.

Great. So much going on. Obviously, an exciting time ahead. But my thanks to Arrowhead for joining us here. We'll have to end it on that note. Thank you, Vince. Thank you, Dan.