Arrowhead (ARWR) Q1 2026 Earnings Call Transcript

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DATE

Thursday, February 5, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Dr. Christopher Anzalone
• Chief Operating Officer — Andy Davis
• Chief Medical Officer — Dr. James Hamilton
• Chief Financial Officer — Daniel Apel

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TAKEAWAYS

• First FDA Approval -- Arrowhead Pharmaceuticals (NASDAQ:ARWR) obtained FDA approval for REDEMPLO as an adjunct to diet for reducing triglycerides in adults with familial chylomicronemia syndrome (FCS).
• International Approvals -- REDEMPLO also received regulatory approvals from Health Canada and the Chinese National Medical Products Administration, with anticipated launches in Canada, China, the EU, and the U.K. later in 2026.
• Product Launch and Uptake -- Over 100 REDEMPLO prescriptions received from a diverse, geographically balanced U.S. prescriber base in the first 10 weeks of launch.
• Payer Feedback -- Early conversations with major payers indicate a willingness to provide coverage for REDEMPLO to label, including both clinically and genetically diagnosed FCS.
• Commercial Model -- Arrowhead implemented the One-REDEMPLO pricing scheme for a single price across present and future indications for FCS.
• Clinical Results -- Phase III PALISADE study showed median triglyceride reduction of 80% from baseline with REDEMPLO, with lower acute pancreatitis incidence compared to placebo.
• Regulatory Label -- The U.S. FDA-approved label for REDEMPLO states no contraindications, no warnings, and no precautions, with self-administration by subcutaneous injection every three months.
• Revenue -- Total revenue for the quarter was $264 million, comprised mainly of $229 million from Sarepta collaboration activities and $34 million from the Novartis upfront payment.
• Net Income -- Reported net income was $30.8 million, equating to $0.22 per share, versus a net loss of $173.1 million, or $1.39 per share, in the year-ago quarter.
• Operating Expenses -- Total operating expenses reached $223 million, an increase of $59 million, driven by $40 million higher R&D and $19 million higher SG&A to support clinical trials and the REDEMPLO launch.
• Balance Sheet -- Cash and investments totaled $917 million at quarter end, not including the $200 million DM1 milestone payment or the $50 million Sarepta anniversary payment pending receipt.
• Capital Raised -- Gross proceeds from recent transactions totaled $1.33 billion, including a $200 million Novartis upfront, $200 million Sarepta milestone, $700 million 0% coupon convertible notes, and $230 million common stock offering.
• Convertible Debt Terms -- The convertible notes carry a 0% coupon, a 35% conversion premium, and capped call features to prevent dilution up to roughly $119 per share (about an 85% premium).
• Plozasiran Pipeline Progress -- The company remains on schedule to complete blinded Phase III SHASTA-3, SHASTA-4, and MUIR-3 studies in mid-2026, with topline data expected in Q3 2026 for severe hypertriglyceridemia.
• Breakthrough Therapy Designation -- The FDA granted breakthrough therapy designation to investigational plozasiran as an adjunct to diet for reducing triglycerides in adults with severe hypertriglyceridemia.
• Obesity Program Interim Data -- Early Phase I/II data showed that ARO-INHBE, combined with tirzepatide, achieved approximately twofold better weight loss at week 16 and approximately threefold reductions in total fat, visceral fat, and liver fat versus tirzepatide alone at week 12 in obese diabetics.
• ARO-ALK7 Gene Silencing -- Dose-dependent reductions in adipose ALK7 mRNA observed, with a mean reduction of 88% at 200 mg at week 8, and maximum reduction of 94% in the ongoing Phase I/II study.
• ARO-DIMER-PA Clinical Start -- Patient dosing began in the first Phase I/II trial of ARO-DIMER-PA, a dual RNAi therapeutic targeting PCSK9 and APOC3 for mixed hyperlipidemia; interim data anticipated in the second half of 2026.
• CNS Platform Milestone -- First patients dosed in Phase I/II trial of ARO-MAPT, targeting tau protein for tauopathies including Alzheimer’s disease, using Arrowhead’s proprietary blood-brain barrier delivery system, with interim healthy volunteer data expected in 2026.
• Strategic Collaboration -- Arrowhead entered a global licensing and collaboration agreement with Novartis for ARO-SNCA, with eligible milestone payments up to $2 billion and tiered royalties up to low double digits on commercial sales.
• Product Adoption Programs -- A high proportion of patients have enrolled in the rely on REDEMPLO patient support initiative; eligible patients paid $0 out of pocket for prescriptions during the quarter.
• Provider Engagement -- Outreach targets approximately 5,000 healthcare professionals, with early prescribing led by preventive cardiologists and endocrinologists, accounting for 70% of prescription volume.

SUMMARY

Arrowhead Pharmaceuticals (NASDAQ:ARWR) reported its transition to a commercial biopharmaceutical company with first regulatory approvals for REDEMPLO for FCS in the U.S. Canada, and China, and launch in the U.S. The company secured $1.33 billion in gross proceeds through collaborations and financings and finished the quarter with a strengthened liquidity profile and positive net income. Management confirmed that critical Phase III studies in plozasiran and expansion efforts in obesity and CNS pipelines are progressing as planned with multiple key data readouts and regulatory events expected in 2026.

