Our target price of $21 per share is derived from our discounted cash flow (DCF) analysis in which we project risk-adjusted free cash flows to 2036 and then discount back at 12.5% annually, applying a 2% terminal growth rate. In our biotechnology coverage universe, we utilize a 12.5% discount rate for all companies that have mid-stage development pipelines.

We rate ARWR as High Risk based on the usual volatility of biotech stocks and uncertainty/risk related to clinical trials and late-stage drug development. Arrowhead has many of the risks associated with biotechnology companies. Share performance is also closely linked to clinical and regulatory updates. Any such updates that fall short of expectations would lead to downside versus our rating. Due to the high cost of Arrowhead’s development effort, we highlight the risk of potentially equity or product financings. If the impact on the company from any of these factors proves to be greater or less than we anticipate, the stock could be under pressure and fall short of our target price or could exceed it.