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Item 2. Management’s Discussion and Analysis

2026-02-05 compared with 2025-08-07 · 111 added, 134 removed, 120 unchanged (67% of the section changed)

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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, and our research and development programs, our expectations regarding regulatory approval for and commercial launch of plozasiran;

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.

and our estimates regarding future revenues, sales of REDEMPLO (plozasiran), our expectations regarding regulatory approval for and commercial launch of plozasiran, operating income, research and development expenses, cash flows, 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.

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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.

Using a broad portfolio of RNA chemistries and 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.

RNAi-based therapeutics seek to leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.

The Company believes that TRiM TM enabled therapeutics offer several potential advantages over prior generations and competing technologies, including:

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multiple routes of administration including subcutaneous injection and inhaled administration;

the ability to target multiple tissue types including liver, lung, central nervous system (CNS), muscle, and adipose tissue;

the ability to target multiple tissue types including liver, lung, skeletal muscle, central nervous system (CNS), adipose tissue, ocular, and cardio-myocytes;

and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules.

The Company’s pipeline includes:

• Hypertriglyceridemia - plozasiran (formerly ARO-APOC3);

The Company's products:

• REDEMPLO ® (Greater China rights out-licensed to Sanofi), indicated as an adjunct to diet to reduce triglycerides in adults with Familial Chylomicronemia Syndrome (FCS), which has received regulatory approvals

in the United States, Canada, and China

The Company’s clinical pipeline includes:

• Severe Hypertriglyceridemia - plozasiran (formerly ARO-APOC3, Greater China rights out-licensed to Sanofi);

• Homozygous familial hypercholesterolemia (HoFH) - zodasiran (formerly ARO-ANG3);

• Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen);

• Mixed hyperlipidemia – ARO-DIMER-PA (Greater China rights out-licensed to Sanofi);

• Inflammatory pulmonary conditions - ARO-RAGE;

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• Metabolic-dysfunction associated steatohepatitis (MASH) - GSK4532990 (formerly ARO-HSD, out

licensed to GSK);

licensed to GSK and Visirna);

• Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda);

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• Spinocerebellar ataxia 2 - SRP-1004 (formerly ARO-ATXN2, out-licensed to Sarepta).

• Parkinson’s disease – ARO-SNCA (out-licensed to Novartis)

• Alzheimer’s disease – ARO-MAPT

• Huntington’s disease – SRP-1005 (formerly ARO-HTT, out-licensed to Sarepta)

The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place.

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These outside costs, including toxicology/efficacy testing and manufacturing costs, as well as 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 Three Quarters of Fiscal 2025 Business Highlights

Key recent developments through the first three quarters of fiscal 2025 included the following:

• Triggered a $100.0 million milestone payment from Sarepta Therapeutics, Inc., which was triggered on July 27, 2025, when the Company reached the first of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1);

• Announced the signing of an asset purchase agreement between Sanofi and Visirna Therapeutics, a majority-owned subsidiary of the Company, created to develop and commercialize four of the Company’s investigational cardiometabolic candidates in Greater China.

Under the terms of the agreement, Sanofi will acquire rights to develop and commercialize investigational plozasiran, the Company's first-in-class RNAi therapeutic candidate designed to reduce production of apolipoprotein C-III (APOC3) as a potential treatment for familial chylomicronemia syndrome (FCS) and severe hypertriglyceridemia (SHTG), in Greater China;

• Initiated and dosed the first subject in the YOSEMITE Phase 3 clinical trial of zodasiran, the Company’s investigational RNAi therapeutic being developed as a potential treatment for homozygous familial hypercholesterolemia (HoFH), a rare genetic condition that leads to severely elevated LDL-cholesterol and early onset cardiovascular disease;

• Completed enrollment of SHASTA-3, SHASTA-4, and MUIR-3 Phase 3 clinical trials of plozasiran.

