Earnings Call Transcript - ARCT Q1 2024

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the Arcturus Therapeutics First Quarter 2024 Earnings Call. This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations and Marketing of Arcturus Therapeutics. Please go ahead.

Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations and Marketing

Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics' quarterly financial update and pipeline progress call. Today's call will be led by Joe Payne, our President and CEO; and Andy Sassine, our CFO. Dr. Pad Chivukula, our CSO and COO, will join them for the Q&A session. 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. 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. 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. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements. And with that, I will now turn the call over to Joe.

Joseph Payne, President and CEO

Thank you, Neda. It's good to be with you again, everybody. I will begin my remarks with an update on progress regarding our COVID-19 vaccine program. We are excited to initiate the commercial manufacturing effort for Kostaive to support the upcoming fall and winter vaccination season in Japan. We're pleased to report that we remain on track to deliver the initial 4 million doses to Japan in the third quarter of this year. Our partner, Meiji, intends to then distribute the Kostaive vaccine throughout the upcoming fall and winter season. In March, the company, along with our partner, CSL, and their partner, Meiji Seika Pharma, announced that our bivalent COVID-19 vaccine candidate, ARCT-2301, met the primary endpoint of noninferiority in a Phase III clinical study in Japan with 930 healthy adults who previously received 3 to 5 doses of mRNA COVID-19 vaccines. We were pleased to see yet again a superior immunogenicity and neutralizing antibody response of bivalent ARCT-2301 compared to a bivalent conventional mRNA comparator, and this was confirmed for both the Omicron BA.4/5 and Wuhan strains. There were no causally associated serious adverse events with ARCT-2301. Arcturus, along with CSL, also initiated a Phase III study with the monovalent ARCT-2303 candidate vaccine containing the Omicron XBB.1.5 variant. The purpose of this study is to generate additional immunogenicity and safety data for our platform in multiple ethnicities to support product licensure in the United States. The study will also assess the co-administration of ARCT-2303 with the age-appropriate seasonal influenza vaccines. Approximately 1,680 young and older adults are planned to be recruited in the study throughout multiple countries in the southern hemisphere. Our ongoing Phase III vaccine studies showcased the consistent superiority, breadth, and durability of the Arcturus STARR vaccine platform. We continue to make progress in expanding the global Kostaive franchise. As reported previously, we filed a Marketing Authorization Application for Kostaive to the European Medicines Agency, or EMA. The iterative regulatory process continues to advance with the European Commission expected to provide an approval decision in the third quarter of this year. Moving to ARCT-2138. The ARCT-2138 program, or the Quadrivalent Seasonal Influenza vaccine program, through our partner, CSL, is progressing well. As of May 1, 2024, 84 healthy young adults were recruited in the Phase I dose-finding and immunogenicity study and received one of four dose levels of the study vaccine or a licensed influenza vaccine. The recruitment of older adults is ongoing, and the company anticipates Phase I top line immunogenicity and safety data in the third quarter of this year. It is important to emphasize that this flu study will also help us understand how high we can successfully dose self-amplifying mRNA in the multivalent vaccine setting. I'll now move on to our ARCT-810 program. This is our messenger RNA therapeutic candidate for ornithine transcarbamylase, or OTC, deficiency. In April, the company presented Phase I single ascending dose studies for ARCT-810 at the Society for Inherited Metabolic Diseases annual conference. The ARCT-810 Phase I single ascending dose study enrolled 30 adults, randomized 2:1 to receive 0.1, 0.2, 0.3, or 0.4 mgs per kilogram dose or placebo as an intravenous infusion. The Phase Ib SAD study enrolled 16 adults with mild OTC deficiency, and that was randomized 3:1 to receive single doses of 0.2, 0.3, 0.4, or 0.5 mgs per kilogram or placebo administered by intravenous infusion. The results showed that ARCT-810 was generally well tolerated with no serious or severe adverse events in both studies. The encouraging results from ARCT-810 Phase I and Phase Ib studies facilitated the initiation of a Phase II multiple ascending dose study in adolescents and adults with OTC deficiency, which is ongoing in the United Kingdom and the European Union. Subjects are randomized in this study to receive six doses every two weeks of ARCT-810 or placebo randomized 3:1. Moving now to our ARCT-032 program. ARCT-032 is our flagship inhaled messenger RNA therapeutic candidate for cystic fibrosis and is formulated with Arcturus' LUNAR delivery technology. The company is presently conducting a Phase Ib clinical study in New Zealand designed to enroll six to eight adults with cystic fibrosis, with each participant receiving two inhaled administrations of ARCT-032. We will be providing an interim data and progress update for both of our flagship mRNA therapeutic programs, that's ARCT-810 for OTC deficiency and ARCT-032 for cystic fibrosis, on Monday, July 1. And with that, I'll now pass the call to Andy.

