Arcturus (ARCT) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Vice President, Head of Investor Relations - Neda Safarzadeh
• President and Chief Executive Officer - Joseph Payne
• Chief Medical Officer - Alan Cohen
• Chief Financial Officer - Dennis Mulroy
• Chief Scientific Officer and Chief Operating Officer - Pad Chivukula

TAKEAWAYS

• Revenue -- $3 million for the three months and $5 million for the six months ended June 30, 2026, compared to $28.3 million and $57.7 million in the prior-year periods, reflecting lower recognition under the CSL collaboration during the termination process.
• Net Loss -- $23.8 million, or a loss of $0.84 per share, for the quarter, compared to a net loss of $9.2 million, or $0.34 per share, in the prior-year period.
• Cash and Cash Equivalents -- $191.5 million as of June 30, 2026, representing a decrease of $39.4 million from Dec. 31, 2025, driven by ongoing clinical development activities.
• Cash Runway -- Management projected that current resources provide a runway of over 2.5 years through year-end 2028, enabling the company to reach clinical and regulatory milestones.
• Research and Development Expenses -- $17.5 million for the quarter, a decrease from $29.6 million in the prior-year period, primarily due to reduced salaries, wages, benefits, and facilities costs.
• General and Administrative Expenses -- $11 million for the quarter, compared to $10.3 million in the prior-year period, with the increase driven by legal fees.
• CSL Settlement Terms -- Arcturus regained global rights to KOSTAIVE and received a one-time cash payment of $12 million following the termination of its sa-mRNA collaboration.
• Liability Release -- The company was released from liabilities worth approximately $16 million associated with an R&D credit as part of the CSL settlement.
• ARCT-032 Phase II Enrollment -- Cohort 4 is evaluating 10 milligrams of the inhaled mRNA therapeutic daily over a 12-week treatment period to monitor pulmonary function and safety.
• Phase III Decision Timeline -- Management expects to decide on advancing the cystic fibrosis program into Phase III in Q4 2026.
• Thermo Fisher Strategic Support -- Advancing to Phase III for ARCT-032 triggers manufacturing support, clinical research, and related services from Thermo Fisher.
• ARCT-032 Safety Data -- The candidate has been administered to more than 50 participants at doses up to 15 milligrams for 28 days without requiring steroid treatment.
• ARCT-810 Operational Milestone -- Enrollment and dosing for the Phase II ornithine transcarbamylase (OTC) deficiency study were completed during the quarter.
• OTC Data Readout -- Management expects to communicate Phase II clinical data and the regulatory plan for the OTC program in Q3 2026.
• Vaccine Portfolio Expansion -- Regained global rights include vaccines for seasonal influenza, pandemic influenza, RSV, and EBV.
• Japan Commercial Strategy -- Arcturus is transitioning from a three-way to a two-way profit share for KOSTAIVE in Japan through its partnership with Meiji Seika Pharma.
• Pandemic Flu Development -- Phase I clinical study for ARCT-2304 is completed, with results accepted for publication in Nature Communications and EMA scientific advice planned for Q4 2026.
• CF Enrollment Geographies -- Screening expanded to Israel and Turkey, where Class I mutations represent 30% to 40% of the cystic fibrosis population.
• Manufacturing Exclusivity -- Subject to regulatory approval, Thermo Fisher will receive exclusive commercial manufacturing rights for ARCT-032.
• OTC Regulatory Data -- The upcoming Q3 2026 update will include supplementary data requested by the FDA during a Type C meeting held earlier in 2026.
• Clinical Site footprint -- The company is utilizing international sites to support recruitment efficiency due to the high prevalence of null mutations in specific Eastern Mediterranean regions.
• LCI Measurement -- The Phase II CF study is utilizing lung clearance index as a sensitive measure of changes in the smallest airways where early disease occurs.
• CF Foundation Collaboration -- Arcturus is leveraging data from the Foundation-funded REACH study as a natural control for its adult cystic fibrosis patient population.

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RISKS

• CEO Payne stated, "It's been decades of failures of inhaled therapeutics, and it's always been attributed to failures in toxicology and tolerability," emphasizing the historical difficulty of maintaining particle integrity during aerosolization.
• CMO Cohen noted the progressive nature of the target disease, stating, "the burden of this disease is remarkable, and it's consistently diminishing their baseline lung function day after day, year after year."
• CFO Mulroy noted that lower revenue recognition was a direct result of progressing toward the termination of the CSL collaboration and regaining asset rights.

