Shares of Arrowhead Pharmaceuticals (NASDAQ:ARWR), a clinical-stage biopharmaceutical company, rocketed 237.5% higher in 2018, according to data from S&P Global Market Intelligence. The stock began the year under pressure, but recovered in a big way thanks to a growing pipeline of early stage RNA interference drugs.
In 2016, toxicity concerns forced Arrowhead Pharmaceuticals to abandon its its entire clinical-stage pipeline. The company's RNA drugs interfere with the expression of troublesome genes inside cells, but safely getting them in position is a challenge. Arrowhead stock took off in 2018 because it looks like the company's next generation of new drug candidates gets the job done safely.
In March, Arrowhead began dosing healthy volunteers with ARO-AAT, an experimental treatment for a rare liver condition that uses a new delivery technique. Patients who actually have alpha-1 liver disease will soon get a chance to test the treatment because the safety study was a success.
A couple of weeks later, Arrowhead began dosing patients with its next candidate, ARO-HBV, and by October, Johnson & Johnson (NYSE:JNJ) was ready to sign a deal worth $250 million to help develop it. The healthcare giant was drawn to early results that showed the treatment knocked the hepatitis B virus down to nearly nothing. But by then, the market was already beating biotech stocks without mercy. The Nasdaq Biotechnology Index tumbled 20% during the last quarter of 2018.
Arrowhead has already gained 21% in 2019, thanks to activity for two new drug candidates. ARO-APOC3 is an experimental triglyceride treatment waiting for a green light from the Food and Drug Administration to begin its first clinical trial. The company also began dosing healthy volunteers with ARO-ANG3, another experimental treatment for abnormal triglycerides and cholesterol levels.
With Johnson & Johnson footing the bills for ARO-HBV's development from now on, Arrowhead can advance its growing pipeline without burning through its cash cushion too fast. The company finished September with $76.5 million in cash and investments after losing $54.5 million during the fiscal year ended in September.
Arrowhead will receive $50 million when Johnson & Johnson starts a mid-stage study with ARO-HBV, and this program could deliver another $1.6 billion in potential milestone payments. Arrowhead is entitled to a mid-teen royalty percentage on sales of ARO-HBV, and Johnson & Johnson will also collaborate on new candidates directed at three undisclosed targets with similar terms.
Cory Renauer owns shares of Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and has the following options: short January 2019 $140 calls on Johnson & Johnson. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.