Arrowhead Pharmaceuticals, Inc.
Q4 2022 Earnings Call Transcript

Published: 28 Nov 2022

[Operator:]

Ladies and gentlemen, welcome to Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be opportunity to ask questions. I will now hand the conference over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

[Vincent Anzalone:]

Thank you, Justin. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2022 fiscal year ended December 30, 2022. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our mid- and later-stage clinical pipeline; Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine, who will provide an update on our earlier stage programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. In addition, Tracie Oliver, our Chief Commercial Officer; and Patrick O'Brien, our Chief Operating Officer and General Counsel, will both be available during the Q&A portion of the call. 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. With that said, I'd like to turn the call over to Chris Anzalone, President and CEO of the company. Chris?

[Christopher Anzalone:]

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Quickly, Vince accidentally misspoke and he said that our fiscal fourth quarter ended December 30, what he meant was September 30 of 2020 -- 2022. Our fourth fiscal quarter and period since our last call has been highly productive. We've seen clear progress across our large and balanced pipeline, large because it now includes 12 drug candidates in clinical trials and balanced because it spans in multiple therapeutic areas and includes six partnered programs and six that are wholly owned. It is a good representation of that which makes us different. We are a company built on an increasingly validated technological platform applied to a large number of varied diseases across multiple organ systems where development is uncommonly rapid from idea to the patients in need, and we use targeted disciplined partnering to help finance development of our wholly owned drugs. This is who we are, and these factors are not new. What is new is the growing sense of clarity we are achieving. I think that this is a recurring theme of this update. We have increased clarity as to the makeup of our multiple Phase 3 programs, increased clarity as to how we intend to use our late-stage drug candidates in different patient populations, increased clarity as to when we expect proof of concept from our earlier stage programs, increased clarity as to where we plan to go next with the expansion of our platforms into new cell types, increased clarity as to how large we think our pipeline of clinical candidates will be over the next few years and increased clarity about how we intend to finance our growing pipeline. Let’s touch on some of these. First, we expect to report on progress for fazirsiran, our AAT program partnered with Takeda, in the near term. We would like to report topline data from the Phase 2 SEQUOIA study at the same time we provide guidance on the Phase 3 study design. Ideally, Takeda and Arrowhead would do these together. Takeda submitted a Phase 3 protocol to the U.S. FDA at the end of last quarter and is waiting for feedback. We expect Takeda to receive that feedback shortly, if there are any comments at all. We believe that FDA’s feedback from prior meetings has been appropriately incorporated into the study design, so we do not expect any major surprises. I believe we have clarity on the future development paths and timelines as well as what the SEQUOIA data are telling us and we will share that as soon as we can. Second, we are gaining a clearer understanding about how our cardiometabolic programs perform in different patient populations, and thus are better able to determine the positioning of each, and importantly the development paths and studies needed to seek approval for various indications. Javier will talk about this in a moment, but the interim analyses for the SHASTA-2 and MUIR studies of ARO-APOC3 and the ARCHES-2 study of ARO-ANG3, which we presented at AHA and at an analyst investor event shortly thereafter, gave us some critical insights that are helping to accelerate the path to Phase 3 studies. We are working on determining the optimal paths, and we expect to have further clarity, including from multiple anticipated regulatory interactions, in 2023. At present, we plan to pursue studies to enable us to treat patients with homozygous familial hypercholesterolemia or HoFH and heterozygous familial hypercholesterolemia or HeFH patients with ARO-ANG3. We hope this would enable us to pursue a staged commercial strategy whereby we could serve the small HoFH market first and grow into the HeFH market after those larger studies are complete and supplemental regulatory approval is obtained. For ARO-APOC3, we are conducting studies now to enable us to treat FCS patients, followed by treating patients with severe hypertriglyceridemia, and eventually the broad population with mixed dyslipidemia. As with the HoFH to HeFH approach, we like the staged commercial strategy and hope we can serve the small FCS market rather quickly, then expand to the larger sHTG population, and eventually the even larger mixed dyslipidemia populations when those studies are complete and their respective supplemental regulatory approvals are obtained. Third, we have line of sight on timelines for initial interim clinical results for two of our pulmonary programs. James will give details on the status, but ARO-RAGE and ARO-MUC5AC are progressing well and we anticipate being able to provide interim data publicly in the first half of 2023. Should we have data that provides clinical proof of concept, I think this would be a potentially big de-risking event for the candidates, and for the pulmonary platform generally. We believe we’ve made a lot of progress with the platform since our generation one candidate ARO-ENaC, and gaining clarity on how the generation two candidates perform will be exciting. Importantly, we are performing various analyses to assess pharmacodynamics using different methods, so we are confident that we should be able to define knockdown and duration of effect at different dose levels and different timepoints. The ARO-MMP7 Phase 1 started later than ARO-RAGE and ARO-MUC5AC, but dosing in healthy volunteers should begin imminently. Fourth, our ARO-C3 program continues to progress well and we expect to have interim knockdown and safety data in the first half of 2023. This is an important program for us because

