arwr-20231231
000087940709-302024Q1false00008794072023-10-012023-12-3100008794072024-01-31xbrli:shares00008794072023-12-31iso4217:USD00008794072023-09-30iso4217:USDxbrli:shares00008794072022-10-012022-12-310000879407us-gaap:CommonStockMember2023-09-300000879407us-gaap:AdditionalPaidInCapitalMember2023-09-300000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300000879407us-gaap:RetainedEarningsMember2023-09-300000879407us-gaap:NoncontrollingInterestMember2023-09-300000879407us-gaap:AdditionalPaidInCapitalMember2023-10-012023-12-310000879407us-gaap:CommonStockMember2023-10-012023-12-310000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-10-012023-12-310000879407us-gaap:RetainedEarningsMember2023-10-012023-12-310000879407us-gaap:NoncontrollingInterestMember2023-10-012023-12-310000879407us-gaap:CommonStockMember2023-12-310000879407us-gaap:AdditionalPaidInCapitalMember2023-12-310000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000879407us-gaap:RetainedEarningsMember2023-12-310000879407us-gaap:NoncontrollingInterestMember2023-12-310000879407us-gaap:CommonStockMember2022-09-300000879407us-gaap:AdditionalPaidInCapitalMember2022-09-300000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000879407us-gaap:RetainedEarningsMember2022-09-300000879407us-gaap:NoncontrollingInterestMember2022-09-3000008794072022-09-300000879407us-gaap:AdditionalPaidInCapitalMember2022-10-012022-12-310000879407us-gaap:CommonStockMember2022-10-012022-12-310000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-012022-12-310000879407us-gaap:RetainedEarningsMember2022-10-012022-12-310000879407us-gaap:NoncontrollingInterestMember2022-10-012022-12-310000879407us-gaap:CommonStockMember2022-12-310000879407us-gaap:AdditionalPaidInCapitalMember2022-12-310000879407us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000879407us-gaap:RetainedEarningsMember2022-12-310000879407us-gaap:NoncontrollingInterestMember2022-12-3100008794072022-12-310000879407arwr:RoyaltyPharmaMember2023-10-012023-12-310000879407arwr:UnderwritingAgreementMemberus-gaap:SubsequentEventMember2024-01-022024-01-020000879407arwr:UnderwritingAgreementMemberus-gaap:SubsequentEventMember2024-01-020000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMember2023-10-012023-12-310000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMember2022-10-012022-12-310000879407arwr:HorizonTherapeuticsIrelandDACMember2023-10-012023-12-310000879407arwr:HorizonTherapeuticsIrelandDACMember2022-10-012022-12-310000879407arwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2023-10-012023-12-310000879407arwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2022-10-012022-12-310000879407arwr:JanssenPharmaceuticalsIncorporationMember2023-10-012023-12-310000879407arwr:JanssenPharmaceuticalsIncorporationMember2022-10-012022-12-310000879407arwr:AmgenIncorporatedMember2023-10-012023-12-310000879407arwr:AmgenIncorporatedMember2022-10-012022-12-310000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKLicenseAgreementMember2023-06-300000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKLicenseAgreementMember2021-11-220000879407srt:MaximumMemberarwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKLicenseAgreementMember2021-11-220000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKHBVAgreementMember2023-12-012023-12-310000879407srt:MaximumMemberarwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKHBVAgreementMember2023-10-310000879407arwr:GlaxosmithklineIntellectualPropertyLimitedMemberarwr:GSKHBVAgreementMember2023-12-310000879407arwr:HorizonTherapeuticsIrelandDACMemberarwr:HorizonLicenseAgreementMember2021-06-012021-06-30arwr:obligation0000879407arwr:HorizonTherapeuticsIrelandDACMemberarwr:HorizonLicenseAgreementMember2021-07-012021-07-310000879407arwr:HorizonTherapeuticsIrelandDACMemberarwr:HorizonLicenseAgreementMember2023-01-310000879407arwr:LicenseAndCoFundingAgreementMembersrt:MinimumMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2020-10-012020-10-31xbrli:pure0000879407srt:MaximumMemberarwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2020-10-012020-10-310000879407arwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2020-10-012020-10-31arwr:bundle0000879407arwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2023-03-310000879407srt:MaximumMemberarwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2023-12-310000879407arwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2022-10-012023-09-300000879407arwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2023-10-012023-12-310000879407arwr:LicenseAndCoFundingAgreementMemberarwr:TakedaPharmaceuticalsUnitedStatesOfAmericaIncorporatedMember2023-12-310000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2016-09-30arwr:agreement0000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2016-09-012016-09-300000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2023-12-310000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2018-09-300000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2020-07-310000879407arwr:OlpasiranAgreementMemberarwr:AmgenIncorporatedMember2022-12-310000879407arwr:OlpasiranAgreementMembersrt:MaximumMemberarwr:AmgenIncorporatedMember2023-12-310000879407arwr:VisirnaLicenseAgreementMemberarwr:VisirnaTherapeuticsIncMember2023-10-012023-12-310000879407arwr:VisirnaLicenseAgreementMemberarwr:VisirnaTherapeuticsIncMember2022-10-012022-12-310000879407arwr:VisirnaLicenseAgreementMemberarwr:VisirnaTherapeuticsIncMember2023-12-310000879407us-gaap:LandMember2023-12-310000879407us-gaap:LandMember2023-09-300000879407us-gaap:BuildingMember2023-12-310000879407us-gaap:BuildingMember2023-09-300000879407arwr:ResearchEquipmentMember2023-12-310000879407arwr:ResearchEquipmentMember2023-09-300000879407us-gaap:FurnitureAndFixturesMember2023-12-310000879407us-gaap:FurnitureAndFixturesMember2023-09-300000879407arwr:ComputerAndSoftwareMember2023-12-310000879407arwr:ComputerAndSoftwareMember2023-09-300000879407us-gaap:LeaseholdImprovementsMember2023-12-310000879407us-gaap:LeaseholdImprovementsMember2023-09-300000879407us-gaap:ConstructionInProgressMember2023-12-310000879407us-gaap:ConstructionInProgressMember2023-09-300000879407us-gaap:DebtSecuritiesMember2023-12-310000879407us-gaap:DebtSecuritiesMember2023-09-300000879407arwr:NovartisMemberus-gaap:PatentsMember2023-12-310000879407us-gaap:LicensingAgreementsMemberarwr:NovartisMember2023-12-310000879407arwr:NovartisMember2023-12-310000879407arwr:NovartisMemberus-gaap:PatentsMember2023-09-300000879407us-gaap:LicensingAgreementsMemberarwr:NovartisMember2023-09-300000879407arwr:NovartisMember2023-09-300000879407arwr:TwoThousandFourEquityIncentivePlanTwoThousandThirteenEquityIncentivePlanTwoThousandTwentyOneEquityIncentivePlanAndInducementGrantsMember2023-12-310000879407arwr:TwoThousandFourEquityIncentivePlanTwoThousandThirteenEquityIncentivePlanTwoThousandTwentyOneEquityIncentivePlanAndInducementGrantsMember2023-09-300000879407srt:MaximumMemberarwr:AtTheMarketAgreementMember2022-12-020000879407srt:MaximumMemberarwr:AtTheMarketAgreementMember2022-12-022022-12-020000879407arwr:AtTheMarketAgreementMember2023-12-310000879407stpr:WIarwr:DrugManufacturingFacilityMember2021-12-20utr:sqft0000879407arwr:LaboratoryAndOfficeFacilityMemberstpr:WI2021-12-200000879407arwr:FacilitiesMember2023-12-310000879407srt:MinimumMemberarwr:FacilitiesMember2023-12-310000879407srt:MaximumMemberarwr:FacilitiesMember2023-12-310000879407stpr:CAarwr:CorporateHeadquartersInPasadenaMember2023-12-310000879407arwr:ColoradoOwnerLLCMemberstpr:CAarwr:CorporateHeadquartersInPasadenaMember2023-12-31arwr:option0000879407stpr:CAarwr:ResearchFacilityInSanDiegoMember2023-12-310000879407srt:MaximumMemberstpr:CAarwr:ResearchFacilityInSanDiegoMember2023-12-310000879407stpr:CAarwr:ResearchFacilityInSanDiegoMember2023-09-250000879407arwr:ResearchFacilityInMadisonMemberstpr:WI2023-12-310000879407us-gaap:ResearchAndDevelopmentExpenseMember2023-10-012023-12-310000879407us-gaap:ResearchAndDevelopmentExpenseMember2022-10-012022-12-310000879407us-gaap:GeneralAndAdministrativeExpenseMember2023-10-012023-12-310000879407us-gaap:GeneralAndAdministrativeExpenseMember2022-10-012022-12-310000879407arwr:TwoThousandsFourEquityIncentivePlanMember2023-12-310000879407arwr:TwoThousandsThirteenIncentivePlanMember2023-12-310000879407arwr:TwoThousandTwentyOneIncentivePlanMember2021-03-180000879407arwr:TwoThousandsThirteenIncentivePlanMember2023-10-012023-12-310000879407arwr:TwoThousandTwentyOneIncentivePlanMember2023-10-012023-12-310000879407us-gaap:EmployeeStockOptionMemberarwr:InducementAwardsMember2023-12-310000879407us-gaap:RestrictedStockUnitsRSUMemberarwr:InducementAwardsMember2023-12-310000879407arwr:TwoThousandTwentyOneIncentivePlanMember2023-12-310000879407arwr:InducementAwardsMember2023-12-310000879407us-gaap:RestrictedStockUnitsRSUMemberarwr:TwoThousandsFourEquityIncentivePlanMember2023-12-310000879407us-gaap:RestrictedStockUnitsRSUMemberarwr:TwoThousandsThirteenIncentivePlanMember2023-12-310000879407us-gaap:RestrictedStockUnitsRSUMemberarwr:TwoThousandTwentyOneIncentivePlanMember2023-12-310000879407us-gaap:RestrictedStockUnitsRSUMember2023-12-310000879407us-gaap:EmployeeStockOptionMember2023-10-012023-12-310000879407us-gaap:EmployeeStockOptionMember2022-10-012022-12-310000879407us-gaap:EmployeeStockOptionMember2023-12-310000879407arwr:VisirnaESOPMember2023-10-012023-10-010000879407arwr:VisirnaESOPMember2023-10-010000879407arwr:VisirnaESOPMember2023-10-012023-12-310000879407us-gaap:RestrictedStockUnitsRSUMember2023-09-300000879407us-gaap:RestrictedStockUnitsRSUMember2023-10-012023-12-310000879407us-gaap:RestrictedStockUnitsRSUMember2022-10-012022-12-310000879407us-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:FairValueInputsLevel1Memberarwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-12-310000879407us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000879407us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000879407us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310000879407us-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407us-gaap:MunicipalBondsMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:FairValueInputsLevel1Memberarwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407arwr:CommercialNotesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-300000879407us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300000879407us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-300000879407us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-300000879407us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-09-300000879407srt:MaximumMemberarwr:RoyaltyPharmaAgreementMember2022-11-012022-11-300000879407arwr:RoyaltyPharmaAgreementMember2022-11-012022-11-300000879407arwr:RoyaltyPharmaAgreementMember2022-11-300000879407arwr:RoyaltyPharmaAgreementMember2023-12-310000879407arwr:RoyaltyPharmaAgreementMember2023-10-012023-12-310000879407arwr:RoyaltyPharmaAgreementMember2022-10-012022-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________________
FORM 10-Q
_____________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to          
Commission file number 001-38042
_____________________________________
ARROWHEAD PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
_____________________________________
Delaware46-0408024
(State or other jurisdiction of incorporation or organization)(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)
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:
Title of each classTrading 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 (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 x No o
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 x No o
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.
Large Accelerated Filer
xAccelerated Filer
o
Non-Accelerated Filer
o
Smaller Reporting Company
o
Emerging Growth Company
o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the registrant’s common stock outstanding as of January 31, 2024 was 123,896,914.



Page(s)
Consolidated Statements of Stockholders’ Equity



PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
Arrowhead Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
December 31, 2023September 30, 2023
(unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash$58,215 $110,891 
Available-for-sale securities, at fair value162,064 292,735 
Prepaid expenses10,516 8,813 
Other current assets7,104 7,082 
Total current assets237,899 419,521 
Property, plant and equipment, net333,411 290,262 
Intangible assets, net9,837 10,262 
Right-of-use assets44,907 45,297 
Other assets232 210 
Total Assets$626,286 $765,552 
LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$4,460 $35,866 
Accrued expenses46,604 39,763 
Accrued payroll and benefits8,777 17,963 
Lease liabilities3,421 10,563 
Deferred revenue 866 
Other liabilities461 435 
Total current liabilities63,723 105,456 
Long-term liabilities:
Lease liabilities, net of current portion115,157 104,608 
Liability related to the sale of future royalties273,692 268,326 
Total long-term liabilities388,849 372,934 
Commitments and contingencies (Note 7)
Noncontrolling interest and stockholders’ equity:
Common stock, $0.001 par value:
Authorized 290,000 shares; issued and outstanding 107,500 and 107,312 shares
200 200 
Additional paid-in capital1,320,356 1,300,395 
Accumulated other comprehensive loss(1,255)(3,222)
Accumulated deficit(1,158,894)(1,026,030)
Total Arrowhead Pharmaceuticals, Inc. stockholders’ equity160,407 271,343 
Noncontrolling interest13,307 15,819 
Total noncontrolling interest and stockholders’ equity173,714 287,162 
Total Liabilities, Noncontrolling Interest and Stockholders’ Equity$626,286 $765,552 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1


Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(unaudited)
Three Months Ended December 31,
20232022
Revenue$3,551 $62,546 
Operating expenses:
Research and development116,491 83,695 
General and administrative23,605 20,985 
Total operating expenses140,096 104,680 
Operating loss(136,545)(42,134)
Other income (expense):
Interest income2,802 2,682 
Interest expense(5,367)(2,849)
Other, net421 507 
Total other (expense) income(2,144)340 
Loss before income tax (benefit) expense and noncontrolling interest(138,689)(41,794)
Income tax (benefit) expense(3,313)17 
Net loss including noncontrolling interest$(135,376)$(41,811)
Net loss attributable to noncontrolling interest, net of tax(2,512)(486)
Net loss attributable to Arrowhead Pharmaceuticals, Inc.$(132,864)$(41,325)
Net loss per share attributable to Arrowhead Pharmaceuticals, Inc.:
Basic$(1.24)$(0.39)
Diluted$(1.24)$(0.39)
Weighted-average shares used in calculating
Basic107,415 106,039 
Diluted107,415 106,039 
Other comprehensive loss, net of tax:
Change in unrealized losses on available-for-sale securities1,909  
Foreign currency translation adjustments58 (122)
Comprehensive loss$(133,409)$(41,933)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2


Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common
Stock
Amount ($)
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Non-
controlling Interest
Totals
Balance at September 30, 2023107,312 $200 $1,300,395 $(3,222)$(1,026,030)$15,819 $287,162 
Stock-based compensation— — 19,694 — — — 19,694 
Exercise of stock options34 — 267 — — — 267 
Common stock - restricted stock units vesting154 — — — — —  
Foreign currency translation adjustments— — — 58 — — 58 
Change in unrealized losses on available-for-sale securities— — — 1,909 — — 1,909 
Net loss — — — — (132,864)(2,512)(135,376)
Balance at December 31, 2023107,500 $200 $1,320,356 $(1,255)$(1,158,894)$13,307 $173,714 

Common
Stock
Amount ($)
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Non-
controlling Interest
Totals
Balance at September 30, 2022105,960 $198 $1,219,213 $(136)$(820,755)$19,819 $418,339 
Stock-based compensation— — 19,390 — — — 19,390 
Exercise of stock options82 — 576 — — — 576 
Common stock - restricted stock units vesting98 1 (1)— — —  
Foreign currency translation adjustments— — — (122)— — (122)
Net loss— — — — (41,325)(486)(41,811)
Balance at December 31, 2022106,140 $199 $1,239,178 $(258)$(862,080)$19,333 $396,372 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3


Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended December 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(135,376)$(41,811)
Adjustments to reconcile net loss to net cash flow from operating activities
Stock-based compensation19,694 19,390 
Depreciation and amortization4,263 2,689 
(Accretion) amortization of note premiums/discounts(835)690 
Realized gain on investments(80) 
Non-cash interest expense on liability related to the sale of future royalties5,367 2,849 
Changes in operating assets and liabilities:
Accounts receivable (38,157)
Prepaid expenses and other current assets(1,748)10,529 
Accounts payable(12,463)(2,072)
Accrued expenses408 (7,203)
Deferred revenue(866)(22,979)
Operating lease, net3,796 559 
Net cash used in operating activities(117,840)(75,516)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(68,656)(38,911)
Purchases of investments (111,199)
Proceeds from sales and maturities of investments133,495 69,416 
Net cash provided by (used in) investing activities64,839 (80,694)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercises of stock options267 576 
Proceeds from the sale of future royalties 250,000 
Net cash provided by financing activities267 250,576 
Net (decrease) increase in cash, cash equivalents and restricted cash(52,734)94,366 
Effect of exchange rate on cash, cash equivalents and restricted cash58 (122)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
BEGINNING OF PERIOD110,891 108,005 
END OF PERIOD$58,215 $202,249 
Supplementary disclosure of cash flows:
Interest paid$ $ 
Income taxes (paid) refunded$(999)$ 
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accrued expenses
$11,290 $14,044 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4


