Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of ~~July 27, 2020~~April 30, 2021 was ~~102,291,803.~~

(unaudited)
June 30, 2020

September 30, 2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents
$
219,322,617

$
221,804,128

Accounts receivable

21,692,564

661,361

Prepaid expenses

4,096,473

3,317,999

Other current assets

2,411,937

2,563,435

Short term investments

67,709,263

36,899,894

TOTAL CURRENT ASSETS

315,232,854

265,246,817

Property and equipment, net

30,389,707

23,214,899

Intangible assets, net

15,788,258

17,063,580

Long term investments

177,529,881

44,175,993

Right-of-use assets

16,522,013

-

Other assets

265,359

144,148

TOTAL ASSETS
$
555,728,072

$
349,845,437

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable
$
4,073,869

$
7,649,921

Accrued expenses

9,414,696

6,504,729

Accrued payroll and benefits

1,991,001

4,955,887

Lease liabilities

1,011,951

-

Deferred rent

-

173,952

Deferred revenue

26,274,362

77,769,629

Other current liabilities

17,262

16,561

TOTAL CURRENT LIABILITIES

42,783,141

97,070,679

LONG-TERM LIABILITIES

Lease liabilities, net of current portion

20,359,726

-

Deferred rent, net of current portion

-

3,703,364

Deferred revenue, net of current portion

-

5,035,142

TOTAL LONG-TERM LIABILITIES

20,359,726

8,738,506

Commitments and contingencies (Note 7)

STOCKHOLDERS’ EQUITY

Arrowhead Pharmaceuticals, Inc. stockholders' equity:

Common stock, $0.001 par value; 145,000,000 shares authorized; 102,250,872 and 95,506,271 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively

194,620

187,876

Additional paid-in capital

948,532,470

664,086,155

Accumulated other comprehensive income (loss)

(175,219
)

(391,624
)
Accumulated deficit

(455,411,478
)

(419,290,967
)
Total Arrowhead Pharmaceuticals, Inc. stockholders' equity

493,140,393

244,591,440

Noncontrolling interest

(555,188
)

(555,188
)
TOTAL STOCKHOLDERS’ EQUITY

492,585,205

244,036,252

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
555,728,072

$
349,845,437

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

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

REVENUE

$
27,375,778

$
42,696,636

$
80,359,211

$
125,502,807

OPERATING EXPENSES

Research and development

32,573,134

19,291,710

85,390,086

57,662,381

General and administrative expenses

10,748,506

4,809,177

38,008,836

16,287,841

TOTAL OPERATING EXPENSES

43,321,640

24,100,887

123,398,922

73,950,222

OPERATING INCOME (LOSS)

(15,945,862
)

18,595,749

(43,039,711
)

51,552,585

OTHER INCOME (EXPENSE)

Interest income (expense), net

2,334,649

1,739,959

6,919,200

4,717,359

TOTAL OTHER INCOME (EXPENSE)

2,334,649

1,739,959

6,919,200

4,717,359

INCOME (LOSS) BEFORE INCOME TAXES

(13,611,213
)

20,335,708

(36,120,511
)

56,269,944

Provision for income taxes

-

-

-

-

NET INCOME (LOSS)

(13,611,213
)

20,335,708

(36,120,511
)

56,269,944

NET INCOME (LOSS) PER SHARE - BASIC

$
(0.13
)

$
0.21

$
(0.36
)

$
0.60

NET INCOME (LOSS) PER SHARE - DILUTED

$
(0.13
)

$
0.21

$
(0.36
)

$
0.58

Weighted average shares outstanding - basic

101,843,436

94,935,471

100,184,216

93,364,102

Weighted average shares outstanding - diluted

101,843,436

98,884,744

100,184,216

97,814,019

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Foreign currency translation adjustments

453,895

(31,172
)

216,405

(81,514
)
COMPREHENSIVE INCOME (LOSS)

$
(13,157,318
)

$
20,304,536

$
(35,904,106
)

$
56,188,430

	(unaudited) March 31, 2021			September 30, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	372,377		$	143,583
Accounts receivable		955			845
Prepaid expenses		6,639			4,250
Other current assets		1,845			1,782
Marketable securities		125,793			85,020
Short term investments (held to maturity)		79,148			86,890
TOTAL CURRENT ASSETS		586,757			322,370
Property and equipment, net		39,400			30,881
Intangible assets, net		14,513			15,363
Long term investments (held to maturity)		97,490			137,487
Right-of-use assets		18,370			16,138
Other assets		265			265
TOTAL ASSETS	$	756,795		$	522,504
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	5,299		$	6,829
Accrued expenses		12,862			5,389
Accrued payroll and benefits		2,859			8,061
Lease liabilities		1,272			1,095
Deferred revenue		144,879			19,291
Other current liabilities		17			16
TOTAL CURRENT LIABILITIES		167,188			40,681
LONG-TERM LIABILITIES
Lease liabilities, net of current portion		22,528			20,044
Deferred revenue, net of current portion		121,530			-
TOTAL LONG-TERM LIABILITIES		144,058			20,044
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY
Arrowhead Pharmaceuticals, Inc. stockholders’ equity:
Common stock, $0.001 par value; 145,000 shares authorized; 104,020 and 102,376 shares issued and outstanding as of March 31, 2021 and September 30, 2020, respectively		196			195
Additional paid-in capital		996,645			965,410
Accumulated other comprehensive income		102			18
Accumulated deficit		(551,394	)		(503,844	)
TOTAL STOCKHOLDERS’ EQUITY		445,549			461,779
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	756,795		$	522,504

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

Consolidated ~~Statement~~Statements of ~~Stockholders’ Equity~~Operations and Comprehensive Income (Loss)

Common Stock

Amount ($)

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Non-controlling
Interest

Totals

Balance at March 31, 2019

94,665,718

$
187,035

$
652,411,876

$
(71,906
)

$
(451,331,580
)

$
(555,188
)

$
200,640,237

Stock-based compensation

-

-

1,957,993

-

-

-

1,957,993

Exercise of stock options

541,919

542

2,766,732

-

-

-

2,767,274

Foreign currency translation adjustments

-

-

-

(31,172
)

-

-

(31,172
)
Net income (loss) for the three months ended June 30, 2019

-

-

-

-

20,335,708

-

20,335,708

Balance at June 30, 2019

95,207,637

$
187,577

$
657,136,601

$
(103,078
)

$
(430,995,872
)

$
(555,188
)

$
225,670,040

Common Stock

Amount ($)

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Non-controlling
Interest

Totals

Balance at March 31, 2020

101,748,107

$
194,117

$
936,353,920

$
(629,114
)

$
(441,800,265
)

$
(555,188
)

$
493,563,470

Stock-based compensation

-

-

10,046,208

-

-

-

10,046,208

Exercise of stock options

302,765

303

2,132,542

-

-

-

2,132,845

Common stock - restricted stock units vesting

200,000

200

(200
)

-

-

-

-

Foreign currency translation adjustments

-

-

-

453,895

-

-

453,895

Net income (loss) for the three months ended June 30, 2020

-

-

-

-

(13,611,213
)

-

(13,611,213
)
Balance at June 30, 2020

102,250,872

$
194,620

$
948,532,470

$
(175,219
)

$
(455,411,478
)

$
(555,188
)

$
492,585,205

Common Stock

Amount ($)

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Non-controlling
Interest

Totals

Balance at September 30, 2018

88,505,302

$
180,875

$
582,902,694

$
(21,564
)

$
(487,265,816
)

$
(555,188
)

$
95,241,001

Stock-based compensation

-

-

7,276,875

-

-

-

7,276,875

Exercise of stock options

1,244,161

1,244

6,440,761

-

-

-

6,442,005

Common stock - restricted stock units vesting

2,197,305

2,197

(2,197
)

-

-

-

-

Common stock - issued for cash

3,260,869

3,261

60,518,468

-

-

-

60,521,729

Foreign currency translation adjustments

-

-

-

(81,514
)

-

-

(81,514
)
Net income (loss) for the nine months ended June 30, 2019

-

-

-

-

56,269,944

-

56,269,944

Balance at June 30, 2019

95,207,637

$
187,577

$
657,136,601

$
(103,078
)

$
(430,995,872
)

$
(555,188
)

$
225,670,040

Common Stock

Amount ($)

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Non-controlling
Interest

Totals

Balance at September 30, 2019

95,506,271

$
187,876

$
664,086,155

$
(391,624
)

$
(419,290,967
)

$
(555,188
)

$
244,036,252

Stock-based compensation

-

-

27,509,663

-

-

-

27,509,663

Exercise of stock options

989,197

989

6,463,433

-

-

-

6,464,422

Common stock - restricted stock units vesting

1,155,404

1,155

(1,155
)

-

-

-

-

Common stock - issued for cash

4,600,000

4,600

250,474,374

-

-

-

250,478,974

Foreign currency translation adjustments

-

-

-

216,405

-

-

216,405

Net income (loss) for the nine months ended June 30, 2020

-

-

-

-

(36,120,511
)

-

(36,120,511
)
Balance at June 30, 2020

102,250,872

$
194,620

$
948,532,470

$
(175,219
)

$
(455,411,478
)

$
(555,188
)

$
492,585,205

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
REVENUE	$	32,811		$	23,529		$	54,113		$	52,983
OPERATING EXPENSES
Research and development		44,697			29,443			81,251			52,817
General and administrative expenses		16,346			16,326			25,147			27,260
TOTAL OPERATING EXPENSES		61,043			45,769			106,398			80,077
OPERATING INCOME (LOSS)		(28,232	)		(22,240	)		(52,285	)		(27,094	)
OTHER INCOME (EXPENSE)
Interest income, net		1,524			2,404			3,692			4,585
Other income (expense)		(110	)		-			1,043			-
TOTAL OTHER INCOME (EXPENSE)		1,414			2,404			4,735			4,585
INCOME (LOSS) BEFORE INCOME TAXES		(26,818	)		(19,836	)		(47,550	)		(22,509	)
Provision for income taxes		-			-			-			-
NET INCOME (LOSS)		(26,818	)		(19,836	)		(47,550	)		(22,509	)
NET INCOME (LOSS) PER SHARE - BASIC	$	(0.26	)	$	(0.20	)	$	(0.46	)	$	(0.23	)
NET INCOME (LOSS) PER SHARE - DILUTED	$	(0.26	)	$	(0.20	)	$	(0.46	)	$	(0.23	)
Weighted average shares outstanding - basic		103,867			101,653			103,303			99,359
Weighted average shares outstanding - diluted		103,867			101,653			103,303			99,359
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		(96	)		(433	)		84			(238	)
COMPREHENSIVE INCOME (LOSS)	$	(26,914	)	$	(20,269	)	$	(47,466	)	$	(22,747	)

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

Nine Months Ended June 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
(36,120,511
)

$
56,269,944

Stock-based compensation

27,509,663

7,276,875

Depreciation and amortization

4,167,873

3,356,769

Amortization/(accretion) of note premiums

652,747

682,243

Changes in operating assets and liabilities:

Accounts receivable

(21,031,203
)

(1,716,736
)
Prepaid expenses and other current assets

(863,287
)

(2,393,230
)
Deferred revenue

(56,530,409
)

97,940,261

Accounts payable

(3,576,053
)

1,824,146

Accrued expenses

(54,217
)

(3,477,235
)
Other

1,303,852

(538,020
)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

(84,541,545
)

159,225,017

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(10,067,360
)

(4,170,285
)
Purchases of marketable securities

(193,964,290
)

(90,266,001
)
Proceeds from sale of marketable securities

29,148,287

29,861,219

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

(174,883,363
)

(64,575,067
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on notes payable

-

(2,415,150
)
Proceeds from the exercises of stock options

6,464,423

6,442,005

Proceeds from the issuance of common stock

250,478,974

60,521,729

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

256,943,397

64,548,584

NET INCREASE (DECREASE) IN CASH

(2,481,511
)

159,198,534

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

221,804,128

30,133,213

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
219,322,617

$
189,331,747

Supplementary disclosures:

Interest paid

$
-

$
(27,437
)
Income Taxes Paid

$
-

$
(2,400
)

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at December 31, 2019		101,112	$	193	$	922,051		$	(196	)	$	(421,964	)	$	(555	)	$	499,529
Stock-based compensation		-		-		12,972			-			-			-			12,972
Exercise of stock options		214		-		1,330			-			-			-			1,330
Common stock - restricted stock units vesting		422		1		(1	)		-			-			-			-
Common stock - issued for cash		-		-		2			-			-			-			2
Foreign currency translation adjustments		-		-		-			(433	)		-			-			(433	)
Net income (loss) for the three months ended March 31, 2020		-		-		-			-			(19,836	)		-			(19,836	)
Balance at March 31, 2020		101,748	$	194	$	936,354		$	(629	)	$	(441,800	)	$	(555	)	$	493,564

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Totals
Balance at December 31, 2020		103,194	$	195	$	978,655		$	198		$	(524,576	)	$	454,472
Stock-based compensation		-		-		15,359			-			-			15,359
Exercise of stock options		282		-		2,632			-			-			2,632
Common stock - restricted stock units vesting		544		1		(1	)		-			-			-
Foreign currency translation adjustments		-		-		-			(96	)		-			(96	)
Net income (loss) for the three months ended March 31, 2021		-		-		-			-			(26,818	)		(26,818	)
Balance at March 31, 2021		104,020	$	196	$	996,645		$	102		$	(551,394	)	$	445,549

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at September 30, 2019		95,506	$	187	$	664,086		$	(391	)	$	(419,291	)	$	(555	)	$	244,036
Stock-based compensation		-		-		17,464			-			-			-			17,464
Exercise of stock options		686		1		4,331			-			-			-			4,332
Common stock - restricted stock units vesting		956		1		(1	)		-			-			-			-
Common stock - issued for cash		4,600		5		250,474			-			-			-			250,479
Foreign currency translation adjustments		-		-		-			(238	)		-			-			(238	)
Net income (loss) for the six months ended March 31, 2020		-		-		-			-			(22,509	)		-			(22,509	)
Balance at March 31, 2020		101,748	$	194	$	936,354		$	(629	)	$	(441,800	)	$	(555	)	$	493,564

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Totals
Balance at September 30, 2020		102,376	$	195	$	965,410		$	18		$	(503,844	)	$	461,779
Stock-based compensation		-		-		23,502			-			-			23,502
Exercise of stock options		820		-		7,734			-			-			7,734
Common stock - restricted stock units vesting		824		1		(1	)		-			-			-
Foreign currency translation adjustments		-		-		-			84			-			84
Net income (loss) for the six months ended March 31, 2021		-		-		-			-			(47,550	)		(47,550	)
Balance at March 31, 2021		104,020	$	196	$	996,645		$	102		$	(551,394	)	$	445,549

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

Unless otherwise noted, (1) the term “Arrowhead” refers to Arrowhead Pharmaceuticals, Inc., a Delaware corporation and its Subsidiaries, (2) the terms “Company,” “we,” “us,” and “our,” refer to the ongoing business operations of Arrowhead and its Subsidiaries, whether conducted through Arrowhead or a subsidiary of Arrowhead, (3) the term “Subsidiaries” refers ~~collectively~~ to Arrowhead Madison Inc. (“Arrowhead Madison”), and Arrowhead Australia Pty Ltd (“Arrowhead Australia”~~) and Ablaris Therapeutics, Inc. (“Ablaris”~~), (4) the term “Common Stock” refers to Arrowhead’s Common Stock, (5) the term “Preferred Stock” refers to Arrowhead’s Preferred Stock and (6) the term “Stockholder(s)” refers to the holders of Arrowhead Common Stock.

