Arrowhead Pharmaceuticals Secures $625 Million in Convertible Notes and Common Stock Offering to Fuel Pipeline and Operations
PASADENA, Calif.
Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR) has announced the successful pricing of its concurrent public offerings, raising a substantial $625 million in aggregate principal amount of 0.00% convertible senior notes due 2032 and an additional amount through the sale of common stock. The company also priced an offering of 3,100,776 shares of common stock at $64.50 per share. For certain investors, these shares were offered in the form of pre-funded warrants at a price of $64.49 per warrant, accommodating up to 1,550,387 shares.
The note offering saw an upsize from its initially announced $500 million, underscoring strong investor demand. The settlement for the notes is slated for January 12, 2026, while the common stock and pre-funded warrant transactions are expected to settle on January 9, 2026, contingent upon standard closing conditions. Underwriters have been granted 30-day options to purchase an additional $75 million in notes to cover overallotments, and an additional 465,116 shares of common stock in the equity offering. Importantly, the completion of each offering is independent of the other, providing Arrowhead with flexibility.
J.P. Morgan and Jefferies are spearheading these offerings as joint book-running managers. BofA Securities, Piper Sandler, and RBC Capital Markets are also serving as bookrunners, indicating a robust syndicate supporting Arrowhead’s capital raise.
The newly issued convertible senior notes are unsecured obligations of Arrowhead and will not accrue regular interest. They mature on January 15, 2032. Noteholders possess conversion rights under specific circumstances before October 15, 2031, after which they can convert at their discretion until the second trading day prior to maturity. Arrowhead will have the flexibility to settle conversions through cash, stock, or a combination thereof. The initial conversion rate is set at 11.4844 shares of common stock per $1,000 principal amount of notes, translating to an initial conversion price of approximately $87.07 per share. This represents a premium of about 35.0% over the common stock offering price, reflecting investor confidence in the company’s growth trajectory. The conversion rate and price are subject to adjustments for certain corporate events.
Arrowhead retains the option to redeem the notes, in whole or in part, starting January 16, 2029, provided the company’s common stock price has traded above 130% of the conversion price for a specified period. The redemption price will be the principal amount, plus any accrued special interest. In the event of a “fundamental change” in the company, noteholders will have the right to require Arrowhead to repurchase their notes at par value, plus accrued special interest.
Net proceeds from the note offering are estimated at approximately $608.2 million, potentially rising to $681.3 million if the overallotment option is fully exercised. Similarly, the common stock offering is expected to yield around $188.3 million, or $216.6 million with the overallotment. A significant portion of the note proceeds, approximately $42.8 million, is earmarked for capped call transactions aimed at mitigating potential dilution. The remaining proceeds from both offerings will be allocated to general corporate purposes, including working capital, R&D, clinical trials, commercialization efforts, and preparation for potential product launches. A portion may also be used to prepay existing credit facility loans.
To manage the dilution associated with potential note conversions, Arrowhead has entered into capped call transactions with financial counterparties. These transactions, covering the shares underlying the notes, are designed to offset cash payments or reduce dilution. The cap price for these transactions is initially set at approximately $119.33 per share, representing an 85.0% premium over the common stock offering price. However, if the stock price significantly surpasses this cap, some dilution may still occur.
The market dynamics around these offerings are noteworthy. In connection with establishing their hedging strategies for the capped call transactions, the counterparties and their affiliates are expected to engage in derivative transactions and potentially purchase or sell Arrowhead’s common stock. This activity could influence the market price of the stock and notes in the near term. Such hedging activities might continue throughout the life of the notes, particularly during conversion observation periods or following repurchases, potentially impacting the stock’s price and the terms of conversion for noteholders.
Each pre-funded warrant offers the holder the right to purchase one share of Arrowhead common stock at an exercise price of $0.01, subject to anti-dilution adjustments. This structure is often employed to allow investors to maintain an economic position similar to share ownership while potentially deferring the tax implications of direct share purchase.
The offerings are being conducted under an effective shelf registration statement filed with the Securities and Exchange Commission. Investors can access detailed information through prospectus supplements and accompanying prospectuses available on the SEC’s website. Investors seeking further details on the offerings can contact J.P. Morgan Securities LLC or Jefferies LLC.
This announcement does not constitute an offer to sell or a solicitation of an offer to buy any securities, and any such offer, sale, or solicitation would be unlawful prior to registration or qualification under applicable securities laws.
About Arrowhead Pharmaceuticals
Arrowhead Pharmaceuticals is dedicated to developing medicines that target intractable diseases by silencing the genes responsible. Leveraging a diverse array of RNA chemistries and delivery methods, the company’s therapies activate RNA interference (RNAi) to achieve rapid, deep, and durable knockdown of target genes. RNAi is a natural cellular process that inhibits gene expression, and Arrowhead’s therapeutics harness this pathway for gene silencing.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, concerning the completion of the offerings, the use of proceeds, and the effects of capped call transactions, are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. These risks include market conditions, closing satisfaction, and factors detailed in Arrowhead’s SEC filings. The company cannot guarantee the consummation of the offerings or the effective use of proceeds.
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