A morsel of phase IIa data from Arrowhead Research Corp. left investors wanting more and sparked analyst speculation about the potential of the firm's ARC-520, an RNAi-based candidate for hepatitis B virus (HBV).

RBC Capital Markets analyst Michael Yee found the "trifecta" of safety, efficacy and durability of available data shows the drug is fundamentally working and "supports blockbuster HBV opportunity." The phase IIb trial with multiple doses will start by the end of this year and generate data in the second half of 2015. "We predict we will see some functional cures in those data better than the current low bar of weak drugs today," wrote Yee in a research report.

Analyst Edward Tenthoff with Piper Jaffray accurately predicted that, "though the safety and mention of efficacy are encouraging, the lack of data will likely lead to weakness in the stock." Pasadena, Calif.-based Arrowhead's shares (NASDAQ:ARWR) were dented early but closed Wednesday at $13.01, up 1 cent, having traded as low as $11.76.

As part of its fiscal third quarter earnings, Arrowhead disclosed it had completed dosing of the 1 mg/kg and 2 mg/kg dose cohorts in the trial, and first blinded data suggest that the magnitude of HBV surface antigen knockdown is similar to that achieved in nonhuman primate studies, including the chronically infected chimpanzee on which investigators already have reported. The firm has begun enrolling an additional dose cohort at 3 mg/kg.

Yee noted that the overall surface antigen drop was "similar to nonhuman primate" studies, which implies for investors around -0.8 log reduction. Company officials could not be reached, but in the conference call on earnings, CEO Christopher Anzalone said the data prove a "clear and consistent reduction of surface antigen in humans. We are, for good or for bad, pioneers in this field," he said. "We are doing something now, in fact we have already done something the world has never seen."

Experts contend that if the surface antigen falls low enough, the patient's immune system can clear HBV. Analyst Yee questioned Anzalone about the possibility of getting a 1 log reduction in the 3 mg/kg arm. "We feel pretty good about that," Anzalone said, pointing to "the depth of knockdown [that] seems to track reasonably well with nonhuman primate models" in the 1 mg/kg and 2 mg/kg doses. "Of course the durability of effect is substantially longer," he added, predicting a "good, deep knockdown" at the 3 mg/kg level. "But, ultimately, we just don't know until we're in humans, and the fact of the matter is, this is a dose-finding study, so from my perspective, I really don't care what the dose level is that gets us that goal, as long as we get there safely. It looks like we have plenty of room in terms of safety. We haven't seen anything that has been concerning in any of the groups."

Dosing might go as high as 4 mg/kg, Anzalone said. "To ensure that we can do that in a timely fashion, we decided to go ahead and initiate a 4 mg/kg [experiment] in healthy volunteers," he said. While that may not be tried with HBV patients, "it's a good thing to have, we figured," he said.

Also enthusiastic was Jefferies analyst Thomas Wei, calling the duration of response a "positive surprise." In the 2 mg/kg arm, all eight patients have passed the sixth week, and five of eight are beyond the eighth week. "Importantly, duration of knockdown has lasted for well over a month," Wei wrote in a research report, citing word from Arrowhead that some patients are even seeing declines in HBV surface antigen beyond the eighth week. "This supports dosing on a monthly or even less frequent basis, an important practical advance given the intravenous-infusion delivery of the drug," noted Wei.

More results are expected to roll out at the Boston meeting of the American Association for the Study of Liver Diseases in November. Arrowhead has two platforms: Dynamic Polyconjugates, an RNA delivery system that has been shown to promote efficient knockdown and wide safety margins using a variety of siRNA molecules; and Homing Peptides, a library of peptides that the company said distinctly targets nearly every tissue in the human body.

The firm's development pace has been brisk. In April 2012, Arrowhead bought Alvos Therapeutics Inc., of Waltham, Mass., in an all-stock deal valued at about $2.1 million plus additional stock worth up to $23.5 million based on hitting clinical and regulatory milestones. Four months later, the buyout helped draw Whitehouse Station, N.J.-based Merck & Co. Inc. to the table for a license option deal that involved funding a monoclonal antibody candidate. Dublin-based Shire plc came along in December of that year, inking a deal to use Homing Peptides to develop and commercialize targeted peptide-drug conjugates using Shire's therapeutic payloads. (See BioWorld Today, Aug. 20, 2012, and Dec. 19, 2012.)

Finding money hasn't been a problem for the company. Arrowhead raised $21 million in 2006, $36 million in May of last year, and earlier this year priced an underwritten offering of 5.5 million shares of common stock at $18.95 each for $104.2 million. (See BioWorld Today, May 6, 2013, and Feb. 20, 2014.)

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