Shares of
Arrowhead Pharmaceuticals (
ARWR) crashed to a two-month low Tuesday after an analyst initiated overage of ARWR stock with an underperform rating.
SVB Leerink analyst Mani Foroohar expects competitive headwinds to batter ARWR stock over the next year. Further, Big Pharma rivals are likely to launch cardiovascular and lipid drugs with massive sales forces before Arrowhead reaches the market, he said.
“We see the next 12 months as far more challenging than the past two years as Arrowhead faces sky-high expectations in the face of increasingly clear competitive headwinds,” he said in a note to clients. Foroohar initiated coverage with an ARWR stock price target of 32.
Arrowhead is working on a technology that interferes in ribonucleic acid, or RNA. RNA acts as a messenger, carrying instructions from the DNA that control protein creation. The
technology is often called RNAi.
Arrowhead’s lead drug is called ARO-AAT. If approved, it would treat alpha-1 antitrypsin deficiency, a genetic condition that can cause lung and liver problems. It’s important to note that Arrowhead’s drug is the furthest along among RNAi-focused companies.
But Foroohar sees ARWR stock challenged by the likes of
Vertex Pharmaceuticals (
VRTX). Vertex is further behind Arrowhead in developing a treatment for alpha-1 antitrypsin deficiency. But Vertex’s drug could improve liver and lung disease “with the convenience of a pill,” he said.
“An update on the first of several Vertex (drugs called) correctors is expected in 2020 and represents a major risk catalyst to our — and Street — ARO-AAT estimates,” he said.
Rivaling Big Pharma In Cardio Diseases
A number of assets in Arrowhead’s pipeline focus on cardiovascular and lipid disorders. But the biotech company is far from the only player in this space.
Arrowhead’s targets are genetically validated. But the biotech company is going up against larger Big Pharma stalwarts in these disorders, Foroohar said.
This suggests “the orphan pricing necessary for Arrowhead to capture value from these assets may not be realizable, as launching these drugs against lower-priced competitors with broad labels, robust datasets and sizable sales forces is outside Arrowhead’s core competency,” he said.
ARWR Stock Benefits From RNAi Deal
Further, ARWR stock benefits from an RNAi partnership with
Johnson & Johnson (
JNJ) in hepatitis B. But even that can’t save ARWR stock, Foroohar said. He also noted investors have baked a substantial acquisition premium into shares.
“A partnering transaction for key Arrowhead pipeline assets or strong data from Vertex in alpha-1 antitrypsin deficiency or competitors in cardio-metabolic programs could flatten this premium,” Foroohar said.
