Earnings Call Transcript - ARWR Q2 2026

Operator, Operator

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. I will now hand the conference call over to Vince Anzalone, Senior Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Vincent Anzalone, Senior Vice President, Investor Relations

Good afternoon, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2026 second quarter ended March 31, 2026. With us today from management are President and CEO, Dr. Chris Anzalone, who will provide an overview; Andy Davis, Senior Vice President and Head of the Global Cardio Metabolic franchise, who will provide an update on commercialization activities; Dr. James Hamilton, Chief Medical Officer and Head of R&D, who will discuss our development programs; and Dan Apel, Chief Financial Officer, who will give an overview of the financials. Following management's prepared remarks, we will open the call to questions. 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 are forward-looking statements 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 our quarterly reports on Form 10-Q. I'd now like to turn the call over to Chris.

Dr. Christopher Anzalone, President and Chief Executive Officer

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. During the fiscal second quarter and the period since our last earnings call, we have continued to execute well against our commercial, R&D and corporate goals. Arrowhead is now on the strongest footing of our history. We are commercial. We have a clear line of sight to expand our commercial opportunities and footprint. Our pipeline is larger than ever. Our discovery capabilities are broader than ever, and our balance sheet is stronger than ever. This is a historic time for our company. We are uniquely positioned to deliver important medicines to patients who need them and to create substantial value for our shareholders. Let's talk about some of our recent progress and begin with commercial. As you recall, the FDA approved REDEMPLO in November 2025 as an adjunct to diet to reduce triglycerides in adults with familial chylomicronemia syndrome, or FCS. FCS is a severe rare disease with an estimated 6,500 people in the U.S. living with genetic or clinical FCS, characterized by triglyceride levels that can be 10 to 100 times higher than normal. This leads to a substantially increased risk of developing acute, recurrent and potentially fatal pancreatitis. As we reported last quarter, the U.S. REDEMPLO launch was off to a strong start. That momentum has continued into the current quarter and we are now seeing around 30 new prescriptions written each week. Greater than 400 prescriptions have been written since launch and more than 10% of these have been for patients switching from our competitors' APOC3 inhibitor. Of course, each prescription needs to be fully adjudicated with payers before becoming paid claims, but we offer a robust quick start program to support these FCS patients in the interim. The volume of physicians writing prescriptions and the number of patients receiving REDEMPLO continues to exceed our initial expectations. With respect to pricing, we updated REDEMPLO's U.S. wholesale acquisition cost, or WAC, to $45,000 per patient per year. This represents a premium to our competitor's WAC pricing. We believe this is appropriate given that clinical data suggests we have a clearly and demonstrably superior product in terms of triglyceride reduction, safety profile and convenience. As part of the One REDEMPLO unified pricing model, this price is intended to remain consistent across FCS and severe hypertriglyceridemia, or SHTG, if that indication is approved. We continue to see this strategy as potentially simplifying payer contracting and eliminating pricing complexity that could complicate future formulary negotiations. Response from payers to this strategy has been positive and our interactions to date have been productive. Beyond the U.S., we secured positive regulatory action in four additional geographies for REDEMPLO in patients with genetically confirmed and clinically defined FCS. We received approvals from the Australian Therapeutic Goods Administration, the Chinese National Medical Products Administration and Health Canada. In addition, the European Medicines Agency's Committee for Medicinal Products for Human Use adopted a positive opinion, recommending the approval of REDEMPLO. This is an impressive result achieved by our global regulatory team in a very short period and further reflects the strength of our clinical data in FCS and the value that REDEMPLO offers to patients. REDEMPLO will be available later this year in Canada, and we anticipate it will be marketed independently by Arrowhead. Pending a marketing authorization decision from the European Commission, we expect to launch REDEMPLO later this year in select EU countries and likely in the U.K. as well. In Greater China, REDEMPLO will be marketed by Sanofi. In addition to our regulatory team, the rest of the R&D organization has performed extremely well and has made progress in the broader portfolio. Our drive to expand our platforms in order to increase the number and types of diseases we can address continues even as