Arrowhead Picks Up Where Roche Left Off, Jumps Ahead in RNAi

Xconomy Wisconsin — 

One of the big stories on the leading edge of drug development is unfolding at a small biotech company few people have heard of on the west side of Madison, WI.

Arrowhead Research (NASDAQ: ARWR) isn’t a household name in Madison, even in the local biotech community, as I discovered on a recent visit. But its profile has been rising in biotech industry circles and on Wall Street in the last year as a player to watch in the field of RNA interference drug development. The company is headquartered in Pasadena, CA, but the core R&D team of about 30 people work on Science Drive in Madison. Arrowhead’s Madison crew is composed of RNAi veterans who have worked together closely, who have been on a corporate roller coaster ride at previous companies (Mirus Bio and Roche), and who have spent years honing technology aimed at solving one of the tougher problems in biotech.

RNA interference, for those unfamiliar, electrified biomedical researchers about a decade ago with its potential to create a whole new class of drugs that work against biological targets that conventional small molecule or protein drugs can’t hit, or don’t hit well enough. The idea is to essentially silence disease-related genes before they can produce disease-related proteins. Pharma companies invested billions for a few years in the middle of the last decade before discovering that no one knew how to effectively deliver these drugs where they need to go inside cells, at least in a high enough concentration to mean anything in a therapeutic sense.

The delivery challenge still vexes companies across the field, and nobody has consistently shown that RNAi drugs can be effectively delivered anywhere but the liver. But the team at Arrowhead has gained increasing recognition through a series of encouraging trials in animals and people that suggest it has a viable polymer-based delivery system, says Michael Houston, a Seattle-based RNAi consultant. Arrowhead raised $100 million from investors to advance its technology in the past year, and saw its stock rise from a low of $1.65 to close at $9.39 yesterday, giving it a market valuation of almost $300 million. Investors are now watching the company closely to see if it can reach its goal of curing hepatitis B, a chronic infection of the liver, in a couple of mid-stage clinical trials in 2014.

“I think Arrowhead, which happens to be a partner of Alnylam, is a very promising company with a great team,” said John Maraganore, the CEO of Cambridge, MA-based Alnylam (NASDAQ: ALNY), the leading RNAi drug developer. “We’re encouraged by their pre-clinical data.” The next big step, he said, will be to pass the next safety study in people, and show signs that the drug is active. “Our fingers are crossed for them!”’

David Lewis, chief scientific officer of Arrowhead Research

David Lewis, chief scientific officer of Arrowhead Research

Arrowhead’s Madison group is led by David Lewis, the chief scientific officer, and David Rozema, the vice president of chemistry. These two, whom I met on a recent reporting trip in Madison, have worked together at Mirus/Roche and now Arrowhead dating all the way back to 2000. They regaled me with tales of corporate misdirection and confusion that sounded like something out of a mixture of the comic strips “Dilbert” and “The Far Side.”

The story really got interesting at Madison, WI-based Mirus Bio near the end of the RNAi frenzy in 2008, when it got acquired by Roche for $125 million. Roche, like Merck and a few other pharma giants, was hot for RNAi at the time. Roche paid more than $330 million in upfront cash to form a partnership with Alnylam, and it had internal RNAi research going in Kulmbach, Germany and Nutley, NJ. Then, in November 2010, Roche pulled the plug on RNAi. Investors were looking for it to pare down spending, the company had just made a monster investment in South San Francisco-based Genentech, and the higher-ups realized that RNAi wasn’t as close to entering clinical trials as many people believed.

For months, the Roche RNAi team in Madison had no idea what would happen to their jobs, Lewis and Rozema said. To make a long story short, Roche invested a lot of money in the Madison site, never figured out a way to get its RNAi drugs into the clinic, and ended up spending most of 2011 trying to sell off the RNAi assets that had fallen out of favor. By October of that year, Arrowhead’s management team scraped together $25 million in financing to get ahold of a ton of Roche RNAi assets. Part of the deal included loads of expensive equipment that Roche shipped to the Dane County Regional Airport for the Madison team to use, after shutting down the Germany site when a divestiture deadline passed.

“There were semis full of equipment” arriving in Madison, Rozema recalls, shaking his head at how Roche bumbled through the RNAi asset sale.

Arrowhead, with the intense motivation and focus of a startup, zeroed in on what it saw as the lead opportunity, with dynamic polyconjugates to deliver small interfering RNA (siRNA) drugs. The basic idea is to attach the siRNA to a polymer nanoparticle, as well as a shielding agent like polyethylene glycol, and a ligand. This combination is supposed to help the specific siRNA get to a specific tissue (like the liver), and stay stable long enough in the bloodstream to get inside the right cells. Without such delivery assistance, siRNA molecules simply get chewed to bits by enzymes in the blood within minutes. With any luck, the smaller polymers should be better than lipid nanoparticles are at being distributed to multiple tissues.