The Company’s global Phase 3 clinical studies are designed to support regulatory submissions for approval of investigational plozasiran in the treatment of severe hypertriglyceridemia.

The Company previously submitted a New Drug Application to the U.S.

Food and Drug Administration (“FDA”) on November 16, 2024 for plozasiran based on positive Phase 3 PALISADE study results in patients with familial chylomicronemia syndrome, which the FDA accepted on January 17, 2025, with a Prescription Drug User Fee Act (PDUFA) action date of November 18, 2025, and indicated it is not currently planning to hold an advisory committee meeting;

• Initiated a Phase 1/2a clinical trial of ARO-ALK7 for the treatment of obesity.

ARO-ALK7 is the first RNAi-based therapy designed to silence adipocyte expression of the ACVR1C gene to reduce the production of Activin receptor-like kinase 7 (ALK7), which acts as a receptor in a pathway that regulates energy homeostasis in adipose tissue;

• Announced Topline results from Part 2 of a Phase 1/2 clinical study of ARO-C3, the Company’s investigational RNAi therapeutic designed to reduce liver production of complement component 3 (C3) as a potential therapy for various complement mediated diseases.

ARO-C3 achieved reductions in alternative pathway complement activity and proteinuria;

• Entered into a global licensing and collaboration agreement with Sarepta on November 25, 2024, which closed on February 7, 2025.

The First Quarter of Fiscal 2026 Business Highlights

The bullets below highlight key developments in our business during the first quarter of fiscal year 2026:

• Filed a request for regulatory clearance to initiate a Phase 1/2a clinical trial of ARO-DIMER-PA, the Company’s investigational RNAi therapeutic being developed as a potential treatment for atherosclerotic cardiovascular disease (ASCVD) due to mixed hyperlipidemia.

ARO-DIMER-PA is designed to silence expression of the proprotein convertase subtilisin kexin 9 (PCSK9) and apolipoprotein C3 (APOC3) genes.

This represents an important step forward for the RNAi field as it is the first clinical candidate to target two genes simultaneously in one molecule, enabled by Arrowhead’s innovative and proprietary TRiM platform.;

• On November 20, 2025, the Company earned a $200.0 million milestone payment from Sarepta Therapeutics, Inc., which was triggered on November 20, 2025, when the Company reached the second of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1);

• Initiated and dosed the first subjects in a Phase 1/2a clinical trial of ARO-MAPT, the Company’s investigational RNAi therapeutic being developed as a potential treatment for tauopathies including Alzheimer’s disease, a progressive neurodegenerative disease characterized by cognitive and functional decline;

• Announced that the FDA has granted Breakthrough Therapy designation to investigational plozasiran as an adjunct to diet to reduce triglyceride (TG) levels in adults with severe hypertriglyceridemia (SHTG) (TG

levels greater than or equal to 500 mg/dL);

• The FDA approved the Company's New Drug Application (NDA) for REDEMPLO injection for Familial Chylomicronemia Syndrome (FCS), on November 18, 2025.

This approval was supported by clinical data from the Phase 3 PALISADE study, a randomized, double-blind, placebo-controlled trial in adults with clinically diagnosed or genetically confirmed FCS.

The PALISADE study met its primary endpoint and all multiplicity-controlled key secondary endpoints, including demonstrating significant reductions in triglycerides and APOC3.

In PALISADE, 25 mg REDEMPLO achieved deep and durable reductions in triglycerides, with a median change from baseline of -80% versus -17% in the pooled placebo group, and a lower numerical incidence of acute pancreatitis compared with placebo;

• Entered into a global licensing and collaboration agreement with Novartis Pharma AG ("Novartis") on August 29, 2025, which closed on October 17, 2025.

Closing of the transaction was subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions.

Upon closing, the Company received $325.0 million through the purchase of 11,926,301 shares of Company common stock by Sarepta, at a price per share of $27.25, and received $500.0 million as an upfront payment on February 24, 2025.

