ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, the Company’s therapies trigger the RNAi interference mechanism to induce rapid, deep and durable knockdown of target genes. RNAi is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.

The Company has focused its resources on therapeutics that exclusively utilize its high levels of pharmacologic activity in multiple animal models spanning several therapeutic areas. The Company believes that TRiMTM enabled therapeutics offer several potential advantages over prior generation and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung, CNS, muscle, and adipose tissue; and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules.

The Company’s pipeline includes:

•Hypertriglyceridemia - Plozasiran (formerly ARO-APOC3)

•Dyslipidemia - Zodasiran (formerly ARO-ANG3)

•Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen)

•Muco-obstructive or inflammatory pulmonary conditions - ARO-MUC5AC and ARO-RAGE

•Idiopathic pulmonary fibrosis - ARO-MMP7

•Non-alcoholic steatohepatitis (NASH) - GSK-4532990 (formerly ARO-HSD, out-licensed to GSK)

•Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda)

•Chronic hepatitis B virus - JNJ-3989 (formerly ARO-HBV, out-licensed to Janssen(1))

•Uncontrolled gout - HZN-457 (formerly ARO-XDH, out-licensed to Horizon(2))

•Complement mediated diseases - ARO-C3

•Non-alcoholic steatohepatitis (NASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1)

•Facioscapulohumeral muscular dystrophy - ARO-DUX4

•Amyotrophic lateral sclerosis “ALS” (CNS) - ARO-SOD1

(1) On October 30, 2023, the Company entered into an Assignment and Consent Agreement with Janssen, whereby, the Company consented to the assignment of the Janssen License Agreement to GSK, which assignment shall be effective upon the receipt of certain anti-trust approvals.

(2) On October 6, 2023, Amgen announced that it has completed its acquisition of Horizon.

The Company operates lab facilities in San Diego, California and Madison, Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California.

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

2023 Business Highlights

During fiscal year 2023, the Company continued to develop and advance its pipeline and partnered candidates and expanded its facilities to support its growing programs. The bullets below highlight some of these key developments; however, this list is not all-inclusive and is meant to be read in conjunction with the entirety of management’s discussion and analysis, the Company’s Consolidated Financial Statements and notes thereto, and all other items contained within this Annual Report on Form 10-K.

•presented data on Company’s pulmonary pipeline at the European Respiratory Society (ERS) International Congress 2023 in Milan, Italy in September 2023, which included:

◦in an ongoing Phase 1/2 clinical trial, ARO-RAGE achieved mean target gene knockdown of up to 90% with a maximum of 95% after a single inhaled administration;

◦the TRiMTM platform can achieve compelling results across multiple additional gene targets in the lung, including MUC5AC, MMP7, and the Company’s newest program against thymic stromal lymphopoietin (TSLP), a clinically well validated target;

•filed an application for clearance to initiate a Phase 1/2 clinical trial of ARO-DUX4 in July 2023, which is being developed as a potential treatment for patients with facioscapulohumeral muscular dystrophy (FSHD);

•hosted a Research & Development (“R&D”) Day on June 1, 2023 to discuss progress of the Company’s pipeline of RNAi Therapeutics, at which the following updates were discussed:

◦ARO-RAGE showed continued dose response with single inhaled dose of 184 mg achieving mean knockdown of 90% and max of 95%;

◦adipose delivery platform achieved single dose target gene silencing of greater than 90% with six months of duration in non-human primates;

◦improved hepatic dimer platform achieved equivalent or better knockdown of two target genes with longer duration than monomer mixture in non-human primates;

◦TRiMTM platform now has potential to address multiple cell types including liver, solid tumors, lung, central nervous system, skeletal muscle, and adipose;

◦announced progress towards the Company's “20 in 25” goal to grow its pipeline of RNAi therapeutics that leverage the proprietary Targeted RNAi Molecule (TRiMTM) platform to a total of 20 clinical stage or marketed products in the year 2025;

•presented updated data from the Phase 2 SEQUOIA study of investigational RNAi therapy fazirsiran in patients with alpha-1 antitrypsin deficiency liver disease which included:

◦fazirsiran reduced serum Z-AAT concentration in a dose-dependent manner;

◦fazirsiran significantly reduced liver Z-AAT; median reductions of 94% of Z-AAT accumulation in the liver;

◦fazirsiran consistently reduced hepatic globule burden; mean reductions of 68% in histologic globule burden were observed;

◦fazirsiran treatment reduced histological signs of hepatic inflammation;

◦50% of the pooled fazirsiran treated patients showed at least a one-point improvement in METAVIR liver fibrosis versus 38% in the placebo group;

◦fazirsiran has been well tolerated to date; treatment emergent adverse events were generally well balanced between fazirsiran and placebo group;

◦pulmonary function test results (FEV1 and DLCO) for both fazirsiran and placebo were stable over time with no apparent dose-dependent effects;

◦updated Phase 2 clinical data were presented at the European Association for the Study of the Liver (EASL) Congress 2023 in an oral presentation titled, “Fazirsiran reduces liver Z-alpha-1 antitrypsin synthesis, decreases globule burden and improves histological measures of liver disease in adults with alpha-1 antitrypsin deficiency: a randomized placebo-controlled phase 2 study”;

◦results were consistent with AROAAT-2002 open-label study previously published in The New England Journal of Medicine;

•presented interim data from the ongoing Phase 2 GATEWAY clinical study of ARO-ANG3 which included:

◦mean reduction in LDL-C of 48.1% (200mg) and 44.0% (300mg);

◦ANPTL3 inhibition with ARO-ANG3 also reduced HDL-C, non-HDL-C, and triglycerides, consistent with published human genetic data;

◦safety and tolerability;

•completed enrollment of the Phase 3 PALISADE clinical trial evaluating ARO-APOC3 for treatment of familial chylomicronemia syndrome;

•announced interim results from ARO-RAGE administration in Part 1 of the ongoing Phase 1/2 study in normal healthy volunteers which included:

◦reductions in soluble RAGE (sRAGE) as measured in serum after two doses on Day 1 and Day 29;

◦duration of pharmacologic effect persisted for at least 6 weeks after the second administration of the 92 mg does with further follow up ongoing;

◦reduction in sRAGE as measured in bronchoalveolar lavage fluid (BALF) at Day 31 after a single dose;

◦reduction in in serum sRAGE was observed after a single dose;

◦the pooled placebo groups experienced a mean sRAGE increase of 8% in BALF and a mean decrease of 1% serum;

◦safety and tolerability;

•expanded TRiMTM platform to include an optimized intrathecal administration for CNS delivery with distribution throughout the brain and in all relevant brain cell types. The first development candidate to utilize this new delivery platform is ARO-SOD1. In June 2023, the Company filed a CTA for approval to initiate a Phase 1 clinical study. In preclinical studies, ARO-SOD1 achieved 95% spinal cord tissue mRNA knockdown after a single intrathecal dose in human SOD1 transgenic rats and maintained greater than 80% spinal cord tissue mRNA knockdown three months after a single intrathecal dose in non-human primates;

•dosed the first patient in Takeda’s Phase 3 REDWOOD clinical study of fazirsiran for the treatment of alpha-1 antitrypsin deficiency associated liver diseases, triggering a $40.0 million milestone payment to the Company which was paid in the third quarter of fiscal 2023;

•dosed the first patient in GSK’s Phase 2b trial of GSK4532990, an investigational RNAi therapeutic for the treatment of patients with non-alcoholic steatohepatitis (NASH), triggering a $30.0 million milestone payment to the Company which was paid in the third quarter of fiscal 2023;

•announced that the FDA has granted Fast Track designation to ARO-APOC3 for reducing triglycerides in adult patients with familial chylomicronemia syndrome (FCS). ARO-APOC3 was previously granted Orphan Drug designation by the FDA and the European Union;

•announced interim results from Part 1 of AROC3-1001, an ongoing Phase 1/2 clinical study of ARO-C3, which included:

◦a dose-dependent reduction in serum C3, with 88% mean reduction at highest dose tested;

◦a dose-dependent reduction in AH50, a marker of alternative complement pathway hemolytic activity, with 91% mean reduction at highest dose tested;

◦duration of pharmacologic effect supportive of quarterly or less frequent subcutaneous dose administration;

◦safety and tolerability;

•initiated dosing in ARO-MMP7-1001 (NCT05537025), a Phase 1/2a single ascending dose and multiple ascending dose clinical study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ARO-MMP7, an investigational RNAi therapeutic designed to reduce expression of matrix metalloproteinase 7 (MMP7) as a potential treatment for idiopathic pulmonary fibrosis (IPF), in up to 56 healthy volunteers and in up to 21 patients with IPF;

•enrolled the first subject in a Phase 1 randomized, placebo-controlled trial to assess the safety tolerability, pharmacokinetics and pharmacodynamics of a development-stage medicine, HZN-457, which is out-licensed to Horizon, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023;

•enrolled the first subject in Amgen’s Phase 3 trial of olpasiran, which triggered a $25.0 million milestone payment to the Company, which was paid in the second quarter of fiscal 2023;

•entered into the Royalty Pharma Agreement on November 9, 2022, pursuant to which Royalty Pharma paid $250.0 million upfront (See Note 11 — Liability Related to the Sale of Future Royalties of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements.”)

