Ladies and gentlemen, welcome to the Arrowhead Research Corporation Fiscal 2015 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.

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its FY15 fourth quarter and year ended September 30, 2015. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the year; Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our clinical programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials. We will then open up the call to your questions. Before we begin, I'd 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 fact, 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, ARC-521, ARC-AAT, ARC-F12 and our other programs, as well as anticipated timing for study enrollment and completion, and the potential for regulatory and commercial success. They 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. During FY15 and the recent period, Arrowhead made dramatic progress with our clinical stage drugs, our rapidly expanding pipeline, and on the underlying technology platform that enables us to develop what we think are best-in-class RNAi therapeutics. We accomplished some important multi-year goals, and before discussing some of the specifics I want to spend a moment to provide context about how you should view the Company now versus a year ago. We've always said that a key benefit of developing a suite of RNAi therapeutics is that data and experience from each program can be leveraged to inform the development of new drugs. Each of these new drugs can potentially have progressively lower risk and a faster path from discovery to human trials if they are built on an underlying delivery platform that is validated in humans. Once this validation is achieved in one candidate, it may provide better certainty in future candidates. We believe that recent data on the ARC-520 drug candidate against chronic hepatitis B infection validate our DPC delivery system and show definitively that we can achieve robust, well tolerated knockdown of target genes. So what did we show? As you probably know, we've been very active over the last few months discussing new data on ARC-520 and our growing HBV program. We hosted an Analyst and Investor Day in September, presented data in several presentations at the AASLD Liver Meeting last month and presented additional data during two presentations at the HEP DART Conference last week. These presentations included data from the ARC-520 clinical program, as well as from a multi-dose study in chimpanzees. These studies were going on in parallel, which allowed us to learn a lot about ARC-520 and the HBV viral…

Thank you, Chris. Good afternoon, everyone. As Chris mentioned, we presented data on ARC-520 at multiple venues over the last few months. These presentations are available on the Events page of our website if you would like more information. But let me take a moment to highlight some of the key findings. In the Heparc 2001 clinical study, 58 patients with chronic HBV received doses between 1 and 4 milligram per kilogram of ARC-520 in seven cohorts. The cohorts varied by ARC-520 dose, e-antigen status and prior NUC treatment status. The primary objectives of the study were to determine tolerability and to measure the depth and duration of surface antigen reduction in response to a single dose, or two doses in the case of Cohort 6, of ARC-520 in combination with entecavir. Arrowhead also assessed additional secondary and exploratory endpoints. On the safety side, ARC-520 was well tolerated with no serious or severe adverse events, no dose-limiting toxicities, no discontinuations due to the drug and a modest occurrence rate of AEs that were all deemed unrelated to study drug by the principal investigator. No AE occurred more than once. There was a low occurrence rate of abnormal laboratory tests with no observed relationship to timing or dose. There were no laboratory changes believed to indicate drug toxicity. On the activity side, surface antigen was reduced substantially with a maximum reduction of 1.9 logs, or 99%, and a mean maximum reduction of 1.5 logs, or 97% in treatment-naive e-antigen positive patients in Cohort 7. Also in Cohort 7 ARC-520 in combination with entecavir achieved maximum reductions of HBV DNA, e-antigen and core-related antigen of 4.3 logs, or 99.995%, 1.7 logs, or 98%, and 1.2 logs, or 94%, respectively. So clearly the drug has shown very good single-dose activity. Consistent with findings…

Thank you, Bruce and good afternoon everyone. As we reported today, our net loss for the year ended September 30, 2015 was $91.9 million, or $1.60 per share based on 57.4 million weighted average shares outstanding. This compares with a net loss of $58.7 million, or $1.25 per share based on 46.9 million weighted average shares outstanding for the year ended September 30, 2014. Total operating expenses for the year ended September 30, 2015 were $96.4 million compared to $53.5 million for the year ended September 30, 2014. Net cash used in operating activities in FY15 was $65.7 million compared with $35.4 million in FY14, an increase of $30.3 million, primarily due to higher R&D expenses of $24.1 million reflecting higher drug manufacturing costs and higher clinical trial costs and progress of ARC-520 and ARC-AAT. Additionally, our salary and compensation-related costs increased on higher headcount and general and administrative costs increased as a result of higher outside professional service costs. The change in operating expenses were additionally influenced by a charge of $10.1 million for acquired in-process research and development costs, a component of the accounting related to the Novartis acquisition. Turning to our balance sheet, our cash and investments of cash were $98.8 million at September 30, 2015 compared with $177.3 million at September 30, 2014. The decrease in our cash and investments balance reflects the $65.7 million cash used in operating activities as well as a $10 million cash payment related to the Novartis acquisition and $2 million in capital expenditures. For the quarter ended September 30, 2015 our cash used in operations was $12 million compared to $13.1 million during the quarter ended June 30, 2015 and cash used in operations of $16.4 million in the quarter ended March 31, 2015. Our common shares outstanding at September 30, 2015 were 59.5 million, and would be 62.2 million assuming conversion of the preferred shares outstanding at September 30, 2015. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken. We feel very good about where we are today, and we expect considerable progress over the next several quarters and beyond. We've been asked about capital needs so I wanted to address that briefly here today. We are not prepared to give forward guidance on our cash burn since it will depend largely on the number, size and speed of enrollment of the clinical trials we have open at any given time. I would, however, like to go through a list of goals that we believe that we will hit during calendar 2016 and, based on our internal forecasting, can all be accomplished with the cash we currently have on hand. These goals are: 1, fully enroll the currently planned six MONARCH cohorts; 2, add new MONARCH cohorts; 3, enter into one corporate collaboration in MONARCH with a new compound for combination therapy; 4, complete enrollment of Heparc-2002; 5, complete enrollment of Heparc-2003; 6, complete enrollment of Heparc-2004; 7, complete enrollment of Heparc-2001 open-label extension; 8, file an IND or equivalent for ARC-521; 9, file an IND or equivalent for ARC-F12; 10, complete Phase 1 study of ARC-AAT in healthy volunteers and patients; 11, initiate longer-term multi-dose study of ARC-AAT; and 12, report additional preclinical data for ARC-LPA and ARC-HIF2. As you can see we have many events over the coming year that are opportunities to drive substantial value creation for our shareholders. I would now like to open the call up to questions, operator?

Thank you. [Operator Instructions] And our first question comes from the line of Michael Yee with RBC Capital Markets. Your line is now open.

Good afternoon. This is Judy Liu on for Michael Yee at RBC Capital Markets. Congrats on the quarter, and thanks very much for taking the question. Two questions, if you don't mind. One is, thanks for the overview on all of your Series 2002, 2003, 2004, 2008 and 2001. And I was wondering, with these multi-dose studies could you give us a sense of when we might get data, when data will start rolling in?

Thanks very much for the question. So it's a difficult question, just because we don't know how fast we can enroll these. We would like to release data in a proper way at scientific conferences. I expect that we could top-line those data before conferences. But it's hard to know how fast we can get these all enrolled and then disclose. So I can't give you too much guidance on most of those. I can say, however, as Bruce pointed out in the prepared remarks, that the long-term extension of 2001, as well as Monarch are both open-label studies. And so we should have good flexibility on when and how we can disclose those data. We don't have to wait for the study to finish and to break the blind. We will have nearly real-time data on how those are going. And so we have some flexibility on disclosing those, so I'd just say, stay tuned. It is -- we will, as I mentioned for our goals in 2016, we expect to finish enrolling many of those studies in 2016. And I think we can be talking about those data also in 2016.

Great, so just to follow-up on that so basically, especially with your open-label extension studies, we should be getting some kind of interesting data by next year, ASLD then?

We have the flexibility to do that. Again, I can't commit that we will be presenting data at ASLD because A, we don't have the power to insure that. Those are, as you know, those are peer-reviewed slots and so we will see. And second, we just don't know on timing. My point, though, is that with those two studies we expect those to be reasonably rapid enrollers. And we should be able to see data on almost a real-time basis. And so we have the flexibility to provide interim data as it comes in. So just stay tuned on that.

Great, thanks. And one last question, if you don't mind. So previously you had also talked about recognizing the need for combination therapy and you talked a little bit about collaboration partnership. Could you give us an update on where you are, where your thoughts are? Like, are you actively engaging in talks right now, and do you have a lot of conviction on going into collaboration partnership next year? Any help here would be great.

Sure. So we do have good conviction on entering a collaboration in an additional Monarch cohort next year. Here is what we have going for us. We've got a drug in ARC-520 that clearly works. It does what it's designed to do. It is active. Is it efficacious? I don't know. That will depend upon whether or not we see functional cures. But it is knocking down the production of proteins that are transcribed from cccDNA. And it is clearly well tolerated. So we have, I think, a reasonably large lead in this field. So as there are other agents that are ready to be tested, we are a pretty good candidates because we are farther along than other people and because we have what appears to be right now a well tolerated drug. So we feel quite confident that will happen next year. We are talking to an awful lot of people who are developing compounds. And so they know who we are and they have a good understanding about what we're doing. So again, I am confident that we will do something with a collaboration in Monarch in 2016.

Thank you. And our next question comes from the line of Eun Yang with Jefferies. Your line is now open.

Hi this is Carmen on your Eun. Thanks for taking the questions. So you mentioned the human data presented in September showed greater treatment effect in the NUC-naive E-antigen-positive patients. Then last week we saw more data in chimps showing evidence of immune reactivation across E-antigen-positive and negative chimps. Could you just help us kind of reconcile this? And maybe talk about the implications of the findings in chimps on data observed in humans to date and your future trial designs?

