Sarepta Therapeutics is selling off Arrowhead Pharmaceuticals shares to stretch its cash runway while also inking a share transfer to pay off half of a $100 million payment owed to the latter.
The beleaguered gene therapy biopharma sold more than 9.2 million shares of Arrowhead common stock that are expected to equate to at least $174 million in "cash proceeds," according to a post-market release from Sarepta on Aug. 13.
Previously, Sarepta owned 11.9 million shares of Arrowhead stock, according to a separate Aug. 13 release from the partner.
The money comes from a privately negotiated block trade, a type of transaction between the buyer and seller that is settled away from public markets to reduce its impact on price.
Furthermore, Sarepta made a deal to transfer 2.6 million shares of Arrowhead stock back to its partner to satisfy $50 million of Sarepta’s $100 million milestone obligation.
The payment is tied to Arrowhead hitting the first enrollment target in a phase 1/2 trial for an investigational RNA interference (RNAi) therapeutic designed to treat type 1 myotonic dystrophy (DM1). The $100 million payment is also dependent upon regulatory approval to launch dose escalation in the same study.
At the end of July, Arrowhead said it met both milestone payment conditions and expected the $100 million within 60 days.
Sarepta confirmed with Fierce Biotech that it still has to pay the other half of the $100 million payment. Arrowhead has chosen to receive the rest of the payment in cash, according to the company’s release.
“The sale of our equity investment is a strategic decision to help fund this milestone but does not change our conviction in the utility of the siRNA approach and our confidence in the work Arrowhead is doing to apply this technology across several disease states,” Sarepta CEO Doug Ingram said in the release.
The biopharma plans on sharing early data from the phase 1/2 trial sometime this year.
Back in November of last year, Sarepta inked a major pact with Arrowhead, making a $500 million upfront payment and a $325 million equity investment to secure rights to seven programs. The deal requires Sarepta to pay $50 million a year for five years plus pay out $300 million in milestones tied to the DM1 trial.
The new announcement comes amid a rapidly evolving saga that stemmed from several deaths occurring in patients who received Sarepta’s gene therapies. The uncertain prospect of the company’s flagship Duchenne muscular dystrophy gene therapy Elevidys does not bode well for Sarepta’s financial standing, as the company faces more than $1 billion in debt that will be due by September 2027.
The biopharma had $510.6 million on hand as of the end of the second quarter, according to an earnings document.
Leerink Partners analysts view the transactions as "a reasonable resolution for all parties," according to an Aug. 14 note on Arrowhead.
According to a separate note for Sarepta, the analysts said the biopharma's decision to sell its stake in Arrowhead is a "prudent" way to strengthen its financial position. That being said, the analysts argued that "more work needs to be done" and questioned the strength of the upcoming siRNA data.
Editor's note: This article was updated at 9:30 a.m. ET on Aug. 14 to include analyst insight.