Ladies and gentlemen, welcome to the Arrowhead Research Corporation Fiscal 2016 First Quarter Financial Results 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.
Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2016 first quarter ended December 31st, 2015. With us today from management are our President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter. 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 may 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 but are not limited to statements regarding the anticipated safety and/or efficacy of ARC-520, ARC-521, ARC-AAT, ARC-F12, and our other programs, as well as anticipated timing for study enrollment and completion and the potential for regulatory and commercial success. They represent management's current expectations and are inherently uncertain, thus actual results may differ materially. Arrowhead 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 quarterly reports on Form 10-Q for additional matters to be considered in this regard. 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, thank you for joining us today. I'd like to start the call by addressing the weakness we have seen in the broader markets and in particular within the biotech sector. It has been a difficult start of the year for the overwhelming majority of biotech companies, we at Arrowhead have been frustrated that our stock price does not properly reflect what we see as our true value. That is unfortunate and currently uncomfortable, this is a cyclical issue, not a structural problem in our view. There have always been cycles in the biotech capital markets, while the field is in a difficult cycle now, this will pass.
This is a normal part of working in this sector. As long as we plan for such disruptions, have a flexible cost structure, and are going after important diseases in novel ways, we can build value during these times. I've always thought that we could get through anything as long as we could say four things. They are, one, our technology works. Two, we are working to solve real medical problems. Three, we have capital now, and four, we have access to additional growth capital. We believe that all of these are true today. Let us look at the past quarter and the period since our last conference call through that lens. This was a pivotal period for Arrowhead in terms of providing further validation of our technology and setting up the rest of the year with multiple milestones and therefore value inflection points.
We presented important data from our ARC-520, our drug candidate, against chronic hepatitis B infection, showing that it does what it is designed to do, and more broadly, that our proprietary DPC delivery platform can effectively and consistently silence target genes in humans. This is a critical step for us and allows us to enter the next stage of growth for Arrowhead. The next step for ARC-520 is multiple-dose Phase II studies. We have begun five separate Phase II studies at 25 sites and counting, spanning four continents. During 2016, we expect to have over 200 patients on various multiple dose regimens. We also intend to add cohorts, including at least one clinical collaboration with an additional novel agent. This is a large number of patients. If ARC-520 is ultimately helpful in enabling functional cures, I believe we have a good chance of seeing evidence this year.
What are the chances that we see something exciting? I believe quite good. Based on human and animal data we presented over the last few months at our Analyst Day, at AASLD, and HepDART, ARC-520 is highly active against cccDNA-derived mRNA transcripts and thus can dramatically reduce the production of all HBV proteins. In fact, I believe we set a new single-dose knockdown record for RNAi. In addition, our long-term study in chimpanzees showed that after repeat dosing, seven of nine animals treated with ARC-520 exhibited signs of immune reactivation. Interestingly, it took as few as three doses of ARC-520 to begin to see these signs. Further, given ARC-520's mode of action, it makes intuitive sense that it could be part of a therapy that leads to functional cures.
Evolution drives toward efficiency. We think that expression of all HBV proteins is likely important for normal function of the virus and maintenance of chronicity. Put another way, we would expect that silencing all viral proteins would make it increasingly difficult for the virus to continue to evade immune control, particularly with an otherwise healthy immune system or one that is stimulated by another agent. Taken together, these and other evidence give us confidence that ARC-520 will play a role in enabling functional cures. If we do see encouraging data in 2016 and beyond, when can investors expect to see this? This, of course, is a difficult question because if we do see functional cures, we do not know how long patients will need to be on therapy to experience them.
The 2001 extension study, which is open to most of the patients in the 2001 single and two-dose study and the MONARCH study are both open label. We see unblinded data in nearly real time and have flexibility as to how and when we communicate them. We intend to present data at relevant medical meetings, but upstream of that, we will look for opportunities to give updates on what we are seeing, which may happen at any time. Stay tuned. Remember that there are no available therapies that lead to a reasonable number of functional cures, and consequently, even relatively infrequent functional cures during the early exploratory phases of our studies would be very exciting for Arrowhead and for the approximately 350 million-400 million patients worldwide who are chronically infected with HBV. What about competitors?
