Arrowhead Pharmaceuticals FY2026 loss widens to $724M
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-K
Rhea-AI Filing Summary
Arrowhead Pharmaceuticals (ARWR) reported fiscal 2026 revenue of $450.8 million, down from $829.4 million in fiscal 2025 as lower collaboration and license revenue outweighed initial REDEMPLO sales. Net loss was $724.2 million, versus $1.6 million, including a $215.0 million expense for a priority review voucher purchased in September.
REDEMPLO generated $6.6 million in product revenue. In Phase 3 SHASTA-3 and SHASTA-4 studies for severe hypertriglyceridemia, plozasiran produced median triglyceride reductions of 79% and 81%, respectively, at Month 12; a prespecified pooled analysis also found significantly fewer acute pancreatitis events. Arrowhead submitted an sNDA and said a potential U.S. launch is planned for Q2 2027, pending regulatory filing, review and approval. After year-end, the FDA accepted the planned application into its STAR pilot program, whose accepted applications qualify for six-month priority review. Arrowhead withdrew its notice to use the PRV and continues to hold it.
At September 30, 2026, cash, cash equivalents and restricted cash were $62.7 million, and available-for-sale securities were $1.13 billion. Operating activities used $271.9 million in cash. Management expects current resources and its operating plan to fund operations through at least 12 months from the financial statements’ issuance.
1 point · 1 major0 major · 2 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Major pointPhase 3 studies showed 79% and 81% median triglyceride reductions at Month 12.
Negative
- Moderate pointRevenue fell to $450.8 million from $829.4 million in fiscal 2025.
- Moderate pointNet loss was $724.2 million, versus $1.6 million in fiscal 2025.
Filing Explained
The notes are a debt obligation now; share dilution remains conditional on a later conversion settled in shares.
As of
The notes also allow holders to require cash repurchase after a fundamental change. Separately, the secured term-loan facility totals
Key Figures
Revenue: $450.8 million
Net loss attributable to Arrowhead: $724.2 million
Product revenue, net: $6.6 million
+5 more
8 metrics
Revenue
$450.8 million
Year ended September 30, 2026; $829.4 million in fiscal 2025.
Net loss attributable to Arrowhead
$724.2 million
Year ended September 30, 2026; $1.6 million in fiscal 2025.
Product revenue, net
$6.6 million
Year ended September 30, 2026.
Priority review voucher expense
$215.0 million
Expensed at closing in fiscal 2026.
Cash flow from operating activities
Used $271.9 million
Year ended September 30, 2026.
Cash, cash equivalents and restricted cash
$62.7 million
As of September 30, 2026.
Available-for-sale securities
$1,130.2 million
As of September 30, 2026.
Median triglyceride reduction
79% in SHASTA-3; 81% in SHASTA-4
Plozasiran results at Month 12.
Key Terms
RNA interference, small interfering RNAs, TRiM platform, sNDA, +2 more
6 terms
RNA interference technical
"RNA interference is a mechanism present in living cells"
RNA interference is a natural cellular process that acts like a mute switch to reduce or silence the activity of a specific gene by targeting its messenger RNA, the blueprint used to make a protein. For investors, it matters because therapies and diagnostics that harness this mechanism can precisely block disease-causing proteins, creating new drug classes with high potential reward but also scientific, manufacturing and regulatory risks that affect company value.
small interfering RNAs technical
"commonly referred to as small interfering RNAs"
Small interfering RNAs (siRNAs) are short, lab-designed strands of genetic material that can selectively block a specific gene from producing a protein, like placing a muted tag on a single instruction in a large manual. For investors, they matter because this gene-silencing mechanism can create highly targeted therapies for diseases, offering clear paths to clinical value but also raising questions about regulatory approval, delivery technology, manufacturing complexity, and commercial scalability.
TRiM platform technical
"The TRiM platform utilizes ligand-mediated delivery"
sNDA regulatory
"submitted a Supplemental New Drug Application"
A SNDA (Subordination, Non‑Disturbance and Attornment Agreement) is a legal pact among a property owner’s lender, the owner’s tenants, and sometimes the landlord that sets who keeps lease rights if the property is sold or a mortgage is enforced. Think of it as a rulebook that decides whether a tenant can stay and keep paying rent or must answer to a new owner after a foreclosure. For investors, an SNDA matters because it protects predictable rental income, clarifies who has priority on claims against a property, and therefore affects a property’s value and the security of related loans.
priority review voucher regulatory
"purchase a rare pediatric disease priority review voucher"
A priority review voucher is a transferable regulatory incentive that lets a company move a future drug or device application to the front of the review line, shortening the review period by several months. For investors it matters because the voucher can speed up market access for a high-value product or be sold to other companies for significant cash, acting like a tradable fast-pass that can accelerate revenue or create immediate financial upside.
Split Real Time Application Review regulatory
"granted plozasiran entry into its Split Real Time Application Review pilot program"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were ARWR’s Phase 3 plozasiran results?
SHASTA-3 and SHASTA-4 reported median triglyceride reductions of 79% and 81%, respectively, at Month 12. In a prespecified pooled analysis, plozasiran also significantly reduced acute pancreatitis events. Arrowhead submitted an sNDA for severe hypertriglyceridemia and said a potential U.S. launch is planned for Q2 2027, pending regulatory filing, review and approval.
What can ARWR do with its priority review voucher?
Arrowhead says it may use the PRV for a future application or sell it to a third party. The FDA accepted the planned plozasiran sNDA for severe hypertriglyceridemia into its STAR pilot program, whose accepted applications qualify for six-month priority review; Arrowhead then withdrew its notice to use the voucher for that application.
When will ARWR’s fiscal year end?
Arrowhead’s board approved changing the fiscal year-end from September 30 to December 31, effective January 1, 2027. The company expects to file a transition report covering the three-month period from October 1, 2026, through December 31, 2026.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________________________________
FORM 10-K
__________________________________________________________________
(Mark One)
| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended September 30 , 2026
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 001-38042
__________________________________________________________________
(Exact name of registrant as specified in its charter)
__________________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(626 ) 304-3400
(Address and telephone number of principal executive offices)
__________________________________________________________________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | o | Non-accelerated filer | o | o | |||||||||||||||||||||||||||
| o | ||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of issuer’s voting and non-voting outstanding common stock held by non-affiliates was approximately $7.4 billion based upon the closing stock price of issuer’s common stock on March 31, 2026. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Company. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of November 5, 2026, 141,368,004 shares of the issuer’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report on Form 10-K is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3).
PART I | ||||||||
ITEM 1. | BUSINESS | 1 | ||||||
ITEM 1A. | RISK FACTORS | 30 | ||||||
ITEM 1B. | UNRESOLVED STAFF COMMENTS | 61 | ||||||
| ITEM 1C. | CYBERSECURITY | 61 | ||||||
ITEM 2. | PROPERTIES | 62 | ||||||
ITEM 3. | LEGAL PROCEEDINGS | 62 | ||||||
ITEM 4. | MINE SAFETY DISCLOSURES | 62 | ||||||
PART II | ||||||||
ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 63 | ||||||
ITEM 6. | RESERVED | 64 | ||||||
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 64 | ||||||
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 79 | ||||||
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 79 | ||||||
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 79 | ||||||
ITEM 9A. | CONTROLS AND PROCEDURES | 79 | ||||||
ITEM 9B. | OTHER INFORMATION | 80 | ||||||
ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 80 | ||||||
PART III | ||||||||
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | 81 | ||||||
ITEM 11. | EXECUTIVE COMPENSATION | 81 | ||||||
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 81 | ||||||
ITEM 13. | CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE | 81 | ||||||
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 81 | ||||||
PART IV | ||||||||
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 81 | ||||||
ITEM 16. | FORM 10-K SUMMARY | 86 | ||||||
SIGNATURE | ||||||||
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES | F-1 | |||||||
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Annual Report on Form 10-K except for historical information may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “goal,” “endeavor,” “strive,” “intend,” “plan,” “project,” “could,” “estimate,” “target,” “might,” “forecast,” “potential” or “continue” or the negative of these words or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements include, but are not limited to, statements about the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs; our expectations regarding the timing and potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic arrangements and transactions we have entered into or may enter into in the future; our beliefs and expectations regarding the amount and timing of future milestone, royalty or other payments that could be due to or from third parties under existing agreements; our expectations regarding regulatory approvals for and commercial launch of plozasiran; our expectations regarding pending litigation outcomes; and our estimates regarding future revenues, sales of REDEMPLO® (plozasiran), operating income, research and development expenses, cash flows, capital requirements and payments to third parties.
