Is Arrowhead Research Corp. a buyout target for a giant Bay Area biopharmaceutical company?
A rumor that Gilead Sciences Inc. of Foster City might be considering buying the small Pasadena biotech company sent the latter’s shares sharply higher last week. The rumor, first reported Dec. 30 on website Seeking Alpha and then picked up elsewhere, drove Arrowhead’s share price up nearly 15 percent that day to close at $7.57. Shares closed the shortened trading week ending Dec. 31 at $7.38, up 16 percent overall, making Arrowhead the second-biggest gainer on the LABJ Stock Index. (See page 34.)
Seeking Alpha reported that there have been rumors that Gilead was eyeing Arrowhead for its use of RNA technology to treat chronic viral hepatitis B infections. The financial website noted that Gilead is developing three of its own drugs to treat the disease.
Martina Schwarzkopf, spokeswoman for Arrowhead, said last week that the company had no comment on the report.
Gilead posted $17.5 billion in revenue for the first three quarters of last year and had a market cap Dec. 31 of $142 billion. The company has a wide range of products on the market, including Sovaldi, a hepatitis C drug that’s been in the news because of its huge price tag: $84,000 for a 12-week course.
In contrast, Arrowhead closed out its fiscal year in September with a mere $175,000 in revenue and an operating loss of $53 million, typical for a biotech firm in the research and development stage. Arrowhead’s market cap Dec. 31 was $404 million. Besides its hepatitis treatment now in the testing stage, the company is developing drugs to treat liver disease, metabolic disorders and certain cancers.
Whether true or not, the buyout rumor report and resulting share-price jump was welcome news for Arrowhead investors still reeling from a sharp October sell-off. Arrowhead shares plunged 49 percent in the days after the company’s Oct. 8 announcement of disappointing early test results for its hepatitis B treatment.
Expectations for the drug were high in the wake of trials involving chimpanzees in which the virus was nearly wiped out. But the first human trials showed much smaller reductions in the hepatitis B virus, prompting the sell-off.
Arrowhead Chief Executive Christopher Anzalone responded to the sell-off with an open letter saying the market was too quick to judge the test results. He said increasing the treatment dosage should result in greater reductions in the hepatitis B virus.
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