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Sentiment for biotech is historically low right now. Although investors are rightfully eyeing Arrowhead Pharmaceuticals' high cash burn with unease, I think the recent punishment is short-sighted.

The business has many opportunities to raise capital on favorable terms. That includes monetizing R&D, the upcoming licensing of late-stage cardiometabolic asset zodasiran, and non-dilutive debt, as the recent $500 million funding ($400 million immediately) demonstrates.

Additionally, Arrowhead Pharmaceuticals is brimming with potential fresh off its second partnered program advancing to phase 3, earning U.S. Food and Drug Administration (FDA) Breakthrough Therapy designation for plozasiran, and ahead of its almost guaranteed approval and market launch for plozasiran in 2025.

If you aren't already on Discord, then join me and fellow members as we discuss biotech investing and this trade in a more timely manner.

The Trade

Arrowhead Pharmaceuticals is considered a Growth (Quality) position. I purchased 54.12 shares at $18.48 per share on October 1, 2024.

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Margin of Safety & Allocation

Arrowhead Pharmaceuticals is considered a Growth (Quality) position. The current modeled fair valuation for the company based on our 2024 model is below:

• Market close September 30: $19.37
• Modeled Fair Valuation: $32.69 per share
• Allocation Range: Up to 10%

Arrowhead Pharmaceuticals reported 124.315 million shares outstanding as of August 1, 2024. The modeled fair valuation above assumes 142.963 million shares outstanding, which is equivalent to 15% dilution.

Further Reading

• May 2024 research note analyzing Q1 2024 operating results
• February 2024 research note analyzing full-year 2023 operating results and management's decision to continue investing in an ambitious drug development strategy

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