Arrowhead Pharmaceuticals, Inc. develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, Arrowhead therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. RNA interference ~~or RNAi,~~(“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. Arrowhead’s RNAi-based therapeutics leverage this natural pathway of gene silencing. The ~~Company's~~Company’s pipeline includes ~~ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency (AATD),~~ ARO-APOC3 for hypertriglyceridemia, ARO-ANG3 for dyslipidemia, ARO-HSD for liver disease, ARO-ENaC for cystic fibrosis, ARO-HIF2 for renal cell carcinoma, ARO-DUX4 for facioscapulohumeral muscular dystrophy, ARO-LUNG2 ~~as a candidate to treat~~for chronic obstructive pulmonary disorder ~~(COPD)~~(“COPD”), and ARO-COV for ~~treatment for~~ the ~~current novel~~ coronavirus that causes COVID-19 and other possible future pulmonary-borne pathogens. ARO-JNJ1, isARO-JNJ2 and ARO-JNJ3 are being developed for an undisclosed liver-expressed ~~target~~targets under a collaboration agreement with Janssen Pharmaceuticals, Inc. (“Janssen”). ~~ARO-HBV (JNJ-3989)~~ ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency (“AATD”) was out-licensed to Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) in October 2020. JNJ3989 (formerly referred to as ARO-HBV) for chronic hepatitis B virus was out-licensed to Janssen in October 2018. ~~ARO-LPA (AMG 890)~~Olpasiran (formerly referred to as AMG 890 or ARO-LPA) for cardiovascular disease was out-licensed to Amgen Inc. (“Amgen”) in 2016.

Arrowhead operates a lab ~~facility~~facilities in Madison, Wisconsin and San Diego, California, where the Company’s research and development activities, including the development of RNAi therapeutics, ~~are based.~~take place. The Company’s principal executive offices are located in Pasadena, California.~~In March 2020, the Company entered into a sublease for additional research and development facility space in San Diego, California as discussed further in Note 8 below.~~

During the first half of fiscal year ~~2020,~~2021, the Company ~~has~~ continued to develop its pipeline and partnered candidates. The Company ~~has began dosing in an adaptive design phase 2/3 trial, called SEQUOIA, with the potential to serve as~~hosted a ~~pivotal registration study of ARO-AAT.~~key opinion leader webinar on its cardiometabolic candidates, ARO-APOC3 and ARO-ANG3. The Company ~~also began dosing in its ARO-AAT 2002 study, a pilot~~presented positive interim clinical data from AROAAT2002, an open-label ~~multi-dose~~ Phase 2 study to assess changes in novel histological activity scale in response to ARO-AAT over time in patients with alpha-1 antitrypsin deficiency associated liver disease. In addition, the Company also dosed the first patients in AROHSD1001, a Phase 1/2 clinical study of ~~ARO-HSD,~~ARO-AAT, the Company’s second-generation investigational ~~RNA interference~~RNAi therapeutic being developed as a treatment for ~~patients~~the rare genetic liver disease associated with ~~alcohol related and nonalcohol related liver diseases, such as nonalcoholic steatohepatitis (NASH).~~AATD. The Company also ~~presented new~~announced positive clinical data on its ~~two~~ cardiometabolic candidates, ARO-APOC3 and ARO-ANG3, ~~in two late-breaking oral presentations~~ at the American Heart Association Scientific Sessions ~~2019. In addition, the~~2020. The Company filed ~~an investigational new drug (“IND”) application~~two Investigational New Drug Applications with the United States Food and Drug Administration to begin a ~~phase 1b~~Phase 2b clinical study of ~~ARO-HIF2~~ARO-APOC3 in patients with severe hypertriglyceridemia and ~~filed~~ a Phase 2b clinical ~~trials application (“CTA”) to begin a phase 1~~ study of ~~ARO-ENaC.~~ ARO-ANG3 in patients with mixed dyslipidemia. Finally, the Company announced a collaboration with Takeda to co-develop and co-commercialize ARO-AAT for alpha-1 antitrypsin-associated liver disease. See Note 2 for more information regarding the collaboration with Takeda.

The Company’s partnered candidates under its collaboration agreements ~~with Janssen and Amgen~~ also ~~continue~~continued to progress. Janssen began dosing patients in a ~~phase~~Phase 2b triple combination study called REEF-1, designed to enroll up to 450 patients with chronic hepatitis B ~~infection, and in~~infection. In connection with the start of this study, Arrowhead earned a ~~$25~~$25.0 million milestone payment under the Company’s License Agreement with Janssen (“Janssen License Agreement”). ~~Janssen has also nominated the first of 3 potential candidates under the Research Collaboration and Option Agreement (“Janssen Collaboration Agreement”), ARO-JNJ1, and the~~The Company is currently performing discovery, optimization and preclinical research and development for ~~this candidate.~~ARO-JNJ1, ARO-JNJ2 and ARO-JNJ3 for Janssen as part of the Company’s Research Collaboration and Option Agreement with Janssen (“Janssen Collaboration Agreement”). Under the terms of the Janssen agreements taken together, the Company has received ~~$175~~$175.0 million as an upfront payment, ~~$75~~$75.0 million in the form of an equity investment by ~~JJDC~~Johnson & Johnson Innovation-JJDC, Inc. (“JJDC”) in Arrowhead ~~common stock,~~Common Stock, two ~~$25~~$25.0 million milestone payments and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the 3 additional targets covered under the Janssen Collaboration Agreement. The Company is further eligible to receive tiered royalties on product sales up to ~~mid teens~~mid-teens under the Janssen License Agreement and up to low teens under the Janssen Collaboration ~~Agreement on product sales.~~ Agreement.

The Company’s collaboration agreement with Amgen for Olpasiran (previously referred to as AMG 890 ~~(ARO-LPA),~~ ~~(the~~or ARO-LPA) (the “Second Collaboration and License Agreement” or ~~“AMG 890 (ARO-LPA)~~“Olpasiran Agreement”), continues to progress. In July 2020, Amgen initiated a Phase 2 clinical study, which resulted in a $20.0 million milestone payment to the Company.The Company has received ~~$35~~$35.0 million in upfront payments, $21.5 million in the form of an equity investment by Amgen in the Company’s Common Stock, ~~a $10~~$30.0 million in milestone ~~payment,~~payments, and may receive up to ~~$420~~an additional $400.0 million in remaining development, regulatory and sales

milestone payments. The Company is eligible to receive up to low double-digit royalties for sales of products under the ~~AMG 890 (ARO-LPA)~~Olpasiran Agreement.~~In July 2020, Amgen initiated a Phase 2 clinical study, which will result in a $20 million milestone payment to the Company.~~

5On October 7, 2020, the Company entered into an Exclusive License and Co-Funding Agreement with Takeda (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s ARO-AAT program. Within the United States, ARO-AAT, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda will lead the global commercialization strategy and receive an exclusive license to commercialize ARO-AAT with the Company 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 $740.0 million.

The revenue recognition for these collaboration agreements is discussed further in Note 2 below.

The Company is actively monitoring the ongoing COVID-19 pandemic. The financial results for the three and ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 were not significantly impacted by COVID-19. ~~The~~During fiscal year 2020, the Company had temporarily paused enrollment in its two ARO-AAT studies, SEQUOIA and the ARO-AAT 2002 study, but resumed the process of screening and enrolling ~~patients during the three months ended June 30, 2020.~~patients. During the pause in enrollment, patients already enrolled in these studies continued to be dosed per protocol and continued to come in for their follow up visits. Additional delays have occurred in the Company’s earlier stage programs, but ~~we do~~the Company does not expect a material impact to any program’s anticipated timelines. ~~Several of the Company’s other clinical candidates are in the start-up stage (ARO-HSD, ARO-HIF2 and ARO-ENaC), during which significant clinical costs will continue to be incurred.~~ Additionally, the Company’s operations at its research and development facilities in Madison, Wisconsin and San Diego, California, and its corporate headquarters in Pasadena, California have continued to operate with limited impact, other than for enhanced safety measures, including work from home policies. However, the Company cannot predict the impact of the progression of COVID-19 will have on future financial results due to a variety of factors including the ability of the Company’s clinical sites to continue to enroll subjects, the ability of the Company’s suppliers to continue to operate, the continued good health and safety of the Company’s employees, and ultimately the length and severity of the COVID-19 pandemic.

The Consolidated Financial Statements have been prepared in conformity with the accounting principles generally accepted in the United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern. Historically, the Company’s primary ~~source~~sources of financing ~~has~~have been through the sale of its ~~securities.~~securities and revenue from its collaboration agreements. Research and development activities have required significant capital investment since the Company’s inception. The Company expects its operations to continue to require cash investment to pursue its research and development goals, including clinical trials and related drug manufacturing.

At ~~June 30, 2020~~March 31, 2021, the Company had ~~$219.3~~$372.4 million in cash and cash equivalents (including ~~$1.8~~$2.4 million in restricted cash), ~~$67.7~~$79.1 million in short-term investments, $125.8 million in marketable securities and ~~$177.5~~$97.5 million in long-term investments to fund operations. During the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, the Company’s cash and investments balance increased by ~~$161.7~~$221.8 million, which was primarily the result of the ~~December 2019 securities offering that generated $250.5~~$300 million ~~in net cash proceeds for~~upfront payment from the ~~Company, as discussed further in Note 6 below. These cash inflows were~~Takeda License Agreement, partially offset by cash ~~outflows primarily related~~used to ~~operating activities.~~fund the Company’s research and development operations and general and administrative expenses.

There have been no changes to the significant accounting policies disclosed in the Company’s most recent Annual Report on Form ~~10-K, except as a result of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases (ASC 842), as discussed below.~~

Leases — The Company determines whether a contract is, or contains, a lease at inception. The Company classifies each of its leases as operating or financing considering factors such as the length of the lease term, the present value of the lease payments, the nature of the asset being leased, and the potential for ownership of the asset to transfer during the lease term. Leases with terms greater than one-year are recognized on the Consolidated Balance Sheets as Right-of-use assets and Lease liabilities and are measured at the present value of the fixed payments due over the expected lease term less the present value of any incentives, rebates or abatements expected to be received from the lessor. Options to extend a lease are typically excluded from the expected lease term as the exercise of the option is typically not reasonably certain. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. The Company records expense to recognize fixed lease payments on a straight-line basis over the expected lease term. Costs determined to be variable and not based on an index or rate are not included in the measurement of the lease liability and are expensed as incurred.10-K.

In March 2016, the FASB issued ASU No. 2016-02, Leases (Topic ASC 842). Under ASC 842, lessees are required to recognize a right-of-use asset and a right-of-use lease liability for virtually all leases other than those that meet the definition of a short-term lease. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern (similar to current capital leases). The Company adopted this standard effective October 1, 2019 and elected the package of three practical expedients that permits an entity to a) not reassess whether expired or existing contracts contain leases, b) not reassess lease classification for existing or expired leases, and c) not consider whether previously capitalized initial direct costs would be appropriate under the new standard. At June 30 2020, the Company has recorded right-of-use assets of $16.5 million and right-of-use liabilities of

$21.4 million on its Consolidated Balance Sheets for its research and development facility leases in Madison, Wisconsin and San Diego, California, as well as its corporate headquarters lease in Pasadena, California, as discussed further in Note 8 below. The adoption of this standard did not have a material impact on the Company’s Consolidated Statement of Comprehensive Income (Loss) and the Company’s Consolidated Statement of Cash Flows.

In November 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2018-18 Collaborative Arrangements (Topic 808). This update provides clarification on the interaction between Revenue Recognition (Topic 606) and Collaborative Arrangements (Topic 808) including the alignment of unit of account guidance between the two topics. ASU 2018-18 ~~becomes~~became effective for the Company ~~in the first quarter of fiscal 2021 with early adoption permitted. The Company does~~on October 1, 2020 and did not ~~expect the adoption of this update to~~ have a material ~~effect~~impact on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15 Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The new standard requires that certain implementation costs for cloud computing arrangements are capitalized and amortized over the term of the associated hosted cloud computing arrangement service. Capitalized implementation costs are classified in prepaid expenses and other assets. The amortization of the capitalized asset is presented in the same line on the statement of operations and comprehensive loss as the fees for the associated hosted cloud computing arrangement service and not included with depreciation or amortization expense related to property and equipment or intangible assets. Cash flows related to capitalized implementation costs are presented in cash flows used in operating activities. ASU 2018-15 became effective for the Company on October 1, 2020 and did not have a material impact on its Consolidated Financial Statements.

On September 28, 2016, the Company entered into 2 collaboration and license agreements and a common stock purchase agreement with Amgen. Under the Second Collaboration and License ~~agreements, and a Common Stock Purchase~~ Agreement ~~with Amgen Inc., a Delaware corporation (“Amgen”). Under one of the license agreements (the “Second Collaboration and License Agreement”~~ or ~~“AMG 890 (ARO-LPA) Agreement”),~~Olpasiran Agreement, Amgen has received a worldwide, exclusive license to Arrowhead’s novel, RNAi ~~ARO-LPA~~Olpasiran (previously referred to as AMG 890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the other collaboration and license agreement (the “First Collaboration and License Agreement” or the “ARO-AMG1 Agreement”), Amgen received an option to a worldwide, exclusive license for ARO-AMG1, an RNAi therapy for an undisclosed genetically validated cardiovascular target. In both agreements, Amgen is wholly responsible for clinical development and commercialization. Under the terms of the agreements taken together, the Company has received ~~$35~~$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 ~~a $10~~$30.0 million in milestone ~~payment,~~payments, and may receive up to ~~$420~~an additional $400.0 million in remaining development, regulatory and sales milestone payments. The Company is further eligible to receive up to low double-digit royalties for sales of products under the ~~AMG 890 (ARO-LPA)~~Olpasiran 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.

The Company substantially completed its performance obligations under the ~~AMG 890 (ARO-LPA)~~Olpasiran Agreement and the ARO-AMG1 Agreement. Future milestones and royalties achieved will be recognized in their entirety when earned. In July 2020, Amgen initiated a Phase 2 clinical study, which ~~will result~~resulted in a ~~$20~~$20.0 million milestone payment to the Company. During the three and six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized ~~$20.0 million~~$0 and $0 ~~million~~ of Revenue associated with its agreements with Amgen, respectively. During the nine months ended June 30, 2020 and 2019, the Company recognized $20.0 million and $0.3 million of Revenue associated with its agreements with Amgen,revenue, respectively. As of ~~June 30, 2020,~~March 31, 2021, there were ~~$20.0 million~~$0 in contract assets recorded as accounts receivable and $0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

On October 3, 2018, the Company entered into athe Janssen License Agreement ~~(“Janssen License Agreement”)~~ and ~~a Research Collaboration and Option Agreement (“~~the Janssen Collaboration ~~Agreement”)~~Agreement with Janssen, ~~Pharmaceuticals, Inc. (“Janssen”)~~ part of the Janssen Pharmaceutical Companies of Johnson & Johnson. The Company also entered into a ~~Stock Purchase Agreement~~stock purchase agreement with JJDC (“JJDC Stock Purchase Agreement”) ~~with Johnson & Johnson Innovation-JJDC, Inc. (“JJDC”), a New Jersey corporation.~~. 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 ~~potentially curative~~potential therapy for patients with chronic hepatitis B virus infection. Beyond the Company’s ~~ongoing~~ Phase 1/2 study of JNJ-3989 (ARO-HBV), Janssen ~~will be~~is also wholly responsible for clinical development and ~~commercialization.~~commercialization of JNJ-3989. Under the Janssen Collaboration Agreement, Janssen will be able to select three new targets against which Arrowhead will develop clinical candidates. These candidates are subject to certain restrictions and ~~will~~do not include candidates that already were in the Company’s ~~current~~ pipeline. The Company will perform discovery, optimization and preclinical research and development, entirely funded by Janssen, which on its own or in combination with Janssen development work, is sufficient to allow the filing of a U.S. Investigational New Drug ~~application~~Application or equivalent, at which time Janssen will have the option to take an exclusive license. If the option is exercised, Janssen will be wholly responsible for clinical development and commercialization of each optioned candidate. Under the terms of the agreements taken together, the Company has received ~~$175~~$175.0 million as an upfront payment, ~~$75~~$75.0 million in the form of an equity investment by JJDC in Arrowhead ~~common stock~~Common Stock under the JJDC Stock Purchase Agreement, and two ~~$25~~$25.0 million milestone payments, and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the 3 additional targets covered under the Janssen Collaboration Agreement. The Company is further eligible to receive tiered royalties up to ~~mid teens~~mid-teens under the Janssen License Agreement and up to low teens under the Janssen Collaboration Agreement on product sales.