As with any clear unmet medical need, there is now meaningful competition in this space. Big Pharma has recently focused on the opportunity. We are substantially ahead of our competitors. We have the strong advantage of data from the long-term chimp study and dozens of patients. Our safety profile has looked good, and we do not require steroid pre-treatment that brings its own AEs and immunosuppresses the patient at the exact time that a therapy is trying to enable the immune system to reconstitute itself. Given where we are in multiple phase II studies now, we believe that if a breakthrough in HBV is going to happen in the next 12 months, it should come from us. Turning to ARC-521, the second drug in our HBV portfolio, we intend to accomplish some important steps during 2016.
We previously reported that our clinical studies and our chimpanzee study show that e-antigen negative patients and those on chronic antiviral therapy tend to have lower levels of viral cccDNA. We also learned that DNA that integrates into the patient's genome can become a significant source of S antigen production. ARC-521 is designed to hit mRNA transcripts derived from both HBV cccDNA and integrated HBV DNA. This means that ARC-520 may be optimal in patient populations with higher levels of cccDNA, such as e-antigen positive NUC-naive patients. ARC-521 may be optimal in patients with lower levels of cccDNA. We'll have to see what the various clinical studies show, but we think having both drugs should allow us to address all of the HBV market in a powerful way.
ARC-521 uses the same DPC delivery vehicle as ARC-520 and ARC-AAT. We have good amount of experience with it clinically. To date, it has been well-tolerated at all dose level study, which gives us great confidence as we prepare to initiate clinical studies of ARC-521 during 2016. We have an aggressive plan for the development of ARC-521 that includes an accelerated first-in-man phase I, II design intended to get us into multiple dose study in patients quite rapidly. We will talk more about this design as we get closer to initiating the study, which has planned regulatory submissions toward the end of the second quarter 2016. In addition to ARC-520 and ARC-521, we have an equally eventful year plan for ARC-AAT, our drug against liver disease associated with a rare genetic disorder that causes alpha-1 antitrypsin deficiency, or AATD.
We recently announced that ARC-AAT was granted orphan drug designation in Europe and previously was granted the same designation in the U.S. in 2015. We are currently conducting a phase I single ascending dose study that consists of part A in healthy volunteers and part B in patients with AATD. During 2015, we achieved a predetermined level of AAT knockdown in healthy volunteers, which triggered the study to transition into patients. We have since been enrolling patients at several sites in Australia and Europe. We decided that it would be useful to compare AAT knockdown in healthy volunteers at the same therapeutic dose levels as patients are or will be receiving. Because of this, we have added additional cohorts in part A of the phase I in parallel with part B, and we have continued to dose escalate in healthy volunteers alongside patients.
We intend to complete enrollment and release top-line results from the expanded part A and part B this year and then report full data at a relevant medical meeting. We think that AATD is a great target for an RNAi-based intervention and one that has relatively low target risk. AATD is caused by a genetic mutation that leads to the production of a misfolded AAT produced primarily in the liver. This misfolded protein is not efficiently secreted and accumulates in hepatocytes, which is thought to be the cause of progressive liver disease. Patients with mutations that make no AAT have normal livers. It seems like a very straight line between knocking down production of this protein in the liver and an ultimate clinical benefit for patients. We are preparing to begin a pilot phase II multiple dose study that we expect to initiate and hopefully fully enroll this year.
The biology of the disease is clear. We believe that ARC-AAT phase II study, combined with the results from the phase I study, may represent clinical proof of concept. Once that is achieved, we can discuss with regulators the potential endpoints of a pivotal study. Having orphan drug designation in the U.S. and Europe allows us to have expanded interaction with regulators, which we intend to leverage to identify the best path to marketing authorization and ultimately to patients with AATD. As you've heard, there are a lot of potentially impactful events for our lead clinical programs planned for 2016 and many more beyond that. It is our greatest priority to ensure that these are properly resourced because they are our key near-term value drivers.
