What changed in this filing

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Item 1. Financial Statements

2023-05-02 compared with 2023-02-06 · 223 added, 134 removed, 436 unchanged (45% of the section changed)

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(In thousands, except per share amounts)

December 31, 2022

March 31, 2023

September 30, 2022

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Common stock, $ 0.001 par value:

Authorized 145,000 shares;

Authorized 290,000 and 145,000 shares;

issued and outstanding 106,869 and 105,960 shares

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Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022

Revenue $ 146,267 $ 151,805 $ 208,813 $ 179,244

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Total operating expenses 98,102 110,252 202,782 201,012

Operating loss ( 42,134 ) ( 63,321 )

Operating income (loss) 48,165 41,553 6,031 ( 21,768 )

Other income (expense):

Interest (expense) income, net ( 167 ) 1,156

Other income (expense), net 507 ( 707 )

Total other income 340 449

Loss before income tax expense and noncontrolling interest ( 41,794 ) ( 62,872 )

Interest income 4,560 1,054 7,242 2,210

Interest expense ( 5,057 ) — ( 7,906 ) —

Other, net 8 1,759 515 1,052

Total other (loss) income ( 489 ) 2,813 ( 149 ) 3,262

Income (loss) before income tax expense and noncontrolling interest 47,676 44,366 5,882 ( 18,506 )

Income tax expense — — 17 —

Net loss including noncontrolling interest $ ( 41,811 ) $ ( 62,872 )

Net income (loss) including noncontrolling interest 47,676 44,366 5,865 ( 18,506 )

Net loss attributable to noncontrolling interest, net of tax ( 999 ) — ( 1,485 ) —

Net loss attributable to Arrowhead Pharmaceuticals, Inc.

Net income (loss) attributable to Arrowhead Pharmaceuticals, Inc.

$ 48,675 $ 44,366 $ 7,350 $ ( 18,506 )

Net loss per share attributable to Arrowhead Pharmaceuticals, Inc.:

Net income (loss) per share attributable to Arrowhead Pharmaceuticals, Inc.:

Basic $ 0.46 $ 0.42 $ 0.07 $ ( 0.18 )

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Diluted 108,143 107,929 107,893 105,034

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments ( 74 ) 1 ( 196 ) ( 38 )

Comprehensive loss $ ( 41,933 ) $ ( 62,911 )

Comprehensive income (loss) $ 47,602 $ 44,367 $ 5,669 $ ( 18,544 )

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

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Comprehensive

controllling Interest Totals

controlling Interest Totals

Balance at September 30, 2022

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Foreign currency translation adjustments — — — ( 122 ) — — ( 122 )

Interest in joint venture — — — — — ( 486 ) ( 486 )

Net loss for the three months ended December 31, 2022

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106,140 $ 199 $ 1,239,178 $ ( 258 ) $ ( 862,080 ) $ 19,333 $ 396,372

Stock-based compensation — — 20,612 — — — 20,612

Exercise of stock options 64 — 520 — — — 520

Common stock - restricted stock units vesting 665 — — — — — —

Foreign currency translation adjustments — — — ( 74 ) — — ( 74 )

Interest in joint venture — — — — — ( 999 ) ( 999 )

Net income for the three months ended March 31, 2023

— — — — 48,675 — 48,675

Balance at March 31, 2023

106,869 $ 199 $ 1,260,310 $ ( 332 ) $ ( 813,405 ) $ 18,334 $ 465,106

Amount ($) Additional

Comprehensive

controllling Interest Totals

controlling Interest Totals

Balance at September 30, 2021

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Foreign currency translation adjustments — — — ( 39 ) — — ( 39 )

Interest in joint venture — — — — — ( 486 ) ( 486 )

Net loss for the three months ended December 31, 2021

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104,798 $ 197 $ 1,080,035 $ ( 108 ) $ ( 707,564 ) $ — $ 372,560

Stock-based compensation — — 33,802 — — — 33,802

Exercise of stock options 237 — 1,537 — — — 1,537

Common stock - restricted stock units vesting 667 1 ( 1 ) — — — —

Foreign currency translation adjustments — — — 1 — — 1

Net income for the three months ended March 31, 2022

— — — — 44,366 — 44,366

Balance at March 31, 2022

105,702 $ 198 $ 1,115,373 $ ( 107 ) $ ( 663,198 ) $ — $ 452,266

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

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(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 41,811 ) $ ( 62,872 )

Adjustments to reconcile net loss to net cash flow from operating activities

Net income (loss) $ 5,865 $ ( 18,506 )

Adjustments to reconcile net income (loss) to net cash flow from operating activities

Stock-based compensation 40,002 58,307

Depreciation and amortization 5,358 5,167

Amortization (accretion) of note premiums/discounts 690 ( 280 )

(Accretion) amortization of note premiums/discounts ( 82 ) 329

Non-cash interest expense on liability related to the sale of future royalties 7,906 —

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Operating lease liabilities 1,205 580

Net cash used in operating activities ( 75,516 ) ( 61,308 )

Net cash (used in) provided by operating activities ( 107,187 ) 1,421

CASH FLOWS FROM INVESTING ACTIVITIES:

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Purchases of investments ( 192,528 ) ( 148,391 )

Proceeds from sales and maturities of investments 69,416 38,268

Proceeds from maturities of investments 141,994 55,781

Net cash used in investing activities ( 116,759 ) ( 103,140 )

