Johnson & Johnson (JNJ - Free Report) announced that it has inked an exclusive licensing deal with Arrowhead Pharmaceuticals, Inc. to develop/commercialize the latter’s subcutaneous RNA interference (RNAi) therapy candidate, ARO-HBV. Notably, ARO-HBV is currently being evaluated in a phase I/II study for the treatment of chronic hepatitis B viral infection. While Arrowhead will complete the ongoing phase I/II program on the candidate, J&J will take over its development stages from phase IIb onward.
Simultaneously, Arrowhead will collaborate for up to three additional RNAi therapeutics against new targets to be selected by J&J, per option agreement. The combined value of the transaction is estimated to be more than $3.7 billion. The deal is expected to close in the fourth quarter of 2018, subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act.
Upon completion, J&J will make an upfront payment of $175 million to Arrowhead. Additionally, J&J’s investment arm, Johnson & Johnson Innovation – JJDC, Inc., will make an equity investment worth $75 million in Arrowhead at $23 per share of Arrowhead’s common stock.
Moreover, J&J will be entitled to pay $3.5 billion as potential milestones. If the candidate is approved, Arrowhead is also eligible to receive tiered royalties up to mid-teens on net sales.
However, investors probably believe that Arrowhead has been underpaid for this potential blockbuster candidate. As a result, shares of Arrowhead fell more than 17% following the news.
ARO-HBV, a next-generation RNAi therapy candidate, is being developed to silence HBV gene by principally targeting two regions of the HBV gene.
Shares of J&J have slipped 0.2% so far this year against the industry’s increase of 8.1%.
We remind investors that in August 2018, the FDA approved Alnylam Pharmaceuticals’ (ALNY - Free Report) Onpattro (patisiran) injection, a first-of-its-kind RNA interference (RNAi) therapy, for treating polyneuropathy of hereditary transthyretin-mediated (hATTR) amyloidosis in adults. Onpattro is the first and the only FDA-approved treatment for this indication.
Johnson & Johnson Price and Consensus
Zacks Rank & Another Stock to Consider
J&J currently carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same sector is Roche Holding AG (RHHBY - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Roche’s earnings estimates have been revised 4.7% upward for 2018 and 6% for 2019 over the past 60 days.
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