Arcturus Therapeutics Holdings Inc. (ARCT) August 2026 Conference Transcript

Thank you so much for joining. I'm Whitney, one of the biotech analysts here at Canaccord, and it's my pleasure to be joined by Arcturus Therapeutics and President and CEO, Joseph Payne. So Joseph, thank you for being here. I'm going to dive right in. We have a lot to cover in a short time. So just starting with a high-level overview of the company, for anybody who's not familiar, who is Arcturus? Where are you today, and what are you trying to do?

Yeah. So mRNA, well, Arcturus is an mRNA medicines company. We're based in San Diego, and we're a next generation mRNA company with technologies that are differentiated from the other players in the mRNA field. We're very well known for our delivery technology, especially for inhaled messenger RNA delivery to the lung and also injectable mRNA to the liver. We have a vaccine enterprise that is, we have an approved COVID vaccine in 32 countries that we've regained control over, strategic control over, which is a new development. But we utilize our vaccine enterprise to fund the therapeutics franchise, and we have a flagship lung program for cystic fibrosis. This is an inhaled messenger RNA to treat CF potentially. And we have an injectable mRNA for the liver for a rare liver disease called ornithine transcarbamylase deficiency. So we have these two flagship assets that represent the platform for the lung and the liver. And that's where we're creating a lot of enterprise value. And the fuel for this company comes in part from our vaccine enterprise, where we have an approved product in 32 countries.

So, starting with SIA, which is where we spend the most time speaking with investors. I guess you mentioned a little bit, but what is Arcto32? Can you talk a little bit about the lipid and what it's delivering and kind of how you're getting it there?

Yeah. So there's very successful, since we're in Boston, you know, there's a very successful company here in town that treats cystic fibrosis very well. But most of the CF drugs out there are modulating a broken or dysfunctional transporter in the lungs called CFTR. That is not what we do at Arctura. We're not modulating a broken or dysfunctional transporter. We are building a new one. So Arcturus' drug, ARCTO32, is a messenger RNA molecule that expresses or makes a brand new CFTR protein in the lung. It's delivered with our technology that the trademark for our tech, a registered trademark for our technology is lunar. And so our lipid nanoparticle lunar delivers the messenger RNA to the bronchial epithelial cells after inhalation through a nebulizer. And we not just access these cells, but get into these cells and release the mRNA to express or make the brand new CFTR for these folks. And the initial target population for this drug is class 1 CF, because class 1 is also described as nulls, meaning they do not have any CFTR in their lungs. There's nothing to modulate. So there's no drugs for these people presently. The standard of care is very limited. And so we are pursuing an area of very high unmet medical need with very limited competition. And that's where we are.

Excellent. Okay, so you hit the nail on the head here. Sometimes some of the pushback we get on O3-2 as well, Vertex, they've got CF handled. But as you alluded to, you're targeting for patients that Vertex does not.

Correct. market.

It's not a dress. And so that kind of has reason to the advocacy story here as well. You talked about having enough data from 032 by the end of the year to be able to figure out how to move forward. How are you thinking about the efficacy bar? What are you focused on? And maybe why or why not is what we've seen from Vertex is there.

Yeah. Yeah. So this is the number one question we actually get from investors even today and this morning, because we are guiding a decision to proceed to phase three. That decision is in Q4, is what the present guidance is. And so people are asking, well, what's that decision based on? What's good data? And it's a difficult question to answer because we're the first movers in this space. We're the first in class therapy for inhaled mRNA to treat class 1 CF. So there is no standard to look at. But I think it's helpful to understand in the space, Vertex, who's right here in town, did a heroic job of getting the first modulator approved. And back then, the very first modulator, just over 2% FEV was shown, but they didn't have any other tools to show or to showcase any sort of improvement. And you fast forward a couple decades later, now Arcturus is trying to be the first again, but this time in class 1 CF. But we're looking at not only a lung function measure called FEV, but we are also looking at a lung clearance index. That's a second lung function measure. We have validated quality of life surveys and measures that we're applying that weren't there a couple decades ago. We also have high resolution CT scan technology to take pictures before and after treatment that can be very helpful to look at mucus and mucus plug reduction. And so we have all these tools that Vertex didn't have, so they were quite heroic actually to get, but that precedence had, you know, a small couple percent of FEV and nothing else. so we feel optimistic i guess that we can apply not just fev but collect data for lung clearance index and quality of life measures and high res ct scan and then on top of that we got to leverage a an ongoing or relatively new normative study that's being collected by the cf foundation so they're doing it's kind of a natural history like study they're tracking class one subjects over several years, hundreds of these patients, and we're going to be able to see what a normative path is for class one and compare our treatment path to that. And again, Vertex didn't have that luxury. And so we just don't, we're not just collecting a bunch of data, but we're also should be able to compare a potential phase three trial set of data to normative study. It's a long way of saying the short answer is Arcturus is going to be establishing what that threshold is. There is no threshold that we need to achieve. What we're hearing from the regulators and the CF Foundation in the community is anything positive will be amazing. And what does positive mean? Well, we're collecting the data in real time, and we're going to be able to make a decision based on that. So the higher these numbers are, the more impact, of course, the better. But really we're in the business of establishing what that threshold is because we're the final company remaining in this space and there's just huge unmet medical need and we need to get something across the finish line.

