Arcturus Therapeutics Holdings Inc. Q4 FY2020 Earnings Call

Greetings, and welcome to the Arcturus Therapeutics Fourth Quarter and Full Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Neda Safarzadeh, Head of Investor Relations, Public Relations and Marketing. Thank you, Neda. You may begin.

Thank you, operator, and good afternoon, everyone. We are joined today by Joseph Payne, President and CEO; Andy Sassine, CFO; Dr. Pad Chivukula, CSO and COO; Dr. Steve Hughes, our Chief Medical Officer; and Prof. Ooi Eng Eong, Deputy Director of Emerging Infectious Diseases program from Duke-NUS Medical School, who is also in Arcturus' Vaccine Platform Scientific Advisory Board. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and any responses to questions on this conference call constitute forward-looking statements that involve substantial risks and uncertainties for the purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. Any statements other than the statements of historical facts included in this communication, including those regarding the company's supply agreements and potential supply agreements, the potential future manufacturing and other operations, the status and results of clinical development programs, the planned initiation, design or completion of clinical trials, the likelihood of success of the company's coronavirus COVID-19 vaccine candidate or other product candidates and the company's current and future cash and financial position, are forward-looking statements. Actual results and performance could differ materially from those projected in any forward-looking statements as a result of many factors, including, without limitation, an inability to develop and market product candidates, unexpected clinical results, and general market conditions that may prevent such achievements or performance. Such statements are based on management's current expectations and involve risks and uncertainties, including those discussed under the heading Risk Factor in Arcturus' most recent Annual Report on Form 10-K with the SEC and in other filings that Arcturus makes with the SEC. Except as otherwise required by law, we disclaim any intention or obligation to update or revise any forward-looking statements, which speak only as of the date they were made, whether as a result of new information, future events or circumstances or otherwise. Now it is my pleasure to pass the call to Joe Payne, President and CEO of Arcturus. Joe, please go ahead.

Hi. Thank you, Neda, and good afternoon to all. Thank you for joining the Arcturus' quarterly call today. I'd like to begin by congratulating J&J on their recent approval of their one-shot COVID vaccine. I'm sure their team has been working very hard, and it's great to see their efforts being rewarded with success. No doubt the world wants access to one-shot vaccines this year in 2021.

Thanks very much, Joe. Next slide please. As you may recall at the last investor conference call that we had, I showed this slide on the Phase 3 trial data of BNT162b2. And the onset of vaccine efficacy of this RNA conventional RNA vaccine was at day 12 after the first dose. As you can see on the red line, the curve for the vaccinated arm pretty much flattened from that point onwards. The adaptive immune responses that coincides with this onset of efficacy could be very informative on the necessary elements of immunity against COVID-19. Next slide please. So we took advantage of the rollout of this conventional RNA vaccine in Singapore to define what components of the adaptive immune responses develop coincidentally with vaccine efficacy onset. We found that BNT162b2 vaccination produced binding IgG responses in 80% of the participants at this time. Interestingly, there are very few antibodies that were neutralizing or even blocking the SARS-CoV-2 and the ACE2 interaction and 15% were positive on SARS-CoV-2 PRNT. In contrast, 85% were positive for virus-specific T cells on our ELISPOT assay. The median number of spots per one million cells were 28 and 13 on days 10 and 21, respectively, after the first dose. These data suggest that virus-binding antibodies and virus-specific T cells are sufficient to protect against COVID-19. Our findings are also consistent with many other studies that show that neutralizing antibodies are not absolutely required for protection. So our findings with the conventional RNA vaccine provide a context for us to compare what we have found in our Phase 1/2 trial with ARCT-021. This vaccine also produces a high seroconversion rate at day 14 after the first dose, 81%, which by the way was actually done using a more stringent serial dilution series rather than optical density readings which we used for the conventional RNA vaccine analysis. Moreover, seroconversion was 100% by day 36. So the antibody responses were very encouraging. All of our participants develop virus-specific T-cell responses on the same ELISPOT assay, although there's a four-day difference that comes from the self-replicating RNA vaccine are ten times greater than conventional RNA vaccine. These results again demonstrate the strong potential of ARCT-021 being a single-shot vaccine against COVID-19. This data is being under review right now and should be available as a preprint online soon. I'll hand this time over to Dr. Steve Hughes, Chief Medical Officer of Arcturus. Thanks.

