Arrowhead Pharmaceuticals, Inc. (ARWR) Q4 2021 Earnings Call Transcript

Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR) Q4 2021 earnings call, dated Nov. 22, 2021.

Corporate Participants:

Vince Anzalone — Vice President of Investor Relations

Christopher Anzalone — President and Chief Executive Officer

Javier San Martin — Chief Medical Officer

Ken Myszkowski — Chief Financial Officer

James Hamilton — Senior Vice President, Discovery and Translational Medicine

Analysts:

Luca Issi — RBC — Analyst

Alethia Young — Cantor Fitzgerald — Analyst

Maury Raycroft — Jefferies — Analyst

Esther Rajavelu — UBS — Analyst

Joel Beatty — Baird — Analyst

Patrick Trucchio — HC Wainwright — Analyst

Mani Foroohar — SVB Leerink — Analyst

Mayank Mamtani — B. Riley FBR — Analyst

Presentation:

Operator

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 a opportunity to ask questions. I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead.

Vince Anzalone — Vice President of Investor Relations

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead’s results for its 2021 fiscal year ended September 30, 2021. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our pipeline; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. In addition, Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine will be available during the Q&A session of today’s call.

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 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent Annual Report on Form 10-K.

That said, I’d like to turn the call over to Christopher Anzalone, President and CEO of the company. Chris?

Christopher Anzalone — President and Chief Executive Officer

Thanks, Vince. Good afternoon everyone and thank you for joining us today. Before I review the last quarter, I want to discuss the announcement this afternoon regarding our license agreement with GlaxoSmithKline for ARO-HSD, our investigational therapeutic in a Phase 1/2 study that is currently being developed as a treatment for patients with NASH. Upon closing, GSK will receive an exclusive license to develop and commercialize ARO-HSD in all territories except Greater China, which will be retained by Arrowhead. GSK will be wholly responsible for further clinical development and commercialization outside of Greater China.

This partnership is a great fit for us because GSK has articulated a clear commitment to genetic medicine. It has substantial capabilities to clinically develop ARO-HSD for NASH, and has impressive commercial infrastructure and expertise to bring this potentially important medicine to the tens of millions of

Patients who need it. This is also an important transaction because it enables us to take a large spend over the next several years off our books and focus our development capital on programs that we may commercialize ourselves. In addition, it brings in substantial non-dilutive capital, while providing us with exposure to future success should this drug candidate offer patients the kind of benefits we believe possible.

Arrowhead will receive an upfront payment of $120 million and is eligible for the following additional payments: $30 million at the start of Phase 2; $100 million at the start of Phase 3; up to $190 million at launch in the U.S. and major markets; and up to $590 million for key sales milestones. Taken together, Arrowhead stands to receive up to $1.03 billion. Arrowhead is further eligible to receive tiered royalties of mid double-digit to 20% on net product sales.

From a strategic standpoint, this deal is another demonstration of our ability to use partnering selectively in areas that are outside of our commercial focus. This also feels like the right time to partner because we believe our clinical data from the Phase 1/2 study demonstrate proof of concept for inhibiting the liver production of HSD17B13. We presented data at AASLD earlier this month showing deep dose-dependent reductions of intrahepatic mRNA and protein levels and a marked reduction in ALT. We believe these are compelling results.

The next steps for this program, if we had decided to retain global product rights, would have been to initiate a placebo-controlled Phase 2 study to evaluate whether HSD17B13 inhibition, over time, would lead to clinically significant improvements in NASH. The published genetic data suggest that people with loss-of-function mutations in HSD17B13 have some level of protection against fibrosis associated with NASH and other liver diseases. We think we have shown that

ARO-HSD does what it is designed to do. However, there have not been any prior HSD17B13 inhibitors studied in clinical trials, so human proof of concept of a

Clinical benefit needs to be established in future clinical studies.

This is where GSK steps in. They have a global reach and extensive experience and resources in clinical, regulatory, medical affairs, and commercial. They are in

A strong position to pick up the program and advance it efficiently. As I mentioned, we think this deal is a net positive for the ARO-HSD program and the patients with NASH. We are confident that GSK is the right company to take the next steps in clinical development and to chaperone the program through regulatory and commercial opportunities that lie ahead. We are thrilled to welcome GSK as our newest partner and look forward to working with them to advance this potentially important new medicine toward patients in need.

I will now move on to some of the recent highlights and accomplishments during the prior quarter and the period since our last call. Our collaboration and license agreement with Janssen, which we signed in 2018, covered our hepatitis B program, previously called ARO-HBV and now called JNJ-3989, and three potential additional programs that we would develop preclinically for Janssen. JNJ-75220795 is the first program for which Janssen exercised its option to take an exclusive license, which earned Arrowhead a $10 million milestone payment earlier in the year. JNJ-75220795, currently in a Phase 1 clinical study, is an investigational RNAi therapeutic developed using Arrowhead’s proprietary TRiM platform and is designed to reduce expression in the liver of PNPLA3 as a potential treatment for patients with NASH.

PNPLA3 has strong genetic and preclinical validation as a driver of liver fat accumulation and damage. During the quarter, Arrowhead earned an additional $10 million milestone payment after Janssen dosed the fifth patient in a Phase 1 clinical study. Staying with the Janssen collaboration, data was presented at AASLD from REEF1, a Phase 2b study to assess the efficacy and safety over 48 weeks of monthly subcutaneous injections of JNJ-3989 at a dose of 40, 100, or 200mg. This was used on top of daily NUC therapy with or without daily oral JNJ-6379, one of Janssen’s capsid assembly modulators or CAMs. JNJ-3989 is an investigational RNAi therapeutic that targets all HBV RNAs, thereby intended to reduce levels of all viral HBV proteins.

