ARWR: New Pulmonary Programs Announced…
NASDAQ:ARWR
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Business Update
New Pulmonary Programs Announced
Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) is developing medicines that cause gene silencing using RNA interference (RNAi), a specific means of inhibiting the expression of genes and stopping the production of a specific protein. The company has a deep and diverse pipeline consisting of the following development product candidates, including nine in-house programs and eight partnered drugs, four with Johnson and Johnson (NYSE:JNJ), one with Amgen (NASDAQ:AMGN), one with Horizon Therapeutics (NASDAQ:HZNP), one with GlaxoSmithKline (NYSE:GSK), and one with Takeda (NYSE:TAK).
The company recently announced two new pulmonary programs, ARO-MUC5AC and ARO-RAGE. Both programs are being developed for muco-obstructive and inflammatory pulmonary conditions (e.g., asthma, COPD, cystic fibrosis, etc.).
ARO-MUC5AC: This targets expression of MUC5AC in bronchial epithelium. MUC5AC is a mucin protein that is upregulated in the airway of asthmatic patients (Bonser et al., 2017). As shown in MUC5AC knockout mice, it is not required for normal mucociliary transport or anti-bacterial defense (Roy et al., 2014). The protein plays a role in asthma pathogenesis based on results from ovalbumin sensitization and challenge studies (Evans et al., 2015).
ARO-RAGE: This targets the receptor for advanced glycation end-products (RAGE). Single nucleotide polymorphisms in the human gene for RAGE are associated with an increased incidence of asthma. RAGE is required for an allergic airway inflammatory response through release of IL-33 into the airway and it acts upstream of IL-5 and IL-13 (Oczypok et al., 2015). A soluble form of the protein (S-RAGE) found in the serum can be utilized as an easily measured biomarker to monitor for target knockdown.
Arrowhead will be presenting preclinical data from both the ARO-MUC5AC and ARO-RAGE programs at the 2022 American Thoracic Society Meeting in May 2022. In addition, the company is expected to file a CTA for a third pulmonary program in the fourth quarter of 2022, however the target for that program remains undisclosed at this time.
The company has two additional pulmonary programs being developed against respiratory viruses. The COVID program targets highly conserved sequences in essential viral mRNA and could potentially address the current SARS-CoV-2 pandemic as well as any future coronavirus outbreaks. The lead COVID candidate reduced viral load in lungs in a hamster model by 80%, reduced histological indices of pulmonary inflammation by 50%, and prevented body weight loss. We expect additional updates to the COVID program when warranted. The company has not disclosed the target for the second viral program, however the company reported that the lead compound decreases viral gene expression in the lung by 90%. We look forward to additional updates from this program.
The last pulmonary program, ARO-ENaC, will not be advanced as the company has decided to focus on second-generation candidates. Arrowhead had previously announced a voluntary pause of the clinical trial for ARO-ENaC based on local lung inflammation seen in a chronic rat GLP toxicity study. Local lung inflammation has also been seen now in a chronic GLP monkey study with ARO-ENaC, thus the company has decided that the most expeditious path forward is to focus on next-generation ENaC candidates. Multiple next-generation candidates are currently being evaluated, and they appear to be substantially more potent than ARO-ENaC. This could allow for lower and less frequent dosing, which may help to increase the toxicology safety of the drugs.
Lastly, Arrowhead has begun work on subcutaneous administration of pulmonary-directed products. The research is in the very early stages, but the company reported that there is some promising preliminary data with the ARO-RAGE program using subcutaneous administration. We anticipate additional details when the company provides an update on the ARO-RAGE program, possibly during a KOL webinar or R&D Day during the first half of 2022.
Update on Cardiometabolic Programs
Arrowhead has two late-stage cardiometabolic programs, ARO-APOC3 and ARO-ANG3. ARO-APOC3 is targeted to apolipoprotein C-III (APOC3), a component of very low density lipoprotein (VLDL) and an inhibitor of lipoprotein lipase. This program is currently focused on treating patients with severe hypertriglyceridemia and dyslipidemia. In support of targeting APOC3, an APOC3 loss-of-function mutation results in lower triglyceride (TG) levels (Jørgensen et al., 2014). Arrowhead is currently testing ARO-APOC3 in the following clinical trials as part of the SUMMIT program:
PALISADE: This is a Phase 3, double blind, placebo controlled trial in patients with familial chylomicronemia syndrome (FCS). These patients have fasting triglyceride levels >880 mg/dL. Approximately 60 patients are expected to be enrolled and assigned to one of four dose cohorts in a 2:1:2:1 manner (ARO-APOC3 25 mg, volume-matching placebo, ARO-APOC3 50 mg, volume-matching placebo). The primary endpoint of the trial is the percent change from baseline at month 10 in fasting triglycerides. Secondary and exploratory endpoints will include the change in lipid parameters, incidence of acute pancreatitis, and other measures. Arrowhead recently announced the first patient has been dosed in the trial.