Arrowhead Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
General and Recent Developments
Arrowhead Pharmaceuticals, Inc. and its subsidiaries (referred to herein collectively as the “Company”) are primarily engaged in developing medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, the Company’s 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. The Company’s RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.
The following table presents the Company’s current pipeline:
Therapeutic AreaNameStageProduct Rights
Cardiometabolic
Plozasiran (ARO-APOC3)
Two Phase 2b and one Phase 3Arrowhead
Zodasiran (ARO-ANG3)
Two Phase 2bArrowhead
OlpasiranPhase 3Amgen
PulmonaryARO-RAGE
Phase 1/2a
Arrowhead
ARO-MUC5ACPhase 1/2aArrowhead
ARO-MMP7
Phase 1/2a
Arrowhead
LiverGSK-4532990Phase 2bGSK
FazirsiranPhase 3Takeda and Arrowhead
JNJ-3989Phase 2GSK
ARO-C3
Phase 1/2a
Arrowhead
ARO-PNPLA3
Phase 1
Arrowhead
ARO-CFBPhase 1/2aArrowhead
Muscle
ARO-DUX4Phase 1/2aArrowhead
ARO-DM1Phase 1/2aArrowhead
Central Nervous System (CNS)
VariousPre-ClinicalArrowhead
The Company operates lab facilities in California and Wisconsin, where its 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 quarter of fiscal 2024, the Company continued to develop and advance its pipeline and partnered candidates. Several key recent developments include:
Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-CFB, being developed as a potential treatment for complement mediated renal disease;
Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-DM1, being developed as a potential treatment for type 1 myotonic dystrophy (DM1), the most common adult-onset muscular dystrophy; and
Entered into an Amended and Restated License Agreement with GSK, pursuant to which GSK received a worldwide, exclusive license to develop and commercialize JNJ-3989 (formerly ARO-HBV). JNJ-3989 had previously been licensed to Janssen Pharmaceuticals, Inc. See Note 2.
Consolidation and Basis of Presentation
The interim Consolidated Financial Statements include the accounts of Arrowhead Pharmaceuticals, Inc. and its subsidiaries (wholly-owned subsidiaries and a variable interest entity for which the Company is the primary beneficiary). Subsidiaries refer to Arrowhead Madison, Inc., Visirna Therapeutics, Inc. (“Visirna”), and Arrowhead Australia Pty Ltd.
5


For subsidiaries in which the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interests retained in such entity by the respective noncontrolling party.
The interim Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The financial data of the Company included herein are unaudited. In the opinion of management, all material adjustments of a normal recurring nature have been made to present fairly the Company’s financial position at December 31, 2023 and the results of operations and cash flows for the periods presented. All intercompany transactions and balances have been eliminated.
Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted from the accompanying interim consolidated financial statements and related notes. Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 for more complete descriptions and discussions. Operating results and cash flows for the three months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024.
Liquidity
The Company’s primary sources of financing have been through the sale of its equity securities, revenue from its licensing and collaboration agreements and the sale of certain future royalties. 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. Additionally, significant capital investment will be required as the Company’s pipeline matures into later stage clinical trials.
As of December 31, 2023, the Company had $58.2 million in cash, cash equivalents and restricted cash ($6.9 million in restricted cash) and $162.1 million in available-for-sale debt securities to fund operations. During the three months ended December 31, 2023, the Company’s cash, cash equivalents and restricted cash and investments balance decreased by $183.3 million which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses and capital expenditures. During the three months ended December 31, 2022, the Company received the $250.0 million upfront payment from Royalty Pharma (Note 11).
On January 2, 2024, the Company entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at a price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.0 million after deducting advisory fees and offering expenses.
In total, the Company is eligible to receive up to $2.8 billion in developmental, regulatory and sales milestones, and may receive various royalties on net sales from its licensing and collaboration agreements, subject to the terms and conditions of those agreements. The revenue recognition for these collaboration agreements is discussed further in Note 2.
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 for the fiscal year ended September 30, 2023.
Uncertainty in Income Taxes
The Company recorded an income tax benefit of $3.3 million and $0 for the three months ended December 31, 2023 and 2022, respectively. The income tax benefit is primarily due to the discrete change in the Company’s uncertain tax positions related to the statute of limitation expiration.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve its income tax disclosure requirements. Under the ASU, entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. This ASU will become effective for the Company beginning on October 1, 2025. The Company does not expect any material impact on its consolidated financial statements and related disclosures resulting from applying this ASU.
6


NOTE 2. COLLABORATION AND LICENSE AGREEMENTS
The following table provides a summary of revenue recognized:
Three Months Ended December 31,
20232022
(in thousands)
GSK$2,685 $(677)
Horizon 21,667 
Takeda866 16,312 
Janssen 244 
Amgen 25,000 
Total$3,551 $62,546 
The following table summarizes the balance of receivables and contract liabilities related to the Company’s collaboration and license agreements:
December 31, 2023September 30, 2023
(in thousands)
Receivables included in accounts receivable$ $ 
Contract liabilities included in deferred revenue$ $866 
Glaxosmithkline Intellectual Property (No. 3) Limited (“GSK”)
GSK License Agreement
On November 22, 2021, GSK and the Company entered into an Exclusive License Agreement (the “GSK License Agreement”). Under the GSK License Agreement, GSK has received an exclusive license for GSK-4532990 (formerly ARO-HSD). The exclusive license is worldwide with the exception of greater China. GSK is wholly responsible for all clinical development and commercialization of GSK-4532990 in its territory. GSK dosed the first patient in a Phase 2b trial in March 2023 and paid a $30.0 million milestone payment to the Company in the third quarter of fiscal 2023.
The Company is eligible for an additional payment of $100.0 million upon achieving the first patient dosed in a Phase 3 trial. Furthermore, should the Phase 3 trial read out positively, and the potential new medicine receives regulatory approval in major markets, the deal provides for commercial milestone payments to the Company of up to $190.0 million at first commercial sale, and up to $590.0 million in sales-related milestone payments. The Company is further eligible to receive tiered royalties on net product sales in a range of mid-teens to twenty percent.
GSK-HBV Agreement
On December 11, 2023, the Company entered into an Amended and Restated License Agreement with GSK (the “GSK-HBV Agreement”) pursuant to which GSK received a worldwide, exclusive license to develop and commercialize JNJ-3989 (formerly ARO-HBV), the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection. JNJ-3989 had previously been licensed to Janssen in October 2018.
Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the amended GSK-HBV Agreement. The Company is eligible to receive up to $832.5 million in development and sales milestone payments under the GSK-HBV Agreement.
There were no contract assets and liabilities recorded as of December 31, 2023.
Horizon Therapeutics Ireland DAC (“Horizon”)
In June 2021, Horizon and the Company entered into a collaboration and license agreement (the “Horizon License Agreement”). Under the terms of the Horizon License Agreement, Horizon received a worldwide exclusive license for HZN-457, a clinical-stage medicine being developed by Horizon as a potential treatment for people with uncontrolled gout.
At the inception of the Horizon License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services, including the Company’s responsibilities to conduct all activities through the preclinical stages of development of HZN-457 (the “Horizon R&D Services”). The Company received a $40.0 million upfront payment in July 2021. Revenue was recognized
7


on a straight-line basis over the timeframe for completing the Horizon R&D Services, concluding in the first quarter of 2023. Further, the Company received an additional $15.0 million upon Horizon’s initiation of a Phase 1 clinical trial in January 2023.
On October 6, 2023, Amgen completed its acquisition of Horizon and subsequently notified the Company of Amgen’s intent to terminate the HZN-457 license. Horizon exercised its right to terminate the Horizon License Agreement for convenience, which took effect on December 21, 2023.
Takeda Pharmaceutical Company Limited (“Takeda”)
In October 2020, Takeda and the Company entered into an Exclusive License and Co-Funding Agreement (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s Fazirsiran program (formerly TAK-999 and ARO-AAT), the Company’s second-generation subcutaneously administered RNAi therapeutic candidate being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency. Within the United States, fazirsiran, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda received an exclusive license to commercialize fazirsiran and will lead the global commercialization strategy, while the Company will be eligible to receive tiered royalties of 20% to 25% on net sales.
At the inception of the Takeda License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibilities to complete the initial portion of the SEQUOIA study, to complete the ongoing Phase 2 AROAAT2002 study and to ensure certain manufacturing of fazirsiran drug product is completed and delivered to Takeda (the “Takeda R&D Services”). Due to the specialized and unique nature of these Takeda R&D Services and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and, thus, one performance obligation. Beyond the Takeda R&D Services, which are the responsibility of the Company, Takeda will be responsible for managing future clinical development and commercialization outside the United States. Within the United States, the Company will also participate in co-development and co-commercialization efforts and will co-fund these efforts with Takeda as part of the 50/50 profit sharing structure within the United States. The Company considers the collaborative activities, including the co-development and co-commercialization, to be a separate unit of account within Topic 808, and as such, these co-funding amounts are recorded as research and development expenses or general and administrative expenses, as appropriate.
Under the terms of the Takeda License Agreement, the Company received $300.0 million as an upfront payment in January 2021 and an additional $40.0 million upon Takeda’s initiation of a Phase 3 REDWOOD clinical study of fazirsiran in March 2023, and is eligible to receive up to $527.5 million in additional potential development, regulatory and commercial milestones.
The Company has allocated the total $300.0 million initial transaction price to its one distinct performance obligation for the fazirsiran license and the associated Takeda R&D Services. Revenue is recognized using the input method (based on actual patient visits completed versus total estimated visits completed for the ongoing SEQUOIA and AROAAT2002 clinical studies). The Company previously expected these clinical trials to extend to September 2025 in order to demonstrate long term safety and efficacy in the open label extension (OLE) part of the studies; however, in August 2023, Takeda initiated a Phase 3 OLE study, concluding the Phase 2 study visits for patients in the SEQUOIA and AROAAT2002 studies by December 31, 2023. Consequently, the Company adjusted its revenue recognition estimates in the fiscal year 2023 to align with the revised performance period, resulting in accelerated revenue of $70.5 million, or $0.66 per diluted share, for the year ended September 30, 2023. The remaining $0.9 million of deferred revenue was recognized for the three months ended December 31, 2023. There were no further contract liabilities as of December 31, 2023.
The Company also recorded $11.1 million as accrued expenses as of December 31, 2023 that was primarily driven by co-development and co-commercialization activities.
Janssen Pharmaceuticals, Inc. (“Janssen”)
On April 7, 2023, Janssen voluntarily terminated its collaboration agreement with the Company and the Company regained full rights to ARO-PNPLA3, formerly called JNJ-75220795. ARO-PNPLA3 is in Phase 1 clinical trials, which are now being developed by the Company.
Further, on December 11, 2023, the Company entered into the GSK-HBV Agreement, as discussed above, pursuant to which GSK received an exclusive license for JNJ-3989 (formerly ARO-HBV). JNJ-3989 had previously been licensed to Janssen in October 2018.
8


Amgen Inc. (“Amgen”)
In September 2016, Amgen and the Company entered into two collaboration and license agreements and a common stock purchase agreement. Under the Second Collaboration and License Agreement (the “Olpasiran Agreement”), Amgen received a worldwide, exclusive license to the Company’s novel RNAi olpasiran (previously referred to as AMG- 890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the Olpasiran Agreement, Amgen is wholly responsible for clinical development and commercialization.
Under the Olpasiran Agreement, the Company has received $35.0 million in upfront payments and $21.5 million in the form of an equity investment by Amgen in the Company’s common stock. Further, the Company received additional an $55.0 million in milestone payments; $10.0 million upon Amgen’s initiation of a Phase 1 study in September 2018, $20.0 million upon its initiation of a Phase 2 clinical study in July 2020, and $25.0 million upon its first subject enrollment in a Phase 3 trial in December 2022. The Company has substantially completed its performance obligations under the Olpasiran Agreement. There were no contract assets and liabilities recorded as of December 31, 2023.
In November 2022, Royalty Pharma and the Company entered into the Royalty Pharma Agreement. In consideration for the payments under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive up to an additional $535.0 million in remaining development, regulatory and sales milestone payments payable from Amgen and Royalty Pharma. See Note 11.
Visirna Therapeutics, Inc. (“Visirna”)
In April 2022, the Company and Visirna, its subsidiary, entered into a License Agreement (the “Visirna License Agreement”), pursuant to which Visirna received an exclusive license to develop, manufacture and commercialize four of the Company’s RNAi-based investigational cardiometabolic medicines in Greater China (including the People’s Republic of China, Hong Kong, Macau and Taiwan).
The Company also performs manufacturing and development work pursuant to a Clinical Supply Agreement between the parties contemplated by the Visirna License Agreement. The Company received $85,989 and $749,262 as consideration for this manufacturing and development work for the three months ended December 31, 2023 and 2022, respectively. There were no contract assets and liabilities recorded as of December 31, 2023.
9


NOTE 3. BALANCE SHEET ACCOUNTS
Property, Plant and Equipment
The following table summarizes the Company’s major classes of property, plant and equipment:
December 31, 2023September 30, 2023
(in thousands)
Land$2,996 $2,996 
Building71,797  
Research equipment59,956 56,509 
Furniture2,761 1,540 
Computers and software883 700 
Leasehold improvements103,893 103,813 
Construction in progress136,914 166,655 
379,200 332,213 
Less: Accumulated depreciation and amortization(45,789)(41,951)
Property, plant and equipment, net$333,411 $290,262 
Depreciation and amortization expense for property and equipment for the three months ended December 31, 2023 and 2022 was $3.8 million and $2.3 million, respectively.
As of December 31, 2023, the Company completed the build out of one of its laboratory and office facilities in Verona, Wisconsin, which resulted in the reclassification of related construction in progress to building. Further, the Company commenced depreciation on the newly completed facility over a 39-year period.
Accrued Expenses
Accrued expenses consist of the following:
December 31, 2023September 30, 2023
(in thousands)
Accrued R&D expenses
$18,106 $16,125 
Accrued R&D expenses; co-development
11,104 5,895 
Accrued capital expenditure
11,290 14,044 
Other
6,104 3,699 
Total accrued expense
$46,604 $39,763 

10


NOTE 4. INVESTMENTS
The Company’s investments consisted of the following:
As of December 31, 2023
(in thousands)
Adjusted BasisGross
Unrealized Gains
Gross
Unrealized Losses
Fair Value
Available-for-sale debt securities$163,119 $ $(1,055)$162,064 
Total current investments$163,119 $ $(1,055)$162,064 
As of September 30, 2023
(in thousands)
Adjusted BasisGross
Unrealized Gains
Gross
Unrealized Losses
Fair Value
Available-for-sale debt securities$295,699 $ $(2,964)$292,735 
Total current investments$295,699 $ $(2,964)$292,735 
The Company has determined that the available-for-sale debt securities that were in an unrealized loss position did not have any credit loss impairment as of December 31, 2023 and 2022.
11


NOTE 5. INTANGIBLE ASSETS
Intangible assets subject to amortization include patents and a license agreement capitalized as part of the Novartis RNAi asset acquisition in March 2015. The following table presents the components of intangible assets:
Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying AmountUseful Lives
(in thousands)(in years)
As of December 31, 2023
Patents$21,728 $13,709 $ $8,019 14
License3,129 1,311  1,818 21
Total intangible assets, net$24,857 $15,020 $ $9,837 
As of September 30, 2023
Patents$21,728 $13,321 $ $8,407 14
License3,129 1,274  1,855 21
Total intangible assets, net$24,857 $14,595 $ $10,262 
Intangible assets are reviewed annually for impairment and more frequently if potential impairment indicators exist. No impairment indicators were identified during the three months ended December 31, 2023 and 2022.
Intangible assets with definite useful lives are amortized on a straight-line basis over their useful lives. Intangible assets amortization expense was $0.4 million for each of the three months ended December 31, 2023 and 2022. None of the intangible assets with definite useful lives are anticipated to have a residual value.
The following table presents the estimated future amortization expense related to intangible assets as of December 31, 2023:
Amortization Expense
Year Ending September 30, (in thousands)
2024 (remainder)$1,275 
20251,700 
20261,700 
20271,700 
20281,700 
Thereafter1,762 
Total$9,837 

