Dicerna Pharmaceuticals, Inc.
Q1 2021 Earnings Call Transcript

Published: 8 May 2021

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Dicerna Pharmaceuticals First Quarter 2021 Earnings Conference Call. As a reminder, this conference call is being recorded at the company's request. I will now turn the call over to your host, Will Grammig of Stern IR. Please go ahead.

[Will Grammig:]

Thank you, operator. Good afternoon, everyone, and thank you for joining us to review Dicerna's first quarter 2021 financial results and operational highlights. For anyone who hasn't yet had a chance to review our results we issued a press release after the close of trading today, which is available under the investors and media tab on our website at dicerna.com. You may also listen to this conference call via webcast on our website, which will be archived beginning approximately two hours after this call is completed.

[Doug Pagan:]

Thank you. Good afternoon, everyone, and thank you for joining us. Dicerna entered 2021 with momentum and the financial strength to continue to build on that momentum. There are currently four Dicerna GalXC molecules in clinical development, nedosiran for all known types of primary hyperoxaluria or PH, for alpha-1 antitrypsin deficiency associated liver disease, RG6346 for chronic HBV with Roche, and an anG PTL three targeted program under our livid collaboration. The clinical programs will grow to six in the coming months, with our DCR-AUD alcohol use disorder program and another Lilly cardiometabolic program targeting LPA that we anticipate to enter the clinic shortly. Beyond those 6, there are currently five more galaxy molecules with declared clinical candidates in preclinical development, which includes a new development program in 2021 under our Novo collaboration.

[Shreeram Aradhye:]

Thank you very much, Doug, and good afternoon, everyone. As Doug mentioned, we continue to make great progress across our clinical development programs and as of now, we have 10 clinical trials under way or expected to begin in the near term, evaluating our four pipeline candidates. Nedosiran for primary hyperoxaluria, for alpha-1 antitrypsin associated liver disease, RG6346 for chronic hepatitis B viral infection with Roche and DCR-AUD for alcohol use disorder. Let me begin with an update on nedosiran, our most advanced program, which is in development for the treatment of primary hyperoxaluria. Primary hyperoxaluria or PH is a family of ultra-rare genetic disorders causing hepatic oxalate overproduction that can result in life-threatening kidney damage as well as damage to other organs. The burden and impact of disease continue to become clearer in PH2 and PH3 as newer data emerge demonstrating the need for a treatment that can address all known PH subtypes. We are developing our Galaxy RNAi product candidate, nedosiran for the treatment of all of the known subtypes, PH1, PH2 and PH3. There are currently no therapeutic options available that treat all three known forms of PH. Having completed enrollment, despite the ongoing pandemic surge late last year, I am pleased to say that PHYOX2 to our six month double-blind, randomized, placebo-controlled pivotal trial in patients with PH1 or PH2 who are older than six years of age is nearing completion with the last patient last visit expected to take place this quarter. As a reminder, the primary endpoint of this six month study is the percent change from baseline in urinary oxalate based on the area under the curve of 24-hour urinary oxalate excretion between days 90 and 180. We anticipate announcing top line data midyear as we also prepare for an NDA submission based on this study. In addition to PHYOX2, we continue to enroll our PHYOX4 single dose trial of nedosiran in patients with PH3, although enrollment has been slower-than-expected due to the current COVID environment. This study is designed to evaluate safety, tolerability and PK/PD of nedosiran in patients with PH3 with the additional objective to evaluate reduction in urinary oxalate as a secondary endpoint for efficacy. Our plan is to include data from this trial in our NDA submission to support a potential approval in PH3. Our expectation is to have top line data from PHYOX4 in the third quarter setting us up for a submission of the nedosiran NDA in the fourth quarter of this year.

[Doug Pagan:]

