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

Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2022 first quarter ended December 31, 2021. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Javier San Martin, our Chief Medical Officer, who will provide an update on our mid- and later stage clinical pipeline. Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine will provide an update on our pulmonary platform; and Ken Myszkowski, our Chief Financial Officer, will give a review of the financials. We will then open up the call to your questions. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K. That said, I'd like to turn the call over to Christopher Anzalone, President and CEO of the Company. Chris?

Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. The biotech market has been a difficult place of late. In 2021, the XBI Biotech Index was down 21%. And during the first month of 2022, the index was down a further 18%. My goal today is not to fight market cycles, but rather to articulate where we are as a company, to help you assess Arrowhead's true value. We are here to create innovative new medicines for the millions of patients who desperately need them. And if we stay focused on that important mission, we will continue to create substantial value for our shareholders. That is the lens through which you should view our update today. As Javier, James and I speak about our continued progress across our programs, think about what those programs will mean to patients and where those programs will take us as a company. There is much that currently excites me about this great company. We had another strong quarter, executing on our strategy with respect to platform extension, pipeline expansion, and business development. We continue to make tangible progress across all our programs. Early in the quarter, we hosted a key opinion leader webinar on ARO-C3, our newest clinical stage investigational therapeutic designed to reduce production of complement components 3 or C3 as a potential therapy for various complement-mediated diseases. We also filed the CTA to begin clinical studies and have been activating sites for first-in-human studies. As with all other drug candidates currently in our pipeline, we expect ARO-C3 to be the first RNAi candidate against this target to reach the clinic. We see substantial unmet medical need we could address across a variety of indications, including PNH, autoimmune hemolytic anemia, C3 glomerulopathy, IgA nephropathy, and lupus nephritis. Our preclinical data have been encouraging. Given that this will be our eighth hepatocyte-directed TRiM candidate in clinical studies, we have a high expectation of success. This program is also a good example of our speed. We went from idea to initiating clinical studies in approximately 12 months. We expect to move at similar speed for future hepatocyte directed candidates. As the extrahepatic platforms mature, we have the potential to move at a similar level of efficiency. During the quarter, we and our partners also presented encouraging clinical data on multiple programs, including ARO-HSD for NASH, ARO-AAT also called TAK-999 for liver disease associated with alpha-1 antitrypsin deficiency, ARO-APOC3 for hypertriglyceridemia, and JNJ-3989 for hepatitis B virus infection. Without exception, all of those candidates appear to be doing what they are designed to do and have been generally well tolerated. We look forward to continued clinical development and learning more about the potential disease-modifying capabilities of those agents. We also signed a license agreement with GlaxoSmithKline for ARO-HSD that just recently closed. We are happy to bring on a new partner and look forward to working closely with GSK as they prepare to start a Phase 2 study. Under the terms of the agreement, GSK received an exclusive license to develop and commercialize ARO-HSD in all territories except Greater China, which was retained by Arrowhead. Arrowhead received an upfront payment of $120 million and is eligible for a $30 million milestone at the start of Phase 2, $100 million milestone at the start of Phase 3, up to $190 million in milestones at launch in the U.S. and the major markets, and up to $590 million for key sales milestones. Arrowhead is further eligible to receive tiered royalties of mid-double digit to 20% on net product sales. I expect GSK to be a great partner for this exciting genetically validated candidate. They have a clear commitment to genetic medicine and defining an effective treatment for NASH, which could include a staggering number of patients. Understanding the complicated biology of this disease and addressing a potentially very large global market are substantial challenges indeed, and we believe that GSK will be a powerful partner to complete clinical development and ultimately deliver a potentially important medicine to the tens of millions of patients who need it. Moving to our cardiometabolic programs. We recently initiated Arrowhead's first Phase 3 study, which I see as a key milestone event and indicative of a maturing company. The PALISADE study is a Phase 3 clinical study to evaluate the efficacy and safety of ARO-APOC3 in adults with familial chylomicronemia syndrome or FCS. ARO-APOC3 is our investigational RNAi therapeutic designed to inhibit the production of apolipoprotein C3 or APOCIII, a key regulator of triglyceride metabolism. Prior studies have been very encouraging, where we have seen greater than 90% triglyceride reduction in some patient populations. This type of dramatic effect could really move the needle for FCS patients who have very little in the way of therapeutic options at present. We also made good progress on patient enrollment for the two ARO-APOC3 Phase 2b studies in severe hypertriglyceridemic patients, the SHASTA-II study and those with mixed dyslipidemia, the MUIR study. These are populations that we believe have few therapeutic options and data from our prior study suggests that ARO-APOC3 could be highly meaningful by lowering triglycerides and raising HDL. We progress on the ARO-ANG3 Phase 2b study in mixed dyslipidemia, the ARCHES-2 study has been rapid, and I expect enrollment to be complete in the coming months. We continue to see a big opportunity to help the millions of patients with elevated triglycerides and LDL cholesterol, and we are optimistic that ARO-ANG3 could be an important future medicine given our prior data and exciting work done by others to validate the target. As has been our consistent practice at Arrowhead of bringing the first RNAi compound into the clinic against specific gene targets, ARO-ANG3 was the first RNAi compound in clinical studies that targets ANGPTL3. Further, the competitive landscape seems to have shifted even further in our favor with the recent announcement that Pfizer has discontinued its partnership with Ionis on its antisense approach to ANGPTL3. Of course, we do not have deep knowledge of data coming out of that program, and it is always difficult to compare results across different studies. But given what