Arrowhead Research has had a rough couple of months, but that hasn’t put CEO Christopher Anzalone in panic mode—far from it.
The Pasadena, CA-based biotech company’s (NASDAQ: [[ticker:ARWR]]) stock price has fallen off a cliff, largely a result of investors getting spooked by some early data in the company’s ongoing Phase 2a study of its RNA interference (RNAi) drug intended to treat hepatitis B, a viral infection that can cause cirrhosis or cancer of the liver.
The data, released in October, prompted multiple law firms to file lawsuits on behalf of investors against Arrowhead, alleging that the company misled them about the experimental drug’s potency. Anzalone says the lawsuits have “no merit,” and he believes the company will prevail in those cases.
He remains upbeat about the company’s technology—which is being developed in Madison, WI—and sees the recent stock decline as just a bump in the road to commercialization.
“We hope that whatever happened over the last two months is really just noise in the long run,” Anzalone says. “Our primary goal here is to create drugs that are going to transform medicine across multiple applications. If we can do that, that’s going to create a ton of value for our shareholders.”
To get there, Arrowhead will have to make good on the promise of RNAi drugs, a field that enjoyed a lot of hype and billions of investment dollars over the last decade, but which has its fair share of skeptics because the technology has struggled to produce clinically successful drugs.
RNAi therapies aim to prevent disease-related genes from producing proteins that would otherwise wreak havoc in the body. A big stumbling block for developers of these drugs has been finding reliable ways to deliver the short RNA strands that they’re based upon to diseased cells before the delicate molecules break down. Arrowhead’s approach to this problem is to use polymer nanoparticles called dynamic polyconjugates to shepherd the RNAs through the body, shielding them from destructive enzymes until they reach the target cells. Its lead candidate, ARC-520, uses this nanoparticle system to deliver an RNA that attacks hepatitis B by blocking its production of a protein that is believed to help protect the virus from the immune system. Take that protein out of the equation, the idea goes, and the immune system can more effectively battle the disease.
Arrowhead is trying to find the right dosage level that will result in a 90 percent “knockdown” of the target hepatitis protein after just one dose of ARC-520, a target Anzalone has admitted is “somewhat arbitrary.” Indeed, he says, no one knows how much of a reduction in the protein is enough to enable the immune system to win against hepatitis B—or if such a conquest is even possible.
The data that Arrowhead has released so far from a 24-patient Phase 2a study showed that a 1 mg/kg dose of ARC-520 resulted in an average peak 39 percent reduction of the target protein, while twice that dose produced a 51 percent drop. The company hasn’t yet released data for a third group of patients who received 3 mg/kg of the drug, and it is still recruiting a fourth group that would receive 4 mg/kg.
Those numbers have clearly disappointed Wall Street. Arrowhead shares tumbled 41 percent on Oct. 8, the day the preliminary data was made public, going from $11.92 per share at the opening bell to $7.03 per share at close. Lately, the stock has been trading around $5 or $6 per share. That’s a far cry from the 52-week apex of $27.63 per share. The company is valued at $334 million, down from about $400 million on Oct. 9.
Neither did the Phase 2a data impress W. Thomas London, a physician and hepatitis researcher at Fox Chase Cancer Center in Philadelphia, who has collaborated with Baruch Blumberg, the discoverer of the hepatitis B virus. “I’m not overwhelmed … because the drug did not reduce the level of [the protein] to zero with one injection,” London says of Arrowhead’s early data. There was still a lot of viral material present and “presumably a lot of virus still being made. I would call it a marginal result.”
To be fair, those were “just the first doses of a dose escalation study,” Anzalone says. “We had said all along we were confident we were going to get good, deep knockdown, we just didn’t know what dose would be required to get there in humans.” He sees promise in the early data because the drug so far appears to be safe, and it’s demonstrating an impact on the target protein, albeit not as much of an impact as the company is ultimately hoping to achieve.
He’s also encouraged by the duration of the drug’s effect. The company thought the biggest reduction in the viral protein might be seen around 10 to 14 days after the dose, but then it expected it to return to baseline levels by around the 30th day, Anzalone says. Instead, the second-highest dose showed a statistically significant effect for 43 days, with the peak typically seen on day 33.
“We thought that was a good starting point,” Anzalone says. “Just imagine as we increase the dose and as we provide a multiple dose regimen, what kind of knockdown we’re going to see. We’re really excited about that.”
But that theory still needs to be proven in additional clinical trials, and the company must demonstrate the drug’s safety with a larger group of patients, Anzalone says. “There’s clearly still a lot of risks ahead of us.”
While Arrowhead completes the Phase 2a study, it’s moving forward with two Phase 2b studies that will test the effects of multiple doses of ARC-520 in combination with commercially available hepatitis B treatments entecavir (Baraclude) and tenofovir (Viread). Arrowhead filed an investigational new drug application with the FDA this week, and it’s planning to seek approval for similar studies in Europe and Asia.
The company might also run pilot studies of ARC-520 in combination with drugs that stimulate the immune system, and it will try dosing schedules that are more or less frequent than the once-a-month regimen used in the current anchor studies, Anzalone says. The company might also explore subcutaneous delivery of ARC-520, which to date has been administered intravenously, he adds.
“We’re going to be learning an awful lot about this virus, how we’re going to attack this virus, throughout 2015,” Anzalone says.
It helps to have a $132.5 million cash stockpile, according to the company’s most recent disclosure. That allows Arrowhead to conduct multiple trials at once, without the help of a business partner, and it also provides some insulation against a fluctuating stock price, Anzalone says. “We have the luxury of being able to keep our heads down and focus on” the company’s work, he adds.
Still, Arrowhead probably can’t afford any major setbacks because the competition to develop better hepatitis B treatments is heating up. Gilead Sciences (NASDAQ: [[ticker:GILD]]) has three drugs in its pipeline, including one in Phase 3 trials, but none of those are RNAi drugs. Alnylam Pharmaceuticals (NASDAQ: [[ticker:ALNY]]), however, is developing an RNAi drug targeting hepatitis B. It acquired the technology when it bought Sirna Therapeutics from Merck in January for $175 million.
That’s an interesting twist because Alnylam and Arrowhead signed a
