Arrowhead Pharmaceuticals is licensing one of its drug candidates, a hepatitis B treatment, to a subsidiary of pharmaceutical giant Johnson & Johnson in a cash and stock deal valued at $250 million up front.
The agreement announced Thursday comes one month after Pasadena, CA-based Arrowhead, which operates its laboratories in Madison, WI, reported encouraging early data from a small clinical trial suggesting its drug could successfully treat hepatitis B viral infections. It also follows the recent FDA approval of an Alynlam Pharmaceuticals drug that takes the same approach to treating disease as Arrowhead’s experimental therapy.
Under the terms of the deal, Johnson & Johnson (NYSE: JNJ) subsidiary Janssen Pharmaceuticals will make a $175 million payment to Arrowhead. Additionally, Johnson & Johnson Innovation will take a $75 million equity stake in Arrowhead. The company said the shares of Arrowhead stock Johnson & Johnson Innovation is receiving are valued at $23 each. Arrowhead’s stock (NADAQ: ARWR) has not traded at or above that price since 2014. Shares in the company were changing hands at $15.68 apiece in early afternoon trading, a decrease of more than 15 percent from Wednesday’s closing price of $18.56 a share.
Arrowhead could earn even more from the deal. Depending on the progress of the drug, ARO-HBV, the biotech would receive milestone payments, plus royalties from sales if the drug reaches the market. In return, Janssen will receive an exclusive license to market ARO-HVB in the U.S. and other countries, Arrowhead said.
The Arrowhead drug, an injectable treatment, was developed to treat chronic hepatitis B virus (HBV). An estimated 257 million people across the globe live with HBV infection, which can lead to cirrhosis and liver cancer, according to the World Health Organization.
Arrowhead is among the companies developing drugs using RNA interference (RNAi), which involves shutting down, or “silencing” a gene before it can make a potentially harmful protein.
Arrowhead is developing ARO-HBV using a new type of RNAi drug delivery platform that it first discussed publicly last year. It’s using the platform—known as Targeted RNAi Molecule, or TriM—to develop drugs for chronic HBV, cardiovascular disease, and other conditions.
The Arrowhead drug is currently in a Phase 1/2 clinical trial. After Arrowhead made public select initial data from the study last month, the company’s stock price soared to a four-year high. Arrowhead said Thursday that beyond completing the ongoing clinical trial, Janssen will be solely responsible for continuing to develop ARO-HBV, and commercializing the drug, if it wins FDA approval.
ARO-HBV is one of three Arrowhead drug candidates currently in clinical trials, the company says on its website.
“This agreement represents an important next step for ARO-HBV,” Chris Anzalone, Arrowhead’s CEO, said in a news release. The deal combines “Arrowhead’s speed and expertise in RNAi drug discovery and Janssen’s clinical development and commercial capabilities,” he added.
Janssen’s decision to buy the rights to ARO-HBV could be seen as validation for RNAi therapies. In August, the FDA approved Alnylam Pharmaceuticals’ (NADAQ: ALNY) drug patisiran (Onpattro). The approval marked the first time an RNAi medicine has reached the market. Last month, Alnylam said it could soon file for an accelerated approval of a second RNAi drug, givosiran, which the Cambridge, MA-based company is developing for a rare genetic disease that causes potentially deadly bouts of abdominal pain.
In addition to the licensing rights for ARO-HBV, Janssen will also receive an option to collaborate with Arrowhead on up to three more RNAi medicines. Arrowhead said it will develop the drug candidates using its TRiM platform and “will perform discovery, optimization, and preclinical development, entirely funded by Janssen sufficient to allow the filing of a U.S. Investigational New Drug application or equivalent.” After that, Janssen would have an exclusive license to market the RNAi drug or drugs Arrowhead develops, if Janssen chooses.
Arrowhead said it expects the deal will close by the end of the year.