we have seen publicly, we continue to be confident in our candidate. For instance, data from our Phase 1/2 study indicated the following: ARO-ANG3 has demonstrated very deep and durable activity, enabling quarterly or less frequent dosing. ANGPTL3 levels were reduced in a dose-dependent fashion from 78% to 90% after 100, 200, or 300 milligrams of ARO-ANG3. We saw mean triglyceride reductions up to 73.5% and mean non-HDL cholesterol reductions up to 50%. Only two patients had elevated ALTs and in both cases, there were concomitant medications associated with increases in ALTs and in both cases, the elevation was transient and not associated with increases in bilirubin, and we have seen no indication that ARO-ANG3 led to any increase in liver fat. Let's now move to our pulmonary platform. James will give a fuller review during this call, but I wanted to highlight a few developments. First, we continue to make progress on the ENaC target but will likely not continue with ARO-ENAC, the candidate that we are testing in a Phase 1/2 study last year. We have two to three next-generation compounds that appear to have favorable pharmacologic properties compared to ARO-ENaC. A step behind this, we are also exploring ways to deliver pulmonary targeted drug candidates via subcutaneous administration, which we believe would be a true breakthrough and are testing this for ENaC as well. We are likely changing horses in the ENaC program, but we have not yet settled on which new horse. We've also discussed our plans to file two new pulmonary CTAs this year but had not previously disclosed the targets or disease areas. I'm excited to announce these programs formally as ARO-RAGE and ARO-MUC5AC, each being developed for various muco-obstructive and inflammatory pulmonary conditions. We are on track to file CTAs for both of these over the next quarter. We will be presenting preclinical data at the American Thoracic Society meeting in May, and we also plan to host a KOL webinar or pulmonary specific R&D day this year. At the latter event, we intend to go into detail on the biology of the targets, present preclinical data, introduce the commercial market opportunity, explain our plans for the clinical studies, and have an outside KOL describe the clinical presentation of the disease and unmet medical need. We are pleased that we expect to file two new pulmonary CTAs in the first half of this year and are also on track to file a third by the end of this year. That target and disease area remained undisclosed. While still on the pulmonary platform, we continue to make progress in COVID and are currently testing compounds that are leading to substantially decreased lung inflammation in viral expression in animal models. This is exciting for what they may mean for the current SARS CoV-2, but also potentially for other SARS-based coronaviruses. As you may recall, we are working to develop antiviral agents by targeting regions that are well conserved across known SARS coronaviruses with the hope that we could treat current and future novel infections. Our progress here has also opened doors for us in other respiratory viruses where we now have active programs. We could see that becoming a substantial sub-franchise, if you will, within our pulmonary platform. These are exciting opportunities for us, and we look forward to updating you on our progress. In addition to the two new pulmonary CTAs in the first half of this year, we are on track with ARO-DUX4, our first skeletal muscle targeted candidate against FSHD. Consistent with our prior guidance, we expect to file that CTA by the end of the first half of this year. This represents a leap forward with the addition of another cell type we can target clinically. More specifically, ARO-DUX4 may offer us the ability to help a group of patients with no real therapeutic options. Recent failures and setbacks in the field have underlined the unmet medical need that currently exists, and we are moving as fast as we can for the FSHD patients who need us. Our partner programs have also made good progress. J&J continues its Phase 1 progress in JNJ-75220795, our partner NASH therapeutic, and JNJ-3989, our partnered HBV Therapeutic. The latter is in multiple Phase 2b studies that have started to read out, and I would expect regular data from them over the next few years. As we discussed on our last earnings call, JNJ-3989 is doing exactly what it was designed to do, and we look forward to seeing how it performs over time and in combination with different agents. Olpasiran, the candidate against cardiovascular disease that we licensed to Amgen, continues in a Phase 2 study. Amgen has said publicly that they expect to complete the Phase 2 in the first half of this year. Data from the Phase 1 were impressive, and we look forward to seeing Phase 2 data and the initiation of a Phase 3. ARO-AAT has an ongoing Phase 2b study that is currently starting to read out PK data at three different dose levels and will read out biopsy data in the third or fourth quarter. We continue to work closely with Takeda and expect to continue discussions with regulators this year about our data and plans for a pivotal study. Our work with Horizon continues to move rapidly in the area of chronic gout, and I will defer to them to provide guidance on future plans and timing. Lastly, we completed a transaction to purchase 13 acres of land in Verona, Wisconsin, which is planned to be the site of a new GMP drug manufacturing facility and an associated laboratory and office facility. Construction is starting this quarter. Completion of the lab and office space is anticipated in early to mid-2023, and completion of the manufacturing facility is expected in late 2023. We will continue to operate additional research and development facilities in Madison, Wisconsin, and San Diego, California. We also signed a lease that will allow us to substantially expand our research laboratories and administrative offices in San Diego in the first half of 2023. We believe the new Arrowhead campuses will allow us to support our growing pipeline, and we think positions us well to advance the manufacturing process, including our commercial scale of our TRiM-enabled drug candidates. We view this as a strong competitive advantage as we approach potential commercialization of our rapidly progressing clinical candidates. So in summary, our pipeline is expanding and maturing. Our platform is providing additional opportunities to discover and develop new investigational medicines in areas where Arrowhead has unique capabilities and expertise. We are using business development selectively to maximize the value of our technology and to bring in non-dilutive capital to support our internal development programs, and we are investing to expand our R&D footprint and take more control of the drug manufacturing process to support clinical and ultimately commercial supply needs. We believe all of this puts Arrowhead in a very strong competitive position. With that overview, I'd now like to turn the call over to Dr. Javier San Martin. Javier?

