UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address and telephone number of principal executive offices)
Former name, former address, and former fiscal year, if changed since last report: N/A
Securities registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock outstanding as of May 5, 2022 was
PART I. FINANCIAL INFORMATION
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ITEM 1. |
FINANCIAL STATEMENTS |
Arrowhead Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
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(unaudited) March 31, 2022 |
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September 30, 2021 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable |
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Prepaid expenses |
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Other current assets |
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Marketable securities |
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Short term investments |
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TOTAL CURRENT ASSETS |
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Property and equipment, net |
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Intangible assets, net |
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Long term investments |
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Right-of-use assets |
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Other assets |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
$ |
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$ |
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Accrued expenses |
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Accrued payroll and benefits |
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Lease liabilities |
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Deferred revenue |
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TOTAL CURRENT LIABILITIES |
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LONG-TERM LIABILITIES |
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Lease liabilities, net of current portion |
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Deferred revenue, net of current portion |
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TOTAL LONG-TERM LIABILITIES |
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Commitments and contingencies (Note 7) |
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STOCKHOLDERS’ EQUITY |
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Arrowhead Pharmaceuticals, Inc. stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
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( |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)
(In thousands, except per share amounts)
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Three Months Ended March 31, |
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Six Months Ended March 31, |
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2022 |
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2021 |
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2022 |
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2021 |
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REVENUE |
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$ |
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$ |
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$ |
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$ |
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OPERATING EXPENSES |
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Research and development |
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General and administrative expenses |
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TOTAL OPERATING EXPENSES |
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OPERATING INCOME (LOSS) |
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OTHER INCOME (EXPENSE) |
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Interest income, net |
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Other income (expense) |
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TOTAL OTHER INCOME (EXPENSE) |
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INCOME (LOSS) BEFORE INCOME TAXES |
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Provision for income taxes |
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- |
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- |
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- |
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- |
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NET INCOME (LOSS) |
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NET INCOME (LOSS) PER SHARE - BASIC |
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$ |
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$ |
( |
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$ |
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$ |
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NET INCOME (LOSS) PER SHARE - DILUTED |
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$ |
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$ |
( |
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$ |
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$ |
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Weighted average shares outstanding - basic |
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Weighted average shares outstanding - diluted |
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
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Foreign currency translation adjustments |
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( |
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( |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Equity
(unaudited)
(In thousands, except per share amounts)
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Common Stock |
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Amount ($) |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Totals |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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Common stock - restricted stock units vesting |
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( |
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- |
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- |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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( |
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- |
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Net income (loss) for the three months ended March 31, 2021 |
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- |
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- |
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- |
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- |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Amount ($) |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Totals |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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Common stock - restricted stock units vesting |
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( |
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- |
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- |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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- |
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Net income (loss) for the three months ended March 31, 2022 |
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- |
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- |
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- |
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- |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Common Stock |
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Amount ($) |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Totals |
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Balance at September 30, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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Common stock - restricted stock units vesting |
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( |
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- |
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- |
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- |
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Common stock - issued for cash |
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- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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- |
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Net income (loss) for the six months ended March 31, 2021 |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Amount ($) |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Totals |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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Common stock - restricted stock units vesting |
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( |
) |
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- |
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- |
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- |
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Foreign currency translation adjustments |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net income (loss) for the six months ended March 31, 2022 |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(In thousands, except per share amounts)
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Six Months Ended March 31, |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
( |
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$ |
( |
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Stock-based compensation |
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Depreciation and amortization |
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Unrealized (gains) losses on marketable securities |
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( |
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Amortization/(accretion) of note premiums/discounts |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other current assets |
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( |
) |
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( |
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Deferred revenue |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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Other |
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property and equipment |
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( |
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( |
) |
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Purchases of investments |
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( |
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( |
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Proceeds from sale of investments |
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
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( |
) |
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( |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from the exercises of stock options |
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NET CASH PROVIDED BY FINANCING ACTIVITIES |
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NET INCREASE (DECREASE) IN CASH |
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( |
) |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Arrowhead Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Unless otherwise noted, (1) the term “Arrowhead” refers to Arrowhead Pharmaceuticals, Inc., a Delaware corporation and its Subsidiaries, (2) the terms “Company,” “we,” “us,” and “our,” refer to the ongoing business operations of Arrowhead and its Subsidiaries, whether conducted through Arrowhead or a subsidiary of Arrowhead, (3) the term “Subsidiaries” refers to Arrowhead Madison Inc. (“Arrowhead Madison”) and Arrowhead Australia Pty Ltd (“Arrowhead Australia”), (4) the term “Common Stock” refers to Arrowhead’s Common Stock, par value $0.001 per share, (5) the term “Preferred Stock” refers to Arrowhead’s Preferred Stock, par value $0.001 per share, and (6) the term “Stockholder(s)” refers to the holders of Arrowhead’s Common Stock.
