Good afternoon, ladies and gentlemen, and welcome to the Arcturus Therapeutics First Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we’ll conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Tuesday, May 9, 2023. I would now like to turn the conference over to Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations and Marketing. Please go ahead.

Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics first quarter 2023 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 the 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 most recent Form 10-K and in subsequent filings 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.

Thank you, Neda, and good afternoon to all and good evening to our friends on the East Coast. I will begin my remarks by highlighting our ARCT-154 COVID-19 vaccine Phase 3 program. This is our most advanced clinical program. ARCT-154 has the potential to offer effective and longer lasting protection against COVID-19. I’m very pleased to report that last month our collaborator Meiji submitted a new drug application to support potential approval of ARCT-154 as a primary immunization vaccine based on our placebo-controlled Phase 3 study. Study conducted was – the Phase 3 study was conducted during a period of multiple variants of concern and met its primary endpoint of preventing COVID-19 and demonstrated a favorable safety profile. This study was conducted to assess efficacy against COVID-19 and approximately 16,000 individuals and we’re very pleased with the results. The ARCT-154 Phase 3 comparative study of ARCT-154 as a booster is being conducted by Meiji Seika Pharma and they have completed enrollment of approximately 828 subjects with interim results expected later this quarter. This non-inferiority study is designed to evaluate the safety and immunogenicity of ARCT-154 compared to Comirnaty of Pfizer and BioNTech and administered as a bio – as a booster dose. We expect the interim analysis data to be submitted to the PMDA later this quarter and to seek registration of the ARCT-154 as a primary series and booster later this year, potentially representing our company’s first product approval. Such a meaningful milestone could be indicative of the broader platform opportunity for our mRNA medicine technologies to result in novel vaccines and therapeutics over the coming years. If approved Japanese sales of ARCT-154 could represent a significant commercial opportunity for Arcturus. I will also remind you that the ARCT-154 Phase 3 Japanese booster study, as well as product manufacturing…

Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for the first quarter of 2023 and provides a summary and analysis of year-over-year and sequential financial performance. Please also reference our Form 10-Q for more details on the financial performance. We are happy to see the progress by Meiji on submitting the new drug application to the PMDA in Japan for ARCT-154. We expect the booster data to be submitted shortly by Meiji once it is completed and quality checked in order to seek registration as a booster dose. This NDA submission is the first for an Arcturus vaccine and will be instrumental in the validation of our self amplifying mRNA vaccine platform. In April 2023, we received an advanced payment of $23.6 million for the manufacturing and supply of ARCT-154 booster vaccines from CSL. The advanced payment is for specified manufacturing runs of ARCT-154, which includes the drug substance utilized as well as the reservation fees and related manufacturing requirements. We took a number of positive steps to improve our balance sheet this quarter with the elimination of $60 million in long-term debt obligations. By repaying the Singapore loan of $17 million in Unused Principal and interest, we eliminated $34 million in additional principal and accrued interest on the non-recourse loan. Additionally, we paid off our $10 million debt obligation to Bridge Bank. As of March 31, 2023, we have no long-term debt and our balance sheet while current assets increased by $21 million, primarily due to the $90 million in accounts receivable from CSL, which is expected to be collected during the second quarter of 2023. I am happy to report our cash runway remains extended to the beginning of 2026 based on our current pipeline and assuming no sales based…

Thanks, Andy. We have continued to make excellent progress and advanced our proprietary messenger RNA and lunar delivery technologies toward later stages of clinical development and potentially having our first product approval later this year. So this is an exciting time at Arcturus. Our strategic collaboration with CSL, which is focused on the development and commercialization of next generation mRNA vaccines is making strong progress. Our teams are working toward the development and commercialization of next generation mRNA vaccines, including those targeting COVID and influenza, and I look forward to providing more information about our progress and upcoming milestones in the coming quarters. So with that, we’d like to turn the time over to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question is from Yasmeen Rahimi from Piper Sandler. Please ask your question.

