SEC Filing | Arrowhead Pharmaceuticals Inc.

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arwr-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38042

ARROWHEAD PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		46-0408024
(State of incorporation)		(I.R.S. Employer Identification No.)

177 E. Colorado Blvd, Suite 700

Pasadena, California 91105

(626) 304-3400

(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 per share	ARWR	The Nasdaq Global Select Market

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of July 27, 2020 was 102,291,803.

	Page(s)
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)	1

Consolidated Balance Sheets	1

Consolidated Statements of Operations and Comprehensive Income (Loss)	2

Consolidated Statement of Stockholders’ Equity	3

Consolidated Statements of Cash Flows	4

Notes to Consolidated Financial Statements	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24

ITEM 4. CONTROLS AND PROCEDURES	24

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	25

ITEM 1A. RISK FACTORS	25

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	26

ITEM 4. MINE SAFETY DISCLOSURES	26

ITEM 5. OTHER INFORMATION	26

ITEM 6. EXHIBITS	28

SIGNATURE	29

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Arrowhead Pharmaceuticals, Inc.

Consolidated Balance Sheets

	(unaudited) June 30, 2020			September 30, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	219,322,617		$	221,804,128
Accounts receivable		21,692,564			661,361
Prepaid expenses		4,096,473			3,317,999
Other current assets		2,411,937			2,563,435
Short term investments		67,709,263			36,899,894
TOTAL CURRENT ASSETS		315,232,854			265,246,817
Property and equipment, net		30,389,707			23,214,899
Intangible assets, net		15,788,258			17,063,580
Long term investments		177,529,881			44,175,993
Right-of-use assets		16,522,013			-
Other assets		265,359			144,148
TOTAL ASSETS	$	555,728,072		$	349,845,437
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	4,073,869		$	7,649,921
Accrued expenses		9,414,696			6,504,729
Accrued payroll and benefits		1,991,001			4,955,887
Lease liabilities		1,011,951			-
Deferred rent		-			173,952
Deferred revenue		26,274,362			77,769,629
Other current liabilities		17,262			16,561
TOTAL CURRENT LIABILITIES		42,783,141			97,070,679
LONG-TERM LIABILITIES
Lease liabilities, net of current portion		20,359,726			-
Deferred rent, net of current portion		-			3,703,364
Deferred revenue, net of current portion		-			5,035,142
TOTAL LONG-TERM LIABILITIES		20,359,726			8,738,506
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY
Arrowhead Pharmaceuticals, Inc. stockholders' equity:
Common stock, $0.001 par value; 145,000,000 shares authorized; 102,250,872 and 95,506,271 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively		194,620			187,876
Additional paid-in capital		948,532,470			664,086,155
Accumulated other comprehensive income (loss)		(175,219	)		(391,624	)
Accumulated deficit		(455,411,478	)		(419,290,967	)
Total Arrowhead Pharmaceuticals, Inc. stockholders' equity		493,140,393			244,591,440
Noncontrolling interest		(555,188	)		(555,188	)
TOTAL STOCKHOLDERS’ EQUITY		492,585,205			244,036,252
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	555,728,072		$	349,845,437

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
REVENUE	$	27,375,778		$	42,696,636		$	80,359,211		$	125,502,807
OPERATING EXPENSES
Research and development		32,573,134			19,291,710			85,390,086			57,662,381
General and administrative expenses		10,748,506			4,809,177			38,008,836			16,287,841
TOTAL OPERATING EXPENSES		43,321,640			24,100,887			123,398,922			73,950,222
OPERATING INCOME (LOSS)		(15,945,862	)		18,595,749			(43,039,711	)		51,552,585
OTHER INCOME (EXPENSE)
Interest income (expense), net		2,334,649			1,739,959			6,919,200			4,717,359
TOTAL OTHER INCOME (EXPENSE)		2,334,649			1,739,959			6,919,200			4,717,359
INCOME (LOSS) BEFORE INCOME TAXES		(13,611,213	)		20,335,708			(36,120,511	)		56,269,944
Provision for income taxes		-			-			-			-
NET INCOME (LOSS)		(13,611,213	)		20,335,708			(36,120,511	)		56,269,944
NET INCOME (LOSS) PER SHARE - BASIC	$	(0.13	)	$	0.21		$	(0.36	)	$	0.60
NET INCOME (LOSS) PER SHARE - DILUTED	$	(0.13	)	$	0.21		$	(0.36	)	$	0.58
Weighted average shares outstanding - basic		101,843,436			94,935,471			100,184,216			93,364,102
Weighted average shares outstanding - diluted		101,843,436			98,884,744			100,184,216			97,814,019
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		453,895			(31,172	)		216,405			(81,514	)
COMPREHENSIVE INCOME (LOSS)	$	(13,157,318	)	$	20,304,536		$	(35,904,106	)	$	56,188,430

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Arrowhead Pharmaceuticals, Inc.

