Great. Thanks everyone for being here. My name is Yanan Zhu. I'm one of the analysts here at Wells Fargo. We're lucky to have Arcturus Therapeutics' management team with us here today. So here for this fireside chat, we have Joe Payne, the founder and CEO of the company, and also Andy Sassine, Chief Financial Officer of the company. Thank you for being here.
Thank you.
It's good to be with you.
Great. So Joe, can you give us a brief overview of the company, the platform, and programs to kick us off?
Sure. So Arcturus is an mRNA vaccines and therapeutics company. We have a vaccine franchise that's led by a COVID vaccine that's also partnered with CSL. We have a liver franchise, and the flagship asset for that is a rare liver disease called OTC deficiency, or ornithine transcarbamylase deficiency, and that's an intravenously dosed mRNA therapeutic. And then we have a lung franchise, and the flagship asset for that is for cystic fibrosis, and that's inhaled messenger RNA. So we have an inhaled messenger RNA capabilities, injectables on both intravenously dosed and then intramuscularly dosed for vaccine applications. So three separate platforms that we're one's proven and approved, and that's the vaccine enterprise, and the other two were on the threshold of some meaningful proof of concept data this year.
Great. Let's talk about the COVID-19 vaccine platform. So what is the gating factor for sales for Kostaive in Japan? What are you expecting in terms of how many COVID shots to be sold by your partner, Meiji, by year-end 2024 and also in 2025?
I can answer the first part, which the first part of the gating is regulatory approval. You know, this last couple weeks, you've seen regulatory approvals of the updated COVID vaccines here in the U.S. That process is happening right now in Japan. So this week and next week, you'll start to see some approvals of the updated vaccine. So the first step, and before we sell anything, is getting that formal approval of the updated vaccine. So that would be a near-term achievement, and then that would allow us licensure to sell the vaccine. In terms of how many and the next steps, maybe you can comment.
Yeah, sure. Meiji has ordered four million vaccines from Arcturus. They've publicly announced it. And so we're going to start shipping the vaccine to them, starting in September or October. And we're actually going over there in October to get the vaccine ourselves because we get a milestone when you have the first sale, and so we're pretty excited to make sure we'll be the first customer to get that milestone payment. So it's the revenue recognition should start probably the clock in the fourth quarter. But as I said, you know, we're going to get a milestone associated with that first sale.
But more importantly, it's going to enable us to amortize our portion of all the development expenses that are related to the COVID program, and the faster we can, you know, offset that against revenue, you know, the more, you know, revenues we'll be able to recognize next year. So next year should be a pretty substantial year from a revenue recognition standpoint, because we'll have no offsetting development expenses at that point. And hopefully, we'll have, you know, more significant contribution from Meiji because they've, you know, projected... They're a public company, and they've projected about 10 million doses next year. And if they sell them at $100 a dose, that's $1 billion in revenue split between three partners, CSL, Arcturus, and of course, you know, Meiji. So we're pretty excited about the opportunity because it doesn't include Europe.
So if Europe gets approved this year, we're hoping that, you know, CSL will be able to commercialize Europe next year, and that'll be certainly gravy. We're not, you know, unfortunately able to give any kind of guidance on that because that is CSL's jurisdiction, but, you know, we're cautiously optimistic about, you know, next year in terms of a breakout year. But hey, you know, our founder, you know, has you know, created a company that is going to be a commercial company in another quarter or so.
It's a pretty impressive, you know, accomplishment for any, you know, biotech CEO.
Great. If I may follow up with a few points of those remarks. When you say next year, Meiji expects 10 million doses, is that next COVID season, meaning starting from fall of 2025? Not, you know, for the front part of the year, right? That's still considered this year's, the four million dose order right? .
Correct. Four million dose this year. Now, our partner in Europe is... in Japan, is called ARCALIS, and we own 38% of them. They're getting GMP qualified to produce the COVID vaccine, Kostaive, in Japan. They haven't gotten approval yet, but once they do, there's an anticipation that Meiji may order additional vaccines from ARCALIS, and that will enable us to potentially have a little upside to the four million doses. But we can't promise anything until ARCALIS is able to get, you know, GMP certification, and they'll be in the process of that this month and next month. It's a near-term event.
Oh, near term, getting regulatory approval in many
Yeah, GMP certified and they're just going through the audit process now.