2023 Financial Performance Summary

Net loss attributable to Arrowhead Pharmaceuticals, Inc. was $205.3 million for the year ended September 30, 2023 as compared to $176.1 million for the year ended September 30, 2022. Net loss per share – diluted was $1.92 for the year ended September 30, 2023 as compared to $1.67 for the year ended September 30, 2022. The change in net loss for the

year ended September 30, 2023 reflected an increase in research and development expenses, which have continued to increase as the Company’s pipeline of candidates has expanded and progressed through clinical trial phases.

The Company had $110.9 million of cash, cash equivalents and restricted cash, $292.7 million in available-for-sale securities and $765.6 million of total assets as of September 30, 2023, as compared to $108.0 million of cash, cash equivalents and restricted cash, $374.3 million in held-to-maturities debt securities, and $691.9 million of total assets as of September 30, 2022. Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months.

Critical Accounting Estimates

Management makes certain judgments and uses certain estimates and assumptions when applying U.S. generally accepted accounting principles (“GAAP”) in the preparation of the Company’s Consolidated Financial Statements. On an ongoing basis, the Company evaluates its estimates, judgments and assumptions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expense. Actual results may vary from what the Company anticipates and different assumptions or estimates about the future could change its reported results. The Company believes the following accounting policies are the most critical to it, in that they require its most difficult, subjective or complex judgments in the preparation of the Company’s Consolidated Financial Statements. For further information, see Note 1, Organization and Significant Accounting Policies of the Notes to the Company’s Consolidated Financial Statements in Part IV, “Item 15. Exhibits and Financial Statement Schedules.”

Revenue Recognition—The Company has adopted Financial Accounting Standards Board (“FASB”) Topic 606 – Revenue for Contracts from Customers. The Company has not yet achieved commercial sales of its drug candidates to date, however, this standard is applicable to its licensing and collaboration agreements. This is discussed further in Note 2, Collaboration and License Agreements of the Notes to the Company’s Consolidated Financial Statements in Part IV, “Item 15. Exhibits and Financial Statement Schedules.”

At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified. The Company then determines the transaction price, which typically includes upfront payments and any variable consideration that it determines is probable to not cause a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is resolved. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.

The Company recognizes the transaction price allocated to upfront license payments as revenue upon delivery of the license to the customer and resulting ability of the customer to use and benefit from the license, if the license is determined to be distinct from the other performance obligations identified in the contract. These other performance obligations are typically to perform research and development services for the customer, often times relating to the candidate that the customer is licensing. If the license is not considered to be distinct from other performance obligations, the Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied at a point in time or over time. If the performance obligation is satisfied over time, the Company then determines the appropriate method of measuring progress for purposes of recognizing revenue from license payments. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition.

Typically, the Company’s collaboration agreements entitle it to additional payments upon the achievement of milestones or royalties on sales. The milestones are generally categorized into three types: development milestones, generally based on the initiation of toxicity studies or clinical trials; regulatory milestones, generally based on the submission, filing or approval of regulatory applications such as a CTA or a NDA in the United States; and sales-based milestones, generally based on meeting specific thresholds of sales in certain geographic areas. The Company evaluates whether it is probable that the consideration associated with each milestone or royalty will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most-likely-amount method, whereas amounts that do not meet this threshold are excluded from the transaction price until they meet this threshold. At the end of each subsequent reporting period, the Company re-evaluates the probability of a significant reversal of the cumulative revenue recognized for its milestones and royalties, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income in the Company’s consolidated statements of operations and comprehensive loss. Typically, milestone payments and royalties are achieved after the Company’s performance obligations associated with the collaboration agreements have been completed and after the customer has assumed responsibility for the respective clinical or preclinical program. Milestones or royalties achieved after the Company’s

performance obligations have been completed are recognized as revenue in the period the milestone or royalty was achieved. If a milestone payment is achieved during the performance period, the milestone payment would be recognized as revenue to the extent performance had been completed at that point, and the remaining balance would be recorded as deferred revenue.

The revenue standard requires the Company to assess whether a significant financing component exists in determining the transaction price. The Company performs this assessment at the onset of its licensing or collaboration agreements. Typically, a significant financing component does not exist because the customer is paying for a license or services in advance with an upfront payment. Additionally, future royalty payments are not substantially within the control of the Company or the customer.

The revenue standard requires the Company to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated. The relative standalone selling price is defined in the revenue standard as the price at which an entity would sell a promised good or service separately to a customer. If other observable transactions in which the Company has sold the same performance obligation separately are not available, the Company estimates the standalone selling price of each performance obligation. Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

Whenever we determine that goods or services promised in a contract should be accounted for as a combined performance obligation over time, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue is recognized using the input method. Labor hours, costs incurred or patient visits in clinical trials are typically used as the measure of performance. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations. If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on the Company’s consolidated balance sheets.

Collaborative Arrangements—The Company analyzes its collaborative arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards, and therefore an appropriate recognition method is determined and applied consistently, either by analogy to appropriate accounting literature or by applying a reasonable accounting policy election. For collaborative arrangements that are within the scope of FASB Topic 808—Collaborative Arrangements, the Company evaluates the income statement classification for presentation of amounts due to or owed from other participants associated with multiple units of account in a collaborative arrangement based on the nature of each activity. Payments or reimbursements that are the result of a collaborative relationship instead of a customer relationship, such as co-development and co-commercialization activities, are recorded as increases or decreases to research and development expense or general and administrative expense, as appropriate.

Leases—The Company classifies each of its leases as operating or financing considering factors such as the length of the lease term, the present value of the lease payments, the nature of the asset being leased, and the potential for ownership of the asset to transfer during the lease term. Leases with terms greater than one-year are recognized on the Company’s consolidated balance sheets as right-of-use assets that represent its right to use an underlying asset for the lease term, and lease liabilities that represent its obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. The Company records expense to recognize fixed lease payments on a straight-line basis over the expected lease term. Costs determined to be variable and not based on an index or rate are not included in the measurement of the lease liability and are expensed as incurred.

RESULTS OF OPERATIONS

The following data summarizes the Company’s results of operations for the following periods indicated:

Year Ended September 30,

(in thousands, except per share amounts)

Year Ended September 30, 2023 Compared to Year Ended September 30, 2022

Revenue

Total revenue for the year ended September 30, 2023 decreased slightly to $240.7 million, 1.0% from the same period of 2022. The revenue is mainly associated with GSK, Horizon, Takeda and Amgen license agreements, as discussed below. The Company has evaluated each agreement in accordance with FASB Topic 808–Collaborative Arrangements and Topic 606-Revenue for Contracts from Customers. See Note 2 — Collaboration and License Agreements of the Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”

GSK

At the inception of the GSK License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services, including the Company’s responsibility to complete the Phase 1/2 study (the “GSK R&D Services”). Due to the specialized and unique nature of the GSK R&D Services and their direct relationship with the license, the Company determined that these deliverables represented one distinct bundle and, thus, one performance obligation.

The Company determined the initial transaction price totaled $120.0 million, including the upfront payment, which was collected in January 2022. The Company has excluded any future estimated milestones or royalties from this transaction price to date. The Company has allocated the total $120.0 million initial transaction price to its one distinct performance obligation for the GSK-4532990 license and the associated GSK R&D Services. As the Company has completed its performance obligation related to this agreement, the upfront payment of $120.0 million was fully recognized in the year ended September 30, 2022. Further, GSK dosed the first patient in a Phase 2b trial in March 2023, triggering a $30.0 million milestone payment to the Company which was paid in the third quarter of fiscal 2023.

The Company has also performed certain development and manufacturing activities, including drug substance and drug product manufacture under GMP conditions, for GSK pursuant to the GSK License Agreement, for which the Company has been reimbursed for its costs. The Company recognized $0.3 million and $4.8 million in connection with these efforts for the years ended September 30, 2023 and 2022, respectively.

Horizon

The Company determined the initial transaction price totaled $40.0 million, including the upfront payment, which was collected in July 2021. The Company has excluded any future estimated milestones or royalties from this transaction price to date. The Company allocated the total $40.0 million initial transaction price to its one distinct performance obligation for the HZN-457 license and the associated Horizon R&D Services. Further, Horizon enrolled the first subject in December 2022 in a Phase 1 randomized, placebo-controlled trial to assess the safety, tolerability, pharmacokinetics and

pharmacodynamics of HZN-457, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023.