Thanks. I'll begin with ARCT-810, our therapeutic candidate for ornithine transcarbamylase (OTC) deficiency. ARCT-810 utilizes Arcturus' LUNAR lipid-mediated delivery platform to deliver OTC messenger RNA to the liver, the primary target tissue in OTC deficiency. Expression of the normal ornithine transcarbamylase enzyme in the liver of patients with OTC deficiency has the potential to restore normal urea cycle activity, preventing neurological damage and the need for liver transplantation. Our ARCT-810 program is supported by preclinical data in OTC-deficient murine models demonstrating that dosing of LUNAR-OTC results in robust ornithine transcarbamylase protein expression and activity resulting in improvements in new agenesis, plasma ammonia, and increased survival. We have already completed a Phase 1 dose escalation study in healthy volunteers. That study demonstrated that administration of ARCT-810 was associated with favorable tolerability and an attractive pharmacokinetic profile going up to the top dose of 0.4 milligrams per kilogram, which is well within the anticipated therapeutic range based on data from our animal studies. Importantly, the lipid was not detectable beyond 48 hours after dosing. We could actually still detect the messenger RNA at the last time point that we assessed, which was two weeks after dosing. The persistence of messenger RNA gives us optimism that we can potentially extend the dose interval beyond a few weeks. We have also initiated a Phase 1 dose escalation study evaluating ARCT-810 for the first time in patients with OTC deficiency. We've been enrolling this study in the US but have recently received approval from Health Canada to also enroll subjects in Canada as well. We look forward to obtaining initial results in this study during the coming year. We are on track to submit a clinical trial application for our multiple-dose Phase 2 study in OTC deficiency patients in Q2 of 2021. Turning now to ARCT-032 our therapeutic candidate for cystic fibrosis. ARCT-032 is designed to result in the expression of a functional copy of messenger RNA encoding the transmembrane conductance regulator, or CFTR in the lungs of CF patients. CFTR is a membrane protein and chloride channel that is deficient in CF patients causing severe pathology including lung dysfunction. ARCT-032 utilizes Arcturus' LUNAR lipid-mediated aerosolized platform to deliver CFTR messenger RNA to the lungs. We believe that this platform has the potential to restore normal lung CFTR activity thereby correcting the underlying defect causing the disease. The ARCT-032 program is supported by preclinical data from a variety of models, including human and ferret bronchial epithelial air-liquid interface cell cultures, ferrets nonhuman primates, and a CFTR-deficient murine model. These studies have demonstrated the ability to efficiently deliver our LUNAR mRNA technology to the airway epithelial cells following topical and aerosol administration. Additionally, intranasal administration has demonstrated the ability to restore chloride channel activity in the nasal epithelial cells in the so-called nasal potential difference studies in the CFTR-deficient mouse and suggests that our approach has the potential to fundamentally address the underlying deficit associated with CF lung disease. We recently successfully completed pre-R&D interactions with FDA to enable advancement of the ARCT-032 program into the clinic. Our expectation is to submit a CTA for the ARCT-032 program in Q4 2021. We are excited about the potential of this program to benefit patients regardless of the underlying specific genetic abnormality causing their disease, and we are very much looking forward to moving ARCT-032 forward to the clinic. I will now pass the call on to Andy, our CFO.

