Episode Details

Arrowhead Pharmaceuticals (ARWR) Q3 FY2026 — Revenue $75,253K vs ~$44,170K expected - a 70% beat, +171% YoY. But the diluted loss was $1.36 vs $1.28 expected, an 8c MISS, on a $194,280K net loss. Of that $75.3M, $72.9M was collaboration revenue; REDEMPLO product sales were $2.4M. Arrowhead beat revenue by 70% and missed on earnings in the same release. Of $75.3M of revenue, $72.9M came from four partners - $25M of it a one-time Madrigal licence cheque booked in full. Actual REDEMPLO sales were $2.4M. The stock closed at a 52-week high the day it reported, up 462% in twelve months. THE CALL: HOLD (3/5, THE SCIENCE WORKED - THE PRICE ALREADY ASSUMES THE NEXT ONE DOES TOO) — base-case value ~$74.0 vs ~$89.59 today. KEY METRICS: - CALL: HOLD 3/5, risk-adjusted fair value ~$74 vs the $89.59 close (-17%). No DCF - Arrowhead has never earned a full-year profit. We sum programmes and haircut each: plozasiran $5.50B ($2.5B 2033 peak at 85% odds), partnered $2.00B, obesity/MASH $1.80B ($4B peak at 22%, it is Phase 1), rest $0.90B. Pipeline $10.20B + $1.60B cash - $1.27B debt = $10.53B / 143.4M shares = $73. Bear $38, bull $126. - WHAT THE $75M ACTUALLY WAS. The 10-Q disaggregates it: Sarepta $26,395K + Novartis $20,232K + Madrigal $25,000K + Sanofi $1,241K = $72,868K of collaboration revenue. Total revenue $75,253K. The $2,385K difference is every dollar of REDEMPLO sold. Madrigal was a single upfront on a licence signed May 4, booked in full. The estimate was $44.2M; the beat was $31.1M; Madrigal was $25M of it. - THE REAL BURN AND THE RUNWAY. Nine-month operating cash flow is only -$79.5M - until you find the $475M of partner cash inside it ($200M Novartis, $200M Sarepta DM1, $50M Sarepta fee, $25M Madrigal). Ex-partner cash the burn is ~-$554M, or ~$185M a quarter. Cash and investments are $1,602M: 8.7 quarters gross, but the Sixth Street covenant strands $250M, so 7.3 spendable - to ~March 2028. - THE CAPITAL STACK. Nine months of financing: $700M of 0.00% converts due 2032 (conversion price $87.07 - the stock is ABOVE it, 8.04M shares), a January offering of 2,015,505 shares at $64.50, and $76.1M of ATM stock. The Sixth Street term loan bears 15.0% PAID IN KIND, $181.4M left. Plus a $392.5M Royalty Pharma liability. Claims ahead of equity: ~$1.26B. - WHAT $89.59 REQUIRES. Enterprise value is $12.32B ($12.64B cap + $0.70B converts + $0.18B loan + $0.39B royalty debt - $1.60B cash). Add the cash still to burn and discount 7 years at 13%: ARWR must be worth ~$31.7B in 2033, or ~$6.3B of revenue at 5x sales. Nine-month revenue is $0.41B; product sales $3.5M. The most bullish plozasiran model is ~$3B. What to watch: Changes our mind UP: a broad severe-hypertriglyceridemia label on the sNDA due before year-end, or REDEMPLO revenue clearing $15M a quarter. Confirms the bear: a label restricted to the prior-pancreatitis subgroup, or another equity raise below $80. We would buy $58-$68. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.