All right. Let's get started. Welcome back everyone to the Leerink Partners Global Healthcare Conference. I'm Lili Nsongo, and this morning I am joined by Joe Payne, President and CEO of Arcturus. Joe, welcome.
Hey, thanks Lili. It's good to be with you.
Thanks for coming back. We had a great discussion last year, and a lot has happened since our last discussion. Maybe you can just give us an update and overview of, like, a year at Arcturus last year since the last time we had this conversation?
Okay. There's lots happened in the past year. Let's begin with our CF franchise. Our CF program completed three cohorts of data in a phase II study. We dosed successfully from 5 mg up to 10 mg, and then recently completed the 15 mg dosing in our third cohort. We were very pleased to see that we were consistently well-tolerated through each of these dose levels, and these are generous dose levels. We're very well aware that there's been 30 years of failures due to safety and toxicology and tolerability, so we're very pleased of course to see that our inhaled therapeutic it's been tolerated at 5 mg, 10 mg, and now 15 milligrams. That's.
Those were 28-day studies, so this is an inhaled messenger RNA therapeutic inhaled daily for 28 days consecutively. It puts us in a position of, I guess, extra confidence as we go into advance this further into the phase II development into a 12-week study. During those three cohorts, we also saw some early signals of clinical or, you know, biological proof of concept. We saw some decreases in mucus plugging, and that was viewed by high-res CT scans, and so we were pleased to see that.
We hope that the reduction in mucus and reduction in mucus plugs that we've observed in our early cohorts will be translated into, you know, lung function improvements and seen in our 12-week study, and that's the primary role of our purpose of our 12-week study is to see some lung function improvements.
Great. Thank you for the overview. Obviously, the cystic fibrosis program has been front and center. I won't touch upon all the program.
Yeah.
Diving first into the cystic fibrosis program.
Sure.
As you mentioned, the phase II part of the program has started with a 28-day study, and so we're moving on to a longer 12-week study. Can you maybe give us an overview of the learnings that you're taking from that 28-day study into the design of that 12-week study?
Yeah. There's a lot we learned. We learned that FEV can be variable in these smaller studies, or we relearned that. The field is aware that these lung function assays or studies can be variable. For those that are unfamiliar with FEV, you're exhaling aggressively into a machine or a box, and so we want to make sure that that variability is controlled. As we develop this into the 12-week study, based on our learnings from the first three cohorts, we now are strengthening the baseline, meaning we're not just looking at a single baseline point for FEV or LCI, we're looking at multiple baselines.
We also need to make sure that that baseline is stable and consistent, and if it's not, then the person will not be part of the study immediately. They'll withdraw for a moment and then come back. 'Cause often these CF subjects are either entering into an infection or they're coming off of an infection, or for whatever reason, there's some undesired variability with respect to lung function, and we just want to make sure they're stable prior to entering this next cohort, this phase IIb type cohort.
Thinking about specifically the design of that upcoming study, are there any restriction in terms of baseline FEV1? You mentioned that you want to strengthen the baseline measurement, but are you narrowing the criteria, in any ways in terms of disease at baseline?
Yes. Yeah. Rather than taking folks that have a baseline lung function from 40 to 100, we're narrowing that. We have a new CMO. His name is Dr. Alan Cohen. He's actually with us at the conference here in Miami. I encourage all investors to talk to him if you get the opportunity. That's another modification we've done in this 12-week study is we're narrowing that sweet spot to identify subjects that are not high functioning at the beginning and not too advanced at the beginning so that we gives us the best opportunity to see lung function improvement in a 12-week study.
Again, in the initial phase II study, you mentioned that you'd seen signal of improvement in mucus plug reduction. FEV1 could be potentially, you know, a little more difficult given the variability. Those metrics, they seem to be complementary but distinct. For the upcoming 12-week phase II study, what level of correlation between the various measurement do you anticipate?