Thank you, Chris, and good afternoon, everyone. I will provide status updates on three of our later-stage clinical programs, ARO-APOC3, ARO-ANG3, our investigational cardiometabolic medicine, and ARO-AAT also called TAK-999, our investigational medicine designed to treat alpha-1 liver disease, which is being co-developed with Takeda. First, ARO-APOC3 is our investigational medicine targeting apolipoprotein C-III being studied in patients with various lipid disorders. Collectively, the mid- and late-stage clinical study for ARO-APOC3 are called the SUMMIT program. We made good progress bringing on new sites for each of the studies, and we're very pleased with the pace of patients' enrollment. I will discuss each study individually. SHASTA-2 is a double-blind, placebo-controlled Phase 2b study of ARO-APOC3 in adults with severe hypertriglyceridemia or SHTG. This population is defined as having triglycerides greater than 500 million per deciliter. The primary objective of the SHASTA-2 study is to evaluate the safety and efficacy of ARO-APOC3 and to select a dosing regimen for the later-stage clinical studies in this patient population, approximately 216 patients will be enrolled in this study. Moving on to the MUIR study, which is a double-blind, placebo-controlled Phase 2b study of ARO-APOC3 in adults with mixed dyslipidemia, this population is defined as having triglycerides between 150 and 500 milligrams and non-HDL cholesterol greater than 100 milligrams or LDL-cholesterol greater than 70 milligrams per deciliter. The primary objective of the MUIR study is to evaluate the safety and efficacy of ARO-APOC3 and to select a dose and dosing regimen for later-stage clinical studies in patients with mixed dyslipidemia. A total of approximately 320 patients will be enrolled in this study. The most recent study initiated in the SUMMIT program is PALISADE, a Phase 3 study to evaluate the efficacy and safety of ARO-APOC3 in adults with familial chylomicronemia syndrome or FCS. These are patients with fasting triglycerides greater than 880 milligrams per deciliter that are refractory to standard lipid-lowering therapy and have a diagnosis of FCS because they tend to have extremely high triglycerides, patients with FCS have an elevated risk of recurrent and painful bouts of pancreatitis. The primary endpoint of PALISADE is a percent change from baseline at month 10 in fasting triglycerides. Additional secondary and exploratory endpoints include the change in other lipid parameters, incidence of acute pancreatitis and other measures. Approximately 60 patients will be enrolled in this study. I will now move on to ARO-ANG3, our investigational medicine designed to reduce the production of angiopoietin-like protein three, ANGPTL3 as a potential treatment for patients with mixed dyslipidemia. The set of mid and late-stage studies for ARO-ANG3 is called the VISTA program. The VISTA program has one active study and one additional planned study that I will describe briefly in a moment. The currently active study is ARCHES-2, a double-blind, placebo-controlled Phase 2b study of investigational ARO-ANG3 in adults with mixed dyslipidemia. This population is defined the same way as in the ARO-APOC3 MUIR study. This patient has triglycerides between 150 and 500 milligrams per deciliter and non-HDL cholesterol greater than 100 milligrams per deciliter or LDL cholesterol greater than 70 milligrams per deciliter. The primary objective of the ARCHES-2 study is to evaluate the safety and efficacy of ARO-ANG3 in adults with mixed dyslipidemia and select a dosing regimen for later-stage clinical studies in this patient population. A total of approximately 180 patients will be enrolled in this study. The next study planned for the VISTA program is GATEWAY, a Phase 2 study of ARO-ANG3 in patients with homozygous familial hypercholesterolemia or HoFH. Studying PCSK9 inhibitors can inhibit cholesterol synthesis and enhance hepatic clearance of LDL cholesterol through upregulation of the hepatocyte LDL receptor. Patients with HoFH can have this functional or absent LDL receptor and thus can be resistant to statins and even resistant to alternatives such as PCSK9 inhibitors. Patients with HoFH are therefore a population with a particularly high need for additional therapies with a mechanism that works outside of the LDL receptor, such as ANGPTL3 inhibition. GATEWAY is an open-label study that will be conducted in subjects with documented HoFH based on genotype or clinical criteria up to approximately 16 subjects who meet eligibility criteria will be randomized in a 1:1 ratio to receive two doses of 200 or 300 milligrams of ARO-ANG3 on Day 1 and Day 84 and will be evaluated over a 36-week period. We're getting up to initiate this study in the first half of 2022, and we'll provide an update when the first patients have been enrolled. Consistent with the other Phase 2 studies in both the VISTA and the SUMMIT programs, we want to give Arrowhead maximum flexibility to initiate Phase 3 studies in multiple patient populations if the data warrant. At the end of these Phase 2 studies, we hope to have a good understanding of the pharmacodynamic effect of both investigational medicines in various patient populations with different baseline lipid profiles. We believe that this will inform our development strategy and also help shape our commercial strategy in both well-defined rare diseases as well as large high-prevalence diseases. I also want to give a brief update on ARO-AAT also called TAK-999. After receiving breakthrough therapy designation, we began a productive dialogue with the FDA about the program. We expect to have data on the reduction of circulating levels of AAT from SEQUOIA in the first half of this year, which will be used to select a dose for Phase 3. We should also be collecting the last 12-month biopsy from the last patients enrolled sometime in the summer of 2022. Together with Takeda, we look forward to continuing the dialogue with the FDA after one or both of these data readouts.

