Analyst Conference Summary

biotechnology

conference date: August 5, 2021 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2021 (fiscal Q3, third quarter 2021)

Forward-looking statements

Overview: Continuing to develop pipeline.

Basic data (GAAP):

Revenue was $45.9 million, up sequentially from $32.8 million, and up from $27.4 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $29.9 million, down sequentially from negative $26.8 million, and down from negative $13.6 million year-earlier.

Diluted EPS was negative $0.29, down sequentially from negative $0.26, and down from negative $0.13 year-earlier.

Guidance:

Conference Highlights:

CEO Chris Anzalone said "The fiscal third quarter saw important advances in several of our development programs. This includes discovery programs and early, mid, and late stage programs. . . We need to always push the boundaries of what is possible and make our Trim platform better."

Expects the pipeline to approximately double in size over the next few years. Hopes to be able to target a new cell type every 18 to 24 months.

In Q2 2021 Arrowhead earned a $10 million exerise fee from Janssen for ARO-JNJ1.

In Q2 2021 reported positive interim 48-week liver biopsy results from the AROAAT2002 study, an open-label Phase 2 clinical study of ARO-AAT, being co-developed with Takeda Pharmaceutical as a treatment for liver disease associated with alpha-1 antitrypsin deficiency (AATD). The interim readout demonstrated consistent and substantial reduction in intra-hepatic mutant AAT protein (Z-AAT), both Z-AAT monomer and Z-AAT polymer; consistent decrease in histological globule burden; improvements in fibrosis; improvements in other relevant biomarkers of liver health. Arrowhead believes data could support an accelerated path to approval. Received FDA Breakthrough Therapy designation.[WM: Dicerna and Alnylam are competing together in this disease, but they are behind ARWR in their development timeline]

ARO-HSD ongoing Phase 1/2 study for NASH reported positive interim results in Q2 2021. As of August 2021 the study was fully enrolled. We saw a high degree of target gene markdown.

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 2021 began dosing a Phase 2b study for mixed dyslipidemia.

ARO-HIF2 for clear renal cell carcinoma first two dose-finding cohorts reported positive interim results in Q2 2021, with early signs of efficacy.

Amgen disclosed in Q2 2021 that Olpasiran (AMG 890) for lipoprotein(a) is expected to complete a Phase 2 study in Q2, with data in 1H 2022.

For ARO-APOC3 for severe hypertriglyceridemia started a Phase 2b study in Q2 2021.

In q2 2021 ARO-DUX4 presented promising preclinical data in facioscapulohumeral muscular dystrophy.

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

ARO-C3 for complement related disease could see an IND submitted this year.

Entered a global license and collaboration agreement with Horizon Therapeutics for ARO-XDH for uncontrolled gout. Arrowhead received $40 million upfront and is eligible for up to $660 million in milestones plus royalties.

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

Cash and equivalents ended at $645 million, down sequentially from $674 million. $29.6 million net cash use. Estimated cash burn rate is now $50 to $60 million per quarter, excluding milestone payments.

Operating expenses of $78 million included $59 million for R&D and $18 million for G&A. Leaving operating income of negative $32 million. Other income $2 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 summary:

CTA bottlenecks for IND filings? Not about ENAC findings. It is just a matter of finding slots at CROs. Pulmonary is particularly difficult. We will get it done, just a quarter or two behind plan.

DUX4 progam v. competitors? There is not much out there for FSMD. Antisense programs are all preclinical. The difference is our ligand v. their antibody approach. No way to compare efficacy or knockdown at this time.

Any takeaways from the toxic signals for ENAC? The toxicity we heard about, no final report yet, was local lung inflamation. No broader issues. We don't know if it is sequence or target specific. We would expect to only see effects in the lungs, given the administration method.

Other tissue targets outside the liver? We have several active programs, but we are not revealing yet. CNS we have mentioned in the past as having potential.

Rat doses with toxic results in rats, scaling to humans? Can't say yet.

C3 program, choice of target, indications? Does not plan to partner this program at this time. C3 is a central node in the complement cascade. Inhibit it and it take out everything downstream. PNH is now reasonably well treated with C5 therapies, but there is a residual refractory population. C3 glumeriopathy is driven by C3, so is a prime target. Other diseases are complement mediated, so could respond. We hope to file a CTA by the end of 2021.

RCC program has seen good enrollment throughout.

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