The Company has performed certain development and manufacturing activities, including drug substance and drug product manufacture under GMP conditions, for Horizon pursuant to the Horizon License Agreement. The Company recognized $1.5 million and $2.5 million in connection with these efforts for the years ended September 30, 2023 and 2022, respectively.

Takeda

At the inception of the Takeda License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibilities to complete the initial portion of the SEQUOIA study, to complete the ongoing Phase 2 AROAAT2002 study and to ensure certain manufacturing of fazirsiran drug product is completed and delivered to Takeda (the “Takeda R&D Services”). Due to the specialized and unique nature of these Takeda R&D Services and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and, thus, one performance obligation. Beyond the Takeda R&D Services, which are the responsibility of the Company, Takeda will be responsible for managing future clinical development and commercialization outside the United States. Within the United States, the Company will also participate in co-development and co-commercialization efforts and will co-fund these efforts with Takeda as part of the 50/50 profit sharing structure within the United States. The Company considers the collaborative activities, including the co-development and co-commercialization, to be a separate unit of account within Topic 808, and as such, these co-funding amounts are recorded as research and development expenses or general and administrative expenses, as appropriate.

The Company has allocated the total $300.0 million initial transaction price to its one distinct performance obligation for the fazirsiran license and the associated Takeda R&D Services. Revenue is recognized using the input method (based on actual patient visits completed versus total estimated visits completed for the ongoing SEQUOIA and AROAAT2002 clinical studies). The Company previously expected these clinical trials to extend to September 2025 in order to demonstrate long term safety and efficacy in the open label extension (OLE) part of the studies; however, in August 2023, Takeda initiated a Phase 3 OLE study available to patients participating in these Phase 2 studies. Based on this new information, patients enrolled in the SEQUOIA and AROAAT2002 studies are expected to complete their Phase 2 study visits between June 2023 and December 2023, shortening the Company’s performance obligation. As a result, effective the second quarter of fiscal 2023, the Company changed its estimates of the revenue recognition to better reflect this newly estimated performance period. The effect of these changes in estimates resulted in accelerated revenue by $70.5 million, or $0.66 per share (diluted) for the year ended September 30, 2023.

Amgen

Under the Olpasiran Agreement, the Company has received $35.0 million in upfront payments and $21.5 million in the form of an equity investment by Amgen in the Company’s common stock. Further, the Company received an additional $55.0 million in milestone payments; $10.0 million upon Amgen’s initiation of a Phase 1 study in September 2018, $20.0 million upon its initiation of a Phase 2 clinical study in July 2020, and $25.0 million upon its first subject enrollment in a Phase 3 trial in December 2022. The Company has substantially completed its performance obligations under the Olpasiran Agreement.

In November 2022, Royalty Pharma and the Company entered into the Royalty Pharma Agreement. In consideration for the payments under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive up to an additional $535.0 million in remaining development, regulatory and sales milestone payments payable from Amgen and Royalty Pharma. See Note 13 — Liability Related to the Sale of Future Royalties of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”

Operating Expenses

The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories. For purposes of comparison, the amounts for the years ended September 30, 2023 and 2022 are shown in the tables below.

Research and Development (R&D) Expenses

R&D expenses are related to the Company’s research and development discovery efforts and related candidate costs, which are comprised primarily of outsourced costs related to the manufacturing of clinical supplies, toxicity/efficacy studies and clinical trial expenses. Internal costs primarily relate to discovery operations at the Company’s research facilities in San Diego, California and Madison, Wisconsin, including facility costs and laboratory-related expenses. The Company does not separately track R&D expenses by individual research and development projects, or by individual drug candidates. The Company operates in a cross-functional manner across projects and does not separately allocate facilities-related costs, candidate costs, discovery costs, compensation expenses, depreciation and amortization expenses, and other expenses related to research and development activities.

The following table provides details of research and development expenses:

$ %

Candidate costs increased $4.5 million, or 3%, for the year ended September 30, 2023 compared to the same period of 2022. This increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial, toxicity study and manufacturing costs.

R&D discovery costs increased $22.3 million, or 41%, for the year ended September 30, 2023 compared to the same period of 2022. This increase was due to the growth of the Company’s discovery efforts and continued advancement into novel therapeutic areas and tissue types.

Salaries and stock compensation expense consist of salary, bonuses, payroll taxes, related benefits and stock compensation for the Company’s R&D personnel. The increases in salaries and stock comp expenses for 2023 were primarily due to an increase in R&D headcount that has occurred as the Company has expanded its pipeline of candidates, in addition to annual salary increases. Stock compensation expense was based upon the valuation of stock options and restricted stock units granted to employees.

Facilities-related expense primarily includes lease costs for the Company’s research and development facilities in San Diego, California and Madison, Wisconsin. Facilities-related costs increased $3.3 million, or 26%, for the year ended September 30, 2023 compared to the same period of 2022. This increase was mainly due to the additional lease expense as the Company expands discovery efforts to identify new drug candidates.

Depreciation and amortization expense, a non-cash expense, relates to depreciation on lab equipment and leasehold improvements at the facilities.

The Company anticipates these R&D expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.

General & Administrative Expenses

The following table provides details of general and administrative expenses:

$ %

Salaries expense increased $6.4 million, or 38%, for the year ended September 30, 2023 compared to the same period of 2022. The increase was driven by the combination of annual salary increases and increased headcount required to support the Company’s growth.

Professional, outside services, and other expense includes legal, consulting, patent expenses, business insurance expenses, other outside services, travel, and communication and technology expenses. This expense increased $6.0 million, or 41%, for the year ended September 30, 2023 compared to the same period of 2022. The increase was mainly due to the cost associated with consulting services focused on the preparation of commercialization activities.

Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California.

Stock compensation expense, a non-cash expense, decreased by $44.7 million, or 51%, for the year ended September 30, 2023 compared to the same period of 2022. The decrease was mainly due to the lower amount of recognized compensation costs and the reversal of recognized compensation costs related to a performance award where the minimum performance goal was not met. The fair value of market condition-based awards was expensed ratably over the service period and was not adjusted for actual achievement.

Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters.

Other than with respect to the stock compensation costs described above, the Company anticipates these general and administrative expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.

Other Income (Expense)

Other income (expense) is primarily related to interest income and expense. Other expense was $1.5 million for the year ended September 30, 2023 compared to other income of $5.8 million for the year ended September 30, 2022. The change was primarily due to the interest expense on the liability related to the sale of future royalties, partially offset by higher yields on investments due to increased interest rates.

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Form 10-K for the year ended September 30, 2022 for a discussion of changes in its results of operations from the year ended September 30, 2022 to the year ended September 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations through the sale of its equity securities, revenue from its licensing and collaboration agreements, and the sale of certain future royalties. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure as the Company’s pipeline continues to expand and matures into later stage clinical trials. Additionally, the Company expanded its facilities in Verona, Wisconsin and commenced the lease agreement for additional facilities in San Diego, California. These expansions are designed to increase the Company’s internal manufacturing and discovery capabilities, and the ongoing expansion in Verona, Wisconsin continues to require capital investment. For further information on our capital needs, see the section titled “Risks Related to Our Financial Condition” in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

The Company’s cash, cash equivalents and restricted cash slightly increased to $110.9 million at September 30, 2023 compared to $108.0 million at September 30, 2022. Cash invested in available-for-sale debt securities was $292.7 million at September 30, 2023 compared to held-to-maturity debt securities of $374.3 million at September 30, 2022. In April 2022, the Company sold all of its investments in mutual funds for $122.3 million.

On September 30, 2023, the Company changed the classification of its investment securities from held-to-maturity to available-for-sale. This change enables the Company to sell securities to diversify its portfolio, reduce exposure to market risks, and provide flexibility to meet cash flow needs and new investment opportunities.

On December 2, 2022, the Company entered into the Open Market Sale Agreement (See Note 6 — Stockholders’ Equity to Consolidated Financial Statements of Part I, “Item 1. Financial Statements”), pursuant to which the Company may, from time to time, sell up to $250.0 million in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering. As of September 30, 2023, no shares have been issued under the Open Market Sale Agreement. The Company believes its current financial resources are sufficient to fund its operations through at least the next twelve months.

The following table presents a summary of cash flows:

Year Ended September 30,

(in thousands)

Cash Flow from:

During the year ended September 30, 2023, cash flow used by operating activities was $153.9 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses, partially offset by the receipt of the $110.0 million from collaboration and license agreements (See Note 2 — Collaboration and License Agreements of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”). Cash used in investing activities was $96.2 million, which was primarily related to the purchase of property and equipment of $176.7 million, offset by net proceeds of $80.6 million from maturities of securities. Cash provided by financing activities of $253.1 million was primarily related to the $250.0 million payment from Royalty Pharma as well as cash received from stock option exercises (See Note 13 — Liability Related to the Sale of Future Royalties of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”).

