Analyst Conference Summary

biotechnology

conference date: November 25, 2019 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2019 (fiscal Q4, fourth quarter 2019)

Forward-looking statements

Overview: Rapid advancement of RNAi therapies continues.

Financial figures were only given for the full fiscal year. I probably won't bother to backfill the Q4 figures from SEC docs. Full year expenses are below, just above the Q&A section.

Basic data (GAAP):

Revenue was $ million, sequentially from $42.7 million, and up from $ million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was $ million, sequentially from $20.3 million, and up from $ million year-earlier.

Diluted EPS was $ , sequentially from $0.21, and up from $ year-earlier.

Guidance:

None.

Conference Highlights:

CEO Christopher Anzalone expects to submit applications for two additional clinical candidates by year end, both based on the TRiM platform. Believes superior to other RNAi platforms because its technology can work outside the liver.

Arrowhead began dosing a Phase 2/3 trial, called SEQUOIA, in August 2019. This is a potentially 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 began recruiting patients 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.

Janssen presented Phase 2 clinical data on a double combination of JNJ-3989 (formerly ARO-HBV) and a nucleos(t)ide analog (NA), and the first clinical data on a triple combination of JNJ-3989, JNJ-6379, and an NA, in two poster presentations at The Liver Meeting, the Annual Meeting of the American Association for the Study of Liver Disease

Arrowhead collaborator, Janssen Pharmaceuticals began dosing patients a Phase 2b triple combination study called REEF-1, designed to enroll up to 450 patients with chronic hepatitis B infection. Arrowhead earned a $25 million milestone payment

Presented positive clinical data on two cardiometabolic candidates, ARO-APOC3 being developed as a potential treatment for patients with severe hypertriglyceridemia and familial chylomicronemia syndrome, and ARO-ANG3 being developed for the treatment of dyslipidemias, such as homozygous familial hypercholesterolemia (HoFH), and metabolic diseases, at the American Heart Association Scientific Sessions 2019

ARO-HSD, a liver-targeted candidate targeting HSD17B13, a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids, resulgint in NASH, 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.

Amgen AMGA90 is in Phase 1.

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

Cash and equivalents ended at $222 million, down sequentially from $295 million.

Operating expenses of $ million included $ million for R&D and $ million for G&A. Leaving operating income of $ million. Other income $ million.

Full fiscal year 2019 operating expenses of $108 million included $81 million for R&D and $27 million for G&A. Leaving operating income of $61 million. Other income $7 million.

During the fiscal year the shares outstanding increased to 95.5 million from 88.5 million.

Q&A:

Novartis inclisiran interest, APOC3? We could partner those programs if we wanted to, but we do not believe it is the best move right now. The Jansen and Amgen deals were done because it helped with capital. Our current plan is to develop and commercialize them ourselves.

Hepatitis B article timing? We should submit our manuscript in the next few months, but cannot predict the date of publication.

Dual target RNAi? We think it is a powerful tool, but are not ready to name targets.

Dose selection, plasma v. triglycerides? It may differ between normal volunteers and a population with genetic abnormalities. We are also interested in seeing what happens with multiple doses, which may differ from the single-dose result.

HSD enrollment? Going fine, cannot give details. We should have a good idea soon of its effectiveness, but can't say when we will be able to share that with investors. But NASH is a tough disease that may require a cocktail approach.

Extra-hepatic targetting? There is a reason the RNAi field started with hepatic targets. A clearance receptor in a clearance organ. Outside of hepaticites every other cell type is much harder. You need a great trigger, targetting ligand, and prolonged circulation time, even linkers become very important. We invested heavily over 8 or 9 years to stay after the non-hepaticite targets, should bare fruite in muscle, lung, and other tissues, but we still have to show it.

Spoke to the question of lowering triglycerides vs. lowering cholesterol.

Cancer studies require specialized patient populations, so a Phase 1 trial can take a year or two.

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