Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.
Thanks, Carmen. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its 2018 fiscal year ended September 30, 2018. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the year; Dr. Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our clinical programs; Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. We will open up the call to your questions. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including, without limitation, those with respect to Arrowhead's goals, plans, and strategies, are forward-looking statements.
These include statements regarding our expectations around the development, safety, and efficacy of our drug candidates, projected cash runway, and expected future development activities. These statements represent management's current expectations and are inherently uncertain. Thus, actual results may differ materially. Arrowhead disclaims any intent and undertakes no duty to update any of the forward-looking statements discussed on today's call. You should refer to the discussions under Risk Factors in Arrowhead's annual report on Form 10-K and the company's subsequent quarterly reports on Form 10-Q for additional matters to be considered in this regard, including risks and other considerations that could cause actual results to vary from the presently expected results expressed in today's call. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?
Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. 2018 was an important year for Arrowhead. Unveiling the new TRiM platform toward the end of 2017 served to frame our technological focus. We recognized that execution would then be critical to demonstrate that we could create real value with it. We needed to push our two lead candidates, ARO-HBV and ARO-AAT, through first-in-human studies in order to confirm our high safety and activity expectations. We needed to advance our preclinical pipeline toward the clinic to better demonstrate the breadth of the TRiM platform. I believe that we have accomplished both of these and that they, along with our success in business development, have put us in a strong position for substantial growth and stability as a company.
Let's go through some key accomplishments that helped us get to where we are today, and then I will discuss a few of these in more detail. We hosted an analyst R&D day in September 2017 to introduce the TRiM platform, which utilizes ligand-mediated delivery and stringent bioinformatics and is designed to enable tissue-specific targeting while being structurally simple. The TRiM platform offers several potential competitive advantages, including a sophisticated RNAi trigger selection and screening process that identifies potent sequences rapidly in locations that RNAi competitors may miss, multiple routes of administration, including subcutaneous, intravenous, and inhaled, potentially faster time to clinical candidates, optimal pharmacologic activity and long duration of effect, potentially wide safety margins, simplified manufacturing at reduced cost, and the promise of taking RNAi to tissues beyond the liver.
We presented clinical data at HepDART 2017 and at the EASL International Liver Congress 2018, demonstrating that four out of eight patients with chronic hepatitis B infection achieved a sustained host response after receiving up to nine doses of ARC-520, our first-generation compound, in combination with daily entecavir. One of these patients sero-cleared all viral markers, including surface antigen, or S antigen, which we believe represents a functional cure. We believe these data represent the first clinical evidence that an RNAi-based approach can lead to the type of favorable sustained host response that we have always believed is possible.
Achieving this result with ARC-520, which was not designed for activity against S antigen produced by integrated DNA, provided us with further confidence that our current generation RNAi-based compound, ARO-HBV, which is designed to silence the production of all HBV gene products, including transcripts derived from integrated DNA, has the potential to be a backbone therapy for combinations intended to functionally cure chronic HBV. This compound was partnered with Janssen Pharmaceuticals in a deal that I will describe in a moment. With these encouraging data in hand and promising preclinical results for our new TRiM-enabled candidates, we moved quickly toward first-in-human clinical studies. Before the end of 2017, we filed for regulatory clearance to begin a phase I study of ARO-AAT, our candidate against alpha-1 liver disease, and a phase I/II study of ARO-HBV.
Both of these submissions were substantially ahead of schedule, thanks to the great work of our discovery, program management, and clinical teams. We began dosing in both ARO-AAT and ARO-HBV clinical studies in the first quarter of 2018. Bruce will describe the studies in a moment, but it's important to mention that they both included single ascending and multiple ascending dose phases designed to generate meaningful readouts on tolerability and activity very rapidly. We continued to execute well on both studies, and by the second quarter, we had already completed enrollment for the entire ARO-AAT study and the single ascending dose portion of the ARO-HBV study and had begun dosing HBV patients in the multiple ascending dose portion of that study. This was impressive speed indeed. In addition to our lead candidates, there was also good progress made on our first partner program using the TRiM technology.
