Ladies and gentlemen welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead Vince.

Thank you, Jessi. Good afternoon everyone. Thank you for joining us today to discuss Arrowhead’s results for its fiscal 2021 second quarter ended March 31, 2021. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our pipeline; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. In addition, James Hassard, our Chief Commercial Officer, and Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine, will be available during the Q&A session of today’s call. Before we begin, I would like to remind you that comments made during today’s call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including without limitation those with respect to Arrowhead’s goals, plans, and strategies are forward-looking statements. These include statements regarding our expectations around the development, safety, and efficacy of our drug candidates, projected cash runway, the receipt of future milestone and licensing payments, and expected future development and commercialization activities. These statements represent management’s current expectations and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Arrowhead disclaims any intent and undertakes no duty to update any of the forward-looking statements discussed on today’s call. With that said, I’d like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?

Thanks Vince. Good afternoon everyone and thank you for joining us today. As we have discussed in the past, our driving focus has always been to bring our technology to patients who can benefit from it. This means treating all types of diseases, both common and rare, and getting to any part of the body. Put simply, it means going to where disease is, from a population standpoint and a physiological and anatomical standpoint. As such, we are constantly working to expand the reach of our products to address various populations by scaling our production capabilities, improving administration convenience, and optimizing dosing schedule. We are also constantly striving to expand our proprietary TRiMTM platform to reach new cell types and address new disease areas without adequate treatment options.

Thank you, Chris, and good afternoon everyone. Since we just reported top-line results from the 12-month biopsy of the ARO-AAT 2002 open label study and we plan on reporting full data on the first five patients shortly, I want to talk about that program first. As Chris mentioned, the consistent fibrosis regression at these early timepoints was unexpected and very exciting. Importantly, we think they demonstrate the clear biological relationship between intra-hepatic Z-AAT and the downstream cascade of events that lead to liver inflammation and fibrosis. The relationship between Z-AAT and fibrosis is a key link. The idea is that substantial reduction in accumulated Z-AAT protein may allow the liver, even at the stage of cirrhosis, to reverse this cascade and ultimately heal and remodel itself. So, what is next? If you recall, the original idea for the SEQUOIA study was an adaptive design Phase 2/3 study with a dose selection stage and then 2 years of treatment at the selected dose in additional patients. Given the encouraging data we have seen in the 2002 open label study, we thought a potentially faster route to NDA would be to make SEQUOIA into a more traditional Phase 2 study, then discuss approvable endpoints with regulators in the context of all the data we will have generated. We are nearing completion of enrollment of the 36 patients in the SEQUOIA Phase 2 and expect to have 12-month paired biopsies for them next year. In addition, we expect to have data from the 16 patients in the 2002 open label study, which gives us approximately 50 patients with paired biopsies. We will also be able to compare data from multiple timepoints and with different dose levels. For an orphan disease, this is a substantial amount of data. We look forward to discussing the rich data set with regulators. We feel very strongly that we will have a comprehensive picture of how AROAAT performs. I can’t say that this will be enough to file an NDA, but we believe the data continue to support some form of accelerated path to approval. ARO-AAT is being co-developed with Takeda. We are still leading development and regulatory interactions at this time. The plan is to transfer the IND and give the lead to the team at Takeda, once the Phase 2 studies are complete. As Chris mentioned earlier, we expect ARO-ENaC, ARO-HSD, and ARO-HIF2 to have initial interim data readouts over the next couple months. Since these are preliminary results from ongoing studies, we will likely provide highlights in a press release and then present a fuller data set at an appropriate medical meeting. Let’s talk about what data might be included and which cohorts are available for each program. I will start with ARO-ENaC, our inhaled RNAi therapeutic candidate designed to target the epithelial sodium channel to treat cystic fibrosis, or CF. CF is a rare disease caused by a genetic mutation that leads to mucus buildup in the lungs. It is characterized by airway dehydration and reduced mucociliary transport. Patients with CF can have difficulty breathing and experience frequent and persistent lung infections. The current strategy is to administer ARO-ENaC in what we call dose cycles. Each dose cycle is three consecutive days of receiving a nebulized dose of ARO-ENaC, or placebo. Repeat dose cycles occur three weeks later. So, for example, if a patient receives two dose cycles, they will receive a nebulized dose on day one, two, and three, and then again on day 22, 23, and 24. ARO-ENaC is in a Phase 1/2 dose-escalating study. We have administered ARO-ENaC in 16 normal healthy volunteers, who received a single dose cycle at four different dose levels, to assess safety and tolerability. We have also administered ARO-ENaC in an additional 12 normal healthy volunteers, who undergo bronchoscopy with bronchial brushings and bronchio-alveolar lavage or BAL, at baseline and at day 18 to evaluate ENaC knockdown in the lung. These subjects receive one dose cycle of 180 mg of ARO-ENaC or placebo. The CF patient portion of the study includes three cohorts – two with six patients each and one with twelve patients. Patients in these cohorts receive two dose cycles and it is placebo controlled. The first cohort of six patients, four of which received ARO-ENaC at a dose of 40 mg and two received placebo, is complete and we are still in the blinded follow up stage. The second cohort will receive a dose of 65 mg and the third cohort will receive a dose of 180 mg. We will be reporting interim results on the four SAD healthy volunteer cohorts, the one healthy volunteer bronchoscopy cohort, and the first cohort of CF patients. What we will be watching most closely is safety and tolerability across the cohorts and the ENaC knockdown from the bronchoscopy cohort. For the CF patient cohort, we will also be measuring FEV1; however, at this lowest dose and with only four patients on active drug, we do not expect to be able to detect changes in lung function. As we get to higher doses, longer exposure, larger sample sizes, and are able to select a more homogeneous patient population, it is our hope that ENaC inhibition will lead to improvements in mucociliary clearance and lung function. The next program with a planned readout over the coming months is ARO-HSD, our investigational candidate for the potential treatment of alcohol and nonalcohol-related liver disease. We think the genetic data supporting HSD17B13 as a target for NASH and alcoholic liver disease is strong. We are conducting a Phase 1/2 study in normal healthy volunteers as well as in patients with NASH or suspected NASH. We have completed the single-dose portion of the study in healthy volunteers and have completed dosing in two of the four multiple-dose cohorts in patients with NASH or suspected NASH. Target engagement in patients, in the form of HSD17B13 mRNA and protein knockdown, will be assessed with liver biopsies. In this study the purpose of the biopsy is to obtain tissue to evaluate gene target knockdown. As the study is short in duration, we are not assessing changes in histology. This mechanism is not intended to reduce liver fat, so we don’t expect to see any change in MRI-PDFF. We will be looking at other biomarkers of liver health to see if there are any early encouraging signs, but we are most focused on ARO-HSD’s ability to reduce expression of its gene target at different doses. NASH has been a difficult area for drug developers, but HSD17B13 is a novel target and we believe there is very strong genetic validation. If we can show good knockdown and safety, we will have confidence in moving towards a Phase 2 study to assess efficacy. The last program for which we expect to have a clinical readout in the near term is ARO-HIF2, which is designed to inhibit the production of HIF-2a to treat clear cell renal cell carcinoma or RCC. We are currently conducting a Phase 1b dose-finding clinical study in three cohorts with advanced clear cell RCC. The study is designed to evaluate the safety of ARO-HIF2, to determine the recommended Phase 2 dose, and to assess pharmacokinetics and preliminary efficacy, based on RECIST, and post-dose tumoral expression of HIF2-alpha and HIF associated genes. We have completed dosing in two of the three cohorts and should be able to report on those two cohorts in the coming two months. We made a protocol amendment last quarter to add patients to the study. These are heavily pretreated patients with metastatic lesions in different locations, so biopsy collection is challenging. The new patients were added to give us a better chance of having tumor samples that can be processed, evaluated, and analyzed. We will be looking for data suggesting functional delivery to tumors as well as measurable levels of HIF2 knockdown. I will now turn the call over to Ken Myszkowski, Arrowhead’s Chief Financial Officer. Ken?

