Conference Transcript - ARWR 2026-05-20

Luca, Analyst — RBC Capital Markets

Hi, Luca, you see Senior Biotech Analyst here at RBC Capital Market. Today is our great privilege to have Arrowhead as part of our 2026 Global Health Care Conference. Representing the company, we have James Hamilton, Chief Medical Officer, as well as Vince Anzalone, Head of IR. James and Vince, thanks so much for being here. How are you guys doing today? Great. Thanks for inviting us.

James Hamilton, Other

Pleasure to be here.

Luca, Analyst — RBC Capital Markets

Great. We have a long list of questions here, but maybe before we go into specific, Maybe I'll ask you, Vince, just big, big picture. I know you guys have been on the road a lot and, you know, had great engagement with investors and whatnot. What has been the feedback? What progress has the organization made over the last few months? And most importantly, what's ahead here for Arrowhead?

Vincent Anzalone, Head of Investor Relations

Is that working? Thanks, Luca, and thanks for the whole RBC team for having us today. So this is a really interesting time for Arrowhead right now. We are, without a doubt, on the most solid footing we've been as a company ever in the history of the company. So the last few months, you asked. So we've secured four additional positive regulatory actions for our lead product, Redemplo. We were approved in the U.S. by the FDA back in November of last year. We've since secured approval in China, in Australia, in Canada, and then a positive CHMP opinion in Europe. And we hope to have EC approval shortly. We've also had our first full quarter of commercial sales for the product, which has been really encouraging, really good dynamics. And it's clear that this is a growing market, not just for us, but for our competitor as well. And that's specifically for FCS, the rare part of SHTG. We hope to complete the phase three studies, the Shasta three and four next month towards the end of June with a readout in Q3. which is going to be a really important event for us and, I think, for patients. You know, we go back a few years, and there were no good options to treat SHTG. And now I think there's general consensus that we have two very good drugs that change the paradigm for treatment for potentially millions of patients. Also, for the company, we strengthened our balance sheet. We have about $1.8 billion of cash on the balance sheet, which is really important for us because we've got very ambitious plans, not just for our lead product, Redempla, but for our second, hopefully approved product, Zodaciran. And then beyond that, in the cardiometabolic space, we should have a readout later this year for our first dual functional or dimer approach, which is one molecule that silences is PCSK9 and APOC3 to treat mixed hyperlipidemia, which is both elevated TGs and elevated LDL cholesterol, which is a very large market. And so, again, we have very ambitious plans, but I think we're properly capitalized. We've executed very well on our first commercial product, and we're well on the way to becoming the next big biotech company or the next class of big biotech companies.

Luca, Analyst — RBC Capital Markets

So I think we've done a lot over the last year, but this year is going to be a really important uh year for us got it got it super helpful um you already mentioned shasta 3 and shasta 4 that's probably the most important callus for the foreseeable future for the stock um you know trial is obviously a little smaller than core and core 2 which is your competitor ionis uh i think i recently you mentioned that i think nine events are sufficient for 80 power and i think low teens event is sufficient for 90 power maybe james i'll pass to you um i use i'm I'm sure you're seeing blinded event rate, how you feel about those blinded event rate and how you're confident that at the end of the day you're going to hit on AP. I mean, I think everybody expects you to hit on triglycerides. However, the quintessence for questions is whether you're going to hit on AP or not. So what's the latest thinking on that?

James Hamilton, Other

Yeah, so I think, as we've said before, we remain cautiously optimistic about our ability to be stat sig on AP. and based on the blinded event rate, again, we remain confident that we'll be sufficiently powered in terms of number of events.

Luca, Analyst — RBC Capital Markets

Got it. That's helpful. That's helpful. Can you talk about the adjudication of those APs? I think you guys had slightly different criteria at the beginning of the trial versus during the trial.