Okay. Got it, got it, got it. Also following up on that milestone payment, you mentioned once they get the Japanese government approval, regulatory approval, you will receive a milestone payment. Have you talked about how big that milestone payment is?
We haven't given specifics, but, you know, we've mentioned that the, you know, there's a milestone payment associated with the first, you know, sale of Kostaive in Japan. And, you know, CSL had to amend their agreement with us in order to enable that to happen, because when we did the deal with CSL, Japan and Meiji was actually occurring simultaneously in parallel. And so Japan was not part of that transaction. So that shows that, you know, CSL is very, I think, you know, a good partner, first of all, that they're willing to help us because they know that we're gonna have development, you know, expenses to offset the revenues. So they allowed us to have a milestone to offset that. So we'll be able to recognize some cash and be rewarded for, you know, getting Japan approved and commercial revenues.
That's the you know the essence of what the whole commercial milestone is about, right? To reward you for that first sale. Europe has another commercial milestone associated, and that is on approval, not on first sale. And we anticipated that would be, you know, a near-term event in the third or fourth quarter, probably the fourth quarter. So, but we haven't given the amount, but hopefully we can, you know, provide some you know clarity with respect to... They're in our forecast for the three-year cash runway, so we've already incorporated those milestones, but no revenues.
Got it. Great. Thank you. Thank you, and, have a good trip to Japan for the vaccination. Okay, so, I think you will present some data at the Options meeting, September. End of September. Can you talk about what can we expect?
Yeah . It's excellent timing. We talked about getting the updated COVID vaccine approved in Japan, and the Meiji distribution force needs to be armed with some additional data that's kind of hot off the press, right before they go out and start literally selling these vaccines, so. So the data that's forthcoming is all about persistence, durability of the vaccine. So you're looking at twelve-month durability data relative to an approved mRNA vaccine. And so that is meaningful because as you've seen here in the U.S., there's a surge of COVID right now. If you can track this by many different means on the internet, but all it means is people, why are they getting COVID? It's because they're not vaccinated with a vaccine that's durable, that's persistent.
Not just for the fall season, Christmas, but for an entire year. And so this kind of data will be very meaningful and a differentiator, and will help with... We'll test market this with Meiji. We'll be able to you know, benefit from this data as well. But it'll be focused on persistence of the immunogenicity over a twelve-month period.
Got it. Great, great. I think you also plan to have interim phase III data for the XBB.1.5 vaccine later this year? What is the significance of this vaccine?
Listen, there's two additional phase III trials we're doing. One's on a bivalent COVID vaccine, and then the XBB is a monovalent vaccine, and they each have a strategic purpose. The bivalent vaccine is important to show the market that our platform is not only superior in the monovalent setting, but also the bivalent setting. You have seen when you're introducing multi-antigenic vaccines are inconsistent in the marketplace. Some are working, some combinations are working, some aren't. It will be really nice for us to come out and show that a multi-antigenic vaccine, a bivalent vaccine, is superior to other bivalent technologies. With respect to the XBB vaccine, that trial is being conducted in the Southern Hemisphere, and it's being evaluated in multiple ethnicities.
A spectrum of humanity is appreciated, especially with the application for licensure in the United States. We'll have that data bolted on to the U.S. application. Our partner, CSL, has been positively messaging their intent to not only apply, but ultimately gain licensure and commercialize Kostaive in the European Union, U.K., and also in the United States. This XBB data is gonna be key from a safety perspective to capture, you know, just a spectrum of humanity in one trial.
Okay. Got it. I think you have covered the EU review part, saying potentially we will get approval fourth quarter.
Yeah, later this year. Yeah, we're still on track for that.
I see. And there might be a milestone for that, I guess?
There is a milestone.
Yeah, right. It's, you know, it's. I don't know, you haven't talked about the size. Is this going to be a fairly substantial one or, you know, less so?
It's meaningful, and it's already built into the guidance that we mentioned, but of three years.
So it's part of our three-year runway for cash till, you know, the first quarter of 2027. So you can kind of back into the numbers and see that it is pretty substantial for us. Right.