Thank you, Steve, and good afternoon, everyone. The press release issued earlier today includes financial statements for the fourth quarter of fiscal year 2020, which I will briefly summarize. Arcturus' primary source of revenue is currently from license fees and collaborative payments received from research and development arrangements with our pharmaceutical and biotech partners. For the year ended December 2020, the company reported revenues of $9.5 million, which is down from $20.8 million for the prior year. The decline in collaboration revenues primarily relate to three factors: first, a $5.6 million decrease in reimbursements from CureVac associated with the OTC collaboration that ended in the third quarter of 2019. Second, we received a one-time license revenue of $3.3 million from synthetic genomics in 2019. And finally, we had slightly lower activity with other collaboration partners. On a quarterly basis, total revenue for the fourth quarter was $2.2 million, which was relatively flat when compared to the $2.3 million in the third quarter. Total operating expense for the year ended December 31st, 2020 was $81.1 million compared to $46.3 million for the prior year. The current year operating expenses were partially offset with $15.2 million of funds earned under the Singapore vaccine grant and funds awarded by the CF Foundation. The increase in net expenditures for the year ended December 31st, 2020 compared to the prior year was primarily due to the increased activity in clinical and manufacturing expenditures related to the company's COVID-19 and OTC program, as well as increased personnel costs and other facility costs related to the organizational growth of the company. On a quarterly basis, total operating expenses for the fourth quarter were $33.3 million compared to $23.3 million for the third quarter and $13.8 million in the same period of 2019. Approximately, $8 million of the sequential increase in operating expenses was due to the ramp in the COVID-19 program-related expenses, which included additional personnel, manufacturing and clinical trial expenses. The current quarter operating expenses were partially offset with the $2.7 million of funds awarded under the Singapore vaccine grants and funds awarded by the Cystic Fibrosis Foundation. Our cash balance totaled $463 million as of December 31st, 2020 compared to cash and cash equivalents of $301.1 million on September 30th, 2020. The increase in cash and cash equivalents compared to the September quarter is primarily due to the receipt of approximately $162 million in net proceeds from our December 2020 public offering. Subsequent to the end of the year, we received a $46 million loan from Singapore EDB to help fund the manufacturing of our COVID-19 vaccine program. Based on our current pipeline, the company's cash position is expected to be sufficient to support operations for more than two years. Our strong cash position enables us to fund our Phase 2 and 3 clinical trial for ARCT-021 as well as advance our additional promising pipeline candidates. We hope that ARCT-021 will receive emergency use authorization later this year in one or more countries. Along with our global manufacturing partners, we have laid the foundation to produce hundreds of millions of doses of ARCT-021 annually, and we have ongoing manufacturing campaigns to both meet clinical needs and to stockpile lyophilized ARCT-021 for potential commercial use. I'll now pass the call back to Joe.

Thanks, Andy. Arcturus has continued to make progress with our mRNA-based therapeutic platform and development stage pipeline. We believe we are on track to rapidly progress ARCT-021 into a Phase 3 study and potentially gain emergency use authorization this year. We believe that ARCT-021, as a single administration investigational vaccine, could have a differentiated profile to other available vaccines, positioning the product for potential widespread uptake in the years to come. We're also aggressively moving forward with our broader pipeline and anticipate reporting important clinical milestones from our other programs. We expect that later this year we will obtain initial safety PK and biomarker activity data from our ARCT-810 clinical study being conducted in patients with OTC, and we look forward to starting a Phase II multiple-dose study later this year. I've also been very pleased with the progress our R&D team has made in advancing ARCT-032 for cystic fibrosis. This program utilizing an aerosolized administration of our LUNAR lipid-mediated mRNA technology demonstrates the breadth of potential application of our platform. Our aspiration with this program is to correct the core underlying deficiency seen in cystic fibrosis and to provide a meaningful new treatment approach for the tens of thousands of individuals living with cystic fibrosis. In addition to these advanced programs, our team is also working hard to apply our mRNA platform to develop vaccines and therapeutics for many other life-threatening diseases, and we look forward to providing further updates on additional programs at a later time. At this point, we can go ahead and open the line for questions. Operator, please proceed.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Yasmeen Rahimi with Piper Sandler. Please proceed with your question.

Hi, team. Thank you so much for all the great updates. A number of questions for you. The first one is directed to Dr. Ooi. Dr. Ooi, thank you for sharing the new data with us. Can you comment on if you looked at T cell responses post day 28, specifically maybe at least at day 60 and how those compared to BNT162b2? And then the second question is for Joe. Joe, can you maybe comment on if Arcturus is equipped and ready to go to incorporate new constructs to provide coverage of the variants in Phase III? And then the third question is for you. Will we be seeing the Phase II data before you start commencing Phase III? And thank you for taking my question.

Great. Thanks, Yas. Professor Ooi. The first one is yours.

Okay. Thanks very much. Those are great questions. Yes, we have looked at longer time points for ARCT-021 at day 28 and beyond up to – I forget at actual exact time points, but the work is actually in progress. I mean the high-level summary is that you do see some level of contraction which is normal for T cells, as they switch into memory. But that will be something that we're also going to examine further in an open-label long-term follow-up to look at how well these memory responses will be elicited upon reexposure to the antigen. What is clear though is that the levels both at the acute stage as well as at a contraction stage in this case for BNT162b2 is at day 21. They are all quite a lot lower than what we've seen with ARCT-021. Thank you.

