ArQule – Finally out of the penalty box

ArQule (ARQL) has doubled in less than two months, following two years of weakness. While tivantinib’s phase III liver cancer is the company’s most visible asset, investors are starting to notice ArQule’s early stage pipeline and its potential to generate meaningful data in the coming year. Both ARQ 092 (Akt inhibitor) and ARQ 087 (FGFR inhibitor) are being tested in biomarker-enriched trials with the potential to have clear efficacy signals during 2015.

ARQ 092 – Fast follower in oncology but leading in rare diseases

ARQ 092 is in phase Ib in patients whose tumors harbor relevant mutations (Akt, PI3K). The drug appears to be a high quality, potentially differentiated Akt inhibitor but the primary risk here is related to Akt as a target for cancer.

To date, Akt inhibitors generated preliminary efficacy signs in biomarker-defined patients but were not effective enough to justify single agent development. As a result, development of Akt programs shifted to combination studies in an attempt to identify the right combination regimens and patient populations. Roche’s GDC-0068 (licensed from Array Biopharma [ARRY]) is being evaluated in three large trials in breast, gastric and prostate cancer. AstraZeneca’s (AZN) AZD5363 is in several randomized trials that are funded predominantly by research institutes.

Since ArQule is evaluating ARQ 092 as monotherapy, expectations from the current trial should be modest. When I spoke with the company’s management earlier this week, they acknowledged the limited activity observed to date with other Akt inhibitors but still felt the drug deserves a chance to demonstrate an effect in relevant patient populations. In that sense, being a fast follower plays to ArQule’s favor as it can use information generated by competitors to optimally design the expansion cohorts. ARQ 092 may also have advantages over other Akt inhibitors such as prolonged target coverage due to long half-life, better safety profile and different isoform selectivity.

ARQ 092 in Proteus Syndrome (PS) – The more interesting angle in the ARQ092 story is Proteus Syndrome, an ultra-rare indication (~100 patients in the US) where ArQule has a clear lead. Enrollment in the PS study (will be run by the NIH) is expected to start in the coming months.

Proteus Syndrome is caused by a mutation in Akt1, making it an ideal indication for Akt inhibitors (I discussed Proteus Syndrome and related disorders in my previous write up on ArQule). In contrast to cancer, Proteus Syndrome is a monogenic disease (all cases are driven by Akt), making the likelihood of success higher.

At a recent medical meeting, ARQ092 demonstrated shutdown of aberrant Akt signaling in cells and biopsies from PS patients. This, coupled with the good exposure and safety profile observed in cancer patients, bodes well for the drug’s prospects to modulate Akt signaling in these patients.

ARQ092

Source : Biesecker, ASHG 2014

As ARQ092 is the first disease-modifying agent to be evaluated in PS, it is hard to predict if and how the drug will exert a therapeutic effect. As an initial readout, investigators will take pre- and post-treatment biopsies and assess Akt pathway inhibition. Assuming this endpoint is met, the next step will be looking for an effect on lesion growth rate and other quality of life parameters.

PS represents a small but meaningful commercial opportunity – PS represents a modest commercial opportunity (~60$M) that could increase several fold by expansion to other similar rare diseases. Despite the limited market potential, I view the PS program as an important value driver given the potentially fast route to market and ArQule’s low market cap ($142M). As a shareholder I would like ArQule to pursue this path even if it proves commercially unfeasible merely for the sake of helping a small group of patients who are living with a debilitating disease with very limited treatment options (ARQ092 is in development in oncology so incremental costs are modest).

ARQ087 – first potential route to market identified

ARQ087 is in phase I with a focus on FGFR-driven tumors. It recently became an important asset following ArQule’s disclosure of two intrahepatic cholangiocarcinoma (ICC) patients who are deriving clear benefit (a minor and a partial response) from ARQ 087. In both cases, patients’ tumors harbor FGFR2 fusions.

ArQule is accelerating the ICC program with the aim of recruiting more FGFR2+ patients during 2015. ICC is a rare (~3500 cases in the US annually) tumor type with a poor prognosis and no approved drugs. Therefore, if the signal is corroborated in additional patients, the company will be in a position to pursue a pivotal phase II with response rate as an approvable endpoint. At the recent TAT 2015 meeting, investigators presented a case of FGFR2+ ICC patient who had a dramatic response to another FGFR inhibitor. This further validates the signal observed with ARQ 087 and implies activity is indeed FGFR-mediated.