Andrew Sassine, CFO

Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the first quarter ended March 31, 2024, and provides a summary and analysis of year-over-year financial results. Please also reference our most recent Form 10-Q for more details on the financial performance. We are very pleased to initiate the commercialization of Kostaive this year. And as Joe mentioned, the initial 4 million doses are planned to be delivered to Japan in the third quarter of this year. As a reminder, Meiji Seika Pharma has an agreement with CSL Seqirus, whereby Meiji will be responsible for the regulatory approval, marketing, distribution and sales of Kostaive in Japan, as well as coordinating the manufacturing of COVID vaccine products with CSL and Arcturus for the Japanese market. The delivery and sales of the vaccine in Japan will trigger our first commercial milestone payment under our CSL collaboration. This is a remarkable achievement since we signed the CSL agreement less than 18 months ago. We will provide more color on the projected milestones and impact from the Kostaive revenue in the fourth quarter of this year. As a reminder, our projected cash runway does not include any revenues from Kostaive or any commercial milestones from the CSL collaboration. I am pleased to announce the engagement of the JPMorgan Investment Banking team to help us monetize our investment in ARCALIS, a 38%-owned joint venture in Japan with partner Axcelead. At this point in time, Arcturus is strategically focused on working with a global group of established CDMOs to support our manufacturing efforts across all of our wholly owned pipeline programs. ARCALIS, located in a strategic biomedical research and development hub in Japan, is poised to become a key player in the global mRNA drug manufacturing landscape. The CDMO is designed to support the production of mRNA vaccines as well as our mRNA-based therapeutics and has already completed the construction of a state-of-the-art mRNA drug substance manufacturing facility. To date, $165 million has been awarded to ARCALIS by the Japanese government. These funds were used to build mRNA drug substance, formulated drug product capability, and to construct a DNA template manufacturing facility. We expect this facility to become a leading manufacturer of mRNA vaccines and therapeutics and the only fully integrated self-amplified mRNA facility in the world. I will now summarize our financial results for the first quarter of 2024 compared to the fourth quarter ended December 31, 2023. Please refer to the press release and our 10-Q for year-over-year financial comparison analysis. Our primary source of revenue was from license fees, consulting, and related technology transfer fees, reservation fees, government grants, and collaborative payments received from research and development agreements with pharmaceutical and biotechnology partners. For the three months ended March 31, 2024, we reported revenues of $38 million compared with $30.9 million for the three months ended December 31, 2023. The sequential increase in revenue was primarily driven by increased activities across all of our CSL programs, including preparation for the commercialization of Kostaive. The BARDA grant revenues of $5.4 million remained relatively consistent sequentially. Total operating expenses for the three months ended March 31, 2024, were $68.4 million compared with $49.1 million for the three months ended December 31, 2023. The sequential increase was primarily related to the increase in R&D expenses. Research and development expenses were $53.6 million for the three months ended March 31, 2024, compared to $36.6 million for the December quarter. The increase in research and development expenses primarily stemmed from the CSL and BARDA programs, as well as our internal OTC and cystic fibrosis program. Additionally, we have increased investments in early-stage and discovery technologies. The company initiated preclinical research related to its Lyme disease and gonorrhea vaccine discovery programs. The increase of $17 million in research and development expenses are broken out as follows: $4.3 million from multiple CSL flu programs, $4.7 million for the Meiji commercial production expenses, and $4.7 million for the next-generation programs. The remaining $3 million was related to increased compensation-related expenses. For the three months ended March 31, 2024, Arcturus reported a net loss of approximately $26.8 million or $1 per diluted share, compared with a net loss of $11.7 million or $0.44 per diluted share in the three months ended December 31, 2023. Cash, cash equivalents, and restricted cash were $345.3 million as of March 31, 2024, and $348.9 million on December 31, 2023. We have achieved a total of approximately $420.1 million in upfront payments and milestones from CSL as of March 31, 2024. We expect to continue to receive future milestone payments from CSL that will support the ongoing development of the COVID and flu programs and three additional vaccine programs by CSL. The expected cash runway extends at least three years based on the current pipeline and programs. In summary, we believe the company remains in a strong financial position and has the resources to achieve multiple near-term value-creating milestones for the vaccine and therapeutic programs. Furthermore, with the anticipated delivery of the Kostaive vaccine later this year in Japan, we look forward to beginning to report potential commercial sales in 2024.