Thank you, Sri. I'd like to briefly walk through the key financial results for the first quarter 2021 and direct you to our press release outlining these results and our Form 10-Q, both issued after close today. Net loss for the first quarter 2021 was $30 million or $0.39 per share compared to $22.5 million or $0.31 per share for the same period last year. Revenue for the first quarter 2021 totaled $47.6 million compared to $34 million in the same period last year. The year-over-year increase in revenue was primarily attributable to an increase in services performed under the Roche, Alexion and Novo collaboration agreement. As of March 31, 2021, we had approximately $138 million of current deferred revenue, which we expect to be recognized over the next 12 months. And approximately $318.3 million of noncurrent deferred revenue expected to be recognized over the following several years. R&D expense for the first quarter totaled $56 million compared to $43.2 million in the same period last year. The year-over-year increase was primarily driven by an increase in employee-related expenses as a result of higher R&D head count necessary to support our expanding pipeline and collaboration agreements as well as development costs associated with the Nedosiran Clinical Development program. G&A expense for the first quarter 2021 totaled $20.7 million compared to $16 million in the same period last year. The year-over-year increase was primarily driven by employee-related expense as we increased head count to support our growing operations as well as increased professional services. We expect our operating expenses to increase in the coming quarters as we continue to grow head count to accommodate additional R&D activity and launch readiness as well as from higher external spend associated with increased activities in our pipeline. During the first quarter of 2021, we received $32.9 million in milestone and reimbursement payments from our collaboration partners and continue to guide to receiving over $83 million for the full year 2021. These payments represent an important source of proceeds and demonstrate the value these collaboration programs should continue to generate as they mature. As of March 31, 2021, we had $544.9 million in cash, cash equivalents and held-to-maturity investments compared to $568.8 million as of December 31, 2020. In early April, we announced the sale of our -- royalty interest to royalty pharma for an upfront amount of $180 million, with the potential to receive up to an additional $60 million, contingent on sales based milestones. This non-dilutive transaction extends our cash runway into 2024. This transaction will begin to be recognized in our financial statements during Q2. We also anticipate signing an OUS commercialization partnership for Nedosiran this year. Our goal has been to maintain a strong balance sheet through the planned NDA submission for Nedosiran in the fourth quarter and potential 2022 commercial launch. That concludes my review of the financials. I would now like to open the call for questions. Operator?

[Operator:]

First question comes from the line of Jonathan Miller from Evercore.

[Jonathan Miller:]

Congrats on all the progress. It seems like you've done a lot of work this year, and there's a lot of stuff coming to the clinic. I'd like to start on PH since that's the most near-term stuff. I guess, can you talk a little bit more about your choice to delay filing to wait for the PH type three data versus going forward with PH type one and two and then moving on with an sNDA when PH type three is ready. And secondly, now that you've had some time enrolling PH three patients. Can you give any more color on that market, how readily identifiable those patients are, how many are seeking treatment as we start to think about PH type three becoming a commercial opportunity? Secondly, what could we expect from the initial data from A1AT releases? I know its healthy volunteers, and I assume we'll see silencing data but is there any other meaningful information we can get from safety or details of loan surveillance that is going to be important in evaluating those initial releases.

[Doug Fambrough:]

I do put a lot on the plate there, but we'll bang through it. Sheri will talk about our filing strategy, and then Rob Ciappenelli will chime in on the PH three market, then we'll turn to an A1AT. Sri?

[Shreeram Aradhye:]

So John, as you know the primary value proposition for nedosiran that we see is the fact that we have the potential to treat all three types of PH. That's been our incoming strategy. We've had agreement on PH1 and two with the FDA with there's still some conversations going on. But we believe that the delay that we are seeing in enrollment is not of a degree that warrants are wanting to split the fire. We think that we expect the enrollment to complete imminently. And with that, we are able to stay on track for our plan, which is an integrated file that includes data on all three types of patients with the goal to get approval for PH1 and 2. And pending the data for PH3. But so at this point, we're staying on track with our original plan.

[Will Grammig:]

And John, I appreciate the question. In terms of the PH2 market, I want to start with we're starting to see some additional data being published through offer around the --. So, this is where we're starting to get into what could be the market here. And we're seeing that PH3 patients are suffering from current kidney stones and impaired renal function. We're starting to quantify that. And what we've heard from our scientific advisors is that there are a group of these patients that are demonstrating symptoms. How many? I think we're still being very conservative in our estimates. And in terms of what we're looking at right now, we're thinking that based on what we know today. But frankly, even over the last two quarters, it keeps changing, about 20% of those patients may be demonstrating symptoms. We certainly will need to have them diagnosed. They will need to have a genetic test to confirm. They have and we're continuing to size up the market that way.

[Doug Fambrough:]

Alright. Sri, do you want to talk about the A1T1 data?

[Shreeram Aradhye:]

Yes. John went so fast, I missed the question.

[Doug Fambrough:]

He was asking about what to expect in the initial release obviously, we'll talk top line on the suppression of the protein in this healthy volunteer trial. Do you think we'll learn anything from safety?

