NEW BULLISH Plays
Arrowhead Research - ARWR - close: 16.96 change: +0.06
Stop Loss: 15.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 4.4 million
New Positions: Yes, see below
Why We Like It:
Biotechs remain a leadership group in the market. The IBB biotech index is up +20.8% in 2014. The BTK biotech index is up +34.8%. This is significantly better than the NASDAQ's +9.8% or the S&P 500's +8% gain this year. Money managers are nearing the end of their fiscal year (October 31st) and nearly 80% of funds are underperforming their benchmarks in 2014. That could tempt fund managers to chase winners and biotechs probably offer the biggest bang for the buck. Currently shares of ARWR are up +55% this year and look poised for further gains.
Who is ARWR? According to the company website, "Arrowhead Research Corporation is a biopharmaceutical company developing targeted RNAi therapeutics. The company is leveraging its proprietary drug delivery technologies to develop targeted drugs based on the RNA interference mechanism that efficiently silence disease-causing genes. Arrowhead technologies also enable partners to create peptide-drug conjugates that specifically home to cell types of interest while sparing off-target tissues. Arrowheadâ€™s pipeline includes clinical programs in chronic hepatitis B virus and obesity and partner-based programs in oncology."
This might sound a little arcane but the company specializes in "getting siRNA drugs into tissues and cell types of interest while avoiding non-specific uptake. Our lead delivery technologies â€“ Dynamic Polyconjugates (DPCs) and Homing Peptides â€“ are actively targeted delivery vehicles that can be modified to exhibit the specific pharmacological properties desired for each target. Efficient targeting is a key differentiator for Arrowhead's technology, which has the potential to make siRNA therapeutics more effective by getting more of the dose to target tissues. The modular and synergistic design of each platform provides a broad base for the development of further products through the optimized combination of delivery vehicle, targeting agent, and RNAi trigger molecule."
Right Wall Street is probably focused on ARWR's current success in their development for a treatment for hepatitis B. According to the CDC, "Hepatitis B is a contagious liver disease that results from infection
with the Hepatitis B virus. When first infected, a person can develop
an 'acute' infection, which can range in severity from a very mild
illness with few or no symptoms to a serious condition requiring
hospitalization. Acute Hepatitis B refers to the first 6 months after
someone is exposed to the Hepatitis B virus. Some people are able to
fight the infection and clear the virus. For others, the infection remains
and leads to a 'chronic,' or lifelong, illness. Chronic Hepatitis B refers to
the illness that occurs when the Hepatitis B virus remains in a person's
body. Over time, the infection can cause serious health problems." It is estimated that 1.2 million people in the U.S. have chronic hepatitis B.
ARWR's drug for hep B is currently titled ARC-520. ARWR reported its Phase IIa trial for ARC-520 began in March 24, 2014. After an 8-week trial it met all its end point milestones. The company expects Phase IIb will begin in the fourth quarter of 2014. If that is successful then the Phase III trials could begin in late 2015.
Technically shares of ARWR are bullish. They have spent almost five months consolidating sideways in the $10-16 zone. They appear to have formed a bottom and have started breaking out past resistance. If you look at a chart with volume you'll notice that the rallies are seeing strong volume, which is another bullish signal.
More aggressive traders may want to open bullish positions now. I do see short-term resistance in the $17.45 area. We are suggesting a trigger to open positions at $17.55.
Keep in mind that biotech stocks can be volatile and ARWR is no exception. I suggest small positions to limit risk or consider the call options. Using the option can limit your risk to the cost of the option.
Trigger @ $17.55 *small positions, higher risk*
- Suggested Positions -
Buy ARWR stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the OCT $17 call (ARWR141018C17) current ask $2.25
Option Format: symbol-year-month-day-call-strike