Arrowhead Pharmaceuticals Inc. (NASDAQ: ARWR) said on Thursday that Johnson & Johnson (NYSE: JNJ) would develop and market its gene-silencing Hepatitis B treatment and buy a minor stake in a deal that could be potentially worth more than USD 3.7 Billion, sending its shares surging 20%.
Under the deal, J&J’s Janssen Pharmaceuticals unit will obtain a worldwide license for Arrowhead’s ARO-HBV drug and an option to collaborate on up to three new RNA interference (RNAi) drugs, which use gene-silencing technology.
J&J’s investment comes a month after Arrowhead released data from an early trial testing ARO-HBV, dubbed “revolutionary” by analysts who also said the Company was positioned to develop a functional cure for Hepatitis B.
It also follows the first U.S. approval for an RNAi drug – Alnylam Pharmaceuticals’ (NASDAQ: ALNY) Onpattro – in August that affirmed the gene-silencing class of drugs as a new frontier in the field of medicine.
J&J will make a USD 75 Million equity investment in Arrowhead at USD 23 per share, a premium of about 24% to the stock’s Wednesday close. Arrowhead will also get USD 175 Million upfront, the Company said in a statement. Arrowhead is also eligible to receive up to USD 1.6 Billion in milestone payments for the Hepatitis B license and about USD 1.9 Billion in option and milestone payments for the three additional treatments.
Arrowhead said proceeds would be used to fund other treatments under development. The Company is currently testing drugs for metabolic disorders, lung disease and cancer.
“I view (the deal) as a pivot to transitioning from a small biotech company to a large pharmaceutical company,” Arrowhead Chief Executive Officer Christopher Anzalone said.
Pasadena, California-based Arrowhead uses its proprietary Targeted RNAi Molecule (TRiM) technology to develop RNAi medicines that treat diseases by targeting and silencing specific genetic material, thereby blocking the production of disease-causing proteins.
Arrowhead’s shares pared some gains and were up about 8% at USD 20.02 in premarket trading. The Company’s market value has jumped five-fold since the start of the year.