• Clinical and payer feedback on the initial REDEMPLO launch signals broad U.S. accessibility, enabled by rationalized pricing and omnichannel engagement.
• Blinded Phase III trials for plozasiran are on track, with topline results scheduled for Q3 2026 and planned label expansion beyond FCS targeted by year-end.
• Arrowhead’s CNS platform utilized systemic delivery for tauopathies, with first-in-human studies now enrolling and interim results projected in 2026.
• Capital structure optimized through zero-coupon convertible notes and capped call features designed to limit shareholder dilution while raising non-dilutive funds.

INDUSTRY GLOSSARY

• FCS (Familial Chylomicronemia Syndrome): A rare genetic disorder marked by severely elevated triglycerides, leading to risk of recurrent, potentially fatal pancreatitis.
• REDEMPLO: Arrowhead’s FDA-approved RNAi-based drug for reducing triglycerides in FCS patients.
• TRiM Platform: Arrowhead’s proprietary targeted RNAi molecule platform enabling precise gene silencing in specific tissues, including CNS penetration.
• SHASTA/MUIR Studies: Arrowhead’s Phase III clinical trials evaluating plozasiran for severe hypertriglyceridemia (SHTG) and acute pancreatitis endpoints.
• APOC3/PCSK9: Genes targeted for RNA interference therapies by Arrowhead in treating hyperlipidemias and cardiovascular risk.
• ARO-INHBE/ARO-ALK7/ARO-DIMER-PA: Arrowhead investigational RNAi therapies in clinical development for metabolic disease, obesity, and mixed lipid disorders.
• ARO-MAPT: Arrowhead’s investigational RNAi therapy for tauopathies, delivered to the brain via proprietary BBB-penetrant technology.

Full Conference Call Transcript

Dr. Christopher Anzalone: Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. We had another quarter of strong execution across all areas of our business, and we are well positioned to build on this progress throughout 2026 and beyond. In fact, the recent months have included some of the more significant achievements in Arrowhead's history. Let's talk about some of these. First, on November 18, 2025, Arrowhead received its first regulatory approval and began the next phase of growth as a commercial company marketing its own medicines. The FDA approved REDEMPLO as an adjunct to diet to reduce triglycerides in adults with familial chylomicronemia syndrome, or FCS.

FCS is a severe rare disease with an estimated 6,500 people in the U.S. living with genetic or clinical FCS, characterized by TG levels that can be 10 to 100x higher than normal, leading to a substantially higher risk of developing acute recurrent and potentially fatal pancreatitis. This approval was supported by clinical data from the Phase III PALISADE study in adults with either clinically diagnosed or genetically confirmed FCS. The PALISADE study demonstrated deep and durable reductions in TGs with a median reduction of 80% from baseline and a lower numerical incidence of acute pancreatitis events compared to placebo.

Arrowhead launched REDEMPLO independently in the U.S. with the One-REDEMPLO pricing model that creates one consistent price across current and potential future indications. This is important. We're committed to sustainable innovation, and this requires a rational drug pricing according to the value a medicine offers to patients and health care systems. REDEMPLO is a pancreatitis drug. And when we think about pricing, we look to those patient populations at greatest risk of acute TG-related pancreatitis. We've only had drug in channel for about 10 weeks, which included Thanksgiving, Christmas and New Year's holidays. So it is difficult to infer too much about launch. However, initial trends in prescription payer interactions and shipments have been encouraging.

To date, over 100 prescriptions for REDEMPLO have been received from a diverse prescriber base with geographically balanced uptake across the U.S. Early patient starts fall into 3 categories: patients transitioning from our expanded access program, patients naive to the APOC3 class and patients switching from olezarsen. In addition, REDEMPLO shipments are being made for patients with clinically diagnosed and genetically confirmed FCS. In addition to FDA approval, we announced in January 2026 that REDEMPLO also received approval for the treatment of FCS from Health Canada and from the Chinese National Medical Products Administration. REDEMPLO will be available later this year in Canada, and we anticipate it will be marketed independently by Arrowhead.

Pending regulatory review and approval, we expect to potentially launch REDEMPLO later this year in select EU countries and in the U.K. In Greater China, REDEMPLO will be marketed by Sanofi. Our cardiometabolic pipeline is off to a good start with REDEMPLO and the ongoing Phase III study of zodasiran in homozygous familial hypercholesterolemia, or HoFH. We are actively expanding this pipeline with a number of discovery programs and importantly, 3 clinical programs. ARO-INHBE and ARO-ALK7 being developed as potential treatments for obesity are in Phase I/II studies. We also recently initiated a Phase I/II study of ARO-DIMER-PA in patients with mixed hyperlipidemia. For our initial obesity candidates, we recently announced some early interim clinical data.