SHASTA-2: This is a Phase 2b, double blind, placebo controlled trial in patients with severe hypertriglyceridemia (SHTG; TG > 500 mg/dL). The primary endpoint of the trial is the safety and efficacy of ARO-APOC3 and to select a dosing regimen for later-stage patients in this population. We anticipate approximately 216 patients being enrolled.
MUIR: This is a Phase 2b, double blind, placebo controlled trial in adults with mixed dyslipidemia, which is defined as having TG between 150 and 500 mg/dL and non-HDL cholesterol > 100 mg/dL or LDL cholesterol >70 mg/dL. The primary objective is to evaluate the safety and efficacy of ARO-APOC3 and to select a dosing regimen for later stage trials in this patient population. We anticipate a total of approximately 320 patients being enrolled.
ARO-ANG3 is focused on treating patients with mixed dyslipidemia and potentially metabolic diseases through targeting angiopoietin like protein 3 (ANGPTL3). ANGPTL3 loss-of-function mutations lead to low levels of LDL, VLDL, HDL, and TG (Musunuru et al., 2010), with one study showing an ANGPTL3 loss of function associated with a 34% reduction in odds of coronary artery disease (CAD) (Stitziel et al., 2017). Arrowhead is currently testing ARO-APOC3 in the following clinical trials under the VISTA program:
ARCHES-2: This is a Phase 2b, double blind, placebo controlled trial in adults with mixed dyslipidemia (patients are defined just as those in the MUIR trial). The primary objective is to evaluate the safety and efficacy of ARO-ANG3 and to select a dosing regimen for later stage trials in this patient population. We anticipate a total of approximately 180 patients being enrolled.
GATEWAY: This will be a Phase 2, open-label trial in patients with homozygous familial hypercholesterolemia (HoFH). Approximately 16 patients will be randomized 1:1 to receive two doses of 200 or 300 mg ARO-ANG3 on Day 1 and Day 84 and they will be evaluated over a 36-week period.
Pfizer (NYSE:PFE) and Ionis Pharmaceuticals (NASDAQ:IONS) recently announced that they are not continuing development of an antisense oligonucleotide (ASO), vupanorsen, which targets ANGPTL3. It was being developed for the treatment of cardiovascular disease and SHTG. Pfizer/Ionis announced that while the drug produced a statistically significant reduction in non-HDL cholesterol and TG, the magnitude of the reductions “did not support continuation of the clinical development program for CV risk reduction or SHTG.” The companies also disclosed that vupanorsen treatment resulted in dose-dependent increases in liver fat and higher doses were associated with increased ALT and AST levels.
We anticipate this will ignite controversy regarding ARO-ANG3 and whether ANGPTL3 is an appropriate target for cardiovascular disease and TG. At this point, we tend to believe the insufficient magnitude of response and liver-specific side effects for vupanorsen are compound-specific, as Arrowhead has not seen increases in liver fat associated with ARO-ANG3 and the level of LDL and non-HDL cholesterol reduction was superior to that previously reported by Ionis.
Update on ARO-AAT
ARO-AAT is being investigated for the treatment of alpha-1 antitrypsin deficiency (AATD). The company has already initiated discussions with the FDA regarding the Phase 3 program. We anticipate data on circulating levels of Z-AAT and 12-month biopsy data from the last patients enrolled in the Phase 2/3 SEQUOIA trial in mid-2022. Additional discussions with the FDA will continue after one or both of those data readouts, which are also going to help guide dose selection for a registration trial.
Financial Update
On February 2, 2022, Arrowhead announced financial results for the first quarter of fiscal year 2022 that ended December 31, 2021. The company reported revenue of approximately $27.4 million for the first quarter of fiscal year 2022 compared to approximately $21.3 million for the first quarter of fiscal year 2021. This revenue consists of the recognition of $20.8 million associated with the Takeda License Agreement and $6.7 million associated with the Horizon Licensing Agreement.
R&D expenses for the quarter ending December 31, 2022 were approximately $65.8 million compared to $36.6 million for the quarter ending December 31, 2021. The increase was primarily due to increased salaries, facilities-related expenses, the progression of pipeline candidates into and through clinical trials, R&D discovery expenses, and non-cash stock-based compensation. G&A expenses for the first quarter of fiscal year 2022 were $25.0 million compared to $8.8 million for the first quarter of fiscal year 2021. The increase was primarily due to increased salaries, professional services, and non-cash, stock-based compensation.
Arrowhead exited the first quarter of fiscal year 2022 with approximately $547.7 million in cash, cash equivalents, and investments. As of January 31, 2022, Arrowhead had approximately 105.5 million shares outstanding and, when factoring in stock options and restricted stock units, a fully diluted share count of approximately 112.3 million.
Conclusion
We’re glad to see Arrowhead continue to expand its pipeline with the additional pulmonary programs. The setback with ARO-ENaC is disappointing, but it sounds like the company has multiple second-generation compounds with which to continue the program and we look forward to an update later this year. We are also looking forward to the additional data for ARO-AAT and how the regulatory discussions are proceeding. We have moved our DCF model ahead by one year but have also removed ARO-ENaC, with the result being our valuation remains at $100 per share.
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