The Company has evaluated these agreements in accordance with ~~the new revenue recognition standard that~~FASB Topic 606 - Revenue for Contracts from Customers, which became effective for the Company on October 1, 2018. ~~The adoption of the new revenue standard did not have a material impact on the balances reported when evaluated under the superseded revenue standard.~~ At the inception of these agreements, the Company ~~has~~ identified 1 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 ~~ongoing~~ 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,~~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 ~~will be~~is accounted for ~~if and when it is exercised.~~separately.

The Company determined the transaction price totaled approximately ~~$252.6~~$252.7 million which includes the upfront payment, the premium paid by JJDC for its equity investment in the Company, the two ~~$25~~$25.0 million milestone payments earned and estimated payments for reimbursable Janssen R&D ~~services~~Services to be performed. The Company has allocated the total ~~$252.6~~$252.7 million initial transaction price to its one distinct performance obligation for the JNJ-3989 (ARO-HBV) license and the associated Janssen R&D Services. This revenue will be recognized using a proportional performance method (based on actual ~~labor hours~~costs incurred versus total estimated ~~total labor hours)~~costs incurred) beginning in October 2018 and ending as the Company’s efforts in overseeing the ~~ongoing phase~~Phase 1/2 clinical trial are completed. During the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized approximately ~~$6.9~~$7.5 million and ~~$42.3~~$22.2 million of ~~Revenue~~revenue associated with ~~its agreements with Janssen and JJDC,~~this performance obligation, respectively.During the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized approximately ~~$57.9~~$20.2 million and ~~$124.8~~$50.9 million of ~~Revenue~~revenue associated with ~~its agreements with Janssen and JJDC,~~this performance obligation, respectively. As of ~~June 30, 2020,~~March 31, 2021, there were $0$0.6 million in contract assets recorded as accounts receivable, and ~~$26.3 million~~$0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets. The $26.3 million of current deferred revenue is driven by the upfront payment, the premium paid by JJDC for its equity investment in the Company, and the two $25 million milestone payments earned, net of revenue recognized to date.

~~Janssen has also selected the first of the three targets under the Janssen Collaboration Agreement, now referred to as ARO-JNJ1, and the~~The Company has begun to conduct its discovery, optimization and preclinical research and development of ~~ARO-JNJ1.~~ARO-JNJ1, ARO-JNJ2 and ARO-JNJ3 under the Janssen Collaboration Agreement. All costs and labor hours spent by the Company will be entirely funded by Janssen. During the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized ~~approximately $0.4~~$0.1 million and ~~$0.4~~$1.4 million of ~~Revenue associated with its efforts on the ARO-JNJ1 candidate, respectively. During the nine months ended June 30, 2020 and 2019, the Company recognized $2.4 million and $0.4 million of Revenue~~revenue associated with these efforts, onrespectively. During the ~~ARO-JNJ1 candidate,~~six months ended March 31, 2021 and 2020, the Company recognized $0.3 million and $2.1 million of revenue associated with these efforts, respectively. As of ~~June 30, 2020,~~March 31, 2021, there were ~~$1.7~~$0.3 million of contract assets recorded as accounts receivable and $0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

On October 7, 2020, the Company entered into the Takeda License Agreement with Takeda. Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s ARO-AAT program, the Company’s second-generation subcutaneously administered RNAi therapeutic candidate being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency. Within the United States, ARO-AAT, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda will lead the global commercialization strategy and receive an exclusive license to commercialize ARO-AAT with the Company 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 $740.0 million.

The Company has evaluated the Takeda License Agreement in accordance with FASB Topic 606 - Revenue for Contracts from Customers, which became effective for the Company on October 1, 2018. At the inception of the Takeda License Agreement, the Company identified 1 distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibilities to complete the initial portion of the SEQUOIA study, to complete the ongoing Phase 2 AROAAT2002 study and to ensure certain manufacturing of ARO-AAT drug product is completed and delivered to Takeda (the “Takeda R&D Services”). Due to the specialized and unique nature of these Takeda R&D Services and their direct relationship with the license, the Company determined that these deliverables represent 1 distinct bundle and, thus, one performance obligation. Beyond the Takeda R&D Services, Takeda will be responsible for managing future clinical development and commercialization. The Company will co-fund certain of the development and commercialization costs that Takeda manages, and these co-funding amounts will be offset against amounts owed to Arrowhead, either from milestones or royalties earned, or profits earned under the 50/50 profit sharing structure for U.S. commercialization.

The Company determined the initial transaction price totaled approximately $300.0 million, which includes the upfront payment. The Company will exclude any future estimated milestones, royalties, or profit-sharing payments from this transaction price to date. The Company will allocate the total $300.0 million initial transaction price to its one distinct performance obligation for the ARO-AAT license and the associated Takeda R&D Services. Revenue will be recognized using a proportional performance method (based on actual costs incurred versus total estimated costs incurred for the Takeda R&D Services). Revenue for the three months ended March 31, 2021 and 2020 were $25.4 million and $0, respectively. Revenue for the six months ended March 31, 2021 and 2020 were $33.6 million and $0, respectively. As of March 31, 2021, there were $0 in contract assets recorded as accounts receivable, $144.9 million in contract liabilities recorded as deferred revenue and $121.5 million in contract liabilities recorded as deferred revenue, net of the current portion.

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

Depreciation and amortization expense for property and equipment for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $1.5 million and ~~2019 was $1,111,293 and $578,342,~~$0.9 million, respectively. Depreciation and amortization expense for property and equipment for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was $2.9 million and ~~2019 was $2,892,551 and $2,081,447,~~$1.8 million, respectively.

~~The Company invests a portion of its excess cash balances in short-term and long-term debt securities.~~ Investments at ~~June 30, 2020~~March 31, 2021 primarily consisted of corporate bonds ~~with~~that have maturities ~~remaining~~ of less than 36 ~~months.~~months and marketable equity securities. The Company’s corporate bonds consist of both short-term and long-term bonds and are classified as “held-to-maturity” on the Company’s Consolidated Balance Sheets. The Company’s marketable equity securities consist of mutual funds that primarily invest in U.S. government bonds, U.S. government agency bonds, corporate bonds and other asset-backed debt securities. Dividends from these funds are automatically reinvested. The Company may also invest excess cash balances in certificates of deposits, money market accounts, government-sponsored enterprise securities, corporate bonds and/or commercial paper. The Company accounts for its held to maturity investments in accordance with FASB ASC 320, Investments – Debt and Equity Securities and its marketable equity securities in accordance with ASC 321, Investments – Equity Securities. ~~At June 30, 2020, all investments were classified as held-to-maturity securities.~~

The following tables summarize the Company’s short-term and long-term investments and marketable securities as of ~~June 30, 2020~~March 31, 2021 and September 30, ~~2019.~~2020 by measurement category.

Realized gains for marketable securities recorded at fair value consist of dividends received and re-invested into the associated fund.

Intangible assets subject to amortization include patents and a license agreement capitalized as part of the Novartis RNAi asset acquisition in March 2015. The license agreement associated with the Novartis RNAi asset acquisition is being amortized over the estimated life remaining at the time of acquisition, which was 21 years, and the accumulated amortization of the asset is ~~$791,495.~~$0.9 million. The patents associated with the Novartis RNAi asset acquisition are being amortized over the estimated life remaining at the time of acquisition, which was 14 years, and the accumulated amortization of the assets is ~~$8,277,460.~~$9.4 million. Amortization expense for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $0.4 million and ~~2019 was $425,107 and $425,107,~~$0.4 million, respectively. Amortization expense for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was $0.9 million and ~~2019 was $1,275,322 and $1,275,322,~~$0.9 million, respectively. Amortization expense is expected to be ~~$425,107~~$0.9 million for the remainder of ~~fiscal 2020, $1,700,429 in~~ 2021, ~~$1,700,429~~$1.7 million in 2022, ~~$1,700,429~~$1.7 million in 2023, ~~$1,700,429~~$1.7 million in 2024, $1.7 million in 2025 and ~~$8,561,435~~$6.8 million thereafter.

The following table provides details on the Company’s intangible asset balances:

At ~~June 30, 2020,~~March 31, 2021, the Company had a total of 150,000,000 shares of capital stock authorized for issuance, consisting of 145,000,000 shares of Common Stock, par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per share.

At ~~June 30, 2020,~~March 31, 2021, ~~102,250,872~~104,019,546 shares of Common Stock were outstanding. At ~~June 30, 2020, 8,252,796~~March 31, 2021, 16,819,225 shares of Common Stock were reserved for issuance upon exercise of options and vesting of restricted stock units granted or available for grant under Arrowhead’s 2004 Equity Incentive Plan, 2013 Incentive Plan, and ~~2013~~2021 Incentive Plan, as well as for inducement grants made to new employees.

In December 2019, the Company sold 4,600,000 shares of its Common Stock in a public offering at a price of $58.00 per share. The aggregate purchase price paid by the investors for the Common Stock was $266.8 million, and the Company received net proceeds of $250.5 million after deducting advisory fees and offering expenses.

Effective August 5, 2020, the Company entered into an Open Market Sale Agreement (the “ATM Agreement”), pursuant to which the Company may, from time to time, sell up to $250,000,000 in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering (“ATM Offering”). The Company is not required to sell shares under the ATM Agreement. The Company will pay Jefferies LLC a commission of up to 3.0% of the aggregate gross proceeds received from all sales of the common stock under the ATM Agreement. Unless otherwise terminated, the ATM Agreement continues until the earlier of selling all shares available under the ATM Agreement or December 2, 2022. No sales have been made under the ATM Agreement.

~~On occasion,~~From time to time, the Company may be subject to various claims and legal proceedings in the ordinary course of business. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were 0 contingent liabilities recorded as of ~~June 30, 2020.~~the six months ended March 31, 2021.

In the normal course of business, the Company enters into various purchase commitments for the manufacture of drug components, for toxicology studies and for clinical studies. As of ~~June 30, 2020,~~March 31, 2021, these future commitments were estimated at approximately ~~$83.0~~$136.0 million, of which approximately ~~$20.5~~$78.0 million is expected to be incurred induring the remainder of fiscal ~~2020, and $62.5 million is expected to be incurred beyond fiscal 2020.~~ year 2021.

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 the Company may develop using these licensed technologies. 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~~a new drug application and upon certain sales level milestones. These milestone payments could amount to the mid to upper double-digit millions of dollars. During the three and six months ended ~~June 30, 2020,~~March 31, 2021, the Company did 0t ~~accrue~~reach any ~~milestone payment.~~milestones. During the ~~nine~~three and six months ended ~~June 30,~~March 31, 2020, the Company accrued a $0.9 million milestone payment related to the progression of the ARO-ENaC program. ~~During the three and nine months ended June 30, 2019, the Company did 0t accrue for any milestone payments.~~ In certain agreements, the Company may be required to make mid to high single-digit percentage royalty payments based on a percentage of the sales of the relevant products.

In April 2019, the Company entered into a lease for its corporate headquarters in Pasadena, California. The 91 month office building lease between the Company and 177 Colorado Owner, LLC is for approximately 24,000 square feet of office space located at 177 E. Colorado Blvd, Pasadena, California. The increased capacity of this new office space compared to the Company’s prior corporate headquarters will accommodate increased personnel as the Company’s pipeline of drug candidates expands and moves closer to market. Lease payments began on September 30, 2019 and are estimated to total approximately $8.7 million over the term. The lease expires on April 30, 2027. The Company has paid approximately $3.5 million for leasehold improvements, net of tenant improvement allowances. The lease contains an option to renew for 1 additional term of five years. The exercise of this option was not determined to be reasonably certain and thus was not included in lease liabilities on the Company’s Consolidated Balance Sheet at March 31, 2021. On October 23, 2020, the Company entered into a lease expansion to add an additional approximately 24,000 square feet of office space at the same location for its corporate headquarters. The lease commencement date is expected to be in June ~~30, 2020.~~2021, after certain leasehold improvements are completed, and the lease expires in April 2027. The lease payments for the expansion are expected to total $6.9 million. The Company anticipates paying approximately $4.2 million of leasehold improvements, net of tenant improvement allowances. The increased capacity of this additional office space compared to the Company’s current corporate headquarters will accommodate increased personnel as the Company’s pipeline of drug candidates expands and moves closer to market.

In January 2016, the Company entered into a lease for its research facility in Madison, Wisconsin. The lease was for approximately 60,000 square feet of office and laboratory space and had an expiration date of September 30, 2026. The lease was amended in January 2019 and May 2020 to expand the rentable square feet by an additional ~~14,000~~40,000 total square feet and to extend ~~the lease expiration date to September 2029. In May 2020, the Company further amended the lease to increase the rentable square feet by an additional 26,000 square feet and extended~~ the lease expiration date to September 30, 2031. Lease payments are estimated to total approximately $26.2 million for the term. The Company anticipates paying approximately $11.0 million of leasehold improvements for the additional 40,000 square feet, net of tenant improvement allowances. The lease contains 2 options to renew for two additional terms of five years. The exercise of these options were not determined to be reasonably certain and thus was not included in lease liabilities on the Company’s Consolidated Balance Sheet at ~~June 30, 2020.~~ March 31, 2021. In November 2020 and December 2020, the Company entered into amendments to expand the rentable square space by an additional 10,743 square feet and these amendments added a total of approximately $1.2 million of lease payments for the remainder of the term.

In March 2020, the Company entered into a sublease agreement (the “Sublease”) with Halozyme, Inc. for additional research and development facility space in San Diego, California. The Sublease provides additional space needed to accommodate the recent growth of the Company’s personnel and discovery efforts. The ~~lease~~Sublease is for approximately 21,000 rentable square feet. The term of the Sublease commenced on April 1, 2020 and will end on January 14, 2023. ~~Lease~~Sublease payments are estimated to total approximately $2.0 million over the term.

Operating lease cost during the three ~~and nine~~ months ended ~~June 30,~~March 31, 2021 and 2020 was ~~$0.8~~$1.1 million and ~~$1.7~~$0.5 million, respectively. Operating lease cost during the six months ended March 31, 2021 and 2020 was $2.0 million and $0.9 million, respectively. Variable lease costs ~~during~~for the three ~~and nine~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~were~~was $0.2 million and ~~$0.6~~$0.2 million, respectively. Variable lease costs for the six months ended March 31, 2021 and 2020 was $0.5 million and $0.3 million, respectively. There was 0 short-term lease cost during the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020.

