What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-05 · 128 added, 123 removed, 181 unchanged (58% of the section changed)

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

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

for the three- and nine-month periods ended September 30, 2024.

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

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This report includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

This report also includes certain statements based solely on information, reports and studies provided by or conducted by Seqirus, Inc.

and Meiji Holdings Co., Ltd or their respective affiliates.

You should read this report and the documents that we reference in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.

You should also review the factors and risks we describe in the reports we will file or submit from time to time with the Commission after the date of this report.

We are a global messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases.

We are a commercial messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases.

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 (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.

Our proprietary self-amplifying mRNA technology (STARR ® technology) has been demonstrated to be 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 in September 2024 KOSTAIVE became the world’s first approved and commercially available 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.

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Under the framework of our collaboration with CSL Seqirus, we continue the development of the COVID-19 vaccine to establish a differentiated platform and address routine recommendations for periodic vaccine composition updates in a timely manner.

In November 2023, ARCT-154, our self-amplifying RNA (sa-mRNA) vaccine, received marketing authorization approval from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan.

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.

In November 2023, KOSTAIVE ® , a self-amplifying messenger RNA (sa-mRNA) vaccine, received marketing authorization approval from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan for adults 18 years and older.

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

KOSTAIVE ® is the brand name approved in Japan for ARCT-154, which is the version of the sa-mRNA COVID vaccine encoding the ancestral strain of SARS-CoV-2, and for updated variant-specific versions of this vaccine.

We may use KOSTAIVE or the specific internally generated name, such as ARCT-154, ARCT-2302 and ARCT-2303, to identify the vaccine.

In September 2024, we announced that Japan’s Ministry of Health, Labor and Welfare (MHLW) granted approval and authorization for an updated version of KOSTAIVE, targeted to protect against the JN.1 lineage of Omicron subvariants for adults 18 years of age and older.

CSL’s exclusive partner in Japan, Meiji Holdings Co., Ltd (“Meiji”) began distributing the updated vaccine in Japan in October 2024, marking the world’s first commercially available sa-mRNA COVID-19 vaccine for adults 18 and older.

The approval was based on manufacturing data demonstrating the quality and consistency of the vaccine product, non-clinical immunogenicity data against JN.1 lineage of Omicron subvariants of KOSTAIVE (JN.1), and clinical evidence supporting the safety and immunogenicity of KOSTAIVE (bivalent, BA.4/5 and ancestral strain).

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

Pivotal Phase 3 Non-Inferiority Study of ARCT-154 in Japan

Meiji Holdings Co., Ltd.

Earlier this year, CSL Seqirus’ partner Meiji Seika Pharma announced that it submitted a partial change application for an amendment to the manufacturing and marketing approval of KOSTAIVE ® to include manufacturing sites in Japan, including ARCALIS, Inc., Arcturus’ manufacturing joint venture in Japan.

Meiji Seika Pharma will begin selling domestically produced KOSTAIVE ® this season.

Clinical Studies of KOSTAIVE (COVID-19 vaccine)

In connection with our collaboration with CSL Seqirus, we continue to collect data from the various ongoing studies described below.

Pivotal Phase 3 Non-Inferiority Study of KOSTAIVE (ARCT-154) in Japan

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.

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).

The study targeted 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 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 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 (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.

These additional data demonstrate the extended persistence of neutralizing antibodies after administration with 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.

On September 30, 2024, we announced results from this study demonstrating that ARCT-154 maintained superior immunogenicity compared to the conventional mRNA vaccine (COMIRNATY) for up to 12 months against Wuhan-Hu-1, Omicron BA.4-5 and certain other COVID-19 variants, and at one-sixth the dose of the comparator (5µg vs 30µg, respectively).

In October 2024, Lancet Infectious Diseases published the follow-up article ‘12-month persistence of immune responses to self-amplifying mRNA COVID-19 vaccines:

ARCT-154 versus BNT162b2 vaccine’ ( https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(24)00615-7/fulltext ), which confirmed a better neutralizing immune response against a panel of SARS-CoV-2 strains in pre-immunized Japanese adults boosted with ARCT-154 compared with the conventional mRNA vaccine, BNT162b2, which persisted up to 12 months post-vaccination, including in those age 50 years and older.