[Shreeram Aradhye:]

We will provide information, John, on the overall safety profile of we have been monitoring safety, and we will report the safety and tolerability of the data up to that point. And I think what you'll see is the data we have that gave us the confidence to proceed with our plans for Phase 2 having selected a dose and a dosing regimen to move forward. And at top line data, you will see some parts of it and then later in the year, the more complete information. Does that answer your question?

[Doug Fambrough:]

Certainly, we would not expect to see declines in lung function in a healthy volunteer population.

[Operator:]

Next one on the queue is Mani Foroohar from SVB Leerink.

[Unidentified Analyst:]

This is Rick on the call for Mani. Congrats on all the progress. And just two questions from us. So, first, looking at the upcoming initiation to the PHYOX7 and PHYOX28 trials. I was just hoping to get a sense of how large of a proportion of the total PH market opportunity is made up by patients with end-stage renal disease and also chiding ending six years old based on any market research that the company may have performed. And second, I was just hoping to get a little bit more color on when we may expect to see some of the initial clinical data from the leading partner programs? And in what sort of a time frame we could expect to see the first data from ANGPTL3 or LPA programs?

[Doug Fambrough:]

Rick, I'm not sure we've got a lot for you on these questions. I mean with respect to the patients under six and patients in ESRD. Most PH patients do live quite a long line, if not a full healthy human life span. And we do see a lot of patients expected across the age spectrum. So, this is not a young pediatric dominated indication. And once on ESRD you obviously have some patients who are closer to the end of their lines, and some patients who then proceed to liver transplant. At which point, they would no longer frankly no longer have meaningful pH because it's deliver the source of the oxalate. I'm not sure we have any specific numbers to quantify those.

[Will Grammig:]

Jon, let me take a little bit of a crack at it. And Rick, what we're trying to do is segment out the market. I think we've talked on previous calls about how thin the data is across the registries for PH1, two and 3. And Doug spot on. We're seeing PH patients demonstrate and demonstrate their disease and be symptomatic. Across all the tranches. Frankly, the easiest ones to find are the infants. But what we frankly is seeing in the PHYOX studies in -- patients we have, as you would expect, in any ultra-rare disease, a number of silent sufferers out there. And we're still really trying to pinpoint down the different segmentations with each of the three new subtypes at this time.

[Doug Fambrough:]

With respect to your second question on timing of clinical trial data from partners and specifically the Lilly -- and LTA. We currently don't know the timing or the data release and clearly, we will share that when we do understand it.

[Operator:]

The next question comes from the line of Madhu Kumar from Goldman Sachs.

[Unidentified Analyst:]

Rob on here for Madhu. Congrats on all the progress. I just have two quick questions. First, what do you think are the key metrics by which nedosiran can differentiate from approved RNAi drugs in PH1? And then additionally, what have you learned from peer alpha on any trips and RNAi drugs about clinical endpoints to examine for Dicerna and in the now initiated Phase 2 trial.

[Doug Fambrough:]

Well, I'll take a crack at your first one, and then Sri can address the -- endpoints question. Clearly, key differentiation for nedosiran from the lumasiran molecule is our ability to dose, we hope, all the PH types, PH type 1, type two and type 3. As you're well aware, PH type two and type three are not addressed by --. With NPH1, where there is patient overlap. We are optimistic based on the study PHYOX3 open-label study, which has the same dosing regimen for PHYOX2 pivotal trial. Based on that PHYOX3 data, we're optimistic that we may report a higher level of normalization of oxalate levels, which we view as the most important metric in looking at the disease. It is important to note that if oxalate is in the normal zone, then you have effectively normalized the disease state fourth patient. And even disease management activities, you have the potential to stop doing those with elevated levels of oxalate, don't think that's something that's going to occur. So, the larger the fraction of patients who achieve a stable normalization level, I think, is going to be viewed as a differentiating factor, and we're optimistic that we may achieve that. We'll have to see what the PHYOX2 data is. Related to that is the average play level achieved by patients, similarly, more reduction, the, better, right? So, the absolute level achieved in the percent normalization, we think, is very important. Beyond that, we have received a lot of positive feedback about the regimen of our product and its presentation as a prefilled syringe for self-administration. This is a lifetime chronic disorder. And that sets up an extremely convenient, no healthcare practitioner acquired, easy to remember dosing regimen with a small volume small needle self-administration subcutaneous injection. That we believe may emerge as a preferred format for in this disease for dosing and RNAi therapy. So, there are a number of differentiation channels that are possible. And in the case of the dosing format, that is we're confident we're on track to launch with those three folks origins.