Thank you, Javier. There are a lot of exciting new programs in discovery and early-stage clinical development. Our R&D organization is operating at an impressive pace and making important progress in multiple areas. Today, I would like to focus on the pulmonary platform, the planned expansion of the pulmonary pipeline and provide an update on where we are with ARO-ENaC. As Chris mentioned, our newest pulmonary candidates are ARO-RAGE and ARO-MUC5AC. They are both on schedule to have CTA filings during the first half of this year. Additionally, we plan on filing a third pulmonary CTA in Q4 of this year. The target for this third program will remain undisclosed at this time. The first program, ARO-MUC5AC targets the expression of MUC5AC in bronchial epithelium. MUC5AC is a mucin protein with upregulated expression in the asthmatic airway. MUC5AC is not normally required for bacterial defense or mucociliary clearance in healthy individuals. However, in asthmatic patients, its upregulation and enhanced secretion can lead to a muco-obstructive disease state, which is not directly addressed by currently available therapies. The degree of mucus obstruction in the asthmatic airway is highly correlated with poor asthma control and increased disease severity. Additionally, multiple genome-wide association studies have demonstrated a correlation between enhanced MUC5AC expression and the development of asthma. Similarly, mice with a genetic deletion of MUC5AC are protected from airway hyperreactivity in the setting of allergic stimuli, again, supporting the concept that MUC5AC-driven mucus plugging plays a central role in allergen-induced airflow obstruction. ARO-MUC5AC is an extremely exciting program, in part because it represents a fundamentally new way of treating asthma. By targeting the mucus we have a unique and potentially very powerful tool. An abstract summarizing preclinical data leading to the nomination of this clinical candidate will be presented at the American Thoracic Society Meeting this Spring. The second program, ARO-RAGE, targets the expression of the receptor for advanced glycation end products or RAGE, which is primarily expressed by alveolar and bronchial epithelium. RAGE is a transmembrane receptor that binds to numerous pathogen-associated and cell damage-associated ligands to activate various components of the innate immune system. RAGE represents an upstream mediator of the inflammatory cascade in asthma as it is required for allergen-induced release of IL-33 into the airway and acts upstream of type 2 cytokines, including IL-4, IL-5, and IL-13. Importantly, a soluble component of RAGE, known as S-RAGE, can be followed as a serum biomarker of gene target knockdown. This is a very important point that I want to highlight. The availability of a circulating biomarker will teach us a lot about the candidate and importantly, may inform on the pulmonary platform broadly. Our hepatocyte-directed TRiM system has proven to translate very predictively from preclinical models to human results and over the last few years, that predictability has increased the speed of our new programs and our expectation of success. We hope to get to the same point with pulmonary directed TRiM system and the availability of S-RAGE circulating biomarker data informing on depth and duration of gene target knockdown using an inhaled route of administration could get us closer to that point. Animal data suggests that RAGE signaling plays a critical role in the pulmonary inflammatory responses to inhaled stimuli. RAGE knockout mice have a markedly attenuated response to allergen exposure. In animals, RAGE is necessary for the activation of airway inflammatory pathways relevant to both type 2 high and potentially type 2 low asthma phenotypes. Further studies have indicated that RAGE knockout mice are protected from allergen provoked increases in IL-33 and TSLP which represent key upstream drivers of asthmatic type 2 inflammation. Thus, we believe RAGE inhibition offers the possibility of arresting the most proximal components of airway inflammation in asthma with potentially broad effects on a wide range of downstream inflammatory mediators. In rats, using a tool trigger targeting RAGE mRNA, single inhaled doses of 0.5 milligrams per kilogram induced S-RAGE reduction of over 90% for approximately three months. Like our MUC5AC program, an abstract has been accepted for oral presentation at ATS this spring, which will summarize preclinical data for our RAGE program. Inhibition of both the MUC5AC and RAGE targets may have clinical utility in severe asthma, COPD, cystic fibrosis, and other muco-obstructive or inflammatory pulmonary conditions. Additional target background, data and clinical plans will be discussed in the future as we approach the start of the clinical studies. We are also making good progress on two additional pulmonary programs that are being developed to address respiratory viruses. One is our COVID program that targets highly conserved sequences in essential viral mRNAs, which may address SARS-CoV-2 and potentially other future coronavirus outbreaks. In a hamster SARS-CoV-2 infection model, our current lead candidate reduced viral load in the lung by 80%, reduced histological indices of pulmonary inflammation by 50%, and prevented body weight loss. We are currently in the lead optimization stage, and we'll provide additional updates when we can. The other is a new program for an undisclosed viral infection. In a mouse model of infection, the current lead compound reduced viral gene expression in the lung by 90% and prevented body weight loss. This is an early program, but we are seeing what we believe are very promising results. Moving to ARO-ENaC. As Chris mentioned, we have decided to focus our resources on next-generation candidates. We previously announced that the clinical study was voluntarily paused after findings of local lung inflammation in a rat chronic GLP toxicology study. We have since seen some local inflammatory findings in chronic GLP monkey studies. It is certainly possible that we are overdosing the animals, and by simply changing the dose level and/or dose intervals we would see a cleaner tox profile. That could provide a faster path back to the clinic, but we decided that the better long-term path is to focus on next-generation ENaC candidates. We are currently interrogating several next-generation ENaC candidates that appear to be substantially more potent than ARO-ENaC. It should be noted that the drug exposure levels used in the CTA-enabling GLP studies supporting the new pulmonary programs, including the MUC5AC and RAGE programs, are significantly lower than those used in support of our first-generation ENaC program. Thus, we expect an ability to use less drug and less frequent dose administration with second-generation programs compared to what was used in the ARO-ENaC chronic toxicology studies and anticipate overall enhanced toxicology species safety margins with second-generation compounds. The last update I'd like to provide on the pulmonary platform is about future opportunities and the potential to add additional flexibility regarding the route of administration. We've been working on addressing pulmonary tissues via subcutaneous administration. These are still early days, but we have recently generated some very promising preliminary data with the ARO-RAGE program using subcutaneous administration. Again, this is early, but we view this as a potential breakthrough if this line of discovery bears fruit. We intend to provide some data on these efforts when we go into more detail about the ARO-RAGE and ARO-MUC5AC candidates at the appropriate forum. This will likely take the form of a KOL webinar or an in-person and webcast pulmonary R&D Day in the first half of this year. This is all very exciting progress, and we look forward to discussing details publicly.

Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended December 31, 2021, was $62.9 million or $0.60 per share based on 104.5 million fully diluted weighted average shares outstanding. This compares to a net loss of $20.7 million or $0.20 per share based on 102.8 million fully diluted weighted average shares outstanding for the quarter ended December 31, 2020. Revenue for the quarter ended December 31, 2021, was $27.4 million compared to $21.3 million for the quarter ended December 31, 2020. Revenue in the current period primarily relates to the recognition of a portion of the $300 million upfront payment received under our collaboration agreement with Takeda and the $40 million upfront payment received under our collaboration agreement with Verizon. Revenue for each agreement will be recognized as we complete our performance obligations which include managing the ongoing AAT Phase 2 clinical trials for Takeda and delivering a Phase 1 ready candidate to Horizon. There remains $188 million of revenue to be recognized associated with the Takeda collaboration, which we anticipate will be recognized over approximately two to three years, and there remains $27 million of revenue for Horizon which we anticipate will be recognized by the end of calendar 2022. Revenue in the prior period primarily related to the recognition of a portion of the milestones received from our license and collaboration agreements with Janssen. Finally, our license agreement with GSK for ARO-HSD resulted in a $120 million upfront payment to Arrowhead, which was collected in January 2022. We anticipate the majority of this to be recognized as revenue in fiscal second quarter 2022. Any additional milestones achieved from our collaboration agreements would be additive to these amounts. Total operating expenses for the quarter ended December 31, 2021, were $90.8 million compared to $45.4 million for the quarter ended December 31, 2020. This increase is primarily due to increased clinical candidate costs that our pipeline has expanded and advanced to our clinical and advanced through clinical trial stages as well as increased noncash stock compensation costs. Net cash used by operating activities during the quarter ended December 31, 2021, was $61.3 million compared with net cash used by operating activities of $38.9 million during the quarter ended December 31, 2020. Key driver of this change was the increased candidate costs. We continue to estimate our operating cash burn to be $60 million to $80 million per quarter in fiscal 2022, excluding any incoming milestone payments from our partners. In addition, we are planning to expand our manufacturing capabilities and expand our R&D facilities. We continue to estimate these capital projects, along with routine capital expenditures, will add an incremental cash outlay of $80 million to $90 million for full-year fiscal 2022. Turning to our balance sheet. Our cash and investments totaled $547.7 million at December 31, 2021, compared to $613.4 million at September 30, 2021. The decrease in our cash and investments was primarily due to cash used for operating activities. With the collection of the $120 million upfront payment in January 2022, our current cash and investments totaled approximately $650 million. Our common shares outstanding at December 31, 2021, were $104.8 million. With that brief overview, I will now turn the call back to Chris.

Thanks, Ken, and thanks to all of you for joining us today. As you've heard, our early pipeline is starting to grow rapidly. Our mid- and later-stage pipeline is advancing on schedule, and we are working hard to continue to expand the reach of our TRiM platform to enable more growth in the future. These are all critical parts of building a sustainable business and growing shareholder value. I want to take a moment to review what we see on the horizon as potential milestones for the business this year. There's a lot going on, so this list is certainly not exhaustive, but includes some of the key events that we will be tracking. I'll start with our partner programs. ARO-AAT, also called TAK-999, for alpha-1 liver disease with Takeda. We expect data from the SEQUOIA study on reductions in circulating AAT levels and 12-month biopsy data, and we will continue discussions with the FDA. ARO-HSD for NASH with GSK; we expect a Phase 2 study to begin this year. ARO-XDH for gout with Horizon; we hope to complete preclinical studies this year. JNJ-3989 for HBV with Janssen; we would expect additional clinical readouts from various ongoing studies. JN-75220795 for NASH with Janssen; we expect progress on the Phase 1 study. Olpasiran, formerly called AMG 890 for cardiovascular disease with Amgen; Amgen has guided to a Phase 2 study readout this year. I'll now talk about potential milestones for our wholly owned programs. ARO-APOC3 for hypertriglyceridemia; we expect to fully enroll the SHASTA-2 and MUIR Phase 2 studies and make progress toward full enrollment on the PALISADE Phase 3 study. ARO-ANG3 for mixed dyslipidemia; we plan to fully enroll the ARCHES-2 Phase 2 study and initiate the GATEWAY Phase 2 study. ARO-C3 for complement-mediated diseases; we expect to initiate a Phase 1 study and potentially have an initial data readout from the single ascending dose portion of the study in healthy volunteers and initiate the multiple dose portion in various patient populations. Pulmonary programs; we plan to file CTAs and initiate clinical studies for ARO-RAGE, ARO-MUC5AC and file a CTA for one additional undisclosed pulmonary program. We also have some early clinical data from the ARO-RAGE program; we also could have some early clinical data from the ARO-RAGE program. ARO-HIF2 for renal cell carcinoma; we intend to report additional Phase 1 data at ASCO GU in February. ARO-DUX4 for FSHD; we plan to file a CTA and initiate a Phase 1/2 clinical study. This is a big year by any measure. We plan to push four new drug candidates into clinical studies and possibly a fifth if ARO-XDH with Horizon makes it this year. We hope to have some data released from six different programs. We hope to fully enroll three Phase 2b studies. Arrowhead has a lot going on, and we look forward to numerous opportunities to show progress across the pipeline throughout the coming year. Thank you for joining us today. I would now like to open the call to your questions. Operator?

And our first question comes from Madhu Kumar from Goldman Sachs. Your line is now open.

Yes. So first one on ARO-AAT. Maybe we can dig in a little bit on how we should think about the discussions you've had so far, and what potentially regulators need to see from the SEQUOIA circulating AAT data and from the liver biopsy follow-up data?

