Analyst Conference Summary

biotechnology

conference date: February 5, 2020 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2019 (fiscal Q1, first quarter 2020)

Forward-looking statements

Overview: Rapid advancement of RNAi therapies continues.

Basic data (GAAP):

Revenue was $29.5 million, sequentially from $ million, and down from $34.7 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $2.7 million, sequentially from $ million, and down from $12.0 million year-earlier.

Diluted EPS was negative $0.03, sequentially from $, and up from $0.13 year-earlier.

Guidance:

$25 to $30 million cash burn per quarter, short term.

Conference Highlights:

CEO Christopher Anzalone said "Three broad value drivers for 2020. RNAi outside the liver. Advance multiple liver targetted programs. Continue to expand the reach of the TRIM platform, including to skeltal muscles." Could have 10 clinical candidates in 2020, and that could double within a few years. That spreads out risk and brings a consistent flow of data readouts. Believes ability to deliver RNAi to skeletal muscle, solid cancers, and lung tissue will allow for a greatly expanded pipeline.

Begain the Phase 1 ARO-HIF2 trial for renal carcinoma in Q2 2020.

Phase 2/3 trial, SEQUOIA, a potentially pivotal registrational study of ARO-AAT, continued. Is second generation subcutaneously administered RNAi therapeutic for a rare genetic liver disease associated with alpha-1 antitrypsin deficiency. Also dosing an open label Phase 2 study. "AAT is a very good RNAi target."

Presented preclinical data in Q4 2019 at the North American Cystic Fibrosis Conference on ARO-ENaC, Arrowhead's first TRiMTM-enabled inhaled, pulmonary candidate for the treatment of cystic fibrosis, scheduled for a CTA filing in the first half of 2020.

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

ARO-HSD, a liver-targeted candidate targeting HSD17B13, a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids, resulting in NASH, has a Phase 1 study starting in Q1 2020. Believes this is a highly-sought target for larger pharma companies.

Amgen AMGA90 is in Phase 1.

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

Cash and equivalents ended at $461 million, up sequentially from $222 million. Added $267 million in the quarter by issuing stock.

Operating expenses of $34.3 million included $23.4 million for R&D and $10.9 million for G&A. Leaving operating income of negative $4.9 million. Other income $2.2 million.

Adding to headcount.

Q&A:

Competition for test subjects for AAT? We have not seen that. The other RNAi therapies are just in Phase 1. Confusion on Street about oral agents, but not in investigator community, because not expected to be sufficiently effective.

ENaC for CF data? We don't know if data will be mature enough to release this year. We will have internal data. ENaC has been a pharma target for a long time, mostly small molecule inhibitors, but ENaC also is in the kidney, so targetting is needed. So all prior efforts failed. Also competing with correctors, but even Vertex wants one. RNAi has a ligand so that even if some gets in the blood, it does not affect the kidneys. Also it can be dosed at much longer intervals that most CF drugs.

HSD partner? We have capital. No pressure to partner. But we are open. We are producing too many new assets to commercialize all of them ourselves.

Ionis AAT topline results? We have not seen the detailed data. We think RNAi will work better than antisense [which is often lumped in as a form of RNAi - WM]

Alcoholic liver disease? It is an interesting set of patients, we are thinking about it.

ANG3 liver toxicity signals? We do not see a liver signal. We see these increases in placebo group, we have seen nothing that we count as a signal so far.

Upper respiratory track infections? About the same as placebos.

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