Vincent Anzalone – Vice President-Investor Relations Christopher Anzalone – President and Chief Executive Officer Bruce Given – Chief Operating Officer Ken Myszkowski – Chief Financial Officer.

Thomas A. Wei – Jefferies LLC Michael J. Yee – RBC Capital Markets LLC Catherine Y. Hu – Barclays Capital, Inc. .

Ladies and gentlemen, welcome to the Arrowhead Research Fiscal 2014 Second Quarter Financial Results Conference Call. Throughout today’s recorded presentation all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions.

I would now hand the conference call over to Vincent Anzalone, Vice President of Investor Relations for Arrowhead. Please go ahead, Vince..

Thank you, operator. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead’s results for its fiscal 2014 second quarter ended March 31, 2014. With us today from management are President and CEO, Dr. Christopher Anzalone; Chief Operating Officer and Head of R&D, Dr. Bruce Given; and Chief Financial Officer, Ken Myszkowski.

Management will provide a brief overview of the quarter and we’ll then open up the call to your questions. Before we begin, I would like to announce that we have scheduled an Analyst and R&D Day for June 19 in New York City.

At this event Arrowhead Management and panel of external disease area experts will discuss our next clinical candidate and provide a corporate update. Space will be limited. So any research analysts, any institutional investors interested in attending should R.s.v.p. to us ir@arrowres.com.

A webcast of the event will also be available on our website for those unable to attend. For today’s call I would like to remind you that comments made may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

All statements other than statements of historical facts, including without limitation those with respect to Arrowhead’s goals, plans and strategies, are forward-looking statements. They represent management’s current expectations and are inherently uncertain. Thus actual results may differ materially.

Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today’s call. You should refer to the discussions under Risk Factors in Arrowhead’s Annual Report on Form 10-K and the Company’s quarterly reports on Form 10-Q for additional matters to be considered in this regard.

With that said, I’d like to turn the call over to Dr. Christopher Anzalone, President and CEO of the Company.

Chris?.

one, progress with our lead candidate, ARC-520 against chronic hepatitis B infection; two, progress on our core DPC platform and the pipeline of new drug candidate it enables; and three, access to capital and talent. Let’s take a closer look at each of these and begin with our ARC-520.

As we have said in the past, our ARC-520 remains our highest priority in primary and near-term value driver. Over 350 million people or roughly one in 20 worldwide are thought to have chronic HBV infections and there is no cure.

This has been a much more difficult virus to treat than hepatitis C in part because blocking viral application is not sufficient to clear the virus. High levels of surface antigen or s-antigen can immunosuppress the patient with chronic HBV infection even when application is blocked to undetectable levels.

Many believe that substantially decreasing s-antigen levels to derepress the immune system enable it to clear the virus. But to date there has not been a way to do this consistently.

Our published non-clinical studies in rodent models as well as a chimpanzee with chronic HBV infection suggest that our ARC-520 is capable of rapid and deep reductions of s-antigen levels in addition to all other HBV gene products. I’m not aware of any published reports that rival our data.

As such, we believe we have a powerful drug candidate and substantial first mover advantage in this large unmet medical need. We intent to retain and expand this advantage with well thought out clinical studies and good execution.

As we have discussed in the past our Phase 1 clinical study began in July 2013 and planned dosing was completed just three months later. It indicated that ARC- 520 was generally safe and well-tolerated at all doses study. This was followed by a Phase 2a study in patients with Chronic HBV infection which started dosing and the end of March 2014.

This study is planned to enroll 16 e-antigen negative chronic HBV patients in two dose groups with patients receiving either ARC-520 or placebo in combination with entecavir. We will follow patients until s-antigen levels return to baseline or within 20% of baseline.

In addition to generating more safety and tolerability data, this study will us give us depth and duration of s-antigen knockdown, which will be used to design the upcoming multi-dose studies. We announced that the first cohort of eight patients have been fully enrolled and dosed in just over a week.

We have received DSMB approval to move into our second cohort and expect to begin dose them shortly. Patient accrual has been very fast, which is encouraging and keeps us on pace to have top line result to report in the third quarter. We expect this to be in the form of a press release.

Demonstrating consistent s-antigen reduction in humans would be an exciting outcome and a first for the field. Therefore we hope to report a more complete data set at a scientific conference or peer reviewed publication. People have enquired as to whether we would release any interim data before the Phase 2a is complete and we will not.

The study is blinded and it would be inappropriate for us to communicate any hard data or even perceive trends while the trail is ongoing. We are happy to provide information about the study design and expected timelines and we thank you for your patience.

