Okay, well, good afternoon, everybody. We're in the interest-
Oh, it's okay.
Okay. We—he can join us.
In the interest of staying on time, we're gonna go ahead and get started 'cause we're already just going. I'm Seamus Fernandez, one of the senior biopharma analysts here at Guggenheim. This is our February SMID Cap Biotech Conference, and really pleased again to have Arcturus here with us. Joe Payne, President and Chief Executive Officer, is with us, and joining us as well will be Andy Sassine, the Chief Financial Officer.
Or you can get mic'd up, Andy.
Thank you.
Wanna get mic'd up?
Oh, I can use yours, no.
Okay. What he's got right there.
I'll get really close to you.
No, go ahead.
So—
Go ahead.
I'll just write on your head.
Anyway, Joe, you know, obviously, there's a lot going on at Arcturus, across the board. Maybe, just to set the stage, provide us a quick reminder about your platform, what you've accomplished, not just in the vaccine space, but also, therapeutics as well.
Sure. So well, Arcturus is a messenger RNA vaccines and medicines company. We're known for our delivery technology platform that we call LUNAR delivery technology. This is a differentiated lipid nanoparticle from the field, and we have different delivery technologies that we use for different applications, whether it's the liver, the lung, or the muscle, for liver therapeutics, lung therapeutics, and for vaccine applications. So we also have important platform technology around the mRNA molecule itself, not only in design, but purification IP is very important in this space, especially for chronic dosing. You need to have intellectual property and know-how on how to create and purify highly pure molecules to broaden the therapeutic index.
These impurities can be bad actors, especially when you're inhaling messenger RNA or injecting them systemically. So this is an area of strength within our platform technology. But we use our LUNAR delivery technology and our manufacturing know-how and our purification, IP to, you know, build a, an exciting platform or a pipeline of therapeutics. And we have a couple readouts this year, for Phase II, and we'll go in and shortly discuss those.
Yeah, it sounds good. So it does sound like the company's kind of now moving through a turning point. You've sort of established the technology itself with your self-amplifying mRNA platform. You're now moving into really delivery technologies with mRNA, in CF, and also a separate delivery of an OTC, a rare disease as well. So, you know, in terms of the catalysts themselves this year, what are you focused on, you know, sort of most urgently? And also, to some degree, how does the vaccines opportunity and your partnerships with CSL and Meiji sort of set the floor for the company going forward?
Yeah. So we do have an approved vaccine called Kostaive in Japan, and we're working to get that approved in the European Union here shortly, with our partners CSL and Meiji. And so that provides a nice foundational framework not only for proving out our technologies and our platform, but to generating a cash flow and revenues with our partners and the sale of the COVID vaccine in Japan and Europe, and as we look forward in the U.S. and globally. So that serves to stabilize the company. We have an approved platform that's partnered, generates milestones for the company. What's exciting about 2025 on the data collection front is on the therapeutic side for both of our Phase II programs in the liver and the lung. Yes, I think that's.
And the timing of those data readouts, can you just remind us in CF and OTC?
Sure. So the first half of this year, we're looking to share interim data for both the OTC and CF programs, and that's, you know, relatively near term.
Great. You know, let's talk about the CF program, and, you know, cystic fibrosis overall, obviously a very big market. Maybe you can just talk a little bit about how you've designed the ARCT-032 to really overcome some of the historical challenges with delivery. And then so far, what have you kind of shown in the clinic?
Sure. So historically, inhaled mRNA has been very challenging. So mRNA has been around for 50 years, but there's no inhaled mRNA therapeutics. So why is that? It's because traditionally or historically, they've been using unmodified mRNA that's unpurified. So it's not purified or unpurified, and they use older delivery technologies that just don't work, or they accumulate, or there's toxicology challenges associated with them. So there's significant hurdles associated with inhaled therapeutics. You need a nanoparticle technology that survives the inhalation, like the nebulization process, the aerosolization process. You need a delivery technology that survives the sputum and the phlegm in the lungs. This is, by nature's design, this phlegm destroys nanoparticles historically.
You have to go through this, you know, a substantial amount of resources and time has been over the last decade for us to optimize a nanoparticle technology that survives the nebulization process, survives the sputum and the phlegm in the lungs to allow biodistribution in the lungs. And then once you get to this cell, you need to design and optimize your lipids and your delivery technology to transfect, enter these bronchial epithelial cells, and then break out of the endosome. The bronchial epithelial cell is different from other cells in the body .
That's obvious, but this endosome, this receptor-mediated uptake and endosomal escape process is biochemically different than other cells. So we had to go through significant optimization efforts for that as well. So I could talk about this at length. But we've addressed the previous challenges from great companies and great technologies previously, and we're in a really good space now. We have a technology that does survive the nebulization process that is stable in sputum.
