What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-08 · 84 added, 54 removed, 220 unchanged (39% of the section changed)

1 unchanged sentence

The following is a discussion of the financial condition and results of operations of Arcturus Therapeutics Holdings Inc.

for the three month period ended March 31, 2024.

for the three and six month periods ended June 30, 2024.

Unless otherwise specified herein, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc.

9 unchanged sentences

In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR ® , may enable multiple nucleic acid medicines.

Our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR ® , technology) provides a longer-lasting and broader response at lower dose levels than conventional mRNA.

In 2023, our COVID-19 vaccine, ARCT-154, received marketing authorization approval in Japan and became the world’s first approved self-amplifying RNA (sa-mRNA) vaccine.

Our proprietary self-amplifying mRNA technology (STARR ® technology) provides a longer-lasting and broader response at lower dose levels than conventional mRNA.

In 2023, our COVID-19 vaccine, ARCT-154 (also referred to as Kostaive ® ), received marketing authorization approval in Japan and became the world’s first approved self-amplifying RNA (sa-mRNA) vaccine.

We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs.

11 unchanged sentences

The approval was based on positive clinical data from several ARCT-154 studies, including the pivotal 19,000 subject efficacy, safety and immunogenicity study performed in Vietnam as well as the pivotal Phase 3 booster study in Japan.

In May 2024, we announced that Nature Communications published results from the 19,000 subject study performed in Vietnam, with results demonstrating that two 5µg doses of ARCT-154 were well-tolerated, immunogenic and provided significant protection against multiple strains of COVID-19.

The Japanese Pharmaceuticals and Medical Devices Agency (PMDA) is currently reviewing a partial change application to update our COVID-19 vaccine (Kostaive ® ) with the JN.1 Variant of Concern.

The European Medicines Agency (EMA) is currently reviewing a marketing authorization application for ARCT-154.

The review procedure started on August 17, 2023.

We continue to collect data from the various ongoing studies described below.

Key Updates on Our COVID Collaboration Program

2 unchanged sentences

(“Meiji”) sponsored a randomized, multicenter, Phase 3, observer-blind, active-controlled comparative study to evaluate the safety and immunogenicity of a booster dose of ARCT-154 and to evaluate the non-inferiority of ARCT-154 over COMIRNATY (Monovalent, Original strain).

The study targeted a total of 780 adult participants, with half in the ARCT-154

group and half in a comparator group, and completed enrollment with 828 participants in February 2023.

The study targeted a total of 780 adult participants, with half in the ARCT-154 group and half in a comparator group, and completed enrollment with 828 participants in February 2023.

As previously announced, the study met all primary and secondary immunogenicity endpoints, including a secondary pre-defined superiority assessment over COMIRNATY (Omicron BA.4/5 strain).

Overall, the safety and immunogenicity results of the study support the favorable benefit/risk profile of the ARCT-154 vaccine when administered as a booster dose in adult individuals who previously received other mRNA COVID-19 vaccines.

On February 1, 2024, the journal Lancet Infectious Diseases published the article ‘Persistence of immune responses of a self-amplifying RNA COVID-19 vaccine (ARCT154) versus BNT162b2’ ( https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(24)00060-4/fulltext ), with a 6-month follow-up results from this study.

On February 1, 2024, the journal Lancet Infectious Diseases published the article ‘Persistence of immune responses of a self-amplifying RNA COVID-19 vaccine (ARCT154) versus BNT162b2’ (https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(24)00060-4/fulltext), with 6-month follow-up results from this study.

These additional data demonstrate the extended persistence of neutralizing antibodies after ARCT-154 compared with conventional mRNA vaccine in the clinical setting, indicating longer-lasting immunity and implying a longer duration of protection by ARCT-154.

Phase 3 Study of Bivalent Version of COVID-19 Vaccine Candidate in Japan

On September 29, 2023, Meiji initiated an additional Phase 3 clinical study with a bivalent version of our COVID-19 vaccine candidate (ancestral strain, ARCT-154 and Omicron BA.4/5) to further support immunogenicity and safety data for our self-amplifying mRNA platform, which may facilitate the timely release of future seasonal updates of our COVID-19 vaccine against evolving variants of concern.