Thank you, Javier, and good afternoon everyone. As we reported today, our net loss for the quarter ended March 31, 2021 was $26.8 million or $0.26 per share based on $103.9 million fully-diluted weighted average shares outstanding. This compares with net loss of $19.8 million, or $0.20 per share based on $101.7 million fully-diluted weighted average shares outstanding, for the quarter ended March 31, 2020. Revenue for the quarter ended March 31, 2021 was $32.8 million, compared to $23.5 million for the quarter ended March 31, 2020. Revenue in both periods relates to the recognition of a portion of the upfront payments and milestones received from our license and collaboration agreements with Janssen, and our revenue in the current period also includes the recognition of a portion of the $300 million upfront payment due upon the signing of our collaboration agreement with Takeda. This payment was received in January. Revenue for the Takeda agreement will be recognized as we continue to work toward completing our performance obligations of managing clinical trials in process and certain manufacturing-related services. The remaining $266 million of revenue associated with the Takeda collaboration is anticipated to be recognized over approximately two years. Our performance and revenue recognition under the Janssen agreements is substantially complete. Any additional milestones achieved with our collaboration partners would be additive to this projection. Total operating expenses for the quarter ended March 31, 2021 were $61.0 million, compared to $45.8 million for the quarter ended March 31, 2020. This increase is primarily due to increased personnel costs and non-cash stock compensation in R&D as our headcount continues to grow. The increase is also due to increased candidate-specific and discovery R&D costs. Net cash provided by operating activities during the quarter ended March 31, 2021 was $263.9 million, compared with net cash used by operating activities of $27.6 million during the quarter ended March 31, 2020. The key driver of this change was the upfront payment received from Takeda in January. We estimate our cash burn run rate to be $50 million to $60 million per quarter. Turning to our balance sheet, our cash and investments totaled $674.8 million at March 31, 2021, compared to $453 million at September 30, 2020. The increase in our cash and investments was primarily due to the upfront payment received from Takeda, offset by cash used for operating activities. Our common shares outstanding at March 31, 2021, were $104 million. With that brief overview, I will now turn the call back to Chris.