Okay. Thanks. And did you have a follow-up question for Professor Ooi, Yas, or would you like me to address your second question?

I guess just – as he has maybe if I may. Can you elaborate on the contraction that he was referring to?

The contraction occurs during acute exposure, leading to significant expansion of T cells. This is the initial response. Over time, some of these T cells will transition into memory T cells, which then reside in lymphoid tissues or potentially where the antigen exposure happens, such as the skin, muscles, and mucosa. When measuring T cells in the blood, you may observe a contraction. However, what's crucial is that if these T cells can be quickly activated again upon encountering the antigen, it seems they will provide protection. I hope that clarifies your question. I'm not certain if your inquiry was scientific in nature regarding the quantity of cells present.

Thank you. That was helpful….

Sure.

I'll move on to Joe. Yeah, if you want to...

Yeah. Yeah, now with respect to variant coverage, I mentioned earlier that we're closely monitoring and evaluating the COVID variants that are potentially escaping or evading neutralizing antibodies, that in the literature. And there are getting reports on those, right? But cellular immunity may provide broader variant coverage. Cellular immunity may actually be very important for resistant variants that evade these neutralizing antibody titers. I refer you to Dan Barouch's work at Harvard Medical School. He was quoted to say, I'm just looking at my notes here, but he was quoted to say that, vaccine-induced T-cell responses are important for COVID vaccines, particularly for resistant variants that might partially evade neutralizing antibodies. So this is becoming a more well-understood and accepted principle that cellular immunity is important for resistant variants. So that's point number one. Now, having said that, even though ARCT-021, as just was shown by Professor Ooi generates a robust T-cell response, that may be broadly protective. If there is any variant that happens to escape our vaccine, then we're still a messenger RNA vaccine, and it's a readily updatable technology. And we can move quickly if needed.

Thank you, Joe. And will we be seeing the Phase 2 data before Phase 3?

Yeah. So Steve, do you want to address that question?

So we'll definitely be seeing the Phase 2 data before Phase 3. We've got some interim analyses that are going to be conducted fairly quickly and they'll go to our data safety monitoring board for review prior to finalization of our Phase 3 dose. Depending on the nature of the evaluation, it will depend on whether it's worthwhile sharing as an update in any level of detail, because we're conducting more than one interim analysis and they're looking at different things. Some are just looking at early safety responses, and then others are looking at immunogenicity responses. So it's quite likely that we'll issue something brief about the safety and something more detailed about the immunogenicity as that data reads out.

Thank you, Steve.

Thank you. Our next question comes from Seamus Fernandez with Guggenheim. Please proceed with your question.

All right. Thanks for the questions. So, a few questions here. First off, can you guys please talk about your solution to variants? And how you're approaching that in the context of correlative protection that is emerging with FDA's guidance, the EU's guidance? And then, some folks are implying that the WHO may come up with a standardized correlative protection that crosses vaccine. So just hoping that you would comment on your approach to variants and then the correlative protection. The second question is on your Phase 3 trial design plan. Can you just give us a sense of the size of the study and how you're planning to execute it? Would this be a head-to-head type study, a crossover study? And just give us a general sense of the size. And then I have a couple of additional questions.

Sure. Seamus, it's good to talk to you. This is Joe.

Me too. Thanks, Joe.

Plan A, with respect to variants, just to reiterate is that our present vaccine, because of the cellular immunity profile, is sufficient to capture or cover any variants that are out there. If there are variants that are challenging or escape or evade protection with our vaccine, we're preparing. We mentioned we're not only monitoring but evaluating the variants that are escaping these neutralizing antibodies and we'll be well-positioned to swap out any manufacturing run with an upgraded variant if needed. Does that address your question?

I guess the question is how exactly we are covering this, Joe. There are several different approaches we're considering, including disease prevention and the prevention of severe disease. There are many ways to define that.

Right. Understand. Steve, do you want to get the first crack at that?