The Company will also receive $250.0 million to be paid in equal installments over five years and is eligible to receive an additional $300.0 million in near-term payments.

Additionally, the Company is eligible to receive royalties on commercial sales and up to approximately $10.0 billion in future potential milestone payments;

• GSK dosed its fifth patient in a Phase 2 trial in December 2024, triggering a $2.5 million milestone payment to the Company which was paid in the second quarter of fiscal 2025;

• Announced that the Company dosed the first subjects in a Phase 1/2a clinical trial of ARO-INHBE;

• Presented interim results from a Phase 1/2a clinical study of ARO-CFB at the 8th Complement-Based Drug Development Summit.

The study resulted in multiple findings including:

(1) ARO-CFB led to dose dependent reductions in circulating CFB protein by up to 90% with greater than 3 months duration, (2) single and multiple doses of ARO-CFB led to near complete inhibition of alternative pathway activity based on Wieslab AP, and (3) single and multiple doses of ARO-CFB led to near complete inhibition of alternative pathway hemolytic activity, measured by AH50.

Critical Accounting Estimates

Upon closing, the Company received $200.0 million as an upfront payment on October 23, 2025.

Additionally, the Company is eligible to receive up to $2.0 billion in potential milestone payments plus royalties on commercial sales.

The bullets below highlight other key developments in our business subsequent to the first quarter of fiscal year 2026:

• Completed upsized offerings of convertible senior notes, common stock, and pre-funded warrants with gross proceeds of $930.0 million, which strengthened the Company’s balance sheet.

• Announced interim results from two Phase 1/2a clinical trials of ARO-INHBE and ARO-ALK7, the Company’s investigational RNAi therapeutics being developed as potential treatments for obesity, showing for patients enrolled in the study that's:

◦ ARO-INHBE in combination with tirzepatide, a GLP-1/GIP receptor co-agonist, nearly doubled weight loss at week 16 and roughly tripled reductions in visceral fat, total fat, and liver fat versus tirzepatide alone in obese patients with type 2 diabetes mellitus at those same endpoints at week 12.

◦ ARO-ALK7, the first RNAi-therapeutic to show adipocyte gene target silencing in a clinical trial, achieved dose dependent reductions in adipose ALK7 mRNA with a mean reduction of -88% at the 200 mg dose at week 8 with a maximum reduction of -94%.

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, 2025.

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The following data summarizes the Company’s results of operations for the following periods indicated:

Three Months Ended June 30, Nine Months Ended June 30,

2025 2024 2025 2024

Three Months Ended December 31,

(in thousands, except per share amounts)

Revenue $ 264,033 $ 2,500

Operating (loss) income $ (165,550) $ (176,141) $ 54,240 $ (438,877)

Net (loss) income attributable to Arrowhead

Operating income (loss)

$ 40,809 $ (161,412)

Net (loss) income per diluted share attributable to Arrowhead

Net income (loss) attributable to Arrowhead

$ 30,811 $ (173,085)

Total revenue for the three and nine months ended June 30, 2025 increased by $27.8 million and $569.4 million, respectively, from the same periods of 2024.

The change was primarily driven by the revenue recognition associated with GSK and Sarepta license agreements as discussed below.

Net income (loss) per diluted share attributable to Arrowhead

$ 0.22 $ (1.39)

Total revenue for the three months ended December 31, 2025 increased by $261.5 million, from the same period of 2024.

The change was primarily driven by the revenue recognition associated with Sarepta, Novartis and Sanofi license agreements 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 .

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Financial Statements” for more information on revenue recognized under the collaboration and license agreements.

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 was 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 Phase 2 study visits for patients in the SEQUOIA and AROAAT2002 studies concluded by December 31, 2023, and the Company has substantially completed its performance obligation under the Takeda License Agreement.

As such, all revenue has been fully recognized as of December 31, 2023.

During the nine months ended June 30, 2024, the Company recorded $0.9 million revenue.