Joseph Payne, President and CEO

Thanks, Andy. We've continued to make excellent progress in our pipeline of mRNA vaccines and therapeutics and advanced our proprietary mRNA and LUNAR delivery platform technologies. We're excited indeed about the initiation of our commercialization process for Kostaive. And with that, I'd like to turn the time over to the operator for questions.

Operator, Operator

Your first question comes from Evan Wang with Guggenheim Partners.

Evan Wang, Analyst

Great, two for me. First, with the therapeutics update on July 1, with the data set now, hoping you can help set some expectations for a number of OTC and CF patients that we'll see and whether you're confident that this will be sufficient number of patients and time course to really interpret. And second, can you walk us through the rationale for the Meiji monetization of ARCALIS, just given the strong cash position?

Joseph Payne, President and CEO

Thanks, Evan, for the questions. With respect to the Meiji monetization or the ARCALIS monetization question, I'll defer that to Andy. But I can address your first question; you asked for further detail around the July 1st meeting that we've announced. We're going to be providing an interim data readout for Phase Ib for the ARCT-032 cystic fibrosis program. We anticipate this to be the enrollment for this to be completed by July 1. We will also be sharing some Phase II data and a progress update for the OTC program, but this will be on a subset of patients, not on a complete set. This information will likely be communicated in the form of a press release. Did I address your question on that one before we go to Andy to address the ARCALIS question?

Andrew Sassine, CFO

Sure. Thanks, Evan, for the question. Obviously, we, as a management team and the Board, made a strategic decision to work very closely with a group of global established CDMOs to help support our manufacturing efforts across our wholly owned pipeline program. So we're kind of in a fortunate position that we were able to attract a lot of very strong investment banks that had expressed an interest in helping us monetize this investment. And we were fortunate to be able to select and work with a prestigious bank like JPMorgan to help us look at strategic options. And of course, you can assume that it's a very well-placed asset for a lot of potential players, especially in Japan with the growth of that market and the approval of the vaccine. We are excited about the growth of ARCALIS. We are certainly going to be there to support them in many different facets, but this is a strategic decision on behalf of our company and management team to become an asset-light and a variable cost operating entity at this point in the stage of our development. Does that help answer your question?

Evan Wang, Analyst

Yes, I'll jump back in the queue.

Operator, Operator

Your next question comes from Liam Hiester with Piper Sandler.

Liam Hiester, Analyst

This is Liam Hiester on for Yas. Just our first question in relation to ARCALIS and Kostaive. What are your expectations around Japan's order potentially in 2025? And then what are the current manufacturing capabilities of ARCALIS, of producing both COVID and flu vaccines? And how is that expected to change in the future? Further moving from there, I think with the OTC and CF programs, do you have any tidbits on potential regulatory path forward in those two programs? And then also with the July 1st data readout, any specific biomarkers that you will be reporting on at that point?

Joseph Payne, President and CEO

Sure. Andy, do you want to address the outlook for ARCALIS and Kostaive and manufacturing capabilities?

Andrew Sassine, CFO

Yes, we're excited about the opportunity for ARCALIS to be producing vaccine for the Japan market soon. They're in the process of getting GMP batches approved for commercialization, and we anticipate that this should occur sometime in the third quarter. Assuming that is successful, it will then be an opportunity for Meiji to order directly from ARCALIS in terms of manufactured doses. With respect to guiding on future orders and potential opportunities, we're going to really have to defer that to our partner, CSL and Meiji. They prefer to lead those discussions and that kind of guidance. Hopefully, you can respect the request of our partners. Obviously, we're pretty excited about the future opportunity for not only the Japanese market but for ARCALIS to be a dominant player.

