Arrowhead Research Hits 52-Week High on Strong Coverage

Joel Anderson  |

Arrowhead Research Corp. (ARWR) , a small-cap biotechnology company specializing in nanomedicine, gained over 25 percent in early trading on Wednesday after an upgrade from key analysts included a glowing review of the potential contained in its Hepatitis B treatment. Shares traded as high as $27.24 apiece, representing a new 52-week high.

Arrowhead has been on a tear over the last year, gaining almost 1,250 percent since Jul. 1, 2013, and 2014 has only built on those gains. The company announced on Monday that it had received regulatory approval to move forward with a Phase 2a trial for ARC-520, a treatment for chronic hepatitis B.

Arrowhead’s most recent pop can be attributed to two major analysts offering a “buy” rating on the stock. RBC Capital’s Michael Yee opened coverage with a price target of $35, stating that he believed ARC-520 had the chance to be a multi-billion dollar treatment.

"We also think Arrowhead is a reasonable partnership candidate for Roche (RHHBY) , Bristol-Myers Squibb (BMY) , Merck (MRK) , Novartis (NVS) , and other antiviral players," he said.

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Deutsche Bank’s (DB) Altheia Young was also bullish, initiating coverage at “buy” with a price target of $45 and an estimate that ARC-520 could generate as much as $5.2 billion in sales each year.

"Arrowhead is an early stage platform company that we believe could have the market cap potential of $4-5B as it becomes de-risked," the analyst said.

Arrowhead’s gains on Wednesday were considerable, showing real strength on nearly four times its daily average volume. The stock had recently been consistently trading just above its 20-day SMA since early December, potentially treating that as a support level, and that may have helped give investors the confidence to drive shares even higher in the aftermath of the positive coverage.

But a look at some of the technical charts surrounding Arrowhead’s stock paint a somewhat mixed picture. An inspection of Arrowhead’s 14-day stachostic RSI shows that the stock had dipped well below a 0.2 level, a lower barrier that traditionally indicates shares are oversold, at the end of February into early March. What’s more, the company’s MACD indicator recently crossed over its signal line, a traditional buy sign.

However, Wednesday’s gains did push the stock back over that 0.2 level for its stochastic RSI. Meanwhile, two other important technical indicators were pushed into a range that would traditionally be interpreted as overbought. The stock’s now trading at a 14-day RSI over 70, and it’s also trading above its upper Bollinger Band, both potentially indicating that current investor sentiment could be overly exuberant.


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