ARO-INHBE enhanced weight loss and fat reduction versus tirzepatide alone in obese patients with type 2 diabetes. More specifically, 2 administrations of ARO-INHBE at the 400-milligram dose in combination with tirzepatide achieved approximately twofold better weight loss at week 16 than tirzepatide alone. This appears to be a high-quality weight loss as we saw an approximately threefold reduction in each of total fat, visceral fat and liver fat measures based on week 12 MRI versus tirzepatide alone in these patients. ARO-ALK7 Phase I/II study is approximately 2 quarters behind the ARO-INHBE study, but early data are encouraging.

We believe this is the first RNAi therapeutic to show a adipocyte gene target silencing in the clinical trial, and we've seen dose-dependent reductions in adipose ALK7 mRNA with a mean reduction of minus 88% at the 200-milligram dose at week 8 and a maximum reduction of minus 94%. While these are very intriguing data, they are early and incomplete. So we have substantial work ahead of us before we get too excited about how these candidates could eventually be used. We will continue to run both Phase I/II studies. We are expanding existing cohorts to increase power, and we are adding new cohorts to better understand these candidates and underlying biology.

We intend to report additional results later in 2026. ARO-DIMER-PA is being developed as a potential treatment for atherosclerotic cardiovascular disease, or ASCVD, due to mixed hyperlipidemia, where both LDL cholesterol and triglycerides are elevated. We believe there are approximately 20 million people in the U.S. with mixed hyperlipidemia, and this is a patient population without adequate treatment options. We recently announced that we dosed the first patients in the Phase I/II clinical trial of ARO-DIMER-PA, which is a dual functional RNAi therapeutic designed to silence expression of the PCSK9 and APOC3 genes, thus designed to reduce both LDL cholesterol and TGs.

This represents an important step forward for the RNAi field as we believe it is the first clinical candidate to target 2 genes simultaneously in 1 molecule and an important step forward for preventative cardiology as both LDL and TGs have epidemiologic support as being important drivers for ASCVD risk. We expect to have interim data for ARO-DIMER-PA in the second half of 2026. If we see good LDL and TG reduction in a well-tolerated manner, we may have something truly special for a very large and currently underserved patient population.

Outside of cardiometabolic, we made important advances in our CNS portfolio, specifically in programs that utilize a new proprietary delivery system designed to achieve blood-brain barrier, or BBB, penetration, utilizing subcutaneous administration. In nonclinical studies across multiple animal models, we saw deep target gene knockdown across the CNS, including deep brain regions. This underscores Arrowhead's leadership in the delivery of siRNA to multiple tissues and cell types throughout the body, utilizing the proprietary TRiM platform. Our first wholly owned program using the BBB platform is ARO-MAPT, being developed as a potential treatment for tauopathies, including Alzheimer's disease.

During the last quarter, we announced that we dosed the first subjects in a Phase I/II clinical trial that will include healthy volunteers and Alzheimer's patients. ARO-MAPT targets the tau protein in the brain, which has good biological validation as a potential driver of pathology and has emerged as a promising target for Alzheimer's disease and additional tauopathies. We anticipate interim clinical data from the healthy volunteer portion of the study should be available in 2026, with data from the Alzheimer's patients to follow in 2027. This is a very exciting program for us. The second program to use our BBB delivery system is SRP-1005, formerly called ARO-HTT for the treatment of Huntington's disease.

This program is partnered with Sarepta, which recently announced the submission of its CTA for study SRP-1005-101, also known as INSIGHTT, in approximately 24 participants. While our cardiometabolic and CNS work by no means encompasses everything we are doing, they are areas of substantial focus and potential value drivers in the near, mid and long term. Within these areas, we are addressing three of the greatest public health challenges of our time, obesity, cardiovascular disease and neurodegenerative conditions. Now I'd like to move on to some key events during the recent period that have dramatically strengthened our balance sheet and give us the necessary resources to push multiple programs toward commercialization.

We anticipate being funded through multiple potential independent and partner launches. These meaningfully increase revenue opportunities for the company and push us toward becoming cash flow positive and self-sustaining from commercial sales. Since our last reporting period, we have completed transactions with gross proceeds of $1.33 billion. Let's break that down. First, we completed a global licensing and collaboration agreement with Novartis for ARO-SNCA, Arrowhead's preclinical stage siRNA therapy against alpha-synuclein for the treatment of synucleinopathies such as Parkinson's disease. The collaboration includes a limited number of additional targets outside our pipeline that will utilize Arrowhead's proprietary TRiM platform.

Arrowhead received a $200 million upfront payment and is also eligible to receive development, regulatory and sales milestone payments of up to $2 billion. Arrowhead is further eligible to receive tiered royalties on commercial sales up to low double digits. Second, we earned $200 million milestone payment from Sarepta following a drug safety committee review and subsequent authorization to dose escalate and achievement of the second prespecified patient enrollment target for ARO-DM1. And third, we closed concurrent public offerings of $700 million aggregate principal amount of 0% coupon convertible senior notes and $230 million of common stock. Both offerings were several times oversubscribed and priced at company-friendly terms.