The primary endpoint of the study is the proportion of patients meeting NUC stopping criteria, which is ALT levels less than 3 times the upper limit of normal, HBV DNA of less than the lower limit of quantitation, HBeAg negative and HBsAg less than 10 IU/mL at the end of treatment. Taken data from 24 weeks off treatment was also presented at AASLD. The data were very encouraging to us. The greatest reduction in HBsAg was observed in the JNJ-3989 200 mg with NUC cohort. A dose dependent response was observed in other cohorts and didn’t appear that adding the CAM had any beneficial effect.

At week 48, the mean reduction in HBsAg from baseline was 2.6 logs and 74.7% of patients achieved HBsAg less than 100 IU/mL, 19.1% of patients met NUC stopping criteria, the primary endpoint. Up to week 72, an additional 10.6% of patients met stopping criteria for a total of 29.7%. This is an important finding. Additional patients continued to meet stopping criteria six months after therapy was removed. We are eager to see data with longer follow-up and individual patient profiles for this study.

If you recall, the studies with our first-generation compound, ARC-520, in which some patients went on to achieve functional cures, the HBsAg clearance didn’t happen within six months of therapy being removed. Some patients took 9, 12, 18 months or longer to clear HBsAg, so we are excited to see additional results from REEF-1. We are also eager to see data from the various other studies that Janssen is conducting. These include the ongoing REEF-2 study, where patients come off all therapy as they achieve NUC stopping criteria; an ongoing study in patients with HBV and the hepatitis delta virus, which is a patient population in desperate need of therapeutic options due to the rapid progression of the disease; and various studies with immunomodulatory agents added.

There are currently multiple studies ongoing with pegylated interferon, called PENGUIN, and a study called Osprey which is a — with a DNA vaccine, JNJ-64300535. We have been extremely impressed with how comprehensive the development program is for JNJ-3989 and we believe it has a potential to play a central role as a backbone therapy for chronic HBV. Staying with AASLD, we also presented additional data on ARO-AAT, also called TAK-999, our investigational candidate designed to treat liver disease associated with alpha-1 antitrypsin deficiency, which received Breakthrough Therapy Designation from the FDA during the quarter and is being co-developed with Takeda.

We presented additional interim clinical data from the ongoing AROAAT2002 study, an open-label Phase 2 clinical study to assess the response of ARO-AAT in approximately 16 patients with AATD associated liver disease and baseline liver fibrosis. We think the data continue to reflect that ARO-AAT is highly active against its target. Specifically, the data suggest that ARO-AAT strongly inhibits production of the mutant Z-AAT protein, which we believe has been established as a clear cause of progressive liver disease. Further, the data suggest that livers in these patients are clearing the accumulated Z-AAT and may be showing signs of healing.

In this study, ARO-AAT treatment lead to a 72% to 100% reduction of liver Z-AAT protein. ARO-AAT treatment reduced histological globule burden in all patients, with 13 of 13 patients having a 1 point or greater reduction in PAS-D globule burden. ARO-AAT treatment also may have improved the liver fibrosis. Six patients had a 1 point or greater improvement in METAVIR fibrosis stage from baseline to week 24 or 48. Since the presentation, we analyzed an additional 12-month paired biopsy that showed improvement in fibrosis, giving us 7 of 15 with fibrosis improvement now. When looking only at the 200 mg cohorts, we saw 7 of 12 patients with improved fibrosis.

ARO-AAT treatment also improved multiple biomarkers of liver health. The mean reduction of ALT from baseline range from 42% to 56% and from 33% to 54% for GGT at week 28 and week 72. Importantly, all groups showed normalized ALT and GGT following treatment. We believe these are all encouraging data. The program is on schedule and we continue to be confident about its potential. We have begun a productive dialogue with FDA about approvable endpoints and the potential for an accelerated approval pathway.

We look forward to continuing this dialogue as the SEQUOIA study continues. We expect to have data on the reduction of circulating levels of AAT from SEQUOIA over the next few months, which should allow us to select a dose to move forward with. We should also be collecting the last 12-month biopsy from the last patient enrolled sometime in the summer of 2022.

Let’s now move on to ARO-HSD, which is our investigational candidate designed to treat NASH that we announced today has been licensed to GSK. We presented data at AASLD on the pharmacodynamic effect of ARO-HSD and safety of various dose levels. In AROHSD1001, a Phase 1/2 clinical study, we observed a dose-dependent pharmacodynamic effect on hepatitis — I’m sorry on hepatic HSD17B13 mRNA in all patients. At the 200 mg dose, all patients showed greater than 90% mRNA reductions. Hepatic HSD17B13 protein levels were reduced in all ARO-HSD dose levels, with multiple measurements below the assay’s lower limit of quantitation.

Decreases in ALT and AST were observed at doses of 100 mg ARO-HSD and greater. ARO-HSD was well-tolerated in all patients, with no drug-related serious adverse events reported, no adverse events leading to drug discontinuations and no drug-related clinically significant adverse laboratory trends observed. We believe these data suggest that ARO-HSD is highly active at silencing liver production of HSD17B13. There is clearly an enormous unmet medical need for patients with NASH and we look forward to GSK designing future studies to evaluate the compound in a Phase 2 and beyond.

Moving to our wholly-owned cardiometabolic pipeline. Javier will give an update in a moment on the studies that are ongoing and their status, but I wanted to highlight another recent data presentation. At AHA last week, we presented additional Phase 1/2 clinical data on ARO-APOC3, Arrowhead’s investigational therapeutic targeting apolipoprotein C-III or APO C-III, being developed as a treatment for patients with hypertriglyceridemia, severe hypertriglyceridemia, and familial chylomicronemia syndrome or FCS.

The presentation was assessing four genetically confirmed FCS patients and 26 patients with multifactorial chylomicronemia, which we refer to as MCM or non-FCS. The latter patients tend to have extraordinarily high triglycerides and exhibit the same or similar phenotype as genetically defined FCS. We wanted to evaluate whether there is a different response to ARO-APOC3 in these two groups. This is important because we are now initiating a Phase 3 study of ARO-APOC3, which Javier will describe.

