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Merging Subsidiaries, Arrowhead Expands Calando Focus to Include Small Molecules

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Arrowhead Research announced last week that two of its subsidiaries, Calando Pharmaceuticals and Insert Therapeutics, have completed their previously announced merger into a single firm that will operate under the Calando name.
 
Although corporate reorganizations have been common in the RNAi therapeutics field, companies coming out of such shakeups have typically been entirely focused on the gene-silencing technology. But Arrowhead has taken a different tack: the merged company will advance both Calando’s siRNA drug pipeline and Insert’s efforts with small-molecule drugs.
 
Calando and Insert “are built around very similar platforms and we saw compelling reasons to merge them into a single, more efficient entity,” Arrowhead CEO Christopher Anzalone said in a statement. “We believe the result will be a leaner and stronger company going forward with multiple compounds in clinical development."
 
According to James Hamilton, vice president of medical technologies at Arrowhead, the combined company’s broader pipeline may also give Arrowhead an edge should it seek to either sell off the post-merger Calando or try to float its shares on the public market.
 
Hamilton, who is also the CEO of the merged company, noted that since Calando and Insert were once separate, it might also be possible to sell just one of the new firm’s business arms. However, there are no immediate plans to do so, he added.
 
Calando was founded in 2005 to apply Insert’s delivery technology, which involves linking drugs to cyclodextrin-based polymers, to RNAi (see RNAi News, 4/29/2005). Since that time, the company has developed a lead drug candidate, the systemically administered cancer therapy CALAA-01, which US regulators recently cleared for phase I testing (see RNAi News, 4/24/2008).
  
Despite this progress, in February Arrowhead announced that it would take over management of Calando and Insert and merge the two in order to streamline their operations. The combined company does, however, maintain two CSOs: Jeremy Heidel, a Calando co-founder who oversees the company’s oligonucleotide delivery operations, and Thomas Schluep, who runs the small-molecule delivery programs.
 
“The new approach involving management centralized at the Arrowhead level and scaled-back infrastructure is a response to current consolidation within the pharmaceutical industry,” Arrowhead said at the time the merger plan was announced. “It is more capital-efficient to leverage existing sales, marketing, and distribution infrastructure of established pharmaceutical companies than for Calando and Insert to invest in building their own.”
 
Hamilton noted that the new Calando has about 11 employees, about half of which are dedicated to RNAi and nucleic acid research.
 
Mergers and Spinouts
 
Consolidation may be the trend in the pharmaceutical industry, but for companies playing in the RNAi space that don’t have the resources of a big pharma, particularly those that have either wrapped up reorganizations or are in the midst of doing so, staying focused on one core technology is the fashion.
 

Calando and Insert “are built around very similar platforms and we saw compelling reasons to merge them into a single, more efficient entity. We believe the result will be a leaner and stronger company going forward with multiple compounds in clinical development."

Nastech Pharmaceutical, for example, began looking beyond its primary research interest in tight junction-based drug delivery to RNAi in 2004 when it acquired a license to the fundamental Fire-Mello patent (see RNAi News, 2/6/2004). A couple of years later, it bought the RNAi assets of startup Galenea (see RNAi News, 2/23/2006).

 

But maintaining two separate pipelines proved challenging. In 2007, Nastech backed away from previous guidance that it would file an investigational new drug application for an RNAi-based flu drug that year but did not provide a new timeline (see RNAi News, 8/16/2007). Previously, the company had said it would file the IND in 2006 (see RNAi News, 3/2/2006).
  
Additionally, as early as mid-2007 Nastech officials began to discuss publicly the possibility that the company would spin out its RNAi operations into a pure-play entity called MDRNA in order to improve the valuation of the RNAi assets and differentiate them from its non-RNAi activities (see RNAi News, 6/28/2007).
 
Although the status of MDRNA is uncertain right now as Nastech deals with various financial setbacks, the company continues to believe “it’s very important to receive independent investor validation” for its RNAi drug assets, Chairman, President, and CEO Steven Quay recently said (see RNAi News, 3/6/2008). But whether Nastech has the financial wherewithal to achieve that validation remains to be seen.
 
One company that has successfully transitioned away from a dual focus on RNAi-based and small-molecule drugs is CytRx.
 
Although it was one of the earliest companies to get in on the RNAi therapeutics game, CytRx found its interest in the technology began to wane as it turned its attention to nearer-term opportunities, such as an investigational small-molecule treatment for amyotrophic lateral sclerosis.
 
In 2005, CytRx President and CEO Steven Kriegsman told RNAi News that the company was weighing the possibility of spinning out its RNAi drug operations into a publicly traded, pure-play firm (see RNAi News, 11/11/2005).
 
When CytRx publicly disclosed those plans, Kriegsman said that the move would allow investors to “more easily” compare the company’s RNAi assets with those of other companies in the field, which could “materially increase CytRx's overall valuation” (see RNAi News, 2/2/2006). Additionally, “repositioning our RNAi technology could [also] substantially accelerate the movement of … RNAi drug candidates into the clinic," he said at the time.
 
Whether this prediction is fulfilled remains to be seen, but by March the spinout, called RXi Pharmaceuticals, had begun trading on the Nasdaq exchange and announced that it would file its first IND next year (see RNAi News, 3/13/2008).
 
Most recently, Canadian drug developer Tekmira Pharmaceuticals announced that it would merge with its former subsidiary Protiva Biotherapeutics (see RNAi News, 4/3/2008). Although the deal was largely a move to end a protracted legal dispute over the rights to an RNAi-delivery technology, it will also result in a new face on the RNAi drugs scene.
 
Although neither was established as an RNAi company, both Tekmira and Protiva have in recent years become increasingly focused on the technology. Once the transaction is complete, the new company — to be called Tekmira — will have two siRNA-based drug candidates in its pipeline and rights to develop a number of others through various collaborations. It will also have an internal, non-RNAi program involving immunostimulatory DNA oligos for cancer.
 
Once the merger has closed, Tekmira said that the new company’s board of directors will conduct a review to prioritize its technology and products. However, based on the emphasis the management teams of both companies have placed on RNAi in corporate presentations and announcements, it appears very likely that RNAi will be the new company’s main interest.

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