In August, we announced that we earned a $10 million milestone payment from Amgen following the administration of the first dose of AMG 890, formerly referred to as ARO-LPA, in a clinical study. Amgen is evaluating AMG 890 in a phase I study in approximately 90 subjects to assess safety, tolerability, pharmacokinetics, and pharmacodynamic effects. The study will be performed in two phases: a single ascending dose phase and a multiple ascending dose phase in subjects with elevated Lp(a). The estimated primary completion date is currently expected in late 2019. Following the primary completion, Amgen will share the data in the appropriate scientific forums. AMG 890 is the third drug candidate enabled by TRiM to enter the clinical development this year following ARO-AAT and ARO-HBV. We view this step and our collaboration with Amgen generally as further validation of our proprietary TRiM platform.
The second half of 2018 continued to be very active and highly productive for Arrowhead. We presented a snapshot of early data for ARO-AAT at the Alpha-1 National Conference, and ARO-HBV at the World Gastro Summit. Both presentations demonstrated that the candidates were generally well-tolerated at all dose levels studied, and importantly, that they were both highly active against their respective targets. These were the first clinical data released for candidates using the TRiM platform. TRiM is the basis of all of our development programs, it was very encouraging to see that positive preclinical data could translate well in human clinical studies. ARO-AAT and ARO-HBV are proving to be highly potent molecules with a long duration of effect. This bodes well for these candidates and potentially for the rest of our TRiM-enabled pipeline.
We presented additional data at The Liver Meeting in November that further supported the continued development of both ARO-AAT and ARO-HBV. Let's start with some highlights of the ARO-AAT data. Three monthly doses of 300 milligrams of ARO-AAT led to reductions in serum alpha-1 antitrypsin to below the level of quantitation in 100% of subjects. These reductions were sustained for greater than 14 weeks, indicating that quarterly or less frequent dosing appears feasible. In addition, single and multiple doses of ARO-AAT appear to be well-tolerated at all doses tested. These were highly encouraging data that give us confidence to move into a planned phase II study in 2019. Moving on to some of the HBV data presented at AASLD.
ARO-HBV achieves high levels of activity across all HBV patients and patient types and appear to be well-tolerated at single and multiple doses up to 400 milligrams, which was the highest dose tested in the ARO-HBV 1001 study. The mean reduction of S antigen was 1.9 logs or 98.7%, with a range of 1.3 logs or 95% to 3.8 logs or 99.98%. We were thrilled to see these results and look forward to continued development in partnership with Janssen. I would now like to discuss the deal with Janssen and what it means to Arrowhead. In October, we reported that Arrowhead and Janssen Pharmaceuticals, Inc., part of the Janssen Pharmaceuticals companies of Johnson & Johnson, signed a license agreement for ARO-HBV and a collaboration agreement for up to three RNAi therapeutic candidates that use our proprietary TRiM platform against new targets to be selected by Janssen.
The total potential deal value is approximately $3.7 billion, plus royalties on commercial sales. Under the terms of the HBV license agreement, Arrowhead received $175 million as an upfront payment. In addition, Arrowhead received $75 million in the form of an equity investment by Johnson & Johnson Innovation, JJDC Incorporated, at a price of $23 per share of Arrowhead common stock. Arrowhead is eligible to receive up to approximately $1.6 billion in milestone payments for the HBV license agreement, including a $50 million near-term milestone payment after initiation of a phase II study. Arrowhead is also eligible to receive approximately $1.9 billion in option and milestone payments for the collaboration agreement related to up to three additional targets. Arrowhead is further eligible to receive tiered royalties up to mid-teens on product sales. I believe this partnership maximizes the chances of success for ARO-HBV.
