Executive Summary / Key Takeaways

• Arcturus Therapeutics is strategically pivoting its focus and resources towards its proprietary mRNA therapeutics pipeline, specifically targeting Cystic Fibrosis (CF) and Ornithine Transcarbamylase (OTC) deficiency, leveraging its differentiated STARR® and LUNAR® platforms.
• The company achieved commercial stage validation with the approval and launch of its KOSTAIVE® COVID-19 vaccine in Japan and subsequent EU approval, generating initial milestones and validating its core technology, though future commercial revenue is conservatively excluded from near-term forecasts.
• Upcoming interim Phase 2 data readouts for the lead therapeutic candidates, ARCT-032 (CF) expected mid-2025 and ARCT-810 (OTC) expected Q2 2025, represent critical near-term catalysts for value creation.
• Cost reductions and facility consolidation, coupled with the strategic focus, have extended the company's cash runway into the first quarter of 2028, providing financial flexibility to advance the core pipeline.
• Arcturus' proprietary LUNAR delivery technology and STARR self-amplifying mRNA platform offer potential advantages in targeted delivery, lower dosing, and durability compared to conventional mRNA approaches, positioning the company uniquely in competitive therapeutic and vaccine markets.

The Strategic Evolution of Arcturus

Arcturus Therapeutics, founded in 2013, has evolved into a commercial messenger RNA medicines company with a dual focus on infectious disease vaccines and rare diseases affecting the liver and respiratory systems. The company's journey saw it transition to a clinical stage in 2020 with IND/CTA approvals for OTC deficiency and a COVID-19 vaccine candidate. A pivotal moment arrived in 2023 with the marketing authorization of its COVID-19 vaccine, KOSTAIVE®, in Japan, followed by its commercial launch in October 2024, marking Arcturus' entry into the commercial stage. This was further validated by the European Commission's approval of KOSTAIVE® in February 2025.

In parallel with its vaccine efforts, Arcturus has been developing a proprietary pipeline of mRNA therapeutics. Recognizing the current market dynamics and regulatory landscape, the company recently announced a strategic decision to streamline resources and concentrate its research and development expenditures primarily on its wholly-owned mRNA therapeutic candidates for Cystic Fibrosis (ARCT-032) and Ornithine Transcarbamylase (OTC) deficiency (ARCT-810). This strategic pivot is designed to accelerate the development of these high-potential assets and extend the company's financial runway.

The competitive landscape for mRNA technology is intense, featuring large players like Moderna (MRNA), BioNTech (BNTX), CureVac (CVAC), and Pfizer (PFE). While companies like Moderna and BioNTech have established significant scale and market share, particularly in the vaccine space, Arcturus aims to differentiate itself through its proprietary technology platforms and targeted focus areas. Arcturus' strategy emphasizes developing potentially best-in-class therapeutics for specific rare diseases with high unmet needs, leveraging its unique technological advantages to potentially offer improved efficacy, safety, and dosing profiles compared to existing or competing approaches.

Technological Edge: STARR® and LUNAR® Platforms

At the heart of Arcturus' strategy are its two core proprietary technology platforms: the STARR® self-amplifying mRNA (sa-mRNA) technology and the LUNAR® lipid-mediated delivery system. These platforms are foundational to the company's pipeline and represent key competitive differentiators.

The STARR® sa-mRNA platform is designed to induce a longer-lasting and broader immune response at lower dose levels compared to conventional mRNA vaccines. Clinical data from the KOSTAIVE® program, including a comprehensive safety analysis from the pivotal Vietnam study published in April 2025, supports a favorable reactogenicity profile and acceptable tolerability, with no reports of myocarditis or pericarditis. Preclinical data suggests that the extended expression of encoded proteins in lymph nodes, enabled by the sa-mRNA technology, may contribute to higher and prolonged neutralizing antibody levels. This durability and lower dose potential offer a distinct advantage in the vaccine space, potentially leading to more convenient dosing schedules and improved safety profiles compared to competitors.