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Therapeutic Area Name Stage Product Rights

Cardiometabolic ARO-APOC3 Two Phase 2b and one Phase 3 Arrowhead

ARO-ANG3 Two Phase 2b Arrowhead

Cardiometabolic ARO-APOC3 Phase 2b and Phase 3 Arrowhead

ARO-ANG3 Phase 2b Arrowhead

Olpasiran Phase 3 Amgen

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ARO-MMP7 Phase 1/2a Arrowhead

Liver ARO-HSD Phase 1/2 GSK

Liver GSK-4532990 (formerly ARO-HSD)

Fazirsiran Phase 3 Takeda and Arrowhead

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ARO-C3 Phase 1/2 Arrowhead

JNJ-75220795 Phase 1 Janssen

ARO-PNPLA3 (formerly JNJ-75220795) Phase 1 Arrowhead

Muscle ARO-DUX4 Pre-Clinical Arrowhead

CNS ARO-SOD1 Pre-Clinical Arrowhead

The Company operates lab facilities in San Diego, California and Madison, 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 2023, the Company continued to develop and advance its pipeline and partnered candidates.

During the first half of fiscal 2023, the Company continued to develop and advance its pipeline and partnered candidates.

Several key recent developments include:

• announced interim results from ARO-RAGE administration in Part 1 of the ongoing Phase 1/2 study in normal healthy volunteers which included:

◦ reductions in soluble RAGE (sRAGE) as measured in serum after two doses on Day 1 and Day 29;

◦ duration of pharmacologic effect persisted for at least 6 weeks after the second administration of the 92 mg does with further follow up ongoing;

◦ reduction in sRAGE as measured in bronchoalveolar lavage fluid (BALF) at Day 31 after a single dose;

◦ reduction in in serum sRAGE were observed after a single dose;

◦ the pooled placebo groups experienced a mean sRAGE increase of 8% in BALF and a mean decrease of 1% serum

◦ safety and tolerability;

• expanded TRiM TM platform to include an optimized intrathecal administration for central nervous system (CNS) delivery with distribution throughout the brain and in all relevant brain cell types.

The first development candidate to utilize this new delivery platform, ARO-SOD1, is anticipated to have a clinical trial

application (CTA) filing in the third quarter of 2023 to begin clinical studies.

In preclinical studies, ARO-SOD1 achieved 95% spinal cord tissue mRNA knockdown after a single intrathecal dose in human SOD1 transgenic rats and maintained greater than 80% spinal cord tissue mRNA knockdown three months after a single intrathecal dose in non-human primates;

• dosed the first patient in Takeda’s Phase 3 REDWOOD clinical study of Fazirsiran for the treatment of alpha-1 antitrypsin deficiency associated liver diseases, triggering a $ 40.0 million milestone payment to the Company which is expected to be paid in the third quarter of fiscal 2023;

• dosed the first patient in GSK’s Phase 2b trial of GSK4532990, formerly called ARO-HSD, an investigational RNAi therapeutic for the treatment of patients with non-alcoholic steatohepatitis (NASH), triggering a $ 30.0 million milestone payment to the Company which is expected to be paid in the third quarter of fiscal 2023;

• announced that the U.S.

Food and Drug Administration (FDA) has granted Fast Track designation to ARO-APOC3 for reducing triglycerides in adult patients with familial chylomicronemia syndrome (FCS).

ARO-APOC3 was previously granted Orphan Drug designation by the FDA and the European Union;

• announced interim results from Part 1 of AROC3-1001, an ongoing Phase 1/2 clinical study of ARO-C3, which included;

◦ a dose-dependent reduction in serum C3, with 88% mean reduction at highest dose tested;

◦ a dose-dependent reduction in AH50, a marker of alternative complement pathway hemolytic activity, with 91% mean reduction at highest dose tested;

◦ duration of pharmacologic effect supportive of quarterly or less frequent subcutaneous dose administration;

◦ safety and tolerability;

• received notice from Janssen of its decision to voluntarily terminate the Research Collaboration and Option Agreement (the “Janssen Collaboration Agreement”) between the Company and Janssen.

The Company regained full rights to ARO-PNPLA3, formerly called JNJ-75220795, upon termination of the Janssen Collaboration Agreement, which took effect on April 7, 2023.

ARO-PNPLA3 is in Phase 1 clinical trials that are now being developed by the Company;

• initiated dosing in ARO-MMP7-1001 (NCT05537025), a Phase 1/2a single ascending dose and multiple ascending dose clinical study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ARO-MMP7, an investigational RNAi therapeutic designed to reduce expression of matrix metalloproteinase 7 (MMP7) as a potential treatment for idiopathic pulmonary fibrosis (IPF), in up to 56 healthy volunteers and in up to 21 patients with IPF;

• enrolled the first subject in a Phase 1 randomized, placebo-controlled trial to assess the safety tolerability, pharmacokinetics and pharmacodynamics of a development-stage medicine, HZN-457 (formerly ARO-XDH), which is out-licensed to Horizon, triggering a $ 15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023;

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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, 2022 and the results of operations and cash flows for the periods presented.

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 March 31, 2023 and the results of operations and cash flows for the periods presented.

All intercompany transactions and balances have been eliminated.

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Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended September 30, 2022 for more complete descriptions and discussions.