we grow as a commercial entity. During the recent period, we have made rapid progress across the pipeline, including programs targeting genes expressed in liver, skeletal muscle, adipose, central nervous system and the lung as well as the first dual functional siRNA designed to silence the expression of two genes with a single molecule. We believe the depth and breadth of our clinical pipeline is unmatched and we expect to continue to lead the field in innovation. Importantly, many of these programs will have clinical readouts this year, so investors and others may start to properly value the broader pipeline. As we look to near-term clinical data releases, we anticipate four important events. First, the Phase III SHASTA-3 and -4 studies of plozasiran in SHTG patients should be ready for top-line data release in Q3. This is an important readout that will drive our anticipated supplemental NDA, or sNDA, as we seek to expand the population of patients we can treat with plozasiran. We expect to continue to see a favorable safety profile and substantial reduction in triglycerides and we are cautiously optimistic that we could see an improvement in acute pancreatitis risk. Second, we expect to have early data from the ongoing Phase I/II study of ARO-DIMER-PA in patients with mixed hyperlipidemia in Q3. We believe this will be the world's first clinical data of a single RNAi molecule designed to simultaneously silence the expression of two proteins. If we see good reduction of PCSK9 and APOC3 and therefore reductions in LDL-cholesterol and triglycerides, we could have a very powerful and unique therapy for roughly 20 million people in the U.S. living with mixed hyperlipidemia. More broadly, the data could provide initial clinical proof of concept for our growing dimer platform and pipeline. We expect to see additional dual functional dimers in the clinic in 2027. Third, we expect to have early data from the ongoing Phase I/II study of ARO-MAPT around the end of Q3 or early Q4. As you recall, this is our first candidate using our CNS platform designed to deliver RNAi molecules to the brain via simple subcutaneous administration. ARO-MAPT targets the tau protein, which is increasingly validated for the potential treatment of Alzheimer's and other tauopathies. We believe that positive early data could be substantially disruptive. It could represent a great move forward in treating tauopathies and more broadly open the door to using RNAi to treat a broad range of conditions from neurodegenerative disorders to obesity. The early ARO-MAPT data are encouraging. We expect a substantial expansion of our CNS pipeline beginning at the end of 2026. Fourth, we expect to provide clinical updates on ARO-INHBE and ARO-ALK7 throughout the second half of the year. Regarding ARO-INHBE, we plan to present additional data at various conferences and launch a Phase II study. For ARO-ALK7, we expect to provide additional data from the ongoing Phase I/II study. We see these as potentially important therapies for metabolic disorders and represent our first steps into obesity and NASH. We expect to have additional candidates in this space by the end of the year and into 2027. Moving on to financial and portfolio management. Arrowhead took important steps to ensure that we are properly funded to advance our commercial and development portfolio. We also entered into a license agreement for a program that achieved clinical proof of concept, but it's not one that we wish to take forward. This is key to Arrowhead's strategy since we are extraordinarily productive in discovery and early development but cannot commercialize everything independently. Let's talk about the steps we took. First, we dramatically strengthened our balance sheet, allowing us to push multiple programs toward commercialization and potentially through multiple independent and partner launches. During the quarter, we completed the largest fundraising Arrowhead has ever conducted. We closed concurrent public offerings of $700 million of 0% coupon convertible senior notes and $230 million of common stock. Both offerings were several times oversubscribed, reflecting investor confidence in our portfolio and our ability to continue to build value. Second, and just this week, we announced an exclusive worldwide license agreement with Madrigal Pharmaceuticals for ARO-PNPLA3, Arrowhead's clinical stage program designed to treat a genetically defined population of NASH patients. Under the terms of the agreement, Madrigal will pay a $25 million upfront payment to Arrowhead. Arrowhead is also eligible to receive development, regulatory and sales milestone payments of up to $975 million. Arrowhead is further eligible to receive tier royalties up to the mid-teens. Madrigal's leadership in the NASH space makes it a natural and attractive partner to advance ARO-PNPLA3 into Phase II studies and towards potential commercialization. The transaction with Madrigal underscores Arrowhead's disciplined business development strategy, demonstrating our ability to partner high potential clinically validated programs with leading organizations. With that overview, I'd now like to turn the call over to Andy Davis. Andy?