The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately, and many of which are beyond our control. As such, our actual results or outcomes and timing of certain events may differ materially from those discussed, projected, anticipated or indicated in any forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and cash flows may differ materially. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in “Item 1. Business” and “Item 1A. Risk Factors” of Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of this Annual Report on Form 10-K. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Statements made herein are as of the date of the filing of this Annual Report on Form 10-K with the SEC and should not be relied upon as of any subsequent date. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
PART I
Unless otherwise noted, (1) the term “Arrowhead” refers to Arrowhead Pharmaceuticals, Inc., a Delaware corporation and its Subsidiaries, (2) the terms “Company,” “we,” “us,” and “our,” refer to the ongoing business operations of Arrowhead and its Subsidiaries, whether conducted through Arrowhead or a subsidiary of Arrowhead, (3) the term “Subsidiaries” refers to Arrowhead Madison Inc. (“Arrowhead Madison”), Arrowhead Australia Pty Ltd (“Arrowhead Australia”), Arrowhead Pharmaceuticals Australia Pty Ltd (“Arrowhead Australia Pty”), Arrowhead Pharmaceuticals NZ Limited (“Arrowhead New Zealand”), Arrowhead Pharmaceuticals Ireland Limited (“Arrowhead Ireland”), Arrowhead Pharmaceuticals Switzerland GmbH (“Arrowhead Switzerland”), Arrowhead Pharmaceuticals Canada Inc. (“Arrowhead Canada”), and Visirna Therapeutics Inc. (“Visirna”), (4) the term “common stock” refers to Arrowhead’s common stock, (5) the term “preferred stock” refers to Arrowhead’s preferred stock and (6) the term “stockholder(s)” refers to the holders of Arrowhead common stock.
ITEM 1.BUSINESS
A.Overview
The Company develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and modes of delivery, the Company’s therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes.
There are approximately 20 Arrowhead discovered drug candidates in clinical trials ranging from early stage (Phase 1) to late stage (Phase 3), including both partnered and wholly-owned candidates. In addition, the Company has a robust discovery stage pipeline which is capable of generating multiple new clinical candidates each year.
The Company achieved a transformational milestone with its first commercial launch in 2025, when the U.S. Food and Drug Administration ("FDA") approved REDEMPLO® (plozasiran) as an adjunct to diet to reduce triglycerides (TGs) in adults with Familial Chylomicronemia Syndrome ("FCS"). REDEMPLO subsequently received marketing authorization for FCS in the European Union, Canada, Australia, China, and the United Kingdom. Additionally, Arrowhead presented results from the pivotal Phase 3 SHASTA-3 and SHASTA-4 studies of plozasiran in adults with severe hypertriglyceridemia (sHTG) during a Hot Line Late-Breaking Science session at the European Society of Cardiology (ESC) Congress 2026 in Munich, Germany. SHASTA-3 and SHASTA-4 met their primary and all prespecified secondary endpoints and demonstrated deep and durable reductions in TGs, with median reductions from baseline of 79% and 81%, respectively, at Month 12 (p<0.0001 in both studies). In a prespecified pooled analysis, plozasiran also significantly reduced acute pancreatitis (AP) events across the broad sHTG study population, with greater absolute benefit observed among patients at higher risk of AP. The Company has submitted a Supplemental New Drug Application (sNDA) to the U.S. FDA and is currently preparing for a potential U.S. launch in sHTG in the second quarter of 2027, pending successful regulatory filing, review, and approval.
The Company has built a commercial organization to support marketing in FCS and continues to progressively build its commercial capabilities to support a potential launch in sHTG in 2027, which will require a larger commercial footprint.
The Company has entered into multiple license and collaboration agreements with leading biotech and pharmaceutical companies, including Novartis Pharma AG, Sarepta Therapeutics, Inc., Amgen Inc., Takeda Pharmaceutical Company Limited, GlaxoSmithKline Intellectual Property (No. 3) Limited and Madrigal Pharmaceuticals, Inc., for programs that the Company does not intend to commercialize independently. This approach aims to expand the reach of the Company’s technology and to provide a source of non-dilutive capital to support REDEMPLO and other wholly-owned programs through commercial stage.
1
RNA Interference and the Benefits of RNAi Therapeutics
RNA interference (“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.
Small molecule and antibody drugs have proven effective at inhibiting certain cell surface, intracellular, and extracellular targets. However, other drug targets have proven difficult to inhibit with traditional drug-based and biologic therapeutics. Developing effective drugs for these targets would have the potential to address large underserved markets for the treatment of many diseases. Using the ability to specifically silence any gene, RNAi therapeutics may be able to address previously “undruggable” targets, unlocking the market potential of such targets.
This figure depicts the mechanism by which gene silencing occurs. Double stranded RNAi triggers (commonly referred to as small interfering RNAs (“siRNAs”)) are introduced into a cell and are loaded into the RNA-induced silencing complex (“RISC”). The strands are then separated, leaving an active RISC/RNAi trigger complex. This complex can then pair with and degrade the complementary messenger RNAs (“mRNA”) and stop the production of the target proteins. RNAi is a catalytic process, so each RNAi trigger can degrade mRNA hundreds of times, which results in a relatively long duration of effect for RNAi therapeutics.
Key Benefits of RNAi and proprietary TRiMTM platform as a Therapeutic Modality:
•Silences the expression of disease associated genes;
2
•Potential to address any target in the transcriptome including previously “undruggable” targets;
•Rapid lead identification;
•High specificity;
•Opportunity to use multiple RNA sequences in one drug product for synergistic silencing of multiple targets; and
•RNAi therapeutics are uniquely suited for personalized medicine through target and cell specific delivery and gene knockdown.
Targeted RNAi Molecule (TRiMTM) Platform
Arrowhead is a leading innovator in the field of siRNA delivery. The Company’s TRiM platform utilizes ligand-mediated delivery and is designed to enable tissue-specific targeting while being structurally simple. Targeting has been core to the Company’s development philosophy and the TRiM platform builds on more than two decades of work on actively targeted drug delivery vehicles. The Company’s scientists have discovered ways to progressively “TRiM” away extraneous features and chemistries and retain optimal pharmacologic activity.
The TRiM platform is comprised of a highly potent RNA trigger identified using the Company’s proprietary trigger selection rules and algorithms with the following components optimized, as needed, for each drug candidate: a high affinity targeting ligand; various linker chemistries; structures that enhance pharmacokinetics; and sequence specific stabilization chemistries.
Therapeutics developed with the TRiM platform offer several advantages: simplified manufacturing and reduced costs; multiple routes of administration; and potential for improved safety because there are fewer metabolites from smaller molecules, thereby reducing the risk of intracellular buildup.
The Company believes that for RNAi to reach its true potential, it must target organs outside the liver. The Company is leading this expansion with the TRiM platform, which has shown the potential to reach multiple tissues throughout the body. The TRiM platform currently enables delivery of siRNA to seven cell types:
3
The TRiM platform has also shown clinical validation for the ability to silence two genes simultaneously with its dual functional dimer technology.
RNA Chemistries
The structure and chemistries of the oligonucleotide molecules used to trigger the RNAi mechanism can be tailored for optimal activity. The Company’s broad portfolio of RNA trigger structures and chemistries, including certain proprietary structures, enables the Company to optimize each drug candidate on a target-by-target basis and utilize the combination of structure and chemical modifications that yield the most potent RNAi therapeutic candidate.
As a component of the TRiM platform, the Company’s design philosophy for RNA chemical modifications is to start with a structurally simple molecule and add only selective modification and stabilization chemistries as necessary to achieve the desired level of target knockdown and duration of effect. The conceptual framework for the stabilization strategy starts with a more sophisticated RNAi trigger screening and selection process that identifies potent sequences rapidly in locations that others may miss.
Approved Products
REDEMPLO® (plozasiran) is approved by the FDA as an adjunct to diet to reduce triglycerides for adults with FCS. REDEMPLO is also approved by the European Commission, Chinese National Medical Products Administration (“NMPA”), Health Canada, Australian Therapeutic Goods Administration ("TGA"), and the United Kingdom's Medicines and Healthcare products Regulatory Agency ("MHRA") for the same indication.
REDEMPLO is a siRNA therapeutic designed to suppress the production of apolipoprotein C-III (APOC3), a protein produced in the liver that raises triglyceride levels by slowing their breakdown and clearance. By targeting the APOC3 gene with sustained silencing, REDEMPLO delivers significant reductions in triglyceride levels. REDEMPLO is the first and only FDA-approved siRNA treatment studied in both genetically confirmed and clinically diagnosed patients living with FCS.
IMPORTANT SAFETY INFORMATION
CONTRAINDICATIONS
None.
ADVERSE REACTIONS
Most common adverse reactions in REDEMPLO treated patients (incidence ≥10% of patients treated with REDEMPLO and >5% more frequently than with placebo) are hyperglycemia, headache, nausea, and injection site reaction.
Please see full Prescribing Information for REDEMPLO.
B.Pipeline
The Company is focused on developing innovative drugs for diseases with a genetic basis, typically characterized by the overproduction of one or more proteins that are involved with disease. The depth and versatility of the Company’s
4
RNAi technologies enable the Company to potentially address conditions across many therapeutic areas and pursue disease targets that are not otherwise addressable by small molecules and biologics.
Plozasiran (ARO-APOC3) - Severe Hypertriglyceridemia (sHTG)
Severe Hypertriglyceridemia is a disease characterized by elevated triglyceride levels > 500 mg/dL. Severely elevated triglycerides in patients with severe hypertriglyceridemia (sHTG) or familial chylomicronemia syndrome (FCS), a rare genetic disorder, can result in potentially fatal acute pancreatitis.