We have clear leadership positions in HBV and liver disease associated with AATD, and we have the potential to be both first and best in class. We are building on this success through a pipeline that includes ARC-F12, ARC-HIF2, and ARC-LPA that address other high-impact diseases. In order to support the development of these drugs and continued improvements to our underlying platforms, which now include subcutaneous and extrahepatic delivery constructs, we have expanded the company and our capabilities over the last few years in terms of headcount, facilities, and equipment. We have taken these steps because we are confident that our DPC and oligonucleotide platforms will give us numerous opportunities to create drugs that change the way important diseases are treated, and at the same time, create lasting value for our shareholders.
We have not only had our foot on the gas over the past few years, we've had it on the floor. Our lead programs, ARC-520, ARC-AAT, and ARC-521, are now at important points in their development when substantial value inflections are possible. Pushing through those points is critical to us as a company, and we want to ensure that we have the capital for this, particularly during this time of uncertainty in the broader markets. In order to keep our foot on the gas with these more mature programs, we are easing up a bit on some of our earliest-stage programs. We created a flexible cost structure that enables us to move quickly, but also to dial down spending on a program-by-program basis, and we are taking advantage of that now in order to fully resource HBV and AAT.
All earlier programs continue to move forward, but some will just move at a slower pace for now. This is a good strategy, and we are quite confident that there will be ample opportunities to fully fund these and other programs through various shareholder-friendly methods. What do we have now, and where does it get us? Today, we reported total cash resources of $76.6 million at the end of fiscal 2016 first quarter. We expect this gives us sufficient liquidity to fund our programs as described above through at least 12 months from now. This is important because we have many important milestones we expect to reach within this window. With that overview, I would 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. On our last call in December, I highlighted some of the data that we presented on ARC-520 last quarter at our Analyst Day, at AASLD, and at HepDART. There was a good amount of data that describes some new concepts in unappreciated biology that we discovered through our clinical studies and through a long-term study conducted in chimpanzees with chronic HBV. Specifically, patients that become e-antigen negative and patients that receive chronic antiviral treatment with NUCs appear to have reduced cccDNA. Consequently, HBV DNA that has integrated into the host genome can become an important source of production for HBV surface antigen, or S antigen, in these patient populations. We presented data showing that because of this, there was a differential response to ARC-520 with respect to S antigen in these various patient populations.
Importantly, we demonstrated that log reductions with e-antigen and core-related antigen were similar across these different patient populations, and we would anticipate that the same would be true for polymerase and the viral X antigen as well. In an unexpected surprise, we also presented data showing that in chimpanzees, seven of nine animals that received multiple dose treatment with ARC-520 showed signs indicative of immune reactivation. This occurred in all of the e-antigen positive animals and half of the e-antigen negative animals. One of the chimps had a therapeutic viral flare and had large, persistent reductions in S antigen and viral DNA as far out as six months following discontinuation of all therapy, and six months was the last time point measured.
I'm not going to go through all the data, but I want to review some key findings so that I can provide some context on how you should view the studies we have going on and those that are planned in the future. Before I do that, let's quickly review the intended mechanism of ARC-520 treatment. ARC-520 is designed to silence the production of all proteins produced by HBV. The virus produces multiple proteins in excess of what is needed to fully form viral particles, some of which are secreted into the bloodstream, and some proteins remaining in hepatocytes. It is believed that many, if not all, of these proteins play a critical role in the viral life cycle and allow the virus to evade immune control and clearance.
The idea behind ARC-520 is that if you reduce the production of these proteins, you may tip the scales, if you will, so that the immune system has a chance to control the virus and potentially get to a functional cure for patients. As I mentioned in our chimpanzee study, we saw signs that the immune system was reawakening in all e-antigen positive animals and half the e-antigen negative animals. This suggests that ARC-520 may be doing exactly what it is designed to do. What does this mean for the design of our clinical program? We see patients as being in 1 of 4 main groups based on their e-antigen status and whether they have received chronic therapy with NUCs. These are NUC-naïve, e-antigen positive, NUC-naïve, e-antigen negative, NUC-experienced, e-antigen positive, and NUC-experienced, e-antigen negative. Our clinical program is enrolling patients from all of these quadrants.