On November 25, 2024, the Company entered into the Sarepta Collaboration Agreement and Stock Purchase Agreement with Sarepta for the development and commercialization of multiple clinical and preclinical programs in rare, genetic diseases of the muscle, central nervous system, and lungs.

During the three months ended December 31, 2025, the Company recorded $229.5 million in revenue.

On August 29, 2025, the Company entered into the Novartis Collaboration Agreement with Novartis for the development and commercialization of multiple preclinical programs in rare, genetic diseases of the central nervous system.

During the three months ended December 31, 2025, the Company recorded $34.2 million in revenue.

On August 1, 2025, Visirna HK, a wholly owned subsidiary of Visirna Therapeutics, Inc, a majority owned subsidiary of the Company, entered into an Asset Purchase Agreement with Sanofi, pursuant to which Visirna HK sold all of its assets and rights in investigational plozasiran to Sanofi, which included an assignment of Visirna HK’s rights (as successor by assignment from Visirna) to develop and commercialize investigational plozasiran in Greater China pursuant to that certain License Agreement by and between the Company and Visirna dated, April 25, 2022 (the “Visirna License Agreement”).

During the three months ended December 31, 2025 , the Company recorded $0.2 million in revenue.

On December 11, 2023, the Company entered into the GSK-HBV Agreement pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989), the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection.

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Further, GSK dosed the fifth patient in a Phase 2 trial in December 2024, triggering a $2.5 million milestone payment to the Company which was paid in the second quarter of fiscal 2025.

During the nine months ended June 30, 2025, the Company recorded $2.6 million revenue.

During the nine months ended June 30, 2025, the Company recorded $570.3 million in revenue.

As of June 30, 2025, no revenue was recorded for the milestone payments or royalties, as none had been achieved.

The Company did not recognize any revenue during the three months ended December 31, 2025.

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 and nine months ended June 30, 2025 and 2024 are shown in the tables below.

For purposes of comparison, the amounts for the three months ended December 31, 2025 and 2024 are shown in the tables below.

Research and Development (“R&D”) Expenses

Research and development 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.

Research and development expenses consist of expenses for drug candidate and drug discovery 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 research and development 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 tables provide details of research and development expenses for the periods indicated:

The Company does not fully track research and development expenses by individual research and development projects, or by individual drug candidates.

The following table provides details of research and development expenses for the periods indicated:

(in thousands) Three Months Ended

June 30, 2025 % of

December 31, 2025 % of

Three Months Ended

June 30, 2024 % of

Increase (Decrease)

Candidate costs $ 95,007 58 % $ 91,623 60 % $ 3,384 4 %

R&D discovery costs 21,043 13 % 17,634 12 % 3,409 19 %

Salaries 26,531 16 % 24,532 16 % 1,999 8 %

Facilities related 6,457 4 % 7,132 4 % (675) (9) %

Total research and development expense, excluding non-cash expense $ 149,038 91 % $ 140,921 92 % $ 8,117 6 %

Stock compensation 7,612 5 % 7,241 5 % 371 5 %

Depreciation and amortization 5,718 4 % 4,269 3 % 1,449 34 %

Total research and development expense $ 162,368 100 % $ 152,431 100 % $ 9,937 7 %

(in thousands) Nine Months Ended

June 30, 2025 % of

Nine Months Ended

June 30, 2024 % of

December 31, 2024 % of

Increase (Decrease)

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Depreciation and amortization 5,886 3 % 4,726 3 % 1,160 25 %

16,017 4 % 12,220 3 % 3,797 31 %

Total research and development expense $ 177,203 100 % $ 137,002 100 % $ 40,201 29 %

Candidate costs increased $3.4 million, or 4%, for the three months ended June 30, 2025 compared to the same period of 2024, and $57.4 million, or 31%, for the nine months ended June 30, 2025 compared to the same period of 2024.