[Javier San Martin:]

I want to give updates on the two main areas of our late-stage development efforts

[James Hamilton:]

I want to give updates on four of our earlier stage programs that include three pulmonary candidates targeting RAGE, MUC5AC, and MMP7, and on our candidate targeting complement C3. Let’s start with C3. ARO-C3 is an investigational RNAi therapeutic designed to reduce hepatocyte expression of complement component 3, or C3, as a potential therapy for various complement mediated hematologic and renal diseases. We are conducting a Phase 1/2 clinical study now that includes two parts. Part 1 is placebo controlled in healthy volunteers and includes single ascending dose, or SAD, cohorts and multiple ascending dose, or MAD, cohorts. All of the SAD and MAD cohorts are fully enrolled and participants are being followed to assess safety and tolerability, dose response based on serum C3 levels, and duration of effect at various dose levels. We are confident that we will have sufficient data in the first half of 2023 to report interim results from Part 1 of this study. Part 2 is open label in eligible subjects with paroxysmal nocturnal hemoglobinuria, or PNH, and complement-mediated renal diseases, including IgA nephropathy and C3 glomerulopathy. Data from Part 1 will inform Part 2 dose selection, which we expect to happen in the coming months and then the patient cohorts will be opened for enrollment in the first half of 2023. We are very excited about this program and believe it has the potential to address multiple serious complement-mediated or complement-associated diseases with unmet need in the renal and hematologic spaces. We know that complement C5 inhibitors are disease modifying in conditions such as PNH and believe that proximal C3 inhibition may confer advantages over C5 blockade. For example, C5 monoclonal antibodies only block the terminal complement pathway, and many of the proximal complement actions remain intact. In addition, clinical validation exists for C3 inhibitors, and we believe RNAi-based C3 inhibition could have clear dosing advantages over other mechanisms. Furthermore, alternative pathway inhibition is likely of key relevance for treatment of conditions such as IgA nephropathy, C3 glomerulopathy and potentially other glomerular diseases. AROC3 is a subcutaneously administered candidate with an expected long dosing interval of once every three months or less frequent. We think this would be much more patient friendly than current C3 inhibitors that require a high volume infusion multiple times per week. I will now move on to our three pulmonary candidates, starting with ARO-MMP7. ARO-MMP7 is designed to the reduce expression of matrix metalloproteinase 7, or MMP7, as a potential treatment for idiopathic pulmonary fibrosis, or IPF. MMP7 is thought to play multiple roles in IPF pathogenesis, including promoting inflammation and aberrant epithelial repair and fibrosis. Silencing MMP7 expression in a rat IPF model reduced inflammatory cell infiltration, limited lung fibrosis, and preserved pulmonary function. In August, we filed a CTA to begin a Phase 1/2 clinical study of ARO-MMP7. The Phase 1/2 study will be similar in design to our other first in human studies and includes a healthy volunteer portion followed by a patient portion. Now, moving on to our two other pulmonary programs, ARO-MUC5AC and ARO-RAGE, our investigational RNAi therapeutics designed to reduce production of mucin 5AC, or MUC5AC, and the receptor for advanced glycation end products, or RAGE, respectively, as potential treatments for various muco-obstructive and inflammatory pulmonary diseases. These two programs are on largely parallel paths and at approximately the same stage. They are both in Phase 1/2 studies designed to assess safety and tolerability, pharmacokinetics, and pharmacodynamics in healthy volunteers first and then in patients with asthma. For both programs, we are approaching full enrollment of the healthy volunteer SAD cohorts and are well into enrollment of the healthy volunteer MAD cohorts. In both the SAD and MAD, we have various methods to assess target engagement, including in induced sputum and bronchoalveolar lavage fluid, and for RAGE we are also measuring serum sRAGE protein, a circulating biomarker for RAGE target engagement in the lung. We anticipate that we will be able to report interim results from Part 1 of these studies and begin Part 2 in patients with asthma in the first half of 2023. These are potentially important new medicines that address targets that have been difficult to drug using other modalities and are designed to treat muco-obstructive and inflammatory lung diseases in fundamentally new ways. We are excited to see and share these results and we are confident in the progress we’ve made on our pulmonary TRiM platform and these generation 2 candidates. I will now turn the call over to Ken Myszkowski. Ken?

