Ladies and gentlemen welcome to the Arrowhead Pharmaceuticals' Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead Vince.

Thanks Carmen. Good afternoon everyone. Thank you for joining us today to discuss Arrowhead's Results for its 2018 Fiscal Year Ended September 30th, 2018. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the year; Dr. Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our clinical programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. We will then open up the call to your questions. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 to Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including without limitation, those with respect to Arrowhead's goals, plans, and strategies are forward-looking statements. These include statements regarding our expectations around the development, safety and efficacy of our drug candidates, projected cash runway, and expected future development activities. These statements represent management's current expectations and are inherently uncertain, thus actual results may differ materially. Arrowhead disclaims any intent and undertakes no duty to update any of the forward-looking statements discussed on today's call. You should refer to the discussions under Risk Factors in Arrowhead's annual report on Form 10-K and the company's subsequent quarterly reports on Form 10-Q for additional matters to be considered in this regard, including risks and other considerations that could cause actual results to vary from the presently expected results expressed in today's call. With that said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?

Thanks Vince. Good afternoon everyone and thank you for joining us today. 2018 was an important year for Arrowhead. Unveiling the new TRiM platform toward the end of 2017 served to frame our technological focus and we recognized that execution would then be critical to demonstrate that we could create real value with it. We needed to push our two lead candidates, ARO-HBV and ARO-AAT through first-in-human studies in order to confirm our high safety and activity expectations. And we needed to advance our preclinical pipeline toward the clinic to better demonstrate the breadth of the TRiM platform. I believe that we have accomplished both of these and that they, along with our business -- with our success in business development, have put us in a strong position for substantial growth and stability as a company. Let's go through some key accomplishments that helped us get to where we are today and then I will discuss a few of these in more detail. We hosted an Analyst R&D Day on September 2017 to introduce the TRiM platform, which utilizes ligand-mediated delivery and stringent bioinformatics, hence designed to enable tissue-specific targeting while being structurally simple. The TRiM platform offers several potential competitive advantages including a sophisticated RNAi trigger selection in screening process that identifies potent sequences rapidly and locations that RNAi competitors may miss. Multiple routes of administration, including subcutaneous, intravenous, and inhaled, potentially faster time to clinical candidates, optimal pharmacologic activity, and long duration of effect, potentially wide safety margins, simplified manufacturing at reduced cost, and the promise of taking RNAi to tissues beyond the liver. This event was intended to provide information on the technological foundation of the company and to set expectations as to capabilities and development timing. We then presented clinical data at HEP DART 2017, and…

Thank you, Chris and good afternoon everyone. I want to describe clinical studies for ARO-AAT and ARO-HBV and give a little more detail about the data that we presented at AASLD last month. They both were highly encouraging, and I really could not have been more pleased with the results. Let's start with ARO-AAT, Arrowhead's second-generation subcutaneously administered RNAi therapeutic being developed as a treatment for a rare genetic liver disease associated with alpha-1 antitrypsin or AAT deficiency. A genetic mutation causes improper AAT folding and impaired secretion by hepatocytes, leading to accumulation in the liver of AAT aggregates known as globules. Accumulated misfolded AAT can lead to recurrent cycle of hepatic injury leading to fibrosis, on to cirrhosis, and then in the worst cases, hepatocellular carcinoma or the need for liver transplant. ARO-AAT is designed to silence production of the mutant AAT protein with the attempt to first and most directly prevent accumulation of disease-causing protein in the liver. The second goal is to allow clearance of accumulated protein already in the liver. This should lead to prevention of repeated cycles of cellular damage, which is what leads to fibrosis and then on to cirrhosis. The fourth goal is reversal of fibrosis associated with prior damage. We believe that the damage cycle seen in AAT liver disease is quite similar to the damage cycle seen in other fibrosis and liver diseases such as viral hepatitis. It is now well established that fibrosis that has not reached end stage can show clear improvement after the [Indiscernible] is removed. As such, we have high hopes that reversal is possible in AAT. AROAAT1001 is a Phase 1 randomized, double-blinded, placebo-controlled, single-ascending dose or SAD and multiple-ascending dose or MAD study to evaluate the safety, tolerability, pharmacokinetics, and effective subcutaneous doses of ARO-AAT…

