Q3 2024 Arcturus Therapeutics Holdings Inc Earnings Call
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Good day, everyone, and welcome to today's Arcturus Therapeutics 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2.
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It is now my pleasure to turn the conference over to Ms. Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations, and Marketing. Please go ahead.
Speaker Change: Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics' quarterly financial update and pipeline progress call.
Speaker Change: Today's call will be led by Joe Payne, our President and CEO, and Andrew Sassine, our CFO.
Speaker Change: Dr. Pat Chivicula, our CSO and COO, will join them for the Q&A session.
Speaker Change: Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not guarantees of performance.
Speaker Change: They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by this statement.
Speaker Change: Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factors section in our most recent form, 10-K, and in subsequent filings with the SEC.
Thank you for watching!
Speaker Change: In addition, any forward-looking statements present our views only as of the date such statements are made.
Speaker Change: Our tourist specifically disclaims any obligation to update such a statement. And with that, I will now turn the call over to Joe.
Joe Payne: Thank you, Neda. It's good to be with you again, everybody. We look forward to providing our updates today on our quarterly investor call.
Joe Payne: I will begin my remarks with an update on progress with our vaccine franchise led by CoStave, our self-amplifying mRNA COVID-19 vaccine.
Joe Payne: We're thrilled about our recent commercial launch of COASTAVE in Japan. Last month, members of our senior management team, including myself, had the wonderful opportunity to travel to Japan to be vaccinated with COASTAVE in Tokyo.
Joe Payne: In addition to our team from Arcturus, we shared this experience with senior management from MAGIE, CSL, and Arcalis.
Joe Payne: As you can imagine, it was an experience our team will never forget.
Joe Payne: In connection with the first sale of our COVID-19 vaccine, Arcturus received a $25 million commercial milestone.
Speaker Change: On the regulatory front, CSL Securis' partner in Japan, Meiji Seica Pharma, announced earlier this year that they submitted a partial change application for an amendment to the Manufacturing and Marketing Approval of COSTAVE to include domestic manufacturing sites in Japan, including Arcalis.
and Arcalis is Arcturus' manufacturing joint venture in Japan.
Speaker Change: When approved, this will allow for Meiji Seika Pharma to begin selling domestically produced coast ape this season.
Speaker Change: The European Medicine Agency continues to review the COSTAVE marketing authorization application. I've been impressed with how our team has worked diligently with the agency as they review the first potential self-amplifying mRNA product in Europe.
Speaker Change: The process is near completion with the CHMP opinion expected next month.
Speaker Change: As we look forward to achieving marketing approval in the U.S., we plan to file a BLA for CoStave in the first half of next year, which will be supported by positive results from multiple Phase III studies.
Speaker Change: We continue to collect meaningful clinical data for our proprietary Next Generation STAR mRNA platform.
Speaker Change: The company announced today another set of positive Phase III results.
Speaker Change: Wherein ARCT2303, this is the monovalent XBB variant derivative of COSTAVE, met all four primary study objectives and key secondary objectives.
The study supports co-administration of CO-STAVE with licensed influenza vaccines.
ARCT-2303 demonstrated superior immune response versus ARCT-154.
Speaker Change: as measured by neutralizing antibodies against Omicron XBB 1.5.6 in terms of geometric mean titer or GMT ratio and a seroconversion rate or SCR difference.
Speaker Change: Co-administration of ARCT-2303 and cell-based quadrivalent influenza vaccine showed non-inferior immune response versus stand-alone QIV administration.
Speaker Change: co-administration of ARCT 2303 and QIV also showed non-inferior immune response versus standalone ARCT 2303 administration.
Speaker Change: And lastly, co-administration of ARCT 2303 and adjuvanted QIV in older adults showed similar responses versus stand-alone administration of ARCT 2303 and adjuvanted.
QIV
Speaker Change: In September, the company, along with our partners, CSL, Icarus, and Meiji, announced new 12-month post-vaccination data for COSTAVE at Options 12 for the Control of Influenza Conference.
Speaker Change: The results of a head-to-head Phase 3 study demonstrated that COSTAVE maintained superior immunogenicity compared to the conventional mRNA vaccine Comirnaty for up to one year against Wuhan HU1.
Speaker Change: and Omicron B.A.4 and 5 and certain other variants. Hand at one-sixth the dose of the comparator.
These results were published in the Lancet Infectious Disease.
Additional Phase 3 data presented at the Options Conference.
Speaker Change: showed that bivalent COSTAVE, also known as ARCT2301, induced superior immunogenicity over conventional bivalent mRNA vaccine CARBONATI that persisted against key variants up to six months post-vaccination.
Speaker Change: Now shifting our attention to our mRNA therapeutics franchise, let's begin with an update on ARCT032.
Speaker Change: ARCT032 is an inhaled messenger RNA therapeutic for cystic fibrosis and it's formulated with Arcturus' lunar delivery technology that differentiates us from our competitors.
Speaker Change: In September, we received clearance of an investigational new drug application to the U.S. Food and Drug Administration.
Speaker Change: The FDA clearance of the IND application enables Arcturus to initiate a phase 2 multiple ascending dose study to evaluate the safety, tolerability, and efficacy of ARCTO32 in people with cystic fibrosis.
Speaker Change: Our team is actively engaged in onboarding a substantial number of clinical sites to help us in this effort.
Speaker Change: We are fortunate to be able to be working closely with the CF Foundation in this process.
Speaker Change: The Phase 2 study is presently screening individuals with CF who do not qualify for or benefit from CFTR modulator medicines due to dysfunctional or absent CFTR protein and or drug intolerance.
Thank you.
Speaker Change: This study will allow us to evaluate FEV, Lung Function Improvement, in individuals with CF.
Speaker Change: And I'm very pleased to report that the company is on track to share interim Phase 2 proof-of-concept data for our CF program in the first half of 2025.
Speaker Change: I'll now move on to our ARCT 810 program. This is our messenger RNA therapeutic candidate for ornithine transcarbamylase, or OTC, deficiency.
Speaker Change: Earlier this year, Arcturus announced the expansion of the Phase II clinical program of ARCT 810 into the United States.
Speaker Change: This open-label multiple-dose study, evaluating pharmacodynamics and safety, is currently enrolling adults and adolescents requiring clinical management for OTC deficiency.
Speaker Change: Our placebo-controlled Phase 2 European study has completed the dosing phase.
Speaker Change: So these concurrent Phase II studies in Europe and the U.S. will allow us to evaluate meaningful biomarker changes in individuals with OTC deficiency.
Speaker Change: And I'm happy to report that the company is on track to share interim Phase 2 proof-of-concept data in the first half of 2025.
With that, I'll now pass the call to Andy.
Thank you, Joe, and good afternoon, everyone.
Andy: The press release issued earlier today includes financial statements for the third quarter of 2024 and provides a summary and analysis of year-over-year and sequential financial performance.
Andy: Please also reference our most recent Form 10-Q for more details on the financial performance.
Andy: We are very pleased with the launch of COSTAVE, our COVID-19 vaccine candidate in Japan.
Andy: This represents an important milestone for Arturas as it is the first commercial product in the company's history.
Andy: We believe that this product highlights the differentiating aspects of SA-mRNA technology and how it can potentially represent an improved vaccine option for patients.
Andy: I am also happy to announce that we have received the $25 million commercial milestone with the first Coast Day sale in Japan.
Andy: I also went to Tokyo last month to get the COSTAID vaccine with 32 executives from Arcturus, Arcalis, CSL, and Meiji.
Thank you.
Andy: Due to the early clinical success of our Cystic Fibrosis Program, Archalis has become a strategic manufacturing asset.
Andy: for Arcturus, and therefore we have decided not to sell our stake in Arcalis at this point in time.
Andy: The strategic review process conducted by J.P. Morgan generated interest from financial and strategic participants, which will benefit Arcturus and Arcalus in the future.
Andy: We decided to expand our manufacturing product line with Arcalis to include respiratory mRNA therapeutics, and therefore we are planning to transfer our cystic fibrosis manufacturing process technology to Arcalis.
Andy: For the three months ended September 30, 2024, we reported revenues of $41.7 million.
Andy: A slight decrease from the $45.1 million reported in the same period in 2023.
Andy: This small decrease is attributable to a decrease in CSL revenue as we achieved a milestone of $35 million during Q3 of 2023.
Andy: compared to a milestone of $25 million during Q3 of 2024.
Andy: This was offset by an increased revenue from the BARDA agreement.
Andy: Total operating expenses for Q3 2024 were $52.4 million compared with $64.5 million for Q3 2023.
Andy: Total operating expenses for the nine months ended September 30, 2024 were $191.8 million compared with $195.9 million for the nine months ended September 30, 2023.
Andy: Research and Development Expenses with $39.1 million for Q3 2024 compared with $51.1 million for Q3 2023.
Andy: The decrease was primarily due to $15.9 million in manufacturing expenses incurred in the 2-3-2023.
Andy: related to the MAGIE supply agreement and other clinical trial manufacturing batches, as well as decreased facilities and equipment expenses.
