Today it's our great privilege to have Arrowhead as part of our 2026 Global Healthcare Conference. Representing the company, we have James Hamilton, Chief Medical Officer, as well as Vince Anzalone, head of IR. James and Vince, thanks so much for being here. How are you guys doing today?
Great. Thanks for inviting us. Pleasure to be here.
Great. We have a long list of questions here, but maybe before we go into specific, maybe I'll ask to you, Vince, just big picture. I know you guys have been on the road a lot and had great engagement with investors and whatnot, but what has been the feedback? What progress has the organization made over the last few months? Most importantly, what's ahead here for Arrowhead?
That working? Okay, good. Thanks, Luka, and thanks for the whole RBC team for having us today. This is a really interesting time for Arrowhead right now. We are, without a doubt, on the most solid footing we've been as a company ever in the history of the company. The last few months, you asked. We've secured four additional positive regulatory actions for our lead product, REDEMPLO. We were approved in the U.S. by the FDA back in November of last year. We've since secured approval in China, in Australia, in Canada, and then a positive CHMP opinion in Europe, and we hope to have EC approval shortly.
We've also had our first full quarter of commercial sales for the product, which has been really encouraging, really good dynamics. It's clear that this is a growing market, not just for us, but for our competitor as well. That's specifically for FCS, the rare part of SHTG. We hope to complete the phase III studies, the SHASTA-3 and SHASTA-4, next month, towards the end of June, with a readout in Q3, which is going to be a really important event for us and I think for patients. Go back a few years. There were no good options to treat SHTG. Now I think there's general consensus that we have two very good drugs that change the paradigm for treatment for potentially millions of patients. Also for the company, we strengthened our balance sheet.
We have about $1.8 billion of cash on the balance sheet, which is really important for us because we've got very ambitious plans, not just for our lead product, REDEMPLO, but for our second, hopefully, approved product, zodasiran. Beyond that, in the cardiometabolic space, we should have a readout later this year for our first dual functional or dimer approach, which is one molecule that silences PCSK9 and APOC3 to treat mixed hyperlipidemia, which is both elevated TGs and elevated LDL cholesterol, which is a very large market. Again, we have very ambitious plans, but I think we're properly capitalized. We've executed very well on our first commercial product, and we're well on the way to becoming the next big biotech company or the next class of big biotech companies.
Got it.
I think we've done a lot over the last year, but this year is going to be a really important year for us.
Got it. Super helpful. You already mentioned SHASTA-3 and SHASTA-4. That's probably the most important catalyst for the foreseeable future for the stock. Trial is obviously a little smaller than CORE and CORE2, which is your competitor, Ionis. I think recently you mentioned that I think nine events are sufficient for 80% power, and I think low teens event is sufficient for 90% power. Maybe James, I'll pass to you. I'm sure you're seeing blinded event rate, how you feel about those blinded event rate, and are you confident that at the end of the day you're going to hit on AP? I think everybody expects you to hit on triglycerides. However, the quintessential questions is whether you're going to hit on AP or not. What's the latest thinking on that front?
Sure. Yeah. I think as we've said before, we remain cautiously optimistic about our ability to be stat sig on AP. Based on the blinded event rate, again, we remain confident that we'll be sufficiently powered in terms of number of events.
Got it. That's helpful. Can you talk about the adjudication of those APs? I think you guys had a slightly different criteria at the beginning of the trial versus during the trial. Maybe just a refresher or memory on what has changed in terms of the adjudication of the criteria for AP, and does that change the stats in any capacity, given that you kind of have changed the criteria mid-flight, if you will? How should we think about that?
Yeah, maybe I'll address the last question first. It does not change the statistical analysis in any way. We made this change about September or so of last year, and at that point, we had been holding on to and not adjudicating the events yet because we were considering making this change. The change was made before any AP events were adjudicated. After we made the change, then we started sending the events to the committee to be adjudicated. What the change was is we switched from using the strict Atlanta criteria to adjudicate AP events. That's what we used in the PALISADE study. With the Atlanta criteria, you have to have classic epigastric abdominal pain, along with either imaging findings or elevated lipase or amylase to be considered acute pancreatitis.