The following table presents maturities of operating lease liabilities on an undiscounted basis as of ~~June 30, 2020:~~March 31, 2021:

Cash paid for the amounts included in the measurement of the operating lease liabilities on the Company’s Consolidated Balance Sheet and included in Other changes in operating assets and liabilities within cash flows from operating activities on the Company’s Consolidated Statement of Cash Flow for the ~~three and nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was ~~$0.5~~$1.4 million and ~~$1.1~~$0.6 million, respectively. The weighted-average remaining lease term and weighted-average discount rate for all leases as of ~~June 30, 2020~~March 31, 2021 was ~~9.6~~8.5 years and ~~8.4%~~8.5%, respectively.

~~As of September 30, 2019, future minimum lease payments due in fiscal years under operating leases were as follows:~~

Arrowhead has ~~two~~three plans that provide for equity-based compensation. Under the 2004 Equity Incentive Plan and the 2013 Incentive Plan, as of ~~June 30, 2020, 744,250~~March 31, 2021, 468,993 and ~~5,652,008~~6,593,291 shares, respectively, of Arrowhead’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. No further grants may be made under the 2004 Equity Incentive Plan. As of ~~June 30, 2020,~~March 31, 2021, there were options granted and outstanding to purchase ~~744,250~~468,993 and ~~2,672,851~~2,229,852 shares of Common Stock under the 2004 Equity Incentive Plan and the 2013 Incentive Plan, respectively, and there were ~~2,583,000~~3,177,950 restricted stock units granted and outstanding under the 2013 Incentive Plan. Also, as of ~~June 30, 2020,~~March 31, 2021, there were ~~1,112,463~~1,080,741 shares reserved for options and ~~744,075~~676,200 shares reserved for restricted stock units issued as inducement grants to new employees outside of equity compensation plans. ~~During~~On March 18, 2021, the ~~three months ended June 30, 2020, 0~~Company’s stockholders approved the Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan (“2021 Incentive Plan”), which authorizes 8,000,000 shares (subject to certain adjustments) to be awarded for grants of stock options, stock appreciation rights, restricted and ~~0 restricted~~unrestricted stock and stock units, ~~were granted~~performance awards, cash awards and other awards convertible into or otherwise based on shares of Arrowhead’s Common Stock. The maximum number of shares authorized under the 2021 Incentive Plan will be (i) reduced by any shares subject to awards made under the 2013 Incentive Plan after January 1, 2021, and ~~134,000 options and 153,000 restricted stock units were granted as inducement~~(ii) increased by any shares subject to outstanding awards ~~to new employees outside of equity incentive plans. During the nine months ended June 30, 2020, 310,500 options and 1,749,071 restricted stock units were granted~~ under the 2013 Incentive 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 March 31, 2021, there had been no adjustments to the 8,000,000 authorized shares under the 2021 Incentive Plan, and ~~477,000 options and 737,575 restricted stock units were~~0 shares of Arrowhead’s Common Stock had been granted ~~as inducement awards to new employees outside of~~under the ~~equity incentive plans.~~2021 Incentive Plan.

Stock-based compensation expense related to stock options for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $3.3 million and ~~2019 was $2,659,265 and $1,016,206,~~$2.5 million, respectively. Stock-based compensation expense related to stock options for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was $6.4 million and ~~2019 was $6,796,175 and $2,823,706,~~$4.1 million, respectively. For non-qualified stock options, the expense creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

The grant date fair value of the options granted by the Company for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $1.4 million and ~~2019 was $3,421,181 and $1,316,220,~~$18.0 million, respectively. The grant date fair value of the options granted by the Company for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was $8.1 million and ~~2019 was $30,020,524 and $9,453,469,~~$26.6 million, respectively.

The intrinsic value of the options exercised during the three months ended ~~June 30,~~March 31, 2021 and 2020 was $20.9 million and ~~2019 was $9,529,237 and $9,349,226,~~$8.6 million, respectively. The intrinsic value of the options exercised during the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 was $52.8 million and ~~2019 was $39,775,062 and $17,471,520,~~$30.2 million, respectively.

As of ~~June 30, 2020,~~March 31, 2021, the pre-tax compensation expense for all outstanding unvested stock options in the amount of ~~$35,021,715~~$35.7 million will be recognized in the Company’s results of operations over a weighted average period of ~~3.3~~2.9 years.

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 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, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Volatility is estimated based on volatility average of the Company’s Common Stock price.

Restricted stock units ~~(RSUs)~~(“RSUs”), including time-based and performance-based awards, were granted under the Company’s 2013 Incentive Plan and as inducements grants granted outside of the ~~Plan.~~Company’s equity-based compensation plans. During the three months ended ~~June 30, 2020,~~March 31, 2021, the Company issued 01,324,750 RSUs under the 2013 Incentive Plan and ~~153,000~~0 RSUs as inducement awards. During the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, the Company issued ~~1,749,071~~1,326,950 RSUs under the 2013 Incentive Plan and ~~737,575~~116,000 RSUs as inducement awards. At vesting, each outstanding RSU will be exchanged for one share of the Company’s Common Stock. RSU recipients may elect to net share settle upon vesting, in which case the Company pays the employee’s income taxes due upon vesting and withholds a number of shares of Common Stock of equal value. RSU awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets.

During the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recorded ~~$7,386,943~~$12.1 million and ~~$941,788~~$10.4 million of expense related to RSUs, respectively. During the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recorded ~~$20,713,488~~$17.1 million and ~~$4,453,169~~$13.3 million of expense related to RSUs, respectively. Such expense is included in stock-based compensation expense in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss). For RSUs, the expense creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

For RSUs, the grant date fair value of the award is based on the Company’s closing stock price at the grant date, with consideration given to the probability of achieving performance conditions for performance-based awards. The grant date fair value of the RSUs granted by the Company for the three months ended March 31, 2021 and 2020 was $101.6 million and $122.0 million, respectively. The grant date fair value of the RSUs granted by the Company for the six months ended March 31, 2021 and 2020 was $109.0 million and $136.0 million, respectively.

As of ~~June 30, 2020~~March 31, 2021, the pre-tax compensation expense for all unvested RSUs in the amount of ~~$87,634,315~~$131.4 million will be recognized in the Company’s results of operations over a weighted average period of ~~3.3~~3.1 years. Unvested RSUs that we have deemed not probable of vesting as of March 31, 2021, have the potential of generating an additional $76.4 million of pre-tax compensation expense if we deem them probable of vesting in a future reporting period.

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following table summarizes fair value measurements at ~~June 30, 2020~~March 31, 2021 and September 30, ~~2019~~2020 for assets and liabilities measured at fair value on a recurring ~~basis:~~basis.

The Company had a liability for contingent consideration related to its acquisition of the Roche RNAi business completed in 2011. The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model using a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on the Company’s assumptions and experience. Estimating timing to complete the development and obtain approval of products is difficult, and there are inherent uncertainties in developing a product candidate, such as obtaining FDA and other regulatory approvals. In determining the probability of regulatory approval and commercial success, the Company utilizes data regarding similar milestone events from several sources, including industry studies and its own experience. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. In November 2016, the Company announced the discontinuation of its clinical trial efforts for ARC-520, ARC-AAT and ARC-521. Given this development, the Company assessed the fair value of its contingent consideration obligation to be $0 at June 30, 2020 and September 30, 2019.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report on Form 10-Q except for historical information may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “could,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements.

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. In addition, many of these risks and uncertainties may be exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. As such, our actual results may differ ~~significantly~~materially from those expressed in any forward-looking statements. Readers should carefully review the factors identified in our most recent Annual Report on Form 10-K under the caption “Risk Factors” as well as the additional risks and uncertainties described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, this Quarterly Report on Form 10-Q and subsequent quarterly reports on Form 10-Q. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Unless otherwise noted, (1) the term “Arrowhead” refers to Arrowhead Pharmaceuticals, Inc., a Delaware corporation and its Subsidiaries, (2) the terms “Company,” “we,” “us,” and “our,” refer to the ongoing business operations of Arrowhead and its Subsidiaries, whether conducted through Arrowhead or a subsidiary of Arrowhead, (3) the term “Subsidiaries” refers to Arrowhead Madison Inc. (“Arrowhead Madison”) and Arrowhead Australia Pty Ltd (“Arrowhead Australia”), (4) the term “Common Stock” refers to Arrowhead’s Common Stock, (5) the term “Preferred Stock” refers to Arrowhead’s Preferred Stock and (6) the term “Stockholder(s)” refers to the holders of Arrowhead Common Stock.

Arrowhead Pharmaceuticals, Inc. develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, Arrowhead therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. RNA interference ~~or RNAi,~~(“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. Arrowhead’s RNAi-based therapeutics leverage this natural pathway of gene silencing. The ~~Company's~~Company’s pipeline includes ~~ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency (AATD),~~ ARO-APOC3 for hypertriglyceridemia, ARO-ANG3 for dyslipidemia, ARO-HSD for liver disease, ARO-ENaC for cystic fibrosis, ARO-HIF2 for renal cell carcinoma, ARO-DUX4 for facioscapulohumeral muscular dystrophy, ARO-LUNG2 ~~as a candidate to treat~~for chronic obstructive pulmonary disorder ~~(COPD)~~(“COPD”), and ARO-COV ~~for treatment~~ for the ~~current novel~~ coronavirus that causes COVID-19 and other possible future pulmonary-borne pathogens. ~~ARO-JNJ1 is~~ARO-JNJ1, ARO-JNJ2 and ARO-JNJ3 are being developed for an undisclosed liver-expressed ~~target~~targets under a collaboration agreement with Janssen Pharmaceuticals, Inc. (“Janssen”). ~~ARO-HBV (JNJ-3989)~~ ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency (“AATD”) was out-licensed to Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) in October 2020. JNJ3989 (formerly referred to as ARO-HBV) for chronic hepatitis B virus was out-licensed to Janssen in October 2018. ~~ARO-LPA (AMG 890)~~ Olpasiran (formerly referred to as AMG 890 or ARO-LPA) for cardiovascular disease was out-licensed to Amgen Inc. (“Amgen”) in 2016.

Arrowhead operates a lab ~~facility~~facilities in Madison, Wisconsin and San Diego, California, where the Company’s research and development activities, including the development of RNAi therapeutics, ~~are based.~~take place. The Company’s principal executive offices are located in Pasadena, ~~California. In March 2020, the Company entered into a sublease for additional research and development facility space in San Diego,~~ California.

Arrowhead has focused its resources on therapeutics that exclusively utilize the ~~company’s~~Company’s Targeted RNAi Molecule (TRiM^TM) platform technology. Therapeutics built on the TRiM^TM platform have demonstrated high levels of pharmacologic activity in multiple animal models spanning several therapeutic areas. TRiM^TM enabled therapeutics offer several potential advantages over prior generation and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung and tumors; and the potential for improved safety and reduced risk of intracellular buildup, because there are less metabolites from smaller, simpler molecules.

During the first half of fiscal year ~~2020,~~2021, the Company ~~has~~ continued to develop its pipeline and partnered candidates. The Company ~~has began dosing in an adaptive design phase 2/3 trial, called SEQUOIA, with the potential to serve as~~hosted a ~~pivotal registration study of ARO-AAT.~~key opinion leader webinar on its cardiometabolic candidates, ARO-APOC3 and ARO-ANG3. The Company ~~also began dosing in its ARO-AAT 2002 study, a pilot~~presented positive interim clinical data from AROAAT2002, an open-label ~~multi-dose~~ Phase 2 study to assess changes in novel histological activity scale in response to ARO-AAT over time in patients with alpha-1 antitrypsin deficiency associated liver disease. In addition, the Company also dosed the first patients in AROHSD1001, a Phase 1/2 clinical study of ~~ARO-HSD,~~ARO-AAT, the Company’s second-generation investigational ~~RNA interference~~RNAi therapeutic being developed as a treatment for ~~patients~~the rare genetic liver disease associated with ~~alcohol related and nonalcohol related liver diseases, such as nonalcoholic steatohepatitis (NASH).~~AATD. The Company also ~~presented new~~announced positive clinical data on its ~~two~~ cardiometabolic candidates, ARO-APOC3 and ARO-ANG3, ~~in two late-breaking oral presentations~~ at the American Heart Association Scientific Sessions ~~2019. In addition, the~~2020. The Company filed ~~an investigational new drug (“IND”) application~~two Investigational New Drug Applications with the United States Food and Drug Administration to begin a ~~phase 1b~~Phase 2b clinical study of ~~ARO-HIF2~~ARO-APOC3 in patients with severe hypertriglyceridemia and ~~filed~~ a Phase 2b clinical ~~trials application (“CTA”) to begin a phase 1~~ study of ~~ARO-ENaC.~~ARO-ANG3 in patients with mixed dyslipidemia. Finally, the Company announced a collaboration with Takeda to co-develop and co-commercialize ARO-AAT for alpha-1 antitrypsin-associated liver disease. See Note 2 of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more information regarding the collaboration with Takeda.

The Company’s partnered candidates under its collaboration agreements ~~with Janssen and Amgen~~ also ~~continue~~continued to progress. Janssen began dosing patients in a ~~phase~~Phase 2b triple combination study called REEF-1, designed to enroll up to 450 patients with chronic hepatitis B ~~infection, and in~~infection. In connection with the start of this study, Arrowhead earned a ~~$25~~$25.0 million milestone payment under the Company’s License Agreement with Janssen (“Janssen License Agreement”). ~~Janssen has also nominated the first of 3 potential candidates under the Research Collaboration and Option Agreement (“Janssen Collaboration Agreement”), ARO-JNJ1, and the~~The Company is currently performing discovery, optimization and preclinical research and development for ~~this candidate.~~ARO-JNJ1, ARO-JNJ2 and ARO-JNJ3 for Janssen as part of the Company’s Research Collaboration and Option Agreement with Janssen (“Janssen Collaboration Agreement”). Under the terms of the Janssen agreements taken together, the Company has received ~~$175~~$175.0 million as an upfront payment, ~~$75~~$75.0 million in the form of an equity investment by Johnson & Johnson Innovation-JJDC, Inc. (“JJDC”) in Arrowhead Common Stock, two $25.0 million milestone payments and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the three additional targets 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.

The Company’s collaboration agreement with Amgen for Olpasiran (previously referred to as AMG 890 or ARO-LPA) (the “Second Collaboration and License Agreement” or “Olpasiran Agreement”) continues to progress. In July 2020, Amgen initiated a Phase 2 clinical study, which resulted in a $20.0 million milestone payment to the Company. 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, $30.0 million in milestone payments, and may receive up to an additional $400.0 million in remaining development, regulatory and sales milestone payments. The Company is eligible to receive up to low double-digit royalties for sales of products under the Olpasiran Agreement.

On October 7, 2020, the Company entered into an Exclusive License and Co-Funding Agreement with Takeda (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s ARO-AAT program. Within the United States, ARO-AAT, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda will lead the global commercialization strategy and receive an exclusive license to commercialize ARO-AAT with the Company 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 $740.0 million.

The revenue recognition for these collaboration agreements is discussed further in Note 2 of the Notes to Consolidated Financial Statements of Part I, Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

The Company continues to develop other clinical candidates for future clinical trials. Clinical candidates are tested internally and through GLP toxicology studies at outside laboratories. Drug materials for such studies and clinical trials are either contracted to third-party manufactures or manufactured internally. The Company engages third-party contract research organizations (“CROs”) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, relating to the preparation for and administration of clinical trials, are referred to as “candidate costs.” If the clinical candidates progress through human testing, candidate costs will increase.

