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Arrowhead Sued over Stock Drop Linked to Clinical Data on HBV Drug Candidate

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NEW YORK (GenomeWeb) – Just days after presenting Phase II data on its lead hepatitis B drug candidate that failed to meet Wall Street expectations and sent its stock into a tailspin, Arrowhead Research has been sued in two class action lawsuits alleging that the company misled investors as to what to expect from the clinical trial.

The suits names as defendants Arrowhead, CEO Christopher Anzalone, and COO Bruce Given, and were filed by two law firms on behalf of anyone who purchased Arrowhead stock between August 12 and October 8, 2014. They seek unspecified damages, as well as legal costs.

Last week, Arrowhead presented data from an ongoing single-dose Phase IIa trial of its siRNA-based HBV treatment ARC-520 showing that the drug led to unexpectedly modest reductions in levels of the virus's surface antigen — a key indicator of active infection.

Specifically, the data showed that HBV patients receiving single 1-mg/kg doses of ARC-520 experienced a mean knockdown of s-antigen at nadir of 39 percent within a range of 22 percent and 57 percent. Patients receiving single 2-mg/kg doses achieved a mean s-antigen knockdown at nadir of 51 percent within a range of 46 percent to 59 percent.

These results are far short of the one-log s-antigen reduction Arrowhead officials have said they hope to achieve with their drug, although the company is also testing 3-mg/kg doses of ARC-520 in the trial and are considering going up to 4 mg/kg should that dose level prove safe in an ongoing Phase I study in healthy volunteers.

Still, in August Anzalone and Given suggested that the 2-mg/kg dose in humans would result in the same high level of s-antigen levels observed previously in non-human primate testing. Given also stated that unblinded data from the Phase IIa study pointed to "surprisingly large reductions in surface antigen" among those receiving the 2-mg/kg dose.

When Arrowhead presented the Phase IIa data at the American Association for the Study of Liver Diseases annual Liver Meeting last Wednesday, its stock dropped more than 43 percent to close the day at $7.03 on the Nasdaq. It has since fallen even further and was trading at $5.73 mid-morning on Tuesday.

In response to the situation, Anzalone last week issued an open letter to Arrowhead's shareholders asserting that any statements made regarding ARC-520 were "consistent and, more importantly, properly reflected the data we were seeing in the initial two cohorts."

He noted in the letter that the non-human primate data on RC-520 showed a roughly 50 percent reduction in s-antigen after a single 2-mg/kg dose and that the company was only able to achieve an 80 percent reduction with the administration of a follow-on 3-mg/kg dose.

He noted in the letter that the non-human primate data on RC-520 showed a roughly 50 percent reduction in s-antigen after a single 2-mg/kg dose and that the company was only able to achieve an 80 percent reduction with the administration of a follow-on 3-mg/kg dose.

Anzalone added that Arrowhead continues to expect it will submit a regulatory filing by the end of the year to support its move into a multi-dose Phase IIb trial of ARC-520, regardless of whether it wants to test the 4-mg/kg dose level in patients.

But in their lawsuits, which were essentially the same in their allegations, the plaintiffs disagreed with Anzalone.

Both accuse Anzalone and Given of making "materially false and misleading statements" about the performance of Arrowhead's drug in the Phase IIa study, adding that they also "failed to disclose the true viral reduction level that ARC-520 can induce in humans," quoting from the August conference call.

The suits also reference media reports that linked statements by Arrowhead management regarding the expected performance of ARC-520 at 2 mg/kg with the drop in stock price once the data were released last week.

In an email, Vincent Anzalone, Arrowhead's vice president of investor relations, said that the company believes the lawsuits "have no merit, and we intend to vigorously defend ourselves against the allegations."

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