Consolidated Statement of Stockholders’ Equity

(unaudited)

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at March 31, 2019		94,665,718	$	187,035	$	652,411,876		$	(71,906	)	$	(451,331,580	)	$	(555,188	)	$	200,640,237
Stock-based compensation		-		-		1,957,993			-			-			-			1,957,993
Exercise of stock options		541,919		542		2,766,732			-			-			-			2,767,274
Foreign currency translation adjustments		-		-		-			(31,172	)		-			-			(31,172	)
Net income (loss) for the three months ended June 30, 2019		-		-		-			-			20,335,708			-			20,335,708
Balance at June 30, 2019		95,207,637	$	187,577	$	657,136,601		$	(103,078	)	$	(430,995,872	)	$	(555,188	)	$	225,670,040

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at March 31, 2020		101,748,107	$	194,117	$	936,353,920		$	(629,114	)	$	(441,800,265	)	$	(555,188	)	$	493,563,470
Stock-based compensation		-		-		10,046,208			-			-			-			10,046,208
Exercise of stock options		302,765		303		2,132,542			-			-			-			2,132,845
Common stock - restricted stock units vesting		200,000		200		(200	)		-			-			-			-
Foreign currency translation adjustments		-		-		-			453,895			-			-			453,895
Net income (loss) for the three months ended June 30, 2020		-		-		-			-			(13,611,213	)		-			(13,611,213	)
Balance at June 30, 2020		102,250,872	$	194,620	$	948,532,470		$	(175,219	)	$	(455,411,478	)	$	(555,188	)	$	492,585,205


	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at September 30, 2018		88,505,302	$	180,875	$	582,902,694		$	(21,564	)	$	(487,265,816	)	$	(555,188	)	$	95,241,001
Stock-based compensation		-		-		7,276,875			-			-			-			7,276,875
Exercise of stock options		1,244,161		1,244		6,440,761			-			-			-			6,442,005
Common stock - restricted stock units vesting		2,197,305		2,197		(2,197	)		-			-			-			-
Common stock - issued for cash		3,260,869		3,261		60,518,468			-			-			-			60,521,729
Foreign currency translation adjustments		-		-		-			(81,514	)		-			-			(81,514	)
Net income (loss) for the nine months ended June 30, 2019		-		-		-			-			56,269,944			-			56,269,944
Balance at June 30, 2019		95,207,637	$	187,577	$	657,136,601		$	(103,078	)	$	(430,995,872	)	$	(555,188	)	$	225,670,040


	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at September 30, 2019		95,506,271	$	187,876	$	664,086,155		$	(391,624	)	$	(419,290,967	)	$	(555,188	)	$	244,036,252
Stock-based compensation		-		-		27,509,663			-			-			-			27,509,663
Exercise of stock options		989,197		989		6,463,433			-			-			-			6,464,422
Common stock - restricted stock units vesting		1,155,404		1,155		(1,155	)		-			-			-			-
Common stock - issued for cash		4,600,000		4,600		250,474,374			-			-			-			250,478,974
Foreign currency translation adjustments		-		-		-			216,405			-			-			216,405
Net income (loss) for the nine months ended June 30, 2020		-		-		-			-			(36,120,511	)		-			(36,120,511	)
Balance at June 30, 2020		102,250,872	$	194,620	$	948,532,470		$	(175,219	)	$	(455,411,478	)	$	(555,188	)	$	492,585,205

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(36,120,511	)	$	56,269,944
Stock-based compensation		27,509,663			7,276,875
Depreciation and amortization		4,167,873			3,356,769
Amortization/(accretion) of note premiums		652,747			682,243
Changes in operating assets and liabilities:
Accounts receivable		(21,031,203	)		(1,716,736	)
Prepaid expenses and other current assets		(863,287	)		(2,393,230	)
Deferred revenue		(56,530,409	)		97,940,261
Accounts payable		(3,576,053	)		1,824,146
Accrued expenses		(54,217	)		(3,477,235	)
Other		1,303,852			(538,020	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(84,541,545	)		159,225,017
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(10,067,360	)		(4,170,285	)
Purchases of marketable securities		(193,964,290	)		(90,266,001	)
Proceeds from sale of marketable securities		29,148,287			29,861,219
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(174,883,363	)		(64,575,067	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable		-			(2,415,150	)
Proceeds from the exercises of stock options		6,464,423			6,442,005
Proceeds from the issuance of common stock		250,478,974			60,521,729
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		256,943,397			64,548,584
NET INCREASE (DECREASE) IN CASH		(2,481,511	)		159,198,534
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		221,804,128			30,133,213
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	219,322,617		$	189,331,747
Supplementary disclosures:
Interest paid	$