Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals conference call. [Operator Instructions] I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2024 second quarter ended March 31, 2024. With us today from management are President and CEO, Dr. Chris Anzalone, who will provide an overview of the quarter; Dr. Bruce Given, our Interim Chief Medical Scientist, who will provide an update on our cardiometabolic pipeline; Dr. James Hamilton, our Chief of Discovery & Translational Medicine, will provide an update on our earlier-stage programs; and Ken Myszkowski, our Chief Financial Officer, will give a review of the financials. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q. I'd now like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. As we discussed in our last conference call, Arrowhead has reached a point where our business requires a greater degree of focus. We are in the process of building out our expertise within the cardiometabolic space and focusing more of our spend in that area. These are wholly appropriate actions because our cardiometabolic programs represent a substantial amount of potential near-, mid- and long-term value. We need to ensure that they are properly resourced both from a financial and human capital standpoints and that they are at the center of investor analysis of our business. This is a good thing for Arrowhead. We have 2 late-stage drug candidates with data across diverse populations from ultrarare to highly prevalent, spanning over 1,000 human subjects. We see a train of potential value creation with plozasiran and zodasiran and expect to file NDAs or supplements to expand those labels almost every year over the next 5 to 6 years. This is a pipeline within just 2 drugs, and I believe we will start unlocking value in the very near term. Further, we expect to expand our cardiometabolic reach into obesity and metabolic disease with 2 additional drug candidates reaching the clinic this year. The plozasiran PALISADE Phase III study in patients with familial chylomicronemia syndrome, or FCS, is clinically complete. The last patient's last visit occurred last week, the database should be locked over the next 2 weeks, and I expect to disclose top line data at our cardiometabolic webinar in June, with a fuller data set hopefully presented this year at an appropriate medical conference. We believe that plozasiran will become our first commercial product, and we are preparing for an NDA submission for use in FCS patients by the…

Thank you, Chris. Good afternoon, everyone. Chris discussed plozasiran and zodasiran at a high level, but I want to spend some time going over a few specific things: first, the data on the SHASTA-2 study of plozasiran that we presented at ACC and simultaneously published in JAMA Cardiology; second, the design and status of SHASTA-3, -4, and -5; third, expectations for our upcoming EAS and NLA presentations; and lastly, a review of the soon-to-report PALISADE study of plozasiran in familial chylomicronemia syndrome, or FCS. Let's’ jump right in with the SHASTA-2 study of plozasiran. To review, plozasiran is designed to reduce production of apolipoprotein C-III, or APOC3, a component of triglyceride rich lipoproteins, TRLs, and a key regulator of triglyceride metabolism. APOC3 increases plasma triglyceride levels by inhibiting breakdown of TRLs by lipoprotein lipase. It also inhibits uptake of remnant cholesterols, derived from TRLs, by hepatic receptors in the liver. The SHASTA-2 study was a double-blind, placebo-controlled Phase IIb study in adults with severe hypertriglyceridemia, or SHTG. Three dose levels of plozasiran, 10 milligrams, 25 milligrams and 50 milligrams, were evaluated against placebo in 229 participants who had fasting triglycerides of greater than or equal to 500 milligrams per deciliter at screening. Each participant received subcutaneous injections on day 1 and week 12, with subjects then followed all the way out to week 48. The primary objective of the study was to evaluate the safety and efficacy of plozasiran in adults with SHTG and to select a dosing regimen for later-stage clinical studies in this patient population. SHTG is characterized by triglyceride levels greater than 500 milligrams per deciliter and is known to significantly increase the risk of ASCVD and acute pancreatitis, often with recurrent attacks requiring repeat hospital admissions and worsening outcomes. Pancreatitis risk is proportional to the number,…

