Arrowhead Research (ARWR) Continues Upward Momentum: How Long Will It Last?

Arrowhead Research Corp (NASDAQ: ARWR)

Arrowhead Research is having yet another strong day in the market today. Yesterday was analyst day for the company; a day designed to show off the results from ARC-520. Today, we’ll talk about the results from ARC-520, how the market reacted to the news yesterday and so far today, and what we can expect to see moving forward. So, let’s get right to it…

ARWR Announces Data Surrounding ARC-520

ARC-520 is Arrowhead Research’s lead candidate; a treatment designed for the hepatitis B virus. Yesterday, the company reported overwhelmingly positive news with regard to the effectiveness of the drug as well as commercialization potential. According to data released, ARC-520 has been proven to significantly reduce instances of the hepatitis B virus in both human and chimpanzee subjects. With regard to commercialization, it is expected that ARC-520 could reach an annual sales potential of $4.5 billion! All in all, the news released yesterday was overwhelmingly positive.

How The Market Reacted To The News

After the release of any positive data surrounding a biotech stock, we tend to see strong gains; and that’s exactly what we’ve seen. In early trading yesterday, ARWR was up more than 20% before correcting throughout the day and ending well into the green. Today, we’re seeing more positive activity from ARWR. Currently (11:34), the stock is trading at $7.46 per share after a gain of 3.77% so far today.

What We Can Expect To See Moving Forward

Moving forward, I am expecting to see more positive news out of ARWR. However, there are a few things to consider along the way. The reality is that the long term growth potential is there; especially when ARC-520 hits the market, but that’s not expected to happen until the year 2020; we’re quite a long way off. In the mean time, the company has displayed disappointing returns on equity, low operating cash flow and deteriorating cash flow. As a result, we’ve seen feeble growth at best historically. With that said, while I am expecting to see long term gains, I’m not sure that we can expect gains to stick in the short term. So, if you plan on moving on this stock, please be sure to do so with caution; at least in the short run.

What Do You Think?

Where do you think ARWR is headed and why? Let us know in the comments below!

[Image Courtesy of Smarter Analyst]


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