On September 29, 2023, Meiji initiated an additional Phase 3 clinical study with a bivalent version of our COVID-19 vaccine candidate (ARCT-2301, which combines ancestral strain, ARCT-154 and Omicron BA.4/5) to further support immunogenicity and safety data for our self-amplifying mRNA platform, which may facilitate the timely release of future seasonal updates of our COVID-19 vaccine against evolving variants of concern.

On March 19, 2024, Meiji announced that the bivalent vaccine met the primary endpoint (non-inferiority) in the study.

2 unchanged sentences

Both the geometric mean titer (GMT) ratio and seroresponse rate (SRR) difference of neutralizing antibodies against SARS-CoV-2 (Omicron strain BA.4/5) met non-inferiority criteria.

In addition, the superiority of ARCT-2301 to

COMIRNATY (BA.4/5) was confirmed for both SARS-CoV-2 (Omicron strain BA.4/5 and Wuhan strain).

In addition, the superiority of

ARCT-2301 to COMIRNATY (BA.4/5) was confirmed for both SARS-CoV-2 (Omicron strain BA.4/5 and Wuhan strain).

There were no causally-associated severe or serious adverse events with ARCT-2301.

14 unchanged sentences

In March 2024, Arcturus and CSL Seqirus initiated a Phase 3 pivotal study with the ARCT-2303 candidate vaccine containing the XBB1.5 Omicron variant.

The purpose of this study is to generate additional immunogenicity and safety data for the recently recommended vaccine composition and support product licensure in the United States.

In addition, the study will assess the

co-administration of the ARCT-2303 vaccine with the age-appropriate seasonal influenza vaccines.

Overall, approximately 1,680 young and older adults are planned to be recruited in the study in Australia, Costa Rica, Honduras and the Philippines.

The purpose of this study is to generate additional immunogenicity and safety data in multiple ethnicities to support regulatory filings globally.

In addition, the study will assess the co-administration of the ARCT-2303 vaccine

with the age-appropriate seasonal influenza vaccines.

Overall, 1,499 young and older adults were recruited in the study in Australia, Costa Rica, Honduras and the Philippines.

The results of this study are expected in the fourth quarter of 2024.

Flu Collaboration Program Updates

9 unchanged sentences

A Phase 1 dose-finding safety and immunogenicity study was initiated in January 2024 in Australia.

As of May 1, 2024, 84 healthy young adults were recruited in the study and received one of four dose levels of the study vaccine or a licensed influenza vaccine.

The recruitment of older adults is ongoing.

Additional preclinical mouse immunogenicity studies and nonclinical safety studies have been completed that will help enable the Phase 2 clinical trial.

As of August 1, 2024, 100 healthy young adults and 35 older adults were recruited in the study and received one of four dose levels of the study vaccine or a licensed influenza vaccine.

Pandemic Influenza Program

13 unchanged sentences

In plasma, ARCT-810 mRNA could be detected up to 4 weeks, while ionizable lipid was no longer measurable after 48 hours, indicating rapid degradation of the lipid nanoparticle that was utilized to deliver ARCT-810 mRNA.

o A Phase 2 multiple-dose study of ARCT-810 in OTC-deficient adolescents and adults initiated dosing in December 2022 and plans to enroll approximately 24 participants in two dose cohorts.

The study is being conducted in the UK and several countries in the European Union.

Efforts to address the continued challenging enrollment rate in Europe,

by adding study sites and patient services to eliminate barriers to participation, appear to be effective and the study continues to enroll patients.

• LUNAR-CF/ARCT-032 – Our program for cystic fibrosis is being supported in part by the Cystic Fibrosis Foundation.

o A Phase 2 double-blind multiple-dose study of ARCT-810 in OTC-deficient adolescents and adults in the European Union and United Kingdom initiated dosing in December 2022.

In July 2024, the Phase 2 study completed enrollment of eight subjects, including adolescents and adults, at the 0.3 mg/kg dose level.

The participants in this

group are randomized 3:1 to receive 6 doses of ARCT-810 or placebo administered every 14 days.

Treatment and follow-up are ongoing.

o We are expanding the Phase 2 clinical program of ARCT-810 by enrolling patients in the U.S.

with more serious disease.

Patient screening has been initiated in the study.

• LUNAR-CF/ARCT-032 – Our program for cystic fibrosis is being supported in part by the Cystic Fibrosis Foundation (“CFF”).