[Ken Myszkowski:]

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for fiscal 2022 was $176.1 million or $1.67 per share based on 105.4 million fully-diluted weighted average shares outstanding. This compares with net loss of $140.9 million or $1.36 per share based on 103.7 million fully-diluted weighted average shares outstanding for 2021. Revenue for fiscal '22 was $243.2 million, compared to $138.3 million for 2021. Revenue in the current period primarily relates to our collaboration agreements with Takeda and Horizon. Revenue will be recognized as we complete our performance obligations, which includes managing the ongoing AAT Phase 2 clinical trials for Takeda, and delivering a Phase 1 ready candidate to Horizon. There remains $128.4 million of revenue to be recognized associated with the Takeda collaboration which we anticipate will be recognized over the next two to three years, and there remains $6.7 million of revenue to be recognized for Horizon, which we anticipate will be recognized

[Operator:]

Please remain on the line. Your conference will resume shortly.

[Ken Myszkowski:]

Sorry, folks, we had a connection problem there. I'll continue about halfway through our -- my prepared remarks. Net cash used by operating activities during fiscal 2022 was $136.1 million, compared with net cash provided by operating activities of $171.2 million during 2021. The increase in cash used by operating activities is driven primarily by higher research and development expenses. We expect our operating cash burn to be $70 million to $90 million per quarter in fiscal 2023 and we expect capital expenditures up to $200 million as we near completion on our footprint expansion projects, including GMP manufacturing. Turning to our balance sheet, our cash and investments totaled $482.3 million at September 30, 2022 compared to $613.4 million at September 30, 2021. The decrease in our cash and investments was primarily due to cash used for operating activities. Our common shares outstanding at September 30, 2022 were 106.0 million. As Chris mentioned earlier, on November 9, 2022, the Company and Royalty Pharma entered into a Royalty Purchase Agreement, pursuant to which Royalty Pharma agreed to pay up to $410 million in cash to the Company in consideration for the Company’s future royalty interest in olpasiran, originally developed by the Company and out-licensed to Amgen in 2016. Pursuant to the Royalty Pharma Agreement, Royalty Pharma paid $250 million upfront and agreed to pay up to an additional $160 million contingent upon the achievement of certain clinical, regulatory and sales milestones. The Company retained rights to $400 million in development, regulatory and sales milestone payments potentially due from Amgen from the same 2016 out-licensing agreement. Pro forma cash and investments at September 30, 2022 including the Royalty Pharma cash receipt would be $732.3 million. I will now turn the call back to Chris.

[Christopher Anzalone:]

Thanks Ken. In our business, opportunity abounds. There is no shortage of need that the biopharmaceutical industry can endeavor to serve and no shortage of lives that can be touched. There is also no shortage of risk, as unknowns abound. As such, clarity is at a premium and will often be a primary value driver. We feel good about the clarity we have recently achieved and expect to achieve in the short-term. These include the following

[Operator:]

And our first question comes from Maury Raycroft from Jefferies.