We went through a 10,000-fold improvement on that process, and we've really understood, screened, and optimized our lipids to break out of the endosome of bronchial epithelial cells. You put that all together and you have a highly pure mRNA that broadens the therapeutic index and a biodegradable technology that broadens the therapeutic index. It gets us to today with a shot on goal that's in humans as we speak.
And in CF, you're, you know, what is the mRNA delivering? What are you trying to achieve with your technology? Obviously, we Know a lot about Vertex and their multi-billion-dollar franchise in CF. How is it different?
Yeah. So we're mRNA therapeutics is different than the modulator business. Vertex has got an extraordinarily successful product that they're in the business of modulating a broken transporter. We're in the business of building a new one. So this is very important for people that don't have any transporter at all. They have no CFTR to modulate. That's called Class I CF. And then there's a large percentage of folks that do not respond to modulators for a variety of reasons.
They don't qualify or benefit from modulators. So this group of people, 15%-18% of the CF community, is in need, real need for something different than modulators. And that's where we fit. An mRNA molecule that accesses these bronchial epithelial cells and expresses or makes a brand new CFTR or this transporter. This could be very disruptive or transformational, very exciting new therapeutic. That's what we're in the business of doing is building a new transporter.
Great. And data so far, you know, I think in the middle of last year, you announced some initial SAD data. Can you maybe just talk about that?
Summarize that?
Yeah. Maybe that initial.
39 subjects of data. 32 subjects were healthy volunteers. We evaluated four dose levels. We learned very quickly, you know, which doses can be tolerated and which doses can't. At the higher doses, we saw some minor febrile reactions. No severe adverse events in any of these subjects. Very successful Phase I trial. We transitioned to seven additional patients, CF patients, not healthy volunteers, and we elevated the dose number to two, so every subject received two administrations of our therapeutic, and that was again successful. It was safe and well tolerated, and that collective data set of 39 subjects of data was submitted to the FDA, and they allowed us to proceed into a Phase II study that we have, we got approval to proceed and officially initiated that trial with our first dosing in December of last year.
Great. And then in terms of where we are at this point in the recruitment of that study and the number of patients that you would hope to show, and I believe it's an interim data set that you would hope to show in the middle of this year?
Correct.
Or, I'm not gonna say the middle, sometime in the first half of this year, but I'll say the middle. Maybe you can give us a sense of how many patients you feel would be supportive of an interim look.
Yeah. In ClinicalTrials.gov, there's a section where you report the number. It's, we put 12. So this is a relatively small, Phase II study. The Phase II study design that is summarized in ClinicalTrials.gov was heavily vetted and highly optimized design that involved the FDA and the CF Foundation, the PIs, our principal investigators involved in the study, potentially. It got a lot of eyes on this, a lot of process. We think it's a nice robust study that's sufficient, if we're successful, that we can mature this, quite easily into a Phase III study.
Just to add to what Joe had articulated, we announced that we had our first patient dosed in December. So obviously doing simplistic math, that means that they must have completed that first patient or at least one patient, you know, 29 days of, you know, successive dosing. That's pretty cool. So as you can tell, we're not talking about two doses anymore. We're not talking about patients that have gotten at least, you know, one dose a day for 29 straight doses and days, which means that, you know, if there was anything that happened in that period of time, we would've had to report it that was negative. I think that is kind of read between the lines that, you know, we're cautiously optimistic, but this is very encouraging and we're excited about hopefully being able to share, you know, additional data points come June.
So from a safety perspective, how are the patients actually added? Is it sort of you wanted to get through that one patient and then additional patients, maybe it's an additional three, for 29 days? And then, is that sort of how it would proceed or how does the study sort of proceed going forward?
Yeah. But there's-
To your interim.
Yeah. So you have an initial cohort. That are initial. This is a multiple ascending dose study, the Phase II study. There's an initial group, a cohort that's evaluated at the lower dose. Then there's a time for the DSMB, that there's a committee that gets together to evaluate the safety that allows us to elevate to the next dose. It's a short period of time, a couple weeks. Then we're allowed to elevate to the next dose.
Okay. And in terms of the endpoints that are gonna be evaluated, my understanding is that the primary endpoint of a study like this, and admittedly it's, I don't know if this study being so small as has, you know, sort of a statistical analysis plan per se, but, can you just update us on what we're looking for in the study? Specifically from an efficacy perspective.