James Hamilton, Other

Maybe just a refresher or memory on what has changed in terms of the adjudication of the criteria for AP. and does that change the stats in any capacity given that you kind of have changed the criteria mid-flight if you will or how should you think about that maybe i'll address the last question first it does not change the the statistical analysis in any way when we we made this change about september or so of last year and at that point we had been holding kind of holding on to and not adjudicating the events yet because we were considering making this change. So the change was made before any AP events were adjudicated. And after we made the change, then we started sending the events to the committee to be adjudicated. And what the change was is we switched from using the strict Atlanta criteria to adjudicate AP events. That's what we used in the Palisades study. and with the Atlantic criteria, you have to have kind of classic epigastric abdominal pain along with either imaging findings or elevated lipase or amylase to be considered acute pancreatitis. It's a strict criteria because a lot of pancreatitis events don't get labs or don't get CT scans. A lot of these patients, if it's their fifth, sixth, or seventh event, they go to the ER and they don't get a CT scan every time. so we added these categories to this now modified atlanta criteria where we have definite ap events that's defined by the atlanta criteria probable or possible ap events and those have different criteria for them and what it allows for us to do is to have more events right there's uh there's more events that are probably that were possibly pancreatitis that we can categorize and that we can adjudicate. So from a statistical standpoint, it helps there. It just allows us to reach that power easier. And importantly, this scale has been accepted by regulators, both in the U.S. and in Europe, also by KOLs, the major journals, New England Journal of Medicine has accepted this scale. And it's the same scale that our competitors are using. So it will facilitate probably more of a direct comparison using the same scale.

Luca, Analyst — RBC Capital Markets

And the reason why you switched is essentially because of the data that you've seen from Ionis. Would that be kind of fair?

James Hamilton, Other

I think that, and I think it also, it just, it makes it easier to reach the required number of events to have adequate power.

Luca, Analyst — RBC Capital Markets

Yeah, definitely going to collect more events this way than maybe the, you know, planned before. How do you think about timing for Shasta 3 and Shasta 4? I believe, you know, the trial was full enroll, I think, end of June last year, June 23rd, 2025. So the last patient's last visit should be, you know, at the end of June this year. So how should we think about timing? Is this a July event? Is there an August event? Like, any thoughts there?

James Hamilton, Other

I think we've said Q3. I think we're going to stick to Q3. And, yeah, that hasn't changed at all.

Vincent Anzalone, Head of Investor Relations

So the process, so once we have last patient, last visit, we have to lock the database and then start to do analysis. And we would say, you know, typically that's going to be a four to eight week process. You never know, you know, if it's on the quick end or the slower end of that. Gotcha. Gotcha. That's helpful.

Luca, Analyst — RBC Capital Markets

That's actually helpful. How do you think about Shasta 5, maybe, James? Like, again, hopefully Shasta 3, Shasta 4, hits on triglycerides, hits on acute pancreatitis, and the rest is history, right? But in a scenario where then on the case, you can still obviously get approved because the trial is, you know, or primary important trial is reduction in triglycerides. However, you know, maybe the label is going to maybe not reflect the benefit of the acute pancreatitis because that was not shown in that trial. So how should we think about the lag between SHASTA 3 and SHASTA 4 versus SHASTA 5? I appreciate SHASTA 5 is event-driven, but any context on how long we will have to wait for SHASTA 5?

James Hamilton, Other

Yeah, so SHASTA 5 is sort of our belt and suspenders approach. We also think it could be helpful with payers to have that additional study that's specifically designed to look at improvement in AP events as the primary. Probably late 2027 for data, late 2027, early 2028, enrollments has picked up quite a bit. If you may recall, we made some changes to the enrollment criteria early in the study, just to boost enrollment a bit. And so I'd say that's, you know, maybe about a third or so enrolled and we are seeing events in in the study so on timing it it's tough to pin down definitively just because it is a time to event study and you're dependent on when you see events but it seems like late 27 is probably a good answer and also for shasta 5 it was it's never been gating to submit for approval for an shtg either here or abroad we the way we sequenced these studies is that we wanted to start Shasta 3 and 4 as quickly as possible so that we can get to an SNDA as quickly as possible.

Vincent Anzalone, Head of Investor Relations

Shasta 5, the timing was designed to coincide with when we thought we would be launching in Europe, not necessarily filing in Europe or even getting approval, but launching. And we're still roughly on that same schedule. And, you know, James made this point earlier, but I think it's important that Shasta 5 is really the first study in this population that only enrolls high-risk patients, and it's looking at AP as the primary endpoint. We get this question all the time. If you hit on AP in three and four, do you immediately close down Shasta 5? And the answer is it's going to be more of a wait and see, because there still might be a benefit, specifically with national payers in Europe, to having a prospective study with AAP is the primary endpoint, either for access in certain geographies or, more importantly, for reimbursement. But, again, I think we'll have the benefit of seeing the IONIS label here in the U.S., potentially also in Europe, before we really have to make that decision. And as James said, the enrollment is really picked up. And so we're going to have to make a somewhat tough decision, but I think it'll be a nice problem to have should we hit it on three and four.

