Analyst Conference Summary

biotechnology

conference date: August 5, 2019
for quarter ending: June 30, 2019 (second quarter 2019)

Forward-looking statements

Overview: Despite being a development-stage company, had $43 million in revenue. Rapid advancement of RNAi therapies continues.

Basic data (GAAP):

Revenue was $42.7 million, up from $0.7 million year-earlier.

Net income was $20.3 million, up from negative $15.6 million year-earlier.

Diluted EPS was $0.21, up from negative $0.18 year-earlier.

Guidance:

None.

Conference Highlights:

CEO Christopher Anzalone reported that now a good mix or early, middle, and late stage programs, as well as partners and years of cash on the balance sheet. Believes Arrowhead's platform gives it a distinct advantage over other RNAcompanies. Hopes to file 2 to 3 CTAs every year.

Arrowhead received FDA Fast Track designation for ARO-AAT. Received FDA clearance to begin a Phase 2/3 trial, called SEQUOIA, with the potential to serve as a pivotal registrational study of ARO-AAT, Arrowhead's second generation subcutaneously administered RNAi therapeutic for a rare genetic liver disease associated with alpha-1 antitrypsin deficiency. Dosing will last 2 years. Also secured first regulatory clearance in the United Kingdom for the ARO-AAT 2002 study, a pilot open-label, multi-dose, Phase 2 study to assess changes in a novel histological activity scale in response to ARO-AAT.

Expanded the AROHBV1001 Phase 1/2 study to include a new triple combination cohort that includes: JNJ-3989, formerly ARO-HBV; JNJ-6379, Janssen's investigational orally administered capsid assembly modulator of the class that forms normal capsid structures; and, a nucleotide analog, or NUC. For the start of dosing of this cohort, Arrowhead earned a $25 million milestone payment from Janssen.

Received orphan drug designation from FDA for ARO-APOC3 for the treatment of familial chylomicronemia syndrome.

Received orphan drug designation from FDA for ARO-ANG3 for the treatment of homozygous familial hypercholesterolemia. Phase 1 dosing began in Q1 2019.

Completed discovery and development work on ARO-HSD, a previously undisclosed liver-targeted candidate targeting HSD17B13, a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids, that is now in IND-enabling GLP-toxicology studies, and, pending success in the tox program, on schedule for a CTA filing at the end of 2019. It appears to have a protective effect for liver disease.

Completed dosing in the single-ascending dose portions of the Phase 1 studies of Arrowhead's two wholly-owned cardiometabolic candidates, ARO-APOC3 and ARO-ANG3, and progressed towards the multiple-dose portions of the Phase 1 studies in various patient populations. In ARO-APOC3 removed the highest dose and added a lower dose due to potentcy.

Amgen AMGA90 is in Phase 1. Amgen did no picked up an additional candidate available under the agreement. Revenue recognized in the quarter was largely from the Amgen agreement.

Other potential drugs are under development, some potentially could be partnered.

Cash and equivalents ended at $295 million. Received a $25 million milestone payment from Janssen.

Operating expenses of $24.1 million included $19.3 million for R&D and $4.8 million for G&A. Leaving operating income of $18.6 million. Other income $1.7 million.

Will hold an analyst day on October 18, focus will be on a long-term view.

Q&A:

JNJ-3989 effects, timeline of that study? It is Janssen's study and timeline. It is hard to predict the added activiety of 3989. It is currently an unknown. The real game is it is a 48 week trial, far longer than has been tried before. We believe many recipes will be tried over the coming years to try to find the optimal.

HSD discovered, rapidly metabolized, loss of function variant. Only inappropriate people would be people who already have that variant. Had not been previously identified as an important target in liver disease. Understanding of NASH causes is not that great yet.

HBV triple data timeline? No chance to see it at ASLD, except maybe a late break. It is only 12 subjects, it is only 12 weeks, will show initial safety concerns if any.

ARO-APOC3? We will have some top line data in September, more later.

ARO-AAT 2002 study reason? Investigators in Europe wanted to do this 12 patient trial. We did not think it would interfere with enrollment in Sequoia.

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