Great. Thank you so much team for allowing me to ask my questions. I guess the first one is, I know you noted that the booster data is expected later this quarter given that the study finished enrollment in February, like, and we’re already in May, like, are we really, really imminent? Like are we just, I guess, still in the month of May or potentially June or will it fall in July? And then maybe comment again a lot of our clients are asking what was the rationale for Meiji to file ahead or instead of waiting for the booster data. And so if you could address that and then two follow-up.

Sure. So first with respect to your first question, Meiji informed us that the interim Phase 3 safety and immunogenicity booster data are presently undergoing final analysis and quality control procedures. So this means we’re close, all right, that the audited QC booster data should be submitted to the PMDA latter this quarter. And with respect to your next question on the filing strategy, we’re just a adhering to very clear guidance from the PMDA regulator. So with respect to filing that we want to approve not only the booster, but the platform itself and the primary vaccination regimen. So the NDA was filed as such according to what they guided.

Okay. And then the third question that I think a lot of our investors are trying to figure out is how to quantify the approval in Japan. So I guess question number one, what is the timeframe by which you will be granted approval? And then how soon could you negotiate with the regulatory – with the Japan authorities in terms of purchasing vaccines? I guess at what junction will we find out how many doses of ARCT-154 was purchased? And I’ll jump back into the queue.

Yes. In terms of framing the size of the Japanese market opportunity, I think it’s helpful for people to understand that approximately 57 million mRNA boosters have been distributed and dosed since September 1 of last year. So that’s approximately 250 days and approximately 57 million mRNA booster shots have been distributed in Japan. So you can base your mathematical speculations and calculations on that.

We typically don’t comment, Yas, on with respect to orders and discussions with respective government that’ll be conducted by our partners Meiji and CSL. And as soon as we have information available, we would be happy to disclose that information with the market.

Okay, thank you team. I’ll jump back into the queue.

Thank you. The next one is from Pete Stavropoulos from Cantor Fitzgerald. Please ask a question.

Hello Joe and Andy and team. Thank you for taking my questions. So I have one question on the vaccine ARCT-154. So we expect to hear about the data from Meiji study. Are there any details of the study that you can provide in terms of what the non-inferiority margin may be? Is the study evaluating immunogenicity only against the Wuhan strain or must it show activity against variants of concern?

Yes, we’re – thanks Pete for the question. The study is definitely evaluating the original Wuhan strain and other variants of concern are being evaluated as part of the study with respect to the statistical parameters. Maybe I can throw that to Pad.

Yes, sure. Hi, this is Pad. Thanks for the question. Again, Meiji will be doing all the statistical analysis, but they’re going to be looking for a non-inferior already threshold of just 0.67. And then – and an objective CR response rate of negative 10. But a lot of that analysis is going to be done by them and they’re going to be sharing the lot of the data going forward.

Okay, thanks. And can you provide any color with regards to the CSL milestones, do you expect more in the balance of this year, and if so, what would be those – what drive those milestones?

Yes. No, thanks for your question, Pete. Unfortunately, we don’t give specific guidance with respect to the development milestones. But as soon as we have achieved and earned them, we will report them to the market as we progress throughout the year.

All right, thanks, Andy. One last question for ARCT-032, you fully enrolled Phase 1, it’s completed in terms of healthy volunteers. I know the focus is safety and tolerability, but will you be looking at any biomarkers in healthy volunteers and also in cystic fibrosis patient populations. How will you evaluate the pharmacodynamic response?

Sure, sure. So with respect to the healthy volunteers, we don’t expect any biomarker data to be meaningful. All of the healthy volunteers already have healthy levels of CFTR in their lungs, for example. But we are closely tracking safety and tolerability and feasibility of dosing. This is the first patient population or subjects or volunteers that have inhaled lunar delivery technology. So we’re very happy to report today that we’ve evaluated four different dose levels, which is basically an extension of time and chair. You can imagine each of these cohorts of eight are people sitting in a chair inhaling the technology for a period of time, the actual ARCT-032 drug product. And we’re happy to report today that we’ve completed the trial and we’ve provided some guidance that we intend to amend the protocol to add patients and enroll CF patients in Q3. And in patients is where we can find some potential biomarker or more meaningful biological proof-of-concept data.