In 2023 we initiated and successfully achieved the recruitment target in a Phase 1 single ascending dose study of ARCT-032 (LUNAR-CF), our mRNA therapeutic candidate for cystic fibrosis (CF), in 32 healthy participants (eight subjects in each of four dose cohorts).

In August 2023 we received regulatory approval of a protocol amendment to transition to a Phase 1b clinical study of ARCT-032 in up to eight adults with CF, with each participant receiving two administrations of ARCT-032.

o The first participant with CF in the Phase 1b study part enrolled and completed two administrations of ARCT-032 in November 2023, and we are continuing enrollment.

o On June 7, 2024, we presented Phase 1 interim data of ARCT-032 at the 47 th Annual European Cystic Fibrosis Conference.

ARCT-032 was generally safe and well tolerated with no serious or severe adverse events in healthy volunteers and in the first four dosed participants with CF in Phase 1b, of which one had 2 Class I mutations and the other three had F508del mutations and were being treated with Trikafta ® .

o We submitted an IND application at the end of July 2024 for an ARCT-032 Phase 2 multiple ascending dose study designed to identify a safe and effective dose in Class I (null) and other CF participants who do not benefit from CFTR modulators.

This study is supported by safety and tolerability data collected in healthy volunteers (N = 32) and the ongoing two-administration Phase 1b study.

No serious adverse events (SAEs) have been observed in any clinical trial participants to date.

No febrile reactions have been observed within the target dose range of the planned Phase 2 study.

The Phase 1b study has completed dosing and follow-up visits.

Of the seven total CF participants in Phase 1b, six are receiving CFTR modulator treatment while one subject has Class I mutations and therefore does not benefit from modulator therapy.

The Class I CF subject had low lung function at baseline (ppFEV1 below 50%) and showed an improvement of 4% in ppFEV1 on Day 8, after receiving two well-tolerated administrations, with no febrile reactions..

o In February 2024, the European Commission (EC), based on a positive opinion issued by the European Medicines Agency (EMA), granted Orphan Medicinal Product Designation for ARCT-032 to treat CF.

ARCT-032 was granted Orphan Drug Designation by the FDA in November 2023.

ARCT-032 was granted Rare Pediatric Disease Designation in October 2023, and Orphan Drug Designation in November 2023 by the FDA.

Updates on Collaboration Agreements

CSL Collaboration Agreement.

In March 2024, we entered into Amendment Number Two to Collaboration and License Agreement to reflect updates to the development program and other adjustments consistent with our prior disclosures regarding the Collaboration and License Agreement (“Amendment Number Two”).

In March 2024, we entered into Amendment Number Two to Collaboration and License Agreement between CSL and the Company to reflect updates to the development program and other adjustments consistent with our prior disclosures regarding the Collaboration and License Agreement (“Amendment Number Two”).

Amendment Number Two, among other things, adjusts (i) the development plans for certain product candidates, (ii) various development milestones related to such product candidates, (iii) provisions of the CSL Collaboration Agreement related to specific royalty payments, (iii) provisions of the CSL Collaboration Agreement related to distributors, and (iv) proprietary payment calculations related to the foregoing.

18 unchanged sentences

The following table summarizes our total revenues for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

Revenue decreased by $42.3 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

The decrease was primarily attributable to the CSL agreement as $78.2 million total revenue was recognized during the first quarter of 2023 upon the achievement of a conditional payment and multiple milestones, compared to $32.4 million total revenue related to CSL during the first quarter of 2024, resulting in a decrease of $45.8 million.

An additional decrease of $1.3 million resulted from the completion of two collaboration agreements by the third quarter of 2023.

The total decrease was primarily offset by an increase in revenue of $4.9 million related to the agreement with BARDA.

* Greater than 100%

Revenue increased by $39.3 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

The increase was primarily attributable to the receipt of a milestone payment from CSL pursuant to the CSL agreement as $45.9 million total revenue was recognized during the second quarter of 2024, compared to $7.6 million total revenue related to CSL during the second quarter of 2023, resulting in an increase of $38.3 million primarily due to the timing and value of milestone achievements and the recognition of revenue from a supply agreement during the current quarter.