Andy: The decreases were primarily offset by a $3.6 million increase in clinical trial-related expenses for the COVID and flu programs.
Andy: For Q3 2024, Arcturus reported a net loss of approximately $6.9 million or 26 cents per diluted share.
Andy: compared with a net loss of $16.2 million, or $0.61 per diluted share for P3 2023.
Andy: Cash, cash equivalents, and restricted cash were $294.1 million as of September 30, 2024, and $348.9 million as of December 31, 2023.
Andy: Arcturus achieved a total of approximately $462.1 million in upfront payments and milestones from CSL as of September 30th, 2024.
Andy: and expects to continue to receive future milestone payments from CSL supporting the ongoing development of the COVID and flu programs and three additional vaccine programs by CSL.
Andy: Based on the current pipeline and programs, the cash runway is expected to extend into the first quarter of fiscal year 2027 and does not include any contributions from the sale of co-stayed vaccines in Japan.
Andy: In summary, the company remains in a strong financial position and has the cash runway needed to achieve multiple near-term value-creating milestones for the vaccine and therapeutic program.
Andy: Furthermore, with the recent launch of Co-Stays in Japan, we look forward to reporting potential commercial revenues in 2025.
I will now pass the call back to Joe.
Joe Payne: Thanks Andy. We've continued to make exceptional progress on our mRNA vaccines and therapeutics pipeline. We are particularly excited about the launch of CoStave, the first commercial product in the company's history.
Joe Payne: And we're also pleased that both of our flagship mRNA therapeutic programs, ARCT032 and ARCT810, are on track for interim Phase II POC clinical data in the first half of 2025.
Speaker Change: I will now turn the call to the operator for Q&A.
Speaker Change: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.
Once again, that is star one to ask a question.
We'll go first to Lillian Sango with Lee Rink.
Lillian Sango: Hi, good afternoon and thank you for taking the question. I guess two questions from my side. So, first question regarding the commercial launch of COSTEV in Japan.
Lillian Sango: Any chance you could give us maybe a little more granularity? So, you had mentioned that 4 million doses had been delivered to Japan through partner Meiji, that they are also upping production. I was wondering if you could give maybe a little more color on the launch trajectory in Japan and expectations for the winter season going into 2025.
Lillian Sango: Secondly, so for the OTC deficiency study, so the European study has completed for a while now, and so the U.S. study is ongoing. Would you mind giving maybe a little more color on the number of patient and type of data we should expect in the upcoming readout in the first half of 2025?
Speaker Change: Thanks, Lily, for the question. Andy, with respect to the additional nuance on the commercialization process in Japan, do you want to handle that question?
Andy: Sure. Thanks, Lily. You know, we're pretty excited about working with Meiji in Japan because, as you know, they're the number one flu vaccine company.
Andy: And so, they're in a very strong position to be able to, you know, launch the product very effectively.
Andy: If you may have paid attention to a recent press release, they've actually articulated that they were planning to sell roughly four and a half million vaccines, you know, during the season with their guidance.
And, of course, you know, we only shipped four million.
Andy: And, of course, the remaining, you know, vaccine must have come.
Andy: from, you know, the opportunity to produce them in our callous in Japan, so
Andy: So we're all awaiting, you know, the announcement of that approval by the PMDA shortly.
Andy: which should enable Meiji to have a full launch by probably December or so with a vaccine that's actually made in Japan, so pretty exciting I think for not only Meiji and CSL but the Japanese people overall.
Andy: So, we're not really, you know, privy to give specific guidelines, other than what
Andy: They've been able to articulate publicly, but I would closely pay attention to any communications coming from Meiji and CSL regarding the launch and progress of the vaccine sales in Japan.
Thank you.
Speaker Change: And pertaining to the OTC question, Lily, the U.S. expansion is going to be similar in size relative to what we did in Europe.
We are enrolling younger and more advanced disease subjects.
Speaker Change: We did see some early signals that were encouraging in the European trial, but we're going to be combining this data in what we share in the first half of next year.
Thank you.
Thank you.
We'll go next to Yasmeen Rahimi with Piper Sandler.
Thank you.
Speaker Change: Hey, good afternoon team. This is Jungu Onferyaz. Thanks for taking our questions.
Speaker Change: First, to the extent that you can, for the phase 2 cystic fibrosis study, could you provide any color on the size and cohorts that you're thinking about? What doses are you planning to move forward with? And then for the second question, what is needed to demonstrate proof of concept in your view?
Speaker Change: Pat, do you want to address that question? The CF study? Yeah, I mean, you know, obviously, you know, if you look at, you know, we are going to be looking at what a lot of our competitors are doing in terms of looking at the various biomarkers.