Thank you, Bruce. The discovery and early development teams made some notable progress over the last quarter, and we also have a busy several months ahead with the Summer Series of R&D webinars that Chris mentioned earlier. We do an enormous amount of work in seeking to innovate new medicines that is often only recognized once there is a clinical candidate, so I wanted to talk for a moment about how we see our priorities and the goals of the team. Number one is to push through the TRiM platform to new cell types and continually seek to optimize the safety and activity of each construct. Number two is to develop new candidates against attractive gene targets where using RNA interference is the only or best method to inhibit the target. Number three is to conduct IND-enabling nonclinical studies and first-in-human clinical studies in the most efficient manner possible to get meaningful readouts that accelerate mid- and late-stage development. And number four is to develop assets which can be readily partnered and support business development activities, which remains a key strategic focus as our pipeline has continued to grow. I think we've made good strides in these areas recently, so let's talk about a few examples. We have continued to expand the reach of the TRiM platform. We now have clinical programs in 3 different tissue types, including liver, lung, and muscle. We also expect, in the very near future, to have clinical programs in 2 additional tissues, specifically CNS and adipose. Each one of these expands the universe of diseases we can address and the number of patients that we can potentially help. During the CNS R&D webinar scheduled for September, we plan on giving an update on a specific candidate that is currently undisclosed and highlight the significant…

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended March 31, 2024, was $125.3 million or $1.02 per share based on 123.3 million fully diluted weighted average shares outstanding. This compares with net income of $48.7 million or $0.45 per share based on 108.1 million fully diluted weighted average shares outstanding for the quarter ended March 31, 2023. No revenue was recorded in the quarter ended March 31, 2024. Revenue of $146.3 million was recorded in the quarter ended March 31, 2023. Revenue is recognized as we complete our performance obligations or key developmental milestones are reached. Revenue in the prior period primarily related to the recognition of payments received from our license and collaboration agreements with Takeda and GSK. Total operating expenses for the quarter ended March 31, 2024, were $126.2 million compared to $98.1 million for the quarter ended March 31, 2023. The key drivers of this change were increased research and development costs, primarily compensation costs and candidate costs, as the company's’ pipeline of clinical candidates has increased and advanced into later stages of development. Net cash used in operating activities during the quarter ended March 31, 2024, was $92.4 million compared with $31.7 million during the quarter ended March 31, 2023. The increase in cash used in operating activities is primarily driven by higher R&D expenses as well as the prior period, including $40 million cash receipt of revenue milestones. Construction of our Verona facility is effectively complete. We are currently undertaking commissioning and qualification activities, which puts us on track for manufacturing drug material to support our clinical trials later this year. We expect final payments to be made over the next several months totaling $50 million, after which we expect capital expenditures to be nominal. Turning to our balance sheet. Our cash and investments totaled $523.1 million at March 31, 2024, compared to $403.6 million at September 30, 2023. The increase in our cash and investments was primarily related to the $450 million equity issuance, partially offset by our ongoing cash burn. Our common shares outstanding at March 31, 2024, were 124.1 million. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken. This has been another quarter of solid execution for Arrowhead. Our Phase III PALISADE study of plozasiran is clinically complete, which sets us up to take the next step in growth for Arrowhead as we make the transition into a commercial organization, provided we receive regulatory approval. We also initiated the SHASTA-3 and -4 Phase III studies of plozasiran in patients with SHTG and are finalizing the design and preparation to initiate SHASTA-5 in patients with SHTG at high risk of acute pancreatitis. We are waiting for FDA feedback on a Phase III program to address ASCVD, which we will discuss after we reach regulatory alignment. In addition to progress in cardiometabolic, we have been very productive in platform development and pipeline expansion. Our TRiM platform can now deliver to CNS and adipose tissue, and we will soon have new clinical programs targeting those tissues. We also initiated clinical studies during the quarter for 2 new candidates, ARO-DM1 and ARO-CFB. Thank you for joining us today, and I'd now like to open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Luca Issi from RBC Capital.

Congrats on the progress. Maybe on FeNO, it sounds like the high FeNO cohort for RAGE has been slow to enroll. Can you maybe just expand on it? When is the earliest we can actually see that data? And maybe what are the bogeys in terms of FeNO reduction that are below, on par or above your expectations? And then maybe second on Lp(a). What was the reaction to Lilly's starting a cardiovascular outcomes trial that is way bigger than your trial and in Novartis' trial? I think Novartis has a 7,000-patient trial, you have an 8,000-patient trial versus Lilly is starting a 30,000-patient trial here for Lp(a). Does that mean that your trial is underpowered? Any thoughts here is much appreciated.

