UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant   ☒                             Filed by a Party other than the Registrant   ☐

Check the appropriate box:

ARROWHEAD PHARMACEUTICALS, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of filing fee (Check the appropriate box):

ARROWHEAD PHARMACEUTICALS, INC.

225 SOUTH LAKE AVENUE, SUITE 1050

PASADENA, CALIFORNIA 91101

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON TUESDAYFRIDAY, MARCH 21, 201716, 2018

TO THE STOCKHOLDERS OF ARROWHEAD PHARMACEUTICALS, INC.:

NOTICE IS HEREBY GIVEN that the 20172018 Annual Meeting of Stockholders of Arrowhead Pharmaceuticals, Inc., a Delaware corporation (the “Company”), will be held on Tuesday,Friday, March 21, 2017,16, 2018, at 10:00 a.m., localPacific time at(the “Annual Meeting”). This year’s meeting will be a completely “virtual” meeting of stockholders. You can attend the Sheraton Pasadena, 303 E. Cordova Street, Pasadena, California 91101,Annual Meeting online, vote your shares electronically, and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/ARWR2018. Prior to the Annual Meeting, you will be able to vote atwww.proxyvote.com for the purpose of considering and voting upon the following purposes:proposals:

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Proposal No. 1 relates solely to the election of the fivesix directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including, without limitation, the election of directors nominated by any stockholder of the Company.

All stockholders of record are cordially invited to attend the Annual Meeting in person.by visiting www.virtualshareholdermeeting.com/ARWR2018. We anticipate that on or about February 3, 2017,2, 2018, we will mail our stockholders a Notice Regarding the Availability of Proxy Materials (the “Notice of Internet Availability”) containing instructions on how to access our 20172018 Proxy Statement and 20162017 Annual Report on Form10-K and to vote online. You will need to have your16-digit Control Number included on your Notice of Internet Availability or your proxy card (if you received a printed copy of the proxy materials) to join the Annual Meeting.

If you prefer to receive paper copies of our proxy materials, please follow the instructions included in the Notice of Internet Availability. To ensure your representation at the meeting, you are urged to vote via the Internet or telephone as instructed in the Notice of Internet Availability, or to mark, sign, date and return the proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose. Any stockholder of record attending the Annual Meeting may vote in personat the Annual Meeting even if such stockholder has previously returned a proxy. Each shareholderstockholder may appoint only one proxy holder to attend the Annual Meeting on his or her behalf. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

Your vote is important, whether or not you expect to attend the Annual Meeting of Stockholders. Stockholders of record are urged to vote via the Internet or telephone as instructed, or if you are voting by mail, to mark, sign and date and promptly return the proxy in the postage-prepaid return envelope provided.

Voting promptly will help avoid the additional expense of further solicitation to assure a quorum at the meeting.

Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on Tuesday,Friday, March 21, 2017:16, 2018:

You may access the following proxy materials at www.virtualshareholdermeeting.com/ARWR2018www.edocumentview.com/ARWR

Notice of the 20172018 Annual Meeting of Stockholders;

Company’s 20172018 Proxy Statement;

Company’s Annual Report on Form10-K for the year ended September 30, 2016;2017; and

Form of Proxy Card

ARROWHEAD PHARMACEUTICALS, INC.

225 South Lake Avenue, Suite 1050

Pasadena, California 91101

(626)304-3400

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON TUESDAY,FRIDAY, MARCH 21, 201716, 2018

GENERAL INFORMATION CONCERNING SOLICITATION AND VOTING

The enclosed Proxy is solicited on behalf of Arrowhead Pharmaceuticals, Inc. (the “Company” or “Arrowhead”) for use at the 20172018 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday,Friday, March 21, 201716, 2018 at 10:00 a.m., localPacific time, and at any adjournment(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders (the “Notice”). TheThis year’s meeting will be a completely “virtual” meeting of stockholders. You can attend the Annual Meeting online, vote your shares electronically, and submit your questions during the Annual Meeting, by visiting www.virtualshareholdermeeting.com/ARWR2018. You will be held atneed to have your16-digit Control Number included on your Notice Regarding the Sheraton Pasadena, 303 E. Cordova Street, Pasadena, CA 91101.Availability of Proxy Materials (“the Notice of Internet Availability”) or your proxy card (if you received a printed copy of the proxy materials) to join the Annual Meeting.

The Company anticipates that the Notice Regarding the Availability of Proxy Materials (the “Notice of Internet Availability”)Availability in connection with these proxy solicitation materials will first be mailed on or about February 3, 20172, 2018 to all stockholders entitled to vote at the Annual Meeting and we will post our proxy materials on the website referenced in the Notice of Internet Availability. As more fully described in the Notice of Internet Availability, all stockholders may choose to access our proxy materials on the website referred to in the Notice of Internet Availability or may request to receive a printed set of our proxy materials.

Record Date

Only holders of record of our common stock at the close of business on January 27, 201723, 2018 (the “Record Date”) are entitled to notice of the Annual Meeting and to vote at the Annual Meeting. On that date, the Company had outstanding 74,569,70686,787,566 shares of common stock (“Common Stock”).

Revocability of Proxies

Any proxy given by a stockholder of record pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Secretary of the Company, at or before the taking of the vote at the Annual Meeting, a written notice of revocation or a duly executed proxy bearing a later date or by attending the Annual Meeting and voting in person. Stockholders may also revoke their proxy by entering a new vote over the Internet or by telephone.

Voting and Solicitation

Each share of the Company’s Common Stock is entitled to one vote on all matters presented at the Annual Meeting. Stockholders do not have the right to cumulate their votes in the election of directors. Shares of Common Stock represented by properly executed proxies will, unless such proxies have been previously revoked, be voted in accordance with the instructions indicated thereon. In the absence of specific instructions to the contrary, properly executed proxies will be voted FOR all matters submitted to a vote of stockholders at the Annual Meeting pursuant to this proxy statement. No business other than that set forth in the accompanying Notice of Annual Meeting of Stockholders is expected to come before the Annual Meeting. Should any other matter requiring a vote of stockholders properly arise, the persons named in the enclosed form of proxy will vote such proxy in accordance with the recommendation of the Board of Directors (the “Board”).

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If you will not be able to attend the Annual Meeting to vote in person, you may vote your shares via the Internet or by telephone or by mail as set forth in the Notice.

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The Company has engaged a proxy solicitor, Alliance Advisors, LLC, to encourage voting by our stockholders. It is estimated that the total cost for the solicitation campaign will be approximately $10,000. Proxies may also be solicited by certain of the directors, officers and employees of the Company, without additional compensation. The Company will bear the costs of solicitation. In addition, the Company expects to reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners.

If your shares are held in street name, the voting instruction form sent to you by your broker, bank or other nominee should indicate whether the institution has a process for beneficial holders to provide voting instructions over the Internet or by telephone. A number of banks and brokerage firms participate in a program that also permits stockholders whose shares are held in street name to direct their vote over the Internet or by telephone. If your bank or brokerage firm gives you this opportunity, the voting instructions from the bank or brokerage firm that accompany this proxy statement will tell you how to use the Internet or telephone to direct the vote of shares held in your account. If your voting instruction form does not include Internet or telephone information, please complete and return the voting instruction form in the self-addressed, postage-paid envelope provided by your broker. Stockholders who vote by proxy over the Internet or by telephone need not return a proxy card or voting instruction form by mail.

Quorum; Abstentions; BrokerNon-Votes

The required quorum for the transaction of business at the Annual Meeting is a majority of the votes eligible to be cast by holders of shares of Common Stock issued and outstanding on the Record Date. Shares that are voted “FOR,” “AGAINST” or “ABSTAIN” on a matter are treated as being present at the meeting for purposes of establishing a quorum with respect to such matter. For certain proposals, brokers may not have discretionary authority to vote on a particular matter if they have not received specific instructions from the beneficial owner of the shares (“brokernon-votes”). In accordance with the rules of Nasdaq, banks, brokerage firms and other nominees who hold Arrowhead shares in street name for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect tonon-routine matters, such as Proposal Nos. 1 and 2 described in this proxy statement. Absent instruction from you, however, your broker can, using its voting discretion, vote on the proposal to ratify the selection of Rose, Snyder & Jacobs LLP as Arrowhead’s independent auditor for the fiscal year ending September 30, 2017.2018. Shares subject to a brokernon-vote will be counted as present for the purpose of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting; the effect of abstentions and brokernon-votes on the proposals presented herein is discussed below.

With regard to the election of directors, votes may be cast in favor of a director nominee or withheld. Because directors are elected by plurality, abstentions from voting and brokernon-votes will be entirely excluded from the vote and will have no effect on its outcome. If a quorum is present at the meeting, the nominees receiving the greatest number of votes, up to fivesix directors, will be elected. Because Proposal Nos. 2 and 3 must be approved by the affirmative vote of a majority of the shares of Common Stock entitled to vote thereon and present in person or by proxy at the Annual Meeting (the “Required Vote”), abstentions will be counted in tabulations of the votes cast on each such proposal and will have the same effect as a vote against the proposal, whereas brokernon-votes (with respect to Proposal No. 2) will be excluded from the vote and will have no effect on its outcome.

Deadline for Receipt of Stockholder Proposals

Any stockholder who meets the requirements of the proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), who intends to present a proposal at the Company’s 20182019 Annual Meeting of Stockholders must ensure that the proposal is received by the Corporate Secretary at Arrowhead Pharmaceuticals, Inc., 225 South Lake Avenue, Suite 1050, Pasadena, CA 91101, not later than October 6, 2017,5, 2018, in order to be considered for inclusion in our proxy materials for that meeting; provided, however, that if the Company’s 2018 2019

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Annual Meeting of Stockholders is held before February 19, 201820, 2019 or after April 20, 2018,15, 2019, you must provide specified information to us a reasonable time before we begin to print and send our proxy statement for our 20182019 Annual Meeting. Proposals received after the specified dates may be excluded from the Company’s proxy statement.