Is there any color that you can give on what that – what you potentially could look at?

Yes. There will be an appropriate time for us to do that. I think that will be at the next quarterly call once we detail the timing of CF patient enrollment and more specifically.

All right. Thank you. Thanks for taking my questions.

Thanks, Pete.

Thank you. The next one is from Seamus Fernandez from Guggenheim Securities. Please ask your question.

Hi guys, this is Evan Wang on for Seamus. Two questions. First on COVID, can you talk about how the monovalent primary and booster approval in Japan helps set up the platform and streamline development for a bivalent or future variance? And I guess, in terms of how you guys are thinking about continued development and I have a follow-up on us. Yes.

Yes, thanks, Seamus for the question. It is correct that mRNA platforms benefit from clock speed and rapid update ability with respect to future updates. And Arcturus is no doubt a next generation mRNA platform. So we benefit from clock speed and rapid update ability benefits, which is becoming more overstated now that we realize that this is a perpetual and seasonal COVID vaccine market. I also want to highlight that with our manufacturing presence in Japan, our callous that’s a local presence of the manufacturing capability too. So it’s not just set ARCT-154 is not only a great asset itself, but it sets the stage for future updates quickly, and that can be manufactured efficiently right in locally in Japan.

Great. And then on the CF, what from the healthy volunteer study really enabled expansion to CF patients? Was there a specific marker you’re looking at? And what does the amended protocol look like? Will it expand from New Zealand? And I guess, when do you plan to update investors on potential CF patient data? Will that later 2023 update include both or just hopefully volunteers? Thanks.

So this last set of questions, I just want to restate your question that you’re focusing on the CF program, correct? Seamus?

Correct.

Okay. Yes, so we definitely intend to modify – we definitely intend to modify the protocol to include CF patients. So I think the appropriate time to give a more specific update will likely be on the next call with respect to a more specific timing of that. In terms of the biomarker or any sort of strategic thinking as to when we can get some sort of proof-of-concept for ARCT-032 in patients, this is too early to provide guidance.

Okay. Thanks.

Thanks.

Thank you. The next one is from Yigal Nochomovitz from Citi. Please ask your question.

Hi, team. This is Carly on for Yigal. Thanks so much for taking our questions. First we had a follow-up related to one of the prior questions. I guess, what’s your expectation as far as how Meiji’s data could potentially be leveraged outside of Japan? I guess given the updated FDA guidelines related to use of bivalent mRNA vaccines should be assumed, CSL will be focused on bivalent rather than ARCT-154 for major markets. Just any thoughts you have on that dynamic would be helpful.

Yes. Hi. It’s correct, the different regulatory agencies have been providing guidance on mRNA vaccines, and you’re correct that in the United States, they’ve now mandated bivalency for conventional mRNA, but they have not mandated bivalency for other platforms and other types of technologies. And we have not yet shared our Phase 3 booster data with the regulatory agencies here in the U.S. So whether the FDA will consider our technology more like conventional mRNA or significantly different to be treated differently is yet to be established. But we are prepared in either situation. We’re aggressively advancing our monovalent technology in Japan and our bivalent technology. We’ve provided updates with respect to milestones, that activity is ongoing in Europe. So we’re prepared in either situation, depending on what a particular regulatory agency requests or expects. Did I address your question, Carly?

Yes, yes, that’s very helpful. And a follow up related to that, I guess, I know even CF cell have talked about the bivalent COVID program as well as a seasonal flu program. We were just curious if developing a combo, a COVID flu vaccine was covered under that agreement you have with CSL or if that might be part of your planning?