The LUNAR® lipid-mediated delivery system is intended to address the critical challenge of effectively and safely delivering RNA therapeutics to disease-relevant target tissues. For the inhaled CF program (ARCT-032), LUNAR® is designed for targeted delivery to the lungs. While specific quantifiable benefits over competitors in CF delivery are not detailed, the company highlights its proprietary nature and chemical differences from competitors' LNPs. Arcturus also emphasizes its significant intellectual property and know-how in mRNA purification, which is crucial for enhancing the purity of mRNA constructs. Higher purity is expected to improve safety and tolerability, particularly for chronic dosing required in therapeutic applications or daily inhalation for CF patients, potentially expanding the therapeutic index.

These technological differentiators are central to Arcturus' competitive moat. The ability to deliver mRNA effectively to target tissues and express proteins at potentially lower, more durable levels, coupled with expertise in purification, provides a foundation for developing differentiated products. This is particularly relevant in the rare disease space where targeted delivery and reduced toxicity are paramount.

Pipeline Progress and Upcoming Catalysts

Arcturus' strategic focus is now squarely on advancing its lead proprietary therapeutic candidates: ARCT-032 for Cystic Fibrosis and ARCT-810 for OTC deficiency. Both programs are currently in Phase 2 clinical trials and are poised for significant data readouts in the near term.

The ARCT-032 program is evaluating an inhaled mRNA therapeutic for CF. The company is currently enrolling adults with CF who do not benefit from CFTR modulators, including Class I null patients and others not taking modulators. Participants in the Phase 2 study are expected to receive daily inhaled treatments over 28 days. The U.S. IND for this Phase 2 study was cleared in August 2024, supported by positive safety and tolerability data from earlier Phase 1 studies. Arcturus expects to complete Phase 2 enrollment by the end of 2025 and, importantly, anticipates providing interim Phase 2 data for the first two cohorts in mid-2025. Management has indicated that an FEV (lung function) improvement of 3%, based on historical precedents in the CFTR modulator space, could potentially justify advancing the program further into development.

For OTC deficiency, the ARCT-810 program is evaluating an intravenously administered mRNA therapeutic. The company has expanded its Phase 2 clinical program into the United United States to enroll younger and more severe patients, with dosing initiated in December 2024. Participants in the U.S. study are expected to receive five intravenous infusions over two months. This study builds upon the completed dosing phase of a placebo-controlled European Phase 2 study. A key focus of the U.S. study is the evaluation of multiple biomarkers, including glutamine and the newly-developed 15N ureagenesis assay, to assess potential improvement in urea cycle activity. Identifying the most informative biomarkers is crucial for designing an efficient pivotal trial, particularly for patients on ammonia scavengers where ammonia measurement is complicated. Arcturus expects to provide interim Phase 2 data for the ARCT-810 program in Q2 2025.

Beyond these lead therapeutic programs, Arcturus continues to advance its partnered vaccine pipeline. The KOSTAIVE® COVID-19 vaccine is slated for a Marketing Authorization Application (MAA) filing in the United Kingdom in Q2 2025, followed by a U.S. BLA filing in Q3 2025. The pandemic influenza (H5N1) vaccine candidate, ARCT-2304, supported by a BARDA award, is also progressing, with a Phase 1 study initiated in December 2024 that completed recruitment in April 2025. Interim Phase 1 data for ARCT-2304 is expected in the second half of 2025. These vaccine programs, while no longer the primary R&D focus, continue to leverage the STARR® and LUNAR® platforms and represent potential sources of future milestones and royalties under the CSL Seqirus (CSL) collaboration and BARDA contract.

Financial Performance and Liquidity

Arcturus' financial performance in recent periods reflects its transition and strategic adjustments. For the three months ended March 31, 2025, total revenue was $29.4 million, a decrease from $38.0 million in the same period of 2024. This decline was primarily driven by lower collaboration revenue from CSL Seqirus, reflecting smaller milestone achievements and reduced amortization as the KOSTAIVE® program shifts towards commercialization, as well as a decrease in grant revenue from the BARDA contract.