12


NOTE 6. STOCKHOLDERS’ EQUITY
The following table summarizes the Company’s shares of common stock and preferred stock:
Shares
Par ValueAuthorizedIssuedOutstanding
(in thousands)
As of December 31, 2023
Common stock$0.001 290,000 107,500 107,500 
Preferred stock$0.001 5,000   
As of September 30, 2023
Common stock$0.001 290,000 107,312 107,312 
Preferred stock$0.001 5,000   
As of December 31, 2023 and September 30, 2023, respectively, 12,559,380 and 12,709,837 shares of common stock were reserved for issuance upon exercise of options and vesting of restricted stock units granted or available for grant under the Company’s 2004 Equity Incentive Plan, 2013 Incentive Plan, and 2021 Incentive Plan, as well as for inducement grants made to new employees under Rule 5635(c)(4) of the Nasdaq Listing Rules.
On January 2, 2024, the Company entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at an offering price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.0 million after deducting advisory fees and offering expenses.
On December 2, 2022, the Company entered into an open market sale agreement (the “Open Market Sale Agreement”), pursuant to which the Company may, from time to time, sell up to $250,000,000 in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering (“ATM Offering”). The Company is not required to sell shares under the Open Market Sale Agreement. The Company will pay Jefferies LLC a commission of up to 3.0% of the aggregate gross proceeds received from all sales of the common stock under the Open Market Sale Agreement. Unless otherwise terminated, the ATM Offering shall terminate upon the earlier of (i) the sale of all shares of common stock subject to the Sales Agreement and (ii) the termination of the Sales Agreement as permitted therein. The Company and Jefferies may each terminate the Open Market Sale Agreement at any time upon prior notice. As of December 31, 2023, no shares have been issued under the Open Market Sale Agreement.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may be subject to various claims and legal proceedings in the ordinary course of business. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were no contingent liabilities recorded as of December 31, 2023 and September 30, 2023.
Commitments
The Company owns land in the Verona Technology Park in Verona, Wisconsin, which is being developed into an approximately 160,000 square foot drug manufacturing facility and an approximately 140,000 square foot laboratory and office facility which will support the Company’s manufacturing process development and analytical activities. As of December 31, 2023, the Company has incurred $224.7 million and intends to spend an additional $60.0 million to $73.0 million to complete the build out of the facilities.
NOTE 8. LEASES
Pasadena, California: The Company leases 49,000 square feet of office space located at 177 East Colorado Blvd. for its corporate headquarters from 177 Colorado Owner, LLC, which lease expires on April 30, 2027. The lease contains an option to renew for one additional five-year term.
San Diego, California: The Company leases 144,000 square feet of office and research and development laboratory space located at 10102 Hoyt Park, San Diego, California, which lease expires on April 30, 2038. Pursuant to the lease, within twelve months of the expiration of the initial 15-year term, the Company has the option to extend the lease for up to one
13


additional ten-year term, with certain annual increases in base rent.
The lease agreement grants the Company the right to receive an Additional Tenant Improvement Allowance (“ATIA”) funded by the lessor, with a maximum amount of $7.2 million, subject to a 7% interest per annum over the base term. Further, on September 25, 2023, the Company executed the first amendment to the lease, which grants a second ATIA with a maximum amount of $23.6 million, bearing interest at a rate of 9% per annum over the base term. The Company has received $30.8 million ATIA from the lessor as of December 31, 2023. As a result, the Company remeasured its lease liability and right-of-use assets to reflect these additional allowances and the related increased lease payments. The Company has further concluded that these ATIAs have no effects on the classification of the lease.
The Company previously subleased additional research and development space in San Diego, California, which subleases ended during the fiscal year of 2023.
Madison, Wisconsin: The Company leases space for office and laboratory facilities, which expires on September 30, 2031. The lease contains options to renew for two terms of five years. After accounting for additional rental square feet added pursuant to amendments to the lease agreement in 2019 and 2020, the Company currently leases a total of 115,000 square feet.
The components of lease assets and liabilities along with their classification on the Company’s consolidated balance sheets were as follows:
Lease Assets and LiabilitiesClassificationDecember 31, 2023September 30, 2023
(in thousands)
Operating lease assetsRight-of-use assets$44,907 $45,297 
Current operating lease liabilitiesLease liabilities3,421 10,563 
Non-current operating lease liabilitiesLease liabilities, net of current portion115,157 104,608 
Three Months Ended December 31,
Lease CostClassification20232022
Operating lease costResearch and development$2,994 $2,069 
General and administrative expense476 533 
Variable lease cost (1)
Research and development779 210 
General and administrative expense  
Total $4,249 $2,812 
(1) Variable lease cost is primarily related to operating expenses associated with the Company’s operating leases.
There was $0 and $0.1 million short-term lease cost during the three months ended December 31, 2023, and 2022, respectively.
The following table presents maturities of operating lease liabilities on an undiscounted basis as of December 31, 2023:
YearAmounts
(in thousands)
2024 (remainder of fiscal year)$9,044 
202515,356 
202615,696 
202714,869 
202813,511 
2029 and thereafter128,356 
Total$196,832 
Less imputed interest$(78,254)
Total operating lease liabilities (includes current portion)$118,578 
14


Supplemental cash flow and other information related to leases was as follows:
Three Months Ended December 31,
20232022
(in thousands)
Cash received for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$3,099 $ 
Right-of-use assets obtained in exchange for amended operating lease liabilities$64 $ 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2,080 $1,331 
December 31,
20232022
Weighted-average remaining lease term (in years)13.36.9
Weighted-average discount rate8.0 %8.5 %
15


NOTE 9. STOCK-BASED COMPENSATION
The Company has three plans that provide for equity-based compensation. Under the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2013 Incentive Plan (the “2013 Plan”), 0 and 3,363,299 shares, respectively, of the Company’s common stock are reserved for grants of stock options and restricted stock awards to employees and directors as of December 31, 2023.
On March 18, 2021, the Company’s Board of Directors approved the Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan (the “2021 Plan”), which authorized 8,000,000 shares (subject to certain adjustments) available for grants of stock options, stock appreciation rights, restricted and unrestricted stock, performance awards, cash awards and other awards convertible into or otherwise based on shares of the Company’s common stock. The maximum number of shares authorized under the 2021 Plan will be (i) reduced by any shares subject to awards made under the 2013 Plan after January 1, 2021, and (ii) increased by any shares subject to outstanding awards under the 2013 Plan as of January 1, 2021 that, after January 1, 2021, are canceled, expired, forfeited or otherwise not issued under such awards (other than as a result of being tendered or withheld to pay the exercise price or withholding taxes in connection with any such awards) or settled in cash. As of December 31, 2023, the total number of shares available for issuance was 5,774,487 shares, which includes 158,678 and 77,014 shares that were forfeited under the 2013 and 2021 Plans, respectively, and 2,411,054 shares have been granted under the 2021 Plan.
In addition, there were 691,245 shares reserved for options and 684,900 shares reserved for restricted stock units issued as inducement grants to new employees granted outside of the Company’s equity-based compensation plans under Rule 5635(c)(4) of the Nasdaq Listing Rules.
The following table presents a summary of awards outstanding:
As of December 31, 2023
2004 Plan2013 Plan2021 PlanInducement AwardsTotal
Granted and outstanding awards:
Options 1,476,799 32,151 691,245 2,200,195 
Restricted stock units 1,886,500 2,013,298 684,900 4,584,698 
Total 3,363,299 2,045,449 1,376,145 6,784,893 
The following table summarizes stock-based compensation expenses included in operating expenses:
Three Months Ended December 31,
20232022
Research and development7,823 8,402 
General and administrative9,862 10,987 
Total$17,685 $19,389 
Stock Option Awards
The following table presents a summary of the stock option activity for the three months ended December 31, 2023:
SharesWeighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Outstanding at September 30, 2023
2,263,477$22.68 
Granted 
Cancelled or expired(29,457)61.11 
Exercised(33,825)8.30 
Outstanding at December 31, 2023
2,200,195$22.46 4.1 years$31,862,157 
Exercisable at December 31, 2023
2,118,298$21.72 3.9 years$31,840,866 
The aggregate intrinsic values represent the amount by which the market price of the underlying stock exceeds the exercise price of the option. The total intrinsic value of the options exercised during the three months ended December 31, 2023
16


and 2022 was $0.6 million and $2.3 million, respectively.
Stock-based compensation expense related to stock options outstanding for the three months ended December 31, 2023 and 2022, was $1.5 million and $2.4 million, respectively.
As of December 31, 2023, the pre-tax compensation expense for all outstanding unvested stock options in the amount of $1.4 million will be recognized in the Company’s results of operations over a weighted average period of 5 months.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. No options were granted during the three months ended December 31, 2023 and 2022.
Visirna ESOP: On October 1, 2023, Visirna, a subsidiary of the Company, granted 7,500,000 stock options to its employees from the Employee Stock Option Plan (the “Visirna ESOP”), which authorizes 20,000,000 shares for issuance. The Visirna ESOP is independently managed by Visirna, including the valuation process. For the three months ended December 31, 2023, stock-based compensation expense related to the Visirna ESOP was $2.0 million.
Restricted Stock Units
Restricted Stock Units (“RSUs”), including market-based, time-based and performance-based awards, have been granted under the Company’s 2013 and 2021 Plans and as inducements grants granted outside of the Company’s equity-based compensation plans. At vesting, each outstanding RSU will be exchanged for one share of the Company’s common stock. RSU awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets.
The following table summarizes the activity of the Company’s RSUs:
Number of
RSUs
Weighted-
Average
Grant
Date
Fair Value
Per Share
Outstanding at September 30, 2023
4,241,640$58.43 
Granted511,29029.48 
Vested(153,457)47.76 
Forfeited(14,775)51.21 
Outstanding at December 31, 2023
4,584,698$55.58 
The fair value of RSUs was determined based on the closing price of the Company’s common stock on the grant date, with consideration given to the probability of achieving service and/or performance conditions for awards.
For the three months ended December 31, 2023 and 2022, the Company recorded $16.2 million and $17.0 million of expense related to RSUs, respectively. As of December 31, 2023, there was $91.9 million of total unrecognized compensation cost related to RSUs that is expected to be recognized over a weighted-average period of 1.5 years.
17


NOTE 10. FAIR VALUE MEASUREMENTS
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The Company’s valuation techniques and inputs used to measure fair value and the definition of the three levels (Level 1, Level 2, and Level 3) of the fair value hierarchy are disclosed in Note 10 - Fair Value Measurements of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules” of its Annual Report on Form 10-K for the year ended September 30, 2023.
The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2, or from Level 2 to Level 3. The Company recognizes transfers between levels at either the actual date of the event or a change in circumstances that caused the transfer. At December 31, 2023 and September 30, 2023, the Company did not have any financial assets or financial liabilities based on Level 3 measurements.
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company:
December 31, 2023
Level 1Level 2Level 3Total
(in thousands)
Available-for-sale debt securities
U.S. government bonds$10,859 $ $ $10,859 
Municipal securities 7,153  7,153 
Commercial notes    
Corporate debt securities 144,052  144,052 
Total available-for sale debt securities10,859 151,205  162,064 
Money market instruments6,489   6,489 
Total financial assets$17,348 $151,205 $ $168,553 
September 30, 2023
Level 1Level 2Level 3Total
(in thousands)
Available-for-sale debt securities
U.S. government bonds$31,553 $ $ $31,553 
Municipal securities 7,093  7,093 
Commercial notes 22,205  22,205 
Corporate debt securities 231,884  231,884 
Total available-for-sale debt securities31,553 261,182  292,735 
Money market instruments347   347 
Total financial assets$31,900 $261,182 $ $293,082 
NOTE 11. LIABILITY RELATED TO THE SALE OF FUTURE ROYALTIES
In November 2022, the Company and Royalty Pharma entered into the Royalty Pharma Agreement, pursuant to which Royalty Pharma agreed to pay up to $410.0 million in cash to the Company in consideration for the Company’s future royalty interest in olpasiran, a small interfering RNA (siRNA) originally developed by the Company and licensed to Amgen in September 2016 under the Olpasiran Agreement.
Pursuant to the Royalty Pharma Agreement, Royalty Pharma paid $250.0 million upfront and agreed to pay up to an additional $160.0 million in aggregate one-time milestone payments due if and when the following milestone events occur: (i) $50.0 million on completion of enrollment in the OCEAN Phase 3 clinical trial for olpasiran, (ii) $50.0 million upon receipt of FDA approval of olpasiran for an approved indication (reduction in the risk of myocardial infarction, urgent coronary revascularization, or coronary heart disease death in adults with established cardiovascular disease and elevated
18


Lp(a)), and (iii) $60.0 million upon Royalty Pharma’s receipt of at least $70.0 million of royalty payments under the Royalty Pharma Agreement in any single calendar year.
In consideration for the payment of the foregoing amounts under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive any milestone payments potentially payable by Amgen under the Olpasiran Agreement.
The Company has evaluated the terms of the Royalty Pharma Agreement and concluded in accordance with the relevant accounting guidance that the Company accounted for the transaction as debt and the funding of $250.0 million from Royalty Pharma was recorded as a liability related to the sale of future royalties on its consolidated balance sheets. The Company is not obligated to repay this upfront funding received under the Royalty Pharma Agreement. This liability is amortized over the expected repayment term using an effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate may vary during the term of the agreement depending on a number of factors, including the amount and timing of forecasted net revenues which affects the repayment timing and ultimate amount of repayment. The Company will evaluate the effective interest rate periodically based on its current revenue forecasts utilizing the prospective method. For the three months ended December 31, 2023 and 2022, the Company recognized non-cash interest expense of $5.4 million and $2.8 million, respectively, on the consolidated statements of operations and comprehensive loss.
NOTE 12. EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per share for the three months ended December 31, 2023 and 2022.
Three Months Ended December 31,
20232022
(in thousands, except per share amounts)
Numerator:
Net loss attributable to Arrowhead Pharmaceuticals, Inc.$(132,864)$(41,325)
Denominator:
Weighted-average basic shares outstanding107,415 106,039 
Effect of dilutive securities  
Weighted-average diluted shares outstanding107,415 106,039 
Basic earnings per share$(1.24)$(0.39)
Diluted earnings per share$(1.24)$(0.39)
Potentially dilutive securities representing approximately 3,544,000 and 3,327,000 shares of common stock were excluded from the computation of diluted earnings per share for the three months ended December 31, 2023 and 2022, respectively, because their effect would have been anti-dilutive.
19


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report on Form 10-Q except for historical information may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “goal,” “endeavor,” “strive,” “intend,” “plan,” “project,” “could,” “estimate,” “target,” “forecast” or “continue” or the negative of these words or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements include, but are not limited to, statements about the initiation, timing, progress and results of our preclinical studies and clinical trials, our research and development programs, and our “20 in 25” pipeline goal; our expectations regarding the potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic arrangements and transactions we have entered into or may enter into in the future; our beliefs and expectations regarding the amount and timing of future milestone, royalty or other payments that could be due to or from third parties under existing agreements; and our estimates regarding future revenues, research and development expenses, capital requirements and payments to third parties.

