Good day. I would like to welcome everyone to Arcturus Therapeutics' First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Today's call is being recorded. I would now like to turn the call over to Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations, and Marketing. Please go ahead.

Thank you, Operator. Good afternoon, and welcome to Arcturus Therapeutics quarterly financial update and pipeline progress call. Today's call will be led by Joe Payne, our President and CEO; and Andy Sassine, our CFO. Dr. Pad Chivukula, our CSO and COO, will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the Safe Harbor provisions of the Private Securities Legation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by this statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factors section in our most recent form, 10-K, and in subsequent filings with the SEC. In addition, any forward-looking statements represents our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements. And with that, I will now turn the call over to Joe.

Thank you, Neda. It's good to be with you again everybody. Over the last few months, there has been elevated interest in our mRNA therapeutics pipeline, given that we have meaningful clinical data sets forth coming. So, I will begin today's call with updates pertaining to our mRNA therapeutics pipeline. I will begin with an update on ARCT-032. This is our messenger RNA therapeutic candidate for cystic fibrosis. Arcturus is advancing at the moment in the open-label Phase 2 multiple ascending dose CF study in adults with CF, who are not eligible for CFTR modulator therapy, or are not taking CFTR modulators due to drug intolerance, poor response, or lack of access to modulators. Each adult participant in the Phase 2 CF study is expected to receive daily inhaled treatments of ARCT-032 over a period of 28 days. The study began last December, and to date, the study continues in multiple subjects without safety or tolerability issues. The company expects to complete Phase 2 enrollment by the end of the year, and provide Phase 2 interim data for the first two cohorts in mid-2025. I will now move on to our ARCT-810 program. This is our messenger RNA therapeutic candidate for Ornithine Transcarbamylase, or OTC deficiency. Arcturus continues to enroll participants in the open-label Phase 2 OTC deficiency study, with five intravenous infusions of ARCT-810 over a period of two months. The company previously completed the dosing phase, involving a cohort of eight people, and the dosing was at 0.3 mg/kg of placebo-controlled European study, enrolling OTC deficient individuals. The company expects to provide Phase 2 interim data this quarter, or Q2 2025. The U.S. Phase 2 study evaluates several biomarkers, including glutamine and ammonia. Elevated glutamine levels can occur when ammonia scavengers are used, particularly in individuals with urea…

Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the first quarter of 2025 and provides a summary and analysis of year-over-year and sequential financial performance. Please also reference our most recent Form 10-Q for more details on the financial performance. I am pleased to announce we were able to extend our cash runway until the first quarter of 2028. However, it was not an easy decision. Due to the current market environment and uncertainty regarding our regulatory process, we have made the decision to focus our research and development expenditures on our CF and OTC programs exclusively. I am happy to announce that we have received the initial milestone payment from CSL in relation to the EU KOSTAIVE approval. We anticipate an additional milestone payment and will provide an update on our second quarter call. I will now provide a summary of our financial results for the first quarter of 2025. Over the three months ended March 31, 2025, revenues were $29.4 million compared to $38 million in the same period of 2024. The decrease primarily reflects lower development milestone revenues recognized under the CSL collaboration agreement as KOSTAIVE transitioned from the development stage to commercialization. Research and development expenses were $34.9 million for the three months ended March 31, 2025, compared to $53.6 million in a comparable period last year. The decrease in research and development expenses was primarily driven by lower manufacturing costs associated with the KOSTAIVE, LUNAR-FLU, and BARDA programs, partially offset by increased manufacturing and clinical costs for the LUNAR-CF and LUNAR-OTC programs. R&D expenses also declined sequentially for fourth quarter -- from fourth quarter '24 by almost $9 million. We anticipate additional quarterly declines in the second-half of fiscal year '25. General and administrative expenses were…

Okay, thanks Andy. Arcturus continues to make excellent progress across our therapeutics pipeline and we look forward to multiple key clinical data sets across our mRNA therapeutics and our partnered vaccine programs this year. So, with that, let's turn the time over to the operator for some questions.

