Analyst Conference Summary

biotechnology

conference date: November 23, 2020 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2020 (fiscal Q4, fourth quarter 2020)

Forward-looking statements

Overview: Spending a lot of money developing the pipeline.

Basic data (GAAP):

Revenue was $7.6 million, down sequentially from $27.4 million, and down from $43.3 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $48.4 million, down sequentially from negative $13.6 million, and down from $11.7 million year-earlier.

Diluted EPS was negative $0.48, down sequentially from negative $0.13, and down from $0.12 year-earlier.

Guidance:

$200 to $250 million cash burn in fiscal 2021.

Conference Highlights:

CEO Christopher Anzalone said "We are building a different kind of biotech company . . . not exclusively rare diseases . . . we are probably the fastest in the business . . . we seek to be pioneers." Plans to introduce 3 new candidates into clinical trials every year. Plus expanding to new cell types (beyond liver). Focus is on well-verified genetic targets. "RNAi does not care what gene is being silenced" so our batting average for new drugs should be higher than for traditional drugs. Working toward the first muscle-targeted program in 2021.

Arrowhead earned a $20 million milestone from Amgen, in fiscal Q4 2020, for first dose in Phase 2 study of AMG 890 (was ARO-LPA), now olpasiran, in fiscal Q4 2020. Will have about 240 patients. Indication is cardiovascular disease.

In Q4 2020 Arrowhead started a Phase 1b study of ARO-HIF2, the company's first tumor targeted investigational RNAi therapeutic, for patients with clear cell renal cell carcinoma.

In Q4 2020 presented new clinical data at the mMeeting of the American Association for the Study of Liver Disease (AASLD) on ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency, showing that ARO-AAT strongly reduced the production of mutant Z-AAT protein and led to improvements in multiple biomarkers of alpha-1 liver disease. Arrowhead signed an agreement with Takeda to co-develop and co-commercialize ARO-AAT, which includes $300 million upfront, $740 million in potential milestone payments, a 50/50 profit sharing agreement in the U.S., and 20-25% royalty on sales outside the U.S. Will talk with FDA about speeding up the path to approval. [WM: Dicerna and Alnylam are competing together in this disease, but they are behind ARWR in their development timeline]

Arrowhead completed enrollment in AROANG1001, a Phase 1/2 clinical study of ARO-ANG3, an investigational RNAi therapeutic being developed for the treatment of mixed dyslipidemia, in Q1 2020. Very encouraging updated data was presented in Q4 2020. Could start a Phase 2b study in 2021.

In Q2 2020 Arrowhead started a development program to address the current novel coronavirus that causes COVID-19.The idea is to produce an inhalable drug, which can be easily adopted to future corona viruses.

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 despite enrollment paused due to pandemic, has completed healthy volunteer dosing. Believes this is a highly-sought target for larger pharma companies.

In Q4 2020 released updated positive data for ARO-APOC3. In Q2 2020 Arrowhead completed enrollment of ARO-APOC3, being developed as a potential treatment for patients with severe hypertriglyceridemia. Preliminary results showed high levels of reduction in APOC3, ANGPTL3, triglycerides, and other lipid parameters. Will release more data later in 2020, including for healthy volunteers and patients. Planning Phase 3 study.

Began a Phase 1/2a clinical trial of ARO-ENaC, an RNAi therapeutic for cystic fibrosis, in August 2020. In November enrolling in multiple dose part of study.

In Q2 completed dosing in healthy volunteer cohorts in AROHSD1001, a Phase 1/2 clinical study of ARO-HSD, a therapeutic being developed as a treatment for patients with alcohol related and nonalcohol related liver diseases. NASH multiple dose portion of study was enrolling in Q4 2021.

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

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

Cash and equivalents ended at $453 million, down sequentially from $465 million. $ million cash used.

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

Full fiscal year 2020 results: Revenue $88 million. GAAP net loss $85 million. GAAP EPS negative $0.84. $95 million cash used in operating activities.

Q&A:

Enac program in 2021? Data towards end of first half or early in Q3 2021. Looking for a change from baseline of at least 5%, hopefully 10% to 15%. Our patients cannot take tricafta, so we do not need to compare our results to it.

ARO-HIF2 dosing? We can't say more than we are dosing patients but have not seen any data yet.

Outside the liver approach v. competitors? We have been working on RNAi outside the liver for over a decade. A lot is just brute force, which makes us look like an overnight success. We have a library of linkers and targets along with potent RNAi triggers that should be potent in vivo. This is absolutely critical outside the liver.

We have a good line of site on half a dozen pulmonary drugs we could develop ourselves. Cardio metabolic as well. Those will not be the only areas we build commercial infrastructure around. Outside of that, we are more likely to partner rather than build our own salesforce.

Ionis Enac data? We think their data is not as consistent as originally thought, the highest dose did not produce the largest reduction. It helps us think about our clinical trial design.

JNJ Hep B timeline? We can't give guidance, that is up to JNJ. We are really excited about the drug and partnership.

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