Based solely on S antigen reduction, the first quadrant may be predicted to see the highest level of activity. However, our chimpanzee study suggests that ARC-520 is hitting the virus at multiple points beyond just S antigen production, which may be relevant to reawakening the immune system. We intend to enroll over 200 patients this year across the various global multiple dose and combination Phase IIb studies. These are the 2001 open label extension, 2002, 2003, 2004, and 2008, which that study is also called MONARCH. You may know it better by that name. These are enrolling and dosing as we speak, and we are pleased with the pace of patient accrual so far. Including the Phase I studies, ARC-520 has now been administered to well over 100 people to date. It continues to be well-tolerated across all studies.
The most common AEs reported in subjects completing treatment were upper respiratory tract infection and headache. For ARC-521, the second drug in our HBV portfolio, we are working on completing GLP toxicology studies to support a regulatory submission to begin the first-in-man study. Our goal is to have an accelerated Phase I/II development path that can get us to multiple dose data in patients rather quickly. We have some ideas about a trial design that would accomplish this, which we will share more about when the study gets started. We continue to plan for a late second quarter 2016 regulatory submission time. ARC-AAT is our drug candidate for the treatment of liver disease associated with a rare genetic disorder called alpha-1 antitrypsin deficiency, which we abbreviate as AATD. As Chris mentioned earlier, we are conducting a Phase I single ascending dose study in both healthy volunteers and patients.
Part A of the study in healthy volunteers has dosed up to five mg per kg, and we are not precluded from going higher. It is likely that Part A in healthy volunteers will complete before Part B in patients. We may report top-line data from Part A later in the year and prior to Part B. The timing of this release will depend on the number of dose levels that we decide to study. While the phase I continues, we are also preparing to begin a pilot phase IIa multiple-dose study. This study will look at the effect on circulating levels of AAT after multiple doses of ARC-AAT. But very importantly, we also intend to take biopsies to determine the effect at the hepatocyte level. This study should also get underway this year. With all these studies going on, our clinical team is very busy.
As you can see, we have several studies that have potentially yield interesting data throughout 2016 and beyond. We are looking to transform the treatment of both HBV and the liver disease associated with AATD, thus making a critical difference in patients' lives, which is when being a drug developer is most rewarding. With that, I'd like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer. Ken?
Thanks, Bruce, and good afternoon, everyone. As we reported today, our net loss for the three months ended December 31, 2015, was $19.3 million, or $0.32 per share, based on 59.5 million weighted average shares outstanding. This compares with a net loss of $22.6 million, or $0.41 per share, based on 54.7 million weighted average shares outstanding for the three months ended December 31, 2014. Total operating expenses for the three months ended December 31, 2015, were $19.4 million, compared to $25.3 million for the three months ended December 31, 2014. Net cash used in operating activities during the three months ended December 31, 2015, was $21.2 million, compared with $24.2 million during the three months ended December 31, 2014. A change of $3.1 million, primarily due to reduced expenses associated with the drug manufacturing campaign to support our phase IIb studies for ARC-520.
The manufacturing campaign for this clinical trial for ARC-520 is largely complete. However, as other clinical candidates are nominated and other clinical trials advance, further expenditures will be incurred. Turning to our balance sheet, our cash and investments of cash were $76.6 million at December 31, 2015, compared with $98.6 million at September 30, 2015. The decrease in our cash and investments balance is primarily related to the $21.1 million cash used in operating activities. Our common shares outstanding at December 31, 2015, were $59.6 million and would be $62.3 million, assuming conversion of the preferred shares outstanding at December 31, 2015. With that brief overview, I'll turn the call back to Chris.