It's a strict criteria because a lot of pancreatitis events don't get labs or don't get CT scans. A lot of these patients, if it's their fifth, sixth, or seventh event, they go to the ER and they don't get a CT scan every time. We added these categories to this now modified Atlanta criteria, where we have definite AP events that's defined by the Atlanta criteria, probable or possible AP events, and those have different criteria for them. What it allows for us to do is to have more events, right? There's more events that are probably or possibly pancreatitis that we can categorize and that we can adjudicate. From a statistical standpoint, it helps there. It just allows us to reach that power easier. Importantly, this scale has been accepted by regulators, both in the U.S. and in Europe, also by KOLs, the major journals.
New England Journal of Medicine has accepted this scale, and it's the same scale that our competitor is using. It will facilitate probably more of a direct comparison using the same scale.
The reason why you switched is essentially because of the data that you've seen from Ionis. Would that be kind of fair?
I think that, and I think it also makes it easier to reach the required number of events to have adequate power.
Got you. Yeah, definitely going to collect more events this way than maybe the plan before. How should we think about timing for SHASTA-3 and SHASTA-4? I believe the trial was full enroll, I think end of June last year, June 23rd, 2025. The last patient's last visit should be at the end of June this year. How should we think about timing? Is this a July event? Is this an August event?
Right.
Any thoughts there?
I think we've said Q3, I think we're going to stick to Q3. That hasn't changed at all.
The process. Once we have last patient, last visit, we have to lock the database and then start to do analysis. We would say, typically that's going to be a four to eight-week process. You never know if it's on the quick end or the slower end of that.
Got you. That's actually helpful. How should we think about SHASTA-5 maybe, James? Again, hopefully SHASTA-3, SHASTA-4 hits the triglycerides, hits an acute pancreatitis, and the rest is history, right? In a scenario where that is not the case, you can still obviously get approved because obviously the primary important trial is reduction in triglycerides. However, maybe the label is going to maybe not reflect the benefit of the acute pancreatitis because that was not shown in that trial. How should we think about the lag between SHASTA-3 and SHASTA-4 versus SHASTA-5? I appreciate SHASTA-5 is event-driven, but any context on how long we will have to wait for SHASTA-5?
SHASTA-5 is sort of our belt and suspenders approach. We also think it could be helpful with payers to have that additional study that's specifically designed to look at improvement in AP events as the primary. Probably late 2027 for data, late 2027, early 2028. Enrollments has picked up quite a bit. If you may recall, we made some changes to the enrollment criteria early in the study just to boost enrollment a bit. I'd say that's maybe about a third or so enrolled, and we are seeing events in the study. On timing, it's tough to pin down definitively just because it is a time-to-event study, and you're dependent on when you see events. It seems like late 2027 is probably a good answer.
Also for SHASTA 5, it's never been gating to submit for approval for an SHTG, either here or abroad. The way we sequence these studies is that we wanted to start SHASTA- 3 and SHASTA-4 as quickly as possible, so that we can get to an SNDA as quickly as possible. SHASTA- 5, the timing was designed to coincide with when we thought we would be launching in Europe, not necessarily filing in Europe or even getting approval, but launching. We're still roughly on that same schedule. James made this point earlier, but I think it's important that SHASTA- 5 is really the first study in this population that only enrolls high-risk patients, and it's looking at AP as the primary endpoint.
We get this question all the time. If you hit on AP in phase III and phase IV, do you immediately close down SHASTA-5? The answer is it's going to be more of a wait and see. There still might be a benefit, specifically with national payers in Europe, to having a prospective study with AP as the primary endpoint, either for access in certain geographies or, more importantly, for reimbursement. Again, I think we'll have the benefit of seeing the Ionis label here in the U.S., potentially also in Europe, before we really have to make that decision. As James said, the enrollment has really picked up. We're going to have to make a somewhat tough decision, but I think it'll be a nice problem to have.
Yeah
Should we hit on three and four? Yes.