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Recent Developments
Arrowhead Pharmaceuticals, Inc. develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, Arrowhead therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. RNA interference (“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. Arrowhead’s RNAi-based therapeutics leverage this natural pathway of gene silencing. The Company’s pipeline includes ARO-APOC3 for hypertriglyceridemia, ARO-ANG3 for dyslipidemia, ARO-ENaC2 for cystic fibrosis, ARO-DUX4 for facioscapulohumeral muscular dystrophy, ARO-COV for the coronavirus that causes COVID-19 and other possible future pulmonary-borne pathogens, ARO-C3 for complement mediated diseases and ARO-RAGE and ARO-MUC5AC for various muco-obstructive or inflammatory pulmonary conditions. ARO-HSD for liver disease was out-licensed to Glaxosmithkline Intellectual Property (No. 3) Limited (“GSK”) in November 2021. ARO-XDH is being developed for uncontrolled gout under a collaboration agreement with Horizon Therapeutics Ireland DAC (“Horizon”). JNJ-75220795 (ARO-JNJ1) is being developed by Janssen as a potential treatment for patients with non-alcoholic steatohepatitis (NASH). ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency (“AATD”) was out-licensed to Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) in October 2020. JNJ-3989 (formerly referred to as ARO-HBV) for chronic hepatitis B virus was out-licensed to Janssen in October 2018. Olpasiran (formerly referred to as AMG 890 or ARO-LPA) for cardiovascular disease was out-licensed to Amgen Inc. (“Amgen”) in 2016. While the Company believes that initial ARO-HIF2 Phase 1 clinical data provides proof of concept for the ability to deliver siRNA to RCC tumors, the Company has decided not to pursue further clinical development of ARO-HIF2 based on a number of factors including the evolving competitive landscape for HIF2 inhibitors.
Arrowhead operates lab facilities in Madison, Wisconsin and San Diego, California, where the Company’s research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California.
