RNAi Pipeline Will Unlock Emerging Markets Despite Regulatory Risks

Key Takeaways

• Advancing RNAi therapy pipeline and global partnerships boost Arrowhead's growth prospects, competitive position, and access to emerging healthcare markets.
  
• Strategic collaborations and favorable regulatory trends support revenue stability, strong margins, and opportunities for long-term earnings and expansion.
  
• Heavy reliance on partnership payments, rising costs amid lack of marketed products, regulatory and competitive pressures, and industry headwinds threaten Arrowhead's earnings stability and growth prospects.

Catalysts

Develops medicines for the treatment of intractable diseases in the United States.

• Arrowhead's advancing late-stage clinical pipeline-especially the expected launch of plozasiran for FCS and SHTG, plus pivotal studies for three other RNAi therapies targeting major unmet needs-positions the company to capitalize on rising demand for innovative treatments driven by an aging population and increasing prevalence of chronic and genetic diseases, which could significantly accelerate revenue growth as approvals and launches materialize.
  
• Expanding global market access, exemplified by the Sanofi-Visirna partnership in Greater China, enables Arrowhead to reach emerging healthcare markets where spending on novel therapies is rising, opening new revenue streams and increasing the company's total addressable market.
  
• Multiple large pharma collaborations and milestone-generating partnerships (notably with Sarepta, Amgen, Takeda, and Sanofi) provide non-dilutive capital, revenue diversity, and stability independent of volatile equity markets, supporting sustained R&D investments and improving medium-term cash flow visibility.
  
• Progress in RNAi delivery technology (TRiM™ platform), pipeline breadth in both prevalent and rare/orphan indications, and first-mover potential in CNS and adipose tissue RNAi expand Arrowhead's competitive edge as advancements in genomics and precision medicine increase the feasibility and personalization of RNAi therapies-supporting stronger projected net margins and long-term earnings growth if adoption broadens.
  
• Regulatory momentum-including FDA receptivity to RNA-based therapies and the increasing prevalence of high-value, rare disease drug development-sets up favorable pricing/reimbursement scenarios and increases the likelihood of accelerated regulatory pathways, which in turn could boost Arrowhead's risk-adjusted earnings and provide optionality for premium M&A or strategic transactions.

Arrowhead Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Arrowhead Pharmaceuticals's revenue will decrease by 11.4% annually over the next 3 years.
• Analysts are not forecasting that Arrowhead Pharmaceuticals will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Arrowhead Pharmaceuticals's profit margin will increase from -25.9% to the average US Biotechs industry of 16.1% in 3 years.
• If Arrowhead Pharmaceuticals's profit margin were to converge on the industry average, you could expect earnings to reach $64.0 million (and earnings per share of $0.38) by about September 2028, up from $-148.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 142.3x on those 2028 earnings, up from -25.9x today. This future PE is greater than the current PE for the US Biotechs industry at 15.5x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.95%, as per the Simply Wall St company report.

Arrowhead Pharmaceuticals Future Earnings Per Share Growth

Risks

• A significant portion of Arrowhead's current revenue is dependent on milestone and collaboration payments, especially from Sarepta and Visirna/Sanofi deals; any delays, restructuring, or reprioritization by partners (notably given Sarepta's own restructuring and financial turbulence) could result in unpredictable cash flows and threaten earnings stability in coming years.
  
• Rising R&D and SG&A expenses driven by late-stage clinical trials and the commercial buildout-without a major product yet on the market and with net losses increasing-raise the risk that high ongoing costs outpace near-term revenue growth, potentially compressing net margins and stressing Arrowhead's cash runway despite a strong current balance sheet.
  
• Exposure to regulatory risks and approval delays persists, given multiple Phase III programs that are still pending critical data readouts and pivotal approvals (notably plozasiran and zodasiran); any negative trial results or regulatory setbacks could materially impact near-term and long-term revenue prospects.
  
• Arrowhead faces intensifying competition in the cardiometabolic and RNAi therapeutic space (such as Ionis's upcoming readout in the same indication); even if Arrowhead's products prove effective, aggressive competitive dynamics could pressure pricing, slow market adoption, and limit potential revenue growth.
  
• There is a risk that broader industry or policy trends-such as sustained high interest rates, increases in cost of capital, and mounting political scrutiny over drug pricing-could lower company valuations, hinder future fundraising capability, and limit Arrowhead's ability to price new products at premium levels, compressing future revenue and net margins.

Valuation

• The analysts have a consensus price target of $44.071 for Arrowhead Pharmaceuticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $17.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $398.8 million, earnings will come to $64.0 million, and it would be trading on a PE ratio of 142.3x, assuming you use a discount rate of 7.0%.
• Given the current share price of $27.8, the analyst price target of $44.07 is 36.9% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.