Phase 3 Study of Bivalent Version of COVID-19 KOSTAIVE in Japan

On September 29, 2023, Meiji initiated an additional Phase 3 clinical study with ARCT-2301, a bivalent version of KOSTAIVE (ancestral strain 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 study endpoint (non-inferiority).

The study enrolled 930 healthy adults and individuals with comorbidities, who previously received three to five doses of mRNA COVID-19 vaccines, including the last booster at least three months prior to recruitment.

The study compares the investigational vaccine (ARCT-2301) and COMIRNATY (ancestral strain and BA.4/5) to evaluate safety and immunogenicity between observer-blind groups.

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).

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

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

The results of this study of the bivalent version of our COVID-19 vaccine candidate were not required for approval of ARCT-154 in Japan but will facilitate the timely release of future seasonal updates of the COVID-19 vaccine.

Geometric mean titers (GMT) of surrogate neutralizing antibodies at Days 1 (baseline) and 29, and geometric mean-fold rises (GMFR) in titers from Day 1 to Day 29;

B) GMT Ratio;

C) seroresponse rates (SRR) at Day 29;

D) SRR Difference – Study ARCT-2301-J01.

GMT – Geometric Mean Titer;

SRR – seroresponse rate.

All values are from the Per Protocol Subset 1 (PPS-1) and are shown with 95% confidence intervals in parentheses.

Solid circles ( ● ) represent the Wuhan variant, open circles ( ○ ) represent the Omicron BA.4/5 variant, and open squares ( ☐ ) represent the Omicron XBB.1.5 variant.

Vertical lines represent the threshold for achieving the non-inferiority and superiority comparisons of ARCT-154 to Comirnaty .

Bivalent ARCT-2301, when administered intramuscularly as a booster dose in subjects who had received three to five doses of authorized mRNA COVID-19 vaccines at least three months before the recruitment, demonstrated immunological superiority over the comparator vaccine (COMIRNATY ® bivalent:

Wuhan strain/Omicron strain BA.4/5), as measured by GMT ratios and seroresponse rates differences for both vaccine strains (prototype Wuhan strain and Omicron BA.4/65 variant).

In addition, ARCT-2301 induced a higher immune response against the epidemiologically dominant Omicron XBB.1.5 variant.

Phase 3 Study in Southern Hemisphere of Monovalent XBB1.5 COVID-19 Vaccine Candidate

In September 2024, we announced 6-month immunogenicity and safety results from this study.

As with the monovalent vaccine, the bivalent sa-mRNA formulation demonstrates superior immunogenicity over the conventional bivalent mRNA vaccine

COMIRNATY, a higher immune response persisting up to six months after a booster dose, and improved breadth, supporting the robustness of the sa-mRNA vaccine platform for future vaccine strain updates.

The study results were presented at OPTIONS XII for the Control of Influenza conference in Brisbane, Australia, in September 2024.

Phase 3 Study in Southern Hemisphere of KOSTAIVE (Monovalent XBB1.5)

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 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.

The study aims to generate additional immunogenicity and safety data in multiple ethnicities to support regulatory filings in the US and 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

LUNAR-qsFLU (Quadrivalent Seasonal Influenza)

The study results show that all four primary study objectives and key secondary study objectives were met.

ARCT-2303 demonstrated superior immune response compared to ARCT-154 as measured by neutralizing antibodies against Omicron XBB.1.5 in terms of GMT ratio and SCR difference.

Co-administration of ARCT-2303 and quadrivalent influenza vaccine (QIV;

Flucelvax, CSL) in adults 18-64 years old showed noninferior immune response compared to standalone QIV.

Co-administration of ARCT-2303 and QIV also showed noninferior immune response compared to standalone ARCT-2303.

Co-administration of ARCT-2303 and adjuvanted QIV (Fluad, CSL) in adults 65 years of age and above showed similar results for co-administered and separately administered groups.

The safety and reactogenicity of co-administered vaccines were comparable with standalone administration.

No safety concerns were raised based on the study results.

Seasonal Flu Collaboration Program Updates

Our LUNAR-qsFLU (qs;

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This platform has been shown to deliver effective protection against COVID-19 and has been optimized to elicit robust immunogenicity with acceptable reactogenicity at a lower dose than conventional mRNA vaccines with the objective of creating a highly effective influenza vaccine for use in general and high-risk populations.

Working with CSL Seqirus, we generated a comprehensive non-clinical data package to support the initiation of the Phase 1 clinical trial with a novel influenza mRNA vaccine candidate.