Thanks Ken. Clearly there is a lot of progress being made and our pipeline is becoming broader and more advanced. The upcoming data readouts are exciting on their own because they potentially represent progress towards new therapies for patients without adequate treatment options. These are people with serious diseases, and this is important to remember. What is also exciting to us as a company is that these data readouts in new tissue types potentially represent clinical validation for our expanding TRiM platform. This is the future for Arrowhead and holds the promise of initiating our next phase of rapid pipeline growth and value creation. Thanks again for joining us today. I would now like to open the call to your questions. Operator?

Our first question is from the line of Maury Raycroft of Jefferies. Your line is now open.

Hi everyone. Congrats on all the progress and thanks for taking my questions. First question is on ENaC. So for the cystic fibrosis patients in cohort 1, and the patients you plan on enrolling in the next two cohorts, can you provide any more specifics on baseline FEV1 or patient histories? And then were the 65 mg and 180 mg doses predetermined or informed by the healthy volunteer data? And can you talk about your degree of confidence in maximizing potential with cohorts 2 and 3?

Sure. Thanks, Maury. I can give you sort of broad answers there and I’ll leave it to Javier for the more granular ones. So the doses were chosen before we saw any data from healthy volunteers. And so these initial doses were based solely on our GLP talks studies in other animal models. I think we’ve mentioned in the past we’ve gone through all the various doses in healthy volunteers, and so far, at least in those individuals, it’s been well tolerated. So, we are cautiously optimistic that will continue to be the case. And we’re looking forward to seeing if we see any changes in FEV1 as we escalate the dose. So, we had a question about FEV1 parameters as they came into the study. And what – I’m sorry, what was the third question?

And then I guess, yes, the FEV1 parameters or patient histories, if you can comment on that?

Okay. Javier?

Yes, so generally speaking, I’ll give you a sense of inclusion criteria, which was similar to the Vertex study. So it is 140 to 90 at baseline, so that’s kind of the range for patients in this study. For the most part, these are relatively young patients, and the average FEV1 is close to about 70 or so in this study. These features, which is those patients who have more than 70%, will be candidates to do the LCI stat study, but generally speaking, it’s a relatively young patient population and all from Australia and New Zealand.

And let me also, I mentioned this in the prepared remarks. So, let me tell you what we’re looking for here. We’re looking for good knockdown in the healthy volunteer cohort that are undergoing the bronchial analysis. We think that’s the most important take home right now. Let’s see if we’re getting good knockdown. I think that with just this first cohort, all we have is four patients. The first cohort of CF patients, all we have is four individuals on active drug and it’s a low dose, of course. And so it feels to us like it is going to be very difficult with those small numbers to see small changes in FEV1. So again, we’re really focused on good knockdown. I think that if we can see a 50% knockdown, I think we’re in good shape there because as we’ve talked about in the past, if you look at the heterozygous in the genetic analysis that those patients with CF, but are essentially heterozygous knockouts of ENaC, they did show a clinical benefit, so that’s really our target right now.

Got it. That’s really helpful. And maybe one last follow-up and then I’ll hop back in the queue. But for the cohorts 2 and 3 for cystic fibrosis patients, could we expect data from those cohorts at the end of the year? And do you have – if you can comment on the potential to see ENaC knocked down in the CF patients, if there’s any strategy in place for that?

Yes. So that’s a good question. So, yes on the first product question, yes, I would expect for us to have those data in the next two cohorts and in CF patients that we can present at some point this year. Look, we have dosed those patients yet and so, we’re not holding those back, but I do expect that we’ll have those by the end of the year. James, do you want to address the question about doing bronchial assessments on CF patients?

Yes, so we’ve right now opted not to do bronchial assessments on CF patients more, just because that presents a potential hindrance to enrollment, and it’s a rare disease population already. So, the intent currently is to do the bronchial assessments in the healthy volunteers, obtain the knockdown data from those subjects and then dose the CF patients without bronchial assessments at the same dose levels.

Makes sense. Thank you very much for taking my questions.

Thanks, Maury.

Next question is from the line of Alethia Young of Cantor. Your line is now open. I think we’ve lost Alethia.

Can you hear me?

Yes, we got you.