In our study, patients with FCS compared with non-FCS, ARO-APOC3 achieved similar levels of reduction of APOC3, similar changes in key lipid parameters, and similar and comparable safety parameters. APOC3 was reduced by 98% in FCS patients and 96% in MCM patients. Both groups showed similar maximum median reductions in triglycerides of 91% and 90% respectively. Non-HDL-cholesterol was reduced by 58% and 49% respectively, and HDL-cholesterol was increased by 152% and 111% respectively.

Across our programs, preclinical data have been largely predictive of early clinical data and early clinical data has been predictive of later stage clinical data. We see this with respect to pharmacodynamic response and safety and tolerability. I believe this is part of what makes RNAi and Arrowhead special, and one of the main reasons we can go into early clinical development with confidence that we have a good idea about what to expect. In our view, this serves to increase the probability of success and potentially reduce risk.

That brings me to our newest clinical program. ARO-C3 is an investigational therapeutic design to reduce production of complement component 3 or C3, as a potential therapy for various complement mediated diseases. During the quarter, we announced the previously undisclosed candidate, we filed a CTA to begin clinical studies and hosted a key opinion leader webinar to discuss the complement pathway and the diseases we will initially focus on. These include IgA nephropathy, complement 3 glomerulopathy, and paroxysmal nocturnal hematuria.

There are also other renal and hematologic diseases that we intend to evaluate in the future. The complement pathway is complex and we did our best on the webinar to explain why we think a C3 targeted drug has the potential to address multiple complement-mediated or complement-associated diseases. We and the KOLs also explained the theoretical advantages that an RNAi therapeutic, like ARO-C3, may have over other mechanisms and other complement targets. If you haven’t listened to the webcast, I recommend you view it on our website for more information about ARO-C3. This is an early clinical program, but as I mentioned, we have a good track record of preclinical data translating well to clinical studies for investigational medicines developed with the TRiM platform.

I’d like to provide a quick update on our pulmonary programs, including ARO-ENaC, which is currently voluntarily paused to new enrollment as we assess some potential preclinical toxicology findings. We are still conducting studies internally to understand the toxicology findings and we don’t have clarity yet on the path forward. While we conduct those studies, we continue to make progress on our two new pulmonary programs, which are on track for CTA filings in the first half of 2022.

In addition, we are working on a next-generation ENaC candidate in parallel should that prove to be helpful or necessary. We believe in ENaC as a target for cystic fibrosis and are confident that our pulmonary targeted TRiM platform has the potential to address multiple diseases in the lung without adequate treatment options. We have less clinical experience applying the TRiM platform to pulmonary tissue, so we don’t yet have the predictability that we see when we apply the TRiM platform in the liver, but we are committed to getting there and we are convinced that we can.

Before turning it over to Javier to discuss the status of our mid and later stage cardiometabolic programs, I want to discuss — I’d like to discuss our growth plans. We now have 10 clinical stage programs and intend to expand our pipeline by 2 to 3 new programs per year. To support this growing pipeline, we are in the planning stages of expanding our R&D footprint in San Diego and Madison. We will be leasing a new space in San Diego that is scheduled to be built over the coming year.

In Wisconsin, we are in discussions with local and state government authorities and the economic development agencies to explore potential tax and other incentives to build a new facility. Should those discussions be successful, we intend to build an Arrowhead campus in Wisconsin with two new facilities. These facilities will house expanded R&D and a GMP drug manufacturing plant. Our pipeline is advancing both in size and proximity to commercialization to the point where our buy versus build analysis indicates that internal control of manufacturing now makes a lot of sense.

This is true financially and importantly strategically. We value speed at every stage of development and in every function. Building out drug manufacturing capabilities for preclinical, clinical, and commercial drug product will give us more control over timing, process and cost. We have not yet closed on the purchase of the land, so we have not yet started to incur significant costs, but Ken will talk later about our estimates for capex should we move forward with this planned expansion.

With that overview, I’d now like to turn the call over to Dr. Javier San Martin. Javier?

Javier San Martin — Chief Medical Officer

Thank you, Chris, and good afternoon everyone. I want to focus on the status of our most advanced, wholly-owned cardiometabolic programs, ARO-APOC3 and ARO-ANG3. Between these two programs, there are several clinical studies that are either active now or will be active soon. I will start with ARO-APOC3. This is our investigational medicine targeting apolipoprotein C-III being studied in patients with various lipid disorders including hypertriglyceridemia, severe hypertriglyceridemia, mixed dyslipidemia, multifactorial chylomicronemia and familial chylomicronemia syndrome.

The set of mid and late-stage studies for ARO-APOC3 is called the SUMMIT program, with each study named for a mountain peak. We currently have three open studies: 2001 is Phase 2 study in patients with severe hypertriglyceridemia, which we are calling SHASTA-2; 2002 is a Phase 2 study in patients with mixed dyslipidemia, which we are calling MUIR; and 3001 is a Phase 3 study in patients with FCS, which we are calling PALIDASE.

I will describe each of these studies briefly and give a current status for each. SHASTA-2 is a double-blind, placebo-controlled Phase 2b study to evaluate the efficacy and safety of ARO-APOC3 in adults with severe hypertriglyceridemia or sHTG. Three dose levels of ARO-APOC3: 10 mg, 25 mg, and 50 mg will be evaluated against placebo in participants who have mean fasting triglycerides of greater than or equal to 500 mg/dL at screening. A total of approximately 216 participants will be enrolled in the study.