Working with CSL Seqirus, we generated a comprehensive non-clinical data package to support the initiation of the Phase 1 clinical trial with a novel influenza sa-mRNA vaccine candidate.

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

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

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The program includes all non-clinical, manufacturing, and regulatory support to advance a vaccine to protect against disease caused by H5N1 highly pathogenic avian influenza.

A pre-IND meeting was granted and Written Response Only (“WRO”) was received for integration into future development plans.

A pre-IND meeting was

granted, and a Written Response Only (“WRO”) was received for integration into future development plans.

Nonclinical safety studies have been completed that will enable the Phase 1 clinical trial.

The IND application was submitted on October 9, 2024.

Enrollment for a Phase 1 clinical trial designed to evaluate the safety and immunogenicity of ARCT-2304 (LUNAR-pandFLU candidate vaccine) is expected to begin before the end of 2024.

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• LUNAR-OTC/ARCT-810

o A Phase 1b study in stable OTC-deficient adults completed dosing in the United States in August 2023.

The trial was designed to assess safety, tolerability and pharmacokinetics of a single dose of ARCT-810, as well as exploratory biomarkers of drug activity.

The Phase 1b study was a single ascending dose, placebo-controlled study that enrolled 16 adults with mild OTCD.

ARCT-810 was generally safe and well tolerated at doses ranging from 0.1-0.5mg/kg and no severe adverse events were observed.

Sporadic infusion-related reactions (IRRs) could be managed with symptomatic treatment and appear to be less frequent with slower infusion rates.

o A Phase 1b study in stable OTC-deficient adults was completed in the United States in September 2023.

The trial assessed safety, tolerability and pharmacokinetics of a single dose of ARCT-810, and exploratory biomarkers of drug activity.

The Phase 1b study was a single ascending dose, placebo-controlled study that enrolled 16 adults with mild OTC-deficiency.

ARCT-810 was generally safe and well tolerated at doses ranging from 0.1-0.5mg/kg and no serious or severe adverse events were observed.

Sporadic infusion-related reactions (IRRs) were managed with symptomatic treatment and appeared to be less frequent with slower infusion rates.

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 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.

Study results were presented at the Society for Inherited Metabolic Disorders meeting in Charlotte, North Carolina in April 2024 and at the annual symposium for the Society for the Study of Inborn Errors of Metabolism in Porto, Portugal in August 2024.

o A Phase 2 double-blind study of ARCT-810 in OTC-deficient adolescents and adults in the European Union and United Kingdom completed dosing of eight subjects in August 2024 at the 0.3 mg/kg dose level.

The participants in this group were randomized 3:1 to receive 6 doses of ARCT-810 or placebo administered every 14 days, and follow-up is ongoing.

o We are expanding the Phase 2 clinical program of ARCT-810 to the U.S.

with an open-label, multiple-dose study to evaluate pharmacodynamics and safety in adult and adolescent patients requiring clinical management for OTC-deficiency.

The study is currently recruiting patients.

o ARCT-810 was granted Orphan Drug Designation in June 2019, Fast Track Designation in May 2023, and Rare Pediatric Disease Designation in June 2023 by the FDA, and Orphan Medicinal Product Designation in August 2022 by the European Commission (EC).

• 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 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..

In 2023 we initiated and successfully completed a safety and tolerability Phase 1 single ascending dose study of ARCT-032 (LUNAR-CF), our mRNA therapeutic candidate for cystic fibrosis (CF).

Thirty-two healthy participants (eight subjects in each of four dose cohorts) received a single inhaled dose of ARCT-032.

A subsequent protocol amendment to transition to a safety and tolerability Phase 1b clinical study of ARCT-032 in adults with CF received regulatory approval in August 2023 and completed dosing and follow-up visits for 7 CF participants in August 2024, with each CF participant having received two administrations of ARCT-032 separated by two days.

o In the Phase 1/1b clinical study, ARCT-032 was generally safe and well tolerated in healthy volunteers and in the participants with CF.

Of the seven total CF participants in the Phase 1b study, six were being treated with CFTR modulators while one subject had Class I mutations that do not benefit from modulator therapy.

No serious or severe adverse events (SAEs) were observed, and the safety profile was similar between healthy volunteers and CF participants.