Luca, Analyst — RBC Capital Markets

Yes, nice problem to have for sure. Maybe, James, I want to go back to something you mentioned earlier, Shasta 5, you obviously relaxed inclusion-exclusion criteria. I think at the beginning you enrolled patients that need to have two acute pancreatitis over the last 12 months versus I believe now you need to have patients that have one acute pancreatitis over the last five years, right? So obviously you have broadened inclusion-exclusion criteria quite dramatically. What was the driver behind the decision? Is that because enrollment was going a little slower than you anticipated?

James Hamilton, Other

It was really driven by enrollment, and the criteria were pretty strict. I think they had to have trigs of greater than 1,000 at screening and, like you said, an event in the last two years. So we opened that up a bit and did at least one AP event in the last five years. They have to have a history of triglycerides greater than 880, and then at screening greater than 500. And that, I don't think we lose any ability to catch patients who are having events, but it's broader. We're just going to catch more patients.

Vincent Anzalone, Head of Investor Relations

And also remember that I think that as a field, we now recognize that the background event rate on placebo is probably higher than we originally expected based on the CORNCOR2 data last year, which, again, was a welcome finding, but it allowed us to make the study enroll a lot faster and still get to the requisite number of events, we think.

Luca, Analyst — RBC Capital Markets

Yeah, so the core and core two plus the practicality of enrolling the trial a little faster really drove the decision. How should we think about commercial? Again, you know, hopefully you hit on acute pancreatitis and the rest is history, but in a scenario where you don't and you get approved with an initial label that doesn't have a benefit on acute pancreatitis yet, how do you think this is going to play out commercially? is there a scenario where maybe payers are going to favor like the drug that has the benefit of acute macrotitis versus your drug or like or is that maybe not the right way to think about it yeah that's a yeah it's a tough question there's so many hypotheticals is there we don't know what this label is going to show for the competitive for the competing product because remember that ap reduction is not the primary endpoint tg reduction is the primary endpoint so so who knows what the indication statement is going to be now it's likely that in the the clinical study

Vincent Anzalone, Head of Investor Relations

section of the package insert, there will be a reference to an AP risk reduction, similar to what we have with plizacirin and what IONIS has with olizarsin in the FCS population. So, yeah, I don't know. You're asking, if this hypothetical happens, what will we do commercially, and then what will payers do? I think that it's an important thing to remember that now, and we were just talking about this outside before this fireside, you know, now we have four distinct studies with three different molecules that show in a population that's at high risk for AP, if you reduce TGs with the APOC3 mechanism, with this class, that you reduce, you reduce TGs, you reduce AP risk. I don't think that's a controversial statement any longer. And I think physicians expect that as well. So I think really the the most important thing to be looking for here is tg reduction from baseline uh and especially in in in the certain high risk population because there is there is there's not a world that that i can imagine where that doesn't reduce ap risk now in clinical studies strange things happen sometimes and you know with small absolute number of events things can get swayed one way or another uh but we we think that the that the the fundamental profile of the drug uh you know, speaks for itself, and we think that'll play out commercially, and we've seen that with FCS. You know, we have had a very successful early launch with this because the drug is very strong at reducing APOC3. When you do that, TGs go down dramatically. When you do that, AP risk goes down dramatically, so we don't see really a scenario where that changes. No, that's actually super helpful.

Luca, Analyst — RBC Capital Markets

Maybe, James, I can go back to you.

James Hamilton, Other

How should we think about the increase in liver fat that we're seeing from your competitor do you think that's on target or is molecule specific where you'll be able to spare that tox if you will or what what's your take yeah we'll see i think you know when our data come out we haven't seen the data we're still blinded we haven't seen the the baseline levels still um in terms of liver fat but uh you know i don't know If it's on target or off target, our hypothesis has been that this is more of an off target issue with the ASO. Certainly the mechanism, I mean, is it physiologically possible that if you enhance lipoprotein like these activity and metabolism of triglycerides that you could get some fat going to the liver? I mean, I guess so. We have not seen it, as you mentioned, in our phase two study at the go-to-market 25 milligram dose. Interestingly, our competitor also has not seen it with their non-Galignac targeted ASO in a few different studies. So, you know, that kind of muddies the water also. I think the increases that they're seeing are modest, you know, 2 to 4 absolute percent increase in liver fat. Not entirely sure how clinically significant that is. but of course we think it would be a meaningful advantage to not have that and not have to deal with an increase in liver fat so we'll see what the data show in in q3 yeah yeah i know that's awful and i know i'm pushing my luck here but is it fair to say that you have not seen it or you have not seen it at the dose that you're pursuing in the pivotal trial if i recall it correctly in the earlier trial at the higher doses that you're no longer pursuing there was a little bit of that signal there like that's correct yeah at the 25 milligrams we didn't see any increase in liver fat at the 50 milligram dose level there was about a two percent absolute increase in liver fat in that