Thanks, Luca. So I can address the FeNO question. Look, it's just been slow to enroll because we are requiring high FeNO in these patients with moderate to severe asthma. So I don't have good visibility on when that could be complete. I think our takeaway message there was that we were sick of waiting around. We think this is a good drug, and we want to move expeditiously into a Phase II, and so we're going. We've got Phase II design, and we are moving towards that. I think we'll start that in the fourth quarter. And so we are looking forward to seeing the FeNO data, of course, but it's not rate limiting. I think the drug is too important to wait for that. Bruce, do you have anything to add about the Lp(a)?

I don't think there's a problem with the Novartis or the Amgen studies being underpowered. I don't really know what's driving that very large study size for Eli Lilly. The devil may be in the details there. But I don't worry about the power of either the Novartis or the Amgen studies.

Our next question comes from the line of Edward Tenthoff of Piper Sandler.

So many things going on, tough to decide where to start. But with the Phase III PALISADE data coming up, top line data, just on your last held event, again, what kind of expectations should we look for in the trig-lowering, especially with data already out from an earlier study? And how will this really compare, do you think, with the Ionis program, which is a little bit ahead of you guys? How do you expect to compete for this small patient population?

Well, as far as expectations go, you're asking me for a crystal ball. I think that our indication so far is that plozasiran's a very powerful drug when it comes to knocking down APOC3, and APOC3 seems to be very important for this patient population. But that said, I mean, I don't have any insight, at this point, what the PALISADE data will show. So hopes are hopes, but in reality, you got to see the data. That said, I don't have any reason to believe that we won't expect a good outcome, but it's a 75-patient trial, so we'll have to see how the trial goes, how the placebo group has performed because that oftentimes has a lot to do with what happens in these trials. So I can't really give you a forecast on that, Ted. I mean, we're excited to see the data.

Bruce, I'm sorry to cut you off, but just to clarify, with kind of the reduction that you've seen with the prior trig reduction in other studies, severe hypercholesterolemia in patients or hypertriglyceridemia in patients, how do you think that will play in these FCS patients? Sorry, that was more my question.

Yes. I guess what I can say is we've had a smattering of FCS patients in the SHTG study. We've had a few patients in Phase I. So far, in that small number of patients, we've seen essentially similar results from the perspective of percent reductions in triglycerides between the FCS patients and, for instance, what we saw in the regular SHTG patients. If that holds in this larger patient population, we should be in good shape. But as I said, each clinical study is its own clinical study. But we don't have reason from what we've seen so far to go in expecting a different result, but we'll have a much larger patient population here to look at.

That's helpful. How do you guys expect to compete with Ionis as well?

Yes. So of course, that's going to depend upon our data. Here is what I believe. I believe that we will have an advantage in dosing intervals. I think we'll be dosing once a quarter rather than once a month. And then as Bruce said, if the data holds with what we've seen in the past, my hope is that we continue to have a more powerful drug that is better tolerated. But we'll have to wait and see what the data look like in this relatively small study. I'll also say one more thing. You mentioned a very small population of FCS. And of course, genetic FCS is not a very large population. But the population that we studied was genetic FCS and phenotypic FCS, if you will, so those patients with trig above 880 with a history of pancreatitis and it turned out to be about half and half in our study. And so we'll see what makes it to the label. But that's the population that we studied, and that is a substantially larger population than simply genetic FCS.

Our next question comes from the line of Ellie Merle of UBS.

This is Jasmine on for Ellie. So when we get updates from patient cohorts from MUC5AC and MMP7 later in the year, can you give any color on the number of patients that we might see? And anything on specifically what end points we'll get?