SUMMARY

Arcturus Therapeutics reported a strategic shift following the termination of its sa-mRNA collaboration with CSL Seqirus, regaining full global rights to its vaccine platform and KOSTAIVE product. Management indicated that this transition allows for increased strategic control over the validated vaccine platform, including seasonal and pandemic influenza programs. The company reported that its rare disease pipeline remains the primary focus, with the cystic fibrosis program nearing a Phase III decision in Q4 2026 and the OTC deficiency program having completed enrollment and dosing. Financial results showed a decrease in revenue due to the partnership termination, but the company maintains a cash runway through 2028 supported by disciplined spending and manufacturing contributions from Thermo Fisher.

• CEO Payne characterized the regained strategic control of the vaccine platform as "an exciting opportunity" for the company to address future epidemics of infectious disease.
• Management confirmed that the regulatory path forward for KOSTAIVE in the United States is "clearly understood" following regular interactions with the FDA.
• CEO Payne attributed the safety profile of ARCT-032 to a proprietary lipid nanoparticle that provides "handles for the body to degrade" and remains non-accumulating.
• The company is actively supporting Meiji Seika Pharma in Japan for the upcoming 2026 to 2027 fall vaccination season with doses and manufacturing support.
• CMO Cohen stated that the company is "laser focused on generating the data needed to support the Phase III decision" for the cystic fibrosis program.
• The termination agreement with CSL resolves an arbitration regarding a European regulatory approval milestone payment.

INDUSTRY GLOSSARY

• sa-mRNA: Self-amplifying messenger RNA, a technology designed to allow the body to produce more of a therapeutic protein from a smaller dose compared to traditional mRNA.
• LUNAR: Arcturus' proprietary lipid-mediated delivery system used for transporting RNA medicines to target cells.
• OTC Deficiency: Ornithine transcarbamylase deficiency, a rare genetic disorder where ammonia accumulates in the blood to toxic levels.
• ppFEV1: Percent predicted Forced Expiratory Volume in one second, a standard measurement used to assess lung function.
• LCI: Lung Clearance Index, a measure of gas distribution in the lungs that can detect early airway disease more sensitively than traditional spirometry.
• ARCT-032: An inhaled mRNA therapeutic candidate developed by Arcturus specifically for the treatment of cystic fibrosis.
• ARCT-810: An mRNA therapeutic candidate developed by Arcturus for the treatment of ornithine transcarbamylase deficiency.

Full Conference Call Transcript

Operator: Hello and welcome everyone joining today's Arcturus Therapeutics Second Quarter 2026 Earnings Call. [Operator Instructions] Please note this call is being recorded and we are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Neda Safarzadeh, Vice President, Head of Investor Relations.

Neda Safarzadeh: Thank you, operator. Good afternoon and welcome to Arcturus Therapeutics quarterly financial update and pipeline progress call. Today's call will be led by Joe Payne, our President and CEO; Dr. Alan Cohen, our Chief Medical Officer; and Dennis Mulroy, our Chief Financial Officer. Dr. Pad Chivukula, our CSO and COO, will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance.

They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factor section in our most recent Form 10-K and in subsequent filings with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements. And with that, I will now turn the call over to Joe.

Joseph Payne: Thank you, Neda, and it's good to be with you again, everybody. The second quarter of 2026 was marked by continued execution across our rare disease pipeline and important strategic developments for Arcturus' vaccine franchise. Today, I'll provide updates on our rare disease programs, ARCT-032 and ARCT-810, and summarize today's good news regarding our vaccine enterprise. I will then turn the call over to Alan for additional clinical updates and to Dennis to review our financial results. Starting with ARCT-032, our inhaled mRNA therapeutic candidate for CF. During the quarter, our Phase II study continued to advance on schedule with active screening and enrollment ongoing across sites in the United States, Israel, and Turkey.

These international sites are important for our recruitment strategy, given the higher prevalence of individuals living with Class I CF in Israel and Turkey. As a reminder, cohort 4 is evaluating 10 milligrams of ARCT-032 administered daily by inhalation over a 12-week treatment period. The study is monitoring for safety and evidence of early clinical benefit, including pulmonary function measures such as percent predicted FEV1 and lung clearance index, or LCI. In addition, quality of life measures and high-resolution CT imaging data are being collected. The decision to advance our CF program into Phase III is expected in the fourth quarter, or Q4 2026.

If Arcturus decides to proceed into a Phase III trial, this decision triggers additional and very meaningful contributions from Thermo Fisher, including manufacturing support, clinical research, and related services. Turning to ARCT-810, this is our mRNA therapeutic candidate for ornithine transcarbamylase deficiency or OTC deficiency. We are pleased to update the market today that we've completed enrollment in our ongoing Phase II study, and all enrolled subjects have completed study drug dosing. This represents an important operational milestone for our OTC program. And with the dosing phase of the study completed, our team is now evaluating the Phase II clinical data, along with the supplementary data requested by the FDA in the Type C meeting earlier this year.

