Q3 2023 Arrowhead Pharmaceuticals Inc Earnings Call
Okay.
Yeah.
Ladies and gentlemen, and welcome to the Arrowhead Pharmaceuticals Conference call.
Throughout today's recorded presentation, all participants will be in a listen only mode.
After the presentation, there will be an opportunity to ask questions.
I'll now hand, the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead Vince.
Thank you Steven.
Good afternoon, and thank you for joining us today to discuss arrowheads results for its fiscal 2023 third quarter ended June 32023 with US today from management are president and CEO , Dr. Chris Anzalone, who will provide an overview of the quarter Dr. Javier San Martin <unk>, Our Chief Medical Officer, who will provide an update on our mid.
In later stage clinical pipeline, Dr. James Hamilton, our chief of Discovery, and translational medicine, who will provide an update on our earlier stage programs and Ken Moskovsky, Our Chief Financial Officer, who will give a review of the financials. In addition, Traci Oliver our chief our Chief Commercial Officer, and Patrick O'brien, Our Chief operating Officer and General Counsel.
We'll both be available during the Q&A portion of the call.
We began I would like to remind you that comments made during today's call contains certain forward looking statements within the within the meaning of section 27 of.
The Securities Act of 1933 and section 21 E 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.
Now I'd like to turn the call over to Christine's Maloney, President and CEO of the company Chris.
Thanks Vince.
Afternoon, everyone and thank you for joining us today.
Our history is built on promise sometime.
Sometimes its promise can be stunning and carried with it the possibility of saving the lives something drastically improving life brothers.
<unk> mission is to bring important new medicines to the people, who need them and save lives and alleviate suffering and while we can while there.
This is our guiding principle and focusing on this promise has given us a purpose and the motivation to I believe innovate at industry, leading levels and operate at speeds not seen before it is not the only important focus for us in other words risk.
Our industry swings in a sea of risk we recognize that in order to succeed we need to appreciate the great promise in front of us, but focus on all the risks between the idea and the medicine ultimately given to a patient.
We are ideal assets, but we are not naive one of our most important job is to mitigate and decrease risk where we can we.
We have made great progress on this broad fronts since our last call and this is how I would like to frame our discussion today.
To begin with pulmonary.
We believe we have taken an important step towards further derisking the entire pulmonary franchise with the first chronic GOP toxicology results starting to come in for.
For Aero LNP, seven, but no way al or no observed adverse effect level was the highest dose we tested in our chronic rat study.
In other words, even at the highest dose tested we are not seeing anything that is deemed adverse.
The highest dose represents what we believe would be substantially greater exposure and would be applied to humans.
We're waiting for final wrap data from the arrow rates product GOP Tox study, but that also is looking like that will be the highest dose we tested.
We are still waiting for the nine month monkey data in both candidates, but our experience with arrow enact leads us to believe that the rack is the more sensitive species for these pulmonary tox studies. So it is very encouraging to us that the rodent studies look so positive.
This is potentially a big step forward for the platform as you may recall, we saw lung inflammation and some of the chronic GOP talks doses for <unk> in 2021.
Based on our analysis of those results. We concluded that we needed to increase the potency of our pulmonary candidates and we clearly did that with arrow MMP, seven Aero Rage, and merit and Aero Mach five AC.
We were optimistic that these improvements would translate into better chronic tox results, but of course, we couldnt know until the data came in as we are now seeing preliminary data from those studies come in we are increasingly confident the arrow MMP seven and likely Arrow rage may have substantially all.
They have substantially wider talks windows and Aero enacted and.
And I believe this represents a significant derisking event for the pulmonary franchise, we look forward to having a complete rat and monkey chronic GOP tox data for Aero Rage, and Aero MMP seven in coming months and expect to have chronic GOP tox data for <unk> next year.
Encouraging preliminary chronic GOP tox data follow prior de risking events in the pulmonary franchise over the past quarter, specifically I believe the arrow rage clinical data indicate three important things.
First the safety and Tolerability reports to date have been good and nothing surprising has emerged this is always a critical first step for a new platform and every new drug.
Second the activity data, we have we have seen thus far have been impressive and showed continued dose response to the top dose level after.
After a single inhaled dose of 184 milligrams per barrel range, we saw up to 95% knockdown with a mean of 90% in that cohort.
Not only is this a high level of target gene knockdown. It was extraordinarily consistent across participants and a cohort.
Each subject had a good response this is in the same ballpark as what we now expect with optimized liver targeted programs and this is an important point.
I think it is generally accepted that orange is a reliable modality to safely reduce expression of the target gene and that when arrowhead introduces a new liver program. There is high expectations, both internally and externally that the drug candidate will reduce expression of the target protein as designed.
But each new dataset, we are approaching with its I am sorry, I am hopeful that with each new dataset.
That we are approaching this expectation in pulmonary at a giant leap forward and an important value inflection points.
Okay.
Lastly, we think the data also showed that the duration of effect with Aero rates supports a dosing interval of two months or more this is an important derisking event, because it limits accumulated drug exposure, increasing our confidence that the good safety profile seen thus far may continue during <unk> treatment. It would also be a very patient friendly dosing regimen.
De risking the pulmonary platform is important for its own sake as we have said in the past.
We see many potential drugs coming out of the franchise that could address a number of unmet medical needs and we appear to be the only company able to effectively use R&D in the lungs.
Pulmonary franchise alone could be the basis of a large company.
But it's also important as an example of how we see how we seek to de risk our broader business.
