Analyst Conference Summary

biotechnology

conference date: November 22, 2021 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2021 (fiscal Q4, fourth quarter 2021)

Forward-looking statements

Overview: Continuing to develop pipeline.

Basic data (GAAP):

Revenue was $138 million, up sequentially from $46 million, and up from $88 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $141 million, down sequentially from negative $29.9 million, and down from negative $85 million year-earlier.

Diluted EPS was negative $1.36, down sequentially from negative $0.29, and down from negative $0.84 year-earlier.

Guidance:

Expects to increase capital spend in 2022.

Conference Highlights:

CEO Chris Anzalone said "The ARO-HSD transaction also helps by reducing expenses going forward... We think this deal is a net positive for the HSD program."

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 Q3 2021 Arrowhead licensed GlaxoSmithKline ARO-HSD for NASH (nonalcoholic steatohepatitis). It is currently in a Phase 1/2 trial. As of August 2021 the study was fully enrolled and reported a high degree of target gene markdown. Only greater China rights will be retained by Arrowhead. Could receive milestone payments of up to $1.03 billion plus royalties if commercialized. An upfront payment of $120 million is scheduled.

In Q3 2021 Janssen disclosed its collaboration with Arrowhead on JNJ-75220795, in a Phase 1 clinical study designed to reduce expression in the liver of patatin like phospholipase domain containing 3 (PNPLA3), as a potential treatment for patients with NASH. Arrowhead earned a $10 million milestone from Janssen after the fifth patient was dosed earlier in the year.

Data from a variety of trials, including JNJ-7373989 for Hep B, ARO-ATT, and ARO-APOC3 were present at conference in Q3 2021. ARO-APOC3 also began a Phase 2b combination trial. ARO-ATT was designated a Breakthrough Therapy by the FDA; the trial data was positive for liver fibrosis.

In Q3 2021 began dosing patients in a Phase 2b clinical study of ARO-ANG3, for treatment for patients with 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, with data in 1H 2022.

For ARO-APOC3 for severe hypertriglyceridemia started a Phase 2b study in Q2 2021. Positive data was presented in mid November. A Phase 3 study is planned.

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.

In Q3 2021 filed a CTA to begin clinical studies for ARO-C3, which is designed to reduce production of complement component 3 as a potential therapy for various complement mediated diseases.

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

Cash and equivalents ended at $613 million, down sequentially from $645 million.

Operating expenses of $287 million included $206 million for R&D and $81 million for G&A. Leaving operating income of negative $149 million. Other income $8 million.

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

Q&A summary:

A1AT FDA feedback? We had an encouraging and productive meeting with the FDA last week.

GSK deal, retention of U.S rights? Reflects the state of development of the program; HSD program is not as developed, we don't have human proof of concept. HSD has a lot of potential patients, AAT is more of an orphan indication.

Potential in neurology? We have no CNS programs, our competitors do, with good reason. At some point we will go there, for now we are focussing, outside the liver, on pulmonary and skeletal muscle.

Competition for HSD? Yes, we spoke to a number of potential partners. J&J did not have a right to option HSD.

Dicerna acquisition? It does not affect our day to day business.

We plan to continue to advance our solid tumor oncology platform.

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