Thank you. [Operator Instructions] We'll take our first question from Lili Nsongo with Leerink Partners. Please go ahead.

Hi, good afternoon. This is Lili Nsongo from Leerink. Thank you for taking the question, and thank you for the update this quarter. I just have two questions. So, the first one, could you provide maybe a little more color in terms of the changes that have taken place in order to be able to extend the cash runway as well as the potential cash flow -- incoming cash flows that you anticipate within this new guidance. And then, the second question relating to the development of the KOSTAIVE vaccine, how should we think about potential milestone related to U.K. approval and U.S. as well as the timing for those? Thank you.

Sure, Lili. Thank you for that question. It was not an easy decision, Lili, but as in this environment, I think it was very prudent for us to focus on our two most critical programs. And as a consequence of that we had to make some tough decisions with respect to cost reductions including some elimination of early development in R&D programs, as well as consolidation of our facility. So, a combination of all these factors contributed to the extension of the runway. But more importantly as well, you can probably surmise that the guidance we originally provided remained relatively conservative based on our cash burn historically. So, hopefully you'll appreciate that we tend to be hopefully under-promising and over-delivering with respect to our cash runway. I hope that answers your question.

It does. Thank you. Go ahead.

Yes. You also asked a second question with respect to milestones, potential milestones associated with the U.K. filing or U.S. filing, and there's no milestones associated with those. Andy wanted to comment further.

We have a milestone associated with the first U.S. revenues from KOSTAIVE, but we're not anticipating that, Lili, until 2028, frankly, assuming approval in '26 or so of the U.S. BLA filing this year. So, we're not including that in our forecast. Hopefully you'll appreciate that we like to remain conservative with respect to that milestone. Thanks, Lili.

Thank you.

And we'll next go to Yasmeen Rahimi with Piper Sandler. Please go ahead.

Good afternoon, team. Thank you so much for all the updates. I wanted to spend some time, as many investors are very much looking forward to ARCT-032's interim readout here, mid-2025. I just want to get a good understanding as we get into this mid-readout, now that we have a little bit more granular color, and the press release that's noted two doses are going to be provided. I guess, how large could the initial interim cohort be across these two doses? What sort of the bar for success do you want to see? And then, to the extent you can talk about the patient population that you're recruiting for this study, that would be really helpful. Sorry, these are like sort of three-pronged questions along the interim readout. I just want to have a good understanding of what we're going to be getting at that interim look.

No, good questions, Yas. We're also excited about this mid-year update for our CF program. There's considerable interest in it. It's a great commercial opportunity and it's an exciting program. But you asked about how large of a data set to expect. The entire Phase 2 study has been listed at clinicaltrials.gov as 12. So, because this is an interim data cut of drawing from two cohorts, you would expect in that six-to-nine region of subjects. So, with respect to the bar of success, clearly this is 28 daily administrations. So, it's a significant hurdle to have reasonable safety and tolerability achieved. In addition to that, we'd be looking for FEV or lung function improvements. And the bar that has been established recently is 3%. We believe if we achieve that, that that would justify advancing the program. Clearly, the higher percentage that we would get would impact the size and nature and cost of our Phase 3 trial. In terms of the types of patients, I think you might be inferring to maybe Class 1 and non-Class 1. Approximately half of these subjects would be Class 1 subjects and the other half would be non-Class 1. But every single one would be similar and that they're all non-modulator responders. And so, we don't tend to bifurcate the data. We view this group as having similar unmet medical need and presentation. So, that's it.

Very helpful. Thank you, Joe. I'll jump back in the queue.

Thanks, Yasmeen.

We'll next go to Seamus Fernandez with Guggenheim Securities. Please go ahead.