During the first half of fiscal 2022, the Company continued to develop and advance its pipeline and partnered candidates and expanded its facilities to support the Company’s growing pipeline. Several key recent developments include:
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dosed the first patients in its PALISADE study, a phase 3 clinical study to evaluate the safety and efficacy of ARO-APOC3 in adults with familial chylomicronemia syndrome (FCS); |
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entered into an exclusive license agreement with GSK for ARO-HSD; |
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Janssen presented clinical data from REEF-1, a Phase 2b study of different combination regimens, including JNJ-73763989 (JNJ-3989), formerly called ARO-HBV, and/or JNJ-56136379 (JNJ-6379), and a nucleos(t)ide analog (NA) for the treatment of chronic hepatitis B virus infection (CHB); |
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filed for regulatory clearance to begin a Phase 1/2a study of ARO-C3 and subsequently dosed the first subjects in AROC3-1001, a Phase 1/2 clinical study of ARO-C3, the Company’s investigational RNA interference (RNAi) therapeutic designed to reduce production of complement component 3 (C3) as a potential therapy for various complement mediated diseases; |
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presented additional interim clinical data from AROHSD1001, AROAAT2002, and AROAPOC31001; |
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completed the purchase of |
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completed enrollment in Phase 2b ARCHES-2 study of investigational ARO-ANG3 for patients with mixed dyslipidemia; |
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filed for regulatory clearance to initiate Phase 1/2a study of ARO-RAGE for treatment of Asthma; |
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filed for regulatory clearance to initiate Phase 1/2a study of ARO-MUC5AC for treatment of muco-obstructive lung disease; |
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initiated and dosed the first patients in the Phase 2 GATEWAY clinical study of investigational ARO-ANG3 for the treatment of patients with homozygous familial hypercholersterolemia; |
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xi) |
decided not to pursue further clinical development of ARO-HIF2 based on a number of factors including the evolving competitive landscape for HIF2 inhibitors. |
The Company is actively monitoring the ongoing COVID-19 pandemic. The financial results for the three and six months ended March 31, 2022 were not significantly impacted by COVID-19. Operationally, the Company has experienced delays in its earlier stage programs due to a shortage in non-human primates, which are critical to the Company’s preclinical programs. Additionally, the Company has experienced delays in enrollment in its clinical trials. The Company’s operations at its research and development facilities in Madison, Wisconsin and San Diego, California, and its corporate headquarters in Pasadena, California have continued with limited impact, other than for enhanced safety measures, including work from home policies and intermittent lab supply shortages. However, the Company cannot predict the impact the progression of COVID-19 will have on future financial and operational results due to a variety of factors, including the ability of the Company’s clinical sites to continue to enroll subjects, the ability of the Company’s suppliers to continue to operate, the continued good health and safety of the Company’s employees and the length and severity of the COVID-19 pandemic.
Liquidity
The Consolidated Financial Statements have been prepared in conformity with the accounting principles generally accepted in the United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern. Historically, the Company’s primary sources of financing have been through the sale of its securities and revenue from its licensing and collaboration agreements. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure in the future, particularly as the Company’s pipeline of drug candidates and its headcount have both expanded significantly. Additionally, significant capital investment will be required as the Company’s pipeline matures into later stage clinical trials, as well as with the Company’s plans to increase its internal manufacturing capabilities, as well as expand its footprint in Verona, Wisconsin and San Diego, California.
At March 31, 2022, the Company had $
In total, the Company remains eligible for $
Summary of Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in the Company’s most recent Annual Report on Form 10-K.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements that have significantly impacted this Quarterly Report on Form 10-Q, beyond those disclosed in the Company’s most recent Annual Report on Form 10-K.
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NOTE 2. COLLABORATION AND LICENSE AGREEMENTS
Amgen Inc.
On
The Company has evaluated these agreements in accordance with FASB Topics 808 – Collaboration Arrangements and 606 - Revenue for Contracts from Customers. The Company has substantially completed its performance obligations under the Olpasiran Agreement and the ARO-AMG1 Agreement. Future milestones and royalties achieved will be recognized in their entirety when earned. In July 2020, Amgen initiated a Phase 2 clinical study of Olpasiran, which resulted in a $
Janssen Pharmaceuticals, Inc.
On
The Company has evaluated these agreements in accordance with FASB Topics 808 – Collaboration Arrangements and 606 - Revenue for Contracts from Customers. At the inception of these agreements, the Company identified
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The Company determined the transaction price totaled approximately $
The Company has conducted its discovery, optimization and preclinical research and development of JNJ-75220795 (ARO-JNJ1), ARO-JNJ2, and ARO-JNJ3 under the Janssen Collaboration Agreement. All costs and labor hours spent by the Company have been entirely funded by Janssen. During the three months ended March 31, 2022, Janssen’s option period expired unexercised for two of the three candidates (ARO-JNJ2 and ARO-JNJ3) under the Janssen Collaboration Agreement. During the three months ended March 31, 2022 and 2021, the Company recognized $