[Will Grammig:]

So the therapeutic hypothesis for disulfiram, as you know, is that by reducing -- by knocking down the expression of the gene in the liver, you reduce the abnormal protein in the liver that allows the liver to regenerate. So, our Phase 2 study is designed one, to confirm that we are able to knock down the liver protein, which we fully expect to do based on the mechanism of action. We then expect to see that, that has resulted even a decrease in the abnormal in the level of abnormal ad in the liver. We have histological endpoints based on biopsies, so serial biopsies done with a cohort, both a six month and a 12-month duration in our Phase 2 study. That will evaluate improvements in histology, where we will be looking for reductions in globules as well as disease activity as well as looking at fibrosis. We have complemented that with the use of imaging studies that will allow us to assess home liver, if you will, behavior for the lack of a better word, in terms of stiffness using or and combine that with soluble biomarkers. To that end, the recent press release from Arrowhead based on five patients worth of data, demonstrating some improvements in fibrosis and consistent changes in many of these markers is actually a very encouraging sign. Yes, it's small numbers of patients, its own data, but at 12 months seeing some changes in the app although in the absence of the placebo control, gives us encouragement that our plans are well thought through, and we are planning on collecting all of that information in the Phase 2 study to then inform us for our regulatory interactions to decide what will be the basis of approval in a Phase 3 study in an indication where the disease is rare enough where traditional liver outcomes in the long-term are going to be difficult to follow. So, that so I think I'm very encouraged by the recent data. They're quite compatible with the plans we have made. We are excited that we have designed a study that has two cohorts looking at six and 12 months of treatment. We've included a population that covers F2 through F4. So, now the focus is on getting it going.

[Operator:]

Next question comes from the line of Stephen Willey from Stifel.

[Unidentified Analyst:]

This is Bonnie on for Steve. For PH3, is there any color that you can provide on how you plan to find these PH3 patients, especially since they're -- as you describe them as silent sufferers? And also, is there any overlap between the PH3 diagnosing physicians and the ones that also diagnose or PH1 to patients?

[Rob Ciappenelli:]

Yes, Bonnie, it's Rob. Thanks for the question. And related to the PH3 marketing, where are these patients. So, one of the key aspects, both from a healthcare professional side and from a patient standpoint that would be education. And you can start to see some of that already on our website and working with the patient as we see the split as. So, awareness of the disease and the symptomatology, key aspects that we have to get out into the marketplace around. If you have frequent stone, you really need to talk to your doctor about what may be going on. Those types of context needs to really continue to get embedded into the marketplace in terms of education. Also, in terms of appropriate and differential diagnosis, the typical PH station three to five year patient journey of speaking a differential diagnosis. And we've got two really good tools right at our fingertip, urinary oxalate testing and genetic testing. Dicerna will have a program to help care professionals differentially diagnose patients. And I think having access to the company's sponsor genetic test is yet another way to take a barrier off the table, so that physician can be informed. And the panel that we're designing will be a panel that not just looks at PH, but gives the physician information that goes beyond PH because, frankly, every patient that these positions are seeing it isn't necessarily a PH basin in part of what we're trying to do is help these patients get to a differential diagnose.

[Doug Fambrough:]

In the physician population, the physician group is the same one.

[RobCiappenelli:]

Yes.

[Doug Fambrough:]

So, the same groups of urologists and the projects we would.

[Unidentified Analyst:]

And my last question is, I was wondering what are your thoughts regarding Alnylam's recent -- data? And what do you believe this means for lumasiran?

[Doug Fambrough:]

I think you're referring to the nephrocalcinosis data, Bonnie. And so we were encouraged to see the data. Another example of what the potential impact of durable reductions in -- over time can achieve. Now for cosmesis is measured on -- we are looking at it, too. Our program is initially focused on demonstrating the durable and meaningful normalization of urinary oxalate in a large proportion of subjects. But we see the calcinosis information as, again, emerging everyone in our case, we are measuring it in our PHYOX2 program as well as our for the studies. It will take time to have that data. But for me, it's, again, for the validation that is even hyperoxaluria lowering action rate loads and reducing urinary oxalate is a good start.