Thanks, Ken. These are challenging times in the financial markets. While it's easy to say and somewhat more difficult to do, we try not to use the day-to-day movements in the stock price as an indication of the true fundamental value we are creating. We focus on how far we've come in the last year and how far we will go in 2016. When we look beyond the next 12 months to the next few years, we see dramatic potential for Arrowhead as our mid-stage pipeline matures and our early and preclinical stage pipeline start to show clinical proof of concept across multiple disease areas. Just like every market cycle before this cycle too will pass. Innovative drugs like the ones we are developing at Arrowhead will always have great value.
At the beginning of the call, I mentioned four things that we believe are true and that will enable us to build value through a difficult market. Let's take another look at those now. Does our technology work? Yes. Data in chimps indicate that ARC-520 and ARC-521 are capable of deep target knockdown. Substantial clinical data with ARC-520 and ARC-AAT indicate that deep knockdown translates well from non-human primates to humans. Between ARC-520 and ARC-AAT, we have seen DPC exposure in well over 150 people, and the safety profile has been promising. In fact, I do not believe there is an RNAi delivery platform with a cleaner safety profile in humans than ours. Are we working to solve real medical problems? Yes. Between 350 and 400 million people worldwide, or approximately one in 20 people on the planet, have chronic HBV infection, and there is no cure.
Approximately 100,000 people in the U.S. and a similar proportion in Europe suffer from AATD, and there is no treatment for liver disease associated with this.
Do we have capital? Yes, we have enough to run through at least the next 12 months while pushing our lead programs as fast as possible and continuing to work on our pipeline. Do we have access to additional capital? Yes, through a number of sources. We have clearly demonstrated ARC-520 and ARC-AAT are active and well-tolerated in humans, and 2016 is full of value inflection points. These include treating over 200 patients in multiple phase II studies of ARC-520, some of which are open label, the introduction of ARC-521 into the clinic, and expected quick progression of phase I, II studies, the release of ARC-AAT healthy volunteer and patient data, and progression into phase II studies. These are important for rapid value creation and therefore important to investors. We are also at a point in development and platform validation that we are an increasingly attractive partner to larger companies.
Many companies looking for exposure to the areas we are addressing with current candidates would be interested in our ongoing programs. Similarly, companies looking to address areas in which we do not have active programs will find Arrowhead an attractive discovery and development partner. We have broad IP coverage through internal development, the Novartis transaction, and the Roche transaction. We have a delivery platform that has demonstrated extremely deep target knockdown in humans and arguably the best safety profile in the field. We are capable of addressing both hepatic and extrahepatic targets. We are capable of both IV and subcutaneous administration, and we have demonstrated very rapid development timelines. As we have mentioned, 2016 is set up to be an exciting year for us across multiple fronts.
I think we will start to see answers to questions that have vexed medicine for some time now, and we look forward to regular communication with the street. I think 2016 is a big year for us, and I also think we'll surprise some people. I would now like to open the call to questions. Operator?
Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please press star and then one on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, to ask a question at this time, please press star and then one. Our first question comes from the line of Michael Yee with RBC Capital Markets. Your line is now open.
Hey, guys. Good afternoon. I liked your comments, Chris. That was refreshing about the capital markets. Three quick ones. One is, you have all these ongoing studies going on, the 2000 series and then MONARCH. Can you be specific about where we are in enrollment, specifically in the NUC-naive e-antigen positive patients, which I think is the most important group? At what point would be a trigger point to release data? Is that like having a seroconversion, something like that? Talk a little bit about that and what you'd want to see to disclose some data. Second question is, in terms of the collaboration, which you've mentioned a few times here, are we talking about combining, you're looking for a partner with something like an oral small molecule, something in the clinic, and you'd want to partner with that and run a collaboration.
Is that what we should be thinking about? Third, for the financial side, I think you burned around $20 million, give or take this quarter. If you have $77 million in cash, help me with that math to make it through 12 months. I should be taking expenses down, which seems odd if you're running all these trials. Help me walk through the math on how you get to 12 months. Thanks.