From a perspective of one or two drug company is a bet not a business from the beginning we have sought to create a broadly diversified business to increase the number of patients we serve but also importantly, as a hedge against the unpredictability of biology.
In our industry the risk of failure is substantial and our mitigation strategy has been part innovation in part brute force. We have sought to create a technological platform that works reliably and then move as fast as we can do create as many well thought out drug candidates as possible.
We built and continue to refine and expand the reach of our trim platform is the modular structurally simple system to one address multiple cell types, which allows our therapies to go where disease is in a way that other RNA companies do not.
To move rapidly from idea to the clinic and then efficiently through mid and late stage clinical studies.
And three provide platform continuity and competence, which gives us an enhanced expectation of success for new candidates that we believe far exceeds that of biotech broadly lessen.
Lessons learned developing each candidate and importance of the development of future candidates. So our expectation of success grows stronger over time, we believe this translates to the potential for more candidates to become approved therapies than industry average.
Our 2020 five initiative, followed this platform development and represents to some extent the brute force component of our broader risk mitigation strategy.
We have platforms that appear to work well. So we have a responsibility to our patients and stakeholders to build as many new drugs as fast as we can.
Our goal to have 20 clinical stage or marketed products by the year 2025.
Somewhat paradoxically building such a large pipeline as part of our strategy.
Our strategy to mitigate balance sheet risk.
We're in a very expensive business and one could argue that the best way to ensure we are properly capitalized to bring drugs to market is to have a small focused pipeline we reject that.
Rather we believe that well thought out drug candidates with greater than industry average chances of success can always find homes and partner companies pipelines as we mentioned at our analyst day in June we have brought in nearly $1 billion in partnering capital over the past six years and have not raised equity capital for over three and a half years and fax GSK recently.
<unk> initiated a phase <unk> study of GSK for <unk> III $2 99 zero, formerly called Arrow HST in the treatment of Nash, which earned us a $30 million milestone payments and <unk>.
Additions Takeda initiated the phase III Redwood study of <unk> being developed as a potential treatment for alpha one antitrypsin deficiency liver disease, which are an arrow had a $40 million milestone payments.
We believe that partnering is a good cornerstone of a broader finance and strategy and one that our platforms are uniquely suited for because of the quality of the candidates coming out of them and the scarcity of the companies that are skilled at generating RNA based therapeutics.
Partnering strategy includes existing partnerships that are maturing and therefore lifting higher payments new potential partnerships that could combine our platforms with a partners target or set of targets and new partnerships on existing programs in our pipeline.
The latter on our last earnings call I discussed that at the time, we had paused the cta filing because of some inbound interest in partnering <unk> four we continue to explore those options. However, we decided to move forward with the Aero decks for Cta filing ourselves.
Partnering discussions can take time, and we don't ultimately know if they will translate into license agreements. We felt that it would not make sense to further delay the cta filing in the phase one study.
While partnering continues to be acquire stone of our financing model. We're certainly cognizant of the risk of over partner, we believe the best way to build a lot of value quickly is to retain some wholly owned candidates and drive toward commercialization of.
Of course, there is substantial risk with this course, but over the past quarter. We believe we have taken some off the table.
We completed enrollment in our phase III palisade study of Aero Apoc, III and patients with familial color Micronesia syndrome or Fcs.
This is an important milestone for arrowhead, because it will likely be the first candidate an indication that we will seek regulatory approval for the.
Final study visit for the last patient and is scheduled for Q2 of 2024. So we expect to start the NDA process next year.
In addition to FCS we are currently working on the phase III plans for severe hypercholesterolemia and mixed dyslipidemia.
We will be discussing with regulators this year.
Shortly after those discussions we plan to start phase III studies for those larger indications.
Our other wholly owned cardio metabolic candidates Arrow and three also had an important milestone during the quarter. We presented data at the European Atherosclerosis Society Congress, demonstrating the <unk> III achieved LDL C reductions of 44% to 48% when added to existing standard of care treatments. These results are similar to reserve.
<unk> seen in studies of an approved monoclonal antibody targeting <unk> three in patients with HR page.
These are important derisking data as we move toward one or more phase III programs, which we are currently designing.
We are actively working on go to market strategies for multiple candidates. We expect to have four drug candidates in phase III studies by the end of the year. Two of these are currently wholly owned Aero Apoc, III and Arrow and three and a third is Easter and has partnered with a 50 50 profit share in the U S. So we have retained substantial economics.
As I mentioned.
We'll have our first phase III Registrational study readout mid next year for our <unk> III, our Aero Apoc III program in FCS and expect an NDA. Soon thereafter, as we look at our pipeline, we expect additional NDA filing opportunities on a very regular basis going forward.
Moving to our earlier stage pipeline, we filed two Cta for two new programs targeting gene expression in two different tissue types.
Already mentioned aero to explore and skeletal muscle for the treatments of Fsh D and the other is aero side, one in the central nervous system for the treatment of ALS, we expect additional cta's over the next few quarters using both the CNS and skeletal muscle platforms.
Of course these are early but they represent important derisking event for potential CNS and skeletal muscle franchise.
With our advances in pulmonary.
These are also illustrative of our desire to expand the reach of our technology and decrease the overall the overall risk of our business by creating value across many different channels.
Lastly, before I hand, the call over to Javier I want to highlight the R&D day that we hosted in June during.
During that presentation, which is still available to view on our website. We gave updates and had external kols talk about some existing clinical programs in cardio metabolic and pulmonary disease.