[Operator:]

Next question comes from the line of Yaron Werber from Cowen.

[Unidentified Analyst:]

Congrats team. This is Brendan on for your Cowen. First, I know you touched on milestone payments, but can you just confirm one more time what you expect maybe in terms of cadence, which milestones you think going to hit maybe the rest of this year and even next year, if you can? And then just really quickly, as you're looking ahead to new programs percent of CNS, maybe kind of give us a sense how you're prioritizing different targets that you think are especially amenable to RNAi versus maybe other modalities? And if you think you'd look to partner that program for development?

[Doug Fambrough:]

Doug Pagan, is going to take them off the question.

[Doug Pagan:]

Thanks for the question, Brendan. Yes. So, the milestones, what we've laid out is starting last year at the end of the quarter, we laid out a five quarter $100 million paid. We recognized 17 in Q4 and now not recognized but received and now 32.9% this quarter. So, the remaining amount there, remaining $50 million or so will come in unevenly milestone payments range from small reimbursements, two large milestones and $10 million, but they will come in over the next two quarters relatively evenly. We haven't forecast or given guidance on next year because some of these milestones are dependent on the ones preceding them. So, we'll look to give more guidance as we get toward the end of this year.

[Doug Fambrough:]

Thanks, Doug. With respect to the target prioritization question, it's such an interesting area. I mean, specifically for the CNS, as you know, we have a collaboration with Lilly, and it has been a close collaboration in the neurodegeneration and pain space, there is potential, which I think you alluded to, for us to do certain orphan indications on our own. There is a dialogue with Lilly with respect to some orphan indications. I would note the s is pretty crowded space where there's been a number of companies focusing with a number of different modalities. And as we evaluate more broadly indications to go after with the Galaxy plus technology, we're not just thinking about CNS. I think among the set, we're pretty deep in the CNS is a minority. We expect to be advancing multiple programs proprietary programs, not necessarily orphan out of GalXC plus internally. And there may be a neuro program among them, that there will be non-euro as well. Each indication is its own little universe of detail and fact. So, it's hard to make general statements about what makes an RNAi indication what makes RNAi preferable in general, relative to others, but other modalities. But in some cases, it has to do with the fact that the target is not very druggable. And other cases, it has to do with the long duration of effect in area under the curve or the difficulty of multiple administration, which we avoid with a long effect with RNAi. So, there are a series of reasons why RNAi would be preferable. And there are different, if you're thinking about, which you use CRISPR against this target compared to which use a small molecule against the target. So, I'm not sure there's a general answer there. However, we do think about that set of potential competitors for different technologies as part of our review of an indication. And there are a bunch of other things that go in there, the strength of the therapeutic hypothesis, the predictability, have the animal models, the difficulty and length of the clinical trial program including endpoint selection and things like that. So, it's really it's a three dimensional chest cane choosing these indications, and we're trying to be very careful about it, but it's hard to describe general rules.

[Operator:]

Next question comes from the line of Luca Issi from RBC Capital.

[Luca Issi:]

Maybe the first one on I think we've seen lumasiran actually, it's off a pretty good commercial start here, particularly ex U.S. So, wondering if that impacts in any sort of form of shape our ongoing dialogue with our potential partner here and maybe dig your picture, how should we think about time lines for potential partnerships ex U.S. for nedosiran? And then on PH3, if I recall it correctly, PHYOX4 is enrolling just six patients, I think, total, including placebo. So, can you just remind us what gives you confidence that such a small data set would be sufficient to get a label that actually includes PH3 as well?

[Doug Fambrough:]

Rob, do you want to address the lumasiran launch?

[RobCiappenelli:]

Sure. Thanks, Doug. Thanks, Luca, for the question. In terms of lumiere and any inquiries from our partners. And the bottom line has been our OUS conversations has proceeded quite nicely with our expectations. And there are from our discussions with partners, it's been really interesting. They're looking at the whole market, not just the PH1 market. And what they see is high unmet need, some promising results as we talk from the -- data. But back to what I was talking earlier that you've got a high burden of disease in PH patients in emerging further than disease in PH three patients and the partners that we're talking about, understand that. And they see the potential with the nedosiran and PHYOX package and being able to bring that package forward, not only in the EU, Asia and other markets. And they just see a lot of potential upside here for the program. And we're really optimistic in wrapping up those conversations and getting a deal done.