Cool. Sorry. My first question was just like this 50% knockdown on ENaC, like, or is that kind of Vertex level, FEV levels when you’re at the right dose or is it kind of lower? How do you think about that? And then just also on the NASH, I mean, with this particular target, do you think there’s a certain group of NASH patients where it’ll work in the more severe or less severe? And I just wanted to confirm that we will get some biopsy data that looks at histology in addition to liver enzymes.

Sure. So, we are not looking at histology in this first study. It’s too short exposure. We’re really just looking at knockdown because this study is really just designed to pick a dose and we’ll be picking that based on knockdown levels. Your other question is a really good one about whether or not there are certain patient populations that will be more amenable to this sort of therapy. I’ll let James and Javier answer that. The answer is I think, no, we don’t know. I think it’s too early to tell at this point, the genetic validation has been quite good. The genetic studies have been quite good. This does silencing of this gene product does appear to confer a protective effect. I don’t know if it’s known if that would be more pronounced in certain patient populations, Javier, you know that?

Yes, I can make a couple of comments, this is Javier and really pretty good question. It’s something that we’ve been thinking a lot about because as NASH is a big condition with many different stages and different causes, and there are many drugs in development with different mechanisms of action. So it is important to start to narrow down and say, what would be the best patient population? So it will need to be a lot more work to really start to think about that with HSD. What we’ll say is we don’t believe that it’s about metabolic factors. We don’t believe it’s about liver fat. There are drugs in development for NASH that have that focus. So it’s likely to be more genetic because the data, as Chris said, was positive not just for NASH, but also for alcoholic liver disease. So that tells you that there’s a clue beyond just small NASH. That is the hint, an initial hint to start to think about clinically the next step in the development of Phase 2 and Phase 3. More work needs to be done, but right now that’s how I think about it. And we’re working with experts in the field to really fine-tune this again, this is I think a key question for the next step in the development of these.

And your question around ENaC, about what sort of knockout percentage could translate into certain FEV1 improvement? The answer is, that’s a great question. We don’t have any idea at this point. I will say though, however, and I’ll remind you and others, and I think you this Alethia, that we are not – the success of this drug is not dependent upon putting Vertex out of business. Rather, our initial patient target populations here are those who know who are not indicated for approved therapies, for instance. These are those that have no 10% of the population or so that have no CF charge, no CFTR to correct. It will be those patients who are not able to take other approved therapies. And so we think that given those parameters, look, if we can just show a 5% improvement in FEV1, that’s a win for these folks, because again, they don’t have any other real therapeutic options right now. Going forward, we can see if we can expand that, but at least initially that’s the target patient population.

That’s fair. And just one follow-up on the NASH, do you think you need like a really deep knockdown to drive benefit or is it kind of like that 50% level? I’m just trying to get a feel for this particular?

I think more knockdown is better. I think if we show only 50% knockdown, I’d be disappointed because as we’re, I think we’re generally pretty good at knocking down liver transcripts. So I would expect better than that. And I think, again, as high as you can get is probably better. There does not appear to be a negative phenotype with silencing that gene product. So it’s not like we’re trying to titrate to some level but not go above some level.

Okay, cool. It was very helpful. Thank you very much.

Welcome.

Next question is from the line of Esther Rajavelu of UBS. Your line is now open.

Hey, thank you for the question and congrats on all the progress this year. So two from me, the first is on the APOC3 trial strategy here. It sounds like you’ve decided to go with the broader patient population for triglyceride management. So can you talk about enrollment and timing expectations in the three different patient segments and how progress in each of those trials may offset filing timelines and the broader strategy around commercialization there?

Sure. So, look we are our primary focus here really is on those severe hypertriglyceridemia patients, those patients with triglycerides above 500, and we think there’s probably a bit more than 4 million of those in the United States alone. We believe that an approval endpoint there is simply lowering triglycerides. We know we can lower triglycerides substantially given the data in our Phase 1/2 study. And so, that just seems to be a pretty straightforward market for us. Having said that, we also are interested in the FCS market because we believe that we can get to market much more quickly there. As we talked about, we think we can initiate a Phase 3 study shortly. We think that’s a yearlong study once everyone’s enrolled. So that will allow us to get to market quickly and start to just be in market. But the reason you mentioned the broader population, the reason that we’re going there, we’re also doing a Phase 2b study in those patients from 200 to 500 or 150 to 500, is just to really retain optionality. It could be that we’re going to want to do a broader Phase 3 study in that population. That would be, I believe probably an outcome study. I don’t know that we’ll get there. We’re going to want to do it now, but I want the optionality such that if we do decide to go there, we can go there quickly. Javier, do you want to talk about the timing?