In addition to the Phase 2a, we remain on schedule with long-term GLP toxicology studies, drug manufacturing, protocol development, site and investigator recruitment and other activities needed to support the Phase 2b studies planned to begin in the second half of this year.

As we’ve discussed in the past, these studies will be multi-national and we would expect to start seeing functional cures with repeat dosing of our ARC-520. And you can see, our progress with ARC-520 has been rapid and consistent. Thus far we have met or beaten all of our guidance and we except this to continue.

The positive safety data from the Phase 1 study de-risks ARC-520 because until a candidate is administered in humans there is no way of knowing if a safety signal will emerge that was not predicted in animal models. The data thus far suggests that we have a safe and well-tolerated drug candidate.

Regarding efficacy we have generated and published data indicating deep and durable knockdown cross multiple animal models including non-human primates. This includes the siRNA sequences in ARC-520 as well sequences against other liver targets in order better understand efficiency of the DPC delivery system.

Because of the reliability of RNAi as a mechanism and highly productive nature of non-human primate data for human knockdown, we expect to see deep and durable s-antigen knockdown in the Phase 2a. Should we see that in report next quarter, it will be another risk removed from the program.

At that point, it would appear that we have a safe and effective drug candidate and the final hurdle would be to demonstrate that reducing s-antigen levels and the final hurdle would be to demonstrate the reducing s-antigen leads to functional cure of HBV.

The multi-dose Phase 2b studies will get to that question, so expect to be looking for functional cures next year. These are exciting times indeed. Let’s now turn to the broader DPC platform and pipeline. In addition to being an exciting candidate, our 520 service is the proof-of-concept for the DPC delivery technology as it relates to liver targets.

If we show the ARC-520, safely and effectively knocks down HBV gene products. It is highly likely the DPCs will be capable of safely and effectively knocking down other hepatitis targets. This is important as we expand our pipeline of RNAi therapeutics and also speaks to the leverage we see across our development programs.

The successful Phase 1 went a long way to de-risk the platform from a safety standpoint. In fact, we saw no evidence of any end-organ toxicity at any dose gives us confidence that we prepare as we prepare multiple new candidates. Phase 2a study top line read out next quarter will more fully derisk the platform by demonstrating knockdown efficiency.

When both of these are firmly established, we see enormous opportunities to create value by aggressively expanding our pipeline. This process has begun and we nominated a clinical candidate for and as yet undisclosed rare liver indication for which we plan to file an IND in the fourth quarter..

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All this work on ARC-520, an expanded pipeline requires for resources both human and financial. We have built up both of these recently. During the quarter, we added staff from the bench scientist level to BP level in various key areas including manufacturing toxicology, chemistry, biology, quality assurance, regulatory and clinical operations.

These additions ensure that we can support rapid clinical development of ARC-520 in our clinical and our next clinical candidates. In addition, they also allow us to continue to develop DPCs. In February, we strengthened our balance sheet during equity financing with gross proceeds of approximately $120 million.

This capital allows us to fully fund ARC-520 into Phase 3 and gives us the resources we need to put additional candidates into the clinic and through proof-of-concept over the next few years.

We now have multiple years of cash to just put our pipeline growth and are not dependent upon near-term power partnerships that can limit upside potential for our shareholders. It also enables us to expand this global war upcoming ARC-520 Phase 2b studies.

We plan to conduct multiple studies to answer key questions about responsive different patient populations to ARC-520.

We’ll discuss more about the Phase 2b studies designs later in the year but it gives us great confidence to know that we are properly resourced to design the development program in a way to generate a comprehensive understanding and data package for ARC-520’s activity.

With that update, I’ll now like to turn the call over to our CFO Ken Myszkowski to review our financials for the period.

Ken?.

All this work on ARC-520, an expanded pipeline requires for resources both human and financial. We have built up both of these recently. During the quarter, we added staff from the bench scientist level to BP level in various key areas including manufacturing toxicology, chemistry, biology, quality assurance, regulatory and clinical operations.

These additions ensure that we can support rapid clinical development of ARC-520 in our clinical and our next clinical candidates. In addition, they also allow us to continue to develop DPCs. In February, we strengthened our balance sheet during equity financing with gross proceeds of approximately $120 million.

This capital allows us to fully fund ARC-520 into Phase 3 and gives us the resources we need to put additional candidates into the clinic and through proof-of-concept over the next few years.

We now have multiple years of cash to just put our pipeline growth and are not dependent upon near-term power partnerships that can limit upside potential for our shareholders. It also enables us to expand this global war upcoming ARC-520 Phase 2b studies.

We plan to conduct multiple studies to answer key questions about responsive different patient populations to ARC-520.