Vincent Anzalone, Head of Investor Relations

study which was i think correct me if i'm wrong james it was about a 10 relative increase because these patients started at almost 20 uh that fraction so it was a it was a modest increase And interestingly, if this was solely an on-target effect, you would expect that to go up as TG metabolism goes up and as TGs go down. And we just, you know, the 25 milligrams, the reason we selected it wasn't because of safety. It's because it was maximally active, and we didn't get any real efficacy improvement when we went from 25 to 50. And so we're kind of scratching our heads on this. I don't want to use the same term, but we are cautiously optimistic that this will not be an issue. Yeah.

Luca, Analyst — RBC Capital Markets

And then maybe to your point, James, it could be a little bit of a combination of both, right? It could be like, you know, two factors driving that phenomenon. I think also maybe in your data set, a little bit of a, you know, A1C signal in your data. Again, we're obviously waiting for the data. Let's see if that signal is replicated or not. But does that keep you up at night?

James Hamilton, Other

No, it doesn't keep me up at night. And that's I think that's there. That's real. We've seen that in other studies with this mechanism. I think our competitor has also seen that. And that's been seen with other drugs that are designed to lower triglycerides, improve lipid profiles, statins, and vibrates. niacin i think can do that and what we've seen is about a 0.25 percent absolute increase in hemoglobin a1c it's predominantly driven by the patients who are diabetic at baseline those the ones who are not diabetic at baseline tend to not have that that increase and it's pretty easy to manage we have rules in our protocols how how investigators are to approach that if they do see an increase and it typically involves just increasing their dose of any diabetic medications they're already on like if they're on metformin just double their dose or adding another oral anti-hyperglycemic agent so the management's pretty straightforward are those roles stricter in shasta 3 and shasta 4 versus what you've done before like meaning are physicians more aggressive in maybe up titrating metformin or any other antidiabetic medications should that signal be replicated or i think more aware now that the rules themselves are not necessarily stricter but as we've seen that signal and we've seen it with with other molecules that we really have mechanisms in place now to to follow up with sites when we do see an increase and make sure that they

Vincent Anzalone, Head of Investor Relations

kind of get on top of it and manage it appropriately and we actually even had studies in the past that We're designed to preclude physicians from changing any other meds. And so that is a – now that physicians know about it, they can monitor it and manage it better. That makes sense.

Luca, Analyst — RBC Capital Markets

Maybe going back to commercial, how should we think about the peak revenue opportunity for this drug? Again, your competitors are on record saying that this could be a $3 billion plus. You guys have a differentiated price that you have announced not too long ago, $45,000 versus $40,000 WAC. Like, how should we think about peak opportunity for this drug?

Vincent Anzalone, Head of Investor Relations

Sure. So I think we have a long way to go to get to that point, but I think we're still at the point where we think this is a $3 to $4 billion opportunity for us. And I think that the more we see with this market and the more we engage with physicians and the more payer discussions we have, it seems clear that the value of this class is recognized across the board. It's clearly, you know, it is a paradigm-shifting class for patients, but the enthusiasm for physicians and the willingness to pay, both here and potentially abroad, is something that we didn't quite appreciate. So I think that, you know, that we're sticking to that $3 to $4 billion, but I would defer to you and other folks on the sell side who are now saying, you know, the APOC-3 class certainly could reach a $9 to $10 billion a year class. Sure, sure.

Luca, Analyst — RBC Capital Markets

No, that's actually helpful. Maybe, James, if I can pivot to Inhibi and OX7, how should we think about the reduction in weight that we have seen so far as monotherapy? It kind of feels to me that maybe the reduction in weight that we've seen as monotherapy, not combination with ZepB, which is a whole separate conversation, has been maybe a little more modest than some people were anticipating. However, we've seen some pretty profound reduction in liver fats. Is this an obesity drug, or is this a MASH drug?

