Analyst Conference Summary

biotechnology

conference date: February 4, 2021 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2020 (fiscal Q1, first quarter 2021)

Forward-looking statements

Overview: Spending a lot of money developing the pipeline.

Basic data (GAAP):

Revenue was $20.7 million, up sequentially from $7.6 million, and down from $29.5 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $25.1 million, up sequentially from negative $48.4 million, and down from negative $4.9 million year-earlier.

Diluted EPS was negative $0.20, up sequentially from negative $0.48, and down from negative $0.03 year-earlier.

Guidance:

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

Conference Highlights:

CEO Christopher Anzalone said "As we look at 2021 we expect substantial progress. ... with several opportunities in the first half of the calendar year alone. By the middle of the year we could have clinical proof of concept for our ability to bring RNAi outside the liver. Opening a whole new range of addressable diseases."

Arrowhead an agreement with Takeda, in Q1 2021, to develop and 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 net sales outside the U.S. At AASLD presented data that ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency, strongly reduced the production of mutant Z-AAT protein and led to improvements in multiple biomarkers.

We hope to be able to target a new cell type every 18 to 24 months.

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 submitted an IND for a Phase 2b clinical study of ARO-ANG3, an investigational RNAi therapeutic being developed for the treatment of mixed dyslipidemia, in Q1 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.

Expects to file at least two pulmonary CTAs (INDs), and one other, in calendar 2021.

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. Planning Phase 3 study.

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

Cash and equivalents ended at $416 million, up sequentially from $453 million. $38.9 million net cash use in quarter. Reveived a $300 million upfront payment in January 2021.

Operating expenses of $45.3 million included $36.6 million for R&D and $8.8 million for G&A. Leaving operating income of negative $24.1 million. Other income $3.3 million.

Operating expenses are expected to increase over time with increased headcount and clinical activity.

Takeda collaboration revenue will be recognized over 2 years.

Q&A:

ENAC program knockdown target? There is good preclinical evidence, but we are pioneers. We don't know what knockdown level is necessary. We think 50% might work, particularly for heterozygous cases.

HIP2 alpha confidence? Again, difficult to predict. The animal models are good, we do not know how much knockdown we can get in humans, or what will be required for clinical benefit.

Phase 1 readouts, 3 by end of Q2? Yes, end of second quarter [WM: but calendar or fiscal?]. It will be a subset of data, just topline.

There is no HIP2 data yet, but we have completed in 6 cohort 1 patients.

Lots of repeated questions and answers on details of early or planned trials.

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