Operating results and cash flows for the three months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2023.

Operating results and cash flows for the six months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2023.

The Company’s primary sources of financing have been through the sale of its securities, revenue from its licensing and collaboration agreements and the sale of certain future royalties.

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Additionally, significant capital investment will be required as the Company’s pipeline matures into later stage clinical trials and as the Company plans to increase its internal manufacturing capabilities.

At December 31, 2022, the Company had $ 202.2 million in cash and cash equivalents (including $ 7.3 million in restricted cash), $ 299.6 million in short-term investments and $ 115.8 million in long-term investments to fund operations.

During the three months ended December 31, 2022, the Company’s cash and cash equivalents and investments balance increased by $ 135.3 million which was primarily due to the $ 250.0 million upfront payment received from Royalty Pharma.

At March 31, 2023, the Company had $ 135.0 million in cash and cash equivalents (including $ 7.3 million in restricted cash), $ 346.0 million in short-term investments and $ 78.8 million in long-term investments to fund operations.

During the six months ended March 31, 2023, the Company’s cash and cash equivalents and investments balance increased by $ 77.6 million which was primarily due to the $ 250.0 million upfront payment received from Royalty Pharma (Note 11) and $ 40.0 million in milestone payments from Horizon and Amgen, partially offset by cash used to fund its operations.

In total, the Company is eligible to receive up to $ 3.6 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.

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COLLABORATION AND LICENSE AGREEMENTS

The following table provides a summary of revenue recognized:

Three Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022

(in thousands)

GSK $ 30,000 $ 120,000 $ 29,323 $ 120,000

Horizon — 7,918 21,667 14,585

Takeda 116,156 20,821 132,468 41,593

Janssen 111 3,066 355 3,066

Amgen — — 25,000 —

Total $ 146,267 $ 151,805 $ 208,813 $ 179,244

The following table summarizes the balance of receivables and contract liabilities related to the Company’s collaboration and license agreements:

March 31, 2023 September 30, 2022

(in thousands)

Receivables included in accounts receivable $ 70,000 $ 6,174

Contract liabilities included in deferred revenue $ 30,914 $ 130,049

Glaxosmithkline Intellectual Property (No.

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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 ARO-HSD.

The exclusive license is worldwide with the exception of greater China, for which the Company retained rights to develop and commercialize ARO-HSD.

The Company has completed its Phase 1/2 study of ARO-HSD, and GSK is now wholly responsible for all clinical development and commercialization of ARO-HSD in its territory.

Under the terms of the agreement, the Company has received an upfront payment of $ 120.0 million and is eligible for additional payments of $ 30.0 million at the start of a Phase 2 trial and $ 100.0 million upon achieving (i) a successful Phase 2 trial readout and (ii) the first patient dosed in a Phase 3 trial.

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, for which the Company retained rights to develop and commercialize GSK-4532990.

The Company completed its Phase 1/2 study of GSK-4532990, and GSK is wholly responsible for all clinical development and commercialization of GSK-4532990 in its territory.

Under the terms of the agreement, the Company has received an upfront payment of $ 120.0 million and recognized an additional $ 30.0 million at the start of a Phase 2 trial.

The Company is also eligible for an additional payment of $ 100.0 million upon achieving a successful Phase 2 trial readout and 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.

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The Company has excluded any future estimated milestones or royalties from this transaction price to date.

The Company has allocated the total $ 120.0 million initial transaction price to its one distinct performance obligation for the ARO-HSD license and the associated GSK R&D Services.

As the Company has completed its performance obligation related to this agreement, the upfront payment of $ 120.0 million was fully recognized as of September 30, 2022.

There were no revenue recorded associated with the GSK License Agreement for the three months ended December 31, 2022 and 2021.

There were no contract assets and liabilities recorded as of December 31, 2022.

The Company has allocated the total $ 120.0 million initial transaction price to its one distinct performance obligation for the GSK-4532990 license and the associated GSK R&D Services.

As the Company has completed its performance obligation related to this agreement, the upfront payment of $ 120.0 million was fully recognized during the six months ended March 31, 2022.

Further, GSK dosed the first patient in a Phase 2 trial in March 2023, triggering a $ 30.0 million milestone payment to the Company which is expected to be paid in the third quarter of fiscal 2023.

There were no contract assets and liabilities recorded as of March 31, 2023.

Horizon Therapeutics Ireland DAC (“Horizon”)

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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.

The Company conducted all activities through the preclinical stages of development of, and Horizon is now wholly responsible for clinical development and commercialization of HZN-457.

In July 2021, the Company received $ 40.0 million as an upfront payment and is eligible to receive up to $ 660.0 million in potential development, regulatory and sales milestones.

The Company conducted all activities through the preclinical stages of development of, and Horizon is now wholly

responsible for clinical development and commercialization of, HZN-457.

The Company received $ 40.0 million as an upfront payment in July 2021 and an additional $ 15.0 million upon Horizon’s initiation of a Phase 1 clinical trial in January 2023, and is eligible to receive up to $ 645.0 million in additional potential development, regulatory and sales milestones.

The Company is also eligible to receive royalties in the low- to mid-teens range on net product sales.

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The Company has excluded any future estimated milestones or royalties from this transaction price to date.

The Company allocates the total $ 40.0 million initial transaction price to its one distinct performance obligation for the HZN-457 license and the associated Horizon R&D Services.