Okay. Got it. Any thoughts on Pfizer BioNTech's recent COVID flu combo vaccine i ssue? Like, I think it failed,
Yeah, I think it's just generally interesting that you see some inconsistencies now in our field. That, you know, why does one combo in the field work and the other doesn't work as well. And so this is an interesting question, and it elevates our attention on our bivalent vaccine trial because that's a multi-antigenic trial. It elevates attention on self-amplifying mRNA because it's a low-dose technology. And we say the word multi-antigenic, it's just a fancy term to say we can put in a lot of proteins or a lot of antigens into one mRNA construct because the dose is much lower. So it's one of the features of self-amplifying mRNA, these inconsistencies.
All it's going to do is draw more attention to self-amplifying mRNA, because it's considered a more multi-antigenic platform technology because it's a low-dose technology. It would be inappropriate for me to speculate as to why one didn't work and one did. I'll let the company speak for themselves on that, but I can suggest that the self-amplifying mRNA has a lot of theoretical potential to be superior as a multi-antigenic platform technology.
Got it . And so speaking of multi-antigenic, I guess your flu vaccine program is, like, is that quadrivalent or trivalent?
That's actually eight antigens in that. It's quadrivalent, but there's two antigens per valency, so that's another example of we're looking at eight antigens in one vaccine, so we're excited about the flu opportunity with CSL. No doubt that's central to their company. It's very important to them. We're not able to give specific guidance on the flu programs, but I can communicate that it's we have a very active program with them on flu. It's multiple constructs being evaluated, and whether it's a standalone flu shot, ultimately that's commercially successful or a combination of sorts, we'll allow the experts, our commercial partners, dictate which of those will be most commercially successful, but we'll support them in any efforts they're doing.
But we cannot guide specifically what we're doing in the flu. That's for them to guide.
Including timeline for data?
Yeah, especially timeline for data. They hold, flu is a very competitive field. It's not like COVID, where we have limited competition. Flu, there's several competitors out there, and it's in their best interest to guide it as they see best. And then we will take their guidance and share it with you secondhand.
Right. What kind of economics or exposure do you have in a flu program?
We have a 60/40 profit-sharing split with the COVID vaccine enterprise, but we have a royalty structure with the flu, so it's up to a double-digit royalty for the flu program.
We have a lot of commercial milestones associated with the flu program as well and development milestone too. So it's a very financially, you know, lucrative program for us, especially because CSL is one of the top two players in the world. So the amount of revenues is very meaningful, and any percentage of that would be, you know, fantastic for, you know, a company like ours.
Yeah, absolutely. Perhaps we can turn to cystic fibrosis. Can you recap the phase 1b data in the initial four patients you reported?
Sure. So, the first four subjects in phase 1b were all patients. Three of them were on Trikafta, and one of them was null for the transporter. It's Class I CF. Each of them received two administrations of ARCT-032. That's our CF potential CF therapeutic. And the purpose of the phase 1b study, just to refresh everyone's memory, it's a safety study. The purpose of the study is to determine safety and tolerability of two administrations in CF patients, and it was very successful with respect to that. We're also measuring lung function, not because it's an efficacy study, but because we're looking for deficits in toxicology, the safety study. And we were pleasantly surprised to see that we didn't see any deficits, but rather we saw elevated or improvements in lung function after just two administrations.
So even though it wasn't an efficacy study, it's not statistically powered, it was encouraging, and we shared this data with the CF Foundation, and they encouraged us to share it at the CF conference. And this will allow us to speak freely with the potential PIs of this upcoming phase two trial, to let them know that not only is it safe and well-tolerated and there's no SAEs, but we had, you know, individual subjects, especially the Class I subject, that responded after just two administrations. And so that should be positively received and help us recruit these Class I subjects for our phase two trial. So, you know, it's encouraging data.
We understand it's not statistically powered, but you can imagine if you're a Class I subject or a family, that is very meaningful data, even though it's one person. It gives them, you know, positive hope and encouragement to participate in a trial that we're conducting.
Just to give you guys a perspective, you know, these people see an annual decline in FEV until they die.
So because there's no therapeutic option for them, they don't have a long life. And so you can imagine when your lung function dips, you know, below 60% and now is in the 30%-40% range, the quality of life isn't that great. So any kind of improvement is considered pretty remarkable, and, you know, so we're pretty excited about what we've seen so far. And, you know, we're gonna start our trial soon, so it won't be long before we'll find out. Yeah. Got it. Yeah, yeah. Let's, you know, touch on that trial. Yeah. But, you know, before that, you do have three additional patients. Yeah. From this phase Ib that wasn't in time for the data when you reported last time, right? Do you still...
