Greetings, and welcome to the Arcturus Therapeutics Fourth Quarter 2022 Financial Update and Pipeline Progress Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations and Marketing. Thank you. You may begin.

Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics’ fourth quarter 2022 financial update and pipeline progress call. Today's call will be led by Joseph Payne, our President and CEO; and Andy Sassine, our CFO. Dr. Pad Chivukula, our CSO and COO, will join in for the Q&A session as well. Before we begin, I would like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied by the statements. Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factors section in our Form 10-K filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements to reflect future information, events or circumstances. And with that, I'll now turn the call over to Joe.

Hey. Thank you, Neda, and good afternoon to all. Thank you for joining us for today's call. The recent period has been characterized by substantial operational and pipeline progress here at Arcturus. We will be highlighting four areas on today's update call. First, we closed our strategic vaccine collaboration agreement with CSL Seqirus at the end of last year. We have received the $200 million upfront payment and invoiced $90 million in additional milestones. Demonstrating the positive progress that the companies have made on our partnered COVID and seasonal flu vaccine programs. Second, we've entered into an agreement with Meiji Pharma to evaluate ARCT-154 as a booster vaccine for SARS-CoV-2 also known as COVID-19. And we're very happy to report significant operational progress in the ongoing Phase 3 study in Japan and we'll be providing an update there. Third, we have continued to advance our RNA platform technology and our earlier stage clinical programs, and we will provide an update on recent progress there. Fourth, we have strengthened our management team by the addition of Dr. Juergen Froehlich as our Chief Medical Officer, overseeing mRNA therapeutics and Dr. Igor Smolenov, as our Chief Development Officer, overseeing clinical development of our vaccine franchise. I'll begin with our recently announced strategic collaboration with CSL. We are in the initial phase of our now four-month-old collaboration and very pleased with how the teams are working together. Arcturus has achieved substantial milestones this month associated with nominating next-generation candidates for COVID and seasonal flu programs. Mutual respect is evident between the working groups of both companies. There is a clear passion and solid work ethic behind the competent execution that has led to these important and early milestones being achieved. We remain eligible for additional development and commercial milestones as covered pipeline programs advance.…

Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the fourth quarter and fiscal year 2022 and provides a summary and analysis of year-over-year and sequential financial performance. Please also reference our Form 10-K for more details on the financial performance. I'll begin with the CSL agreement. Arcturus received a $200 million upfront payment that was received in the fourth quarter of 2022. Additionally, in March 2023, our first achieved development milestones primarily associated with nominating next-generation candidate for COVID-19 and seasonal flu programs, resulting in $90 million invoiced to CSL. We are excited to continue working on these programs under the guidance and leadership of our partner CSL. Our CSL collaboration is a 40-60 profit sharing agreement related to COVID-19 vaccine product. With respect to program costs related to the bivalent COVID-19 vaccine, we expect that future anticipated milestones will cover all related expenses going forward. Additionally, the program cost for the seasonal flu candidate will be reimbursed in full on an ongoing basis. CSL can apply a $37.5 million R&D credit to be used within the next five years against cost incurred on the flu and three other respiratory disease vaccines. As you heard earlier, we are excited that Meiji completed enrollment during the first quarter of 2023 for the Phase 3 COVID-19 booster trial of ARCT-154 in Japan. Meiji is responsible for all related clinical, regulatory, development and manufacturing expenses for the ARCT-154 booster vaccine. Our manufacturing loan with the Singapore government, which had a principal and interest balance of $50.4 million as of December 31, 2022 was renegotiated in March 2023, which resulted in Arcturus paying back $17.1 million and the remaining $33.3 million being forgiven. As a result, Arcturus has no further loan obligation payable to Singapore.…

Hey. Thanks, Andy. It's been a productive quarter. We hit the ground running with CSL, as indicated by meaningful early milestones being achieved in the partnership. We made measurable progress in each of our clinical programs, which has put us in a position to potentially file our first NDA in Japan and collect meaningful clinical data in 2023 for each one of our pipeline programs. This will showcase the intramuscular, intravenous and inhaled applications of our proprietary mRNA and delivery technologies. And we've also strengthened our management team and look forward to many of you meeting them over the next -- the remainder of the year. So with that, we would like to turn the time over to the operator for questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] First question comes from the line of Seamus Fernandez with Guggenheim. Please proceed with your question

Thanks for the question. So, my first question is actually on the Meiji trial. It sounds like the team there has made a lot of progress enrolling patients and we're almost on the cusp of actually getting the clinical data. I was just hoping that the team could comment on what your hope or expectations are for those data relative to Comirnaty? And if there will be follow-up data because I believe there has been in the past some suggestion of greater durability with the self-amplifying RNA as a potential advantage over just a standard modified mRNA. And then the second question, just really wanted to get a better sense if you are willing to share the dosing regimen in a little bit more detail and the number of patients that have been dosed so far in the OTC study? Thanks so much.