Hey, guys. This is Evan Wang on for Seamus. Thanks for the question. Just following up on cystic fibrosis, we've seen some tolerability issues from a competitor program. Can you remind us again the difference of O32 versus some of the other competitor mRNA programs? And just to hone in on that a little bit more, in terms of the dose range you're exploring and what we may see from these first or these three dose cohorts, especially relative to what you studied in healthy volunteers and the initial CF patient studies. And then, in terms of the first two dose cohorts, how should we be thinking about that? I guess and whether you expect each dose cohort to be efficacious or whether you expect a dose response here? Thank you.

Yes, a lot there; all good questions. First of all, our therapeutic is different from our competitors. I think the key points of differentiation would be, number one, our delivery technology. Our LUNAR lipid nanoparticle delivery technology is exclusive to us. We discovered this and are applying it to the CF program. And it's chemically different from what everyone else is utilizing. And we've showcased these differences in preclinical animal models. So, clearly there's something there with respect to our delivery technology. When you're talking about safety and tolerability, you also have to recognize the level of purity of an mRNA construct. And Arcturus has significant intellectual property pertaining to the purification of our mRNA and how this could potentially impact safety and tolerability is on removing impurities effectively. If we do that, then that would logically enhance or expand the therapeutic index and improve a safety and tolerability profile. And those would be two key areas of differentiation. We mentioned that there's two cohorts and each of those is attributed to a different dose level. We have, of course, flexibility built into this Phase 2 study to have a third cohort or third dose level or expand the second level. We haven't provided any guidance on the nature of that third dose level, but the data that we intend to share midyear will be drawing from two different dose levels. And none of these levels of dosing is wasted, we believe. You asked if all of these could be efficacious and somewhat that may indeed be the case, but we'll save the details for that disclosure for midyear.

Got it. Thank you.

Thank you. And next we'll go to Myles Minter with William Blair. Please go ahead.

Hi, this is Jake on for Myles. Thanks so much for taking our question. A couple for you, first on CF, we're just wondering if you guys have talked about any sort of accelerated approval pathway for ARCT-032 given that need there in all mutant patients. And then, a second question on OTC, you guys mentioned measuring glutamine as a biomarker there. Just wondering if you have any sort of initial bar for success where we should expect a percentage of normal on glutamine. Thank you.

Okay. Great questions. First of all, with respect to some sort of regulatory acceleration, whenever you see excellent Phase 2 data, that would always warrant a discussion with regulators to accelerate the approval pathway, especially like you mentioned for serious diseases where there's significant unmet medical need. We have not shared any data, so we don't know. It would be too early for me to guide whether this is good or great or excellent data. But to simply address your question, if it's considered excellent data, then yes, we would be looking to accelerate the clinical path for sure. With respect to glutamine, I'd like to remind everyone listening that if you have a dysfunctional urea cycle, then your body cannot convert that ammonia into urea. So, what does it do? It converts ammonia into glutamine. So, glutamine is just a great biomarker that can help us understand this disease. In terms of what would we be looking for in glutamine levels, it would be simply to restore normal levels, very often, it's well known that folks suffering from urea cycle disorders, including OTC deficiency, have elevated glutamine levels. And if we could restore those into the normal range that could be some convincing evidence that are therapeutic.

And next, we'll go to Whitney Ijem with Canaccord Genuity. Please go ahead.

Hey, guys. Thanks for taking the questions. Just sticking with CF, can you talk about the time points that you're measuring FEV in the study and what the duration of follow-up, I guess, we should expect from both cohorts? I'm curious if there's interim time points you're looking at between the 0 and 28 days, and if there's subsequent time points, and if we should expect all those for both cohorts in the upcoming data?

Yes, the details pertaining to this trial design are available on clinicaltrials.gov and also the CF Foundation tracker that tracks not only our Phase 2 trial and the details there, but also our competitors. And that's a good reference for people to look at. We're going to be measuring FEV, or lung function improvement, this 28-day treatment cycle. So, what do I mean by before? Well, there's a screening process where FEV is measured. Then, of course, at day zero, prior to first administration, and then there's a few measurements throughout the cycle. And then, of course, afterwards, it's approximately seven FEV measurements taken. We haven't shared the specific details of that, just for competitive purposes. But there's plenty of data points in the study to give a decent level of conviction to advance this program further into development. Did I address your question, Whitney?