Revenue is recognized on a straight-line basis over the estimated timeframe for completing the Horizon R&D Services.

The Company determined that the straight-line basis was appropriate as its efforts will be expended evenly over the course of completing its performance obligation.

The Company allocated the total $ 40.0 million initial transaction price to its one distinct performance obligation for the HZN-457 license and the associated Horizon R&D Services.

Revenue was recognized on a straight-line basis over the timeframe for completing the Horizon R&D Services.

The Company determined that the straight-line basis was appropriate as its efforts were expended evenly over the course of completing its performance obligation.

Further, Horizon 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.

Revenue for the three months ended December 31, 2022 and 2021 were $ 21.7 million and $ 6.7 million, respectively.

There were $ 15.0 million in contract assets recorded as accounts receivable and $ 0 in contract liabilities recorded as deferred revenue as of December 31, 2022.

There were no contract assets and liabilities recorded as of March 31, 2023.

Takeda Pharmaceutical Company Limited (“Takeda”)

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Outside the United States, Takeda will lead the global commercialization strategy and will receive an exclusive license to commercialize Fazirsiran, while the Company will be eligible to receive tiered royalties of 20 % to 25 % on net sales.

In January 2021 , the Company received $ 300.0 million as an upfront payment and is eligible to receive potential development, regulatory and commercial milestones of up to $ 595.0 million.

The Company received $ 300.0 million as an upfront payment in January 2021, recognized an additional $ 40.0 million upon Takeda’s initiation of a Phase 3 clinical study in March 2023, and is eligible to receive potential development, regulatory and commercial milestones of up to $ 527.5 million.

At the inception of the Takeda License Agreement, the Company identified one distinct performance obligation.

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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.

The Company determined the initial transaction price totaled $ 300.0 million, which includes the upfront payment.

The Company has excluded any future milestones or royalties from this transaction price to date.

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 a proportional performance method (based on actual patient visits completed versus total estimated visits completed for the ongoing SEQUOIA and AROAAT2002 clinical studies).

The Company recognized $ 16.3 million and $ 20.8 million in connection with these efforts for the three months ended December 31, 2022 and 2021, respectively.

There were $ 0 of contract assets recorded as accounts receivable and $ 107.1 million of contract liabilities recorded as deferred revenue, of which $ 66.3 million was classified as current deferred revenue, as of December 31, 2022.

The Company also recorded $ 9.8 million as accrued expenses as of December 31, 2022 that was primarily driven by co-development and co-commercialization activities.

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 part of the studies;

however, Takeda now intends to initiate a new open label extension (OLE) study available to patients participating in these Phase 2 studies that will initiate as early as July 2023.

Based on this new information, patients enrolled in the SEQUOIA and AROAAT2002 studies are expected to complete their Phase 2 study visits between June 2023 and June 2024, shortening the Company’s performance obligation.

As a result, effective the second quarter of fiscal 2023, the Company changed its estimates of the revenue recognition to better reflect these newly estimated proportional performance periods.

The effect of these changes in estimates resulted in accelerated revenue by $ 61.4 million, or $ 0.57 per share (diluted) for

each of the three and six months ended March 31, 2023.

There were $ 30.9 million of contract liabilities recorded as deferred revenue, of which $ 29.8 million was classified as current as of March 31, 2023.

In March 2023, Takeda dosed the first patient in the Phase 3 REDWOOD clinical study of Fazirsiran, triggering a $ 40.0 million milestone payment to the Company which is expected to be paid in the third quarter of fiscal 2023.

The Company also recorded $ 9.4 million as accrued expenses as of March 31, 2023 that was primarily driven by co-development and co-commercialization activities.

Janssen Pharmaceuticals, Inc.

On October 3, 2018, Janssen, part of the Janssen Pharmaceutical Companies of Johnson & Johnson, and the Company entered into a License Agreement (the “Janssen License Agreement”) and a Research Collaboration and Option Agreement (the “Janssen Collaboration Agreement”).

The Company also entered into a stock purchase agreement with JJDC, Inc.

(“JJDC”), Johnson & Johnson’s venture capital arm (the “JJDC Stock Purchase Agreement”).

Under the Janssen License Agreement, Janssen has received a worldwide, exclusive license to the Company’s JNJ-3989 (ARO-HBV) program, the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection.

Under the Janssen License Agreement, Janssen received a worldwide, exclusive license to the Company’s JNJ-3989 (ARO-HBV) program, the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection.

Beyond the Company’s Phase 1/2 study of JNJ-3989 (ARO-HBV), which the Company was responsible for completing, Janssen is wholly responsible for clinical development and commercialization of JNJ-3989 (ARO-HBV).

Under the Janssen Collaboration Agreement, Janssen was able to select three new targets against which the Company would develop clinical candidates.

These candidates were subject to certain restrictions and did not include candidates that already were in the Company’s pipeline.

The Company was obligated to perform discovery, optimization and preclinical research and development, entirely funded by Janssen, which on its own or in combination with Janssen development work, would have been sufficient to allow the filing of a U.S.

Investigational New Drug Application or equivalent, at which time Janssen would have the option to take an exclusive license.

If the option was exercised, Janssen would have been wholly responsible for clinical development and commercialization of each optioned candidate.