All dose cohorts will enroll in parallel with 72 participants per dose cohort randomly assigned in a 3 to 1 ratio to receive ARO-APOC3 or placebo. Each participant will receive subcutaneous injections on day 1 and week 12. The duration of the study is approximately 54 weeks from screening to the week 48 end-of-study examination. The primary objective of the SHASTA-2 study is to evaluate the safety and efficacy of ARO-APOC3 in adults with sHTG and to select a dosing regimen for later stage clinical studies in this patient population. SHASTA-2 has enrolled 40 of the planned 216 patients, with an additional 56 patients currently in a screening to potentially be enrolled. We have activated 60 of the planned 80 sites and our goal is to have the study fully enrolled around Q3 of 2022.

Moving on to the MUIR study. It is a double-blind, placebo-controlled Phase 2b study to evaluate the efficacy and safety of ARO-APOC3 in adults with mixed dyslipidemia. Four dose cohorts of ARO-APOC3 will be evaluated against placebo in participants who had the following at screening: elevated triglycerides greater than or equal to 100 mg/dL but less than 500 mg/dL, and non-HDL-cholesterol greater than or equal to 100 mg/dL or LDL cholesterol greater than or equal to 70 mg/dL.

A total of approximately 320 participants will be enrolled in the study. All dose cohorts will enroll in parallel with approximately 80 participants per dose cohort, randomly assigned in a 3 to 1 ratio to receive ARO-APOC3 or placebo. In three cohorts: 10 mg, 25 mg, and 50 mg. Each participant will receive a subcutaneous injection on day 1 and week 12 for a total of two injections. In one additional 50 mg cohort, each participant will receive a subcutaneous injection on day 1 and week 24 for a total of two injections. The duration of the study is approximately 54 weeks from screening to the week 48 end-of-study examination.

The primary objective of the MUIR study is to evaluate the safety and efficacy of ARO-APOC3 in adults with mixed dyslipidemia and to select a dose and dose regimen for later stage clinical studies in this patient population. The MUIR study has enrolled 22 of the planned 320 patients, with an additional 38 patients currently in screening to potentially be enrolled. We have activated 15 of the planned 32 sites and our goal is to have the study fully enrolled in Q4 of 2022.

The last active study for ARO-APOC3 is PALISADE. PALISADE is a Phase 3 study to evaluate the efficacy and safety of ARO-APOC3 in adults with familial chylomicronemia syndrome. Two-dose level of ARO-APOC3: 25 mg and 50 mg will be evaluated against placebo in participants with fasting triglycerides greater than 880 mg/dL that are refractory to standard lipid-lowering therapy and diagnosis of FCS. Approximately 60 participants will be randomized in 2 to 1 ratio to receive four total doses of ARO-APOC3 or placebo administered subcutaneously once every three months.

The duration of the study is approximately 56 weeks from screening to the month 12 end-of-study examination. After month 12, participants will be eligible and invited to consent and continue in an open-label extension study. All participants in the placebo group who opt to continue will switch to active drug during the extension study and the primary objective of the PALISADE study is to evaluate the efficacy and safety of ARO-APOC3 in adults with FCS.

The primary endpoint is percent change from baseline at month 10 in fasting triglycerides. Additional secondary and exploratory endpoints include the change in other lipid parameters, incidence of acute pancreatitis, and other measures. We have activated three of the planned 55 sites globally. We are working hard to activate additional sites. There are currently patients in active screening and we anticipate the first patient to be enrolled and dosed before the end of the year.

I will now move on to ARO-ANG3, our investigational medicine designed to reduce production of angiopoietin-like protein 3. ANGPTL3 is a potential treatment for patients with mixed dyslipidemia. The set of mid and late-stage studies for ARO-ANG3 is called the VISTA program, with this study named for a national park. We currently have one open study in the VISTA program.

AROANG3-2001, a Phase 2 study in patients with mixed dyslipidemia, which we are calling ARCHES-2. ARCHES-2 is a double-blind, placebo-controlled Phase 2b study to evaluate the efficacy and safety of investigational ARO-ANG3 in adults with mixed dyslipidemia. Three dose levels of ARO-ANG3: 50 mg, 100 mg, and 200 mg will be evaluated against placebo in participants who had the following at screening: LDL cholesterol greater than or equal to 70 mg/dL or non-HDL-cholesterol greater than or equal to 100 mg/dL; and mean fasting triglycerides between 150 mg/dL and 500 mg/dL.

A total of approximately 180 participants will be enrolled in this study. All dose cohorts will enroll in parallel with 60 participants per cohort randomly assigned in a 3 to 1 ratio to receive a subcutaneous injection of ARO-ANG3 or placebo on day 1 and week 12. The duration of the study is approximately 42 weeks from screening to the week 36 end-of-study examination. After completing the week 36 visit, participants will be eligible to continue in an open-label extension study.

The primary objective of the ARCHES-2 study is to evaluate the safety and efficacy of ARO-ANG3 in adults with mixed dyslipidemia and select a dosing regimen for later stage clinical study in this patient population. The ARCHES-2 study has reached 50% enrollment with 90 of the planned 180 patients enrolled and dosed, with an additional 68 patients currently in screening to potentially be enrolled. We have activated all 25 of the initially planned 25 sites and our goal is to have this study fully enrolled in Q2 of 2022.

I will now turn the call over to Ken Myszkowski, Arrowhead’s Chief Financial Officer. Ken?

Ken Myszkowski — Chief Financial Officer

Thank you, Javier, and good afternoon everyone. As we reported today, our net loss for fiscal 2021 was $140.8 million or $1.36 per share based on 103.7 million fully-diluted weighted average shares outstanding. This compares with the net loss of $84.6 million or $0.84 per share based on 100.7 million fully-diluted weighted average shares outstanding for 2020.

Revenue for fiscal 2021 was $138.3 million, compared to $88.0 million for 2020. Revenue in the current period primarily relates to the recognition of a portion of the $300 million upfront payment received under our collaboration agreement with Takeda. Revenue for the Takeda agreement will be recognized as we continue to work toward completing our performance obligations of managing clinical trials in process and certain manufacturing related services. There remains $209 million of revenue to be recognized associated with the Takeda collaboration and it is anticipated to be recognized over approximately two to three years. Any additional milestones achieved with our collaboration partners would be additive to this projection.

