ARCA biopharma Should Be On Your Radar After Latest Advancements

May 29, 2019 11:30 AM ETARCA biopharma, Inc. (ABIO)4 Comments9 Likes

Summary

  • ARCA biopharma published positive results from its phase 2b GENETIC-AF study using Gencaro to treat patients with genetically-defined heart failure with atrial fibrillation.
  • The FDA has agreed to allow ARCA to run a phase 3 study under a special protocol agreement, in which upon meeting the primary endpoint would allow a regulatory filing.
  • Gencaro for heart failure with AF is expected to make between $500 million and $800 million in revenue in the U.S. alone.
  • ARCA biopharma has cash of $8 million as of March 31, 2019, which is expected to last until end of Q3 of 2019, in order to advance the phase 3 study it will need to either find a partner or raise cash by other means soon enough.
  • This idea was discussed in more depth with members of my private investing community, Biotech Analysis Central. Start your free trial today »

ARCA biopharma (NASDAQ:ABIO) announced that it had published positive results from the phase 2 study, known as GENETIC-AF in a medical journal. These results were obtained using the beta blocker bucindolol in a genetically-defined heart failure (HF) population with atrial fibrillation (AF). The good news is that patients treated with bucindolol saw a more favorable response to the drug, compared to standard beta blockers. Unfortunately, bucindolol did not reduce several measures in a superior fashion compared to metoprolol succinate. Despite this, the biotech is set to move on to a phase 3 study under an SPA from the FDA, which is very bullish.

Phase 2b GENETIC-AF Data

The phase 2b GENETIC-AF study recruited heart failure patients who have the beta-one adrenergic receptor (ADRB1) Arg389Arg genotype. This study was looking to compare bucindolol and metoprolol succinate to help sinus rhythm in a genetically defined HF population with AF. Heart failure is when the heart is not able to pump enough blood as it should. This does not indicate that the heart stops pumping or is close to stopping. This is a chronic condition and can occur in one or both sides of the heart. Then, AF stands for atrial fibrillation, which means the heart pumps rapidly at certain moments. This causes terrible blood flow. This phase 2b study enrolled a total of 267 patients with a left ventricular ejection fraction (LVEF) < 0.50. The main thing to know about LVEF is that the left ventricular is the main oxygenated blood pumping chamber of the heart. The reason why is because, from that chamber, blood is pumped up to the aorta and then out to the rest of the person's body. So, this study recruited patients who had an LVEF below 50. It is said that those who have an LVEF between 55 and 70 are in the normal range. The primary endpoint was looking to measure AF and atrial flutter (AFL) or all-cause mortality (ACM). This was evaluated by using something known as an electrocardiogram during a 24-week period. Plasma NT-proBNP, which is a biomarker of AF and HF, was reduced in the Gencaro group at 4 weeks, 12 weeks, and 24 weeks. These p-values were p = 0.003, p = 0.002, and p = 0.005, respectively. However, the metoprolol group achieved a reduction at 24 weeks of p = 0.014. What's the final outcome? The final outcome was that Gencaro wasn't able to reduce AF/AFL/ACM compared to metoprolol in the broad population of heart failure patients. However, the study saw a better response for patients with genetically-defined HF. That's why a path came forward for ARCA to advance to a late-stage study.

Advancement Towards Phase 3 With Special Protocol Agreement

With the positive phase 2b results of Gencaro in a genetically-defined patient population with heart failure, ARCA received more positive news for its program. It was able to speak to the FDA and establish a Special Protocol Assessment (SPA) with the agency for a pivotal phase 3 study. This phase 3 study will be known as PRECISION-AF. It will recruit patients with a genetically defined heart failure (HF) with atrial fibrillation (AF). It is the hope that Gencaro will achieve its endpoints for the study. I state this not only for the biotech itself but also because there are no FDA-approved drugs to treat this specific patient population. That means, if the phase 3 trial is successful, along with approval of the drug, ARCA will have that specific population of the market all to itself. A Special Protocol Assessment being given is very good news. That's because it establishes the condition that, if the endpoints are met, it would immediately support a regulatory filing for the application of Gencaro for these patients. It is estimated that the global atrial fibrillation market could reach $12.5 billion by 2020. As you can see, globally, this is a large market. Considering that this company has several programs in this area, if it succeeds in most or all of its studies, it has a chance for massive stock gains in the coming years. Gencaro for heart failure with AF is expected to make between $500 million and $800 million in revenue in the U.S. alone. This estimate is also established for the European Union as well. There are several catalysts for this program. However, it's important to note that they are not in the near term, and they are spaced out. The first catalyst involves the trial initiation of the phase 3 PRECISION-AF study. It is expected that the trial will be initiated by the end of 2019. The problem is that ARCA is low on cash. That means I expect a major cash raise or the need to find a partner to run this study. That would be the risk here for this biotech, the date for trial initiation is dependent upon having enough cash on hand. It's possible then that the study could be pushed up to 2020. This then follows 2 other catalysts later down the line. The first of which are interim results from the phase 3 PRECISION-AF study due Q3 of 2021 and then final results expected by Q2 2022. As long as the endpoints for the study are met, then the drug should be approved by the FDA. The final item to note is that with the pending patents going through for the U.S. and Europe, ARCA would have an exclusive market for Gencaro of about 10 years. That will be plenty of time to drive up revenues.

Financials

According to the 10-Q SEC filing, ARCA biopharma has cash and cash equivalents of $8 million as of March 31, 2019. The company believes that it has enough cash to fund its operations until the end of Q3 of 2019. That means sometime by September of 2019. However, as I have stated on many occasions, biotechs don't wait until the last few months to raise cash. On top of that, the phase 3 PRECISION-AF study can't be started until a large amount of cash is put into the company's coffers. ARCA doesn't even expect the phase 3 study to be initiated until the end of 2019. That means either a partnership with upfront cash and milestones or a big cash raise through dilution will be needed in the coming months. The risk here is that a large cash raise could be required, which may end up causing the stock to trade much lower. The other risk is that the phase 3 study may not even be started if at all. It highly depends on how quick the biotech can get funding in order to accomplish its goal of advancing Gencaro forward.

Conclusion

With the positive data established from a specific, genetically-defined population in the phase 2b GENETIC-AF study, the biotech will be able to move on to a phase 3 study under an SPA with the FDA. The risk is that there is no guarantee that the phase 3 study will end up being successful. If that happens, that would be a major setback for the company in getting Gencaro to market. It would be a good market opportunity for the biotech. That's because, in the US alone, Gencaro for heart failure with AF could generate between $500 million and $800 million. Even upon achieving a successful outcome in phase 3, another risk would be the ability to get the drug approved by the FDA. Approval of Gencaro will largely depend upon safety and efficacy data once the phase 3 study is concluded. ARCA biopharma has several other risks. For starters, it has a very low market cap of only $8.5 million, despite trading at $6.51 per share. Secondly, the average volume for the stock is 833,000. That means the liquidity of the stock is not good at all. Having said that, it is susceptible to heavy swings and possibly manipulation in either direction based on investor sentiment.

This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.


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