[Shreeram Aradhye:]

Luca, this is Sri. As far as the use of the PHYOX4 data toward a potential PH3 submission and approval, I think behind your question is the indication. Of course, we are more confident. We have agreement on PH1 and P H2. The way we think about PH3 is as follows

[Operator:]

Next one on the queue is Yigal Nochomovitz from Citigroup.

[Yigal Nochomovitz:]

First, on PHYOX7, am I correct that you're going to be measuring EGFR? And would you expect the doser to have an impact on EGFR slope in these patients given the reduction in oxalate and perhaps even potential to delay dialysis? And then the second question, a follow-up on the previous one. Just wondering, what are you hoping to see in the Phase 2 data for alpha-1 antitrypsin deficiency that will meet your objectives for the target product profile for Velcera? And then finally, Doug, I think you mentioned at one point in your prepared remarks that you becoming a you'd be becoming a bit more adventurous with respect to future indications for the GalXC program platform. So, just wondering if you could provide any preview of where you may go beyond the latest new program in alcohol use disorder.

[Doug Fambrough:]

Sure. So, Sri will start off on the PHYOX7.

[Shreeram Aradhye:]

Yes. So, PHYOX7 is actually the study in which we will evaluate the ability of nedosiran to reduce hepatic oxalate production, in people who have a degree of insufficiency, including being on dialysis that prevents urinary oxalate from being the right marker, so we will use plasma oxalate reductions as evidence of efficacy. So, PHYOX7 is about demonstrating the efficacy of nedosiran in a population that we have not yet studied. So, it's not a population in which we will then be evaluating whether progression of GFR reductions in onset of new dialysis or things like that, it's actually evaluating effects on oxalate. So, that was one. Your second question was about and what we expect to see in Phase 2. And I will repeat my prior answer, which is that the goals of the Phase 2 study are to demonstrate the ability of the selected dosing regimen to reduce abnormal A1AT levels in the liver. The primary endpoint is actually around the serum because that's an asset that's available. We want to measure an A1AT deliver and show that we can reduce it. We're going to do the serial biopsies that will evaluate histology to see what we are doing to the abnormal globules that accumulate and deliver and other markers of injury. We will be evaluating fibrosis. We will combine that with imaging measures of the stickiness, which are an indicator of fibrosis, i.e., fibroscan and MR Elastography. And we will add some soluble biomarkers that are also indicative of progressive liver injury in addition. But it's a combination of a number of those things all moving in the right direction. That will be the basis of the data. That will be the data that we'll collect in Phase 2 and then convert that into a proposal for a meaningful endpoint in our Phase 3 study as the basis of approval in discussions with the regulators.

[Doug Fambrough:]

We have the expectation of observing improvement across all of those parameters. But we're not going to get quantitative about what we're looking for. Yes. And can you repeat the third question?

[Yigal Nochomovitz:]

Sure, Doug. I think you'd mentioned at one point that you were going to become a --.

[DougFambrough:]

Yes, of course. There are GalXC Plus goes a lot of late. And that raises a lot of possibilities for what we could do. RNAi is not inherently an orphan disease or metabolic disease technology, ultimately perhaps will impact every therapeutic area with possible exception of antibacterials because doesn't, it doesn't work in bacteria. And there are certain cases where there's famous undruggable targets that are really intriguing. That sort of wouldn't meet the criteria of strong genetic association and the traditional association study sense? And obviously, you have I talking about genetic diseases in that case. I didn't really mean something that I could go into a lot more detail on. There's going to be diversity in our indications. We're not going for commercial synergy. We're going for products that, in each case, would support doing a commercial launch, even if you didn't have a commercial operation in that area. And I really, I think, was just trying to express that sense of diversity that's likely to come out.

[Operator:]

So, next question comes from the line of Mayank Mamtani from B. Riley Securities.

[Mayank Mamtani:]

Congrats on so much going on and still having. So, maybe just three for me. Just quickly on PHYOX8, the open-label pediatric. Any color on the timing there? I know now it's starting next quarter, but are you thinking of this could also sneak into the NDA initial.

[Doug Fambrough:]

No. So, I don't expect PHYOX data sneaking to the NDA. That will have to be a supplemental.

