Trading Options with an Edge
Select Page

Hawk’s Nest

Arrowhead (ARWR) Calls Bought on Sell-Off

by | Jul 8, 2021

Arrowhead Pharma (ARWR) shares recently fell 30% after pausing its RNAi therapeutics candidate in Cystic-Fibrosis due to lung inflammation but worth looking closer as a potential opportunity as September $70 calls have bought 2900X for nearly $2M into the weakness. ARWR did have a buyer of 1000 January $70 puts on 12/28 that remains in open interest while other flows have been mostly smaller but bullish such as on 7/2 the July $70 calls opened 1500X into weakness, the August $60 calls opened 700X for $600K, and January $55 puts sold to open 400X. ARWR’s low on the move came right at its major supportive base level from March/April as well as YTD lower value making $60 important to hold. VWAP from the March 2020 lows is down at $54 while shares sit right on VWAP off the September lows at $65 and also the 50% retracement of the September/July range. Arrowhead develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, Arrowhead therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. Arrowhead is leading the field in bringing the promise of RNAi to address diseases outside of the liver, and its pipeline now includes disease targets in the liver, lung, and solid tumors. ARO-AAT is the Company’s second generation subcutaneously administered RNAi therapeutic being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency (AATD) and is partnered with Takeda. The recent news was a setback but ARWR has a deep pipeline and ARWR does not see read through to its pulmonary platform. ARWR Ph1/2 ARO-HIF2 data in renal cell carcinoma was encouraging. ARWR also has a lot of optionality to pursue strategic partnerships across its portfolio. ARWR currently has a market cap of $9.15B and has over $300M in cash with revenues seen at $135M in 2021. Analysts have an average target of $95 and short interest at 5% of the float has been declining for months. HCW defended shares seeing little read-through to other programs saying the paused program was only valued at $2/share and sees the sell-off as a compelling opportunity to own into multiple potential positive vents and more valuable programs in 2H21 and 2022, a $95 target on shares. RBC lowered its target to $83 noting the recent news is not thesis changing and similar to Ionis (IONS) issues. B. Riley also called the weakness a buying opportunity and has a $106 target.