Good afternoon. We'd like to welcome you to our fireside chat with Arcturus' CEO, Joseph Payne, and CMO, Juergen Froehlich. Thank you for joining us and for your time. Joe, let's start off with an introduction of yourselves and sort of a quick overview of Arcturus. Yeah, thanks, Pete. It's good to be with you again. My name is Joe Payne. I'm the President and CEO of Arcturus. I also founded the company. I'm a scientist by training. Worked in large pharma like Merck and Bristol-Myers Squibb. Established some experience and expertise in RNA medicines and was feeling entrepreneurial in 2013 and established the company at that time. That's enough about me. I look forward to introducing Juergen to some of the investors on this call. He's our Chief Medical Officer, but why don't you take it from here, Juergen? Thanks, Joe. Nice to meet you all. It's a pleasure to be with you today. My name is Juergen Froehlich, and I'm the Chief Medical Officer at Arcturus Therapeutics. I have been in the biotech industry for about 35 years, and in the last 20 years, I was mainly working in rare diseases. I've been involved in several successes, including U.S. and non-U.S. approvals, but I also witnessed failures. I was involved in many non-clinical and all phases of clinical drug development, including cystic fibrosis and ornithine transcarbamylase deficiency-vision, a liver disease. For CF, I supported the NDA and MAA submissions and approvals for KALYDECO, and I participated in regulatory interactions with the FDA to plan development of follow-on CFTR modulators. I was involved in early and late-stage development of inhaled therapeutics, including planning and conduct of phase I to phase III trials with colistin, molnupiravir, and a liposomal formulation of ciprofloxacin in patients with CF and bronchiectasis. In 2018, I was an invited panel member at an FDA-directed workshop addressing development of inhaled antibacterials for cystic fibrosis and for CF, non-CF bronchiectasis. Let me stop here and give it back to Pete for guiding us through this. Yeah, thank you for the introduction. Juergen, starting in 2012, around there, there's been great innovation, a series of drug approvals for cystic fibrosis. These are the CFTR modulators, and they provide great benefit for these patients. Just can you highlight the impact of these drugs, but also what the unmet need remains in CF? Sure. Let me give you some overview of this. Related to CFTR modulators, depending on the CFTR genotype, they correct or potentiate the malfunctioning CFTR channel on epithelial cells. In the areas of the lung, this functionality results in higher chloride concentrations, in higher water content, and improves the fluidity of the mucus and makes mucus clearance so much better. In clinical studies with CFTR modulators, within a few months after treatment initiation, we saw lung function improvements of up to 14% of an endpoint called percent predicted FEV1. This is a surrogate endpoint for improvement in cystic fibrosis. Long-term pulmonary treatment benefit is demonstrated with a lower lung function decline in CF patients, reduced episodes of acute worsening. They are also called pulmonary exacerbations, and a lower incidence of microbial burden and chronic infections. Actually, some patients stop producing sputum after a while taking modulators, and they call them they are drying out. This is a quick overview of what the modulators are doing. In addition, widespread clinical use of CFTR modulators has substantially decreased CF-related mortality and increased life expectancy of newborns diagnosed with CF. Ivacaftor was approved in 2012, TRIKAFTA in 2018. The most recent annual report from the CF Foundation Patient Registry includes data up to 2023. Over those 10 years, from 2013 to 2023, the annual mortality rate decreased from 1.5% to 0.7% per year, while the predicted median survival increased from 39% to 61%. These are very, very impressive numbers within only 10 years. Let me shift gears to talk about people with CF who still have an unmet medical need. Current modulators only provide a partial restoration of function, and they work only in cells that provide at least some CFTR protein that may be dysfunctional, but they do not work if the patient's genotype prevents the production of the protein. These genotypes where they do not work are called Class I mutations. The reports from the Cystic Fibrosis Registry have so far not included mortality rates in these patients, but these patients continue to show declines in lung function over time, and they have higher rates of exacerbations. These rates are similar to the general CF population that they had before the introduction of CFTR modulators. The unmet medical need currently is not just in those Class I patients. There are even more patients who are not responding to modulators despite being eligible, and other patients do not tolerate modulators or do not take them. All these patients will still benefit from better CFTR function, and there's no reason to believe that our mRNA CFTR replacement therapy will not work. Let me stop here. Let's actually move on to your candidate 032. Just walk us through your overall strategy for the CF program and what sort of sets this apart from other candidates, drug candidates in development, the exon skippers, and gene therapies. I can begin by providing at least some areas of differentiation. ARCT-032 is an mRNA therapeutic that's designed to express and replace the missing or dysfunctional or impaired CFTR. Our lipid nanoparticle that we use is different. It has gone through a very long, almost a decade now, of optimization with respect to inhaled mRNA therapeutics. Our LUNAR delivery technologies, it's called, have been optimized for nebulizability. We have to survive the nebulization and aerosolization process. We've gone through an optimization exercise with respect to stability in sputum. The Cystic Fibrosis Foundation provided actual CF patient sputum and phlegm to evaluate stability of our nanoparticle technology, and