Sure, thanks for that. It's a great question. So we never expected immune reactivation or anything like that after a single dose in humans. Remember, these patients have been immunosuppressed for decades, many of them. And so we always view that as asking way too much of the drug to see that kind of effect after a single dose. Now with the chimps, they've also been infected for quite some time and they've also been immuno-suppressed for quite some time. And so we also would not have expected with them to see immuno-reactivation after a single dose. But remember, those chimps were treated monthly for between 6 and 11 doses. So they had more of a chance to -- their immune system has more of a chance to reconstitute itself. And so I think that's the big difference there. But also now keep in mind about the chimp, and I think this puts the data into some perspective. There has never, to our knowledge, been a report of a chimp curing itself, or functionally curing itself. And of course, that's quite different than humans. Humans can spontaneously functionally cure. So while the chimps, we think, are really good models for the life history or the lifecycle of the virus and the physiology of the animal in relation with the virus, it may be that you can only go so far with the chimp and you can't actually get to that cure because again, not only have we not seen a spontaneous cure in a chimp, we haven't even seen a therapy-derived or therapy-induced functional cure in a chimp. So the fact that we were able to reawaken that immune system I think is a really big thing in those animals. And again, the fact that we didn't just see it…

Great, thank you very much. And then one quick follow-up, on ARC-AAT, you mentioned you hoped to initiate a long-term study in 2016. Do you have any sense for when we might be able to see some data from the Phase 1 trial that's ongoing?

Yes. So I don't have a good answer for that right now because we're still enrolling that. We have, as you know, we were enrolling that entirely in Australia and then we expanded throughout multiple sites in Europe to insure that we have a good wide net to catch as many patients as we can. And so I think that we've got -- we have structurally we've got a good design to bring in the patients we need. But even so, I just don't know when that's going to be complete. And we also don't know how high a dose we're going to go. We're exploring that right now. So stay tuned on that. My hope is that once that's finished we can -- and the data are analyzed that we can top-line the data and then present a more, a fuller data set at a scientific conference, hopefully some time in 2016.

Thank you. [Operator Instructions] And our next question comes from the line of Donald Hutchinson with Safe Harbor Financial. Your line is now open.

Good afternoon. I read recently where J&J purchased a early stage company involved in hepatitis B, I believe, by taking a pill. I'm just wondering whether, given the obvious industry interest in hep B, whether Arrowhead has ever fielded any interest from larger companies along those lines?

Yes, thanks for that question. So we are talking to companies large and small about ARC-520, about ARC-521 and about potential collaborations as appropriate in Monarch. And so while we're not going to speak to any particular discussions that we have with companies, one can be comfortable that we are speaking with all of the players and that we're not hiding the ball here. I think we're seeing some pretty exciting things between the chimp study and our clinical study. We've got, we think, a pretty exciting mode of action. We have a drug that appears to be quite well tolerated so far. And we now have an industry that has woken up to the big opportunity and the big unmet medical need of hepatitis B. So we are speaking with a number of companies at all times.

Any thoughts about the characteristics of future or whatever about the hepatitis B pill?

We are a ways away from a pill providing a functional cure. We haven't seen anything -- we haven't seen any oral drug that we think is quite close to that, so no. We have no opinion on a pill that will magically assault hepatitis B any time soon.

Thank you. And our next question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.

Apologies, I was disconnected actually from the call earlier, so if my questions been answered. I guess I kind of had a sort of higher level question. With other companies developing RNAi approaches, how do you sort of stay ahead of the curve and not sort of inform the competition in terms of where we're going? And in particular I'm kind of thinking about the recent chimp findings, and in particular to me that really means that it's more than just S-antigen holding immune reactivation. So high level competition about how you stay competitive against the field in general, but RNAi companies in particular.

So even at a high level I think there's a number of answers to that. First is we stay ahead by staying ahead. We have a large time lead, I think, against our competitors. We were the first ones in the clinic and we are deeper into the clinic than any of our competitors. And I think that's important. It's a very difficult virus. And I think that the company that ultimately solves this or is part of the solution is going to learn an awful lot about the virus during these clinical trials. That's why Monarch is so important to us that it's an iterative study. So the fact that we are first out there and we are moving flexibly to make sure that we can employ what we learn is good, is important. Second, I guess, answer is that we have a complete package here. ARC-520 and ARC-521 are both designed to knock out all of the viral proteins. I think that's important. As you touched on it, there's been an awful lot of talk about this S-antigen theory, if you will, and we think S-antigen is important. But we don't think it's the only thing. I mentioned X-antigen as an example, and there's an awful lot of talk that that is going to be an important player in inducing the functional cure. We knock that out as well. So I think the fact that we are not just focusing on S-antigen or something else is important to us. Third, we have now a pretty large safety profile, or a safety profile that's based on a pretty large sample size. As I mentioned, we have been in over 100 people now. And we have a safety profile that I would put up against anybody. You mentioned RNAi in particular. I'd put this up against any RNAi player. I think that we have been -- we always thought it was going to be a well tolerated drug. And we have even exceeded our own expectations so far. And then finally, we have generated a ton of data in our clinical programs as well as in this chimp study. We've got blood samples every two weeks in these chimps, we've got multiple biopsies and we have spoken a lot about them. But we've not talked about everything we've learned. So I think we still have a competitive advantage as it relates to what we've learned about the virus and we will certainly use that as we are designing our clinical programs and as we move forward in Monarch as well as other studies.

Thank you. And I'm showing no further questions at this time, I'd like to turn the conference back over to Mr. Chris Anzalone for any closing comments.

Thanks very much for everyone listening today and we wish you all a happy holiday season, and we look forward to seeing you in 2016.