PropThink: ArQule Reports 3Q Results as Investors Now Look to Tivantinib's HCC Indication
(Thomson Reuters ONE) -
By Jake King
Oncology-focused ArQule, Inc. (NASDAQ:ARQL) reported third quarter financial
results on Thursday morning, noting that cash, equivalents, and marketable
investts totaled $140M on Sept. 30, and that the company will likely end the
year with close to $130M. ArQule performed a bit better financially than
expected in the quarter, but importantly, the company is guiding for FY12 net
loss per share in the range of $.20 to $.25, in-line with analyst estimates.
The company has recently faced some headwinds. ArQule's Japanese partner Kyowa
Hakko Kirin suspended a Japanese Phase 3 non small-cell lung cancer trial of
tivantinib in August due to safety concerns. And in early October, ArQule
announced that its lead development program in the West (partnered with Daiichi
Sankyo [OTC:DSKYF]), also evaluating tivantinib as a treatment for NSCLC, would
not meet its primary endpoint; the Phase III MARQUEE trial was halted for
futility. It is important to note that the MARQUEE trial demonstrated no safety
issues. The stock sold off by almost 70% as investors discounted tivantinib's
NSCLC indication. (Read more here.)
The company now pins tivantinib's future on a planned Phase III trial for
hepatocellular carcinoma (HCC, or liver cancer) and a Phase II trial for
colorectal cancer (CRC). The CRC trial is expected to show clinical results by
the end of the year. On Thursday's conference call, management, however, focused
almost exclusively on the HCC indication, and questions from analysts
demonstrated that the CRC indication is not the top priority at the moment,
considering that it is only in Phase II. Because ArQule is set to release data
from the CRC trial in the coming months, and there is little value being
assigned to this indication, investors may be able to get a "free" look at Phase
II data with limited downside risk. With a $156M market capitalization, the
company trades with an enterprise value of just over $15M (technology value),
with most, if not all, of the value assigned to the potential HCC indication.
Given that tivantinib has shown activity in multiple cancer indications, the low
price of the stock presents an opportunity to own a promising compound on the
cheap.
ArQule and the FDA have agreed to a Special Protocol Assessment for tivantinib's
upcoming HCC trial, and management hopes to begin treating the first patient by
the end of the year or in early 2013. The trial won't be completed for at least
another year, likely two, so any related value-driving events for the HCC
indication, aside from trial initiation, won't materialize in the near-term.
Management did say that of ArQule's four early-stage candidates, it will likely
partner one or more based on early trial data as it becomes available. ArQule's
partnership with Daiichi has been lucrative and crucial to ongoing tivantinib
development; if it can secure a similar partnership for another compound, the
benefits could be meaningful.
With risk somewhat limited by ArQule's healthy balance sheet, a long-term
position based on tivantinib in HCC - with the possibility of unexpected upside
should the CRC trial demonstrate promise - might make sense. The market for a
quality second-line HCC treatment is lucrative as the drug could fulfill an
unmet medical need. The FDA's expressed confidence in the trial also lends
credibility to its design, although an SPA is far from determinant. Thursday
morning, the stock gained slightly, and should maintain strength as the CRC
trial results come into view.
Read this article in its original form by clicking here.
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Datum: 01.11.2012 - 17:02 Uhr
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