[Maury Raycroft:]

Just going to ask one on AAT. Wondering if you can clarify if you or Takeda has shared the Phase 2 biopsy data with FDA? And if their feedback will be based on the biopsy data or only the serum biomarker knockdown data?

[Christopher Anzalone:]

Javier?

[Javier San Martin:]

Yes, the feedback that we're looking is at the Phase 3 protocol design that was already discussed twice. And as Chris said, we already -- Takeda already incorporated most of the feedback. So this is more a procedure than anything else. And the SEQUOIA data is not part of this feedback that we're looking for. In other words, the SEQUOIA data that was necessary to inform the Phase 3 was already presented and is part of the discussion that we’re having with the agency over the last four or five months.

[Maury Raycroft:]

Got it. Okay. Okay. And then for the AAT data that you have in hand, can you comment on what you're seeing and better set expectations for what you will disclose? And if you start the Phase 3 in the first quarter of next year, do you think the update will happen in December or more likely around JPMorgan meeting in early January?

[Christopher Anzalone:]

Yes. I can't give too granular guidance on the timing for the update. But I'll tell you my hope is that we can do that in December. We just have to see what schedules look like. We expect the feedback, if any, from FDA almost any day now. And so we do have time to get that in, in December. And so we'll see. With respect to giving further guidance on the SEQUOIA data, we're just not going to do that. We will provide that update at the same time as we give guidance on what the Phase 3 will look like.

[Operator:]

And our next question comes from Luca Issi from RBC Capital.

[Luca Issi:]

I have a quick one on APO versus ANG. It looks to me you're prioritizing APOC3 over ANG3, especially for the larger mixed dyslipidemia population. Can you expand a little bit more on the rationale behind the decision? And is it fair to assume that you're looking for a partner for APOC3 given that you need to run a cardiovascular outcome trial?

[Christopher Anzalone:]

I'll take the second part, and then I'll hand the first part over to Javier. The answer is no, we are not looking for a partner for APOC3. That, to us, feels like an important opportunity for us. The data have been from our perspective, unequivocal. And we see a large opportunity in large markets as well as smaller SHTG market and, of course, the very small FCS market. So we like the opportunity, and we intend to conduct that cardiovascular outcome study ourselves and to commercialize that drug ourselves.

[Javier San Martin:]

Yes. So a couple of things. So first, the Phase 2 data or the interim data that we presented at the American Heart Association really confirmed what we learned in the Phase 1/2 studies. So it wasn't about prioritization, it was about to really learn and confirm the specific therapeutic effect of these two molecules. And as we said before, ANG seems to be a drug that is more focused on hypercholesterolemia, and that is how we see the opportunity. Now that's a much crowded space, when you think about the general hypercholesterolemia population, but this drug has a very unique pathway and mechanism of action that can address these specific smaller population, that is rare HoFH and the not so rare HeFH. So it's not about prioritization, but it's about where the profile of this drug fits in the context of clinical care, particularly when you fast forward a few years from now. So ARO-APOC3, as you saw the data that we knew about the severe hypertriglyceridemia populations is confirmed, and it's very remarkable and is consistent. And as I always said, with these therapeutics, we have 100% response with regard to hypertriglyceridemia. So our initial plan to go with the two severe hypertriglyceridemia syndrome, the FCS or the SHTG, continue to be the same. What we are learning and I think that was a key feature of our Analyst and Investor Day is what is the unmet medical need in cardiovascular risk reduction in the next five to 10 years? And we believe that the LDL cholesterol issue is probably well taken care of and the rest of the risks come from different sources of lipid and lipoprotein, most of which are addressed with the ARO-APOC3 molecule. So in conclusion, we see the opportunity where the unmet medical need is and ARO-APOC3 fit very well with those criteria. So it's not about prioritization, but it's really going to where the drugs have the biggest promise.