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately, and many of which are beyond our control. As such, our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated or indicated in any forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and cash flows may differ materially. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in “Item 1. Business” and Item 1A. Risk Factors” of Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of our most recent Annual Report on Form 10-K. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company 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, the Company’s therapies trigger the RNAi interference mechanism to induce rapid, deep and durable knockdown of target genes. RNAi is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.
The Company has focused its resources on therapeutics that exclusively utilize its high levels of pharmacologic activity in multiple animal models spanning several therapeutic areas. The Company believes that TRiMTM enabled therapeutics offer several potential advantages over prior generation and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung, CNS, muscle and adipose tissue; and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules.
The Company’s clinical pipeline includes:
Hypertriglyceridemia - Plozasiran (formerly ARO-APOC3);
Dyslipidemia - Zodasiran (formerly ARO-ANG3);
Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen) ;
20


Muco-obstructive or inflammatory pulmonary conditions - ARO-MUC5AC and ARO-RAGE;
Idiopathic pulmonary fibrosis - ARO-MMP7;
Non-alcoholic steatohepatitis (NASH) - GSK-4532990 (formerly ARO-HSD, out-licensed to GSK);
Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda);
Chronic hepatitis B virus - JNJ-3989 (formerly ARO-HBV, out-licensed to GSK);
Complement mediated diseases - ARO-C3;
Non-alcoholic steatohepatitis (NASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1);
Facioscapulohumeral muscular dystrophy - ARO-DUX4;
Dystrophia myotonica protein kinase (DMPK) - ARO-DM1; and
Hepatic expression of complement factor B (CFB) - ARO-CFB.
The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California.
The Company continues to develop other clinical candidates for future clinical trials. Clinical candidates are tested internally and through GLP toxicology studies at outside laboratories. Drug materials for such studies and clinical trials are either manufactured internally or contracted to third-party manufacturers. The Company engages third-party contract research organizations (CROs) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, relating to the preparation for and administration of clinical trials, are referred to as “candidate costs.” As clinical candidates progress through clinical development, candidate costs will increase.
The First Quarter of Fiscal 2024 Business Highlights
Key recent developments during the first quarter of fiscal 2024 included the following:
Entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at a price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.0 million after deducting advisory fees and offering expenses;
Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-CFB, being developed as a potential treatment for complement mediated renal disease;
Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-DM1, being developed as a potential treatment for type 1 myotonic dystrophy (DM1), the most common adult-onset muscular dystrophy; and
Entered into an Amended and Restated License Agreement with GSK, pursuant to which GSK received a worldwide, exclusive license to develop and commercialize JNJ-3989 (formerly ARO-HBV). JNJ-3989 had previously been licensed to Janssen Pharmaceuticals, Inc. See Note 2.
Net loss was $132.9 million for the three months ended December 31, 2023 as compared to $41.3 million for the three months ended December 31, 2022. Net loss per share – diluted was $1.24 for the three months ended December 31, 2023 as compared to $0.39 for the three months ended December 31, 2022.
The changes in net loss for the three months ended December 31, 2023 were due to the combination of a decrease in revenue and an increase in research and development expenses, which have continued to increase as the Company’s pipeline of candidates has expanded and progressed through clinical trial phases.
The Company had $58.2 million of cash, cash equivalents and restricted cash, $162.1 million in available-for-sale securities, and $626.3 million of total assets as of December 31, 2023, as compared to $110.9 million of cash, cash equivalents and restricted cash, $292.7 million in available-for-sale securities and $765.6 million of total assets as of September 30, 2023. Based upon the Company’s current cash and investment resources, operating plan, and factoring in the $429.0 million in net proceeds from the January 2024 stock offering, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months.
Critical Accounting Estimates
There have been no significant changes to the Company’s critical accounting estimates disclosed in the most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
21


RESULTS OF OPERATIONS
The following data summarizes the Company’s results of operations for the following periods indicated:
Three Months Ended December 31,
20232022
(in thousands, except per share amounts)
Revenue
$3,551 $62,546 
Operating loss $(136,545)$(42,134)
Net loss attributable to Arrowhead Pharmaceuticals, Inc.$(132,864)$(41,325)
Net loss per share-diluted$(1.24)$(0.39)
Revenue
Total revenue for the three months ended December 31, 2023 decreased by $59.0 million, or 94.3% from the same period of 2022. The revenue for the three months ended December 31, 2023 were mainly driven by the revenue recognition associated with GSK and Takeda, as discussed below.
The Company has evaluated each agreement in accordance with FASB Topic 808–Collaborative Arrangements and Topic 606-Revenue for Contracts from Customers. See Note 2 — Collaboration and License Agreements to Consolidated Financial Statements of Part I, “Item 1. Financial Statements” for more information on revenue recognized under the collaboration and license agreements.
GSK: On December 11, 2023, GSK and the Company entered into the GSK HBV Agreement. Under the GSK-HBV Agreement, GSK received a worldwide, exclusive license to develop and commercialize JNJ-3989 (formerly ARO-HBV). JNJ-3989 had previously been licensed to Janssen in October 2018. Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the GSK-HBV Agreement.
Takeda: In October 2020, Takeda and the Company entered into the Takeda License Agreement. The Company has allocated the total $300.0 million initial transaction price to its one distinct performance obligation for the fazirsiran license and the associated Takeda R&D Services. Revenue is recognized using the input method (based on actual patient visits completed versus total estimated visits completed for the ongoing SEQUOIA and AROAAT2002 clinical studies). The Company previously expected these clinical trials to extend to September 2025 in order to demonstrate long term safety and efficacy in the open label extension (OLE) part of the studies; however, in August 2023, Takeda initiated a Phase 3 OLE study, concluding the Phase 2 study visits for patients in the SEQUOIA and AROAAT2002 studies by December 31, 2023. Consequently, the Company adjusted its revenue recognition estimates in the fiscal 2023 to align with the revised performance period and the remaining $0.9 million deferred revenue was recognized for the three months ended December 31, 2023. The Company recognized $16.3 million revenue for the three months ended December 31, 2022.
Horizon/Amgen: During the three months ended December 31, 2022, Horizon recorded $6.7 million revenue of the total $40.0 million upfront payment received in July 2021, which was recognized on a straight-line basis over the timeframe for completing the Horizon R&D Services, concluding in the first quarter of 2023. Horizon also enrolled the first subject in December 2022 in a Phase 1 randomized, placebo-controlled trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of HZN-457, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023. Further, Amgen enrolled the first subject in its Phase 3 trial of olpasiran, which triggered a $25.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023. On October 6, 2023, Amgen,,Inc. completed its acquisition of Horizon and subsequently notified the Company of Amgen’s intent to terminate the HZN-457 license. Horizon exercised its right to terminate the Horizon License Agreement for convenience, which took effect on December 21, 2023.

22


Operating Expenses
The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories. For purposes of comparison, the amounts for the three months ended December 31, 2023 and 2022 are shown in the tables below.
Research and Development (R&D) Expenses
R&D expenses are related to the Company’s research and development discovery efforts and related candidate costs, which are comprised primarily of outsourced costs related to the manufacturing of clinical supplies, toxicity/efficacy studies and clinical trial expenses. Internal costs primarily relate to discovery operations at the Company’s research facilities in California and Wisconsin, including facility costs and laboratory-related expenses. The Company does not separately track R&D expenses by individual research and development projects, or by individual drug candidates. The Company operates in a cross-functional manner across projects and does not separately allocate facilities-related costs, candidate costs, discovery costs, compensation expenses, depreciation and amortization expenses, and other expenses related to research and development activities.
The following table provides details of research and development expenses for the periods indicated:
(in thousands)Three Months Ended
December 31, 2023
% of
Expense
Category
Three Months Ended
December 31, 2022
% of
Expense
Category
Increase (Decrease)
$%
Candidate costs$45,274 39 %$42,284 51 %$2,990 %
R&D discovery costs29,222 25 %12,693 15 %16,529 130 %
Salaries22,595 19 %14,689 17 %7,906 54 %
Facilities related6,542 %3,341 %3,201 96 %
Total research and development expense, excluding non-cash expense$103,633 89 %$73,007 87 %$30,626 42 %
Stock compensation9,007 %8,402 10 %605 %
Depreciation and amortization3,851 %2,286 %1,565 68 %
Total research and development expense$116,491 100 %$83,695 100 %$32,796 39 %
Candidate costs increased $3.0 million, or 7%, for the three months ended December 31, 2023 compared to the same period of 2022. This increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher manufacturing, outsourced clinical trial, and toxicity study costs.
R&D discovery costs increased $16.5 million, or 130%, for the three months ended December 31, 2023 compared to the same period of 2022. This increase was primarily driven by the growth of the Company’s discovery efforts and continued advancement into novel therapeutic areas and tissue types, particularly due to an increase in labor along with rising costs associated with CNS studies and lab supplies.
Salaries and stock compensation expense consist of salary, bonuses, payroll taxes, related benefits and stock compensation for the Company’s R&D personnel. The increases in salaries and stock comp expenses for the three months ended December 31, 2023 were primarily due to an increase in R&D headcount that has occurred as the Company has expanded its pipeline of candidates, in addition to annual salary increases. Stock compensation expense was based upon the valuation of stock options and restricted stock units granted to employees and directors.
Facilities-related expense included lease costs for the Company’s research and development facilities in San Diego, California and Madison, Wisconsin. Facilities-related costs increased $3.2 million, or 96%, for the three months ended December 31, 2023 compared to the same period of 2022. This increase was mainly due to the additional lease expense in San Diego, California as the Company expands discovery efforts to identify new drug candidates.
Depreciation and amortization expense, a non-cash expense, increased $1.6 million, or 68% for the three months ended December 31, 2023 compared to the same period of 2022. The increase was primarily attributed to higher leasehold improvements, due to completion of the development of the San Diego facility. Additionally, as of December 31, 2023, the Company completed the build out of one of its laboratory and office facilities in Verona, Wisconsin, and commenced depreciation.
The Company anticipates these R&D expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.
23


General & Administrative Expenses
The following table provides details of the Company’s general and administrative expenses for the periods indicated:
(in thousands)Three Months Ended
December 31, 2023
% of
Expense
Category
Three Months Ended
December 31, 2022
% of
Expense
Category
Increase (Decrease)
$%
Salaries$6,259 27 %$4,207 20 %$2,052 49 %
Professional, outside services, and other 5,222 22 %4,383 21 %839 19 %
Facilities related1,025 %1,005 %20 %
Total general & administrative expense, excluding non-cash expense$12,506 53 %$9,595 46 %$2,911 30 %
Stock compensation10,687 45 %10,987 52 %(300)(3)%
Depreciation and amortization412 %403 %%
Total general & administrative expense$23,605 100 %$20,985 100 %$2,620 12 %
Salaries expense increased $2.1 million, or 49%, for the three months ended December 31, 2023 compared to the same period of 2022. The increase was driven by the combination of annual salary increases and increased headcount required to support the Company’s growth.
Professional, outside services, and other expense includes legal, consulting, patent expenses, business insurance expenses, other outside services, travel, and communication and technology expenses. This expense increased $0.8 million, or 19%, for the three months ended December 31, 2023 compared to the same period of 2022. The increase was mainly due to legal services associated with new patent applications and intellectual property matters.
Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California.
Stock compensation expense, a non-cash expense, was based upon the valuation of stock options and restricted stock units granted to employees.
Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters.
The Company anticipates these general and administrative expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.
Other Income (Expense)
Other income (expense) is primarily related to interest income and expense. Other expense increased $2.5 million for the three months ended December 31, 2023 compared to the same periods of 2022. The increase was primarily due to the non-cash interest expense on the liability related to the sale of future royalties.
24


LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through the sale of its equity securities, revenue from its licensing and collaboration agreements, and the sale of certain future royalties. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure as the Company’s pipeline continues to expand and matures into later stage clinical trials. Additionally, the Company expanded its facilities in Verona, Wisconsin and leased additional facilities in San Diego, California. Each of these expansions is designed to increase the Company’s internal manufacturing and discovery capabilities and requires significant capital investment.
The Company’s cash, cash equivalents and restricted cash decreased to $58.2 million at December 31, 2023 compared to $110.9 million at September 30, 2023. Cash invested in available-for-sale debt securities was $162.1 million at December 31, 2023 compared to $292.7 million at September 30, 2023.
On December 2, 2022, the Company entered into the Open Market Sale Agreement, pursuant to which the Company may, from time to time, sell up to $250.0 million in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering. As of December 31, 2023, no shares have been issued under the Open Market Sale Agreement.
On January 2, 2024, the Company entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters. The Company issued 15,790,000 shares of common stock at an offering price of $28.50 per share. The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.0 million after deducting advisory fees and offering expenses.
The Company believes its current financial resources are sufficient to fund its operations through at least the next twelve months.
The following table presents a summary of cash flows:
Three Months Ended December 31,
20232022
(in thousands)
Cash Flow from:
Operating activities$(117,840)$(75,516)
Investing activities64,839 (80,694)
Financing activities267 250,576 
Net (decrease) increase in cash, cash equivalents and restricted cash$(52,734)$94,366 
Cash, cash equivalents and restricted cash at end of period$58,215 $202,249 
During the three months ended December 31, 2023, cash flow used by operating activities was $117.8 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses. Cash provided by investing activities was $64.8 million, which was primarily related to sales and maturities of investments of $133.5 million, offset by capital expenditures, $68.7 million of construction in progress. Cash provided by financing activities of $0.3 million was primarily related to cash received from stock option exercises.
During the three months ended December 31, 2022, cash flows used by operating activities was $75.5 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses, partially offset by the receipt of $6.0 million from GSK and Horizon. Cash used in investing activities was $80.7 million, which was primarily related to capital expenditures, primarily construction in progress, of $38.9 million and investments of $111.2 million, partially offset by net sales and maturities of investments of $69.4 million. Cash provided by financing activities of $250.6 million was primarily related to the $250.0 million payment from Royalty Pharma as well as cash received from stock option exercises. See Note 11 — Liability Related to the Sale of Future Royalties of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.”
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Companys exposure to market risk from that described in Item 7A of its Annual Report on Form 10-K for the year ended September 30, 2023.
25


ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the quarter covered by this Quarterly Report on Form 10-Q. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company regularly evaluates its controls and procedures and makes improvements in the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.


26


PART II—OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
From time to time, the Company may be involved in routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of its business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings, particularly complex legal proceedings, cannot be predicted with any certainty. There have been no material developments in the legal proceedings that the Company disclosed in Part I, Item 3 of its Annual Report on Form 10-K for the year ended September 30, 2023.
ITEM 1A.    RISK FACTORS
The Companys business, results of operations and financial conditions are subject to various risks. These risks are described elsewhere in this Quarterly Report on Form 10-Q and in the Companys other filings with the SEC, including the Companys Annual Report on Form 10-K for the year ended September 30, 2023. There have been no material changes from the risk factors identified in the Companys Annual Report on Form 10-K for the year ended September 30, 2023.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.    MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5.    OTHER INFORMATION
(c) Trading Plans
During the quarter ended December 31, 2023, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

27


ITEM 6.    EXHIBITS
Exhibit
Number
Document Description
3.1
3.2
3.3
10.1*,†
31.1*
31.2*
32.1**
32.2**
101.INS*Inline XBRL Instance Document
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
104*The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL (included as Exhibit 101)
_________________
*Filed herewith.
**Furnished herewith.
Certain portions of this exhibit were redacted by means of marking such portions with asterisks because the identified portions are (i) not material and (ii) treated as private or confidential by the Company.

28


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 6, 2024
ARROWHEAD PHARMACEUTICALS, INC.
By:/s/ Kenneth A. Myszkowski
Kenneth A. Myszkowski
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
29
gsk-amendedandrestatedli
EXHIBIT 10.1 EXECUTION VERSION CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION IS (I) NOT MATERIAL AND (II) TREATED AS PRIVATE OR CONFIDENTIAL BY THE COMPANY. 1 AMENDED AND RESTATED LICENSE AGREEMENT This Amended and Restated License Agreement (“Agreement”), made as of December 11, 2023 (the “Amended Effective Date”), is by and between Arrowhead Pharmaceuticals, Inc., a Delaware corporation with a place of business at 177 East Colorado Boulevard, Suite 700, Pasadena, California 91105, USA (“Arrowhead”), and GlaxoSmithKline Intellectual Property (No. 3) Limited, a company existing under the laws of England, with offices at 980 Great West Road, Brentford, Middlesex, TW8 9GS (“GSK”). Arrowhead and GSK are at times referred to herein individually as a “Party” and collectively as the “Parties”. RECITALS WHEREAS, Arrowhead possesses certain information, materials, and intellectual property rights relating to oligonucleotides and oligonucleotide constructs, including the Licensed Construct in clinical development known as ARO-HBV, which inhibits expression of the hepatitis B virus (“HBV”); WHEREAS, GSK, directly and through certain of its Affiliates, has extensive experience and expertise in the development and commercialization of pharmaceutical and biologic products, and owns or otherwise controls information, materials and intellectual property rights useful to Develop and Commercialize pharmaceutical and biologic products in the Field; WHEREAS, Arrowhead and Janssen Pharmaceuticals, Inc. (“Janssen”) entered into that certain License Agreement, dated as of October 3, 2018 (the “Original Execution Date”), as amended pursuant to (a) that certain Amendment No. 1 to License Agreement, by and between Arrowhead and Janssen, dated as of December 18, 2018; and (b) that certain Amendment No. 2 to License Agreement, by and between Arrowhead and Janssen, dated as of February 4, 2019 (collectively, the “Original Agreement”), pursuant to which, among other things, Arrowhead granted to Janssen an exclusive license under Arrowhead Intellectual Property to Develop and Commercialize Licensed Constructs and Licensed Products as set forth therein; WHEREAS, GSK and Janssen have entered into that certain Asset Purchase Agreement, dated as of October 30, 2023 (the “APA”), pursuant to which, among other things, effective as of the Closing (as defined in the APA), Janssen, with Arrowhead’s consent, has assigned all of its rights, title and interest in, under and to the Original Agreement and certain other Purchased Assets (as defined in the APA) to GSK; and WHEREAS, in accordance with Section 17.6 of the Original Agreement, the Parties now desire to amend and restate the Original Agreement into this Agreement, effective as of the Amended Effective Date upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:


 
2 ARTICLE I: DEFINITIONS Unless the context otherwise requires, the terms in this Agreement with initial letters capitalized shall have the meanings described below or the meaning as designated in the indicated places throughout this Agreement. 1.1 “Access Territory” means those countries set forth in Schedule 1.1. 1.2 “Accounting Standards” means GAAP or IFRS, as appropriate, as generally and consistently applied in compliance with Applicable Laws throughout the relevant company’s organization at the relevant time. 1.3 “Acquired Business” has the meaning set forth in Section 12.3. 1.4 “Acquired General Arrowhead Patent Rights” has the meaning as set forth in Section 10.2.3. 1.5 “Acquired Specific Arrowhead Patent Rights” has the meaning as set forth in Section 10.2.3. 1.6 “Acquirer” means, collectively, the Third Party referenced in the definition of Change of Control and such Third Party’s Affiliates, other than the applicable Party in the definition of Change of Control and such Party’s Affiliates, determined as of immediately prior to the closing of such Change of Control. 1.7 “Action” means any claim, action, cause of action or suit (whether in contract or tort or otherwise), litigation (whether at law or in equity, whether civil or criminal), controversy, assessment, arbitration, investigation, hearing, charge, complaint, demand, notice or proceeding of, to, from, by or before any Governmental Authority. 1.8 “Active Ingredient” means a clinically-active material that provides a pharmacological activity in a pharmaceutical or biologic product (excluding formulation components, such as coatings, stabilizers, excipients or solvents, adjuvants or controlled release technologies). 1.9 “Affiliate” means, with respect to a designated Party or entity, any entity controlling, controlled by, or under common control with such Party or entity. For purposes of this definition only, “control” means: (a) where the entity is a corporate entity, direct or indirect ownership of 50% or more of the stock or shares having the right to vote for the election of directors of such entity; and (b) where the entity is other than a corporate entity, the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract or otherwise. For clarity, an entity may be or become an Affiliate of a Party or another entity and may cease to be an Affiliate of such Party or other entity, in each case, during the Term. The Parties acknowledge that, for the purposes of this Agreement, Visirna Therapeutics, Inc. shall not be an Affiliate of Arrowhead. 1.10 “Agreement” has the meaning set forth in the preamble above.