The first big application of the dynamic polyconjugate approach is in what Arrowhead calls ARC-520. This drug candidate is for hepatitis B, which, you guessed it, is a liver disease. It’s a chronic infection that can lead to cirrhosis, liver cancer, and death. About 360 million people worldwide are chronically infected with hepatitis B virus, and an estimated 500,000 to 1,000,000 people die each year from hepatitis B-related liver disease, according to the World Health Organization. The current standard treatment of oral antiviral pills, and injectable interferon, only cures about 10-20 percent of patients and forces them to endure nasty flu-like side effects. So that leaves plenty of room for new treatments.

ARC-520 is designed to fight hepatitis B in an interesting way, by reducing the production of viral antigens which are thought to suppress the immune system. By reducing those antigens, ARC-520 enables the immune system to more effectively do its job against the invader. Studies of the drug candidate in mice have shown it can reduce one of the key antigens by three orders of magnitude (99.9 percent), and the effect lasted for a month on a single dose. Another study in a chimpanzee confirmed the antigen knockdown.

Even more interesting, researchers saw an increase in circulating liver enzymes about four weeks after the second dose in the chimpanzee, which suggested an immune response was triggered to hepatitis B. That’s what scientists want to see, because the immune response is thought to be critical for eradicating the virus and helping people achieve a “functional cure.” This fall, Arrowhead ran a 36-patient clinical trial in Australia to assess safety at a variety of doses, and said they all got their full assigned dose and none dropped out of the study because of side effects.

Lucky for Arrowhead, its encouraging results happened to arrive just as investors were starting to get interested in RNAi once again. Alnylam Pharmaceuticals surprised many investors in July when it showed it could effectively deliver one of its RNAi drugs through a subcutaneous injection—the kind of convenient, just-under-the-skin injection that appeals to patients with chronic diseases, at least when compared with intramuscular injections or IV infusions. Alnylam, as a leader in the RNAi field, tends to help lift the tide for other companies in the field.

Of course, the task in front of Arrowhead now gets much tougher. The company is gearing up to build on its body of evidence with a clinical trial in the first half of 2014 that should provide the first inkling of whether its drug works for patients with hepatitis B. The Phase 2a study will randomly assign patients to a single intravenous dose of the Arrowhead drug and an antiviral called entecavir, to see how well, and for how long, it can suppress the expression of what’s known as the hepatitis B surface antigen, compared to patients on a placebo. If that study goes well, Arrowhead has said it will be prepared to roll quickly into the next phase, a bigger Phase 2b study that will gauge safety and effectiveness at sites in the U.S., western Europe, Asia, and other parts of the world. Essentially, those studies will tell Arrowhead whether ARC-520 has the kind of effectiveness it needs to go forward, even though a single dose isn’t likely to be enough to produce cures, said Arrowhead’s Lewis.

Most of Arrowhead’s current value can be attributed to ARC-520, said Thomas Wei, an analyst with Jefferies & Co. in a note to clients Dec. 18. But Arrowhead has other delivery technologies cooking in its Madison labs, and the next generation may prove superior to ARC-520, which comes in the form of a double-molecule construct, said Dirk Haussecker, an RNAi consultant and blogger.

“It is the single-molecule version of their DPC delivery technology that I am most excited about and could emerge as the best-in-class RNAi delivery technology not just for the liver, but also beyond,” Haussecker said in an e-mail. “In addition to its potency and apparent safety, it would also be amenable to subcutaneous administration.”

If Arrowhead has success with either of its polymer delivery technologies, you can be sure other RNAi drug developers will beat a path to its door. It has the only polymer-based RNAi delivery technology in clinical trials today, although there are others in earlier development at Seattle-based PhaseRx and others. No doubt, drug developers will start thinking about polymer-delivered RNAi drugs against other liver diseases, and then even more ambitiously about delivering RNAi drugs to tissues other than the liver.

Lewis and Rozema, like a lot of industry scientists, know better than to get carried away with the hype. They know how unrealistic the expectations were five years ago, and how bleak things were just a couple years ago, when the whole Madison RNAi operation came close to being closed down and scattered to the wind. Maybe it was just that I met these guys before Thanksgiving, but they sounded pretty humble, and thankful to have a fighting chance to show they’ve come up with something useful for medicine.

“We have a lot of skilled people, and work well together,” Lewis said. “A lot of us go back to the Mirus days, over 10 years. We’ve worked a long time, and get along.” Rozema added: “We can all see where we want to go.”