Plozasiran (formerly ARO-APOC3) is designed to reduce production of apolipoprotein C-III (APOC3), a component of triglyceride rich lipoproteins (TRLs) including Very Low Density Lipoprotein (VLDL) and chylomicrons, a key regulator of triglyceride metabolism. The Company believes that knocking down the hepatic production of APOC3 may result in reduced VLDL synthesis and assembly, enhanced breakdown of TRLs, and better clearance of VLDL and chylomicron remnants.
Multiple Phase 3 studies to support regulatory filings for approval in sHTG including SHASTA-3, SHASTA-4, SHASTA-5, and MUIR-3 are either ongoing or have been completed. SHASTA-3 and SHASTA-4 met their primary and all prespecified secondary endpoints and demonstrated deep and durable reductions in triglycerides (TG), with median reductions from baseline of 79% and 81%, respectively, at Month 12 (p<0.0001 in both studies). In a prespecified pooled analysis, plozasiran also significantly reduced acute pancreatitis (AP) events across the broad sHTG study population, with greater absolute benefit observed among patients at higher risk of AP. At Month 12, more than 90% of plozasiran-treated patients in both studies achieved TG levels below 500 mg/dL (<5.65 mmol/L) and more than half achieved TG levels below 150 mg/dL (<1.69 mmol/L).
Zodasiran (ARO-ANG3) - Homozygous Familial Hypercholesterolemia (HoFH)
Dyslipidemia and Hypertriglyceridemia are risk factors for atherosclerotic coronary heart disease and cardiovascular events.
Zodasiran (formerly ARO-ANG3) is designed to reduce production of angiopoietin-like protein 3 (ANGPTL3), a liver synthesized inhibitor of lipoprotein lipase and endothelial lipase. ANGPTL3 inhibition has been shown to lower serum LDL, serum and liver triglyceride and has genetic validation as a novel target for cardiovascular disease. The Company currently expects to complete a Phase 3 clinical trial (YOSEMITE) in mid-2027 evaluating the efficacy and safety of zodasiran in adolescent and adult subjects with HoFH.
5
ARO-DIMER-PA - Mixed Hyperlipidemia
Mixed Hyperlipidemia is a highly prevalent disorder characterized by elevated low-density lipoprotein cholesterol (LDL-C) and triglyceride (TG) levels and is a major risk factor for Atherosclerotic Cardiovascular Disease (ASCVD), which is the leading cause of mortality worldwide and associated with substantial morbidity and healthcare costs.
ARO-DIMER-PA is a dual functional RNAi molecule designed to silence expression of the proprotein convertase subtilisin kexin 9 (PCSK9) and apolipoprotein C3 (APOC3) genes in hepatocytes. Prior clinical experience with other investigational and approved agents suggests that PCSK9 and APOC3 inhibition may lead to robust reductions in LDL-C, TGs, triglyceride rich lipoprotein remnants, and total atherogenic lipoproteins. This represents an important step forward for the RNAi field as it is the first clinical candidate to target two genes simultaneously in one molecule, enabled by Arrowhead’s innovative and proprietary TRiM platform.
The Company is conducting a Phase 1/2a clinical trial of ARO-DIMER-PA. Interim data on the Phase 1/2a study was presented showing that ARO-DIMER-PA achieved deep and durable silencing of two genes with a single RNAi molecule, with mean maximal single dose reductions in serum PCSK9 of 72% and APOC3 of 88%.
ARO-INHBE - Obesity
ARO-INHBE is designed to reduce the hepatic expression of the INHBE gene and its secreted gene product, Activin E. INHBE is a promising genetically validated target in which loss-of-function INHBE variants in humans are associated with lower risk of obesity and metabolic diseases, such as type 2 diabetes. The Company is currently investigating ARO-INHBE in a Phase 1/2a clinical trial.
ARO-ALK7 - Obesity
ARO-ALK7 is designed to silence adipocyte expression of the ACVR1C gene to reduce the production of Activin receptor-like kinase 7 (ALK7), which acts as a receptor in a pathway that regulates energy homeostasis in adipose tissue. In large genetic datasets, reduced ACVR1C expression has been associated with healthier adipose distribution and reduced risk of obesity-related metabolic complications. The Company is currently investigating ARO-ALK7 in a Phase 1/2a clinical trial.
ARO-RAGE - Inflammatory Pulmonary Disease
ARO-RAGE is designed to reduce production of the Receptor for Advanced Glycation End products (RAGE) as a potential treatment for various inflammatory pulmonary diseases. The Company is currently investigating ARO-RAGE in a Phase 2 clinical trial to assess the efficacy on small airway dysfunction in allergen-induced mild asthma.
ARO-MAPT - Alzheimer's and Tauopathies
Aggregation of the toxic tau protein is believed to be a key driver in multiple tauopathies, including Alzheimer’s disease. By preventing or potentially reversing tau protein accumulation in subjects with mild cognitive impairment due to Alzheimer’s disease and mild Alzheimer’s disease dementia, ARO-MAPT has the potential to prevent or slow disease progression.
ARO-MAPT is Arrowhead’s first investigational RNAi-based therapy to utilize a new proprietary delivery system which, in preclinical studies, has achieved blood-brain-barrier penetration and deep knockdown of target genes across the central nervous system (CNS), including deep brain regions, after subcutaneous injections. ARO-MAPT is designed to silence CNS expression of the microtubule associated protein tau (MAPT) gene, which encodes the tau protein. The Company is currently investigating ARO-MAPT in a Phase 1/2a clinical trial. Interim data from the Phase 1/2a study showed that ARO-MAPT achieved mean cerebrospinal fluid total tau reduction of 73% on Day 105, with a maximum individual reduction of 85%, supporting the potential for quarterly dosing.
ARO-C3 - Complement Mediated Renal Disease
A number of rare renal diseases result from uncontrolled activation of the alternative pathway of complement, leading to progressive glomerular damage, proteinuria, hematuria, and impaired kidney function, and often resulting in end-stage renal disease (ESRD). In addition, dysregulation of the alternative complement pathway has been shown to play a role in the pathogenesis and progression of disease in some of the more common glomerulopathies. Silencing complement component 3 (C3) may be a therapeutic approach for treatment of these conditions.
ARO-C3 is designed to reduce production of C3 as a potential therapy for patients with various complement mediated or complement associated renal diseases. The Company has completed a Phase 1/2a clinical trial of ARO-C3.
ARO-CFB - Complement Mediated Disease
6
A number of rare renal diseases result from uncontrolled activation of the alternative pathway of complement, leading to progressive glomerular damage, proteinuria, hematuria, and impaired kidney function, and often resulting in end-stage renal disease (ESRD). In addition, dysregulation of the alternative complement pathway has been shown to play a role in the pathogenesis and progression of disease in some of the more common glomerulopathies. Silencing complement factor B (CFB) may be a therapeutic approach for treatment of these conditions.
ARO-CFB is designed to reduce hepatic expression of CFB, which plays an important regulatory role in amplifying complement alternative pathway activation and has been identified as a promising therapeutic target. ARO-CFB is being developed as a potential treatment for complement mediated kidney diseases such as immunoglobulin A nephropathy (IgAN), which is the most common glomerular disease worldwide and carries a high lifetime risk of progression to end-stage renal disease. Additionally, ARO-CFB may have clinical applications in non-renal diseases involving complement activation. The Company has completed a Phase 1/2a clinical trial of ARO-CFB.
Collaboration and License Agreements
GlaxoSmithKline Intellectual Property (No. 3) Limited (“GSK”)
GSK-HSD License Agreement - Alcohol-related liver disease (ALD)
On November 22, 2021, GSK and the Company entered into an Exclusive License Agreement (the “GSK-HSD License Agreement”). Under the GSK-HSD License Agreement, GSK has received an exclusive license for GSK-4532990 (formerly ARO-HSD). The exclusive license is worldwide with the exception of greater China. GSK is wholly responsible for all clinical development and commercialization of GSK-4532990 in its territory.
GSK-4532990 (formerly ARO-HSD) is designed to reduce production of HSD17B13, a hydroxysteroid dehydrogenase involved in the metabolism of hormones, fatty acids and bile acids. Published human genetic data indicate that a loss of function mutation in HSD17B13 provides strong protection against alcoholic hepatitis and cirrhosis. GSK is conducting Phase 2b clinical trials in patients with alcohol-related liver disease (ALD). Alcohol-related liver disease (ALD) represents a spectrum of liver injury resulting from alcohol use, ranging from hepatic steatosis to more advanced forms including alcoholic hepatitis (AH), alcohol-associated cirrhosis (AC), and acute AH presenting as acute-on-chronic liver failure.
GSK-HBV Agreement - Chronic Hepatitis B Virus Infection
On December 11, 2023, the Company entered into an Amended and Restated License Agreement with GSK (the “GSK-HBV Agreement”) pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989), the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection. Daplusiran/tomligisiran had previously been licensed to Janssen Pharmaceuticals, Inc. (“Janssen”) in October 2018. GSK is conducting a Phase 2 study of daplusiran/tomligisiran followed by bepirovirsen in patients with chronic hepatitis B.