I view ARO-HBV as a very exciting experimental agent against chronic HBV infection. Our early data indicate that we may be silencing the virus deeper than has ever been reported, even in hard-to-treat patients, such as HBe negative patients that are increasingly predominating in many regions. As I mentioned, we saw good activity in all patients and the safety profile was quite good. We think we squeezed a substantial amount of risk out of the program already. However, we have not yet seen functional cures and much work remains. For instance, the right phase II-B studies will be large, expensive, and complicated. Combinations with different compound classes should be interrogated, and the permutations are extensive because many different dosing schedules for each compound are possible.
Beyond phase II, pivotal studies will be large and multinational. Ultimately, commercial rollout would require global infrastructure and experience with diverse reimbursement paradigms almost immediately. I have great faith in Arrowhead and believe we can do anything we put our minds to, but Janssen has all of these capabilities today. It has expansive resources and a demonstrated commitment to these types of programs and commercial launches. We see Janssen as the ideal partner to potentially accelerate our goal of bringing a functional cure to patients with chronic hepatitis B infection. Outside of HBV, this deal helps us further build out the TRiM platform and create value in two concrete ways. First, it provides the possibility of Janssen funding the development of up to three additional programs against novel targets outside of our pipeline that could become important new medicines.
Second, it provides us with a substantial amount of capital to develop a number of new medicines in our current and future pipeline that we may potentially commercialize ourselves. This last point is a very important one. We hosted an R&D day in October to discuss in more detail our emerging pipeline. In those presentations, we demonstrated the progress being made on our two new cardiometabolic candidates, ARO-APOC3 for hypertriglyceridemia, for which we plan to file a CTA in the next three weeks, and ARO-ANG3 for dyslipidemia and metabolic diseases, for which we filed a CTA in October and are planning to start clinical studies in early 2019. We also discussed our extrahepatic programs, ARO-ENaC for cystic fibrosis and ARO-HIF2 for clear cell renal cell carcinoma. We announced initial data showing good knockdown in muscle.
The TRiM platform is enormously flexible, and we have numerous and growing opportunities to develop innovative new medicines. Swapping control of ARO-HBV for the financial resources to develop and potentially commercialize a large portion of our growing pipeline while retaining upside exposure in HBV is a good trade for us. With that overview, I'd now like to turn the call over to Dr. Bruce Given, our COO and Head of R&D. Bruce?
Thank you, Chris, and good afternoon, everyone. I want to describe the clinical studies for ARO-AAT and ARO-HBV and give a little more detail about the data that we presented at AASLD last month. They both were highly encouraging, and I really could not have been more pleased with the results. Let's start with ARO-AAT. Arrowhead's second-generation subcutaneously administered RNAi therapeutic being developed as a treatment for a rare genetic liver disease associated with alpha-1 antitrypsin, or AAT, deficiency. A genetic mutation causes improper AAT folding and impaired secretion by hepatocytes, leading to accumulation in the liver of AAT aggregates known as globules. Accumulated misfolded AAT can lead to a recurrent cycle of hepatic injury, leading to fibrosis, onto cirrhosis, and then, in the worst cases, hepatocellular carcinoma or the need for liver transplant.
ARO-AAT is designed to silence production of the mutant AAT protein with the intent to first, and most directly, prevent accumulation of disease-causing protein in the liver. The second goal is to allow clearance of accumulated protein already in the liver. This should lead to prevention of repeated cycles of cellular damage, which is what leads to fibrosis and then onto cirrhosis. The fourth goal is reversal of fibrosis associated with prior damage. We believe that the damage cycle seen in AAT liver disease is quite similar to the damage cycle seen in other fibrosing liver diseases, such as viral hepatitis. It is now well established that fibrosis that has not reached end stage can show clear improvement after the insult is removed. As such, we have high hopes that reversal is possible in AAT.