Okay. Thanks, Seamus. Well, with respect to your first question, the primary objective of that trial is to establish non-inferiority with respect to the immunogenicity data. One of the key sets of immunogenicity data is that one-month blood data that's been drawn already. So you're correct in your assessment that we're collecting data as we speak, that's very relevant to the upcoming potential new drug application in Japan. So, we want to make sure that, that immunogenicity data is included in that application. With respect to your durability in CSL, yes, no doubt, we will be tracking that in parallel. But that durability data is not a pre-requisite to establishing approval with the PMDA approval in Japan. It will be an add-on and just strengthen our commercial business case, if we're fortunate to get commercialized this year. Yeah. And then, the -- with respect to the second question, all we've indicated and guided there with respect to OTC is that we -- for the first time, we've informed, we've communicated externally that we have now enrolled multiple patients. We cannot give any more specifics than that. And then with respect to guidance, we want to be clear that we're still on track for sharing Phase 2 data later this year.

Joe, if you don't mind, can I just clarify enrolled patients? Or have you started dosing patients officially?

Yes, enrolled means that I define as dosing, correct. So whenever I mentioned the word enrollment in this context, it's past screening, they have been dosed, correct.

Okay. Great. Thank you.

Hey, Seamus. Just one other point is that even in the early, the first dosing, we are expecting some pharmacological activity because it is a dose level where we’ve seen pharmacological effect in preclinical models.

Our next question comes from the line of Yanan Zhu with Wells Fargo. Please proceed with your question

Great. Thanks for taking the questions and congrats on the progress. A few questions, on the Japan COVID study, could you talk about the -- what might be the non-inferiority margin for the primary analysis? And have you talked about the potential economics from a Japanese regulatory approval? Thanks.

Well, I want to make sure I understand your question. With respect to the Phase 3 trial in Japan, I know that it's been properly powered to achieve statistical relevance with respect to a non-inferior endpoint. So, there's no concerns there with respect to the margins required. Numerical superiority will obviously be observed, but statistical superiority, we'll have to collect the data to understand that. With respect to your second question, which was on -- I can pass it along to Andy.

Yeah. No, thank you for the question. Unfortunately, we don't provide guidance with respect to economics. And when we do have that available, we will share with the market what the economics are for CSL, and Meiji and ourselves going forward. So, thanks for the question.

Got it. And then a couple of questions on OTC deficiency. In terms of data later this year, you mentioned a subset of patients. Would we see one or both cohorts of data and also what would define success for that readout?

Sure. So, the success is biological proof-of-concept, and that's being defined by biomarker changes being observed in this patient population. So the biomarkers include ammonia and orotic acid in urea, ammonia in the blood, orotic acid in the urine. Urea genesis will be measured. Other amino assets will be also measured for and the OTC enzyme itself will be measured in the blood through unvalidated assay. So, our several biomarkers will be measured. And so, when we indicate biological proof-of-concept, we mean being able to measure or determine changes in those biomarkers because of the therapeutic. With respect, what was the other question?

Would we see one or both cohorts of patients?

That depends on the rate of enrollment. We're recruiting up to 24 subjects in this trial and 12 of them are at one particular dose and 12 were at another dose. And this is placebo controlled. So it's a 9:3, 3:1 ratio at each of those cohorts. So, if the rate of enrollment exceeds 12, then yes, we'll be able to provide those observations.

Great. Lastly, on the cystic fibrosis program with data later this year. Just wondering what -- for this healthy volunteer study, what would be the most meaningful readout that we should watch out for? And how do you determine the dose to be used in cystic fibrosis patients afterwards? Thank you.

Right. So, this is the most meaningful exercise here with these four doses being evaluated in these early subjects in Phase 1. It's just ascertaining safety and tolerability of the dosing regimen itself. This is an inhaled therapeutic. So, we're going to be able to quickly evaluate the maximum tolerated dosing for example. The -- how long can a person enable this therapeutic for. And so that will be the most interesting data that could come out of.

Yeah. This is Pad. And based on our Phase 1 data, obviously, we'll be looking at the lowest dose and the top dose. And when we decide to -- when we go into Phase 2, we can probably eliminate some of the lower doses, and we’ll pick a dose where we feel comfortable with, that has a good safety margin to start with.

Great. Very helpful. Thank you.

Thanks, Yanan.

Our next question comes from the line of Yigal Nochomovitz with Citi. Please proceed with your question

Hi, team. This is Ashiq Mubarack on for Yigal. Thanks for taking my questions. On the OTC program, you had some earlier comments on enrollment and how that's going. Can you comment at all on the rate of enrollment, in particular, site activation and if there are still outstanding challenges there or if was more or less an solved? And in terms of the OTC data itself, you're planning on sharing. Can you comment at all on your expectations for kinetics of response, meaning as in how long do you need to dose and follow these patients before accumulating enough response data that would be meaningful enough to share? Thanks.

Sure. So, I can update the market that we have now onboarded nine active sites for OTC deficiency. The bulk of that effort was last year. This is the year where we've initiated enrollment officially. So, with respect to the pace of enrollment, it's nothing that is out of the ordinary for a rare liver disease in Europe. So that's the only comment I can provide there. All we've disclosed is multiple patients being enrolled so far. With respect to the kinetics, it's helpful to understand that this is a six-administration trial. So these doses are separated by two weeks. So there's six administrations. And what we've seen preclinically is that OTC is additive in our preclinical animal studies. So we may see this in humans as well. So that with respect to kinetics, we are collecting blood draws after each administration over these half a dozen doses.

