Xconomy Q&A: An Update with Arcturus Therapeutics CEO Joseph Payne

Xconomy San Diego — 

Things have been moving quickly in recent weeks for the San Diego RNA drug developer Arcturus Therapeutics.

After initiating a reverse merger last month, Arcturus signed a research collaboration and worldwide licensing agreement with Janssen Pharmaceuticals, part of the Johnson & Johnson (NYSE: JNJ) family of companies. In a statement last week, Arcturus said it would work with Janssen to develop and commercialize its proprietary technologies for developing nucleic acid-based drug products for the treatment of hepatitis B.

Arcturus’s drugs are based on RNA, a molecule that carries the genetic instructions that cells use to make proteins. Founded in 2013 and incubated for a time in J&J’s JLABS incubator in San Diego, Arcturus also has collaborations to develop other RNA-drugs with Takeda, Ultragenyx, and the Cystic Fibrosis Foundation. Arcturus says its proprietary technology is designed to deliver RNA to a wide variety of specific cells, and it can deliver multiple sizes and mixtures of RNA to multiple cell types.

As a public company, Arcturus plans to focus on both rare and large patient population diseases.

The company’s lead drug candidate, Lunar-OTC, targets a rare enzyme deficiency (ornithine transcarbamylase deficiency) that causes a urea cycle disorder that results in an inability to control ammonia levels during digestion. It’s a difficult disease to manage, requires close monitoring and a very restrictive diet, and can lead to frequent hospitalizations. Arcturus recently demonstrated its proof-of-concept for treating the disorder in pre-clinical trials with mice, using a messenger RNA molecule to normalize ammonia levels. “Our goal is to be in the clinic in 18 to 24 months,” Arcturus CEO Joseph Payne (on right in photo above, with co-founder and CSO Pad Chivukula) told analysts in a Sept. 28 conference call.

Payne also told analysts that Arcturus currently has seven drug development programs, including  four that are funded by pharmaceutical and strategic partners.

While Arcturus says it has developed proprietary technologies for its RNA drug pipeline, the newcomer is entering a difficult field with many established players, including Alnylam Pharmaceuticals (NASDAQ: ALNY) and Moderna Therapeutics, both based in Cambridge, MA, as well as Carlsbad, CA-based Ionis Pharmaceuticals (NASDAQ: IONS). Regulus Therapeutics (NASDAQ: RGLS), another San Diego player in RNA therapeutics, serves as a cautionary tale after stumbling badly in its development of a microRNA drug for hepatitis C.

Under its agreement with Janssen, Arcturus said it would receive an upfront cash payment, R&D support, pre-clinical, development, and sales milestone payments, as well as royalty payments on any future licensed product sales. Janssen would assume responsibility for development costs and all commercialization costs associated with the program.

The merger between Arcturus and Alcobra, an Israel-based biotech trading on the Nasdaq exchange, is pending approval by shareholders of both companies as well as regulatory review. The combined company plans to trade on Nasdaq under the ticker symbol “ARCT.”

If the deal closes by the end of this year as expected, Alcobra shareholders would own about 40 percent of the combined company while Arcturus shareholders will own about 60 percent. Alcobra, valued at almost $47 million (including $35 million in cash) was focused on developing drugs for attention deficit hyperactivity disorder (ADHD) and Fragile X Syndrome. It halted much of its R&D work in January after its ADHD drug failed in Phase 3 studies, and began evaluating its strategic alternatives in April.

The combined company will continue to follow the strategy set by Arcturus—developing RNA medicines to treat infectious diseases, cystic fibrosis, non-alcoholic fatty liver disease (NASH), and rare liver diseases.

Although Alcobra and Arcturus executives discussed their merger with analysts last month (a transcript is here), we asked Arcturus CEO Joseph Payne for an update. He responded to questions submitted by e-mail. His answers have been lightly edited for clarity.

Xconomy: Can you explain why Arcturus struck this deal with J&J’s Janssen?

Joe Payne: We consider this a … Next Page »

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