Analyst Conference Summary

biotechnology

conference date: May 2, 2023 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2023 (fiscal Q2, second quarter 2023)

Forward-looking statements

Overview: Continuing to develop pipeline.

Basic data (GAAP):

Revenue was $146 million, up sequentially from $63 million, and down from $152 million year-earlier. Revenue is from up-front payments and milestones, not sales.

Net income was $49 million, up sequentially from negative $41 million, and up from negative $44 million year-earlier.

Diluted EPS was $0.45, up sequentially from negative $0.39, and up from negative $0.41 year-earlier.

Guidance:

none

Conference Highlights:

CEO Christopher Anzalone said "We expect to have at least 14 drug candidates in clinical trials by the end of this year. Our 20-in-25 goal is to have 20 products in the pipeline in 2025." It appears that the lung RNAi drug program is being validated. Believes can now deliver to adipose tissue in addition to liver, lung, and CNS. Discussing possible new licensing deals.

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 Q1 earned a $40 million milestone payment from Takeda for first dosing in Phase 3 trial of fazirsiran (TAK-999/AOR-AAT). Fazirisran trial is for alpha-1 antitrypsin liver disease. Also earned a $30 million milestone payment from GSK following the start of the Phase 2b trial of GSK4532990, formerly called ARO-HSD, an investigational RNAi therapeutic for the treatment of patients with non-alcoholic steatohepatitis (NASH). These payments were recorded in fiscal Q2, but will be received in fiscal Q3.

ARO-RAGE interim Phase 1/2 results for inflammatory pulmonary diseases were positive.

ARO-APOC3 Phase 3 study for hypertriglyceridemia 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). Received Fast Track FDA designation in Q1 2023.

ARO-ANG3, is designed to silence the hepatic expression of angiopoietin-like protein 3 (ANGPTL3). Data from the Phase 2 trial 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.

Dosing began in a Phase 1/2a single ascending dose and multiple ascending dose clinical study of ARO-MMP7, Arrowhead's third pulmonary therapeutic, being developed as a potential treatment for idiopathic pulmonary fibrosis

Phase 2a of the ARO-C3 trial for complement mediated diseases including PNH should begin in 2023. The ongoing Phase 1/2 trial in complement mediated diseases reported interim results, including high reduction rates for C3.

In Q1 2023 reported positive results, with Takeda, from the Phase 2 SEQUOIA clinical study of fazirsiran for AATD-LD. Provided an outline of a Phase 3 study that was co-developed by Takeda and Arrowhead and will be conducted by Takeda. Key results from SEQUOIA included 50% of paients showed fibrosis regression.

ARO-SOD1 will be our first CNS candidate. NDA expected in Q3 2023.

Cash and equivalents ended at $560 million, down sequentially from $618 million. $107 million used in operating activities.

Operating expenses of $98 million included $75 million for R&D and $23 million for G&A. Leaving operating income of negative $48 million. Other income $0 million. Taxes $0 million.

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

Aroowhead will hold an R&D day on June 1, 2023.

Q&A selective summary:

New data from cardio and pulmonary on R&D day? We will be overviewing the pulmonary programs, including the data we have at that time, like MUC5AC. For cardio we will talk broadly about ANG and C3 and how they fit into treatment paradigms. Also some about CNS and adipose platforms.

For RAGE we are enrolling mild to moderate asthma patients, not powered for FEV1, small cohorts. We are measuring several parameters. No one has been able to reduce expression of MUC5AC in the past, in humans. It is a target-rich environment, we hope the knock-downs affect disease states.

Tofersen v. ARO-SOD1? We will be competitive and likely better in knockdown. We should have better duration.

Cap ex and Op ex pace? Changes have been factored into our long term plans. We are growing very fast now. We can partner judiciously. We are too small to commercialize all of those.

We believe our TRiM platform has improved on the ENAC version that we discontinued.

CNS platform? We are seeing high levels of reduction in both rodents and non-human primates. That should support long dosing intervals.

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