[Christopher Anzalone:]

Yes. Look, I think that our development programs worked exactly as we design them to work. We have these two drug candidates that were clearly active and clearly had some overlap in their activity. And people would ask how we're going to apply these two drugs to various patient populations. And our answer always was we need to look at the data, and that will guide us. That was not a satisfactory answer to some people, but that was the answer. And now do we have an interim look got a better idea about how these will help various patient populations. And so now I think we've got a good idea. Again, as Javier said, we don't view this as prioritizing. We view this as just following where these drugs are going to have their greatest benefit in which patients.

[Operator:]

And our next question comes from Ellie Merle from UBS.

[Ellie Merle:]

For the initial pulmonary readout in the first half of next year, I guess what are you looking to see in terms of the degree of protein knockdown based on the dose levels that you're studying in healthy volunteers? And I guess when you think about pulmonary delivery, I guess, what is proof of concept for the pulmonary platform look like from this readout or if perhaps we do wait for longer-term data?

[Christopher Anzalone:]

Sure. Look, I think these are well-validated targets, particularly MUC5AC. But I think even RAGE and certainly MMP7. And so our thinking is that if we can see a well-tolerated, deep knockdown in healthy volunteers, that is a substantial clinical proof of concept. We will also have some data later in the year on -- in various patient populations. But I think if we can see good consistent knockdown in healthy volunteers that's well tolerated, I think that is giant leap forward for the entire platform and certainly for the individual candidates. With respect to how much knockdown we need, I don't think we're setting expectations for ourselves here. I think we want to see what we see. But our hope is that we see consistent and at least relatively deep knockdown. And if we can, I think that given the importance of these targets, I think that they will have disease-modifying effects.

[Operator:]

And our next question comes from Joel Beatty from Baird.

[Joel Beatty:]

For the lung programs, MUC5AC and RAGE, I think in your prepared remarks, you mentioned that both of these programs are going to reaching the top of the SAD cohorts and also flowing MAD cohorts. How do you decide the peak dosing of those? Is this kind of preset? Or are you looking at safety or efficacy markers?

[James Hamilton:]

So the dose levels for the SAD and MAD are largely preset. And then as we go from one dose level to the next, we have an independent Data Safety Committee that reviews aggregate safety data and boats to allow dose escalation from the dose just completed to the next higher dose. Hopefully, that addresses your question.

[Joel Beatty:]

Great. And then for the cardio drugs APOC3 and ANG3, do you see the market opportunity as more of displacing current drugs and being used in place with them or as add-on therapies to the current set of drugs in the market?

[Christopher Anzalone:]

I think it's a little bit too early to opine on that. That's a broad question. Give us some more time so we can complete the Phase 2, and we have a better idea about what that looks like and we can go from there. But at this point, I don't think that we want to get into how we slot into various therapeutic paradigms.

[Operator:]

And our next question comes from Edward Tenthoff from Piper Sandler.

[Edward Tenthoff:]

Two questions, if I may. Just housekeeping, what was the fourth quarter weighted average shares outstanding, if you have them to 3 decimal points? But then for Chris, kind of level question. You guys have been so successful at partnering different therapies. You've been clear that cardiovascular is a key area of focus. How are you really looking at the pipeline going forward? Like is pulmonary disease going to be an area of a secondary focus? Are you going to look to partner some of those therapies? How should we be thinking about sort of where you guys are going to stay focused and specialized?

[Christopher Anzalone:]

Sure. Ken, do you want to address the first question?

[Ken Myszkowski:]

Yes. The weighted average shares for Q4 were 105.879 million

[Edward Tenthoff:]

Awesome. And then again, just in terms of higher level, obviously, a focus on cardiovascular disease. What else are you guys thinking about partnering or what is going to be core?