During the year ended September 30, 2022, cash flow used by operating activities was $136.1 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses, partially offset by the receipt of the $120.0 million upfront payment from GSK. Cash used in investing activities was $5.4 million, which was primarily related to the purchase of property and equipment of $52.8 million, offset by net proceeds from maturities of investments of $47.4 million. Cash provided by financing activities of

$65.2 million was primarily related to the formation of the Company’s joint venture, Visirna, as well as cash received from stock option exercises.

On December 20, 2021, the Company completed a purchase of 13 acres of land in the Verona Technology Park in Verona, Wisconsin, which is being developed into an approximately 160,000 square foot drug manufacturing facility and an approximately 140,000 square foot laboratory and office facility which will support the Company’s process development and analytical activities. The Company is now occupying the laboratory and office facility, but construction of the manufacturing facility is still ongoing. As of September 30, 2023, the Company has incurred $166.2 million and intends to spend an additional $120.0 million to $130.0 million to complete the build out of the facilities.

As part of this land acquisition, the Company entered into a development agreement with the City of Verona to construct certain infrastructure improvements within the tax increment district and will be reimbursed up to $16.0 million by the City of Verona by future tax increment revenue generated from the developed property. The total amount of funding that City of Verona will pay under the Tax Increment Financing program is not guaranteed and will depend on future tax revenues generated from the developed property. The Company also became eligible to receive up to $2.5 million in refundable Wisconsin state income tax credits from the Wisconsin Economic Development Corporation (WEDC) as incentives for investing in the local community and creating new job opportunities. As of September 30, 2023, the Company has collected $1.5 million of these credits.

Contractual Obligations

For information related to the Company’s future commitments for its facility-related obligations and collaboration and licensing agreements, see Notes 8 and 2, respectively, of Notes to the Company’s Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.” Commitments related to the Company’s clinical, manufacturing and business operation related agreements are $579.7 million as of September 30, 2023, but many of these agreements are cancellable.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk exposures primarily due to its investing activities. The primary market risk exposure is change in interest rates. Adverse changes to rates may occur due to changes in the liquidity of a market or to changes in market perceptions of creditworthiness and risk tolerance.

The Company does not hold any instruments for trading purposes and investment criteria are governed by its Investment Policy. As of September 30, 2023 and 2022, the Company had cash, cash equivalents, and restricted cash of $110.9 million and $108.0 million, respectively, and investments of $292.7 million and $374.3 million, respectively. The Company has invested its cash reserves in corporate bonds typically with maturities of less than 3 years and historically classified these investments as held-to-maturity. On September 30, 2023, the Company changed the classification of its investment securities from held-to-maturity to available-for-sale. This change enables the Company to sell securities to diversify its portfolio, reduce exposure to market risks, and provide flexibility to meet cash flow needs and new investment opportunities. Due to the relatively short-term nature of the investments that the Company holds, it does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to its investment portfolio.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its Consolidated Financial Statements for external purposes in accordance with GAAP.

This process includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that controls may become inadequate because either conditions change or the degree of compliance with policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2023. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2023.

Rose, Snyder and Jacobs LLP, the independent registered public accounting firm that audited the Consolidated Financial Statements included in this 2023 Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2023, which is included herein.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s process for evaluating controls and procedures is continuous and encompasses consistent improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

ITEM 9B.OTHER INFORMATION

(b) Trading Plans

During the quarter ended September 30, 2023, the following directors and officers (as defined in Exchange Act Rule 16a-1(f)) adopted certain trading plans intended to satisfy Rule 10b5-1(c):

(1) This column indicates the total number of shares vesting, but the 10b5-1 Plan provides for the sale of only those shares necessary to satisfy payment of applicable withholding taxes.

(2) Termination of a trading plan that was intended to satisfy Rule 10b5-1(c).

ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information called for by this Item will be incorporated by reference from the Company’s Definitive Proxy Statement, under the headings Proposal One — Election of Directors, Equity Compensation Plan Information, Corporate Governance, Environmental and Social Commitment, and, if applicable, Delinquent Section 16(a) Reports, to be filed for the Company’s 2024 Annual Meeting of Stockholders, which proxy statement will be filed no later than January 26, 2024 (the “Definitive Proxy Statement”).

ITEM 11.EXECUTIVE COMPENSATION

The information called for by this Item will be incorporated by reference from the Definitive Proxy Statement, under the heading Executive Compensation.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by this Item will be incorporated by reference from the Definitive Proxy Statement, under the heading Voting Securities of Principal Stockholders and Management.

ITEM 13.CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information called for by this Item will be incorporated by reference from the Definitive Proxy Statement, under the headings Review and Approval of Related-Party Transactions and Certain Relationships and Related Transactions, and Director Independence.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this Item will be incorporated by reference from the Definitive Proxy Statement, under the heading Audit Fees.

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:

(1)Financial Statements.

See Index to Financial Statements and Schedule on page F-1.

(2)Financial Statement Schedules.

See Index to Financial Statements and Schedule on page F-1. All other schedules are omitted as the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or notes thereto.

(3)Exhibits.

The following exhibits are filed (or incorporated by reference herein) as part of this Annual Report on Form 10-K:

Incorporated by Reference Herein

ExhibitNumber Description Form Date

Incorporated by Reference Herein

ExhibitNumber Description Form Date

Incorporated by Reference Herein

ExhibitNumber Description Form Date

Incorporated by Reference Herein

ExhibitNumber Description Form Date

21.1* List of Subsidiaries

23.1* Consent of Independent Public Registered Accounting Firm

101.INS* Inline XBRL Taxonomy Extension Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith

** Indicates compensation plan, contract or arrangement.

*** Furnished herewith

† Certain portions of this exhibit were redacted by means of marking such portions with asterisks because the identified portions are (i) not material and (ii) treated as private or confidential by the Company.

ITEM 16.FORM 10-K SUMMARY

None.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 29, 2023

ARROWHEAD PHARMACEUTICALS, INC.

By: /s/ Christopher Anzalone

Christopher Anzalone

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature Title Date

Christopher Anzalone

Kenneth A. Myszkowski

Douglass Given

/s/ Mauro Ferrari Director November 29, 2023

Mauro Ferrari

/s/ Michael S. Perry Director November 29, 2023

Michael S. Perry

/s/ William Waddill Director November 29, 2023

William Waddill

/s/ Adeoye Olukotun Director November 29, 2023

Adeoye Olukotun

/s/ Victoria Vakiener Director November 29, 2023

Victoria Vakiener

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 468) F-2

Consolidated Balance Sheets as of September 30, 2023 and 2022 F-5

Notes to Consolidated Financial Statements F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Arrowhead Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arrowhead Pharmaceuticals, Inc. and Subsidiaries (the Company) as of September 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated November 29, 2023, expressed an unqualified opinion.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Revenue Recognized Over Time

Description of the Matter

As discussed in Note 1 and Note 2 to the Consolidated Financial Statements, the Company earns its revenue through license and collaboration agreements. For performance obligations related to services that are required to be recognized over time, the Company measures its progress to completion using various measures, including an input measure of total labor costs incurred divided by total labor costs expected to be incurred, time elapsed, and an output measure of total patient visits divided by total patient visits expected. The selection of measurement criteria is based on the nature and phase of trials being conducted.

F-2

Auditing revenue recognition is complex and highly judgmental due to the variability and uncertainty associated with the Company’s assessment of measure of progress. Changes in these estimates would have a significant effect on the amount of revenue recognized.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risk of material misstatement of license and collaboration agreement revenue including those associated with cost to complete estimates. We tested controls over management’s process to collect, review, and approve the data used in assessing revenue recognized over time.

To test the measures of progress used for performance obligations related to services that are required to be recognized over time, our audit procedures included, among others, evaluating the appropriateness of the Company’s accounting policy for each type of arrangement, testing the identified measure of performance by reading contracts with customers, including all amendments, and reviewing the contract analyses prepared by management. We evaluated whether the selected measures of progress towards satisfaction of performance obligations were applied consistently. We also tested the completeness and accuracy of the underlying data used for the measure of progress by testing and or analyzing the underlying data.

Rose, Snyder & Jacobs LLP

We have served as the Company’s auditor since 2004.