FGFR ICC- TAT 2015

 Source : Massard, TAT 2015

FGFR is a highly competitive space – FGFR is one of the hottest target in early stage oncology drug development, based on a growing body of scientific literature implicating mutations in the four family members (FGFR 1-4) in various tumor types as well as preliminary signs of efficacy with FGFR inhibitors.

There are over ten active programs in development which can be divided to dual VEGFR/FGFR and FGFR-selective compounds. Each subgroup can be further divided based on selectivity profile against additional targets beyond FGFR and VEGFR.

Dual FGFR/VEGFR inhibitors are more advanced but they suffer from safety issues characteristic of broad-spectrum kinase inhibtors. Clovis’ (CLVS) lucitanib is the only FGFR/VEGFR inhibitor that has generated promising results to date (discussed here). FGFR-selective inhibitors proved more efficacious against tumors with FGFR fusions where FGFR is a primary growth driver.

The leading FGFR-selective programs are J&J’s (JNJ) JNJ-42756493, Novartis’ (NVS) BGJ398 and AstraZeneca’s AZD4547, all of which are in phase II. Additional programs are in phase I (Chugai, ArQule) or pre-clinical testing (Incyte [INCY], Loxo [LOXO], Blueprint).

Differentiation is an open question but ARQ 087 has a real fighting chance With so many drugs in development it is still early to pick winners as every drug has different pharmacologic and clinical profiles. Objective responses were observed with multiple inhibitors across various tumor types and so far no program has been terminated due to safety issues.

From a selectivity standpoint, ARQ 087 started the race as an inferior drug but there are preliminary indications that ARQ 087 has a real fighting chance. First and foremost, the drug has clear activity in FGFR-mutated tumors with durable responses in two out of two ICC patients with FGFR2 fusions. ARQ 087’s manageable safety profile at clinically relevant doses enables continuous as opposed to other drugs that require intermittent dosing. In addition, initial exposure data show exposure is numerically higher (sometimes dramatically) compared to other FGFR inhibitors.

ICC represents ARQ 087’s fastest route to market – The clear efficacy signal merits pushing ICC aggressively despite the selectivity overhang. In an effort to accelerate its ICC program, ArQule plans to expand the ARQ 087 to additional clinical sites. Novartis is also pursuing FGFR2+ ICC as part of a phase II that started recruiting in the summer of 2014. Although ArQule is one year behind Novartis, it is already in touch with many of the leading centers that treat ICC as part of tivantinib’s liver cancer study, which may enable it to shorten timelines. If the preliminary signs of efficacy are corroborated in 10-15 patients, ArQule may start a pivotal phase II in 2016.

Milestones for 2015

ARQL- milestones

 Portfolio holdings – April 5, 2015

biotech portfolio - 5-4-15biotech ETFs - 5-4-15

16 thoughts on “ArQule – Finally out of the penalty box

  1. very comprehensive discussion about their early stage pipeline.
    However their main asset is still tiva in liver cancer. What is your estimate for the probability for success of their Ph 3 trail? Does the current cap of $140M reflects an expectation for a failure of the program?

    Anything interesting from your call with MRNS management?

  2. andre (ARQL) – Thanks. I view the liver cancer study as a high risk bet with ~15-20% likelihood of success. If you compare ARQL’s market cap to that of other P3 companies, there is obviously a huge discount, reflecting low expectations.
    I don’t expect tivantinib to be a major driver for ARQL during 2015 (interim analysis is expected H1 16). News will come from 092 and 087.

    Ohad

  3. Hi Ohad

    What do you think about MGNX at current levels? Most interesting is obviously there DART platform which might be available before CARTs and where MGNX still holds very significant rights for several DARTs in several partnerships. Think they also have a favorable business model, i.e. revenues from existing collaborations covering expenses. Long term USD 10bn+ company?

    Have you ever taken a closer look at IPH.PA (Innate Pharma) who are focusing on NK cells and are a first mover in this field?

    Many thanks for your thoughts on both!

  4. Ohad

    Quite a impressive write up on Arql.notice that it’s one of your smallest positions in your model portfolio.would it be a position you would add to here?if they execute with good data read outs on ARQ087 and ARQ092 can you envision a partnership/buyout possibility.

  5. Nice article Ohad. Any thoughts on potential upside with Tivantinib in other indications? AZN is using a C-MET inhibitor in their combo studies i think. Any potential as a combo in prostrate perhaps? Too bad Daiichi isn’t a immuno-onco player. I thought ARQL was also running a KRAS NSCLS P2 trial. Silence on that front.