And discuss what's next for us in CNS tissue, including potentially systemic delivery and delivery to adipose tissue. The R&D day had a lot of detail we are constantly pushing our technology forward and expanding its reach.
With that overview I'd now like to turn the call over to Dr. Javier San Martin Javier.
Thank you Kris and good afternoon, everyone.
The design planning and preparation of the late stage studies of our cardio metabolic candidates <unk> and <unk> is well underway, we're making good progress towards our goal of funding multiple end of phase two meeting with regulators this year and initiate the multiple phase III study late this year early next year.
We also intend to present final phase II data at the American Heart Association meeting in November pending abstract acceptance for multiple studies for both it'll apoc III and it'll HP.
Let's take a moment to review the various studies, we have conducted and then I will provide our current thinking around the phase III studies.
The phase III studies may look like for each clinical indication.
I will tell you with <unk>, our investigational <unk> therapeutic being developed as a treatment for patients with mixed dyslipidemia severe hypercholesterolemia Anthony at Illumina anemia syndrome.
Plus it is designed to reduce pollution of April <unk> or April <unk>, a component of triglyceride rich lipoproteins, including very low density lipoproteins or be LPL and Carlo 19th and is a key regulator of trainees Smith.
Knocking down the <unk> provision of apus you'd see that pattern.
So introduce VLDL synthesis, and assembly and enhanced breakdown of triglyceride, rich lipoproteins and better clearance of LDL and Carlo make good Raymond LPL dependent and independent pathway.
We view <unk> as having the potential to address many patients population, we variously PV solar that can lead to different clinical complications obtain attacks.
<unk> has seen the number of FCS is collected.
Similarly high levels typically over a 1000 milligrams, they're visited them and as high as 5000 media credit facility.
The highest rates of acute pancreatitis that usually requires hospitalization and can be fatal.
Patient with SCS may also experienced chronic abdominal pain and they had to adhere to very strict value with very low.
Tim you didn't.
Their quality of life.
FCS is a severe and hope to create a genetic disease that affects Kansas to a few thousand patients in the U S.
So if it were hypothetically to Daniela.
GE is connected by a marked elevation in Chile, typically over 500 milligrams per deciliter, which can lead to increased risk of acute pancreatitis as well as an increase of slightly less.
This condition is estimated to affect several million patients in the U S.
Lastly, mixed Dyslipidemia AC <unk>.
Hi, LDL cholesterol combined with Dts remnant cholesterol and low HDL, the lipid profile and major company up at least as close in February .
With a likely tenths of millions of patients in the U S. Makes this convenient who are not adequately controlled with current standard of care.
The studies that we have conducted or are planning to conduct for each population.
Yes.
For FCS we're conducting the palisade study, which is the phase III placebo controlled study to evaluate the efficacy and safety of <unk> in adults with Fcs.
This study is percent changed from baseline in <unk> at Mastec.
Study was fully enrolled in may with a total of 75 subjects distributed across Saturday night.
Nine different sites in 18 countries for wet randomized to receive 25 milligrams for.
<unk> 50 million <unk> or matching placebo.
Every three months this puts us on schedule for study completion in Q2 of 2024 data readout showed you did ask that and then NDA preparation for regulatory filings, but this eventual complete the randomized portion of Palisades are also eligible to continue in an expansion piece.
All participants will receive placebo.
For <unk>, we are conducting two phase II study in 229 patients randomized three to one to receive 10 25 or 50 million.
<unk> all placebo on day, one and week 12 patients.
Patients with FCS we're excluding from this.
The primary endpoint is essentially from basin fast IMTT at week 24.
That too was the study that enable us to begin planning and design for our phase III plan in SSD Chi patients the data strongly support advancement into phase III and we plan to present results at the American Heart Association in November .
The current phase III plan for this is Jean.
Two separate studies, which will be called <unk> and therefore, the idea behind it to studies to have first.
As to regulatory submission with the <unk> study.
Your line 12 months randomized control study of approximately 600 patients with <unk> greater than 500 milligrams per deciliter.
We believe this study plus the less safety data from our phase one and two studies will be an appropriate package for an initial filing for the <unk> indication.
The <unk> studies.
<unk> is designed to investigate the effect of Italy, principally in emergency vehicle population that have recently been.
Jeff.
Just a follow will include patients with <unk> greater than 880 milligrams per deciliter and recent history of pancreatitis.
<unk> of the double blind portion of the study will be to Es and it will be powered to detect difference in the incidence of Sun Goodnight.
This state that could enable label expansion to include the indication statement of pancreatitis risk reduction a key clinical outcome relevant to patients and reimbursement authorities.
We have made a lot of progress on the planning and design of these studies and intend to have discussions with regulators this year and move forward rapidly with study initiation.
We will provide more details from the study when they begin.
In the broader mixed Dyslipidemia population and welcome to the <unk> unit Phase two study in becoming a 53 patients randomized two one to receive $10 25 or $50 million.
<unk> or placebo on day, one and at week 12.
We include an additional cohort and tissue and so we see them 50 milligrams on day, one week 24.
Primary and the primary endpoint is percent change from baseline in first MTG a week 24.
These final assessment of the changes in value slippage lipid parameters, such as LDL cholesterol and non HDL C HDL April and VLDL and other biomarkers.
To assist the Chi study results, we believe the phase II data from the newer studies strongly support.
<unk> into a phase III study and we also plan to present these results at <unk>.
Hi.
The phase II program for this population would be a cardiovascular outcome trial called Cascade.