Can you talk about the safety from these three? Mm-hmm. You know, I think people were looking for absence of febrile reactions. Yep ... just like the first four. Did that, you know, is that the case? Anything more you can tell us about the three? Sure. So patients five, six, and seven in phase Ib were all relatively stable and on Trikafta. So after we got access to the data, we saw that they came in with high lung function. None of them would have qualified for an efficacy study, which is okay, because they, the purpose is a phase Ib safety study. So the safety data was very important, and we're very appreciative to these patients supporting.
Efficacy improvements when they come in very high and they're already on Trikafta didn't give us any you know significant signals to share. We are appreciative of the safety data, which had no serious adverse events. It was safe and well-tolerated. Not just these seven patients, but the entire 39 subjects now, we haven't seen any febrile reactions at the target dose levels that we are going after in phase II. That includes all seven patients and all of the healthy volunteers at the target dose level in phase II. We're optimistic that this should be safe and well-tolerated. We've got to prove that out, but we think we're in good shape.
The FDA has had a chance to evaluate those patient data and, you know, and, you know, gave us approval to proceed, you know, with the data set. So that was encouraging. Right. I think your phase your you know study was. The IND was cleared just the other day. Yesterday. Yeah, just yesterday. Yeah, and it wasn't the standard. Normally, you file an IND at phase I, and it's like this thick, but ours was enormous. It was almost eight, nine years of data that that culminated in phase I and phase Ib trials. This was a phase II IND that had just copious amounts of data in it. So kudos to the team. They worked really hard in the summer. None of them could take vacation, but they got it done, and we got it.
We negotiated a really good design with this phase II trial with the FDA. They're very supportive and excited about it. The foundation is excited about it. I can tell you some additional details. Yeah. There's no placebo associated with this trial, and you know, we have 39 subjects of data already, so no placebo is required for this. That will help us in recruitment. We also don't need to perform what's called a lung brushing, where you stick a device down into the lungs and scrape and get a lung sample. That's no longer required by the FDA. They wrote a white paper on that, so we don't have that incorporated into our design.
If you're a Class I subject, you don't want to participate in a study where you could be getting a placebo or you're getting your lungs brushed. We think this will facilitate recruitment, and that's a differentiator for us, and so we're very happy with the design. It is multiple doses being evaluated, and it's several weeks is the study, and we believe and the dosing is either gonna be daily or every other day. Throughout this study, we should say with definitive confidence that this is working. Give us a really clear idea of what to do next after this kind of study. Got it. In terms of dose level. Yeah. I think earlier on, you mentioned you have a phase II dose level selected, right? Yeah.
Tell me what those levels? There's two dose levels being evaluated in this phase II study, but we haven't shared what those doses are. We're keeping those. There's no need to do it. We're just being intentionally coy about the dose levels in the competitive environment. Right. But you did say at neither level, you saw febrile reaction in your healthy volunteers. Yeah. At both these dose levels that we're evaluating in phase II, we saw no febrile reaction, not even a febrile reaction in healthies or patients. Got it. Got it. Could you talk about the duration of this? Like, how long is the? We said several weeks. The trial will be posted on clinicaltrials.gov relatively shortly here.
So, we'll see how that. Once that's finalized, then I'll be able to speak more definitively about that. Got it. But it's several weeks, not months. Got it. Given it's not, it's not controlled, it's not placebo-controlled, it's open label. Correct. What are you looking for for the outcome? Yeah, that was very clear from the FDA, FEV. FEV is what they want to see. This is a lung function improvement before, during, and after the trial. So, if we show something like that, that's meaningful, then I think we have exciting rationale to advance into a pivotal trial. And if it's stellar data, we'll be negotiating and asking for some sort of accelerated approval provisions because people are in real need for this type of therapeutic.
Got it. So, what is considered a meaningful improvement? Could you set the bar?
Ah! Yeah, that's the gazillion-dollar question. We do have feedback from the FDA, but we won't be sharing that with the public.
Got it.
What's the magic level? Yeah.
Okay. Good to hear there is a bar. The issue of albuterol administration prior to inhale inhaling your product, right? Is that the part of the design? And, you know, can you talk about that?
