Day one of the Back to School Biopharma Conference Citi is hosting here in New York. I'm Yigal Nochomovitz, a biotech analyst. We're on our third session of the morning, which is my great pleasure to introduce Arcturus Therapeutics. We have both the CEO, Joe Payne, and Alan Cohen is the relatively new CMO. Welcome, both of you. Appreciate it. Thank you. It's good to be with you. Joe, a lot's happened in the last couple of years with the company, both on the OTC front and then also on the CF front. It'd be great if we could just start with the high level, introduce the company, what are the key programs. Yeah. We'll have plenty to talk about on both those programs. Sure. Arcturus is a messenger RNA medicines company that we have next generation technologies that differentiate us from the field and within the mRNA community. We do have a self-amplifying mRNA technology to support the vaccines division. But we utilize the self-amplifying mRNA platform, which includes infectious disease vaccines and potential cancer applications. We utilize that division to non-dilutively fund the value-creating portion of the organization, and that is our therapeutics pipeline. We have a pair of messenger RNA therapeutics that are deep in phase II with some meaningful milestones and readouts this year. Our liver platform has a flagship asset that is for an indication called ornithine transcarbamylase deficiency or OTC deficiency. It is the number one urea cycle disorder. And we have a phase II readout for that later this month. That is a very near-term milestone for us, along with some regulatory clarity associated with that flagship program for the liver platform. And then we also have an inhaled messenger RNA platform that is led by our CF product or cystic fibrosis indication, and we have a key decision for that program in Q4, a go/no go decision to whether we proceed into phase III. That is where we are. Again, just to reiterate, we have an advanced vaccine platform, self-amplifying mRNA that is approved in 32 countries. And we are looking to that to help generate cash or fuel for the value-creating therapeutics pipeline franchise. Okay. Let us start with OTC. You mentioned that there is going to be some data coming up. Maybe help us understand what we are going to learn at that data readout. I believe that is later this year? This month. This month. Yeah. Very good. What are we going to learn? What will you learn in terms of feedback from the FDA in terms of the path forward? Given you're studying both the pediatrics and the adults, are there differences Yeah in terms of what you need to see there? Yeah. We've had a pair or two Type C meetings this year. We've engaged the regulatory agency to discuss the path forward for this program. You're right, there's two general populations that we've segregated the OTC deficiency community into. You have stable adults, and then you have pediatrics, where there's a larger commercial opportunity and higher unmet need with respect to pediatrics. As we've talked to them, we've already indicated that both of these Type C meetings were positive and productive, but the details around those meetings will be provided in more granularity at our communication later this month. It's not just data that we'll be providing, but it's also the regulatory path forward and more granular feedback from those two Type C meetings. In terms of what data to expect, you mentioned this is a phase II data set that includes Europe and the U.S. We have completed all our dosing and enrollment. We have already communicated that. It is just about compiling the data and presenting it. But why it is a unique data set is not only because it is additional data from our interim communications, but it is in a format and additional data that was recommended through advice from the regulatory agency from these Type C meetings. We will be able to communicate not just biomarker data, but additional data that we had to go back retroactively and dig up, and provide that for Wall Street as well. So it sounds like some of those details in terms of what biomarkers you are going to show are not ready for prime time today. That is something you can talk about later. Well Or could you illuminate a little bit? Well, we can discuss this a little bit. The biomarkers for OTC deficiency are well established. Ammonia is a bad actor. Yeah. It has always been a surrogate biomarker. It is something that you do not want ammonia, systemic ammonia. It crosses the blood-brain barrier and does bad things. We need to control that and show the regulatory agency that we can control ammonia. Ammonia is a key biomarker, but so is glutamine, and something that is helpful for people listening to the call today is that a lot of the patients that we are treating are already on ammonia scavengers, and they are doing their best to control ammonia because that is what is very problematic. What they do is they take all these pills, and they drink a lot of water, and these pills are ammonia scavengers that sequester the ammonia, and then they drink a lot of water, and they urinate all the ammonia out. It is an exhaustive process, but that is how they are trying to manage ammonia. What people do not realize is that these OTC patients, these subjects, still do not feel well. Why is that if they are controlling their ammonia and doing their best? It is because of glutamine. Ammonia gets converted to glutamine in the body before it is scavenged. What we found, and