During fiscal 2021, we also entered into a new collaboration agreement with Horizon to develop a drug candidate to treat uncontrolled gout. We received a $40 million upfront payment for this agreement. A portion of this amount was recognized in fiscal 2021 and we expect the balance to be recognized by the end of 2022 as our performance requirements are completed. Revenue in the prior period primarily related to the recognition of a portion of the milestones received from the license and collaboration agreements with Janssen.

We also announced a new licensing agreement with GSK today for our ARO-HSD candidate. This agreement will result in an upfront payment of $120 million to Arrowhead. We anticipate the substantial majority of this to be recognized as revenue in fiscal 2022. Total operating expenses for fiscal 2021 were $287.3 million, compared to $181.2 million for 2020. This increase is primarily due to increased candidate specific and discovery R&D costs as the Company’s pipeline of clinical candidates has both increased and advanced, as well as additional non-cash stock compensation expense.

Net cash provided by operating activities during fiscal 2021 was $171.2 million, compared with net cash used by operating activities of $95.4 million in 2020. The key driver of this change was the $340 million in total upfront payments received from Takeda and Horizon in fiscal 2021. Excluding any potential milestone payments received from our collaboration partners, we estimate our operating cash burn to be $60 to $80 million per quarter in fiscal 2022. In addition, we are planning to expand our manufacturing capabilities and expand our R&D facilities. These capital projects, along with routine capital expenditures, will add an incremental cash outlay of $80 to $90 million for full year fiscal 2022.

Turning to our balance sheet, our cash and investments totaled $613.4 million at September 30, 2021, compared to $453 million at September 30, 2020. The increase in our cash and investments was primarily due to the $340 million in total upfront payments received from Takeda and Horizon, offset by cash used for operations. Our common shares outstanding at September 30, 2021 were 104.3 million.

With that brief overview, I will now turn the call back to Chris.

Christopher Anzalone — President and Chief Executive Officer

Thanks Ken. And thanks to all of you for joining us today. We’re executing on our strategy with respect to platform extension, pipeline expansion and business development. Arrowhead’s opportunities in the near-term and long-term are vast and continue to grow each day. The data from our clinical programs continue to be encouraging and strongly support further development of our investigational medicines.

Lastly and importantly, we see the potential in the not too distant future where important medicines discovered and developed by Arrowhead start to get to the patients who need them. This is why we invest in R&D and why we are building manufacturing capabilities now to support clinical and commercial supply needs.

I would now like to open the call to your questions. Operator?

Questions and Answers:

Operator

And thank you. [Operator Instructions] And our first question is going to come from Luca Issi from RBC Capital. Your line is now open.

Luca Issi — RBC — Analyst

Great, thanks so much for taking my questions and congrats on the progress. I’ll ask to both the main question and a follow-up, I guess. So on A1AT, it sounds like you had a productive dialog with the FDA here. Can you expand a little more in that conversation? And what was their level of receptivity on the idea of getting approved on just liver A1AT level? That’s question one. Then question two on GSK. Wondering if you can comment on why you decided to retain sizable economics in the U.S. with 50/50 profit split for A1AT, but obviously here we have a very different structure for NASH. So, any color on that would be great. Thanks so much.

Christopher Anzalone — President and Chief Executive Officer

Sure. So we’ll take the first one first which is straightforward. There’s not much we can tell you. Look, we had a very encouraging and productive discussion with the FDA, in fact, just last week. I think that we are moving in the right direction and it was a good collaborative interaction. We look forward to continue discussions. This is an ongoing dialog and we’ve just begun this. And so I expect to have continued dialog in 2022, particularly as we have additional data. So there’s not much I can tell you right now. Other than that, again, so far so good, I think it’s been a good conversation so far.

With respect to the different field structure is for AAT and for HSD, it’s — I think that just reflects the state of the development of the two programs course. AAT was coursed farther advanced than HSD as first. Second, AAT. I think the biology there is quite clear. HSD we still need to stuff out. There’s really good genetic validation for that target. But as we talked about earlier in the call, there’s been been no inhibitors of this protein that have been tested and so while the genetic data look encouraging, we still need human [Indecipherable] and so I fully trust that we’ll show that or at least GSK will show that, but it’s just a different state of progress between AAT and HSD. Even finally, these are two very different diseases. Right now, HSD is a very large disease, tens of millions of people in the U.S. are likely potential patients for that, whereas AAT is an orphan indication. We think that there’s maybe 100,000 to 120,000 potential patients in the U.S.

And so given all of that, we would look for different economics and different structures for those two programs. We’re very happy with both of them, I think we have the right partner for AAT indicator who is committed and we are really working together with them to bring this important medicine to these patients. And similarly, I think we have got the right partner in GSK for NASH. They appear to be committed to the program and we are impressed with their ability to move that program forward.

Luca Issi — RBC — Analyst

Super. Thanks so much.

Christopher Anzalone — President and Chief Executive Officer

Welcome.

Operator

Thank you. And our next question comes from Alethia Young from Cantor. Your line is now open.

Alethia Young — Cantor Fitzgerald — Analyst

Hey guys. Thanks for taking my questions. One, I just wanted you to talk a little bit about your perspective on the capsid and sRNA data at AASLD. I mean do you feel like combination is the way to go? It’s kind of interesting the capsid initial activity. And then I think my second question is just on whether you guys would ever kind of think about maybe potentially doing something in like neuro? So, as I know some of your competitors are now talking about that things?