Speaker Change: and you know we can't disclose a lot about the actual study design and you know our plan is to again recruit
Speaker Change: We finished our Phase II study. We plan to start our study in the U.S., and we'll provide more data around our CS study later on this year, I mean early next year.
Speaker Change: Yeah, multiple doses are going to be evaluated in the CF study. It's an open-label study. There's no bronchoscopy included in this study.
Speaker Change: And FEV is going to be measured throughout the study, but with respect to specific time points and additional details, there will be an appropriate time for us to share that. And that will be at a later time.
Thank you.
Got it. Thank you.
Thanks.
We'll move next to Whitney Egem with Canaccord Genuity.
Speaker Change: Hey guys, thanks for taking the question. First, I just wanted to follow up on the commentary around vaccines in Japan and the switch to Arkalis once it's approved.
Speaker Change: Is the idea that when Arkela is approved and it's manufactured domestically in Japan that there will be kind of a step up or an acceleration, just as we think about modeling quarter over quarter next year? And then the second question to follow up on OTC, I think looking back, the interim phase two data had originally been expected in the fourth quarter, so maybe I missed it, but what drove the shift to the first half of next year? Thanks.
Andy, do you want to address the first question?
Andy: Sure, Whitney. No, I think you were spot-on there with that assessment and, you know, you can tell Meiji and Arcalis are very proud to obviously be able to manufacture the first, you know, SAMRNA vaccine in Japan and
Andy: And it was pretty evident by, you know, the response and the press that we're all, you know, in attendance. They had over 30 press.
Andy: you know, official there, so a pretty well-attended press conference, and certainly, I think, you know, they would probably prefer to launch
Andy: and articulate that this vaccine is made in Japan. And certainly having shipments from, you know, Arcalis in December will enable them to articulate that more clearly. So...
with respect to probably a more aggressive...
Andy: commercial launch, you could probably anticipate, you know, it would happen in December-January time frame, in my opinion. So, if you're looking at the timing of the revenues, probably would happen in the, you know, probably the first two quarters of next year.
Andy: And with respect to the OTC data, we did complete dosing in Europe and there was some early evaluation of some of that data.
Andy: The data is not locked, and we initiated the enrolling process in the U.S. prior to that process, so we thought it was wise to just couple these together and provide the interim data update in the first half of next year.
Understood, thanks.
Bye.
We'll move next to Evan Wang with Guggenheim Securities.
Thank you very much.
Speaker Change: Hi guys, thanks for the question. Just a few from me.
Speaker Change: Firstly, on CoStave, anything you can share on broader vaccination trends in Japan, so not just CoStave-specific? I know the Japanese season starts later, but has this been in line with Meiji's estimate to support the dose totals for the season?
Speaker Change: And also I'm curious, Dave, you highlight kind of recognizing revenue in 2025. Can you remind us some of the reporting here and how Arcturus recognizes some of this revenue?
Speaker Change: And then third, on ODC and cystic fibrosis, you know, I'm just wondering, it's great to see the timelines and for proof of concept in the first half, 25. I'm just wondering what gives confidence in some of these timelines. Is dosing and recruitment thus far better than expected? Any additional color there would be helpful. Thanks.
Sure.
Speaker Change: You had a question about revenues. Do you want to address that one first, Andy?
Sure. As you can see, when...
Speaker Change: Yeah, when Meiji will sell the vaccines in Japan, they will be reporting those sales to CSL on a quarterly basis.
Speaker Change: CSL then will determine the allocation of the profit share between CSL, MAGIE, and Arcturus.
Speaker Change: At that point in time, you know, we'll be able to recognize those revenues once that allocation is, you know, contributed to Arcturus.
Speaker Change: And keep in mind that we do have to offset the initial revenues by the 40% of the production cost that we are responsible for in the development of the program.
Speaker Change: And so, that amount has not been communicated officially, but you can assume that that would probably incur at least, you know, a few million doses before you're able to offset those.
Speaker Change: initial 40% of the development and production costs for the co-state vaccine. I hope that was helpful.
Speaker Change: and addressing your questions about the Co-State Trend and the CF Timeline.
Speaker Change: I can comment that the team was in Japan and we got a really good feel for Meiji's presence in Japan and the vaccine industry. They have a large sales force, they have approximately 40% of the flu shot business in Japan.
Speaker Change: Just a large number of physicians in Japan, as you can imagine.
Speaker Change: So, you know, clearly there's an educational phase at the launch, teaching people about this next generation technology, but any additional details than that, it would be more appropriate to just, for them to provide with their regular, you know, updates on, with respect to commercial guidance.