Takeda Pharmaceutical Company Limited (“Takeda”) - Alpha-1 Antitrypsin Deficiency (AATD)
On October 7, 2020, Takeda and the Company entered into an Exclusive License and Co-Funding Agreement (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company co-develop the Company’s fazirsiran program (formerly TAK-999 and ARO-AAT), the Company’s second-generation subcutaneously administered RNAi therapeutic candidate being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency. Within the United States, fazirsiran, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda received an exclusive license to commercialize fazirsiran and will lead the global commercialization strategy, while the Company will be eligible to receive tiered royalties of 20% to 25% on net sales.
Fazirsiran is a subcutaneously administered RNAi therapeutic being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency (AATD), which is a rare genetic disorder that severely damages the liver and lungs of affected individuals. Fazirsiran is designed to reduce production of the mutant Z-AAT protein by silencing the AAT gene in order to prevent accumulation of Z-AAT in the liver, allow clearance of the accumulated Z-AAT protein, prevent repeated cycles of cellular damage, and possibly prevent or even reverse the progression of liver fibrosis.
AATD is a genetic disorder associated with liver disease in children and adults, and pulmonary disease in adults. AAT is a circulating glycoprotein protease inhibitor that is primarily synthesized and secreted by liver hepatocytes. Its physiologic function is the inhibition of neutrophil protease to protect healthy lung tissues during inflammation and prevent tissue damage. The most common disease variant, the Z mutant, has a single amino acid substitution that results in improper folding of the protein. The mutant protein cannot be effectively secreted and accumulates in globules in the
7
hepatocytes. This triggers continuous hepatocyte injury, leading to fibrosis, cirrhosis, and increased risk of hepatocellular carcinoma.
Individuals with the homozygous PiZZ genotype have severe deficiency of functional AAT leading to pulmonary disease and hepatocyte injury and liver disease. Lung disease in this patient population is frequently treated with AAT augmentation therapy. However, augmentation therapy does nothing to treat liver disease, and there is no specific therapy for hepatic manifestations. There is a significant unmet need as liver transplant, with its attendant morbidity and mortality, is currently the only available treatment.
The goal of fazirsiran treatment is prevention and potential reversal of Z-AAT accumulation-related liver injury and fibrosis. Reduction of inflammatory Z-AAT protein, which has been clearly defined as the cause of progressive liver disease in AATD patients, is important as it is expected to halt the progression of liver disease and allow fibrotic tissue repair.
Takeda is conducting multiple Phase 3 studies for the treatment of AATD liver disease including the REDWOOD study.
Amgen Inc. (“Amgen”) - Atherosclerotic Cardiovascular Disease (ASCVD)
On September 28, 2016, Amgen and the Company entered into two collaboration and license agreements and a common stock purchase agreement. Under the Second Collaboration and License Agreement (the “Olpasiran Agreement”), Amgen received a worldwide, exclusive license to the Company’s novel RNAi olpasiran (previously referred to as AMG 890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the Olpasiran Agreement, Amgen is wholly responsible for clinical development and commercialization.
Olpasiran is designed to reduce production of apolipoprotein A, a key component of lipoprotein(a), which has been genetically linked with increased risk of cardiovascular diseases, independent of cholesterol and LDL levels. Amgen completed a Phase 2 clinical study evaluating the efficacy, safety, and tolerability of olpasiran in subjects with elevated levels of lipoprotein(a). Amgen reported Phase 2 clinical results at the American Heart Association (AHA) Scientific Sessions in November 2022 and simultaneously published in the New England Journal of Medicine. Amgen began evaluating olpasiran in a Phase 3 study (OCEAN) to assess the impact of olpasiran on major cardiovascular events in participants with atherosclerotic cardiovascular disease and elevated lipoprotein(a), in a double-blind, randomized, placebo-controlled, multi center study in December 2022.
In November 2022, Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) and the Company entered into a Royalty Purchase Agreement (the “Royalty Pharma Agreement”). In consideration for the payments under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement.
Sarepta Therapeutics, Inc. (“Sarepta”)
On November 25, 2024, Sarepta and the Company entered into a global licensing and collaboration agreement. The Sarepta Agreement covers multiple clinical and preclinical programs in rare, genetic diseases of the muscle, central nervous system (CNS), and the lungs, as well as allows Sarepta to select up to six new targets for the Company to conduct discovery and preclinical development activities in areas complementary to Sarepta’s leadership in precision genetic medicine for rare diseases, which can utilize Arrowhead’s proprietary and differentiated TRiM platform. Clinical stage programs under the license and collaboration agreement include SRP-1001 (ARO-DUX4), SRP-1003 (ARO-DM1), SRP-1002 (ARO-MMP7), SRP-1004 (ARO-ATXN2) and SRP-1005 (ARO-HTT). Preclinical stage programs under the Sarepta Agreement include SRP-1007 (ARO-ATXN1) for patients with spinocerebellar ataxia 1 (SCA1), and SRP-1006 (ARO-ATXN3) for patients with spinocerebellar ataxia 3 (SCA3).
SRP-1001 (ARO-DUX4) - Facioscapulohumeral Muscular Dystrophy (FSHD)
SRP-1001 is designed to target the gene that encodes human double homeobox 4 (DUX4) protein as a potential treatment for patients with facioscapulohumeral muscular dystrophy. Sarepta is currently investigating ARO-DUX4 in a Phase 1/2a clinical trial.
Facioscapulohumeral muscular dystrophy (FSHD) is an autosomal dominant disease associated with the failure to maintain complete epigenetic suppression of DUX4 expression in differentiated skeletal muscle, leading to overexpression of DUX4, which is myotoxic and can lead to muscle degeneration. As DUX4 expression is recognized as the cause of muscle pathology in FSHD patients, the Company believes that the selective targeting and knockdown of DUX4 using RNAi may prevent or reverse downstream myotoxicity and lead to muscle repair and improvement in muscle function in patients. There are currently no effective treatments specifically for FSHD.
8
SRP-1003 (ARO-DM1) - Type 1 Myotonic Dystrophy
SRP-1003 is designed to reduce expression of the dystrophia myotonica protein kinase (DMPK) gene. There is currently no approved disease-modifying therapy for type 1 myotonic dystrophy (DM1). Treatments have focused on symptomatic management, including physical therapy, exercise, ankle-foot orthoses, wheelchairs, and other assistive devices. Sarepta is currently investigating ARO-DM1 in a Phase 1/2a clinical trial.
Type 1 myotonic dystrophy is an autosomal dominant, debilitating, chronic progressive multisystem disorder characterized by an expansion of a highly unstable CUGexp in the DMPK gene. Patients with DM1 have muscle weakness and wasting, myotonia, cataracts, and often have cardiac conduction abnormalities, and may become physically disabled and have a shortened life span.
SRP-1002 (ARO-MMP7) - Idiopathic Pulmonary Fibrosis (IPF)
SRP-1002 is designed to reduce expression of matrix metalloproteinase 7 (MMP7) as a potential treatment for Idiopathic Pulmonary Fibrosis (IPF). Sarepta is currently investigating ARO-MMP7 in a Phase 1/2a clinical trial.
IPF is a chronic interstitial lung disease characterized by progressive fibrosis.
SRP-1004 (ARO-ATXN2) - Spinocerebellar Ataxia 2 (SCA2)
SRP-1004 is designed to reduce the expression of the ATXN2 gene as a potential treatment for spinocerebellar ataxia 2 (SCA2). Sarepta is currently investigating ARO-ATXN2 in a Phase 1/2a clinical trial.
SCA2 is a progressive cerebellar ataxia with instability of stance, speech and swallow disorder, pain, spasticity, and ocular signs, caused by gain of function of mutant expanded polyQ ATXN2 protein.
Novartis Pharma AG (“Novartis”)
On August 29, 2025, Novartis and the Company entered into a global licensing and collaboration agreement. The agreement covers ARO-SNCA, Arrowhead’s preclinical stage siRNA therapy against alpha-synuclein for the treatment of synucleinopathies, such as Parkinson’s Disease, and other additional collaboration targets that will utilize Arrowhead’s proprietary TRiM platform.
Madrigal Pharmaceuticals Inc. (“Madrigal”)
On May 4, 2026, Madrigal and the Company entered into a global licensing agreement, under which Madrigal received an exclusive global license to develop, manufacture, and commercialize ARO-PNPLA3, a clinical stage program designed to reduce liver expression of patatin-like phospholipase domain containing 3 (PNPLA3) as a potential treatment for patients with metabolic dysfunction-associated steatohepatitis (MASH) who carry the I148M genetic variant of the PNPLA3 gene.
C.Intellectual Property
Patents
The Company controls approximately 710 issued patents (including 464 directed to RNAi trigger molecules and 165 directed to targeting groups or targeting compounds), including European validations, and approximately 1,022 currently pending patent applications worldwide from 113 different patent families. The Company’s patent applications have been filed throughout the world, including, in the United States, Argentina, ARIPO (Africa Regional Intellectual Property Organization), Australia, Brazil, Canada, Chile, China, Eurasian Patent Organization, Europe, GCC (Gulf Cooperation Council), Hong Kong, Israel, India, Indonesia, Iraq, Jordan, Japan, Lebanon, Mexico, New Zealand, OAPI (African Intellectual Property Organization), Peru, Philippines, Russian Federation, South Africa, Saudi Arabia, Singapore, South Korea, Thailand, Taiwan, Uruguay, Venezuela, and Vietnam.
