Investor euphoria over Pasadena-based Arrowhead Pharmaceuticals Inc. surged to new highs last week as the company’s shares jumped nearly 38% over two days on a double-dose of positive news.
The first boost came early on Nov. 24 after Basel, Switzerland-based pharmaceuticals giant Novartis announced it would buy Parsippany, N.J.-based Medicines Co. for $9.7 billion.
Medicines Co. has been developing similar drug technology to Arrowhead.
Both Medicines Co. and Arrowhead use RNA therapy in their drugs. RNA, or ribonucleic acid, is a molecule that, among other things, can convey genetic information.
This RNA-based technology is used to “silence” genes that otherwise would cause genetic-based diseases to form or spread in the body.
Analyst upgrade
News of Novartis’ purchase of Medicines prompted Madhu Kumar, a New York-based senior research analyst with Robert W. Baird & Co. Inc., to upgrade Arrowhead stock to “outperform” from “neutral.” Kumar raised the company’s target price to $70 a share from $39 a share
News of the deal and the upgrade sent Arrowhead shares up 13% shortly after the market opened on Nov. 25.
In his report, Kumar pointed to a successful trial of an RNA-based drug developed by Medicines Co. and Cambridge, Mass.-based Alnylam Pharmaceuticals Inc. to treat high cholesterol.
He said Novartis’ decision to buy Medicines after this successful trial signals a much lower risk for a line of drugs Arrowhead is developing that uses RNA in conjunction with fat molecules.
In the black
Hours later, just after market close on Nov. 25, Arrowhead released a positive fiscal year-end earnings report, which is somewhat unusual for a pharmaceutical company that has yet to bring a drug to market.
The company reported earnings of $68 million, or 69 cents per share, for the fiscal year ending Sept. 30, compared to a loss of $54.5 million, or negative 65 cents per share, for the fiscal year ending in September 2018.
The positive earnings were due to a surge in revenue to $168.8 million for the fiscal year ending Sept. 30 — a more than 10-fold increase from $16.1 million for the fiscal year ending in September 2018.
In remarks to analysts immediately following the earnings release, Arrowhead Chief Financial Officer Ken Myszkowski said the jump in revenue was due mostly to up-front payments resulting from the company’s licensing and collaboration agreements with the Janssen Pharmaceuticals unit of Johnson & Johnson Services Inc., the New Jersey-based pharma giant.
As part of that deal last year, Janssen agreed to pay Arrowhead $250 million up front and up to $3.7 billion in total for Arrowhead to develop and seek licensing for three drugs outside of Janssen’s major drug pipeline.
In his presentation to analysts following the earnings release, Arrowhead Chief Executive Christopher Anzalone laid out the company’s strategy to take a slate of 10 different drugs using its RNA technology to the clinical studies phase by the end of next year. Having so many drugs in trial phase greatly reduces the negative impact if one or two of those drugs should not fare well.
Traditionally, only giant pharmaceutical companies the size of Novartis ($52 billion in revenue last year) are able to take so many drugs to trials simultaneously.
“We believe this is a strikingly unique position for a company our size,” Anzalone said in the earnings presentation.
The earnings report sent Arrowhead shares rocketing on Nov. 27 to close at an all-time high of $69.02 a share, more than double the price just two months ago. By contrast, almost exactly three years ago, on Nov. 30, 2017, Arrowhead shares reached their nadir of $1.14, meaning the share price has exploded by a factor of 60 during those three years.
This article was originally published on Nov. 25, 2019, and was updated on Nov. 29, 2019.
Healthcare/biomed, energy, engineering/construction and infrastructure reporter Howard Fine can be reached at [email protected]. Follow him on Twitter @howardafine.