Yes, sure. So the number of patients depends on enrollment. We're doing 7 per cohort in the IPF patient cohort, so a single-digit number of patients, call it, less than 10, assuming we report maybe the first dose of IPF patients. And then the end point of that would be MMP7 levels in the valve that we're measuring in all IPF patients. And then for MUC5AC, we probably have a little bit more in terms of number of patients, 20 or so, that we have available to report on. And that would be MUC5AC protein levels from sputum. That's the primary biomarker that we're looking at.

Okay. Great. And just a quick follow-up, if I could. At ATS on RAGE, can you give any specifics on what we can expect there on the new data?

Yes, sure. So we'll be presenting the healthy volunteer RAGE data and then the serum RAGE knockdown data in the patient goals that we have available.

Our next question comes from the line of Jason Gerberry of Bank of America.

This is Dina on for Jason. Congrats on the progress this quarter. Just had a quick one on plozasiran just in terms of thinking about the PALISADE data. I believe your data will include FCS patients and high TG patients with functional LPL activity. I'm just curious how you see the inclusion of the patients with the LPL activity enriching your data set. And do you plan to break out clinical activity of these 2 subgroups to maybe inform comparisons with Ionis' olezarsen?

Well, as Chris said, I mean, the patients that are not genetically proven FCS at the point they enroll are phenotypically FCS patients. So they're not just high triglyceride patients. They are patients that really look and feel like FCS, but they just have not had the genetics done at the time of enrollment. And as Chris said, that's a fairly large population. Some of them are undiagnosed FCS patients. But oftentimes, they're compound heterozygotes, which may or may not include LPL but then have other genetic abnormalities as well, and the compound effect winds up having a phenotypically look like they have FCS. So it's a heterogeneous group. And at this point, again, when we haven't seen the data, everything is blinded, I can't really say how that might play into the results. That's going to be one of the really interesting things to see in the data, do the genetic FCS patients look and behave the same? We'll see. We'll know more once we have all the data in our hands.

A quick follow-up, apologies if I missed this in your prepared remarks, but for the ARO-RAGE Phase II asthma trial that you're planning to initiate later this year, is that in an all-comers population? Or is that going to be in just the eosinophilic high Type 2 patients?

Yes, we're still waiting on feedback from regulatory agencies. So we'll talk more about the design later once it's clear to us.

Our next question comes from the line of Maury Raycroft of Jefferies.

Congrats on the progress. I was going to ask one on FCS as a follow-up to some of the others. Assuming the genetic and clinical patients perform the same in the PALISADE FCS study and that study is successful, what are your expectations for a label, what the label would look like? And how could that play into the commercial opportunity? And then as a follow-up, can you comment on baseline pancreatitis in this study and what you expect to see on that measure?

Okay. Well, let me take the pancreatitis question first. There was a significant history of pancreatitis in the patient population. And there's still a few events, to be adjudicated that, I think, are being adjudicated maybe this week or next. So I don't know what the total number of pancreatitis events in the study will be in the end. But it's a number. It's enough that we'll be able to hopefully see something, but we don't know at this point. So that's on pancreatitis. With respect to labeling, of course, we don't make that decision, the agency does. But the decision to look at either genetic FCS patients or, if you will, phenotypic FCS patients is something that the agency bought into. Certainly, historically, when there's been an agreement between the agency and a company, historically, the agency tends to give you labeling that reflects the population that you studied. Obviously, any individual situation can vary. But our, certainly, expectation going in would be that, that labeling would reflect the patient population we studied. And that would have an impact, obviously, with respect to potentially a differential label between us and olezarsen. We won't know until we get there, but we could see a distinction.

Got it. That's really helpful. And maybe one last follow-up, for a number of patients out there that would be clinically defined with FCS, do you guys have any bookends on that, what that could look like?

So we've gone at that from a number of ways. It's in the thousands. We haven't set on an exact number, but it feels like it's in the thousands. Beyond that, it's hard to tell at this point.

Our next question comes from the line of Mayank Mamtani from B. Riley.

This is Kevin on for Mayank from B. Riley. I have a question about the future strategy in terms of you have both potent drugs, plozasiran and zodasiran. Can you elaborate on how you would go carve a target population given that there are specific distinction in terms of mechanism or clinical effect by these 2 compounds?