Yeah. So I think there's a couple of parts in answer to the question. One is the FDA very recently, I think within the past week have given updated guidance that includes specific appendix on how to bring forward new vaccines or variations on existing vaccines for emerging variants. And then the second piece is the effectiveness of the current vaccine against emerging variants. So maybe just dealing with the second piece first, which is really you need to conduct a clinical trial with efficacy-based outcomes in order to address that. And then people that have been vaccinated that end up contracting COVID then actually sequencing the virus that they've got to see whether it's a variant or not and that can give you an idea of whether you have active or adequate coverage for all of the variants or whether there's one or more particular variants that are escaping your vaccine and we intend to do that. The second piece is being able to rapidly pivot with your vaccine platform to cover new variants. And we're seeing some of this with the other mRNA vaccines at the moment where they're rapidly retooling manufacturing a vaccine with a slightly different sequence and then taking that forward into early-phase clinical trials to generate immunogenicity data, which then hopefully can be used to show activity against the variant. In order to really go down that route, which is the route that's been put forward by the FDA, you require efficacy data from your vaccine platform. So we're moving aggressively forward with our Phase 3 clinical trial that will generate the body of efficacy data that we need to then very quickly pivot to utilize that data to fast track subsequent vaccines if they're necessary. And at this point, we don't know whether we're going to need different vaccines for at least the variants that are out there at the moment. We believe that the T-cell coverage that we're seeing with our vaccine positions us well for coverage against all of the variants. But if it turns out that we do need additional coverage, then we can leverage the clinical data that we'll have from our Phase 3 program that we're about to kick off to very rapidly bring forward new variants based upon immunological correlative protection as they emerge.

Great. As we consider the design of the Phase 3 study, can you help us understand the different points in time from which events can be counted? It seems that some two-dose companies benefit significantly from this in terms of their reported efficacy. Can you provide insight into how you plan to execute your Phase 3 study and what endpoints you are discussing with the regulatory agencies in the countries where you intend to operate?

Yeah, sure. So it's going to be a randomized placebo-controlled study. Our comparator's placebo, it will be a one-to-one randomization the same as the other studies or most of the other studies at least that have moved forward and got emergency use authorization or conditional approval at the moment. It's going to be several thousand participants in the region of 10,000 to 15,000. And it's going to be several different countries. We're not disclosing the actual countries at the moment, because we're going through the process of discussion with the regulators and doing feasibility at individual sites to choose from our shortlist the countries that are most tractable for a rapid study start-up. But in general terms, we're looking at countries that have a high incidence of COVID at the moment so that we can collect events quickly. That have a very short regulatory approval process in terms of approving the clinical trial start-up. And also, countries that have a low vaccine penetration and are predicted to continue to have a low vaccine penetration at least through the first four to six months of the study that allows us to collect all of our events that are needed and the safety follow-up that we require to get registration. I think it's inevitable that after a period of time, participants that have been vaccinated with placebo are going to have to cross over. And we've seen that with the studies that are – where they've already got emergency use authorization, they're now allowing crossover. But the important thing is that we don't cross over until we've collected all of our events and that's what we're planning at the moment.

Great. And maybe just as a one follow-up question. In terms of just the Phase 2 study data that you guys know so far, can you just give us an update on how many patients have been dosed? Is the safety actually known to the team? And is it unblinded? And is there anything that you would comment on – with regard to the Phase 2 study?

So I can tackle that question as well. So we've vaccinated over 500 people at the moment. I don't have the most up-to-date figures from today, but it was definitely over 500 as of Saturday. No dosing was performed on Sunday. Where we don't – we haven't unblinded the data at the moment, but we do have a safety review committee that is actively looking at the data in an ongoing fashion but – in a blinded fashion. In broad terms, we haven't seen anything in the Phase 2 data that is markedly different from what we've seen in our Phase 1/2 study. Although, of course, we're blinded to dose so we don't know what's happening at the different doses, but at a very high level the data looks very similar to what we've seen in the Phase 1/2 study.

Okay. Great. And this will be my last question. Any second doses? Have any of the second doses been executed in the study as yet, or is it still too early?

Yeah. So a number of people have received a second dose already. I don't have that number to hand at the moment. But it's more than a few. And even with the second dose, we're not seeing anything remarkable. Thanks, Seamus.

Thank you. Our next question comes from Nick Abbott with Wells Fargo Securities. Please proceed with your question.

Hey, Nick.