I think so. Just to clarify, we should expect the full 28 days, and then maybe some additional follow-up from both cohorts? Or is it that -- yeah, okay.

Yes, maybe not the entire follow-up, because these can be a few months in nature, the follow-up. So, we may not have the entire follow-up for everybody. We intend to have safety, tolerability, and the lung function values for the complete treatment course, correct.

Okay. Perfect, excellent. Okay. And then, just a follow-up to clarify on the U.S. KOSTAIVE milestone, is it that there is not a milestone on approval, or that you are not including a milestone on approval in your guidance to be conservative?

Okay. Yes. There is a milestone associated with first commercial sales in the U.S., and that milestone is not included in our guidance, because we're not anticipating commercial sales until 2028. And so, hopefully that gives you some perspective as to the cash runway. It does not include a U.S. milestone related to first commercial sales.

Okay. And also not one related to U.S. approval.

Right. There is no milestone with U.S. approval. It's related to commercial sales, correct.

Okay. Perfect. Perfect. Thank you very much.

Thank you, Whitney.

Thank you. And next we'll go to Pete Stavropoulos with Cantor Fitzgerald. Please go ahead.

Hi. This is Samantha on the line for Pete. Thanks for taking our questions. So, on the CF program, given that the impaired CFTR function impedes mucociliary clearance and muco-plugging, do you see potential for O32 to normalize or remodel the lungs? And if it can, can you speculate on the length of time this may take? I'm curious to hear your thoughts.

No. It's a great question. We're hoping to be the first to answer that question with data. But just some basic comments is that these patients that are participating in our trial do not have 100% lung function. And some of that dysfunction is attributed to irreversible damage. So, there's going to be some portion of the lung that just isn't recoverable. But we're also optimistic that there is a portion that is. And so, the lung is very well known to regenerate and heal effectively if you can reverse the dysfunctional biology. So, we hope to see that in our upcoming trial results. In terms of the time, because this is a topically administered agent, the time course to restoration, it may be different from systemic treatments like you see in the modulator business. We're different. We're topically administered. So, accessibility to these cells is going to be a key marker of success. And as the lung heals, then more cells would be accessible. So, at least theoretically, we anticipate a steady improvement over an extended period of time. But what is just unknown at this point is how long is that time period and how much material is required. But we're anxiously awaiting the data.

That's very helpful. And one short follow-up question. Besides FEV, are there any other measurements that you could or will look at that might enhance the investigator's conviction in the program, something like quality of life measurements or others?

Yes, there's a survey that we're provided. There's a validated CF questionnaire that over the last couple of decades in the modulator field, they have improved these questionnaires significantly. And that will complement our FEV data. In terms of other mechanisms like mucociliary clearance or others, the FDA came back with some simple guidance there that all they need to see is FEV to justify advancing this into a Phase 3 trial. But we are supporting that data set with some questionnaires to see if we can support what we observe with respect to lung function improvements.

That's great. Thank you guys so much.

Thank you, Samantha.

Next, we'll go to Tom Shrader with BTIG. Please go ahead.

Good afternoon. Thanks for taking the question. You've commented that the next CF trial is going to depend a lot on the size of the efficacy signal. But do you have a sense of the minimum safety database for indication of this? Is 100 about right? Or are you flying completely blind at this point?

We're definitely not completely blind. I think 100 is reasonable. Unfortunately, it depends on how successful the Phase 2 results are. If the more successful they are, the more leverage we have to decrease this number and get this into real subjects commercially as fast as possible. But 100 is reasonable. So, that would imply that we had 39 subjects in Phase 1 and Phase 1b. We had another dozen. That would get us over 50 after Phase 2. We'd probably need a minimum of 50 people to strengthen the database to achieve that 100. But we have not, just to be clear, we haven't received that. But that's a reasonable estimate.

