Chardan Heads to Sidelines on Arrowhead Pharmaceuticals Inc (ARWR) Following RNAi Program Discontinuations

Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) are currently plummeting 62% in pre-market trading after yesterday’s announcement that the biotech firm has discontinued all of its clinical RNAi programs, from ARC-520 to ARC-521 to ARC-AAT. The decision arises on back of discussions with regulatory agencies and experts alike who believed there would be considerable delays in the EX-1 programs integral to the biotech firm’s RNAi programs as ARWR would have to investigate the cause of deaths in a non-clinical toxicology study revealed November 8th.

Instead, the firm will opt to switch research focus toward its subcutaneous (subQ) and extra-hepatic programs ARC-LPA, ARC-AMG1 (both partnered with unrated Amgen), ARC-F12, ARC-HIF2, and previously unannounced subcutaneous programs for chronic hepatitis B virus (HBV) and alpha-1 antitrypsin deficiency (AATD).

In reaction to the RNAi program discontinuations, Chardan analyst Madhu Kumar downgrades to a Neutral rating on ARWR while slicing the price target from $8 down to $2, which represents a 54% downside from where the shares last closed.

Kumar opines, “As previously highlighted, the Bear Case for ARWR has occurred, with broad loss of the EX-1 based clinical pipeline. In our 10 November 2016 company note, we highlighted both bullish and bearish scenarios for Arrowhead after the FDA’s announced clinical hold for the Heparc-2004 clinical study of ARC-520. In particular, we stated that, due to the use of EX-1 DPC technology across Arrowhead’s clinical pipeline, ‘the clinical hold could reflect a widespread risk to the Arrowhead platform.’ The announced discontinuation of EX-1 clinical assets confirms this risk, leaving us with little visibility on Arrowhead’s development program moving forward.”

However, “Because the ARWR discontinuations are associated with the DPC platform and not the RNAi drugs, they should have minimal read-across to the RNAi space” and for the drugs that do not use a DPC platform like EX-1, to Kumar, these “should not face similar safety risks.”

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Madhu Kumar is ranked #3,916 out of 4,241 analysts. Kumar has a 36% success rate and faces a loss of 10.8% in his yearly returns. When recommending ARWR, Kumar loses 22.2% in average profits on the stock.

TipRanks analytics indicate ARWR as a Strong Buy. Based on 4 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on ARWR, while 1 maintains a Hold. The 12-month average price target stands at $9.50, marking a 116% upside from where the stock is currently trading.screen-shot-11-30-16-at-02-49-pm

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