Christopher Anzalone — President and Chief Executive Officer

Sure. I think we did. It’s good to hear from you. So, with respect to combination for HBV. Look I think that I was very encouraged by Janssen’s data. Our drug is doing what it’s designed to do. We saw deep reductions of S antigen. We are — I assume that we are seeing good reductions in all viral antigens. We saw a good percentage of patients who got S below 100 IU, I think it was 75% or so during treatment. That’s impressive and we think that that number, that 100 IU is an important number. It’s been shown in the past that patients who can get below 100 IU have a better chance of seroclearance.

And then, of course, the primary endpoint looked good. We saw a lot of patients who achieved NUC stopping criteria and even more patients who achieved that criteria even after they came off therapy and so we’re really encouraged by that starts and we’re looking forward to watching these patients continue off therapy and seeing if we can get some functional cures.

Now with respect to combinations. We’ve always believed that this is a tough virus and that that we were hopeful that our drug could be backbone approach and nothing we have seen so far has pulled us from that thought. We still think it’s going to be the backbone approach and we still think that to get wide-ranging consistent functional cures that you may need a combination approach.

I think that that a CAM is probably not the preferred combination going forward, but J&J, Janssen is going about this in the right way. They have a number of studies ongoing. We look forward to seeing what the immunomodulatory studies look like and beyond. So I think that we are still in the early part of trying to figure out what the correct therapy as for HBV. But I think we’re on the right track and I think those data support that.

Alethia Young — Cantor Fitzgerald — Analyst

Do you have any plans for neuro?

Christopher Anzalone — President and Chief Executive Officer

Oh, sorry, CNS, right. Sorry, CNS. Look, we do not — we don’t have any stated programs in CNS right now. But you’re right, we have competitors who have been working on that for some time now, for good reason. There’s a lot of unmet medical need there and there are clearly some indications that could be addressed using RNAi and so we wish them good luck. I think that at some point, we will be there because it’s important for us to be there. To date, we have focused on on other cell types. As you know, we’ve got new programs on pulmonary and solid tumor, skeletal/muscle by the middle of next year. We didn’t talk about that in the call, but we’re still on track for skeletal/muscle. But yes, eventually at some period, we will likely have a program in CNS, we don’t have one right now.

Alethia Young — Cantor Fitzgerald — Analyst

Great, thank you.

Christopher Anzalone — President and Chief Executive Officer

Welcome.

Operator

And thank you and our next question comes from Maury Raycroft from Jefferies. Your line is now open.

Maury Raycroft — Jefferies — Analyst

Hey, congrats on the update and thanks for taking my questions. I was just going to ask a question on HSD. Congrats on that update. Wondering if you can say if process to partner HSD asset was competitive. And since you’re pursuing PNPLA 3 in NASH with J&J. Did J&J have any option or right of refusal for HSD?

Christopher Anzalone — President and Chief Executive Officer

Sure. Thanks very much. It’s good to hear from you, Maury. We — yes, we did run a competitive process. We spoke with a number of companies about the asset and GSK seem to be the best partner. J&J did not have a right of first refusal or anything like that for HSD.

Maury Raycroft — Jefferies — Analyst

Got it. Okay. And also one quick question for AAT, just wondering of the 16 patients, if you can clarify how many of those patients will have 12-month biopsy and how many will have 18 month biopsy?

Christopher Anzalone — President and Chief Executive Officer

Javier, do you want to address that?

Javier San Martin — Chief Medical Officer

Yeah, so 12-month biopsy of all eight patients on cohort 2 that received 200 milligrams, 18 months, right now, we had two and is likely to be few patients that we had a 24-month biopsy, but because it’s not mandatory, not all patients will have said or have accepted to go through the third biopsy and that’s the case in the first cohort that was the 6 months, 200 mg, two of the four patients accepted to have a follow-up biopsy and two of them did not. So we don’t know how many will accept from the other cohorts that they post baseline biopsy was at week — sorry, at month 12.

Maury Raycroft — Jefferies — Analyst

Got it. Okay. Thanks for taking my questions.

Operator

Thank you. And our next question comes from Esther Rajavelu from UBS. Your line is now open.

Esther Rajavelu — UBS — Analyst

Hey, thank you for taking my question. I have just two, first on the ARO-APOC3 program. If the magnitude of the APOC3 reduction is similar between the FCS and MCM patients. Can you share your thoughts on what the implications for therapeutic benefit and outcomes could be for the FCS patients? And then my follow-up is on manufacturing, which I’ll ask in a second.

Christopher Anzalone — President and Chief Executive Officer

Sure. Javier, would you like to address that?

Javier San Martin — Chief Medical Officer

Yes. So that’s the data we presented this past week at AHA in which we show the FCS population and the MCM population has very much the same response with regards to the target APOC3 and to the magnitude of decrease in triglycerides, which is in the range of 80% to 90%. So what that means for patients with FCS is many of them, depending on their baseline and will achieve a level beyond which the likelihood or risk from that will be very, very low, which is the whole of therapy. So we’re very encouraged by this result. And again, right now, the majority of patients depending on their baseline will be in a healthy range of triglycerides.

Christopher Anzalone — President and Chief Executive Officer

Yes. And I just want to underline that. I think that’s one of the things that’s so exciting about that candidate that we are really moving the needle on triglycerides. We can really think about now normalizing many patients’ triglyceride level and I think that’s a big thing.

Esther Rajavelu — UBS — Analyst

Got it. And then on the manufacturing investment. Do you expect it — once you have your facility up and running that it may change the economics of your existing partnerships, assuming those assets progress to the clinic to commercialization or do you expect that could change potential terms for future deals?

Christopher Anzalone — President and Chief Executive Officer

That’s a good question, I don’t think they will materially change the economics of existing deals. We could be a supplier to those partners. No one has to use us, but they may want to use us, so that there are economics there. Going forward, I think your point’s a good one. It could be that it makes sense for future partners to take advantage of our manufacturing capabilities. And look, we spend a lot of time these days working on process development and I think that we have discovered new ways of manufacturing that could lead to better purity, could lead to lower costs and I think that could be something that’s helpful for our partners.

Esther Rajavelu — UBS — Analyst

Great. Thank you.

Operator

And thank you and our next question comes from Joel Beatty from Baird. Your line is now open.

Joel Beatty — Baird — Analyst

Hi. Great. Congrats on the progress. Two questions on the ENaC program. The first is, what’s the latest on the timing of an update on that going ahead on the NHP study and anything else that may be needed to be looked at for the program going ahead? And then the second question on ENaC is just on the lung programs is what gives you confidence that two non-ENaC program with a CTA filing can go ahead even if the data doesn’t look at ENaC NHP study?

Christopher Anzalone — President and Chief Executive Officer

Sure. Thanks for the questions. So with the exact timing of how we move forward and when we move forward on ENaC as a target. I can’t give you specific timing because this is all kind of real-time right now. I do believe though that in the first quarter of next year, we’ll know where we’re going — we’re waiting for the NHP chronic tox, as you point out, and I think that should be in sometime by the end of December. We’re also doing a number of non-clinical studies internally to try to understand the basis of the — of that local inflammatory response that we saw in the rats.

So I don’t — beyond that I can’t give you much more granularity, but I do believe though at some point in that first quarter, we’ll know — we’ll have either a path forward to restart ARO-ENaC or we may decide to switch horses and move to this next generation. As I mentioned in my prepared remarks, we haven’t been working on next generation in-house and we are — I think we have a couple of potential candidates. Nothing has been nominated yet. We have a couple that are substantially more potent or at least appear, substantially more potent than ARO-ENaC and that could help out with an overloading issue if in fact that was the reason for the tox issue we saw in the rats. So I would just say stay tuned on that. We’ll know a lot more in the next couple of months I think.

Regarding what gives us confidence about the new pulmonary programs. Look we — I think that the more potent we can make these constructs, the better we know that overloading could be an issue at least in rats and so we’re focused on making these constructs as potent as we can. And our next two are also substantially more potent than ARO-ENaC. I think that gives us some more comfort that we are — that we’ve got something — probably we’ve we got these two programs that may work well. But look at the end of the day, you don’t know until you know and so we have to run chronic tox programs and we’ll see where those go, but at least so far, what we have in those — in the two newer programs, we feel pretty good about and we’re on track to file CTAs in the first half of next year.

Joel Beatty — Baird — Analyst

Great, thank you.

Christopher Anzalone — President and Chief Executive Officer

And one more thing. I was just given a note on this to remind me. It’s a good point. One of the two next programs has a circulating biomarker that’s going to be helpful to us. It did give us an idea about how much knockdown we’re getting, what was — what’s tough about ENaC is that to understand how much knockdown you’re getting. It’s just technically difficult and so I think we have a leg up on this next program.

Operator

Thank you. And our next question comes from Patrick Trucchio from HC Wainwright. Your line is now open.

Patrick Trucchio — HC Wainwright — Analyst

Thanks, good afternoon. Just a couple of follow-up questions from me. The first one is, I’m wondering if you can discuss the impact if any from the recently announced acquisition of the competitors platform in terms of partnering discussions on your various programs. I’m wondering if you’ve seen an increased level of interest since that deal was announced and which programs could be next to partner in your pipeline?

Christopher Anzalone — President and Chief Executive Officer

Well, you’re master of the unanswerable questions. I don’t know that we’ve seen any increased partner interest in the last, what we’ve got. So, I will say this, here’s what we can control. Our job is to make medicines that are safe and that can help patients in ways that other medicines can’t. To the extent that we can focus on that and we can succeed at that and we can do that rapidly, everything else we sort of follow. And so I kind of view this M&A — the recent M&A — the recent acquisition as a bit of noise because it doesn’t really affect our day-to-day business. So, we need to remember why we’re here every day, which is to make important medicines and that’s what we’re doing.

Patrick Trucchio — HC Wainwright — Analyst

Yes. That’s helpful and then just with the understanding that AMG 98 [Phonetic] is being developed by Amgen. I’m wondering if you could discuss expectations around the Phase 2 trial? And assuming it’s on track for Phase 2 top line data in the first half of 2022, I’m wondering what level of Lp(a) knockdown would give confidence to move forward to a pivotal program?

Christopher Anzalone — President and Chief Executive Officer

Sure. I think of it — I don’t think we know more than you do to be honest. My understanding is that Amgen has guided that they will have data in the first half of next year. I haven’t heard that that’s changed. But so, that’s my understanding. And frankly, my expectation would be then that they would move into a pivotal study thereafter. I don’t know how long it will take them to do that. The data that we’ve seen so far — the data that have been presented are really good. That is a potent drug candidate.

They’re seeing very deep knockdown with a very small amount of drug in Lp(a) and I think that the genetic validation of that target is clear. So my expectation is that they will have data in the first half of the year and then we’ll just see how fast we can move to a pivotal. I can’t really give you an idea about what would make them happy in terms of reduction of Lp(a) levels. I can’t tell you though that internally we have been impressed with what they’ve shown so far and if this was our program, I certainly wouldn’t be slowing down. I’d be moving into a Phase 3 given what we’ve seen so far at least.

Patrick Trucchio — HC Wainwright — Analyst

Terrific. Thank you very much.

Christopher Anzalone — President and Chief Executive Officer

Welcome.

Operator

And thank you and our next question comes from Mani Foroohar from SVB Leerink. Your line is now open.

Mani Foroohar — SVB Leerink — Analyst

Hey, thanks. Follow-up question regarding. So another question about ENaC program. Can you talk a little bit about this mouse signal counterpart with a related, but not identical technology in ASO, had early human data and so perhaps related are not talk signal and not in primates discontinued their program, but did release that early human data. Should we expect that it’ll be releasing some patient data with ARO-ENaC or is that something that you think you’ll just put out — you’ll just put away and will never see? And I have one follow-up.