Encino, California

November 29, 2023

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Arrowhead Pharmaceuticals, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Arrowhead Pharmaceuticals, Inc. and its Subsidiaries (the Company’s) internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of September 30, 2023 and 2022 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2023 and related notes, and our report dated November 29, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Rose, Snyder & Jacobs LLP

Encino, CA

November 29, 2023

F-4

Arrowhead Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands, except per share amounts)

September 30,

ASSETS

Current assets:

Cash, cash equivalents and restricted cash $ 110,891 $ 108,005

Accounts receivable — 1,410

Available-for-sale securities, at fair value 292,735 —

Held-to-maturity securities, at amortized cost — 268,391

Held-to-maturity securities, at amortized cost — 105,872

LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

Current liabilities:

Other liabilities 435 —

Long-term liabilities:

Lease liabilities, net of current portion 104,608 78,800

Deferred revenue, net of current portion — 55,950

Liability related to the sale of future royalties 268,326 —

Commitments and contingencies (Note 7)

Noncontrolling interest and stockholders' equity:

Accumulated other comprehensive loss (3,222) (136)

Total Arrowhead Pharmaceuticals, Inc. stockholders' equity 271,343 398,520

Total noncontrolling interest and stockholders' equity 287,162 418,339

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

F-5

Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

Year Ended September 30,

Operating expenses:

Other income (expense):

Interest expense (18,326) — —

Net loss attributable to noncontrolling interest, net of tax (4,000) (431) —

Net loss per share attributable to Arrowhead Pharmaceuticals, Inc.:

Weighted-average shares used in calculating

Other comprehensive loss, net of tax:

Unrealized losses on available-for-sale securities (2,964) — —

Foreign currency translation adjustments (122) (67) (87)

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

F-6

Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands)

Common stock - restricted stock units vesting 899 1 (1) — — — —

Foreign currency translation adjustments — — — (87) — — (87)

Common stock - restricted stock units vesting 1,027 1 (1) — — — —

Foreign currency translation adjustments — — — (67) — — (67)

Common stock - restricted stock units vesting 913 1 (1) — — — —

Unrealized losses on available-for-sale securities — — — (2,964) — — (2,964)

Foreign currency translation adjustments — — — (122) — — (122)

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

F-7

Arrowhead Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash flow from operating activities:

(Accretion) amortization of note premiums/discounts (2,017) 2,910 266

Net loss (gain) from investments — 4,432 (1,708)

Changes in operating assets and liabilities:

CASH FLOWS FROM INVESTING ACTIVITIES:

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the sale of future royalties 250,000 — —

Proceeds from investment in joint venture — 60,000 —

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Supplementary disclosures:

Interest paid $ — $ — $ —

Income Taxes Paid $ — $ (2) $ (2)

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

F-8

Arrowhead Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

General

Arrowhead Pharmaceuticals, Inc. and its subsidiaries (referred to herein collectively as the “Company”) are primarily engaged in developing medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, the Company’s therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. RNA interference (“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. The Company’s RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.

The following table presents the Company’s current pipeline:

Therapeutic Area Name Stage Product Rights

Cardiometabolic Plozasiran (ARO-APOC3) Two Phase 2b and one Phase 3 Arrowhead

Zodasiran (ARO-ANG3) Two Phase 2b Arrowhead

Olpasiran Phase 3 Amgen

Pulmonary ARO-RAGE Phase 1/2a Arrowhead

ARO-MUC5AC Phase 1/2a Arrowhead

ARO-MMP7 Phase 1/2a Arrowhead

Fazirsiran Phase 3 Takeda and Arrowhead

HZN-457 Phase 1 Horizon(2)

ARO-C3 Phase 1/2a Arrowhead

ARO-PNPLA3 Phase 1 Arrowhead

Muscle ARO-DUX4 Pre-Clinical Arrowhead

Central Nervous System (CNS) ARO-SOD1 Pre-Clinical Arrowhead

(1) On October 30, 2023, the Company entered into an Assignment and Consent Agreement with Janssen. See Note 15.

(2) On October 6, 2023, Amgen announced that it has completed its acquisition of Horizon.

Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of Arrowhead Pharmaceuticals, Inc. and its subsidiaries (wholly-owned subsidiaries and a variable interest entity for which the Company is the primary beneficiary). Subsidiaries refer to Arrowhead Madison, Inc., Visirna Therapeutics, Inc. (“Visirna”), and Arrowhead Australia Pty Ltd. For subsidiaries in which the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interests retained in such entity by the respective noncontrolling party.

The Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform with the current period presentation.

Liquidity

The Company’s primary sources of financing have been through the sale of its securities, revenue from its licensing and collaboration agreements and the sale of certain future royalties. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure in the future, particularly as the Company’s pipeline of drug candidates and its headcount have both expanded

F-9

significantly. Additionally, significant capital investment will be required as the Company’s pipeline matures into later stage clinical trials and as the Company plans to increase its internal manufacturing capabilities.

At September 30, 2023, the Company had $110.9 million in cash, cash equivalents and restricted cash ($7.9 million in restricted cash) and $292.7 million in available-for-sale debt securities to fund operations. During the year ended September 30, 2023, the Company’s cash, cash equivalents and restricted cash and investments balance decreased by $78.6 million which was primarily due to cash used to fund its operations, offset by the $250.0 million upfront payment received from Royalty Pharma (Note 13) and $110.0 million in milestone payments from the Company’s collaboration and license agreements (Note 2).

In total, the Company is eligible to receive up to $2.8 billion in developmental, regulatory and sales milestones, and may receive various royalties on net sales from its licensing and collaboration agreements, subject to the terms and conditions of those agreements. The revenue recognition for these collaboration agreements is discussed further in Note 2.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, judgments and assumptions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expense. Actual results could materially differ from those estimates.

Variable Interest Entity (“VIE”)

A VIE is an entity that, by design, either (i) lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) has equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE through its interest in the VIE.

On April 25, 2022, the Company entered into a license agreement with Visirna (Note 2) and consolidated Visirna’s financial statements in which the Company has a direct controlling financial interest based on the VIE model.

The Company considers all the facts and circumstances, including its role in establishing Visirna and its ongoing rights and responsibilities to assess whether the Company has the power to direct the activities of Visirna. In general, the parties that make the most significant decisions affecting a VIE and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.

The Company also considers all of its economic interests to assess whether the Company has the obligation to absorb losses of Visirna or the right to receive benefits from it that could potentially be significant to Visirna. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to Visirna. Factors considered in assessing the significance include: the design of the Visirna, including its capitalization structure, subordination of interests, payment priority, and the reasons why the interests are held by the Company.

At Visirna’s inception, the Company determined whether it was the primary beneficiary and if Visirna should be consolidated based on the facts and circumstances. The Company performs ongoing reassessments of the VIE based on reconsideration events and reevaluates whether a change to the consolidation is required. As of September 30, 2023, there were no events to be reconsidered in the consolidation.

Cash, Cash Equivalents and Restricted Cash

All highly liquid interest-bearing investments are classified as cash equivalents. These investments mainly include commercial paper with maturities of three months or less when purchased. The carrying value of these cash equivalents approximate fair value.

There was $7.9 million and $7.3 million restricted cash at September 30, 2023 and 2022, respectively, that is primarily held as collateral associated with letters of credit for the Company’s facility leases.

F-10

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk primarily consist of cash, cash equivalents and restricted cash and investments. As of September 30, 2023 and 2022, the Company’s investments were primarily invested in money market funds, certificates of deposit, commercial paper, and corporate debt securities through highly rated financial institutions. The Company also maintains several bank accounts primarily at three financial institutions for its operations. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per institution. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held.

Investments

Investment securities are mainly held-to-maturity investments, available-for-sale, and marketable securities.

These held-to-maturity investments may consist of investment-grade interest bearing instruments, primarily money market accounts, government-sponsored enterprise securities, corporate bonds and/or commercial paper, which are stated at amortized cost. The Company does not intend to sell these investment securities and the contractual maturities are not greater than 36 months. Those with maturities less than twelve months are included in short-term investments on the Company’s consolidated balance sheets, while those with remaining maturities in excess of twelve months are included in long-term investments on its consolidated balance sheets. Discounts and premiums to par value of the debt securities are amortized to interest income/expense over the term of the security, and no gains or losses on held-to-maturity investment are realized until they are sold. The Company reassesses the classification of held-to-maturity at each reporting period.

The available-for-sale investments may consist of investment-grade interest bearing instruments, primarily money marketaccounts,government-sponsoredenterprisesecurities,corporatebondsand/orcommercialpaper, which are accounted for at fair value.Changes in fair values are reported as unrealized gains or losses and are recorded in the Company’s consolidated statement of operations and comprehensive loss.On September 30, 2023, the Company changed the classification of debt securities to available-for-sale from held-to-maturity.As a result, these debt securities are carried at fair value.

The Company’s marketable debt securities consisted of mutual funds that primarily invest in U.S. government bonds, U.S. government agency bonds, and corporate bonds. Dividends from these funds were automatically re-invested. These securities were recorded at fair value, and all unrealized gains/losses were recorded in the Company’s consolidated statement of operations and comprehensive loss. In April 2022, the Company sold all of its investments in mutual funds for $122.3 million.

The Company monitors its investments closely. If an unrealized loss is determined to be other-than-temporary, it is written off as a realized loss through the consolidated statements of operations and comprehensive loss. The Company’s methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors, including the length of time to maturity and the extent to which the fair value has been less than the cost, recoverability of future cash flows as compared to carrying value of the security, the financial condition and the near-term prospects of the issuer, and the Company’s ability and intent to hold the security. If a decline in fair value of investments is determined to be other-than-temporary, the securities are written down to fair value as the new cost basis and the amount of the write down is accounted for as realized losses. The Company did not recognize any other-than-temporary impairments of its investment for the years ended September 30, 2023, 2022, and 2021.