Under the terms of the agreements taken together, the Company has received $ 175.0 million as an upfront payment, $ 75.0 million in the form of an equity investment by JJDC in the Company’s common stock under the JJDC Stock Purchase Agreement, and milestone and option payments totaling $ 73.0 million, and the Company may receive up to $ 0.8 billion in development and sales milestone payments for the Janssen License Agreement, and up to $ 0.6 billion in development and sales milestone payments for the remaining target covered under the Janssen Collaboration Agreement.

The Company is further eligible to receive tiered royalties on product sales up to mid-teens under the Janssen License

Agreement and up to low teens under the Janssen Collaboration Agreement.

During 2022, Janssen’s option period expired unexercised for two of the three candidates (ARO-JNJ2 and ARO-JNJ3) under the Janssen Collaboration Agreement.

At the inception of the Janssen License Agreement and Janssen Collaboration Agreement, the Company identified one distinct performance obligation.

Regarding the Janssen License Agreement, the Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibility to complete the Phase 1/2 study of JNJ-3989 (ARO-HBV) and the Company’s responsibility to ensure certain manufacturing of JNJ-3989 (ARO-HBV) drug product is completed and delivered to Janssen (the “Janssen R&D Services”).

Under the terms of the Janssen License Agreement, the Company has received $ 175.0 million as an upfront payment, $ 75.0 million in the form of an equity investment by JJDC in the Company’s common stock under the JJDC Stock Purchase Agreement, and milestone and option payments totaling $ 73.0 million, and the Company may receive up to $ 0.8 billion in development and sales milestone payments for the Janssen License Agreement.

The Company is further eligible to receive tiered royalties on product sales up to mid-teens under the Janssen License Agreement.

On April 7, 2023, Janssen voluntarily terminated the Janssen Collaboration Agreement.

Upon termination, the Company regained full rights to ARO-PNPLA3, formerly called JNJ-75220795, the only candidate for which Janssen had exercised its option.

In May 2021, Janssen exercised its option right for JNJ-75220795 (ARO-JNJ1), which resulted in a $ 10.0 million milestone payment to the Company.

This $ 10.0 million milestone payment was recognized entirely as of September 30, 2021.

The Company conducted its discovery, optimization and preclinical research and development of JNJ-75220795 (ARO-JNJ1), ARO-JNJ2, and ARO-JNJ3 under the Janssen Collaboration Agreement.

All costs and labor hours spent by the Company have been entirely funded by Janssen.

There was no revenue recorded associated with the Company’s agreement with Janssen for the six months ended March 31, 2023 and 2022.

There were no contract assets and liabilities recorded as of March 31, 2023.

At the inception of the Janssen License Agreement, the Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibility to complete the Phase 1/2 study of JNJ-3989 (ARO-HBV) and the Company’s responsibility to ensure certain manufacturing of JNJ-3989 (ARO-HBV) drug product is completed and delivered to Janssen (the “Janssen R&D Services”).

Due to the specialized and unique nature of these Janssen 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.

The Company also determined that Janssen’s option to require the Company to develop up to three new targets is not a material right and, thus, not a performance obligation at the onset of the agreement.

The consideration for this option is accounted for separately.

The Company determined the transaction price totaled approximately $ 252.7 million, which includes the upfront payment, the premium paid by JJDC for its equity investment in the Company, two $ 25.0 million milestone payments related to JNJ-3989 (ARO-HBV), and estimated payments for reimbursable Janssen R&D Services to be performed.

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Future milestones and royalties achieved will be recognized in their entirety when earned.

There were no contract assets and liabilities recorded as of December 31, 2022.

The Company has conducted its discovery, optimization and preclinical research and development of JNJ-75220795 (ARO-JNJ1), ARO-JNJ2, and ARO-JNJ3 under the Janssen Collaboration Agreement.

All costs and labor hours spent by the Company have been entirely funded by Janssen.

Janssen’s option period expired unexercised for two of the three candidates (ARO-JNJ2 and ARO-JNJ3) under the Janssen Collaboration Agreement during 2022.

In May 2021, Janssen exercised its option right for JNJ-75220795 (ARO-JNJ1), which resulted in a $ 10.0 million milestone payment to the Company.

This $ 10.0 million milestone payment was recognized entirely as of September 30, 2021.

There were no revenue recorded associated with the Company’s agreement with Janssen for the three months ended December 31, 2022 and 2021.

There were no contract assets and liabilities recorded as of December 31, 2022.

There were no contract assets and liabilities recorded as of March 31, 2023.

On September 28, 2016, Amgen and the Company entered into two collaboration and license agreements and a common stock purchase agreement.

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Under both agreements, Amgen is wholly responsible for clinical development and commercialization.

Under the Olpasiran Agreement and the ARO-AMG1 Agreement, the Company has received $ 35.0 million in upfront payments, $ 21.5 million in the form of an equity investment by Amgen in the Company’s common stock, and $ 30.0 million in milestone payments.

Under the Olpasiran Agreement and the ARO-AMG1 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 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 and the ARO-AMG1 Agreement.

In July 2019, Amgen informed the Company that it would not be exercising its option for an exclusive license for ARO-AMG1, and as such, there will be no further milestone or royalty payments under the ARO-AMG1 Agreement.

In July 2020, Amgen initiated a Phase 2 clinical study of Olpasiran, which resulted in a $ 20.0 million milestone payment to the Company.

