ArQule –An ultra-rare opportunity emerges

With most of its market cap covered by cash, ArQule (ARQL) and its pipeline are receiving very limited appreciation. The negative sentiment stems from skepticism regarding tivantinib,  currently in phase III for liver cancer (partnered globally and in Japan with Daiichi Sankyo and Kyowa Hakko Kirin, respectively). The skepticism is based on the drug’s 2012 failure in lung cancer as well as uncertainty about its mechanism of action.

The market also assigns no value to ArQule’s two early stage programs, which are close to completing phase I. The more advanced program, ARQ092, is an Akt inhibitor with what appears to be a better clinical profile compared to the first generation of Akt inhibitors (e.g. MK-2206) but still no clear route to market. In contrast to the case with tivantinib, which many claim is not a true Met inhibitor, ARQ092 appears like a bona fide Akt inhibitor with similar pharmcodynamic behavior to other Akt inhibitors in development.

ARQ092 as a fast follower

Roche and AstraZeneca (AZN) have the most advanced Akt inhibitors in development (both in randomized phase II trials). Roche’s GDC-0068 (licensed from Array Biopharma [ARRY]) is being evaluated in three large trials in breast, gastric and prostate cancer. Astra’s AZD5363 is in several randomized trials that are funded predominantly by research institutes. Results from the above studies should start to generate data in 2015 and could inform phase III strategy for Akt inhibitors as they assess multiple regimens and predictive biomarkers.

As I discussed last year, ARQ092 can be regarded as a fast follower behind Roche and AstraZeneca, whose Akt inhibitors are in multiple large phase II studies. The big advantage in having a fast follower drug is that its development is informed by experience gained with more advanced compounds. This includes indication, biomarkers for patient selection, combination regimens and mitigation of toxicity.

While ARQ092’s development will continue to focus on oncology and rely on experience generated by Roche and AstraZeneca, ArQule might pursue a parallel effort in a group of ultra-rare diseases. This strategy may enable ArQule to differentiate its Akt inhibitor and potentially beat competing drugs to the market.

On the last quarterly call, Arqule’s management indicated it will present preclinical data with ARQ092 in an undisclosed ultra-rare disease at the 2104 meeting of American Society of Human Genetics (ASHG). According to CEO Paolo Pucci “there will be some pretty extensive preclinical work done for 092, our Akt inhibitor, in a very rare and terribly debilitating disease…“.

Akt-related rare diseases

Based on the abstract released on the ASHG website, the ultra-rare indication is Proteus syndrome (PS), a condition characterized by asymmetric and disproportionate growth of certain tissues in the body. The most famous Proteus syndrome patient is Joseph Merrick, known as the elephant man.

Akt was implicated in Proteus syndrome following a landmark publication from a group at the NIH which showed that 90% of tested patients carry an activating mutation in Akt, which is also observed in various cancer types. The presence of the same mutation in cancer and Proteus syndrome is logical, as both cases involve uncontrolled growth and proliferation.

The abstract describes experiments (conducted by the same NIH group who identified the Akt mutation in 2011) using cells from PS patients. Treatment with ARQ092 led to a rapid shutdown of Akt signaling and resulted in a reduction in cell viability, which appeared meaningful but not dramatic (25-40%). These findings, albeit preliminary, represent the first proof of concept for Akt inhibitors in rare diseases (to my knowledge) and may pave the way to clinical testing of ARQ092 in PS.

Interestingly, other rare diseases are also characterized by hyperactivation of Akt that leads to uncontrolled growth of certain tissues. These diseases are characterized by mutations in other components of the PI3K-Akt-mTOR pathway and share some clinical features with PS. These include diseases with activating mutations in PI3K (PIK3CA-related overgrowth spectrum) or inactivating mutations in PTEN (PTEN Hamartoma Tumor Syndrome).

Commercial opportunity – modest but meaningful

Although there are still a lot of uncertainty associated with ARQ092’s potential development in PS and other PI3K-related diseases, this development is a clear positive. Rare diseases are regarded as attractive due to the high unmet need, low regulatory requirements, short timelines and high pricing. Another important aspect that distinguishes rare genetic diseases from cancer is their monogenic nature (caused by a single genetic defect). This is in contrast to cancer, which is typically driven by multiple mutations. Having a disease with a clear etiology significantly increases likelihood of finding effective treatments.

It is also important to acknowledge the uncertainties associated with developing ARQ092 in PS other PI3K-related diseases. On top the obvious challenge of translating an effect on cells in a tube to patients, a primary challenge would be safety. Akt inhibitors lead to hyperglycemia (increased blood glucose) and skin toxicities. To date, the glucose side effect appears manageable but the skin toxicities are dose limiting and have hampered development of Akt inhibitors. Based on phase I results for ARQ092 and AZD5363, this issue was overcome with the new Akt agents and creative dosing regimens. It remains to be seen whether ARQ092’s safety profile will be mild enough to be given to young patients (including infants) on a chronic basis.

Competition is another risk to bear in mind, although it is unclear whether Roche and AstraZeneca will pursue such an ultra-rare opportunity. In addition, there are many drugs in development or approved which inhibit the PI3K pathway including PI3K inhibitors and mTOR inhibitors. Akt inhibitors may have a better clinical profile but this is still an open question. Lastly, as no company has tried to pursue these indications, the clinical trial design needed for approval is unknown.

The commercial opportunity is also unclear as most of the relevant diseases are very rare and the exact prevalence is unknown. PS is believed to have a known prevalence of 100-200 patients worldwide. Most other indications range from 20 to 200 patients each, with Cowden syndrome (1 in 200,000 people) as the only exception. Therefore, the immediate market opportunity is probably ~500 patients which may grow to ~1000 with time as diseases without approved drugs are often under-diagnosed.

A 500-1000 prevalence is in the low range of other rare disease programs, which typically address a market of thousands or more. For example, BioMarin’s (BMRN) Vimzim is approved for Morquio A which has a global prevalence of ~3000 patients. There are cases, however of companies which decided to pursue ultra rare diseases with a very low prevalence. Ultragenyx’s (RARE) UX003 program, which targets a disease with a prevalence of 200 in developed countries, is a recent example. Analysts forecast peak sales of $75M for UX003, which could serve as a good conservative benchmark for ARQ092’s opportunity in PS and other PI3K-related diseases. This is on top of the potential for Akt inhibitors in cancer, which is significantly larger.

Q4 is going to be an important quarter for ARQ092, with preclinical results in PS at ASHG (October 18-22) and clinical data in cancer at EORTC (November 18-21). These readouts may increase awareness of ARQ092 as well as its worth in the eyes of investors. The commercial opportunity in PS is modest and timelines for approval in cancer are long, but for a company with an enterprise value of $2.5M, ARQ092 may become an important valuation driver.

72 thoughts on “ArQule –An ultra-rare opportunity emerges

  1. Hi Ohad,

    What are your thoughts on the 12 month median OS for ARRY’s MEK162 in NRAS melanoma? Do the PFS and OS results bode well for the P3 outcome? Thanks.



  2. Kimi – Thanks.

    Rick (ARRY) – It is hard to call Binimetinib’s data impressive but given the lack of other tratment options even limited efficay is better than nothing. It’s hard to put the PFS and OS in perspective so this doesn’t change my view of this program.



  3. wow on ambi…didnt see that…does everyone with a jak2 become acquired? jeez

    ohad is arry ahead of all meks when it comes to nras? …but kras is where the $$ is, correct?


  4. Robert – Yes ARRY has th most advanced melanoma NRAS program. There are many other subsets where MEK inhibitors may come in handy, KRAS+ NSCLC is viewed as the largest opportunity but BRAF+ colon and RAS+ ovarian cancer are also attractive indications imo.

    Dan – Not sure, need to see GSK’s and Roche’s data set first.



  5. hi everybody,

    if I see it correctly, AMBI shares can be bought for approx. 15 USD now. that is the price that will be refunded in cash to stock holders once the transaction is closed.

    BUT the CVR comes in addition, doesn’t it?? so in effect the CVRs would come for free?!?

    thanks for your opinions



  6. Hello Ohad
    I used to be an investor in NSPH, sold my shares 6 months ago and just looked back at share price yesterday – it imploded to $0.58 – market cap is $45M. The company has struggled to sell more systems to hospitals and other clients and are still far from break-even. It seems they will need to find some cash just to stay afloat, ehnace the decline (market cap used to be 200M not long ago. I wonder what you view is on systems like NSPH, for rapid detection/assays at hospital or in labs. I ask this espcially knowing that youa re a big fan of technology for screeninga nd customized medicine (FMI) and I know the two technologies are remarkably different, however, isn’t it expected thats ystems such as NSPH will find a broader use? Thanks for your opinion, as always


  7. Hello Ohad,
    Seattle Genetics is getting hammered today as a result of a downgrade by Bank of America. BAC says Aethera data not as positive as expected and gave a $34 negative price target. Your thoughts?


  8. Christian
    I have some limited experience with CVRs.
    After the transaction is closed the stockholders will receive $15 cash plus one CVR note per AMBI share. This note will trade on the stock exchange as a regular share. You can trade it at any time or wait to collect 4.50 royalties after meeting some or all milestones. After receiving any one of the milestone payments the value of the CVR will drop correspondingly. After the last payment the value of the CVR will become zero.

    After Sanofi bought Genzyme they provided in addition to the $74 purchase price a CVR which still trades as a normal share. The stock symbol is GCVRZ.
    You may look into this document for good explanation of the CV rights:
    EX-99.A.43 2 b85162exv99waw43.htm
    Still the conditions of the CVR are not know, but they may have an expiration date, i.e. if the FDA approval is not obtained by a certain date, the CVRs may expire, so the right look like royalty options


  9. Ohad, you said that RXDX had a high valuation, but I don’t see that, unless you consider $157 million high. What did you think of their presentation as ESMO?


  10. Re AMBI (Dan, Chrstian, Ike, andre) – Indeed looks like the CVR will not be traded on the stock exchange so the onlty way to get exposure to it is owning the stock prior to finalization of the deal. There are 2 tranches, each relating to 50% of the CVR potential, looks like the second scenario will occur before the first one:

    “A holder of a CVR will be entitled to a cash payment of $2.25 upon the first commercial sale in the United States following marketing authorization of a product for remission induction in patients with acute myeloid leukemia (“AML”), either alone or in combination with any other therapy, if the product’s marketing authorization does not require that a patient have received at least one prior systemic therapy for AML, plus an additional $2.25 upon the first commercial sale in the US following marketing authorization of a product for the treatment of relapsed or refractory FLT3-positive AML in patients who have received at least one prior systemic therapy for AML. ”



  11. Hey Ohad
    regarding FMI – who do you think are potential suitors? I do not think thse woudl be drug companies (would create conflict of interest) – possibly diagnostics and assay reagent makers as BD, Quiagen, Coulter, Illumina?


  12. Ohad, what did you think of the RXDX presentation at ESMO? Price has come down a bit in the last couple days. Would you be a buyer?


  13. Richard – I am somewhat ambivalent about RXDX’s data. On the one hand they have clear activity across the different mutations (ALK, ROS1, TrkA), including the firs response in a patient with a Trk-fusion. On the other, I fear their compound will be inferior to competing drugs which appear more selective and potent. For Trk, LOXO might have a better molecule that can inhibit teh target more potently (without penetrating the brain). For ALK/ROS1 there are multiple drugs that appear more efficacious based on cross trial comparisons.



  14. EORTC abstracts are out:

    P 100: First-in-human study with ARQ 092

    Efficacy is only mentioned for the intermittent schedule. Of the 27 pts, one with lymphoma had a partial response, 21 had stable disease including 3 pts with 18–20% tumor reduction. Safety profile is reported to be in line with other drugs in the class.

    P 169: First-in-human study of ARQ 087

    Best response in 32 of 40 evaluable pts was stable disease (80%). Eleven of 32 pts had stable disease for ≥16 wks [adrenocortical (2), renal cell, endometrial, ovarian carcinomas, choroidal melanoma, pleural mesothelioma, liposarcoma, osteosarcoma and chondrosarcoma]. ARQ 087 was well tolerated with manageable, mostly grade 1/2 AEs.

    Ohad, do you view these results as encouraging for a P1 trial? Thanks as always!



  15. Deglan – I would say they are ok, so far no major surprises.

    ARQ092 – we already knew about the PR in the lymphoma patient, the other cases of tumor shrinkage are encouraging. The most important finding is the safety profile which proves that the drug safe enough to be pursued and implies it truly inhibits Akt.
    ARQ087 – The lack of efficacy is not surprising, this is similar to other FGFR inhibitors (note this molecule is not very selective so its future is unclear imo). The lack of hyperpohsphatemia is an advantage (can be explained by the lower inhibition of FGFR4) but also calls into question whether good FGFR inhibition was achieved.

    I was surprised by the amount of preclinical data ArQule has this year. I counted at least 5 abstracts on one or both drugs in combination looking at biomarker, distribution or synergism. Couldn’t find anything dramatic but good to see they have been busy setting the stage for combination and biomarker-defined trials.



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