Property and Equipment

Property and equipment are recorded at cost. Depreciation of property and equipment is recorded using the straight-line method over the respective useful lives of the assets ranging from three to seven years. Leasehold improvements are amortized over the lesser of the expected useful life or the remaining lease term.

The Company periodically assesses long-lived assets or asset groups, including property and equipment, for recoverability when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the Company identifies an indicator of impairment, the Company assesses recoverability by comparing the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset.

F-11

An impairment loss is recognized when the carrying amount is not recoverable and is measured as the excess of carrying value over fair value. There were no impairment charges during the years ended September 30, 2023, 2022, and 2021.

Intangible Assets Subject to Amortization

Intangible assets subject to amortization include certain patents and license agreements. The Company qualitatively evaluates intangible assets for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount of intangible assets may exceed their implied fair values. As of September 30, 2023 and 2022, intangible impairment assessments indicated that there was no impairment.

Leases

The Company determines whether a contract is, or contains, a lease at inception. All of the Company’s leases are classified as operating leases. Leases with terms greater than one-year are recognized on the Company’s consolidated balance sheets as right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities that represent its obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. The Company records expense to recognize lease payments on a straight-line basis over the expected lease term. Costs determined to be variable and not based on an index or rate are not included in the measurement of the lease liability and are expensed as incurred.

Revenue Recognition

The revenue standard provides a five-step framework for recognizing revenue as control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that it determines are within the scope of the revenue standard, the Company performs the following five steps: (i) identify the contract; (ii) identify the performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified. The Company then determines the transaction price, which typically includes upfront payments and any variable consideration that it determines is probable to not cause a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is resolved. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.

F-12

Typically, the Company’s collaboration agreements entitle it to additional payments upon the achievement of milestones or royalties on sales. The milestones are generally categorized into three types: development milestones, generally based on the initiation of toxicity studies or clinical trials; regulatory milestones, generally based on the submission, filing or approval of regulatory applications such as a Clinical Trial Application (“CTA”) or a New Drug Application (“NDA”) in the United States; and sales-based milestones, generally based on meeting specific thresholds of sales in certain geographic areas. The Company evaluates whether it is probable that the consideration associated with each milestone or royalty will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are excluded from the transaction price until they meet this threshold. At the end of each subsequent reporting period, the Company re-evaluates the probability of a significant reversal of the cumulative revenue recognized for its milestones and royalties, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income in the Company’s consolidated statements of operation and comprehensive loss. Typically, milestone payments and royalties are achieved after the Company’s performance obligations associated with the collaboration agreements have been completed and after the customer has assumed responsibility for the respective clinical or preclinical program. Milestones or royalties achieved after the Company’s performance obligations have been completed are recognized as revenue in the period the milestone or royalty was achieved. If a milestone payment is achieved during the performance period, the milestone payment would be recognized as revenue to the extent performance had been completed at that point, and the remaining balance would be recorded as deferred revenue.

Further, the revenue standard requires the Company to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated. The relative standalone selling price is defined in the revenue standard as the price at which an entity would sell a promised good or service separately to a customer. If other observable transactions in which the Company has sold the same performance obligation separately are not available, the Company estimates the standalone selling price of each performance obligation. Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

Whenever the Company determines that goods or services promised in a contract should be accounted for as a combined performance obligation over time, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue is recognized using the input method; Labor hours, costs incurred or patient visits in clinical trials are typically used as the measure of performance. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations. If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on its consolidated balance sheets.

Certain judgments affect the application of the Company’s revenue recognition policy. For example, the Company records short-term (less than one year) and long-term (over one year) deferred revenue based on its best estimate of when such revenue will be recognized. This estimate is based on the Company’s current operating plan and, the Company may recognize a different amount of deferred revenue over the next 12-month period if its plan changes in the future.

Collaborative Arrangements

The Company analyzes its collaborative arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards, and therefore are within the scope of Financial Accounting Standards Board (“FASB”) Topic 808 - Collaborative Arrangements. For collaborative arrangements that contain multiple elements, the Company determines which units of account are deemed to be within the scope of Topic 808 and which units of account are more reflective of a vendor-customer relationship, and therefore are within the scope of Topic 606. For units of account that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied consistently, either by analogy to appropriate accounting literature or by applying a reasonable accounting policy election. For collaborative arrangements that are within the scope of Topic 808, the Company evaluates the income statement classification for presentation of amounts due to or owed from other participants associated with multiple units of account in a collaborative arrangement based on the nature

F-13

of each activity. Payments or reimbursements that are the result of a collaborative relationship instead of a customer relationship, such as co-development and co-commercialization activities, are recorded as increases or decreases to research and development expense or general and administrative expense, as appropriate.

Research and Development

Costs and expenses that can be clearly identified as research and development are charged to expense as incurred. Included in research and development costs are operating costs, facilities, supplies, external services, clinical trial and manufacturing costs, overhead directly related to the Company’s research and development operations, and costs to acquire technology licenses.

Stock-Based Compensation

Share-based compensation expenses for all stock grants are based on their estimated grant-date fair value. The fair value of stock option awards is estimated using the Black-Scholes option valuation model which requires the input of subjective assumptions to calculate the value of stock options. For restricted stock units, the value of the award is based on the Company’s stock price at the grant date. For performance-based restricted stock unit awards, the value of the award is based on the Company’s stock price at the grant date, with consideration given to the probability of the performance condition being achieved. The Company uses historical data and other information to estimate the expected price volatility and the expected forfeiture rate for stock option awards. Expense is recognized over the vesting period for all awards and commences at the grant date for time-based awards and upon the Company’s determination that the achievement of such performance conditions is probable for performance-based awards. This determination requires significant judgment by management.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Company’s assets and liabilities, and expected benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The Company assesses the likelihood that its deferred tax assets will be realized and, to the extent management does not believe these assets are more likely than not to be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in earnings in the period that includes the enactment date.

Earnings per Share

Basic earnings per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of stock options and restricted stock units outstanding.

During the years ended September 30, 2023, 2022 and 2021, the calculation of the effect of dilutive stock options and restricted stock units excluded all stock options and restricted stock units outstanding during the period due to their anti-dilutive effect.

Foreign currency translation adjustments

One of the Company’s wholly-owned subsidiaries’ functional currencies are not the United States dollar, which is the Company’s reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included in the accumulated other comprehensive loss.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements that have significantly impacted this Annual Report on Form 10-K.

F-14

NOTE 2. COLLABORATION AND LICENSE AGREEMENTS

The following table provides a summary of revenue recognized:

Year Ended September 30,

(in thousands)

The following table summarizes the balance of receivables and contract liabilities related to the Company’s collaboration and license agreements:

September 30,

(in thousands)

Receivables included in accounts receivable $ — $ 1,410

Contract liabilities included in deferred revenue $ 866 $ 130,049

Glaxosmithkline Intellectual Property (No. 3) Limited (“GSK”)

On November 22, 2021, GSK and the Company entered into an Exclusive License Agreement (the “GSK License Agreement”). Under the GSK License Agreement, GSK has received an exclusive license for GSK-4532990 (formerly ARO-HSD). The exclusive license is worldwide with the exception of greater China. GSK is wholly responsible for all clinical development and commercialization of GSK-4532990 in its territory.

The Company is also eligible for an additional payment of $100.0 million upon achieving the first patient dosed in a Phase 3 trial. Furthermore, should the Phase 3 trial read out positively, and the potential new medicine receives regulatory approval in major markets, the deal provides for commercial milestone payments to the Company of up to $190.0 million at first commercial sale, and up to $590.0 million in sales-related milestone payments. The Company is further eligible to receive tiered royalties on net product sales in a range of mid-teens to twenty percent.

The Company has also performed certain development and manufacturing activities, including the manufacture of drug substance and drug product under GMP conditions, for GSK pursuant to the GSK License Agreement, for which the Company has been reimbursed for its costs. The Company recognized $0.3 million and $4.8 million in connection with these efforts for the years ended September 30, 2023 and 2022, respectively.

Horizon Therapeutics Ireland DAC (“Horizon”)

On June 18, 2021, Horizon and the Company entered into a collaboration and license agreement (the “Horizon License Agreement”). Under the terms of the Horizon License Agreement, Horizon received a worldwide exclusive license for HZN-457, a clinical-stage medicine being developed by Horizon as a potential treatment for people with uncontrolled

F-15

gout. Horizon is wholly responsible for clinical development and commercialization of HZN-457. On October 6, 2023, Amgen completed its acquisition of Horizon.