Yeah, likely. Yeah. Every single CF patient I've talked to takes albuterol regularly, some sort of steroid, to help open up their airways to... 'Cause they take a lot of drugs, and they inhale a lot of these things, especially antibiotics, to prevent them from getting sick, and that can be very bad when you have compromised lungs as a CF patient. So every single CF patient I've talked to is very familiar and commonly and regularly using albuterol. So we use it as a pre-treatment just to make sure that more of the lungs get access to this very important drug, we believe. So that's part of the process.
It's not an issue. It's, it's more of a facilitator. Because it doesn't last that long, right? It's the effect of it is to help during the, you know, inhalation process, but it doesn't affect the actual outcome of any of the tests that we're gonna be conducting.
Most of the patients are already regularly using it anyway, so.
Especially for antibiotics, they use that on a regular basis. It's not an issue. You mentioned it as an issue. So It's the normal course of operating for this patient population.
Got it. But given that you mentioned the dosing could be daily, right? Or every other day. Then is there a need to isolate the effect of Albuterol from the drug?
If it works, these people have no option, so... And if it works and it helps these people, then yeah, I would take it too, right? You know, because they don't have another option. As I said, their lung function declines until they die.
Yeah, but the albuterol is just minutes to, it's just a very temporary effect, i t's not till the next day. You know, they don't take Albuterol, and it lasts till the next day. It's just-
Just asking about the duration of effect. You might need to separate those two, but sounds like Albuterol is short acting.
Short. That, yeah. T here's no concern there. Yeah.
Got it . Enrollment of Class I patients, right? So, you know, sounds like these patients have no option. This should be very readily available source of patients, right?
Well, what we found, and several other companies have shared our stories together, but these Class One subjects especially are difficult to enroll because they have compromised lungs, and they don't want to be experiments. They want to participate in trials that have a meaningful product, right? That can help them. So thankfully, we've now gone through 39 subjects, and we can show, including one Class One that has positively responded, and I think we're now in a position to effectively recruit these people. Without that data set, it's very, very, very difficult to recruit Class One patients. This is what we found. But once now that we have the data set, I think we're in a position to efficiently recruit them, especially because we're not in a placebo-controlled trial. We're not doing lung brushings. It's being...
You know, the oversight of this is, we trust our management team 100% on this. They're outstanding in CF. We're working with the CF Foundation, and they're, you know, fantastic, and they, and they're really helping us now, and that's the number one benefit of this IND to the U.S., is now we can tap into, in a very real way, the resources that the CF Foundation brings 'cause we're conducting this trial on their home turf, and so that's gonna really help us. Before, we were in New Zealand for phase I and phase Ia.
Right . So like, what's the factor or important update to the investor community will you provide for this trial in terms of beginning to enroll or, you know, dosing of the first patient and, and-
Gauging expectations on the key data, I think that's next year. We're saying first half of next year, but we haven't provided any other guidance as to what will be the next and greatest update. But you know, sometime next year, we'll be able to provide what we hope to be very meaningful proof of concept data that's based on FEV. And of course, all the safety data associated with several treatments of this inhaled therapeutic.
Great. Very exciting, and looking forward to those updates, data updates next year. In terms of enrolling patients, is there no gating factor, right? Is there any site initiation that, you know, you're still working on?
No, nothing out of the ordinary. We are working with the CF Foundation, the TDN, right? This is a group of eighty sites or so that are active in CF trials. We're working with the CF Foundation to identify the key sites where we can conduct this specific type of trial with these specific type of patients. They have all the database and the access to these folks, so we're working closely with them. We should be in good shape, and we're fairly confident that we can recruit, enroll, and execute on this trial.
Great. Thanks for the update on the phase two for cystic fibrosis. If we can, in the remainder of time, touch on OTC deficiency. So you reported some single-dose data at the SIMD meeting? There weren't any efficacy signals, right?
Yeah, as expected.
From that single dose. Right. You know, can you talk about the tolerability of, you know, from that single dose? This is obviously a liver, you know, it, it's a liver-targeted, you know, mRNA therapeutics. Right? I think you did kind of change your infusion to a slower infusion to trying to avoid some of the infusion-related, you know, reactions. Can you talk about that?