The Company is actively monitoring the ongoing COVID-19 pandemic. The financial results for the three and six months ended March 31, 2021 were not significantly impacted by COVID-19. During fiscal year 2020, the Company had temporarily paused enrollment in its two ARO-AAT studies, SEQUOIA and the ARO-AAT 2002 study, but resumed the process of screening and enrolling patients. During the pause in enrollment, patients already enrolled in these studies continued to be dosed per protocol and continued to come in for their follow up visits. Additional delays have occurred in the Company’s earlier stage programs, but the Company does not expect a material impact to any program’s anticipated timelines. Additionally, the Company’s operations at its research and development facilities in Madison, Wisconsin and San Diego, California, and its corporate headquarters in Pasadena, California have continued to operate with limited impact, other than for enhanced safety measures, including work from home policies. However, the Company cannot predict the impact the progression of COVID-19 will have on future financial results due to a variety of factors including the ability of the Company’s clinical sites to continue to enroll subjects, the ability of the Company’s suppliers to continue to operate, the continued good health and safety of the Company’s employees, and ultimately the length and severity of the COVID-19 pandemic.

Net losses were $26.8 million for the three months ended March 31, 2021 as compared to net losses of $19.8 million for the three months ended March 31, 2020. Net losses were $47.6 million for the six months ended March 31, 2021 as compared to net losses of $22.5 million for the six months ended March 31, 2020. Net losses per share-diluted were $0.26 for the three months ended March 31, 2021 as compared to net losses per share-diluted of $0.20 for the three months ended March 31, 2020. Net losses per share-diluted were $0.46 for the six months ended March 31, 2021 as compared to net losses per share-diluted of $0.23 for the six months ended March 31, 2020. The increase in net losses for the three and six months ended March 31, 2021 was due to an increase in research and development expenses as the Company’s pipeline of candidates has expanded and progressed through clinical trial phases, partially offset by an increase in revenue from the Company’s license and collaboration agreements, primarily from the Takeda collaboration.

The Company has strengthened its liquidity and financial position through upfront and milestone payments received under its collaboration agreements, as well as equity financings. Under the terms of the Company’s agreements with Janssen 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 Arrowhead Common Stock and two $25.0 million milestone payments. Under the terms of the Company’s agreements with Amgen, 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. The Company’s October 2020 licensing agreement with Takeda resulted in a $300.0 million upfront payment, which was collected in the beginning of the second quarter of 2021. The Company had $372.4 million of cash and cash equivalents, $125.8 million of marketable securities, $79.1 million in short-term investments, $97.5 million of long term investments and $756.8 million of total assets as of March 31, 2021, as compared to $143.6 million, $85.0 million, $86.9 million, $137.5 million and $522.5 million as of September 30, 2020, respectively. Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months.

There have been no changes to the significant accounting policies disclosed in the Company’s most recent Annual Report on Form 10-K.

The following data summarizes our results of operations for the following periods indicated:

The increase in revenue for the three and six months ended March 31, 2021 compared to the three and six months ended March 31, 2020 was driven by the revenue recognized for the Takeda collaboration. The increase in net losses during the three and six months ended March 31, 2021 compared to the three and six months ended March 31, 2020 was driven by an increase in research and development expenses as our pipeline of clinical candidates has continued to increase and progress through clinical trial phases, partially offset by an increase in revenue from the Takeda License Agreement.

Total revenue for the three months ended March 31, 2021 and 2020 was $32.8 million and $23.5 million, respectively. Total revenue for the six months ended March 31, 2021 and 2020 was $54.1 million and $53.0 million, respectively. Revenue for the three

months ended March 31, 2021 is primarily related to the recognition of $25.4 million of revenue associated with the Takeda License Agreement and the recognition of a portion of the $252.7 million initial transaction price associated with our agreements with Janssen and JJDC for the progress we achieved towards completing our performance obligations under those agreements. Revenue for the six months ended March 31, 2021 is primarily related to the recognition of $33.6 million of revenue associated with the Takeda License Agreement and the recognition of a portion of the $252.7 million initial transaction price associated with our agreements with Janssen and JJDC for the progress we achieved towards completing our performance obligations under those agreements.

On September 28, 2016, the Company entered into two collaboration and license agreements and a common stock purchase agreement with Amgen. Under the Second Collaboration and License Agreement or Olpasiran Agreement, Amgen has received a worldwide, exclusive license to Arrowhead’s novel, RNAi Olpasiran (previously referred to as AMG 890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the other collaboration and license agreement (the “First Collaboration and License Agreement” or the “ARO-AMG1 Agreement”), Amgen received an option to a worldwide, exclusive license for ARO-AMG1, an RNAi therapy for an undisclosed genetically validated cardiovascular target. In both agreements, Amgen is wholly responsible for clinical development and commercialization. Under the terms of the agreements taken together, 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, and may receive up to an additional $400.0 million in remaining development, regulatory and sales milestone payments. The Company is further eligible to receive up to low double-digit royalties for sales of products under the ~~Stock Purchase~~Olpasiran 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.

The Company substantially completed its performance obligations under the Olpasiran Agreement and the ARO-AMG1 Agreement. Future milestones and royalties achieved will be recognized in their entirety when earned. In July 2020, Amgen initiated a Phase 2 clinical study, which resulted in a $20.0 million milestone payment to the Company. During the three and six months ended March 31, 2021 and 2020, the Company recognized $0 and $0 in revenue, respectively. As of March 31, 2021, there were $0 in contract assets recorded as accounts receivable and $0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

On October 3, 2018, the Company entered into the Janssen License Agreement and the Janssen Collaboration Agreement with Janssen, part of the Janssen Pharmaceutical Companies of Johnson & Johnson. The Company also entered into a stock purchase agreement with JJDC (“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. Beyond the Company’s Phase 1/2 study of JNJ-3989 (ARO-HBV), Janssen is also wholly responsible for clinical development and commercialization of JNJ-3989. Under the Janssen Collaboration Agreement, Janssen will be able to select three new targets against which Arrowhead will develop clinical candidates. These candidates are subject to certain restrictions and do not include candidates that already were in the Company’s pipeline. The Company will perform discovery, optimization and preclinical research and development, entirely funded by Janssen, which on its own or in combination with Janssen development work, is sufficient to allow the filing of a U.S. Investigational New Drug Application or equivalent, at which time Janssen will have the option to take an exclusive license. If the option is exercised, Janssen will be 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 Arrowhead Common Stock under the JJDC Stock Purchase Agreement, and two ~~$25~~$25.0 million milestone payments, and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the three additional targets covered under the Janssen Collaboration Agreement. The Company is further eligible to receive tiered royalties up to ~~mid teens~~mid-teens under the Janssen License Agreement and up to low teens under the Janssen Collaboration Agreement on product sales. ~~The Company’s collaboration agreement with Amgen for AMG 890 (ARO-LPA),~~ ~~(the “Second Collaboration and License Agreement” or “AMG 890 (ARO-LPA) Agreement”),~~ continues to progress. The Company has received $35 million in upfront payments, $21.5 million in the form of an equity investment by Amgen in the Company’s Common Stock, a $10 million milestone payment, and may receive up to $420 million in development, regulatory and sales milestone payments. The Company is eligible to receive up to low double-digit royalties for sales of products under the AMG 890 (ARO-LPA) Agreement. In July 2020, Amgen initiated a Phase 2 clinical study, which will result in a $20 million milestone payment to the Company.

~~The Company continues to develop~~ ~~other clinical candidates for future clinical trials.~~ Clinical candidates are tested internally and through GLP toxicology studies at outside laboratories. Drug materials for such studies and clinical trials are either contracted to third-party manufactures or manufactured internally. The Company engages third-party contract research organizations (CROs) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, relating to the preparation for and administration of clinical trials, are referred to as “program costs”. If the clinical candidates progress through human testing, program costs will increase.

The Company is actively monitoring the COVID-19 pandemic. The financial results for the three and nine months ended June 30, 2020 were not significantly impacted by COVID-19. The Company temporarily paused enrollment in its two ARO-AAT studies, SEQUOIA and the ARO-AAT 2002 study, but resumed the process of screening and enrolling patients during the three months ended June 30, 2020. During the pause in enrollment, patients already enrolled in these studies continued to be dosed per protocol and continued to come in for their follow up visits. Additional delays have occurred in the Company’s earlier stage programs, but we do not expect a material impact to any program’s anticipated timelines. Several of the Company’s other clinical candidates are in the start-up stage (ARO-HSD, ARO-HIF2 and ARO-ENaC), during which significant clinical costs will continue to be incurred. Additionally, the Company’s operations at its research and development facilities in Madison, Wisconsin and San Diego, California, as well as its corporate headquarters in Pasadena, California have continued to operate with limited impact, other than for enhanced safety measures, including work from home policies. However, the Company cannot predict the impact of the progression of COVID-19 will have on future financial results due to a variety of factors including the ability of the Company’s clinical sites to continue to enroll subjects, the ability of the Company’s suppliers to continue to operate, the continued good health and safety of the Company’s employees, and ultimately the length of the COVID-19 pandemic.

Net losses were $13.6 million for the three months ended June 30, 2020 as compared to net income of $20.3 million for the three months ended June 30, 2019. Net losses were $36.1 million for the nine months ended June 30, 2020 as compared to net income of $56.3 million for the nine months ended June 30, 2019. Net losses per share – diluted were $0.13 for the three months ended June 30, 2020 as compared to net income per share - diluted of $0.21 for the three months ended June 30, 2019. Net losses per share – diluted were $0.36 for the nine months ended June 30, 2020 as compared to net income per share – diluted of $0.58 for the nine months ended June 30, 2019. An increase in research and development and general and administrative expenses coupled with a decrease in revenue from the license and collaboration agreements with Janssen were the drivers of the increase in net losses and net losses per share, as discussed further below.

~~The Company strengthened its liquidity and financial position through the Janssen License Agreement, Janssen Collaboration Agreement and JJDC Stock Purchase Agreement, executed in October 2018.~~ Under the terms of the agreements taken together, the Company has received $175 million as an upfront payment, $75 million in the form of an equity investment by JJDC in Arrowhead common stock, and two $25 million milestone payments. Additionally, in December 2019, the Company completed a securities offering which generated approximately $250.5 million in net cash proceeds. Moreover, effective August 5, 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC (the “ATM Agreement”), which provides that, subject to the conditions and limitations set forth in the ATM Agreement, the Company may elect, from time to time, to issue and sell shares of the Company’s common stock up to $250 million. These cash proceeds secure the funding needed to continue to advance our pipeline candidates. The Company had $219.3 million of cash and cash equivalents, $67.7 million in short-term investments, $177.5 million of long term investments and $555.7 million of total assets as of June 30, 2020, as compared to $221.8 million, $36.9 million, $44.2 million and $349.8 million as of September 30, 2019, respectively. Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months.

Management makes certain judgments and uses certain estimates and assumptions when applying generally accepted accounting principles in the United States (“GAAP”) in the preparation of our Consolidated Financial Statements. We evaluate our estimates and judgments on an ongoing basis and base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, in that they require our most difficult, subjective or complex judgments in the preparation of our consolidated financial statements. For further information, see ~~Note 1, Organization and Significant Accounting Policies, to our Consolidated Financial Statements, which outlines our application of significant accounting policies.~~

There have been no changes to the significant accounting policies disclosed in the Company’s most recent Annual Report on Form 10-K, except as a result of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases (ASC 842), as discussed below:

Leases - The Company determines whether a contract is, or contains, a lease at inception. The Company classifies each of its leases as operating or financing considering factors such as the length of the lease term, the present value of the lease payments, the nature of the asset being leased, and the potential for ownership of the asset to transfer during the lease term. Leases with terms greater than one-year are recognized on the Consolidated Balance Sheets as Right-of-use assets and Lease liabilities and are measured at the present value of the fixed payments due over the expected lease term minus the present value of any incentives, rebates or abatements expected to be received from the lessor. Options to extend a lease are typically excluded from the expected lease term as the exercise of the option is typically not reasonably certain. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. The Company records expense to recognize fixed lease payments on a straight-line basis over the expected lease term. Costs determined to be variable and not based on an index or rate are not included in the measurement of the lease liability and are expensed as incurred.

~~The following data summarizes our results of operations for the following periods indicated:~~

The decrease in our Revenue during the three and nine months ended June 30, 2020 was driven by the timing of progress achieved in completing our performance obligation from our agreements with Janssen and JJDC, which were executed in October 2018; partially offset by the $20 million milestone revenue from Amgen for the initiation of phase 2 clinical study for AMG 890 (ARO-LPA). The increase in our Net Loss during the three and nine months ended June 30, 2020 was driven by this decrease in Revenue and also increases in Research and Development and General and Administrative Expenses as our pipeline of clinical candidates has continued to increase.

Total revenue was $27,375,778 for the three months ended June 30, 2020 and $42,696,636 for the three months ended June 30, 2019. Total revenue was $80,359,211 for the nine months ended June 30, 2020 and $125,502,807 for the nine months ended June 30, 2019. Revenue in the both periods is primarily related to the recognition of a portion of the $252.6 million initial transaction price associated with our agreements with Janssen and JJDC as we achieved progress toward completing our performance obligation within those agreements.

On September 28, 2016, the Company entered into two Collaboration and License agreements, and a Common Stock Purchase Agreement with Amgen Inc., a Delaware corporation (“Amgen”). Under one of the license agreements (the “Second Collaboration and License Agreement” or “AMG 890 (ARO-LPA) Agreement”), Amgen has received a worldwide, exclusive license to Arrowhead’s novel, RNAi ARO-LPA program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the other license agreement (the “First Collaboration and License Agreement” or “ARO-AMG1 Agreement”), Amgen received an option to a worldwide, exclusive license for ARO-AMG1, an RNAi therapy for an undisclosed genetically validated cardiovascular target. In both agreements, Amgen is wholly responsible for clinical development and commercialization. Under the terms of the agreements taken together, the Company has received $35 million in upfront payments, $21.5 million in the form of an equity investment by Amgen in the Company’s Common Stock, and a $10 million milestone payment, and may receive up to $420 million in development, regulatory and sales milestone payments. The Company is further eligible to receive up to low double-digit royalties for sales of products under the AMG 890 (ARO-LPA) 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.

The Company substantially completed its performance obligations under the AMG 890 (ARO-LPA) Agreement and the ARO-AMG1 Agreement. Future milestones and royalties achieved will be recognized in their entirety when earned. In July 2020, Amgen initiated a Phase 2 clinical study, which will result in a $20 million milestone payment to the Company. During the three months ended June 30, 2020 and 2019, the Company recognized $20 million and $0 million of Revenue associated with its agreements with Amgen, respectively. During the nine months ended June 30, 2020 and 2019, the Company recognized $20 million and $0.3 million of Revenue associated with its agreements with Amgen, respectively. As of June 30, 2020, there were $20 million in contract assets recorded as accounts receivable, and $0 contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

On October 3, 2018, the Company entered into a License Agreement (“Janssen License Agreement”) and a Research Collaboration and Option Agreement (“Janssen Collaboration Agreement”) with Janssen Pharmaceuticals, Inc. (“Janssen”) part of the Janssen Pharmaceutical Companies of Johnson & Johnson. The Company also entered into a Stock Purchase Agreement (“JJDC Stock Purchase Agreement”) with Johnson & Johnson Innovation-JJDC, Inc. (“JJDC”), a New Jersey corporation. 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 potentially curative therapy for patients with chronic hepatitis B virus infection. Beyond the Company’s ongoing Phase 1 / 2 study of JNJ-3989 (ARO-HBV), Janssen will be wholly responsible for clinical development and commercialization. Under the Janssen Collaboration Agreement, Janssen will be able to select three new targets against which Arrowhead will develop clinical candidates. These candidates are subject to certain restrictions and will not include candidates in the Company’s current pipeline. The Company will perform discovery, optimization and preclinical research and development, entirely funded by Janssen, sufficient to allow the filing of a U.S. Investigational New Drug application or equivalent, at which time Janssen will have the option to take an exclusive license. If the option is exercised, Janssen will be wholly responsible for clinical development and commercialization of each optioned candidate. Under the terms of the agreements taken together, the Company has received $175 million as an upfront payment, $75 million in the form of an equity investment by JJDC in Arrowhead common stock, two $25 million milestone payments and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the three additional targets covered under the Janssen Collaboration Agreement. ~~The Company is further eligible to receive tiered royalties up to mid teens under the Janssen License Agreement and up to low teens under the Janssen Collaboration Agreement on product sales~~.

