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Arrowhead Chief Sees Little Cost Increase Associated with Newly Acquired Peptide Tech

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By Doug Macron

Arrowhead Research's top official last week assured investors that the company's acquisition of Alvos Therapeutics would not significantly impact its burn rate, which had already been markedly increased late last year when it acquired the RNA drug assets of Roche.

He also said that the deal is expected to give Arrowhead an edge in its longstanding effort to close a partnership with a bigger industry player, although he declined to provide any guidance on when such an arrangement might be struck.

Last week, Arrowhead announced that it bought Alvos and its proprietary library of targeting peptides for $2.1 million in stock, plus the promise of an additional $23.5 million worth of shares upon the achievement of certain clinical and regulatory milestones (GSN 4/12/2012).

During a conference call held to discuss the transaction, Arrowhead CEO Christopher Anzalone said the peptides would mainly be used to enhance the company's existing RNAi delivery technologies, while also providing opportunities for the company to move into a new area of small-molecule drug development.

Alvos' peptide platform originated at the MD Anderson Cancer Cancer and involves the use of peptide sequences specifically matched to known and novel receptors on the surface of target cell types, including tumors.

Arrowhead said that a white paper describing the technology will be released in the near future.

The peptide platform “augments our existing business very well,” Anzalone said during the conference call. He said that Arrowhead primarily aims to use the technology to boost the efficacy of its two core delivery approaches.

The first, known as Rondel, uses cyclodextrin-based polymers to shuttle siRNAs into cells, and is being used with Arrowhead's clinical-stage solid tumor treatment CALAA-01. Anzalone noted that an ongoing phase Ib study of the drug, which involves a new dosing schedule designed to address adverse events observed in a phase I trial (GSN 8/11/2011), is expected to wrap up by “the early summer.”

Arrowhead's other delivery method is based on the so-called dynamic polyconjugate technology developed by Madison, Wis.-based Mirus Bio, which was acquired by Roche in 2008 for $125 million as part of the Swiss pharmaceutical firm's efforts to build its RNAi drugs capabilities. Around two years later, however, Roche cut all of its in-house efforts with RNA medicines, and began looking to sell off all related assets.

In 2011, Arrowhead stepped in and bought the DPC technology, along with Roche's 40-person operations in Madison, in exchange for a 10 percent equity stake and potential million-dollar late-stage milestones (GSN 10/27/2011). In doing so, Arrowhead effectively doubled its burn rate.

Anzalone said that Arrowhead is now beginning efforts to incorporate Alvos' peptide technology with its two RNAi delivery approaches, noting that MD Anderson researchers have already identified a “very large number of sequences that we are convinced … bind specifically to either tumors or tumor vasculature.”

Translating this work to its own programs will now involve conjugating the peptides to the Rondel and DPC molecules, he said.

“We do not think this is a science question,” Anzalone noted. “We think this is an engineering question in that we believe the conjugation, while certainly not trivial, is solvable. The first job that we'll be doing is to play with those conjugation chemistries. We already have a series of strategies that we have set and should be able to start that shortly.”

Addressing concerns voiced by investors participating on the conference call, Anzalone said that the costs associated with the Alvos acquisition and the integration of its peptide technology are expected to be “quite low.

“We have substantial infrastructure and expertise in Madison … [and] will not have to increase our infrastructure at all to make room for this program,” he explained. “We will leverage a lot of the expertise we have right now … [and] will probably bring in only a small number of new chemists and biologists to help us with this.

“We're thinking probably in the order of two, maybe three [new hires]… so our costs there are quite manageable,” Anzalone noted.

At the same time, he said, Arrowhead views the addition of the peptide technology as giving a boost to its search for a big pharma partnership — something that has been on the firm's radar for years but has yet to materialize.

“This asset will make our RNAi programs even more attractive to partners,” he said, adding that talks over potential deals are “still on track” but declining to offer any guidance on timing.

Additionally, “we think this [peptide technology] will be attractive on its own to partners,” giving other companies, for example, a way to improve the profile of their existing small-molecule drugs that may be nearing the end of patent exclusivity, he said.

“That will give them a reformulation that is truly targetable,” Anzalone said.


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