Speaker Change: But all I can say is that I was very impressed with the management team and the commercial staff there, that they really knew what they were doing.
Speaker Change: is, I would say, open label. It's not placebo controlled. There's no bronchoscopy.
Speaker Change: involve their lung brushing, which can deter participants from participating. And we also have some early data that we've already shared in Phase 1B, including a Class 1 subject that had some early and promising data.
Speaker Change: So I think that data collection is helping us. We're also working with the CF Foundation.
Speaker Change: And, you know, as we're onboarding a substantial number of sites, I think it's given us encouragement with these preliminary conversations that we should be well on track to deliver some data in the first half of next year.
We'll move next to Myles Minter with William Blair.
Myles Minter: Hey, thanks for taking the questions. Three quick ones if I may. The first one is just on the guidance that you'd get the EMA approval milestone from CSL for
Myles Minter: potential approval of COSTA in the first quarter of 2025, does that imply that you'd expect to see a CHIMP opinion issued at either the November or December meeting by the end of this quarter?
Myles Minter: The first one. The second one is on the decision to keep the Alcoa's equity stake. Does that mean if Meiji does?
Myles Minter: If additional manufacturing orders of CoStave to Alcalis, that's something you could actually report on, rather than just pushing back to Meiji for commercial guidance.
Myles Minter: And the third question is, moving the CF program manufacturing to Alcalis and having a U.S. focused phase two clinical trial, does that mean you have to get FDA inspection of that facility? Thanks very much.
Andy, do you want to...
provide a first step? Sure.
Myles Minter: with the early progress we've had in cystic fibrosis. So, obviously, manufacturing and trying to plan strategically a global production base is quite daunting because...
Myles Minter: just to address, just to give you an idea, just to address...
Myles Minter: The class one population, you're looking at probably 17, roughly, kilograms, you know, per year.
Myles Minter: And so, you need to put together, you know, a very...
well-orchestrated
Myles Minter: you know, manufacturing base to be able to address all that. And, of course, our catalyst has now become very strategic.
Myles Minter: because of that opportunity. And consequently, you know, they are a very low-cost and very efficient operation because, as you know, the drug substance, drug product, and DNA is all made there. And so is bioauthentication.
Myles Minter: in the fill finish. So having all that, you know, in one location reduces.
Myles Minter: transferring drug substance to Europe for, you know, the drug product completion stage and so
Myles Minter: There are many implications and opportunities, and obviously, as you have just heard, the amount of mRNA we're going to need to make.
for the CF Program is quite substantial. [inaudible]
Myles Minter: And, you know, based on just the capacity Arcallis has now, that's about $100 million a year just for Arcallis in sales. And that's only, you know, considering two, you know,
you know, kilograms out of the 17.
Myles Minter: So, just to give you, you know, the significant impact of this opportunity is pretty substantial. So, we've had to reevaluate.
Myles Minter: our global supply base and working very closely with Aldebaran and Danaher, of course, and Catalan and Gressy Farm and Polymune. And so this has taken on a very global concerted effort. It's exciting, but it's going to take a little bit of work and
Myles Minter: Certainly, you know, it makes our Calis a much more valuable partner right now and we need them and we're kind of excited about working more closely with them on the CF program.
Myles Minter: And pertaining to EMA approval, we've clearly guided today that we're anticipating a CHMP decision in December.
and that obviously precedes a formal approval process shortly thereafter.
Myles Minter: that takes us into Q1, so I think your assumption is fair.
Speaker Change: Did we address all your questions, Miles? Just a quick one on the second one.
Speaker Change: with the manufacturing orders that could come to MAGIE when the PMDA issues approval in December, if they do that, is that something you as Arcturus would be able to report on if they do indeed receive a bulk manufacturing order for Costave?
Thanks.
Speaker Change: Yeah, the short answer is no. But Andy, yeah, go ahead.
Speaker Change: Yeah, no, we really can't, you know, comment on those because that'll be, you know, up to Meiji and...
in CSL to articulate that. Of course,
Speaker Change: You know, we'll give you as much, you know, color as we can post, you know, quarter and hopefully that'll enable you to have a better insight as to the ramp up and the success of the Arcalis production, you know, on a quarterly basis.
Awesome. Appreciate you taking all the questions. Thanks.
Thanks, folks.
We'll move next to Yenin Zhu with Wells Fargo.
Speaker Change: Hi, thanks for taking our question. This is Kwan Ong for IANA. So I have a question on your CF program.