Yes. So Kevin, the way I tend to think of it is, if you think of sort of lipid and lipoproteins as a bit of a continuum and, on one end, you have familial hypercholesterolemia, a very LDL dominated sort of disease, if you will, which then comes down into HoFH and patients that, for other reasons, just have very high cholesterols but maybe normal triglycerides, and then you come into the middle where you have what used to be called mixed dyslipidemia, now called mixed hyperlipidemia, that, in an untreated state, patients are maybe a combination of LDL and triglycerides, often with a lot of metabolic syndrome, obesity, diabetes, et cetera, about 20 million patients in the U.S., and a lot of those patients are already on statins and already have some level of control of their LDL, so from what's left untreated, it's largely in this triglyceride rich lipoprotein/remnant sort of phenotype, if you will. And then going further up that size, you get into the severe hypertriglyceridemia and, at the outer end of that, when you have FCS. So if you think of it that way, I almost think of it like a U shape, where one end of the U is familial hypercholesterolemia and the other end of the U is FCS, and you come down and in the middle you have this 20 million patients with mixed hyperlipidemia. So on the one end, that's cholesterol. That's a very healthy place for ANGPTL3. And we've already seen that to an extent, for instance, with Regeneron's muscle antibody, works well on that side of the spectrum. And then on the far side of the other spectrum with FCS and SHTG and the phenotypic FCS, you have plozasiran. So the real question is in the middle where you've got a mix of LDL and triglycerides in the phenotype. And both drugs look to be very interesting drugs in that mixed dyslipidemia or mixed hyperlipidemia population. So what it means to us is that on the two ends of the spectrum, the drugs have target markets that make a lot of sense. And in the middle, both drugs look like they could be a major improvement over what's been available to practicing physicians for the last 30 years. So that's kind of how we see it. I hope, Kevin, that makes some sense to you.

Our next question comes from the line of Brendan Smith of TD Cowen.

Maybe just another quick one on pulmonary and then I have a broader follow-up. So first, I actually just wanted to see if there's anything else specifically that you're seeing in the asthma patient data that's giving you more confidence to move into Phase II, maybe more to the point if you've seen any of the high FeNO patient data yet, like if you're seeing RAGE FeNO knockdown or anything like that? And then more broadly, I just wanted to check and see if there's any update on potential licensing or commercialization partnerships or maybe when we might get an update there and what that's looking like.

Sure. Look, I think the biggest driver in not waiting and moving towards that Phase II is the safety and tolerability that we've seen so far and the target engagement. We're seeing good RAGE knockdown. We've seen a lot of excitement from KOLs for the RAGE pathway, and so it just makes. So we're moving as quickly as we can there. On the partnering side, we are always or virtually always in discussions. As you can imagine, we have no control over time. And so I have nothing to report at this point other than the fact that this is an important part of our business, and we do expect to execute additional transactions.

Our next question comes from the line of Keay Nakae from Chardan.

First question, is there a rationale for the different sample sizes between SHASTA-3 and -4? Is one deliberately oversampled?

Not really. So the design of the SHTG program was, in many ways, a result of our discussions with FDA about their overall expectations for what they wanted to see in an efficacy database, safety database, et cetera. It could have been 350 in both. In the end, it practically made sense to have one with 400 and one with 300. But it's really largely just driven by the practicalities to get the patient population that the agency was requesting. So it really is accidental, you might say, that they're different size. Yes, they're both way overpowered for efficacy. If you saw the results from SHASTA-2, they're both way overpowered for efficacy.

Okay. Well, that's great to hear. Just in terms of the mixed CVOT, since you have a design, you're ready to submit for review, have you selected 1 of the 2? And then based on the feedback, do you still, I guess, have the option to switch? Or how should we be thinking about where you're at with this?

Yes. So until we have feedback and alignment with the regulators, it makes sense for us just to stand pat on this. We'll give you, of course, all the information that we can once we have confirmation from the regulators that we are all aligned on what the study looks like. So stay tuned on that. We're still working.