Yea, I can’t speak to the details of a combined product. In the CSL collaboration, we did disclose that the license is for COVID and flu, so it implies that there’s potential there. But a combined product is definitely fascinating and interesting. But we haven’t provided any guidance with respect to timing of a combined product.

Okay. Got it. And then just last question from us, as far as the $23.6 million advanced payment from CSL that you disclosed, can you just elaborate on what triggered that, I guess, was that specifically related to manufacturing runs to supply the Japan market? Any just clarity you could give there would be great.

Sure. As you could imagine, you have to prepare for manufacturing of 154 which requires to manufacture drug substance, which is utilized in the production of the vaccine as well as reservation fees and related manufacturing requirements. So if you want to get certain orders in by a certain time, you need to prepare for that potential opportunity if that makes sense.

Okay. Got it. That’s helpful. Thank you for taking the questions.

Thank you, [indiscernible]

Thank you. The next one is from Yanan Zhu from Wells Fargo Securities. Please ask your question.

Hi, thanks for taking our questions. So on the 154, primary vaccine data required by the Japan regulators for approving the booster indication, and is the decision to submit the primary vaccine data by Meiji informed by the booster data that they might be seeing? Thank you.

Good question. You do not – it’s not prerequisite to get the booster approved to have the primary approved, but it is very helpful, as you can appreciate to get the platform and the primary approved for subsequent updates or future bivalent or more mature monovalent technologies as they come forward. So that is why the PMDA and Meiji and CSL and Arcturus and our teams wanted to make sure that the primary vaccine was also included in this NDA because it allows for approval of the platform and accelerated timelines for subsequent updates as needed.

Right. And then the question on whether this decision is actually was in part encouraged by what made you saw with the booster data, because obviously it’s a consuming – time consuming process to submit like the large, very large dataset for the primary vaccine data, right?

Yes. We can allow you to speculate according to your own wisdom. We can only comment that the study’s been ongoing since December that we’ve – that, that, that Meiji has been collecting data after since February. But we can’t comment as to whether they made decisions based on that data or not.

Got it. That’s very helpful. Thank you. And we get this question from clients whether – about whether the monovalent 154 could compete effectively with the available bivalent vaccine in the Japan market. Could you shed some color on that?

Sure. I mentioned on this call that, that there’s already been I guess, 57 million mRNA boosters distributed and dosed in Japan just since September 1. So there’s definitely a significant mRNA vaccine booster market in Japan as to – as for whether this self amplifying mRNA next generation technology can compete that that’s one of the purposes of this Phase 3 heads up comparison. And we’ll let the Japanese government and Meiji take care of answer that question through orders in the future.

Hi, yes. This is Pad, and I’ll just add a couple other comments to this. We and others have shown that the self amplifying technology can potentially lead to higher neutralization titers as well as longer duration. So I think we will be tracking that in our Phase 3 booster trial. And I think if those data are positive, and I think we do believe that, that the monovalent could compete with some of the data that we’re seeing with the bivalent.

Yes. The lower dose, the lyophilized nature of the product, and broad neutralizing capability and extended durability would all be…

Very helpful. Yes. Yes. So maybe a couple of questions on the CF program. I was wondering, could you remind us whether the healthy volunteer study is a single dose or multiple dosing and how do you think about whether the highest dose in the healthy volunteers is sufficient to cover your potentially therapeutic dose in patients? And lastly, if this is multi-dose in healthy volunteers, would you have any like drug accumulation data in the lung in addition to in the blood?

Yes. Hi, this is Pad and I’ll answer some of your questions. So again the Phase 1 study was a single ascending dose, right? So single dose, and we also plan to when we do the Phase 1b part of this, which is in patients we intend to use again single dose study. We – Joe also mentioned that we did a dose escalation four different dose levels and the dose levels that we chose and that, that went into that Phase 1 healthy volunteer study were in the therapeutic range of what we saw was effective in preclinical models. So some of the – so the numbers we see the in the healthy volunteers, and if that’s replicated in patients, we should – that should be in the right range.