Christopher Anzalone — President and Chief Executive Officer

Sur. I just don’t know at this point. Let’s see what — where that program is going to go. I don’t know if we’re going to restart that and so it’s — I kind of don’t want to get hypothetical at this point. And so, that will stay paused. Once we have an idea about how we go forward, either restarting enrollment of that or switching to a new construct at that point then we can have a better discussion about what we do with the data that have been collected so far.

Mani Foroohar — SVB Leerink — Analyst

Great. And as you guys spent a lot of time talking about extrahepatic program, obviously a place for RNAi, still earlier in development than liver targeting for you and all companies broadly speaking. Is there a timeline we should expect an update on the oncology program that you gave a first look at and you continue to see oncology or broadly speaking of the kidney diseases as an area of growth for you? Or is that more of a one-off experiment?

Christopher Anzalone — President and Chief Executive Officer

No, I would not call that one-off experiment? It is the first experiment in solid tumor targeting. And I think that we think we’re off to a good start there. We — I think we’ve seen clear target engagement that’s important. We’ve seen clear knockdown that’s important. And so now, we just need to see if that particular drug is a drug. We’ll look at longer term response rate and we’ll make that decision, but I think from a platform standpoint, we are on the right track. Is it the last iteration of our oncology platform. Absolutely not. We will certainly continue to to advance it. But at least — but from my perspective, it’s a good start.

Now and to be clear, this program is designed to address solid tumors really kind of broadly. We don’t yet have a platform that is designed to address kidney indications. That may happen at some point in the future, but right now we don’t have that. I don’t know if I have a good — if I have a good prediction about when we’re going to have our next slug of data for HIF2. We are fully enrolled. And so I think we’re just following patients. James, do you have anything to add on that.

James Hamilton — Senior Vice President, Discovery and Translational Medicine

No, I think that’s about right, This study is fully enrolled and so all the patients on drug are in the follow-up period.

Mani Foroohar — SVB Leerink — Analyst

Great. Thanks guys.

Christopher Anzalone — President and Chief Executive Officer

Welcome.

Operator

Thank you and our next question comes from Mayank Mamtani from B. Riley Securities. Your line is now open.

Mayank Mamtani — B. Riley FBR — Analyst

Good afternoon, team. Congrats on the pipeline progress and also on the GSK deal and thanks for squeezing us in. Just have a few clarifying questions, just quick one. So on the J&J refund study, just any idea on — at what time points the follow-ups might come and when can we see the patient level analysis? Is there any insight you have on how J&J might be thinking of communicating going forward?

Christopher Anzalone — President and Chief Executive Officer

I really can’t give you that because there are some things I just don’t know. In fact, we haven’t seen. I don’t believe at least, I don’t think we have even seen the individual patient data. As I said earlier, look, we’re really encouraged by those data. I think they’re good data. Our drug is doing what we let it design to do and for now look, we just need to kind of sit back and see how this goes. As I mentioned in the prepared remarks, ARC-520 for those patients on our 520 who is serocleared for S, it didn’t happen in six months, it happened as early as nine months or as long as two years or so, as I recall after drug was removed and so we look forward to watching continue follow up.

I think that we are — we have just entered a prolonged data rich period with Janssen given REEF-1, REEF-3, REEF-D [Phonetic] the interferon studies and others. I think that there will be — I think that there should be regular data released from various parts of these studies going forward. And so, I think the ’22 is probably going to be substantially more data rich than ’21 was.

Mayank Mamtani — B. Riley FBR — Analyst

Looking forward to that. Understood. And then on AAT, can you remind us how you’re tracking with the SEQUOIA Phase 2/3 data pack is I think about 40 subjects? And what might be the expectations in a placebo-controlled setting relative to what you’ve shown in open-label format?

Javier San Martin — Chief Medical Officer

Yes. Sure. So, as you know, we have completed enrollment of 40 patients. The next stage we’re going to work on dose selection, will occur in the first half of 2022. So and that will be probably our next interaction with the agency to discuss the dose and the paired biopsies will be finished by July, August of next year. So, last patient second of post baseline biopsy will be in that timeframe. So add to that the timing for data lock and evaluation, so I would say towards the end of 2022, we will have the placebo-controlled paired biopsies we tracked from SEQUOIA.

Mayank Mamtani — B. Riley FBR — Analyst

Great. Thank you. And just on the cardiometabolic wholly-owned portfolio, I heard — I appreciate the level of detail on ANG3 and APOC3. And can you just put it together, like how in 2023, we will see some of the data generation activities. And I didn’t — I think that’s on the enrollment for FCS study, the Phase 3 study. Could you just remind me on that?

Christopher Anzalone — President and Chief Executive Officer

So it’s hard to guide to data release at this point because we — particularly for FCS because we haven’t even dosed first patient yet there. These are — all these days, we’re talking about our year long studies and so the — both the unknown here is how fast we can get these enrolled. So, give us more time here at enrollment and then we — I think we’ll have better visibility on when we can start to have data release? Do you have anything else to add on. Javier.

Javier San Martin — Chief Medical Officer

No. I think that’s fair.

Christopher Anzalone — President and Chief Executive Officer

And your — the question on the Phase 3 for FCS. So that study is up and running and we have patients in screening. We’ve already activated sites that we anticipate dosing before the end of the year, first dosing.

Mayank Mamtani — B. Riley FBR — Analyst

Great. Thanks so much for taking my questions.

Operator

And thank you. And I’m showing no further questions. I would now like to turn the call back to Chris Anzalone for closing remarks.

Christopher Anzalone — President and Chief Executive Officer

Okay. Thanks everyone for joining us today and we wish you a happy and safe Thanksgiving weekend.

Operator

[Operator Closing Remarks]