So can you talk a little bit more about what data you'll have or you're waiting for? So is it a certain number of patients with a certain amount of followers?

Are you waiting for the CF Foundation data that you mentioned? What are the reasons? So, yeah, the data that we're collecting presently is in, it's called our fourth cohort in phase two. We're enrolling up to 20 subjects. We're enrolling not just in the United States, but also in Turkey and Israel. Turkey and Israel have high prevalence rates of class one CF, up to 40% of the subjects at these sites are class one. So we've now determined the cadence of screening and enrollment to be encouraging, and so that gives us the confidence of the timing of the decision being in Q4 based on that. But the data we're collecting, we're not just enrolling 20 subjects. We are enrolling two lung function measures, which is FEV and LCI. There are two different types of lung function measures that can be very important for regulatory engagement and discussions to get things approved. But then there's also a lot of supportive data on the, there's two separate surveys that are validated, quality of life measures. We've got to, these people can't all improve lung function. We've got to improve how they feel as well. Do they feel better? And that's what the quality of life survey indicates or measures. And then the picture is worth a million words. And from our direct, in my personal experience. When we show a before and after image in a high-res CT scan of these lungs, that's going to prove to be very valuable for the community, but also to the regulatory agency. They requested, they asked us to take these images to support this package that we're putting together. So there's, altogether, it's five data that we're collecting throughout this year in up to 20 people.

Just to double check, will all 20 patients be completed in fourth quarter or if there will be some subset that you'll be comfortable with?

Yeah, it's an open-label study. We didn't guide the completion of enrollment because we just don't know. It's an open-label study that's presently recruiting. But we did feel comfortable that we'll have sufficient data to make a decision. And the reason we're guiding the decision is very important. Normally, a CEO like myself, we guide for data or guide completion of enrollment, but we're guiding a decision to proceed because that decision triggers an elevated contribution from our partner, Thermo Fisher, to help address the phase three budget up to $40 million. So it's a big material event for us. So that's why we're guiding the decision to proceed, because it's tied to the Thermo Fisher deal and how we address our phase three budget for the CF program.

Okay. I'm glad you brought that up, because that is another question we get from investors a lot, is why would they tell us the decision but not the data? Just to confirm, you do plan to share the data.

The decision always comes before the data, especially in an open-label study. The board, once we have that decision to proceed, will proceed. But as soon as that happens, you have the good problem that people were like, well, what was that decision based on? So, and yes, the short answer, of course, we'll be able to share the data. But exactly when, we haven't provided that guidance.

And on Thermo Fisher, you recently announced that deal. So can you talk a little bit more about that? What does that bring, both monetarily, but also from manufacturing's capacity perspective?