Joseph Payne, President and CEO

And with respect to your second question, Liam, for both our OTC and CF programs, I think it's safe to assume that we're intending to expand into the U.S. with OTC, not only expand into the U.S. at some point but get access to younger, more advanced OTC deficiency disease so that we can mature that product and the regulatory advancement of that. On the CF side, the Phase II plans are around not only the United States but other countries as well, and we're going to be working closely and have been with the CF Foundation on the design and implementation of that trial.

Operator, Operator

Your next question comes from Myles Minter with William Blair.

Sarah Schram, Analyst

It's Sarah on for Myles. Congrats on another great quarter. So just a couple from us on the 810 program. Can you confirm switching the ARCT-810 dosing format to a three-hour three-step process and then premedicating with acetaminophen and antihistamine in the current Phase II MAD study after observations in the Phase Ib? And just kind of walk us through the rationale for that switch if it was made. And second, how confident are you that we won't see any febrile reactions in the ongoing that portion of the study?

Joseph Payne, President and CEO

Yes. Great question. We had the opportunity to share some of the details around our learnings from Phase I and Phase Ib in OTC at the recent SIMD conference. We learned a lot. What is very typical, and what I've personally experienced throughout my career and those in the field, is you have to understand the rate of these infusion-related reactions early in the trial, and then you ameliorate these or reduce the frequency and address them through adjustments in premedication and the dosing regimen itself. We've successfully done that. I believe that we've identified a more effective, optimized premedication protocol that involves acetaminophen. It's also we're happy to utilize a premedication process that does not have steroids. So it's steroid-sparing, which is important to this population. That was a nice learning that we captured from our early trials. We also modified the regimen. So it's a three-step process for the more conservative and subtle in the infusion process. This is something that is very typical. So it's not something we brag about, that we've removed these infusion-related reactions or at least reduced them significantly because this is something that is typical for this type of product. But rest assured, all these learnings that we've learned in the Phase I and Phase Ib trials have been applied to the Phase II trial, and we'll be able to give an update on that on July 1.

Operator, Operator

Your next question comes from Whitney Ijem with Canaccord Genuity.

Joohwan Kim, Analyst

This is Joohwan on for Whitney. Maybe just a quick two-part question. Assuming you're able to show successful delivery of CFTR to the lungs, subject to LNP, how are you thinking about expanding the inhaled side of the pipeline, whether it's continuing rare disease setting or potential vaccine or something else? And then maybe thinking towards the Phase II, are you thinking about targeting null patients? Or are you more open to broader mutations at that point?

Joseph Payne, President and CEO

With respect to targeting different mutations, I can allow Pad to address that in a moment. But yes, you can imagine the energy at Arcturus, now that we're coming to the closing of the enrollment of Phase Ib and working with the CF Foundation on Phase II. We're excited about what opportunities can we do outside of CF, and so those discussions are dynamic and very fun here at Arcturus. But we haven't disclosed what our next steps are, our next targets in the lung, but there'll be a time and a place to do that. But we are also excited about initiating and getting on to the Phase II trial, of course, assuming Phase Ib is good. We'll provide an update on that on July 1. But with respect to whether we're going to go after other mutations, my initial response is we're going to initially focus on non-modulator-responsive patients. This includes the Class I sub-patient population of the CF community and also those that do not respond to the presently approved modulators. But in terms of other details of the different types of patients, Pad, anything to add there?

Padmanabh Chivukula, CSO and COO

No. I think you've identified the key point, Joe. Our therapeutic approach using mRNA does not depend on mutations, allowing us to target a wider group of patients. However, some other mutations are already well addressed. The greatest need right now is among patients with null mutations, and we will concentrate on that group initially. Nonetheless, we will explore broader indications in the future as well.

Operator, Operator

Your next question comes from Yanan Zhu with Wells Fargo.

Yanan Zhu, Analyst

Great. Congrats on progress. Maybe a first question on the Japan order. Is this 4 million order an initial order, or could there be an additional order for the season? Also, has Meiji set a price? What is the out-of-pocket if we consider local government subsidy?

Joseph Payne, President and CEO

All right. That's a good question for Andy.

