Arrowhead Pharmaceuticals Reassures Investors Amid Sarepta Partnership Concerns

Arrowhead Pharmaceuticals has moved to allay investor worries regarding its collaboration with Sarepta Therapeutics, asserting confidence in the troubled partner's ability to meet financial obligations. The reassurance comes as Sarepta faces mounting challenges, prompting speculation about the future of their $825 million deal.

Deal Structure and Financial Commitments

In November, Sarepta entered into a significant agreement with Arrowhead, comprising a $500 million upfront payment and a $325 million equity investment. The deal structure includes:

• Annual payments of $50 million for five years
• $300 million tied to enrollment milestones in a myotonic dystrophy type 1 (DM1) study
• An initial $100 million payment upon reaching the first DM1 study milestone

Arrowhead has stated that it anticipates earning the $100 million DM1 milestone soon, with the remaining $200 million expected by year-end.

Safeguards and Termination Provisions

Addressing concerns over Sarepta's recent setbacks, Arrowhead highlighted protective measures within the agreement:

• Clear termination provisions allowing asset and intellectual property recovery
• Right to terminate the DM1 portion of the deal if milestone payments are missed
• Option to end the entire agreement if annual payments are not made

Importantly, Arrowhead retains all payments received to date, regardless of potential termination scenarios.

Market Response and Analyst Perspectives

The reassurance from Arrowhead appears to have had a positive impact on investor sentiment. The company's stock, which had experienced a 21% decline since the previous Friday, opened up 4% following the announcement, surpassing $15.50 per share.

Jefferies analysts noted that even in the event of deal termination due to nonpayment, Sarepta would still face significant financial obligations. While the specifics of these terms remain confidential, the analysts believe Arrowhead is well-positioned regardless of the outcome, citing the company's wholly owned programs and potential for new partnerships.

As the pharmaceutical industry watches this partnership closely, Arrowhead's proactive communication strategy appears to be stabilizing investor confidence in the face of partner uncertainties.