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Veterans of J&J, Pfizer, and Medimmune Seek to Transform Arno into Oncology Powerhouse

Xconomy New York — 

The employees at Arno Therapeutics in Parsippany, NJ, have so much empty floor space in their square-shaped office suite that they could set up a volleyball net there and have a daily game. Well, sort of. Arno is one of many emerging “virtual” biotechs, so it outsources much of the clinical development work on its cancer drugs, and employs only six full-timers—not quite enough for a full-fledged volleyball match. In fact, the extra space is so bothersome to the company’s new CEO, Glenn Mattes, that he’s planning to move the company to smaller digs.

Arno’s business model revolves around a few highly trained decision makers, who are tasked with pinpointing the best path to approval for each of the company’s drugs—and determining the most qualified outside vendors to move those projects forward. That team includes Mattes, a Johnson & Johnson (NYSE: JNJ) retiree who is best known for launching that company’s first two HIV/AIDS treatments, and chief operating officer Chris Houchins, who oversaw eight cancer compounds as director of oncology clinical operations for Pfizer (NYSE: PFE). And in late June, Arno named a new chief medical officer: Alexander Zukiwski, whose experience includes working for Medimmune and the J&J units Centocor and Ortho Biotech.

Mattes points out that everyone on Arno’s staff brought Rolodexes filled with contacts at contract research organizations and other outsourcing allies. “You can run a really efficient model by managing those partnerships well,” Mattes says. “Between Chris and Alex and me, we know what works. We know where we want to do the trials, who we should partner with to get the trials done, how much we want to pay for them, and how much work we need to be doing here to get all the way through Phase 3 if we need to.”

Arno’s tiny staff is juggling those decisions for not one, but three drug candidates, all of which are in the early stages of human testing. The company was formed around a molecule from the University of Pittsburgh, which was licensed in 2006 by Two River, a New York-based venture capital and merchant banking company. The drug, called AR-67, inhibits topoisomerase 1, an enzyme that has been implicated in several cancer types. Arno is investigating its use in a type of brain tumor called glioblastoma multiforme and in the blood cancer myelodysplastic syndrome (MDS).

In 2008, Arno licensed two additional molecules from a university that’s better known for its sports teams than it is for its biotech discoveries: Ohio State. One, called Ar-12, seems to induce cell death in solid tumors and lymphoma. The other, AR-42, is known as a pan-DAC—it inhibits several histone and non-histone proteins, and it has shown activity in both solid and liquid cancers. “We have three drugs with multiple indications that we’re going after, so it’s a pretty ambitious program,” Mattes says.

All three molecules are in drug classes that are being pursued by many other companies—putting the onus on Mattes and his team to find distinctive and high-value markets for each. “We have to be very creative in determining what the unmet medical needs are, and finding efficient, quick-to-market strategies,” he says.

AR-42, for example, has shown promise in blood cancers, as well as cancers of the bladder, liver, lung, and prostate, Mattes says. But what’s particularly interesting, says Mattes, is that it seems to work in solid tumors that are benign, but still dangerous because of their size or location in the body. “There’s no work being done on benign tumors,” Mattes points out. “The only treatment for those patients is surgery. This would be a substitute for surgery, so we think there would be a real interest on the part of the FDA is seeing something like this go to market.”

Arno is typical of the type of startup Two River pursues. “We identify new and interesting therapeutic techniques that are viable molecules with strong intellectual property,” says Two River partner David Tanen. “And rather than developing single-technology companies, we increase the chance of success by adding to the pipeline.” Like all its portfolio companies, Arno is named after a river—this one in the Tuscany region of Italy.

And Two River partners take a strong management position in all their portfolio companies, which they say allows them to manage risk and negotiate better contracts with consultants and contract research organizations. Two River partner and chairman Arie Belldegrun also serves as the chairman of Arno’s board.

Belldegrun is a urologist whose business experience includes serving as the founding chairman of Cougar Biotechnology, a cancer drug developer that was bought by J&J in 2009 for $970 million. The FDA approved Cougar’s lead product, abiraterone acetate (Zytiga), for prostate cancer this year. The Cougar story is one that Mattes hopes Arno can learn from, with the help of Belldegrun. “Cougar’s management had the wherewithal to take the product into Phase 3,” Mattes says. “They clearly defined the regulatory pathway and the unmet medical need.”

Belldegrun says the key to success is not only finding the most promising molecules, but also in maintaining close relationships between the startups and the academic scientists who discover those drug candidates. The inventors of Arno’s drugs are still involved in the development path, he says. “The notion is that it’s better [for academic scientists] to join with Big Pharma, but Arno has developed a close collaboration with academia,” Belldegrun says. “It’s a partnership that benefits both parties. Decisions are made quickly. There’s no punch list of bureaucracy.”

Arno raised $18 million in 2008 and merged with the shell of a publicly traded company. It now trades over-the-counter (OTCBB: ARNI). The company raised a second round of $15 million in 2010.

Mattes says the company will scrutinize data from early trials of its three drugs before it fine-tunes the development paths for each of them. “The datasets will really start to reveal themselves to us in the first half of next year,” Mattes says.

Belldegrun adds that holding several drug candidates that are all showing promise in multiple indications is a “good problem” for Arno. “But it’s a critical stage for the company,” he says. “We don’t want to go into areas where there are already multiple new drugs. We want to find our niche.”

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