Pasadena biotech firm Arrowhead Pharmaceuticals Inc. closed a $45 million private placement offering with a group of health care investment firms last month and will use the proceeds to advance the trials of its six drug products – which could entice new suitors.
The company issued 7.63 million new shares to OrbiMed, Perceptive Advisors, and RTW Investments of New York, Boston’s RA Capital Management and other institutional investors at $5.90 a share, roughly the same price its shares were trading at on the Nasdaq when the deal closed Aug. 12. The company’s stock closed at $6.17 on Aug. 31. It is up 19 percent since the deal was announced.
The vote of confidence might presage more transactions for Arrowhead in the not too distant future.
Ahmed Enany, chief executive of downtown trade group Southern California Biomedical Council, said Arrowhead’s promise could attract acquisition offers.
“Sometimes big pharma comes in when research in phase two and three looks promising,” said Enany.
Dr. Christopher Anzalone, Arrowhead’s chief executive, said the company is open to discussions and that a partnership could take a variety of forms, from another company taking over clinical development entirely to just providing sales and marketing in China, where Arrowhead sees a big potential market.
“I see us at some point as a fully integrated pharmaceutical company,” said Anzalone. “I think at some point we’ll have a mix of drugs that we sell ourselves, and some for which we’ll partner with another company because it makes sense for continued development.”
In the near term, he said, the infusion of cash would boost efforts to advance its ARC-520 hepatitis B drug, which is the furthest along in its trials.
Madhu Kumar, a research analyst at Chardan Capital Markets in New York, whose investment banking division advised Arrowhead on the deal, called the investment a vote of confidence in ARC-520.
“They probably have one of the best therapies for hepatitis B,” said Kumar. “The class of investors they got – blue-chip, top-notch biotech investors – that kind of scrutiny reflects the value of the company.”
Anzalone said the investment firms all took passive stakes.
The investment comes during a period of expansion for Arrowhead, which has been increasing its head count at its corporate headquarters in Pasadena and expanding its research and development facility in Madison, Wis., he said.
“It feels like a nice validation of where we are as a company and where our programs are,” he said.
Anzalone said that while the market might ascribe the most value to ARC-520 in the short term, he thought the company’s targeted gene silencing technology, which shuts off disease-producing genes, was its most valuable asset. The firm uses this technology in all its drugs. Recent data on ARC-520 proved the company could silence specific disease-producing genes in the liver, he said.
“The next great leap forward will be showing that we can do it outside the liver,” he said.
ARC-520 is in the second phase of clinical testing, a period during which the drug’s efficacy and side effects are monitored.
“We’ve shown now that ARC-520 is capable of substantially reducing expression of hepatitis B proteins,” Anzalone said. “It’s been in over 200 people so far and it’s well-tolerated.”
He said more affirming data could be released later this year from its test of ARC-AAT, a drug for a disorder that leads to lung or liver disease, and from its test of a second hepatitis B drug, ARC-521, in the first quarter of next year. Both drugs are being tested in humans as part of the first clinical research phase, which evaluates safety.
Although there are drugs on the market that slow the progression of chronic hepatitis B, which according to the World Health Organization affects an estimated 240 million people worldwide and can lead to cirrhosis and liver cancer, there aren’t any which rid the body of the disease.
Until now, the pharmaceutical industry has been more focused on treating hepatitis C with drugs such as Sovaldi and Harvoni, which generated a combined $4.3 billion in first-quarter revenue for their maker, Foster City-based Gilead Sciences Inc.
Now Wall Street and big pharma are paying more attention to hepatitis B, said Anzalone.
“I think there’s such a great unmet medical need that large pharmaceutical companies are now recognizing,” he said. “Luckily, we saw that coming several years ago. Because of that, we’re ahead in understanding the virus and developing a potential cure.”
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