And then, in OTC, it seems like there's two deliverables. One, you're helping OTC, but in a grander plan that you're getting stuff into the liver. Is that the same readout? What I'm really asking is, do you have any way to monitor uptake into the liver that isn't correction of OTC? Or is it really the same readout for both questions?

Yes, there's not going to be a bio-sampling or some sort of tissue removal as part of this process. The FDA doesn't require that for these significant rare diseases. But we do have a biomarker strategy. We've alluded to glutamine, for example, as one of those biomarkers. But then there's also a functional readout. And the 15N ureagenesis assay is also of interest there. A great paper just came out last week as at the University of Zurich that may encourage people listening to or refer to, but that's another new exciting way to track disease progression or healing.

Okay, great. Thank you.

Thank you, Tom.

Next, we'll go to Yigal Nochomovitz with Citi. Please go ahead.

Hi, thanks. I had one question on CF and one on OTC. On CF, I think in the past you've talked about some thresholds for FEV1 improvement that you would deal with the sufficiently strong to move forward. I'm wondering if you could comment on that with respect to the upcoming data. And then, on OTC, you mentioned some biomarkers. You mentioned the N15 assay. I'm wondering, are you also going to measure orotic acid and uridine, because those are also urinary biomarkers that would be interesting. And you mentioned glutamine, but I think alanine is another one that could be interesting as a biomarker in lieu of ammonia, which you can't measure. Thanks.

Good. Thanks, Yigal. I'll first start with the thresholds in CF. These numbers that have been communicated over this last quarter especially are based on historical precedence, but in the modulator space. But if you can have a 3%, and if you can show a 3% improvement in FEV over a treatment course, then in order to reprove that in a Phase 3 study would require potentially hundreds of people. And so, that's a significant endeavor. Nonetheless, one that we would pursue in order to prove that this is real, but if the FEV value goes up to 5%, then your Phase 3 trial could be as low as 50 people, definitely or at least confidently below under 100 people. So, there and if you go north of 5%, then in higher FEV responses, It wouldn't change the size of the Phase 3 trial because earlier on this call there was a question about how much -- how many people would you need to establish a significant enough safety database and 100 is approximated at this point. So, whether you see higher levels of FEV, you'd still need at least 50% we estimate or 50-50 participants in the Phase 3 trial. Shifting to the OTC program, orotic acid is a biomarker we are tracking as well and that's in the urine and that is associated with the urea cycle and hyperammonemia. And then also, there is several amino acids and biomarkers that we're exploring. Glutamine is just more well-understood and frequently used by clinicians and doctors to track people on ammonia scavengers to look at glutamine to see if that's elevated as well, then they still have some challenges with hyperammonemia that's outside of their ammonia scavenger medicine and their diet. So, glutamine is a more common biomarker that's well more well understood in the community. But you're absolutely right, there's other biomarkers we're measuring as well.

Okay, thanks. And then, just going back to the 3% versus 5%, what are you assuming there in terms of the dispersion of the data, given it's obviously a relatively small sample size, six or 12 people? So what does that mean in terms of how much dispersion you're willing to accept and be comfortable with whether it's the 3% or the 5%? Because obviously that will impact the way you power things.

Yes, yes, yes. Of course, we'd like to see elevated consistency in small data sets such as this. We'll have the opportunity to share that data and discuss it. But at this time, it's just too early to comment further on that. But yes, to address your -- the core of your question, a more consistent dataset would be preferred.

Got it. All right. Thanks so much.

And next we'll go to Yanan Zhu with Wells Fargo. Please go ahead.

Great. Thanks for taking our questions. So, on cystic fibrosis, I thought, previously the guidance was dated second quarter. Given that the guidance is midyear, is it okay to assume that more likely the data will be in the third quarter? And what might be the venue for the update? And on efficacy, I was wondering, in terms of, you talk about the bar for FEV1. I was wondering what is the bar for proportion of patients meeting that 3% minimum threshold of improvement, would it be, like, if the response rate, if we can call them that, is like expected to be fairly broad or could this be even like a 20% response rate still considered a worthwhile product to move forward with? Thanks.

