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Arrowhead Pharmaceuticals Q1 Results Didn't Matter -- but Its Pipeline Update Did

By Keith Speights - Feb 6, 2020 at 6:00AM

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The clinical-stage biotech posted a revenue decline and a widening net loss in Q1. But no one cared.

Arrowhead Pharmaceuticals (ARWR 3.64%) ranked as one of the biggest biotech winners in 2019, racking up a gain of 410%. The stock has given up some of those gains in 2020 so far, though.

But a rebound could now be on the way. Arrowhead announced its fiscal 2020 first-quarter results after the market closed on Wednesday. Here are the highlights from the company's Q1 update.

Test tubes with an image of DNA appearing in one tube

Image source: Getty Images.

By the numbers

Arrowhead reported first-quarter revenue of $29.5 million. That reflected a 15% year-over-year decline, but it met the consensus Wall Street revenue estimate for Q1.

The company reported a Q1 net loss of $2.7 million, or $0.03 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Arrowhead posted positive net income of $12.04 million, or $0.13 per share. The average analysts' estimate for Q1 was a net loss of $0.01 per share.

Arrowhead ended its fiscal first quarter with cash, cash equivalents, and short-term investments of $461 million. That was an increase from the $221.8 million on hand as of Sept. 30.

Behind the numbers

For most companies, declining revenue and missing analysts' earnings estimates would be a recipe for a disastrous quarter. But there are different dynamics at play for clinical-stage biotech stocks like Arrowhead.

The company's revenue comes from money received from collaboration partners. Everyone expects Arrowhead to lose money. If the loss is a little wider than expected, it's not a big deal.

What is a big deal is its pipeline progress. Arrowhead's shares jumped around 5% in after-hours trading on Wednesday thanks to the company's announcement of interim clinical results from phase 1/2a studies of experimental drugs ARO-APOC3 and ARO-ANG3. These results gave investors a lot more to be excited about than Arrowhead's financial numbers.  

ARO-APOC3 showed promise in reducing triglyceride levels in patients and in reducing levels of the APOC3 protein. ARO-ANG3 also demonstrated potential in lowering LDL cholesterol, triglycerides, and ANGPTL3 protein levels in patients.

Arrowhead's chief medical officer, Javier San Martin, stated that the results from the two studies "are highly encouraging and support our beliefs that RNAi [RNA interference] may be the optimal mechanism to inhibit APOC3 and ANGPTL3." He said that the "high level of pharmacologic activity with good safety and tolerability to date is precisely what we were hoping for."

Looking ahead

Arrowhead expects to begin dosing patients by early in the second quarter if not before then in its phase 1 clinical studies of ARO-HSD targeting the treatment of alcohol- and nonalcohol-related liver disease and of ARI-HIF in treating clear cell renal cell carcinoma.  It also plans to submit a regulatory filing in the first half of this year to begin clinical testing of ARO-ENaC in treating cystic fibrosis.

The company appears to be in a good position financially after conducting a stock offering that raised gross proceeds of around $267 million. As a result of this capital raise, Arrowhead should be able to fund operations well into the future.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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