Yeah. Again, this is Pad. Just to point out that, we're the first protein replacement therapeutic that's going after this indication and specifically for protein replacement using mRNA. So there's a lot of unpaved road that we're trying to tackle. What we envision, of course, that we could see something in the first few doses. And if we do -- because of that, we are measuring a handful of biomarkers. So, we hope that we see something very soon, and we'll report on that.

Got it. That's very helpful. And if I could ask one more on the cystic fibrosis program. Do you think it's possible we could get some initial healthy volunteer data this calendar year or is that you think that's more likely to be a 2024 event? Maybe once you have that data in hand, how do you think you can pivot into treating actual cystic fibrosis patients? Thanks.

Yeah. The study is being conducted in New Zealand, the Phase 1 study for CF because we've already dosed a pair of cohorts, there may be some initial feedback from, and we haven't had any serious or severe adverse events, right? We have to report on that. So after the first survey after the first couple of cohorts, it does present the potential opportunity to end Phase 1 to add CF patients. But whether we add CF patients to the Phase 1 trial itself or quickly pivot to a more traditional Phase 2 regulatory process is yet to be determined and communicated.

Very helpful. Thanks very much.

Thanks.

Our next question comes from the line of Pete Stavropoulos with Cantor Fitzgerald. Please proceed with your question

Hello, Joe, Andy and team. Thank you for taking my questions. So I have one on 810, the OTC deficiency program. What type of patients are you enrolling? Can you speak to their baseline characteristics? Are you kind of enrolled patients are stable on stable background meds? And are they controlled uncontrolled? And can you speculate in which type of patients you may be able to see the most pronounced effects in?

Yeah. These are stable adult and adolescent subjects. That will be the initial focus. So, both adults and adolescents in the European Phase 2 multiple ascending dose trial. So I can comment on that. With respect to the other, and what was the other aspect of your question?

Can you lay on which type of patients you may actually see the most pronounced effect?

Okay. Well, I think this therapeutic has the opportunity to have a biological impact on every patient injected. However, if they are already on ammonia scavengers, for example, the other biomarkers will be more meaningful, like, urea genesis and OTC itself. But if they are not on ammonia scavengers then, of course, ammonia will be looked at erotic acid and other amino acids are going to be investigated on, so the collective body of data should be sufficient to negotiate the regulatory path efficiently with regulatory agencies.

Okay. Sorry go ahead.

No. That’s it.

Yeah. I have a couple of questions. So if you can give a sense of how many subjects have gone through the full dosing cycle in the Phase 2 MAD study? And are you -- is there like a safety look built in by, let's say, the SMD (ph)?

Yeah. There's always safety checkpoints, but we've already got approval to proceed in a multiple ascending dose for six administrations, right? Always communicated as multiple subjects. But if every two weeks, there's another administration. So, you can make your assumptions based on that, that there's enrolled subjects that if they continued on in the study, of course, they would have multiple administrations so far.

Okay. And moving on to 032. So congratulations on that. The enrollment seems to be going well. But just have -- I know you briefly mentioned preclinical data in your prepared remarks. But if you can go into a little bit more detail, perhaps, Pad, what from the preclinical data sort of enhance our conviction to move into the human studies? And specifically, can you discuss the predictive value of the model? And how phenotypically similar? Is it to see patients, recapitulate human disease in the lungs? And has it been validated through other therapeutic agents?

Yeah. The CF ferret model is relatively new. It's an exciting model that the CF Foundation and many others are recommending companies to utilize because it's very likely more representative of the human condition because of the mucus that's generated in the lungs and the CF ferret model. The key -- so it's difficult to speculate or confirm that this is a validated predictive model, but I think it's very logic or to suggest that it's more representative of the human condition because of the additional mucus in the lungs, I think that is a safe assumption. I would like to just point out that our approach has been different from previous approaches that we properly modify and also purify our messenger RNA molecule utilizing the Arcturus proprietary technology. This is the first time an inhaled messenger RNA therapeutic for CF has entered the clinic utilizing the LUNAR technology. This technology has been highly optimized for bronchial epithelial cell delivery and been optimized to survive the mucus environment and optimized for inhalation and aerosolization processes. And then finally, we also note that this has also been uniquely optimized. The CFTR construct itself to increase functional activity. So, there's a lot of differences in this therapeutic than what's been tried before. So, we look at the CF ferret model as indicative, very meaningful because we just don’t see a lot of folks or companies or therapeutics being showcased in the specific model. So I think it could potentially be very meaningful.

All right. Thank you for taking my questions.

Yes. Thank you, Pete.

That is all the time we have for questions, at this time. I'd like to hand the call back to Joseph Payne for closing remarks.

Hey, thanks. Thanks to everybody. So let me -- thanks for participating on the call. If there's any remaining questions, please reach out to the team, and we'll get back to you right away and bye for now.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.