Arrowhead axes assets, but spares staff, to save $100M a year in refocus on core areas

Arrowhead Pharmaceuticals is terminating development of a pair of pipeline prospects as part of a push to be more strategic about where it puts its dollars. With costs rising as programs enter late-stage trials, the RNA specialist plans to look “more vigorously” for partners and cull assets outside its areas of focus.

The biotech is stopping development of the amyotrophic lateral sclerosis (ALS) prospect ARO-SOD1 and the gout candidate, HZN-457, that Amgen returned after it bought Horizon Therapeutics. Arrowhead CEO Christopher Anzalone expanded on the decision to drop ARO-SOD1 on a first-quarter results conference call with investors Tuesday.

“There's nothing within ARO-SOD1 that pushed us off it. We liked ARO-SOD1,” Anzalone said. “The problem with SOD-1 is that it was appearing to be increasingly commercially unviable. It didn't make economic sense to develop that drug. It was less of SOD-1 failing than a lack of confidence in the SOD-1 ALS markets.”

Arrowhead saw ARO-SOD1 as a proof of concept for its expansion into the central nervous system (CNS). But with the candidate trailed by another CNS prospect, which Anzalone said could give “good proof of concept of the platform” and “be a more commercially viable drug,” the biotech has decided to spend its cash elsewhere. A CNS therapy against another target is scheduled to enter the clinic this year. 

The terminations are part of a portfolio review that also affected some undisclosed preclinical programs and is forecast to reduce cash burn by around $100 million. Anzalone outlined where the savings will and won’t come from in an email to Fierce Biotech.

“The reduction in the growth in operating expenses is forecast to come from pipeline prioritization towards our core verticals of cardiometabolic and pulmonary and away from non-core areas,” Anzalone said. “We still intend to grow, just at a more deliberate pace, so no layoffs are planned.”

Anzalone went into more detail about the need to prioritize on the call with investors, explaining that “it is simply not economically feasible to do everything on our own past a certain stage of development.” In early development, Arrowhead can do “many things … without spending too much money and without building large teams with a deep therapeutic area expertise,” Anzalone said, but it now needs to spend.

“As our pipeline grows and we enter later-stage expensive and complex clinical studies requiring significant capital, deeper domain expertise and ultimately commercial infrastructure, we need to prioritize what we do internally,” the CEO added. “That is where we are now.” 

Arrowhead is currently adding late-stage development and commercial infrastructure in cardiometabolic disease. The biotech is also committed to pulmonary disease. Rather than focus discovery on those two areas, Arrowhead plans to keep working on a broader set of indications. Some candidates will slot into the two verticals. Others may warrant adding a new vertical, as Arrowhead is considering doing in CNS.

A third set of candidates will have no future at Arrowhead but could be “a substantial source of capital” for the rest of the business, Anzalone said. The CEO expects deals for assets in noncore areas to be an “increasingly important piece of our financing plan going forward.”

Bruce Given, M.D., Arrowhead’s former chief operating officer and head of R&D, has come back to help with the restructuring as interim chief medical scientist. Given’s responsibilities also include helping recruit “new therapeutic area experts to decentralize the chief medical officer function.” 

“We just thought that we needed good leaders with deep expertise in our chosen verticals,” Anzalone explained on the call. “So far, that's going to be cardiometabolic. We expect pulmonary to be the next vertical. We're probably going to have several others going forward, and they just needed their own leaders. And so, for us, it made sense to restructure towards that.”