Shares of Arrowhead Research (ARWR) tumbled as much as 50% on October 8, 2014 after reporting its phase 2a results in Hepatitis B. The share price saw a decline all the way down to $6 per share based off of this news but has since recovered back to around $7 per share. The company was testing its main drug ARC-520 in  phase 2 study using its DPC -- Dynamic Polyconjugate -- delivery technology. The DPC is a delivery technology the company uses to deliver its RNAi -- RNA interference -- drug component. The DPC acts like a virus in that it is able to allow the RNAi strand to travel through the body without degrading and gives the RNAi molecule a more targeted delivery to the disease. RNAi molecules are known to down regulate the genes of diseases by blocking the proteins of the disease before they are ever produced. 

The data was presented as a late-breaker abstract at the AASLD -- American Association for the Study of Liver Disease -- and the company has reported its initial findings. The results were that ARC-520 was able to reduce HBsAg by 51% or a log 0.3 reduction of the Hepatitis B virus. HBsAg stands for "Hepatitis B Surface Antigen" and it is the measure of how much of the Hepatitis B virus remains in the blood of the patient. The reason for the drop in Arrowhead was because investors were expecting the 2 mg/kg dose for ARC-520 to achieve a log 1.0 reduction of HBsAg. This means that investors were expecting a complete cure of the Hepatitis B virus in the initial 2 mg/kg dose. 

After looking at the initial findings we believe that the market has overreacted as it misunderstood the data. This trial was testing as a phase 2a study, which means that this study is used for partial efficacy of a drug compound. That is, this trial was testing the initial 2 mg/kg dose for ARC-520 against the Hepatitis B Virus. With this initial data the company can now see that ARC-520 is safe at 2 mg/kg and can now go to an even higher dose at 4 mg/kg. There is still a chance for Arrowhead to eventually achieve a log 1.0 reduction of the HBsAg in patients, but more testing will still need to be done to determine this possibility. 

After this 50% drop on initial Hepatitis B data we believe that Arrowhead Research is a good buying opportunity. It now allows investors that were not in this name before to jump in at a good price point. One thing to keep in mind, though, is that this is still risky because there is no guarantee with certainty that Arrowhead will achieve its log 1.0 reduction in the Hepatitis B virus. Although going from 2 mg/kg dose to 4 mg/kg dose should somehow increase efficacy of the drug compound, as of right now it can't be determined whether the drug will achieve its functional cure of the Hepatitis B virus but they may get close as the dosages are increased to appropriate levels. We believe that shares of Arrowhead Research Corp are still a buy after this initial data presented in this phase 2 trial against the Hepatitis B virus.