 
3 1.11 “Agreement IP” means, collectively, the Agreement Know-How and the Agreement Patent Rights. 1.12 “Agreement Know-How” means any and all Know-How that is first discovered, developed, generated, invented, derived, created, conceived or reduced to practice during the Term by or on behalf of one (1) or more Personnel of a Party (or any of its Affiliates, licensees, sublicensees or subcontractors), either alone or jointly with one (1) or more Personnel of the other Party (or any of its Affiliates, licensees, sublicensees or subcontractors), in each case, in the performance of activities under this Agreement, including the Existing Inventions and the New Arising Know-How. For clarity, for purposes of this definition solely, where “Party” is GSK it shall include Janssen as predecessor-in-interest to GSK. 1.13 “Agreement Patent Rights” means any and all Patent Rights that (a) have a priority date after the Original Effective Date, and (b) claim or otherwise disclose any Agreement Know-How. 1.14 “Alliance Manager” has the meaning set forth in Section 3.13. 1.15 “Amended Effective Date” has the meaning set forth in the preamble above. 1.16 “Anti-Corruption Laws” means the FCPA and related regulations in the United States, and equivalent anti-bribery laws and regulations under Applicable Laws in other jurisdictions. 1.17 “APA” has the meaning set forth in the recitals above. 1.18 “Applicable Laws” means the applicable provisions of any national, supranational, regional, state and local laws, treaties, statutes, rules, regulations, administrative codes, guidance, ordinances, judgments, decrees, directives, injunctions, orders, permits, of or from any court, arbitrator, Regulatory Authority, or Governmental Authority having jurisdiction over or related to the subject item, including GCP, GLP and GMP, as applicable. 1.19 “ARO-HBV” has the meaning set forth in Section 1.123(a). 1.20 “Arrowhead” has the meaning set forth in the preamble above. 1.21 “Arrowhead Agreement IP” means, collectively, the Arrowhead Agreement Patent Rights and the Arrowhead Agreement Know-How. 1.22 “Arrowhead Agreement Know-How” has the meaning set forth in Section 8.2.3(c). 1.23 “Arrowhead Agreement Patent Rights” has the meaning set forth in Section 8.2.3(d). 1.24 “Arrowhead Excluded Know-How” means, collectively, any and all Know-How that Arrowhead or any of its Affiliates comes to Control after the Amended Effective Date during the Term (including any New Arising Know-How that is Arrowhead Agreement


 
4 Know-How), in each case, that (a) relates to CMC for the Manufacture of the Licensed Constructs or Licensed Products but is not necessary for the Manufacture of the Licensed Constructs or Licensed Products; or (b) (i) embodies RNAi molecule sequence selection and compound design process, and (ii) is not disclosed by Arrowhead to GSK under Section 3.4 (provided that this clause (b) shall not include any Know-How that is necessary for the clinical development, Manufacture or Commercialization of the Licensed Constructs or Licensed Products) but, in each case ((a) or (b)), excluding any Know-How that was solely or jointly invented by or on behalf of one (1) or more Personnel of GSK (or its Affiliates, licensees, sublicensees or subcontractors) (including any Joint Agreement Know-How or any such New [***] Know-How). 1.25 “Arrowhead Excluded Patent Rights” means any Patent Rights that claim or otherwise disclose any Arrowhead Excluded Know-How but, in each case, excluding any Patent Rights that also claim or otherwise disclose (a) any Arrowhead Know-How or (b) any Joint Agreement Know-How. 1.26 “Arrowhead Intellectual Property” means, collectively, (a) the Arrowhead Patent Rights; (b) the Arrowhead Know-How; and (c) Arrowhead’s interest in the Joint Agreement IP. 1.27 “Arrowhead Invention” has the meaning set forth in Section 8.1. 1.28 “Arrowhead Know-How” means any Know-How Controlled by Arrowhead or any of its Affiliates at any time that is necessary or reasonably useful to Exploit any Licensed Constructs or Licensed Products (including (a) all CMC Know-How; and (b) all Arrowhead Agreement Know-How) but, in each case, excluding (i) any Arrowhead Excluded Know-How or (ii) any Joint Agreement Know-How. 1.29 “Arrowhead Patent Rights” means any Patent Rights Controlled by Arrowhead or any of its Affiliates at any time that (a) claim or otherwise disclose any Arrowhead Know-How; or (b) otherwise Covers any Licensed Constructs or Licensed Products, or the Exploitation of any Licensed Constructs or Licensed Products (including (i) all General Arrowhead Patent Rights, (ii) all Specific Arrowhead Patent Rights and (iii) all Arrowhead Agreement Patent Rights) but, in each case ((a) or (b)), excluding (A) any Arrowhead Excluded Patent Rights or (B) any Joint Agreement Patent Rights. A list of certain Arrowhead Patent Rights that (1) as of the Original Execution Date, Cover the Exploitation of ARO-HBV, are attached to the Original Agreement as Exhibit B to the Original Agreement, or (2) as of the Amended Effective Date, Cover the Exploitation of ARO-HBV, is attached hereto as Schedule 1.29. For clarity, the General Arrowhead Patent Rights and Specific Arrowhead Patent Rights are as indicated (x) as of the Original Execution Date, on Exhibit B to the Original Agreement, or (y) as of the Amended Effective Date, on Schedule 1.29, as applicable. 1.30 “Arrowhead Platform Technology” means targeted RNAi molecule technology Controlled by Arrowhead or any of its Affiliates as of the Original Execution Date or during the Term utilizing targeting ligand-mediated delivery of RNAi designated by Arrowhead as its TRiMTM platform.


 
5 1.31 “Arrowhead Third Party Agreement” has the meaning set forth in Section 6.5.3(a). 1.32 “Audited Party” has the meaning set forth in Section 7.5.2. 1.33 “Audited Site” means any site or facility of a Party or any of its Affiliates, Third Party sublicensees, or Third Party contractors or subcontractors hereunder, as the case may be, on which any Clinical Trial or Manufacturing of Licensed Products for human use is conducted, and which is undergoing an inspection or audit by a Regulatory Authority or a Party as provided hereunder. 1.34 “Auditing Party” has the meaning set forth in Section 7.5.2. 1.35 “Bankrupt Party” has the meaning set forth in Section 13.3.1. 1.36 “Bankruptcy” means, with respect to a Party, that: (a) the Party has been declared insolvent or bankrupt by a court of competent jurisdiction; (b) a voluntary or involuntary petition for protection under any bankruptcy or insolvency laws (including under the Bankruptcy Code) is filed in any court of competent jurisdiction against the Party and such petition has not discharged or dismissed within forty (40) Business Days after filing; (c) the Party has made or executed an assignment of substantially all of its assets for the benefit of creditors; (d) proposes a written agreement of composition or extension of its debts; (e) proposes or is a party to any dissolution or liquidation of such Party; or (f) admits in writing its inability generally to meet its obligations as they fall due in the general course. 1.37 “Bankruptcy Code” means Title 11 of the United States Code, as may be amended or superseded from time to time. 1.38 “Bankruptcy Commencement Date” has the meaning set forth in Section 13.3.2. 1.39 “Breaching Party” has the meaning set forth in Section 13.2.1. 1.40 “Business Day” shall mean a day other than a Saturday, Sunday or public holiday in United States and England when banks in United States and England are open for normal banking business and excluding the period from 24 December to 2 January in which the corporate offices of GSK are closed for business. 1.41 “Calendar Quarter” means each three (3) month period commencing January 1, April 1, July 1 or October 1 of any Calendar Year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Amended Effective Date to the end of the first full Calendar Quarter thereafter; and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement. 1.42 “Calendar Year” means the period beginning on January 1 and ending on December 31 of the same year; provided, however, that (a) the first Calendar Year of the Term shall commence on the Amended Effective Date and end on December 31 of the same year; and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the effective date of termination or expiration of this Agreement.


 
6 1.43 “CAPA” means a written recovery plan or proposal of corrective and preventative actions. 1.44 “Change of Control” means, with respect to a Party, (a) a merger or consolidation of such Party with a Third Party that results in the voting securities of such Party outstanding immediately prior thereto, or any securities into which such voting securities have been converted or exchanged, ceasing to represent at least fifty percent (50%) of the combined voting power of the surviving entity or the parent of the surviving entity immediately after such merger or consolidation, (b) a transaction or series of related transactions in which a Third Party, together with its Affiliates, becomes the direct or indirect beneficial owner of fifty percent (50%) or more of the combined voting power of the outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or substantially all of such Party’s and its controlled Affiliates’ assets. Notwithstanding the foregoing, any transaction or series of transactions effected for the primary purpose of financing the operations of the applicable Party or changing the form or jurisdiction of organization of such Party will not be deemed a “Change of Control” for purposes of this Agreement. 1.45 “Clinical Investigation Laws” means Applicable Laws relating to human clinical investigations, such as 21 C.F.R. Parts 50, 54, 56 and 312 and then-current Good Clinical Practice, each as in effect and as amended from time to time. 1.46 “Clinical Trial” means a clinical trial in human subjects that has been approved by an institutional review board or ethics committee, as applicable, and is designed to measure the safety or efficacy of a therapeutic product, including any Phase 1 Clinical Trial, Phase 2 Clinical Trial, Phase 3 Clinical Trial, Post-Marketing Studies or any such clinical trial incorporating more than one (1) of these phases. 1.47 “CMC” means, chemistry, manufacturing and controls with respect to a product, which includes (a) manufacturing and process development records for such product; and (b) all chemistry, manufacturing and control procedures necessary or reasonably useful for the manufacture of such product. 1.48 “CMC Know-How” means the Arrowhead Know-How relating to the CMC of ARO- HBV, any Licensed Construct or any Licensed Product, including data, procedures, techniques, and information resulting from any test method development and stability testing, process development, process validation, process scale-up, formulation development, delivery system development, quality assurance and quality control development, and other related activities. 1.49 “Collaboration Activities” means the Parties’ activities (performed directly or, as may be permitted hereunder, on their behalf through their Affiliates, Third Party sublicensees or Third Party contractors or subcontractors) performed under this Agreement. 1.50 “Combination Product” means (a) a single pharmaceutical formulation containing as its Active Ingredients (i) one or more Licensed Constructs, and (ii) one or more Active Ingredients other than a Licensed Construct; (b) a bundle of products comprised of (i) one or more single pharmaceutical formulations comprising at least one Licensed Construct, and (ii) one or more other therapeutically effective or Prophylactically Active Products,


 
7 priced and sold in a single package containing such multiple products or packaged separately but sold together for a single price; or (c) a Licensed Product that is defined as a “combination product” by the FDA pursuant to 21 C.F.R. §3.2(e) or its foreign equivalent (but excluding devices, drug delivery vehicles, adjuvants, solubilizers and excipients), in each case ((a), (b) or (c)), in all dosage forms, formulations, presentations, line extensions and package configurations thereof. 1.51 “Commercialization” or “Commercialize” means, with respect to any product, any and all activities undertaken before and after Regulatory Approval of any Drug Application for such product and that are directed to marketing, promoting, importing or exporting for sale, using, offering for sale, or selling a product, including commercial manufacturing, launching product, conducting any Post-Marketing Studies, market access activities, price setting and price negotiation activities, managed care contract sales, medical affairs activities, and distribution and importation activities in support thereof. 1.52 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended by any Party with respect to any objective, those reasonable, diligent, good faith efforts to accomplish such objective that a similarly situated pharmaceutical or biotechnology company in the exercise of its reasonable business discretion would normally use to accomplish a similar objective under similar circumstances. With respect to any objective relating to the research, Development, Manufacture or Commercialization of a Licensed Construct or Licensed Product by any Party, Commercially Reasonable Efforts shall mean those efforts and resources normally used by a similarly situated pharmaceutical or biotechnology company in the exercise of its reasonable business discretion with respect to a product owned or controlled by such Party, or to which such Party has similar rights, which product has similar product characteristics, is of similar market potential and is at a similar stage in its development or life as is such Licensed Product, taking into account all Relevant Factors. 1.53 “Competing Product” has the meaning set forth in Section 12.1. 1.54 “Confidential Information” has the meaning set forth in Section 9.1.1. 1.55 “Construct” means any Targeting Ligand linked to at least one strand of an RNAi Trigger. 1.56 “Control” means with respect to any Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings, or materials, possession by a Party or one of its Affiliates (whether directly by ownership (either sole or joint) or license or sublicense from a Third Party, or indirectly through an Affiliate having ownership or license or sublicense from a Third Party (other than, in each case of such Party or such Affiliate, by a license, sublicense or other right granted (but not assignment) pursuant to this Agreement)) of the ability to grant to the other Party a license, sublicense, right of access, or other right to or under such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings, or materials, without (a) violating the terms of any agreement or other arrangement with any Third Party in existence as of the time such Party or its Affiliate would be required hereunder to grant such license, sublicense, right of access or other right thereto or thereunder, and (b) incurring any additional payment obligations to a Third Party that are not subject to an


 
8 allocation agreed between the Parties pursuant to this Agreement or otherwise in writing (including pursuant to Section 6.5.3), and with such agreement or other arrangement existing (i) with respect to Arrowhead, as of (A) the Original Effective Date or (B) subsequent to the Original Effective Date if (in the case of this clause (B)) Arrowhead first acquired rights to such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials pursuant to such agreement or other arrangement; or (ii) with respect to GSK, as of (A) the Amended Effective Date or (B) subsequent to the Amended Effective Date if (in the case of this clause (B)) GSK first acquired rights to such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials pursuant to such agreement or other arrangement. Notwithstanding anything in this Agreement to the contrary, a Party or its Affiliates will be deemed not to Control any Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials that are owned or in-licensed by an Acquirer except (1) if such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials owned or in-licensed by the Acquirer were generated from participation by employees or consultants of such Acquirer in furtherance of Development, Manufacturing or Commercialization activities with respect to the Licensed Constructs or any Licensed Products under this Agreement after such Change of Control, (2) for any Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials owned or in-licensed by such Acquirer not used in the performance of Development, Manufacturing or Commercialization activities with respect to the Licensed Constructs or any Licensed Products under this Agreement prior to the consummation of such Change of Control that, after the consummation of such Change of Control, are used by such acquired Party or any of its Affiliates in the performance of Development, Manufacturing or Commercialization activities with respect to the Licensed Constructs or any Licensed Products under this Agreement, or (3) if, prior to the consummation of such Change of Control, such acquired Party or any of its Affiliates also Controlled such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials owned or in-licensed by such Acquirer, in each of which cases ((1)–(3)), such Patent Rights, Know-How, Regulatory Approvals, Regulatory Filings or materials owned or in-licensed by such Acquirer will be deemed Controlled by the acquired Party or its Affiliates for purposes of this Agreement. 1.57 “Cover” means, with respect to a given chemical composition of matter, compound, construct or product (including any Licensed Construct or Licensed Product) and a given claim of a Patent Right in a particular country or other jurisdiction, that the making, offering for sale, selling, importing or using of such chemical composition of matter, compound, construct or product would, but for the ownership of, or a license granted under, such Patent Right, infringe any claim of such Patent Right in such country or other jurisdiction in which that activity occurs. 1.58 “CPR Mediation Procedure” has the meaning set forth in Section 14.2. 1.59 “CPR Rules” has the meaning set forth in Section 14.3. 1.60 “Cure Period” has the meaning set forth in Section 13.2.1.