we went through a 10,000-fold optimization process there. We then had to evaluate and screen a library of lipids to look at bronchial epithelial cell transfection and, of course, endosomal lytic disruption. Yeah, a considerable amount of optimization effort, but the LUNAR technology is chemically different. The lipids are different. It's a strong composition of matter IP. They're hydrolyzable, biodegradable, and so that's a key differentiator, and we've showcased that in the preclinical animal models. With respect to our approach relative to others, I'll touch on this and then turn the time over to Juergen, but our mRNA is different. It's important for people to realize that it's been optimized and modified to improve rates of expression of the CFTR. Our mRNA is purified in a different manner. It's a proprietary process to purify the mRNA. It's very important to remove the bad actors, the small double-stranded and single-stranded impurities. These small RNA molecules are problematic and inflammatory, and that's not a good thing in patients with compromised lungs like CF. We formulated a novel technology that I just touched on that's different. It is not a viral vector, so that's, of course, a differentiator from other approaches in the space. mRNA is in the business of building a new transporter. Its modulators are in the business of fixing an impaired or broken or dysfunctional transporter. It's our strong view that transient therapies like lipid nanoparticles with mRNA are preferred for transient or regenerating organs and tissues like the lung and liver. Building a new CFTR is likely preferred over fixing, we'll call it, or modulating an impaired CFTR with modulators, but that story will unfold, and we look forward to collecting the data. Juergen, anything to add or? Thanks, Joe, for all the impressive work that was done at Arcturus to get us to this point where we are currently. Let me add that I think it's important to understand that our study drug called ARCT-032 is a mutation-agnostic mRNA replacement therapy, and this tweaks the underlying cause of lung disease. As I mentioned, we are currently focusing our clinical program on patients that have the unmet medical need where CFTR modulators do not work. It can also be anticipated that our drug may have additional benefit by improving or maintaining lung function when given on top of CFTR modulators. Of course, to find out, we would have to do additional clinical studies, but they're currently not in scope while we are focusing for the unmet medical need. Joe, you mentioned that the mRNA is modified. So are these actual base modifications or modifications of, let's say, the codons used and also anything to extend the half-life of the CFTR? Yeah, the modifications that we've employed, some are ones where we have freedom to operate, and others are novel. The intent of the design was to extend the expression time of the CFTR so we could elevate CFTR levels. We've implemented those into the construct that we're using presently. We believe, of course, we don't have direct comparative evidence at this point, but we believe that it has some unique benefits. It could be a superior construct to our competitors, but we don't know at this time. Okay. One thing, Joe, thanks just to continue with this train of thought. After delivery of our product to human bronchiectasis cells, the product will start to produce fully active human CFTR protein. Its durability of action or half-life is expected to be fully equivalent to normal wild-type CFTR. I think this is an important aspect to our program as well. All right. Moving on to the phase I, you guys conducted a phase I in healthy volunteers, and then part two of the phase I in a handful of CF patients. Just what are the key learnings from part one and part two, and what do you find most compelling from the data that's been generated? Yeah, sure. Just a brief study overview. Part one was a randomized double-blind placebo-controlled study with single-assignment doses in healthy volunteers, as you said. We had eight subjects per dose cohort, randomized three to one active to placebo. While part two was an open-label extension of the study. It was a two-dose study in adults with cystic fibrosis, and they could have had any genotype. Participants first received a 9 mg and two days later an 80 mg dose. This is within the range of doses between 3 mg and 27 mg that we studied in healthy volunteers. Let me briefly present the results in both parts. ARCT-032 was generally safe and well tolerated without safety findings or without physical or laboratory assessments indicating there was something bad happening. There were no reports of serious or severe adverse events, no dose-limiting toxicities, or events that led to discontinuation. In part one in healthy volunteers, we did see a dose-related increase in transient mild respiratory symptoms. Sometimes these were associated with a decline in lung function from the predose value. However, these events resolved quickly, spontaneously, or after administration of albuterol. Albuterol is a short-acting bronchodilator that is given by metered dose inhaler. It is a very often used bronchodilator. Midway through our second highest dose cohort, the study safety review committee recommended that we pretreat all subsequent participants with albuterol, which actually mitigated respiratory symptoms and prevented declines in FEV1. Let me now move to part two. In part two, we have a total of seven CF participants enrolled. One of them was homozygous for a Class I mutation, and all others had at least one F508del mutation and were on CFTR modulated treatment. As said, all participants received pretreatment with albuterol and tolerated both doses generally well. There were no serious or severe adverse events. Again, no discontinuations, and we did not see any meaningful drops in lung function during or shortly after dosing. Yeah, and we also did see that some of them had, remember the purpose of this phase I study. It was a safety study. Why were