what the community well understands, is that you have high levels of glutamine. Why is this a problem? Because glutamine crosses the blood-brain barrier as well, and it converts back to ammonia. Even if you are doing everything right, you can still have fog head, headaches, and complications associated with the glutamine biomarker. In addition to ammonia, which is a well-understood and surrogate biomarker, there is glutamine, and we are just finding that these biomarkers are both of interest to not only the community, but the regulatory agency. The other comment that I can provide is in stable adults, there is an increased emphasis on glutamine, because they have been managing, at least to the best of their ability, the ammonia levels already. They are more interested in getting that ammonia down so they feel better, or the glutamine down. Yeah they can feel better. But in the pediatric population, there's elevated interest in ammonia because that's the population that is having severe disease. Okay fatality occurs and severe hospitalization and hyperammonemic attacks and stuff like that in the children. So there's more of an emphasis on ammonia in the kids and an increased emphasis on glutamine in the adults. Okay. That makes sense. So it sounds like there may be different metrics for the different populations. Yeah for the next set of studies. So we're going to get longer duration of data, those endpoints for those populations, and then you're going to move into a phase III, basically after you disclose this. What's the game plan there? How much can you say? Yeah. In terms of the regulatory path forward, we are intentionally going to be communicating that with clarity concurrent with the data readout later this month. Okay. People do not have to wait very long. That is one of the potential value inflections for this program, is not just the data, but providing what our proposed path forward is for pediatrics and adults. Okay. By the way, I remember in our, long time ago, there was another biomarker. Was it orotic acid or something like that? Did that one not feature heavily anymore? It is still there. Okay. But it is. Yes, that is right. There is orotic acid in urine. Yeah. The urea cycle impacts a lot of biology. Yeah. There is a lot of amino acids that are indirectly and directly impacted by this cycle that occurs in the liver, in the periportal portion of the liver. Yes, orotic acid is a byproduct that can be measured. However, it is quite variable. Okay helpful. It can be supportive in nature. Okay we're also looking at the 15N-ureagenesis assay. Yeah, I wanted to ask about that too. Yeah. Okay. Let's skip over to there. Tell us about that. This is, I guess, a radiolabeled nitrogen- Yeah heavy nitrogen. Yeah. We talked about multiple biomarkers already. Yeah. Ammonia, which is the bad actor. Glutamine, which is also complicating and annoying. People want to control and normalize that. This is a urea cycle disorder, so you can track urea itself. Right. There is different ways to do so. There is a relatively new assay, this N15 assay, that is very clever. It is an academic status right now. Yes, we have been collecting that data. We consider that data to be supportive in nature. It is still an early technology, so it is unlikely that it will be a validated primary endpoint or something Yeah like that. Is it cool technology? Is it potentially supportive? Absolutely. We will be collecting that data as well. Is that something the FDA has heard of or understands, or they're in a sort of a learning mode there as far as that- because it's so new? Combination of both. Do you want to comment on that? Yeah. This is Alan Cohen. Hi. Hi. The ureagenesis cycle is an exploratory endpoint. It is another way of validating, as Joe said, the fact that we are normalizing the urea cycle function. I think the things that the agency is going to be continuing to be interested in wanting to see are all the things that he just highlighted. The challenge is that we only give 5 doses in these patients over what is a relatively short period of time, 12 weeks. Being able to liberalize patients' ammonia-binding medications, getting that dose down so that we can show that we have either stabilized it or normalized it, is not something that is easy and feasible to do in such a short period of time. What you would like to see is that it is stable. Patients are feeling better. They are reporting that they are not foggy. Perhaps they are gaining weight, perhaps they are acting, and they are liberalizing their protein intake. Even though we told these patients to remain on a stable diet, some of the things that we look forward to sharing in the near future are going to be those kinds of measures and those kinds of important observations. Okay. All right. We are looking forward to a lot. Sounds like there is going to be a very significant update then with a lot more detail on- Yeah Exactly. Not just ARCT-810, but also the regulatory feedback. But the platform in general, we're also going to use this as an opportunity to update folks on our intravenously dosed mRNA therapeutics platform for the liver. So it'll be a comprehensive update. It's not going to be an average update. So stay tuned, and I hope people tune- So there's something beyond the OTC in terms of another indication potentially, or? You have to tune in. We'll wait. Yep. Okay. All right. Maybe we could switch over, talking about CF for a little bit. Yeah. Another very important