Anadys Moves Hepatitis C Drug Ahead on its Own

Anadys Moves Hepatitis C Drug Ahead on its Own

Bruce V. Bigelow 8/20/09
http://www.xconomy.com

It’s been relatively slow for San Diego life sciences news, except for a flurry of funding deals for local drug development companies. Get the scoop on who’s getting money, along with some biotech profiles and more.

—CEO Steve Worland of San Diego’s Anadys Pharmaceuticals(NASDAQ: ANDS) says the company has stabilized following some mercurial advances and declines in the price of its shares. Whether or not Wall Street has been overreacting to Anadys’ announcements concerning its experimental drug for treating hepatitis C, Worland has put his efforts to find a drug development partner on hold. Instead, he’s cut payroll and raised more than $16 million so the company can carry out the next stage of its drug development plan on its own.

Anadys, Biotech’s Roller Coaster Story, Gears Up for Next Big Step with Hepatitis C Drug
Luke Timmerman 8/19/09

If there were a prize for the whiplash-inducing roller coaster story of the year in San Diego biotech, Anadys Pharmaceuticals would have to be a contender. But if CEO Steve Worland has his way, some of that stomach-turning drama of the past eight months will soon just be a memory.

“You might say we’ve been stabilized, but I’m not sure we were really unstable before,” Worland says. “We’ve turned an important corner.”

Anadys got to this position, talking about stability, after it dropped bombshells on investors twice this year—once in a good way, and once not so good. The positive one came in January, when the company (NASDAQ: ANDS) shocked Wall Street by dribbling out data from the first eight patients with hepatitis C who got the lowest dose of its experimental drug, ANA598. The patients had 99 percent of their virus wiped out within the first 72 hours, which was a far better anti-viral punch than any other drug in its class. The stock, which had been on practically no one’s trading screen the day before, with just 68,000 shares changing hands, rocketed on the news from $1.91 to $4.10 on volume of more than six million shares.

This was just the beginning. The preliminary results were from the lowest of three doses studied in a clinical trial, and Anadys suggested the data would only look better a couple months later, at a key research meeting, the European Association for the Study of the Liver. Anticipation was in the air: Anadys engaged in talks with potential partners about the data. The hepatitis C space was hot. Cambridge, MA-based Vertex Pharmaceuticals built a legion of fans on Wall Street for its industry-leading drug, and then Vertex paid more than $375 million in March to acquire another hepatitis C drug developer at a similar stage of development as Anadys. Shortly after, Worland talked about how his company and others were changing the paradigm for treating hepatitis C, following the cocktail-drug approach pioneered by HIV treatments.

Then came the plunge. Anadys presented full results from the clinical trial, which showed that, as predicted, the company’s ANA598 product had even stronger anti-viral activity at higher doses. There were no serious side effects, no signs of patients developing drug resistance, or of the virus bouncing back.
Anadys CEO Steve Worland

Anadys CEO Steve Worland

What was the problem? A separate study of 24 healthy volunteers showed that three patients dropped out of the study because they had developed Grade 2 rashes, measured on a scale of one to four, with four being the most severe. The price of Anadys shares fell, even though hepatitis C patients on the drug had no severe rashes, other drugs in the class have the same side effect, and healthy volunteers essentially have no reason to stay in a study if they see any side effects at all. Such nuances were lost on the fast-money crowd. Anadys shares fell 40 percent that day, making it the biggest decliner on the Nasdaq, and shares kept falling. “People thought the rash was more severe than it was,” Worland says. “It was an extreme reaction.”

Regardless of which interpretation you prefer to believe, Anadys had to deal with the consequences. It wasn’t able to find a partner to help take ANA598 through the next phases of clinical development on its preferred terms, and cash began to run low. By June, Worland had to act, by shedding

an expensive office lease, cutting 40 percent of the staff, and swallowing hard, by selling new shares and warrants at bargain prices in order to collect net proceeds of $16.2 million. That was a tiny fraction of what he could have raised a few months earlier, when the stock hit its 52-week high of $8.43. The company was left with 29 employees.

Then, slowly, the roller coaster started climbing again for Anadys. The company announced on July 30, as part of its second-quarter financial report, its revamped game plan as a stand-alone company: It had agreed with the FDA on a clear next step for development of ANA598. If this trial goes according to plan, it will keep control of the drug during a critical value-building phase, and still have enough cash in the bank to run into 2011.

Even though agreeing to a clinical trial design with the FDA is usually a perfunctory event at most biotech companies, investors suddenly got excited. Volume skyrocketed again, and 25 million shares changed hands the following day as Anadys stock shot up 44 percent, from $1.80 to $2.60.

The market moved up this time because investors were impressed at the rigor of the trial design, which should give Anadys a clearer idea, in a short period of time, of ANA598’s prospects, Worland says. The trial will randomly assign patients to get ANA598 along with the standard two drugs, pegylated interferon alpha and ribavirin, or the two standard drugs alone. It will enroll 90 patients, and monitor their viral levels at weeks four and 12.

In the past, the FDA has asked companies at Anadys’ stage of the game to take more modest steps with a four-week trial, not a more in-depth 12-week study, Worland says. The long-term effectiveness is of key importance to partners. If it can stick to its timelines, Anadys could get the first signs of effectiveness from this trial by the end of the year, with more details to follow in the first half of 2010, Worland says.

“People asked ‘can you really do that? Is the FDA going to allow you to do that? The answer is yes. They encouraged it,” Worland says.

So where does this leave Anadys now? The company has put its partnership talks on “hiatus” because it has enough money in the bank to carry out the next phase of ANA598’s development. If the drug passes that test, Anadys should be able to command better terms from a potential partner or acquirer. (Worland said he discussed with partners the possibility of selling the company in the spring, but the feedback he got was that the company first needed to gather more data.)

Anadys still hasn’t enrolled the first patient in the mid-stage clinical trial, and it sounds like it is still getting its ducks in a row for the study, which will likely have 15 to 20 sites in the U.S., Worland says. The next really big news will be when Anadys has preliminary results on the anti-viral activity of its drug, which could come out by the end of this year.

“We’re in the driver’s seat now,” Worland says. “We’re well-positioned.”