Arrowhead Pharmaceuticals - $ARWR - Earnings Analysis: Strong cash position following the Sarepta Therapeutics collaboration agreement. Strong pipeline of candidates in various stages of clinical development.

By sagebytes in Health — 11 Feb 2025

Business Model

Arrowhead Pharmaceuticals generates revenue through licensing and collaboration agreements with pharmaceutical companies. Key programs include plozasiran, zodasiran, and olpasiran.

Revenue Sources

Upfront payments, milestone payments, and royalties on commercial sales from partnered programs.
Co-development and co-commercialization agreements, primarily within the United States, where profits are shared on a 50/50 basis.

Income Statement Analysis

Revenue decreased by approximately 29.6% year-over-year, primarily related to revenue recognized from GSK and Takeda license agreements.
Research and development expenses increased by approximately 17.6%, driven by increased candidate costs and progression of candidates through clinical trials.
General and administrative expenses increased by approximately 14.0%, resulting from an increase in costs related to legal, audit, consulting, patent filings, business insurance and other external services, in addition to increased headcount.
Interest expense increased due to non-cash interest expense associated with liability related to sale of future royalties and Credit Facility.

Balance Sheet Analysis

Cash and cash equivalents decreased primarily due to ongoing research and development and operating expenses.
Total assets decreased, reflecting the decrease in cash and investments.
Total liabilities increased primarily due to an increase in interest due on the credit facility and other operating liabilities.
Total stockholders' equity decreased reflecting an increased accumulated deficit related to net losses.

Cash Flow Analysis

Net cash used in operating activities increased due to higher research and development expenses.
Net cash provided by investing activities increased due to proceeds from sales and maturities of investments.
Net cash provided by financing activities increased significantly due to proceeds from issuance of pre-funded warrants.

Capital Allocation

Arrowhead is focused on investing in its cardiometabolic pipeline, including obesity and CNS programs. The company has $1.4 billion in cash available for acquisitions and growth investments following the close of the Sarepta Therapeutics deal. A portion of milestone payments received will be used to repay debt per the Financing Agreement.

Management Commentary

The company is now well positioned for growth with plans for an independent commercial launch in 2025 and the potential for multiple partner launches over the coming few years.

Arrowhead is currently funded into 2028 with further cash runway potential with multiple wholly owned candidates providing opportunities for additional partnerships.

Overall Sentiment: Positive, with emphasis on growth potential, strategic partnerships, and pipeline advancement.

Recommendation

Rating: Hold

Reason for Rating: The company has a strong pipeline and the potential for growth. Increased expenses and decreased revenue in the short term are offset by the strong cash position from the recent strategic partnership. A 'Hold' rating is appropriate pending further data from clinical trials and clarity on the launch of plozasiran.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/11/2025, 6:22:16 AM