    Also ARQL had a BTK inhibitor a while back. Wonder whether it makes sense for them to restart development based on Gilead’s interest.

  6. Kevin (MGNX) – Agree about their DART platform being a valuable asset with a large number of industry partners. The main issue is the early stage of their DART pipeline which will take time to generate data. In addition, they need to prove their format is superior to AMGN’s BiTE and in general bispecific antibodies haven’t generated good results in solid tumors.
    Re IPH – Intersting approach but their data to date is underwhelming imo. A lot depends on the AML randomized trial but I am not optimistic. The NKG2A program they just got from Novo is interesting.

    Dave (ARQL) – Thanks. Yes I would like to add more ARQL in the coming months but given the high risk I wouldn’t allocate more than 3-4% of total portfolio. Re: partnership or acquisition, I don’t expect anything this year but if 092 or 087 generate positibe signals in Proteus and ICC, respectively they will become a takeout target given the low market cap.

    Rick (ARQL) – Thanks. I don’t price in additional indications for tivantinib, the new MET inhibitors appear more potent and selective. Interesting point about the BTK inhibitor, it could become an interesting asset if they show activity against Imbruvica-resistant mutations (which is something they are working on from what I understand).

    Elyas (CLVS) – It’s positive but not significant as the BTD covers only BRCA+ ovarian cancer. If/when they receive the same designation for BRCAness tumors that’s going to be a big deal imo.

    Ohad

  7. Hey Ohad,

    What is your opinion about EXEL now? They are very close to the METEOR read out with PFS being the primary end point. Given the lack of new treatment options in the RCC space and favorable PFS and ORR from the small ph1 trial does EXEL have a chance? How high can it go if endpoints are met?

    TIA…looking forward to your MRNS post.

  8. Hello Ohad,

    1. Any thoughts on UniQure N.V. QURE? what do you think of current valuation?
    2. There are few IPO’s on the way. What is your opinion of Aduro biotech, especially their most advanced program CRS-207 and GVAX for pancreatic cancer in phase 2 trial.
    I value your opinion,
    thanks, Ella

  9. HI Ohad,

    Cabozantinib has gained Fast Track designation to treat RCC. so what do you think of METEOR right now?

    Thanks
    Steve

  10. Larry (SNSS) – Unfortunately I don’t see any value there post the P3 failure as I don’t think regulatory agencies will approve the drug based on subset analyses.

    Amol (EXEL) – Honestly, I find it hard to reach a decision here…. On the one hand cabo’s response rate and PFS were remarkable in a small p2 but the OS was surprisingly short, which raises some doubts.

    Ella (QURE) – I prefer other names in gene therapy with a more visible route to meaningful revenues (although QURE has an approved product). I would go with AAVL and ONCE as they have mid/late stage programs with binary data in the near future.
    Re: Aduro, the deal they signed with NVS was truly impressive. The pancreatic cancer data are impressive but since we’re talking about pancreatic cancer, cance vaccines and the sample size was small, there is a high likelihood it’s a statistical fluke.

    steve (EXEL) – The fast track designation doesn’t really matter in terms of predicting success in RCC. As I wrote above, my sentiment towards METEOR is 50/50 right now.

    Ohad

  11. Thanks for your opinion. Seems like PFS is the primary end point they might win. But I understand that investors are skeptical now given that they were burn twice in COMET1 and COMET2. I will probably ride it into readout.

    By the way since rare diseases are in vogue do you intend to write a price on it and few stocks that you like in the space?

  12. Hi Ohad,

    Any thoughts on TTOO? They look like an emerging leader in molecular diagnostics with nice management team. I value your opinion.

    Peter

  13. Robert (EXEL) – Approval is indeed PFS-dependent (assuming no detrimental effect on OS). What bothers me in the P2 survival figure is that it questions the validity of the high PFS achieved by cabo.

    Amol – Agree that so far, cabo had a PFS effect even in COMET1 which failed on OS. Rare diseases is an area I am looking closely at as part of my day job at the fund. Among publicly traded companies, I like to look for rare disease opportunities beyond the traditional powerhouses (SHGP, BMRN, ALXN etc.) such as ARQL’s proteus syndrome program or MRNS’ PCDH19 trial, on which I will elaborate in my write up later today.

    Peter J(TTOO) – Sorry, don’t know them well.

    Ohad

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