[Christopher Anzalone:]

Sure. Thanks, Ed. So broadly, of course, that's a dynamic question because as the company grows and as market appetites for various targets and drugs change, of course, that which can be partnered changes. Having said all of that, look, we -- as we've said in the past, we like cardiovascular. We like what we're seeing with APOC3 and ANG3. We like the idea of building commercial force to address those. We like the staged approach there starting with HoFH and expanding into HeFH. We like the idea of starting with small FCS, expanding into SHTG, and expand into mixed dyslipidemia. Now with regard to the pulmonary, look, that's a very interesting area. We think that's a target-rich environment. That feels to us like another liver. And we think, look, there we can address that market. I think there are 600-or-so-thousand pulmonologists in the U.S., and we see not two or three or four drugs with eight or nine or 10 drugs. So I think that we will play there. Now because it's so target rich, I think we also could do some partnerships there at some point. We're not looking to partner these first three right now. But I think there's room there for us to build a real franchise. And then also to work with the right companies on a handful of other targets potentially. And then you look at our other candidates, C3, that's a very interesting drug candidate to hold on to ourselves. That gives us an awful lot of optionality in terms of how we commercialize that, where we go, how fast we can get there. So anyways, so that's sort of a broad answer to your question, I guess.

[Edward Tenthoff:]

And just hats off on the Royalty financing. That was a great deal.

[Christopher Anzalone:]

Thank you.

[Operator:]

And our next question comes from Patrick Trucchio from H.C. Wainright.

[Patrick Trucchio:]

I'm just wondering, I have a follow-up just on the platform. And if you can discuss the relative advantages of the siRNA approach as it compares to others such as small molecules or gene editing, specifically in the area of alpha-1. So also more broadly across the pipeline, what is your level of confidence that siRNA will be the preferred mechanism in these various targets and indications and the programs currently underway, particularly as these other modalities advance in clinical development?

[Christopher Anzalone:]

Sure. So look, that's a little bit of a hard question to answer broadly because various drug candidates will have specific advantage. But I'll tell you broadly the way we look at this. RNAi is not the right modality for every indication, of course, but for many indications where you really -- where you need to reduce the expression of some gene product, it's a good one. I think we've shown -- we and others have shown time and time again that RNAi appears to be a potentially better modality than antisense oligos in terms of dosing schedule, in terms of depth of knockdown in terms of safety. We think that will continue, at least as it relates to hepatocyte targets, and we'll see if that applies more broadly. When you look at gene editing, look, I think that's an interesting idea. I think that we're not quite ready for prime time there. And I think that there is a permanence associated with gene editing that may be -- that may cause some pause with at least for certain indications. What's great about RNAi is that we get a good, long, durable effect, but yet it is ultimately reversible. After some period of time, that drug wears off and it doesn't knock down the gene product any longer. What would concern me at least in the near to midterm with the gene editing approach is that the idea of having to unCRISPRize something is a daunting one. And so I think it's still a bit of an early technology. But at least as it relates to the indications we're going after, we believe that RNAi at least in our current pipeline is likely to -- and from my perspective, at least the preferred modality.

[Patrick Trucchio:]

Yes. That's helpful. And then earlier in the call, there was commentary around increased clarity on which programs and how large the pipeline could become in the next few years with the goals outlined through 2025. So I'm wondering if you can elaborate a bit more on this commentary, particularly regarding gating factors involved in deciding which targets or disease to pursue, such as the level of genetic or clinical validation required? And how many programs either in terms of new INDs or some other metric would you be expected to announce on an annual basis going forward as you expand the pipeline?

[Christopher Anzalone:]

Well, yes. So we're excited about our 20 in '25 program. We feel comfortable that we'll get there. I think 20 clinical candidates, whether wholly owned or partnered is a lofty goal, and I think we're going to achieve it. Regarding genetically validated targets and such, if you go down our pipeline, I think that there is pretty good consensus that these are all well-validated targets, with the possible exception of HBV just because it's a complicated virus, of course. But everything else, I think, clearly, there is consensus among KOLs that if you can reduce the expression of these various targets, positive phenotypes will result. And our goal is to continue with that. Second, if you look down our pipeline, everything we've gone after, we've been the first RNAi player there. I'd like to continue that at least in the near term, I think we will be continuing that. And then finally, with respect to our ability to get outside the liver, as we talked about with pulmonary, with skeletal muscle, we'll be announcing our next cell type in the first half of next year. With all of these, it gives us the ability to run out and take land, right? We don't see any near-term competitors in these extra-hepatic spaces at least so far. And so it gives us the ability to really be choosy and go after targets that are well validated to decrease our biology risk.