 
9 1.61 “Develop” means any and all pre-clinical, clinical, and other activities to study a drug candidate or product and develop it toward Regulatory Approval (including any such activities conducted after such Regulatory Approval other than Post-Marketing Studies) for Commercialization, including toxicology and ADME tests, analytical method development, stability testing, process development and improvement, process validation, process scale-up prior to first Regulatory Approval, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, pre- and post-approval Clinical Trials, regulatory affairs, regulatory activities and manufacturing activities in support thereof. For clarity, the definition of “Development” shall include all activities under the Development Plan but exclude all Commercialization activities. “Developing”, “Development” and “Development activities” shall each have a correlative meaning. 1.62 “Development Plan” means the plan describing the Development of the Licensed Product(s) as of the Amended Effective Date, which is attached hereto as Schedule 3.2. 1.63 “Disclosing Party” has the meaning set forth in Section 9.1.1. 1.64 “Dispute” means any dispute, claim, or controversy arising from or regarding this Agreement, including the interpretation, application, breach, termination, or validity of any provision hereof. 1.65 “Drug Application” means an NDA, MAA, or equivalent application, submitted to a Regulatory Authority in a particular jurisdiction, for marketing approval of a pharmaceutical or drug product. 1.66 “Drug Regulation Laws” means Applicable Laws regulating drugs and pharmaceutical products, such as the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et. seq., the Prescription Drug Marketing Act of 1987, the Controlled Substances Act, 21 U.S.C. § 801 et. seq., and policies issued by the FDA, each as in effect and as amended from time to time. 1.67 “EMA” means the European Medicines Agency or any successor agency for the EU. 1.68 “European Union” or “EU” means the countries of the European Economic Area, as it is constituted on the Amended Effective Date and as it may be modified from time to time after the Amended Effective Date. 1.69 “Exclusivity Term” has the meaning set forth in Section 12.1. 1.70 “Executive Officers” means (a) for Arrowhead, the Chief Executive Officer of Arrowhead or any executive officer of Arrowhead delegated authority by the Chief Executive Officer with respect to any particular matter; and (b) for GSK, the Chief Scientific Officer of GSK, or any executive officer of GSK delegated authority by the Chief Scientific Officer of GSK with respect to any particular matter. In the event that the position of any of the Executive Officers identified in this Section 1.70 no longer exists due to a corporate reorganization, corporate restructuring or the like that results in the elimination or modification of the identified position, the applicable Executive Officer shall be replaced with another senior


 
10 officer with responsibilities and seniority comparable to the eliminated or modified position. 1.71 “Existing Clinical Data” has the meaning set forth in Section 8.2.2. 1.72 “Existing Confidentiality Agreement” means (a) that certain Confidential Disclosure Agreement, dated as of June 21, 2023, by and between GlaxoSmithKline LLC and Arrowhead; and (b) that certain Joinder Agreement to Confidential Disclosure Agreement, by and among GlaxoSmithKline LLC, Janssen, and Arrowhead, dated as of July 19, 2023. 1.73 “Existing Invention” has the meaning set forth in Section 8.2.2. 1.74 “Existing Joint Agreement Patent Rights” means any Agreement Patent Rights that (a) have a priority date prior to the Amended Effective Date; and (b) claim or otherwise disclose any Existing Invention that was jointly invented by or on behalf of (i) on the one hand, Arrowhead (or any of its Affiliates) and (ii) on the other hand, GSK (as the permitted assigned of Janssen) (whether or not they solely relate to the Registered Starting Material ([***])), including those Patent Rights set forth on Schedule 1.74. 1.75 “Exploit” means to make, have made, import, use, sell or offer for sale, including to research, develop, commercialize, register, manufacture, have manufactured, hold or keep (whether for disposal or otherwise), have used, export, transport, distribute or have distributed by others, promote, market or have sold or otherwise dispose of, or have offered for sale, and convey or grant end-users use rights. “Exploiting” and “Exploitation” shall each have a correlative meaning. 1.76 “FCPA” means the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1 et. seq.), as may be amended at the relevant time. 1.77 “FDA” means the United States Food and Drug Administration or any successor agency thereto for the United States. 1.78 “Field” means all therapeutic, prophylactic and diagnostic uses in humans or animals. 1.79 “First Commercial Sale” means, on a Licensed Product-by-Licensed Product and country-by-country basis, with respect to a given Licensed Product in a given country, the first commercial sale for monetary value in an arms-length transaction of such Licensed Product to a Third Party purchaser by or on behalf of a Selling Party in such country following receipt of applicable Regulatory Approval for such Licensed Product in such country; provided, however, that First Commercial Sale shall not include any transfer of a Licensed Product (a) between or among GSK or any other Selling Party or any of its or their respective Third Party subcontractors (such as contract manufacturers, suppliers, or distributors for consignment, where such transfer is not a transfer to a wholesaler or retailer) or (b) for purposes of patient assistance, charitable or promotional purposes, for use in a Clinical Trial or for use in any other tests or studies reasonably necessary to comply with any Applicable Law or request by a Regulatory Authority; provided, further, that solely for purposes of defining the Royalty Term as set forth in Section 1.184, the transfers


 
11 set forth in clauses (a) or (b) above shall only be excluded from the definition of First Commercial Sale hereunder if such transfer are made without consideration. 1.80 “FTE” means the equivalent of the work of one qualified employee or agent for the applicable activities, full time, for one year (constituting one thousand eight hundred (1,800) working hours). For clarity, no more than one thousand eight hundred (1,800) hours per year (or equivalent pro-rata portion thereof for a period less than twelve (12) months) may be charged for an individual contributing work factoring into any reimbursable FTE Costs hereunder, regardless of how much additional work time is contributed by such individual during such period. An individual contributing work for less than one thousand eight hundred (1,800) hours per year shall be deemed a fraction of an FTE on a pro-rata basis. 1.81 “FTE Costs” means the FTE Rate times the number of FTEs expended during the applicable financial period. The FTE Costs shall be determined based on time (as calculated in pro-rated FTEs) actually spent performing the applicable activities under this Agreement, unless another basis is expressly specified herein or otherwise agreed in advance by the Parties in writing. 1.82 “FTE Rate” means, for the period commencing on the Amended Effective Date until such time as the Parties agree otherwise, [***] per year, subject to annual increases beginning on January 1, 2025 to reflect percentage increase in the Consumer Price Index for the US City Average, calculated by the Bureau of Labor Statistics during the immediately preceding Calendar Year and similarly calculated year to year increases each subsequent Calendar Year. 1.83 “G5 Countries” means France, Germany, Italy, Spain and the United Kingdom. 1.84 “GAAP” means United States generally accepted accounting principles applied on a consistent basis. 1.85 “General Arrowhead Patent Rights” has the meaning as set forth in Section 8.3.3(b). 1.86 “Generic Competition” has the meaning as set forth in Section 6.4.5(c). 1.87 “Generic Version” means, with respect to a particular Licensed Product in a particular country, a product on the market in such country commercialized by any Third Party that is not a sublicensee of GSK and that did not purchase such product in a chain of distribution that included GSK or any of its respective Selling Parties, that has been approved in such country by the applicable Regulatory Authority in reliance, in whole or in part, on the prior approval (or on safety or efficacy data submitted in support of the prior approval) of such Licensed Product as determined by the applicable Regulatory Authority, including any product that is authorized for sale (a) in the U.S. pursuant to Section 505(j) of the US Federal Food, Drug, and Cosmetic Act (21 USC Section 355(j)); (b) in the European Union pursuant to a provision of Articles 10, 10a or 10b of Parliament and Council Directive 2001/83/EC as amended (including an application under Article 6.1 of Parliament and Council Regulation (EC) No 726/2004 that relies for its content on any such provision); or (c) any foreign equivalent thereof or successors thereto.


 
12 1.88 “Good Clinical Practice” or “GCP” means the current standards for Clinical Trials for pharmaceutical and biologic products, as set forth in the ICH guidelines and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good clinical practice as are required by the European Union and other Governmental Authorities in countries in which a Licensed Product is intended to be sold to the extent such standards are not less stringent than United States Good Clinical Practice. 1.89 “Good Laboratory Practice” or “GLP” means the current standards for laboratory activities for pharmaceutical and biologic products, as set forth in the FDA’s Good Laboratory Practice regulations or the Good Laboratory Practice principles of the Organization for Economic Co-Operation and Development, as amended from time to time, and such standards of good laboratory practice as are required by the European Union and other Governmental Authorities in countries in which a Licensed Product is intended to be sold, to the extent such standards are not less stringent than United States Good Laboratory Practice. 1.90 “Good Manufacturing Practice” or “GMP” means the current quality assurance standards that ensure that pharmaceutical and biologic products are consistently produced and controlled in accordance with the quality standards appropriate to their intended use as defined in 21 C.F.R. § 210 and 211, European Directive 2003/94/EC, Eudralex Volume 4 and applicable United States, European Union, Canadian and ICH guidance or equivalent laws in other jurisdictions to the extent no less stringent. 1.91 “Government Health Care Programs” means the US Medicare program (Title XVIII of the Social Security Act), the US Medicaid program (Title XIX of the Social Security Act), the TRICARE program, the US Federal employee health benefits program, and other foreign, federal, state and local governmental health care plans and programs. 1.92 “Government Order” means any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award entered by or with any Governmental Authority. 1.93 “Governmental Authority” means any United States federal, state or local government or any government other than the United States government, or political subdivision thereof, or any multinational organization or authority to the extent empowered to act on behalf of or in the stead of a government, or any authority, agency, or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, pricing or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or government empowered arbitral body. 1.94 “GSK” has the meaning set forth in the preamble above. 1.95 “GSK Agreement IP” means, collectively, the GSK Agreement Know-How and the GSK Agreement Patent Rights. 1.96 “GSK Agreement Know-How” has the meaning set forth in Section 8.2.4(a). 1.97 “GSK Agreement LC/LP IP” means, collectively, the GSK Agreement LC/LP Know- How and the GSK Agreement LC/LP Patent Rights.


 
13 1.98 “GSK Agreement LC/LP Know-How” means any GSK Agreement Know-How Controlled by GSK (or any of its Affiliates) during the Term that is (a) actually being used by GSK (or any of its Affiliates) in the Development, Manufacture or Commercialization of any Licensed Construct or Licensed Product; and (b) necessary to Exploit such Licensed Construct or Licensed Product but, in each case ((a) and (b)), excluding (i) any Know-How that is specifically related to (A) with respect to any Licensed Product that is a Combination Product, any Active Ingredient other than a Licensed Construct (or the Development, Manufacturing or Commercialization thereof) or (B) any compound, construct or product that is not a Licensed Product (or the Development, Manufacturing or Commercialization thereof), and (ii) any GSK Excluded Know-How. 1.99 “GSK Agreement LC/LP Patent Rights” means any GSK Agreement Patent Rights Controlled by GSK (or any of its Affiliates) during the Term that (a) claim any GSK Reversion Know-How; or (b) Cover any Licensed Construct or Licensed Product (or the Development, Manufacture or Commercialization thereof) but, in each case ((a) or (b)), excluding (i) any Patent Rights that also claim or otherwise disclose (A) with respect to any Licensed Product that is a Combination Product, any Active Ingredient of such Combination Product that is not a Licensed Construct (or the Development, Manufacturing or Commercialization thereof), or (B) any compound, construct or product that is not a Licensed Product (or the Development, Manufacturing or Commercialization thereof), and (ii) any GSK Excluded Patent Rights. 1.100 “GSK Agreement Patent Rights” means, collectively, (a) all Agreement Patent Rights set forth in Section 8.2.4(b), and (b) the Janssen Licensed Patent Rights. 1.101 “GSK Excluded Know-How” means [***]. 1.102 “GSK Excluded Patent Rights” means [***]. 1.103 “GSK Reversion IP” means, collectively, the GSK Reversion Know-How and the GSK Reversion Patent Rights. 1.104 “GSK Reversion Know-How” means any GSK Agreement Know-How or Joint Agreement Know-How Controlled by GSK (or any of its Affiliates) as of the effective date of any termination of this Agreement by Arrowhead pursuant to Section 13.2.2 or by GSK pursuant to Section 13.5, in each case, that, as of the effective date of such termination, is (a) actually used by GSK (or any of its Affiliates) in the Development, Manufacture or Commercialization of any Terminated Product; and (b) necessary to Exploit such Terminated Product but, in each case ((a) and (b)), excluding (i) any Know-How that is specifically related to (A) with respect to any Terminated Product that is a Combination Product, any Active Ingredient other than a Licensed Construct (or the Development, Manufacturing or Commercialization thereof) or (B) any compound, construct or product that is not a Terminated Product (or the Development, Manufacturing or Commercialization thereof), and (ii) any GSK Excluded Know-How. 1.105 “GSK Reversion Patent Rights” means any GSK Agreement Patent Rights or Joint Agreement Patent Rights Controlled by GSK (or any of its Affiliates) as of the effective


 
14 date of any termination of this Agreement by Arrowhead pursuant to Section 13.2.2 or by GSK pursuant to Section 13.5 that (a) claim any GSK Reversion Know-How; or (b) Cover any Terminated Product (or the Development, Manufacture or Commercialization thereof) but, in each case ((a) or (b)), excluding (i) any Patent Rights that also claim or otherwise disclose (A) with respect to any Terminated Product that is a Combination Product, any Active Ingredient of such Combination Product that is not a Licensed Construct (or the Development, Manufacturing or Commercialization thereof), or (B) any compound, construct or product that is not a Terminated Product (or the Development, Manufacturing or Commercialization thereof), and (ii) any GSK Excluded Patent Rights. 1.106 “HBV” has the meaning set forth in the recitals above. 1.107 “HDV” means the hepatitis D virus. 1.108 “Health Care Laws” means Applicable Laws relating to Government Health Care Programs, Private Health Care Plans, privacy and confidentiality of patient health information and human biological materials, including, in the United States, federal and state Applicable Laws pertaining to the federal Medicare and Medicaid programs (including the Medicaid rebate program); federal Applicable Laws pertaining to the Federal employees health benefit program and the TRICARE program; federal and state Applicable Laws applicable to health care fraud and abuse, kickbacks, physician self-referral and false claims (including 42 U.S.C. § 1320a-7a, 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn and the federal Civil False Claims Act, 31 U.S.C. § 3729 et. seq.); the Health Insurance Portability and Accountability Act of 1996; and 45 C.F.R. Part 46, as well as similar Applicable Laws in the Territory, each as in effect and as amended from time to time. 1.109 “Human Biological Samples” means any human biological material (including any derivative or progeny thereof), including any portion of an organ, any tissue, skin, bone, muscle, connective tissue, blood, cerebrospinal fluid, cells, gametes, or sub-cellular structures such as DNA, or any derivative of such biological material such as stem cells or cell lines; and any human biological product, including, but not limited to, hair, nail clippings, teeth, urine, faeces, breast milk, and sweat. 1.110 “ICH” means the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use. 1.111 “IFRS” means International Financial Reporting Standards applied on a consistent basis. 1.112 “In-Licensed Arrowhead Patent Rights” has the meaning set forth in Section 10.2.3. 1.113 “IND” means an Investigational New Drug Application filed with the FDA, or a similar application filed with a Regulatory Authority outside of the United States for authorization to commence a Clinical Trial, such as a clinical trial application or a clinical trial exemption, or any related regulatory submission, license or authorization. 1.114 “Indemnified Party” has the meaning set forth in Section 11.1.