Yes, I would say another comment about these broad population and why we’re doing the Phase 2b study, one in line with what Chris just said, but the other is because we’re really focused on the first filing will be FCS, followed by severe hypertriglyceridemia. And we want to have a good pool of patients to really describe the safety profile and be able to facilitate the approval and the Phase 3 for severe hypertriglyceridemia patients. So I wouldn’t go, I wouldn’t be very concrete about the timing other than we’ve started the screening process for APOC3 severe hypertriglyceridemia patients as we speak. We’ve got the AMD in, and we’re just meeting the FCS protocols. So the entire APOC3 program is testing kind of the same time all about a month, either one or the other. I think we’re planning to do these three things, get very specific for the broad population, a clinical outcome study, and have a Phase 2 data that will enable the registration study for severe hypertriglyceridemia, which we believe will be in about one year study and it’s not required clinical outcomes. So biomarkers in this case, triglycerides are sufficient. We’re starting a Phase 3 study for the ultra-rare FCS indication also in the next couple of months. So it’s a very broad program with these three major parts.

Got it. Thank you. And then another one really quickly, is this the latest program at the muscle-targeting agent that you have that you’re planning to file – the DUX4 asset? Can you talk about that in the context of some of the other preclinical agents that are being considered by others?

Sure. James, could you go and address that?

Yes, sure. So, I’m assuming that you’re referring to some of the other oligos that are preclinical. I have not seen data with any of those preclinical compounds. I think our approach is a little different given the targeting approach that we’re using. We use a small molecule targeting approach with an siRNA mediated mechanism of action versus antisense targeted with a transforming ligand. I think those other compounds are still early preclinical. And as Chris mentioned, we should be filing within the next quarter or so.

And as we mentioned in the prepared remarks, we will be presenting animal data in June at the FSHD Conferences. So we look forward to sharing that with you and, and we’re excited about the data. We think those are good data. We’re excited about the drug candidate.

Right, okay.

You’re welcome.

Next question is from the line of Ted Tenthoff of Piper Sandler. Sir, your line is now open.

Right. Thank you very much. A lot of questions have been asked, but there’s just so much going on. Maybe with respect to DUX4, and I apologize if this was asked, but with respect to some of the competitive programs out there, how do you deliver it to the muscle and what do you sort of see as the market opportunity? Thank you.

Sure. So, stay tuned on those. I expect that we’ll have a webinar to go into the market dynamics of that a bit. The way we view the market, look, it is a substantial muscular dystrophy. We think it’s a substantial opportunity there. There are no good therapies that are designed directly for FSHD. The biology here is crystal clear. We know it is the continued expression of this protein that causes this disease. And look, we believe we can knock it down, at least in animal models we have. And so, you’ll see some nonclinical data in June, I expect sometime thereafter we’ll have a webinar. We’ll talk about the way we see the market and such. And in respect to competitors, as James mentioned, there’s not a ton of data out there. People have talked about the data they’ve generated, but we haven’t seen very much of it. And so, we are hanging our hat on the fact that we’re pretty good at RNAi. We’re pretty good at getting outside the liver. We think we’ll be the first of this type of molecule to the clinic. And so we’ll just – we’ll see how we stack up.

Perfect. I appreciate it. So to follow the data coming down.

Yes. Thanks, Ted.

Next question is from the line of Luca Issi of RBC Capital Markets. Your line is now open.

Fantastic. Thanks so much for taking my question and congrats on all the progress. Maybe one quick one on AAT, can you give us some directional color on the ongoing dialogue with the FDA here? Is there a scenario where impressive data from the 2002 trial plus the first 36 patients from SEQUOIA is actually sufficient for an accelerated approval? If so, what gives you confidence that that could be the case, maybe if there’s any comps that we should think about? And then the second one on ENaC, maybe for Javier here, I think we’ve seen Ionis showing an improvement in FEV1 to 4.5% of the highest dose. Wondering if you believe that you can actually show something better here given the cellular uptake for your molecule is receptor-mediated via integrins. While that is not the case for Ionis's, do you have any color there? It’d be great. Thanks so much.

Yes. So, I’ll address the AAT question. It’s a great question. And it’s one that I just don’t want to tackle. We’ll have those discussions with the FDA. We’ve had a good collaborative relationship with the FDA in the past, and we expect that to continue. And so, we’ve got an awful lot of data to unpack and see how we can move forward as quickly as possible to get to patients. Look, I think that we are aligned on this. The FDA and other regulators recognize this as a real unmet medical need. We offer, I think, you know, a good opportunity to help an awful lot of people with this liver disease. And so, I think we all want to see regulators and us, of course, and the patient group. We all want to see a drug to market as quickly as possible. We’ll just see what that route is. As Javier mentioned in the prepared remarks, we’re going to have paired biopsies for around 50 people, which is a lot for an orphan indication. So we think there’s an awful lot of data there. And then we’ll just have to see how, if that could be enough for the FDA, we just can’t apply them at this point. Javier, you want to talk about ENaC?