Andrew Sassine, CFO

Yes. As I mentioned a little earlier, I think ARCALIS is in the process of getting three GMP batches manufactured and getting them approved so that it could become commercial. That time frame is probably going to be in the third quarter. If they're successful, that certainly opens the door for ARCALIS to deliver additional vaccines, and it will be up to Meiji to make that decision. This is an important catalyst to watch for, and we're supporting ARCALIS in this endeavor. And hopefully, they will be successful with the timeline. With respect to the pricing, I think a lot of people have asked that question. If you look at the Ministry of Health website, there have been a few numbers reported at about $100 per dose, and we've also learned that the market price for Pfizer and Moderna is higher than that. So we're pretty comfortable, and I think Meiji is pretty comfortable with the pricing of the vaccine right now and are excited to start commercializing Kostaive in Japan. With respect to your second part of the question, I apologize, but could you repeat it again?

Yanan Zhu, Analyst

Yes. Out-of-pocket costs after the local government subsidy.

Andrew Sassine, CFO

Okay. Good, yes. We've learned through numerous sources in Japan that the local government, as well as the national government, will subsidize about 80% of the vaccine price, so obviously, very encouraging support from the government. As you know, this is a strategic investment and position on behalf of the Japanese government for the people to protect them in the future because it is one of the only state-of-the-art mRNA manufacturing facilities located in Japan. Japan is committed to protecting their population going forward in the event of any future pandemics or outbreaks, so certainly, a very important strategic decision on behalf of the government. We are very fortunate to be selected by the government and Meiji to be their partner.

Yanan Zhu, Analyst

Great. If I may ask a question about the CF program. I was mainly wondering about whether there is a biomarker that can guide those findings, whether it is in the current Phase Ib or in the next Phase II? How will you identify those? Is it going to be the FEV1, like a functional endpoint, or is there a biomarker that can help in that regard?

Joseph Payne, President and CEO

Yes. Thanks, Yanan. Dosing has been guided largely by safety and tolerability measures in our Phase I and Phase Ib trials. With respect to a biomarker, there isn't one that's driving these decisions. Anything else to add there, Pad?

Padmanabh Chivukula, CSO and COO

No, for this program specifically, it's not driven through biomarkers. That's correct. It's more focused on harder endpoints. In terms of lung volume and FEVs and lung clearance indices, there will be opportunities to address those questions.

Operator, Operator

Your next question comes from Yigal Nochomovitz with Citigroup.

Amin Makarem, Analyst

This is Amin on for Yigal. I have a couple of questions. First, I would like to understand the calculation for this formula. So, if we have $100 per dose and 4 million doses, that totals to $400 million, and your share is around 30%. Is that the correct way to consider your portion of the revenue? Additionally, when will this revenue be recognized? Will it all be in the third quarter of 2024, or will it be distributed over the next few quarters? I have a follow-up question as well.

Joseph Payne, President and CEO

Yes. Go ahead, Andy.

Andrew Sassine, CFO

Yes. No, those are very good questions. We will provide more substance and color in the fourth quarter, and hopefully, you can be a little patient with respect to those questions and answers. With respect to the breakout between Meiji, CSL, and Arcturus, we're really not allowed to comment on that at this point, except to say that we're all very pleased with the economic-sharing opportunity and are grateful to be able to work with three distinguished global partners and especially with their commercial distribution capability, not only within Japan but globally. So our profit share is a 60-40 split with CSL globally on a gross profit basis. So obviously, we can't do that with a third partner. You will have to improvise and assume that it will be split somehow in three ways. That should give you some color that this is a very lucrative opportunity for all three players involved.

Amin Makarem, Analyst

Okay, great. And one more on ARCALIS. What can you tell us about how much your stake at ARCALIS is? Is there any good comp for what the manufacturing side looks like? Or also, what are the timelines you are looking at to monetize this opportunity?

Joseph Payne, President and CEO

Are you asking? I just want to confirm that you got the question, Andy. Okay, go ahead.

Andrew Sassine, CFO

Yes. We're fortunate that there are a number of publicly traded comps in the United States that should give you a perspective on the valuation of CDMOs participating in the mRNA space. You can also take a look at what Aldevron was purchased for from Danaher recently in the last two years. Catalent was acquired as well, and there are a few other publicly traded comps that you can evaluate. The market is very attractively valued because of the growth potential for this mRNA therapeutic going forward. Hopefully, the appropriate party that wants to be part of growing these operations will help develop it. We believe that's our goal, to work closely with them.

Operator, Operator

Your next question comes from Ed Arce with H.C. Wainwright & Company.