[Operator:]

And our next question comes from Madhu Kumar from Goldman Sachs.

[Madhu Kumar:]

Maybe following up on Ellie's question, what do you think is the dynamic range of RAGE and MUC5AC knockdown that will be predictive of clinical benefit in these obstructive pulmonary conditions?

[Christopher Anzalone:]

James?

[James Hamilton:]

Yes. So for RAGE, I would say, based on our animal data, we were in the Alternaria model that we presented at ATS, we were wanting to get better than 50% knockdown, 60% to 70% knockdown in that particular animal model. And then for MUC5AC, I think if you look at the patient data versus the healthy volunteer expression level for MUC5AC that patients have maybe tenfold more MUC5AC compared to what the healthy has. So I think that -- and you probably don't have to bring the patients back to normal levels to have a benefit. But particularly in the patients, I think there's pretty significant dynamic range in terms of MUC5AC knockdown such that if you get 50% reduction in MUC5AC expression, we may see an associated clinical benefit. I don't know if that addresses your question.

[Madhu Kumar:]

No, that's helpful. Maybe on AAT, I guess kind of -- how much different would you expect the SEQUOIA data to be from the Phase 2 of label extension given kind of like patient recruitment in SEQUOIA relative to the open label extension? Like is there any reasons are going to be a significant difference in kind of the disease course in the SEQUOIA patients relative to the open label extension?

[Christopher Anzalone:]

I don't believe so. No, they should be similar. Look, we always viewed that open-label data as important in terms of pegging a story. It was a small number of patients, but we thought it pegged the story. And we have been looking for -- we've been hoping that SEQUOIA would confirm that story.

[Operator:]

And our next question comes from Mayank Mamtani from B. Riley.

[Mayank Mamtani:]

Thanks for squeezing me in and I appreciate you putting out the 2025 campaign. So maybe on the SHASTA study, a quick follow-up on the two pancreatic events that you saw there. Admittedly in a blinded manner, but is that what you would expect for a study this size? And in general, like what would be the event rate for SHTG study? And maybe a second part, as you think about validating triglyceride as an approvable endpoint for either SHTG or for larger mixed dyslipidemia indication, how are you sort of thinking about that next year?

[Javier San Martin:]

Yes. So with regards to the two cases of pancreatitis are well within the expected event rate, which is about 3% to 5% per year in this patient population. So we saw two cases in about 200 patients and by the time we -- I mean, by now we have almost one year follow-up in most of those patients. So yes, the event rate is what we expected. And the second part with regard to the Phase 3 study, I think we commented on this before, the registration program for ARO-APOC3 in the severe hypertriglyceridemia indication does not need pancreatitis endpoint for approval. But of course, we would like to enrich the patient population as much as possible to provide information about pancreatitis risk reduction, which is the goal of therapy. And that would be very important for many other reasons really to translate the clinical benefit, to define the value proposition and so forth. So the approval path does not require pancreatitis, but we will do our best to have enough number of patients at high risk, so we can see the risk reduction in pancreatitis as a consequence of normalizing triglycerides levels.

[Mayank Mamtani:]

And then just a quick one on A-1 AT. Are you able to comment on how -- as you think about Phase 3, how are you thinking about placebo response? Because there have been studies recently put out independent of this program and also by Takeda about how to sort of think about F2, F3 patients differently. So is there anything you could comment on that on the placebo response for Phase 3, how you might be thinking about?

[Javier San Martin:]

So we're going to use the totality of the data available to estimate the placebo rate and that would be part of the equation for the effect size and the power for that study. So you will see that in detail whenever we can do this event with Takeda and present the SEQUOIA data and the Phase 3 study design. So we, of course, use the totality of the data to plan for that study.

[Operator:]

And our next question comes from Keay Nakae from Chardan.

[Keay Nakae:]

Chris, one question on AATD, the Phase 3 design, is it your expectation that the agency will or will not require care biopsy data?