The increase for both periods 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 $3.4 million, or 19%, for the three months ended June 30, 2025 compared to the same period of 2024, primarily driven by animal studies and system support costs.

R&D discovery costs decreased $8.0 million, or 14%, for the nine months ended June 30, 2025 compared to the same period of 2024, primarily driven by strategic shifts toward clinical development and commercial launch.

R&D discovery costs are influenced by the Company’s ongoing discovery efforts, continued advancements into novel therapeutic areas and tissue types, and increasing costs related to CNS studies and lab supplies.

Candidate costs increased $28.1 million, or 37%, for the three months ended December 31, 2025 compared to the same period of 2024.

The increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial costs, manufacturing, and toxicity study costs.

R&D discovery costs increased $8.9 million, or 69%, for the three months ended December 31, 2025 compared to the same period of 2024.

This increase primarily reflects higher R&D discovery activity associated with ongoing discovery efforts and expansion into novel therapeutic areas and tissue types;

partially offset by lower partnership cost.

Salaries consist of salary, bonuses, payroll taxes, and related benefits for the Company’s R&D personnel.

expense increased $2.0 million, or 8%, for the three months ended June 30, 2025 and $8.5 million, or 12%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The increase for both periods was primarily due to an increase in headcount that has occurred as the Company has expanded its pipeline of candidates, in addition to annual salary increases.

Salaries expense increased $2.9 million, or 11%, for the three months ended December 31, 2025 compared to the same period of 2024.

The increase was primarily due to an increase in headcount that has occurred as the Company has expanded its pipeline of candidates and worked to prepare for the manufacture of commercial material at the Verona facility, as well as annual salary increases.

Facilities-related expense includes lease costs for the Company’s research and development facilities in San Diego, California and in Madison and Verona, Wisconsin.

These expenses decreased $0.7 million, or 9%, for the three months ended June 30, 2025 compared to the same period of 2024, due to refunds received related to the San Diego and Madison buildings.

These expenses increased $1.3 million, or 7%, for the nine months ended June 30, 2025 compared to the same period of 2024, primarily due to property taxes charged to the laboratory and office facilities in Verona, Wisconsin, which completed their build out during the first quarter of fiscal 2024.

Stock compensation expense, a non-cash expense, is primarily based on the valuation of the restricted stock units granted to employees, which is based on the closing stock price on the grant date.

Stock compensation expense increased $0.4 million, or 5%, for the three months ended June 30, 2025 compared to the same period of 2024, primarily due to an increase in headcount.

Stock compensation decreased $0.7 million, or 3%, for the nine months ended June 30, 2025 compared to the same period of 2024, primarily due to the cancellation of awards upon the departure of employees.

These expenses increased $0.4 million, or 5%, for the three months ended December 31, 2025 compared to the same period of 2024.

This increase was primarily due to expenses, such as utilities and repair and maintenance charges, associated with the expanded manufacturing facilities in Verona, Wisconsin to support manufacturing operations.

Stock compensation expense, a non-cash expense, is primarily based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date.

Stock compensation expense decreased $1.2 million, or 16%, for the three months ended December 31, 2025 compared to the same period of 2024.

The decrease was primarily related to stock options award expense incurred in the first fiscal quarter 2024 related to Visirna, our variable interest entity, that did not repeat in the first fiscal quarter 2025.

Depreciation and amortization expense, a non-cash expense, relates to depreciation on buildings, lab equipment and leasehold improvements.

These expenses increased $1.4 million, or 34% for the three months ended June 30, 2025 and $3.8 million, or 31%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The increase was primarily attributable to completion of the build out of facilities in Verona, Wisconsin, and the commencement of depreciation.

These expenses increased $1.2 million, or 25% for the three months ended December 31, 2025

compared to the same period of 2024.

The increase was primarily attributable to the transfer of additional manufacturing equipment following the completion of certification, qualification and validation to support manufacturing operations.