RNAi Triggers: The Company owns issued patents or has filed patent applications directed to RNAi trigger molecules, which serve as the foundation of the Company’s TRiM platform, and are targeted to reduce expression of various gene targets. However, the Company cannot guarantee that issued patents will be enforceable or provide adequate protection for the Company, or that pending patent applications will result in issued patents. These patents and patent applications that relate to partnered and non-partnered products in the Company's clinical pipeline include the following:
9
| Patent Group | Estimated Year(s) of Expiration* | ||||
| AAT | 2035, 2038 | ||||
ALK7 | 2044 | ||||
| ANGPTL3 | 2038 | ||||
| APOC3 | 2038 | ||||
APOC3/PCSK9 Dimer | 2045 | ||||
| ATXN2 | 2044 | ||||
| C3 | 2043 | ||||
| CFB | 2044 | ||||
| DM1 | 2043 | ||||
| DUX4 | 2041 | ||||
| HBV | 2032, 2036, 2037 | ||||
| HSD17B13 | 2039, 2043 | ||||
| HTT | 2045 | ||||
INHBE | 2044 | ||||
| LPA | 2036 | ||||
| MMP7 | 2042 | ||||
| PNPLA3 | 2041 | ||||
| RAGE (AGER) | 2042 | ||||
| SNCA | 2045 | ||||
*Assuming issuance of any pending patent applications, and excluding any patent term adjustments or patent term extensions.
Delivery Technologies: The delivery technology-related patents and patent applications, which include components used in the Company’s TRiM platform, have been filed and/or issued in various jurisdictions worldwide including the United States, Argentina, Australia, Brazil, Canada, China, Eurasian Patent Organization, Europe (including validations in France, Germany, Italy, Spain, Switzerland, United Kingdom), GCC (Gulf Cooperation Council), Israel, India, Japan, Lebanon, Mexico, New Zealand, Philippines, Russia, South Africa, South Korea, Singapore, Taiwan, and Uruguay. However, the Company cannot guarantee that issued patents will be enforceable or provide adequate protection for the Company, or that pending patent applications will result in issued patents. These various groups of patents and applications that relate to partnered and non-partnered products in the Company's clinical pipeline are set forth below:
| Patent Group | Estimated Year(s) of Expiration* | ||||
| Targeting ligands and other RNAi delivery and platform technologies | |||||
| CNS Intrathecal Delivery Platform | 2043 | ||||
| Adipose Delivery Platform | 2044 | ||||
BBB Shuttle Delivery Platform | 2045 | ||||
| Cardiomyocyte Delivery Platform | 2045 | ||||
| Muscle delivery platform | 2041 | ||||
| PK/PD lipid modifiers | 2041 | ||||
| RNAi agent design (5′-phosphate mimic) | 2037 | ||||
Targeting groups (αvβ6 integrin ligands) | 2037, 2038, 2041 | ||||
Targeting groups (N-acetylgalactosamine ligands) | 2037 | ||||
| Trialkyne linkers | 2039 | ||||
*Assuming issuance of any pending patent applications, and excluding any patent term adjustments or patent term extensions.
10
The RNAi and drug delivery patent landscapes are complex and rapidly evolving. As such, the Company may need to obtain additional patent licenses prior to commercialization of its candidates. Please see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Trademarks
The Company has registered or filed applications to register trademarks related to its business operations, including marks for the Company’s corporate name and logo and product marks for commercialized products. Trademark rights for product names are generally country-specific and are subject to regulatory review of proposed proprietary names.
In January 2024, the Company began filing trademark applications related to REDEMPLO®, which has become the Company’s first commercially approved product, in various jurisdictions throughout the world. REDEMPLO is registered as a trademark in the United States, China, European Union, United Kingdom, Japan, Canada, Australia, and numerous other jurisdictions.
Trademark registrations may be maintained indefinitely, subject to timely renewal and continued use of the marks in commerce in the applicable jurisdictions. The Company monitors and, where appropriate, takes action to protect its marks against infringement, dilution, or unauthorized use. Third parties may nonetheless challenge or seek to cancel the Company’s marks, assert that the Company’s marks do not infringe their rights, or attempt to adopt confusingly similar marks. Any such dispute could be costly, could divert management’s attention, and could require the Company to rebrand certain products or technologies. Please see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
D.Government Regulation
Government authorities in the United States, at the federal, state, and local levels, and in other countries and jurisdictions, including the European Union (“EU”), extensively regulate, among other things, the research, development, testing, product approval, manufacture, quality control, manufacturing changes, packaging, storage, recordkeeping, labeling, promotion, advertising, sales, distribution, marketing, and import and export of drugs and biologic products. The processes for obtaining regulatory approval in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and regulations and other regulatory authorities both pre- and post-commercialization, are a significant factor in the production and marketing of the Company’s products and its R&D activities and require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
The FDA and other government entities regulate drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and biologics under the FDCA and the Public Health Service Act (the “PHSA”), and the regulations promulgated under those statutes, as well as other federal and state statutes and regulations. Failure to comply with applicable legal and regulatory requirements in the United States at any time during the product development process, approval process, or after approval, may subject us to a variety of administrative or judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, withdrawal of approvals, delay or suspension of clinical trials, issuance of warning letters and other types of regulatory letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil monetary penalties, refusals of or debarment from government contracts, exclusion from the federal healthcare programs, restitution, disgorgement of profits, civil or criminal investigations by the FDA, U.S. Department of Justice, State Attorneys General, and/or other agencies, False Claims Act suits and/or other litigation, and/or criminal prosecutions.
An applicant seeking approval to market and distribute a new drug in the United States must typically undertake the following:
(1) completion of preclinical laboratory tests, which may include animal and in vitro studies, and formulation studies in compliance with the FDA’s good laboratory practice (“GLP”) regulations;
(2) submission to the FDA of an Investigational New Drug application (“IND”) for human clinical testing, which must become effective without FDA objection before human clinical trials may begin;
(3) approval by an independent institutional review board (“IRB”), representing each clinical site before each clinical trial may be initiated;
(4) performance of adequate and well-controlled human clinical trials in accordance with the FDA’s current good clinical practice (“cGCP”) regulations, to establish the safety and effectiveness of the proposed drug product for each indication for which approval is sought;
(5) preparation and submission to the FDA of an NDA;
11
(6) satisfactory review of the NDA by an FDA advisory committee, where appropriate or if applicable;
(7) satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the drug product, and the active pharmaceutical ingredient or ingredients thereof, are produced to assess compliance with current good manufacturing practice (“cGMP”) regulations and to assure that the facilities, methods, and controls are adequate to ensure the product’s identity, strength, quality, and purity;
(8) payment of user fees, as applicable, and securing FDA approval of the NDA; and
(9) compliance with any post-approval requirements, such as any Risk Evaluation and Mitigation Strategies (“REMS”) or post-approval studies required by the FDA.
Preclinical Studies and an IND
Preclinical studies can include in vitro and animal studies to assess the potential for adverse events and, in some cases, to establish a rationale for therapeutic use, which studies are subject to federal regulations and requirements, including GLP regulations. Other studies include laboratory evaluation of the purity, stability and physical form of the manufactured drug substance or active pharmaceutical ingredient and the physical properties, stability and reproducibility of the formulated drug or drug product. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some preclinical testing, such as longer-term toxicity testing, animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. However, submission of an IND may not result in the FDA allowing clinical trials to commence, and clinical trials that have commenced may be paused, if the FDA has any concerns and places the trial on hold.
A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation in part or in full. Following issuance of a full or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed, which determination will be based on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
Human Clinical Studies in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with cGCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. The plan for, and protocols and informed consent processes and documentation for, any clinical trial is also subject to certain requirements for approval, and periodic review and reapproval, by an IRB representing each institution participating in the clinical trial. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on its ClinicalTrials.gov website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
Phase 2: The product candidate is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
Phase 3: The product candidate is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. An IRB also may suspend or terminate a clinical trial under certain circumstances. The FDA will typically inspect one or more clinical sites in late-stage clinical trials to assure compliance with cGCP and the integrity of the clinical data submitted.
12
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with certain FDA regulatory requirements in order to use the study as support for an IND or application for marketing approval or licensure, including that the study was conducted in accordance with cGCP, including review and approval by an independent ethics committee and use of proper procedures for obtaining informed consent from subjects, and the FDA is able to validate the data from the study through an onsite inspection if the FDA deems such inspection necessary. The cGCP requirements encompass both ethical and data integrity standards for clinical studies.
Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently approximately $4.601 million for fiscal year 2027, for applications requiring clinical data, and the sponsor of an approved NDA is also subject to an annual program fee, currently approximately $0.417 million for fiscal year 2027. These fees are adjusted annually.
The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA’s receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP.
The FDA also may require submission of a REMS plan to mitigate any identified or suspected serious risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
The FDA’s Decision on an NDA
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. After approval, the FDA may seek to prevent or limit further marketing of a product based on the results of post-market studies
13
or surveillance programs. Some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation entitles the applicant to incentives such as grant funding towards clinical study costs, tax advantages, and waivers of FDA user fees. Orphan drug designation must be requested before submitting an NDA, and both the drug and the disease or condition must meet certain criteria specified in the Orphan Drug Act and FDA’s regulations. The granting of an orphan drug designation does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and effectiveness of a drug must be established through adequate and well-controlled studies.
After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other application to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.
The FDA’s interpretation of the scope of orphan drug exclusivity may change. The FDA’s longstanding interpretation of the Orphan Drug Act is that exclusivity is specific to the orphan indication for which the drug was actually approved. As a result, the scope of exclusivity has been narrow and protected only against competition from the same “use or indication” rather than the broader “disease or condition.” Although certain courts had held that orphan drug exclusivity extends to the full designated disease or condition, in February 2026, Congress amended the Orphan Drug Act, as part of the Consolidated Appropriations Act, 2026, to codify the FDA’s interpretation that exclusivity covers only the same approved use or indication within the designated rare disease or condition, effective for all designated drugs.
Expedited Review and Accelerated Approval Programs
A sponsor may seek approval of its product candidate under programs designed to accelerate the FDA’s review and approval of NDAs. For example, Fast Track Designation may be granted to a drug intended for treatment of a serious or life-threatening disease or condition and data demonstrate its potential to address unmet medical needs for the disease or condition. The key benefits of Fast Track Designation are the eligibility for priority review, rolling review (submission of portions of an application before the complete marketing application is submitted), and accelerated approval, if relevant criteria are met.
The FDA may approve an NDA under the accelerated approval program if the drug treats a serious condition, provides a meaningful advantage over available therapies, and demonstrates an effect on either (1) a surrogate endpoint that is reasonably likely to predict clinical benefit, or (2) on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval, which the FDA may require to be underway prior to approval, are generally required to verify the drug’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, preapproval of promotional materials is required for drugs granted accelerated approval.
In addition, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If a drug is designated as breakthrough therapy, FDA will provide more intensive guidance on the drug development program and expedite its review. Additionally, a sponsor of an approved product for a qualifying rare pediatric disease may be awarded a priority review voucher by FDA, which the sponsor or subsequent holder of the voucher may redeem to obtain priority review of a different marketing application.
The FDA’s Split Real Time Application Review (“STAR”) pilot program, established in 2022 under the FDA’s PDUFA VII commitments, permits the sponsor of an efficacy supplement for a product intended to treat a serious condition with an unmet medical need, where there is evidence of substantial improvement over available therapy, to submit the supplement in two parts, and provides for an expedited review, with the goal of FDA action in advance of the applicable
14
priority review goal date. Applications accepted into the STAR pilot program receive priority review. In October 2026, the FDA granted entry into the STAR pilot program for the Company’s sNDA for plozasiran for the treatment of sHTG.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events or problems with manufacturing processes of unanticipated severity or frequency, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
•restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
•fines, warning letters, untitled letters, or it has come to our attention letters, or holds on post-approval clinical trials;
•refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
•product seizure or detention, or refusal to permit the import or export of products; or
•injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (“PDMA”), which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Drug Price Competition and Patent Term Restoration Act of 1984 (commonly referred to as the “Hatch-Waxman Amendments”) amending the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application (“ANDA”) to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug (“RLD”). In order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. However, an applicant may submit an ANDA suitability petition to request the FDA’s prior permission to submit an abbreviated application for a drug that differs from the RLD in route of administration, dosage form, or strength, or for a drug that has one different active ingredient in a fixed combination drug product (i.e., a drug product with multiple active ingredients).
15
At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to an RLD if the rate and extent of absorption of the generic drug do not show a significant difference from the rate and extent of absorption of the RLD. Upon approval of an ANDA, the FDA indicates that the generic product is “therapeutically equivalent” to the RLD and it assigns a therapeutic equivalence rating to the approved generic drug in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider the therapeutic equivalence rating to mean that a generic drug is fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of a therapeutic equivalence rating often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of data exclusivity for NDAs containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.
Hatch-Waxman Patent Certification and the 30 Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the drug substance (active ingredient), the drug product (formulation or composition), or an approved method of using the drug, and for which a claim of patent infringement could reasonably be asserted. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the referenced product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval.
A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA will not be approved until all the listed patents for the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV certification, expiration of the patent, a decision in the infringement case that is favorable to the ANDA applicant, or settlement of the lawsuit reflected in a settlement order or consent decree.
505(b)(2) New Drug Applications
As an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the FDA pursuant to an NDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant, and for which the applicant has not obtained a right of reference. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous findings of safety and effectiveness is scientifically and legally appropriate, it may eliminate the need to conduct certain preclinical studies or clinical trials of the new product. The FDA may also require companies to perform additional bridging studies or measurements, including clinical trials, to support the change from the previously approved reference drug. The FDA may then approve the new drug candidate for all, or some, of the label indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.
To the extent that a Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
16
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With the enactment of Food and Drug Administration Safety and Innovation Act (“FDASIA”), sponsors must also submit pediatric study plans prior to the assessment data.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. This is not a patent term extension under 35 U.S.C. § 156, but it effectively extends the regulatory period during which the FDA cannot accept or approve another application.
Biologics License Applications and Biosimilars
Biological products are licensed under Section 351(a) of the PHSA on the basis of a biologics license application (“BLA”) rather than approved under an NDA. The development, clinical testing, manufacture, licensure and post-approval regulation of biologics generally parallel the requirements for drugs described above, including the IND, cGCP, cGMP, user fee, expedited program and post-approval requirements, although a BLA must demonstrate that the product is safe, pure and potent, and the FDA may impose additional requirements relating to manufacturing controls, comparability following manufacturing changes and lot release. Biologics are also eligible for orphan drug designation and exclusivity on the same basis as drugs.
The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated pathway under Section 351(k) of the PHSA for the licensure of biological products that are demonstrated to be “biosimilar” to, or “interchangeable” with, a previously licensed reference product. Under the BPCIA, the FDA may not accept an application for a biosimilar or interchangeable product until four years after, and may not license such a product until 12 years after, the date on which the reference product was first licensed, subject to certain exceptions. Unlike the Hatch-Waxman framework for drugs, the BPCIA does not provide for Orange Book-style patent listing upon BLA approval or an automatic stay of approval; instead, patent disputes between the reference product sponsor and a biosimilar applicant are addressed through the BPCIA’s patent information exchange procedures and related litigation. The scope and application of the BPCIA’s exclusivity and patent provisions continue to be the subject of interpretation by the FDA and the courts and of proposed legislation.
Patent Term Restoration and Extension
A patent claiming a new drug or biological product may be eligible for a limited patent term extension under the Hatch-Waxman Amendments. Those Amendments permit a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of an NDA/BLA, plus the time between the submission date of an NDA/BLA and ultimate approval. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted within 60 days of product approval and prior to the expiration of the patent in question. The U.S. Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with the FDA.
Review and Approval of Drugs in the European Union, United Kingdom and Other Jurisdictions
In order to market any pharmaceutical product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions governing, among other things, research and development, testing, manufacturing, quality control, safety, efficacy, labeling, clinical trials, marketing authorization, packaging, storage, record keeping, reporting, export and import, advertising, marketing and other promotional practices involving pharmaceutical products, as well as commercial sales, distribution, authorization, approval and post-approval monitoring and reporting of its products. Whether or not a company obtains FDA approval for a pharmaceutical product, the company would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or marketing of the pharmaceutical product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not
17
ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
REDEMPLO has received marketing authorization for the treatment of FCS in the EU, Canada, Australia, China and the United Kingdom (“UK”), and the Company conducts clinical trials in a number of jurisdictions outside the United States, including Australia and New Zealand. Each of these jurisdictions maintains its own regulatory regime, administered by its own regulatory authority (for example, Health Canada, the Australian Therapeutic Goods Administration, China’s National Medical Products Administration and the UK’s Medicines and Healthcare products Regulatory Agency (“MHRA”)), governing clinical trials, marketing authorization, manufacturing, post-approval obligations, promotion and pricing and reimbursement. Certain of these authorities permit reliance on prior assessments by reference regulators; for example, REDEMPLO was authorized in the UK under the MHRA’s International Recognition Procedure. The discussion below summarizes the EU and UK regimes, which the Company believes are illustrative of the types of requirements that apply in other jurisdictions outside the United States.
Following its withdrawal from the EU, the UK regulates medicinal products independently of the EU; the EU–UK Trade and Cooperation Agreement provides for mutual recognition of good manufacturing practice inspections and certificates, but not for mutual recognition of marketing authorizations or other pharmaceutical regulatory requirements. Under the Windsor Framework, which amended the Protocol on Ireland/Northern Ireland, medicinal products in Northern Ireland have, since January 1, 2025, been licensed by the MHRA on a UK-wide basis, and EU centralized marketing authorizations no longer extend to Northern Ireland. In the UK, medicinal products are regulated by the MHRA under the Human Medicines Regulations 2012. New UK clinical trials regulations (the Medicines for Human Use (Clinical Trials) (Amendment) Regulations 2025) came into force on April 28, 2026 and, among other things, provide for a combined MHRA and research ethics review, a notification scheme for lower-risk trials and statutory trial registration and results-publication requirements. The MHRA also operates an International Recognition Procedure under which it may rely on assessments by certain reference regulators, including the EMA and the FDA, in granting UK marketing authorizations. The pricing of branded medicines supplied to the National Health Service is governed by the 2024 Voluntary Scheme for Branded Medicines Pricing, Access and Growth (“VPAG”) or a statutory scheme, each of which requires manufacturers to pay a percentage of net sales to the UK government. Under the U.S.–UK pharmaceutical pricing arrangement announced in December 2025, the UK agreed, among other things, to increase the cost-effectiveness threshold applied by the National Institute for Health and Care Excellence and to cap the VPAG payment rate for newer medicines at 15% for 2026 through 2028.