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Additionally, our Bylaws provide for notice procedures to recommend a person for nomination as a director or to propose business to be considered by stockholders at a meeting. To be considered timely under these provisions, the stockholder’s notice must be received by the Corporate Secretary at our principal executive offices at the address set forth above between 90 and 120 days prior to theone-year anniversary of the date of the 20172018 Annual Meeting;provided, however, that if the 20182019 Annual Meeting date is advanced by more than 30 days before or delayed by more than 60 days after the anniversary date of the 20172018 Annual Meeting, then stockholders must provide notice within time periods specified in our Bylaws. Our Bylaws also specify requirements as to the form and content of a stockholder’s notice.

PROPOSAL ONE

ELECTION OF DIRECTORS

The Board has nominated the following fivesix persons as directors to serve until the 20182019 Annual Meeting and until their successors have been duly elected. Each of the nominees is currently a director of Arrowhead. Except as set forth in the biographical information below, none of the nominees is related by blood, marriage or adoption to any other nominee or any executive officer of the Company. The fivesix nominees receiving the greatest numbers of votes at the Annual Meeting will be elected to the fivesix director positions. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the fivesix nominees named below. If any nominee is unable or declines to serve as director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by our present Board to fill the vacancy. The table below sets forth, with respect to each nominee for election, his age and current position with Arrowhead.

Nominees for Election as Directors. The Board unanimously adopted a resolution proposing the nominees set forth below for election as Directors of the Company for the next year.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

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Board Composition and Nominating Process

The Nominating Committee of the Board of Directors annually considers the size, composition and needs of the Board and, as appropriate, recommends the nominees for directors to the Board for approval. The Committee considers and evaluates suggestions from many sources regarding possible candidates for directors. Below are general criteria for the evaluation of current and proposed directors:

Additionally, the Committee considers the mix of skills and experience among current and prospective directors with a goal of assembling a Board with complementary skills for the benefit of the Company. Listed below are the relevant contributions of each current board member.

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Dr. Christopher Anzalone has been President, Chief Executive Officer and Director of the Company since December 1, 2007. In 2005, Dr. Anzalone formed and served as CEO of the Benet Group LLC, a private equity firm focused on creating and building new nano-biotechnology companies from university-generated science. Prior to his tenure at the Benet Group, from 1999 until 2003, he was a partner at the Washington, DC-based private equity firm Galway Partners, LLC, where he was responsible for sourcing, structuring and building new business ventures. Dr. Anzalone holds a Ph.D. in Biology from UCLA and a B.A. in Government from Lawrence University. We believe Dr. Anzalone’s qualifications to serve on the Board include his deep understanding of the business through his role as Chief Executive Officer; in addition, Dr. Anzalone has extensive experience in biotechnology, nanotechnology, company-building and venture capital.

Dr. Mauro Ferrarihas been a director of the Company since 2010. Dr. Ferrari is the President and CEO of The Houston Methodist Hospital Research Institute (TMHRI), Executive Vice President of Houston Methodist Hospital and Senior Associate Dean of Weill Cornell Medical College in New York. He is also the President of The Alliance for NanoHealth. Dr. Ferrari is an internationally recognized expert in nanomedicine and biomedical nanotechnology. Prior to assuming leadership of TMHRI, Dr. Ferrari was Professor and Chairman of The Department of NanoMedicine and Biomedical Engineering at The University of Texas Health Science Center at

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Houston, Professor of Experimental Therapeutics at the MD Anderson Cancer Center, Adjunct Professor of Bioengineering at Rice University and Adjunct Professor of Biomedical Engineering at the University of Texas in Austin. His previous academic appointments include tenured professorships at UC Berkeley and The Ohio State University.

From 2003 to 2005, Dr. Ferrari served as Special Expert on Nanotechnology and Eminent Scholar at The National Cancer Institute, where he led in the development of NCI’s program in Nanotechnology, which remains the largest program in NanoMedicine in the world. Dr. Ferrari has been serving as the Editor-in-Chief for “Biomedical Microdevices: BioMEMS and Biomedical Nanotechnology” since 1997. We believe Dr. Ferrari’s qualifications to serve on the Board include his extensive training and experience in the fields of nanotechnology, biotechnology and biomedical applications. Dr. Ferrari has significant technical training, several academic appointments, over 300 published articles, over 30 issued patents and is the recipient of most prestigious academic awards in nanomedicine and drug delivery technology. Additionally, Dr. Ferrari has extensive experience in developmental stage organizations having founded several startup companies.

Edward W. Frykman has been a director of the Company since January 2004. Mr. Frykman was an Account Executive with Crowell, Weedon & Co., a position he held from 1992 until 2008 when he retired. Before his service at Crowell, Weedon & Co., Mr. Frykman served as Senior Vice President of L.H. Friend & Co. Both Crowell Weedon & Co. and L.H. Friend & Co. are investment brokerage firms located in Southern California. In addition, Mr. Frykman was a Senior Account Executive with Shearson Lehman Hutton, where he served as the Manager of the Los Angeles Regional Retail Office of E. F. Hutton & Co. Mr. Frykman is also a director of Acacia Research Corporation, a publicly-held corporation based in Newport Beach, California. We believe Mr. Frykman’s qualifications to serve on the Board include his long tenure as a member of the Board, which has enabled Mr. Frykman to gain a deep understanding of the company’s operations, strategy and finances. Mr. Frykman has over 20 years of Audit Committee leadership in his roles of Audit Committee Chairman at both Acacia and Arrowhead and an extensive knowledge and experience in financial statement analysis gained in his career in finance and management.

Dr. Douglass Givenhas been a director of the Company since November 2010. Dr. Given is the founder and managing partner of G5 Partners LLC and Director and Chief Executive Officer of Health 2047, Inc., a San Francisco, California based health information start up. He joined Bay City Capital, LLC in 2000, served as a General Partner and Investment Partner from 2004-2014 and participated in more than 50 investments. He has co-founded 14 startup companies. He formerly held positions as Corporate Senior Vice President and Chief Technology Officer at Mallinckrodt, Vice President at Schering Plough, Vice President at Monsanto/GD Searle and Medical Advisor at Lilly. He has been a Director at 8 public and 8 private companies and is currently Chairman at Arrowhead, Vivaldi Biosciences Inc. and Medical eXellence Inc. He has held positions as CEO at Progenitor Inc, Mercator Genetics Inc, NeoRx Corp, VIA Pharmaceuticals Inc., and Vivaldi Biosciences Inc. Dr. Given has been a member of the University of Chicago Medical Center and Pritzker School of Medicine Visiting Committee since 1995 and served as its Chair from 2007-2013.

Additional University of Chicago activities include the Center for Global Health External Advisory Board and Investment Committee for the Innovation Fund. He is a member of the Johns Hopkins Bloomberg School of Public Health Advisory Board and its Development Committee and Innovation and Commercialization Committee. He is a member of the Harvard School of Public Health International Advisory Council and the Stanford Medicine Community Council. He received his MD & PhD from the University of Chicago and MBA from the Wharton School, University of Pennsylvania. Dr. Given was a Clinical and Research Fellow in Internal Medicine and Infectious Diseases at Massachusetts General Hospital and Harvard Medical School. We believe Dr. Given’s qualifications to serve on the Board include his extensive experience as a physician scientist, in finance and business transactions, particularly investments in the life sciences industry, as well as directorship roles in biopharmaceutical companies. Dr. Given also has significant leadership roles, including CTO and Senior Vice President, at several large pharmaceutical companies. Dr. Douglass Given is a brother of Dr. Bruce Given, our chief operating officer.

Dr. Michael S. Perry has been a director of the Company since 2011. Dr. Perry is currently Senior Vice President and Chief Scientific Officer, Global Business Development and Licensing at Novartis Pharma. Prior to his appointment at Novartis, Dr. Perry was a Venture Partner with Bay City Capital LLP from 2005 until November 2012 and President and Chief Medical Officer of Poniard Pharmaceuticals from 2010 to November 2012. He also currently serves as a member of the board of directors of AmpliPhi Biosciences Corporation and Avita

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Medical. He was Chief Development Officer at VIA Pharmaceuticals, Inc., a publicly held drug development company, from April 2005 until May 2009. Prior thereto, he served as Chairman and Chief Executive Officer of Extropy Pharmaceuticals, Inc., a privately held pediatric specialty pharmaceutical company, from June 2003 to April 2005. From 2002 to 2003, Dr. Perry served as President and Chief Executive Officer of Pharsight Corporation, a publicly held software and consulting services firm. From 2000 to 2002, Dr. Perry served as Global Head of Research and Development for Baxter BioScience. From 1997 to 2000, Dr. Perry was President and Chief Executive Officer of both SyStemix Inc. and Genetic Therapy Inc., two wholly owned subsidiaries of Novartis Corp. and from 1994 to 1997, he was Vice President of Regulatory Affairs for Novartis Pharma (previously Sandoz Pharmaceuticals). Prior to 1994, Dr. Perry held various management positions with Syntex Corporation, Schering-Plough Corporation and BioResearch Laboratories, Inc. Dr. Perry holds a Doctor of Veterinary Medicine, a Ph.D. in Biomedical Pharmacology and a B.Sc. in Physics from the University of Guelph, Ontario, Canada. He is a graduate of the International Management Program at Harvard Business School. We believe Dr. Perry’s qualifications to serve on the board include his medical expertise and his extensive experience in preclinical and clinical drug development, including executive level leadership roles in several publicly held biotech companies.