Additionally, there was an increase in revenue of $2.9 million related to the BARDA Contract during the second quarter of 2024 as compared to the second quarter of 2023.

The total increase in revenue was offset by a $1.9 million decrease in revenue recognized from other agreements during the second quarter of 2024 as compared to the second quarter of 2023 due to lower activity or completion of collaboration agreements.

Six Months Ended June 30,

(in thousands)

Revenue decreased by $2.9 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

We received revenue under the CSL agreement of $78.3 million during the six months ended June 30, 2024, compared to $85.8 million total revenue related to CSL during the six months ended June 30, 2023, resulting in a decrease of $7.5 million primarily due to the timing and value of milestone achievements and the achievement of a conditional payment during the first half of 2023, offset by the recognition of revenue from a supply agreement during the current year.

Additionally, there was a decrease of $3.2 million in revenue recognized under other agreements during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 due to lower activity or completion of collaboration agreements.

The total decrease in revenue was offset by a $7.8 million increase in revenue recognized from the BARDA Contract during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Our operating expenses consist of research and development and general and administrative expenses.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

4 unchanged sentences

The following table presents our total research and development expenses by category:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

10 unchanged sentences

Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses, facility related expenses and laboratory supplies related to conducting research and development activities.

Research and development expenses were $53.6 million for the three months ended March 31, 2024, compared with $51.8 million in the comparable period last year, primarily reflecting increased BARDA related expenses of $3.0 million, increased early-stage programs expenses of $2.7 million, increased personnel expenses of $2.2 million and increased facilities and equipment expenses of $1.4 million.

The increases were offset by a $3.5 million decrease in discovery technologies expenses, a $2.1 million decrease in COVID expenses primarily caused by fewer contract manufacturing costs and a $1.9 million decrease in OTC expenses.

We expect that our research and development efforts and associated costs will increase and continue to be substantial over the next several years as our pipeline progresses.

Research and development expenses were $58.7 million for the three months ended June 30, 2024, compared with $52.7 million for the three months ended June 30, 2023, primarily reflecting increased clinical related expenses of $6.3 million, increased manufacturing expenses of $0.8 million and increased personnel expenses of $0.5 million.

The increases were offset by a $1.0 million increase in contra research and development expenses related to the agreement with the CFF and a $0.6 million decrease in facilities and equipment expenses.

Research and development expenses were $112.2 million for the six months ended June 30, 2024, compared with $104.4 million in the six months ended June 30, 2023, primarily reflecting increased clinical related expenses of $6.3 million, increased personnel related expenses of $2.8 million, increased facilities and equipment expenses of $0.8 million and increased manufacturing expenses of $0.3 million.

The increases were offset by $1.4 million in consulting expenses and a $1.0 million increase in contra research and development expenses related to the agreement with the CFF.

We expect that our research and development efforts and associated costs will continue to be substantial over the next several years as our pipeline progresses.

Early-stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, including the LUNAR-CF and LUNAR-FLU programs.

5 unchanged sentences

Although such expenses increased during 2024 as compared to 2023, we expect that they will not increase over the next twelve months.

During the three months ended March 31, 2024, facilities and equipment expenses increased primarily due to higher rent and associated costs.

Additionally, we recognized a $0.8 million lease impairment loss during the same period due to the abandonment of one of our facilities.

Facilities and equipment expenses primarily consist of rent expense, common area maintenance charges, shipping costs, various costs of our offices and laboratories and depreciation expenses.

Facilities and equipment expenses are not expected to increase during the next twelve months.

1 unchanged sentence

General and administrative expenses primarily consist of salaries and related benefits for our executive, administrative, legal and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses.

General and administrative expenses were $14.9 million for the three months ended March 31, 2024 compared with $13.8 million in the comparable period last year.

The increase in expenses resulted primarily from increased personnel expenses due to increased salaries, increased travel and consulting expenses as well as escalated rent expense associated with our facilities.

The Company does not expect that general and administrative expenses will increase on a yearly basis from the current quarter March 31, 2024 expense trend.

General and administrative expenses were $12.3 million for the three months ended June 30, 2024 compared with $13.2 million for the three months ended June 30, 2023.

The decrease in expenses resulted primarily from decreased personnel expenses of $0.6 million, decreased facilities expenses of $0.3 million and decreased travel expenses of $0.2 million.