The Company has evaluated these agreements in accordance with ~~the new revenue recognition requirements that~~FASB Topic 606 - Revenue for Contracts from Customers, which became effective for the Company on October 1, 2018. ~~The adoption of the new revenue standard did not have a material impact on the balances reported when evaluated under the superseded revenue standard.~~ At the inception of these agreements, the Company ~~has~~ 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 ~~ongoing~~ Phase ~~1 /~~

1/2 study of JNJ-3989 (ARO-HBV) and the Company’s responsibility to ensure certain manufacturing of ~~ARO-HBV~~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,~~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 ~~will be~~is accounted for ~~if and when it is exercised.~~separately.

The Company determined the transaction price totaled approximately ~~$252.6~~$252.7 million which includes the upfront payment, the premium paid by JJDC for its equity investment in the Company, the two ~~$25~~$25.0 million milestone payments earned and estimated payments for reimbursable Janssen R&D ~~services~~Services to be performed. The Company has allocated the total ~~$252.6~~$252.7 million initial transaction price to its one distinct performance obligation for the JNJ-3989 (ARO-HBV) license and the associated Janssen R&D Services. This revenue will be recognized using a proportional performance method (based on actual ~~labor hours~~costs incurred versus total estimated ~~total labor hours)~~costs incurred) beginning in October 2018 and ending as the Company’s efforts in overseeing the ~~ongoing phase~~Phase 1/2 clinical trial are completed. During the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized approximately ~~$6.9~~$7.4 million and ~~$42.3~~$22.2 million of ~~Revenue~~revenue associated with ~~its agreements with Janssen and JJDC,~~this performance obligation, respectively. During the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized approximately ~~$57.9~~$20.2 million and ~~$124.8~~$50.9 million of ~~Revenue~~revenue associated with ~~its agreements with Janssen and JJDC,~~this performance obligation, respectively. As of ~~June 30, 2020,~~March 31, 2021, there were $0$0.6 million in contract assets recorded as accounts receivable, and $26.3 million of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets. The $26.3 million of current deferred revenue is driven by the upfront payment, the premium paid by JJDC for its equity investment in the Company, and the two $25 million milestone payments earned, net of revenue recognized to date.

Janssen has also selected the first of the three targets under the Janssen Collaboration Agreement, now referred to as ARO-JNJ1, and the Company has begun to conduct its discovery, optimization and preclinical research and development of ARO-JNJ1. All costs and labor hours spent by the Company will be entirely funded by Janssen. During the three months ended June 30, 2020 and 2019, the Company recognized approximately $0.4 million and $0.4 million of Revenue associated with its efforts on the ARO-JNJ1 candidate, respectively. During the nine months ended June 30, 2020 and 2019, the Company recognized $2.4 million and $0.4 million of Revenue associated with these efforts on the ARO-JNJ1 candidate, respectively. As of June 30, 2020, there were $1.7 million of contract assets recorded as accounts receivable, and $0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

The Company has begun to conduct its discovery, optimization and preclinical research and development of ARO-JNJ1, ARO-JNJ2 and ARO-JNJ3 under the Janssen Collaboration Agreement. All costs and labor hours spent by the Company will be entirely funded by Janssen. During the three months ended March 31, 2021 and 2020, the Company recognized $0.1 million and $1.4 million of revenue associated with these efforts, respectively. During the six months ended March 31, 2021 and 2020, the Company recognized $0.3 million and $2.1 million of revenue associated with these efforts, respectively. As of March 31, 2021, there were $0.3 million of contract assets recorded as accounts receivable and $0 of contract liabilities recorded as current deferred revenue on the Company’s Consolidated Balance Sheets.

The Company has evaluated the Takeda License Agreement in accordance with FASB Topic 606 - Revenue for Contracts from Customers, which became effective for the Company on October 1, 2018. At the inception of the Takeda License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibilities to complete the initial portion of the SEQUOIA study, to complete the ongoing Phase 2 AROAAT2002 study and to ensure certain manufacturing of ARO-AAT drug product is completed and delivered to Takeda (the “Takeda R&D Services”). Due to the specialized and unique nature of these Takeda R&D Services and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and, thus, one performance obligation. Beyond the Takeda R&D Services, Takeda will be responsible for managing future clinical development and commercialization. The Company will co-fund certain of the development and commercialization costs that Takeda manages, and these co-funding amounts will be offset against amounts owed to Arrowhead, either from milestones or royalties earned, or profits earned under the 50/50 profit sharing structure for U.S. commercialization.

The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories. Certain reclassifications have been made to prior-period operating expense categories to conform to the current period presentation. For purposes of comparison, the amounts for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ are shown in the tables below.

R&D expenses are related to the Company’s research and development efforts, and related program 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 operations at our research facilities in Madison, Wisconsin and San Diego, California, including facility costs and laboratory-related expenses. Salaries and stock compensation expense consist of salary, bonuses, payroll taxes and related benefits and stock compensation for our R&D personnel. Depreciation and amortization expense relates to depreciation on lab equipment and leasehold improvements at our ~~Madison~~ research ~~facility.~~ facilities. We do not separately track R&D expenses by individual research and development projects, including 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 for research and development activities. The following table provides details of research and development expenses for the periods indicated:

Three

Three

Months
Ended

% of
Expense

Months
Ended

% of
Expense

Increase (Decrease)

June 30, 2020

Category

June 30, 2019

Category

$

%

Salaries

$
4,861

15
%

$
3,456

18
%

$
1,405

41
%
Stock compensation

5,296

16
%

931

5
%

4,365

469
%
In Vivo studies

810

3
%

766

4
%

44

6
%
Drug manufacturing

6,607

20
%

4,907

25
%

1,700

35
%
Toxicity/efficacy studies

3,019

9
%

1,858

10
%

1,161

62
%
Clinical trials

6,129

19
%

4,310

22
%

1,819

42
%
License, royalty & milestones

-

0
%

-

0
%

-

N/A

Facilities related

1,209

4
%

652

3
%

557

85
%
Depreciation/amortization

1,382

4
%

998

5
%

384

38
%
Other R&D

3,260

10
%

1,414

7
%

1,846

131
%
Total

$
32,573

100
%

$
19,292

100
%

$
13,281

69
%

	Three					Three
	Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)
	March 31, 2021		Category			March 31, 2020		Category			$		%
Salaries	$	8,685		19	%	$	4,216		14	%	$	4,469		106	%
Facilities related		1,671		4	%		823		3	%		848		103	%
Candidate costs		20,667		46	%		15,716		53	%		4,951		32	%
R&D discovery costs		5,502		12	%		4,516		15	%		986		22	%
Total research and development expense, excluding non-cash expense		36,525		82	%		25,271		86	%		11,254		45	%
Stock compensation		6,406		14	%		2,953		10	%		3,453		117	%
Depreciation/amortization		1,766		4	%		1,219		4	%		547		45	%
Total research and development expense	$	44,697		100	%	$	29,443		100	%	$	15,254		52	%

Nine

Nine

Months
Ended

% of
Expense

Months
Ended

% of
Expense

Increase (Decrease)

June 30, 2020

Category

June 30, 2019

Category

$

%

Salaries

$
13,173

15
%

$
10,121

18
%

$
3,052

30
%
Stock compensation

9,411

11
%

2,453

4
%

6,958

284
%
In Vivo studies

2,557

3
%

1,661

3
%

896

54
%
Drug manufacturing

19,092

22
%

18,141

32
%

951

5
%
Toxicity/efficacy studies

9,142

11
%

6,679

12
%

2,463

37
%
Clinical trials

15,764

19
%

9,756

17
%

6,008

62
%
License, royalty & milestones

903

1
%

-

0
%

903

N/A

Facilities related

2,653

3
%

2,018

4
%

635

31
%
Depreciation/amortization

3,712

4
%

3,340

6
%

372

11
%
Other R&D

8,983

11
%

3,493

6
%

5,490

157
%
Total

$
85,390

100
%

$
57,662

100
%

$
27,728

48
%

	Six					Six
	Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)
	March 31, 2021		Category			March 31, 2020		Category			$		%
Salaries	$	16,857		21	%	$	8,312		16	%	$	8,545		103	%
Facilities related		3,150		4	%		1,444		3	%		1,706		118	%
Candidate costs		35,684		44	%		29,145		55	%		6,539		22	%
R&D discovery costs		10,213		13	%		7,471		14	%		2,742		37	%
Total research and development expense, excluding non-cash expense	$	65,904		81	%	$	46,372		88	%	$	19,532		42	%
Stock compensation		11,891		15	%		4,115		8	%		7,776		189	%
Depreciation/amortization		3,456		4	%		2,330		4	%		1,126		48	%
Total research and development expense	$	81,251		100	%	$	52,817		100	%	$	28,434		54	%

Salaries expense increased by ~~$1,405,000~~$4,469,000 from ~~$3,456,000~~$4,216,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$4,861,000~~$8,685,000 during the current period. Salaries expense increased by ~~$3,052,000~~$8,545,000 from ~~$10,121,000~~$8,312,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$13,173,000~~$16,857,000 during the current period. ~~The~~This increase ~~in the expense~~ is primarily due to an increase in R&D headcount that has occurred as the Company has expanded its pipeline of candidates.

Facilities expense increased by $848,000 from $823,000 during the three months ended March 31, 2020 to $1,671,000 during the current period. Facilities expense increased by $1,706,000 from $1,444,000 during the six months ended March 31, 2020 to $3,150,000 during the current period. This category includes rental costs for our research and development facilities in Madison, Wisconsin and San Diego, California. This increase is primarily due to the commencement of our sublease in San Diego, California in April 2020.

Candidate costs increased by $4,951,000 from $15,716,000 during the three months ended March 31, 2020 to $20,667,000 during the current period. Candidate costs increased by $6,539,000 from $29,145,000 during the six months ended March 31, 2020 to $35,684,000 during the current period. This increase is primarily due to the progression of our pipeline of candidates into and through clinical trials, which results in higher outsourced clinical trial, toxicity study and manufacturing costs. We anticipate these expenses to continue to increase as our pipeline of candidates grows and progresses to later phase clinical trials.

R&D discovery costs increased by $986,000 from $4,516,000 during the three months ended March 31, 2020 to $5,502,000 in the current period. R&D discovery costs increased by $2,742,000 from $7,471,000 during the six months ended March 31, 2020 to $10,213,000 in the current period. This increase is primarily due to the growth of our discovery efforts, including the addition of our research facility in San Diego. We anticipate this expense to continue to increase as we increase headcount to support our discovery efforts to identify new drug candidates.

Stock compensation expense, a non-cash expense, increased by ~~$4,365,000~~$3,453,000 from ~~$931,000~~$2,953,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$5,296,000~~$6,406,000 during the current period. Stock compensation expense, a non-cash expense, increased by ~~$6,958,000~~$7,776,000 from ~~$2,453,000~~$4,115,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$9,411,000~~$11,891,000 during the current period. Stock compensation expense is based upon the valuation of stock options and restricted stock units granted to employees, directors and certain consultants. Many variables affect the amount expensed, including the Company’s stock price on the date of the grant, as well as other assumptions. The increase in the expense in the current period is primarily due to the increased headcount discussed above and a mix of higher grant date fair values of awards amortizing during the ~~periods~~current period due to the Company’s stock price at the time of the grants.

In vivo studies expense increased by $44,000 from $766,000 during the three months ended June 30, 2019 to $810,000 during the current period. In vivo studies expense increased by $896,000 from $1,661,000 during the nine months ended June 30, 2019 to $2,557,000 during the current period. In vivo studies expense can vary depending on the stage of preclinical candidates, the nature and amount of testing required and the cost variation of different in vivo testing models. The increase in vivo studies expense is the result of the timing of discovery studies being completed between periods.

Drug manufacturing expense increased by $1,700,000 from $4,907,000 during the three months ended June 30, 2019 to $6,607,000 during the current period. Drug manufacturing expense increased by $951,000 from $18,141,000 during the nine months ended June 30, 2019 to $19,092,000 during the current period. The increase in the expense primarily relates to the timing of manufacturing campaigns in preparation for our candidate clinical trials and toxicology studies. We ~~anticipate this expense to increase as the volume of candidates in our pipeline increases and as each candidate progresses through clinical trial phases.~~

Toxicity/efficacy studies expense increased by $1,161,000 from $1,858,000 during the three months ended June 30, 2019 to $3,019,000 during the current period. Toxicity/efficacy studies expense increased by $2,463,000 from $6,679,000 during the nine months ended June 30, 2019 to $9,142,000 during the current period. This category includes IND-enabling toxicology studies as well as post-IND toxicology studies, such as long-term toxicology studies, and other efficacy studies. The change in the expense primarily relates to toxicology studies for ARO-ANG3, ARO-APOC3, ARO-HIF2 and ARO-HSD as each candidate progresses through and into clinical trials. We anticipate this expense to increase as we prepare to enter clinical trials with our other drug candidates.

Clinical trials expense increased by $1,819,000 from $4,310,000 during the three months ended June 30, 2019 to $6,129,000 during the current period. Clinical trials expense increased by $6,008,000 from $9,756,000 during the nine months ended June 30, 2019 to $15,764,000 during the current period. The increase in the expense is primarily due to the ongoing ARO-AAT and JNJ-3989 (ARO-HBV) clinical trials, the progression of the ARO-ANG3 and ARO-APOC3 clinical trials, and the start up of the ARO-HSD, ARO-HIF2 and ARO-ENaC clinical trials. We anticipate thisgenerally expect future stock compensation expense to increase as our ~~current~~headcount continues to increase to support our clinical ~~candidates progress through clinical trials and as we enter clinical trials with our other drug candidates.~~

License, royalty and milestones expense did not change from $0 during the three months ended June 30, 2019 to $0 during the current period. License, royalty and milestones expense increased by $903,000 from $0 during the nine months ended June 30, 2019 to $903,000 during the current period. This category includes milestone payments which can vary from period to period depending on the nature of our various license agreements, and the timing of reaching various development milestones requiring payment. During the nine months ended June 30, 2020, the Company accrued a $0.9 million milestone payment related to the progression of the ARO-ENaC program. During the nine months ended June 30, 2019, the Company did not accrue for any milestone payments.

Facilities expense increased by $557,000 from $652,000 during the three months ended June 30, 2019 to $1,209,000 during the current period. Facilities expense increased by $635,000 from $2,018,000 during the nine months ended June 30, 2019 to $2,653,000 during the current period. This category includes rental costs for our research and development facilities in Madison, Wisconsin and San Diego, California. The increase in the expense is primarily due the commencement of our sublease in San Diego, California in April 2020.pipeline.

Depreciation and amortization expense, a non-cash expense, increased by ~~$384,000~~$547,000 from ~~$998,000~~$1,219,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$1,382,000~~$1,766,000 during the current period. Depreciation and amortization expense, a non-cash expense, increased by ~~$372,000~~$1,126,000 from ~~$3,340,000~~$2,330,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$3,712,000~~$3,456,000 during the current period. The majority of depreciation and amortization expense relates to depreciation on lab equipment and leasehold improvements at our Madison research facility.