Corporate Governance Policies and Practices

The following is a summary of our corporate governance policies and practices:

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Stockholder Communications with Directors

Stockholders who wish to communicate with the Board or any individual director can write to: Jane Davidson, Corporate Secretary, Arrowhead Pharmaceuticals, Inc., 225 South Lake Avenue, Suite 1050, Pasadena, CA 91101. Your letter should indicate that you are an Arrowhead stockholder. Depending on the subject matter, management will:

Board Meetings and Committees

The Board held a total of eightsix meetings during the fiscal year ended September 30, 2016.2017. The Board has three standing committees: an Audit Committee, a Compensation Committee and a Nomination Committee.

The functions of the Audit Committee are to select independent public accountants, to review the scope and results of theyear-end audit with management and the independent auditors, to review the Company’s accounting principles and its system of internal accounting controls, to review the Company’s annual and quarterly reports before filing with the Securities and Exchange Commission and to review any related-party transactions. The Audit Committee met fourthree times during fiscal 2016.2017. The current members of the Audit Committee are Edward W. Frykman, Chairman, William Waddill, Mauro Ferrari and Michael S. Perry. The Board has determined that all members of the Audit Committee are independent directors under the Rules of the SEC and the listing standards of Nasdaq Marketplace Rules and are financially literate. The Board has determined that Mr. Frykman is anand Mr. Waddill are “audit committee financial expert”experts” in accordance with the applicable regulations, based on histheir experience as noted above. The Audit Committee Charter is available on the Company’s website at www.arrowheadpharma.com.

The functions of the Compensation Committee are to review the goals and achievements of the Company and the Chief Executive Officer for the prior year and approve the goals of the Company and the Chief Executive Officer for the next year, to review and approve salaries, bonuses and other benefits payable to the Company’s executive officers and to administer the Company’s 2004 Equity Incentive Plan and 2013 Incentive Plan. The Compensation Committee is specifically responsible for determining the compensation of the Chief Executive Officer and the other executive officers. The Compensation Committee reviews compensation recommendations made by the Chief Executive Officer for other senior executives of the Company at least annually; the Chief Executive Officer is not present during discussions or deliberations regarding his compensation. TheIn fiscal 2017, the Compensation Committee engaged Streeter Wyatt LLC, a consultantcompensation consulting firm, to provide advice and guidance with regard to compensation for our named executive officers for fiscal 2016.officers. The decision to engage the consultant was not made or recommended by management and the Committee has the sole discretion to engage or change the consultant. The Compensation Committee met threetwo times during fiscal 2016.2017. The current members of the Compensation Committee are Michael S. Perry, Chairman, Edward Frykman and Mauro Ferrari. The Board has determined that all members of the Compensation Committee are independent directors under the listing rules of Nasdaq Marketplace Rules. The Compensation Committee’s charter is available on the Company’s website at www.arrowheadpharma.com. The Committee has not delegated any of its responsibilities or authorities granted under its charter.

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The Nomination Committee is responsible for proposing a slate of directors for election by the stockholders at each Annual Stockholders Meeting and for proposing candidates to fill any vacancies. The Nomination Committee met once during fiscal 2016.2017. The current members of the Nomination Committee are Michael S. Perry, Chairman, Edward Frykman and Mauro Ferrari. The Nomination Committee’s charter is available on the Company’s website at www.arrowheadpharma.com. The Nomination Committee manages the process for evaluating current Board members at the time they are considered forre-nomination. After considering the appropriate skills and characteristics required on the Board, the current makeup of the Board, the results of the evaluations and the wishes of the Board members to bere-nominated, the Nomination Committee recommends to the Board whether those individuals should bere-nominated.

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On at least an annual basis, the Nomination Committee reviews with the Board whether it believes the Board would benefit from adding new members and, if so, the appropriate skills and characteristics required for any new members. If the Board determines that a new member would be beneficial, the Nomination Committee solicits and receives recommendations for candidates and manages the process for evaluating candidates. All potential candidates, regardless of their source, are reviewed under the same process. The Nomination Committee (or its chairman) screens the available information about the potential candidate(s). Based on the results of the initial screening, interviews with viable candidates are scheduled with Nomination Committee members, other members of the Board and senior members of management. Upon completion of these interviews and other due diligence, the Nomination Committee may recommendnominate a candidate to the Board the election or nomination of a candidate.for election.

Candidates for independent Board member positions have historically beenare identified through recommendations from directors or others associated with the Company.Company, as well as through a formal search process managed by an executive recruiter. Arrowhead stockholders may also recommend candidates by sending the candidate’s name and resume to the Nomination Committee pursuant to the procedures, set forth above, for communication with the Board. As described above, our Bylaws also provide for separate notice procedures to recommend a person for nomination as a director to be considered by stockholders at a meeting, including requirements as to the timing, form and content of a stockholder’s notice.

The Nomination Committee has no predefined minimum criteria for selecting Board nominees, although it believes that all directors should share qualities such as governance and business experience at the corporate level, relevantnon-competitive experience and strong communication and analytical skills. Independent directors must meet the criteria for independence set forth by Nasdaq and the SEC. In any given search, the Nomination Committee may also define particular characteristics for candidates to balance the overall skills and characteristics of the Board and the needs of the Company. During any search, the Nomination Committee reserves the right to modify its stated search criteria for exceptional candidates. While the Board does not have a policy with regard to consideration of diversity for selecting candidates, the Nomination Committee may consider diversity, including diversity with respect to experience, skill set, age, areas of expertise and professional background, as well as race, gender, national origin and any other criteria deemed appropriate by the Nomination Committee.

No incumbent director attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board held during fiscal 2016,2017, and (ii) the total number of meetings held by all committees of the Board during fiscal 20162017 on which such person served.

In addition, a majority (three)two of the directors attended the 20162017 Annual Meeting of Stockholders. It is the Company’s policy to encourage, but not require, that all directors attend our annual stockholder meetings.

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DIRECTOR COMPENSATION

Directors who are also employees of the Company receive no separate compensation from the Company for their service as members of the Board. The below table sets forth compensation levels orfor each of our outside directors for calendar 20162017 and 2017.2018.

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The following table sets forth the total compensation paid to ournon-employee directors in fiscal 2016.2017. Dr. Anzalone’s compensation is set forth in the discussion of Executive Compensation and in the Summary Compensation Table.

As of the last day of fiscal year 2016,2017, the directors held the following outstanding stock option and restricted stock unit grants in the aggregate: Douglass Given – 65,000 stock options and 35,00080,000 restricted stock units; Michael S. Perry – 77,000 stock options and 30,00080,000 restricted stock units; Edward Frykman – 76,500 stock options and 25,00050,000 restricted stock units; and Mauro Ferrari – 25,469 stock options.options and

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50,000 restricted stock units. Mr. Waddill became a director effective 1/1/2018 and did not hold any stock options or restricted stock units as of the last day of fiscal year 2017.

Vote Required; Recommendation of the Board

The fivesix nominees receiving the greatest numbers of votes at the meeting, assuming a quorum is present, will be elected to the fivesix director positions to serve until their terms expire or until their successors have been duly elected and qualified. Because directors are elected by plurality, abstentions from voting and brokernon-votes will be entirely excluded from the vote and will have no effect on its outcome.

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THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES

FOR DIRECTOR IN PROPOSAL ONE.

PROPOSAL TWO

ADVISORY VOTE ONTO APPROVE EXECUTIVE COMPENSATION

The compensation paid to our Named Executive Officers (“NEOs”) is described below in the Compensation Discussion and Analysis on pages 911 through 2331 of this proxy statement for the year ended September 30, 2016.2017. The Board of Directors is asking stockholders to cast anon-binding, advisory vote FOR the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, as set forth in the compensation tables and narrative discussion, is hereby APPROVED.”

Although the vote we are asking you to cast isnon-binding, the Compensation Committee and the Board value the views of our stockholders and will consider the outcome of the vote when determining future compensation arrangements for our named executive officers.

The Board has adopted a policy providing for annual advisory votes onto approve executive compensation. Unless the Board modifies its policy on the frequency of holding advisory votes onto approve executive compensation, the next such advisory vote will occur in 2018.2019.

Vote Required; Recommendation of the Board

Proposal Two must be approved by the Required Vote, assuming a quorum is present. For this purpose, abstentions will be counted as a vote against the proposal, while brokernon-votes will have no effect on the outcome of the vote.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL TWO.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The following compensation discussion and analysis contains statements regarding future individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of Arrowhead’s compensation programs and should not be understood to be statements of management’s expectations or guidance. Arrowhead cautions investors not to apply these statements to other contexts.

Our Compensation Committee reviews and approves our executive compensation philosophy, objectives and methods, evaluates our performance and the performance of our executive officers, and approves executive compensation. The members of our Compensation Committeecontexts. Fiscal years are appointed by our Board, and each member is an independent director (as “independence” is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards). The members of our Compensation Committee are Michael S. Perry (Chairman), Mauro Ferrari and Edward Frykman.denoted as fiscal years, all other year references refer to calendar years.

This Compensation Discussion and Analysis explainsdescribes the compensation program for our compensation philosophy, policies and practices for the following executives, who are referred to in this Compensation Discussion and Analysis and in the subsequent tables as our “NamedNamed Executive Officers” or “NEOs”:Officers. During 2017, these individuals were:

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We provide a summary of our recent business achievements, a descriptionThis Compensation Discussion and Analysis describes the material elements of our executive compensation program a descriptionduring 2017. It also provides an overview of the overallour executive compensation philosophy and objectives, of the program and an analysis of each component ofsummarizes our executive compensation that we provide to our named executive officers. In addition, we explainpolicies and practices. Finally, it analyzes how and why the Compensation Committee of our Board of Directors (the “Compensation Committee”) arrived at the specific compensation policies and decisions involving the namedfor our executive officers, during andincluding our Named Executive Officers for 2016. We describe measures2017 including the key factors that the Compensation Committee has takenconsidered in responsedetermining their compensation.

Our Company

We develop medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, our therapies trigger the RNA interference mechanism to feedbackinduce rapid, deep, and durable knockdown of target genes. RNA interference, or RNAi, is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. Deemed to be one of the most important recent discoveries in life science with the potential to transform medicine, the discoverers of RNAi were awarded a Nobel Prize in 2006 for their work. Our RNAi-based therapeutics leverage this natural pathway of gene silencing.