Yes. So, the question would regard to ENaC with, a 4% or 5% improvement, we can do more than that. Well, certainly that’s our expectation. And we’ll like to see whether that will be related to the level of knockdown would that we see in, in other RNAis and our experience with other target tissue. So that’s the expectation that we may see 50% or more of the knockdown, and that should translate into improvement in mucociliary clearance or MCC that eventually will translate into an improvement in FEV1. So we do believe based on our previous experience that those responses like, it will happen. We believe that we will be very successful and have the ENaC get into the epithelial cells and therefore knockdown the gene to the point that we’ll see the clinical benefit. So that's what we believe; that’s what we are going to see, very significant knockdown and the consequent improvement in the clinical aspect of the disease, which is MCC and FEV1 ultimately.

Again, of course, we’re cautiously optimistic that we can achieve that. And maybe beat it at some point. The reason that I’m trying to manage our expectations here on this first data readout is because not only is it a low dose, but it’s only four patients, and FEV1 as you know is truly an awfully noisy measure. And so that just feels like such a small sample size that to expect to see changes in FEV1 at that point is asking a bit much. So let’s just wait, and we are cautiously optimistic that we have something that can help some of these patients.

Got it. Super helpful. Maybe just a super quick follow-up over there, Javier, I want to make sure you’ve captured a question. So is my understanding that you guys are conjugating your siRNA within integrin receptors, right? A ligand to bind integrin receptor, will that matter, will that drive better – potentially better cellular uptake versus your approach that does not have a conjugation way integral receptor? Is that a factor we should think about it or not, any color would be great. Thank you.

James, would you like to take that one?

Sure. I can take that one. I mean, based on our animal data, the targeting ligand matters. We get better knock down with the targeting ligand than when we don’t use the targeting ligand. Of course, that’s with siRNA and animals, we haven’t looked at antisense, but that’s our experience.

Gotcha. Super helpful. Thanks so much.

Next question is from the line of Patrick Trucchio of H.C. Wainwright. Your line is now open.

Hi, thanks. Good afternoon. Just a couple of questions from me. Follow up questions on capital allocation and the development strategy. So, I’m wondering how we should think about the pipeline build-out and strategy, particularly if we see evidence with the extra-hepatic programs of the TRiM platform is capable of successful target knockdown in tissue beyond the liver. Specifically, how many programs could you build-out in the lung muscle and other tissue based on your current capital position? And then secondly, I’m wondering what the requirement is for moving forward in a particular indication, specifically, are you evaluating potential programs in these extra-product tissues based on genetically validated targets, or would you be looking for clinically validated targets in additional tissue, and how we should think about that? And then lastly, I think you’ve mentioned the past intention of partnering for HIF2 and possibly other programs. So, I’m wondering what the latest thinking is on potential partnering for liver-targeted programs and the extra-hepatic programs?

The point is a lot at, a lot on Patrick. So, let’s see, how many targets can we go after? The answer is I don’t know the answer to that. Look, we – I think we’re well capitalized right now. We’ve got access to, I don’t know, 600 million more potential millions of dollars in Amgen milestone payments, something around that, several billion dollars of possible milestone payments from Janssen, 700 and change, or so million dollars possible of milestone payments from Takeda. So, we’ve got access to a fair amount of additional capital. Put it this way, look, we’re not slowing anything down right now. Because of capital conservation, we have enough capital to push all these programs forward. If you look at our burden compared to some of our competitors, I think we do it in a pretty capital-efficient manner. So, we’re not at a point where we are capital constrained. And frankly, I sort of don’t see that in the near term at least. We’ve got good bandwidth and capital for a number of programs. The question then is what do we hold onto and what do we partner? And that’s a dynamic question. As we’ve talked about in the past, our pipeline is going to be so large that no company, much less our size, can commercialize all that. And so we will do some targeted partnerships. You saw that with Takeda. You saw that with Amgen. You’ve seen that with J&J. We’ll continue to do some of that. But an important part of our value creation model here is to hold on to a fair number of molecules and commercialize drugs. That’s why Jim Hassard is here in this room. He’s going to be developing our commercial infrastructure. When we look at where we make our – we place our bets here, what we’re going to be looking to do is to create some synergy and some leverage among our various products. We’ve talked about in the past, the idea of some synergy around cardio-metabolic assets. We have APOC3 and ANG3. We see – you see, we like the idea of building commercial infrastructure to sell both of those drugs into lipid clinics and cardiologists, et cetera. Similarly, we like that for pulmonologists. There are somewhere between 14,000 and 16,000 pulmonologists in the U.S. and the lung is a target-rich environment. We’ve got one lung candidate in the clinic right now in ARO-ENaC, but we’ve got several that we’re developing in addition and so we liked the idea of packing our pipeline and addressing those large markets with the commercial infrastructure.

Got it. That’s helpful. And then just another, if I may just a quick follow-up on alpha subunit and HIF2a, so you mentioned that the next Phase 2 data sets expected in the first half of 2022. So, we’re just wondering what are the expectations ahead of that data and what are the relative advantages as compared to the ASO approach and if any milestones or payments are expected to Arrowhead at that time?