[Mayank Mamtani:]

Okay. Got it. And then, yes, most of my questions are just follow-up clarification. And then on the AAT side, again, I appreciate the extensive color you've already provided. But I was just curious that on the dose levels, if you could comment that you've tested, and you've obviously looked at it against the Alnylam molecule. Just trying to understand how much knockdown and how much headroom do that knockdown you need to have now that you know, at least from the arrowhead data that the liver healing process is happening pretty quickly. So, just curious, are you -- do you feel comfortable with the doses that you've looked at in your Phase 1 and sort of have a good answer there?

[Dou Fambrough:]

We've done doses in our Phase 1 healthy volunteer study. They're very similar to doses that we explore to identical, right? And HBV and then the dose around before that we're talking about another indication here where you're going to have long-term chronic dosing. And you have dose additivity in RNAi. So, there's I know that the buy side tends to focus a lot on, OK, when this group got 85%, this group got 90%, maybe that one's better. Inside the company, it doesn't matter. You're going to be doing multiple doses, it's going to go down to its max rapidly after two doses. So, I think it's there's maybe a little too much focus on that. When we were evaluating the Dicerna molecule versus the Alnylam molecule, we are also considering the ease of manufacture of the molecules. We're considering the type of preclinical toxicology studies that were done and its implication for sequencing of later studies of course, the outcome, the detailed outcome of those studies. So, there are a number of things that played into it. The ability to generate sufficient knockdown, frankly, is very easy in a multi-dose context. And so that wasn't even the primary. As I've said in the past, both companies are very good at making these molecules. And I think either one could have been selected and successfully developed, it only makes sense to do one based on the totality of the data, we chose our on.

[Mayank Mamtani:]

Got it. And Doug, on the programs, you said majority are non CNS. I guess my question on this, to be more specific on this carport. Like when you look at indications, do you think of who might be ahead from an antisense, less inferior -- kind of more inferior platform standpoint? Or are you looking to sort of tread new waters like you did with AUD? Is that like how are you determining what cell types? And what indications you're going to go for?

[DougFambrough:]

I would like to have some things that are first-in-class in what we're doing. There are context where an antisense ahead may be really problematic in there a context where we think it may not be problematic. But the competitive environment around an indication is an important element. And it matters a lot if you're competitive in a large market versus competitive in an ultra-orphan market. We would you want to be straight up head-to-head and an ultra-orphan that's already being addressed fairly well with a similar modality, it's probably not a good place to be.

[Operator:]

Next question comes from the line of Ed Arce from H.C. Wainwright.

[Unidentified Analyst:]

This is Thomas Yip asking a couple of questions for Ed. Congratulations on a lot of progress with multiple programs -- partner. Perhaps this question for the Phase 2 Roche collaboration with 6346 in HBV. As we understand the comm end point of service engine reduction, what would be threshold that we can look at as to be considered as a success for the 6346?

[Doug Fambrough:]

Well, in the Phase 2 study, the question being asked is really, does it look like you can achieve a functional cure with these combinations. And that means the s antigen would go to undetectable and remain so. Until 24 weeks, which would be the final assessment point. So, you're really looking for zero.

[Unidentified Analyst:]

Okay. And that perhaps back to and as you outlined, we are approaching closer to NDA filing and perhaps approval within the next 12-months. And you specifically mentioning targeting neurologies and nephrologists. Any thoughts on what U.S. market launch would look like?

[Rob Ciappenelli:]

Yes. It's Rob. I appreciate the question. In terms of our commercial activities, you're responding, we're pacing them to the NDA filing and targeting and the FDA approval, a couple of key components. The launch planning is clearly under way at this point. I'm really pleased, and Doug mentioned it, we've hired the Vice President of Sales, which is the last member of my leadership team. So, we have the full complement assumptions represented across commercial at this point in time. And as you can imagine, all the key areas that you'd be expecting at this point in time are under development, such as branding, message testing, pricing and contracting, establishing patient services, acumen and skills. And last but not least, now starting to design inside the sales force. Our expectation is still go-to-market with a full and comprehensive promotional plan package and we'll have all the functions in place to do that in the United States.\

[Unidentified Analyst:]

Okay. Got it, insight. Perhaps one final short one for Lilly's, it's anticipated in for 469 in second quarter. Are there any milestones associated with that filing?

[RobCiappenelli:]

Yes.

[Operator:]

Next question comes from the line of Robyn Karnauskas from Truist.