Thanks, Michael. Tell me if I forget any of these here. The first one with respect to progress in MONARCH. I don't want to go down the rabbit hole of providing blow-by-blow updates on all these studies. Here's what I can tell you, though. I agree with you that the NUC-naive e-positive cohorts are quite interesting. We are actively enrolling patients right now, we are in those studies. We are seeing patients. We're recruiting additional patients. Those are ongoing. How many patients we have dosed, again, I think it's a bad precedent for us to start talking about that on a real-time basis. Rest assured that we have a number of sites open, and we are actively recruiting that study.
Although I will say, while I think that's a very attractive quadrant, if you will, I'm really interested to see the e-negatives and also the NUC-experienced patients as well. Remember, with those chimps, we saw seven of nine chimps experience immune reactivation or at least signs of immune reactivation. All of the e-positive chimps showed signs of immune reactivation, but half of the negative chimps also showed signs of immune reactivation. I'm bullish that 520 will not only be active for NUC-naive e-positive patients, but also other patient populations.
I guess, just to be clear on this first one, just to get a clear answer. If you looked at the timelines, it's months of dosing and then follow-up, but that could go out for a while. In terms of getting data this year on any of these cohorts, would you want to see seroconversion to announce data? Is that something that you would trigger an announcement if you're seeing a real-time seroconversion, for example?
Yeah. The short answer is I don't know the answer to that. We don't have a set criteria for what would trigger an announcement, to be honest with you. The studies that are placebo-controlled will be difficult to have data from those this year. I think there's a better likelihood of having data in those open label studies, the 2001 extension, where I think we've got something like 55 possible patients who could enroll in that, then, of course, MONARCH, which will be a larger number. Those are open label, we have good flexibility on when and how we present data. Again, I can't give you a hard and fast rule as to what would trigger an announcement. We'll just have to see what those data look like when they come in. Again, we see them in almost real time, stay tuned.
We could certainly have data this year as those studies roll out.
Okay. Collaboration?
Collaboration. Sure, we'd be interested in collaborating on an oral small molecule, we'd also be interested in collaborating on other modes of administration and other types of drugs. As Bruce Given has talked about in the past, we view MONARCH as our test kitchen, right now, the only ingredients in that test kitchen are ARC-520, interferon, and NUCs. The first cohorts are designed to look at combinations of those. Now, keep in mind, we're also looking at monotherapy, because again, I think that the 520 is going to be a powerful drug in and of itself. In terms of combinations, that's all we've got.
There are other experimental drugs that we are talking to other people about including in a cohort or two of MONARCH and an oral would be fine, but also IV or SubQ or what have you would be okay with us. We want to find a recipe that gives us a cure consistently, blow that study out.
You said you feel confident about a collaboration this year.
I do.
You have an active dialogue. You feel good? Okay.
Yes, I do.
Okay. Then third on the financials.
Yeah. The financials are going to be bumpy because what we've said in the past is that we spend now, gosh, closer to about $3 million a month on our base burn. This is all internal R&D. It's called corporate costs. Then layer on top of that clinical costs. Those clinical costs are bumpy, because they will include manufacturing runs, they'll include setup costs for sites, et cetera. Yes, the trend will be higher as we go deeper into the studies and as we bring in more studies in the clinic. On a quarter by quarter, on a month by month basis, those numbers will differ.
Okay. Thanks.
Bruce, do you want to add anything to that?
Yeah, I would just say that one of the things that Chris did imply is that we could have this year, if we kept the pedal to the floor on our earlier stage products, there would be manufacturing costs and toxicology costs and things of that sort, which can be quite substantial. We have elected to, as Chris said, take the foot off the gas a little bit on those and slow some of those costs down. I think that's the biggest element in allowing us to feel comfortable that we can go 12 months.
Okay. Thanks.
Sure. Thank you.
Thank you. Our next question comes from the line of Eun Yang with Jefferies. Your line is now open.
Oh, thanks very much. I just want to clarify the potential collaboration for this year for ARC-520. Does that mean it's a partnership for development and commercialization partnership or kind of a clinical program collaboration?