This is something that I've done successfully at previous companies and also Alnylam did successfully with their very successful product, Patisiran or Onpattro. What you do is you get into the clinic right away, and then you identify the rate of infusion-related reactions. There's always a percentage of people that are sensitive to infusions, especially with lipid nanoparticles involved, and then once you find out what that rate is, you can adjust it or reduce it by modifying the infusion protocol, and we did that. We now have a three-step process rather than a simple process, so it's a three-step process, and it removed all the IRRs. Now, we hope that that continues.
We have to get more patients involved, and that's one of the purposes of this expanded phase two trial, but in the US. But everything there is on track. So with respect to infusion-related reactions, I'm happy to see that that's being controlled, and we're identifying infusion protocols to address that. And then every other safety parameter is actually quite similar to what I've and other people have observed in other lipid nanoparticle RNA therapeutics. So, but we've completed the, you know, cohort in Europe. A nd we're in the process of collecting that data. So, and that's multi-dose. And so up to six doses. So that should give you encouragement that, you know, had we had a major issue, we would've had to share that with you by now.
So that's good news, you know, we're I think one of the first or one of the few companies that have had, you know, multi-dose intravenously delivered mRNA. And so we're pretty excited right now. We have to find out if it does get into the periportal portion of the liver and actually expresses, you know, the OTC enzyme.
Right. Yeah, I think you're about to remind us when that data will be recorded?
It's 0.3 mg per kilogram. Six people received drug; two people got placebo. It's a cohort of eight. It's all out of Europe, and that dosing is completed. The data's being collected, and we said that it'll be available in Q4. And remember, we want to confirm that it's safe and well-tolerated in five or six administrations, right? And then also get smarter on the biomarker strategy. It's very important for our pivotal trial that we identify a biomarker that can help drive decision-making and regulatory approval. Because in a pivotal trial in OTC deficiency, likely all those patients will be on ammonia scavengers, which makes ammonia a challenging biomarker to drive a trial and a decision. So we need to get smarter, and I understand, 'cause there's so many biomarkers that we're measuring, we just need to learn from that, from this European trial.
So safety and tolerability, getting smarter the biomarker strategy, apply those learnings to this new expanded phase two trial here in the U.S., and then we'll be in a position to have a nice, tightly designed, biomarker-driven pivotal study, which I think will really differentiate us. Because others in the space were. It's difficult to have a biomarker strategy. They use diets, and they off-board drugs, and that can be a lengthy process. But we're looking to have a more cost-efficient pivotal trial.
Got it . And for this MAD study, are you targeting in the fourth quarter with the first cohort of data, are you targeting a medical meeting, or have you decided?
Oh, we haven't decided how we're gonna share that data yet. I know there's some premier meetings in the fourth quarter. But that hasn't been communicated yet.
Got it. Would you say you have, you know, figured out a biomarker, or is that still in the works?
Still in the works and figured it out. We haven't seen the data from Europe yet. It's being collected. It's in the works, would be the short answer.
Got it, got it. I guess the last question on the financials. I mean, you're trying to monetize your stake in ARCALIS, the Japan kind of a joint venture manufacturing facility. Can you provide an update there, and have there been any third-party interest?
I think in our last call, we said that, you know, the process is continuing with J.P. Morgan. We hired them as our banker to lead the process in Japan, and although, you know, we're encouraged by the process, we can't really give you specific details at this point in time, but hopefully, we'll have an update in the fourth quarter on the ARCALIS opportunity.
Got it. That's very helpful. I know we're out of time. Joe, would you mind to go through the catalysts? Is that-
Oh, I don't mind it. And, you know, for the first time in twelve years, I had to write them down 'cause there's so many. There's that many. So regulatory approval of the Japanese JN.1 Kostaive update. We have the twelve-month data for Kostaive that's coming later this month. We have the phase 1 for the BARDA starting for the pandemic vaccine, got regulatory approval in Europe for Kostaive. We have sales achievements by Meiji in Q4 and Q1. We have to initiate the recruitment in CF, and that's gonna be an exciting program to watch. The OTC data is coming out in Q4, with potentially additional data from the U.S. expansion. And then we're.
And then the bivalent and the XBB phase three data for Kostaive is all coming out, all in the next few months. So it was hard for me to memorize that, so forgive me. I just wrote it down.
Understandable. Thank you very much for a great session.
Thank you