Speaker Change: Can you share with us your thought process on FEV1 and also Vertex Moderna will report their VX522 phase 1 data also in first half 25. So can you remind us the differentiation of 032 versus VX522? Thank you.
Speaker Change: Yeah, it's definitely a wonderfully competitive area, and I think this is great for patients in general in the CF community, but we do have key differentiation elements to our program and our technology compared to our competitive peers.
Speaker Change: So, thank you for the question. The first and foremost, we have a different delivery technology that we call Lunar, but this...
Speaker Change: not only has a different registered trademark, but it's a chemically different lipid nanoparticle that is biodegradable, non-accumulating, and we believe these chemical differences have proven out to provide differentiated data pre-clinically.
Speaker Change: So we have preclinical data in the ferret model that has shown that we have a very significant response that supersedes positive control after a single administration. I think that would be representative of
Speaker Change: the differentiation I'm speaking to. We're also sharing data more visibly. We've already provided some phase 1b data and a class one subject that has provided some promising early response after just two administrations.
Speaker Change: And then finally, a purification IP, I think, is a differentiator.
Speaker Change: And this is a big deal in the therapeutic space when you're dosing chronically.
Speaker Change: and larger amounts of mRNA. It's very important, especially in compromised lungs like the CF patient population.
Speaker Change: that these mRNA molecules are substantially purer. And we have a potentially leadership position in this space and with intellectual property behind it. It's different. How we purify our mRNAs is likely different than our competitors.
Speaker Change: I'll stop there, I could talk for a while, but I think those are the key differentiators.
Speaker Change: Right, Daddy. Thanks for all the colors. And would you mind sharing your barcode success on FBV1?
Speaker Change: Did you say our expectations around FEV1? What was your question? Right.
Yeah. Yeah. Yeah.
Speaker Change: Because we're addressing a patient population where there's substantial unmet medical need, again, these are the non-modulator responders, it's about 15-18% of the CF population, so we're going after these folks that do not really have an excellent treatment option.
Speaker Change: So the barrier for entry, the bar that we need to establish for lung function improvement, I believe is very small.
Speaker Change: We haven't provided any details on that and with respect to our conversations with regulatory agencies, for example, we hold those cards close to our chest. But the short answer is anything measurable, I believe, would be very significant for this patient population.
Speaker Change: A small percentage improvement would be very meaningful in our view, but we haven't given that specific number yet. There will be an appropriate time later down the road.
Thank you.
Speaker Change: Yeah, thank you for that. And one quick question on 2303. Congrats on the data. Can you share with us what's the next step for the program? Are you ready to file or what's your strategy? Thank you.
Oh, 2303.
Speaker Change: The strategic purpose for these other phase 3 trials was just to showcase the breadth of the platform.
Speaker Change: that the technology can be multi-antigenic, for example, in the bivalent trials we're doing.
Speaker Change: And also in where we're conducting these trials is meaningful because we're collecting an expanded safety database and multiple ethnicities around the world with these additional phase three trials.
Speaker Change: Taking that all together, it helps beef up and support a really strong BLA application in the first half of next year. So they're strategically important to support the BLA application in the U.S. I don't foresee us...
Speaker Change: marketing these products. The data is used to support the platform of CoStave in the United States.
Got it. Thank you for the callers.
Thank you, Iyana.
We will move next to Pete Stavropoulos with Cantor Fitzgerald.
Thank you.
Speaker Change: Hi, this is Samantha Shaffer on the line for Pete. Thanks for taking our question. Can you touch on the H5N1 pandemic flu program? If you could remind us on key details for this non-CSL partnered program and what to expect. Thanks.
Speaker Change: The short answer to that question is we remain on track to get into the clinic this year.
Speaker Change: Thank you for the question, H5N1 is definitely important to BARDA. We do have some BARDA references in our filing documents and our press release.
Speaker Change: and probably the script as well. You can see that we're elevating our relationship with them. But that stage, that stage of getting into the clinic, is coming up here shortly.
Thank you. Thank you. Thank you.
Thank you.
We'll move next to Ed Arce with H. C. Wainwright.
Speaker Change: Hi, good afternoon everyone. This is Thomas Atkins, of course, as congratulations on your progress.
Thank you.
That's actually a really good question. The data we're collecting
Speaker Change: is not only important to establish proof of concept for intravenously dosed mRNA in our platform.
Speaker Change: But a key part of the OTC strategy is to identify the appropriate biomarker if we choose to advance this into a pivotal trial or a phase 3 trial.
Speaker Change: So, it's not just the data that's important in this first half of 2025, but understanding which of these many biomarkers that we're collecting data on, many of them, and we believe we have a strategy that is going to be...