AROAAT1001 is a phase I randomized, double-blind, placebo-controlled, single ascending dose, or SAD, and multiple ascending dose, or MAD, study to evaluate the safety, tolerability, pharmacokinetics, and effect of subcutaneous doses of ARO-AAT on serum alpha-1 antitrypsin levels in healthy adult volunteers. The SAD portion of the study included four cohorts at dose levels of 35, 100, 200, and 300 milligrams, and the MAD portion of the study included three cohorts at dose levels of 100, 200, and 300 mg. Additional cohorts were planned at a dose of 400 mg but were deemed unnecessary based on observed activity at lower doses. Excuse me. AROAAT1001 enrolled 45 healthy volunteers. We presented data at AASLD demonstrating that ARO-AAT at single and multiple doses produced robust and consistent reductions in serum AAT levels.
Single doses of 200 and 300 mg resulted in greater than 91% serum AAT reduction, with three or four subjects having concentrations below the level of quantitation. In the 200 and 300 mg single dose cohorts, an average serum AAT reduction of greater than 90% was sustained for six weeks. In the multiple dose cohorts of 200 and 300 milligrams for patients receiving all three doses, an average of greater than 90% reduction in serum AAT was sustained for longer than 14 weeks. The maximum nadir reduction was 94%. Monthly serum AAT follow-up is ongoing, with nine of 10 subjects below the level of quantitation in the multiple dose cohorts, including 100% of subjects from the 300 mg group. We believe this represents near full suppression of the liver production of AAT. Duration of response indicates that quarterly or less frequent dosing appears feasible.
ARO-AAT was well-tolerated at all doses tested, with the most common adverse events, or AEs, being upper respiratory tract infection in 39% and headache in 32.5%. 50 doses of ARO-AAT were administered with six or 12% associated with an AE at the injection site. We are currently designing a phase II study of ARO-AAT that we intend to start in 2019, pending completion of chronic GLP toxicology studies, which is expected next month, and pending completion of discussions with regulatory authorities on study design and endpoints. Moving on to ARO-HBV and the data from the AROHBV1001 study presented at AASLD. ARO-HBV is a third generation subcutaneously administered RNAi therapeutic candidate being developed as a potential treatment for patients with chronic hepatitis B virus infection.
As Chris mentioned, Arrowhead recently entered into a license agreement with Janssen Pharmaceuticals Inc, part of the Janssen Pharmaceutical Companies of Johnson & Johnson, to develop and commercialize ARO-HBV. AROHBV1001 is a phase I/II clinical study evaluating safety, tolerability, and pharmacokinetic effects of single ascending doses, or SAD, of ARO-HBV in healthy adult volunteers, as well as the safety, tolerability, and pharmacodynamic effects of multiple ascending doses, or MAD, of ARO-HBV in patients with chronic HBV. Dosing in the SAD portion of the study is complete and included five cohorts at dose levels of 35, 100, 200, 300, and 400 mg. Dosing in the MAD portion of the study is ongoing and includes cohorts receiving three monthly subcutaneous injections of ARO-HBV at doses of 25, 50, 100, 200, 300, and 400 mg.
The 25 and 50 mg dose cohorts were recently added, and cohort sizes were increased to N equal eight in the dose escalation HBV patient cohorts to better characterize ARO-HBV dose response. The study is also evaluating whether there is added benefit with weekly or biweekly loading doses. The interim analysis at AASLD reported on all single-dose healthy volunteer cohorts and initial HBV patient cohorts that received monthly doses of ARO-HBV and had greater than six weeks of surface antigen assay results. We reported on safety and tolerability in all healthy volunteers and safety tolerability and virological assessments in HBV patient cohorts 2B through 5B, eight, and nine. Cohorts 2B through 5B were HBeAg positive or negative, NUC naive or NUC-experienced at baseline. Cohorts eight and nine were HBeAg positive, treatment naive, or NUC experienced respectively.