Our next question comes from the line of William Pickering of Bernstein.

Congrats on the progress. On SHTG, in SHASTA-2, you had a fairly sizable placebo effect of 17% at 24 weeks. Could you comment on whether you think that's a reasonable proxy for what to expect in the pivotal? And if there are any strategies to potentially limit that?

Yes. Well, it's kind of interesting because, if you actually look at the data, placebo was essentially plugging along at right around 0 change. And then at week 20, it was like 0. And at week 24, it dips down to whatever, minus 17%, I guess. And then it went halfway back up to 0 4 weeks later. And then 8 weeks later, it was right back to where it had been for the first 20 weeks. So it's just one of those weird deals. This is what makes it hard to do placebo-controlled studies. Placebo just behaves strangely at unpredictable times, and all of us just have to put up with that. We did things in the trial to try to minimize changes in placebo. But in the end, it's always difficult to really manage that.

And if I could just squeeze in a very quick follow-up. What led you to pick the 25 milligrams instead of the 50? And do you think that you'll be able to demonstrate a more compelling efficacy profile versus olezarsen at that dose?

Yes. Well, 50 and 25 were very similar with respect to activity, with respect to efficacy. And that was not only in SHASTA-2 but that was also in MUIR. They just looked really close. And yet, there was a difference in tolerability. And so it really was a benefit/risk decision in the parlance, of the regulatory parlance. But in our parlance as well, we put up with side effects in this business when we have to. But if, in fact, there's a dose available that essentially gives you full efficacy and has better safety and tolerability, you take that one. Our overall assessment of the 25-milligram dose in both of those 2 large Phase IIs in which it was in is that it's kind of indistinguishable from placebo. The difference between active and placebo is so small as to be not convincingly different at the 25-milligram dose in terms of safety and tolerability. And that mattered a lot when the efficacy looked basically the same. And 50 milligrams looked a little different from placebo, so we took advantage of the fact that we were at the top of the dose response curve for efficacy and we had a better safety and tolerability profile.

Our next question comes from the line of Patrick Trucchio of H.C. Wainwright & Co.

Just a couple of follow-up questions on the complement programs. Just first, I appreciate that dosing in the Phase I trial began last month. I'm wondering if you can talk about potential timing of initial data in this trial evaluating ARO-CFB and kind of what you'd be looking for in that initial data and later data to give confidence in advancing this program. And then secondly, if you can talk more broadly about the potential advantages of CFB relative to existing treatments for various complement-mediated disease and how you envision CFB fitting in the different treatment paradigms. And then lastly, how should we think about this complement program relative to ARO-C3? And can you talk in more detail how these programs may progress in parallel?

Yes, sure. Maybe I'll take the last one first. Thanks for the question. So I think we will make a data-driven decision for C3 versus CFB. We think there are maybe some indications where C3 might work better, something like C3 glomerulopathy, where the disease is really driven by the accumulation of excessive C3 and then others where CFB might work better, but I think that will be really data-driven. And then in terms of advantages over some of the other therapeutics out there, I think the dosing advantage is really significant that we would have for both of these. In terms of duration of effect for ARO-C3, we're getting 88% knockdown that can be essentially maintained for 3 to 4 months after a single dose. So I think if you're again looking at dosing quarterly versus other therapies that require either daily oral dosing or frequent subcutaneous dosing, I think there's a big advantage there. We'll see what the dosing regimen looks like for ARO-CFB, but based on preclinical data, that's a very potent molecule. And so I'd expect something similar in terms of duration of effect. And then data timing, the CFB study just got started. It's a healthy volunteer study. And so the biomarker knockdown of circulating plasma CFB, that's the main efficacy or activity biomarker of interest. And we could potentially have something by year-end for that.

Thank you for your questions. This does conclude our question-and-answer session. I would now like to turn the call back over to Chris Anzalone for some closing remarks.

Thanks, everyone, for joining today, and we look forward to seeing you at a Summer Series starting later this month.

This does conclude today's conference. You may now disconnect.