General & Administrative Expenses

The following tables provide details of general and administrative expenses for the periods indicated:

The following table provides details of general and administrative expenses for the periods indicated:

(in thousands) Three Months Ended

June 30, 2025 % of

December 31, 2025 % of

Three Months Ended

June 30, 2024 % of

December 31, 2024 % of

Increase (Decrease)

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$ 46,021 100 % $ 26,910 100 % $ 19,111 71 %

(in thousands) Nine Months Ended

June 30, 2025 % of

Category Nine Months Ended

June 30, 2024 % of

Category Increase (Decrease)

Salaries $ 23,152 27 % $ 20,087 28 % $ 3,065 15 %

Professional, outside services, and other 35,811 41 % 16,910 23 % 18,901 112 %

Facilities related 4,546 5 % 3,278 5 % 1,268 39 %

Total general & administrative expense, excluding non-cash expense $ 63,509 73 % $ 40,275 56 % $ 23,234 58 %

Stock compensation 21,230 25 % 30,759 42 % (9,529) (31) %

Depreciation and amortization

1,525 2 % 1,350 2 % 175 13 %

Total general & administrative expense $ 86,264 100 % $ 72,384 100 % $ 13,880 19 %

Salaries expense increased $1.2 million, or 18%, for the three months ended June 30, 2025 and $3.1 million, or 15%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The increase was driven by the combination of annual salary increases and an increase in headcount required to support the Company’s growth as the Company prepares for commercialization.

Professional, outside services, and other expenses include costs related to legal, audit, consulting, patent filings, business insurance, other external services, as well as travel, communication, and technology expenses.

These expenses

increased $9.5 million, or 175%, for the three months ended June 30, 2025 and $18.9 million, or 112%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The increase for both periods were mainly due to professional services associated with commercialization and business development efforts as the Company prepares for a product launch, including costs for data analytics, marketing and commercial launch support.

Salaries expense increased $4.6 million, or 63%, for the three months ended December 31, 2025 compared to the same period of 2024.

The increase was driven by higher headcount required to support the Company’s growth as the Company prepared for commercialization as well as of annual salary increases.

Professional, outside services, and other expenses include costs related to legal, consulting, patent filings, business insurance, other external services, as well as travel, communication, and technology expenses.

These expenses increased $8.8 million, or 87%, for the three months ended December 31, 2025 compared to the same period of 2024.

The increase was mainly due to professional services associated with commercialization as the Company initiated a product launch, including costs for data analytics, marketing and commercial launch support.

Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California.

These expenses increased $0.9 million, or 76%, for the three months ended June 30, 2025 and $1.3 million, or 39%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The increase was primarily driven by higher common area maintenance charges, increased staff amenities expenses, and an increase in headcount.

Stock compensation expense, a non-cash expense, is based on the valuation of the restricted stock units granted to employees, which is based on the closing stock price on the grant date.

These expenses decreased $4.4 million, or 45%, for the three months ended June 30, 2025 and $9.5 million, or 31%, for the nine months ended June 30, 2025 compared to the same periods of 2024.

The decrease was primarily due to lower compensation costs related to performance awards, as the timing of these expenses can vary based on the achievement of related performance targets.

These expenses increased $0.4 million, or 29%, for the three months ended December 31, 2025 compared to the same period of 2024.

The increase was primarily driven by higher staff amenities expenses driven by higher headcount.

Stock compensation expense, a non-cash expense, is based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date.

These expenses increased $5.4 million, or 70%, for the three months ended December 31, 2025 compared to the same periods of 2024.

The increase was primarily due to recognition of compensation expense related to a performance-based restricted stock unit award following the achievement of a pre-specified performance milestone.

Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters.

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Other (expense) income is primarily related to interest income and expense.

Other expense increased $15.7 million and $38.0 million for the three and nine months ended June 30, 2025 compared to the same periods of 2024.