As I mentioned at the beginning of the call, we demonstrated strong execution across all areas of our business. We received regulatory approval in 3 different countries. We launched our first commercial product. We continue to grow our cardiometabolic portfolio. We had encouraging early results from our obesity programs. We advanced our TRiM platform and CNS pipeline, and we meaningfully improved our financial position to push these and other programs forward. It has been a productive last few months at Arrowhead with so much potential to continue the strong progress in 2026 and beyond. With that overview, I'd now like to turn the call over to Andy Davis. Andy?

Andy Davis: Thank you, Chris, and good afternoon, everyone. It has been just over 2 months since the approval of REDEMPLO on November 18, 2025, and we are very pleased with the progress we are seeing. I'd like to share some early insights across health care provider engagement, patient dynamics and payer developments. I'll start with health care provider engagement. As a reminder, we are targeting approximately 5,000 health care professionals through personal promotions, complemented by a much broader omnichannel effort. Early prescribing has been led by preventive cardiologists and endocrinologists, who together account for approximately 70% of total prescriptions, with the remainder coming from internal medicine physicians focused on lipid disorders.

In addition, advanced practice providers, including nurse practitioners and physician associates working within multidisciplinary care teams; are playing a meaningful role in patient identification and treatment decisions. Turning to patient dynamics. As Chris mentioned, over 100 prescriptions for REDEMPLO have been received to date. We see this as a very strong start that exceeded our expectations for the early months of the launch. We are also seeing geographically balanced uptake across the United States. Early patient starts fall into 3 categories: patients transitioning from our expanded access program, patients naive to the APOC3 class and patients switching from olezarsen. Class-naive patients represent the overwhelming majority of starts with expanded access and switch patients contributing evenly to the remainder.

Patients receiving REDEMPLO include both clinically diagnosed and genetically confirmed FCS, with the majority not required to submit genetic testing to gain access. Importantly, a high proportion of patients are enrolling in the rely on REDEMPLO patient support program. And in the fiscal first quarter, patients eligible for co-pay assistance paid $0 out of pocket. Next, I'll touch on payer developments. While it is still early, we remain encouraged by positive payer feedback on both the clinical profile of REDEMPLO and our unified One-REDEMPLO pricing approach. We are actively engaged with the largest payers and discussions to date reflect a willingness to cover REDEMPLO to label, including access based on either genetic or clinical diagnosis of FCS.

I'd like to conclude with a brief comment on execution. Within days of FDA approval, we had product available in the channel for FCS patients. Our REDEMPLO care coordinators, rare disease specialists and field reimbursement navigators were deployed on day 1 to support prescribers and patients, and our payer account team continues to work closely with customers to minimize access barriers. The teams are off to a great start. And our teams are highly encouraged by early stakeholder feedback. This feedback further reinforces the key differentiating attributes of REDEMPLO. As a reminder, in the PALISADE study, REDEMPLO reduced triglycerides by 80% from baseline as early as month 1 and maintained this reduction with minimal variability through 12 months of treatment.

In addition, the numerical incidence of acute pancreatitis was lower in REDEMPLO-treated patients than in placebo. And the U.S. approved prescribing information includes no contraindications, no warnings and no precautions. And REDEMPLO can be self-administered at home once every 3 months, just 4 injections per year. With that, I'll turn the call over to James Hamilton to discuss the R&D portfolio.

James Hamilton: Thank you, Andy. I'd like to start with a review of the REDEMPLO FDA approval and information in the label and contained in the package insert. REDEMPLO is approved as an adjunct to diet to reduce triglycerides in adults with FCS. The recommended dose of REDEMPLO is 25 milligrams, and it can be self-administered at home by subcutaneous injection once every 3 months. REDEMPLO has no contraindications, warnings or precautions in the U.S. FDA-approved label. The most common adverse reaction includes hyperglycemia, headache, nausea and injection site reactions. REDEMPLO was studied in patients with both genetic FCS and clinically diagnosed FCS in the Phase III PALISADE study.

Patients achieved deep and durable reductions in median triglycerides of around 80% from baseline with reductions largely maintained below the guideline directed threshold of 500 milligrams per deciliter throughout the year of treatment. Importantly, patients with genetic FCS versus clinical FCS showed similar reductions from baseline. We see the clinical FCS population as having the same high unmet need as the genetic FCS group. And as such, we think it's crucial to have shown that both patient populations showed similar large reduction from baseline in triglycerides.

In PALISADE, treated patients also had a reduced rate of adjudicated acute pancreatitis events, a very welcome finding for FCS patients and their caregivers and an important validation that reduction in triglycerides can, in fact, lead to reductions in pancreatitis. In addition to FCS, we are also investigating plozasiran in patients with severe hypertriglyceridemia or SHTG. We announced last quarter that the FDA granted breakthrough therapy designation to investigational plozasiran as an adjunct to diet to reduce triglycerides in adults with SHTG.

Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition and where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapies on clinically significant endpoints. This is another important step for the program. The global Phase III studies of plozasiran designed to support the supplemental NDA filing to expand the label beyond genetic and clinical FCS are the SHASTA-3 and SHASTA-4 studies, which enrolled approximately 750 patients; and MUIR-3, which enrolled 1,400 patients. We're also enrolling patients in SHASTA-5 to directly assess the ability of plozasiran to reduce the risk of acute pancreatitis as the primary endpoint.