Yeah. Because this is 28 consecutive doses, you can imagine that we want to evaluate the safety and tolerability of that. That's a big deal. It's way more doses than we did in Phase 1b . There's a lot more drug onboarded, a lot more CFTR potentially onboarded to the patient. So safety and tolerability will be a very important component of this study. It's also an efficacy study though. The FDA made it very clear. There's a lot of different ways to evaluate efficacy in CF, but they made it very clear that FEV was the data that we would need to be collected that would be sufficient to us to advance this to a Phase III study, and FEV is just simply a lung function evaluation.
People, we want to see not only suspension of degradation of the lungs in these patients, but some sort of signal, some sort of elevation in lung function. And that's done by blowing in through these tubes and evaluating an improvement or elevation, an improvement in lung function.
Okay. And, you know, typically what we've heard from thought leaders in the space is, you know, sort of a reasonable threshold is about a 5% improvement in FEV1. But what's the baseline for FEV for a CF patient? You know, it's a wide range for FEV going from healthy all the way to sort of a CF patient.
It is the right question. Everyone's really hyper-focused on FEV, and it reminds me of where we used to be as a community, for the modulator business. You know, over a decade ago, people asked the same question, what's significant, and for modulators, you know, they were just guesstimating. They didn't know what it was. And it's kind of the same for messenger RNA therapeutics. What we do wanna see is suspension, you know, no longer degradation of the lung. And we wanna see elevation of FEV. But what that number actually is going to be, we don't know. We're the first movers in this space. We don't know what mRNA is going to do. So, but what the FDA has told us is they want to see something. So if you, what is something, something statistically significant, right?
So Statistical significance, depending on the KOL that you talk to, is around 4%. But I want to stress that we're the first, we don't know what the number's gonna be. The first FEV improvement in the modulator space was 2.7%. And that ended up being a very successful drug. So whether it's 2% or 22%, we don't know. We're collecting that data, and then we'll be able to share it. And that will be very meaningful. As I've had personal conversations with this community. Of modulator non-responders, they just wanna see something. And the FDA wants to see something, but it has to be statistically significant. Yeah.
Just to put things in perspective, to add to what Joe has articulated, these people see degradation every year until they die. Right? In their 20s and 30s. So if you take that into account that, you know, on average 2%-3%, and you show a 2%-3% improvement, that's now 4%-5%, 6% absolute, right? Relative to what they would've done, on a historic basis. So t hat's more meaningful when you look at the fact that these people don't have an alternative right now.
Got it. And by definition, you kind of characterized these patients as the, I assume, the 12 patients. Are they all modulator non-responders or just? Can't respond, a re they class I, you know?
Earlier, I mentioned that it's approximately 15%-18% of the CF community does not benefit, qualify from, for modulators. But so if you look at that 18% number, if you cut it in half, about 9% are Class I. The other 9% approximately are not Class I, but they don't benefit or respond to modulators. It's about 50/50. If you look in our study, we haven't completed the cohorts and the recruitment process, but you can guesstimate that they should be about half and half.
Got it. Okay. Great. And, you know, as we just sort of think about what a go/no-go decision looks like, for your program, how, what's the decision process to kind of, go from Phase II interim results, potentially even to accelerate that, or to say, okay, we're gonna go to the final result, and then, you know, proceed to Phase III, or we've gotta do a little bit more work on the program?
If it's safe and well tolerated after 28 days of dosing, that's gonna give this a real big surge of confidence, because we've been getting consistent feedback from the community that if we see something statistically significant, then we have a clear path to Phase III. The size of that Phase III, the design of the Phase III trial, the nature of that Phase III trial will depend upon the FEV number that the larger the number, the smaller.
Yeah. Got it.
We can't give any details on Phase III until we see the results of Phase II.
We have the results.
If we see anything statistically significant in FEV, then that would be the trigger under the assumption it's safe and well tolerated. But that's a big piece of it. Having 28 daily administrations safe and well tolerated is very, also very important.
And in terms of the opportunity that you would see, are we talking about exclusively the sort of non-responder, modulator non-responder population, or is there an opportunity to then, after you've sort of, you know, targeted the non-responder population, to further expand into a potential population that includes modulators? So an onboarding of mRNA and modulators is combination o pportunity.
Yeah. In the introduction, I said that what we're doing is very different from what Vertex is doing. In the future, that may not be the case, so right now there's modulators and mRNA therapeutics, but in the future that could be considered systemic and topical, and so they could blend and overlap quite a bit. It wouldn't surprise me if this is successful and the modulators and the next generation modulators continue to be successful, that these will eventually blend into one treatment that most of these subjects will get a topical treatment and a systemic treatment. They won't be viewed as mRNA and modulators i n the future. But I hope we'll have that good problem in the future. We'll start with focus on the Class I and the non-modulator responders first, and we'll go from there.
I just wanna clarify what systemic and topical means. Which of the two is systemic and which is topical?