In December 2022, 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.

Revenue for the three months ended December 31, 2022 and 2021 were $ 25.0 million and $ 0 , respectively.

There were $ 25.0 million in contract assets recorded as accounts receivable and $ 0 in contract liabilities recorded as deferred revenue as of December 31, 2022.

Further, in November 2022, Royalty Pharma and the Company entered into the Royalty Pharma Agreement.

There were no contract assets and liabilities recorded as of March 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 $ 375.0 million in remaining development, regulatory and sales milestone payments payable by Amgen 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.

Joint Venture and License Agreement with Visirna Therapeutics, Inc.

On April 25, 2022, Visirna and the Company 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).

Pursuant to a Share Purchase Agreement entered into simultaneously with the Visirna License Agreement (the “Visirna SPA”), the Company acquired a majority stake in Visirna (after accounting for shares reserved for Visirna’s employee stock ownership plan) as partial consideration for the Visirna License Agreement.

Pursuant to a Share Purchase Agreement (the “Visirna SPA”) entered into simultaneously with the Visirna License Agreement, the Company acquired a majority stake in Visirna as partial consideration for the Visirna License Agreement.

Under the Visirna SPA, entities affiliated with Vivo Capital also acquired a minority stake in Visirna in exchange for $ 60.0 million in upfront capital to support the operations of Visirna.

As further consideration under the Visirna License Agreement, the Company is also eligible to receive potential royalties on commercial sales.

During the three months ended December 31, 2022, the Company performed manufacturing and development work pursuant to a Clinical Supply Agreement between the parties contemplated by the Visirna License Agreement.

The Company received $ 0.7 million as consideration for this manufacturing and development work, and there were no contract assets and liabilities recorded as of December 31, 2022.

During the six months ended March 31, 2023, the Company performed manufacturing and development work pursuant to a Clinical Supply Agreement between the parties contemplated by the Visirna License Agreement.

The Company received $ 0.9 million as consideration for this manufacturing and development work, and there were no contract assets and liabilities recorded as of March 31, 2023.

PROPERTY AND EQUIPMENT

The following table summarizes the Company’s major classes of property and equipment:

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

(in thousands)

7 unchanged sentences

Property and equipment, net $ 185,228 $ 110,297

Depreciation and amortization expense for property and equipment for the three months ended December 31, 2022 and 2021 was $ 2.3 million and $ 2.1 million, respectively.

The increase in the construction in progress during the three months ended December 31, 2022 was mainly due to the continuing developments of manufacturing, laboratory and office facilities in Verona, Wisconsin as well as a new laboratory and office facility in San Diego, California.

Depreciation and amortization expense for property and equipment for each of the three months ended March 31, 2023 and 2022 was $ 2.2 million.

Depreciation and amortization expense for property and equipment for the six months ended March 31, 2023 and 2022 was $ 4.5 million and $ 4.3 million, respectively.

The increase in the construction in progress during the six months ended March 31, 2023 was mainly due to the continuing developments of manufacturing, laboratory and office facilities in Verona, Wisconsin as well as a new laboratory and office facility in San Diego, California.

The Company’s investments consisted of the following:

As of December 31, 2022

As of March 31, 2023

(In thousands)

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(amounts in thousands) (in years)

As of December 31, 2022

As of March 31, 2023

Patents $ 21,728 $ 12,545 $ — $ 9,183 14

6 unchanged sentences

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, 2022 and 2021.

No impairment indicators were identified during the six months ended March 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 for each of the three months ended December 31, 2022 and 2021 was $ 0.4 million.

Intangible assets amortization expense was $ 0.4 million for each of the three months ended March 31, 2023 and 2022, and $ 0.9 million and for each of the six months ended March 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, 2022:

The following table presents the estimated future amortization expense related to intangible assets as of March 31, 2023:

Amortization Expense

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(in thousands)

As of December 31, 2022

As of March 31, 2023

Common stock $ 0.001 290,000 106,869 106,869

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Preferred stock $ 0.001 5,000 — —

13,769,984 and 14,000,392 shares of common stock as of December 31, 2022 and September 30, 2022, respectively, 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 March 16, 2023, the Company’s stockholders approved an increase in authorized common shares, par value $ 0.001 per share, from 145,000,000 to 290,000,000 .

The amendment to the Amended and Restated Certificate of Incorporation was filed on April 27, 2023.

The Company does not have any current intention to issue shares in connection with acquisitions or pursuant to any equity financing outside of its existing equity compensation plans.

As of March 31, 2023 and September 30, 2022, respectively, 13,075,198 and 14,000,392 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 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”).

3 unchanged sentences

The Company and Jefferies may each terminate the Open Market Sale Agreement at any time upon prior notice.

As of December 31, 2022, no shares have been issued under the Open Market Sale Agreement.

As of March 31, 2023, no shares have been issued under the Open Market Sale Agreement.

COMMITMENTS AND CONTINGENCIES

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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, 2022.

There were no contingent liabilities recorded as of March 31, 2023.

On December 20, 2021, the Company completed a purchase of 13 acres of 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 process development and analytical activities.

5 unchanged sentences

The Company has licensed from third parties the rights to use certain technologies for its research and development activities, as well as in any products it may develop using these licensed technologies.

These agreements and other similar agreements often require milestone and royalty payments.