Mild, transient events of elevated temperature or feeling hot accompanied by other nonspecific symptoms were observed at dose levels that are higher than those planned for the Phase 2 study.

In the CF subjects, lung function measured over 8 days did not demonstrate a discernable pattern or safety concern after 2 doses of

Preliminary findings from the study were presented at the European CF Society Conference in June 2024 in Glasgow, Scotland, and at the North American CF Conference in September 2024 in Boston, MA.

o We submitted an IND application at the end of July 2024, and on August 29, 2024, the FDA issued a “Study May Proceed” notification 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 two-administration Phase 1b study.

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 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 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.

Updates on Research and Platform Activities

We continue to invest and improve our LUNAR-lipid mediated delivery of mRNA with continuous improvements in our mRNA and sa-mRNA platforms in conjunction with improvements in our next generation proprietary lipids to improve targeting, efficacy and safety profiles for both our vaccine and therapeutic protein platforms.

This investment has led to key innovations ensuring that our LUNAR formulated drug product candidates have optimal characteristics for therapeutic use, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms.

As such, we consider ourselves a leader in the research and development of mRNA therapeutics for multiple indications.

We continue to conduct exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR ® and STARR ® platforms could potentially be useful for identification and development of additional products for our portfolio.

Discovery Programs – Vaccine Programs (Lyme Disease and Gonorrhea)

Based on the clinical and regulatory validation of LUNAR and STARR technologies provided by the approval of ARCT-154, our next-generation vaccine for COVID-19, we have initiated new vaccine discovery programs for Lyme disease and gonorrhea.

The new discovery programs rely on the evidence of superior immunogenicity, durability, and breadth of immune response compared to conventional mRNA vaccines, as observed in the COVID-19 program.

Based on the clinical and regulatory validation of LUNAR and STARR technologies provided by the approval of KOSTAIVE, a self-amplifying messenger RNA (sa-mRNA) vaccine for COVID-19, we initiated new vaccine discovery programs earlier this year for Lyme disease and gonorrhea and continue to progress such programs.

The discovery programs rely on the evidence of superior immunogenicity, durability, and breadth of immune response compared to conventional mRNA vaccines, as observed in the COVID-19 program.

Lyme disease is a bacterial infection and is the most common vector-borne disease in the United States.

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With such collaborations we have established an Integrated Global Supply Chain Network with our primary and secondary sourcing contract development & manufacturing organizations (CDMOs) based in the United States, EU and Asia for producing critical raw materials, drug substance, and packaged finished product.

As the market for COVID vaccines shifts from multi-dose vial formats to lower and single-dose vial formats, we continue, with our collaborator CSL Seqirus, to evaluate and advance manufacturing process and capabilities and technology transfers, and prepare for stockpiling and commercialization of COVID vaccines.

As the market for COVID vaccines shifts from multi-dose vial to lower and single-dose vial presentation, we continue, with our collaborator CSL Seqirus, to evaluate and pursue different forms of drug product presentations, advance manufacturing process and capabilities and technology transfers, and prepare for stockpiling and commercialization of COVID vaccines.

Results of Operations

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We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees, royalties on future sales, consulting fees and payments for technology transfers.

We expect that sales of KOSTAIVE ® by Meiji Holdings Co., Ltd, CSL’s partner in Japan will commence in the fourth quarter of 2024 in Japan.

However, revenues for us will be subject to a profit sharing mechanism whereby development costs are deducted from sales revenues prior to any distribution to the Company.

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

Three Months Ended June 30,

Three Months Ended September 30,

(in thousands)

* 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,

Revenue decreased by $3.5 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

The decline was mostly attributable to a lower milestone achievement from the CSL agreement during the third quarter of 2024.

This decrease was offset by revenue recognized from a supply agreement related to the commercial production of KOSTAIVE ® and an increase in revenue from the BARDA agreement during the three months ended September 30, 2024.

Nine Months Ended September 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.

Revenue decreased by $6.4 million during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The decrease was due to the timing and value of milestone achievements and the achievement of a conditional payment during the nine months ended 2023, offset by revenue from supply agreements during the current year.

Additionally, there was a decrease in revenue recognized under other agreements during the nine months ended September 30, 2024 due to lower activity or completion of collaboration agreements.

The total decrease in revenue was offset by an increase in revenue recognized from the BARDA Contract.

Operating expenses

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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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 $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.