Drug and Biologic Development Process
The conduct of clinical trials in the EU is governed by the EU Clinical Trials Regulation (EU) No. 536/2014 (“CTR”). Under the CTR, a sponsor is able to submit a single application for approval of a clinical trial through a centralized EU clinical trials portal, the Clinical Trials Information System (“CTIS”). One national regulatory authority (the reporting EU member state proposed by the applicant) takes the lead in validating and evaluating the application, and consults and coordinates with the other concerned EU member states. If an application is rejected, it may be amended and resubmitted through the CTIS. If an approval is issued, the sponsor may start the clinical trial in all concerned EU member states. However, a concerned EU member state may in limited circumstances declare an “opt-out” from an approval and prevent the clinical trial from being conducted in such EU member state. The CTR also aims to streamline and simplify the rules on safety reporting and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the CTIS. Following a three-year transition period that ended on January 30, 2025, all clinical trials in the EU are governed by the CTR and managed through CTIS, which serves as the single entry point for the submission of clinical trial applications (“CTAs”) and related information. In December 2025, the European Commission proposed targeted amendments to the CTR, intended to shorten assessment timelines and further harmonize review, as part of its proposed “EU Biotech Act,” which remains under consideration by the European Parliament and the Council.
Under the CTR, national laws, regulations, and the applicable GCP and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use guidelines on GCP, and the ethical principles that have their origin in the Declaration of Helsinki.
During the development of a medicinal product, the European Medicines Agency (“EMA”) and national regulators within the EU provide the opportunity for dialogue and guidance on the development program. At the EMA level, this is usually done in the form of scientific advice, which is given by the Committee for Medicinal Products for Human Use (“CHMP”) on the recommendation of the Scientific Advice Working Party (“SAWP”). A fee is incurred with each scientific advice procedure, but is significantly reduced for designated orphan medicines. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing),
18
nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs. Advice is not legally binding with regard to any future Marketing Authorization Application (“MAA”) of the product concerned.
Marketing Authorization Procedures
In the EU and in Iceland, Norway and Liechtenstein (together the European Economic Area or “EEA”), after completion of all required clinical testing, pharmaceutical products may only be placed on the market after obtaining a Marketing Authorization (“MA”). To obtain an MA of a drug under EU regulatory systems, an applicant can submit a MAA through, amongst others, a centralized or decentralized procedure.
The centralized procedure provides for the grant of a single MA by the European Commission (“EC”) that is valid for all EU member states and, after respective national implementing decisions which must be rendered within 30 days, in the three additional member states of the EEA. The centralized procedure is compulsory for specific pharmaceutical products, including for medicines developed by means of certain biotechnological processes, products designated as orphan pharmaceutical products, advanced therapy pharmaceutical products and pharmaceutical products with a new active substance indicated for the treatment of certain diseases (AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune diseases and other immune dysfunctions and viral diseases). For pharmaceutical products containing a new active substance not yet authorized in the European Economic Area before May 20, 2004 and indicated for the treatment of other diseases, pharmaceutical products that constitute significant therapeutic, scientific or technical innovations or for which the grant of a MA through the centralized procedure would be in the interest of public health at EU level, an applicant may voluntarily submit an application for a marketing authorization through the centralized procedure.
Under the centralized procedure, the CHMP established at the EMA is responsible for conducting the initial assessment of a drug. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure, the timeframe for the evaluation of an MAA by the EMA’s CHMP is, in principle, 210 days from receipt of a valid MAA. However, this timeline excludes clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP, so the overall process typically takes a year or more, unless the application is eligible for an accelerated assessment. Accelerated assessment might be granted by the CHMP in exceptional cases when a pharmaceutical product is expected to be of major public health interest, particularly from the point of therapeutic innovation. On request, the CHMP can reduce the time frame to 150 days if the applicant provides sufficient justification for an accelerated assessment. The CHMP will provide a positive opinion regarding the application only if it meets certain quality, safety and efficacy requirements. However, the EC has final authority for granting the MA within 67 days after receipt of the CHMP opinion. Pharmaceutical products that do not fall within the mandatory scope of the centralized procedure may alternatively be authorized through the decentralized or mutual recognition procedures, under which the competent authority of one EU member state leads the assessment and the other concerned EU member states are asked to recognize its conclusions, subject to a dispute resolution mechanism under which disagreements may ultimately be referred to the EC for a binding decision.
All new MAAs must include a Risk Management Plan (“RMP”), describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. RMPs are continually modified and updated throughout the lifetime of the medicine as new information becomes available. New RMPs are required to be submitted (i) at the request of EMA or a national competent authority, or (ii) whenever the risk-management system is modified, especially as the result of new information being received that may lead to a significant change to the benefit-risk profile or as a result of an important pharmacovigilance or risk-minimization milestone being reached. The regulatory authorities may also impose specific obligations as a condition of the MA. Since October 20, 2023, all RMPs for centrally authorized products are published by the EMA subject to only limited redactions.
Marketing Authorizations have an initial duration of five years. After these five years, the authorization may subsequently be renewed on the basis of a reevaluation of the risk-benefit balance. Once renewed, the MA is valid for an unlimited period unless the EC or the national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with only one additional five-year renewal. Applications for renewal must be made to the EMA at least nine months before the five-year period expires.
Data and Market Exclusivity in the European Union
As in the United States, it may be possible to obtain a period of market and / or data exclusivity in the EU that would have the effect of postponing the entry into the marketplace of a competitor’s generic, hybrid or biosimilar product (even if the pharmaceutical product has already received an MA) and prohibiting another applicant from relying on the MA holder’s pharmacological, toxicological and clinical data in support of another MA for the purposes of submitting an application, obtaining MA or placing the product on the market. New Chemical Entities (“NCE”) approved in the EU qualify for eight years of data exclusivity and ten years of marketing exclusivity. The overall ten-year period can be
19
extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are deemed to bring a significant clinical benefit in comparison with existing therapies.
The data exclusivity period begins on the date of the product’s first MA in the EU. After eight years, a generic product application may be submitted and generic companies may rely on the MA holder’s data. However, a generic product cannot launch until two years later (or a total of 10 years after the first MA in the EU of the innovator product), or three years later (or a total of 11 years after the first MA in the EU of the innovator product) if the MA holder obtains MA for a new indication with significant clinical benefit within the eight-year data exclusivity period. Additionally, another noncumulative one-year period of data exclusivity can be added to the eight years of data exclusivity where an application is made for a new indication for a well-established substance, provided that significant preclinical or clinical studies were carried out in relation to the new indication. Another year of data exclusivity may be added to the eight years, where a change of classification of a pharmaceutical product has been authorized on the basis of significant pre-trial tests or clinical trials (when examining an application by another applicant for or holder of market authorization for a change of classification of the same substance the competent authority will not refer to the results of those tests or trials for one year after the initial change was authorized).
Products may not be granted data exclusivity since there is no guarantee that a product will be considered by the EU’s regulatory authorities to include an NCE. Even if a compound is considered to be an NCE and the MA applicant is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the pharmaceutical product if such company can complete a full MAA with their own complete database of pharmaceutical tests, preclinical studies and clinical trials and obtain MA of its pharmaceutical product.
On April 26, 2023, the EC proposed a comprehensive reform of the European pharmaceutical legislation (the “EU Pharma Package”), consisting of a new directive and a new regulation that would replace Directive 2001/83/EC and Regulation (EC) No 726/2004. The European Parliament and the Council reached a provisional political agreement on the EU Pharma Package on December 11, 2025, and the Council formally adopted its position at first reading on September 28, 2026; approval by the European Parliament at second reading is expected in late 2026. Following publication in the Official Journal of the European Union, the new rules are expected to enter into force 20 days after publication and generally to apply 24 months thereafter, with certain provisions applying earlier. Marketing authorizations granted, and applications submitted, before the new rules apply are expected to remain subject to the current regulatory data and market protection rules under transitional provisions. The final text of the EU Pharma Package has not yet been published in the Official Journal, and the application of the new rules to products authorized before they take effect will be governed by transitional provisions. Under the agreed text, the EU Pharma Package would, among other things, reduce the standard period of regulatory protection for new medicines from eight years of data protection and two years of market protection to eight years of data protection and one year of market protection, subject to conditional one-year extensions (including for products that address an unmet medical need and for a new indication with significant clinical benefit) up to a maximum of eleven years; reduce standard orphan market exclusivity from ten to nine years, with eleven years available for orphan medicines addressing a high unmet medical need; and shorten the EMA’s standard assessment timeline from 210 to 180 days. The EU Pharma Package would also allow an EU member state to require the launch and continued supply of a protected medicine in that member state, failing which, after three years, the medicine would lose its protection against generic competition there.