In 2017, we receivedrefocused our resources on therapeutics that exclusively utilize our 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; 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 stockholders and prior years’ stockholder advisory vote on our executive compensation program (the “Say-on-Pay Vote”).smaller, simpler molecules.

2017 Business Highlights

SummaryPipeline Overview

We are focused on developing innovative drugs for diseases with a genetic basis, typically characterized by the overproduction of one or more proteins. The depth and versatility of our RNAi technologies enable us to address conditions in virtually any therapeutic area and pursue disease targets that are not otherwise addressable by small molecules and biologics. The timing of our planned and already filed clinical trial applications (CTA) discussed below are based on calendar quarters, not fiscal quarters.

In

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During 2017, we continued to develop and commercialize two RNAi therapeutics for cardiovascular targets, including our preclinical program ARO-LPA and a novel therapeutic for an undisclosed target identified by Amgen. The agreements provide for $56.5 million of upfront cash payments as well as option payments, milestone payments and royalties on sales of products of up to $617 million. Aside from the immediate and future financial impact, this collaboration with a large biopharma partner provides validation for the Company’s technology in several key ways: validation of our strategic positioning as a platform company, validation of the science underpinning our technology platform, validation of our RNAi delivery capabilities including subcutaneous administration, and validation of our ARO-LPA program. Additionally, the collaboration provides both therapeutics with access to the development and commercialization capabilities of a large biopharma company while limiting the financial investment by the Company.

Arrowhead made goodmake progress on its preclinical programs,our long-term strategic objectives, including adding subcutaneously delivered candidates for hepatitis B (ARO-HBV) and alpha-1 antitrypsin deficiency (ARO-AAT) to its preclinical pipeline. In addition, promising data from our preclinical programs showing delivery and knockdown of our oncology and cardiovascular drug candidates was presented at several scientific conferences.

Through the fiscal year, the Company continued to progress its clinical program, initiating a Phase 2b multi-dose study for ARC-520 (hepatitis B), a Phase 1/2 study for ARC-521 (follow-on for hepatitis B) and a Phase 2b study for ARC-AAT (alpha-1 antitrypsin deficiency). Although the Company’s intravenously administered programs were terminated in November 2016, these studies provided important safety and knockdown data in human subjects that will inform the Company’s follow-on subcutaneously administered programs for hepatitis B, alpha-1 antitrypsin deficiency and our other programs. Following the termination of the clinical programs, the Company reduced its workforce by approximately 30%, while maintaining resources necessary to support current and potential future partner-based programs and Arrowhead’s internal candidates. Based on the streamlined cost structure and cash secured from the Amgen transaction and another financing transaction in 2016, the Company has a cash runway expected to extend to fiscal 2019.

Executive Compensation Program and 2016 Actions

Our executive compensation program consists primarily of the following forms of compensation:specific accomplishments:

A base level

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In addition, we recorded the Company to attract and retain top talent. In 2016, base salary for each executive was increased by 4-6% which was consistent with prior year increases and reflects the Compensation Committee’s decision to provide a modest increase for each executivefollowing financial results in recognition of continuing service.fiscal 2017:

Each named executive officer is eligible to be considered for an annual cash incentive compensation award based

Executive Compensation Highlights

Based on Companyour overall operating environment and individual performance. Target awards are set based on each executive’s role inthese results, the Company. At higher levels of control and accountability forCompensation Committee took the Company’s overall performance, a higher percentage of each named executive officer’s total cash compensation (base salary plus annual cash incentive compensation) is comprised of performance-based cash incentive compensation. For 2016, target awards ranged from 35-100%, which was consistentfollowing key actions with prior years.

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The CEO’s bonus was paid out at only 75% of target because, while not under the CEO’s control, circumstances arose that ledrespect to the Company’s terminationcompensation of its intravenously administered programs in November 2016. Bonuses were paid out at or near targetour Named Executive Officers for other named executives reflecting the Company’s and each individual’s achievement of the results described in more detail below.2017:

Consistent

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Advisory Vote to Approve Named Executive Officer Compensation

At our 2017 Annual Meeting of Stockholders in March 2017, we conducted anon-binding stockholder advisory vote on the compensation of our Named Executive Officers (commonly known as a“Say-on-Pay” vote). Our stockholders approved theSay-on-Pay proposal with approximately 51% of the Company’s stagevotes cast in favor of developmentthe proposal. While this result represented a majority of the shares of our common stock entitled to vote thereon and present in person or by proxy at the Annual Meeting, it does not meet our goal for support for ourSay-on-Pay proposal, as 53% of the votes cast were voted in favor of our Named Executive Officer’s compensation in 2016 and 58% of the votes cast were voted in favor of their compensation in 2015. In 2015, 2016 and 2017, respectively, the “No” votes represented approximately 16%, 17% and 15% of the outstanding shares of our stock entitled to align compensation with long term performance, overallvote at the Annual Meeting.

While we have received the support of a majority of the votes cast on ourSay-on-Pay proposal in each of the last three years, we recognize that the recent level of support indicates a concern on the part of some of our stockholders and their advisorsabout our executive compensation is weighted towardprogram. As a result, in each of the past threeyears,the Compensation Committee, in consultation with our Board of Directors, has undertaken to better understand and respond to the concerns and views of our stockholders and communicate the rationale underlying our compensation decisions:

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We value the opinions of our stockholders and will continue to consider the outcome of futureSay-on-Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers. The Compensation Committee is committed to being responsive to stockholder feedback regarding our executive compensation program, policies, and practices, including concerns expressed through theSay-on-Pay vote.

Pay-for-Performance Analysis

We believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our executive officers with the goal of aligning their interests with those of our stockholders. To ensure this alignment and to motivate and reward individual initiative and effort, a significant portion of our executive officers’ target annual total direct compensation opportunity is both performance-based and“at-risk.”

We emphasize performance-based compensation that appropriately rewards our executive officers, including our Named Executive Officers, through two separate compensation elements:

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The pay mix for our CEO for each of the last three fiscal years illustrates the ongoing emphasis on our performance-based compensation philosophy:

We believe that, ultimately, the creation of sustainable long-term stockholder value will ultimately depend on our ability to successfully bringingbring to market the products we develop or to market, or partnering thempartner with strategic collaborators to bring them to market, andmarket. Consequently, the Compensation Committee strives to incentivizeincent our senior managementexecutive officers to create that value through a robust and attractive pipeline of drug candidates. As a result, our executive compensation program is designed to provide incentives that facilitate these efforts, in particular, for our CEO, milestone based performance grants directly linked to goals that promote the development of our pipeline and other related business and market-based objectives. The Compensation Committee closely tracks the progress against these objectives to monitor our success as a company over thateach product’s development period and evaluates our executive managementofficers primarily on that progress.

ResponseTo ensure that we remain faithful to 2016 Say-on-Pay Vote

We held an advisory stockholder vote on executiveour compensation at our annual stockholder meeting in March 2016. Our stockholders approved, on an advisory basis, our say-on-pay proposal, with approximately 53% of stockholders voting on such matter voting in favor of the proposal. This is in line with the 2015 vote, when stockholders approved that year’s say-on-pay vote with 58% of those casting votes. While we received an overall positive vote in 2016,philosophy, the Compensation Committee is committedregularly evaluates the relationship between the reported values of the equity awards granted to being responsiveour executive officers, the amount of compensation realizable (and, ultimately, realized) from such awards in subsequent years and our total stockholder return over this period.

Executive Compensation Policies and Practices

We endeavor to stockholder feedback regardingmaintain sound governance standards consistent with our executive compensation including concerns expressed through the say-on-pay vote on executive compensation.

In addition to holding an annual advisory vote onpolicies and practices. The Compensation Committee evaluates our executive compensation we are committedprogram on a regular basis to ongoing engagementensure that it is consistent with our stockholders onshort-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation and corporate governance issues. The Compensation Committee directed Arrowhead’s management to maintain our efforts to obtain feedback from stockholders. Our Compensation Committee’s goal in soliciting feedback was to (1) better understand stockholders’ views on executive compensation, and (2) based on that understanding, better communicate the rationale behind the decisions of the Compensation Committee. Although Arrowhead’s stockholder base currently consists primarily of individual investors, we were able to identify and solicit feedback from individual and institutional holders of approximately 21 million shares or 28% of our outstanding stock. The Company also solicited feedback from a prominent investor advisory firm in order to further understand proxy advisory firmrelated policies and how they relate to the perspectives held by our stockholders. Only a small number of stockholders chose to provide customized feedback to us. The collected feedback included a desire to understand how executive compensation aligns with corporate performance. Based on this feedback and a review of current peer practices in executive compensation, and in response to concerns expressed through the 2016 say-on-pay vote, for 2016 equity grants, the Compensation Committee continued its practices first implemented in 2015 of granting a majority of equity awards to the Company’s CEO that only vest, if at all, based on the achievement of pre-established performance criteria, requiring a minimum of three-year vesting for full value equity awards to our other named executive officers and requiring compliance with stock ownership guidelines for the CEO, COO, and CFO.

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The Company’s 2013 Incentive Plan provides for recovery of awards made under the plan in accordance with any applicable Company claw back or recoupment policy, including as required by law, regulation, or exchange rule. The Compensation Committee plans to institute a compensation recovery (claw back) policy when and to the extent required by final rules regarding such policies are adopted by Nasdaq as mandated by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules were not finalized as expected in 2016 and the Committee is expecting to adopt such a policy when the rules are finalized. It is anticipated that any such policy would require the Company to seek recovery of certain incentive compensation paid to executive officers in the event the Company was required to prepare an accounting restatement to correct a material error.