Hi, guys. It's Joe on for Nick. Congrats on all the progress, and appreciate you taking the questions. Two from us. Maybe just further on the Phase 3 design, without disclosing specific countries, how do you think about site distribution in terms of major geographies? I'm assuming it's primarily ex US, and what consideration will be given to the prevalence of variant strains within the countries you select? And then beyond that, in the Phase 3 design to what extent do you intend to characterize the T cell immunity component to the story? And then secondly, on the recent licensing deal with Alexion, is there any additional detail you can provide in terms of the specific technology that was licensed? And if and when you expect the technology will be transferred to your manufacturing partners? And could this technology potentially accelerate your prior guidance of hundreds of millions of doses annually?

Great questions. The first one will be addressed by Steve and then I can handle the Alexion question.

Okay. So, thanks. All great questions. With regard to the Phase 3 study, we're focusing on geographies where we can do placebo-controlled clinical trials and where the COVID incidence rate is high. We're not focusing so heavily on emerging variants, because it's difficult to predict and stay ahead of that. So for instance the UK variant has a relatively low prevalence in the United States at the moment, but is predicted to be a dominant strain by the end of March based upon some models. And that timeframe would obviously be within the time frame for recruiting a clinical trial. So trying to stay ahead of the variants, I think is futile. So we just have to manage that within the clinical trial. And as we said, we're confident that because of the strong T cell responses that we're seeing that we are going to actually have good coverage against the variants. In terms of – I forgot the last part of the Phase 3 clinical trial question. Would you mind just repeating it?

Yes. To what extent will you measure and characterize the T cell immunity component to the story?

Yes. So, I think, in the Phase 3 study, that's more challenging. And we are doing more T cell work in our Phase 2 study. So the additional T cell data is going to be coming out. Our partner that's conducting the lab work is just in the process of validating those assays at the moment. So we'll be able to provide the results of that in due course. In the Phase 2 study, we're not currently planning to conduct any more T cell analysis. I don't think it helps us very much to get beyond the body of T cell work that we'll have by then.

Great. And with respect to the second question, the exclusive license that we acquired from Alexion helps us with the technology to support our highly efficient processes to manufacture high-purity mRNA vaccines. Arcturus has three franchises, not just the vaccine franchise, but also a liver and a lung franchise. And these liver and lung areas are systemically or inhaled administrations of messenger RNA, which require a higher barrier of purity. And it's of extreme importance to have high-purity messenger RNA to support those programs. But having said that, we've applied this Alexion IP to the ongoing programs, including our vaccine program. And will this provide advantages? Absolutely, with respect to more efficient processes and higher purities, which is applicable not only to our liver and lung programs, but of course also of importance to the vaccine program as well.

Thank you. Has this technology already been implemented, or when do you expect it to be passed to manufacturing partners? Is it possible to consider that it will be part of the manufacturing runs for Phase 3, or is it more likely that it will be looked at for commercial supply further down the line?

Yes. Pad, why don't you continue?

Sure. Thank you for that question. We have been in discussions with Alexion for quite some time to evaluate their technology, and we've assessed it internally. We believe that these processes can be adapted for our future batches, and that is correct. As Joe mentioned, these will be implemented for our protein replacement applications, and they can definitely also be utilized for our commercial batches of COVID.

Great. Very helpful, guys. Thank you and congrats again on the progress.

Thanks.

Thank you. Our next question comes from Yigal Nochomovitz with Citigroup. Please proceed with your questions.

Hi. Thanks. I have two questions. The first one, with respect to the timing of Phase 2 data, what do you need to see in that data that will provide additional confidence that you selected the 5-microgram single dose regimen? And conversely, what data from the Phase 2 would make you revert to the 2-dose regimen, as well as potentially the 7.5 microgram dose? And then separately, could you just comment on what's different about your technology that allows for lyophilization in contrast to the other mRNA vaccines already commercialized that have the liquid formulation. Thank you.

Steve, do you want to address the first?

Okay. Sure. So primarily, we're just looking for confirmation of the safety data readout from the Phase 2 study. We are collecting immunogenicity data as well. But our first readout, as we move towards Phase 3, is going to be based upon safety. Since we disclosed data back in November. And again, in December, we've had subsequent internal reads on the data that give us a lot of confidence in the 5-microgram dose is really a sweet spot for us. And also, that dose is the one for which, at least in the Phase 1/2 study, we have most exposures and most information. So we think we have sufficient data from the immunogenicity perspective to confidently select that dose. So we're primarily looking at safety data readouts in the first instance. We're also going to have a later immunogenicity interim analysis that allows us to rapidly switch tech if we need to down the road.

