Aradigm Corporation (NASDAQ: ARDM) is an emerging specialty pharmaceutical company focused on the development and commercialization of drugs for the prevention and treatment of severe respiratory diseases. Aradigm has completed two Phase 3 clinical trials with Linhaliq™.
On September 25, 2017, ARDM advised that the U.S. Food and Drug Administration (FDA) has accepted for filing with Priority Review its New Drug Application (NDA) for Linhaliq™ for the treatment of non-cystic fibrosis bronchiectasis (NCFBE) patients with chronic infections with Pseudomonas aeruginosa (P. aeruginosa).
The granting of Priority Review for the Linhaliq NDA accelerates the timing of the FDA review of the application compared to a standard review. The PDUFA (Prescription Drug User Fee Act) goal date for completion of the FDA review of the Linhaliq NDA is January 26, 2018.
Linhaliq was previously evaluated in two Phase 3 studies (ORBIT-3 and ORBIT-4) to determine its safety and effectiveness as a once-a-day inhaled formulation for the chronic treatment of patients with NCFBE who have chronic lung infections with P. aeruginosa.
Aradigm discussed the results of the Phase 3 studies at meetings with FDA in December 2016 and March 2017. Based on these discussions, the statistical analysis of the results was changed from the pre-specified plan to stratification based on sex and the frequency of pulmonary exacerbations in the prior year, as the stratum for current smokers contained a small number of subjects.
In neither trial did Linhaliq compared to placebo demonstrate a statistically significant improvement in the third secondary endpoint of the quality of life using the difference in the Respiratory Domain score of the QoL-B questionnaire between baseline and Week 48. Notwithstanding the earlier failures, the Phase 3 trial in fact succeeded in showing that Linhaliq offers both efficacy and safety and thus the company filed an NDA for the same.
Pulmonary infections with non-tuberculous mycobacteria (NTM) have become a serious growing public health problem in the U.S. and many other countries as they can result in debilitating lung disease and are costly to treat. Patients with NTM at present typically have to use several antibiotics to avoid the emergence of resistance. Therefore, the company has a large potential market, if it could deliver a much-needed new treatment for these patients with severe lung diseases.
Aradigm has a commercial partner i.e. Grifols who will fund the development cost, and $20M in milestones, in exchange for receiving part of the revenues. Grifols will fully commercialize Linhaliq in exchange for revenue sharing at a pre-determined ratio. It is to be noted that the agreed revenue sharing ratio would divide by half if there were a competitor in that country.
After approval, successful commercialization should not be a major issue. And after approval, “Aradigm believes the NCFBE indication for Linhaliq will exceed $500M of sales by 2021”. With more indications over the near to medium term.
The risk-reward tradeoff for the company is quite attractive for ARMD. In fact, The Company’s stock has unsurprisingly found enormous strength in the recent past and with the recent developments, analysts have revised their outlook on the stock. The stock currently has an average rating of “Buy” and a consensus price target of $7.10.
About the Company: Aradigm is an emerging specialty pharmaceutical company focused on the development and commercialization of drugs for the prevention and treatment of severe respiratory diseases.
Aradigm has completed Phase 3 development of Linhaliq (an investigational proprietary formulation of ciprofloxacin for inhalation) for the treatment of NCFBE. Aradigm’s inhaled ciprofloxacin formulations including Linhaliq are also product candidates for treatment of patients with cystic fibrosis and non-tuberculous mycobacteria, and for the prevention and treatment of high threat and bioterrorism infections, such as inhaled tularemia, pneumonic plague, melioidosis, Q fever and inhaled anthrax.
About Linhaliq: Linhaliq, formerly known as Pulmaquin®, is composed of a mixture of liposome encapsulated and unencapsulated ciprofloxacin. Ciprofloxacin, available in oral and intravenous formulations, is a widely prescribed antibiotic.
It is used often to treat acute lung infections because of its broad-spectrum antibacterial activity against various bacteria, such as Pseudomonas aeruginosa. Aradigm’s once-a-day novel inhaled formulations of ciprofloxacin are encapsulated in liposomes, allowing for a sustained release of the drug within the lung and improving airway tolerability.
The formulations are to be used for chronic maintenance therapy as they are expected to achieve higher antibiotic concentration at the site of infection and relatively low systemic antibiotic concentrations to minimize side effects.
Grant to Investigate the Treatment of Pulmonary Non-Tuberculous Mycobacterial (PNTM) Infections with Linhaliq: The National Institute of Allergy and Infectious Diseases (NIAID) and National Institutes of Health (NIH) awarded Aradigm a grant to investigate the treatment of two pulmonary non-tuberculous mycobacteria infections, Mycobacterium avium and Mycobacterium abscessus, with Aradigm’s inhaled liposomal ciprofloxacin products Linhaliq™ and Lipoquin®. Professor Luiz Bermudez at Oregon State University, Corvallis, will lead the laboratory research as a part of the consortium funded by this two-year grant of approximately $972,000.
According to a report from NIH based on an epidemiological study in U.S. adults aged 65 years or older, PNTM infections are an important cause of morbidity among older adults in the United States. From 1997 to 2007, the annual prevalence significantly increased from 20 to 47 cases per 100,000 persons, or 8.2% per year. Forty-four percent of PNTM-affected people in the study had bronchiectasis compared to 1% in the non-PNTM cases, pointing to an important co-morbidity. PNTM infections are common also in patients with other chronic lung conditions, such as cystic fibrosis and emphysema.
Key milestone/highlights of the company:
2nd Quarter 2017 Financial Results:
The Company recorded $7.7 million in revenue in the second quarter of 2017 compared with $14,000 in revenue in the second quarter of 2016.
The Company recognized $7.5 million in contract revenue – related party, $196,000 in government contract revenue and $7,000 in government grant revenue for the second quarter of 2017, as compared to $14,000 in government grant revenue for the second quarter of 2016. The increase in revenue was from the Company’s adoption of ASC Topic 606 Revenue from Contracts with Customers and primarily resulted from a change in estimated variable consideration associated with the $5 million regulatory milestone for the New Drug Application (NDA) submittal.
Total operating expenses for the second quarter of 2017 were $5.7 million, compared with total operating expenses of $7.6 million for the second quarter of 2016.
The decrease in research and development expenses of $2.4 million was due to lower contract manufacturing and clinical trial costs because the Linhaliq™.
Net income for the second quarter of 2017 was $1.0 million or $0.07 per share, compared with a net loss of $8.7 million or $0.59 per share in the second quarter of 2016. For the quarter ended June 30, 2017, the increase in net income resulted primarily from an increase in revenue of $7.7 million and a decrease in operating expenses of $1.9 million.
As of June 30, 2017, the Company reported cash and cash equivalents of $12.0 million.
Key risk factors and potential stock drivers:
The recent FDA action is the most significant milestone in the history of Aradigm and will lead the future direction for the company.
The company expects a similar submission in the European Union early next year. Marketing authorizations in these two major territories would be transforming events for the company
ARDM is still at a research & development stage and has not yet generated meaningful revenue and will likely operate at a loss/thin profits as it grows its market position and seeks ways to monetize it.
Any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor.
Stock Chart:
On Tuesday, September 26, 2017, ARDM shares were at $3.52 (+ 4.76 %) on an above average volume of 1.9 million shares exchanging hands. Market capitalization is $38.23 million. The current RSI is 92.51.
In the past 52 weeks, shares of ARDM have traded as low as $0.78 and as high as $7.19.
At $2.53, shares of ARDM are trading above its 50-day moving average (MA) at $1.46 and above its 200-day MA at $1.56.
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