Nice problem to have, for sure. Maybe James, I want to go back to something you mentioned earlier, SHASTA-5. You obviously relaxed the inclusion and exclusion criteria. I think at the beginning, you enroll patients. They need to have two acute pancreatitis over the last 12 months versus, I believe now you need to have patients that have one acute pancreatitis over the last five years, right? Obviously you have broadened the inclusion and exclusion criteria quite dramatically. What was the driver behind the decision? Is that because enrollment was going a little slower than you anticipated?
That's right. Yeah, it was really driven by enrollment, and the criteria were pretty strict. I think they had to have TGs of greater than 1,000 at screening and, like you said, an event in the last two years. We opened that up a bit and did at least one AP event in the last one years. They have to have a history of triglycerides greater than 880, and then at screening greater than 500. That I don't think we lose any ability to catch patients who are having events, but it's broader. We're just going to catch more patients.
Got you.
Also remember that I think that as a field, we now recognize that the background event rate on placebo is probably higher than we originally expected based on the CORE and CORE2 data last year. Which, again, was a welcome finding, but it allowed us to make this study enroll a lot faster and still get to the requisite number of events we think.
Yeah. The CORE and CORE2 plus the practicality of enrolling the trial a little faster may really grow the decision. How should we think about commercial? Again, hopefully you hit on acute pancreatitis and the rest is history. In a scenario where you don't and you get approved with an initial label that doesn't have a benefit in acute pancreatitis yet, how do you think this is going to play out commercially? Is there a scenario where maybe payers are going to favor the drug that has a benefit in acute pancreatitis versus your drug? Is that maybe not the right way to think about it?
Yeah, it's a tough question. There's so many hypotheticals, isn't there? We don't know what this label is going to show for the competing product. Remember that AP reduction is not the primary endpoint. TG reduction is the primary endpoint. Who knows what the indication statement is going to be. It's likely that in the clinical study section of the package insert, there will be a reference to an AP risk reduction similar to what we have with plozasiran and what Ionis has with olezarsen in the FCS population. Yeah, I don't know. You're asking if this hypothetical happens, what will we do commercially and then what will payers do? I think that it's an important thing to remember that now, we were just talking about this outside before this fireside.
Now we have four distinct studies with three different molecules that show in a population that's at high risk for AP, if you reduce TGs with the APOC3 mechanism, with this class, that you reduce TGs, you reduce AP risk. I don't think that's a controversial statement any longer. I think physicians expect that as well. I think really the most important thing to be looking for here is TG reduction from baseline. Especially in the certain high-risk population. Because there's not a world that I can imagine where that doesn't reduce AP risk. Now, in clinical studies, strange things happen sometimes.
Sure.
With small absolute number of events, things can get swayed one way or another. We think that the fundamental profile of the drug speaks for itself. We think that'll play out commercially. We've seen that with FCS. We have had a very successful early launch with this because the drug is very strong at reducing APOC3. When you do that, TGs go down dramatically. When you do that, AP risk goes down dramatically. We don't see really a scenario where that changes.
Yeah. No, that's actually super helpful. Maybe James Hamilton, I can go back to you. How should we think about the increase in liver fat that we're seeing from your competitor? Do you think that's on target or is molecule specific where you'll be able to spare that tox, if you will? Or what's your take?
Yeah, we'll see. I think when our data come out, we haven't seen the data. We're still blinded. We haven't seen the baseline levels still, in terms of liver fat. I don't know if it's on target or off target. Our hypothesis has been that this is more of an off-target issue with the ASO. Certainly, the mechanism, is it physiologically possible that if you enhance lipoprotein lipase activity and metabolism of triglycerides, that you could get some fat going to the liver? I guess so. We've not seen it, as you mentioned, in our phase II study at the go-to-market 25 mg dose. Interestingly, our competitor also has not seen it with their non-GalNAc targeted ASO in a few different studies. That kind of muddies the water also.
I think the increases that they're seeing are modest in a 2%-4% absolute increase in liver fat. Not entirely sure how clinically significant that is, but of course, we think it would be a meaningful advantage to not have that and not have to deal with an increase in liver fat. We'll see what the data show in Q3.