So let me first answer the last part of that question with regards to the serum Z-AAT values. We're looking at that data to really do the dose selection, but of course, that's not going to be the only parameter. We have data from liver C protein and of course, fibrosis changes and, of course, safety as well. So the dose selection, we're going to make along with Takeda over the next few months will come out of all the data set. With regard to conversation with regulatory agents, I prefer to not get into any details other than we had a very good introduction about 1.5 months ago. Under the Breakthrough Therapy designation, we have planned a number of interactions this year to again define the Phase 3 study or the registration study that will incorporate, of course, the dose selection.

It’s important to highlight that this division has not considered any other drug candidates for this disease to our knowledge. Our initial meeting was primarily to ensure that we are all aligned. There is a clear understanding and recognition of the unmet medical needs associated with this disease. There seems to be a growing recognition that, as people are living longer and not smoking, this disease is becoming more prevalent. Historically viewed mainly as a pulmonary issue, there is now increased attention on the liver aspect as well. We have had a strong relationship with the FDA so far, and we are looking forward to progressing to the next steps.

Okay. So second question relates to the cardiometabolic field for you all. So how do you think about the launch of Novartis' Leqvio and how that influences how you think about kind of the larger ambitions for drugs like ARO-APOC3 and ARO-ANG3?

No, that's going to be interesting. As you know, the Leqvio markets are somewhat different from the markets we're targeting. There is some overlap, but it's not the same market. From what we've observed, there seems to be acceptance for a subcutaneously administered cardiovascular drug. Leqvio appears to be a good option, and there remains a significant unmet medical need. However, that’s as far as we can interpret the impact of that launch on our expectations. Our primary focus is on the markets we believe we can serve with APOC3, specifically FCS and severe hypertriglyceridemia, which affects several million people. The regulatory pathway and markets are clear, and we may also explore mixed dyslipidemia. For ANG3, we see a clear opportunity to treat patients with elevated LDL and triglycerides. We will monitor the Leqvio launch, but we do not rely on a blockbuster outcome there to feel confident about the future of these two drugs.

Thank you. And our next question comes from Maury Raycroft from Jefferies. Your line is now open.

I'll do a two-part question. So for the two new pulmonary programs announced today, are you using the same approach as ENaC with targeting integrin alpha-v beta-6 on lung epithelial cells? And if so, how consistent or variable is this target in the new indications? Then can you talk more about why the new programs will require less total drug?

Yes, we are still using the same targeting ligand approach, and we believe it will remain consistent across the different patient populations we plan to address with ARO-RAGE and MUC5AC. The second part of your question was...

Why are we confident that we'll be able to use less drug with the new programs.

Yes, sure. So I think there's two reasons for that. One is the availability of readily measurable biomarkers for both of those programs for ARO-MUC5AC and ARO-RAGE that will allow us to I think better understand where we are in terms of knockdown that has always been a challenge for ENaC that there's not a great biomarker to measure. I think the other aspect is that as we've learned more about the pulmonary platform, we have continued to gain an understanding of how much drug we can give and not see a tox signal. So relative to the dosing regimens we were using in the ENaC program and if you might remember, we were using a day one, two, three cycle in both the clinical program and the tox program. We're confident based on what we've seen that we can dose at lower levels and lower intervals and achieve the same level or better knockdown from the gene target.

Yes. I think that's the big takeaway message that we expect to use substantially less drug and administer it less often with these two drug candidates. And also, as James said, we'll have a better idea about depth and duration of knockdown. We are a bit flying blind with ENaC. And so we are probably in those tox species. We're probably pushing too much drug in there. And I think we'll have a much better time here, titrating that in humans as we can see what knockdown looks like.

Thank you. And our next question comes from Ted Tenthoff from Piper Sandler. Your line is now open.

I want to get a sense for what we should be expecting on HIF2 alpha at ASCO GU coming up?

Yes. So that study is fully enrolled and all patients are through their second biopsy pre-dose and post-dose biopsy. So they get a biopsy pre-dose and post-dose. So we will share an update on, of course, safety and changes in a RECIST criteria as well as gene target knockdown. So that's what we'll be sharing at ASCO GU.

And the highest dose level, I think, was double from the dose that we had previously presented. And so this was the highest dose that we intended to go to.

Yes, this will be all three cohorts.

And what's the total number of patients?

We ended up enrolling the 27?

Great. Perfect. Thanks, guys. Looking forward to the data.

Thank you. And our next question comes from Mayank Mamtani from B. Riley Securities. Your line is now open.

Congratulations on the progress. Could you clarify the preclinical work on the rodent and monkey studies for RAGE and MUC5AC? Have you conducted similar studies where you observed the signal, and has that work already been completed?

Yes, or is ongoing.

Okay. And just maybe a follow-up there. Is that information you have before you get into the clinic?

We would certainly have to have toxicology studies that support the Phase 1 dosing regimen. So to answer your question, yes.

And on the chronic side, Mike, we have some ideas about what doses would provide what knockdown and over what period of time. But again, here, with RAGE and with MUC5AC, we have the luxury of knowing that in humans. And so we have the luxury of waiting to see what the depth and duration look like before we design those chronic tox studies and make sure that we are not administering substantially more drug than we would be in humans.

And then a financial question I had was about milestones that we could expect this year. And specifically, from J&J and Amgen, if they do decide to move into a next study, like a two-part question, like how much would be the milestone and then the timing of that, if you could remind us that would be great.

Yes, we cannot remind you because we never communicated it. As you can understand, our partners are sensitive about making those milestones too specific. Therefore, we have not been able to disclose publicly what the various milestone levels are. I apologize, but I don't feel comfortable providing guidance on when those could occur because those programs belong to J&J and Amgen at this time.