If I may add, Steve, the chances of us moving forward with the two-shot vaccine are quite low. As I mentioned in my opening comments, we believe that during the endemic phase of COVID, vaccinations will primarily be single doses for everyone, regardless of their previous vaccination status. People will prefer a single administration, whether for a boost or as a standalone shot. Therefore, we plan to collect our Phase 3 data based on a single-shot format and are encouraged by Professor Ooi's recent data indicating that our vaccine performs well. Now, regarding the second question, Pad, would you like to address that?

Sure. We have been working on messenger RNA for several years. We initially developed it for our protein replacement applications. Since the platform was already functional for those applications, we decided to use it for COVID-19. There is specific expertise required for the lyophilization of nanoparticles that contain these large messenger RNA. Because we began our program a few months after some of the other leading companies, we used that time to develop a lyophilized program which we were able to implement into our Phase 3.

Yes. The Phase 3 study will evaluate our lyophilized version of the vaccine, which we believe is crucial, particularly for countries facing difficulties with the distribution of frozen liquids and the associated cold chain challenges. With a freeze-dried product, there are no complications related to using it once it has melted, which simplifies distribution.

Got it, thank you.

Thank you.

Thank you. Our next question comes from Wangzhi Li with Ladenburg. Please proceed with your question.

Hi. Thanks for taking my question. Maybe just first a follow-up with the lyophilization. Could you further clarify how you've done any bridging study at this moment, or will you do a bridging study to compare the current version before the start of Phase 3?

Will we need any bridging studies, Steve maybe you can comment? Is that what your question is, Wangzhi? Did I...

Yes.

When we began developing the lyophilized formulation, our first priority was to assess analytical comparability. We aimed to ensure that, both before and after reconstitution, the particle size and characteristics were consistent between our frozen liquid formulation and the lyophilized product. This was a critical aspect of our initial evaluation. The second focus was on immunogenicity; we needed to confirm that the immunogenic response observed in our preclinical studies was similar for both our frozen and lyophilized products. We have gathered this data, and now we feel confident in proceeding to Phase 3 based on our findings.

Thank you. I have a question for Dr. Ooi regarding the new data, which was very encouraging. In the press release, it stated that the PRNT reached 100% by day 36, and 59% by day 28. Can you clarify how this compares to the PRNT50? The PRNT50 indicates the utilization of 50% of the virus, so does the 59% mean that 59% of the virus is being utilized on the NDA? Could you help me understand this in relation to the previous data?

Yes, that's a very good technical question. The 59% refers to the proportion of individuals that test positive. We approached this differently; for ARCT-021, we started with a dilution of one in 20, while for BNT162b2, we began with a one in 10 dilution. This allows for a better chance of detecting antibodies at an earlier stage. However, an important number to consider is the titer, which measures the amount of antibody using a method called PRNT50. This indicates the highest dilution at which 50% of the virus is neutralized. We choose 50% because it lies along the linear part of the sigmoidal curve formed when plotting results, maintaining sensitivity. It's important to note that interpreting the titer right now is challenging because we still lack a clear correlate of protection. We don't know if the correct ratio is one in 10, one in 20, or higher. That’s why we believed it was crucial to examine the onset of efficacy from the BNT162b2 trial to determine what initiated protection. Our findings are consistent with Phase 1 data, where even Pfizer and BioNTech could not detect neutralization early on. Everything suggests that protection may involve other aspects of the adaptive immune response beyond neutralizing antibodies.

My last question is about the new variants. Have you conducted any preclinical evaluations regarding the T cell response? It might have been discussed earlier, but is there any data on the T cell response to the new variants with the current vaccine?

Yes. Preclinical evaluation. Pad, why don't you go and address that question?

Yes. No. Of course as Joe mentioned that's something that we're actively evaluating. And we hope to share the data in the near future. But something that we're definitely considering and collecting.

Okay, great. Thanks for taking my question and congratulations on the progress.

Thank you, Wangzhi.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Joseph Payne for any closing comments.

Hey. Thanks everyone. It looks like our time is up and we're going to be closing the call but feel free to reach out to our team as always if you have any follow-up questions. We will be as efficient as we can in our responses. Bye for now.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.