Andy Davis, Senior Vice President and Head of the Global Cardio Metabolic Franchise

Thank you, Chris, and good afternoon, everyone. It has now been approximately 5.5 months since the FDA approval of REDEMPLO on November 18, 2025, and we continue to be very pleased with the trajectory of the launch. Today, I would like to cover five areas: prescription and patient dynamics, payer coverage development, pricing strategy, commercial infrastructure expansion and our international and SHTG outlook. Let's start with prescription and patient dynamics. REDEMPLO's launch continues to build strong and consistent momentum. Through the fiscal second quarter ending March 31, 2026, we have seen prescriptions accelerating week-over-week, growing nearly threefold from the start to the end of the quarter. That momentum has continued into the current quarter with total prescriptions written exceeding 400, representing over 40% growth over just the last four weeks alone. The awareness and conviction driving this prescription growth are encouraging. REDEMPLO awareness among the prescribers who matter most has increased meaningfully. Critically, this awareness has translated into conviction. Nearly all REDEMPLO prescribers surveyed report being satisfied or highly satisfied with the product, and REDEMPLO is perceived strongest on the efficacy outcomes FCS patients care about most: triglyceride reduction and acute pancreatitis risk reduction. The patient mix continues to reflect what we expected. Approximately 85% of prescriptions are from patients naive to the APOC3 class, a strong signal that physicians are identifying and treating FCS patients who have never had access to an effective therapy. Switch patients largely account for the remainder. Patient persistence data is equally encouraging. We feel activity is accelerating meaningfully, an important early validation of both clinical effectiveness and patient satisfaction for REDEMPLO's once-quarterly dosing profile. Geographic distribution of prescribing is balanced across the country. This breadth of prescriber activation across all territories signals that patient identification capability is building at scale across the organization, not just concentrated in a handful of high-volume centers, and this gives us confidence in the durability of the prescription growth trajectory. Turning to payer access. We are making meaningful and consistent progress. Our market access team has been actively engaged with the largest payers in the country, covering the vast majority of U.S. lives to support continued patient access. These discussions are proceeding as expected and in some cases, have already led to REDEMPLO's improved coverage. Additional formulary coverage decisions are expected in the coming months across both commercial and government segments. A particularly important development in the payer landscape is the diagnostic pathway flexibility that major payers are recognizing. The coverage policies taking shape across major payers reflect both genetic testing and clinical criteria as valid routes to diagnosis. This is critical for ensuring that all appropriate REDEMPLO patients can access treatment because a meaningful proportion of real-world FCS patients are clinically diagnosed rather than genetically confirmed and policies that require genetic confirmation as a prerequisite would create an unnecessary and inappropriate barrier. As Chris mentioned, we have made a proactive decision to set the list price of REDEMPLO to $45,000 per patient per year. This decision reflects our commitment to optimizing market access for FCS patients and is consistent with our belief that a competitive and rational price point accelerates formulary decisions and reduces friction in the prior authorization process. We have always believed that REDEMPLO's clinical profile is best-in-class and the $45,000 per year price point reflects the premium value supported by the clinical evidence. With the FCS launch performing ahead of our expectations and with potential expansion into SHTG on the horizon, we are making deliberate and sequenced investments to scale our commercial infrastructure. I will speak more on this in the future, but the field infrastructure we are building will be sized and structured for both the current expanded FCS accessible population and also the future SHTG opportunity as it unfolds in the future. On international expansion, REDEMPLO received regulatory approval in both Canada and China in January and most recently in Australia last month. All three markets are currently in prelaunch phase as we work through the pricing and reimbursement frameworks in each country. We look forward to providing updates on those timelines as they develop. Also last month, the Committee for Medicinal Products for Human Use recommended EU marketing authorization for REDEMPLO in Europe for FCS without requiring genetic confirmation. Consequently, we anticipate an EMA approval decision in the June to July time frame. We intend to commercialize REDEMPLO directly in Europe, supported by contracted infrastructure, which encompasses market access strategy, account management deployment, medical science liaison support and broader stakeholder engagements, including medical congresses and patient advocacy group engagement. We believe this model is the right approach for Arrowhead and are pleased with the readiness of that team as we approach the anticipated EMA decision. Finally, I want to comment on the SHTG program, which represents the most significant near-term value catalyst for the cardiometabolic franchise. We are approaching what we expect to be a highly meaningful series of milestones. Top-line results from SHASTA-3 and SHASTA-4, our two registrational Phase III studies in severe hypertriglyceridemia are expected in Q3. We head into the data readout with confidence grounded in the strength of REDEMPLO's established mechanism of action and the consistency of the APOC3 biology we have observed across our full clinical program to date. We also intend to present the data at a major medical congress, which we hope will be with a simultaneous publication in a top-tier medical journal. We then expect to file an sNDA with the FDA before the end of 2026 with an anticipated regulatory approval based on an expected standard review timeline targeted in the second half of 2027. Additional regulatory filings in other jurisdictions are planned to follow thereafter. The SHTG opportunity represents a patient population that is substantially larger than FCS with over 1 million high-risk patients in the United States alone. The commercial infrastructure investments we are making for FCS today are also designed with that launch in mind. In summary, the REDEMPLO launch is progressing well and continues to exceed our expectations across prescription volume, patient dynamics and payer access. Physician satisfaction and forward prescribing intent are both extremely strong. Refill activity is accelerating and we have a series of highly anticipated milestones in the second half of 2026 that we believe will be transformative for the cardiometabolic franchise and for Arrowhead. With that, I'll turn the call over to James Hamilton to discuss the broader R&D portfolio.