Yes. Thanks, Yanan. You bring up a great question. With respect to the bar of a response rate, that hasn't really been established by the field. We're going to have to make a call based upon this data, the FEV and the consistency of it. There isn't some sort of feedback we've received from the FDA, for example, on this question. We have received feedback from the FDA that 12 subjects may very likely be sufficient to advance this. So, as long as there's some level of consistency within these 12 subjects and remember multiple dose levels will be evaluated within this group, then that is likely considered success and we'll be able to receive approval to advance this into a Phase 3 trial. Then you asked another question though. It was about the --

The timing and venue.

Oh, the timing and venue, yes, well, because this data set is involving data from two cohorts now, we wanted to allow that extra few weeks just to schedule and get additional numbers to strengthen the data set. So, it's just -- that's the reason for focusing on a midyear data interim data update. In terms of a venue, we haven't decided on that. But that is something that we'll communicate relatively soon here.

Okay. If I may, also wondering since you are moving ahead with filing the BLA, so you're still on track for filing the BLA for KOSTAIVE in the U. S. I was wondering with the new leadership at CBER, have you had any interactions with FDA very recently? And what is the expectation for this filing? Thanks.

Our interactions with the FDA, I'll first comment on that have been normal. The feedback we've received has been within the expected timeline or even earlier in the example of the Fast Track Designation on the vaccine side. So, we haven't seen any changes to regulatory environments for at least our mRNA based vaccines and therapeutics. We do recognize that there's a passionate new administration that but all of them and all of the employees we've talked to at each of these agencies are passionate about gaining access to safer and better medicines and vaccines. And that is almost a credo at Arcturus. We want to provide that and we're believing we're providing data to support that notion. So, I think, the science will stand in its own legs throughout this process.

Great. Thanks for taking the questions.

Yes. Thank you, Yanan.

We'll go next to Yale Jen with Laidlaw & Company. Please go ahead.

Good afternoon and thanks for taking the questions. Just two from us. The first one is for the ureagenesis assays you mentioned during the call. Could you elaborate a little bit more in terms of any specific readout that can be relevant to the data release? And maybe the second question really here is that on the big picture perspective that given that you are focusing much more on your in-house programs and so far you have two very active ones, would you consider a little bit more maybe even in the early stage, so maybe enrich the pipeline, maybe sometime come out later this year or next year to enrich that? Thanks.

Yes, the early, early stuff does not consume a lot of resources. So, clearly, we want to be in a position of being able to announce new programs when it's appropriate upon establishing any sort of proof of concept for each of these therapeutic programs. And we've already done considerable effort there already to date. So, we're in a position to move if needed. Our focus on our budget and extending the runway hasn't impacted our subsequent programs. That work's already been done.

Okay. In terms of the ureagenesis assay, any specific readout that we should pay attention to?

Yes. I encourage people to go to the 15N ureagenesis paper that I've highlighted a couple of times on this call out of the University of Zurich. It's new. It comes out of the Journal of Metabolic Health and Disease, and the title of it is Characterization in Treatment, Monitoring of Ureagenesis Disorders Using Stable Isotopes. But we just believe that's a significant upgrade on the ureagenesis assays of decades ago. So, a considerably better process, and we will be collecting data within the context of what's being utilized in this paper.

Okay, fair enough.

And we will provide more details on this at the right time. We are just applying to that seat.

Okay. Well, great, thanks a lot, and congratulations on all the progress.

And this concludes our question-and-answer session. I would now like to turn the call back over to Joe Payne for final and closing remarks.

Okay. Thanks evidence everyone for participating on the call. I know there are some conferences up, and we can meet face-to-face. But if there is any remaining questions, don't hesitate to reach out to your team, and we will get back to you. Thanks, everybody.

Thank you. And this does conclude today's conference. We thank you for your participation. You may disconnect at any time.