At the inception of the Horizon License Agreement, the Company identified one distinct performance obligation. The Company determined that the key deliverables included the license and certain R&D services, including the Company’s responsibilities to conduct all activities through the preclinical stages of development of HZN-457 (the “Horizon R&D Services”). Due to the specialized and unique nature of these Horizon R&D Services and their direct relationship with the license, the Company determined that these deliverables represented one distinct bundle and, thus, one performance obligation. Beyond the Horizon R&D Services, which are the responsibility of the Company, Horizon will be responsible for managing future clinical development and commercialization of HZN-457. The Company conducted all activities through the preclinical stages of development of HZN-457.

Under the terms of the agreement, the Company received an upfront payment of $40.0 million in July 2021. The Company determined the initial transaction price totaled $40.0 million and has excluded any future estimated milestones or royalties from this transaction price to date. The Company allocated the total $40.0 million initial transaction price to its one distinct performance obligation for the HZN-457 license and the associated Horizon R&D Services. Revenue was recognized on a straight-line basis over the timeframe for completing the Horizon R&D Services. The Company determined that the straight-line basis was appropriate as its efforts were expended evenly over the course of completing its performance obligation. Further, Horizon enrolled the first subject in December 2022 in a Phase 1 randomized, placebo-controlled trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of HZN-457, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023.

On November 21, 2023, the Company received notice from Horizon that it has elected to terminate the Horizon License Agreement. Horizon exercised its right to terminate the Horizon License Agreement for convenience. The termination will take effect on December 21, 2023.

In addition, the Company has performed certain development and manufacturing activities, including drug substance and drug product manufacture under GMP conditions, for Horizon pursuant to the Horizon License Agreement. The Company recognized $1.5 million and $2.5 million in connection with these efforts for the years ended September 30, 2023 and 2022, respectively.

Takeda Pharmaceutical Company Limited (“Takeda”)

On October 7, 2020, Takeda and the Company entered into an Exclusive License and Co-Funding Agreement (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s Fazirsiran program (formerly TAK-999 and ARO-AAT), the Company’s second-generation subcutaneously administered RNAi therapeutic candidate being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency. Within the United States, fazirsiran, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda received an exclusive license to commercialize fazirsiran and will lead the global commercialization strategy, while the Company will be eligible to receive tiered royalties of 20% to 25% on net sales.

Under the terms of the Takeda License Agreement, the Company received $300.0 million as an upfront payment in January 2021 and an additional $40.0 million upon Takeda’s initiation of a Phase 3 REDWOOD clinical study of fazirsiran in March 2023, and is eligible to receive up to $527.5 million in additional potential development, regulatory and commercial milestones.

F-16

The Company also recorded $4.5 million as accrued expenses as of September 30, 2023 that was primarily driven by co-development and co-commercialization activities.

Janssen Pharmaceuticals, Inc. (“Janssen”)

On October 3, 2018, Janssen, part of the Janssen Pharmaceutical Companies of Johnson & Johnson, and the Company entered into a License Agreement (the “Janssen License Agreement”). The Company also entered into a stock purchase agreement with JJDC, Inc. (“JJDC”), Johnson & Johnson’s venture capital arm (the “JJDC Stock Purchase Agreement”). Under the Janssen License Agreement, Janssen received a worldwide, exclusive license to the Company’s JNJ-3989 (formerly ARO-HBV) program, the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection. Beyond the Company’s Phase 1/2 study of JNJ-3989, which the Company was responsible for completing, Janssen is wholly responsible for clinical development and commercialization of JNJ-3989.

Under the terms of the Janssen License Agreement, the Company received $175.0 million as an upfront payment, $75.0 million in the form of an equity investment by JJDC in the Company’s common stock under the JJDC Stock Purchase Agreement, and milestone and option payments totaling $73.0 million, and the Company may receive up to $825.0 million in development and sales milestone payments for the Janssen License Agreement. The Company is further eligible to receive tiered royalties on product sales up to mid-teens under the Janssen License Agreement.

At the inception of the Janssen License Agreement, the Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibility to complete the Phase 1/2 study of JNJ-3989 and the Company’s responsibility to ensure certain manufacturing of JNJ-3989 drug product is completed and delivered to Janssen (the “Janssen R&D Services”). Due to the specialized and unique nature of these Janssen R&D Services and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and, thus, one performance obligation.

The Company determined the transaction price totaled approximately $252.7 million, which includes the upfront payment, the premium paid by JJDC for its equity investment in the Company, two $25.0 million milestone payments related to JNJ-3989, and estimated payments for reimbursable Janssen R&D Services to be performed. The Company has allocated the total $252.7 million initial transaction price to its one distinct performance obligation for the JNJ-3989 license and the associated Janssen R&D Services. The Company recognized this transaction price in its entirety as of September 30, 2021, as its performance obligations were substantially completed. There were no contract assets and liabilities recorded as of September 30, 2023.

On April 7, 2023, Janssen voluntarily terminated its collaboration agreement with the Company, dated October 3, 2018. Upon termination of the collaboration agreement, the Company regained full rights to ARO-PNPLA3, formerly called JNJ-75220795. ARO-PNPLA3 is in Phase 1 clinical trials that are now being developed by the Company.

Amgen Inc. (“Amgen”)

On September 28, 2016, Amgen and the Company entered into two collaboration and license agreements and a common stock purchase agreement. Under the Second Collaboration and License Agreement (the “Olpasiran Agreement”), Amgen received a worldwide, exclusive license to the Company’s novel RNAi olpasiran (previously referred to as AMG- 890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the Olpasiran Agreement, Amgen is wholly responsible for clinical development and commercialization.

F-17

$55.0 million in milestone payments; $10.0 million upon Amgen’s initiation of a Phase 1 study in September 2018, $20.0 million upon its initiation of a Phase 2 clinical study in July 2020, and $25.0 million upon its first subject enrollment in a Phase 3 trial in December 2022. The Company has substantially completed its performance obligations under the Olpasiran Agreement. There were no contract assets and liabilities recorded as of September 30, 2023.

In November 2022, Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) and the Company entered into a Royalty Purchase Agreement (the “Royalty Pharma Agreement”). In consideration for the payments under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive up to an additional $535.0 million in remaining development, regulatory and sales milestone payments payable from Amgen and Royalty Pharma. See Note 13.

Joint Venture and License Agreement with Visirna Therapeutics, Inc. (“Visirna”)

On April 25, 2022, the Company entered into a License Agreement with Visirna (the “Visirna License Agreement”), pursuant to which Visirna received an exclusive license to develop, manufacture and commercialize four of the Company’s RNAi-based investigational cardiometabolic medicines in Greater China (including the People’s Republic of China, Hong Kong, Macau and Taiwan). Pursuant to a Share Purchase Agreement entered into simultaneously with the Visirna License Agreement (the “Visirna SPA”), the Company acquired a majority stake in Visirna (after accounting for shares reserved for Visirna’s employee stock ownership plan) as partial consideration for the Visirna License Agreement. Under the Visirna SPA, entities affiliated with Vivo Capital also acquired a minority stake in Visirna in exchange for $60.0 million in upfront capital to support the operations of Visirna. As further consideration under the Visirna License Agreement, the Company is also eligible to receive potential royalties on commercial sales.

NOTE 3. PROPERTY AND EQUIPMENT

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

September 30,

(in thousands)

Computers, software, office equipment and furniture $ 2,240 $ 2,182

Less: Accumulated depreciation and amortization (41,951) (31,554)

Depreciation and amortization expense for property and equipment for the years ended September 30, 2023, 2022, and 2021 was $10.7 million, $8.7 million and $6.6 million respectively.

The increase in the construction in progress during 2023 was mainly due to the continuing developments of manufacturing, laboratory and office facilities in Verona, Wisconsin. In May 2023, the Company completed the development of the San Diego facility, which resulted in the reclassification of related construction in progress to leasehold improvements as of September 30, 2023.

F-18

NOTE 4. INVESTMENTS

The Company’s investments consisted of the following:

(in thousands)

Adjusted Basis GrossUnrealized Gains GrossUnrealized Losses Fair Value

On September 30, 2023, the Company changed the classification of its investment securities from held-to-maturity to available-for-sale. This change enables the Company’s need to be able to respond to market and liquidity risks in managing its portfolio. Such investments are carried at fair value with any unrealized gains and losses reported as a component of other accumulated comprehensive loss. At the date of the transfer, the carrying value of the Company’s held-to-maturity securities was $295.7 million, and net unrealized losses of $3.0 million were recognized in accumulated other comprehensive loss. The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position have any credit loss impairment as of September 30, 2023.

(in thousands)

Adjusted Basis GrossUnrealized Gains GrossUnrealized Losses Fair Value

Short-term investments (due within one year)

Held-to-maturity certificate of deposit 50,000 — — 50,000

Long-term investments (Due within one through three years)

F-19

NOTE 5. INTANGIBLE ASSETS

Intangible assets subject to amortization include patents and a license agreement capitalized as part of the Novartis RNAi asset acquisition in March 2015. The following table presents the components of intangible assets:

(in thousands) (in years)

Intangible assets are reviewed annually for impairment and more frequently if potential impairment indicators exist. No impairment indicators were identified during 2023 and 2022.