We remain on schedule to complete the blinded portion of the SHASTA-3, SHASTA-4 and MUIR-3 Phase III clinical studies in mid-2026. We expect top line data to be available in the third quarter of 2026 with planned sNDA submission for SHTG before the end of the year. We presented the study design and baseline characteristics of the SHASTA-3 and SHASTA-4 studies at the 23rd World Congress Insulin Resistance, Diabetes and Cardiovascular Disease in December 2025. I'd like to spend a moment to go over a few key parts of that poster. The primary endpoint of the SHASTA studies and the accepted regulatory endpoint is TG lowering versus placebo. Plozasiran has been highly active in all patient populations studied.

So these studies are overpowered to show TG lowering. One of the additional objectives and key secondary endpoints of SHASTA-3 and SHASTA-4 studies includes the assessment of acute pancreatitis rates. To be clear, the study was not designed or prospectively powered to demonstrate AP rate reduction after just a near treatment. However, there are a meaningful number of SHTG patients enrolled that would be considered at high risk for AP. Specifically, among the 2 studies, which will be pooled for AP event assessment; 37% of enrolled patients reported TGs greater than 880 milligrams per deciliter, an accepted high-risk threshold for AP. In addition, 20% of enrolled patients had a prior medical history of pancreatitis.

Lastly, we are seeing AP events in the studies. We are, of course, still blinded and have about another 4 months before the last patient reaches the end of the blinded period, but overall, the studies are progressing as planned. Chris mentioned the interim obesity results from our ARO-INHBE and ARO-ALK7 programs earlier, but I'd like to add some color and talk about what we are adding to these programs. First, these early results were very encouraging. The next steps would be to investigate whether and where there is a therapeutic benefit and in the patient segments and treatment settings where it may be applicable.

To review, the interim clinical trial results represent the first demonstration in humans that the Activin E/ALK7 pathway, a genetically validated pathway that regulates adipose fat storage, may potentially be harnessed therapeutically to improve body composition and enhance weight loss versus tirzepatide treatment alone in obese patients with type 2 diabetes mellitus. This patient population typically experiences less weight loss with incretin therapy. They're less likely to reach weight loss targets and need more effective treatment options. Importantly, ARO-INHBE in combination with tirzepatide achieved approximately twofold weight loss and approximately threefold reduction in visceral fat, total fat and liver fat versus tirzepatide alone in obese diabetics. We saw signals that the pathway was active in the nondiabetics as well.

But based on early data, the diabetic signal, particularly in combination with tirzepatide; appeared to be the clearest. We are planning -- we are already in the planning and execution stage of the following next steps. increasing numbers of patients in the Phase I diabetic cohorts, including longer follow-up and better -- to better understand drug durability and activity out to 1 year; and initiating monotherapy cohorts in obese diabetic patients. We expect to have more data later in 2026 from these programs as we see data from the new expanded scope of the Phase I/II studies. I will now turn the call over to Dan Apel.

Daniel Apel: Thank you, James, and good afternoon, everyone. I'll provide a brief outline of our financial picture. As we reported today, net income for the quarter ended December 31, 2025, was $30.8 million or an income of $0.22 per share based on 140.7 million fully diluted weighted average shares outstanding. This compares to a net loss of $173.1 million or a loss of $1.39 per share for the quarter ended December 31, 2024, based on 124.8 million fully diluted weighted average shares outstanding at that time. Revenue for the quarter totaled $264 million, driven primarily by our license and collaboration agreements with Sarepta and Novartis.

Of this amount, approximately $229 million related to the Sarepta collaboration, and this included $181 million from the achievement of the second DM1 milestone, $32 million from the ongoing recognition of the initial Sarepta consideration and $17 million related to reimbursement of incurred collaboration program costs. In addition, we recognized $34 million of the $200 million upfront payment we received from Novartis under our global licensing and collaboration agreement with them. The remainder of that $200 million will be deferred over time as we fulfill our preclinical collaboration obligations. Finally, on revenue, we also recorded our first commercial sale of plozasiran in FCS.

As both Chris and Andy have mentioned, we are very encouraged with the feedback and uptake we are seeing with patients and providers. For now, we are not disclosing specific sales numbers until such time as they become a meaningful driver to our financials. Turning to expenses. Total operating expenses for the quarter were approximately $223 million compared to $164 million in the prior year quarter, representing an increase of $59 million year-over-year. This increase was driven by $40 million of higher R&D expenses and $19 million of higher SG&A expenses.

To break that down, the increase in R&D expense was primarily attributable to, as planned, higher clinical costs associated with our Phase III registrational studies for plozasiran in SHTG as well as increased clinical supply chain costs. Nearly half of our clinical trial spend in the quarter was associated with our 3 registrational SHTG studies, namely SHASTA-3, SHASTA-4 and MUIR; which again should read out in the summer. SG&A expenses increased year-over-year compared to the prior year's fiscal first quarter, primarily driven by investments to support the commercialization of REDEMPLO.

