Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR): Buy The Dip

Up until the middle of this week, Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) had been a real winner for our readers.We first highlighted the company back at the of July, when it was trading for $1.76 a share. Between that date and September 13, the Wednesday just gone, the company gained more than 100% to top out at a $3.53 close midweek.During the session yesterday, however, Arrowhead took a steep correction. The company closed out yesterday for a share, down 21% from highs.We are still looking at a nearly 60% gain in a six week period, but those readers that took a position on the back of our now asking the question, what next?Let's try and figure that out.For those not familiar with this company, it is a biotechnology stock that has a pretty deep pipeline of proprietary technologies many of which have the potential to target relatively large markets and unseat some pretty big earners in their respective spaces.With that said, however, the pipeline question is full of preclinical assets meaning any exposure at this stage is rooted in speculation that, once these retreats the clinic, the efficacy signals that were picked up was brought up preclinical modeling will translate to human studies. That's a big if and one that has caught out even the best biotechnology investors over the years.So why was the company gaining strength against the backdrop of such uncertainty?There is an ongoing collaboration with Amgen, Inc. (NASDAQ:AMGN), rooted in a cardiovascular asset, that serves to validate – to a degree – part of the companies pipeline. That aside, however, there is also a revised focus on what the company calls its subQ and extra-hepatic pipeline, which includes programs in HBV, AAT, Factor 12, HIF-2alpha.This all comes against a backdrop of slightly weakened sentiment, rooted in the failure of what was called the DPC EX1 delivery vehicle, which was the company's lead program, based on safety concerns.Anyway, we got to the middle of this week and management put out an update as to its expectations for the programs that are currently active. It's this update that has driven the correction. Why? Because the time frames outlined as part of the update are a little bit delayed on what markets were expecting/hoping for.Specifically, Clinical Trial Authorization (CTA) filings are planned in Q4 2018 and in 2019 for the company's two lead HIF programs; a CTA for the lead AAT asset is expected in Q1 2018 and the same a quarter later, in Q2 2018, for the HBV program. For two further assets, both in the company's ARO program, CTA filings are planned for one or both candidates by the end of 2018.Essentially, then, we aren't going to see any advance from preclinical to clinical studies across any of the company's programs before, at earliest, the end of the first quarter this year. Likely beyond that, given that this timeframe is rooted in an uncharacteristically quick response from the FDA on the CTAs in question.Here is the deal.For a company that had ongoing programs in other assets (say a phase 2 or phase 3 program elsewhere), this sort of delay would be bad news. The company would have to continue spending money on these programs while it waited for the catalysts to come from the delayed advance.For Arrowhead, however, this is an inaccurate analysis.The company is reporting around $10 million a quarter in burn, which is likely to decrease during the current quarter because there is essentially no clinical activity going on. At June 30, 2016, cash on hand (as well as short-term investments) totaled more than $75 million. This means that the delay in starting the clinical programs is going to do very little in terms of increased dilution risk.So why is this important?Well, the correction came based on market interpretation of the delay and its impact on said dilution risk. As such, we see the current dip as an overreaction and – in turn – an opportunity to pick up some cheap shares ahead of a return to the overarching upside momentum.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on ARWR, sign up below!Image courtesy of Chris Evans via FlickrDisclosure: We have no position in ARWR and have not been compensated for this article.