Yes, we can’t give you any guidance on what the data will look like, or even frankly, when it’s going to come out. Amgen has said publicly that they expect to have data in the first half of 2022 and I can’t give you more granular than that. Look, we’re excited about that. We think that’s a great drug, given the data that we’ve seen, that they presented publicly that looks like a very potent drug with good durability and we’re excited to see what this Phase 2 study looks like in terms of really blowing out how durable that is. But I think that’s going to be a key advantage to ASOs. I think generally speaking, when you look at ASOs versus sRNA, at least as it relates to hepatocyte-directed contracts, I think that we will beat ASOs in durability; that has a theoretical basis as well as clinical basis. We know that RNAi is a catalytic process, whereas antisense oligos work on a consumptive process. And that has been borne out in clinical data where generally just substantially more durable than antisense oligos. With respect to safety, if you look back at the safety profiles of various antisense oligos, we think that they will have an advantage there also; there’s no, for instance, there’s been no class effect that’s been seen in sRNAs with respect to thrombocytopenia, but we have seen that in antisense oligos. So, we’ll work excited for Amgen. We think that they’re the right partner and we think they’ve got the right drug.

Got it. That’s helpful. Thank you very much.

You’re welcome.

Next question is from the line of Salveen Richter of Goldman Sachs. Your line is now open.

Hi, thank you so much for taking our question. This is Sonia on for Salveen. Could you provide the rationale for why you chose FSHD as the first indication for your skeletal muscle assets?

Sure. Thanks for that question. We think FSHD is a perfect or as close to perfect as you can get, I think, target for this. It is – the biology is clear. We know that the continued expression of DUX4 has caused this disease, you and I shouldn’t be expressing that right now. And somebody with this, does if we can just turn that off then that should alleviate the symptoms around that disease. We also don’t run the risk of over science if you will, as I mentioned, I think more knockdown is better than less. And so it’s not like we have to get to a certain level of knockdown and go no further. So that’s helpful to us. The only thing that is troublesome about the target is that it – there’s no known circulating biomarker. And so when determining what our dose is going forward, when you are determining our knockdown levels, we’re likely going to have to do biopsies. Look, that’s not a deal breaker. That’s just a little bit more cumbersome, but this is a patient population that is in desperate need of new therapies. And so we think we really have something that could be helpful to them.

Thanks.

You’re welcome.

Next question is from the line of Keay Nakae of Charda. Your line is now open.

Thanks, Chris. You mentioned your other pulmonary targets that are under development. I’m wondering when we get the initial knockdown data for CF patients. What kind of read across could that provide to your other pulmonary programs? So in other words, are you using the same inhaled route of administration, the same conjugated ligand for epithelial cells and is it just a different siRNA payload?

Yes, it’s a great question. So, yes, we expect to be able to read through these data to read, gosh, let me put that better. We do expect this to read through to our potential other programs here in pulmonary, and we are using the same targeting ligand. We’re targeting alpha-v beta-6 integrin. And so to the extent that we see knockdown early, we would expect that that would suggest we should see knockdown in the other ones. As you point out, just in sequence, they’re modified different reports as well, but if we can knock down to one, I would expect you to knock down in the other. And so that’s why this data readout is so important to us. It reads on our ability to create a real pulmonary franchise. If we can do that, there is a ton of value that we can create, and there are multiple product candidates that we can create and a ton of drugs I think we can bring to various diseases.

Okay, great. Thanks.

You’re welcome.

Next question is from the line of Mayank Mamtani of B. Riley Securities. Your line is now open.

Good afternoon, team. Thanks for taking my question. So maybe just a quick follow-up on ENaC. Yes, another one, could you maybe comment on the safety profile, given the history of the target? And the reason I ask is, how much do you think that you can push beyond the lipon efficacy, beyond the builders that you’re testing in patients that are now versus those with partial function and basically, like at what point do you can kind of make that determination that you can quickly move to the next Phase 2 or Phase 3 study?

Yes. Sorry that line was not great, but what I think I heard you ask was about the safety profile that we’ve seen so far. We can’t go into detail of course until we present the data, but we have said publicly that we’ve seen a good safety profile so far, we’ve had no discontinuations to drug. We’ve been – we’ll increase what we saw and look, we didn’t expect problems in the safety – in safety for this, but you just never know when you’re bringing a new class of drugs into a new cell type, particularly the lungs, and we’ve been really quite thrilled that we’ve been say profile has been good. I think a follow-on question here is, again, I apologize that the connection wasn’t great was, could you go higher if you need me to go higher, and I’ll defer to James on this, but I believe that there has been no reason to.

And how do you balance that – going into a Phase 2, Phase 3 study and then no patients versus those that are partial function. I hope you can hear me fine now?

Yes. I can cover the question on safety and dose escalation, and we have not seen any safety findings in the clinical studies that would prevent us from increasing the dose. And what was the other question?