Thank you. Ours is an inhaled topical agent. Thank you. It's inhaled and topically delivered to bronchial epithelial cells, where the modulators are pills that people take that are systemically distributed throughout. The whole body.
Topically delivered to the cells directly b ut the cells are still systemically producing-
Yeah.
-the protein.
Yeah. See, our drug does not get to other organs in the body. It's only accessing the lungs, which is the most important. organ in cystic fibrosis. But if we could treat folks with, you know, our therapeutic, then it's possible that less systemic agents would be needed. So the dose would drop, but I think the future will allow for both.
Got it.
Just to add and remind you, although it's a small number, we had one patient who was on Trikafta during our, you know, two dose Phase IIb or Ib trial that showed a 9% FEV improvement. And so that gave us encouragement and optimism that maybe we can help that population too. But until we, you know, get through our Class I and, you know, non-modulator responders, then I think that would be the next normal step.
Right. And one of the primary challenges it seems like is actually measuring the mRNA because it's in the lung and there's g iven that, you know, actually, scraping the lung or testing the lung in this particular patient population is pretty high risk. So you really are looking exclusively at FEV1 as the primary biomarker of benefit.
Yeah. We were very pleased that the FDA encouraged us not to do any lung scraping or any sampling. FEV is the only efficacy endpoint they need to allow us to advance to Phase III.
Great. And obviously, given the market opportunity, not just in class one and non-responders, but if there were an opportunity to see an incremental benefit over and above Trikafta, there would be a substantial market opportunity-
Oh, enormous.
-to pass.
Yeah.
Exceeding the $10 billion opportunity.
Yeah.
Great.
You know, this is an exciting program that we're watching closely.
Very big readout for our-
Yeah. Yeah. It'll.
-for Arcturus, for sure.
Yeah. We've been waiting a long time. This has been, this program has had a lot of great science in it over a lot of years with a lot of help from the CF Foundation and others. So, it's time.
Great. On the liver side, can you just update us on what we're likely to see and learn o n the liver side in OTC this year?
Yeah. People have been patiently waiting, our investors and new investors waiting for OTC data to come out. We're guiding the first half of this year, including not only the cohort at 0.3 mg/kg, but we've also elevated the dose to 0.5 mg/kg and transitioned the trial to the United States, and so we indicated to the market, communicated to the market that we've initiated our 0.5 mg/kg cohort, and so we'll see what this data looks like, and also understand which biomarker is most relevant for a Phase III trial design. People are looking not only for biological proof of concept in this trial, but what's our biomarker strategy gonna look like for Phase III? If we are able to communicate that this year, that'll be exciting as well.
And one of, one of the reasons that we're excited about the U.S. is these patients are a little bit, you know, thicker and, and there'll be adolescents involved. So we're encouraged by kind of expanding the cohort to, you know, see the response in these people.
Okay. And what is the biomarker of choice here? What would you kind of characterize as a particularly positive outcome that would drive forward into the, A Phase III, you know.
For those that are not on, for the OTC deficient population, the majority of them are on ammonia scavengers. But for those that are not on ammonia scavengers, you can easily track ammonia levels. So that would be an interesting biomarker. But we anticipate most, if not all, of our patients in Phase III to be on ammonia scavengers. So we need to look at other biomarkers. We are evaluating orotic acid in the urine.
We're looking at glutamine and other amino acids in the plasma. A lot of amino acids are implicated or impacted by the urea cycle. And because this is a urea cycle disorder, we're tracking ureagenesis, and so whether it's ureagenesis or different amino acids or orotic acid in the urine, we're looking at all of these. And what the market doesn't understand is which of these biomarkers will be a good tool for us in Phase III, because ammonia will be challenging in Phase III because everyone will likely be on ammonia scavengers. So that'll be a new element to the communication this year.
Great. And maybe we can just comment on the scale of the market opportunity. We talked about a potential, you know, call it, anywhere from $3 billion, $5 billion , $10 billion market opportunity in CF. OTC, I think scales very differently. Maybe just remind us of the size of the rare disease opportunity, as you guys see it for OTC.
I think you're looking at anywhere from $500 million-$1 billion, you know, based on some of the analysts, you know, reports. If you look at Ravicti, you know, that was like about almost three quarters of a billion dollar drug. And that's only in like 500-600 patients. So it's a very encouraging market for a company of our size.
Yeah. Great. Well, we didn't get to turn to vaccines. Unfortunately, not enough time. to cover, but you guys have a lot going on. Just wanted to say thanks for joining us Here at our SMid Cap conference again, and really looking forward to the exciting data that you have coming this year. You know, looking forward to the readouts, you know, in the first half of this year, and we'll, we'll kind of anticipate 'em.
Thank you.