Speaker Change: appropriate for a phase 3 or pivotal trial, but we won't be communicating specifically what that biomarker strategy is today. That's something that we can do concurrently with the interim data sharing in the first half of next year.
Thank you.
Speaker Change: And then for the other program that is partnered with CSL, are there any updates with the Lunar Flu program? I believe last we heard there's a Phase I flu program.
Thank you.
Speaker Change: Yeah, good question. Our CSL collaboration in the flu is a very active one, I'll say that.
It's multiple programs are involved.
Speaker Change: The funding for these programs has been increasing. We're meeting regularly in JSC meetings with CSL.
Speaker Change: But with respect to the cadence of data sharing and any sort of commercial strategy on these, we've respectively agreed with CSL that we'll allow them to provide that information.
Speaker Change: So all we can say with respect to the flu program is that it's very active, there's multiple programs, and that funding is increasing for these programs, and it's definitely a priority for our collaboration.
Speaker Change: But, again, how the data is shared and the cadence of that data and any sort of commercial strategy and what it's combined with, the bundling commercial strategies, these kind of things we can't refer to at all.
Thank you.
Speaker Change: Got it. Perks, one more question from us, this one first for Andy. Just wonder, what's the entire 25 million milestone for Muji? Was that entire announced, recognized in third quarter, or it's going to be spread over several quarters?
Yeah, the 25 million, when it's recognized, go ahead, Andy.
Yeah, thank you, Joe. Yeah, the $25 million is...
Speaker Change: going to be reported just like all of our other development milestones at this point in time on
and ASC-606 require that we...
Speaker Change: probably amortized around 90-93% of the milestone in the quarter that it was earned.
and then the remaining amount is amortized over.
Speaker Change: a production-to-complete method, and so that's why you see the accrual on some of the, you know, CSL revenues that occur on a recurring basis in our quarters.
Speaker Change: Hopefully, that gives you a perspective of what we've recorded here in the quarter.
Thank you.
Speaker Change: Thank you again for taking our questions. Looking forward to our continuing progress with closed data in Japan.
Thank you. Thank you.
We'll move next to Yale Gen with Laidlaw and Company.
Speaker Change: Great, thanks for answering the question, taking the questions. My first question is that given that three parties will be involved in terms of determining the allocations
Speaker Change: So, should we anticipate any potential for royalty from Japan, revenue from Japan will be something of next year instead of the last quarter of this year?
Timing of revenue recognition. Yeah, go ahead, Andy.
Andy: Yeah, yeah, I think if you listen closely to what we were articulating, you know, by the time MAGIE, you know, reports the sale to CSL, and then they will in turn...
Speaker Change: determine the allocation, you're probably better off assuming that the sales will be recognized in the first half of next year rather than than this year. So hopefully that gives you some perspective.
Speaker Change: Because, remember, we also have the 40% of the production cost that we have to absorb.
Speaker Change: before we're able to recognize any revenues. So I think I would prefer to caution on the conservative side and probably anticipate the first half of next year is a better.
Speaker Change: you know, predicament of when we can, you know, see some of those revenues. Hopefully that helps you.
Speaker Change: Yes, it does. And maybe just to tag on one more question, at least on the P&L side.
Speaker Change: I noticed that this quarter's R&D expenses was lower than the prior two quarters. I understand you have changes from the last year, but should we anticipate this a little bit lower R&D expenses?
Presumably we'll continue or how should we think about that?
The End
Speaker Change: That's a good question and you know the one of the reasons why it's so difficult to give quarterly guidance is because of the
Speaker Change: you know, functionality of when trials are completed and when inventory is shipped, so...
Speaker Change: That's why I prefer to provide, you know, a runway guidance. And so if you can...
Speaker Change: you know, be reassured that we, you know, had restated that our guidance is in the first quarter of 27, so that's remained consistent now for a few quarters.
Speaker Change: So you can assume that our burn is going to be somewhere around $100 million a year.
Speaker Change: And if you divide that by the cash we have, that should give you some comfort that...
Speaker Change: we should be, you know, easily achieving that first quarter of 27.
Speaker Change: goal and keep in mind that it doesn't include any revenue contributions, you know, from Japan, so hopefully we'll be able to update the market next year on that progress.
Speaker Change: Great. And maybe the last question here is that in terms of 2303 combined with the QIV, how should we think about that going forward in terms of these combined...
Speaker Change: vaccines, would that be something that we should, you know, CSI will make a decision on the specifics. Exactly, yeah, yeah, we now have the phase 3 data to show that.
