What happened

Shares of Arrowhead Pharmaceuticals (ARWR 7.19%) rose nearly 16% today after the company announced fiscal first-quarter 2019 operating results. The company reminded investors of its massive collaboration with Janssen, a Johnson & Johnson subsidiary, that has significantly derisked the medium-term development of its bustling drug pipeline.

In fact, the fiscal first-quarter 2019 financial results show Arrowhead Pharmaceuticals is now flush with cash thanks to the license agreement with Janssen. The business reported almost $190 million in cash and cash equivalents as of Dec. 31, the end of the quarterly period. That bodes well for advancing its five unpartnered clinical programs, including its lead drug candidate ARO-AAT in alpha-1 liver disease.

As of 12:03 p.m. EST, the stock had settled to a 14.4% gain.

A man sitting with his laptop as cash money falls around him.

Image source: Getty Images.

So what

Arrowhead Pharmaceuticals is developing a pipeline of gene-silencing drug candidates based on RNA interference (RNAi) technology, which is one potential way to treat diseases with a simple genetic basis. The biotech has added its own twist to the Nobel Prize-winning method called targeted RNAi molecule (TRiM), which allows therapeutic payloads to be delivered into specific tissues in the body. That could result in increased safety, higher effectiveness at lower doses, and reduced side effects.

Janssen is intrigued by the potential. It offered to develop ARO-HBV (since renamed JNJ-3989) for treating hepatitis B and an additional three drug candidates based on the TRiM platform that will be named later. In return, Arrowhead Pharmaceuticals received an up-front payment of $175 million and an equity investment of $75 million. If all development, regulatory, and commercialization milestones are met in the collaboration, then the innovator could receive up to $3.7 billion in additional milestone payments. Royalties on potential sales would be earned on top of that bounty.

Now what

Arrowhead Pharmaceuticals has hovered around a market cap of $1 billion since early October 2018. Considering the company has plenty of cash to develop its promising pipeline and has attracted two deep-pocketed partners in Amgen and Janssen, investors are certainly excited about what the future may hold. That said, it will take years and successful trial outcomes to deliver on that potential, which means investors will need to remain patient.

Check out the latest Arrowhead Pharmaceuticals earnings call transcript.