As previously discussed, in advance of the U.S. launch, we built robust commercial capabilities to fully support FCS and importantly, capabilities that were intentionally designed to be highly leverageable downstream should we obtain approval for plozasiran in SHTG and sulastiran in HoFH. Turning now to the balance sheet. Cash and investments totaled $917 million as of December 31, 2025. Common shares outstanding at quarter end were 137.4 million. To be clear, the reported cash balance does not include the $200 million that we earned for the DM1 second milestone, which was received in January; nor does it include the $50 million anniversary payment that we expect to receive from Sarepta on or before February 10.

Finally, and importantly, the cash balance of $916 million also does not include the financing transactions announced in early January, consisting of a concurrent offering of convertible senior notes and common stock, along with associated capped call transactions. As Chris mentioned, these were on company-friendly terms in the sense that the convertible was 0% coupon and the initial conversion premium was 35%. Said another way, the 0% coupon means the notes will not bear regular interest and the principal amount of the notes will not accrete. The initial conversion price represents a significant premium of approximately 35% over the public offering price per share of common stock in the common stock offering.

Moreover, the private cap calls will prevent any dilution to existing shareholders up to an 85% of the premium over the offering price or roughly $119. We estimate that the total cost of capital of that convertible at any share price below that $119 to be very attractively below 1.5%. All that is to say that we have very significantly and efficiently strengthened our balance sheet, which provides additional flexibility to support ongoing clinical development, current and future commercialization activities and other long-term strategic priorities. With that brief overview, I will now turn the call back to Chris.

Dr. Christopher Anzalone: Thanks, Dan. This is indeed an exciting time to be at Arrowhead or an Arrowhead shareholder. We're coming off a historic period for the company where we executed extremely well and all the hard work of the last several years is starting to pay off. While 2025 is productive, we look to the remainder of 2026 and the years ahead to be even more transformational. Let's look at some key 2026 events that we anticipate could be important value-creating events for the company and our shareholders.

Commercial sales progress for REDEMPLO, Q3 2026 readout of Phase III SHASTA-3 and SHASTA-4 studies of plozasiran in patients with SHTG, which we believe has the potential to be a $3 billion to $4 billion commercial opportunity; second half 2026 readout for ARO-DIMER-PA targeting PCSK9 and APOC3 for LDL and TG lowering, which may address mixed hyperlipidemia, a population of potentially 20 million patients in the U.S.; additional ARO-INHBE and ARO-ALK7 data presented in 2026 that may build on the already encouraging early data for this novel non-incretin strategy; and early ARO-MAPT data in 2026, potentially providing validation for this drug candidate and our emerging CNS pipeline with systemic delivery via subcutaneous administration.

These are just a few potentially important events in 2026 alone. If you fast forward 1 to 3 years, we expect many more opportunities in our pipeline to build value and potential commercial launches, both independently and with partners. Thank you for joining us today. And I would now like to open the call to your questions. Operator?

Operator: [Operator Instructions] Our first question will come from the line of Mike Ulz from Morgan Stanley.

Michael Ulz: Maybe just one on REDEMPLO. Can you just give a little bit more color on the breakdown between the different categories of patients transitioning from expanded access, naive and switch? And then maybe on the latter in terms of switch, just any key reasons you're seeing a switch? And does it have anything to do with coverage and pricing?

Andy Davis: Thanks, Mike. This is Andy. Yes, I can comment that the vast majority of patient origination is from APOC3-naive segment, with the remaining balance split roughly 50-50 between those that are coming from switch and those that are transitioning off of the expanded access program. As it relates to switch, we're seeing switch patients that are coming both from efficacy, but also from safety as the two principal drivers for why physicians might be considering REDEMPLO as an alternative. I hope that helps.

Operator: Our next question comes from the line of Maury Raycroft from Jefferies.

Maurice Raycroft: Congrats on the progress. I'll ask one on obesity. Just wondering if you've had discussions with FDA about the development path or when would it make sense to do this? And what could timelines for your Phase II start look like? And do you need to have all the data, including combo data in hand, before you can determine next steps for the development path?

James Hamilton: Yes, sure, Maury. I can take that. This is James. Probably middle of the year, we would be having some of those discussions with FDA. I don't think we need all of the data from all of the cohorts. As I mentioned in the prepared remarks, we expanded some of these cohorts, so they'll be going on some of them for a longer period of time. So FDA conversations probably middle of -- around middle of the year, and then we'll be looking to file an IND shortly thereafter.

Operator: Our next question will come from the line of Andrea Newkirk from Goldman Sachs.

Andrea Tan: Maybe I can ask you one here on the ARO-DIMER-PA asset. Just as we think about the data set that are -- that's coming later this year, just curious if you might be willing to speculate or share what you are looking for or how you've defined a TPP, what level of reduction in LDL-C and you're hoping to see? And then how that might inform a go/no-go decision for advancing the asset forward? And what extent of reduction would give you confidence that you could then see that translation to a benefit on MACE?

