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Arrowhead Research Releases 1st Quarter FY 2014 Financial Results

February 7, 2014

Arrowhead Research Corp., a biopharmaceutical company developing targeted therapeutics, announced financial results for its fiscal 2014 first quarter ended Dec. 31, 2013.

In a release on Feb. 4, Arrowhead noted fiscal 2014 first quarter and recent company highlights:

-Completed planned enrollment in a Phase 1 clinical trial of the ARC-520 candidate against chronic hepatitis B infection in 36 healthy volunteers;

-Strengthened the balance sheet with an equity offering with $60 million in net proceeds;

-Presented data at the AASLD Liver Meeting suggesting that in a chimpanzee chronically infected with HBV, ARC-520 may have induced a therapeutic immunological flare, which is thought to be part of a cascade of events that after longer exposure may lead to functional cure;

-Submitted application to the Hong Kong Department of Health requesting permission to begin a Phase 2a trial of ARC-520 in chronic hepatitis B patients;

-Presented unblinded Phase 1 data at HepDART 2013 indicating that ARC-520 was generally safe and well tolerated at all six dose levels studied, with no differences in adverse event frequency and severity between treatment and placebo groups.

Selected Fiscal 2014 First Quarter Financial Results

Net loss attributable to Arrowhead for the quarter was $10.6 million, or $0.28 per share based on 37.7 million weighted average shares outstanding. This compares with a net loss attributable to Arrowhead of $4.6 million, or $0.33 per share based on 14.1 million weighted average shares outstanding, for the quarter ended December 31, 2012.

Total operating expenses for the quarter ended December 31, 2013 were $7.1 million, compared to $5 million for the quarter ended December 31, 2012. Research and development related expenses were $4.5 million and $1.7 million for general and administrative expenses.

Net cash used in operating activities for the quarter was $7 million, compared with $3.8 million in the prior year period.

The company's cash and investments of cash were $85.5 million at December 31, 2013, compared to $29.8 million at September 30, 2013. The increase in the cash balance reflects $60 million from financings during the quarter, plus cash inflow from exercise of warrants and stock options of $2.8 million.

Common shares outstanding at December 31, 2013, were 39 million, and 49.7 million assuming conversion of preferred stock outstanding.

Approximately 350 million people worldwide are chronically infected with the hepatitis B virus. Chronic HBV infection can lead to cirrhosis of the liver and is responsible for 80 percent of primary liver cancers globally. Arrowhead's RNAi-based candidate ARC- 520 is designed to treat chronic HBV infection by reducing the expression and release of new viral particles and key viral proteins. The goal is to achieve a functional cure, which is an immune clearant state characterized by hepatitis B s-antigen negative serum with or without sero-conversion. The siRNAs in ARC- 520 intervene at the mRNA level, upstream of where nucleotide and nucleoside analogues act. In transient and transgenic mouse models of HBV infection, a single co-injection of Arrowhead's DPC delivery vehicle with cholesterol-conjugated siRNA targeting HBV sequences resulted in multi-log knockdown of HBV RNA, proteins and viral DNA with long duration of effect. In a chimpanzee chronically infected with HBV and high viremia and antigenemia, ARC-520 induced rapid reductions of 90-95 percent in HBV DNA, e-antigen, and s-antigen, which did not return to baseline until study day 43, 43, and 71, respectively. Data also suggested that a therapeutic immunological flare occurred, which is thought to be part of a cascade that under chronic therapy may lead to HBsAg seroconversion and functional cure. Arrowhead has completed enrollment in a phase 1 single ascending dose study in normal volunteers, which the company expects to follow with a phase 2a study in chronic HBV patients.

Arrowhead Research Corp. is leveraging its proprietary drug delivery technologies to develop targeted drugs based on the RNA interference mechanism that efficiently silence disease-causing genes. Arrowhead technologies also enable partners to create peptide- drug conjugates that specifically home to cell types of interest while sparing off-target tissues. Arrowhead's pipeline includes clinical programs in chronic hepatitis B virus and partner-based programs in obesity and oncology.

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