Business Overview and History

Arcturus Therapeutics Holdings Inc. (ARCT) is a commercial-stage biopharmaceutical company leading the charge in the development of innovative messenger RNA (mRNA) medicines and vaccines. With a strong focus on infectious diseases and rare genetic disorders, Arcturus has built an impressive pipeline that showcases the versatility and potential of its proprietary platforms.

Arcturus was founded in 2013 as a spinoff from Marina Biotech, a biopharmaceutical company focused on the development and commercialization of nucleic acid-based therapeutics. The company's initial focus was on developing its proprietary LUNAR lipid-mediated delivery system to enable the delivery of various nucleic acid-based medicines. This innovative delivery system has been integral to Arcturus' ability to overcome the challenges associated with effectively delivering mRNA to target tissues.

In the early years, Arcturus established several key research collaborations and licensing agreements to advance its platform technology. In 2015, the company signed a research collaboration and license agreement with Ultragenyx Pharmaceutical to develop treatments for rare diseases. This was followed by additional deals with partners like CureVac, Synthetic Genomics, and the Cystic Fibrosis Foundation. These collaborations allowed the company to expand its research and development efforts while securing valuable funding and validation.

Arcturus made an important strategic move in 2019 when it merged with a publicly-traded company, Alcobra Ltd., to become a Nasdaq-listed entity. This transition provided the company with greater access to capital markets to fund its growing pipeline of mRNA-based therapeutic and vaccine candidates.

Over the years, Arcturus has faced various challenges common to early-stage biotechnology companies, such as securing sufficient funding, advancing its programs through clinical trials, and establishing manufacturing capabilities. However, the company has demonstrated resilience, forming strategic partnerships and obtaining government grants to support its research and development efforts.

A Breakthrough Moment: The COVID-19 Vaccine Journey

Arcturus' remarkable journey took a pivotal turn in 2020 when the COVID-19 pandemic struck. Leveraging its LUNAR and STARR (self-amplifying RNA) technologies, the company rapidly developed a novel mRNA-based COVID-19 vaccine candidate, ARCT-154 (branded as KOSTAIVE in Japan). This vaccine demonstrated impressive results in clinical trials, leading to its historic approval in Japan in 2023, making it the world's first commercially available self-amplifying RNA (sa-mRNA) COVID-19 vaccine.

The successful launch of KOSTAIVE in Japan, in partnership with Meiji Holdings and CSL Seqirus, has been a significant milestone for Arcturus. The company reported receiving a $25 million commercial milestone payment upon the first sale of the vaccine, highlighting the potential of this groundbreaking technology. As of September 30, 2024, Arcturus has achieved a total of approximately $462.1 million in upfront payments and milestones from the CSL Seqirus collaboration.

Expanding the Pipeline: Rare Diseases and Beyond

While the COVID-19 vaccine success has been a game-changer, Arcturus has remained steadfast in its pursuit of addressing unmet medical needs in other therapeutic areas. The company's pipeline boasts several promising mRNA-based candidates, including ARCT-810 for the treatment of ornithine transcarbamylase (OTC) deficiency, a rare genetic disorder, and ARCT-032 for cystic fibrosis (CF).

In the OTC deficiency program, Arcturus has expanded its Phase 2 clinical trials to the United States, alongside the ongoing European study. The company is on track to share interim proof-of-concept data for this program in the first half of 2025. Similarly, the ARCT-032 CF program has received clearance from the FDA to initiate a Phase 2 multiple-ascending-dose study, with the goal of evaluating the safety, tolerability, and efficacy of this mRNA therapeutic in people with CF.

Financials

As of September 30, 2024, Arcturus reported a strong cash position of $294.1 million, including restricted cash, providing the company with a runway extending into the first quarter of fiscal year 2027. This cash position, coupled with the potential for future milestone payments from the CSL Seqirus collaboration, positions Arcturus well to continue advancing its pipeline and navigating the dynamic biopharmaceutical landscape.

For the fiscal year 2023, Arcturus reported revenue of $157.75 million, with a net loss of $29.725 million. Operating cash flow was negative $18.099 million, and free cash flow was negative $21 million.

In the most recent quarter (Q3 2024), Arcturus reported revenue of $41.67 million, a decrease of $3.47 million (-7.7%) year-over-year from $45.14 million in Q3 2023. This decline was primarily attributable to a lower milestone achievement from the CSL agreement during the third quarter of 2024, partially offset by revenue recognized from a supply agreement related to the commercial production of KOSTAIVE and an increase in revenue from the BARDA agreement.

Net loss for Q3 2024 improved to $6.9 million, compared to a net loss of $16.22 million in Q3 2023. Operating cash flow for the quarter was negative $24.06 million, with free cash flow at negative $23.49 million.