As equity compensation comprises the majority of our CEO’s compensation, and is expected to comprise the majority of his compensation going forward, and instituting performance awards was the key measure taken to address the stockholder concerns expressed in our 2015 and 2016 Say on Pay Votes, we describe below in detail the equity awards made to the CEO in 2016 and 2015, as well as the rationale behind the grant of a time based award to the CEO in 2016.

Equity Awards to the CEO in 2017

At the time of filing, an equity award to the CEO in 2017 has not been finalized, however, the Compensation Committee expects that the award will be 100% performance based with vesting criteria dependent upon achieving rigorous milestones related to the Company’s technical, clinical and corporate goals.

Equity Awards to the CEO in 2016

In January 2016, the CEO received a performance-based restricted stock award. The award vests only upon the achievement of rigorous performance milestones which align with the Company’s primary business objective of developing and marketing RNAi-based drugs using our proprietary delivery platform and, which, if achieved, are designed to result in substantial value creation for shareholders. At the time of the grant, the Compensation Committee determined that, while these vesting milestones were achievable in the timeframes set forth, they additionally require robust leadership, substantial skill and sustained effort on the part of the CEO. The achievement of these milestones is dependent on a number of factors, primarily the continued successful technical and clinical development of the Company’s drug products and/or follow-on candidates, successful business development, and the procurement of sufficient financial resources. The vesting of the award is split equally among each milestone set forth below and, to date, only one of the three milestones was met with the vesting of that portion certified by the Compensation Committee in December 2016:practices:

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The value of the RSU awards was calculated in accordance with ASC 718 which requires the Company to assess the likelihood of achieving the milestones within the specified time frames. The awards were valued at $0 at the time of grant based on the significant business, technical, financial, and operational difficulty of their achievement. Had the grant value been calculated without taking the likelihood of achievement into account, the grant date value would have been approximately $3.3 million, a reduction of 22% in grant date value (without taking likelihood of achievement into account) from Dr. Anzalone’s equity grant in 2015.

The CEO also received a time-based grant of a stock option to purchase 80,000 shares of the Company’s Common Stock valued at the time of grant at $368,797. The Committee believes that along with performance-based equity grants, a smaller time-based grant is appropriate given its retention value and the uncertain nature of the drug development business. The Committee determined that the value of grants was consistent with grants to similarly placed executives at peer companies, except that the Company is a standout in awarding majority performance-based awards. The grants are consistent with the Company’s executive compensation policies of employing performance based equity as a majority of the CEO’s compensation with the intent to align the CEO’s overall compensation to shareholder return.

Equity Awards to the CEO in 2015

In March 2015, the CEO received performance awards of restricted stock units and stock options. These awards included vesting only upon achievement of rigorous performance milestones that align with the Company’s primary business objective of developing and marketing RNAi-based drug. If achieved, these awards were designed to result in substantial value creation for shareholders. The Compensation Committee determined that, while these milestones were achievable in the timeframes set forth, they additionally will require robust leadership, substantial skill and sustained effort on the part of the CEO. The achievement of these milestones is dependent on a number of factors; primarily the continued successful technical and clinical development of the Company’s drug products and/or follow-on candidates, successful business development, and the procurement of sufficient financial resources. During 2016, all of the milestones were met.

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The vesting of the award was split equally among the milestones and can be adjusted up or down by 20% based on the performance of the Company’s stock vs. the Nasdaq Biotech Index for the fiscal year in which it is achieved to insure that the vesting of a portion of the award is tied to the industry-adjusted performance of the Company’s stock. Such adjustment is in the sole discretion of the Compensation Committee. Based on appreciation of the Company’s stock in fiscal 2016, the Compensation Committee adjusted the number of shares of the vested tranches up by 20%.

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The value of the awards was calculated in accordance with ASC 718 which requires the Company to assess the likelihood of achieving the milestones within the specified time frames at the grant date. The awards were valued at $1.2 million at the grant date. Had the grant been calculated without taking the likelihood of achievement into account, the grant date value would have been approximately $4.2 million. The Committee determined that the grants were consistent with grants to similarly placed executives at peer companies, except that the Company is a standout in granting majority performance-based equity awards. The awards are consistent with the Company’s executive compensation policies of employing performance-based equity as a majority of the CEO’s compensation with the intent to align the CEO’s overall compensation to shareholderlong-term equity component, thereby making a substantial portion of each executive officer’s target total direct compensation dependent upon our stock price and/or total stockholder return.

Elements of Compensation

In 2016, our executive compensation program consisted of the following forms of compensation, each of which are described below in greater detail:

The Company evaluates compensation on a calendar year basis. The tables and information presented in this Compensation Discussion and Analysis and the Executive Compensation tables presented herein generally refer to base salary compensation and equity awards paid during the fiscal year. Cash bonus awards and equity awards reflect performance during the calendar year and are paid shortly thereafter.

Base Salary

Our named executive officers, along with their base salaries and adjustments for the past three years, were as follows:

The Compensation Committee contends it is important to provide reasonable, fixed compensation to our executive officers working in a highly volatile and competitive industry, while balancing the needs to retain and recruit talented executives, achieve corporate goals, and conserve cash and equity. In determining appropriate base salary levels for a given executive officer, the Compensation Committee considers the following factors (with no specific weighting applied to any individual factor):

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Salaries for executive officers are negotiated on an individual basis at the time of hire. Adjustments to base salary are considered annually. The Chief Executive Officer assists the Compensation Committee in its annual review of the base salaries of other executive officers and key employees based on the foregoing criteria.

Annual Incentive Compensation

The Company provides executive officers with performance-based cash incentive awards, which are designed to reward executives for overall corporate performance as well as individual performance. Executive officers are evaluated for eligibility generally on an annual basis. Through a collaborative planning process involving the Board of Directors and executive management, corporate goals are established each year and are evaluated regularly by the Board of Directors for their continued relevance to the Company’s status.

For 2016, the maximum Annual Incentive Award for the Chief Executive Officer was 200% of his target, and the minimum amount was zero. The Annual Incentive Awards for the other named executive officers were set by the Compensation Committee in collaboration with the Chief Executive Officer based on each executive’s accountability, scope of responsibilities and potential impact on the Company’s performance. Accordingly, based on higher levels of control and accountability for the Company’s overall performance, a higher percentage of each named executive officer’s total cash compensation is dependent on a performance-based Annual Incentive Awards.

2016 Goals and Achievements

In determining the amount of Annual Incentive Compensation for each named executive officer, the Compensation Committee evaluated the corporate goals that had been established at the beginning of the year (set forth below) as well as other corporate and individual achievements and performance throughout the year. For 2016, the Compensation Committee determined that the Company had achieved its primary business objectives, as detailed below. In determining the CEO’s cash bonus for 2016, the business development and financing goals were weighted most heavily, followed by progress on the Company’s clinical and preclinical pipeline and organizational development goals least heavily, in that order. In light of the discontinuation of the Company’s intravenous clinical programs, the Compensation Committee reduced the CEO’s bonus to 75% of target.

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2016 Annual IncentiveExecutive Compensation Payment

Based on these achievements, the Compensation Committee approved Annual Incentive payments for the named executive officers for 2016 as set forth below.

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2017 Goals

For 2017, the Compensation Committee set new goals. These goals address clinical milestones for the Company’s lead products, research and development milestones for the Company’s drug pipeline, business development objectives and infrastructure enhancement. These goals will be used by the Committee to evaluate the performance of the Company and the individual named executive officers and to determine Annual Incentive Awards for 2017. The Committee will also consider unanticipated achievements, opportunities vs. results and circumstances outside the control of the executives. Target awards for 2017 are the same as target awards for 2016.

Equity Compensation

Named executive officers are eligible to receive equity compensation in the form of stock options and restricted stock units. Stock options generally vest and become exercisable over a period of four years with monthly vesting and restricted stock units vest over a period of three years with annual vesting. Our typical option awards to named executive officers have a term of 10 years.

Equity Awards to CEO in Fiscal 2017

At the time of filing, an equity award to the CEO in 2017 has not been finalized, however, the Compensation Committee expects that the award will be 100% performance based with rigorous milestones related to the Company’s technical, clinical and corporate goals.

Equity Awards to CEO in Fiscal 2016

As described above, in January 2016, the CEO was granted performance awards. These awards vest according to performance milestones, which, if achieved, are designed to result in substantial value creation for shareholders.

The Compensation Committee has determined that the milestones are rigorous and will require substantial leadership, skill and effort on the part of the CEO to meet within the time frame allowed. One of the milestones has been met. See the summary beginning on page 12 for further discussion of the grants.

The CEO also received a time-based grant of an option to purchase 80,000 shares of the Company’s Common Stock. The Committee believes that along with performance based equity grants, a smaller time-based grant is appropriate given its retention value and the uncertain nature of the drug development business.

Equity Awards to CEO in Fiscal 2015

As described above, in March 2015, the CEO was granted performance awards valued at approximately $1.2 million. These awards vest according to rigorous performance milestones which, if achieved, are designed to result in substantial value creation for shareholders. See page 13 for further discussion of the grants.

Equity Award Grants to other NEOs in Fiscal 2015, 2016 & 2017

In consideration of the Company’s overall performance and each executive officer’s individual performance, the Compensation Committee awarded equity grants for the Company’s executive officers in March 2015 for 2014 performance, January 2016 for 2015 performance and January 2017 for 2016 performance. The awards consisted of restricted stock units and stock option grants. The restricted stock unit awards made in fiscal 2015 and 2016 vest in three equal tranches on the first, second and third anniversary of the date of grant. The restricted stock unit awards made in 2017 vest in full on the second anniversary from the date of grant. In light of the discontinuation of the Company’s intravenous clinical programs and with the goal of retention, for 2017, the Compensation Committee determined that a longer period until any vesting initiated was in the best interests of the Company, and a shorter total vesting period would encourage key employees to remain with the Company. Further, no stock options were granted to executive officers in 2017. The stock option awards granted in 2015 and 2016 vest and become exercisable monthly over a period of four years and have a term of 10 years. We believe that the combination of restricted stock units and stock options provide a mix of equity awards that will reward value creation over the near term and long term for our named executive officers. For additional details regarding the grants of equity awards in fiscal 2016, refer to the “Grants of Plan-Based Awards” table.