Thanks very much, Eun. I'm glad you asked that. It's really what we're talking about in the nearer term is just a clinical collaboration. What we have is, we think is something of great value to potential partners. We are in now multiple phase II studies with a drug that clearly knocks down the whole HBV genome, that is well-tolerated. So we think it's going to be quite attractive to those companies with experimental agents to combine with ours. I think it's too early to start talking about partnership. I think that it's better for us, better for our shareholders to get into these studies together, to let those companies better understand our drug, to see if our drug works well with theirs. Then we can always talk about a larger partnership after that.
I think that the way to do that is really to do it sequentially.
Okay. Given that private hep B company, Novira, got acquired by JJ, are you seeing interest from potential partners on your program? Is the reason why you are saying that this is not the right time, is it because you want to create more value before you form a partnership? I'm trying to gauge the interest levels that you are receiving from potential partners down the road.
Right. Let me say two things on that. Number one, big pharma has clearly woken up to this opportunity. When we first started developing ARC-520, we were out there alone banging the drum that HBV is the next HCV. We truly believe there was a massive unmet medical need and that if somebody could conquer this disease, there was going to be an awful lot of value to create. We were alone then. We are not alone now. Big pharma has woken to that. It's not just J&J, but it's really all big pharma. We talk to these people on a regular basis. We see an awful lot of interest in finding a consistent functional cure. I just think that we are the closest thing to that at this point.
We'll see if we can make it there, as I said in my prepared statements, I think that if there's going to be a breakthrough in HBV this year, it's going to come from us. Just by virtue of our mode of action and just by virtue of how deep we are in the clinic. Now with respect to when is the right time to do a partnership, if we were to do a partnership, I think there's still an awful lot of value to create before one would want to have those deep discussions. I think that we need to get into these 200+ patients with various regimens this year and start to see what we're going to see.
Thanks, Eun. Earlier portion of your prepared remark, you said that you have access to the capital. Now you have about 12 months to cash at run rate. Can you kind of provide us a little bit more details on what you mean by access to capital?
Yeah. Sure. I think we have access to a variety of capital sources. As I mentioned, we have something that is of value here, and I think that in 2016, we have many inflection points, where we have the potential of showing large increases in value and these are always interesting to investors. Even beyond that, we are now to a point where I think we could be of interest to larger companies in terms of partnerships, not only for our current candidates, but for our new novel candidates, if you will. We have largely crossed, and we continue to cross, I guess, the bridge of platform validation. We've been now in, gosh, well over 100 people with our first DPC delivery construct. The safety profile is quite good, and our activity is quite good.
I think that we have answered a lot of questions in companies' minds. Now I think that we've got access to that capital from partnerships as well. My point was this, that we've made an awful lot of progress in the last few years, and I'm quite comfortable that we will have access to capital to continue to grow this company. I would like it better if our stock price was higher at this point, but I'm comfortable that there's an awful lot of pent-up value that we've created and that could be expressed later in the year.
Thank you.
Sure.
Thank you. Our next question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.
Great. Thank you very much. Thanks for the update. I wanted to just make sure I heard something correctly. Bruce, did you say that you would anticipate registering or seeking registration for ARC-520 in the 2018 timeframe? Did I hear that correctly?
No.
Okay.
I don't think I said anything about registration, and certainly nothing about a timeframe. No, I don't think so, Ted.
Okay, good. I just want to make sure. I guess, a lot of data to come out of the clinical studies this year. I know that you're pushing out some of the earlier stage programs. Does this mean we should still anticipate an IND this year, or would that slip into 2017 as well?
Yeah, that's a great question, Ted. I don't have a good answer for you at that point. As I mentioned, we're certainly not stopping our progress in any program. In fact, we're continuing to move rapidly, just a little bit less rapidly, if you will, than two months ago, than a month ago, even. It's not clear how much this is going to change those kind of timeframes. Stay tuned on that. We'll let you know as we continue to build those programs out.