program. Maybe just first of all, just give us a snapshot of what you've shown. You've done some dosing work. You had several updates last year. Just kind of summarize where we are. Yeah. A lot's happened in the CF program for Arcturus, but also within the CF community. Inhaled RNA therapeutics in general has been extraordinarily difficult for the field, whether it's antisense or siRNA, circular RNA, gene editing RNA, and mRNA and everything in between. Humans just don't like to inhale lipids and RNA. It's been a challenge for decades. But we've now overcome that challenge through a lot of work over this past decade and a lot of investment from the Cystic Fibrosis Foundation and other strategic partners. But we're now in a place where we feel very good about the safety and tolerability profile. We've completed 5, 10 milligrams, and 15 milligrams of daily dosing over 28 days. Just to put a frame of reference on that is much, much, much higher and much more consistent than any other program that's out there. It's a very differentiated profile and those differentiations of much more generous dosing of mRNA for a consistent period of time. The reason we're able to do this is because of our next generation technology is differentiated. We have a chemically different lipid nanoparticle that differentiates us from the field. We have a purification process for the RNA molecule itself that helps with safety and tolerability by removing these problematic impurities. These small RNA impurities can be very problematic for immune responses. Finally, our nebulization process. We took an off-the-shelf nebulizer and converted it and customized it to something that's more efficient at aerosolizing these types of therapeutics, to prevent aggregates and macroparticles and discombobulated particles, right? We need to retain the integrity of the particle, prevent aggregation, forming these macroparticles that can be toxic as well. If you combine that all together, a chemically different lipid nanoparticle that is biodegradable and non-accumulating, and then you have this more pure construct and optimized nebulizer. You pool that all together, you have a logarithmically different technology platform, and that is what we are seeing so far with respect to safety and tolerability. The reason I am emphasizing that is that is what has plagued the entire field of inhaled RNA therapeutics, has been safety and tolerability, and thankfully, we believe that we have addressed that challenge. We are presently in a 3-month study that started back in March. We are deep into this open label study. We are not just evaluating this technology over 28 days, but now 3 months or 12 weeks of consecutive daily dosing. We are in a position to share or provide a decision for this program in phase III. Now if it is okay, I would like to discuss why we have guided a decision. I will just take a moment to do that. Of course. Normally a CEO guides data or guides for completion of enrollment, but we are guiding a decision to proceed. Now, why is that? It is because we signed a Thermo Fisher agreement in July, and this is a very meaningful agreement for Arcturus because if Arcturus makes the decision to proceed into a phase III study, then this triggers up to a $40 million contribution from Thermo Fisher to support our phase III budget. That is a lot of money for a company of our size. The decision to proceed is what triggers it. That is the guidance. We are guiding this decision to proceed because it is associated with up to $40 million commitment or contribution from Thermo Fisher to support our phase III budget for the CF program. That is why we have that unique guidance in place. Maybe Oh, go ahead, Alan. Yeah. So for some of your listeners and people in the room here that may not be as familiar with our program, let me just give you some nuts and bolts so you will at least know what is coming. Joe mentioned that we did dose ranging over four weeks at 5, 10, and 15 milligrams. When we did that early safety tolerability study, it is certainly not long enough to give us a clinical signal of any meaning. We did make an observation, which we took forward selecting the 10 milligram, the middle dose, because we saw changes, improvements in radiographic findings in the lung. So that was the dose we took forward for the 12-week study. What we are dosing right now is upwards to 20 patients over a three-month period of time at 10 milligrams. We have gone outside of the United States to go into places like Turkey and Israel, which have a very high preponderance of people with null mutations or the kinds of patients that have the highest unmet medical need. And we are looking at not one, not two, but five potential endpoints that have clinical meaning. Two pulmonary function measures, including spirometry, looking at percent predicted FEV1, which is the most traditional endpoint that has been used for approvals for pulmonary diseases, including cystic fibrosis. Lung clearance index, which by the way, the CF Foundation will be reporting out their natural history study, the REACH study, next month in October. And they are doing that study to help sponsors like us have a normative database for this adult population. Two quality of life measures and the radiographic high-resolution CT scanning data that we use to help select our dose for this phase II study. So at the end of this fourth quarter or sometime during this fourth quarter, what Joe was mentioning is we are going to be