[Robyn Karnauskas:]

So one quick one. When you thought about designing your Phase 2 trial for A1AT, just a couple of questions I had for you. I know there's some questions around biopsies having different levels of fibrosis improvement, depending on where you biopsy in the liver. So, how what kind of things did you take away from the arrowhead data as far as like any potential modulations of how you're going to be running the Phase 2 trial? And what other additional parameters, what do you think are the most important parameters or additional parameters that maybe you haven't spoken about yet, that will be important to determining how doctors view the A1AT data from the clinician side? I was just worried about the biopsies having variable results.

[DougFambrough:]

Well, we designed the study, keeping firstly a placebo-controlled Phase 2 study. So, that's the first thing. So, we haven't included the control that allows us to make meaningful interpretations of the information that we will find. That's number one. Number two, knowing that the duration of effect in which you may see improvements in fibrosis until the iron data became available and knowing that, that's early small numbers, but still at 12-months, we have designed a cohort at six months and 12-months, right? So, we are getting a good sense for when are we seeing -- what is the trajectory of the histological improvements that we expect to see. Traditionally, biopsies do carry the risk that you described, which is given that you a very small portion of the liver, around 70,000 of the entire liver volume, things do get difficult to interpret. But I think that the goal was to make sure that we have had a control arm, we are making sure that we are thinking carefully about standardizing the way we're going to look at the biopsy so central pathologists, having predefined criteria for how the tissue will be evaluated. So, there's a series of steps that are taken in this context that there are a lot of learnings from the national nature on how you need to do this to get it right. And we'll certainly be thinking about it. But in order to overall interpret the information, we are complementing it with the imaging approaches of fibroscan and MR Elastography, to create a holistic picture, for lack of a better word of how we are impacting the disease. The foundation of it all is essentially finessing the gene to reduce that normal protein and allowing the liver to start healing. And we are encouraged to see from the early -- data that Mike was previously described in --. There seems to be a possibility that this happens in a liver disease.

[Operator:]

Next one on the line is Keay Nakae from Chardan.

[Keay Nakae:]

Just a couple of quick accounting questions. Doug, the upfront $180 million for the royalty. How are you recognizing that?

[Doug Fambrough:]

So, we'll put that on the balance sheet, albeit a deferred item in the liability section, and then we will recognize it proportionate for the current period royalties earned. Over the proportion over the denominator of the lifetime royalties. So, it will be sort of a pro rata recognition over time for the life of the patent.

[Keay Nakae:]

And the sales milestones, will you recognize those in whole once reached?

[DougFambrough:]

The contingent sales milestones for the royalty, they would be treated similarly to our others in that they would be added into the total transaction price, and there would be sort of a catch-up for the proportion recognized over time. So, they wouldn't be a single onetime recognition.

[Operator:]

Next one on the line is Jonathan Miller from Evercore.

[Jonathan Miller:]

One more thing that I wanted to follow-up on from another analyst's question. When you think about ex U.S. PH partners, what are you looking for and the ideal partner there? And is there anything in particular on a deal structure that you're most attracted to? How would you like to what sort of a partnership would you like to Form Act?

[Doug Fambrough:]

Yes. I can speak generally about this. We're very deep in the process at this point in time. We are looking for a partner that we think brings excellent rare disease capabilities and a strong history with the call point as a desirable point as well. In terms of structure, this is not a transaction where we're trying to optimize an upfront payment. This is more something where we're looking for a risk-sharing partner where we're also going to share the upside of successful commercialization in Europe. We're fortunate to be reasonably well funded from a balance sheet perspective and have a pretty good visibility on continued cash inflows through collaboration. And so it was not a case where we were it's not a case where we're trying to optimize that. What is the biggest number that we can get upfront here. But rather, what we think is our strong risk share in the collaboration. I think that's probably all I can say on structure at this point. Alright. We'll take someone back or a second place. And I think that's our last question. So, I want to thank everybody, and thank you, operator. As we head into the summer months, we're really excited to have a lot of potential announcements, including by PHYOX2 readouts, PHYOX4 readouts Phase 1 data in A1AT, patient dosing and the Phase 2 initiation on that. And in A1AT NDA filing our IND filing for DCR-AUD initiating that Phase 1 study. And of course, we are IND this year. There may be some more things that we end up announcing. Over the coming months as well. So, we'll be participating in a number of investor conferences in the coming months. So, we can keep you updated there. And also, of course, on our next call. Thanks for joining us. Have a great evening.