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Employee Benefit Program

Executive officers are eligible to participate in all of our employee benefit plans, including medical, dental, vision, life, and disability insurance, in each case on the same basis as other employees, subject to applicable law. In addition, the Company provides additional life insurance for the Chief Executive Officer for the benefit of his heirs. We also provide vacation and other paid holidays to all employees, including executive officers, all of which we believe to be comparable to those provided at peer companies. These benefit programs are designed to enable us to attract and retain our workforce in a competitive marketplace. Health, welfare and vacation benefits are designed to ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.

Our retirement savings plan (401(k) plan) is a tax-qualified retirement savings plan, pursuant to which qualified employees, including the named executive officers, are able to contribute certain amounts of their annual compensation, subject to limits prescribed by the Internal Revenue Service. We have historically made matching contributions of 100% of the first 3% of salary and of 50% of the next 2% of salary contributed to the plan. The value of these benefits for each of our named executive officers is reflected in the “All Other Compensation” column of the Summary Compensation Table.

Termination Benefits

The Company has entered into severance arrangements with named executive officers as listed below. The payments would be made in each case if the Company terminates the officer’s employment without cause (or in the case of Dr. Anzalone, he terminates with good reason). The Company’s 2013 Incentive Plan also provides for the acceleration of unvested awards if there is a change of control, as defined in the plan, except as otherwise determined by the Board of Directors.

Comparative Analysis

Since 2013, the Compensation Committee has engaged StreeterWyatt LLC, a compensation consultant, to conduct a comparative study and report on compensation levels and practices, including equity, relative to industry peers. The findings are presented to the Committee by StreeterWyatt in conjunction with the Committee’s annual review of executive compensation and StreeterWyatt provides a competitive assessment of the Company’s executive compensation program as compared to the market data for base salaries, target total cash compensation and equity compensation. As a general rule, the Compensation Committee considers NEO compensation relative to the peer group median, however, various other factors were taken into account in determining compensation and the Compensation Committee does not target compensation at any specific level relative to the peer group. Such factors include past performance and scope of the NEO’s actual role relative to the normal scope associated with that particular job among the peer group companies.

Because the biotechnology industry is a dynamic industry, the comparator group used by the Compensation Committee to measure the competitive positioning of our compensation packages is updated annually to ensure that companies continue to meet the established criteria. The peer group was assembled based on following criteria: publicly-held pre-commercial U.S. biotechnology companies, and companies with 50 – 500 employees. In general, the Company also selected peer companies with market capitalization values between 50% and 200% of the Company’s market capitalization at the time of the peer selection. The peer group was selected in such a manner that the Company’s market capitalization was very near the median for all peer companies. Consideration was also given

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to the frequency or infrequency with which a company was identified as a peer with other peer companies. Specifically, the selected comparable companies were as follows:

Peer group members for 2016:

The compensation studies prepared by StreeterWyatt and presented in December 2015 and 2016 provided an assessment of the Company’s compensation practices as compared to industry peers. Compensation levels for the Company’s executives, in the aggregate, were determined to be within the range of compensation provided to similarly placed executives and consistent with the Company’s compensation philosophy. Merit increases and market-based adjustments awarded to executives in 2016 and 2017 were consistent with the findings and recommendations of StreeterWyatt regarding market based increases observable from peer and survey data.

Compensation Policies

Policy ObjectivesPhilosophy

Our executive compensation policies for executive officers havephilosophy reflects our two fundamental objectives: (1) 

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We believe that the compensation of our executive compensationofficers should be directly linked to the achievement of specific objectives that are expected to increase stockholder value. In furtherance of this goal, the Compensation Committee has established the following guidelines as a foundation for compensation decisions:

TheExecutive Compensation Program Design

Our practice is to combine a mixture of compensation elements that balance achievement of our short-term goals with our longer-term performance. Currently, our executive compensation program consists of three keyprincipal elements:

We believe that cash compensation in the form of base salary and an annual incentive paymentscompensation opportunity provides our executivesexecutive officers with short-term rewards for success in operations, and that long-term incentive compensation throughin the awardform of RSU and PRSU awards that may be settled for shares of our common stock, and options and restrictedto purchase shares of our common stock units alignsalign the objectives of managementour executive officers with those of our stockholders with respect to long-term performance and success.

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The Compensation Committee takes into account the Company’sconsideration, among other things, our financial and working capital condition when approving performance objectives and making compensation decisions and approving performance objectives. Because the Company has soughtfor our executive officers. Since we seek to preserve cash and currently doesdo not operate at a profit, overall target total direct compensation isopportunities are weighted more heavily toward equity-based compensation.long-term incentive compensation in the form of equity awards. Thus, a significant portion of each executive’sexecutive officer’s target total direct compensation is at“at risk,” and dependent on the increase in the value of the company’sour common stock. The Compensation Committee periodically reassesses the appropriate weighting of cash and equity compensation.

With respect to equity awards,In the case of long-term incentive compensation, typically the Compensation Committee designs these awards typicallyto vest, or be earned, over a multi-year period, of three to four years, meaning that long-term value creation, contrasted with short-term gain, presents the best opportunity for employeesour executive officers to profitbenefit from thesetheir awards.

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We do not maintain a specific policy on the percentage allocation between short-term and long-term incentive compensation elements.

Governance of Executive Compensation Program

Role of the Compensation Committee

The Compensation Committee discharges many of the responsibilities of our Board of Directors relating to the compensation of our executive officers, including our Named Executive Officers, and thenon-employee members of our Board of Directors.The Compensation Committee has overall responsibility for overseeing our compensation and benefits philosophy and policies generally, overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO and our other executive officers, and ensuring that the target total direct compensation opportunities of our executive officers, including our Named Executive Officers, are consistent with our compensation philosophy, policies, and objectives.

The members of the Compensation Committee are appointed by our Board of Directors, and each member is an independent director (as “independence” is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). Currently, the members of the Compensation Committee are Michael S. Perry (Chairman), Mauro Ferrari, and Edward Frykman.

The Compensation Committee reviews our executive compensation annually.program annually on a calendar year basis, generally in December. The Compensation Committee draws on a number of resources to assist in the evaluation of the various components of the Company’sour executive compensation program including, but not limited to, input from our CEO, the advice of an independentexternal compensation consultant (as identified below) retained by the Compensation Committee, information provided in the public filings of industry peers and industry data compiled yearly by Radford in its Global Life Sciences Survey, which represents a nationally-based assessment of executive compensation widely used within the pharmaceutical and biotechnology industry sectors. While we do

The Compensation Committee relies upon the judgment of its members in making compensation decisions. In addition, the Compensation Committee incorporates judgment in the assessment process to respond to and adjust for the evolving business environment. The members of the Compensation Committee have extensive experience in executive management, as well as compensation practices and policies.

Compensation-Setting Process

The Compensation Committee develops recommendations for the target total direct compensation opportunities for our executive officers, including our Named Executive Officers. The Compensation Committee does not use a single method or measure in making its compensation decisions, nor does it position compensation levels based upon a specific or target level relative to a peer group or other companies,companies. Nonetheless, the pay practices at other companies are an important factor that the Compensation Committee considers in assessing the reasonableness of compensation and ensuring that our compensation practices are competitive in the marketplace.

Generally, the Compensation Committee evaluates the compensation of our executive officers relative to the median of the competitive market. However, as discussed hereafter, various other factors are taken into consideration in determining our executive officers’ compensation and the Compensation Committee does not target compensation at any specific level relative to the competitive market. When reviewing our current executive compensation arrangements and approving each compensation element and the target total direct compensation opportunity for our executive officers, the Compensation Committee considers the following factors:

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These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.

Role of Chief Executive Officer

In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance, market compensation data, and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s recommendations with respect to the compensation levels for individual executive officers other than himself based on the performance evaluation conducted by each executive officer’s manager and his own evaluation of the executive officer’s performance.

The Compensation Committee reviews and discusses these recommendations and proposals with our CEO and considers them as one factor in formulating the recommendations for the compensation for our executive officers, including our other Named Executive Officers. Our CEO recuses himself from all discussions and recommendations regarding his own compensation.

Role of Compensation Consultant

The Compensation Committee engages an external compensation consultant to assist it by providing information, analysis, and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. The Compensation Committee has the final authority to engage and terminate the engagement of any compensation consultant that it retains.

For the period from October 2016 through September 2017, the Compensation Committee engaged StreeterWyatt LLC, a national compensation consulting firm, as its external compensation consultant (“StreeterWyatt”). StreeterWyatt assisted the Compensation Committee in its review of executive andnon-employee director compensation practices for 2017, including the competitiveness of compensation levels, executive compensation design, comparisons with our industry peers, and other technical considerations.

Beginning in October 2017, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm (“Compensia”), as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our executive officers, and to assist with data analysis and the selection of the compensation peer group. During 2017, the scope of Compensia’s engagement included:

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The terms of Compensia’s engagement include reporting directly to the Compensation Committee and to the Compensation Committee chair.

In 2017, neither StreeterWyatt nor Compensia provided any other services to us. The Compensation Committee has evaluated StreeterWyatt’s and Compensia’s independence pursuant to the listing standards of the NASDAQ and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by either StreeterWyatt or Compensia.

Competitive Positioning

For each of the past five years, the Compensation Committee has directed its external compensation consultant to conduct a comparative study and report on compensation levels and practices relative to industry peers, including a competitive assessment of our executive compensation program as compared to the market data for base salaries, target total cash compensation, long-term incentive compensation, and target total direct compensation. Typically, the findings of this study are presented to the Compensation Committee by the compensation consultant in conjunction with the Compensation Committee’s annual review of our executive compensation program.