NUC-experienced patients continued their daily NUC throughout the study, and NUC-naive patients started daily NUC on day one. Virological results reported were through 56 days after the third dose, which would be day 113, when available, if not most frequent. The data presented at AASLD can be summarized as follows. ARO-HBV administered subcutaneously appears to be well tolerated at single or multiple monthly doses up to 400 mg. Mild injection site reactions were observed with approximately 12% of subcutaneous injections. Strong S antigen responses were observed in all HBV patients wit h a mean NATR of 1.9 logs and a range of 1.3 to 3.8 logs. S antigen reductions were similar in HBe antigen positive and HBe antigen negative patients.
The mean S antigen NATR in HBe antigen positive patients was 2.1 logs, and the mean S antigen NATR in HBe antigen negative patients was 1.8 logs. Thus, there was less than a 1% difference in the two populations. S antigen reductions were also similar for NUC-naive patients in cohorts eight and NUC-experienced patients in cohort nine. The mean S antigen reductions on day 57 for cohort eight was 1.7 logs, and the mean S antigen reduction on day 57 for cohort nine was 1.9 logs. This study highlighted an improvement over results from Arrowhead's first-generation compound, ARC-520, which targeted only HBV transcripts derived from cccDNA. The S antigen responses observed with ARO-HBV are consistent with its ability to silence HBV mRNA from cccDNA and host integrated viral DNA, which is believed to be a major source of S antigen production in certain patient populations.
Responses were also observed in all other virological parameters, including HBV DNA, HBV RNA, HBe antigen, and core-related antigen in those patients that had measurable levels. These were really exciting results for us. We are also thrilled to now have Janssen as a new partner for the future development and potential commercialization of ARO-HBV. Both of our organizations share the aim to advance transformational medicines that achieve higher rates of functional cure with a finite treatment duration for patients with chronic hepatitis B viral infection. Lastly, I want to give a quick update on ARO-ANG3 and ARO-APOC3. As Chris mentioned, we already filed a CTA for ARO-ANG3, and I am pleased to report that we have the regulatory approvals necessary to begin recruiting subjects.
In the first quarter of 2019, we intend to begin dosing for AROANG1001A Phase I single and multiple dose study to evaluate the safety tolerability, pharmacokinetics, and pharmacodynamic effect of ARO-ANG3 in healthy volunteers and dyslipidemic patients. We'll give more details once the study starts. For ARO-APOC3, we are working on a CTA filing now that we intend to submit in the next month. Additional details on that study will also be available when it starts. With that brief review of our clinical programs, I'd like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer. Ken?
Thank you, Bruce, and good afternoon, everyone. As we reported today, our net loss for fiscal 2018 was $54.5 million or $0.65 per share based on 83.6 million weighted average shares outstanding. This compares with the net loss of $34.4 million or $0.47 per share based on 73.9 million weighted average shares outstanding for fiscal 2017. Revenue for fiscal 2018 was $16.1 million compared to $31.4 million for fiscal 2017. The decrease is driven by the timing of our revenue recognition of the upfront payments received from our collaboration agreements with Amgen, of which approximately $30 million was recognized during fiscal 2017, and the remaining $5 million was recognized during fiscal 2018. During fiscal 2018, we also recognized revenue for the $10 million milestone payment we received from Amgen in August, as Amgen initiated a phase I clinical trial for AMG 890.
Total operating expenses for the year ended September 30th, 2018, were $72.1 million, compared to $68.4 million for the year ended September 30, 2017. This increase is primarily due to toxicity study costs and drug manufacturing costs for ARO-AAT and ARO-HBV candidates. Net cash used in operating activities in fiscal 2018 was $47.2 million, compared to $23.9 million in fiscal 2017. Our R&D and G&A cash expenditures were relatively consistent in each period. The driver of the change in operating cash was cash received from Amgen in each period. In fiscal 2018, we received the $10 million milestone payment, while in fiscal 2017, we received the $30 million upfront payment associated with AMG 890. Turning to our balance sheet, our cash investments and cash balances totaled $76.5 million at September 30th, 2018, compared to our cash balance of $65.6 million at September 30th, 2017.