<unk> has demonstrated positive effects on several lead your parameters that breakfast sandwich residual risk factor for that is for US is whether this is even after the LDL is well controlled.
The Cascade study with <unk> the patient population, we have tight race by the Hyatt <unk> <unk> cholesterol and low HDL all of which are effectively addressed by Italy with CBD.
The study will be designed in collaboration with an academic research organization or a Oh, we're working on all aspects of the study design include the installation of the patient population understanding that model in background event trades the potential effect size with that information will define the sample size.
And duration of exposure to be able to detect a clinically meaningful reduction in cardiovascular events.
We are finalizing an agreement with the selected <unk> to help us look the simple study.
Scheduled to engage with regulators later this year and plan to initiate the Cascade study in 2024.
Our strategy for <unk> is to progressively studied in last year alone. This study is to potentially being very high prevalence disease population that currently do not.
I think lately.
Our strategy for <unk> C is more focused on smaller well defined population.
It's being developed as a treatment for homozygous familial hypercholesterolemia or HOS age.
Potentially in the future subsets of hatred of cellular familial hypercholesterolemia or <unk>.
Phase two program for <unk> in two studies. They are just two phase II study in 204, basically with Mississippi, The EMEA and the Gateway study in 18 patients with HOS phage interim data from the Gateway study was presented have been 81 European Atherosclerosis Society.
<unk> in May of 2023.
Our study week 20 administration of 200 or 300 milligrams eight O agency on day one.
Before led to mean reductions in LDL cholesterol at 48, 1%, 44% respect.
These reductions were achieved on total continue standard of care, including <unk> <unk> <unk> hundred 90, <unk> and Harris.
These results were on par with an approval a monoclonal antibody that also targets <unk>.
<unk> has a much more convenient and patient friendly dosing regimen of one subcutaneous injection every three months versus the antibody, which requires an intravenous infusion once a month.
We're currently working on the Phase III study design and plan for Aero engine C in nature, phage and assessing potential other population for future studies.
I've spoken a bit more detail on both <unk> and <unk> in our R&D day in June at.
I'd recommend you view the art archive webcast our presentation slides on our website if you want more.
On the biology of the target 700 clinical data the rationale for what our belief in <unk> potential and more specific information about our plans for clinical development.
The other late stage program, we're working with our partner Takeda is a <unk> for the treatment of AA TV leave their disease in June update the phase II clinical data from the Sequoia study were presented that diesel Congress 2020, I don't know that presentation.
Clinical results from the phase II Sequoia study of assisting with clear and compelling.
So youll see them treatment demonstrated substantial effect on several key medical fever disease.
Okay that has taken the lead in conducting the phase III clinical study is designed to enroll 160 adult patient with F. Two F for fibrosis.
The primary endpoint of this study is to decrease some baseline of at least one stage at week 106 in patients with F to NFC fibrosis.
Okay that is doing an outstanding job, bringing global sites online further study and enrolling patients efficiency. Additionally.
Additional information on the Redwood study can be found at that rate lever studies dot com.
I will now turn the call over to vote or change timing chains.
Thank you Javier.
Our pipeline of early stage clinical candidates now includes eight programs addressing various diseases with gene expression and for tissue types, including liver lung and now muscle in CNS.
Of these eight programs most are wholly owned and in our core areas of focus.
They are in pulmonary Taro rage era marked by Basi Aero MMP seven.
Cardio metabolic arrow Pn TLA at three <unk>.
In neuromuscular Aero Dux for an Aero side, one and.
And we also have arrows three for complement mediated diseases and HCN for $5 seven partnered with Horizon <unk>.
In addition, we have many undisclosed preclinical programs that should continue to feed our pipeline for years to come.
We are increasingly looking for opportunities to focus around core areas and we are fortunate that our platform provides us with so many opportunities.
Our discovery and clinical development teams continue to be highly productive and efficient.
One main benefit of drug development based on our proprietary technology platform is that it allows us to apply learnings from prior programs to each new program.
This makes us faster more precise and I believe yields drug candidates with a higher probability of success.
The trim platform has given us that advantage for liver directed programs for a few years now.
We believe we are now in a period, where those same advantages exists for lung directed programs and we have the potential to get there over the next couple of years for muscle and CNS.
We held a very comprehensive R&D day during the quarter, So I'm not going to review all of arrowheads discovery and early development programs.
To focus on some important potentially derisking data from our Aero Rich program.
Era Rage is our RNA therapeutic candidate designed to reduce expression of the receptor for advanced application and products or rage as a potential treatment for inflammatory pulmonary diseases such as asthma.
We are currently conducting a phase one two clinical trial in normal healthy volunteers and in patients with mild to moderate asthma.
We have also recently filed an amendment to add a cohort of asthma patients with high baseline levels of fractional exhaled nitric oxide or <unk>, which is a biomarker for the degree of IL <unk> 13, driven type two inflammation in the lungs.
Let's talk briefly about what data, we generated and reported that the R&D day.
First with respect to safety and Tolerability to date, there have been no reported serious or severe adverse events no study withdraws or drug discontinuation due to adverse events and safety labs have shown no pattern of adverse changes.
There have also been no chain has also been no change in the pattern of airway immune cells and all chest X rays have been read as normal.
These encouraging results have also been generally consistent and the Aero MMP seven era marked by basi programs.
With respect to activity the results to date, especially at the highest dose level have exceeded our estimates and really represent a best case scenario for target engagement.
We are measuring soluble rage protein or <unk> and serum after multiple doses in both healthy volunteers and in patients.