We’ll discuss more about the Phase 2b studies designs later in the year but it gives us great confidence to know that we are properly resourced to design the development program in a way to generate a comprehensive understanding and data package for ARC-520’s activity.

With that update, I’ll now like to turn the call over to our CFO Ken Myszkowski to review our financials for the period.

Ken?.

Thanks Chris and good afternoon everyone. As we’ve reported earlier today, our net loss attributable to Arrowhead for the three months ended March 31, 2014 was $13.9 million or $0.31 per share based on $44.3 million weighted average shares outstanding.

This compares with the net loss attributable to Arrowhead of $6.8 million or $0.41 per share based on $16.5 million weighted average shares outstanding for the three months ended March 31, 2013. Total operating expenses for the three months ended March 31, 2014 were $11.3 million compared to $5.4 million for the three months ended March 31, 2013.

Research and development related expenses were $5.2 million, while G&A costs were $1.3 million. The increase in operating expenses compared to the year ago period are due to ARC-520 clinical trial, related on going toxicology trials and drug manufacturing costs in preparation for Phase 2 clinical trials.

R&D compensation expense was higher due to increased headcount as compared to the prior year. Net cash used in operating activities for the first six months of fiscal 2014 were $14.7 million compared with $8.3 million in the prior year period. The change in cash used in operating activities is constituent with the change in operating expenses.

Turning to our balance sheet, our cash balance at March 31, 2014 was $142.8 million, our cash resources also include excess cash invested in investment grade bonds maturing in the near future. Bonds maturing in less than twelve months are classified as short-term investments in total $17.8 million at March 31, 2014.

Bonds maturing in more than 12 months are classified as long-term investments and totaled $34 million at March 31, 2014. Including short and long-term investments in fixed income securities are cash and investment balance was $194.7 million at March 31, 2014 compared to $29.8 million at September 30, 2013.

The increase reflects the financings completed this past February and October. Additionally, the company received cash inflow of $8 million from the exercise of warrants and stock options. Our common shares outstanding at March 31, 2014 were $51.9 million. At March 31, 2014 there were also 21,000 shares of preferred stock outstanding.

These preferred shares are convertible into 5.6 million shares of common stock. Common shares outstanding including the convergence of our preferred shares would be $57.5 million. With that financial overview, I will now turn the call back to Chris..

Thanks Ken. We’ve made good progress in all areas and we are quite pleased with our execution of the past quarter. Unfortunately, weakness in the biotech market generally in RNAi companies in particular over the past several weeks, have met this progress toward value creation has not been reflecting our stock price.

We are focused on providing growth to our shareholders, but sometimes market moves distorted value creation in the short-term. We have no control over that. What we can control are the quality of our science, the choices we make to go after high value unmet medical needs, the quality of our clinical programs in the extent to which we execute.

On all of these fronts, we have excelled so we have to trust that the market perception will catch-up with us just as it did last year. Our lead program continues to move rapidly. Our pipeline is filling out.

Our core technology is increasingly derisked and we have a very strong balance sheet, needless to say we are positioned exactly where we believe we need to be for durable value creation. Importantly, we will have regular impactful events throughout the remainder of 2014 to demonstrate our progress.

These include the following, throughout May and June we will present at major investor and scientific conferences including the Deutsche Bank, Healthcare conference this week, TIDES next week and Jefferies, Wells Fargo and Piper Jaffray events in June. On June 19, we will hold an Analyst Day to discuss our next clinical candidates.

In the third quarter, we expect to release top line results from Phase 2a study of ARC-520, in the fourth quarter we anticipate that multi-dose Phase 2b studies will begin. Also in the fourth quarter, we expect to file an IND for our next clinical candidates.

And lastly, we will provide updates on undisclosed programs and technological capabilities that we are targeting for 2015. I’d now like to open the call to your questions.

Operator?.

Thank you. (Operator Instructions) And our first question comes from Thomas Wei from Jefferies. Your line is now open..

Thanks, and just a couple of questions on Hong Kong study. Just to clarify in your press release that you’re going to put out in the third quarter.

Will it actually contain the magnitude of the surface antigen reduction that you see in each arm?.

Yes, thanks Thomas. Yes, that is our intention we will be describing the depth and duration of s-antigen knockdown in that press release is correct..

And how would you set our expectations on what sort of magnitude is reasonable to expect from a single dossier?.

Yes. So we’ve been very up front about this, maybe to our judgment. But looking at we expect to see a lot of knockdown and that is our goal. Given the data with interferon the best we can understand is that somewhere around log and knockdown maybe important to get to eventual s-antigen loss and a function of cure.