 
15 1.115 “Indemnified Persons” shall mean, with respect to a Party, such Party and its Affiliates, and any of its or their respective officers, directors, employees or agents. 1.116 “Indemnifying Party” has the meaning set forth in Section 11.1. 1.117 “Janssen” has the meaning set forth in the recitals above. 1.118 “Janssen Licensed Patent Rights” means, collectively, (a) the Patent Rights set forth on Schedule 1.118; and (b) any and all other Patent Rights Controlled by GSK (or its Affiliates) during the Term pursuant to a non-exclusive license granted by Janssen to GSK under the APA or an ancillary agreement thereto. 1.119 “Joint Agreement IP” means, collectively, the Joint Agreement Know-How and the Joint Agreement Patent Rights. 1.120 “Joint Agreement Know-How” has the meaning set forth in Section 8.2.5(a). 1.121 “Joint Agreement Patent Rights” has the meaning set forth in Section 8.2.5(b). 1.122 “Know-How” means any and all proprietary technical, scientific, and other know-how (whether or not patentable), data, results and other information, and materials of any type whatsoever, in any tangible or intangible form whatsoever, that are not generally known to the public, including discoveries, inventions, trade secrets, research and development data, databases, plans, practices, procedures, experimental techniques, protocols, material specifications, and assay or test protocols; biological, chemical, pharmacological, toxicological, pharmaceutical, pre-clinical, clinical, safety, and quality control data and information; methods and processes (including manufacturing methods and formulas); and molecules, chemical entities, reagents, starting materials, reaction intermediates, building blocks, synthetic products, delivery systems, excipients, ingredients, formulations, formulae, and compositions of matter; case reports forms, medical records, data analyses, reports, studies and procedures, designs for experiments and tests and results of experimentation and testing (including results of any Development activities), summaries and information contained in submissions to and information from ethical committees, or Regulatory Authorities. The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation including the item, or a development relating to the item, is (and remains) not known to the public. For clarity, “Know-How” includes any rights (other than Patent Rights, but including copyright, database or design rights) protecting such Know-How. 1.123 “Licensed Construct” means (a) the chemical composition of matter known as “ARO- HBV” set forth on Schedule 1.123(a) (“ARO-HBV”); (b) [***]; and (c) any salts, hydrates, solvates, esters, metabolites, intermediates (including the Registered Starting Material ([***])), stereoisomers, polymorph, complexes, cocrystals, derivatives and formulations of any of the compositions of matter in the foregoing clause (a) or (b). 1.124 “Licensed Product” means any and all products in any dosage form and strengths, or formulation, or method of delivery, including any improvements thereto, that contains a


 
16 Licensed Construct as an Active Ingredient, whether as the sole Active Ingredient or as a Combination Product with one or more Active Ingredients other than a Licensed Construct. 1.125 “Losses” means damages, losses, liabilities, costs (including costs of investigation and defense), fines, penalties, or expenses (including reasonable attorneys’ and experts fees and expenses), resulting from a claim in an Action by a Third Party, and incurred by a Party (or other Indemnified Person as provided in Article XI) as a result of such Action. 1.126 “MAA” means (a) a marketing authorization application filed with (i) the EMA under the centralized EMA filing procedure or (ii) a Regulatory Authority in any country in the European Union if the centralized EMA filing procedure is not used; or (b) any other equivalent or related regulatory submission, in either case to gain approval to market a pharmaceutical or biologic product in any country in the European Union, in each case including, for the avoidance of doubt, amendments thereto and supplemental applications. 1.127 “Manufacturing” means activities performed to manufacture a product into final form for end use, including producing and manufacturing starting materials and intermediates used to manufacture such product, filling, finishing, packaging, labeling, performing quality assurance testing and release, and shipping and storing the product. 1.128 “MHLW” means the Ministry of Health, Labour and Welfare of Japan and any successor agency thereto. 1.129 “NDA” means a new drug application or biologics license application submitted to the FDA for purposes of obtaining Regulatory Approval for a new drug in the United States, for a particular indication, including, for the avoidance of doubt, amendments thereto and supplemental applications. 1.130 “Net Sales” means, with respect to a Licensed Product commencing with its First Commercial Sale, the gross invoiced sales amounts of such Licensed Product by or on behalf of GSK or any of its Affiliates or Sublicensees (each, a “Selling Party”) to a Third Party (but not including sales relating to transactions between or among any Selling Parties, other than sales to wholesalers and distributors) in an arms-length transaction, less the following deductions from such gross amounts, determined in accordance with the applicable Accounting Standards of such Selling Party consistently applied, to the extent specifically and solely allocated to the sale of such Licensed Product to such Third Party and actually taken, paid, accrued, allowed, included, or allocated based on good faith estimate in the gross sales price with respect to such sale (and consistently applied as set forth below): (a) normal and customary trade, cash or quantity discounts, allowances, wholesaler and pharmacy fees, and credits allowed or paid, in the form of deductions actually allowed or actually paid with respect to sales of such Licensed Product (to the extent not already reflected in the amount invoiced) excluding commissions for commercialization;


 
17 (b) non-recoverable sales taxes, VAT and Indirect Taxes, and other taxes directly linked to the sales of such Licensed Product to the extent included in the gross amount invoiced; (c) outbound freight, shipment and insurance costs to the extent included in the price and separately itemized on the invoice price; (d) compulsory payments and cash rebates imposed on sales of such Licensed Product paid to a Governmental Authority (or agent thereof) pursuant to Applicable Law by reason of any national or local health insurance program or similar program, to the extent allowed and taken, including fees levied by a Governmental Authority as a result of Applicable Law; (e) retroactive price reductions, credits or allowances actually granted upon rejections or returns of such Licensed Product, including for recalls or damaged goods and billing errors; (f) rebates, charge backs and discounts (or equivalents thereof) actually granted to managed health care organizations, pharmacy benefit managers (or equivalents thereof), federal, state/provincial, local or other Governmental Authorities, or their agencies or purchasers, reimbursers, or trade customers; (g) coupons, or discount/rebates associated with co-pay cards; and (h) any other items actually deducted from gross invoiced sales amounts as reported by such Selling Party in its financial statements in accordance with its applicable Accounting Standard, applied on a consistent basis. In no event will any particular amount identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions). To the extent that any Selling Party receives consideration other than or in addition to cash upon the sale or disposition of a Licensed Product, Net Sales will be calculated based on the average price charged for such Licensed Product, as applicable, during the preceding royalty period, or in the absence of such sales, based on such Selling Party’s reasonable determination of the fair market value of the Licensed Product. The permitted deductions of Section 1.130(a) through Section 1.130(h) above will be fairly allocated to the Licensed Product and, as between the Licensed Product and other products or services of such Selling Party will not be inappropriately allocated. Such Selling Party will not attempt to reduce compensation rightly due to Arrowhead under this Agreement by shifting compensation otherwise payable to such Selling Party from a Third Party with respect to any Licensed Product to another product or service for which no royalties are payable to Arrowhead under this Agreement. For purposes of the definition of Net Sales: if any Licensed Product under this Agreement is sold in the form of a Combination Product, and such Licensed Product and any other Active Ingredient(s) contained within such Combination Product are sold separately, the Net Sales of such Combination Product for any period shall be determined by multiplying


 
18 the Net Sales (as defined above in this Section 1.130) of such Combination Product for such period by the fraction, A/(A+B) where A is the weighted (by sales volume) average gross sale price in a particular country of such Licensed Product during such period when sold separately in finished form and B is the weighted average gross sale price in such country during such period of such other Active Ingredient(s) are sold separately in finished form. In the event that the weighted average gross sale price of such Licensed Product for a period can be determined but the weighted average gross sale price of such other Active Ingredient(s) cannot be determined, the Net Sales of such Licensed Product for such period shall be calculated by multiplying the Net Sales of such Combination Product for such period by the fraction A/C where A is the weighted average gross sale price of such Licensed Product during such period when sold separately in finished form and C is the weighted average gross sale price of such Combination Product during such period. In the event that the weighted average gross sale price of such other Active Ingredient(s) for a period can be determined but the weighted average gross sale price of such Licensed Product for such period cannot be determined, the Net Sales of such Licensed Product for such period shall be calculated by multiplying the Net Sales of such Combination Product for such period by a fraction determined by the following formula: one (1) minus B/C where B is the weighted average gross sale price of such other Active Ingredient(s) during such period when sold separately in finished form and C is the weighted average gross sale price of such Combination Product during such period. In the event that the weighted average gross sale price of both such Licensed Product and such other Active Ingredient(s) in such Combination Product cannot be determined for a period, the Net Sales of such Licensed Product for such period shall be based upon the relative value contributed by each component. GSK (or the applicable other Selling Party) shall propose a value for the weighted average gross sale price of such Licensed Product and such other Active Ingredient(s) in such Combination Product. Within twenty (20) Business Days after GSK, on behalf of itself or the applicable other Selling Party, submits such proposal to Arrowhead, the Parties shall meet to discuss, acting reasonably and in good faith, and agree upon (which agreement shall not be unreasonably withheld) the weighted average gross sales price of such Licensed Product and such other Active Ingredient(s) in such Combination Product for such period. The weighted average gross sale price for such Licensed Product, such other Active Ingredient(s), or such Combination Product, as applicable, for such period shall be calculated once each Calendar Year and such price shall be used during all applicable reporting periods for the entire following Calendar Year. When determining the weighted average gross sale price of a Licensed Product, any other Active Ingredient(s), or any Combination Product for a period, the weighted average gross sale price shall be calculated by dividing the sales dollars (translated into US Dollars) by the units of active ingredient sold during the twelve (12) months (or the number of months sold in a partial Calendar Year) of the preceding Calendar Year for such Licensed Product, such other Active Ingredient(s), or Combination Product. In the initial Calendar Year, a forecasted weighted average gross sale price will be used for such Licensed Product, such other Active Ingredient(s), or Combination Product. Any over or under payment due to a difference between forecasted and actual weighted average gross


 
19 sale prices will be paid or credited in the first applicable payment of the following Calendar Year. Sales of Licensed Products among GSK and any other Selling Parties (including sales by any such Selling Party to GSK or another Selling Party) for resale by such entity to a Third Party shall not be deemed a sale for purposes of this definition of “Net Sales”; provided that the resale of such Licensed Products by such entity to a Third Party (other than a Sublicensee, but including wholesalers and distributors) shall be deemed a sale for the purposes of this definition of “Net Sales.” If GSK or any of its Affiliates or Sublicensees purchases Licensed Products from a Selling Party that is the end user of such Licensed Product, then Net Sales shall include the value of such sale, calculated at the higher of (i) the actual price paid in such sale for such Licensed Product or (ii) the fair market value of such Licensed Product at the time of such sale (as determined by the mutual agreement of the Parties, acting reasonably and in good faith). Transfers or dispositions of any Licensed Product for no monetary consideration: (A) in connection with patient assistance programs; (B) for charitable or promotional purposes; (C) for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient” or other limited access programs; or (D) for use in any tests or studies, including Clinical Trials, reasonably necessary to comply with any Applicable Law, regulation or request by a Regulatory Authority shall not, in each case ((A) through (D)), be deemed sales of such Licensed Product for purposes of this definition of “Net Sales”. 1.131 “New Arising Know-How” means any and all Know-How that is discovered, developed, generated, invented, derived, created, conceived or reduced to practice during the Term, at any time on or after the Amended Effective Date, by or on behalf of one (1) or more Personnel of a Party (or any of its Affiliates, licensees, sublicensees or subcontractors), either alone or jointly with one (1) or more Personnel of the other Party (or any of its Affiliates, licensees, sublicensees or subcontractors), in each case, in the performance of activities under this Agreement. 1.132 “New [***] IP” means, collectively, the New [***] Know-How and the New [***] Patent Rights. 1.133 “New [***] Know-How” has the meaning set forth in Section 8.2.3(a). 1.134 “New [***] Patent Rights” has the meaning set forth in Section 8.2.3(b). 1.135 “Non-Bankrupt Party” has the meaning set forth in Section 13.3.1. 1.136 “Non-Breaching Party” has the meaning set forth in Section 13.2.1. 1.137 “Notice of Claim” has the meaning set forth in Section 11.2.1. 1.138 “Original Agreement” has the meaning set forth in the recitals above. 1.139 “Original Effective Date” means October 29, 2018.


 
20 1.140 “Original Execution Date” has the meaning set forth in the recitals above. 1.141 “Out-of-Pocket Costs” means, with respect to a Party, costs and expenses paid by such Party to any Third Party for services or materials provided by such Third Party to directly support applicable activities under this Agreement. For clarity, Out-of-Pocket Costs do not include payments for a Parties’ or its Affiliates’ internal salaries or benefits, facilities, utilities, general office or facility supplies, insurance or information technology, capital expenditures or the like. 1.142 “Owned General Arrowhead Patent Rights” has the meaning set forth in Section 10.2.3. 1.143 “Owned Specific Arrowhead Patent Rights” has the meaning set forth in Section 10.2.3. 1.144 “Party” and “Parties” have the meaning set forth in the preamble above. 1.145 “Patent Controversy” means any Dispute between the Parties to the extent that it involves an issue relating to the validity, scope, enforceability, patentability, inventorship or ownership of any Patent Rights, Know-How or other intellectual property rights hereunder, and including any such issues relevant to any Prosecution activities hereunder. 1.146 “Patent Costs” means all Out-of-Pocket Costs reasonably incurred by or on behalf of a Party (such as by a designated Affiliate) in Prosecuting applicable Patent Rights. 1.147 “Patent Office” means the United States Patent and Trademark Office, European Patent Office, or other Governmental Authority responsible for the examination of patent applications or granting of other Patent Rights in a country, region, or supra-national jurisdiction. 1.148 “Patent Rights” means, in reference to a designated invention, all original (priority establishing) patent applications claiming such invention filed anywhere in the world, including provisionals and nonprovisionals, and all related applications thereafter filed, including any continuations, continuations-in-part, divisionals, or substitute applications, any patents issued or granted from any such patent applications, and any reissues, reexaminations, renewals or extensions (including by virtue of any supplementary protection certificates) of any such patents, and any confirmation patents or registration patents or patents of addition based on any such patents, and all foreign counterparts or equivalents of any of the foregoing in any country or jurisdiction. 1.149 “Patent Term Extension” means an extension of the term of any issued patent, or a right of protection equivalent to such an extension, granted under law or regulation such as the U.S. Drug Price Competition and Patent Term Restoration Act of 1984 in the United States, the Supplementary Protection Certificate of the member states of the EU, or any other similar law or regulation in any other country or jurisdiction. For example, a pediatric extension obtained by application to or through approval of a Patent Office extending the term of any patent shall be deemed a Patent Term Extension. 1.150 “Patent Working Group” has the meaning set forth in Section 8.8.


 
21 1.151 “Payee Party” has the meaning set forth in Section 7.3. 1.152 “Payor Party” has the meaning set forth in Section 7.3. 1.153 “Person” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or agency or political subdivision thereof. 1.154 “Personnel” means, with respect to any Person, its officers, directors, employees, workers, contractors, advisors, consultants, agents or other representatives. 1.155 “Pharmacovigilance Agreement” has the meaning set forth in Section 3.6.4. 1.156 “Phase 1 Clinical Trial” means, in reference to a Clinical Trial of a Licensed Product, that as described in US federal regulation 21 C.F.R. § 312.21(a). 1.157 “Phase 2 Clinical Trial” means, in reference to a Clinical Trial of a Licensed Product, that as described in US federal regulation 21 C.F.R. § 312.21(b). 1.158 “Phase 3 Clinical Trial” means, in reference to a Clinical Trial of a Licensed Product, that as described in US federal regulation 21 C.F.R. § 312.21(c). 1.159 “Post-Marketing Studies” means any Clinical Trial conducted with a Licensed Product after receipt of Regulatory Approval of the Licensed Product, which are conducted voluntarily in order to enhance marketing or scientific knowledge of the Licensed Product and are not required by Regulatory Authorities or are not intended to support Regulatory Approval of a Licensed Product for a new indication or other material change to the product label. 1.160 “Pre-Existing Acquired Rights from Third Parties” means any and all agreements by and between Arrowhead and any Third Party, in effect as of the Original Execution Date, and pursuant to which the Third Party assigns (by express terms, whether or not using the word “assign”) Arrowhead any Third Party’s Patent Rights or Know-How that, in whole or in part, are necessary or useful for Developing, Manufacturing, or Commercializing any Licensed Product. As of the Amended Effective Date, the Pre-Existing Acquired Rights from Third Parties are set forth on Part III of Schedule 1.163. 1.161 “Pre-Existing Licenses from Third Parties” means any and all agreements by and between Arrowhead and any Third Party, in effect as of the Original Execution Date, and pursuant to which the Third Party grants (by express terms, whether or not using the word “license”) Arrowhead any license or sublicense (or use or other Exploitation) rights to or under any Third Party’s Patent Rights or Know-How that, in whole or in part, are necessary or useful for Developing, Manufacturing, or Commercializing any Licensed Product. As of the Amended Effective Date, the Pre-Existing Licenses from Third Parties are set forth on Part I of Schedule 1.163. 1.162 “Pre-Existing Licenses to Third Parties” means any and all agreements by and between Arrowhead and any Third Party, in effect as of the Original Execution Date, and pursuant


 
22 to which Arrowhead or its Affiliates grants (by express terms, whether or not using the word “license”) such Third Party any license or sublicense (or use or other Exploitation) rights to or under any Arrowhead Intellectual Property. As of the Amended Effective Date, the Pre-Existing Licenses to Third Parties are set forth on Part I of Schedule 1.163. 1.163 “Pre-Existing Third Party Agreements” means (a) Pre-Existing Licenses to Third Parties; (b) Pre-Existing Licenses from Third Parties; (c) Pre-Existing Acquired Rights from Third Parties; and (d) any other agreements between Arrowhead or its Affiliates and a Third Party in effect as of the Original Execution Date that contain any terms relating to the Development, Manufacture, or Commercialization of a Licensed Product, ARO-HBV or any Licensed Construct; provided that, as of (i) the Original Execution Date, the Pre- Existing Third Party Agreements are set forth on Exhibit E to the Original Agreement, or (ii) the Amended Effective Date, the Pre-Existing Third Party Agreements are set forth on Schedule 1.163. 1.164 “Private Health Care Plans” means non-governmental Third Party health care payors and plans, including insurance companies, health maintenance organizations and other managed care organizations, Blue Cross and Blue Shield plans, and self-funded employers. 1.165 “Product Infringement” has the meaning set forth in Section 8.4.2(a). 1.166 “Product Trademark Rights” means any Trademark Rights pertaining specifically to any Licensed Product and Controlled by a Party hereunder. 1.167 “Prophylactically Active Product” means a product that prevents any disease, condition or symptom associated with or induced by HBV infection or HDV infection in humans or animals. 1.168 “Prosecuting” means, in reference to a designated Patent Right, preparing a Patent Right in application form for filing in any Patent Office, or performing activities associated with filing, prosecuting, maintaining, defending, or correcting the Patent Right in any Patent Office proceeding or with appeal of a Patent Office decision therefrom, including with respect to any post-grant proceeding, supplemental examination, post-grant review, inter partes review, reexamination, reissue, interference, or opposition proceeding in any Patent Office. For the avoidance of doubt, Prosecuting excludes any infringement suit or other legal Action to enforce a Patent Right or declaratory judgment suit or other legal Action initiated by a Third Party to challenge in court the validity or enforceability of a Patent Right. “Prosecute” and “Prosecution” shall each have a correlative meaning. 1.169 “Prosecuting Party” means the Party with the current right to Prosecute the applicable Patent Right as set forth in Section 8.3. 1.170 “Prosecution Contact” means a Party’s designated patent attorney or agent identified in a notice to the other Party (as may be updated from time to time) as its contact for communications between the Parties regarding the Prosecuting of any Arrowhead Patent Rights. 1.171 “Receiving Party” has the meaning set forth in Section 9.1.1.


