ARWR: Sells Olpasiran Royalty Interest for $250 Million…
NASDAQ:ARWR
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Business Update
Sells Royalty Interest in Olpasiran for $250 Million
On November 9, 2022, Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) announced that Royalty Pharma had acquired a royalty interest in Amgen’s olpasiran for $250 million in cash upfront and up to $160 million in additional potential clinical, regulatory, and sales milestone payments. Arrowhead has retained the rights to up to $400 million in development, regulatory, and sales milestone payment potentially due from Amgen.
Olpasiran was licensed to Amgen in 2016. It is designed to lower levels of lipoprotein A (Lp(a)) and is entering a Phase 3 cardiovascular outcomes study to determine whether it can reduce the risk of cardiovascular events in patients with atherosclerotic cardiovascular disease and high levels of Lp(a). Phase 2 results from the OCEAN(a)-DOSE study were recently presented at the American Heart Association Scientific Sessions 2022. Those results showed olpasiran significantly lowered Lp(a) levels over 36 weeks.
Phase 2 Trials of Cardiometabolic Candidates Fully Enrolled; Development Pathway Update
On November 9, 2022, Arrowhead held a virtual investor event to provide updates for its 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 72 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. The goal is to have the trial fully enrolled by mid-2023 (it's currently ~50% enrolled) and complete it in 2024.
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. The trial is fully enrolled with 216 subjects and data from 177 subjects that had entered the study at the time of data cutoff was recently presented at the 2022 American Heart Association Scientific Sessions (Ballantyne et al., 2022). Following two doses of ARO-APOC3, data showed patients treated with 10, 25, of 50 mg ARO-APOC3 had decreases of triglycerides up to 86%, non-HDL-C up to 45%, and increased HDL-C up to 99% through the week 16 timepoint. Safety data was encouraging as ARO-APOC3 was well tolerated with the treatment emergent adverse events (TEAEs) reflecting the underlying comorbidities of the study population.
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. The total planned enrollment of 320 patients has been reached. Data presented at the virtual investor event showed patients treated with 10, 25, of 50 mg ARO-APOC3 had decreases of triglycerides up to 65%, non-HDL-C up to 28%, LDL-C of up to 20%, and increased HDL-C up to 50% through the week 16 timepoint.
ARO-ANG3 targets the 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. Three dose levels of ARO-ANG3 (50 mg, 100 mg, 200 mg) are being tested. Patients will receive a subcutaneous injection on day 1 and week 12. Following the 36-week end-of-study visit, patients will be eligible to continue in an open label extension period. Total planned enrollment of 204 patients is complete. Data presented at AHA showed that patients treated with 50, 100, or 200 mg of ARO-ANG3 had reductions in triglycerides of up to 59% and LDL-C up to 32% at Week 16. In addition, ARO-ANG3 was associated with median relative reduction in liver fat at Week 24 of 28% for the 100 and 200 mg dose, with no liver specific adverse events reported to date. ARO-ANG3 has been well tolerated with TEAEs) reflecting the underlying comorbidities of the study population.
GATEWAY: This is a Phase 2, open-label trial in patients with homozygous familial hypercholesterolemia (HoFH). Up to 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. The study is fully enrolled and data should be available in 2023.
With the data that has been accumulated thus far for ARO-APOC3 and ARO-ANG3, the company has better clarity on the development pathway for those two candidates.
• For ARO-ANG3, Arrowhead will be focusing on patients with hypercholesterolemia, which includes heterozygous familial hypercholesterolemia (HeFH), estimated to affect approximately 1.4 million patients in the U.S., and HoFH, of which there are approximately 1200 patients in the U.S. Arrowhead plans to have ‘End-of-Phase 2’ meetings with the FDA in the first half of 2023 and to potentially begin Phase 3 studies in the second half of 2023.