Thank you. And our next question comes from Patrick Trucchio from H.C. Wainwright. Your line is now open.

Just a follow-up on the APOC3 and ANG programs. I'm wondering if there's a possibility of evaluating these compounds in a combination treatment. And secondly, can you tell us your latest thoughts on the potential for partnering these programs and what form that could take?

We are not currently looking into combining the two drug candidates. While it is a possibility, we have not conducted any nonclinical work on their combination, so it's not something we are considering at this time. Regarding partnerships, we believe that these two drug candidates represent rare opportunities in one’s career. They truly seem like significant drugs to us. Our data from the Phase 1/2 studies were quite promising, and we clearly see the markets they could serve, as well as the established regulatory pathways. We view these as important new medicines, so we plan to retain control over them. We understand that ANG will necessitate an outcome study, which will be costly. Nevertheless, given our current position as a company, we are willing to take on that responsibility because we are confident in the chances of success and believe these drugs are vital. For now, we intend to proceed with these and will work on building a commercial team to eventually market both drugs.

Thank you. And our next question comes from Luca Issi from RBC Capital. Your line is now open.

Great. Congrats on the progress. Just a few quick ones. One, maybe circle back on ENaC. It sounds to me that the safety signal that you've seen in rats was actually replicated in nonhuman primates. So wondering, if you can talk a little bit more about that and why you ultimately decided to switch horses, so to speak here? And then maybe on A1AT, I want to make sure I'm clear. Is there a scenario where you can possibly file ahead of running a Phase 3? Or do you think at this point running a Phase 3 is a must? And then maybe last one on mixed dyslipidemia. Why going after this indication for both ANG3 and APOC3 and not maybe prioritizing one versus the other?

There's a lot to cover. Let me begin with AAT. I prefer not to speculate on that as we are in discussions with the FDA. We have maintained a positive relationship with them and we will continue to share data and discuss the most efficient way to bring this important medication to patients. So please stay tuned, and we will update you as soon as we have more information. Regarding mixed dyslipidemia and both APO and ANG, I want to clarify a few points. First, with ANG, we have always focused on it based on the promising results from the Phase 1/2 study, nonclinical studies, and GWAS analysis. We believe this drug candidate effectively lowers LDL and triglycerides, addressing a significant need in the market. We see a substantial opportunity in this large market. For APOC3, we are currently conducting a Phase 2b study in that population. We have not determined yet if we will conduct an outcome study for this large population. However, we wanted to keep our options open. Thus, we are proceeding with the Phase 2b study and will evaluate the results. If we choose to pursue an outcome study afterward, we won't delay it for a couple of years waiting for the Phase 2b study to conclude. I believe having this flexibility is crucial and justifies the investment in the Phase 2b study. Should we decide to target the same market with both drugs, I believe having these two options will be beneficial. We will gain valuable insights from the Phase 2b studies and potentially the Phase 3 studies regarding the efficacy of these drugs and the types of patients they can assist. Ultimately, we aim to provide cardiologists and lipid clinics with the tools they need to deliver personalized healthcare based on their patients' requirements. This aligns with the ideal vision of healthcare. Having these two treatment options and using them effectively is vital. We see a significant opportunity to capture market share. Other APOC3 or ANG3 inhibitors may emerge in the future, but we intend to maximize our share of this market. Now, could you remind me of the first question?

ENaC, what did you see in monkey?

Go ahead. Yes, yes. Okay. So, we don’t typically discuss GLP tox findings in detail. However, we observed some signs of local lung inflammation, although it wasn't exactly the same as what we saw in rats. I believe we were administering more drug than necessary. The once-a-day administration for three days was intended to ensure we understood the depth and duration of the knockdown. We've gained significant insights since then, and it seems we may not require as much drug or such frequent dosing. This boosts our confidence, particularly for RAGE, MUC, and possibly ENaC2. We believe we not only have more potent drugs but also a better understanding of how effectively we can deliver them. Although we won't know for sure until we begin clinical trials, we are optimistic based on the clinical and nonclinical data we've gathered. We believe this platform and these drug candidates will be well tolerated and hold significant potential.

Super helpful.

Thank you. And our next question is from Alethia Young from Cantor Fitzgerald. Your line is now open.

There are two other similar types of questions. Regarding the pulmonary franchise, it appears you are considering expanding into larger indications. I would like to understand how you plan to develop certain businesses that may resemble your current partnerships and collaborations now that you are larger. Hopefully, when capital markets improve, you can secure funding to pursue significant indications as well. This leads to a broader strategic inquiry. You have numerous programs and collaborations progressing in various ways. Is your strategy consistent, or do you plan to retain more of your core assets? How often do you consider pursuing larger commercial opportunities that might require greater investment on your part but could also provide substantial returns?

Thanks, Alethia. It's still early in the pulmonary space, but we believe in the potential and the opportunity to create a commercial presence there. There are around 16,000 pulmonologists in the U.S., and based on our assessment of our pulmonary platform, we envision having eight or nine drugs, not just two or three. We see the value in developing a sales force to reach those pulmonologists effectively. Currently, we prefer to retain our assets because the lung field presents numerous opportunities, and there may be instances where we consider partnerships. However, we are focused on building a company that involves commercializing a significant number of crucial drugs independently. We understand the importance of not over-partnering. Our partnerships are primarily aimed at helping us deliver drugs to patients that we can’t reach easily and securing the necessary capital to fund our own programs. We will maintain this partnering strategy.

Thank you. And our next question comes from Joel Beatty from Baird. Your line is now open.

