As part of an ongoing cost-cutting strategy, Arrowhead Research reported last week that its Calando Pharmaceuticals subsidiary will halt clinical development of its siRNA-based cancer treatment CALAA-01 after it wraps up a phase I study of the drug, and that it has ceased all preclinical research and development efforts.
According to an Arrowhead filing with the US Securities and Exchange Commission last week, Calando will not restart any of its drug-development programs until they can be partnered or out-licensed.
The decision to essentially put Calando's operations on hold was not entirely unexpected. Arrowhead has for some time been facing a severe cash crunch and a deflated stock price, prompting the company to aggressively pursue opportunities to partner, license, or divest Calando, its drug programs, or its delivery technologies (see RNAi News, 10/23/2008).
During midday trading today, the company's stock closed at $0.54 a share, almost 50 percent down since the beginning of the year and well off a 52-week high of $2.82.
"The dislocation in the equities markets all but eliminated the primary source of funding for Arrowhead and its subsidiaries," Arrowhead President and CEO Christopher Anzalone said during a conference call held last week to discuss the company's fiscal second-quarter financial results. "This required us to make some difficult decisions … in order to extend our financial runway and preserve opportunities to pursue our target markets."
By late 2008, Arrowhead said that Calando would not advance any preclinical programs, including one centered around a second RNAi cancer drug called CALAA-02, into clinical studies until a money-generating deal for the subsidiary could be forged (see RNAi News, 12/18/2008).
Unable to sign such a deal, Arrowhead began hinting a few months later that it might order Calando to "scale back" development of its clinical candidates (see RNAi News, 2/12/2009).
During last week's call, Anzalone conceded that while Arrowhead has been "working on establishing the right set of partnerships for a few quarters now … this process has taken longer than anticipated."
He added that "a number of factors" have contributed to this difficulty, "including the fact that the two platforms around which partnerships would be formed have some intertwining" intellectual property, which has complicated business negotiations.
Although Calando was originally established to develop the small molecule-delivery technology of Arrowhead subsidiary Insert Therapeutics for therapeutic RNAi applications (see RNAi News, 2/25/2005), the two units were later merged under the Calando banner in order to cut Arrowhead's costs (see RNAi News, 10/23/2008). As such, Calando has been developing two separate but related delivery platforms.
During that call, Anzalone also said that greater competition for partnerships is hindering Arrowhead's efforts to strike deals.
"Because the disruptions in the biotech capital markets have pushed a large number of companies into looking for partnerships, the business-development market is extremely crowded," he noted. With active negotiations ongoing, "we remain confident that we will complete the right partnerships."
In its SEC filing, Arrowhead said such a partnership is expected to include a "modest upfront payment" with the potential for milestones and royalties. However, the company cautioned that "there can be no assurance regarding if or when a transaction might be concluded."
According to Anzalone, Arrowhead's current goal is to drive Calando's burn rate to "virtually zero after planned partnerships are complete."
In the SEC filing, Arrowhead noted that Calando has "phased down its operations significantly" during the first half of fiscal 2009, and that the subsidiary's quarterly cash consumption has been reduced from between $2.2 million and $2.6 million in fiscal 2008 to $1.4 million in the second quarter of fiscal 2009.
"It is expected that Calando’s cash burn will further decrease as it completes the phase down of operations and the CALAA-01 phase I trial is concluded," Arrowhead added.
And while further development of the drug will depend on licensing or partnership deals, Arrowhead said it expects to "invest minimal cash to maintain limited operations at Calando going forward."
For the three-month period ending March 31, Arrowhead's revenues shrank to $200,000 from $700,000 in the year-ago quarter.
The company's net loss also fell, dropping to $5.3 million, or $0.12 per share, from $5.7 million, or $0.15 per share, a year earlier.
Arrowhead's research and development spending in the quarter declined to $1.5 million from $1.8 million, while general and administrative costs dropped to $1 million from $1.5 million. Expenses incurred at Calando include $428,000 in salary and related costs, and $1.1 million in R&D and consulting.
At the end of the fiscal second quarter, Arrowhead had cash of roughly $3.6 million.