The company's financial performance has been marked by fluctuations, with total operating expenses decreasing from $64.5 million in Q3 2023 to $52.4 million in Q3 2024, driven by reduced manufacturing expenses and lower facilities and equipment costs.

Liquidity

Arcturus' strong cash position of $294.1 million as of September 30, 2024, provides the company with significant liquidity to fund its ongoing operations and research initiatives. This robust financial standing, combined with potential future milestone payments and revenue from collaborations, ensures that Arcturus has the necessary resources to advance its pipeline and pursue strategic opportunities in the dynamic biopharmaceutical market.

The company's debt-to-equity ratio stands at 0.09923777810024975, indicating a relatively low level of debt. Arcturus also maintains a healthy current ratio and quick ratio of 4.762549846680967, suggesting strong short-term liquidity.

In April 2023, Arcturus' wholly-owned subsidiary, Arcturus Therapeutics, Inc., entered into a $50 million revolving credit agreement with Wells Fargo Bank. As of September 30, 2024, no borrowings were outstanding on this credit facility, providing additional financial flexibility if needed.

Navigating Regulatory Hurdles and Expanding Global Footprint

Arcturus' success with KOSTAIVE in Japan has paved the way for further global expansion. The company is actively engaging with regulatory authorities, including the European Medicines Agency (EMA), to secure approvals for KOSTAIVE in additional markets. The EMA is currently reviewing Arcturus' marketing authorization application for KOSTAIVE, with a CHMP opinion expected in the coming months.

Furthermore, Arcturus has made strategic moves to strengthen its manufacturing capabilities, including the decision to transfer the production of its cystic fibrosis program to its joint venture, ARCALIS, in Japan. This integration is expected to enhance the company's supply chain efficiency and ensure a reliable source of high-quality mRNA for its growing pipeline.

Overcoming Challenges and Maintaining Momentum

Arcturus' journey has not been without its challenges. The company has navigated the complexities of regulatory approvals, manufacturing scale-up, and the evolving competitive landscape in the mRNA space. However, the company's steadfast commitment to innovation, its robust partnerships, and its ability to adapt have been instrumental in maintaining its momentum.

Looking Ahead: Unlocking the Full Potential of mRNA Therapeutics

As Arcturus continues to advance its pipeline and solidify its position as a leader in the mRNA field, the company's focus remains on addressing unmet medical needs and delivering life-changing therapies to patients. With the successful launch of KOSTAIVE in Japan and the ongoing development of its rare disease programs, Arcturus is poised to capitalize on the vast opportunities presented by the rapidly evolving mRNA landscape.

The company is on track to file a Biologics License Application (BLA) for KOSTAIVE in the first half of 2025, supported by positive results from multiple Phase 3 studies. Additionally, Arcturus expects to share interim Phase 2 proof-of-concept data for its ARCT-032 (cystic fibrosis) and ARCT-810 (OTC deficiency) programs in the first half of 2025.

In the vaccine space, Arcturus and CSL Seqirus initiated a Phase 3 pivotal study with the ARCT-2303 candidate vaccine containing the XBB1.5 Omicron variant in March 2024. They also launched a Phase 3 study in September 2023 with a bivalent version of KOSTAIVE (ARCT-2301) containing the ancestral strain and Omicron BA.45 to further support the immunogenicity and safety of Arcturus' sa-RNA platform.

The company's seasonal flu program, LUNAR-qsFLU, now exclusively licensed to CSL Seqirus, initiated a Phase 1 clinical trial in January 2024 in Australia. Additionally, the pandemic influenza program, LUNAR-pandFLU, supported by a contract from the Biomedical Advanced Research and Development Authority (BARDA), is advancing with an IND application submitted in October 2024 and a Phase 1 clinical trial expected to begin before the end of 2024.

Conclusion

Arcturus Therapeutics has emerged as a trailblazer in the mRNA therapeutics and vaccine space, leveraging its proprietary platforms to tackle complex medical challenges. The company's achievements, particularly with the approval and commercialization of KOSTAIVE in Japan, have demonstrated the transformative potential of its technology. As Arcturus continues to execute its strategic priorities, investors will closely follow its ability to navigate the regulatory landscape, strengthen its manufacturing capabilities, and unlock the full potential of its robust pipeline.

With a strong financial position, a diverse pipeline of mRNA-based candidates, and strategic partnerships in place, Arcturus is well-positioned to capitalize on the growing mRNA therapeutics and vaccines market, which is expected to expand at a CAGR of around 25-30% over the next 5-10 years. The company's focus on addressing unmet medical needs in infectious diseases and rare genetic disorders, coupled with its innovative sa-mRNA technology, places it at the forefront of this rapidly evolving field.