Yeah. No, that's helpful. I know I'm pushing my luck here, but is it fair to say that you have not seen it, or you have not seen it at the doses that you're pursuing in the pivotal trial? If I recall it correctly, in the earlier trial at the higher doses that you're no longer pursuing, there was a little bit of that signal there.
That's correct.
Yeah.
Yeah. At the 25 mg , we didn't see any increase in liver fat. At the 50 mg dose level, there was about a 2% absolute increase in liver fat in that study.
Which was, I think, correct me if I'm wrong, James, but it was about a 10% relative increase because these patients started at almost 20% fat fraction. It was a modest increase. Interestingly, if this was solely an on-target effect, you would expect that to go up as TG metabolism goes up and as TGs go down.
The 25 mg , the reason we selected it wasn't because of safety, it's because it was maximally active, and we didn't get any real efficacy improvement when we went from 25- 50. We're kind of scratching our heads on this. I don't want to use the same term, but we are cautiously optimistic that this will not be an issue at all for us.
Yeah. Then maybe to your point, James, it could be a little bit of a combination of both, right? It could be two factors driving that phenomenon. I think also maybe in your data set, a little bit of A1c signal in your data. Again, we obviously are waiting for the data. Let's see if that signal is replicated or not. Does that keep you up at night?
No. It doesn't keep me up at night. I think that's there. That's real. We've seen that in other studies with this mechanism. I think our competitor has also seen that, and that's been seen with other drugs that are designed to lower triglycerides, improve lipid profiles as statins and fibrates. niacin, I think, can do that. What we've seen is about a 0.25% absolute increase in hemoglobin A1c. It's predominantly driven by the patients who are diabetic at baseline. The ones who are not diabetic at baseline tend to not have that increase. It's pretty easy to manage. We have rules in our protocols, how investigators are to approach that if they do see an increase, and it typically involves just increasing their dose of any diabetic medications they're already on. If they're on metformin, just double their dose or adding another oral anti-hyperglycemic agent.
The management's pretty straightforward.
Are those rules stricter in SHASTA-3 and SHASTA-4 versus what you've done before? Meaning, are physicians more aggressive in maybe uptitrating metformin or any other antidiabetic medications should that signal be replicated or?
Yeah, I think they're more aware now that the rules themselves are not necessarily stricter. As we've seen that signal and we've seen it with other molecules, we really have mechanisms in place now to follow up with sites when we do see an increase and make sure that they get on top of it and manage it appropriately.
We actually even had studies in the past that were designed to preclude physicians from changing any other meds. Now that physicians know about it, they can monitor and manage it better.
True. No, that makes sense. Maybe going back to commercial, how should we think about the peak revenue opportunity for this drug? Again, your competitors are on record saying that this could be a $3 billion plus. You guys have a differentiated price that you have announced not too long ago, $45,000 versus $40,000 WAC. How should we think about peak opportunity for this drug?
Sure. I think we have a long way to go to get to that point, but I think we're still at the point where we think this is a $3 billion-$4 billion opportunity for us. I think that the more we see with this market and the more we engage with physicians, and the more payer discussions we have, it seems clear that the value of this class is recognized across the board. It is a paradigm-shifting class for patients. The enthusiasm for physicians and the willingness to pay, both here and potentially abroad is something that we didn't quite appreciate. I think that we're sticking to that $3 billion-$4 billion, but I would defer to you and other folks on the sell side who are now saying the APOC3 class certainly could reach a $9 billion-$10 billion a year class.
Sure. No, that's actually helpful. Maybe, James, if I compare the two, INHBE and ALK7, how should we think about the reduction in weight that we have seen so far as monotherapy? It kind of feels to me that maybe the reduction in weight that we've seen as monotherapy, not combination with Zepbound, which is a whole separate conversation, has been maybe a little more modest than some people were anticipating. However, we've seen some pretty profound reduction in liver fats. Is this an obesity drug or is this a MASH drug? How should we think?