I mean, we certainly expect ARC-521-
Oh, sorry
to go, so-
Yeah
I mean, we'll have an IND equivalent for ARC-521. Our announced expectation is to have that submission before mid-year, right around mid-year, but on this side of the halfway point. What I think your question's aimed at, and what Chris was saying is that the next one after 521, at this point, would be somewhat dependent on something breaking in the way of capital in one way or the other.
Yeah. I think it's probably fair to say that if we were sitting on $1 billion of cash right now, I don't think that ARC-520 or ARC-521 or AAT would move any faster. Those are fully resourced, and our foot is on the floor with those programs.
Yep. Excellent. Good. All right. Thanks, guys.
Yep. Thanks, Ted.
Thank you. Again, ladies and gentlemen, if you would like to ask a question at this time, please press star and then one. Our next question comes from the line of James Gash, a private investor. Your line is now open.
Hello.
Hi, James.
You mentioned that we're not alone in HBV. I believe the same is true for the AATD. Could you discuss the orphan drug designation and, for instance, how the seven-year exclusivity might apply?
Sure. That's a great question. Thank you. Bruce, you want to address that?
Sure. Well, in the U.S., the orphan drug designation gives you exclusivity for the chemical entity itself. We would have a minimum of seven years exclusivity now. Hopefully, we would reach the market such that we would have longer patent life than the seven-year minimum. The other advantage for orphan drugs is it just gives you better access to the agency. It reduces fees associated with the drug development process at the level of the agency. There are advantages there as well. Hopefully, we'll have patent coverage that stretches beyond seven years exclusivity anyway.
It's not really an exclusivity, say, for the only RNAi drug.
It is not an exclusivity for the indication. Europe is a different story. Europe, there can be exclusivity for the indication, although sometimes the indications get a little bit sliced and diced. In Europe, you can see exclusivity for the indication. Europe, you also get a cut with fees from orphan exclusivity. In Europe, orphan exclusivity is actually for 10 years, with the possibility of picking up an extra year if one gets another indication for the drug. Also, in both in the U.S. and Europe, you can get some extension for pediatric approvals as well. Orphan drugs in the U.S. and Europe are a bit different.
First to market in Europe might actually constitute a real advantage?
Yes. First to market in Europe in orphan drugs is important.
Okay. Thank you.
You're welcome.
Thank you. Our next question comes from the line of Mark Puckett, a private investor. Your line is now open.
Thank you very much. A good job. I want to congratulate you on the science. I think my question on additional capital has been answered, with respect to that, can you expand a little bit on what your strategies are for expanding that capital? I know a lot of us are out here that are playing with our own money, we're certainly attuned to the interest. It's certainly been unfortunate, the stock price behavior the last year. I think I can speak for many of us that you've done a great job with the science. We need to do a little bit more with the capital markets. Thank you.
Sure. There's not much I can say on that. Here's what I can tell you. We're focused on building these programs out and pushing ARC-520, ARC-521, and ARC-AAT through the clinic as quickly as we can. As we talk about, I think that 2016 is full of important milestones that are real value drivers for us. I think that our access to capital and our appetite for taking capital changes dramatically as we hit some of those milestones. We feel quite comfortable that we've got plenty of runway to hit a lot of those milestones. From a capital market standpoint, we feel quite good, and we feel confident. It's just not something that I lose sleep about at this point.
On the partnership side, as I mentioned, we have now matured to a point where I think that we can be a true, credible partner with a larger company, not just for the candidates that we have in development right now, but for novel candidates, some that they may be interested in, that we have the ability to help them get into. We've always thought that we would get there, and we've always been quite confident in our technology. Now that we've got good proof of concept in humans, a good safety profile in humans, as I mentioned, I think we've got the record in single-dose knockdown using RNAi in humans. I think that we have the cleanest safety profile in the field in humans.
I think these sorts of things and our flexibility with respect to delivery in terms of hepatic versus extrahepatic, in terms of IV versus SubQ, I think all of these things make us comfortable that we can credibly compete for non-dilutive capital via partnerships.
Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Christopher Anzalone for any closing remarks.
Okay. Thank you everyone for tuning in today, and we look forward to an exciting 2016. We'll talk to you later.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.