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J&J, Arrowhead in gene-silencing drug deal worth up to $3.7 billion

Key Points
  • Johnson & Johnson will make a $75 million equity investment in Arrowhead Pharmaceuticals at $23 per share.
  • Arrowhead said J&J would develop and market its gene-silencing Hepatitis B drug.
  • J&J will pick up a minor stake in the company in a deal that could be potentially worth more than $3.7 billion.
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Arrowhead Pharmaceuticals said on Thursday Johnson & Johnson would develop and market its gene-silencing Hepatitis B drug and pick up a minor stake in the company in a deal that could be potentially worth more than $3.7 billion.

Under the deal, J&J's Janssen Pharmaceuticals unit will obtain a worldwide license for Arrowhead's ARO-HBV drug and an option to collaborate on up to three new RNA interference (RNAi) drugs, which use gene-silencing technology.

J&J will make a $75 million equity investment in Arrowhead at $23 per share, a premium of about 24 percent to the company's Wednesday close. Arrowhead will also get $175 million upfront, the company said in a statement.

Arrowhead is also eligible to receive up to $1.6 billion in milestone payments for the Hepatitis B license agreement and about $1.9 billion in option and milestone payments for the collaboration agreement related to up to three additional targets.

The deal validates J&J's interest in Arrowhead's Targeted RNAi Molecule (TRiM) technology, the Pasadena, California-based company said in a statement.

Using TRiM, Arrowhead develops RNAi medicines that treat diseases by targeting and silencing specific genetic material, thereby blocking the production of disease-causing proteins.

The deal comes a month after Arrowhead released data from an early trial testing ARO-HBV. Analysts had dubbed the drug's results as "revolutionary", saying that the company was positioned to develop a functional cure for Hepatitis B.

Hepatitis B, which affects an estimated 257 million people, is a life-threatening viral infection that attacks the liver. It is transmitted through contact with body fluids and patients risk death from cirrhosis and liver cancer.

Janssen will also fund Arrowhead to develop and test three new drugs in animals, following which the healthcare conglomerate will have the option to develop them further and sell them.

In August, Alnylam Pharmaceuticals received the first U.S. approval for an RNAi drug, affirming the gene-silencing class of drugs as a new frontier in the field of medicine.

Arrowhead's market value has risen five fold since the start of the year.

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