These data will inform upcoming regulatory discussions across both adult and pediatric development. We expect to communicate the Phase II clinical study data later this year in Q3 2026. Concurrent with the data readout, we will provide additional details regarding the regulatory path forward for our OTC deficiency program. Now on to our vaccine division. Today we announced the conclusion of our sa-mRNA collaboration with CSL Seqirus. And on behalf of Arcturus, I wanted to express sincere gratitude to the outstanding team at CSL. They've been a great partner to help shepherd this first-in-class next-generation sa-mRNA technology to where it is today, a validated platform with approvals in over 30 countries.

We are pleased to regain global rights to our commercial COVID vaccine product, KOSTAIVE, and to our self-amplifying mRNA platform. Having strategic control of this validated vaccine platform is an exciting opportunity for our company. The Arcturus sa-mRNA platform is validated. It's proven to be efficacious with an immune response that is durable and superior in comparative studies. It's been reviewed by several regulatory agencies to be safe and well-tolerated. The manufacturing process is commercial-ready, scalable, fast, with lower COGS attributed to a significantly lower dose level.

Several global regulatory agencies have reviewed and approved Arcturus' sa-mRNA vaccine platform as represented by KOSTAIVE, which has been approved for licensure in Europe, Japan, and more recently the United Kingdom, with the regulatory path forward into the United States also clearly understood. The Arcturus vaccine platform is pandemic-ready. The U.S. government is keenly aware of this next-generation sa-mRNA platform. It is likely not a matter of if, but rather a matter of when this platform will be called upon to address future epidemics of infectious disease. Under the agreement, Arcturus regained global rights to KOSTAIVE and the broader infectious disease vaccine portfolio, including seasonal influenza, pandemic influenza, RSV, and EBV vaccine programs.

The agreement also resolves the arbitration related to European regulatory approval milestone payment. CSL Seqirus wired a one-time cash payment of $12 million to Arcturus, and Arcturus is released from liabilities, including those associated with an R&D credit, with an aggregate value of approximately $16 million. With strategic control of the portfolio returned to Arcturus, we are evaluating opportunities to maximize its future value, including further commercialization and partnering pathways. With that, I'll turn the call over to Alan for a more detailed update on our clinical programs.

Alan Cohen: Thank you, Joe, and good afternoon, everyone. From a clinical development perspective, the second quarter represented meaningful progress for both ARCT-032 and ARCT-810. Beginning with our CF program, ARCT-032, our ongoing Phase II study continues to enroll people living with cystic fibrosis who have Class I mutations. Enrollment remains on schedule. With active screening and enrollment underway across sites in the United States, Israel, and Turkey. The study is designed to evaluate daily inhaled dosing of 10 milligrams over a 12-week treatment period. It continues to assess safety as well as evidence of early clinical benefit, including pulmonary function measures such as changes in percent predicted FEV1 and lung clearance index, quality of life measures, and high-resolution CT scan imaging.

One important development this quarter was the expansion of screening and enrollment activities beyond the United States into the Eastern Mediterranean region. Israel and Turkey are geographies with a high prevalence of individuals with CF Class I or null mutations, which will meaningfully support our recruitment efforts and efficiencies for this study. Unlike the United States, where up to 10% of people with CF are ineligible for modulators due to null mutations, up to 30% to 40% of people with CF have null mutations and are eligible for consideration of enrollment in our ARCT-032 study from Turkey and Israel, respectively.

Clinical execution remains on schedule, and we are laser focused on generating the data needed to support the Phase III decision expected in Q4 2026. Turning to our OTC deficiency program, ARCT-810. Within the quarter, we completed enrollment of the ongoing Phase II study, and all enrolled subjects completed study drug dosing. This is an important operational milestone and allows us to now focus on evaluating the supplementary data generated from the enrolled study population. We remain grateful for the continuing support, ongoing encouragement, and strong engagement on behalf of our ARCT-810 OTC deficiency study by the patients, their families, and the rare disease care community. Thank you for your collective help and interest in our development program.

Our current efforts are focused on data review, preparation for upcoming regulatory interactions, and planning for an End-of-Phase II meeting regarding the path forward across both adult and pediatric development. We expect to communicate both the data and regulatory plan for the OTC deficiency program in Q3 2026. Across both our rare disease programs, our focus remains on disciplined clinical execution, quality data generation, and productive regulatory engagement to support efficient development decisions. With that, I will turn the call over to Dennis.