Because the biotechnology sector is dynamic, the comparator group used by the Compensation Committee to assess the competitive positioning of the compensation of our executive officers is updated annually to ensure that peer companies continue to meet the established criteria. For purposes of its review of our executive compensation program in fiscal 2017, the Compensation Committee directed StreeterWyatt to update its compensation peer group reflecting the competitive market for executive talent based on following criteria:

The compensation peer group was selected in such a manner that our market capitalization was very near the median for all peer companies. Consideration was also given to the frequency or infrequency with which a company was identified as a peer with other peer companies.

For 2017, the compensation peer group consisted of the following companies:

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The compensation study prepared by StreeterWyatt and presented in December 2016 provided an assessment of our compensation practices as compared to industry peers. Compensation levels for our executive officers, in the aggregate, were determined to be within the range of compensation provided to similarly placed executives and consistent with our compensation philosophy.

Individual Compensation Elements

In 2017, the principal elements of our executive compensation program were as follows:

Base Salary

Base salary represents the fixed portion of the compensation of our executive officers, including our Named Executive Officers, and is an important element of compensation intended to attract and retain highly-talented individuals.

The initial base salaries for our executive officers are negotiated on an individual basis at the time of hire. Thereafter, using the competitive market data provided by its compensation consultant, the Compensation Committee reviews and determines adjustments to the base salaries for each of our executive officers, including our Named Executive Officers, as part of its annual executive compensation review. In addition, the base salaries of our executive officers may be adjusted by the Compensation Committee in the event of a promotion or significant change in responsibilities. Generally, the Compensation Committee sets base salaries with reference to the competitive range of the market median of our compensation peer group and applicable executive compensation survey data, as well as its assessment of the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.

In December 2016, consistent with the recommendation of our CEO, the Compensation Committee determined to increase the base salaries of our executive officers, including our Named Executive Officers. In making these decisions, the Compensation Committee considered the current risks and challenges facing us, as well as the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.

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The base salaries of our Named Executive Officers for 2016 and 2017 were as follows:

The actual base salaries paid to our Named Executive Officers in fiscal 2017 are set forth in the “Fiscal 2017 Summary Compensation Table” below.

Annual Incentive Compensation

We provide our executive officers, including our Named Executive Officers, with the opportunity to earn performance-based annual incentive awards, payable in cash, which are designed to reward them for our overall corporate performance as well as their individual performance. Generally, our executive officers are evaluated each year for eligibility to receive an annual incentive compensation opportunity. Through a collaborative planning process involving our Board of Directors and management, corporate performance objectives are established at the beginning of each year and evaluated regularly by our Board of Directors for their continued relevance to our status.

Risk ManagementTarget Annual Cash Bonus Opportunities

For purposes of the 2017 performance-based incentive awards, each executive officer, including each of our Named Executive Officers, was assigned a target annual incentive award opportunity based upon a percentage of his or her base salary. The target annual incentive award opportunities for our executive officers, including our Named Executive Officers, were recommended by our CEO (except with respect to his own target annual incentive award opportunity) based on each executive officer’s accountability, scope of responsibilities, and potential impact on our performance, and approved by the Compensation Committee. The determination of target annual incentive award opportunities was based on the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above. Based on higher levels of control and accountability for our overall performance, a higher percentage of each executive officer’s total target cash compensation was dependent on his or her performance-based annual incentive awards.

For 2017, the Compensation Committee increased the target annual incentive award opportunity for each of our Named Executive Officers, except for our CEO. The increase reflected the increased leadership responsibilities for each position as the Company grows and market-based adjustments.

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The target annual incentive award opportunities for our Named Executive Officers were as follows:

Potential annual incentive awards for our CEO could range from zero to 200% of his target annual incentive award opportunity. There is no set minimum or maximum for annual incentive awards for our other Named Executive Officers.

Performance Objectives

In determining the amount of the annual incentive award for each of our executive officers, including each of our Named Executive Officers, the Compensation Committee evaluated the corporate performance objectives that had been established at the beginning of the calendar year (as set forth below) as well as other corporate and individual achievements and performance throughout the year. These performance objectives addressed milestones for our lead products, research and development milestones for our drug pipeline, business development objectives, and infrastructure enhancements. In December 2017, the Compensation Committee determined that we had largely achieved or exceeded our primary business objectives set for calendar 2017, as described below.

In determining our CEO’s annual incentive award for 2017, the preclinical development and Amgen collaboration goals were weighted most heavily, followed by financial and manufacturing objectives with organizational development goals least heavily, in that order.

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Annual Incentive Award Payments

The actual annual incentive award payments earned by our Named Executive Officers ranged from 90% to 115% of their target annual incentive award opportunities. The awards are recommended by our CEO and approved by the Compensation Committee based on the overall achievement of the Company’s goals, their contributions to the goals, and the overall performance of each officer during the year. The following table sets forth the target annual incentive award opportunities, the actual award payment as a percentage of each Named Executive Officer’s base salary, and the actual award payment made in cash to each of our Named Executive Officers based on their performance in 2017:

The annual incentive award payments made to our Named Executive Officers for fiscal 2017 are set forth in the “Fiscal 2017 Summary Compensation Table” below.

Long-Term Incentive Compensation

We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realizable value of these equity awards over time bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers, including our Named Executive Officers, to create value for our stockholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted to our executive officers by the Compensation Committee. The amount and forms of such equity awards are determined by the Compensation Committee after considering the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above.

2017 LTI Awards

Performance-Based RSU Award for Chief Executive Officer

In December 2016, the Compensation Committee determined that the annual equity awards to be granted to our executive officers should be solely in the form of restricted stock unit (“RSU”) awards that may be settled for shares of our common stock. In the case of our CEO, the Compensation determined that his award was to be entirely performance-based and granted PSUs. Dr. Anzalone was granted a performance-based RSU of 978,000 shares to be vested in six equal installments on the achievement of the following milestones:

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The milestones must be achieved by April 12, 2019 or the grants will expire.

In December 2016, the Committee certified achievement of the performance milestones and the vesting of the following previously granted performance-based restricted stock unit awards and option awards.

Equity Grants to Other Named Executive Officers

The Compensation Committee approved the following aggregate equity awards for our Named Executive Officers for 2017:

In view of the discontinuation of our intravenous clinical programs and to satisfy our retention objectives, the Compensation Committee determined the time-based RSU awards granted to our executive officers, including our other Named Executive Officers in fiscal 2017 should have a lengthier initial vesting date, and a shorter overall vesting period. Thus, the time-based RSU awards granted to our executive officers vest on the second anniversary of the date of grant, contingent upon an executive officer remaining employed by us on that date.

The equity awards granted to our Named Executive Officers in fiscal 2017 are set forth in the “Fiscal 2017 Summary Compensation Table” and the “Fiscal 2017 Grants of Plan-Based Awards Table” below.

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Welfare and Health Benefits

Our executive officers, including our Named Executive Officers, are eligible to participate in all of our employee benefit plans, including medical, dental, vision, life, and disability insurance, in each case on the same basis as our other employees, subject to applicable law. In addition, we provide additional life insurance for our CEO for the benefit of his heirs. We also provide vacation and other paid holidays to all our employees, including our executive officers, all of which we believe to be comparable to those provided at peer companies. These benefit programs are designed to enable us to attract and retain our workforce in a competitive marketplace. Our health, welfare, and vacation benefits are designed to ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.

Our retirement savings plan (“401(k) plan”) is atax-qualified retirement savings plan, pursuant to which qualified employees, including our Named Executive Officers, are able to contribute certain amounts of their annual compensation, subject to limits prescribed by the Internal Revenue Service. Historically, we have made matching contributions of 100% of the first 3% of base salary and of 50% of the next 2% of base salary contributed to the plan. The value of these benefits for each of our Named Executive Officers is reflected in the “All Other Compensation” column of the “Summary Compensation Table” below.

Perquisites and Other Personal Benefits

Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our executive officers, including our Named Executive Officers, except as generally made available to our employees, or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment and retention purposes.

In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.

Employment Arrangements

We have entered into a written employment agreement with our CEO and have written employment offer letters with our other executive officers.In filling each of our executive positions, we recognized the need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, in formulating these compensation packages, we were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations. Each of these arrangements provides for “at will” employment.

For detailed descriptions of the employment arrangements we maintained with our Named Executive Officers for 2017, see “Termination Benefits – Potential Payments Upon Termination or Change in Control” below.

Post-Employment Compensation Arrangements

We have entered into an employment agreement with our CEO, and we also have agreements with our CFO and General Counsel that provide for certain payments and benefits in the event of certain involuntary terminations of employment. We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. These agreements are designed to provide reasonable compensation to executive officers who leave our employ under certain circumstances to facilitate their transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.

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The Compensation Committee does not consider the specific amounts payable under these agreements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.

In addition, our 2013 Incentive Plan provides for the acceleration of vesting of outstanding and unvested equity awards in the event of a change in control of the Company, as defined in the plan, except as otherwise determined by our Board of Directors.The Company has amended the agreements for outstanding equity awards granted to our CEO pursuant to our 2004 Equity Incentive Plan and 2013 Incentive Plan to provide that, upon a change in control of the Company, the vesting of such awards will accelerate only in the event of a subsequent involuntary termination of employment (a “double-trigger” arrangement).

For detailed descriptions of the post-employment compensation arrangements we maintained with our Named Executive Officers for 2017, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Termination Benefits – Potential Payments Upon Termination or Change in Control” below.

Other Compensation Policies and Practices

Equity Awards Grant Policy

We do not have any program, plan, or obligation that requires us to grant equity awards on specified dates, although historically we have granted such awards to our existing executive officers and employees at least annually and to newly-hired employees on the commencement of their employment. We do not have any program, plan, or practice to grant options to purchase shares of our common stock to our executive officers in coordination with the release of material nonpublic information. Equity awards may occasionally be granted following a significant change in job responsibilities or to meet other special retention or performance objectives.

