Shares of Arrowhead Research Corp (ARWR) jumped 10% today, after the news that the company has filed an IND to the FDA to begin testing two phase 2b trials using its drug ARC-520 in patients with the Hepatitis B virus. The company had run an initial phase 2a trial using ARC-520 against Hepatitis B using only a single dose. This time around Arrowhead will run a multi-dose trial that should improve the efficacy of the drug in the clinical trial. A few months ago shares of Arrowhead dropped from $17 per share all the way down to $5 per share after the release of the first batch of the company's Hepatitis B data. The fall in share price occurred because investors believed that a single dose of ARC-520 could cure chronic Hepatitis B in one shot and it was not because the results were bad.

As we have explained before the phase 2a trial using ARC-520 was a single dose of the drug to the patient. Arrowhead was basically looking for safety and slight efficacy of the drug compound against the virus. Typically biotech companies break down their trials into two different parts. A phase 2a trial and a phase 2b trial is what trials are normally broken down too. We were shocked to see that investors expected a full cure with just a single dose. The company had always intended to run  a multi-dose  phase 2b trial for ARC-520. Shares of Arrowhead are still above the 52-week low of $4.95 per share. The next  inflection point for the company will be based on the next set of phase 2b results. Since the company has split the phase 2b trials into two separate trials it will create two different catalyst events.

The company probably won't release the next set of data in the phase 2b trial for ARC-520 until the middle of 2015. Until then the share price may rise slightly in anticipation of those results but for now the decline in share price seems to have been stabilized for the time being. Arrowhead has a huge opportunity to target the Hepatitis B market because it's a larger market than the Hepatitis C market which Gilead Sciences (GILD) currently has a huge blockbuster in. Matter in fact there are 2 billion people worldwide infected with the Hepatitis B virus and of those 400 million become chronically infected. Chronic Hepatitis B infection occurs in those patients who are unable to clear the virus from their bodies within a few months. These patient's bodies are unable to clear the virus and develop serious problems such as liver cancer, and cirrhosis -- scarring of the liver and loss of function of the liver.

We believe that Arrowhead is in good shape considering the company is not having to go back to the drawing board with another phase 2a trial. By that we mean that the company is continuing with its phase 2b trial for ARC-520 in combination with entecavir or Tenofovir. Despite the recent share price decline the company is still on track to start its phase 2b trial using ARC-520 against Hepatitis B. With limited treatment options for this type of disease therapy from Arrowhead would be a huge help for these patients. Not too mention that Arrowhead would be able to target a large market in this space and increase the value of the company for its shareholders. Like all other biotech stocks this still carries a possible risk for failure in the phase 2b trial but we think that as of right now, with the results seen to date,  Arrowhead is on track.