And in Dallas after a single dose in healthy volunteers and after multi doses multiple doses at the top dose level.
The mean maximum reduction in <unk> at the 92 milligram dose level. After two doses on phase one and 2009 was 80% with a maximum reduction of 90% with a long duration of effect supports every other month dosing.
At the highest dose of 184 milligrams, we achieved a similar result, after just a single dose with mean <unk> reduction of up to 76% maximal reduction of 91%.
We also observed continued to his response and valve with a single inhaled dose of 184 milligrams, achieving mean reduction of 90% and maximal reduction of 95%.
We are still collecting data that we intend to report on later this year, including presentations at the European Respiratory Society International Congress in September .
We believe this is the first compelling clinical evidence of gene targets silencing in the lung using <unk>.
We also believe that these clinical results have a good chance of being predictive of clinical results other pulmonary programs, including Aramark, five AC and Aero MMP seven and additional undisclosed preclinical programs.
And lastly on Rage, what data are we generating over the coming months.
We will have the chronic monkey GOP toxicology results before the end of the year, which will be needed prior to phase III initiation.
We will be getting additional longer term follow up and multiple dose data at the highest doses in healthy volunteers and in patients later this year and into next year.
Lastly, we will be getting data from the high Fino cohorts, which is designed to assess if rates knockdown leads to an IL 13 specific anti inflammatory effect.
This study is not long enough for large enough to expect an efficacy signal, but signals of inflammatory pathway inhibition. After a short course of exposure would be a welcome result.
We expect these data in 2024.
I also wanted to provide an update on our earliest clinical candidates.
During the last quarter, we filed a cta for our first muscle CNS candidates Aero dux for an Aero side one respectively.
<unk> four is the first clinical candidate utilizing the trim platform to target disease associated genes in skeletal muscle.
<unk> four is an investigational RNA therapeutic designed to reduce expression of the gene that encodes the human double <unk>, four or <unk> protein as a potential treatment for fascia scapula, humoral muscular dystrophy or sshd.
Pending regulatory clearance, we intend to proceed with the phase one two a dose escalating study to evaluate aero dux for adult patients with Fsh D type one.
<unk> is designed to enroll up to 52 patients.
The other Cta filed during the quarter was for Aerostar, one the first therapeutic candidate designed for delivery to the CNS again, leveraging the trim platform.
Aerostar, one is designed to reduce expression of superoxide dismutase, one or <unk> and CNS as a potential treatment for patients with him a terrific lateral sclerosis or ALS caused by <unk> mutations.
Pending regulatory clearance, we intend to proceed with the phase one dose escalating study to evaluate <unk> in adult patients with ALS harboring aside one mutation, which is considered to be causative of ALS.
The study is designed to enroll up to 24 patients.
I will now turn the call over to Ken Moskovsky, Ken. Thank you James and good afternoon, everyone as.
As we reported today, our net loss for the quarter ended June 32023 was $102 9 million or <unk> 96.
Her share based on 107 million fully diluted weighted average shares outstanding.
This compares with a net loss of $72 million or <unk> 68 per share based on $105 8 million fully diluted weighted average shares outstanding for the quarter ended June 32022.
Revenue for the quarter ended June 32023 was $15 8 million compared to $32 4 million for the quarter ended June 32022.
Revenue in the current period, primarily relates to our collaboration agreement with Takeda.
Revenue is recognized as we complete our performance obligations, which include managing the ongoing <unk> phase III clinical trials for Takeda.
It remains $17 million of revenue to be recognized associated with the Takeda collaboration, which we anticipate will be recognized over the next year.
Total operating expenses for the quarter ended June 32023, or $118 5 million compared with $105 3 million for the quarter ended June 32022.
The key drivers of this change were increased candidate costs, partially offset by lower stock compensation expense.
The increase candidate costs were primarily due to the progression of the company's pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial toxicity study and manufacturing costs.
Net cash used in operating activities during the three months ended June 32023.
Was $21 4 million compared with net cash used in operating activities of $68 9 million for the three months ended June 32022.
We expect our operating cash burn to be $80 million to $90 million next quarter we.
We expect to spend between 160 and $180 million over the next three quarters to complete our GMP.
Factoring facility related laboratories in Verona, Wisconsin.
Turning to our balance sheet, our cash and investments totaled $494 5 million at June 32023, compared to $482 3 million at September 32022.
The increase in our cash and investments was primarily related to the $250 million payments from the royalty from royalty pharma.
As well as other licensing cash inflows.
Our operating cash burn.
With continuing capital projects.
Our common shares outstanding at June 32023 were $107 1 million.
With that brief overview I will now turn the call back to Chris.
Thanks, Ken.
We are well on our way to reaching our 2025 goal to grow our pipeline of <unk> therapeutics to a total of 20 clinical stage or marketed products in the year 2025.
All of our pipeline expansion is just a means to land the ultimate goal and the reason we continue to invest in expanding our platform discovering new candidates advancing our clinical programs and streamline the drug manufacturing process is that it allows us to get important new medicines to patients in need as quickly and efficiently as possible.
Doing this will also create a sustainable business and provide a steady stream of commercial revenue, which we now have a better line of sight on and a plan that we're executing to get there.
Thank you for joining us today, and I would now like to open the call to your questions operator.
Thank you we will now conduct the question and answer session. As a reminder to ask a question. Please press star one on one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one again.
Ask that you please limit.
Get your questions to one and if you would like to ask another question. Please re queue.
Please standby, while we compile the Q&A roster.
