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Still Eyeing IPO, Quark Says Cost Expectations for Rx Pipeline Exceed $54M

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By Doug Macron

Quark Pharmaceuticals last week released some additional details about its proposed US initial public offering, indicating that it is hoping to raise enough capital to help cover the more than $54 million it will take to conduct phase I and II trials for its lead product candidates.

In an amended preliminary prospectus for the IPO filed with the US Securities and Exchange Commission last week, the company also said R&D costs decreased over the first nine months of 2010 while revenues rose for the period year over year.

Quark filed the preliminary prospectus in September 2010, stating that it aims to float its shares on the Nasdaq and will use the proceeds to advance its clinical and preclinical pipeline. The company also noted at the time that it plans to file two investigational new drug applications in 2012.

Last week, Quark provided a breakdown of the expected costs of moving forward its current portfolio of clinical candidates.

Among them is QPI-1002, which is designed to temporarily block the expression of the stress-response gene p53. The drug is being tested as a way to prevent ischemia-reperfusion-induced kidney injury in patients removed from a cardiopulmonary bypass pump, or delayed graft function in patients whose blood flow is re-established to a transplanted kidney.

QPI-1002 has completed phase I testing for both indications and is currently in phase II for the kidney-transplant indication. According to its SEC filing, Quark said it will need $16.2 million to complete this stage of testing.

Meantime, phase II development for the acute kidney injury indication is expected to begin in the second half of this year, which Quark said will cost $23.6 million to finish.

In August, Novartis took an option to the drug (GSN 8/19/2010, and the SEC filing disclosed that Quark is barred from collaborating with any other company on p53-targeting siRNAs while the option is in effect.

Quark is also developing an agent dubbed QPI-1007, which is an siRNA that inhibits the pro-apoptotic gene caspase 2. The drug was recently moved into phase I testing as a treatment for sudden vision loss associated with non-arteritic anterior ischemic optic neuropathy (GSN 10/21/2010). According to the company, it is the first of its drug candidates to be based on entirely proprietary siRNA structures.

Though Quark ultimately sees the agent indicated to treat other conditions involving retinal ganglion nerve cell loss, in particular glaucoma, it has not yet decided whether it will start phase II testing for this indication ahead of NAION.

In the SEC filing, Quark said it will cost $2.2 million to complete phase I development of QPI-1007 and approximately $12.2 million to finish phase II development in NAION and glaucoma.

Overall, Quark said it will cost $54.2 million to move QPI-1002 and QPI-1007 through phase II testing in all four indications.

"The amounts we actually expend in these areas will depend upon a number of factors, including the success of research and product development efforts, [US Food and Drug Administration] approval of our products, cash generated from future operations, and actual expenses to operate our business," it noted in the filing.

Quark also said proceeds of the IPO, along with cash on hand and funding from existing collaborators, will be enough to carry the company through the first half of 2013 and enable it to complete phase II trials of QPI-1002, finish phase I studies of QPI-1007, and conduct a phase II trial of the agent in either NAION or glaucoma.

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Preclinical Pipeline

Quark also said that capital from the IPO would enable it to continue working on its preclinical pipeline.

Among the compounds still in animal testing is an siRNA that inhibits RhoA, a small GTPase that the company has said "controls cellular functions including motility, growth, differentiation, and apoptosis, and is a key effector of inhibitory signals for outgrowth of neuronal processes."

Quark said the siRNA has been shown to improve neurological functions and reduce neuropathic pain in a rat spinal cord injury model, and is now being tested in animal models of other diseases, including spinal cord injury and optic nerve regeneration.

Quark is also working on siRNAs that inhibit Toll-like receptors 2 and 4, which play key roles in the immune system and in inflammatory processes. In a mouse model of lung transplantation, these molecules have been shown to prevent primary graft dysfunction caused by ischemia-reperfusion injury.

The firm is also eyeing chronic indications such as cancer and kidney disease.

Quark anticipates filing an IND from one of these early-stage programs next year, as well as an IND from its ongoing collaboration with Nitto Denko in fibrotic disease (GSN 7/15/2010).

Financials

For the nine-month period ended Sept. 30, 2010, Quark reported a net loss of roughly $17.3 million, compared with a loss of about $16 million in the same period the year before.

Revenues were $2.8 million, of which $1.4 million were for R&D services provided to Pfizer, which holds the rights to Quark's phase II wet age-related macular degeneration and diabetic macular edema drug PF-655. In the same nine-month period in 2009, Quark's revenues were roughly $2 million.

R&D spending in the period was $13.7 million, down from $15.7 million, while general and administrative costs fell slightly to $4.8 million.

At the end of September, Quark had cash and cash equivalents totaling $8.7 million.


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