 
23 1.172 “Registered Starting Material ([***])” means Arrowhead’s proprietary [***]used in the Manufacture of ARO-HBV. 1.173 “Regulatory Approval” means the approval (including supplements, amendments, pre- and post-approvals), license, registration or authorization of the applicable Regulatory Authority necessary for the marketing and sale of drug product in a country or jurisdiction, including any and all pricing and reimbursement approvals that are necessary to obtain in such country or jurisdiction to launch a drug product (even if such approvals are not legally required to launch such drug product in such country or jurisdiction). For purposes of illustration, in addition to approval of a Drug Application: Regulatory Approval in France includes approval of a Drug Application and publication of the reimbursed price level in the official journal and registration on a reimbursement list by or on behalf of Comité Economique des Produits de Santé or Haute Autorité de Santé (or a successor agency); Regulatory Approval in Italy includes publication of reimbursement in the Government’s Offical Gazette (by Agenzia Italiana del Farmaco or a successor agency); Regulatory Approval in Germany includes execution of contract with the head association of sick funds (GKV-Spitzenverband, Gesetzlichen Krankenversicherung, or a successor agency); Regulatory Approval in Spain (includes authorization by La Comisión Interministerial de Precios de los Medicamentos or La Comisión Nacional para el Uso Rational de los Medicamentos, or a successor agency) for national patient access to reimbursement by or on behalf of a Governmental Authority; and Regulatory Approval in the United Kingdom includes approval by the National Institute for Health and Care Excellence (or a successor agency) to obtain mandatory funding to enable broad market access. 1.174 “Regulatory Authority” means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the registration or authorization or marketing and sale of a medicinal product in a country, such as the FDA in the United States, EMA in the EU, and MHLW in Japan. 1.175 “Regulatory Exclusivity Right” means a right or protection, granted by a Regulatory Authority in a jurisdiction, providing with respect to a product in such jurisdiction marketing or data exclusivity that prevents the Regulatory Authority from accepting or approving a Drug Application (whether new or abbreviated), submitted by a Person other than GSK (or any of its Affiliates or Sublicensees), such as through new molecular entity, new use or indication exclusivity, new formulation exclusivity, non-patent related pediatric exclusivity or orphan drug exclusivity granted by the FDA, or an exclusive right to sell pursuant to the data exclusivity provisions under EC Directives 2004/27/EC and 2001/83/EC and Regulation 726/2004/EC, or marketing exclusivity granted in respect of pediatric studies under Regulation 1901/2006, or Section 505A(a) of the FD&C Act. 1.176 “Regulatory Filing” means any documentation comprising or relating to or supporting any filing or application with any Regulatory Authority with respect to a Licensed Product, or its use or potential or investigative use in humans, including any documents submitted to any Regulatory Authority and all supporting data, including INDs, supportive documents enabling a clinical program, Drug Applications, safety and adverse event reports and all correspondence with any Regulatory Authority with respect to any Licensed Product


 
24 (including minutes of any meetings, telephone conferences or discussions with any Regulatory Authority). 1.177 “Relevant Factors” means all relevant factors that may affect the Development, Regulatory Approval, Manufacturing or Commercialization of a Licensed Product, including (as applicable): actual and potential issues of safety, tolerability, efficacy or stability; expected and actual product profile (including product modality, category and mechanism of action), as such or in comparison with the profile of other products and regimens; stage of development or life cycle status; actual and projected Development, Regulatory Approval, Manufacturing, and Commercialization costs, timelines and budgets; any issues regarding the Manufacturing of the Licensed Product; the likelihood of obtaining Regulatory Approvals for such Licensed Product; the timing of such Regulatory Approvals; the current guidance and requirements for Regulatory Approval for such Licensed Product and similar products and the current and projected regulatory status; labeling or anticipated labeling for such Licensed Product; the then current competitive environment and the likely competitive environment at the time of projected entry into the market; past performance of such Licensed Product or similar products; present and future market potential, as such or taking into account the relevant portfolio or pipeline; present and future relevant patient population; existing or projected pricing, sales, reimbursement, return on investment and profitability; pricing or reimbursement changes in relevant countries; proprietary position, strength and duration of patent protection, anticipated exclusivity and freedom to operate hurdles; legal issues; and other relevant scientific, technical, operational, commercial or economic factors. 1.178 “Representatives” has the meaning set forth in Section 9.1.1. 1.179 “Right of Reference” has the meaning set forth for such term in 21 C.F.R. § 314.3(b) or an equivalent right of access or reference under any Applicable Law in any other jurisdiction outside the United States. 1.180 “RNAi Trigger” means an oligonucleotide comprised of a strand of RNA or chemically modified RNA designed to hybridize to the HBV genome to effect silencing through RNA interference of HBV genomic transcripts. 1.181 “[***]” has the meaning set forth in Section 1.182. 1.182 “[***]” means [***]. 1.183 “[***]” has the meaning set forth in Section. 1.184 “Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by- country basis, the period from the date of the First Commercial Sale of such particular Licensed Product by or on behalf of a Selling Party in such country, until the later of (a) the expiration of the last Valid Claim of [***] which Covers [***] of such Licensed Product in such country; (b) the termination or expiration of Regulatory Exclusivity Rights protecting such Licensed Product in such country; or (c) [***] years from the date of First Commercial Sale of such Licensed Product in such country.


 
25 1.185 “S Trigger Target Sequence” means [***]. 1.186 “Securitization Transaction” has the meaning set forth in Section 15.1.2. 1.187 “Selling Party” has the meaning set forth in Section 1.130. 1.188 “Specific Arrowhead Patent Rights” has the meaning as set forth in Section 8.3.3(a). 1.189 “Sublicensee” means any Third Party to which GSK or any of its Affiliates has granted or grants any sublicense under any of the rights or licenses granted to GSK under Section 2.1.1 or Section 2.1.2 (and any further sublicensee of such Third Party (regardless of the number of tiers, layers or levels of sublicenses or covenants not to sue of such rights)), in each case, as permitted under this Agreement; provided that “Sublicensee” shall exclude distributors and subcontractors performing activities by or on behalf of GSK or its Affiliates, as applicable. 1.190 “Target Sequence” means the sequence of an HBV genome or HBV genomic transcript(s) to which the guide strand of an RNAi Trigger is intended to hybridize. 1.191 “Targeting Ligand” means a compound or moiety suitable for targeting the delivery of an RNAi therapeutic agent to an hepatocyte. 1.192 “Taxes” means federal, state, local or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, VAT and Indirect Taxes, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. 1.193 “Term” has the meaning set forth in Section 13.1. 1.194 “Terminated Product” means, in the event of any termination of this Agreement by Arrowhead pursuant to Section 13.2.2 or by GSK pursuant to Section 13.5, any Licensed Product that is actively being Developed or Commercialized by or on behalf of GSK (or any of its Affiliates) immediately prior to the effective date of such termination; provided that Terminated Product shall solely refer to the form of such Licensed Product that is being so Developed or Commercialized by or on behalf of GSK (or any of its Affiliates) immediately prior to such effective date of termination. 1.195 “Territory” means the entire world, including all of its countries and their possessions and territories. 1.196 “Third Party” or “Third-Party” means any person, entity, or other party other than a Party to this Agreement or any of its Affiliates. 1.197 “Third Party Action” has the meaning set forth in Section 8.7.1.


 
26 1.198 “Third Party Payments” has the meaning set forth in Section 6.4.5(d). 1.199 “Trademark Rights” means all registered and unregistered trademarks (including all common law rights thereto), service marks, trade names, brand names, logos, taglines, slogans, certification marks, internet domain names, trade dress, corporate names, business names and other indicia of origin, together with the goodwill associated with any of the foregoing, and all applications, registrations, extensions, and renewals thereof throughout the world, and all rights therein provided by international treaties and conventions. 1.200 “United States”, “US” or “U.S.” means the United States of America, including its territories and possessions. 1.201 “Valid Claim” means a claim (a) of any unexpired Patent Right issued or granted by a Patent Office that has not been revoked or held unenforceable or invalid by a decision of a court or Governmental Authority of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer, or otherwise, or (b) of any Patent Right that is being prosecuted in good faith and has not been abandoned or finally disallowed without the possibility of appeal or re- filing of the application and has been pending for less than [***] years. 1.202 “VAT and Indirect Taxes” means any value added, sales, purchase, turnover or consumption tax as may be applicable in any relevant jurisdiction, including but not limited to value added tax chargeable under legislation implementing E.U. Council Directive 2006/112/EC on the common system of value added tax. 1.203 “X Trigger Target Sequence” means [***]. ARTICLE II: LICENSE GRANTS 2.1 Grants. 2.1.1 Development License. Subject to the terms and conditions of this Agreement, Arrowhead hereby grants to GSK an exclusive (even as to Arrowhead, except to the extent Arrowhead expressly retains or is expressly granted back rights under this Agreement), worldwide license, with the right to sublicense in accordance with Section 2.1.3, under Arrowhead Intellectual Property, to research and have researched and to Develop and have Developed Licensed Constructs and Licensed Products in the Field in the Territory, and to make and Manufacture, have made and Manufactured, use, have used, and import and have imported Licensed Constructs and Licensed Products for such purposes. The license rights granted under this Section 2.1.1 shall commence on the Amended Effective Date and run throughout the Term hereof, subject to the termination provisions under Article XIII. 2.1.2 Commercialization License. Subject to the terms and conditions of this Agreement, Arrowhead hereby grants to GSK an exclusive (even as to Arrowhead, except to the extent Arrowhead expressly retains or is expressly granted back rights


 
27 under this Agreement), worldwide license, with the right to sublicense in accordance with Section 2.1.3, under the Arrowhead Intellectual Property, to Commercialize and have Commercialized, offer for sale and sell, and have offered for sale and sold Licensed Products for use in the Field in the Territory, and to Manufacture, have Manufactured, use, have used, and import and have imported Licensed Constructs or Licensed Products for such purposes. The license rights granted under this Section 2.1.2 shall commence on the Amended Effective Date and continue, on a Licensed Product-by-Licensed Product and country-by-country basis, throughout the Term hereof, subject to the termination provisions under Article XIII. 2.1.3 Sublicensing. In the event that GSK grants any sublicense of the license rights granted to GSK under this Section 2.1 to any Affiliates or any Third Parties, GSK shall remain responsible for its obligations under this Agreement and shall be responsible for the performance of the relevant sublicensee and the compliance by such sublicensee with the terms and conditions of this Agreement, and Arrowhead will have the right to proceed directly against GSK without any obligation to first proceed against the Sublicensee. Any sublicense granted by GSK under this Section 2.1 to any Sublicensee shall refer to this Agreement and shall not conflict with GSK’s obligations under this Agreement, including obligations of confidentiality, non-disclosure and non-use of Confidential Information, and allocation of intellectual property rights that are at least as restrictive or protective of Confidential Information and intellectual property rights (including with respect to GSK Agreement IP, Arrowhead Agreement IP and Joint Agreement IP) as set forth in this Agreement. With respect to any such Sublicensee that includes the grant to such Third Party of exclusive rights to Develop or Commercialize any Licensed Products, GSK will, within a reasonable time period after granting such sublicense, provide a copy of the sublicensing agreement to Arrowhead, which agreement may be redacted to omit any terms not relevant to determining GSK’s and the Sublicensee’s obligations under this Agreement. 2.2 Licenses Constitute IP under Bankruptcy Code. All rights and licenses granted under or pursuant to any section of this Agreement by one Party to the other, including Section 2.1 hereof, are, and shall otherwise be deemed to be, for the purpose of Section 365(n) of the Bankruptcy Code (or comparable provisions of laws of other jurisdictions) rights to “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code (or comparable provisions of laws of other jurisdictions). Each Party hereby acknowledges, on behalf of itself and its Affiliates, “embodiments” of intellectual property pursuant to the Bankruptcy Code include the following: (a) data from the research and Development of Licensed Products; (b) Licensed Constructs and Licensed Product samples and inventory; (c) Licensed Product formulations; (d) laboratory notebooks and records from either Party’s research relating to any Licensed Constructs or Licensed Product, including from the Development Plan; (e) results from Clinical Trials of Licensed Products and the Licensed Products therein; (f) Regulatory Filings and Regulatory Approvals relating to Licensed Products; and (g) marketing, advertising and promotional materials relating to Licensed Products.


 
28 2.3 Rights in Combination Products. Notwithstanding the terms of any license grant or covenant under this Agreement, no rights will be conveyed or granted by one Party to another hereunder to (a) an Active Ingredient of any Combination Product, whether in Development or Commercialized, where the Active Ingredient is not a Licensed Construct, (b) a product of such Combination Product that is not a Licensed Product, or (c) an Active Ingredient, other than a Licensed Construct, that is otherwise used in combination with a Licensed Product in pre-clinical research, Clinical Trials or in accordance with an approved product label. 2.4 No Other Rights. No rights other than those expressly set forth in this Agreement are granted by one Party to the other Party hereunder, and no additional rights shall be deemed granted to either Party by implication, estoppel, or otherwise, with respect to any Patent Rights, Know-How, or other intellectual property rights. ARTICLE III: DEVELOPMENT 3.1 Completion of Option Right Development Plan. The Parties acknowledge and agree that, prior to the Amended Effective Date, pursuant to the Original Agreement, (a) Janssen exercised the Option Right, and the Option Right Development Term (each, as defined under the Original Agreement) commenced, on September 15, 2021 by delivery of notice to Arrowhead in accordance with Section 4.1 of the Original Agreement; (b) Janssen subsequently terminated the activities under the Option Right Development Plan (as defined under the Original Agreement), and the Option Right Development Term ended, effective as of January 25, 2023 in accordance with Section 4.7 of the Original Agreement; and (c) GSK has as of the Amended Effective Date or shall have after the Amended Effective Date no obligations to Arrowhead (or any of its Affiliates) with respect to (i) any amounts due and payable to Arrowhead in accordance with Section 4.7 of the Original Agreement and (ii) any costs or expenses incurred by or on behalf of Arrowhead (or any of its Affiliates) in connection with the performance of any research or other Development activities under the Option Right Development Plan or otherwise in connection with the performance of any other activities under Article IV of the Original Agreement. 3.2 Development. Except as expressly provided otherwise under this Agreement, from and after the Amended Effective Date, GSK shall have the exclusive right, the sole responsibility and the sole decision-making authority (directly or through one or more of its Affiliates or Sublicensees, or any Third Party subcontractors selected by any of the foregoing) for all Development activities with respect to any Licensed Constructs or Licensed Products in the Territory, including to conduct any non-clinical studies or Clinical Trials that GSK (or any of its Affiliates or Sublicensees) believes appropriate in order to obtain Regulatory Approval for Licensed Products in the Territory. The Parties acknowledge that the Development Plan as of the Amended Effective Date that is attached to this Agreement as Schedule 3.2, is preliminary and provides high-level plans for Development activities of any Licensed Product in the Territory as of the Amended Effective Date, and is provided to Arrowhead for informational purposes only. The Parties further acknowledge and agree that (a) for clarity, the Development Plan shall not limit or otherwise restrict GSK’s (or any of its Affiliates’ or Sublicensees’) right to conduct any Development activities with respect to any Licensed Constructs or Licensed Products in


 
29 the Territory, and GSK shall have the sole right to make all decisions with respect to the implementation of the Development Plan or any other Development activities with respect to any Licensed Constructs or Licensed Products in the Territory in accordance with this Section 3.2. Notwithstanding the foregoing, GSK may notify Arrowhead of any update or amendment of the Development Plan; provided, however, that, subject to Section 3.7, GSK shall have no obligation to provide Arrowhead any such update or amendment to the Development Plan. 3.3 Development Diligence. 3.3.1 GSK Development Diligence. Following the Amended Effective Date, GSK shall use Commercially Reasonable Efforts to (a) conduct Development activities required in order to support an application for Regulatory Approval for a Licensed Product in the United States, the European Union, China and Japan for at least one (1) indication; and (b) in the event that such Development activities are successful and based on the available data from such Development activities, seek Regulatory Approval for such Licensed Product in the United States, the European Union, China and Japan for at least one (1) indication. Notwithstanding anything to the contrary set forth herein, Arrowhead acknowledges and agrees that GSK’s diligence obligation under this Section 3.3.1 shall not be construed in any way such as to require GSK [***]. 3.3.2 Development Compliance. Each of GSK and its Affiliates, Sublicensees, and its and their Third-Party subcontractors shall conduct its respective Development activ