Yeah, so the CF product is very unique. And in order to communicate how unique it is, I need to start with the product that Arcturus already has. So Arcturus has a product, and it's approved in 32 countries. It's a COVID vaccine called CoStafe, but that is dosed 5 micrograms once a year. five micrograms once a year. The CF program is 10,000 micrograms every day. So it's a significant commercial manufacturing opportunity for big players. So the large manufacturing players were aware of this, and we had the opportunity to engage them and create a competitive situation where we ultimately ended up selecting to work with Thermo Fisher on this product. And why this deal was very unique is because normally, as a CEO, when I do a deal or get money, I usually sell stock or I sell a royalty for an asset. And this was neither. This was support for a phase three program in exchange for commercial manufacturing rights. Very unique, one-of-a-kind deal. But the reason it was created is because, number one, the CF is a unique product, 10,000 micrograms per day. That's a significant commercial manufacturing opportunity. And because it was just a competitive situation where these manufacturers had to get creative, and so did we, in order to get it involved. And then it checked the boxes for us. We didn't want to dilute the company or the asset with this type of deal. So it checked all the boxes. We were very pleased with the Thermo Fisher team. investors often ask did Thermo Fisher have access to the data and and the the the answer is yes obviously they not only went under CDA but they of course had access to the e-room and got to understand all the the the data that we've collected so far and then once it's signed you should understand that they have they don't have open access to the open data that there's periodic updates. I think it's every few months that we give them updates after that.

Great. Okay. And just to last question on this, what are they doing now? What are they doing at risk, basically? Why is it important that they saw the data before doing the deal?

Yes. That's a great point. So it's not disclosed. We shared that we wouldn't share the amount of commitment. What is disclosed in the documents with the SEC, the 8K, is that if we make the decision to proceed into a phase three, then they will provide contributions or commit up to $40 million. So if the phase three budget is $80 million, then that would be approximately half, right? But your question is, what are they doing between now and that decision? there is an agreed upon amount. It's meaningful, but we agreed that we wouldn't share the exact number. The larger portion of that $40 million comes up with the decision to proceed, though.

I could ask more on CF, but I'll switch over to ARCT-810, the liver target program. So can you briefly introduce that compound with what is it, what's it delivering, and the oxygen?

Yeah. So ARCT810 is a messenger RNA therapeutic to treat ornithine transcarbamylase deficiency. This is the number one urea cycle disorder. It's a very exciting commercial opportunity for a company of our size. In this disease, there's an enzyme in the urea cycle called ornithine transcarbamylase, or OTC, that's dysfunctional. And when you have a dysfunctional urea cycle, ammonia levels rise in your blood, and ammonia crosses the blood-brain barrier, and that's not good. And so we want to normalize ammonia and normalize the urea cycle by, in our case, using a messenger RNA molecule that goes into the cells of the liver and replaces, builds a brand new ornithine transcarbamylase enzyme and satisfies that requirement for the urea cycle to be working normally. And now we're deep in phase two on this program, and we've completed the dosing and the enrollment in Europe and U.S., and we're very pleased to report that we'll be sharing data, providing the data readout for that later this quarter, so before September 30th, and concurrent with that data readout, we're also going to be providing granularity on the regulatory path forward. We've had a couple type C meetings with the regulatory agency, and we've already communicated that those meetings were productive, successful. We were very pleased with the outcome of those studies in terms of direction and clarity and so we're conducting accordingly but we'll be able to give some more color and definitely more granularity on the regulatory path with the data readout that's coming in here shortly later this quarter. So again the data readout concurrent with the regulatory plan forward that communicates in detail what we learned from those multiple multiple type C meetings. So that's a big event for us. That's, we believe, material. So we'll, we look forward to that.

Okay, got it. And just to go back to the opportunity, from an investor pushback perspective, sometimes you go, well, OTC is very competitive. There's already, again, these patients are already well served. So what's the pushback there? Why are you still moving forward?