Our first question comes from Luca <unk> of RBC capital.
Oh, great. Thanks, so much for taking my questions.
Just a quick one here.
If you can comment on what was your reaction to the Roche and I'll Islands deal I guess two questions. There is a <unk> target.
You may be willing to pursue and two how should we think about read through to your cardiovascular franchise and then maybe Super quick one for Javier our severe high particular, sorry, do you mean I was under the impression that you were planning a single pivotal trial with triglycerides as a primary endpoint and Patrick I, just as a secondary endpoint. However, it announced today that youre planning to separate.
So wondering what drove that change thanks, so much.
Sure.
No.
I don't know that we have really a physician on the Roche deal good for them.
Not working on that target.
It just didn't it didn't fit into to where we see opportunities in this space and I don't think it reads through to our cardio metabolic assets I think those I think those are those aren't really orthogonal to each other.
Or do you want to address that yes, so hi Luca.
I think when we presented the clinical program for AIA proceed at the R&D day, I think I mentioned that we're doing two studies.
The first one which is the one that would be the primary source of registration is this just the T, which is 600 patients approximately with TG hired in a fight.
We will start in parallel studies four in patients with higher <unk> levels and recent past history of pancreatitis that study would be approximately 200 patients and that will not be part of the initial filing.
B CEP sequined interaction with the agency hopefully to get okay.
Pancreatitis risk reduction in that study and eventually add that in April . So it was planned but there is a sequence here first set to see reputation and say consistent floor navalist sponge.
Okay.
Okay. Thank you one moment for our next question.
Our next questions come from Maury Raycroft of Jefferies.
Hi, Congrats on the progress and thanks for taking my questions.
For your pulmonary platform you've got the late breaker title for your range program at <unk> next month, how much asthma patient data can we expect in this update or will it be longer term follow up from this AD and mad healthy volunteer.
Part of the study and then separately wanted to clarify for the pre claim tox.
Ladies are those six months or 12 months and it sounds like Youre somewhat beyond where you were with Enoch on safety can you just <unk>.
Elaborate more on that as it relates to the preclinical and clinical data that you've got so far.
Yeah sure I can take the first part of the question.
The data that will be presented at the European respiratory is primarily an update on the healthy volunteer set in that duration.
We may have a little bit more duration data from the first patient cohort asthmatic patient cohort, but we won't have additional patient data at that time.
And then regarding the Tox studies.
This is the six month rat Tox study that Chris was referring to.
Rage and MMP seven.
So we're still waiting on the nine months.
Monkey Tox and you mentioned.
But it sounds like we are beyond where we were with <unk>.
With <unk> and I think Thats I think that is true we are using substantially less material.
All of these candidates.
Tox studies and that appears to be bearing fruit for us.
Got it okay. Thanks for taking my questions.
Welcome.
Alright. Thank you one moment for our next question.
Our next question comes from Patrick <unk> of it.
C Wainwright and company.
Thanks, Good afternoon, just a few follow up questions.
The first one is just.
Around the <unk>.
Aero Rage chronic tox data.
Can you just clarify is this data would would it be expected in the third quarter or fourth quarter of calendar 2023, and how would you expect it to differ per that which was reported from arrow enact just in terms of how are the doses for these compounds compared to enact in the study.
Studies specifically.
And then separately just also regarding the pulmonary programs in clinical development.
Several three programs in clinical development at least one in preclinical development can you give us an idea of what targets. You could include for your pulmonary platform as it expands and to what degree would you be looking at targets with genetic or clinic valid clinical validation as you look to build out this pulmonary pipeline going forward.
Yeah.
I'll take the second and James can take the first.
Got the easy one.
The answer is we can't give you too much guidance on on an undisclosed targets we are.
Sure.
I get your point.
That of course, we will be looking at genetically validated targets and clinically validated targets and that is always our preference.
You've heard us say before our goal here is to is to take as little target risk as we can and one way to do that is to is to work on the.
The most validated targets that we can and so we will we will certainly be doing that.
Will we expanded beyond that into into some targets that half of that last validation probably.
But my hope is that we will in the near to midterm at least.
The targets, we're focusing on will be well validated James you wanted to address the top yes sure Patrick Thanks for the question.
Regarding tox.
So the doses are across the board lower for for the new pulmonary programs lower in terms of exposure I think most importantly at <unk>.
Less frequent if you recall we used.
A day 123 every two week dosing regimen for <unk>.
And then for our current programs the dose frequency is spread out much much less frequent dosing either monthly or every two months and the chronic tox studies.
If you look at if you compare the exposure.
I don't want to say it spans from.
Rob.
Enacting of four times to enacting 20 times, the amount of material compared to the various.
Newer compounds, where we're working on and that is entirely a testament to how much more potent. These these follow on compounds are.
Great. Thank you so much.
All right you're welcome.
Thank you one moment, while we queue. Our next question.
The next question is from the.
Chart on.
Hi, Thanks question about partnering specific specifically for the CBD assets.
Youre going to go go it alone initially with some of these phase III, but you do have an outcome study out your plan.
See success going it alone.
That make it more or less likely that you'll want to partner to do an outcome study.
So we are we are planning on doing on doing the outcome study for Aero Apoc III by ourselves.
We see that as it as it.
There is a very interesting asset the data have been very compelling. So we are happy to take that on ourselves. It doesn't mean that we're not going to partner that at some point geographically potentially.
Who knows but we are happy to to to take on the C bot risk ourselves into that Thats our plan right now.
Yes.
Okay. Thanks.
