Analyst Conference Summary

biotechnology

conference date: November 28, 2022 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2022 (fiscal Q4, fourth quarter 2022)

Forward-looking statements

Overview: Continuing to develop pipeline. Revenue is from a milestone payment, not sales.

Basic data (GAAP):

Revenue was $243 million, up sequentially from $32 million, and up from $138 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $173 million, down sequentially from $72 million, and down from negative $141 million year-earlier.

Diluted EPS was negative $1.67, down sequentially from $0.68, and down from negative $1.36 year-earlier.

Guidance:

Expects operating cash burn to be $70 to $90 million per quarter in fiscal 2023. For fiscal 2023 expects cap ex near $200 million.

Conference Highlights:

CEO Chris Anzalone said "Our 4th fiscal quarter has been highly productive. We have seen clear progress across our large and balanced pipeline. It now includes twelve drug candidates in clinical trials and balanced because it spans multiple therapeutic areas." 6 programs have partners and 6 are wholly-owned. Arrowhead is clear on where it will expand its pipeline into new cell types (will announce in 1H 2023). Believes ARO-APOC3 can serve a small FCS population relatively quickly and then expand the label. Plans to have 20 drugs in market or pipeline in 2025.

In November 2022 Arrowhead strengthened its balance sheet with the sale of its royalty interest in olpasiran to Royalty Pharma for $250 million in cash upfront, plus up to $160 million in payments contingent on the achievement of certain clinical, regulatory, and sales milestones. Arrowhead retained rights to $400 million in development, regulatory, and sales milestone payments potentially due from Amgen from the 2016 out-licensing agreement

Initiated Phase 1/2a clinical trial of ARO-RAGE, an inhibitor of Receptor for Advanced Glycation End products, in August 2022. Could stop the inflamatory cascade in asthma. An abstract will be presented at ATS this spring. Could address other pulmonary targets.

Initiated Phase 1/2a clinical trial of ARO-MUC5AC, an inhibitor of mucin 5AC, in August 2022. Targets bronchial epithelium affecting asthma. An abstract was presented at ATS 2022.

Results from the Phase 2 study of fazirsiran (ARO-AAT) for liver disease associated with alpha-1 antitrypsin deficiancy were published in the New England Journal of Medicine and given in an oral presentation at EASL in Q2 2022. Showed signs of efficacy.

ARO-APOC3 Phase 3 study for hypertriglyceridemia study is in Phase 3 and should see more readouts in 2023 after enrollment completed in Q3 2022. It is a potential treatment for SHTG (severe hypertriglyceridemia) and FCS (familial chylomicronemia syndrome). At American Heart Association 2022 session reported it decreased triglycerides by 86%, and non-HDL-C by 45% while increasing HDL-C by 99% in patients with severe hypertriglyceridemia.

In Q3 2022 completed enrollment in the Phase 2 GATEWAY clinical study of ARO-ANG3, which is designed to silence the hepatic expression of angiopoietin-like protein 3 (ANGPTL3), in patients with homozygous familial hypercholesterolemia (HoFH). In Q1 2022 Arrowhead completed enrollment of the Phase 2b stury of ARO-ANG3 in patients with mixed dyslipidemia. Trial completion expected near 2022 year-end, with topline data in Q2 2023. Also started the Phase 2 Gateway study of the drug for homozygous familial hypercholesterolemia. At American Heart Association 2022 session reported it decreased triglycerides by 59%, LDL-C by 32%, and was associated with a relative reduction in liver fat fraction in patients with mixed dyslipidemia

Olpasiran (AMG 890) for lipoprotein(a) completed a Phase 2 study. At American Heart Association 2022 session reported it reduced Lp(a) levels by more than 95% in patients with established atherosclerotic cardiovascular disease.

Takeda is planning a Phase 3 study of ARO-AAT for Alpha-1 liver disease in Q1 2023.

In Q3 2022 initiated a Phase 1 clinical trial of ARO-MMP7, an investigational RNAi therapeutic designed to reduce expression of matrix metalloproteinase 7 (MMP7) as a potential treatment for idiopathic pulmonary fibrosis (IPF).

Phase 2a of the ARO-C3 trial for complement mediated diseases including PNH should begin in 2023.

Cash and equivalents ended at $482 million, down sequentially from $582 million. $136 million used in operating activities.

Operating expenses of $422 million included $297 million for R&D and $124 million for G&A. Leaving operating income of negative $179 million. Other income $6 million.

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

Q&A selective summary:

AAT biopsy data? Those looking at the Phase 3 protocol had that data presented to them.

AAT data comments? Hope is that updates will come in December, but depends in updates from FDA. Sequoia data update will be given when we give guidance on what the Phase 3 trial will look like.

APOC3 priority over ANG3? We are not looking for a partner for APOC3; the data shows it is a big opportunity for us. Data presented at AHA did not indicate a priority of one over the other. Rather which specific indication to begin with in each case.

Initial pulmonary readout protein knockdown goal? Targets are well-validated. We are looking for a well-tolerated deep knockdown in healthy volunteers.

Cardio drugs, do you see them as replacing drugs currently on the market? Too early to say, will know more when we have complete Phase 2 data.

We see, in the long run, not 2 or 3 or 4 pulmonary drugs, but 8 to 10. Some could be partnered. We want to hold onto the C3 therapies ourselves.

Shasta study pancreatic events? They were well within the normal rates, 3% to 5% per year, for this type of patient. SHTG study does not need a pancreatitis endpoint for approval, but we would like to generate that data.

AAT biopsy data? That is likely to be the key endpoint. Goal is to prevent fibrosis progression.

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