we evaluating lung function in a safety study? We were looking for deficits and negative responses, right? We're looking for toxicology in a safety study. We were pleased to see that the majority of these subjects showed some positive increases in FEV1 after just two administrations. That was a positive development. It was trending in a good direction, so that was good news. With some PK findings. As we had expected from previous nonclinical studies, the ARCT-032 pharmacokinetic analysis in part one of the phase I study showed only very limited systemic exposure. For instance, we did not detect mRNA in plasma, and we only saw some LNP lipid components only sporadically at low concentrations, which is all reassuring of how it works and that it's not systemically actually available. Joe, I mean, if I recall correctly, there's four patients with the data that you've shown, but you've generated data on how many? And have you disclosed? Yeah, yeah, yeah. We've shared all the data. The first four subjects had an increase of 4% FEV1 after two administrations. It's a small number. It's not statistically significant. Of course, we're pleased to see a trend in the positive direction. Patients five, six, and seven were high-functioning subjects. They had high lung function, so there wasn't really room to—we're pleased that they participated to establish safety and tolerability, but we weren't able to see a significant elevation in FEV1 in these folks because they came in at a very high lung function. Overall, it's safe and well tolerated. We're very pleased with the study of 39 subjects total. We got authorization to proceed into a phase II study, and we'll be talking about that shortly. Let's go into a topic too. I think you initiated in December 2024. Just go quickly over the trial design. Yeah, let me continue the trial design of the phase II study with a multiple-assignment dose open-label design to evaluate the safety, the tolerability, and efficacy, including PPFEV1 changes in lung function. The key qualification criteria for patients are ineligibility for CFTR modulator therapy like Class I patients, but also either prior poor response or intolerance to CFTR modulators or lack of access to modulators. Our participants are expected to receive daily treatments of study drug over a period of 28 days, and this is followed by a 12-week post-dosing period. We also on purpose to reduce the treatment burden of the patients as well as the overall burden of our clinical sites, we designed the study to require a relative low number of study visits. All right. Clinicaltrials.gov says it's about 12 participants. How many dosing cohorts are there, and how many patients per cohort? Yeah, we are planning for three dose levels. We have three cohorts, and we are enrolling either three or six participants per cohort, a total of 12. Yeah, the FDA provided us flexibility with respect to numbers. We haven't given those specific details, but the regulatory agency is allowing us some flexibility there. All right. Just describe the patient population that you're actually enrolling. Are you focusing just on Class I or low-functioning class two, etc.? Yeah. Yeah, we are focusing on all these patients with unmet medical needs. These are either Class I patients or those who did not improve on CFTR modulators or did not tolerate them or do not take them. This is some enlarged population, and I think, as I mentioned earlier, there is no reason to believe that within that population, there is any differential response in efficacy or safety with our drug. Right. Competitor Vertex is conducting a phase I too with 522, also RNA-based therapy. One of the experimental arms is using Ivacaftor. Can you speculate why? Joe, do you want to start, or shall I start? Oh, go ahead. Speculating as to why Vertex is using ivacaftor, yeah. Yeah, right. Let me talk about some nonclinical data. We have nonclinical data, including the analysis from cultured human CF bronchial epithelial cells. These are cultures that we also use to determine the efficacy or the activity of CFTR modulators. These data indicate that exposure of ARCT-032 leads to CFTR activity that is similar or higher compared to wild-type CFTR, wild-type cells, or even to exposure to TRIKAFTA depending on culture conditions. As you know, TRIKAFTA, as well as any other approved combination of CFTR modulators, still require ivacaftor activity for optimal effect. That is why ivacaftor or an equivalent drug is always included in the currently approved combinations. As mentioned earlier, our drug is mutation agnostic, and it is supported by nonclinical data that just mentioned that we believe that the CFTR activity that is achieved after treatment will be similar to normal human CFTR function. In addition, we can exercise, and the FDA allowed us. Our protocol gives us the flexibility to test optimal dose levels and dosing intervals as per our phase II protocol. We have the confidence that we start with daily dosing, and then we have flexibility to change dosing intervals or dose levels. This will give us a data-driven approach, and this approach will be the best way to identify an effective and safe dosing regimen for our pivotal trials. I'll just add something here is that we've already established that an mRNA approach is completely different from modulators. mRNA is in the business of replacing the CFTR with a brand new CFTR, where the modulator business is in the business of fixing an impaired CFTR. There is another key difference. Ours is topically administered, and the modulators are systemically administered. In this initial phase, yes, we're addressing an unmet medical need with modulator non-responders. As you look beyond that, clearly, there's synergies and complementarity with the modulators because one's topical and one's systemic. We're not in the business of replacing modulators. We just want to address the unmet medical need of modulator non-responders and then build in this concept of complementarity with the modulator space and expanding