If you are therefore prepared to take Arrowhead's charismatic, ambitious CEO's word for it, and continue to have faith that the TRiM platform is best in class in the RNAi field - superior, for example, to Alnylam's (ALNY), or Dicerna's - acquired by Novo Nordisk (NVO) last year for $3.3bn - this could be a good time to think about picking up some Arrowhead shares.
If, on the other hand, you take the viewpoint that Alnylam, for example, has successfully commercialized five RNAi drugs in the past few years, earning $844m of revenues in 2021, and also acknowledge that new technologies, such as CRISPR/Cas9 gene editing - as developed by CRISPR Therapeutics (CRSP) and Intellia (NTLA) - base editing - as developed by Beam Therapeutics (BEAM) - or MRNA technology - pioneered by the likes of Moderna (MRNA), BioNTech (BNTX), and Pfizer (PFE) - have come to the fore while Arrowhead has toiled in the clinic, you may feel like Arrowhead crown has slipped and its current >$4bn market cap valuation is unwarranted.
In the rest of this post I'll provide some additional colour and context to help investors make up their minds, and offer some thoughts of my own.
Arrowhead Pipeline - Where Are The Blockbusters (and When Will They Make It To Market)?
From a technical perspective, RNA-interference technology works by degrading messenger-RNA carrying instruction to make certain proteins, effectively ceasing production, and "silencing" overactive genes that cause diseases.
Arrowhead's TRiM platform is focused on ligand mediated delivery, tissue specific targeting, and structural simplicity, plus the ability to reach beyond the liver and therefore target a wider range of diseases. Many observers believe TRiM is the best RNA platform available for drug developers, despite the long wait for a first commercialized asset - and in fairness to Arrowhead, attracting the likes of GSK, Janssen, Amgen, Horizon and Takeda suggests that the pharmaceutical world shares that sentiment.
It should be noted that the risk these pharmas are taking is minimal - they are only required to pay out if and when milestones are achieved - but in the ultra-competitive drug development industry, the fact they have opted to work with Arrowhead and TRiM rather than a rival platform must reflect their belief that it offers them the greatest chance of success. We should also note that although Alnylam has five drugs on the market, it has come at a cost - the company's net losses in 2019, 2020 and 2021 were $939m, $828m, and $708m - hardly a business model to try to imitate.
Nevertheless, Arrowhead's only chance of succeeding for its shareholders lies in bringing products to market - and preferably ones that have "blockbuster" potential, i.e. that are capable of generating revenues >$1bn per annum.
As we can see above Arrowhead now has a sizable portfolio of clinical stage assets, but where do the blockbuster opportunities lie?
Beginning with the Takeda partnered ARO-AAT - now referred to as Fazirsiran - I view this as an exciting opportunity. There are four FDA approved products indicated for Alpha 1 Liver Disease - Prolastin-C and Prolastin-C Liquid from Grifols (GRFS), Aralast from Takeda, Zemaira from CSL Behring, and Glassia from Kamada Ltd.
These therapies are "augmentation therapies," which refers to the use of alpha-1 antitrypsin protein ("AAT") from the blood plasma of healthy human donors used to "augment" alpha-1 levels circulating in the blood and lungs of Alphas diagnosed with emphysema - sales data is hard to find, but when was approved in 2010, Prolastin was apparently generating ~$320m of revenues per annum, and controlling 75% of the market.
Evaluate Pharma speculates that Fazirsiran could generate $750m of revenues by 2028, however, with Arrowhead claiming a 20%-25% share. That's due to a broader indication of liver disease associated with AATD, for which there are no approved therapies. Phase 2 data announced in June this year from 16 patients demonstrated median reductions in accumulated total mutant AAT protein ("Z-AAT") at weeks 24 and 48 in the liver of -83.3%, whilst biomarkers of liver injury were reduced while regression of fibrosis of at least 1 stage occurred in seven of 12 patients receiving the 200-mg dose. The drug was also well tolerated with no deaths, discontinuations, of dose interruptions.
As Anzalone noted on the Q322 earnings call, the more important data - 12-month biopsy data - arrives this quarter and ought to be worth paying close attention to. If Arrowhead / Takeda can show that they can genuinely treat fibrosis and reverse liver damage, although the market opportunity may not be initially substantial, the validation of Arrowhead's technology and label expansion opportunities ought to act as a potentially major upside catalyst. Takeda will certainly enjoy a good return on its ~$1bn overall investment.