Research and development expenses were $39.1 million for the three months ended September 30, 2024, compared with $51.1 million for the three months ended September 30, 2023.

The decrease was due to high manufacturing expenses in 2023 for Meiji supply batches and other clinical trial batches which were not incurred in 2024.

The decrease was also due to lower facilities and equipment expenses in 2024.

This was offset by an increase in clinical trial related expenses.

Research and development expenses for the nine months ended September 30, 2024 were $151.4 million compared with $155.5 million for the nine months ended September 30, 2023.

The decrease was due to lower manufacturing expenses in 2023 for Meiji supply batches and other clinical trial batches which were not incurred in 2024.

Additionally, there was a decrease in consulting expenses as well as facilities and equipment expenses in 2024.

This was offset by increased clinical related expenses for the COVID program and increased personnel related expenses in 2024.

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.

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The expenses for early-stage programs and discovery technologies primarily consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees.

Both early-stage programs and discovery technologies expenses are expected to steadily increase over the coming years.

Early-stage programs and discovery technologies expenses are expected to steadily increase over the coming years.

Personnel related expenses primarily consist of employee salaries and benefits, share-based compensation and consultants.

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

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 primarily consist of rent expenses, 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.

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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 $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.

General and administrative expenses were $13.3 million for the three months ended September 30, 2024 compared with $13.4 million for the three months ended September 30, 2023.

The decrease in general and administrative expenses was attributable to decreased personnel expenses, partially offset by increased legal and other professional expenses, facilities expenses and other various general and administrative expenses.

General and administrative expenses for the nine months ended September 30, 2024 remained consistent compared to the nine months ended September 30, 2023.

The Company expects that general and administrative expenses will remain relatively consistent over the next fiscal year with the current pipeline.

Finance income (expense), net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Interest expense

* Greater than 100%

Interest income is generated on cash and cash equivalents.

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.

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

The increase in interest income for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily the result of increased interest earned on investment accounts caused by higher interest rates.

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

Other income and expense

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Off-balance sheet arrangements

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.

Through September 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 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.

From the Company’s inception through the quarter ended September 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 third quarter of 2024, we have achieved a total of approximately $462.1 million in upfront payments and milestones from CSL Seqirus, including a milestone of $25.0 million achieved in the current quarter with payment anticipated in the fourth quarter of 2024.

At September 30, 2024, we had $294.1 million in cash and cash equivalents and restricted cash.

CSL Seqirus, Inc.

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Wells Fargo Credit Agreement

On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc.

On April 21, 2023, our wholly-owned subsidiary, Arcturus Therapeutics, Inc.

entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo agreed to make a $50.0 million revolving credit line available to the Company (the “Wells Fargo Loan”) and each Wells Fargo Loan evidenced by a revolving line of credit note (the “Note”).

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

As of September 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.

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There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Note.

As collateral, the Company has agreed to pledge $55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

As collateral, we agreed to pledge $55.0 million in cash to be held in our securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

Grant from the Biomedical Advanced Research and Development Authority

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It provides for reimbursement by BARDA of our permitted costs up to $63.2 million.

As of September 30, 2024, the remaining available funding net of revenue earned was $41.6 million.

Vinbiocare Agreement

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In October 2022, in association with the termination of the Vinbiocare License and Supply Agreements, we signed the Vinbiocare Support Agreement with Vinbiocare which continues Vinbiocare’s clinical obligations and reserved a portion of the original $40.0 million upfront payment received from the License and Supply Agreements to be paid over the future periods.

The Vinbiocare Support Agreement requires us to pay to Vinbiocare certain limited payments, including upon the occurrence of specified events through the first quarter of 2025.

The Vinbiocare Support Agreement requires us to pay Vinbiocare certain limited payments, including upon the occurrence of specified events through the first quarter of 2025.

Vinbiocare is also eligible to receive a single digit percentage of amounts received by Arcturus on net sales, if any, of ARCT-154 (or next-generation COVID vaccine) up to a capped amount.

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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, 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.

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.

Funding Requirements

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Our future funding requirements are difficult to forecast and will depend on many factors, including the following:

• the development of our LUNAR-COV19 and LUNAR-FLU vaccine candidates;

• the development and commercialization of our LUNAR-COV19 and LUNAR-FLU vaccine candidates;

• the achievement of milestones under our strategic alliance agreements;

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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