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Thank you, Andy. As Chris mentioned, we have a very broad pipeline with over 20 clinical programs, so I will focus on areas with upcoming readouts. First, I'd like to announce that we are planning to host three webcasts over the coming months as part of our R&D webinar summer series. Each webcast will cover a specific aspect of our pipeline where we expect to have upcoming data readouts this year. These include cardiometabolic, including plozasiran, zodasiran and ARO-DIMER-PA; obesity, including ARO-INHBE and ARO-ALK7; and ARO-MAPT, including the blood-brain barrier, or BBB, platform. I'll now give status updates from the quarter on these specific areas. First, let's review the suite of plozasiran Phase III studies, SHASTA-3, SHASTA-4, SHASTA-5 and MUIR-3, designed to support supplemental NDA filings to expand the REDEMPLO label beyond genetic and clinical FCS into patients with SHTG. SHASTA-3 and SHASTA-4 together enrolled over 750 patients and have a primary endpoint of change in triglycerides from baseline with key secondary endpoints of acute pancreatitis rates. MUIR-3, which enrolled over 1,400 patients, is designed to supplement the SHASTA studies with additional patient safety data. We are also enrolling patients at high risk of acute pancreatitis into SHASTA-5 to directly assess the ability of plozasiran to reduce the risk of acute pancreatitis as the primary endpoint. Should SHASTA-3 and SHASTA-4 show a statistically significant improvement in acute pancreatitis risk, we will reassess whether there is added value in continuing SHASTA-5. We remain on schedule to complete the blinded portion of SHASTA-3, SHASTA-4 and MUIR-3 in mid-2026 to support a planned top-line data readout in the third quarter. This would further support our plans for an sNDA submission for SHTG before the end of this year. Before moving on to zodasiran, I'd like to highlight a presentation we made with new long-term efficacy and safety data for plozasiran across a spectrum of patients with hypertriglyceridemia at the American College of Cardiology Conference in March. The data were from a two-year open-label extension of the two Phase IIb double-blind placebo-controlled studies of plozasiran: SHASTA-2, conducted in adults with severe hypertriglyceridemia, and MUIR, which enrolled patients with hypertriglyceridemia. During the two-year open-label extension, patients saw median reductions in their triglycerides of 83% in SHTG patients from SHASTA-2 and 67% in HTG patients from MUIR with additional reductions in random and non-HDL cholesterol. Ninety-six percent of SHTG patients achieved triglycerides below 500 milligrams per deciliter and 63% achieved triglycerides below 150 milligrams per deciliter with 93% of HTG patients achieving triglycerides below 150 milligrams per deciliter. Importantly, no adjudicated acute pancreatitis events occurred in any patient receiving plozasiran during the two-year Phase IIb open-label extension study. These findings support the potential of plozasiran as a promising new approach to managing patients with moderate to severe HTG phenotypes who are at risk of acute pancreatitis and potentially other cardiometabolic comorbidities. I'd now like to give a quick update on the YOSEMITE Phase III study of zodasiran, which is being developed as a potential treatment for homozygous familial hypercholesterolemia, or HoFH, a rare genetic condition that leads to severely elevated LDL cholesterol and early onset cardiovascular disease. Zodasiran is the fourth investigational RNAi-based candidate developed by Arrowhead to reach late-stage clinical studies. YOSEMITE is designed to enroll approximately 60 individuals with HoFH over the age of 12, who will be randomized 2:1 to receive five doses of 200 milligrams zodasiran or placebo. The primary endpoint is the percent change from baseline to month 12 in fasting LDL cholesterol. Enrollment has been on track and we are confident that the study can be fully enrolled this year to enable study completion and potential NDA filings before the end of 2027. The last program within cardiometabolic is ARO-DIMER-PA, the first dual functional siRNA designed to silence the expression of two genes with a single RNAi molecule. ARO-DIMER-PA is being developed as a potential treatment for atherosclerotic cardiovascular disease due to mixed hyperlipidemia by silencing expression of both PCSK9 and APOC3. In January, we initiated a Phase I/IIa placebo-controlled dose-escalating study to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and effects on LDL cholesterol and triglycerides using single-dose ARO-DIMER-PA in Part 1 and multiple doses in Part 2 in up to 78 adults with mixed hyperlipidemia. Enrollment in the study has been rapid and we are on schedule to have sufficient data to provide the first clinical readout in Q3 of this year. This is a very interesting program, and we think the preclinical data has been highly compelling. We have some innovative ideas on late-stage trial designs that could potentially accelerate the path to regulatory approval. So we are eager to have the first clinical readout to start moving ahead to later studies if supported by initial data. Lastly, I'd like to give an update on the status of the ARO-MAPT first-in-human study. ARO-MAPT is being developed as a potential treatment for tauopathies, including Alzheimer's disease, a progressive neurodegenerative disease characterized by cognitive and functional decline. Alzheimer's disease is the most common cause of dementia affecting an estimated 32 million people worldwide and is part of a group of neurodegenerative diseases called tauopathies that are marked by abnormal tau accumulation and formation of tau tangles in neurons. Tau-related pathology may be a critical driver of neurodegeneration and targeting tau is a promising strategy to potentially slow or stop cognitive and functional decline. ARO-MAPT is Arrowhead's first investigational RNAi-based therapy to achieve a new proprietary delivery system, which in preclinical studies has achieved blood-brain barrier penetration and deep knockdown of target genes across the central nervous system, including deep brain regions after subcutaneous injection. This underscores Arrowhead's leadership in the delivery of siRNA to multiple tissues and cell types throughout the body, utilizing our proprietary and differentiated targeted RNAi molecule, or TRiM, platform. In December 2025, we dosed the first subjects in a Phase I/II clinical trial of ARO-MAPT. This study is a placebo-controlled dose-escalating study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of ARO-MAPT in up to 64 healthy subjects and up to 48 patients with mild cognitive impairment due to Alzheimer's disease and mild Alzheimer's disease dementia. In Part 1a of the study, healthy subjects will receive one or three weekly doses of ARO-MAPT or placebo by subcutaneous injection. In Parts 1b and Part 2, healthy volunteers and Alzheimer's disease patients, respectively, will receive multiple escalating doses of ARO-MAPT or placebo. We are nearing completion of enrollment of the single-dose portion of the study in healthy volunteers and have begun enrollment in the multi-dose cohorts in both healthy volunteers and patients with Alzheimer's disease. This keeps us on pace for an initial data readout at the end of Q3 or early Q4. I will now turn the call over to Dan Apel.

Daniel Apel, Chief Financial Officer

Thank you, James, and good afternoon, everyone. As we reported today, net loss for the quarter ended March 31, 2026, was $132.7 million or a loss of $0.93 per share based on 142.4 million fully diluted weighted average shares outstanding. This compares to net income of $370.4 million or $2.75 per share for the quarter ended March 31, 2025, based on 134.5 million fully diluted weighted average shares outstanding in that quarter. Recall that in the prior year quarter, we recorded over $540 million in revenue solely related to the Sarepta transaction that was executed at that time. Revenue for this quarter totaled $74 million, driven primarily by our license and collaboration agreements with Sarepta and with Novartis. Of this amount, approximately $42 million related to the Sarepta collaboration. This includes $28 million from ongoing recognition of the initial Sarepta consideration, $10 million related to reimbursement of incurred preclinical collaboration program costs and $4 million for our clinical supply provided to them under a clinical supply agreement. In addition, we recognized $20 million of the $200 million upfront payment received from Novartis in October, bringing year-to-date recognition of Novartis upfront to $54 million, with the remaining $146 million to be deferred over time as we fulfill our preclinical obligations. We also recorded $11 million related to the asset purchase agreements between Sanofi and Visirna to develop and commercialize investigational plozasiran in Greater China. Visirna, as you know, is our majority-owned subsidiary with operations in China and the amount recognized is almost entirely due to the January approval of FCS in that region by the Chinese National Medical Products Administration. As mentioned previously, we are not intending to headline specific REDEMPLO product sales numbers until such time as they become a meaningful driver to our financials. That said, net sales can be derived from our disclosures as the difference between total net revenue and collaboration revenue and represents approximately $1 million for the quarter. This is our first full quarter of REDEMPLO sales. And on a unit basis, that figure compares favorably to the first full commercial quarter of the other approved APOC3 inhibitor. Turning now to expenses. Total operating expenses for the quarter were approximately $215 million, roughly flat with operating expenses in the first fiscal quarter. This compares to $162 million in the prior year quarter, representing an increase of $53 million year-over-year. This increase was driven by $40 million of higher R&D expenses and $13 million of higher SG&A expenses, fully in line with our expectations. The increase in R&D expense was primarily attributable to ongoing progression of our Phase III registrational studies for plozasiran in SHTG as well as our early-stage pipeline programs, including the dimer and MAPT. Fiscal year-to-date, almost two-thirds of the clinical trial spend can be attributed to our plozasiran Phase III studies. As James already mentioned, the registrational SHTG studies for plozasiran should read out in the summer and clinical trial spend for these programs should thereafter moderate accordingly. SG&A expenses increased year-over-year compared to the prior year second fiscal quarter, driven primarily by ongoing investments to support the commercialization of REDEMPLO. As previously discussed, we are continuing to build our commercial capabilities to fully support the FCS launch. We continue to leverage and invest in these capabilities to support REDEMPLO and FCS while also positioning the organization to support a potential future launch in SHTG. And we ultimately expect to leverage these same capabilities for the advancement of zodasiran for the treatment of HoFH. Turning to the balance sheet. Cash and investments on hand totaled nearly $1.8 billion as of March 31, 2026. Common shares outstanding at quarter end were 140.6 million. To provide a little color, in this quarter alone, we brought in over $1 billion, including approximately $850 million net from our January financing transactions, inclusive of a concurrent offering of 0% convertible senior notes and common stock, along with the associated capped call transaction. Other notable inflows in the quarter include the $200 million received from Sarepta upon achieving the second DM1 program milestone as well as the $50 million anniversary payment under the Sarepta long-term collaboration agreement. All of this is very much in line with the information provided previously during our February earnings call. We believe our strong balance sheet provides us with significant financial flexibility to support ongoing clinical development to advance current and future commercialization activities and to execute against our long-term strategic priorities. With that brief overview, I will now turn the call back to Chris.

Dr. Christopher Anzalone, President and Chief Executive Officer

Thanks, Dan. As we build out our commercial team and focus on efficiently bringing REDEMPLO to patients who need it, we have not lost sight on continuing to expand our pipeline and ultimately increasing the number of medicines we can offer to a wide variety of patients. Our business has become more complex as we grow in all of these areas, where we continue to innovate and execute well. We see multiple key potential value-creating events in the second half of 2026 that together speak to our priorities. Here are just a few of the events we are tracking. SHASTA-3, SHASTA-4 and MUIR-3, which is a suite of Phase III clinical studies designed to support an sNDA for REDEMPLO in patients with SHTG, is on schedule for completion and top-line readout in Q3. The first clinical readout of ARO-DIMER-PA targeting both PCSK9 and APOC3 for LDL and triglyceride lowering is also expected in Q3. The first clinical readout for ARO-MAPT is expected around the end of Q3 or early Q4. It is being developed as a potential treatment for tauopathies, including Alzheimer's disease and is our first program using the CNS delivery platform designed to cross the blood-brain barrier after systemic delivery via subcutaneous administration. Additional ARO-INHBE and ARO-ALK7 data releases are planned in 2026 for this novel non-incretin strategy, which had quite encouraging early data, particularly in diabetic obese patients in combination with tirzepatide and with liver fat reductions as monotherapy or in combination with tirzepatide. As James mentioned, we are planning to webcast three presentations as part of our summer series of R&D webinars to go over cardiometabolic broadly, obesity and ARO-MAPT. These can serve as a review of the programs and results to date and as a primer for the potentially important readouts coming up later this year. Thank you for joining us today. I would now like to open the call to your questions.

Operator, Operator

At this time we will now conduct the question-and-answer session.

Edward Tenthoff, Analyst, Piper Sandler

My question really has to do with looking at the upcoming severe hypertriglyceridemia readout. When it comes to pancreatitis as a secondary endpoint, is the plan to pool SHASTA-3 and -4? And what are sort of the assumptions around pancreatitis?

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Yes, Ted, thanks for the question. This is James. Yes, you've got that right. The plan is to pool both of those studies, SHASTA-3 and -4, and we'll analyze a meta-analysis of those two studies to look at pancreatitis event rates, both rates of events in individual patients and the total number of overall events. I think that's kind of all I can say on that. We're still blinded. And like we said, we should have the data in Q3.

Edward Tenthoff, Analyst, Piper Sandler

Great. Looking forward to that.

Operator, Operator

Our next question comes from Jason Gerberry of Bank of America.

Jason Gerberry, Analyst, Bank of America

I just wanted to probe in a little bit more on the INHBE and ALK7 updates later this year and get your latest thoughts on these modalities and think investors have soured a little bit on INHBE after the WAVE data update. So just wanted to get your perspective on kind of what you need to see from these upcoming readouts to advance one or both for obesity treatment versus any alternative potentially considering for a NASH indication.

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Jason, this is James. Sure. Happy to cover those questions. We've been saying all along really that we thought that the INHBE and ALK7 axis is interesting, but we thought the approach was to combine with GLP-1s. And that is still our standpoint here. We think that there's potential, particularly in the type 2 diabetics for additional weight loss on top of tirzepatide or other GLP-1s with either ALK7 knockdown or INHBE knockdown. What we've seen from the clinical study that we talked about earlier this year with INHBE knockdown is really clear redistribution of fat out of the liver, even with monotherapy, but also with combination therapy and some additional changes and improvements in body composition and reductions in total fat and visceral fat, particularly in that type 2 diabetic population. So I think we look forward to more of the same and sharing more of that liver fat data here in the coming quarter or so and then in the second half of the year, providing some additional updates on the changes in body composition and some of the other parameters that we showed back in January.

Operator, Operator

Our next question comes from Brian Cheng of JPMorgan.

Ron Feiner, Analyst (covering for Brian Cheng), JPMorgan

This is Ron on for Brian. Congrats on the quarter. Just wanted to ask you, can you guys give more color on the interactions you've had with payers that led to the recent price lowering? And what has been the feedback since your competitive action last month?

Andy Davis, Senior Vice President and Head of the Global Cardio Metabolic Franchise

Ron, this is Andy. So our interactions with payers to date have been consistent and positive, and we're seeing payer policies that reflect the ability to diagnose FCS patients through multiple diagnostic pathways, in particular through the clinical criteria that we saw in PALISADE. So really positive conversations with payers about coverage policies and about future coverage.

Ron Feiner, Analyst (covering for Brian Cheng), JPMorgan

Okay. And just a quick follow-up. How should we think about the impact here to gross-to-net following the price lowering?

Dr. Christopher Anzalone, President and Chief Executive Officer

Gross-to-net. Dan will take that. What's our assumption on gross-to-net with the new pricing policy?

Daniel Apel, Chief Financial Officer

Yes. I'll answer that. I'm not going to give guidance on gross-to-net. We have not seen anything substantial in that regard nor do we currently expect anything material other than statutory requirements such as Medicaid rebates and the manufacturer's discount program and the like. We have a policy not to provide any sort of guidance on that at this stage.

Dr. Christopher Anzalone, President and Chief Executive Officer

And let's just be clear, the lowering of the WAC from $60,000 to $45,000 had nothing to do with any pushback from the payers. To the contrary, I think those interactions have been quite positive. This is a lowering of the WAC in anticipation of an expansion of the market into SHTG and to ensure that we would avoid a step-through requirement with our competitor. As we talked about, we are priced at a premium here. We think that's appropriate given the characteristics of our drug versus the competitor's drug. And we think $45,000 actually long term is a good price in terms of maximizing access to the drug across various subpopulations within SHTG.