I think we're still both. As you mentioned with monotherapy, ARO-INHBE showed the reductions in visceral fat, as well as in liver fat, and we'll be sharing some additional liver fat data upcoming here at the EASL conference end of this month. There's certainly the opportunity for a MASH drug. On top of that, what we saw in the combination arms, particularly in the type two diabetics, was not only the large reductions in visceral fat and liver fat, but what looked like an additive effect on body weight loss in that population. That's a tough population to treat with GLPs alone. They don't lose as much body weight as the non-diabetics do. When you add the INHBE molecule on top of tirzepatide, which was the only GLP we used in the study, they lost some additional body weight, additional body fat.
There might be an indication there for weight loss on top of GLP-1s in that subpopulation. As you mentioned, the weight loss in the monotherapy populations was nothing to write home about, really. From a weight loss standpoint, it's really the diabetics that we're focused on, and that's the population that we'll look at in a phase II as well. We're planning to look at the diabetics, non-diabetics on. Got you. That's helpful. Obviously, there is a regulatory path out there where, as monotherapy, you have to show a 5% reduction in weight loss to get a drug approved. That's what the FDA has come forward with. Hopefully in your future trial, you're actually going to show that reduction in weight loss that is above that 5% magic number. Should that not be the case, how you're planning to engage regulators?
Is there a way that maybe you can get this drug over the finish line in reduction of visceral fat or reduction of liver fat or total body compositions? How should we think about endpoint to get these drugs over the finish line?
I think the MASH endpoints are a lot more clear right now. At least there's precedent for using histology as a primary endpoint, and then liver fat probably as a secondary. On the combination therapy weight loss, it's a little less clear, and we have some ongoing FDA interactions around endpoints in our phase II, and what does a combination therapy success for weight loss look like? Do you need additional weight loss? Do you need to show other clinically meaningful biomarker improvements? Improvements in visceral fat, that's an interesting one.
I think it's certainly something we could probably hit on giving the large reductions that we've seen. I think we just need more discussions with regulators to see if visceral fat reduction is a pathway.
Got you. That's helpful. I know we're already out of time here. Maybe quickly on, given this is kind of fresh off the press, what's your take on the tau data that Biogen reported last week? Sounds like Biogen is kind of moving away from CNS and strategically speaking, however, this data was good enough for them.
To still start a phase III, which I think was surprising to some people. What's your take on their data set, and what's the read-through to your approach at this point?
I think it was generally supportive of the tau hypothesis that the tau matters, and particularly the fact that they're starting a phase III. They've seen all the data, so there must be something there that's sufficiently interesting that they would take that molecule forward into phase III. High level, it sounds like they were seeing reductions in tau in the CSF, and then that was translating into the PET scan signal, reductions in tau PET, and that was further translating into some improvements in cognitive rating scales. That's all supportive for our approach, which of course is that siRNA-mediated knockdown mechanism, we dose sub Q instead of intrathecal. I think that for us represents a huge advantage.
Sure. Super helpful. Last question, maybe Vince, back to you. What do you think is the most underappreciated aspect of the Arrowhead story today?
Oh, gosh. The answer to that is different every month. I would say historically the challenge has been we have such a broad platform and pipeline. The question is, what are you going to focus on? I think we've actually pretty sufficiently addressed that issue over the last year and a half or so, which is capital allocation will be most slanted towards our cardiometabolic pipeline. We are more willing to invest in phase II and phase III in commercial for assets that are going to fit within that commercial portfolio. I think that we have 20+ drugs in clinical studies. We just did a deal a couple of weeks ago with Madrigal on a MASH asset for PNPLA3.
I think we're going to be more aggressive in partnering non-core assets, and we're going to continue to be disciplined with capital allocation for products that continue to support the growing portfolio of cardiometabolic assets. I think that's probably today what we're dealing with. We talked a little bit about obesity. There was some pushback about where do you need to see monotherapy weight loss, to James Hamilton's point. The best signal was in combination with the GLP-1 in those type two diabetics, and I think we need to win on monotherapy. We've been pretty clear from the start that is not what this mechanism is designed for. That was a pushback for a while. I think that our development strategy takes that into account, and I think we can still win with that.
Fantastic. We are out of time. Thanks so much, James and Vince. Appreciate your time, and thanks everyone for joining us.
Thank you.
Thank you.