Operating expenses saw a significant decrease, totaling $46.2 million in Q1 2025 compared to $68.4 million in Q1 2024. Research and development expenses decreased by 35% year-over-year to $34.9 million, mainly due to lower manufacturing costs for the LUNAR-COVID and LUNAR-FLU programs. This was partially offset by increased clinical and manufacturing costs for the LUNAR-CF and LUNAR-OTC programs, aligning with the company's strategic focus. General and administrative expenses also decreased by 24% to $11.3 million, primarily due to reduced share-based compensation. The net loss for Q1 2025 was $14.1 million, an improvement from the $26.8 million net loss in Q1 2024.

For the full year 2024, revenue was $138.4 million, down from $157.8 million in 2023, mainly due to lower CSL milestones, partially offset by increased BARDA revenue. Total operating expenses were $248.0 million in 2024, relatively consistent with $245.0 million in 2023. The net loss for 2024 was $80.9 million, compared to a net loss of $29.7 million in 2023.

As of March 31, 2025, Arcturus held $273.8 million in cash, cash equivalents, and restricted cash. The company has historically funded operations through collaborations, grants, equity sales, and debt. Through Q1 2025, Arcturus has received approximately $488.1 million in upfront payments and milestones from CSL Seqirus. The company also has access to a $50 million revolving credit line from Wells Fargo (WFC), secured by $55 million in cash collateral.

Crucially, management announced in the Q1 2025 earnings call that the strategic decision to focus R&D on the CF and OTC programs, coupled with cost reductions and facility consolidation, has extended the company's cash runway until the first quarter of 2028. This guidance is based on conservative assumptions, excluding potential future commercial revenue from KOSTAIVE® sales in Japan or the U.S. commercial milestone (not expected until 2028). While cash used in operating activities increased in Q1 2025 compared to Q1 2024 due to timing of receivables, payables, and deferred revenue recognition, the overall financial strategy aims to manage burn effectively to support the extended runway.

Risks and Challenges

Despite the promising pipeline and extended runway, Arcturus faces significant risks inherent in the biotechnology sector. Clinical trial success is not guaranteed; the upcoming Phase 2 data for ARCT-032 and ARCT-810, while highly anticipated, could fail to demonstrate sufficient efficacy or safety to warrant further development. Regulatory approval pathways are complex and uncertain, as highlighted by management's commentary on the market environment influencing their strategic pivot.

Competition in the mRNA space is fierce, with larger, better-funded companies like Moderna and BioNTech/Pfizer possessing greater resources for R&D, manufacturing scale, and commercialization. While Arcturus believes its technology offers differentiation, demonstrating a clear, quantifiable advantage in clinical outcomes and translating that into market share will be challenging. Dependence on partners like CSL Seqirus for vaccine development and commercialization means Arcturus' potential future revenue from these programs is subject to partner priorities, execution, and market dynamics beyond its direct control.

Operational risks include the successful transfer of manufacturing technology, particularly for the CF program to ARCALIS, and scaling up production for potential commercial supply. The company also disclosed a material weakness in internal control over financial reporting related to IT general controls as of March 31, 2025, although management is actively engaged in remediation efforts expected to be completed in fiscal year 2025. The need for potential future financing, while mitigated by the extended runway, remains a possibility depending on the pace and success of pipeline development and commercialization efforts.

Conclusion

Arcturus Therapeutics is at a pivotal juncture, strategically focusing its resources on its most promising proprietary mRNA therapeutic candidates for Cystic Fibrosis and OTC deficiency. This pivot, enabled by cost controls and validated by initial commercial success in the vaccine space, has significantly extended the company's financial runway into early 2028. The core investment thesis hinges on the successful clinical development of ARCT-032 and ARCT-810, driven by the potential advantages of Arcturus' differentiated STARR® and LUNAR® technology platforms in targeted delivery, lower dosing, and durability.

The upcoming interim Phase 2 data readouts in mid-2025 for CF and Q2 2025 for OTC are critical catalysts that will provide the first look at proof-of-concept for these programs and could unlock substantial value. While navigating intense competition and inherent biotech risks, Arcturus' focused strategy, technological differentiation, and extended cash position provide a clearer path forward. Investors should closely monitor the clinical data, progress in regulatory filings for the vaccine programs, and the company's ability to execute on its manufacturing and financial plans as key indicators of future success.