The increase in our cash and investments balances was driven by $56.5 million of net cash proceeds received from our equity financing in January, along with the $10 million milestone payment received from Amgen in August. These receipts more than offset cash used in operations and capital expenditures. We anticipate our cash and investments balance at December 31st, 2018, to be about $305 million, reflecting both the $175 million upfront payment and the $75 million equity investment from Janssen and JJDC, as Chris discussed previously. In October, we issued 3.3 million shares to JJDC for their equity investment at a price of $23 per share. We anticipate recognizing approximately $198 million of revenue, which includes the upfront payment, the premium JJDC paid for the common stock, and estimated payments for ARO-HBV drug material on hand and to be manufactured.
This revenue will be recognized over the course of completing our management and oversight of the ongoing phase I/II clinical study for ARO-HBV and of delivery of the drug material. Our common shares outstanding at September 30th, 2018, were 88.5 million. With that brief overview, I will turn the call back to Chris.
Thanks, Ken. It's clear we've made great progress as a company in a short amount of time. Last year at this time, we were just preparing to file CTAs for the first product candidates leveraging the TRiM platform. Today, there are three candidates in the clinic, ARO-HBV, ARO-AAT, and AMG 890. Two of those, ARO-HBV and ARO-AAT, have already shown encouraging first-in-human readouts with mid-stage studies on the horizon. We also have two additional candidates, ARO-ANG3 and ARO-APOC3, approaching first-in-human studies and additional candidates, ARO-ENaC and ARO-HIF2, planned for 2019. Looking forward, we have equally ambitious goals for the future. We want to, one, file two to three new CTAs every year. Two, target a new cell type with the TRiM platform every 18 months. Three, have 10 TRiM-enabled candidates in clinical studies by the end of 2020.
I think we have proven that Arrowhead can execute with speed and precision, I fully expect to accomplish these goals and more. Thanks again for joining us today. I would now like to open the call to your questions. Operator?
Thank you. Ladies and gentlemen, if you have a question at this time, just press star and the number one key of your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Again, to ask questions, just press star and one. Our first question comes from the line of Maury Raycroft with Jefferies. Please go ahead.
Hi. Good afternoon, congrats on the progress. First question is just on AAT, just clarifying, are you in the middle of ongoing pre-IND discussions with FDA? Can you provide any insights into what you're considering or leaning toward for the endpoints dosing and then the trial size?
Sure. Bruce, do you want to take that?
Yeah. Hi, Maury. We are in discussions at, certainly in the process of being in discussions with FDA. I really would never want to discuss any sort of specifics about what we or they are thinking about endpoints, or even trial size. We like the nature of the discussions and they're ongoing.
Okay. As far as timing goes, should we think about the starting in first half of 2019 or second half? Any additional clarity there?
Go ahead.
Yeah, sure. It's fair to expect an IND filing in the first quarter of 2019.
Got it. Okay. Then just based on the maturing phase I data that you've shown at Well, actually, I guess the data from AASLD for both AAT and HBV. Wondering if you're going to provide an update on that data at any later stage and when that could happen.
Well, we will, I'm sure, continue to file abstracts with meetings like EASL and AASLD. I would expect that we'll continue to do that. It's always up to those organizations, of course, whether they accept those abstracts. Assuming they do, I think you can expect to see us at those meetings.
Okay. The last question is just on APOC3. You reported some preclinical data recently at the AHA meeting. Wondering if you can give a quick recap of the data. It seems like you took biopsies from the NHPs in the study to evaluate the APOC3 knockdown. Would that be something that you'd have to do in the clinic as well?