Thank you, Bruce and good afternoon everyone. As we reported today, our net loss for fiscal 2018 was $54.5 million or $0.65 per share based on 83.6 million weighted average shares outstanding. This compares with a net loss of $34.4 million or $0.47 per share based on 73.9 million weighted average shares outstanding for fiscal 2017. Revenue for fiscal 2018 was $16.1 million compared to $31.4 million for fiscal 2017. The decrease is driven by the timing of our revenue recognition of the upfront payments received from our collaboration agreements with Amgen, of which approximately $30 million was recognized during fiscal 2017 and the remaining $5 million was recognized during fiscal 2018. During fiscal 2018, we also recognized revenue for the $10 million milestone payment we received from Amgen in August, as Amgen initiated a Phase 1 clinical trial for AMG 890. Total operating expenses for the year ended September 30th, 2018 were $72.1 million compared to $68.4 million for the year ended September 30th, 2017. This increase is primarily due to toxicity study cost and drug manufacturing cost for ARO-AAT and ARO-HBV candidates. Net cash used in operating activities in fiscal 2018 was $47.2 million compared to $23.9 million in fiscal 2017. Our R&D and G&A cash expenditures were relatively consistent in each period. The driver of the change in operating cash was cash received from Amgen in each period. In fiscal 2018, we received the $10 million milestone payment, while in fiscal 2017; we received the $30 million upfront payment associated with AMG 890. Turning to our balance sheet, our cash and investments and cash balances totaled $76.5 million at September 30th, 2018, compared to our cash balance of $65.6 million at September 30th, 2017. The increase in our cash and investments balances was driven by $56.5 million of net cash proceeds received from our equity financing in January along with the $10 million milestone payment received from Amgen in August. These receipts more than offset cash used in operations and capital expenditures. We anticipate our cash and investments balance at December 31st, 2018 to be about $305 million, reflecting both the $175 million upfront payment and the $75 million equity investment from Janssen and JJDC as Chris discussed previously. In October, we issued 3.3 million shares to JJDC for their equity investment at a price of $23 per share. We anticipate recognizing approximately $198 million of revenue, which includes the upfront payment, the premium JJDC paid for the common stock, and estimated payments for ARO-HBV drug material on hand and to be manufactured. This revenue will be recognized over the course of completing our management and oversight of the ongoing Phase 1/2 clinical study for ARO-HBV end of delivery of the drug material. Our common shares outstanding at September 30th, 2018 were 88.5 million. With that brief overview, I will turn the call back to Chris.

Thanks Ken. It's clear we've made great progress as a company in a short amount of time. Last year at this time, we were just preparing to file CTAs for the first product candidates leveraging the TRiM platform. Today, there are three candidates in the clinic, ARO-HBV, ARO-AAT and AMG 890. Two of those, ARO-HBV and ARO-AAT, have already shown encouraging first-in-human readouts with mid-stage studies on the horizon. We also have two additional candidates, ARO-ANG3 and ARO-APOC3, approaching first-in-human studies and additional candidates, ARO-ENaC and ARO-HIF2 planned for 2019. Looking forward, we have equally ambitious goals for the future. We want to; one, file two to three new CTAs every year; two, target a new cell type with the TRiM platform every 18 months; and three, have 10 TRiM-enabled candidates in clinical studies by the end of 2020. I think we've proven that Arrowhead can execute with speed and precision and fully expect to accomplish these goals and more. Thanks again for joining us today. I'd now like to open the call to your questions. Operator?

Thank you. [Operator Instructions] And our first question comes from the line of Maury Raycroft with Jefferies. Please go ahead.

Hi, good afternoon and congrats on the progress. First question is just on AAT. Just clarifying are you in the middle of ongoing pre-IND discussions with FDA? And can you provide any insights into what you're considering or leaning toward for the endpoints dosing and then the trial size?

Sure. Bruce, do you want to take that?

Yes, hi Maury. We are in discussions at -- certainly in the process of being in discussions with FDA. I really would never want to discuss any sort of the specifics about what we or they are thinking about endpoints or even trial size. But we're -- we like the nature of the discussions and they are ongoing.

Okay. And should we think about -- as far as timing goes, should we think about starting in first half of 2019 or second half, any additional clarity there?

I think -- yes, sure. It's fair to expect filing -- an IND filing in the first quarter of 2019.

Got it, okay. And then just based on the maturing Phase 1 data that you've shown at -- well, actually, I guess, the data from AASLD for both the AAT and HBV and just wondering if you're going to provide an update on that data at any later stage and when that could happen.

Well, we will, I'm sure, continue to file abstracts with meetings like EASL and AASLD. I would expect that we'll continue to do that. It's always up to those organizations, of course, whether they accept those abstracts. But assuming they do, I think you can expect to see us at those meetings.

Okay. And the last question is just on APOC3. You reported some preclinical data recently at the AHA Meeting. Just wondering if you can give a quick recap of the data. And it seems like you took biopsies from the NHPs in the study to evaluate the APOC3 knockdown. Would that be something that you would have to do in the clinic as well?

No, we'll be able to measure it in the periphery in the clinic. What we showed is -- first of all, APOC3 is a small gene. It has core hemology between rodents and NHPs in humans. So, to develop our trigger, we first of all had to have a transgenic mouse that incorporated the human APOC3 transgene and we showed very deep knockdown and a strong dose response in that transgenic mouse model. We then went into non-human primates and the interesting thing there was that we -- the knockdown that we saw was on the order of about 60% or so. And we had a couple of possible explanations for this. One is that it is known that APOC3 is made both in the intestine and the liver. In humans, probably something on the order of 80% to 90% of the APOC3 made in the liver. But it was unclear whether that ratio was different in the non-human primates. And in fact, when we did the biopsy, we were able to show that we were getting 90% knockdown in the liver of the cynos and it basically demonstrated that in cynos -- and this is probably similar in rodents as well, probably 40% to 50% of the APOC3 comes from the intestine, but that's a different ratio than in humans. So, in humans, we're going to able to measure the circulating APOC3 and of course, we can also measure their triglycerides. So, we will not have to do biopsies.

Got it, very helpful. Thank you very much.

You're welcome.

Thanks Maury.

Thank you. And our next question comes from Katherine Xu with William Blair. Please go ahead.

Good afternoon. I have a couple of questions. So, last week, Spring Bank kind of revealed a discovery program they have, which is some chirally pure antisense agent against the x-protein specifically. So, I'm just wondering, for ARO-HBV, have you assayed activity against the x specifically? Just curious on that. I know you have some data, but I would love to hear your thoughts in light of that. And with regard to the AAT program, so assume that your toxicology is six months that is wrapping up right now or next month, so the Phase 2 likely will be six months in duration. I'm just wondering, is it possible or do you have a program going in a way that it can be followed-up beyond that or extended into a longer term study? Then also within six months, do you think you'll start to see a histological reversal of the disease?

So, Chris, you want me to handle those?

Yes, go ahead.

Yes, just in case people are confused, I'm actually at a different location. So, first of all, with AAT, to answer that question, first, Katherine, we did six-month rat and nine-month monkey in our chronic tox studies. And in fact, that's the duration required to be able to treat for an unlimited period of time. So, we are not limited to six months or nine months of treatment. Assuming those studies are successfully reported out and acceptable to regulatory agencies, we get to treat for as long as we want. So, six months is not a limitation for us, once these studies are completed and accepted by regulatory authorities. The other part of that question, do we think six months is enough that feels pretty short to me, to be honest with you. I think in six months, it's possible that some of the changes that occur in the liver could improve, but it would be highly unlikely to see improvements in things, of course, like fibrosis. But it probably is too fast even to have very complete improvement in globules, for instance. So, I think these studies are going to have to be longer than six months to really show the benefits in the liver that we want to see. So, that's regarding AAT. Regarding x-protein, so x-protein is very hard to measure and study in vivo in whole animals. It's a little more straightforward to study in in-vitro cell systems. But we believe x-protein is very important. We agree with Spring Bank in that regard. We designed our RNAi trigger in the x region to be able to hit x and that's clearly one of our targets. But it's not possible to at least currently to study the x-protein clinically. It's really only studiable under relatively constrained preclinical situations at this point.

Thank you.

You're welcome.

Thank you. [Operator Instructions] And our next question is from Ted Tenthoff with Piper Jaffrey. Please go ahead.

Great. Thank you very much. So, a lot of my questions were answered. I wanted to come back to this revenue recognition. Ken, I think you said it would be about $190 million basically through what period would that be recognized?

It's going to be about $198 million. We are going to be recognizing that -- we anticipate, over the next three quarters. So, the first quarter of the fiscal year October through June 30th of next year. So, for your purposes, you can assume that it's basically going to be recorded ratably over that period.

Great. Thank you very much.

Thank you. And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call back to Chris Anzalone for his final remarks.

Thanks everyone for your attention today and I wish you a happy holidays and we look forward to seeing you in 2019.

And with that, ladies and gentlemen, we appreciate you calling in our conference today. You may now disconnect. Have a great day.