Dennis Mulroy: Thanks, Alan, and good afternoon, everyone. Our press release issued earlier today includes financial statements for the 3 and 6 months ended June 30, 2026, and provides a summary and analysis of year-over-year performance. Please also reference our Form 10-Q for more details on our financial performance. Cash and cash equivalents were $191.5 million as of June 30, 2026, and $230.8 million on December 31, 2025, for a decrease of $39.3 (sic) [ $39.4 million ] million over the first half of 2026. Revenue was $3 million and $5 million for the 3 and 6 months ended June 30, 2026, compared to $28.3 million and $57.7 million in the comparable periods last year.

Lower revenue was recognized under the CSL collaboration as Arcturus progressed towards termination of the agreement and regaining rights to KOSTAIVE and its broader infectious disease vaccine portfolio. Research and development expenses were $17.5 million and $39 million for the 3 and 6 months ended June 30, 2026, compared with $29.6 million and $64.5 million for the corresponding periods in 2025. The decreases were primarily driven by lower research and development spending, including reduced salaries, wages, benefits, and facilities costs as the Company continues to advance its CF and OTC programs while maintaining its disciplined approach to capital allocation.

General and administrative expenses were $11 million and $20.5 million for the 3 and 6 months ended June 30, 2026, compared with $10.3 million and $21.7 million in the comparable periods last year. Overall, general and administrative expenses remained relatively consistent across periods with a slight quarter-to-quarter increase due to legal fees partially offset by reduced spending in salaries, wages, benefits, and facilities costs. We remain focused on disciplined execution and capital allocation as we advance our rare disease programs. The CSL Seqirus termination and settlement agreement strengthens our financial position as we regain control of those assets, and the Thermo Fisher collaboration funds and supports execution of late-stage development of our CF program.

We continue to maintain a strong balance sheet and cash runway of over 2.5 years through year-end 2028, allowing the company to reach important clinical and regulatory milestones for its rare disease pipeline. With that, I'll pass the call back to Joe.

Joseph Payne: Thank you, Dennis. Arcturus continues to execute across our rare disease therapeutics portfolio while strengthening the long-term strategic position of the company. With enrollment progressing in our Phase II ARCT-032 study and completion of enrollment and dosing of ARCT-810 and the return of strategic control of our vaccine portfolios, we remain focused on advancing important clinical, regulatory, and corporate milestones through the remainder of 2026. And with that, let's turn the call over to the operator for questions.

Operator: [Operator Instructions] We'll take our first question from Lili Nsongo with Leerink Partners. Please go ahead.

Lili Nsongo: Hi, good afternoon. Thank you for the update on the quarter. Just thinking about the OTC program, could you maybe provide us a little bit of detail and an overview of the data we should expect at the upcoming readout later this quarter? Would it be solely the U.S. pediatric or U.S. adolescent and adult patient or would we also see a longer-term update from the European patients?

Joseph Payne: Hi, Lili. Thanks for the question. Yes, with dosing completed, you're right. We are preparing for this data disclosure later this quarter. We're evaluating the Phase II clinical data, which includes the U.S. and European dataset. The new data, of course, will be the most recent patients that have added and completed dosing here in the United States. But it will also include supplementary data that was requested by the FDA in the Type C meeting earlier this year. And so we just intend to share a fulsome update on the OTC program that includes not only the Phase II data, but the requested Type C data, and providing additional detail with respect to the regulatory path forward.

I'll leave it at that.

Lili Nsongo: Great, thank you. Maybe as a follow-up, still staying with OTC, do you view diet liberalization as the bar for success, or should we be looking maybe at the biomarker level?

Joseph Payne: With respect to biomarker levels, yes. Well, I know the biomarkers being evaluated and measured are ammonia and glutamine and, of course, urea itself. But maybe, Alan, you can comment or address the rest of the question.

Alan Cohen: Yes, great question. I think the two elements that are going to be most important are not just the biomarkers. They're certainly important because it speaks to mode of action, but also how these patients feel as well as function. So it'll be the totality of the data that we've been able to generate up to this point, not only relating to safety and tolerability, but also biomarkers, as Joe just mentioned, most notably ammonia levels and glutamine, but also the additional quality of life and functional measures that we're collecting.

So it really will be the totality of all the data is what the agency is interested in wanting to see and which is obviously important to move our program forward.

Operator: We'll take our next question from Pete Stavropoulos with Cantor Fitzgerald. Please go ahead.

Pete Stavropoulos: Thank you very much. Hi, Joe and team. Congrats on the progress. I have a couple questions on the CF program. First one is, how has the cadence of enrollment been? And will you wait for all the patients to complete the study before data disclosure, or is there a possibility of an interim look? And are there plans to adjust the protocol to allow dosing past 12 weeks or 3 months?

