ARWR valuation

[holdencf]

We should start having a serious discussion about what "should" the "current" SP be and what "could" it be as certain events are realized.

I believe the next major SP appreciation event "should" be ARC-AAT.  I believe based on DPC performance in ARC-521, AAT results "should" be similar if not better.  With HBV we didn't know about iHBV DNA.  521 was designed to KD cccDNA and iHBV DNA the destroying both sources of HBsAG production. So very excited to see how 521 works.  Please opine as to whether AAT should work as well or better than 521.

I am building a more complicated version of my model to reflect the following:  Arc 520/521 discounted cash flow with a matrix of discount rate-driven present values that will change as derisking events occur (trial results, partnerships, movement from clin dev into the clinic, IND filings, etc...).  Going to take a while on top of work and holiday chores.  Will post some results.  I correspond with several people from the YMB.  I will bounce model off them for scrutiny before I try to attach here - have not yet tried to attach a doc to a forum) 

The scientists in the Forum have not started discussing this disease in detail.  Here is a little detail.  Hope we can drill down on this but it would seem that the disease is a straight forward mutated gene. One would think, that without the complications ARWR negotiated with ARC-520/521 and HBV, This might be an easier disease to KD.  But that is probably a naive view into which I would welcome holes punched.

Mutations in the SERPINA1 gene cause alpha-1 antitrypsin deficiency. This gene provides instructions for making a protein called alpha-1 antitrypsin, which protects the body from a powerful enzyme called neutrophil elastase. Neutrophil elastase is released from white blood cells to fight infection, but it can attack normal tissues (especially the lungs) if not tightly controlled by alpha-1 antitrypsin.


Mutations in the SERPINA1 gene can lead to a shortage (deficiency) of alpha-1 antitrypsin or an abnormal form of the protein that cannot control neutrophil elastase. Without enough functional alpha-1 antitrypsin, neutrophil elastase destroys alveoli and causes lung disease. Abnormal alpha-1 antitrypsin can also accumulate in the liver and damage this organ.
 Environmental factors, such as exposure to tobacco smoke, chemicals, and dust, likely impact the severity of alpha-1 antitrypsin deficiency.

Read more about the SERPINA1 gene.

[end2war]

"I believe the next major SP appreciation event "should" be ARC-AAT. I believe based on DPC performance in ARC-521, AAT results "should" be similar if not better. "

I don't think we know yet how well designed and effective are the triggers in AAT, or how much KD they will achieve. That is the point of the Phase 2 which has not started. Although the next step in the Phase 1 may provide good KD data for a single dose, we still need phase 2 to find out how straight forward KD will translate into clearing of the liver from the globules and other problems of the disease. I don't think you can assume that the good ARC-520 results with triggers necessarily translates into AAT trigger results. We don't yet know if they have identified the all correct genes to knock down, whether there is a second source of the problem protein (as they found in cHBV) what the duration of KD will be or what the added effect will be when they move to multi dose.

I hope these issues regarding trigger effectiveness will all turn out fine and no surprises, but we need to see test results, not just guess, IMO.

Another question is when they will report the phase 1 B data as they said they would keep escalating the dose until they determined the highest safe KD, so I am not sure when those tests will allow a report. Presumably the longer it takes the higher the single dose KD is getting, so the wait could be a sign of good things to come.

Another thing I would not assume without a test result is safety. Just because the other triggers are not accumulating or producing off target or toxic effects, we need to see what happens with AAT triggers. Even delivery is not guaranteed to work the way it did with ARC-520/521. So, testing here is going to be necessary.

But, AAT should be able to read out some data, the theory they are testing is more straight forward than the cHBV problem, and ARWR clearly thinks we could get some good efficacy data quicker with AAT than with ARC-520 as the theory they are testing seems simpler in concept. This should be a real good acid test for ARWRs siRNA and DPC in particular. And the Orphan Drug Designation should enable it to gain priority attention with the FDA and move fast if results warrant it. So, I generally am hopeful that developments and results with AAT may drive the PPS and potential collaborations, but I don't think they will be ripe for a license or deal until they have phase 2 data, and it is hard to predict whether AAT will wor as well or better than 521 which has a known delivery system that works and now a know KD parameter that gains very high KD, ie the triggers are both designed right and on target with 9 chimps indicating safety.

[holdencf]

End,
The primary end point in a Phase 1 is safety but the company also collects efficacy data.  I am assuming that delivery and safety will be robust.  If they experienced DLT AE or SAE resulting in patients being dropped we would have heard about it via PR or we will hear about it in 1Q. Same DPCs as ARC-520/521 so strong indication they are safe in humans regardless of trigger success.  All this means is that they are delivering to target without pre-delivery degradation of the delivery vehicle.  Were that to happen we have a bunch of dead people as siRNA's are toxic if released into blood stream and they would have announced it.  Agreed?  We know they got 99% KD in animal models.  Agreed? (they did).  If they can silence the incorrect expression of a gene in animals and they know what gene definitively cause the disease in humans (they do) then logic would dictate that they can deliver the trigger (they can) and that a trigger designed to KD the human version of the gene SHOULD work.  Entirely different than is the case with small molecules that have entirely different chemistry reactions in animals than in humans.  

So...Conclusion, 1Q16 AAT announcement will be a SP moving event.  Good new stock up.  Logic would dictate that the drug works.  We will know in 1Q16.

[end2war]

holden,

I own the stock and of course have high hopes for AAT, which has won Orphan Designation. And, based on what we know so far, I agree with the "logic" of your assumptions and guesses for how the trials will come out. But logic is not how this is necessarily works. You need real test results.

I had these discussions with HP over the 3 and 4 KD results, where he wanted to estimate and project what they would show based on logic. It turned out that the experimental results were not what he "logically" projected because there were intervening factors involving iDNA production of sAG that was not reached by ARC-520.

So, we can hope for a 1 qtr positive test result, and I have no problem with your estimate of that. Truth be told I am in your camp, with a reservation that guesses mean nothing until we have the expected confirming data, and we should still be prepared for potential surprises. This is how science proceeds.

As to your statement: "All this means is that they are delivering to target without pre-delivery degradation of the delivery vehicle. Were that to happen we have a bunch of dead people as siRNA's are toxic if released into blood stream and they would have announced it. Agreed? "

No, there is no evidence yet that the delivery to AAT patients is without degradation, and it is not clear what portion of the drug gets to target, nor whether it is damaged or degraded on the way. We need to see KD data to get a better feel for that.

Additionally, I don't agree that we would have a bunch of dead people if delivery is not working right or is degraded. But, there still could be some off target effects and some toxicity to be reported. I agree that the way they are talking about safety, nothing suggests there will be any negative surprises, but it still is possible, if for no other reason, that the tests are not done yet, and they are escalating the dose to the MAXIMUM they can which shows efficacy. At a high enough dose, don't be surprised if we see some SAEs. Other siRNAs have seen them.

[Think2Succeed]

A few points:

Pros:
1. The beauty of RNAi is that once the correct target has been identified then DPC works like a charm in sending the load there (that's why we saw >2 log KD in HBV infected chimps
2. ARC-AAT seems to be a disease that's much easier to handle than HBV
3. ARC-AAT is targeting a disease with no approved treatments hence any benefit would make the drug approvable
4. Unlike HBV, with ARC-AAT management is not looking for a functional cure off treatment (if it happens then that's a big bonus) but to achieve a functional cure ON treatment !

Cons:
1. At this stage we still don't know if ARC-AAT's target has been chosen correctly...we need some efficacy data in humans first (some of which will come from Phase 1 Part B)
2. Even if the target has been chosen correctly the company still needs to figure out the correct dosing and regimen and that's probably going to be a little more difficult since we didn't have a long term 9 chimps study with AAT.

Overall I'd say that, given the high probability of replicating the success (once the correct target is validated- which means high KD) in subsequent trials that RNAi offers , so I'd say that Phase 1 data for ARC-AAT is going to be extremely important both for ARC-AAT's chances to become a marketable drug but also for DPC. At this point I think the market discounts completely ARC-AAT but if positive data is presented then new valuations have to be made and I wouldn't be surprised to see the drug partnered after phase 1 data (given the high predictability profile). DPC will also be further de-risked as so far we only have safety and efficacy data in humans only for HBV but proving that it works in another total different disease/target will finally shift Arrowhead's value proposition to its delivery platform instead of an individual drug as it is currently.

My current preliminary estimations is that the market potential for ARC-AAT is around 1-1.5 billions and a big chunk of that should be unlocked just with phase 1 efficacy data !

T2S

[end2war]

T2S

I mostly agree with your summary, except I don't think it is correct to say that the target or goal of AAT is a FC.

That concept does not seem to apply because there is no going off drug for those that gain a KD benefit. The idea that the KD does not cure the patient is correct, since it does not fix the defective gene. So, AAT, if it works, will not provide a complete cure; but I don't think it is a FC either.

A FC involves bringing the immune system on line to hold the disease in check. Please correct me if I am wrong, but it is my understanding that for AAT to work as planned, there is no need to activate the immune any response.Thus, as so as I understand it, unless that is how the liver mends itself and the globules clear, I am not expecting the benefits to come from immune activation..

Rather, I think the goal of AAT is to KD the target gene, reduce or eliminate the misfolded protein, and alleviate the symptoms of the disease simply because it is not accumulating in the liver and clogging up the liver function. It is hoped that damaged livers will recover. And, as I understand it there will be no going off drug once the benefits are achieved.

Thus, in essence, rather than FC, I think they are simply going for KD that achieves a clinical  benefit of clearing misfolded proteins from the liver. Those that get this KD will still need another drug to supply the missing protein. but AAT will do its job if it just gains KD, IMO.

[Think2Succeed]

End,

You're right and it is exactly what I meant through FC while on treatment. I probably chose the wrong technical term to define the fact that a patient experiences deep KD that leads to significant improvements in his/her condition. My understanding is also that the immune response re-activation is not necessarily needed in this instance. That could be a good question for hparch...to see what his understanding is in this matter as well.

T2S

[end2war]

T2S

I did a little more due diligence since my post. After the KD of the target gene, it is expected the liver will recover from the globules and cirrhosis as part of normal liver function, not as a result of immune activation. Basically, the liver is always clearing gunk and that is its nature. 

However, it is not totally clear what the FDA will require to grant approval. Would it be pure KD of the target gene, or would they need to show some liver improvement, such as clearance of liver globules. Such decisions are decided in negotiation with the FDA when the data is presented on KD.

I understand that they expect to see globule decline and improvement in the health of the liver pretty fast once the objectionable protein is cleared, so approval will not be delayed much in any event after they prove KD of the gene and have a statistically significant sample.

It is really an interesting question whether ARC-520 or ARC-AAT is on the faster path to potential drug approval. With ARC-520, they plan to do some Monarch trials that are Nuc Naive and those could show FCs leading directly to a phase 3 trial and accelerated approval. Both drugs are close to approval if everything goes right and they gain FDA accelerated status. Both drugs are potentially eligible for accelerated status, indeed, ARC-AAT already has been granted orphan drug designation which means they are on an accelerated path.

[Think2Succeed]

Nov 30, 2015 13:42:05 GMT -5 end2war said:

It is really an interesting question whether ARC-520 or ARC-AAT is on the faster path to potential drug approval. With ARC-520, they plan to do some Monarch trials that are Nuc Naive and those could show FCs leading directly to a phase 3 trial and accelerated approval. Both drugs are close to approval if everything goes right and they gain FDA accelerated status. Both drugs are potentially eligible for accelerated status, indeed, ARC-AAT already has been granted orphan drug designation which means they are on an accelerated path.

I think ARC-AAT will get to the finish line faster (but not by much) due to much shorter trials. There is no need in ARC-AAT to have a 48 weeks trial...here the goal is deep KD while on treatment and from part A we saw that the drug was active even faster than initially anticipated, they just need to figure out the dosing frequency now (once every month ? Every 3 months ? etc...depending on how long the deep KD persisted once the max KD was achieved). Also as you mentioned ARC-AAT already has ODD.

T2S

[trader87]

IMO the kd of protein will suffice since that is the spicket that fills up the liver.
Any ideas on possible unique ways to test for globules without a biopsy?
jtrader

[mudbug021]

IMHO, I believe ARC-AAT will get to market first. The main reason being it is an Orphan status drug and the FDA is a lot more helpful or lenient in the research. The other reason is the HBV research has to wait for ARC-521 which in essence is a year behind the AAT trials. In my mind its just a logical conclusion to see AAT first to market.

The only thing that could hold AAT back is the discovery of another issue likened to what they found with HBV. The bottom line is we just dont know how complicated the Alpha-1 Antitrypsin Deficiency disease really is. Whether its going to be a mono trigger therapy or multiple trigger therapy is yet to be determined.

[Think2Succeed]

mud,

It's true that we don't know how complicated AATD is but I doubt that's more complicated than HBV. The Hep B market is huge and big pharma has tried for decades to find a cure for it and all it has done so far is to come up with a 10-15% cure rate and a drug with very unpleasant side effects that needs to be taken for a year. Orphan drugs have only become the focus of big pharma in the last few years mostly. So, I think the chances with ARC-AAT to replicate the results in NHP's are much greater than it was with HBV.

T2S