The increase was primarily due to non-cash interest expense associated with the liability related to the sale of future royalties and the Credit Facility, partially offset by higher income from increased investment yields.

Net loss attributable to Arrowhead Pharmaceuticals, Inc.

was $175.2 million and $170.8 million for the three months ended June 30, 2025 and 2024, respectively.

Other expense decreased $1.2 million for the three months ended December 31, 2025 compared to the same period of 2024.

The decrease was primarily due to higher income from increased investment yields.

Net Income (Loss)

Net income attributable to Arrowhead Pharmaceuticals, Inc.

was $22.1 million for the nine months ended June 30, 2025 compared to a net loss attributable to Arrowhead Pharmaceuticals, Inc.

of $429.0 million for the same period of 2024.

Net loss per diluted share was $1.26 and $1.38 for the three months ended June 30, 2025 and 2024, respectively.

Net income per diluted share was $0.17 for the nine months ended June 30, 2025 compared to net loss per diluted share of $3.63 for the same period of 2024.

The increase in net loss attributable to Arrowhead Pharmaceuticals, Inc.

for the three months ended June 30, 2025 compared to the same period of 2024 was primarily due to higher research and development expenses as the Company's pipeline of candidates has expanded and progressed through clinical trial phases, as well as higher interest expense related to the Financing Agreement.

The increase in net income for the nine months ended June 30, 2025 compared to the same period of 2024 was primarily due to an increase in revenue from the Sarepta Collaboration Agreement, partially offset by higher research and development expenses, which have continued to increase as the Company's pipeline of candidates has expanded and progressed through clinical trial phases.

was $30.8 million for the three months ended December 31, 2025, compared to a net loss attributable to Arrowhead Pharmaceuticals, Inc.

of $173.1 million for the three months ended December 31, 2024.

Net income per diluted share was $0.22 for the three months ended December 31, 2025, compared to a net loss per diluted share of $1.39 for the three months ended December 31, 2024.

The increase in net income attributable to Arrowhead Pharmaceuticals, Inc.

for the three months ended December 31, 2025 compared to the same period of 2024 was primarily due to an increase in revenue from the Sarepta Collaboration Agreement, partially offset by higher research and development expenses, associated with the expansion of the Company's pipeline and progression through clinical trial phases.

LIQUIDITY AND CAPITAL RESOURCES

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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, including commercialization efforts.

The Company’s cash, cash equivalents and restricted cash was $129.8 million as of June 30, 2025 compared to $102.7 million as of September 30, 2024.

Cash invested in available-for-sale securities was $770.6 million as of June 30, 2025 compared to $578.3 million as of September 30, 2024.

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 $250.0 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 June 30, 2025, no shares have been issued under the Open Market Sale Agreement.

The Company’s cash, cash equivalents and restricted cash was $201.6 million as of December 31, 2025 compared to $226.5 million as of September 30, 2025.

Cash invested in available-for-sale securities was $715.0 million as of December 31, 2025 compared to $692.8 million as of September 30, 2025.

In August 2024, the Company entered into the Credit Facility, which provides for a senior secured term loan facility of $500.0 million, which includes $400.0 million funded on the closing date with an additional $100.0 million at the Company’s option during the seven-year term of the agreement.

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Upon closing, the Company received $325.0 million for the purchase of 11,926,301 shares of common stock, at a price per share of $27.25, and received $500.0 million as an upfront payment on February 24, 2025.

The Company is eligible to receive additional milestones of up to $350.0 million over the 12 months from the date of this report.

In the event of Sarepta's termination of the licensing and collaboration agreement for convenience, the Company would remain entitled to receive milestone payments totaling $300.0 million in the aggregate minus any milestone previously paid.

During the fourth quarter of fiscal 2025, a $100.0 million milestone payment from Sarepta was triggered, when the Company reached the first of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1).

The Company received $53.2 million of Arrowhead common stock and $50.0 million cash from Sarepta to satisfy the milestone payment.