Oh, great, great question. You're right. There used to be a lot more than six or seven players involved, but in the messenger RNA space, it's just us. So that's wheedled down. So we're the only injectable messenger RNA play remaining. With respect to gene editing, unfortunately, as that program has progressed, it looks like there's some challenges with the younger neonates and babies on that side. on the gene therapy side there has been some success in approved product that addresses a portion of the stable adult population and the remaining question is how long will that last for but the lion's share of the commercial opportunity is in pediatrics the lion's share of the opportunity is in the x-linked boys this is an x-linked disorder genetic disorder where that is potentially fatal for young males. And that's where the unmet medical need is. That's where the commercial opportunity is. But looking outside of that, we could usurp a big chunk or a majority part of this, of the OTC division community because of the comments I've just made. I think that for the liver, which is a transient organ that regenerates, utilizing a transient mRNA therapeutic strategy may be ideal ultimately for this population. And because there's so many different genetic versions of this disease, having an attenuatable, adjustable therapeutic is also going to be an attractive feature of our platform. So the short answer is I think we're very confident that we'll capture, if this is proven to be successful, it's a good opportunity for us there's it's uh an attractive market okay and can you talk a little bit more about the endpoints and i guess some of the discussions we've been having with regulators around what uh yeah i know more about the design later but i guess what are the endpoints in the orbit yep when you're in the rare disease space and you're doing trials of small numbers it's very important to have biomarkers and we have not one but three and so we're we're fortunate to have ammonia as a biomarker, glutamine as a biomarker, and urea itself. So this is a urea cycle. So we can measure urea output. So we can measure that. Ammonia is a surrogate biomarker. It's very well understood. The FDA and the medical community know that elevated ammonia is bad. So if we can reduce that, that'll be, especially in children, in severe disease, in the pediatric space, I think there's going to be elevated attention to the ammonia normalization and reduction of ammonia. But glutamine is also of particular interest because most of these OTC deficient subjects are on ammonia scavengers. So the ammonia might suppress, the ammonia scavengers might suppress the ammonia level. However, they're still have high elevated glutamine and that glutamine crosses the blood-brain barrier and then converts back to ammonia. So even though these people are doing everything the doctors ordered, they're following their diet, their exercise regimen, they're taking their ammonia scavengers, they still feel weary because of glutamine, and they look at their blood levels. And we've seen very consistent high levels of glutamine, even in people that are on ammonia scavengers. So normalizing glutamine is going to be a key part of the story. But ammonia, glutamine, and urea itself. There's other biomarkers. You can imagine all the amino acids impacted by the urea cycle, but those are the primary three that we're collecting data on.

Okay, perfect. So taking a big step back and just thinking high level about the opportunity again, so for CF, you mentioned class one patients, it's roughly what, 10,000 patients?

Yeah, yeah, 10,000. Now, it's not just class 1s. There's a big chunk of the population that does not respond to modulators as well, so we'll call them modulator non-responders, but yes, the initial target group is class 1, folks.

10,000?

10,000 plus, yeah.

10,000 plus CF, and then OTC, the initial patient numbers.

It's around 10,000 as well, and U.S. and Europe. That's what the published numbers indicate.

Okay, so $20,000 total, orphan drug pricing, meaning, you know, yes.

Well, the pricing for OTC is $1.2 million for Revicti, and that doesn't functionally cure the disease. We're in the business of providing that if this is successful. And there is nothing for Class 1 CF right now, so a huge unmet need that we're very motivated to satisfy.

So two programs, large unmet need, large TAN in both, and you have phase two kind of approaching potential phase three for both, which I think some people lose sight of as they talk about So can you talk about your cash runway maybe, and what are the key systems that are concentrated in your runway, which I believe is through Seton after 20-20 minutes?

Yes, yep.

And how are you thinking about the capital needed to continue to unlock the...

No. Yeah. So we just came out of an earnings call. We disclosed $191 million plus a $12 million infusion of cash from a partner. That takes us over $200 million. And that takes us through 2028. So more than two and a half years of runway. So we have a strong balance sheet and that's attractive in this biotech market that we're in and we intend to keep that. In terms of the ambition to develop both of these rare disease programs independently, that would be ambitious. I don't think it's realistic that our present cash would allow us to complete two phase three studies. So we hope to have the good problem of wanting to do both of these. But if both are successful, we've been public before that it's likely that we will partner the OTC program in order to pay for the CF program. And we have the ambition to take that all the way to completion. And then there's one caveat, a big asterisk, is we just regained control, 100% control of our vaccine enterprise. We have that partnered and that those rights have now been returned and the market appreciated that when that was announced. And there's good reasons for that because even though people do not like to talk about COVID vaccines very much, they have to appreciate that it's a large market. I chat GPD'd this like you guys can as well. RSV is a $2 billion market. Shingles is a $6 billion market, shingles vaccine. You got pneumonia that comes up around $9 billion this year. Flu vaccines, $9.5 billion. But COVID, $10 billion. It's still this year. That's where we are. So you may not want to talk about COVID because of the pandemic. But as an investor, you need to appreciate it's a massive market. And there's a lot of large vaccine players that may be interested in potentially partnering with us. And so we're going to explore that opportunity. as well as now that we have 100% control of it, expand the commercial opportunity. It is approved in 32 countries. We already have a partner in Japan that's distributing our COVID vaccine this season in Japan.

Perfect. All right. With that, we are out of time. But thank you so much for joining. Thanks all for listening.