[Javier San Martin:]

Yes. So the biopsy data is likely to be the key endpoint. That's where we will -- we're thinking, that's what we studied. That's what the disease is defined by. So this is a disease of fibrosis progression and ended in end-stage liver disease with fibrosis. So the goal of therapy is to prevent fibrosis progression or to reduce fibrosis severity. So that seems to me a logical approvable endpoint in a condition that is defined by fibrosis progression.

[Operator:]

And our next question comes from Mani Foroohar from SVB.

[Mani Foroohar:]

I've got a couple of questions more about your own sort of rationale and strategy given that a lot of the analysts have dug into the details of this or that specific program. So I'll start with SEQUOIA. Did I hear right that that your plan is to disclose the upcoming SEQUOIA data green biopsy alongside the Phase 3 trial design? And if so, could you give me a sense of the rationale of why those two should come out at the same time? And then secondarily, there's been a few people who've asked about your strategy around running CVOTs, which assets to hold on to or not. Can you give me a sense of what your ballpark estimate around the size, cost and the operational burden of a CVOT would be for you? And how you guys think about the number of studies of that scale that you could run for your assets simultaneously?

[Christopher Anzalone:]

Sure, So the first question is -- I've got more on the first question than the second question. So look, the -- having a complete data set for SEQUOIA and having clarity on what the Phase 3 looks like just happened to come out at around the same time. And so it made sense for us to present both of those at the same time. And I think they're both related, of course, and they feed on each other, of course. If there was a big time delta between the two, we would have been happy to separate those. But it just turns out that, again, the SEQUOIA data are analyzed and we expect to have final clarity on the Phase 3 data at about the same time. So it makes sense to do this together. And we'd like to do them in conjunction with Takeda. That makes sense as well. We'll just see when the calendars will align for that. With respect to the CVOT outlook, we haven't given any guidance on how large a study would be and how much would cost yet, in large part because we haven't had those end of Phase 2 meetings with the FDA. We really want to start to have these discussions before we opine on that because there are several ways you can do a CVOT, of course. And it just feels a little bit early to opine on that. We will give guidance on that once we have it. But we just -- we're still pretty early here. We've got an interim look. We have a pretty good idea about what the data we think are telling us. And then we still are going to run these studies out to the end and then have end of Phase 2 meetings. And so I expect that next year sometime we can give you better guidance or some guidance on size, cost, et cetera, for the CVOT.

[Mani Foroohar:]

Can I ask one quick follow-up on that second half of that question? For HeFH in particular, how do you think about the appropriate patient population to study? There are a number of approved therapies out there, PCSK9-targeting and otherwise. But the universe of available therapies varies pretty wildly across geographies, not just an approval is of actual availability of patients, given reimbursement, et cetera, and real-life barriers. So how do you think about the strategy between pursuing a study focused in areas where patients don't really have access to approved therapies versus a study an add-on with approved therapies to allow you to access the U.S. and Western European market with more real world relevant data? Like how do you balance those two? Would you do two CVOTs, would you do two HeFH studies, is there someone to capture the two in one larger multi-arm study? Help me think about how you strategize and think about the likely outcomes for that path forward in that indication.

[Christopher Anzalone:]

Yes. Again, this will be unbiased fine answer to you, and I apologize. But until we start to have these interactions with the regulators, it's hard for us to know what -- it's hard for us to give you a good answer on that. Again, keep in mind that we're still -- we still finished that study yet. We wanted to tell the Street as quickly as we could, where we think we can apply these two drugs. I think we've done that, but we're not yet ready to talk about how we would roll this out, where we’d roll this out, what sorts of studies would support these kind of these of populations until we start to have those interactions.

[Operator:]

And I am showing no further questions. I would now like to turn the call back over to Chris Anzalone for closing remarks.

[Christopher Anzalone:]

Thanks, everyone, for joining us today. I hope everyone had a pleasant Thanksgiving holiday and have a nice larger holiday season. I apologize for the technical difficulties mid-call today, but we will talk to you soon.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.