Got it. And will there understanding that this is a single dose administration would we still be able to get some sense of drug degradation in the lung?

Of course, we won’t be – we’re not, I mean, obviously, do – if what you’re asking is if we’re going to be doing biopsies in the lung to look at either distribution or the activity obviously that, that’s going to be quite cumbersome, right? But we will be looking at PK, right? Looking at PK, like if you look at some of the data that was presented by the other mRNA companies that, that worked on lung diseases, you can get a sense for what we would be looking at.

I’m sorry. Just to clarify, I was referring to LNP accumulation in a lung.

Yes. I understand what you’re asking, but I mean the way to look for it is doing a biopsy, for example, right? In the lung, and I’m not sure we’ll be doing that.

Right. Okay. Got it. Got it. Thank you.

Thanks, Yanan.

Thank you. The next question is from Yale Jen from Laidlaw & Company. Please ask your question.

Good afternoon. Thanks for taking the question. My first question also get to 154, given that the Meiji and the CSL, I believe has a deal signed earlier this year, my question is, does CSL also have the rights outside of United – outside of Japan for the monovalent vaccine? And would that be something that appears also could benefit from that economically? And I have a follow-up. Thanks.

Yes. Correct. CSL has obtained in our collaboration all rights to the COVID and bivalent program outside of the United States. So I’m sorry, including the United States. So the global license and consequently because of the Meiji opportunity that we had going on concurrently with the CSL opportunity, we were able to close both transactions simultaneously. And we were fortunate that the collaboration worked out very well for both all three parties, frankly. And so we’re excited to be working with the number one player in Japan, Meiji with respect to vaccines and flus. And obviously CSL is number two in the world with respect to flu. So we have two very prominent players certainly in the various markets that we can rely on for commercialization. And as you know, the economics are very attractive in both the COVID monovalent and bivalent opportunity for us as a 60/40 profit split with both CSL and Arcturus.

Okay. Great. And the question on 032 is that you have done the healthy volunteer study for the safety. Do you anticipate either in the next trial or in the future to do a longer safety study to ensure that the patient will be able to inhale the drug without – in the long-term without any negative impact?

Well, if you’re referring to multiple dose, I’m sure that I can confirm that…

Right. And…

As part of our clinical strategy – yes, yes, we definitely want to implement that at some point in our clinical strategy, and we’ll provide more details on that likely on our next conference call. But the dosing, just so everyone on the call is clear, it’s not like we’re increasing the dose level, we’re – it’s time and chair. These four dose levels are the as an individual volunteer sitting in a chair for a period of time, inhaling our drug. So the – it’s – as we – when we say increasing the dose, we’re just saying increasing the time and chair while they’re inhaling the drug, okay?

,:

Thanks. Did you ask question? Okay. Thanks.

Yes, I did. Just in terms of our hepatitis B virus data so far…

Yes. The hepatitis B product, yes. So obviously we presented recently our – some of our capabilities in the gene editing space because Arcturus is a platform company that’s been developing liver targeted nanoparticles that encapsulates mRNA for therapeutics. But we believe that, that this technology is quite broad and applicable to multiple therapeutic areas and therapeutic modalities. And gene editing is just one of those modalities that we feel very encouraged that, that this technology can be applied in that arena.

And more specifically, the data for hepatitis B, for example, that was presented in Paris recently, this is well received because it’s a another example of how our LUNAR technology is – has the ability to deliver large and very large mRNAs to hepatocytes. And so it’s – it opens up the field of opportunity a little bit broader than before.

Okay. Great. Thanks a lot and congrats on all progresses.

Okay. Thank you.

Thank you. There are no further questions at this time. I will now hand a call back to Joe.

Hey, thanks for participating on the call everyone, and if there’s any remaining questions, of course, reach out to our team and we’ll get back to you right away. Thanks to everyone. Good night.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.