The Company is eligible to receive additional milestones of up to $250.0 million over the 12 months from December 31, 2025, inclusive of the second DM1 milestone payment of $200.0 million earned in November 2025 and received in January 2026.

On August 29, 2025, the Company entered into a licensing and collaboration agreement with Novartis.

Upon closing in October 2025, the Company received $200.0 million as an upfront payment.

On December 10, 2025, the Company entered into an Amended and Restated Open Market Sale Agreement (the “Amended and Restated Sale Agreement”) with Jefferies LLC, acting as sales agent and/or principal, which amended and restated the Company’s prior open market sale agreement in its entirety.

Pursuant to the Amended and Restated Sale Agreement, the Company may, from time to time, sell shares of the Company’s common stock through Jefferies LLC in an at-the-market offering, up to the maximum program amount permitted under the Company’s effective shelf registration statement.

As of December 31, 2025, the Company had sold approximately 689,000 shares of common stock under the Amended and Restated Sale Agreement, generating gross proceeds of $48.2 million and net proceeds of $46.8 million, after deducting commissions and offering costs.

Based upon the Company's current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund its operations through at least the next twelve months from the date of the issuance of these unaudited consolidated financial statements.

The following table presents a summary of cash flows:

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands)

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Financing activities (14,750) 20,634

Net increase (decrease) in cash, cash equivalents and restricted cash $ 27,485 $ (41,353)

Net decrease in cash, cash equivalents and restricted cash

$ (25,011) $ (48,728)

Cash, cash equivalents and restricted cash at end of period $ 201,643 $ 53,889

During the nine months ended June 30, 2025, cash flow provided by operating activities was $159.1 million, which was primarily due to $500.0 million of cash received as part of the Sarepta agreement, partially offset by ongoing expenses related to the Company's research and development programs and general and administrative expenses.

Cash used in investing activities amounted to $201.9 million, which was primarily attributable to capital expenditures of $15.2 million and investment purchases of $774.6 million, partially offset by proceeds from maturities of investments of $587.9 million.

Cash provided by financing activities of $70.3 million was primarily related to cash received from the issuance of common stock in the Sarepta agreement and pre-funded warrants and stock option exercises (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part I, “Item 1.

During the three months ended December 31, 2025, cash flow provided by operating activities was $13.5 million, which was primarily due to $200.0 million of cash received as part of the Novartis agreement which was recorded in deferred revenue, increase in ongoing expenses related to the Company's research and development programs and general and administrative expenses, partially offset by the increase in accounts receivable relating to the achievement of the ARO-DM1 development milestone of $200 million per the Sarepta Collaboration Agreement.

Cash used in investing activities amounted to $23.7 million, which was primarily attributable to investment purchases of $136.9 million, and capital

expenditures of $2.1 million, partially offset by proceeds from maturities of investments of $115.3 million.

Cash used in financing activities of $14.8 million was primarily due to the repayment of the credit facility of $66.7 million, partially offset by $46.8 million in proceeds received from the issuance of common stock under the ATM Offering and $5.1 million from the exercise of stock options (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part I, “Item 1.

Financial Statements”).

During the nine months ended June 30, 2024, cash flow used in operating activities was $325.6 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses.

During the three months ended December 31, 2024, cash flow used in operating activities was $146.3 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses.

Cash used in investing activities was $76.9 million, which was primarily attributable to capital expenditures of $7.5 million and investment purchases of $33.7 million, partially offset by proceeds from sales and maturities of investments of $118.2 million.

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Contractual Obligations

The Company entered into an amendment to the Financing Agreement with Sixth Street Lending Partners on November 24, 2024 (see Note 12).

The Company entered into a global licensing and collaboration agreement with Novartis on August 29, 2025, which closed on October 17, 2025 (see Note 2).

There has been no other material change in the Company’s contractual obligations from that described in Item 7 of its Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis