Ladies and gentlemen, welcome to the Arrowhead Research Fiscal 2014 Fourth Quarter Year End Financial Results Conference Call. Throughout today's recorded presentation all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince.

Thank you. Good afternoon, everyone. And thank you for joining us today to discuss Arrowhead's results for its fiscal 2014 fourth quarter and year ended September 30, 2014. With us today from management are President and CEO, Dr. Christopher Anzalone; Chief Operating Officer and Head of R&D, Dr. Bruce Given; Chief Financial Officer, Ken Myszkowski. Management will provide a brief overview of the quarter and we’ll then open up the call to your questions. Before we begin, I would like to remind you that comments made during today's call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including without limitation those with respect to Arrowhead's goals, plans and strategies, are forward-looking statements. These include but are not limited to statements regarding the anticipated safety and or efficacy of ARC-520 and our other clinical programs, as well as anticipated timing for study enrollment and completion, it represent management's current expectations and are inherently uncertain. Thus actual results may differ materially. Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today's call. You should refer to the discussions under Risk Factors in Arrowhead's annual report on Form 10-K and the company's quarterly reports on Form 10-Q for additional matters to be considered in this regard. With that said, I’d like to turn the call over to Dr. Christopher Anzalone, President and CEO of the company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. The 2014 fiscal year was one of progress and expansion for Arrowhead. We pushed our first candidate ARC-520 into the clinic. We began rapid pipeline expansion with the introduction of our next candidate ARC-AAT and we made important corporate progress on multiple fronts such as strengthening our balance sheet. Let's begin with ARC-520. We completed a first in man Phase 1 study in nine cohorts that assess safety and tolerability of doses ranging from 0.01 to 4 mgs/kg, in a total of 54 subjects. There were no dropouts for adverse events, no serious adverse events or adverse events rated as severe. Neither the incidence nor severity of AEs was different between the treatment groups and placebo. And we did not see any dose limiting toxicities. ARC-520 and the underlying DPC delivery system, appears to be well tolerated at all dose levels studied. This is a strong and important statement, a substantial unknown for any new candidate and platform entering clinical studies, as whether a safety signal will emerge that was not predicted in animal models. The positive safety profile we have seen represents a significant derisking event for ARC-520 and a broader DPC platform. With confidence in the safety and tolerability of ARC-520, we moved into a Phase 2a dose finding study in order to characterize single dose activity in chronic HBV patients. Specifically, we are learning the safety profile of ARC-520 in HBV patients and how deeply various doses of ARC-520 will suppress a specific viral protein to surface antigen or s-antigen. This study is ongoing but we have completed dosing 24 patients in three initial cohorts, 1, 2 and 3 mgs/kg. We have presented data from 1 and 2 mgs/kg and we are still following patients…

Thanks, Chris, and good afternoon, everyone. We made a lot of progress in 2014 in our lead candidates ARC-520 in addition to expanding our pipeline to include ARC-AAT. It's testament to the potential of both product candidates that we have selected present date on ARC-520 in a late breaker poster session and on ARC-AAT in the plenary session at AASLD earlier this month. The following has reviewed these data. We completed nine dose cohorts in our Phase 1 trial of ARC-520. The study was designed to characterize the safety profile of ARC-520 across the range of doses and to evaluate pharmacokinetics. It was a randomized double blind placebo controlled single dose escalation first in human study of ARC-520 administered intravenously to help the adult volunteers. All subjects received either placebo or ARC-520 in doses ranging from 0.01 to 4 mgs/kg. The study successfully enrolled 54 subjects at a single center with 36 received in ARC-520 and 18 received in placebo. There are no reports of serious AEs, no dose-limiting toxicities, no discontinuations due to AEs and a modest overall rate of AEs, without a clear dose related increase in frequency or severity. There is a modest occurrence rate of non-clinically significant abnormal laboratory test in placebo and ARC-520 treated subjects. There were no reported drug related or clinically significant differences for vital signs or ECGs between subjects received in drug versus placebo. One occurrence in each of moderate flushing and urticarial rash seen at dose levels of 0.3 mgs/kg and 2 mgs/kg respectively, led to the subsequent reduction in the fusion rate of ARC-520, as well as the introduction of pretreatment with an oral over-the-counter antihistamine. Since the introduction of these mitigations, no signs of hypersensitivity or infusion reactions have been seen. There are no changes in ALT, AST or…

Year ended September 30, 2014, was $58.6 million or $25 per share, based on $47 million weighted average shares outstanding. This compares with the net loss attributable to Arrowhead of $31.1 million or $30 per share based on $24 million weighted average shares outstanding for the year ended September 30, 2013. Total operating expenses for the year ended September 30, 2014 was $53.5 million compared to $24.9 million for the year ended September 30, 2013. Net cash used in operating activities for fiscal 2014 were $35.4 million compared with $19 million in the prior year period. The increase in operating expenses and cash used in operating activities as compared to the prior fiscal year reflects cost associated with the progress achieved on our lead candidate ARC-520, as well as our recently announced second candidate, ARC-AAT. These costs include manufacturing expenses, supplies for clinical trials, practicality studies, and the cost associated with administration of clinical trials, as well as increased headcount as compared to last year. Turning to our balance sheet, our cash in investments of cash were $177.3 million at September 30, 2014, compared to $29.8 million at September 30, 2013. The increase in our cash balance reflects $172.6 million in cash from financing during fiscal 2014. Our cash resources keep us on solid financial footing and provide ample runway to support the needs of our operation. Our common shares outstanding at September 30, 2014 were $54.7 million and would be $58.6 million assuming conversion of the preferred shares outstanding at September 30, 2014. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken. We’ve always believed that the DPC delivery platform and RNAi in general have some very attractive features that will allow us to rapidly expand our pipeline once we have proof of concepts for the underlying technologies. In its most basic form, the technology platform enables the company to build multiple products in a cost effective way and should have a progressively lower risk profile. We believe the emerging ARC-520 Phase 2a data as well as upcoming Phase 2b data and ARC-AAT Phase 1 data can give us that proof of concept and technology validation. We’re seeing scientifically important and potentially meaningful results. We hope to provide additional data throughout 2015, that supports this position. So what are some of the key events that you should expect? As mentioned, we have filed to begin a Phase 1 study of ARC-AAT in up to 48 subjects including healthy volunteers and AATD patients. We plan to initiate this study shortly after receiving regulatory approval and believe we can achieve clinical proof of concept in 2015. We plan to file with the regulatory authorities this quarter to begin a series of Phase 2b studies of ARC-520. Our goal is to develop a comprehensive data set on ARC-520s activity in various patient populations using various combinations and different dosing regiments. Expect to see additional details as we initiate these studies throughout 2015. We’ll continue to dose finding Phase 2a study of ARC-520 and present a full data set once it is complete. We’re also working on additional drug candidates based on various formulations of the DPC delivery system. We expect filings for our next clinical candidate in calendar 2015, and we hope to provide updates about progress on DPC that can be administered subcutaneously and DPC is targeting extra-hepatic tissues in calendar 2015. We feel confident about where we are with ARC-520. We believe that it carries substantially lower risk now that we have established a base safety profile and have demonstrated that it is effectively hitting its target with the long duration of effect. The next step is to establish that ARC-520 can lead to a clinical benefit in patients and enable functional cures. We also hope to demonstrate clinical activity with ARC-AAT as we enter clinical trials shortly. We expect 2015, to be an exciting year indeed. So, thanks for joining us on our call today and we look forward to continued progress in fiscal 2015. I would now like to open the call to your questions. Operator?

[Operator Instructions] The first question comes from Thomas Wei from Jefferies. Your line is open. Please go ahead.

Thanks. Just a couple of questions. The first on the renal and the liver toxicity that we're seeing in the animal studies. Could you just help us understand, was that something that was associated with the dose level given or the number of doses? And how quickly was that seen in animals? Just wanted to get a sense of how much we should interpret from this early human data?

Bruce, you want to take that.

Sure. We haven’t spoken much about it before, Chris. I mean how much would you like me to cover here.

Well, you can talk about it generally, what we have seen in GLP tox studies and non-GLP studies, not necessarily doses but you can give an idea about what you're seeing in acute tox.

So Thomas, what we see once you get to doses that produce toxicity is that the first sign is just [indiscernible] increases in the liver and for the kidney it would be BUN and creatinine. And the corresponding toxicity related to that is in the liver, have parasite damage, and in the kidney its proximal tubular damage that we see that corresponds to those chemistries. One encouraging thing about our product is that it's cleared from the circulation very quickly. So, in fact when you see that toxicity, you see it early. You see it in the first 24, 48 hours, and if you don’t see any toxicity there then you won’t see it later. And of course, we’re talking about dosing monthly or maybe even less frequently. So what's good about that is that, with chronic dosing, we don’t see an increase in toxicity. When you're at the - for dose level that you get findings, they tend to be the same after the first dose if you will as after multiple months of dosing. But they don't increase and basically the organs recover in the interval between dosing. So, hopefully that answers your question.

That's helpful. And then my second question was just on the duration of the effect, here you had shown in the poster that the mean Nader was achieved at day 33 in the 2 mgs/kg, it's not the median but presumably that means at around half of patients have their surface antigen start rebounding before day 30, and the other half after day 30. When we think about your multi-dose study, are there any dosing or efficacy or safety implications around that to stock that half of patients might have a duration of effect that’s less than 30 days?

Let me handle that Chris.

Sure. Go ahead.

Yeah Thomas, it’s really pretty flat those response curve. It's kind of what Chris said, it’s not a U-shape or V-shape sort of curve where you go to your Nader [ph], you come right back up. It really was much more of a flat sort of curve, and the Nader by definition is the lowest value. But overall, it was not a sharp loss of activities. So, we were still statistically significant at day 43 and then frankly probably would have been at day 57 except that we had an odd individual in the foreseeable group that cause a sort of strange data point at day 57. So it’s really not a situation where any of those patients, the two 2 mg/kg were flying back up after day 30 for instance. They're all - I would say surprised about the same. And it's - so the notion of, if we dose it at day 30 for instance, are we really dosing at a point of still very significant knockdown, I think the answer is going to be, yes. And I don’t think there’s going to be a lot of individual variability affecting that.

And let me just add two things on both those questions. First, regarding tox. So as, Bruce mentioned, we’ve done an awful lot of work on driving tox with high doses in animal models because we want to understand what that looks like when you start to approach a toxic dose. And so I think we have a good idea what that looks like across multiple species, and importantly we’re just not seeing any signs of that at the doses we’re studying right now in humans, as we talked about we seen no deal tees, we’ve seen a very well tolerated drug so far. So, it does not feel like we’re terribly close to where things might start to become a bit toxic. And secondly, let me just add on the dosing on top of prior doses. So keep in mind also, as you know Thomas, as you increase dose - as we increase dose, we expect to keep a knockdown and there’s generally - in animal models and in humans with other companies, it's generally a correlation between depth and duration of knockdown. And so as we get deeper knockdown with 3 mgs/kg and 4 mgs/kg, I expect we’ll get a longer duration of knockdown as well and that should give us plenty of room to be dosing right on top of the prior dose. And maybe even on top of the dose prior to that as well for dosing every 30 days. And so we think we should get a really strong additive effect with multiple doses, not just a second dose but maybe the third dose and beyond.

Great. Thanks for taking my questions.

Sure. Thank you, Thomas.

Thank you. Our next question comes from Michael Yee from RBC Capital Markets. Your line is open. Please go ahead.

Hey, thanks. A couple of questions. First on the Hepatitis B, program. Do you have the medians for cohort 1 and cohort 2? And do you know if there is any relationship to amount of knockdown in baseline s-antigen? That's the first question. Second one is on, think about all these Phase 2 that are starting up in 2015, do you - generally think will get data on these? And or do you think we need to sort of wait for the Phase to B program to get a better read on whether greater knockdown actually leads to seroconversion. And I have one AAT question.

Right. Bruce, you want to take the first question and I can speak to the second one.

Mike, I'm not - I don’t have the median data in front of me. It’s fairly small group, it’s six subjects. I am not sure that the median will help us a lot. I don’t think the data was generally driven by outliers. So I don’t think the median data would be very much different than the mean data. But that said, I don’t have it in front of me to look it, it’s not the way we’ve been reporting the data or graphing that for that matter. So I don’t have a good - I can’t give you an answer for that.

And then, baseline, do [indiscernible] to baseline entry levels?

The baseline varied in these patients from a low that was fairly close to 1,000 international units and high - if I remember right was up around 15,000 or so. And again there’s fairly low number of patients between the one and two mix per kg, you have 12 patients total. So it was a pretty good spread. It was not obvious that response varied by baseline but again it's a very small data set to try to drop any influence. But - and keep in mind that cutoff level, the 1,000. That's still a decent amount of percentage and so these are not patients that were low because we wanted to have enough dynamic range to be sure that we could really see things. And so these all have pretty healthy amounts of s-antigen and frankly we haven’t noticed the difference at this point but I think that will be easier for us to look at, at the end of Phase 2b when we have a lot more data points to look at.

Of course, [indiscernible] I would think that a lower baseline you might get greater effect obviously testing the same dose?

Yes, these are all fairly high baselines in a way. So, you might be right, but we haven’t have the ability to test that yet in the program.

Okay. And then, data for 2015, or any data that would give the street or give you the answer that knockdown as leading to seroconversion?

Yeah. So, of course we wouldn’t expect that with a single dose and so we really have to see that in the multiple dose studies. And we’ll have two anchor studies, as you know, one in E negative patients and one in E antigen positive patients. And those are placebo-controlled. I expect that we’ll have several additional Phase 2b studies that are open labeled and so it will be easier to talk about those data throughout 2015. So, I feel like we should have some updates on those, and then we’ll see what kind of updates we can give on the large anchor studies.

Okay. I’ll wait for that. And then my last question is on AAT, remind me that do we know, similarly when you started testing these patients, what amount of knockdown should meet the clinical meaningful liver outcome changes? Obviously, there is a long term question I think we’ve all been asking which is going to take a long time to get liver benefit, data on liver efficacy, that’s going to be a long time. So what type of knockdown should we be seeking about that, will make the credit meaningful?

Bruce, you want to speak to that.

Sure. Well, it's a really important question, and one of course that we don’t know with certainty. We were I think really very pleasantly surprised by what we saw on the PiZ mice and obviously so are the abstract reviewers at AASLD because that's - I think what caused their eye, that even with the single dose, with what is very complete knockdown, we saw morphological changes in that model and with multiple doses we really saw a lot of clearance. The thing about it is that - the liver is very - the liver is the body’s main detoxifying organ. So, it handles all the toxins in the body and it gets injured quite a bit in the process, so it is very much designed to deal with its own injury and to heal itself. The kidney is kind of that way too. The kidney is pretty good at healing itself from acute sort of insults as well. So, what I think what’s really happening here is that the liver normally is doing a reasonably good job of trying to handle this excess production of this mutant protein that it can’t get rid of and the disease happens because it just overwhelms the liver’s ability to heal. So when you knockdown the AAT you takeaway that production of new monomer. The liver actually surprised us with how quickly it started to heal itself in these mice. Now, mice are not humans of course but we’re kind of thinking that would knockdown 90% or more that the liver could well do a lot of self healing. And which is part of why we’re thinking that the dosing interval in AAT might turn out to be six weeks or even longer in humans once we get in there and see the data. Because of course the knockdown in HPV has been longer than we expected in humans versus animals. So we don't know what we’re going to see with AAT. But I think here we generally think somewhere around 90% plus, and keep in mind, we’re talking about what we’re measuring in the plasma and somewhere around 93% to 95% or so of circulating AAT comes from the liver, the rest is coming from outside the liver. So if you’re seeing a big reduction, the liver production maybe down even more. So you’ll see 90% - the plasma maybe relatively 95% or 98% or 99% in the liver.

Got it. Okay. Got it, very helpful. Thanks guys.

Thank you.

Thank you. Our next question comes from Ted Tenthoff from Piper Jaffray. Your line is open. Please go ahead.

Great. Thanks. Can you hear me okay? Excellent. So appreciate the updates. Quick question as with respect to what you have seen not in human primates but more other animal models with respect to higher doses and multiple doses. Is there anyway those models correlate to human exposure with respect to s-antigen or HBV models, I forget if it's still the woodchuck which is the one that is the standard? But what kind of dosing curves have you seen at higher ARC-520 doses and repeat dosing and is there anyway to model that or extrapolate how far you think you might actually be able to go with 3 mg/kg, 4 mg/kg, and to our multiple doses in man?

Yeah. So, Ted, thanks for that question. We don't have data in the woodchuck model. That’s a different virus. It’s similar but it’s different, and so that would require different sequences and it’s not clear how illuminating that model would be. So we didn’t look at that. Generally, we see the additive effects in multiple animal models across target. And so we take a lot of solace in that and believing that we'll see this additive or step down approach on multiple dosing. And of course, we look to what other companies have done in RNAi, and you’ve seen the similar thing where you get an additive or step down approach. And so we expect that but at the end of the day, we see that in humans and that’s why we are moving as quickly as we can into the Phase 2b studies even while we are working on the 4 mgs/kg, single dose study, we’re moving into the Phase 2b multiple dose studies because that’s where we start to learn a lot about our drug. That’s where we start to learn a lot about how we might optimize the therapy.

Fair enough. Okay guys. And when will you be able to articulate in more detail, more clarity on what some of those studies are going to look like in the month of the starting?

Some of that, as I mentioned is really iterative process. And so while we have ideas for several of them, I think that as data come in that multiple dose studies, we’ll see things that will surprise us. And will frankly surprise the whole field, because we’ll be doing something that the field never been able to do before and so new ideas will come. I think that we’ll start to give some guidance in early 2015 as we start to submit filings for some of those parallel studies and then we’ll keep you up to-date in as real time basis as we can. Again, I suspect that in the first half of 2015, we will start to add additional parallel studies, and as we talked about, the ones that you could imagine of different dosing schedules. We always thought that we wanted to look at dosing ARC-520 every two weeks, in addition to every month, but now given the duration of knockdown I think that we may try longer dose intervals. And then of course, we’ll be interested in looking at combination with interferon as well as other mild stimulatory agents. So once we get our two big anchor studies underway, we can focus on some of those smaller studies and we’ll let you know the specific design of those as we apply for them.

Okay. Good, that’s helpful. Thanks.

You're welcome. Thank you, Ted.

Thank you. Our next question comes from Alethia Young from Deutsche Bank. Your line is open. Please go ahead.

Great. Thanks for taking my question. A couple of ones. One, are you leaving the protocol open in Phase 1b?

Bruce, you want to talk to that?

You mean the Phase 2a study, is that what you mean?

Yes.

Well, we can talk about that. So far our plan is to start with 4 mgs/kg. And then of course we'll have 85 days. So I guess, there’s always be the possibility we could go higher but it’s not our plan at this point. That’s really a question.

Yeah. And then I guess, what would influence your - what would be the factors that would make you go out and leave it open? Are there any at this point?

It’s hard to speculate. I mean I suppose if we saw something in the knockdown that made us think we wanted to try our higher doses and our investigators were game for it, I suppose we might but it’s surely speculative. I mean it’s not our expectation that we’ll need to go higher or want to go higher but I suppose we could.

And importantly, there has been no data to live in our ability to do that. The sales profile has been so good that if we wanted to go higher there is - we haven’t seen anything that would keep us from doing that. At this point we don’t - we’re not planning on that.

Okay. And then just, thinking although about we kind of flipping the study-, let go ahead to do like the United States, Europe and different areas. How do you think about the risk of that as far as what you’ll need - what the FDA needs different than anything else, we've seen RNA or just kind of if you can help characterize that timeline risk and just risk in general after that submitting that package?

Sure. Bruce, you want to speak on that?

Yeah, Alethia as you know it’s always unknown, we like the data package, we think it’s very solid and very complete, but one variable until the first time you submit to the FDA, is the first time you submit and it’s hard really for me to gauge that risk. We feel like the clinical data is very strong. We feel like the tox data is good and everything else, but ultimately they - as we always say, we submit, they review, they decide. And that's always the case.

And, what are the timelines for submitting again? Or having kind of characterizing more specifically that?

Before the end of the year.

Okay. And you guys don’t have any sort of fast-track or anything?

Not at this point. No, we haven’t asked for it either, haven't asked and haven’t received.

And that’s a really good question Alethia. We’ve thought about that and we have spent an awful lot of time working on our manufacturing and making sure that we’re able to scale this up quickly, should we get lucky and see functional cures early because I think that if we were to see that, I think regulatory agencies will get excited quickly and we can move I think fairly quickly towards into Phase 3, and we want to make sure that our manufacturing is not going to slow us down for that. So, hopefully we can explore that possibility in the future.

Okay. Great. Thanks guys. Happy Thanksgiving.

Yeah, you too. Thank you.

Thank you. We’re showing no one else in the queue at this time. I’ll turn the conference back over to Mr. Chris Anzalone, for closing remarks.

Thank you, everyone. And I wish you all happy Thanksgiving and a happy holiday season.