Youre welcome.
Thank you one moment for our next question.
Okay.
Our next question comes from Edward <unk> of Piper Sandler.
Great. Thank you very much.
So much going on and excited about the progress.
As we look at the pipeline.
What should we be expecting from we'll see three I know that we're in these patient cohorts now.
These three camaro occupancy.
Maybe iga nephropathy.
When could we get data from those and what would be your ultimate view for advancing.
<unk> three <unk>.
Yes.
<unk> of when we should get data, we're probably looking at end of next year. So end of 2024.
And what was the other part of the question.
Just how would you anticipate progressing from there.
Yes, I mean I think.
What the data show US I think there are several other examples out there.
<unk> III programs that are ongoing for Iga nephropathy, and C III commercial opportunity with <unk>.
With Biomarkers as primary endpoints. So I think our late stage programs would probably look something similar to those.
Okay, great. Thank you.
Thank you.
Thank you on moment for our next question.
Our next question comes from Mani <unk> of Leerink partners.
Hey, guys. Thanks for taking my question.
A quick one around.
How do you think about building the CV side of the franchise could you lay out what your estimation is for what is that <unk> should cost of Hanmi Cascade now.
Was there any given the plan could go it alone.
I would assume that you've got a reasonable budget estimate for what that might cost.
And can you walk us through sort of how we should think about.
Expansion in Opex as you build out the infrastructure to support what will be a larger study that you guys have ever done standalone before.
Sure. So we cant we cant give you.
Yes, we are putting together our estimates about what that's going to cost. However, we still haven't had our end of phase.
Phase two meeting with the FDA, we are putting together our proposal.
And so I expect it will be speaking with them. This year until we have that conversation until we have feedback from them, it's going to be very difficult for us to give you. Good numbers, just because because we want better clarity.
We will be happy to give you some estimates on some guidance once we have those discussions but at this point, it's a bit premature.
Okay. So we should expect some like we should expect the numerical guidance around that.
Post the end of postal post the end of Phase II meeting is that is that a reasonable expectation for us to have.
Yes, I think I think that's I think that's that is reasonable we need we need to have feedback from the FDA need to incorporate that into our plans and then and then and then have that filled it out into our budget.
So sometime.
Sometime over the next couple of quarters, we should have a good estimate for you then we will be happy to chat about at that point.
Okay. That's helpful. Thanks, guys.
Sure you're welcome.
Right. Thank you one moment for our next question.
Next question comes from Mike <unk>.
Morgan Stanley .
Hey, guys. Thanks for taking the question.
Maybe just a follow up on the pulmonary program specifically to the MMP seven program can you just remind us when we might see the initial clinical data there and should the focus be just on target knockdown or are there other data points that we should be focused on as well. Thank you.
Yes, I think so.
As we stated at the Analyst day meeting, we really think that focus there should be on the the patients. Since those are that's the population that is up regulated.
<unk> seven in <unk> and.
And the balance in the serum so that's what we'll be focusing on we are still in the healthy volunteer.
<unk> of the study and.
So we don't know how the patient cohorts will enroll just yet depending on enrollment. It's conceivable we could have some data by end of next year.
Got it thank you.
Alright. Thank you one moment for our next question.
Our next question is from.
Tony of B Riley Securities.
Good afternoon, and thanks for taking our question. So maybe just on the piano high asthma patient cohorts.
Deciding to enroll.
Got it.
Those levels being looked at and sort of what initial number of patients.
And then to have before you may look to disclose something externally and if you could comment.
How this could be same or different it additive.
Execution on the mild to moderate asthma patient cohort and then I have a quick follow up.
Sure so they're the two highest dose levels were.
What we're looking at in the cohorts.
The 92, and the 184 milligram.
Dose levels that we studied in healthy volunteers will investigate those doses in the pheno cohorts as well and we're doing a <unk> 16 per per cohort.
In terms of how many we'd have to have enrolled before we disclose data I can't really give you a clear answer to that yeah. Yeah.
So, let's just assume that we will disclose those once once those cohorts are complete.
Wouldn't make much sense for us to.
Feed that our drips and Drabs I think we'll wait until the study is over.
Got it.
In terms of <unk>.
Asthma cohort data before the end of the year.
Could you just clarify would you also include some valve bronchoscopy data also in addition to CRM data on the higher dose levels.
Satisfy that.
The asthma patients actually don't undergo bronchoscopy. So we don't have <unk> data from the asthma patients. It's only the only S. Rage measure we get is from the serum and asthma patients.
Got it.
And just lastly on the financials of the two milestones.
And on some deals came to get equity just clarify how they will be sort of modeled on your P&L in terms of revenue.
Any monetization candy.
So those milestones have already been recorded in revenue.
They are not amortized overtime.
We actually recorded.
Quarter before last we received the cash in this past quarter.
Understood. Thanks for taking our questions.
Thank you.
Okay.
Great. Thank you one moment for our next question.
Next question comes from Ellie Merle of UBS.
Hey, guys. Thanks, so much for taking the question just a follow up on that pulmonary patient cohort timing and I guess, where are you in the enrollment of the.
I think you just mentioned yet 16 portola part.
And then for Mark I guess where are you.
<unk> of the asthma patient cohorts.
And have you started enrolling in the COPD cohort and then just for Muck Daddy fee.
We expect in terms of the.
The timing of potential patient data.
Thanks.
So on the.
On the cohorts those.
Amendments to add those cohorts I think are just they've been filed and sort of working their way through the various regulatory bodies and ethics committees in businesses, we haven't enrolled any high.