Other research expense increased by $1,846,000 from $1,414,000 during the three months ended June 30, 2019 to $3,260,000 during the current period. Other research expense increased by $5,490,000 from $3,493,000 during the nine months ended June 30, 2019 to $8,983,000 during the current period. This category includes the following costs to support discovery efforts and the advancement of current drug candidates: in-house laboratory supplies, outsourced labs services, and other miscellaneous research and development expenses. The increase in other research expense is due to additional in-house laboratory supplies for our increased headcount and partially due to equipment purchased for the new San Diego research and development facility.

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

	Three					Three										Three					Three
	Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)					Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)
	June 30, 2020		Category			June 30, 2019		Category			$		%			March 31, 2021		Category			March 31, 2020		Category			$			%
Salaries	$	2,633		25	%	$	1,241		26	%	$	1,392		112	%	$	3,257		20	%	$	3,033		19	%	$	224			7	%
Stock compensation		4,750		44	%		1,027		21	%		3,723		363	%
Professional/outside services		2,020		19	%		1,670		35	%		350		21	%		1,838		11	%		1,677		10	%		161			10	%
Facilities related		446		4	%		241		5	%		205		85	%		787		5	%		418		3	%		369			88	%
Other G&A																	1,355		8	%		1,026		6	%		329			32	%
Total general & administrative expense, excluding non-cash expense																	7,237		44	%		6,154		38	%		1,083			137	%
Stock compensation																	8,953		55	%		10,019		61	%		(1,066	)		-11	%
Depreciation/amortization		154		1	%		5		0	%		149		2980	%		156		1	%		153		1	%		3			2	%
Other G&A		746		7	%		625		13	%		121		19	%
Total	$	10,749		100	%	$	4,809		100	%	$	5,940		123	%
Total general & administrative expense																$	16,346		100	%	$	16,326		100	%	$	20			129	%

	Nine					Nine										Six					Six
	Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)					Months Ended		% of Expense			Months Ended		% of Expense			Increase (Decrease)
	June 30, 2020		Category			June 30, 2019		Category			$		%			March 31, 2021		Category			March 31, 2020		Category			$			%
Salaries	$	9,747		26	%	$	4,909		30	%	$	4,838		99	%	$	5,841		23	%	$	7,114		26	%	$	(1,273	)		-18	%
Stock compensation		18,099		48	%		4,824		30	%		13,275		275	%
Professional/outside services		5,519		15	%		4,252		26	%		1,267		30	%		3,820		15	%		3,499		13	%		321			9	%
Facilities related		1,657		4	%		803		5	%		854		106	%		1,517		6	%		1,211		4	%		306			25	%
Other G&A																	2,048		8	%		1,785		7	%		263			15	%
Total general & administrative expense, excluding non-cash expense																$	13,226		52	%	$	13,609		50	%	$	(383	)		-3	%
Stock compensation																	11,611		46	%		13,349		49	%		(1,738	)		-13	%
Depreciation/amortization		456		1	%		16		0	%		440		2750	%		310		2	%		302		1	%		8			3	%
Other G&A		2,531		7	%		1,484		9	%		1,047		71	%
Total	$	38,009		100	%	$	16,288		100	%	$	21,721		133	%
Total general & administrative expense																$	25,147		100	%	$	27,260		100	%	$	(2,113	)		-8	%

Salaries expense increased by ~~$1,392,000~~$224,000 from ~~$1,241,000~~$3,033,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$2,633,000~~$3,257,000 during the current period. Salaries expense ~~increased~~decreased by ~~$4,838,000~~$1,273,000 from ~~$4,909,000~~$7,114,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$9,747,000~~$5,841,000 during the current period. The increase of $224,000 during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 is due to an increase in headcount. The decrease of $1,273,000 during the ~~expense~~six months ended March 31, 2021 as compared to the six months ended March 31, 2020 is primarily ~~driven by~~due to higher annual ~~merit increases,~~ performance bonuses awarded in December 2019. We expect salaries expense to increase as our headcount continues to increase to support our expanding clinical pipeline.

Professional/outside services include legal, accounting, consulting, patent expenses, business insurance expenses and other outside services retained by the Company. Professional/outside services expense increased ~~headcount.~~ by $161,000 from $1,677,000 during the three months ended March 31, 2020 to $1,838,000 during the current period. Professional/outside services expense increased by $321,000 from $3,499,000 during the six months ended March 31, 2020 to $3,820,000 during the current period. The increase is primarily related to increased consulting costs.

Facilities-related expense increased by $369,000 from $418,000 during the three months ended March 31, 2020 to $787,000 during the current period. Facilities-related expense increased by $306,000 from $1,211,000 during the six months ended March 31, 2020 to $1,517,000 during the current period. This category primarily includes rental costs for our corporate headquarters in Pasadena, California. The increase is due to increased communication and technology costs as the Company’s headcount continues to grow.

Other G&A expense increased by $329,000 from $1,026,000 during the three months ended March 31, 2020 to $1,355,000 during the current period. Other G&A expense increased by $263,000 from $1,785,000 during the six months ended March 31, 2020 to $2,048,000 during the current period. This category consists primarily of travel, communication and technology, office expenses, and franchise and property tax expenses. The increase is due to an increase in headcount at the Company’s corporate headquarters.

Stock compensation expense, a non-cash expense, ~~increased~~decreased by ~~$3,723,000~~$1,066,000 from ~~$1,027,000~~$10,019,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$4,750,000~~$8,953,000 during the current period. Stock compensation expense, a non-cash expense, ~~increased~~decreased by ~~$13,275,000~~$1,738,000 from ~~$4,824,000~~$13,349,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$18,099,000~~$11,611,000 during the current period. Stock compensation expense is based upon the valuation of stock options and restricted stock units granted to employees, directors and certain consultants. Many variables affect the amount expensed, including the Company’s stock price on the date of the grant, as well as other assumptions. ~~The~~We generally expect future stock compensation expense to increase ~~in expense is primarily due~~as our headcount continues to ~~the timing of the achievement of certain performance-based awards in each period and a mix of higher grant date fair values of awards amortizing during the periods due~~increase to ~~the Company’s stock price at the time of the grants.~~

Professional/outside services include legal, accounting, consulting, patent expenses, business insurance expenses and other outside services retained by the Company. Professional/outside services expense increased by $350,000 from $1,670,000 during the three months ended June 30, 2019 to $2,020,000 during the current period. Professional/outside services expense increased by $1,267,000 from $4,252,000 during the nine months ended June 30, 2019 to $5,519,000 during the current period. The increases in the expense in the three and nine month periods are primarily related certain patent-related expenses.

Facilities-related expense increased by $205,000 from $241,000 during the three months ended June 30, 2019 to $446,000 during the current period. Facilities-related expense increased by $854,000 from $803,000 during the nine months ended June 30, 2019 to $1,657,000 during the current period. This category primarily includes rental costs forsupport our ~~corporate headquarters in Pasadena, California. The increase in the expense is primarily related to costs incurred as we moved into our new corporate headquarters during the current period.~~clinical pipeline.

Depreciation and amortization expense, a noncash expense, increased by ~~$149,000~~$3,000 from ~~$5,000~~$153,000 during the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$154,000~~$156,000 during the current period. Depreciation and amortization expense, a noncash expense, increased by ~~$440,000~~$8,000 from ~~$16,000~~$302,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 to ~~$456,000~~$310,000 during the current period. The increase ~~in the expense~~ is primarily related to amortization of leasehold improvements for our ~~new~~ corporate headquarters.

Other income/expense ~~increased by $121,000 from $625,000~~was income of $2,405,000 during the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$746,000~~income of $1,414,000 during the current period. Other ~~G&A~~ income/expense ~~increased by $1,047,000 from $1,484,000~~was income of $4,585,000 during the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$2,531,000~~income of $4,735,000 during the current period. This category consists primarily of travel, communication and technology, office expenses, and franchise and property tax expenses. The increase in the expense was due to increased communication and technology and office expenses associated with our new corporate headquarters.

Other income / expense was income of $2,334,649 and $1,739,959 during the three months ended June 30, 2020 and 2019, respectively. Other income / expense was income of $6,919,200 and $4,717,359 during the nine months ended June 30, 2020 and 2019, respectively. Other income / expense in the both periods wasis primarily related to interest income ~~earned~~and realized and unrealized gain/loss on ~~the Company’s investments. This interest income has increased in the current periods as~~ our ~~investment holdings have grown.~~ marketable securities.

Arrowhead has historically financed its operations through the sale of its equity securities. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure in the future.

At ~~June 30, 2020,~~March 31, 2021, the Company had cash on hand of approximately ~~$219.3~~$372.4 million as compared to ~~$221.8~~$143.6 million at September 30, ~~2019. Excess cash~~2020. Cash invested in short-term fixed income securities and marketable securities was ~~$67.7~~$204.9 million at ~~June 30, 2020,~~March 31, 2021, compared to ~~$36.9~~$171.9 million at September 30, ~~2019. Excess cash~~2020. Cash invested in long-term fixed income securities was ~~$177.5~~$97.5 million at ~~June 30, 2020,~~March 31, 2021, compared to ~~$44.2~~$137.5 million at September 30, ~~2019.~~2020. The Company also entered into an Open Market Sale Agreement (the “ATM agreement”) in August 2020, 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. As of March 31, 2021, no shares have been issued under the ATM agreement. The Company believes its current financial resources are sufficient to fund its operations through at least the next twelve months.

A summary of cash flows for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as follows:

During the ~~nine~~six months ended ~~June 30,~~March 31, 2021, cash flow provided by operating activities was $225.0 million, which was primarily due to the $300 million payment received under the Takeda License Agreement, partially offset by ongoing expenses of the Company’s research and development programs and general and administrative expenses. Cash used in investing activities was $3.9 million, which was primarily related to the purchase of property and equipment of $11.4 million, partially offset by the net sales of investments of $7.5 million. Cash provided by financing activities of $7.7 million was related to cash received from stock option exercises.

During the six months ended March 31, 2020, the Company used ~~$84.5~~$51.1 million in cash from operating activities, which was primarily related to the ongoing expenses of the Company’s research and development programs and general and administrative expenses. Cash used in investing activities was ~~$174.9~~$168.8 million, which was primarily related to the purchase of fixed-income investments of ~~$194.0~~$180.5 million and property and equipment of ~~$10.1~~$7.9 million, partially offset by ~~maturities~~the maturity of $19.6 million of fixed-income ~~securities of $29.1 million.~~securities. Cash provided by financing activities of ~~$256.9~~$254.8 million was driven by the Company’s securities financing in December 2019, which generated $250.5 million in net cash proceeds, as well as ~~$6.5~~$4.3 million in cash received from stock option exercises.

During the nine months ended June 30, 2019, the Company generated $159.2 million in cash from operating activities, which was primarily related to the $175.0 million upfront payment and the $25.0 million milestone payment received from Janssen, and the premium JJDC paid on the Company’s common stock during the period. These inflows were partially offset by approximately $55 million of cash used for the ongoing expenses of the Company’s research and development programs and general and administrative expenses. Cash used in investing activities was $64.6 million, which was primarily related to purchases of fixed-income investments of $90.3 million partially offset by maturities of fixed-income investments of $30.0 million. Cash provided by financing activities of $64.5 million was driven by the equity investment the Company received from JJDC during the period.

We do not have any off-balance sheet ~~arrangements or relationships.~~arrangements.

There has been no material change in our exposure to market risk from that described in Item 7A of our Annual Report on Form 10-K for the year ended September 30, ~~2019.~~2020.

Our Chief Executive Officer and our Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e)) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer where appropriate, to allow timely decisions regarding required disclosure.

No change in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings, particularly complex legal proceedings, cannot be predicted with any certainty. We disclosed information about certain of our legal proceedings in Part I, Item 3 of our Annual Report on Form 10-K for the year ended September 30, ~~2019.~~2020.

~~The disclosure below supplements~~There have been no material changes to the risk factors ~~described~~included in our Annual Report on Form 10-K for the year ended September 30, ~~2019.~~2020. Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, ~~2019,~~2020, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price of shares of our Common Stock. Additional risks not currently known or currently material to us may also harm our business.

~~Our results of operations and financial condition may be adversely affected by the novel coronavirus (COVID-19) pandemic and other public health epidemics.~~

Our business and its operations, including but not limited to our research and development activities and our supply chain, could be adversely affected by health epidemics in regions where we have business operations, and such health epidemics could cause significant disruption in the operations of third parties upon whom we rely. In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to other countries, including the United States, and has been declared a pandemic by the World Health Organization. In response to public health directives and orders related to COVID-19, we have implemented work-from-home policies for substantially all of our employees to the extent work can be performed effectively at home. The effects of executive and similar government orders, shelter-in-place orders and our work-from-home policies may negatively impact our productivity, disrupt our business, increase our expenses, including costs associated with preventive and precautionary measures that we, companies with which we conduct business, and governments are taking, and delay our clinical trials and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, results of operations and financial condition.

Quarantines, shelter-in-place, executive and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, have impacted and may continue to impact personnel at our business partners in the United States and other countries, or our access to raw materials for our research and development facility discovery efforts, which would disrupt our supply chain.

In addition, our clinical trials have been and may continue to be affected by the COVID-19 pandemic. For example, during fiscal year 2020, we temporarily paused enrollment in our two ARO-AAT studies: SEQUOIA and the ARO-AAT 2002 study. As of June 30, 2020, enrollment in both of these studies has resumed. Additional delays have occurred in the Company’s earlier stage programs, but we do not expect a material impact to any program’s anticipated timelines. Several of the Company’s other clinical candidates are in the start-up stage (ARO-HSD, ARO-HIF2 and ARO-ENaC), during which significant clinical costs will continue to be incurred. If COVID-19 continues to spread in the United States and elsewhere, we may experience additional disruptions that could severely impact our business, preclinical studies and clinical trials, including:

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by COVID-19, and the duration of such impact, may be difficult to assess or predict, the widespread pandemic has resulted in significant disruption of global financial markets, which could reduce our ability to access capital and negatively affect our future liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 and related government orders and restrictions could materially affect our business and the value of our common stock.

The COVID-19 pandemic continues to evolve rapidly. The ultimate impact of the COVID-19 pandemic or a similar public health emergency is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems, or the global economy as a whole. However, any one or a combination of these events could have an adverse effect on our results of operations and financial condition.

Effective August 5, 2020, we entered into an Open Market Sale Agreement (the “ATM Agreement”), pursuant to which we may, from time to time, sell up to $250,000,000 in shares of our common stock through Jefferies, acting as the sales agent and/or principal, in an ATM Offering. We are not required to sell shares under the ATM Agreement. We will pay Jefferies a commission of up to 3.0% of the aggregate gross proceeds we receive from all sales of our common stock under the ATM Agreement. Unless otherwise terminated, the ATM Agreement continues until the earlier of selling all shares available under the ATM Agreement or December 2, 2022. No sales have been made under the ATM Agreement.

The ATM Offering is being made under a prospectus supplement filed on August 5, 2020, and related prospectus filed with the SEC pursuant to our automatically effective shelf registration statement on Form S-3 (File No. 333-235324), filed with the SEC on December 2, 2019.