the market there. Right. So data readout 2Q 2025 for 032, what are you planning to show? And for FEV, how often are you actually taking those measurements? The size of our phase II trial has been indicated on clinicaltrials.gov as approximately 12 people. We do have the flexibility to increase that. And then we've guided that. Have you increased it? We may. We have the flexibility to do it. All we've guided is interim data. We've said in the first half and then to the second quarter, so the end of the second quarter here, we'll have the opportunity to share that data. It's an interesting market right now. We have to take that into consideration of timing of data sharing as well. Are we on track? Yes. What do you expect to show? Just an interim data set, which means instead of all 12, it will be a subset of that data and showing FEV1. It's not just safety and tolerability, but also some we would like to be able to share some FEV1 improvements, some efficacy progress for this therapeutic. Okay. Let me just add that lung function in our phase II study, including PPFEV1, will be conducted at each clinic visit and according to international guidelines. All lung function tests will be overread by a central laboratory, which is standard practice for clinical trials in cystic fibrosis. All right. In the phase I, you showed absolute and relative changes in FEV1. How should we think about presentation and interpretation of this physiological endpoint when taking into consideration the patient's baseline FEV1? I understand this is always a topic that needs to be addressed. In CF clinical trials, they typically report both absolute and relative changes in percent predicted FEV1. PPFEV1 has been accepted by the FDA and other regulatory agencies as a surrogate endpoint for pivotal clinical trials. These trials have always used to report absolute and relative values for assessment of marketing authorizations. That said, we will also plan to report both values, but we do understand that the absolute changes from baseline may be the preferred way to interpret our study, and we definitely will report those. Yeah. The only thing I just want to clarify too is just the FDA has asked us the 12 subjects is all we need to advance this to the next into a more significant development trial. We do not need anything more than 12. They have also emphasized we do not need any other biomarker data. Just FEV is sufficient in 12 subjects to advance this. They appreciate the 39 subjects of data that we have already collected. We only need an additional 12. All right. Now, besides safety, what's sort of the minimum threshold for success for FEV1? And what would give you sort of conviction to move forward? Yeah. Vertex announced that the threshold for moving their program forward was an improvement of 3% FEV. Of course, this is based on a considerable amount of historical precedent in the modulator space. We may consider a similar threshold for advancing the program. Of course, we have higher aspirations for the efficacy of our product, but that threshold is 3%. If that's exceeded, then that would justify advance. That would be very exciting for the field for this unmet medical need. We do have higher aspirations to exceed that. Yeah. Sorry. Go ahead. If I may add, I think we are doing the right study to show what we wanted to show. I'm very confident that our study has the right design. In terms of, I guess, these patients have mucus buildup or mucus plugs, any expectations of actually seeing some remodeling or lessening of mucus in this study? Look, the study will be relatively small, but sticky mucus, just to give you some background, in insufficiently treated people with CF leads to detrimental changes in structural and functional characteristics of the lung, like airway wall thickness, air trapping, or mucus plugging. These are the three parameters that are usually being considered and measured. Within the eligibility range of the baseline function for our phase II study, we expect that these processes undergo actually dynamic changes where air trapping and mucus plugging can change over a relatively short period of time. Therefore, we believe that the initial daily treatment schedule of four weeks will provide us with the highest chance of success to demonstrate successful treatment with ARCT-032 in our study. In principle, you can envision this. We are continuously hitting the cells with ARCT-032. We are improving locally the mucus, and this leads to increased mucus clearance, and eventually, the plugging will go away. That is why we do not expect that we see a treatment benefit after one, two, or three days, but within four weeks, we expect to see an effect. All right. Last question because we're almost out of time. Besides FEV1, are there any other measurements that you're planning on showing? There are a bunch of quality of life measurements that are usually taken for these patients. Do you expect an impact on any of those? Yeah. Nothing outside of FEV1 was the only thing that was requested by the FDA, but we are collecting additional information and secondary endpoints. You're going to want to comment on that briefly? One quick comment. We'll be using the Cystic Fibrosis Questionnaire Revised, called also CFQR, as a secondary endpoint. This has been used in all other previous CFTR modulator trials. It appears in the labels for these trials. We are using this, and the CFTR modulator treatment, the more effective combinations have shown changes within about four weeks of treatment. We are also confident that with the CFQR, we see changes, which is a patient-reported outcome instrument, that we see changes within four weeks of treatment. Thank you very much for taking the time to chat. Wish you the best of luck for the readout in 2Q. Thanks. Yeah. We'll look forward to follow-up questions from the investor community. We'll see you guys soon, okay? All right. That conference in September, Cantor. Thank you. Thank you for plugging that. Yeah. Thank you very much. You got it. Thanks, guys. Bye.