Speaker Change: non-inferior or in your equivalence, right? So, CSL will be determining anything to do with commercial strategy.
Speaker Change: especially with the flu they provide that whether it's combos or co promotions or bundling anything like that that'll all come from them
Okay, great. Thanks a lot, and congrats on the progress.
Yeah, thank you. Thank you.
We'll move next to Yigal Nakamovas with Citi.
Yigal Nakamovas: Hi guys, I hope you can hear me okay. Just first of all, could you just clarify 25 million milestone from
Yigal Nakamovas: from Japan. Is that counts receivable or is it actually your cash reported at the end of the quarter? Thanks.
Speaker Change: Yeah, no, good question. You know, we give CSL about 60 days to pay the bill, so, and they've been a pretty good, you know, customer, so I'm not too worried about getting that 25 million dollars. Hopefully that, you know, alleviates your concern about them paying us.
Speaker Change: Okay, and then on the manufacturing, I'm just wondering, so you're saying that you're going to transfer the manufacturing on the CF over there?
The capacity is left at our callous after
including CF on top of COVID.
Speaker Change: Do they have the capability there to do the fill and finish for the specialization of the CF product given that it's going to be a nebulized product? Is there anything else that they need to incorporate into the manufacturing chain to do that piece of things?
No, it was a short question though.
Speaker Change: Go ahead. Yeah, we can let... Go ahead. Let Pat answer that if he has any more color on the production.
Again, the process for making our drug substance
Speaker Change: for both our CF product as well as our vaccine products are very similar. So that's the great beauty about messenger RNA. I think we can use a very similar process for all the APIs in all of our programs.
that we're currently having internally.
Speaker Change: There's obviously nuances related to a lyophilized product or a frozen drug product, and I think that there is some specific, and the components, exact components that are in our CF product are different than what we're currently using for our vaccines. So because of that, there is a know-how or a tech transfer process that we have to undergo. But we're confident that that tech transfer process is going to be just fine and capable.
of making our drug substance.
Speaker Change: And ultimately, you asked a question a little bit about PhilFINISH, they are building out not just drug substance capabilities, but also drug product and final PhilFINISH capabilities as well, and because of that we're going to be leveraging our partners.
Speaker Change: So the product produced for CF in Japan will be the final commercial product, correct? Yeah, that would be the vision of the, yes.
Okay and then as far as capacity I guess
Speaker Change: The question is, what about OTC, is that something you would consider transferring over there or is there a reason you are deciding not to do that, is it a capacity question? It's rare to leave a small amount, so.
Please go on, okay.
Speaker Change: We can handle that, you know, with our, you know, current partners. We're fine there. Just the demand for the amount of cystic fibrosis mRNA that's going to be required is pretty substantial.
I articulated early, you know, on a...
Speaker Change: on a year-over-year basis of 17, you know, kilograms. That's a lot of mRNA, and as you know, you know, our callus has capacity up to 5 kilograms right now, so...
Speaker Change: And so, certainly, there's an opportunity to potentially expand that as we are able to achieve some clinical success with the CF program.
Speaker Change: And then last one is so you have the four million doses that you're shipping over there
Speaker Change: And then you said another half a million that's going to be made locally in Japan. So are they basically, you know, and then at some point, they're all going to go into the channel and there may be some overlap potentially. Are they all going to kind of look indistinguishable from a?
you know, a labeling, branding perspective.
Speaker Change: Well, they all have the same label, yeah. The label is uniform, yeah.
Thank you. Thank you. Thank you.
Speaker Change: The excitement here is that, you know, our callous is now, you know, in the...
in the process of producing, you know, the COVID-19 vaccine.
Speaker Change: And that's important because, as you know, the Japanese government has, you know, given Arcalis $165 million to help construct that, you know, facility, so it's a very strategic facility.
Speaker Change: plan, not only for the Japanese people, but the government, to protect the people in any future pandemics that should arise. And so that, I think, is why the people over there are very excited about this opportunity.
Thank you.
Speaker Change: And one thing to correct, Yigal, the $4 million has already been shipped. I just wanted to make sure that was clear. Oh, okay.
Understood. Thank you.
Speaker Change: And with no further questions holding at this time, I'll turn the conference back to Joe Payne for any additional or closing remarks.
Joe Payne: Hey, thanks everyone for participating on the call. If there's any remaining questions, please don't hesitate to reach out to our team, and we'll get back to you as soon as we can. Thanks and good night.
Speaker Change: Thank you. Ladies and gentlemen, that will conclude today's program. We thank you for your participation. You may disconnect at any time.
Thanks for watching!