Arrowhead Research (ARWR), which develops targeted RNAi therapeutics, pulled down gross proceeds of $104 million on Wednesday through the sale of its common stock, a sale that comes at an all-time peak in share price. Developers of RNAI therapeutics have been hot, hot, hot in the last year, and ARWR has led the pack in terms of performance.
Tracked against the iShares Nasdaq Biotechnology (IBB)
Arrowhead’s $18.95 pricing this week is made more interesting after a glance at the company’s previous financings. Demand has clearly been on the up-and-up.
February 2014 – Arrowhead prices 5.5 million shares at $18.95 for $104 million in gross proceeds.
October 2013 –Arrowhead priced nearly 11 million shares (in common and preferred) at $5.86 for $60 million net proceeds.
May 2013 – Arrowhead priced nearly 20 million shares (in common and preferred) at $1.83 for $36 million in gross proceeds
January 2013 – Arrowd priced 1.65 million units at $2.12 each, consisting of one share of common stock and one warrant to purchase 0.50 of a share of common stock at $2.14 for $3.5 million in gross proceeds.
December of 2012 – Arrowhead priced 1.8 million units at $2.26 each, consisting of one share of common stock and one warrant to purchase 0.50 of a share of common stock at $2.20 per share, for $4 million in gross proceeds.
Including the underwriter’s over-allotment option, ARWR stands to net $113 million from this latest offering, bringing the company’s balance of cash and equivalents to $170 million. Importantly, the caliber of funds involved in ARWR has increased in tandem with its price performance: Sabby, Camber, Orbimed, and Baker Bros. all have 5%+ stakes in this, as of Wednesday, billion dollar company.
Already this year, RNAi-related deals have made waves. Alnylam Therapeutics (ALNY) kicked off 2014 with a $700 million investment from Sanofi (SAN) – the deal was done at a premium to market. Just days later, Tekmira Pharmaceuticals (TKMR) proved that their LNP (lipid nanoparticle) approach to RNAi delivery remains competitive, despite being one of the older platforms in the segment – Monsanto (MON) signed on for an $86.2M option agreement to license Tekmira’s delivery technology for agricultural use. Dicerna Pharmaceuticals (DRNA) is the latest RNAi player to enter the public sphere. The company priced its February IPO at $15 per share and opened its first day of trading at $30. At $38 as of this week, DRNA is nearly $700 million company despite a paucity of human data.
For investors in the space, it’s about the potential for these technologies to fundamentally change the underlying cause of a disease, not just treat its symptoms. There’s little reason to believe that the premium being paid for RNAi companies will soften materially in the near-term.
Of these, PropThink has covered Tekmira extensively in the past year. Shares are up nearly 300% from our original suggestion to buy the stock. You can read up on our coverage here. We continue to believe that the valuation disparity between TKMR, ARWR, ALNY, and now DRNA will close up. Although Tekmira’s most important near-term catalyst, the release of data on TKM-PLK1 in Gastrointestinal Neuroendocrine Tumors (GI-NET) and Adrenocortical Carcinoma (ACC), provides a clear datapoint, it simply isn’t a major focus for most involved investors
In connection with TKMR and ARWR, PropThink has taken a long position.