The overall decrease was offset by an increase of $0.2 million in legal expenses.

General and administrative expenses were $27.2 million for the six months ended June 30, 2024 compared with $27.0 million in the six months ended June 30, 2023.

The increase in expenses resulted primarily from a $0.5 million increase in accounting and legal fees, a $0.5 million increase in supplies and a $0.1 million increase in software expense.

The increase was offset by a decrease of $0.6 million in personnel related expenses and a decrease of $0.3 million in insurance costs.

The Company does not expect that general and administrative expenses will increase on a yearly basis from the current quarter June 30, 2024 expense trend.

Finance income (expense), net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

3 unchanged sentences

Interest income is generated on cash and cash equivalents.

The increase in interest income for the three months ended March 31, 2024 as compared to the comparable period last year was primarily the result of increased interest rates and shifting money within accounts.

Interest expense decreased as no interest expense was incurred during the first quarter of 2024.

Interest expense during the first quarter ended March 31, 2023 was incurred in conjunction with the Western Alliance Agreement and the Singapore Loan, both of which have since been terminated.

The increase in interest income for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was primarily the result of increased interest earned on investment accounts.

Interest expense during the six months ended June 30, 2023 was incurred in conjunction with the Western Alliance Agreement and the Singapore Loan, both of which have since been terminated.

Other income and expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Gain (loss) from foreign currency

(Loss) gain from foreign currency

Gain on debt extinguishment

3 unchanged sentences

Off-balance sheet arrangements

Through March 31, 2024, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Through June 30, 2024, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Liquidity and Capital Resources

From the Company’s inception through the quarter ended March 31, 2024, the Company has funded its operations principally with the proceeds from the sale of capital stock, long-term debt and revenues earned through collaboration agreements and government contracts.

Through the first quarter of 2024, we have achieved a total of approximately $420.1 million in upfront payments and milestones from CSL Seqirus, including a milestone of $19.2 million achieved in the current quarter with payment anticipated in the second quarter of 2024.

At March 31, 2024, we had $345.3 million in cash and cash equivalents and restricted cash.

From the Company’s inception through the quarter ended June 30, 2024, the Company has funded its operations principally with the proceeds from the sale of capital stock, long-term debt and revenues earned through collaboration agreements and government contracts.

Through the second quarter of 2024, we have achieved a total of approximately $437.1 million in upfront payments and milestones from CSL Seqirus, including a milestone of $17.0 million achieved in the current quarter with payment anticipated in the third quarter of 2024.

At June 30, 2024, we had $317.2 million in cash and cash equivalents and restricted cash.

CSL Seqirus, Inc.

14 unchanged sentences

If an Event of Default (as defined in the credit agreement) occurs, then all Wells Fargo Loans shall bear interest at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default.

As of March 31, 2024, no borrowings were made against the Wells Fargo Note.

The term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal.

As of June 30, 2024, no borrowings were made against the Wells Fargo Note.

The term of the agreement was originally two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal.

In June 2024, Arcturus Therapeutics and Wells Fargo entered into an amendment to the Note, whereby the term of the Note was extended by one year to April 2026.

There is no penalty for terminating the agreement.

13 unchanged sentences

General Financial Resources

A portion of our current cash balance is expected to be utilized during fiscal year 2024 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA agreement and (iv) continued exploratory activities related to our platform and other general administrative activities.

A portion of our current cash balance is expected to be utilized during fiscal year 2024 to fund (i) advances to our LUNAR-CF program in clinical trials, (ii) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA Contract and (iv) continued exploratory activities related to our platform and other general administrative activities.

Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control.

3 unchanged sentences

We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development.

Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement and identifying and developing successful mRNA drug and vaccine candidates.

Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement, successful

clinical trials for OTC and CF and identifying and developing successful mRNA drug and vaccine candidates.

If we are not able to achieve planned milestones or incur costs in excess of our forecasts, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.

11 unchanged sentences

• the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish, including those with CSL Seqirus and CSL Seqirus’ arrangement with Meiji, and any related payments thereunder;

• the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates;

• the initiation, progress, timing and successful completion of preclinical studies and clinical trials for our product candidates, including OTC and CF;

• the number and characteristics of product candidates that we pursue;

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis