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.