Biotech Stock Mailbag: Arrowhead, Catalyst Pharma

BOSTON (TheStreet) -- A discussion of an experimental hepatitis B therapy kicks off this week's Biotech Stock Mailbag.

Tim L. asks, "Adam, I appreciate the preview of the Intercept Pharmaceuticals (ICPT) data you provided last week. Can you do the same for Arrowhead Research (ARWR) and its hepatitis B data? Thanks."

Arrowhead is conducting a phase IIa study of ARC-520 in hepatitis B patients, with an announcement of initial results expected this quarter. All of the ARC-520 data generated to date have been in mice and a single hepatitis B-infected chimpanzee, so the phase IIa study results from hepatitis B-infected patients are very important for Arrowhead. 

ARC-520 uses RNA interference (RNAi) to turn off the production of hepatitis B genes, and by doing so, reduce the number of infectious hepatitis B viral particles. With the viral load reduced, a patient's own immune system can re-activate and kill the remaining hepatitis B virus. Arrowhead hopes to demonstrate treatment with ARC-520 can lead to a "functional cure" for hepatitis B. Current treatments for hepatitis B such as interferon or antivirals sold by Gilead Sciences GILD and Bristol-Myers Squibb BMY work by reducing viral load but don't help many patients achieve a cure.

The phase IIa study enrolls 16 hepatitis B patients and randomizes them to treatment with a single dose of ARC-520 (either 1 mg/kg or 2 mg/kg) or a placebo. The study's primary endpoint is the log reduction and duration of reduction of hepatitis B surface antigen (HBsAG), a measure of the presence of hepatitis B virus in the body. 

Gauging expectations for the study is a bit tricky. Buyside investors I've spoken with, generally speaking, are looking for a 1 log reduction in HBsAG from the 2 mg/kg dose of ARC-520. The homerun scenario would be a 1 log reduction in HBsAG combined with detection of antibodies and/or ALT (liver) flares, both of which suggest the patient's immune system is waking up to kill the hepatitis B virus. 

Sell-siders are giving Arrowhead more leeway with their study predictions. A log reduction in the range of 0.5 to 1 at the highest ARC-520 dose should be viewed positively, particularly if the drug's safety profile allows Arrowhead to increase the treatment dose to 3 mg/kg, where its effect should be greater. 

The safety of ARC-520 will also be scrutinized closely. In particular, the ALT (liver) flares which may indicate a positive immune response could also be a signal of a liver toxicity problem.

Aside from Arrowhead, the ARC-520 study results could also impact Alnylam Pharmaceuticals (ALNY), which is developing its own RNAi therapy against hepatitis B. Alynylam hasn't generated any human clinical data yet. 

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