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Arrowhead Puts Planned Calando INDs On Hold Pending Cash-Making Deal

Calando Pharmaceuticals will not advance any additional therapeutic candidates into clinical development until its parent company, Arrowhead Research, signs a deal to generate capital from the unit, which could include striking an industry partnership for its drug-delivery technologies, an Arrowhead official said.
“Calando is our most mature biopharmaceutical subsidiary, and we believe that the progress demonstrated through 2008 positions it well for a potential near-term liquidity event,” Arrowhead President and CEO Christopher Anzalone said this week. “Such an event could take many forms, including broad license agreements, partnerships, or a complete sale. The right structure will be one that is intended to return capital to Arrowhead.”
Anzalone made his statements this week during a conference call held to discuss Arrowhead’s fiscal fourth-quarter financial results.
Earlier this year, Arrowhead projected that Calando would enter into an industry partnership and file an investigational new drug application before the end of 2008. Neither goal was achieved.
“We have not entered into any definitive [alliance] agreements,” Anzalone said during the call, “but have begun a process that could lead to a partnership or sale [of Calando]. With respect to the new IND filing, we have decided not to move forward on any new clinical programs until we execute some type of liquidity event.”

“It may be that there are some companies that value the siRNA piece of the company … more highly than the [small-molecule] piece of the company. We are certainly open to discussing a large licensing agreement to cover either of the platforms.”

Among the “number of ways” such an event could happen are “an all-out sale” wherein a buyer purchases Calando’s small molecule- and siRNA-delivery platforms, he said.
“It could also be structured essentially as a licensing agreement” for either of the delivery technologies, he explained. “It may be that there are some companies that value the siRNA piece of the company … more highly than the [small-molecule] piece of the company. We are certainly open to discussing a large licensing agreement to cover either of the platforms.”
In the end, “it just [comes] down to the negotiations with potential acquirers … and we think we have brought [the RNAi] technology to a point where it is time to start having those discussions,” Anzalone added.
Anzalone said that he anticipates Calando will reach some sort of liquidity event before the end of 2009 “given our clinical results and the interest in siRNA delivery.” But even if it is unable to do so, he stressed that Arrowhead is well-positioned to stay up and running.
“We do have a plan to continue operations through fiscal 2009 and even into fiscal 2010 with the capital we have on the books,” he said. “So, in the worst case scenario, if none of those options pan out, we’re still able to continue operations” within all its subsidiaries.
As of Sept. 30, Arrowhead had cash and cash equivalents totaling $10.1 million.
Liquidity Event Horizon
As a holding company focused on developing and eventually monetizing various technologies through subsidiaries, Arrowhead has been aiming for some time to cash in on Calando’s drug-delivery capabilities. While those capabilities had initially been limited to RNAi drug delivery, Calando expanded into in the small-molecule drug field in May when it was merged with another Arrowhead subsidiary, Insert Therapeutics, as part of a plan to trim costs (see RNAi News, 5/1/2008). The new unit retained the Calando name. 
However, as RNAi News reported in October, Arrowhead has not ruled out the possibility that Calando’s RNAi and small-molecule operations could once again be separated to suit the needs of a potential acquirer (see RNAi News, 10/23/2008).
Calando currently has one siRNA-based therapeutic, CALAA-01, in phase I testing. The intravenously administered drug targets the M2 subunit of ribonucleotide reductase and is delivered using Calando’s so-called Rondel technology, which comprises a linear, cyclodextrin-containing polycation capable of binding to the anionic backbone of an siRNA. When mixed together, the polymer and siRNA self-assemble into nanoparticles that are protected from nuclease degradation in blood serum, the company said.
According to Calando, the cyclodextrin in the polymer allows stabilizing agents to be attached to the surface of the particles. These agents have terminal adamantane groups that form inclusion complexes with cyclodextrin and contain polyethylene glycol, which prevents aggregation and degradation. Additionally, ligands to cell-surface receptors can be covalently attached to the adamantane-PEG modifier, which allows the particles to be targeted to tissues of interest.
Calando also has another siRNA cancer drug, CALAA-02, in preclinical development. CALAA-02 targets hypoxia-inducible factor-2 alpha, which is over-expressed in multiple solid tumors and is necessary for various aspects of tumor growth including angiogenesis and cell proliferation. Calando had expected to begin phase I testing of this drug in 2009 (see RNAi News, 9/18/2008), but Arrowhead’s new moratorium on IND filings has put this timeline in question.
Fiscal Q4
For the three-month period ended Sept. 30, Arrowhead reported an increase in its net loss to $8.7 million, or $0.21 per share, from $7.6 million, or $0.20 per share, the year before.
The company’s operating expenses jumped to $11.5 million in the quarter from $8.7 million in the same period last year, as research and development spending climbed to $4.9 million from $3.2 million.