Please ensure Javascript is enabled for purposes of website accessibility

Is Arrowhead Pharmaceuticals Close to a Cure for HBV?

By Zhiyuan Sun – Apr 30, 2020 at 7:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The collaboration between a pharmaceutical giant and a mid-cap biotech company may have accomplished the impossible.

Arrowhead Pharmaceuticals (ARWR -0.69%) saw its stock price rise from $20 to over $70 last year on the basis of no news. A similar decline occurred in reverse this year -- again on the basis of no material news whatsoever. Massive speculation on the stock may be related to its flagship candidate, ARO-HBV, which has demonstrated in clinical trials to best efficacy against current standards of care for combating the hepatitis B virus (HBV). Is this potentially a functional cure for the condition, or have investors become too hyped on its potential? Let's find out together. 

DNA strands

Image source: Getty Images.

What are Hepatitis B and ARO-HBV?

Hepatitis B is a serious infection of the liver caused by HBV; it's spread via body fluids. The disease affects an estimated 257 million people worldwide, including about 850,000 in the U.S. Its total addressable market is estimated to scale to $3 billion globally by 2024. Although there is a vaccine available, it has no therapeutic effect if it is not given in a timely manner after exposure. 

Currently, patients living with chronic hepatitis B face risk of permanent scarring of liver tissues, or even death. As a result, they must be administered nucleotide analogues (NAs, compounds similar to naturally occurring DNA or RNA and combined with sugar) such as entecavir or tenofovir to maintain a low viral load. Unfortunately, after five years of receiving these analogues, fewer than 3% of patients will be cured of the condition. However, there may be light at the end of the tunnel. 

ARO-HBV is a ribonucleic acid interference (RNAi) therapy. In this therapeutic class, small RNA molecules are injected into a particular area of the patient's body to inhibit the expression of viral genes. ARO-HBV was specifically designed to silence the levels of DNA to RNA transcription in the HBV virus. 

How does clinical data look?

In phase 1 clinical trials, patients were given a combination of NAs and three doses of ARO-HBV over a period of two months, then evaluated in a follow-up period for a total of four months. The critical primary outcome was measuring declines in patients' HBV surface antigen levels (HBsAg), which indicates the severity of the current infection. 

Before the trial began, patients' mean HBsAg levels ranged from 3,212 IU/ml to 9,381 IU/ml across six cohorts. Four months after treatment with ARO-HBV and NAs, five of seven patients in the 100mg ARO-HBV cohort, five of six patients in the 200mg ARO-HBV cohort, six of eight patients in the 300mg ARO-HBV cohort, and five of seven patients in the 400mg ARO-HBV cohorts saw their HBsAg levels decline to less than 100 IU/ml. In other words, a vast majority of patients were functionally cured of the condition!

Is the company a buy?

Outstanding efficacy in early trials is a good indicator of success in latter investigations. Currently, Arrowhead has licensed ARO-HBV to Johnson & Johnson's (JNJ -0.71%) Janssen Pharmaceuticals subsidiary. Under this deal, Arrowhead would be eligible to receive up to $3.5 billion in milestone payments in the likely event of clinical success. If the drug is approved by the U.S. Food and Drug Administration, the company would also be eligible for mid-teen percentages in royalties of product sales. Phase 2 data from ARO-HBV are set to be released by the end of this year and would act as a significant catalyst for the stock price.

Furthermore, investors are well guarded against stock dilution while they wait for results. The company possesses more than $400 million cash on hand to fund research and development expenses, compared with a near $4 billion market cap. Additionally, Arrowhead has plenty of other promising candidates in its pipeline that are worthy of a look. Biotech investors who are interested in innovations in RNAi should definitely add Arrowhead to their portfolios. 

Zhiyuan Sun owns shares of Arrowhead Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Arrowhead Pharmaceuticals, Inc. Stock Quote
Arrowhead Pharmaceuticals, Inc.
ARWR
$33.05 (-0.69%) $0.23
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$163.36 (-0.71%) $-1.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.