So that we expect by log and knockdown the last a month. Now if we don’t get there with two 2 mgs/kg. We are prepared to amend the protocol and go up 3 mgs/kg, because we like the flexibility of having a log knockdown. So I think it’s fair to expect that is our goal at least..

And if that were to be the case where it falls slightly short, I guess I am curious if you were – if you felt slightly short and you thought that a 3 mg/ kg dose was important to pursue.

How does that impact the timing of that start of the Phase 2b study? Ultimately wouldn’t you be able to get there by giving multiple doses anyway just curious how you think about the single dose data relative to multi dose study?.

Yes, you’re exactly right. If we did fall slightly short of that we believe we can get there by dosing more often than once a month or whatever we decide on this. So you’re right about that. But what we want to do is, we want to give the Phase 2b enough flexibility to get around to ask a lot of questions.

So the more knock down that we can demonstrate with a single dose the greater flexibility we’ve got. So it has been our reason that we really like to make sure that we can get to a log of knockdown. Now regarding timeline, we don’t believe that if we did have to go 3 mgs/kg that will affect the timeline.

We still expect that we can release top line data in the third quarter and that we can start the Phase 2b on time. But let me factor there really right now is finishing the long-term toxic studies – the long-term GLP tox studies that need to support the Phase 2b.

And so we are on track to start that in the second half of the year, and whether we stop it to go to 3 mgs/kg we think we can still make that..

Great, thanks. That is very helpful..

Sure, you are welcome..

Thank you. Our next question comes from the line of Michael Yee with Capital Markets. Your line is open..

Hey, thanks. I got knocked off briefly, so I don’t know if was answered, but can you perhaps give some scenarios on the Phase 2b, still get this data obviously, appreciating what you just answered on the last question. I mean multiple doses how long in combination with entecavir.

Maybe you could walk through some of that when you would actually see data on that, that’s like a mid 2015 event.

If you start all this on time?.

For the Phase 2b studies..

Yes, correct..

I would like to give you guidance on that but it’s – we just shared at this point because we just don’t know. We will learn a lot over the next several months, we’ll learn how long we can keep as knockdown or how deep it goes. And so, my thinking is that, it’s hard to give guidance on when might have data for the Phase 2b, do we have that.

My sense is that we’ll start at least some of the Phase 2bs sometime in the second half of this year. And we could have some data in the middle of 2015 but just. But it’s – we cannot committed that yet, until we have a better understanding about what we are until what the s-knockdown curve looks like..

But in terms of the types of arms like given your base case, how many different arms and what are you looking, how long is dosing, talk a little bit about that when you start maybe this year?.

Sure, Bruce.

Do you want to address those questions?.

Yes, sure.

Our thought process has been that the we’re probably – we are on a classic sort of highly controlled multi-arm study that would include a new nuke only arm and that would be either in entecavir or tenofovir we are just stratified between the two, but we view them as equivalent clinically, so a nuke only arm and then an arm that was a nuke plus a low-ish dose of ARC-520 and then nuke plus that’s the higher dose of ARC-520.

And we expect, the controlled, the highly controlled studies to probably, have a 12 weeks of dosing that maybe basically three monthly doses for instances or something along those lines and then we of course would follow after the last dose. So they’d probably would be something like 16 weeks duration.

But it’s our expectations at those patients would enrolled right into a long-term follow-up a footprint that would allow dosing how to at least a year. And that would include probably the nuke only arm as well.

Getting to go into that study and we of course have no idea, if we could produce this profound knockdown in surface antigen, we have no idea how long we have to do that before the immune system can respond.

Our best guess is it’s probably longer than just a few months, but we are hopeful that it will be maybe something like half a year or might even be a year of therapy we just don’t know yet..

So to clarify that, you said, we already into a long-term follow-up, you said, you’d followed them for 16 weeks, do you follow them for four months, and then just allow them to just get more dosing at the relapse? Is what you mean?.

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Last clarification I promise, you – so therefore you do not expect (indiscernible) antibodies on this one dose Phase 2a correct?.

Well that will be a real surprise, I mean that would be a very happy surprise, but that’s asking an awful lot. That’s kind of the lottery ticket we sold..

Okay thank you..

Thank you. Our next question comes from Ying Huang from Barclays. Your line is open..

Catherine Y. Hu – Barclays Capital, Inc.:.

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Bruce, do you want to address this?.

Fair, so we’re measuring other parameters in those patients that in the 2b that would be e-antigen positive we’ll be looking at what’s going now with e-antigen as well.

