ARWR - Arrowhead drops as Cantor flags risks to Johnson & Johnson licensing deal

Arrowhead Pharmaceuticals ( NASDAQ: ARWR ) fell sharply on Monday after Cantor Fitzgerald saw risks to the company's licensing deal with Johnson & Johnson ( NYSE: JNJ ), noting that the pharma giant is reportedly deprioritizing its portfolio targeted at hepatitis virus.

According to a 2018 agreement with Arrowhead ( ARWR ), JNJ ( JNJ ) received a worldwide, exclusive license for HBV candidate JNJ-3989 (ARO-HBV) from the company. Arrowhead ( ARWR ) is set to earn $1.6B in milestone payments as JNJ's Janssen unit leads its clinical development and commercialization.

Cantor analyst Prakhar Agrawal pointed to a recent news report on JNJ's ( JNJ ) plans to deprioritize hepatitis B and D treatments and terminate several ongoing HBV studies.

"Based on our initial review, this seems to include a wind-down of all ongoing HBV trials testing" Arrowhead's ( ARWR ) RNA interference therapeutic JNJ-3989, Agrawal wrote.

The analyst issued an Overweight rating and a $79 per share target on Arrowhead ( ARWR ) ahead of the company's earnings release on Monday.

Meanwhile, Arrowhead ( ARWR ) said that JNJ ( JNJ ) has yet to notify its decision to end the agreement.

"We have seen the media reports and it is also our understanding that Janssen is deprioritizing HBV broadly, however we have not received a termination letter for our license agreement," Bloomberg News reported citing an emailed statement from Arrowhead ( ARWR ).

"It is our understanding that some legacy HBV studies are continuing but we do not know where JNJ-3989 will ultimately end up. We will assess our options and rights when Janssen decides the path forward for the program," the company added.

In December, Seeking Alpha contributor Larry Hall cited mixed trial results Arrowhead ( ARWR ) has generated for JNJ-3989 as one of the many challenges the company faces.

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