Analyst Conference Summary

biotechnology

conference date: February 6, 2023 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2023 (fiscal Q1, first quarter 2023)

Forward-looking statements

Overview: Continuing to develop pipeline. Sold potential royalties in advance; has plenty of cash to operate.

Basic data (GAAP):

Revenue was $63 million, down sequentially from $243 million, and up from $27 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was negative $41 million, down sequentially from negative $173 million, and up from negative $63 million year-earlier.

Diluted EPS was negative $0.39, down sequentially from negative $1.67, and up from negative $0.30 year-earlier.

Guidance:

none

Conference Highlights:

CEO Chris Anzalone said "Arrowhead currently occupies a unique position within the biopharmacy world. I believe our RNAi modality and proprietary Trim platform in particular are considered increasingly validated... Arrowhead is positioned to create substantial value for our shareholders. " Sees possibly 8 or 9 therapies could come out of the lung program once the ability to deliver to the first cell types are validated. Believes will initiate FSHD study next quarter. Next quarter we will reveal the next cell type we will be targetting. Hopes to have 20 drugs in the clinic or on the market by 2025. 2023 should be data rich.

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.

In January 2023 topline results for fazirsiran for the treatment of liver disease associated with alpha-1 antitrypsin deficiency, in the Phase 2 trial, were reported as positive. Takeda will conduct a Phase 3 study with up to 160 patients. Arrowhead will receive a milestone payment when the study begins.

In the December quarter Arrowhead earned a $25 million milestone payment from Amgen ofr olpasiran for cardiovascular disease, up initiation of the Phase 3 trial. In the Phase 2 study olpasiran reduced Lp(a) levels by more than 95% in patients with established atherosclerotic cardiovascular disease.

A Phase 1/2a 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), was initiated in late 2022.

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.

ARO-ANG3, is designed to silence the hepatic expression of angiopoietin-like protein 3 (ANGPTL3). Data for patients with heterozygous and homozygous familial hypercholesterolemia (HeFH and HoFH), showed it decreased triglycerides by 59%, LDL-C by 32%, and was associated with reduction in liver fat fraction in patients with mixed dyslipidemia.

In 2022 Arrowhead earned a $15 million milestone payment from Horizon Therapeutics after the first subject was enrolled in Horizon's Phase 1 study of HZN-457, formerly called ARO-XDH, for the treatment of gout

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

Cash and equivalents ended at $618 million, up sequentially from $482 million. $ million used in operating activities.

Operating expenses of $105 million included $84 million for R&D and $21 million for G&A. Leaving operating income of negative $42 million. Other income $0 million. Taxes $0 million.

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

Q&A selective summary:

Pulmonary franchise data expected in Q2? We don't have a specific target knockdown level we are looking for. The first four dose levels in healthy volunteers will be available.

Branchial levage data expectations? Based on monkeys, the levage data should behave the same as the serum data. It may give us more accurate knockdown data for RAGE. It should also give us a better idea of duration.

J&J discussions? It's new that they are deprioritizing HBV, it is not about our product, we don't know their plans. Either they assign it to another party or it comes back to us. That drug clearly does what it is designed to do. The NASH program with Jansen will not be affected, we could see some data this quarter.

Lung data in Q2, effect on other lung programs? It can be substantially derisking. They are simple RNAi triggers linked to get into pulmonary epithelial cells. These cells do not care what the RNAi trigger is, so if it works with the first one, it should work for others. Right now we are not targetting macrophages.

Measuring DUCS4 can be challenging. It is one reason for a longer Phase 2 study, and with endpoints like imaging. The animal study should help with strategy development.

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