Operator, Operator

Our next question comes from Mike Ols from Morgan Stanley.

Avraham Novick, Analyst (covering for Mike Ols), Morgan Stanley

This is Avi Novick on for Mike. Congrats on the quarter. Among the patients who were switchers, could you characterize the motivations for switching to REDEMPLO? Was it due to its clinical profile? Or could it be more payer related?

Andy Davis, Senior Vice President and Head of the Global Cardio Metabolic Franchise

Mike, this is Andy. Thanks for the question. We've seen a diversity of reasons for switch that include efficacy, safety and tolerability and a variety of other reasons as well. So I wouldn't say there's one particular reason driving switch. There's a multitude of reasons.

Operator, Operator

Our next question comes from Maurice Raycroft of Jefferies.

Maurice Raycroft, Analyst, Jefferies

Maybe just a follow-up to Ted's question earlier on SHASTA-3 and -4. Just wondering if there's an updated perspective on whether the blinded acute pancreatitis event rates are tracking in line with your expectations and whether you'd be able to generate enough events by the time the study completes? Or could you potentially even keep the study blinded a little bit longer to get an adequate number of total events?

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Maury, this is James. I'll take that question. We're not giving any guidance on the number of events we're seeing. Suffice it to say, we feel comfortable with the number of events we have seen and the big reveal will be in Q3. But there are no plans to extend the study or remain blinded for a longer period at this time.

Operator, Operator

Our next question comes from Mani Foroohar from Leerink.

Mani Foroohar, Analyst, Leerink

You have Val for Mani. Congrats on the quarter. Can you talk about how the Phase III data from Biogen will inform the strategy for ARO-MAPT? And maybe also can you just comment on your internal expectations for this readout?

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Sure. I'm assuming you're referring to the antisense MAPT program from Biogen and Ionis that is expected to read out around this quarter or early next quarter. I hope those data look good, and I hope that they show an improvement in cognitive rating scales. I think that would be broadly positive for Arrowhead and for the tau hypothesis in general. Of course, that study is in Alzheimer's disease and a positive readout would support our Alzheimer's programs. That being said, even if those data are not positive, we still have the option of pursuing all the other tauopathies, because the knockdown approach of tau should improve any condition that's really driven by tau gain of function or tau pathology. So things like progressive supranuclear palsy or corticobasal degeneration or some of the specific MAPT gain-of-function frontotemporal dementia disorders are all fair game for us as we think about Phase II and Phase III down the road. So hopefully the Biogen data are positive. If not, it's not the end of the world for our program because we can still pursue other tauopathies.

Operator, Operator

Our next question comes from Joseph Thome from TD Cowen.

Joseph Thome, Analyst, TD Cowen

Just as we're thinking about the potential outcomes for the SHASTA-3 and -4 studies later this year, do you expect that you'll have to show differentiated efficacy versus what the competitor has shown in addition to the dosing benefit in order to keep that even slightly premium pricing? And then just a point of clarification, are you characterizing the acute pancreatitis events in SHASTA-3 and -4 the same way that you characterized them in the long-term SHASTA-2 extension that was recently presented?

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Why don't I take the second part first about the characterization. The answer is no. In the SHASTA-2 study, we used the strict Atlanta criteria to look at pancreatitis events, whereas in the SHASTA-3 and -4 pooled analysis, we're using a modified Atlanta criteria that includes definite, probable and possible pancreatitis. Regarding premium pricing, let's just see what those data look like.

Dr. Christopher Anzalone, President and Chief Executive Officer

Historically, when we look at data side-by-side with the large caveat, of course, it's difficult to compare different clinical studies with different patient populations. What we have seen consistently is superior triglyceride reduction, superior safety profile and of course superior convenience. We expect those to continue. And should that be the case, then we would expect that a premium is still appropriate.

Operator, Operator

Our next question comes from Patrick Trucchio of H.C. Wainwright.

Patrick Trucchio, Analyst, H.C. Wainwright

Just regarding your business development strategy, I was hoping you could give us some additional detail just in terms of which assets you would be looking to bring forward on your own versus those that you may partner? And then just more broadly, how you're thinking about how RNAi fits into the broader genetic medicines portfolio and how RNAi is looking competitively against modalities like gene editing, et cetera?

Dr. Christopher Anzalone, President and Chief Executive Officer

Sure. Look, I think that RNAi is at the forefront of genetic medicine for the foreseeable future. Now look, it's not the right modality for everything. But for those diseases that are characterized by the overproduction of something, if we can address that cell type, then RNAi is a very attractive modality. When we think about RNAi versus gene editing, RNAi is a relatively straightforward and conservative approach. It is a reversible approach, and in our hands, we can have very long durability. So you can almost get the best of both worlds where you have a low dosing burden but the ability to come off drug if new biology emerges that suggests you don't want to knock down that gene product. That's not the case with gene editing. Gene editing does have a place for certain severe diseases, but there are long-term unknowns, and for many indications where RNAi can address the target, RNAi feels to me the better approach. Regarding development and partnerships, this is a dynamic question. Right now, we feel pretty good about our existing wholly owned pipeline and like the idea of pushing these forward ourselves with the possible exception of C3 and Factor B. We like those programs a lot, they appear to do what they're intended to do and seem to be well tolerated. Those are outside of our core focus at present, so they are candidates to partner with the right partner at some point. Everything else feels pretty good right now. That may change as we talk to other companies and as our pipeline grows, but we don't feel a real sense of urgency to do additional deals on existing clinical programs other than maybe C3 and Factor B.

