ARROWHEAD PHARMACEUTICALS, INC. 8-K

What Happened
Arrowhead Pharmaceuticals announced on January 12, 2026 that it issued $700.0 million aggregate principal amount of 0.00% Convertible Senior Notes due January 15, 2032 (the "Notes"). The offering included an additional $75.0 million issued pursuant to the underwriters’ full exercise of an overallotment option. The Notes are senior unsecured obligations and will not bear regular interest (special interest up to 0.50% may accrue in limited circumstances). The initial conversion rate is 11.4844 shares per $1,000 principal (initial conversion price ≈ $87.07/share). Conversions may be settled in cash, shares or a combination, at Arrowhead’s election. The company also entered into capped call transactions to limit dilution; those hedges cost about $47.9 million and have an initial cap price of ≈ $119.33/share.

Key Details

• Total Notes issued: $700.0 million (includes $75.0M overallotment exercised); maturity date: January 15, 2032.
• Coupon: 0.00% regular interest; special interest may accrue up to 0.50% per year in specified reporting-failure events.
• Conversion terms: 11.4844 shares per $1,000 principal (≈ $87.07 per share); conversion available generally from Oct 15, 2031 and freely until shortly before maturity.
• Capped‑call hedges: entered Jan 7–8, 2026; cost ≈ $47.9M; initial cap price ≈ $119.33/share (about 85% premium to a recent offering price).

Why It Matters
This transaction provides Arrowhead with immediate financing ($700M gross) without ongoing cash interest payments, which can extend runway and fund operations or R&D. However, the Notes create potential future dilution if converted into common stock (conversion price ≈ $87.07/share), and the company paid roughly $47.9M for capped calls to limit that dilution up to a cap (~$119.33). The zero-coupon structure reduces near‑term cash burden compared with a traditional interest‑bearing loan, but investors should watch for conversion-related dilution, any future redemptions or fundamental‑change repurchase rights, and the accounting and cash effects of the hedge cost. Keywords: convertible notes, capped call, conversion price, dilution, maturity.