James Hamilton, Other

I think we're still making both. As you mentioned, with monotherapy, arrow inhibiting showed the reductions in visceral fat as well as in liver fat, and we'll be sharing some additional liver fat data upcoming here at the EASL conference end of this month. So there's certainly the opportunity for a MASH drug. On top of that, what we saw in the combination arms, particularly in the type 2 diabetics, was not only the large reductions in visceral fat and liver fat, but what looked like an additive effect on body weight loss in that population. That's a tough population to treat with GOPs alone. They don't lose as much body weight as the non-diabetics do. And then when you add the inhibiting molecule on top of terzepatide, which was the only GLP we used in the study, they lost some additional body weight, additional body fat. So there might be an indication there for weight loss on top of GLP-1s in that subpopulation. As you mentioned, the weight loss in the monotherapy populations was nothing to write home about, really. So from a weight loss standpoint, it's really the diabetics that we're focused on. And that's the population that we'll look at in a phase two as well. We're planning to look at the diabetics, non-diabetics, and look at liver fat, liver histology, as well as body composition and body weight.

Luca, Analyst — RBC Capital Markets

Gotcha, gotcha. That's helpful. Obviously, there is a regulatory path out there where, you know, as monotherapy, you have to show a 5% reduction in weight loss to get a drug approved. That's what the FDA has come forward with. So, you know, hopefully in your future trial, you're actually going to show that reduction in weight loss that is, you know, above that 5% kind of magic number. But should that not be the case, how you're planning to engage regulators? Like, is there a way that maybe you can get this drug over the finish line in reduction of visceral fats or reduction of liver fats or total body compositions? Like, how should you think about endpoint to get these drugs over the finish line?

James Hamilton, Other

So I think the MASH endpoints are a lot more clear right now. At least there's precedent for using histology as an endpoint, as a primary endpoint, and then liver fat probably as a secondary. On the combination therapy weight loss, it's a little less clear. We have some ongoing FDA interactions around endpoints in our phase two. And what does a combination therapy success for weight loss look like? Do you need additional weight loss? Do you need to show other clinically meaningful biomarker improvements? Improvements in visceral fat, that's an interesting one. I think, you know, it's certainly something we could probably hit on, given the large reductions that we've seen. But I think we just need more discussions with regulators to see if that is, the visceral fat reduction is a pathway.

Luca, Analyst — RBC Capital Markets

Gotcha. That's helpful. I know we're almost out of time. We're already out of time here. Maybe quickly, given this is kind of fresh off the press, what's your take on the Tau data that Biogen reported last week? Again, it sounds like Biogen is kind of moving away from CNS and strategically speaking. However, this data was good enough for them to still start a phase three, which I think was surprising to some people. What's your take on their data set and what's the read through to your approach at this point?

James Hamilton, Other

Yeah, I think it was generally supportive of the tau hypothesis, that the tau matters, and particularly the fact that they're starting a phase three. They've seen all the data, so there must be something there that's sufficiently interesting that they would take that molecule forward into phase three. High level, I mean, it sounds like they were seeing reductions in tau in the CSF, and then that was translating into the PET scan signal, reductions in tau PET. and that that was further translating into some improvements in cognitive rating scales. So that's all supportive for our approach, which, of course, is that SIRNA-mediated knockdown mechanism, we dose sub-Q instead of intrathecal. So I think that, for us, represents a huge advantage.

Luca, Analyst — RBC Capital Markets

Sure, super helpful. Last question, maybe, Vince, back to you. What do you think is the most underappreciated aspect of the Arrowhead story today?

Vincent Anzalone, Head of Investor Relations

Oh, gosh. The answer to that is different every month. So I would say, historically, the challenge has been we have such a broad platform and pipeline. The question is, what are you going to focus on? And I think we've actually pretty sufficiently addressed that issue over the last year and a half or so, which is capital allocation will be most slanted towards our cardiometabolic pipeline. We are more willing to invest in phase two and phase three and commercial for assets that are going to fit within that commercial portfolio. And I think that we have 20 plus drugs in clinical studies. We just did a deal a couple weeks ago with Madrigal on a MASH asset for PNPLA3. I think we're going to be more aggressive in partnering non-core assets, and we're going to continue to be disciplined with capital allocation for products that continue to support the growing portfolio of cardiometabolic assets. So I think that's probably today what we're dealing with. We talked a little bit about obesity. There was some pushback about where do you need to see monotherapy weight loss, to James' point. The best signal was in combination with the GLP-1 in those type 2 diabetics, and I don't think we need to win on monotherapy. We've been pretty clear from the start that that is not what this mechanism is designed for. That was a pushback for a while, but I think that our development strategy takes that into account. I think we can still win with that.

Luca, Analyst — RBC Capital Markets

Fantastic. We're out of time.

Vincent Anzalone, Head of Investor Relations

Thanks so much, James and Vince.

Luca, Analyst — RBC Capital Markets

Appreciate your time, and thanks, everyone, for joining us.