Antonio Arce, Analyst

Great, and congrats on the progress so far this year. A couple of our questions around Kostaive and ARCALIS and that order coming up later this year have been answered. But I wanted to get back to your therapeutics pipeline and, in particular, the two programs with an update on July 1st. I was hoping that you could share some granularity on the data that you expect to present on that Monday as well as what are your data thresholds for success in both of those programs to support further development.

Joseph Payne, President and CEO

Yes. Good question. Yes, it's an important day for us this July 1st meeting, for sure. I appreciate the question. The interim data set for the Phase Ib ARCT-032 CF program primarily focused on safety and tolerability of two administrations of this therapeutic. We may be able to give additional granularity or guidance on the dosing and the specific regimen we are utilizing. It provides another opportunity to give more details or guidance on the subsequent Phase II trial. The primary objective is to establish safety and tolerability of two inhaled administrations of this product and help people understand the dosing and the regimen we are pursuing for Phase II. With respect to ARCT-810, I mentioned it is on a subset of patients. It won't be the complete enrollment. We are looking for biomarker changes, primarily from a data perspective, that unlike the patients in Phase I and Phase Ib, these Phase II patients are more advanced. There's also adolescents participating in this trial, so more variability in biomarkers from the onset. What we'd like to see is some biomarker changes there, and there'll be more information to provide on July 1st. Was that helpful, Ed?

Operator, Operator

Your next question comes from I-Eh Jen with Laidlaw & Company.

Yale Jen, Analyst

Both are related to the Japan part. The first one is that the Japanese government has, I believe, funded the ARCALIS construction and production. Would that number times your share of the company will be a proxy for the potential value of that asset? And then I have a follow-up.

Joseph Payne, President and CEO

Andy?

Andrew Sassine, CFO

You can assume that the funding provided by the Japanese government was entirely in grant form. Our partner Axcelead has collaborated closely with our construction partners in Japan to build this factory. It's safe to say that the costs to construct this state-of-the-art facility, which includes three different buildings on a single site, exceed $165 million. This amount is part of the overall investment, but there is significantly more capital that has been contributed through investments by Axcelead and other co-shareholders and equity partners involved in this joint venture. I hope this gives you a clearer picture of the capital involved, which is quite substantial.

Yale Jen, Analyst

That's very helpful to establish some foundational thoughts. My next question is regarding the 4 million doses expected to be delivered in the third quarter. What COVID strains is the vaccine targeting?

Joseph Payne, President and CEO

That's a great question. The WHO came out and announced that the JN.1 variant was going to be the variant of concern or focus for this upcoming fall and winter seasons. The PMDA traditionally listens carefully to that recommendation and aligns with it. So I think it's safe to assume that the JN.1 variant is likely the one that we're referring to with respect to the 4 million doses. But the formality of that announcement will likely come from Meiji.

Yale Jen, Analyst

Okay, great. And maybe just to squeeze one more for Andy. Starting for the last two quarters, you have the grant revenue from BARDA. Should we anticipate this figure, from a modeling purpose, to continue quarter-over-quarter or is that more lumpy?

Andrew Sassine, CFO

That's a very good question. We don't provide guidance typically with respect to quarterly milestones that we anticipate because they are dependent on certain variables that need to be achieved and targets that we need to achieve. Sometimes those targets can flip from quarter to quarter. It's not a linear progression model, right? I prefer to avoid quarter-to-quarter type of guidance and prefer to focus on our three-year projections and the ability to determine, within a reasonable timeframe, how much milestone we should earn within a year or two or three. A lot easier to do that versus quarter-to-quarter. I hope you can appreciate that. I'd love to give you more color. Maybe in the fourth quarter, when we begin to ship Kostaive revenues and collect the commercial milestone, hopefully, that will enable us to have a little more quarter-to-quarter perspective. But I prefer to remain conservative and guide you when I have a better assessment of what's going to happen in the near term. Hopefully, that will help answer your question.

Yale Jen, Analyst

Absolutely. And congrats on the progress.

Operator, Operator

There are no further questions at this time. I will now turn the call over to Joe for closing remarks.

Joseph Payne, President and CEO

We appreciate all the participation on the call. If there are remaining questions, please don't hesitate to reach out to our team, and we'll get back to you. Thanks to everyone. Good night.

Operator, Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.