Dr. Christopher Anzalone: Yes, sure. We'll see. I think we probably don't have to reach the level of reduction in terms of APOC3 and triglycerides that we're seeing with plozasiran, for example. Something less than that with the combination of the LDL cholesterol reductions would probably be sufficient. So I think if you look at some of the monkey data that we presented in the dyslipidemic monkeys, we were seeing reductions in LDL and in triglycerides of around 40%, 50%. So I think something like that, if you could do both of those, that would be really encouraging. But we'll see what the data show later this year.

Operator: Our next question comes from the line of Luca Issi from RBC Capital Markets.

Unknown Analyst: This is Cathy on for Luca. Congrats on strong REDEMPLO launch and progresses. My question also on INHBE and ALK7 since we just talked about the regulatory path. Andy, I appreciate early days, but how are you thinking about potential pricing for INHBE and ALK7? I mean Lilly now offers Zepbound via LillyDirect at $300 a month and the compounders announced today that you can get oral Wegovy basically at the same monthly price as YouTube TV. So what is your latest thinking on pricing? And how should we think about COGS for INHBE and ALK7?

Andy Davis: It is -- as you expected, it's way too early for us to think about that. We're inherently in the biology here to see how these drug candidates could potentially work in various patient populations. Until we have a better understanding of that, it's really too early to speculate on potential pricing.

Operator: Our next question comes from the line of Prakhar Agrawal from Cantor.

Prakhar Agrawal: Congrats on the quarter and the progress. So I think, James, you mentioned that about the Pancreatitis event rates in the ongoing Phase III SHASTA-3, 4 trials. Maybe if you can talk about the blinded AP events that you're seeing in those trials and whether it's in the same ballpark of what Ionis saw? And just a follow-up to that, would you expect the placebo event rate on AP reduction to perform similarly to olezarsen core trials, given the population looks similar? Or are there any nuances that we should be aware of?

James Hamilton: Yes. So on the first one, we're not going to give any additional details on event rates or the number of events that we've seen other than to say that we are seeing events. On the second question, I mean, I think it's rational to look at the CORE and CORE2 placebo rate that the population was similar to ours. So they are obviously different studies, but the population was similar.

Operator: Our next question comes from the line of Jason Gerberry from Bank of America.

Jason Gerberry: You mentioned payer feedback for REDEMPLO. I believe that was in the context of FCS. But I'm curious if in those discussions, SHTG came up at all and whether that price point that you guys have for FCS is appropriate for a market the size of SHTG and the likely benefits that APOC3 would provide. It seemed pretty derisked at this point, but just kind of curious if those discussions came up and how the view was on the $60,000 price point.

Andy Davis: Thanks, Jason. This is Andy. I appreciate the question. I won't get into the details of any specific payer discussions, only to say that our team is laser-focused on ensuring we can gain coverage and access for those patients that have FCS, either genetically confirmed or clinically diagnosed. I would just add that the payers with whom we're discussing represent over 90% of U.S. lives and both the clinical teams and the economic teams recognize the clinical value and the economic value of REDEMPLO at the One-REDEMPLO price that we've previously announced.

Dr. Christopher Anzalone: And you mentioned the size of the SHTG market. We think there are somewhere around 3.5 million people with triglycerides above 500. But that market is not all created equal. When we look at our -- at least initial target market there and we look at how we price REDEMPLO, it is really focused on those very high-risk individuals, those maybe 750,000 to maybe 1 million people who are -- who have triglycerides above 880 or history of pancreatitis. That's -- at least initially, that is the real core market that those are the patients who really need this new medicine.

So again, don't get lost in the 3 million to 4 million people with trigs above 500 really focus on that high risk group. That's what we're focusing on at least initially.

Operator: Our next question will come from the line of Patrick Trucchio from H.C. Wainwright.

Patrick Trucchio: My question is on ARO-MAPT. I'm just curious, with the interim data from the healthy volunteer portion and then with the patient data to follow, I'm wondering, what specific elements of the healthy volunteer data, safety, CSF tauopathies knockdown or downstream biomarkers would most likely increase your confidence in this program and as well the data we should look for in patients to follow? And if you could also just talk about just the confidence this would give in the CNS targeting and platform overall and how we should expect the CNS platform to develop from here?

James Hamilton: Yes, I can take that, Patrick. This is James. So maybe I'll take the second question first. We don't have any data in the clinic yet, any data in humans, but we do have data using the platform with multiple different targets in multiple different monkey studies, and they're pretty consistent in terms of the drug concentration that we get in various CNS regions and the knockdown we're able to achieve in the deep brain. So that is helpful and certainly enhances our confidence. But of course, the large leap in confidence will come once we see the clinical data.

And to your first question, I think the key data that we anticipate being confidence building, of course, safety and then the CSF knockdown will be key in the healthy volunteers. There's not a lot of other downstream biomarkers to measure in the healthy volunteers. But then going forward into the patient cohorts, we can measure some of the [ phospho ] tauopathies varieties in the blood, also in the CSF. And then, of course, we can look at tau PET, although those readouts will take a while to see the tau PET signals in the patients. I think seeing a reduction in tau PET signal will be really very encouraging.