These agreements and other similar

agreements often require milestone and royalty payments.

Milestone payments, for example, may be required as the research and development process progresses through various stages of development, such as when clinical candidates enter or progress through clinical trials, upon NDA and/or certain sales level milestones.

During the three months ended December 31, 2022 and 2021, the Company did not reach any milestones.

On November 19, 2021, the Company entered into a new 15 -year lease for approximately 144,000 square feet of office and research and development laboratory space under construction in San Diego, California.

This facility will replace the Company’s current office and research facility sublease located in San Diego, California.

During the three and six months ended March 31, 2023 and 2022, the Company did not reach any milestones.

On November 19, 2021, the Company entered into a 15 -year lease for approximately 144,000 square feet of office and research and development laboratory space in San Diego, California.

This facility replaces the Company’s current office and research facility located in San Diego, California.

The increased capacity of this new facility compared to the Company’s current research facility in San Diego will accommodate increased personnel for its expanding pipeline of current and future drug candidates.

The estimated rent commencement date for the new lease is in April 2023 after construction and leasehold improvements have been completed.

The lease payments, which begin on the rent commencement date, will be approximately $ 119.0 million over the initial 15 -year term.

The lease payments which began on April 19, 2023, the rent commencement date, will be approximately $ 119.0 million over the initial 15 -year term.

The Company also estimates payments for operating expenses to be approximately $ 3.0 million for the first year of the lease, and these payments will continue throughout the initial 15 -year term.

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Pasadena, California :

The Company leases office space located at 177 Colorado Blvd for its corporate headquarters from 177 Colorado Owner, LLC.

The lease began on September 30, 2019 and expires on April 30, 2027.

The Company leases 49,000 square feet of office space located at 177 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 term of five years .

On October 23, 2020, the Company entered into a lease expansion to add an additional approximately 24,000 square feet of office with a lease expiration date of April 30, 2027.

San Diego, California :

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The components of lease assets and liabilities along with their classification on the Company’s consolidated balance sheets were as follows:

Lease Assets and Liabilities Classification December 31, 2022 September 30, 2022

Lease Assets and Liabilities Classification March 31, 2023 September 30, 2022

(in thousands)

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Non-current operating lease liabilities Lease liabilities, net of current portion 80,070 78,800

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

Lease Cost Classification 2023 2022 2023 2022

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Variable lease cost primarily related to operating expenses associated with the Company’s operating leases.

There was $ 0.1 million and $ 0 short-term lease cost during the three months ended December 31, 2022, and 2021, respectively.

The following table presents payments of operating lease liabilities on an undiscounted basis as of December 31,

There was $ 0.4 million and $ 0.3 million short-term lease cost during the three months ended March 31, 2023, and 2022, respectively.

There was $ 0.7 million and $ 0.5 million short-term lease cost during the six months ended March 31, 2023, and 2022, respectively.

The following table presents payments of operating lease liabilities on an undiscounted basis as of March 31, 2023:

(in thousands)

5 unchanged sentences

Supplemental cash flow and other information related to leases was as follows:

Three Months Ended December 31,

Six Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases (in thousands) $ 2,503 $ 2,171

March 31, 2023

Weighted-average remaining lease term (in years) 6.6 7.6

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The Company has three plans that provide for equity-based compensation.

Under the 2004 Equity Incentive Plan (the “2004 Plan”) and 2013 Incentive Plan (the “2013 Plan”), 175,083 and 3,991,304 shares, respectively, of the Company’s common stock are reserved for the grant of stock options, stock appreciation rights, restricted stock awards and performance unit/share awards to employees, consultants and others as of December 31, 2022.

Under the 2004 Equity Incentive Plan (the “2004 Plan”) and 2013 Incentive Plan (the “2013 Plan”), 173,983 and 3,518,957 shares, respectively, of the Company’s common stock are reserved for the grant of stock options, stock appreciation rights, restricted stock awards and performance unit/share awards to employees, consultants and others as of March 31, 2023.

On March 18, 2021, the Company’s Board of Directors approved the Arrowhead Pharmaceuticals, Inc.

1 unchanged sentence

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, 2022, the total number of shares reserved for issuance under the 2021 Incentive Plan was 7,155,527 shares, which includes 136,972 shares that were forfeited under the 2013 Plan.

As of March 31, 2023, the total number of shares reserved for issuance under the 2021 Incentive Plan was 6,126,788 shares, which includes 139,053 shares that were forfeited under the 2013 Plan.

In addition, there were 743,726 shares reserved for options and 738,875 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, 2022

As of March 31, 2023

2004 Plan 2013 Plan 2021 Plan Inducement Awards Total

4 unchanged sentences

Stock Option Awards

The following table presents a summary of the stock option activity for the three months ended December 31, 2022:

The following table presents a summary of the stock option activity for the six months ended March 31, 2023:

Shares Weighted-

3 unchanged sentences

2,721,384 $ 20.73

Granted 32,151 33.03

Cancelled or expired ( 25,581 ) 58.07

Exercised ( 145,637 ) 7.50

Outstanding at December 31, 2022

2,625,776 $ 21.02 4.7 $ 61,867,396

Exercisable at December 31, 2022

2,346,710 $ 17.83 4.4 $ 60,525,256

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company’s closing stock price and the stock option exercise price) that would have been received by the stock option holders had all stock options been exercised on December 31, 2022.