reporting out based on this open label study, what our intentions are with respect to moving the program forward. And then we hope to share substantive data sometime in the early part of next year. Okay. All right, so a lot of follow-ups on this. Yeah important stuff. I guess first of all, on the Thermo arrangement, Yeah can you just clarify? What is the structure there? Because it Yeah doesn't sound like it sounds like they're going to help fund this study, but is there a royalty? Sure. It's not like- Yeah. This is a very unique agreement. It's one of a kind. There's never been a deal like this ever in the pharmaceutical industry. That's how unique this is. There's more legal costs associating with putting this agreement because there was no template for it. Usually a CEO like myself wants to get money in the bank, and that's what we're paid to do, and we do it by either selling stock or diluting the company, or we sell a royalty, dilute the asset. This was neither. The reason they're supporting this program is in exchange for a few years of commercial manufacturing exclusivity. That's a unique deal. No royalty, no equity, just a commercial manufacturing exclusivity. Why are they doing that for the CF program? Well, Arcturus, we haven't touched on it today, but we do have a product in 32 countries that's dosed 5 micrograms once a year. It's a COVID vaccine called KOSTAIVE. That's 5 micrograms once a year. The CF program is 10,000 micrograms every day. This is a significant commercial manufacturing contract. Large commercial manufacturers were approaching myself personally, the company, and building a relationship in order to close and get this commercial manufacturing exclusivity. What we ended up doing is this unique situation where a company of our size entering phase III, we said, "Hey, how about if you support us with some contributions in phase III in exchange for commercial manufacturing exclusivity?" And it worked. It's a great relationship with Thermo Fisher Scientific. We're very pleased to be working with them with respect to our manufacturing strategy going forward, which is significant for the CF program. Okay. Then sort of the intersecting question, Alan Cohen, you mentioned all the different, the HRCT, high-resolution CT, and then the lung clearance index, and then of course FEV1, which is the classic endpoint. Like, how do all these things intersect in terms of determining what's a good enough profile to trigger the decision to go into phase III? Oh. What do you need to see there? What do you want to see there? Everyone is very familiar with FEV1, but perhaps the others are Yeah not as obvious. Two years ago, there were several competitors with us in the inhaled therapeutic space for Class 1 CF, and now, to a large extent, it feels like it is just us, especially with respect to transient mRNA, inhaled therapeutics. The outlook is different. There is not a threshold. Wall Street, and trust me, I get it, Wall Street likes to see a number or a threshold that needs to be achieved in order to define success. But because we are first movers in this space, we are creating that threshold. That is the objective. What is success? That is what we are defining. We are not the first person to do this in CF. Vertex was heroic a couple decades ago with ORKAMBI. It was the first modulator, and they had to create the threshold. Back then they only had FEV lung function. That is it. It was 2 point something percent. They did not have lung clearance index. They did not have quality of life measures. They did not have high-res CT scan and AI tech and all this stuff. They did not have a REACH study, a normative natural history like study from the CF Foundation to support it. They did it with just FEV. What they did was truly heroic. We do not need to do that, thankfully. We do not need to be heroic. We have FEV, we have LCI, multiple quality of life measures that are understood and validated to a large extent with the regulatory agencies and then also we have a normative study to compare to, and the high-res CT scan pictures before and after treatment that can all support this. What we are in the business of doing is establishing what success looks like. The follow-up question is like, well, what does success look like? Because you got to make a decision on something, right? I don't want to mislead people that we're in the business of pushing some therapeutic forward if it isn't working. I know that Thermo Fisher may be supporting approximately half of the phase III budget, but Arcturus has to pay the other half, and we're not going to do this if we don't deem it feasible or reasonable. But I want people here to understand the, I would say, the immense and good pressure to get this over the finish line. The CF community, the Class I CF community, they need a drug. They need to address this huge unmet need, very similar to what Vertex was experiencing a couple decades ago with ORKAMBI. It's kind of like resetting it, but this time we have a set of tools to help us establish what success looks like. As a scientist, Yigal, you know what success looks like. If the collective data is generally positive, I think it'll be easy to negotiate, convince, share, and get alignment with not just the CF community, the regulatory agency, the PIs involved, our partners, and of course the senior management team and our board to know what success looks like. But that's the long answer to your question. Let me just add one additional piece of color. I think over four weeks, simply safety and tolerability was really what we were looking for in dose selection. 12 weeks, what we would like to see is some measure and indication that patients aren't just stable, but there's a modicum of improvement across at least one or more of the measures, so spirometry or lung clearance index or both. A phase III study would certainly need to be longer, and in many ways, these patients remind me of the idiopathic pulmonary fibrosis patient population. A different disease, of course, it's a restrictive lung disease. But when I was involved with getting pirfenidone and nintedanib both approved therapies through to the finish line and launch. What we were able to do there was show that we could stabilize and reduce the slope of the curve of reduction in lung function over time. Eventually, that had implications on survival. I think in many ways, this is a population, given that they really only get supportive care, that if we can just flatten the curve of decline, and they are averaging about 1% to 2.5% of lung function loss annually. If we could stabilize those patients, I think that would be a huge step forward, and I think that is what Joe is referring to. For purposes of the current study, we would certainly like to see across the five measures that we are looking at, indications that we are not just stabilizing a subset of patients, but also that there are measures of improvement. For the longer-term study for a phase III, I think stability as well as some measures of improvement would be what would be necessary to get a therapy like this approved for particularly the null population. Which ones would be more likely to be in the gaining function versus stability amongst these endpoints? Is there a preliminary? Yeah. I think the agency has consistently looked for functional measures. Right now, I think among the five that we have, both pulmonary functions looking at mid-airways with spirometry, smaller airways with lung clearance index. What is interesting about the high-resolution CT scan, which has never really been used as a primary endpoint for the agency across all sorts of diseases, including Alpha-1 antitrypsin deficiency and others, although in my opinion, it should be. There is demonstration in the literature that that could actually serve as a surrogate for stability or improvement in LCI, high-resolution CT scan changes. We would certainly be having conversations with the agency talking about the value, the importance, and the translational literature that would support using LCI not just in a supportive capacity. Well, sorry, just to clarify, you have HRCT, LCI, FEV1, what are the other two? And two quality-of-life measures. Oh. CFQ-R and EQ-5D. Yeah. These are detailed surveys that are not just Q&A sessions. These are validated surveys. Right that are respected and appreciated and considered meaningful. Right. What the agency is, now granted, this is an open label trial, so patients going in, particularly a group like this that has very little to offer, want to feel better. An open label study trying to ascertain whether or not the reported quality-of-life measures that we are getting back are genuine or in fact just people wanting to feel better. In a blinded study, which would certainly also be required for a phase III, we would be looking for demonstration of not just how a patient functions, but how they feel. Both of those actually carry enormous weight at the agency. Okay. You mentioned the REACH study, which I wanted to ask about. Right now we are still waiting for the full data, is that right? Or do you guys know that data yet and you already can start to make comparisons in terms of slopes? We do not. The CF Foundation, who we partner with, they provide us with our Safety Monitoring Committee, for example. They have supported us financially in terms of our development. Joe mentioned earlier the aerosolization device. Right. A lot of that work was paid for by the foundation. There is an October meeting in Atlanta where we understand that they will be sharing more data about the REACH study. My understanding is that it is largely, if not completely enrolled, so that data should be made available in the near future, but it is not our dataset. Right. It is an independent dataset. Again, what I am driving at is you want to see that data. Of course. in the Class Is Yeah get the slopes then sort of say like Now we can compare our dataset to that that's going to be your That adds- your normative comparison, right? That would be correct. We would need to have access to that data or subsets of that data sufficiently so that we could power our phase III study. Yeah. But also determine if it is a viable thing to do in the first place, right? Yeah. I mean, basically. Correct. Yeah. You can appreciate there is degradation of the lung and lung function Right in these subjects over years, and hundreds of them are being evaluated in this study. If you had that, just hypothetically, if you had the REACH data today, you would be able to make a decision on that. It increases the likelihood of success of the program. It gives us more confidence on this decision. This is something we want to proceed with in phase III. I just want to remind everyone that our preclinical efficacy data is really strong. We've shown that we were superior to positive controls in a genetically engineered ferret model. We already have seen in phase II, in a majority of subjects that received the 10-milligram dose, which is what we're utilizing now in 12 weeks, a majority of them, we've already seen improvements in mucus plug reduction in a majority of these people. We've already seen some human indications of positive clinical signals. Then we've already seen some strong preclinical data. The final reminder is please always remember that the reason, the primary reason that all of these RNA companies have failed over decades has been safety and tolerability, not efficacy. It's because in order to get this nest of disease dealt with, you need to pound it every day and resolve it. That's really difficult to do, to reach a threshold of safety and tolerability that's reasonable enough to just keep hitting it every day until it resolves. Once it's resolved, then it opens up the opportunity for a lot of therapeutics, because the lung will now be available for gene editing, for example. It's our view that we need to resolve the disease and the nest with a daily treatment, or at least a regularly dosed treatment. Okay. Since it's open label, this current 12-week study, you have some degree of insight into what's going on with these patients. You have some flavor. Correct for the trend, the direction of travel of things, yes? Oh, it's been going since March, and it's a 12-week study, so I'll let people imply what that means from a safety and tolerability perspective. You haven't reported any- No adverse safety, right? No. We're still actively enrolling. Data Safety Monitoring Committee hasn't had any impact on our ability to continue to freely enroll patients. We announced and shared earlier this year that we, as I mentioned earlier, we went, in addition to the sites in the U.S., which we expanded, we went into places like Turkey and Israel, where there is a very high preponderance of patients with null mutations to the tune of It's about 5%-10% in most typical centers in the U.S. It's closer to 35%, 40% in places like Turkey and Israel. We're actively still enrolling the study, and we will be able to report out, as Joe mentioned earlier, our intentions and plans moving forward sometime in Q4. Yeah. It's going to be one, in Q4 you'll have one update where I assume you'll show us this data, or not necessarily? The only thing we're guiding in Q4 is the decision. Okay it is an open label study, so it is likely that the decision will happen before the study is complete and ready to share. Like the data. There is usually a time before the senior management team and the board will be confident in the data, sufficiently confident to proceed, prior to it being ready for communication. Now, is it one day after the decision, one week, one quarter? We haven't guided. All we've guided is the decision, the go/no-go decision to be in Q4, and then shortly after that decision will be an opportunity to communicate the data. Right. I think there has been keen interest from yourself and others regarding real interest in wanting to see the data set and understanding what has been accomplished, what endpoints we've achieved, believable, important findings, which ones may have been less helpful. Just like we would expect to see that from others, like the Vertex program, as Joe Payne alluded to earlier, shut down earlier this year. We would hope to see some of that data in a peer-reviewed setting. There is no intermediate case where you get a good degree of confidence, but you feel you need to For example, you see this and you see something good, and you see something trending nicely versus natural history, but then you say, "Okay, maybe we need a little bit higher dose." Or not necessarily that, but anything where there is an intermediate case. If there- or this is- Yeah just a go, no-go, black and white decision. Just a go, no-go. We believe we've- got the right dose and the right dosing regimen. The The decision to proceed will happen Thermo doesn't play a role in the decision. They've just That's correct. They're just the recipient of the We negotiated that we'll have control of that decision. They know that $40 million is more to us than it is to them. So they trust that if we're proceeding, that there's reason to do so. Right. Okay. Yeah. Okay. That makes sense. Okay. We're just about out of time, but wanted to ask very quickly Yeah we're asking all the companies this, just 30 seconds on the use of AI tools Oh, great in your Yeah company. How do you use it? Yeah, let me jump on that one. Just very quickly. It's had a much more significant impact on our organization than I have imagined. I'll just say that. On every aspect of the company, it's really been impactful to a company at our stage with this type of platform. You can imagine that AI is used to design mRNA, designing antigens, help us with target selection, help us with impacting protein design, longer-lasting proteins, more benign, less immunogenic proteins. There'll be an appropriate time for us to communicate our AI infrastructure. It's not today, but we look forward to sharing some more details there later this year. That could be very interesting. But the short answer is yes, it's been, I would say, very impactful and very pleased to how the AI infrastructure development at Arcturus and its direct and meaningful impact on multiple programs. Well, we'll look forward to hearing more about that. Yeah. Then of course the data OTC and then the decision on CF. Yeah Thank you so much. Great stuff. Thanks for the time. Thank you. All right. Great talking to you.