Intangible assets with definite useful lives are amortized on a straight-line basis over their useful lives. Intangible assets amortization expense in each of 2023, 2022, and 2021 was $1.7 million. None of the intangible assets with definite useful lives are anticipated to have a residual value.

The following table presents the estimated future amortization expense related to intangible assets as of September 30, 2023:

Amortization Expense

Year Ending September 30, (in thousands)

NOTE 6. STOCKHOLDERS’ EQUITY

The following table summarizes the Company’s shares of common stock and preferred stock:

F-20

Par Value Authorized Issued Outstanding

(in thousands)

On March 16, 2023, the Company’s stockholders approved an increase in authorized common shares, par value $0.001 per share, from 145,000,000 to 290,000,000. The amendment to the Amended and Restated Certificate of Incorporation was filed on April 27, 2023.

As of September 30, 2023 and 2022, respectively, 12,709,837 and 14,000,392 shares of common stock were reserved for issuance upon exercise of options and vesting of restricted stock units granted or available for grant under the Company’s 2004 Equity Incentive Plan, 2013 Incentive Plan, and 2021 Incentive Plan, as well as for inducement grants made to new employees under Rule 5635(c)(4) of the Nasdaq Listing Rules.

On December 2, 2022, the Company entered into an open market sale agreement (the “Open Market Sale Agreement”), pursuant to which the Company may, from time to time, sell up to $250,000,000 in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering (“ATM Offering”). The Company is not required to sell shares under the Open Market Sale Agreement. The Company will pay Jefferies LLC a commission of up to 3.0% of the aggregate gross proceeds received from all sales of the common stock under the Open Market Sale Agreement. Unless otherwise terminated, the ATM Offering shall terminate upon the earlier of (i) the sale of all shares of common stock subject to the Sales Agreement and (ii) the termination of the Sales Agreement as permitted therein. The Company and Jefferies may each terminate the Open Market Sale Agreement at any time upon prior notice. As of September 30, 2023, no shares have been issued under the Open Market Sale Agreement.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be subject to various claims and legal proceedings in the ordinary course of business. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were no contingent liabilities recorded as of September 30, 2023 and 2022.

Commitments

On December 20, 2021, the Company completed a purchase of 13 acres of land in the Verona Technology Park in Verona, Wisconsin, which is being developed into an approximately 160,000 square foot drug manufacturing facility and an approximately 140,000 square foot laboratory and office facility which will support the Company’s process development and analytical activities. As of September 30, 2023, the Company has incurred $166.2 million and intends to spend an additional $120.0 million to $130.0 million to complete the build out of the facilities.

Technology License Commitments

The Company has licensed from third parties the rights to use certain technologies for its research and development activities, as well as in any products it may develop using these licensed technologies. These agreements and other similar agreements often require the Company to make milestone and royalty payments. Milestone payments, for example, may be

F-21

required as the research and development process progresses through various stages of development, such as when clinical candidates enter or progress through clinical trials, upon NDA and/or certain sales level milestones. The Company did not reach any milestones during the years of 2023 and 2022. During 2021, the Company triggered the milestone related to the progression of the ARO-ENaC and ARO-HIF2 candidates and made milestone payments of $2.4 million.

NOTE 8. LEASES

On November 19, 2021, the Company entered into a 15-year lease for approximately 144,000 square feet of office and research and development laboratory space in San Diego, California, for which the rent commencement date began on April 19, 2023. This new facility accommodates increased personnel for its expanding pipeline of current and future drug candidates. Pursuant to the lease, within twelve months of the expiration of the initial 15-year term, the Company has the option to extend the lease for up to one additional ten-year term, with certain annual increases in base rent.

The lease agreement grants the Company the right to receive an Additional Tenant Improvement Allowance (“ATIA”) funded by the lessor, with a maximum amount of $7.2 million, subject to a 7% interest per annum over the base term. Further, on September 25, 2023, the Company executed the first amendment to the lease, which grants a second ATIA with a maximum amount of $23.6 million, bearing interest at a rate of 9% per annum over the base term. The Company has received $27.8 million ATIA from the lessor as of September 30, 2023. As a result, the Company remeasured its lease liability and right-of-use assets to reflect these additional allowances and the related increase lease payments. The Company has further concluded that these ATIAs have no effects on the classification of the lease.

Other Significant Leases

Pasadena, California: The Company leases 49,000 square feet of office space located at 177 East Colorado Blvd. for its corporate headquarters from 177 Colorado Owner, LLC, which lease expires on April 30, 2027. The lease contains an option to renew for one term of five years.

San Diego, California: The Company subleased space from Halozyme, Inc. for additional research and development space in San Diego, California. The term of this sublease commenced on April 1, 2020 and ended on January 14, 2023. On December 23, 2022, the Company entered into a new six-month lease agreement with 11404 & 11408 Sorrento Valley Owner (DE) LLC, effective January 15, 2023. The lease ended on July 15, 2023.

Madison, Wisconsin: The Company leases space for office and laboratory facilities, which expires on September 30, 2031. The lease contains options to renew for two terms of five years. After accounting for additional rental square feet added pursuant to amendments to the lease agreement in 2019 and 2020, the Company currently leases a total of 115,000 square feet.

The components of lease assets and liabilities along with their classification on the Company’s consolidated balance sheets were as follows:

September 30,

Lease Assets and Liabilities Classification 2023 2022

(in thousands)

Operating lease assets Right-of-use assets $ 45,297 $ 58,291

Current operating lease liabilities Lease liabilities 10,563 2,776

The components of lease cost along with its classification on the Company’s consolidated statements of operations were as follows:

F-22

Year Ended September 30,

(in thousands)

Operating lease cost Research and development $ 10,350 $ 7,278 $ 3,649

Variable lease cost(1) Research and development 1,179 728 814

General and administrative expense — — 1

(1) Variable lease cost is primarily related to operating expenses associated with the Company’s operating leases.

There was $1.4 million, $0.3 million and $0 short-term lease cost during the years ended September 30, 2023, 2022, and 2021, respectively.

The following table presents maturities of operating lease liabilities on an undiscounted basis as of September 30, 2023:

Year Amounts

(in thousands)

Less imputed interest (78,526)

Total operating lease liabilities $ 115,171

Supplemental cash flow and other information related to leases was as follows:

Year Ended September 30,

(in thousands)

Cash received for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 48,391 $ — $ —

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 5,204 $ 4,500 $ 3,100

Weighted-average remaining lease term (in years) 13.5 7 8

Weighted-average discount rate 8.0 % 8.5 % 8.5 %

F-23

NOTE 9. STOCK-BASED COMPENSATION

The Company has three plans that provide for equity-based compensation. Under the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2013 Incentive Plan (the “2013 Plan”), 0 and 3,408,707 shares, respectively, of the Company’s common stock are reserved for the grant of stock options and restricted stock awards to employees and directors of the Company as of September 30, 2023.

On March 18, 2021, the Company’s Board of Directors approved the Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan (the “2021 Plan”), which authorized 8,000,000 shares (subject to certain adjustments) available for grants of stock options, stock appreciation rights, restricted and unrestricted stock, performance awards, cash awards and other awards convertible into or otherwise based on shares of the Company’s common stock. The maximum number of shares authorized under the 2021 Plan will be (i) reduced by any shares subject to awards made under the 2013 Plan after January 1, 2021, and (ii) increased by any shares subject to outstanding awards under the 2013 Plan as of January 1, 2021 that, after January 1, 2021, are canceled, expired, forfeited or otherwise not issued under such awards (other than as a result of being tendered or withheld to pay the exercise price or withholding taxes in connection with any such awards) or settled in cash. As of September 30, 2023, the total number of shares reserved for issuance was 6,204,720 shares, which includes 217,922 shares that were forfeited under the 2013 Plan, and 1,979,364 shares have been granted under the 2021 Plan.

In addition, there were 707,432 shares reserved for options and 683,825 shares reserved for restricted stock units issued as inducement grants to new employees granted outside of the Company’s equity-based compensation plans under Rule 5635(c)(4) of the Nasdaq Listing Rules.

The following table presents a summary of awards outstanding:

ARWR US Equity

ARWR · 10-K · period ended 2023-09-30

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.CONTROLS AND PROCEDURES

ITEM 9B.OTHER INFORMATION

ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.EXECUTIVE COMPENSATION

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16.FORM 10-K SUMMARY

ARWR US Equity☆

ARWR · 10-K · period ended 2023-09-30

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.CONTROLS AND PROCEDURES

ITEM 9B.OTHER INFORMATION

ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.EXECUTIVE COMPENSATION

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16.FORM 10-K SUMMARY

ARWR US Equity