The total intrinsic value of the options exercised during the three months ended December 31, 2022 and 2021 was $ 2.3 million and $ 12.5 million, respectively.

Stock-based compensation expense related to stock options oustanding for the three months ended December 31, 2022 and 2021, was $ 2.4 million and $ 3.0 million, respectively.

As of December 31, 2022, the pre-tax compensation expense for all outstanding unvested stock options in the amount of $ 9.5 million will be recognized in the Company’s results of operations over a weighted average period of 1.3 years.

Outstanding at March 31, 2023

2,582,317 $ 21.26 4.5 years $ 30,107,439

Exercisable at March 31, 2023

2,348,193 $ 18.75 4.2 years $ 30,100,306

The aggregate intrinsic values represents 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 March 31, 2023 and 2022 was $ 1.4 million and $ 10.8 million, respectively.

The total intrinsic value of the options exercised during the six months ended March 31, 2023 and 2022 was $ 3.6 million and $ 23.3 million, respectively.

Stock-based compensation expense related to stock options outstanding for the three months ended March 31, 2023 and 2022, was $ 2.2 million and $ 2.7 million, respectively.

Stock-based compensation expense related to stock options for the six months ended March 31, 2023 and 2022 was $ 4.6 million and $ 5.7 million, respectively.

As of March 31, 2023, the pre-tax compensation expense for all outstanding unvested stock options in the amount of $ 7.6 million will be recognized in the Company’s results of operations over a weighted average period of 1.0 year.

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 valuation model was developed for use in estimating the fair value of traded options, which do not

have vesting restrictions and are fully transferable.

The Black-Scholes option valuation 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, 2022 and 2021.

The following table provides the assumptions used in the calculation of grant-date fair values of these stock options based on the Back-Scholes option pricing model:

Six Months Ended March 31,

Expected dividend yield (1)

Risk-free interest rate (2)

Expected volatility (3)

Expected term (in years) (4)

Weighted average grant date fair value per share of options granted (5)

(1) The dividend yield is zero as the Company currently does not pay a dividend.

(2) The risk-free interest rate is based on that of the U.S.

Treasury yields with equivalent terms in effect at the time of the grant.

(3) Volatility is estimated based on volatility average of the Company’s common stock price.

(4) The expected term represents the period of time that stock options granted are expected to be outstanding, by using historical exercise patterns and post-vesting termination behavior.

(5) No options were granted during the six months ended March 31, 2022.

Restricted Stock Units

9 unchanged sentences

Forfeited ( 74,500 ) 57.28

Outstanding at December 31, 2022

Outstanding at March 31, 2023

4,330,343 $ 57.62

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, 2022 and 2021, the Company recorded stock-based compensation expense of $ 17.0 million and $ 21.5 million, respectively, related to shares of RSUs.

As of December 31, 2022, there was $ 128.3 million of total unrecognized compensation cost related to RSUs that is expected to be recognized over a weighted-average period of 2.2 years.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 18.4 million and $ 28.2 million of expense related to RSUs, respectively.

For the six months ended March 31, 2023 and 2022, the Company recorded $ 35.4 million and $ 49.7 million of expense related RSUs, respectively.

As of March 31, 2023, there was $ 153.6 million of total unrecognized compensation cost related to RSUs that is expected to be recognized over a weighted-average period of 2.5 years.

FAIR VALUE MEASUREMENTS

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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, 2022 and September 30, 2022, the Company did not have any financial assets or financial liabilities based on Level 3 measurements

At March 31, 2023 and September 30, 2022, 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, 2022

March 31, 2023

Level 1 Level 2 Level 3 Total

1 unchanged sentence

government bonds $ 23,074 $ — $ — $ 23,074

Municipal securities — 7,034 — 7,034

Commercial notes — 95,786 — 95,786

22 unchanged sentences

The Company will evaluate the effective interest rate quarterly based on its current revenue forecasts utilizing the prospective method.

For the three months ended December 31, 2022, the Company recognized non-cash interest expense of $ 2.8 million on the consolidated statements of operations and comprehensive loss.

For the three and six months ended March 31, 2023, the Company recognized non-cash interest expense of $ 5.1 million and $ 7.9 million, respectively, on the consolidated statements of operations and comprehensive income (loss).

EARNINGS PER SHARE

The following table presents the computation of basic and diluted earnings per share for the six months ended

March 31, 2023 and 2022.

Three Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022

(in thousands, except per share amounts)

Net income (loss) $ 48,675 $ 44,366 $ 7,350 $ ( 18,506 )

Weighted-average basic shares outstanding 106,757 105,545 106,394 105,034

Effect of dilutive securities 1,386 2,384 1,499 —

Weighted-average diluted shares outstanding 108,143 107,929 107,893 105,034

Basic earnings per share $ 0.46 $ 0.42 $ 0.07 $ ( 0.18 )

Diluted earnings per share $ 0.45 $ 0.41 $ 0.07 $ ( 0.18 )

Potentially dilutive securities representing approximately 4,350,000 and 4,069,000 shares of common stock were excluded from the computation of diluted earnings per share for the three and six months ended March 31, 2023, respectively, because their effect would have been anti-dilutive.

There were no potentially dilutive securities with anti-dilutive effect for the six months ended March 31, 2022.

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 1. Financial Statements