Joseph Payne: Okay, there's a few questions there, but thanks, Pete, for joining the call. With respect to the cadence of enrollment, we touched on that we've expanded our footprint to ex-U.S. sites in Israel and Turkey that are assisting with that challenge. With all rare disease programs, it's all about the cadence of enrollment, and we feel confident. In fact, we've expressed considerable or a high level of confidence with respect to the cadence of enrollment rate now that Israel and Turkey are participating in this trial. With respect to the remainder of the questions, I can turn the time over to Alan.

Alan Cohen: Sure. I think, Pete, the essence of what you're asking is, when do we know that we can draw a line and total up the cumulative nature of the data we've generated and that we're satisfied that it's sufficient to make a decision. I think the data is going to drive that.

But certainly we believe that at the rate we're currently enrolling and the quality and nature of the data that we're generating, particularly now that we've added Israel and Turkey to the mix, which have such a larger preponderance of the patients we're most interested in identifying and enrolling, we believe that the time should be sufficient through a balance of Q4 to be able to accumulate the necessary data to make an informed decision on what's best for the program and for these patients moving forward.

Joseph Payne: And just to add to that, if you notice our new guidance is focusing on the decision to proceed rather than a data share or completion of enrollment. And this is simply because the next meaningful event for this program is that decision, which is guided for Q4. The decision to proceed triggers significant and meaningful contributions from Thermo in our recent deal that we announced. And so that's what we're focused on is getting sufficient data for that decision to proceed in Q4.

Pete Stavropoulos: All right, thank you for that. I do have one question on LCI being used for CF, the Phase II study. Can you just talk a little bit about this test, sort of how sensitive is it, and how variable is one close reading to another?

Joseph Payne: Yes, LCI is definitely a different lung function measurement. Alan, maybe you can comment on some key differences there with sensitivity, etc.

Alan Cohen: Yes, sure. I think the biggest unknown and the biggest challenge for using lung clearance index in adults with CF has been the lack, as you know, of normative data among the population that's of most interest. Fortunately, as you're probably aware, the CF Foundation funding the REACH study, and that study is, we're going to get an update on that at the upcoming cystic fibrosis meeting in Atlanta in October. And the foundation has been kind enough to offer to make that data available, especially for companies like ours that are working in this space, so that we can have access to that data and use it as a natural control.

So the short answer is, is that the sicker the patients are performing this test, the more challenging it is. But we're focusing in on a mix of patients within a range that we believe we should be able to get highly reproducible, meaningful data that's not only reproducible, but also is giving us a much more sensitive measure of changes in the smallest airways where the earliest changes of lung disease occur in this population. So it's adding additional nuanced information that spirometry and pulmonary function testing traditionally doesn't give us. So we think it's actually better for the patient population. It's better for our understanding of the disease itself.

And we think it might lead to another pathway forward for showing an ability to stabilize and improve lung function in this very vulnerable patient population.

Pete Stavropoulos: All right. Thank you very much for that color, and congrats once again on the quarter.

Joseph Payne: Thanks, Pete.

Operator: We'll take our next question from Yanan Zhu with Wells Fargo. Please go ahead.

Kuan-Hung Lin: Hi, thanks for taking our question. This is Kuan-Hung for Yanan, and congrats on the quarter. On the CF program. Can you share by Q4 what kind of dataset do you expect to have collected to help you make a decision? And given that this is an open-label study, are you seeing the data in real time? Any safety update you can give us? Thank you.

Joseph Payne: Yes, the data we're collecting is FEV1 and LCI data for pulmonary lung function data, and that's supplemented with high-res CT scan data and validated quality of life measures and surveys. So that's going to be the collective data that's going to be under consideration when Arcturus makes its decision to proceed. And then with respect to the open-label nature of the study, absolutely. It's an open-label study. Arcturus and the team will have access to data on an ongoing basis.

Kuan-Hung Lin: Also any safety signal you have observed or any comments on that?

Joseph Payne: Yes, with respect to CF safety, ARCT-032 is the name of our CF candidate. And this candidate, or ARCT-032, has been in over 50 participants to date, relatively ranging from all the way up to 15 milligrams for 28 days of daily dosing. And we've done so without steroid treatment before, during, or after. And this whole time being permitted by regulatory agencies to self-administer in their home, not necessarily required for these people to do so in a clinic. And we're presently active in a 12-week study.

So this is, I guess, a longer way of saying that we have a high level of confidence in our safety and tolerability of this platform, given the dose levels and the duration we've collected so far. And we hope that continues. But it is a key differentiator for our programs. So thank you for the question. You know, it's been decades of failures of inhaled therapeutics, and it's always been attributed to failures in toxicology and tolerability. Humans just don't like to inhale foreign substances. So we've overcome those challenges over the last decade of R&D.

Kuan-Hung Lin: Got it. And a quick question on OTCD. Has the E-o-P II meeting with FDA been scheduled? And what are the potential outcomes from the meeting? Thank you.

Joseph Payne: Yes, we've already highlighted and guided that we're going to have a fulsome data and regulatory path update later this quarter, and that will be the opportunity to provide some more details about that End-of-Phase II meeting. And so that will be the appropriate time to do so.

Kuan-Hung Lin: Got it. Thank you for all the color. Thanks for your questions.

Operator: We'll take our next question from Yigal Nochomovitz with Citigroup. Please go ahead.

Joohwan Kim: Hi, this is Joohwan Kim on for Yigal. Thanks so much for taking our questions. Just curious, but I'd love to hear a little bit more about the collab with Thermo. Can you tell us a little bit about how that came about and have they seen any interim Phase II data or 15-milligram data ahead of you guys making that deal?

Joseph Payne: Yes, it's a great question. So there was significant interest from multiple large manufacturers in the CF product because it's a very unique product. Unlike our vaccine, our KOSTAIVE vaccine that we just regained rights and control, that vaccine is dosed at 5 micrograms once a year. It's a very infrequent, long-duration-acting product. Unlike that product, the CF product is 10,000 micrograms daily. So because it's a significant commercial manufacturing product, a deal, then you can understand the level of competitive interest from large manufacturers. As they came together, we put forward a deal that made sense to all parties involved, and Thermo Fisher ultimately became our exclusive partner for commercial manufacturing of the CF product through that path.

Did I address your question?

Joohwan Kim: Yes, and I was just wondering, did they happen to see the interim Phase II data?

Joseph Payne: Yes, absolutely. Just like in all major deals, and this one was a significant one for us. And they went under CDA. They have access to an e-room and all the clinical data, understanding it's an open-label study. So yes, they had access to all the data.

Joohwan Kim: Got it. Thanks very much.

Operator: We'll take our next question from Myles Minter with William Blair. Please go ahead.

Jake Batchelder: Hi, this is Jake on for Myles. Thanks so much for taking our questions. One on OTC, just wanted to get a sense of the baseline hyperammonemic crisis rate in the Phase II study and how that might compare to other OTC trials to date. And then one on KOSTAIVE, you mentioned that the regulatory path for KOSTAIVE approval in the U.S. is clear. Just wanted to maybe get a little bit more color on what that path is. Thanks.

Joseph Payne: Sure. So, do you want to take that question, Alan?

Alan Cohen: Yes. So, for our current ongoing OTC program, we're dosing -- we're giving 5 doses over an approximately 12-week period of time. So, the anticipated percent and burden of exacerbations or hyper anemic (sic) [ hyperammonemic ] episodes occurring during that window, and the nature of our inclusion and exclusion criteria are really not looking to capture patients that are unstable enough that we would likely be capturing those events or looking to those events to be helpful and informative during the course of just a simple 5-dose regimen.

What we're really, our goal and objective here was to bring in patients who are on a stable protein intake, who are stable medically and functionally, but who still are burdened with OTC deficiency and are adults. The goal there being that we want to see if we can have an impact on their baseline periods of ureagenesis as related to measurements of blood ammonia and glutamine levels, as well as other trace minerals. So the short answer is that we aren't actively looking for patients who are labile enough for which to capture those events.

But obviously in longer-term studies where we would be treating patients more chronically and in particular in a pediatric population where the burden is much more problematic and the reason for our programs to want to direct towards newborns and young children who are much more vulnerable and sicker, that would clearly be a greater level of interest and focus for subsequent studies that we hope to be getting into in the near future. Does that address your question?

Jake Batchelder: Yes, and then I just wanted to ask about KOSTAIVE and the potential development in the U.S. that you referred to.

Joseph Payne: Oh, and Jake yes, we already received, you know, we had very regular interactions with the United States FDA for several years since inception of the pandemic. And then under the new administration here in the United States, there was an abrupt change in view of vaccine policy. And however, even under that new administration, we received very clear guidance as to what is needed for us to get this approved in the U.S. So what I'm communicating is that we have a very clear path of what's required, what's remaining to do to get this approved in the U.S.

Operator: We'll take our next question from Whitney Ijem with Canaccord Genuity. Please go ahead.

Whitney Ijem: Hey guys, just wanted to quickly on CF, follow up. I appreciate we're not going to necessarily see a data update in the fourth quarter, but as you announce whether or not you're moving forward into a Phase III, can you help us understand how you're thinking about like more quantitatively which endpoints are of importance and what you're looking for? And I guess, is there a scenario where maybe you're not seeing an FEV1 benefit, but you might still move forward based on something you're seeing on LCI, CT, et cetera. Thanks.

Joseph Payne: Yes, I'll begin and then provide Alan some time here too. So just to refresh, we are collecting FEV, LCI data, high-res CT scan data, and quality of life measures. What is very unique in this process is as we've engaged the FDA, we have come to realize that our technology and our product and the patients that we're pursuing are very, very unique. We're the first to do this. So in terms of what thresholds of success need to be achieved is going to be set and established by us in this process, not by historical or other precedents in the field.

And so what we've heard consistently is anything positive with respect to these, the data that we're collecting would be very well received and a significant win and exciting for the Class I CF community. There will be increased emphasis on lung function measurements, of course, like FEV and LCI. But Alan, anything to add?

Alan Cohen: Yes, I think Joe got the essence of what I'm thinking and wanted to get across. But just to reframe, remember that this population of Class I mutation patients, particularly those who are adolescent and young adults, are on average experiencing anywhere from 1% to over 2% drops in their percent predicted FEV1, just as a course of surviving annually. So just being around and doing a good job of taking care of themselves, the burden of this disease is remarkable, and it's consistently diminishing their baseline lung function day after day, year after year. So the goal here is to see if we can stabilize and improve these patients.

And it's probably going to be a measure of not just a single spirometric measure or a single change in LCI. Stabilizing this would clearly be a big step forward for these patients, also how they feel and function. So additionally, their quality-of-life measures, how they're able to maintain themselves, and their overall health and well-being will all be in the mix of the elements that we're going to be looking at to help inform us on next steps for the program.

Whitney Ijem: Got it. That's helpful. And then just one follow-up clarification on KOSTAIVE in Japan, given the change in the CSL relationship, how should we think about impact there? Sorry if I missed it. Thanks.

Joseph Payne: Well, it's a great question. We were splitting the profit share three ways, and now that's no longer. It'll be split two ways. But those conversations are very active right now with Meiji. We have a great relationship with them in Japan. We are definitely preparing for the upcoming fall season. We're supporting them with manufacturing and shipping doses so that they can be prepared to distribute those in the upcoming season. So it's a very active collaboration, but it will -- the profit share will now be split two ways. In terms of the details there, that's in an active conversation. So there'll be an appropriate time to provide more granularity there.

Operator: We'll take our next question from Adam Dawoud with B. Riley Securities. Please go ahead.

Adam Dawoud: Hey, guys. This is Adam on for Mayank. Thanks for taking the question. So just curious whether you've given any thought to the fact that since Vertex required, I think it was a 4-week bronchodilator and clinic-supervised dosing, while ARCT-032 is dosed at home, how are you thinking about that tolerability gap as a durable differentiator? And what do you think could apply for the Phase III?

Joseph Payne: No, I appreciate the question. It gives us the opportunity to provide more detail as to why we're observing more attractive safety and tolerability profile with this platform. So the first point of key differentiation is the lipid nanoparticle is different. It's chemically different. A carbon-based core. It's a thiocarbamate core, which means there's sulfur, oxygen, nitrogen. These heteroatoms provide handles for the body to degrade. And it's also chemically different how it interacts with the biology in the body too. So we have a different lipid nanoparticle that's biodegradable, non-accumulating, and that is very important with respect to safety and tolerability. The second point of differentiation is that our manufacturing process to purify the mRNA is different.

We have trade secret know-how and IP around the process to purify the mRNA molecule itself. And the impurities coming out of the output of this manufacturing process can be very problematic with respect to undesired inflammatory and immune responses. Controlling those is a very important differentiator that uses our technology. And the third point of differentiation is our nebulizer. This aerosolization of these particles was proven to be very challenging in the early days of this program. We spent a few years and we have to say that we have to do it again, support from the CF Foundation to optimize the nebulizers so that it retains the integrity of the particle through the aerosolization process.

And you don't want these particles aggregating and forming macro particles during the inhalation process. So we've optimized against that. So whether it's the lipid nanoparticle or a more pure mRNA or an optimized nebulizer, if you take all that three together, that contributes to the better safety and tolerability profile.

Operator: We'll take our next question from Adam Walsh with ROTH Capital Partners. Please go ahead.

Adam Walsh: Hi, thanks for taking my questions. So you announced Cohort 4 began dosing in March of 2026. And I think by my math, we're about 5 months out. Joe, you've spoken to the safety and tolerability advantages with 032. And I'm just curious, is kind of the lack of any disclosure on tolerability at this point something that we can read into and continue following? Or are we getting over our skis with that?

Joseph Payne: No, I appreciate the question. It does seem logical. I think it's a safe statement that if there is anything serious or severe that's occurred in our trial or material, we would have to disclose that. But with respect to commenting on details, with respect to safety and tolerability, we will wait for the appropriate time to do so like we've done with the previous cohorts. Alan, anything to add there?

Alan Cohen: Yes, I think we're trying to be thoughtful in terms of our sharing of information and rather than parse through it because we have the position to have the data present in an open-label manner throughout, it's really going to be the cumulative experience with as many exposures as possible, ideally through 3 months and upwards to 20 patients, that's really going to be the determinant as to next steps. So we'd rather wait until we have a larger body of data over more patients over a longer period of time to make a point of sharing what we believe is the totality of our experience thus far beyond 28 days.

And we look forward to sharing that in the months ahead.

Operator: We'll take our next question from Jinnie Kim with BTIG. Please go ahead.

Jinnie Kim: Good afternoon. Thank you for taking my question. This is Jinnie on for Tom Shrader. So, with the global vaccine rights returned to you, you're effectively running a standalone vaccine portfolio on top of two active rare disease programs. How are you thinking about the cost to maintain and monetize KOSTAIVE and the broader infectious disease portfolio, and does retaining these rights change your R&D expense trajectory meaningfully?

Joseph Payne: Let me restate your question to make sure I get the crux of it. Is it good news that we've regained rights and control? Absolutely. And I think your question is, is like, well, how are you going to pay for all of the exciting applications of this platform? And there's two efforts that we're going to be focusing on now that we have control. Number one is commercialization. We'd like to continue to mature the product that's already partnered with Meiji as a distributor in Japan and support them in what we can in Japan.

And then now we can more proactively with the focused commercial efforts, even as a small company, Arcturus, to see if we can explore opportunities in Europe, especially with the United Kingdom. That's an exciting potential opportunity there. So there's commercial activities that will expand. And if we're successful in any way there, then those will pay for the other platform activities. And then the other more potentially more obvious one is we now having control of this validated platform from a business development perspective, that opens pathways to partnership. What that looks like and what opportunities there can be. There's a variety of opportunities.

We've talked about KOSTAIVE, but also the vaccine portfolio includes really high-value targets like seasonal flu and pandemic flu. EBV is an interesting target. HMPV, we have RSV. There's a long list of antibacterial vaccine opportunities that can be investigated with this platform, and the list goes on and on. We'll be spending considerable effort in looking at partnering pathways now that we've regained control of the platform.

Operator: We'll take our next question from Yale Jen with Laidlaw & Company. Please go ahead.

Yale Jen: Thanks for taking the questions and congrats on all the progress. I do want to continue the previous question in terms of this vaccine portfolio. Just curious, besides KOSTAIVE, what the clinical stage of other vaccine has been, both flu as well as RSV and the EBV. Can I have a follow-up?

Joseph Payne: Most of the data that we've collected has been undisclosed. Many of it has been preclinical. We have completed a Phase I trial for seasonal flu influenza and pandemic flu as well. On that note, since you asked the question, I'm going to refer to my notes that I put together here before the call. But the Phase I clinical study for the pandemic flu program, ARCT-2304, the Phase I clinical study is completed and the grant with BARDA is fully executed. The manuscript with the results of the study with BARDA and the U.S. government has been accepted by Nature Communications. So we look for a publication there shortly.

And Arcturus is planning to pursue scientific advice with EMA regarding a pathway to licensure later this year, probably in Q4. So, you know, those are two more active prominent clinical programs, seasonal flu and pandemic flu. With respect to the other programs, we didn't do any formal disclosures on that. We will likely do those under CDA with potential interested parties later this year.

Yale Jen: Okay, great. That's helpful. And maybe just along that line, in terms of Meiji if they choose to develop a COVID vaccine for the next season, not the current season, but potentially next season, would that be something you guys also will get involved? Or how should we see that?

Joseph Payne: Well, yes, we're always going to support Meiji in any way that we can. And then if we have any future strategic relationships that can complement or help them, that would be something that we'd seriously consider. But the short answer is yes, we will help Meiji in any way possible, especially on the manufacturing and making sure that we're timely with respect to delivery of any materials that they need, etc.

Yale Jen: Okay, great. Thanks a lot and congrats on the progress.

Joseph Payne: Yes, thanks, Yale.

Operator: Thank you. At this time we've reached our time for allotted questions, and we will now turn the call back over to Joe Payne for closing remarks.

Joseph Payne: Hey, thanks, everyone, for participating on the call. Don't hesitate to reach out to our team for any remaining questions, and we'll get back to you as soon as we can. Bye for now.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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