For the 12-week study, we're not just looking at FEV, we're also looking at lung clearance index or LCI. I think it's helpful to also understand that we're looking at two quality-of-life measures, not just a single quality-of-life measure. On top of that, we're looking at this high-res CT scans before and after the 12 weeks of study. That's five areas that we're looking at, and we're collecting quality-of-life measures, lung function measures, and then imaging with the CT scan. That's a lot of data, a lot more data than we have in the first three cohorts.
Once we sit down with the FDA and look at all of those five sets of data, we'll be able to understand what an inhaled therapeutic and messenger RNA therapeutic can do for these Class 1 CF subjects. How well it correlates is yet to be determined. We're the first inhaled messenger RNA therapeutic to get to this point. We're gonna be determining a lot of you know, for the first time, what kind of data we can collect. I like to remind investors all the time that we are not a systemic modulator treating the delta F508. We are an inhaled messenger RNA therapeutic that's treating Class 1 subjects, and they've had advanced disease for 20+ years often, and it's gonna take time to peel away that disease, like peeling away an onion.
This daily treatment for 28 days, we saw some early signals, and we're getting excited. Now we've got to advance this into a 12-week and see to what extent we can continue to chip away at this disease and start to see not just FEV, but potentially LCI improvements. Both FEV and LCI has been used as endpoints for approved CF drugs. We're gonna look at both, and we're gonna be the first company basically to see this, to see which of these gets impacted the most and in which type of patients. It's gonna be an exciting year for data collection for us in this 12-week study.
I wanna talk more specifically about lung clearance index.
Yes.
LCI, as you mentioned, it has been used to support approval, but traditionally, it's preferred in the pediatric population.
Yes.
What specific magnitude of change in LCI over the 12-week period do you see as meaningful? How should we interpret this metric that you're now-
Yeah.
...introducing in adults?
The reason why I think it's helpful to understand why LCI is a primary or, you know, a driving endpoint for the pediatric studies. In pediatrics, these subjects do not have as advanced disease as adults, right? The disease has only been progressing for a small number of years instead of a large number of years. Because of that, you can imagine if you could look inside their lungs, that everything is less advanced, less cirrhotic disease, less scarring, less mucus plugs, less. The size of these mucus plugs are different. Whenever you're determining smaller changes of improvements, that can be detected by LCI. It's a more sensitive study. If the mucus plugs are smaller or the numbers are smaller, then that can also be detected by LCI.
Just going back to what we've already seen in the second cohort after 28 days, we saw some mucus plug reduction. That may actually be more correlative to LCI. We don't know. We're gonna actually collect the data to see that. Larger plugs. When those get ameliorated, we see FEV improvements because that's a larger impact. The smaller numbers, like whether they're small plugs being, you know, corrected or ameliorated, those will potentially be detected and detectable by LCI. That's why we're looking at both, because there's obviously changes that we can see that are, you know, large mucus plug reductions versus smaller, and that's FEV versus LCI. We're just excited to collect the data and share it with the FDA to understand how we're correcting this disease over an extended period of time.
Thinking about FDA interactions, overall in the field, as we mentioned previously, LCI has been used within the pediatric population. How has FDA's thinking around pivotal endpoint for adult CF evolved over time?
Well, FEV's been around the longest. If you're talking about, that's typically the primary endpoint for multiple lung diseases, not just CF. It's an older technology, right? If you go to a site today, I think people prefer a more sensitive, more accurate, technology of LCI. FEV is the situation where you're blowing into a device and there's some subjectivity or there's variability associated with that. That can be, you know, 3, 4, even 5% or even more, depending on what's causing the variability. LCI is a passive study, and it's important to understand that it's not as subjective, it's not impacted by how the person is feeling. LCI is a situation where you fill their lungs with a gas. An example is 100% oxygen.
Right now, we're breathing 20% oxygen. If you fill the patient's lungs with 100% gas and then you track the re-equilibration of from 100% oxygen to 20% oxygen and measure the time it takes for that to occur, that's just a passive situation where they're just breathing in and out. It's not dependent on how the patient feels. There's much less variability, and that's why it's really good for kids because you don't need to train the child or rely on consistent. They just have to breathe, and same with adults. We're measuring LCI in adults as well in this study, and they just have to breathe. It doesn't depend on their mood or the time of day.