Congrats on the progress. First question is on ARO-RAGE. How close is the relationship between the circulating S-RAGE biomarker and activity in the lungs to be able to really help with pinpointing the dosing?

Yes. So the S-RAGE comes from two different origins. It's a splice variant that is secreted or it's cleaved off of the actual RAGE receptor that's transmembrane receptor. So by measuring the S-RAGE, we should have a very good idea of what knockdown of that receptor is. I hope that answers your question.

Yes. And as a follow-up, how closely behind could subcutaneous lung programs be to the lung-administered programs?

It's too early to determine that. These programs are still in the initial stages, and we are enthusiastic about them because if we can successfully develop and scale them, it would be a significant breakthrough. It remains a strong focus for us, but we're not there just yet. Therefore, it's difficult to predict how far we are from that point. I anticipate that we will be able to hold an in-person, pulmonary-focused R&D day or at least a webinar, depending on the COVID situation; I believe we'll have some data to share then. We're excited about the progress, but we're still in the process of development.

Thank you. And our next question comes from Mani Foroohar from SVB Leerink. Your line is now open.

So I'm digging through this ANGPTL3 data from Ionis, which we also cover. They have previously shown 62% knockdown with their 80-milligram dose. We don't actually know what the 320-milligram Phase 2b knockdown really look like. We haven't seen that full data. But with you guys at 388% knockdown, some of nuances around dosing, obviously, in terms of frequency, et cetera, given the commentary from Pfizer that suggests that perhaps despite seeing impressive knockdown, they hadn't seen that translate to reproducing the level of clinical benefit on triglycerides, non-HDLC, et cetera. Are there specific data sets that you guys look at that suggest the knockdown that you're seeing will translate to those clinical benefits when they did not in the larger clinical trial that Pfizer showed? And I have a quick follow-up.

Well, we have what we presented the LDL and non-HDL data and triglycerides data with that level of knockdown in the 80% to 90% range, from the 200 and 300 milligram dose. So the non-HDL and LDL data is clearly superior to what Ionis had presented in the past. But we don't know what is current data exactly. So, we do believe that there is at least three different sources that speak to the correlation between the level of knockdown or the level of suppression of ANGPTL3 and the pharmacodynamic effect, that you will study the Regeneron data and the comparison so far between the Ionis and our data. If you look at the Regeneron data, they do need to dose pretty high to get to the level of suppression to achieve the pharmacodynamic effect. And we did see a dose response in our case as well. And again, as I said, we'll study the differentiation between the heterozygous and homozygous is quite clear. So, I think this is a target where the magnitude of the target suppression correlates with the clinical or the pharmacodynamic effect.

It’s challenging to compare these two studies since we haven’t fully seen their data. However, their dosing is once every two weeks or once a month, while we are administering it every three months or potentially even less frequently. Regarding ALT increases, we had two patients with such increases, which we believe were linked to other medications they were taking. This suggests a difference in our data. Additionally, we haven’t observed increases in liver fat, while it seems they have. This illustrates the advantages of RNAi over antisense. When comparing these two methods, RNAi tends to result in a deeper and more lasting knockdown. If the sequences are chosen well, the safety profile can also be more favorable. We are very confident in our candidate and the target, as highlighted by the GWAS data and additional information.

Yes, that makes sense to me. What I'm trying to understand is that our information is limited to a press release from Pfizer, which covered their formal events and the commentary they provided on what they felt clinically justified launching into a large, complex Phase 3 trial. How do you assess what your threshold would be for a number that justifies moving into a Phase 3 trial for a broad patient population, as opposed to a more narrowly defined one? Do you believe the numbers you previously presented are sufficient, or do you think it’s necessary to pursue a more aggressive reduction than what you've observed so far?

We will review our Phase 2b data, which has shown LDL reduction of up to 50% and mean reduction around that same figure. We have also observed triglyceride reduction in the 70% range, which is significant. However, we won't see clinical outcomes in a brief study, so we rely on these surrogate endpoints, but I believe they are substantial. Compared to other triglyceride-lowering agents, there are limited options available. If our data continues to progress positively as it has in the Phase 1/2 study, this would give us strong confidence to proceed to an outcome study.

Thank you. And our next question comes from Keay Nakae from Chardan. Your line is now open.

Two questions. First, subcu admin to the lung. Are you using the same conjugate targeting ligand for Integrin or you evaluating something different? And is the primary performance objective a better safety profile?

Yes. I can address the first question as we are exploring various approaches to this. When we present, we can provide more details. We're aiming for a better safety profile. This is a good question; we are not hesitant about the inhaled route, but opting for subcutaneous administration simplifies things for us. If we can deliver this through subcutaneous means, we eliminate certain unknown concerns regarding safety profiles in toxicology studies with animals. This makes our process easier. Moreover, subcutaneous administration is a more straightforward method for potentially all applications compared to using a nebulizer, which, although relatively simple, still necessitates a machine and consumes time. This could be more cumbersome than a simple subcutaneous injection, which could potentially be done every two weeks, monthly, or every three months, depending on what we determine. This represents a more convenient way to administer the treatment, and we believe it could lead to significant advancements in this field. However, I want to be cautious and not overstate our progress since we are not there yet. Nonetheless, our initial findings have encouraged us to continue investigating this option.

Okay. Great. And just a clarification on the upfront from GSK, the $120 million you received in January. How much of that will be recognized as revenue in fiscal Q2? And how much might be amortized over some period of time?

Probably all of it will be recognized in fiscal Q2. Our performance obligations are basically complete for that milestone that we received.

And thank you. And I am showing no further questions. I would now like to turn the call back over to Chris Anzalone for closing remarks.

Thanks very much for joining us today. It's always a pleasure to speak with you, and we look forward to talking to you next quarter.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.