Operator: The next question will come from the line of Edward Tenthoff from Piper Sandler.

Edward Tenthoff: So thanks for all the detail. Really exciting to see the pipeline advancing. I'm wondering when it comes to the recognition of revenues, at this point, are you guys anticipating breaking out a cost-of-goods-sold line? I'm sure a lot of the manufacturing expense has already been expensed to R&D. But I'm just trying to think about how you're planning on reporting COGS going forward? And will you break out REDEMPLO product sales in the future?

Daniel Apel: Yes. Thanks, Ted. Thanks for the question. Yes. As you pointed out, the cost of goods sold prior to launch are going to be in the R&D, and that's the majority of what we're going to see in the short term. We said in the prepared remarks, we're not going to disclose this actively until such time as they are meaningful drivers. So we will, at some point, I'm not going to hazard a guess as to when that will be. But then you would -- at that point, you would normally see then sort of the traditional product revenue and product sales.

Operator: Our next question comes from the line of Joseph Thome from TD Cowen.

Joseph Thome: Maybe just based on the differential biology of Activin E/ALK7, can you talk a little bit about your expectation to see monotherapy weight loss in obese nondiabetic patients with the ALK7 program? And a point of clarification, when you talk about the expansions of the studies in terms of including that monotherapy diabetic population and expand the overall size, was that for the Activin E/ALK7 programs already, both of them?

Dr. Christopher Anzalone: Yes. I think -- well, we don't really have expectations in terms of monotherapy weight loss. We'll see what happens. I think we've said a few times that we view these studies as hypothesis generating. So we'd like to see if there's an early signal and then potentially expand cohorts to confirm that signal. So I can't really predict ahead of time what we're going to see. Then on your second question, the addition of the monotherapy cohort, we did add that in the INHBE study. We will likely have that in the ALK7 study as well.

Operator: Our next question comes from the line of Mani Foroohar from Leerink Partners.

Mani Foroohar: I know earlier, so I'm not sure this was asked earlier, but could you give us a breakdown of the EAP versus non-EAP patients out of the 100-plus prescriptions? And how should we think about the total pool of EAP patients rolling on to commercial drug? Is that -- is there a tail of that remaining? And I have a follow-up question.

Andy Davis: Thanks for your question, Mani. This is Andy. At this time, we're not going to provide any further details aside from the previous remarks, which the vast majority of patients are APOC3 naive. It gives us a lot of optimism about our ability to identify and diagnose both genetically confirmed and clinically diagnosed FCS patients. And again, with respect to the balance, we do see that fairly evenly split between those patients transitioning off of the expanded access program and those that are coming via switch.

Mani Foroohar: Okay. That's helpful. And a separate question, what are the expectations we should have over the next 12 to 18 months around potential data sets admittedly perhaps early on novel tissue types and further expansion of the platform?

Dr. Christopher Anzalone: That's a good question, Mani. We've not given any guidance to that at this point. I think we have enough exciting stuff with more ALK7 data, with initial MAPT data, with initial [ Zimer ] data, with SHASTA-3 and 4 reading out with sales that we feel pretty good about those things. But you know us, Mani. We are always developing the platform, and we are always expanding to the sites. And so I can't -- it's possible that you may hear something about where we're going with the platform as well as maybe new candidates within the existing platform. I just can't give you any guidance on when that might be, I apologize.

Operator: Our next question will come from the line of Madison El-Saadi from B. Riley.

Madison Wynne El-Saadi: On the 100 prescriptions you mentioned, I'm curious how many of those do you expect to be converted to paid drug? And how long does it take to get from prescription to drug [ and ] body? And then relatedly, how should we think about the pace of both patient onboarding and competitive switching? Is this kind of a leading indicator for SHTG dynamic?

Andy Davis: Thanks, Madison. Happy to comment. What we're seeing are really high-quality prescriptions in the sense that we believe these prescriptions truly represent either genetically confirmed or clinically diagnosed FCS patients. So we do have high confidence that a significant proportion of those prescriptions will, in time, translate into drug shipments and drug in patients. As far as the time it takes from prescription to drug shipment, again, that does vary by patient, by insurance and by prior authorization. But I would say, in general, we're able to do that within just a couple of weeks from prescription to patient receiving drug.

So I've been incredibly pleased with the patient identification including both genetic and clinically diagnosed and incredibly pleased with the operational execution from the team in converting prescriptions to shipped medicine.

Dr. Christopher Anzalone: And also just broadly be careful about reading too much into where we are right now. We've only been actively in market for 10 weeks now. And so we're still working with payers. We're still working with physicians to get comfortable prescribing this. We're still informing and educating patients and prescribers about the medicine. So we have a long way to go. Let's see where we are more towards the end of the year. We have a pretty small sample set at this point.

Operator: I'm not showing any further questions in the queue. I would now like to turn it back over to Chris for any closing remarks.

Dr. Christopher Anzalone: Thanks, everyone, for joining us today, and we look forward to speaking with you next quarter.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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