Analyst Conference Summary

biotechnology

conference date: May 7, 2020 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2020 (fiscal Q2, second quarter 2020)

Forward-looking statements

Overview: Rapid advancement of RNAi therapies continues.

Basic data (GAAP):

Revenue was $23.5 million, down sequentially from $29.5 million, and down from $48.1 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $19.8 million, down sequentially from negative $2.7 million, and down 23.9 $ million year-earlier.

Diluted EPS was negative $0.20, down sequentially from negativ $0.03, and down from $0.24 year-earlier.

Guidance:

None.

Conference Highlights:

CEO Christopher Anzalone said "2020 is the year that we intend to make the promise of RNAi outside the liver a reality. We hope to gain clinical proof-of-concept in the lung and solid tumors and then rapidly expand our pipeline, much as we did with our hepatocyte targeted pipeline in 2018 and 2019. This could provide new treatment options for countless patients and provide Arrowhead shareholders with continued value growth." He spoke at length about AAT metabolism in the liver, the length of time needed for meaningful results, and how Arrowhead's approach has advantages. Has had to pause some clinical trials.

Began 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, completed enrollment of its first cohort. 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.

Arrowhead completed enrollment in AROANG1001, a Phase 1 clinical study of ARO-ANG3, an investigational RNAi therapeutic being developed for the treatment of mixed dyslipidemia, in Q1 2020.

In Q2 2020 Arrowhead started a development program to address the current novel coronavirus that causes COVID-19 and other possible future pulmonary-borne pathogens. No additional details about this program are being disclosed at this time.

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, Phase 1 study dosed its first patient in March 2020, but enrollment paused due to pandemic. Believes this is a highly-sought target for larger pharma companies.

In Q2 2020 Arrowhead reported interim multiple-dose results on two cardiometabolic candidates: ARO-APOC3, being developed as a potential treatment for patients with severe hypertriglyceridemia, and ARO-ANG3, being developed for the treatment of mixed dyslipidemia. Showed high levels of reduction in APOC3, ANGPTL3, triglycerides, and other lipid parameters

Applied to FDA to begin a Phase 1/2a clinical trial of ARO-ENaC, an RNAi therapeutic for cystic fibrosis.

Amgen AMGA90 is in Phase 1.

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

Cash and equivalents ended at $498 million, up sequentially from $461 million. $27.6 million cash used.

Operating expenses of $45.8 million included $29.4 million for R&D and $16.3 million for G&A. Leaving operating income of negative $22.4 million. Other income $1.4 million. Stock compensation expense has been increasing.

Q&A:

AAT you don't expect changes at 6 months? Based on preclinical data and modeling data. There are two major results we hope to see early, polymers and inflammation. But we will look at biopsies at 6 months. AAT is the key serum biomarker. We are looking for a way to quantify inflammation.

Trial design, APOC3? About 300 patients, though we don't think we need that number to prove statistical significance.

Trial design, ANG3? We are still working on the final dosing level.

Do you think you could move rapidly to a pivotal trial for APOC? We are working on that. Reducing risk of pancreatitis is one goal. We are working to define a population, with the FDA. We are confident elivated triglycerides are an independent risk factor that our therapy addresses.

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