These patients for the most be fully suppressed with respect to HPV DNA, so we wouldn’t expect to really be able to see anything there but in those patients who are low but not fully suppressed we would expect to see further suppression with the addition of our ARC-520 and that’s something that we will be measuring. So all of that’s part of it.

I think one of the interesting questions regarding the surface antigen is with multiple doses what we see a ratchet down even further and I think that’s a very real possibility.

Thomas Wei asked at the beginning about single-dose, but I think with multiple dose in fact we may seen an additive effect and the surface antigen may fall, further than it does with the single dose and that's why those we’ll be looking for very carefully and that again may be very helpful to the immune system to kind of de-repression.

So we’ll be looking at all of that and that the quantitative surface antigen levels over 16 weeks, I think they are going to be an important parameter and something that we are particularly interest to see..

And is that for the Phase 2b?.

I’m sorry.

Is that for the Phase 2b?.

Yes that’s for the 2b..

What about the 2a.

Are you collecting anything else?.

Well, the 2a is in e-antigen negative patients that will process with respective DNA, so there is not a whole lot more two measure there. We just kind of point of doing an e-antigen negative patients at least for pure experiment where only one variable is moving. That’s my design..

Okay.

And then on the other question of reduction after 12 weeks?.

So you’re asking after single dose?.

Yes..

We’ll follow the s-antigen until it gets back to baseline or at least within 20% of baseline. It’s far out, I’d say, three months. So we don’t expect it to say down that long, but we don’t know what we’re going to see until we see it. But generally the thought process is that RNA that loads into risk tends to persist about a month.

So it seems that it’ll be somewhat unlikely for it to go a whole lot further than that, but until we get there we don’t know..

Okay, great. Thank you..

(Operator Instructions) Our next question comes from line of James Gash who is a private investor. Your line is open..

Yes.

Regarding the 2a, will there be any different rates of infusion or will that all be the same?.

Those will all be the same.

Bruce, you want to talk about the infusion rate there?.

Yes. The rates will be the same. We’re infusing at a rate of about 10 milligrams per minute and that will be same, but of the course the doses are different on a milligram per kilogram basis.

So, yes, (indiscernible) six minutes or seven minutes to infused depending on the weight of the patient and a 2-mg per kg dose will probably tend to take something more on the order of 10 minutes, but the rate of infusion is necessary..

Can you hold out the possibility that a 2-mg per kg at a slower rate of infusion get the job done before you go to a 3-mg per kg..

You mean you mean give a deeper knockdown?.

Yes..

I don’t think so. I don’t think that would really have much of an impact unless it was a really slow infusion. Maybe you could theoretically wonder, but I don’t think in any sort of reasonable rate..

Okay. Thank you. The next is question is basically a clarification of outstanding shares, common shares.

What’s the number on that?.

Sure. So our outstanding shares at March 31were 51.8 million. So that does not include the preferred shares that are outstanding, which would add another 5.6 million when they are converted to common shares..

Can you comment? Has there have been any conversion?.

Yes. During the year, there have been about 7.6 million of preferred shares that have been converted to common. So there are remaining about 21,000 shares preferred that are out there. And as I say, when those are converted that will be another 5.6 million shares..

Okay. I understand.

So more than that was converted?.

That’s right..

Okay. Thank you, gentlemen..

Yes. Thank you..

Our next question comes from the line of [Grant Zeng from Zack Investment Research] (ph). Your line is now open..

Hi. Congratulations on a strong quarter. Just a quick question about the Phase 2b trial.

Do you have a rough estimate of the cost of Phase 2b trial?.

So that’s a good question. We’ve not given guidance on that at this point in part because we have not said on the number of studies we’re going to do.

As we mentioned in the prepared remarks; one of the important things about raising the money that we did in February is that it gives us the flexibility to do a relatively large number of small pilot studies to get out various questions with respect to how ARC-520 works with different patient populations.

So I suspect that we’ll give more guidance on the Phase 2b later this year, once we must get into it or once we’re approaching it. At that point, we can give you probably a better understanding about what some other studies might be and then an overall cost associated with it..

Do you have enough, cash….

We have plenty of cash at Phase 2 what we say is, we’ve got enough cash to get us into a Phase 3 of ARC-520 as well as towards additional candidates through clinical proof-of-concept. And so, we’re not – we are really not cash constrained right now as it relates to the development of ARC-520..

Sounds good. Thank you..

You are welcome..

This concludes the question-and-answer session. I’d like to turn the conference back to Chris Anzalone for any further remarks..

Thank you, very much for your interest and we look forward to telling you more on June 19 at the Analyst Day..

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may all disconnect. Everyone have a great day..