Yes, you’re talking about considerations for Phase 2, Phase 3 and again, right, we had crackling on the line. So, I’m not sure what you did. Are we limited on the background patients that we can enroll in this. So then do they have a lung function above some sort of level?

No, I don’t think it’s, I mean, at this point as Chris mentioned early on, we’re very interested in the naïve patient population just because they don’t have any other options, but we are certainly looking at and enrolling patients now that are on CFTR modulators. And there’s no reason we can’t study that population down the road.

Okay. Maybe just a quick follow-up on the HPV readout that is expected later in the year, as I understand, it’s run by J&J, but just given the deep and durable HPV that’s out there to knock down that you had, can you also just touch on the differences between REEF-1 and REEF-2, and then what learnings we could have from the two different studies?

Yes. I can’t give you any guidance on when those might readout. And I certainly can’t give any guidance on what might be in there. REEF-1 is 450 patients as I recall, and it’s a triple combination or its various permutations of three different compounds, a NUC and one of Janssen’s capsid inhibitors and then RNAi drug, again, it’s various permutations of that. And the endpoints have to do with s-antigen as I recall after 12 months of therapy and then a six-month follow-up as well. REEF-2 is similar, but it also has some stopping criteria. If s-antigen or if other parameters reach certain criteria, then it’s my understanding that therapy could be withdrawn. That’s going to be interesting. I think just given the NUC’s topic studies that have been done over the last several years. So, look, I’m as excited to see those data as you are. And I also and I can’t give you any better guidance on when those data will come out.

Great. And final question, which new cell type should we expect to hear from you given, I think they’re getting closer to that 18 month to 24-month window since you said that you’ll be going after muscle?

Sorry, you’re breaking up. I couldn’t get that question. I’m joking. I can’t answer it. We are, of course, working on other cell types in that, I can’t give you any guidance on what’s going to pop there are several of the words that we are working on, but stay tuned we’ll…

You already have going on. Thanks for taking my question.

You’re welcome.

Last question is from the line of Mani Foroohar of SVB Leerink. Your line is now open.

Thanks guys. A couple of quick ones. First, when you think about targeting HIF, you’re talking about a much more heterogeneous pool of cells within a single patient and much more heterogeneous among patients than in other inherited gene-defined diseases. Are there mechanisms in terms of biopsy approach, patient selection, etc., that you can pursue to try and get a better sample and more accurate assessment of how effectively you’re targeting the target tissues and where you’re knocked down across the population of cells? And then I have a follow-up kind of a financial question.

Yes, that’s a good question. So the answer is, at least in the first part of the study, we’re just seeing where we’re going to see. And then follow-on questions, follow-on studies. We’ll be – we’d like to see if we can find patients that are enriched. James, do you want to – is there anything you can add to that with respect to what we’re looking for now and what we in the biopsy what can we see and what we might – what might people see?

Sure, sure. Yes. I mean the critical aspect of this study is all about target knockdown. And of course, the HIF2 target really drives a large percentage of RCC tumors. So we think this is a critical target for this disease in terms of ways to maximize biopsy yield. I think there are certain tissue types that we have asked sites to preferentially biopsy over others that just give higher yields in terms of number of tumor cells and improve our ability to measure knockdown. I’m not sure if that addresses your question or not.

Yes. And maybe also what you’re getting at and we don’t really answer this. This point will be nice if we can tell if those better responders. And if we see a difference in response rates, those better responders if they are higher expressors of integrins versus below responders, I don’t know how much we can teach that out in this study, but that would be something that would be helpful going forward I think.

Great. That’s helpful. And on the financials question, as you guys move into a state where you’re running more mid and late-stage studies across a broader pipeline, across many different tissue types, different types of clinicians that you’re addressing cardiologists, pulmonologists oncologists, how should we think about modeling growth in R&D expense? And then as proportionate stock-based comp from expense, do you expect that to stay linear on a percentage basis or become a larger or smaller portion of comp as the company scales in terms of absolute headcount in future years? Like how should we think about those trends?

So we haven’t – I’ll answer the first question sort of, we haven’t given any guidance on increase in R&D spend. We’re not prepared to do that quite yet. Give us a bit of time, but we haven’t given any guidance there. Ken, you want to address this?

Yes, so stock compensation is really hard to estimate because it’s really based upon the value of our stock when we issue our equity. It is a non-cash expense. So, I would sort of use that as a guide and leave that out. But we really can’t give you better guidance on the growth of what that expense will be.

All right. Thanks for taking the questions, guys.

Thank you.

Thank you, participants. I’ll now hand the call back over to Christopher Anzalone for closing remarks, sir, you may proceed.

Thank you all for joining us today. And we look forward to talking to you again soon. Enjoy the rest of your week.

And that concludes today’s conference. Thank you all for participating. You may now disconnect.