I guess, has the FDA shown openness to consider LCI as a potentially pivotal endpoint in-
Yeah.
...in adults?
The short answer is absolutely yes. They've already approved drugs based on LCI for CF in other patient populations, right? We think that they would be very open to it. To emphasize this point, the CF Foundation is already collecting a natural history study in Class 1 subjects of a variety of ages, and they're measuring FEV and LCI. They're already doing a natural history study for this purpose for companies like Arcturus so that if we're successful in our phase IIb, this fourth cohort of phase II, if we're successful, we could potentially advance this into phase III and leverage that data from the natural history study that is being collected by the CF Foundation for CF, FEV, and LCI.
Staying on the study design for the upcoming phase II, how should we think about dosing? 'Cause as you mentioned, in the first phase II study, you had a 5-mg cohort, a 10-mg cohort for which we've seen efficacy data, and then a 15-mg cohort. I think at earnings you had mentioned that potentially you would take forward both the 10 mg and the 15 mg.
Yeah.
Can you tell us what you've seen so far in efficacy? Have we reached the kind of like the peak of what you would want to see in efficacy at 15N? Is there room for more?
Yeah.
There are safety limitations?
The short answer is there's definitely room and opportunity for us to increase the dose further. We had dosing at 27 mg in healthy volunteers already. We have experience at 27 mg dosing. However, we're at the point where we've addressed a lot of questions by modifying the dose level. This is a disease that is more duration dependent. We're peeling away an onion. It's not just something that people inhale once and correct a disease that's been aggregating for 20 years. We need to peel away that disease one inhalation at a time. What our team is focused on, and not just our team, but the community, we're more interested in the duration. What happens when you extend the duration of this treatment?
We saw some activity at 10 mg already, so we're just gonna extend that first. We have the flexibility now, based upon our N-15-mg cohort and our experience in phase I as well, that we can increase the dose further if we'd like to. Our present, I guess, hope and our expectation is that by at 10 mg, hopefully we'll see a significant improvement over a 12-week period versus a 28-day period.
Mm-hmm. For this study, you're expanding to sites in Europe and the Middle East to kind of maximize the capture of Class 1 patients.
Yes.
How should we think about the standard of care in this various region? What percentage of those, I think the target end is about 20 patients. What percentage of those patients would be coming from international sites versus-
Yeah.
... U.S. sites?
Yeah. We've gotten familiar with several sites in Europe and Middle East. We haven't disclosed the exact sites for you know, just 'cause it's unnecessary. The sites that we're working with are high quality, that their standard of care is commensurate with here in the U.S. These are well-trained, they're familiar with FEV and trained in LCI. If there is sites that aren't here domestically or internationally, we send a team out there to make sure that they are, if they need a brush-up or if they need a new, fresh training, we're making sure they get the training for LCI as well. We do emphasize the difference. The reason we're bringing on Europe and Middle East is they have a higher prevalence.
A higher percentage of the CF subjects are Class 1. We were surprised to find out that it's 20, 30, in some sites, even 50%, very high numbers of Class 1 subjects. Unlike here in the U.S., where it's around approximately 10% of the CF subjects are Class 1. We're going there not just because it has an equivalent standard of care and equivalent training, but also because they have a higher prevalence of Class 1. It's that simple.
Before we move on to other program, maybe one last question on the CF program. How should we think about the regulatory path beyond, the phase II, so the 12-week study? Do you expect to take this study and potentially have it as the basis for an accelerated approval? Do you anticipate a phase III? What is baked into your expectations?