A copy of the ATM Agreement is attached as Exhibit 1.1 to this Quarterly Report. The foregoing description of the ATM Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 1.1. A copy of the opinion of Gibson, Dunn & Crutcher LLP relating to the validity of the securities issued in the ATM Offering is filed as Exhibit 5.1 to this Quarterly Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		46-0408024
(State of incorporation)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.001 per share		ARWR		The Nasdaq Global Select Market


~~Securities registered pursuant to Section 12(b) of the Act:~~
~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, Par Value $0.001 per share~~	~~ARWR~~	~~The Nasdaq Global Select Market~~

	Page(s)
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS ~~(unaudited)~~	1

Consolidated Balance Sheets	1

Consolidated Statements of Operations and Comprehensive Income ~~(Loss~~(Loss))	2

Consolidated ~~Statement~~Statements of Stockholders’ Equity	3

Consolidated Statements of Cash Flows	4

Notes to Consolidated Financial Statements	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1516

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2425

ITEM 4. CONTROLS AND PROCEDURES	2425

PART II — OTHER INFORMATION	26

ITEM 1. LEGAL PROCEEDINGS	2526

ITEM 1A. RISK FACTORS	2526

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	26

ITEM 4. MINE SAFETY DISCLOSURES	26

ITEM 5. OTHER INFORMATION	26

ITEM 6. EXHIBITS	2827

SIGNATURE	2928

							March 31, 2021			September 30, 2020
	June 30, 2020			September 30, 2019			(In thousands)
Computers, office equipment and furniture	$	661,927		$	637,577		$	1,022		$	662
Research equipment		19,514,871			12,932,304			23,894			20,654
Software		293,189			147,254			599			631
Leasehold improvements		24,883,656			21,579,415			33,107			25,238
Total gross fixed assets		45,353,643			35,296,550			58,622			47,185
Less: Accumulated depreciation and amortization		(14,963,936	)		(12,081,651	)		(19,222	)		(16,304	)
Property and equipment, net	$	30,389,707		$	23,214,899		$	39,400		$	30,881

	(unaudited) June 30, 2020			September 30, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	219,322,617		$	221,804,128
Accounts receivable		21,692,564			661,361
Prepaid expenses		4,096,473			3,317,999
Other current assets		2,411,937			2,563,435
Short term investments		67,709,263			36,899,894
TOTAL CURRENT ASSETS		315,232,854			265,246,817
Property and equipment, net		30,389,707			23,214,899
Intangible assets, net		15,788,258			17,063,580
Long term investments		177,529,881			44,175,993
Right-of-use assets		16,522,013			-
Other assets		265,359			144,148
TOTAL ASSETS	$	555,728,072		$	349,845,437
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	4,073,869		$	7,649,921
Accrued expenses		9,414,696			6,504,729
Accrued payroll and benefits		1,991,001			4,955,887
Lease liabilities		1,011,951			-
Deferred rent		-			173,952
Deferred revenue		26,274,362			77,769,629
Other current liabilities		17,262			16,561
TOTAL CURRENT LIABILITIES		42,783,141			97,070,679
LONG-TERM LIABILITIES
Lease liabilities, net of current portion		20,359,726			-
Deferred rent, net of current portion		-			3,703,364
Deferred revenue, net of current portion		-			5,035,142
TOTAL LONG-TERM LIABILITIES		20,359,726			8,738,506
Commitments and contingencies (Note 7)
STOCKHOLDERS’ EQUITY
Arrowhead Pharmaceuticals, Inc. stockholders' equity:
Common stock, $0.001 par value; 145,000,000 shares authorized; 102,250,872 and 95,506,271 shares issued and outstanding as of June 30, 2020 and September 30, 2019, respectively		194,620			187,876
Additional paid-in capital		948,532,470			664,086,155
Accumulated other comprehensive income (loss)		(175,219	)		(391,624	)
Accumulated deficit		(455,411,478	)		(419,290,967	)
Total Arrowhead Pharmaceuticals, Inc. stockholders' equity		493,140,393			244,591,440
Noncontrolling interest		(555,188	)		(555,188	)
TOTAL STOCKHOLDERS’ EQUITY		492,585,205			244,036,252
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	555,728,072		$	349,845,437

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
REVENUE	$	27,375,778		$	42,696,636		$	80,359,211		$	125,502,807
OPERATING EXPENSES
Research and development		32,573,134			19,291,710			85,390,086			57,662,381
General and administrative expenses		10,748,506			4,809,177			38,008,836			16,287,841
TOTAL OPERATING EXPENSES		43,321,640			24,100,887			123,398,922			73,950,222
OPERATING INCOME (LOSS)		(15,945,862	)		18,595,749			(43,039,711	)		51,552,585
OTHER INCOME (EXPENSE)
Interest income (expense), net		2,334,649			1,739,959			6,919,200			4,717,359
TOTAL OTHER INCOME (EXPENSE)		2,334,649			1,739,959			6,919,200			4,717,359
INCOME (LOSS) BEFORE INCOME TAXES		(13,611,213	)		20,335,708			(36,120,511	)		56,269,944
Provision for income taxes		-			-			-			-
NET INCOME (LOSS)		(13,611,213	)		20,335,708			(36,120,511	)		56,269,944
NET INCOME (LOSS) PER SHARE - BASIC	$	(0.13	)	$	0.21		$	(0.36	)	$	0.60
NET INCOME (LOSS) PER SHARE - DILUTED	$	(0.13	)	$	0.21		$	(0.36	)	$	0.58
Weighted average shares outstanding - basic		101,843,436			94,935,471			100,184,216			93,364,102
Weighted average shares outstanding - diluted		101,843,436			98,884,744			100,184,216			97,814,019
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		453,895			(31,172	)		216,405			(81,514	)
COMPREHENSIVE INCOME (LOSS)	$	(13,157,318	)	$	20,304,536		$	(35,904,106	)	$	56,188,430

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at March 31, 2019		94,665,718	$	187,035	$	652,411,876		$	(71,906	)	$	(451,331,580	)	$	(555,188	)	$	200,640,237
Stock-based compensation		-		-		1,957,993			-			-			-			1,957,993
Exercise of stock options		541,919		542		2,766,732			-			-			-			2,767,274
Foreign currency translation adjustments		-		-		-			(31,172	)		-			-			(31,172	)
Net income (loss) for the three months ended June 30, 2019		-		-		-			-			20,335,708			-			20,335,708
Balance at June 30, 2019		95,207,637	$	187,577	$	657,136,601		$	(103,078	)	$	(430,995,872	)	$	(555,188	)	$	225,670,040

	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at March 31, 2020		101,748,107	$	194,117	$	936,353,920		$	(629,114	)	$	(441,800,265	)	$	(555,188	)	$	493,563,470
Stock-based compensation		-		-		10,046,208			-			-			-			10,046,208
Exercise of stock options		302,765		303		2,132,542			-			-			-			2,132,845
Common stock - restricted stock units vesting		200,000		200		(200	)		-			-			-			-
Foreign currency translation adjustments		-		-		-			453,895			-			-			453,895
Net income (loss) for the three months ended June 30, 2020		-		-		-			-			(13,611,213	)		-			(13,611,213	)
Balance at June 30, 2020		102,250,872	$	194,620	$	948,532,470		$	(175,219	)	$	(455,411,478	)	$	(555,188	)	$	492,585,205


	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at September 30, 2018		88,505,302	$	180,875	$	582,902,694		$	(21,564	)	$	(487,265,816	)	$	(555,188	)	$	95,241,001
Stock-based compensation		-		-		7,276,875			-			-			-			7,276,875
Exercise of stock options		1,244,161		1,244		6,440,761			-			-			-			6,442,005
Common stock - restricted stock units vesting		2,197,305		2,197		(2,197	)		-			-			-			-
Common stock - issued for cash		3,260,869		3,261		60,518,468			-			-			-			60,521,729
Foreign currency translation adjustments		-		-		-			(81,514	)		-			-			(81,514	)
Net income (loss) for the nine months ended June 30, 2019		-		-		-			-			56,269,944			-			56,269,944
Balance at June 30, 2019		95,207,637	$	187,577	$	657,136,601		$	(103,078	)	$	(430,995,872	)	$	(555,188	)	$	225,670,040


	Common Stock		Amount ($)		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non-controlling Interest			Totals
Balance at September 30, 2019		95,506,271	$	187,876	$	664,086,155		$	(391,624	)	$	(419,290,967	)	$	(555,188	)	$	244,036,252
Stock-based compensation		-		-		27,509,663			-			-			-			27,509,663
Exercise of stock options		989,197		989		6,463,433			-			-			-			6,464,422
Common stock - restricted stock units vesting		1,155,404		1,155		(1,155	)		-			-			-			-
Common stock - issued for cash		4,600,000		4,600		250,474,374			-			-			-			250,478,974
Foreign currency translation adjustments		-		-		-			216,405			-			-			216,405
Net income (loss) for the nine months ended June 30, 2020		-		-		-			-			(36,120,511	)		-			(36,120,511	)
Balance at June 30, 2020		102,250,872	$	194,620	$	948,532,470		$	(175,219	)	$	(455,411,478	)	$	(555,188	)	$	492,585,205

Held to Maturity									As of March 31, 2021
	As of June 30, 2020								(In thousands)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial notes (due within one year)	$	67,709,263	$	1,188,416	$	—	$	68,897,679	$	79,148	$	887	$	-		$	80,035
Commercial notes (due within one through three years)	$	177,529,881	$	5,845,177	$	(14,833)	$	183,360,225	$	97,490	$	2,655	$	(66	)	$	100,079
Total	$	245,239,144	$	7,033,593	$	(14,833)	$	252,257,904‬	$	176,638	$	3,542	$	(66	)	$	180,114

									As of September 30, 2020
									(In thousands)
									Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial notes (due within one year)									$	86,890	$	1,590	$	-		$	88,480
Commercial notes (due within one through three years)									$	137,487	$	4,573	$	(79	)	$	141,981
Total									$	224,377	$	6,163	$	(79	)	$	230,461

	As of September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial notes (due within one year)	$	36,899,894	$	222,584	$	—	$	37,122,478
Commercial notes (due within one through three years)	$	44,175,993	$	875,258	$	—	$	45,051,251
Total	$	81,075,887	$	1,097,842	$	—	$	82,173,729

	Intangible assets subject to amortization			Intangible assets subject to amortization
Balance at September 30, 2019	$	17,063,580
				(in thousands)
Balance at September 30, 2020				$	15,363
Impairment		—			-
Amortization		(1,275,322	)		(850	)
Balance at June 30, 2020	$	15,788,258
Balance at March 31, 2021				$	14,513

2020 (remainder of fiscal year)	$	681,214
2021		3,091,900
			(in thousands)
2021 (remainder of fiscal year)			$	1,740
2022		3,853,290		4,522
2023		3,406,754		4,624
2024		3,269,674		4,523
2025 and thereafter		18,689,588
Total lease payments		32,992,420
2025				4,649
2026 and thereafter				17,421
Total			$	37,479
Less imputed interest		(11,620,743)	$	(13,679	)
Total operating lease liabilities (includes current portion)	$	21,371,677	$	23,800

2020	$	1,521,451
2021		2,256,379
2022		2,521,446
2023		2,590,558
2024		2,661,512
2025 and thereafter		10,834,206
Total	$	22,385,552

	Number of Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value		Number of Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance At September 30, 2019		4,773,670		$	8.16
Balance at September 30, 2020										4,539,403		$	16.67
Granted		787,500		50.42						168,000		65.41
Cancelled		(42,409	)	25.04						(108,149	)	28.85
Exercised		(989,197	)	6.54						(819,668	)	9.44
Balance At June 30, 2020		4,529,564		$	15.71	6.2 years	$	133,654,814
Exercisable At June 30, 2020		2,928,765		$	7.66	4.8 years	$	104,700,213
Balance at March 31, 2021										3,779,586		$	20.06	6.1 years	$	175,292,764
Exercisable at March 31, 2021										2,426,786		$	10.64	4.8 years	$	135,141,412

	Number of RSUs			Weighted- Average Grant Date Fair Value		Number of RSUs			Weighted- Average Grant Date Fair Value
Unvested at September 30, 2019		2,062,833		$	9.43
Unvested at September 30, 2020							3,524,025		$	44.11
Granted		2,486,646			57.04		1,442,950			75.54
Vested		(1,155,404	)		9.65		(823,575	)		30.11
Forfeited		(67,000	)		31.78		(289,250	)		39.14
Unvested at June 30, 2020		3,327,075		$	44.49
Unvested at March 31, 2021							3,854,150		$	59.24

									Level 1		Level 2		Level 3		Total
	Level 1		Level 2		Level 3		Total		(in thousands)
Cash and cash equivalents	$	219,322,617	$	—	$	—	$	219,322,617	$	372,377	$	-	$	-	$	372,377
Short-term investments	$	68,897,679	$	—	$	—	$	68,897,679
Long-term investments	$	183,360,225	$	—	$	—	$	183,360,225
Marketable securities									$	125,793	$	-	$	-	$	125,793
Short-term investments (held to maturity)									$	-	$	80,035	$	-	$	80,035
Long-term investments (held to maturity)									$	-	$	100,079	$	-	$	100,079
Contingent consideration	$	—	$	—	$	—	$	—	$	-	$	-	$	-	$	-

	Three Months Ended		Three Months Ended
	June 30, 2020		June 30, 2019
Revenue	$	27,375,778	$	42,696,636
Operating Income (Loss)		(15,945,862)		18,595,749
Net Income (Loss)		(13,611,213)		20,335,708
Net Income (Loss) per Share (Diluted)	$	(0.13)	$	0.21

	Nine Months Ended		Nine Months Ended
	June 30, 2020		June 30, 2019
Revenue	$	80,359,211	$	125,502,807
Operating Income (Loss)		(43,039,711)		51,552,585
Net Income (Loss)		(36,120,511)		56,269,944
Net Income (Loss) per Share (Diluted)	$	(0.36)	$	0.58


	Nine Months Ended June 30, 2020			Nine Months Ended June 30, 2019
Cash Flow from Continuing Operations:
Operating Activities	$	(84,541,545	)	$	159,225,017
Investing Activities		(174,883,363)			(64,575,067	)
Financing Activities		256,943,397			64,548,584
Net Increase (Decrease) in Cash		(2,481,511)			159,198,534
Cash and Cash Equivalents at Beginning of Period		221,804,128			30,133,213
Cash and Cash Equivalents at End of Period	$	219,322,617		$	189,331,747

	Six Months Ended			Six Months Ended
	March 31, 2021			March 31, 2020
	(in thousands)
Cash Flow from:
Operating Activities		224,951			(51,115	)
Investing Activities		(3,892	)		(168,849	)
Financing Activities		7,735			254,811
Net Increase (decrease) in cash and cash equivalents		228,794			34,847
Cash and cash equivalents at beginning of period		143,583			221,804
Cash and cash equivalents at end of period		372,377			256,651

Exhibit Number		Document Description

~~1.1~~10.1		~~Open Market Sale Agreement, dated as of August 5, 2020, by and between~~ Arrowhead Pharmaceuticals, Inc. and Jefferies LLC*2021 Incentive Plan (Incorporated by reference from Exhibit A of the Company’s Definitive Proxy Statement on Schedule 14A filed on January 28, 2021)
31.1
~~5.1~~		Opinion of Gibson, Dunn, and Crutcher, LLP*

~~31.1~~		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.INS 101.SCH		Inline XBRL Instance Document Inline XBRL Taxonomy Extension Schema Document*

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*

104		The cover page from ~~the Company’s~~this Quarterly Report on Form 10-Q, ~~for the quarter ended June 30, 2020,~~ formatted in Inline XBRL (included as Exhibit 101)*

ARROWHEAD PHARMACEUTICALS, INC.

By:		/s/ Kenneth A. Myszkowski
		Kenneth A. Myszkowski	Chief Financial Officer
	~~Chief~~	(Principal Financial Officer and Duly Authorized Officer)

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