Not exactly known for its dealmaking, Sarepta Therapeutics has thrown down a massive wad of cash to work with Arrowhead Pharmaceuticals on RNAi-based medicines.
Sarepta Therapeutics has always been a unique company with its focus on Duchenne muscular dystrophy. The company goes where few others have been able to grab a foothold and tends to court controversy in that quest. Its gene therapy Elevidys failed a confirmatory trial last year and now, not only does it remain on the market, but the FDA has since granted an expanded label.
But one thing Sarepta hasn’t been particularly known for is deals. That is, until it dropped a massive licensing agreement last week with Arrowhead Pharmaceuticals. Sarepta is putting down $500 million upfront and a $325 million equity investment in the near term, plus up to $10 billion in milestones and other payments.
“We think the deal is smart, as a relatively small outlay from Sarepta . . . could yield billions of cash flows in the long run,” Jefferies analysts wrote in a note to investors following the deal announcement.
Even if all of the $10 billion in milestones aren’t paid out—and that’s a distinct possibility—I disagree with labeling this deal small. I do agree with the smart part though.
This is cash that we rarely see from even Big Pharmas. The most recent one that comes to mind is Merck’s massive outlay to snag a chunk of Daiichi Sankyo’s antibody-drug conjugate portfolio for $4 billion upfront and $22 billion in long-term milestones. But even then, Daiichi is a well-established Japanese pharmaceutical company that has delivered AstraZeneca-partnered oncology blockbuster Enhertu. Who wouldn’t want to partner with it?
And that is not a slam on Arrowhead. The company has some exciting science in the works (more on that in a minute) and is nearing its first FDA approval potentially next year. It’s just that Daiichi was obviously going to find a big-name partner. I didn’t have Arrowhead and Sarepta on any of my biopharma deal bingo cards.
Getting it Done
BMO Capital Markets analysts said the deal reflects Sarepta’s ability to get things done. “The Sarepta team has demonstrated a strong ability to make things happen on the development/commercial/manufacturing/regulatory front,” the BMO group wrote in a note to investors last week.
They certainly have had regulatory success even when the data point elsewhere. Sarepta’s gene therapy Elevidys was greenlit under the accelerated approval pathway in June 2023. Four months later, the drug failed a confirmatory trial, but Sarepta vowed to keep selling it, and in June secured full FDA approval and a label expansion. The DMD drug brought in $181 million in the third quarter of this year. Sarepta’s other approved therapies include Exondys 51, Vyondys 53 and Amondys 45, all targeting different subpopulations of DMD.
Sarepta pulled off the massive Arrowhead tie-up amid an increasingly competitive neuromuscular space. The BMO group pointed to Novartis’ $1.1 billion acquisition of Kate Therapeutics in the same week and Sanofi’s May licensing agreement with Fulcrum Therapeutics that could be worth over $1 billion.
But the deal makes perfect sense for Sarepta. The company had a big hole in its pipeline and had to shore up long-term growth.
Enter Arrowhead, which will hand over the reins to multiple clinical programs in rare genetic diseases of the muscle, central nervous system and lungs. Sarepta also gains the option to select six new targets for discovery using Arrowhead’s targeted RNAi molecule platform (TRiM). In Sarepta’s experienced hands, BMO sees the possibility of success for these programs skyrocketing.
The deal diversifies Sarepta’s portfolio with new disease areas and a new modality, as its recent focus has been on gene therapy, William Blair analysts wrote. Experts at Jefferies, meanwhile, pointed to the revenue cliff ahead for the Duchenne muscular dystrophy gene therapy Elevidys that will arrive after 2030.
Meanwhile, Arrowhead will be able to focus energy on commercializing its first RNA interference therapy plozasiran, which is in Phase III development for diseases of the liver. H.C. Wainwright analysts predict that plozasiran could be approved in 2025, with Arrowhead becoming a commercial company in 2026.
Shares of both Arrowhead and Sarepta rallied following the news, a welcome sign in a biotech industry still trying to claw its way out of a prolonged downturn. This deal puts Arrowhead’s programs in the fast lane, fills Sarepta’s pipeline back up to the brim and, most importantly, could mean some brand-new options for patients with extremely rare diseases who desperately need an industry champion.