No, we'll be able to measure it in the periphery, in the clinic. What we showed is, first of all, APOC3 is a small gene that has poor homology between rodents and NHPs in humans. To develop our trigger, we first of all had to have a transgenic mouse that incorporated the human APOC3 transgene, and we showed very deep knockdown and a strong dose response in that transgenic mouse model. We then went into non-human primates, and the interesting thing there was that the knockdown that we saw was on the order of about 60% or so. We had a couple possible explanations for this. One is that it is known that APOC3 is made both in the intestine and the liver.
In humans, probably something on the order of 80%-90% of the APOC3 is made in the liver, but it was unclear whether that ratio was different in the non-human primates. In fact, when we did the biopsy, we were able to show that we were getting 90% knockdown in the liver of the cynos. It basically demonstrated that in cynos, and this is probably similar in rodents as well, probably 40%-50% of the APOC3 comes from the intestine. That's a different ratio than in humans. In humans, we're going to be able to measure the circulating APOC3, and of course, we can also measure their triglycerides. We will not have to do biopsies.
Got it. Very helpful. Thank you very much.
You're welcome.
Thanks.
Thank you. Our next question comes from Katherine Xu with William Blair. Please go ahead.
Yeah, good afternoon. I have a couple questions. Last week, Spring Bank kind of revealed a discovery program they have, which is some chirally pure antisense agent against the X protein specifically. I'm just wondering, for ARO-HBV, have you assayed activity against the X specifically? Just curious on that. I know you have some data, but would love to hear your thoughts in light of that. With regard to the AAT program, assume that your toxicology is six months. That is wrapping up right now or next month. The phase II likely will be a six-month duration. I'm just wondering, is it possible, or do you have the program going in a way that it can be followed up beyond that or extended into a longer-term study? Also, within six months, do you think you'll start to see histological reversal of the disease?
Chris, you want me to handle those?
Yeah, go ahead.
Just in case people are confused, I'm actually at a different location. First of all, with AAT, to answer that question first, Catherine, we did six-month rat and nine-month monkey in our chronic tox studies. In fact, that's the duration required to be able to treat for an unlimited period of time. We are not limited to six months or nine months of treatment. Assuming those studies are successfully reported out and acceptable to regulatory agencies, we could treat for as long as we want. Six months is not a limitation for us once these studies are completed and accepted by regulatory authorities. To the other part of that question, do we think six months is enough? That feels pretty short to me, to be honest with you.
I think in six months it's possible that some of the changes that occur in the liver could improve. It would be highly unlikely to see improvements in things, of course, like fibrosis. It probably is too fast even to have very complete improvement in globules, for instance. I think these studies are going to have to go longer than six months to really show the benefits in the liver that we want to see. That's regarding AAT. Regarding X protein. X protein is very hard to measure and study in vivo, in whole animals. It's a little more straightforward to study in in vitro cell systems. We believe X protein's very important. We agree with Spring Bank in that regard. We designed our RNAi trigger in the X region, to be able to hit X and that's clearly one of our targets.
It's not possible, at least currently, to study the X protein clinically. It's really only studiable under relatively constrained pre-clinical situations at this point.
Thank you.
You're welcome.
Thank you. Ladies and gentlemen, as a reminder, to ask a question, just press star and the number one key of your touch-tone telephone. Our next question is from Ted Tenthoff with Piper Jaffray. Please go ahead.
Great. Thank you very much. A lot of my questions were answered. I wanted to come back to this revenue recognition. Ken, I think you said it would be about $190 million, basically through what period would that be recognized?
It's going to be about $198 million. We are going to be recognizing that we anticipate over the next three quarters. The first quarter of the fiscal year, October through June 30th of next year. For your purposes, you can assume that it's basically going to be recorded ratably over that period.
Great. Thank you very much.
Thank you. Ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call back to Chris Anzalone for his final remarks.
Thanks everyone for your attention today, and I wish you a happy holidays, and we look forward to seeing you in 2019.
With that, ladies and gentlemen, we appreciate you calling in on our conference today. You may now disconnect. Have a great day.