Patients just yet and then be modified they see patient cohorts.
Enrolling into the.
Actually all the cohorts are open.
All of the <unk>.
Patient cohorts are currently open.
Bye Bye see you looking assuming enrollment goes well probably having data.
Mid to late next year as well.
And then your last question I believe was on the COPD cohorts for multi they see that's a similar situation.
The cohorts.
Got the amendments filed and so those are working their way through.
Through to get ethics, and a regulatory approval. So we'd expect to have those being enrolled later this year to have data.
At the end of next year.
Great. Thanks, so much.
Alright. Thank you so much for one moment for our next question.
Okay.
Our next question is from William <unk> of Bernstein.
Good afternoon, Thanks for taking my question.
So on adipose you gave a really interesting update at the R&D day, but you didn't disclose the target I was wondering what the next steps on that program and when we might learn more about it. Thank you.
Yes, we have not disclosed targets we are we.
We are still in the early days a bit with that approach. We are we have.
We have some ideas or targets, but we are not prepared to what to show any any more data there quite yet my hope is that is that you'll start to hear more about the clinical plan for adipose.
In 2024.
Got it thanks, and then on <unk> it sounds like you've become less definitive on the path forward for <unk> three in that indication versus last year. I was wondering if you could just talk about sort of what aspects of your thinking has evolved and how sure. You are that you will in fact take it forward to phase III.
Yes, so I think the issue is whether we can develop the indication of <unk> without a cardiovascular outcomes trial.
And there is.
Some freshness support that on some others don't so we are working our way to understand if that is the sub population of <unk>.
That can be pushed forward into a regulatory path without.
The requirement of a cardiovascular outcome trial, so thats kind of where we're at right now.
Got it thank you so much.
Okay. Thank you one moment for our next question.
Next questions from Luca <unk> of RBC capital.
Oh, great. Thanks, so much for squeezing me in again, maybe just circling back on rage.
James or Javier what are you, hoping to see some initial readout for fee now I understand the follow up will be short, but what levels do you anticipate at baseline and what kind of reduction are you hoping to see there again, just trying to understand what the bogie for initial success. There and then maybe Ken if I may I think your prior 10-Q's suggested to build the facilities Verona.
Wisconsin was going to cost $200 million to $260 million. However to 10-Q today suggest that that number has gone up to $2 62 to 81 is that correct and if to what drove that change. Thanks. So much.
Dan do you want to bet, sorry, so we have seen certain cost increases as well as about a quarter of a delay in that project.
So you will see that that total cost comes at a bit higher than we had originally estimated.
That's really it.
Yes.
We do have a point of reference for the <unk>.
The <unk> program in which say so.
We're between 40, and 48% reduction I think either call, which fund, but thats the range.
We believe.
We'll be convincing that <unk> inhibition.
<unk> inhibition.
So the IL 13.
So thats the range that <unk> been making.
'twenty.
Alright, great.
<unk> 'twenty fino.
The SNF illustrated at 200, so it's the same population very much of those point of reference if you will studies, we expect to see something similar.
Got it thanks, so much.
Alright, thank you.
For our last question.
This question is from Brendan Smyth have TV Cohen.
Hi, guys. Thanks for taking my questions maybe a.
Couple of quick ones from us.
First just wanted to ask actually about <unk>.
CNS programs that you alluded to that you're going to kind of announce and bring into the clinic over the next couple of years.
Really I guess, how are you thinking about which indications to move there are you really thinking to focus more on final indications given that that tissue is a little bit easier to get to.
Really what is kind of your strategy and deciding where to go there kind of just trying to understand where you think is especially right per Arne AI.
Then if I could just really quickly I wanted to ask a little bit more about kind of your financing plan, obviously didn't balance sheet for now.
But to your point you haven't raised equity in a few years, but you have a fair number of important readouts coming up.
And a lot of studies going on so as we're kind of just looking at cash burn over the next few years, what really is kind of your strategy for the next 18 to 24 months.
Sure I'll take that and then I'll, let Javier and James take a framework. So look as I mentioned in the prepared remarks.
<unk>.
Partnering is really a cornerstone of our financing strategy and so and so we are exploring a number of different options really as we speak.
Debt.
That are important for us.
There are also other.
There are other avenues. We are we are also exploring the possibility of doing some specific.
Product.
Financing for Apoc, III, we know thats going to be a spot, we know thats going to be expensive.
And we are exploring the cost of capital for for financing that in return for some royalties on that product for some period of time things of that nature.
I think that we can I think we can get a long way to our to our financing needs through those those levers and we are looking to pull those levers.
Certainly in the near to mid term I think it's important for us.
And then in regards to the CNS targets.
We're interested in and targets that may involve the.
The spinal cord as you mentioned, but also targets in the cortex, we can get good knockdown in various parts of the cortex.
And we're looking at some targets in the deeper grain, although that can be a little bit more challenging to achieve the same level of knockdown and then we like as we do for other tissue types targets with a degree of genetic validation that are either genetically defined or have some level of jeanette.
The consolidation behind them and preferably a degree of clinical validation with.
Other modalities that are out there that have shown some success that we could follow on.
Alright, great. Thanks, guys.
Okay. Thank you.
I'm showing no further questions at this time I would now like to turn the conference back to Chris Anzalone for closing remarks.
Thanks, everyone for joining us today and I hope you have an enjoyable summer and we look forward to talking to you soon.
Alright. This concludes todays goodbye.
Thank you for participating you may now disconnect.
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