Right now it's difficult to gauge expectations 'cause we need to get this 12-week study data in our hands, 'cause that will project our. If the 12-week study is spectacular, we'll go to the FDA and make a spectacular request, but realistically, we understand the. In parallel here, we have this natural history study that's collecting FEV and LCI in hundreds of Class 1 subjects. We would like to leverage that data in a phase III study, so I think it's a conservative expectation is that we will be doing a phase III study, number one, but we haven't seen the data. Under a conservative expectation, we'll do a phase III study. The size of that study will likely be dictated by the safety database.
If we do 40, 50 people, that would be over 100 total subjects or experience, and that is likely sufficient, but we haven't had that conversation, so the size of it's still not ironed out. The duration of it, of course, depends on this 3-month study or this 12-week study. If we see a lot of traction here, we don't have to do it much longer, whereas if we see very limited traction, we might have to do a longer study. The expectation, if it's successful, if we see some success here, then we'll have a study, you know, around 50 people, and is it 6 months? That would be reasonable.
I wanna be clear, we haven't had these discussions with the FDA in this granularity, and it will depend almost completely on this fourth cohort phase II 12-week study. Once we have that data in hand, then I'll be able to answer those questions with detail.
How soon can we expect that data?
It's an open label study, so we're not gonna be sharing the sentinel subject in 3 and 6. I think, there'll be an opportunity to potentially share data, you know, after 10 subjects are completed. We haven't guided any time to share the data. All we've guided is that we're planning to initiate this study in the first half of this year, and we're very close to doing that 'cause we've already got approval to proceed, so you can imagine that that's very soon. It's an open label study, so we keep those options open, but we haven't guided on any timing of sharing the data.
Once we have a couple months of enrollment, then we'll be in a situation where I can give you a tight understanding when we're gonna complete enrollment and have the data to share.
Great. Well, we look forward to that, then. Moving on to the OTC program.
Yeah.
Could you give us an overview of the data to date?
Yes. Yeah. Well, we had a phase I and phase Ib, and then we had multiple phase II studies in the U.S. and Europe. We're just wrapping up, you know, the U.S. effort there. The key objective for that program is to establish clarity in the regulatory path in children. Ornithine transcarbamylase deficiency is the number one urea cycle disorder, but the most significant commercial opportunity in that is in the kids. This is where the highest unmet medical need. These children are, unfortunately, it's very severe and serious disease, and there's fatalities or death, and we want to make sure we can address this market of unmet medical need.
In order to do so, we need to have clarity from the FDA, and so we have a pair of Type C meetings that we're doing in real time. We'll say in the next three months we'll be able to understand where we are with respect to a regulatory path going forward, not just with the stable adults, but also in the unmet medical need of the children. Once we have a clear path of what's our regulatory path in that group, then there's value associated with that. 'Cause right now investors ask, "How are you gonna get this approved?" I can't answer that. Once we have that clear picture, which we fully intend on getting clarity, then I'll be able to answer that question.
There's near-term value creation for our OTC program, especially if we have a clear path to approval for the children.
So far the data and the studies have been focused on adults and adolescents.
Correct.
You're going into Type C meetings with the FDA regarding the program.
Yeah.
How do you expect the journey from adolescent to adult to pediatric to look like? Do we go back to the drawing board in some sense because of safety, or are there learnings from adult and adolescents that are gonna ease the journey?-
Yeah.
...into pediatric patients?
Well, there's a couple things that our program's done that no other previous program has done. We are looking at what's called an 15N ureagenesis assay.
Mm-hmm.
This is a new assay that's never been employed or considered by the FDA, and we've introduced that to them. We've talked to them. They're very interested in the data. What role that will be in kids is uncertain. I think with severe children, ammonia will always be the concern here because it's such a challenge to control, that even ammonia scavengers are having problems. If we can control ammonia in the severe disease in these children, then that's gonna be a clear driver. To what extent and how we and the timing of that, we've presented, obviously, a path forward there, but we need to get alignment with the FDA.
Mm-hmm.