Authority to grant equity awards to our employees rests with the Compensation Committee, although the Compensation Committee has delegated authority to our CEO to grant equity awards tonon-executive employees within prescribed limits set by the Compensation Committee. With respect to our executive officers, except for our CEO, recommendations for equity awards are made by our CEO and reviewed and approved by the Compensation Committee.

Under the terms of our 2013 Incentive Plan, pursuant to which new equity awards are granted, the exercise price of any option to purchase shares of our common stock awarded under the plan must be equal to at least 100% of the fair market value of our common stock (which is determined based on the closing sales price of our common stock on the NASDAQ Global Market) on the date of grant.

Stock Ownership Policy

We maintain a stock ownership policy for our CEO, COO, and CFO to further align their respective interests with the interests of our stockholders, and to further promote our commitment to sound corporate governance. This policy requires our CEO to own a minimum number of shares of our common stock equal to a value of six times his annualized base salary and our COO and CFO to own a minimum number of shares of our common stock equal to a value of twice their annualized base salary. Each of these executive officers has achieved the required ownership.

Compensation Recovery (“Clawback”) Policy

In December 2017, our Board of Directors adopted a clawback policy as follows:

“If Arrowhead Pharmaceuticals, Inc. (the “Company”) is required to materially restate any of its financial statements, the Board of Directors (the “Board”) shall assess the degree to which any fraud, negligence, or intentional misconduct by any executive officer of the Company was responsible for such restatement. If the Board determines that any executive officer was responsible for causing such restatement, the Board shall, in addition to any other lawful remedies the Board or the Company may take, seek recovery of all or a portion of the incentive compensation awarded to the executive officer for the performance period

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covered by the restated financial statement, provided that such recovery shall not extend to payments made more than three years prior to the date the financial record was restated. In addition, the Board may, in its absolute discretion, revoke any of the responsible executive officer’s unpaid or unvested incentive compensation outstanding as of the date of the Board’s determination of the executive officer’s responsibility for the financial restatement.”

In addition, our 2013 Incentive Plan provides for the recovery of awards made under the plan in accordance with any applicable compensation recovery or recoupment policy, including as required by law, regulation, or national securities exchange rule.

Policy Prohibiting Hedging and Pledging

Our Insider Trading Policy prohibits our employees, including our executive officers, and thenon-employee members of our Board of Directors from short-term trading, options trading, trading on margin, pledging our common stock as collateral, and all hedging transactions with respect to our securities.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief financial officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act in any taxable year. Remuneration in excess of $1 million may only be deducted if it is “performance-based compensation” within the meaning of Section 162(m) or qualifies for one of the other exemptions from the deduction limit. In making compensation recommendations, the Compensation Committee considers the potential effects of Section 162(m) on the compensation paid to our Named Executive Officers.

Where reasonably practicable, the Compensation Committee seeks to qualify the performance-based incentive compensation paid or awarded to our Named Executive Officers for the “performance-based compensation” exemption from the deduction limit of Section 162(m). As such, in approving the amount and form of compensation for our Named Executive Officers, the Compensation Committee considers all elements of our cost of providing such compensation, including the potential impact of Section 162(m). To maintain flexibility in compensating our Named Executive Officers in a manner designed to promote varying corporate goals, however, the Compensation Committee has not adopted a policy that all compensation payable to our Named Executive Officers that is subject to Section 162(m) must be deductible for federal income tax purposes. From time to time, the Compensation Committee may, in its judgment, recommend and our Board of Directors may approve compensation for our Named Executive Officers that does not comply with an exemption from the deduction limit when it believes that such compensation is in the best interests of the Company and our stockholders.

The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our Named Executive Officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees andnon-employee members of our Board of Directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.

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COMPENSATION RISK ASSESSMENT

In reviewing theour various compensation structure,programs, the Compensation Committee considers how the Company’sour compensation policies and practices may affect the Company’sour risk profile and whether compensationsuch policies and practices may encourage undue risk-taking by our employees. More specifically, the Compensation Committee considers the general design philosophy of the Company’sour policies and practices for our employees whose conduct would be most affected by incentives established bypursuant to these compensation policies. In considering these issues, the Compensation Committee concluded that the use of performance-based annual incentive paymentscompensation plan and long-term incentive compensation opportunities in the form of equity awards did not appear to create undue risks for the Companyus or encourage excessive risk-taking behavior on the part of named executive officers.our Named Executive Officers.

With respect to the annual incentive awards for our executive officers, the amount of an individual’s award depends principally on overall Company performance, as determined by the Compensation Committee, which reduces the ability and incentive for an individual to take undue risks at the expense of Companyour performance in an effort to increase the amount of his or her bonusannual incentive award. The Company’sOur performance goalsobjectives are reviewed regularly by the Compensation Committee and theour Board of Directors and are considered to be generally of the nature that promote the steady progression of the Company’sour development programs and would not encourage or reward excessive risk taking. Additionally, therisk-taking. In addition, our Board of Directors has the ability to intervene in instances where actions by the executives our executive officersvis-à-vis Company performance goalobjective attainment would be considered unduly risky to prevent or penalize such actions.

Minimum Stock Ownership Requirements

The Compensation Committee has adopted guidelines for ownership of the Company’s stock by the Company’s CEO (6 times annual salary), COO (2 times annual salary), and CFO (2 times annual salary). The ownership levels are to be achieved within the next four years.

Trading Policy

The Company’s Insider Trading Policy prohibits short-term trading, options trading, trading on margin, pledging Company stock as collateral, and hedging with respect to the Company’s securities. The policy applies to all employees of the Company, including the NEOs and the Board of Directors.

Roles in Determining Compensation

The Board has delegated to the Compensation Committee the responsibility to ensure that total compensation paid to our executive officers, including named executive officers, is consistent with our compensation policy and objectives. The Compensation Committee oversees and approves all compensation arrangements and actions for our executive officers and other key employees, including the named executive officers. While the Compensation Committee draws on a number of resources, including input from the Chief Executive Officer and independent compensation consultants, to make decisions regarding the Company’s executive compensation program, ultimate

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decision-making authority rests with the Compensation Committee. The Compensation Committee retains discretion over base salary, annual incentive bonus, equity compensation and other compensation considerations for our named executive officers. As part of the review process, the Chief Executive Officer makes recommendations to the Compensation Committee with respect to the compensation levels for individual executives other than himself based on the performance evaluation conducted by each executive’s manager and his own evaluation of the executive’s performance. The Compensation Committee reviews this information and adjusts or approves the recommendations. In addition, for each named executive officer, the Compensation Committee considers the Company’s performance against annual and longer term objectives, market data regarding executive compensation at comparable companies and realized and realizable values under previous equity awards.

The Compensation Committee relies upon the judgment of its members in making compensation decisions. In addition, the Compensation Committee incorporates judgment in the assessment process to respond to and adjust for the evolving business environment. During 2016, Dr. Perry served as Chairman of the Compensation Committee, and Mr. Frykman, and Dr. Ferrari served as members. The Company’s Board of Directors has determined that all of the Compensation Committee members are “independent” directors for all required legal purposes, including pursuant to Nasdaq’s definition of independence. The members have extensive experience in executive management, as well as compensation practices and policies.

The Compensation Committee has retained the services of an external compensation consultant, StreeterWyatt LLC (“StreeterWyatt”). The mandate of StreeterWyatt is to assist the Compensation Committee in its review of executive and director compensation practices, including the competitiveness of pay levels, executive compensation design, comparison with the Company’s peers in the industry and other technical considerations. The Compensation Committee has evaluated StreeterWyatt’s performance, considered alternative compensation consultants and has the final authority to engage and terminate the StreeterWyatt’s services. The decision to engage StreeterWyatt was not made or recommended by the Company’s management. The Compensation Committee, after a review of the factors set forth in Section 10C-1 of the Securities Exchange Act of 1934, has determined that the work performed by StreeterWyatt in 2016 does not present any conflicts of interest.

Equity Awards

Under the terms of our 2013 Incentive Plan, pursuant to which new equity grants are made, the exercise price of any stock options awarded under these plans must be equal to at least 100% of the fair market value of our Common Stock (the closing sales price on the Nasdaq Global Market) on the date of grant. We do not have any program, plan or obligation that requires us to grant equity awards on specified dates, although historically we have made grants to existing officers and employees at least annually and to new hires on the commencement of their employment. We do not have any program, plan or practice to grant stock option to our executive officers in coordination with the release of material nonpublic information. Equity awards may occasionally be granted following a significant change in job responsibilities or to meet other special retention or performance objectives.

Authority to make equity grants to employees rests with the Compensation Committee, although the Compensation Committee has delegated authority to the Chief Executive Officer to make grants to non-executive employees within limits set by the Compensation Committee. With respect to executive officers, except for the Chief Executive Officer, recommendations for equity grants are made by the Chief Executive Officer and reviewed and approved by the Compensation Committee.

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Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the foregoing Compensation Discussion and Analysis be included in this proxy statement.

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Compensation Committee Interlocks and Insider Participation

During 2017, Dr. Perry, Dr. Ferrari and Mr. Frykman served on the Compensation Committee. During fiscal year 2017, there were no compensation committee interlocks between the Company and other entities involving the Company’s executive officers and directors.

Summary Compensation Table

The following table summarizes compensation earned for services rendered during fiscal 2017, 2016, 2015, and 20142015 by our Chief Executive Officer, our Chief Financial Officer, our Chief Operating Officer, our Chief Scientific Officer,General Counsel and our General Counsel,Vice President, Strategic Business Operations, collectively our “Named Executive Officers”:

Summary Compensation Table

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Grants of Plan-Based Awards

The following table sets forth cash bonus and equity grants made to the named executive officers in fiscal 2016:2017:

Grants of Plan Based Awards Table