• For ARO-APOC3, the company will be focusing on a broader population that includes patients with FCS, SHTG (prevalence of approximately 4 million in the U.S.), and those at risk for atherosclerotic cardiovascular disease (ASCVD) despite maximally tolerated statins, with a prevalence of approximately 12 million in the U.S. Arrowhead is planning to have regulatory interactions in the second half of 2023 and to begin Phase 3 studies in the first half of 2024.
Update on Earlier Stage Programs
Arrowhead has a robust early-stage pipeline that includes three pulmonary candidates (ARO-RAGE, ARO-MUC5AC, and ARO-MMP7) and a candidate targeting complement C3.
ARO-C3: This program is targeting complement component 3 (C3). The complement pathway is a part of the innate immune system and C3 activation is required for the classical complement pathway, the alternative complement pathway, and the lectin pathway. The company is conducting a Phase 1/2, placebo controlled, dose-escalating trial to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics in up to 24 healthy volunteers (Part 1) and up to 24 adult patients with paroxysmal nocturnal hemoglobinuria (PNH) and up to 14 adult patients with complement-mediated renal disease (Part 2). Part 1 of the study is fully enrolled and interim results should be available in the first half of 2023. Data from Part 1 of the study will inform Part 2 dose selection and we anticipate enrollment opening up in the first half of 2023.
ARO-MMP7: Matrix metalloproteinase 7 (MMP7) is a secreted endopeptidase that is highly overexpressed in patients with idiopathic pulmonary fibrosis (IPF) (Bauer et al., 2017). It is useful as a biomarker due to its increased expression being correlated with disease progression. In addition, MMP7 knockout mice are protected from pulmonary fibrosis induced by intratracheal bleomycin (Zuo et al., 2002). Unfortunately, MMP7 is a difficult target for drug development as there is substantial domain homology with other MMPs, thus making gene silencing a potentially useful mechanism for downregulating MMP7 expression. Arrowhead filed a CTA in August 2022 to initiate a Phase 1/2 trial that will be designed similarly to other first-in-human studies with a healthy volunteer portion and a patient portion.
ARO-RAGE/ARO-MUC5AC: ARO-RAGE 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 (sRAGE) found in the serum can be utilized as an easily measured biomarker to monitor for target knockdown.
ARO-MUC5AC 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).
Both candidates are in Phase 1/2 studies to assess the safety and tolerability, pharmacokinetics, and pharmacodynamics in healthy volunteers first and then in patients with asthma. Both trials are close to full enrollment of healthy volunteers for the single ascending dose portion and have begun enrollment for the multiple ascending dose cohorts. We anticipate interim results from the healthy volunteer portion of these trials and the initiation of dosing in patients with asthma in the first half of 2023.
Financial Update
On November 28, 2021, Arrowhead announced financial results for fiscal year 2022 that ended September 30, 2022. The company reported revenue of approximately $243.2 million for fiscal year 2022 compared to approximately $138.3 million for fiscal year 2021. This revenue included the recognition of $120 million associated with the GSK license agreement, $85.8 million associated with the Takeda License Agreement, and $26.7 million associated with the Horizon Licensing Agreement.
R&D expenses for the year ending September 30, 2022 were approximately $297.3 million compared to $206.3 million for the year ending September 30, 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 fiscal year 2022 were $124.4 million compared to $81.0 million for fiscal year 2021. The increase was primarily due to increased salaries, professional services, and non-cash stock-based compensation.
Arrowhead exited fiscal year 2022 with approximately $482.3 million in cash, cash equivalents, and investments. As of November 16, 2022, Arrowhead had approximately 106.0 million shares outstanding and, when factoring in stock options and restricted stock units, a fully diluted share count of approximately 111.8 million.
Conclusion
We believe that Arrowhead’s decision to sell its royalty interest in olpasiran was a good one as it provides a substantial amount of non-dilutive capital for an asset that will be in a multi-year cardiovascular outcomes trial. In regards to the company’s pipeline, we look forward to multiple data readouts in 2023 as well as a near term read out for the Phase 2 SEQUOIA trial along with the Phase 3 study design for fazirsiran. We have made no changes to our model and our valuation remains at $92 per share.
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