We need to have that conversation put in writing and the minutes captured, and then we'll be in a position to clearly communicate how we're doing it. I believe ammonia will be a part of the path forward with the children, especially severe disease, and 15N will always be there 'cause we're collecting that data, and that's a wonderful new assay that just strengthens the data set. To what extent diet and the removal of standard of care is to be negotiated with the FDA. What is known is that these kids are dying on a regular basis, and that is not acceptable by many groups, and we got to address it. We've shown safety and tolerability and early efficacy in the stable adults, so we gotta get this into the kids.
We have to get it there as soon as we can, and we're in the throes of that negotiation process now. Hopefully, next time I chat with you, I'll be able to give you a clear answer of what that trial looks like.
Obviously, it seems like there is an increased focus in the larger opportunity, which is the pediatric opportunity. For the clinical development plan for this program, should we expect that you would push first for development in pediatric?-
Yes.
...the pediatric population, and that the adult and adolescent could be a kind of like-
Yeah.
...extension
We're pushing aggressively towards the unmet medical need.
You're prioritizing.
Dying children isn't acceptable, and we just gotta get to that place first.
Great.
I can't provide any guidance or clarity until I have it.
Yeah.
We're getting close. We said that we'll have that clarity in the first half of this year, so that's a very near-term milestone for our company and for that franchise specifically. It's just understanding what's the path for pediatrics there?
Yeah. Great. Well, we look forward to hearing back from your interactions with the FDA on the program.
Yes. Yeah. For sure.
Moving on to the respiratory vaccine franchise, it's obviously a partnered franchise with CSL. The franchise includes KOSTAIVE, which has been approved in multiple regions of the world, commercialized in Japan, and so the approval in the EU last year, it's triggered a milestone from CSL.
Yes.
There's been some arbitration around that.
Yeah.
There's been approval in the U.K. as well. Can you maybe give us an update, one, on the arbitration with the EU milestone.
Sure.
How should we think about future milestone associated with the program?
Well, we got our approval for KOSTAIVE in United Kingdom, that happened in January. With respect to the arbitration, that's still ongoing. What we disclosed in our earnings call is that we're in discussions with the CSL, not just with respect to the European milestone, which is significant for us, but also with respect to the overall collaboration. You know, last September, 24 hours before our BLA filing, we had a communication from the FDA with respect to the U.S. approval of KOSTAIVE. Under this present administration, there's been some challenges for vaccine companies, and everybody here knows what I'm talking about. Those challenges were real, and it impacted our CSL relationship. CSL wants KOSTAIVE for the United States of America.
That's why they did the deal ultimately. Now that that's been challenged, it's opened the door for some discussions with Arcturus and CSL, and we disclosed that. What those discussions are, how this is gonna impact our collaboration is. I'm not prepared to comment on that. It may be a positive thing for Arcturus, and so we will be looking closely at that. Next time we chat, hopefully we'll have clarity with respect to our CSL collaboration, not just the arbitrated milestone in Europe, and we'll see what happens there. It could be interesting for us.
In addition to the clarity from the OTC program, and then as this ongoing open-label, you know, phase II fourth cohort in CF, a lot's gonna unfold. A lot of clarity is gonna be created for this company in the coming quarters.
Mm-hmm. As you mentioned, the EU approval-related milestone that's under arbitration, so this was $30 million, right?
We haven't disclosed the amount, but it's a significant milestone for us.
Was a significant milestone. How would the outcome of arbitration potentially impact your cash runway guidance?
Our present runway guidance does not include the anticipated potential milestone. If that happened, that would impact our runway. Presently, our runway goes into the second quarter of 2028.
The second quarter of 2028, excluding the-
Correct.
...the milestone under arbitration.
Yeah. Excludes any BD or any opportunities on arbitration or any pending lawsuits that we have, that are ongoing. None of those revenues are built into our runway.
Great. Well, it looks like you're slated to give us a lot of different updates on the rare disease programs throughout the year, and we look forward to those. We are at the top of our time. I'm gonna scan the room quickly for questions. Other than that, thank you so much for your time.
Yeah.
We look forward to the updates.
Thank you, Lili.