Operator, Operator

Our next question comes from Amine Chaherli from B. Riley Securities.

Amine Chaherli, Analyst, B. Riley Securities

Congratulations on the quarter. As you think about the next generation of the dimer platform, is a construct combining INHBE or ALK7 with a non-overlapping mechanism target something you're evaluating for obesity or other indications?

Dr. Christopher Anzalone, President and Chief Executive Officer

Yes.

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Can we move on to the next question?

Operator, Operator

Our next question comes from Luca Issi from RBC Capital Markets.

Shelby Hill, Analyst (covering for Luca Issi), RBC Capital Markets

This is Shelby on for Luca. Given the competitor has announced a new price at $40,000 and have first-mover advantage, can you walk us through the rationale to continue to price REDEMPLO at a premium versus the competitor in SHTG, maybe as a way to undercut their pricing since you're coming in second? Just wondering the rationale behind that.

Andy Davis, Senior Vice President and Head of the Global Cardio Metabolic Franchise

Thanks, Shelby. As Chris previously mentioned, we do believe REDEMPLO is a best-in-class APOC3 inhibitor and that it commands premium pricing as a consequence of that. There are a variety of reasons for that, including the depth of knockdown for APOC3 as a target and the depth of triglyceride reduction we have observed. We saw an 80% reduction from baseline in PALISADE. We saw a numerical decrease in acute pancreatitis in PALISADE. We have an FDA label that has no contraindications, no warnings and no precautions. And then lastly, we have a convenient dosing schedule of only four injections a year. When you sum up the totality of those attributes, we believe it's best-in-class and, as a consequence, should be premium priced.

Operator, Operator

Our next question comes from Jen Jia from Cantor Fitzgerald.

Jennifer Jia, Analyst, Cantor Fitzgerald

This is Jennifer Jia on for Prakhar Agrawal. I'd like to understand a little bit more on the expectations for the ARO-DIMER readout later this year. So what efficacy are you hoping to see? And what does it take to take this forward to a larger trial? And if it's positive, do you consider going straight to a cardiovascular outcomes trial? Or will you still need to complete a Phase II?

Dr. James Hamilton, Chief Medical Officer and Head of R&D

Jennifer, this is James. The great thing about this program is that all of the relevant biomarkers and even biomarkers you could use for potential approval are blood-based. We can measure PCSK9, APOC3 in the blood, and we can measure LDL cholesterol, triglycerides, ApoB and non-HDL cholesterol—these are all easy to measure. So that's what we'll be primarily focused on, as well as safety in this initial data readout. In terms of where we go from here, we're working on that now. There may be some additional limited Phase II work which we could even consider doing as part of this study, but then moving quickly into an outcomes study down the road. So more to come on the development plan and the study designs, but we're looking forward to the readout later this year.

Operator, Operator

Our next question comes from Kaey Nakae from Chardan Capital Markets.

Kaey Nakae, Analyst, Chardan Capital Markets

A question about the Madrigal license agreement for PNPLA3. Help us understand from a capital allocation strategy perspective why it makes sense for you to do this deal at this time as opposed to taking the drug further on your own?

Dr. Christopher Anzalone, President and Chief Executive Officer

Good question. Let me remind everyone where ARO-PNPLA3 came from. We didn't develop this independently. This is part of our deal with Janssen that was centered around an HBV program, but also included a couple of additional targets, and this was one of those targets. Janssen did the Phase I, and the Phase I was compelling: after only a single dose, they saw about a 40% reduction in liver fat in homozygous patients. Janssen, as I understand it, decided to get out of NASH and the asset was returned to us. We didn't spend any money on this. As we looked at taking this forward, we think it's a compelling target for a company focused on NASH. This is a genetically defined population, which is both an advantage and a challenge—advantage because it's specific, challenge because there will be a companion diagnostic component. It made sense for us to find a pure-play NASH company to take this forward. Madrigal is a natural partner. It didn't make sense for us to spend money right now to do a Phase II that could be lengthy and expensive compared to our other priorities. We've got a very large pipeline and some really interesting programs that we are pushing ourselves. Our ROI likely is better by allocating capital to programs we expect to hold long-term. So we are thrilled to have Madrigal as a partner to develop and potentially commercialize that asset. We feel good about the deal.

Operator, Operator

This concludes the question-and-answer session. I would now like to turn it back to Chris Anzalone for closing remarks.

Dr. Christopher Anzalone, President and Chief Executive Officer

Thanks, everyone, for joining us today. We look forward to seeing you in the future.

Operator, Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.