Separately, on May 12, 2026, the European Parliament and the Council reached a provisional political agreement on a proposed Critical Medicines Act, which is expected to be formally adopted in late 2026 or early 2027 and would introduce measures intended to secure the supply of critical medicines in the EU, including resilience-related requirements in public procurement that may favor EU-based manufacturing, support for EU-based manufacturing projects and mechanisms for collaborative procurement by EU member states, which the agreed text extends to orphan medicines.
Orphan Designation and Exclusivity
The criteria for designating an orphan medicinal product in the EU are similar in principle to those in the United States. The EMA’s Committee for Orphan Medicinal Products (“COMP”) evaluates applications for orphan drug designation within 90 days and will issue a recommendation if the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the EU (prevalence criterion). In addition, Orphan Drug Designation can be granted if, for economic reasons, the medicinal product would be unlikely to be developed without incentives and if there is no other satisfactory method approved in the EU of diagnosing, preventing, or treating the condition, or if such a method exists, the proposed medicinal product is a significant benefit to patients affected by the condition. Orphan drug designations are granted by the EC. An application for orphan drug designation (which is not a marketing authorization, as not all orphan-designated medicines reach the authorization application stage) must be submitted first before an application for marketing authorization of the
20
medicinal product is submitted. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted, and sponsors must submit an annual report to EMA summarizing the status of development of the medicine. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Designated orphan medicines are eligible for conditional marketing authorization.
COMP reassesses the orphan drug designation of a product in parallel with the review for a marketing authorization; for a product to benefit from market exclusivity it must maintain its orphan drug designation at the time of marketing authorization review by the EMA and approval by the EC. Additionally, any marketing authorization granted for an orphan medicinal product must only cover the therapeutic indication(s) that are covered by the orphan drug designation. Upon the grant of a marketing authorization, orphan drug designation provides up to ten years of market exclusivity in the orphan indication. Under the EU Pharma Package described above, orphan market exclusivity for products whose marketing authorization applications are submitted after the new rules apply is expected to be reduced to nine years (eleven years for orphan medicines addressing a high unmet medical need), and the two-year pediatric extension of orphan market exclusivity described below is expected to be replaced by a six-month extension of any applicable supplementary protection certificate.
During the 10-year period of market exclusivity, with a limited number of exceptions, the regulatory authorities of the EU member states and the EMA may not accept applications for marketing authorization, accept an application to extend an existing marketing authorization or grant marketing authorization for other similar medicinal products for the same therapeutic indication. A similar medicinal product is defined as a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication. An orphan medicinal product can also obtain an additional two years of market exclusivity for an orphan-designated condition when the results of specific studies are reflected in the Summary of Product Characteristics (“SmPC”), addressing the pediatric population and completed in accordance with a fully compliant Pediatric Investigation Plan (“PIP”). No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.
The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, i.e. the condition prevalence or financial returns criteria under Article 3 of Regulation (EC) No. 141/2000 on orphan medicinal products. When the period of orphan market exclusivity for an indication ends, the orphan drug designation for that indication expires as well. Orphan exclusivity runs in parallel with normal rules on data exclusivity and market protection. Additionally, a marketing authorization may be granted to a similar medicinal product (orphan or not) for the same or overlapping indication subject to certain requirements.
Pediatric Development
In the EU, companies developing a new pharmaceutical product are obligated to study their product in children and must therefore submit a PIP together with a request for agreement to the EMA. The EMA issues a decision on the PIP based on an opinion of the EMA’s Pediatric Committee (“PDCO”). Companies must conduct pediatric clinical trials in accordance with the PIP approved by the EMA, unless a deferral (e.g. until enough information to demonstrate its effectiveness and safety in adults is available) or waiver (e.g. because the relevant disease or condition occurs only in adults) has been granted by the EMA. The MAA for the pharmaceutical product must include the results of all pediatric clinical trials performed and details of all information collected in compliance with the approved PIP, unless a waiver or a deferral has been granted, in which case the pediatric clinical trials may be completed at a later date. Pharmaceutical products that are granted a marketing authorization on the basis of the pediatric clinical trials conducted in accordance with the approved PIP are eligible for a six-month extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan pharmaceutical products, a two-year extension of the orphan market exclusivity. This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the approved PIP are developed and submitted. An approved PIP is also required when a marketing authorization holder wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized and covered by intellectual property rights.
Post-Approval Regulation
Similar to the United States, both MA holders and manufacturers of pharmaceutical products are subject to comprehensive regulatory oversight by the EMA, the EC and/or the competent regulatory authorities of the EU member states. This oversight applies both before and after grant of manufacturing licenses and marketing authorizations. It includes control of compliance with EU good manufacturing practices rules, manufacturing authorizations, pharmacovigilance rules and requirements governing advertising, promotion, sale, and distribution, recordkeeping, importing and exporting of pharmaceutical products.
21
Failure by us or by any of our third-party partners, including suppliers, manufacturers and distributors to comply with EU laws and the related national laws of individual EU member states governing the conduct of clinical trials, manufacturing approval, MA of pharmaceutical products and marketing of such products, both before and after grant of MA, manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.
The holder of an EU MA for a pharmaceutical product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of pharmaceutical products.
These pharmacovigilance rules can impose on holders of MAs the obligation to conduct a labor intensive collection of data regarding the risks and benefits of marketed pharmaceutical products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies or post-authorization safety studies to obtain further information on a medicine’s safety, or to measure the effectiveness of risk-management measures, which may be time consuming and expensive and could impact our profitability. MA holders must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of Periodic Safety Update Reports (“PSURs”) in relation to pharmaceutical products for which they hold MAs. The EMA reviews PSURs for pharmaceutical products authorized through the centralized procedure. If the EMA has concerns that the risk-benefit profile of a product has varied, it can adopt an opinion advising that the existing MA for the product be suspended, withdrawn or varied. The agency can advise that the MA holder be obliged to conduct post-authorization Phase 4 safety studies. If the EC agrees with the opinion, it can adopt a decision varying the existing MA. Failure by the MA holder to fulfill the obligations for which the European Commission’s decision provides can undermine the on-going validity of the MA.
More generally, non-compliance with pharmacovigilance obligations can lead to the variation, suspension or withdrawal of the marketing authorization for the pharmaceutical product or imposition of financial penalties or other enforcement measures.
The manufacturing process for pharmaceutical products in the EU is highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive (EU) 2017/1572 (replacing Directive 2003/94/EC), Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice (“GMP”). These requirements include compliance with EU GMP standards when manufacturing pharmaceutical products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical ingredients into the EU. Amendments or replacements of Directive 2001/83/EC and Regulation (EC) No 726/2004 are part of the reform proposal for European pharmaceutical legislation.
Similarly, the distribution of pharmaceutical products into and within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU member states. The manufacturer or importer must have a qualified person who is responsible for certifying that each batch of product has been manufactured in accordance with GMP, before releasing the product for commercial distribution in the EU or for use in a clinical trial. Manufacturing facilities are subject to periodic inspections by the competent authorities for compliance with GMP.
Advertising and Promotion
The advertising and promotion of our products is also subject to EU laws concerning promotion of pharmaceutical products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other national legislation of individual EU member states may apply to the advertising and promotion of pharmaceutical products and may differ from one country to another. These laws require that promotional materials and advertising in relation to pharmaceutical products comply with the product’s SmPC as approved by the competent regulatory authorities. The SmPC is the document that provides information to physicians concerning the safe and effective use of the pharmaceutical product. It forms an intrinsic and integral part of the marketing authorization granted for the pharmaceutical product. Promotion of a pharmaceutical product that does not comply with the SmPC is considered to constitute off-label promotion. All advertising and promotional activities for the product must be consistent with the approved SmPC and therefore all off-label promotion of pharmaceutical products is prohibited in the EU. Direct-to-consumer advertising of prescription-only pharmaceutical products is prohibited in the EU. Violations of the rules
22
governing the promotion of pharmaceutical products in the EU could be penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising and promotion of our products to the general public and may also impose limitations on its promotional activities with healthcare professionals.
Pricing and Reimbursement Environment
Even if a pharmaceutical product obtains a marketing authorization in the EU, there can be no assurance that reimbursement for such product will be secured on a timely basis or at all. The EU member states are free to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement, and to control the prices and reimbursement levels of pharmaceutical products for human use. An EU member state may approve a specific price or level of reimbursement for the pharmaceutical product, or alternatively adopt a system of direct or indirect controls on the profitability of the company responsible for placing the pharmaceutical product on the market, including volume-based arrangements, caps and reference pricing mechanisms.
Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of our product candidates, if any, to other available therapies in order to obtain or maintain reimbursement or pricing approval. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, pharmaceutical products launched in the EU do not follow price structures of the United States and generally published and actual prices tend to be significantly lower. Publication of discounts by third-party payers or authorities and public tenders may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.
The so-called health technology assessment (“HTA”) of pharmaceutical products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU member states, including France, Germany, Ireland, Italy and Sweden. The HTA process, which is governed by the national laws of these countries, is the procedure according to which the assessment of the public health impact, therapeutic impact, and the economic and societal impact of use of a given pharmaceutical product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost-effectiveness of individual pharmaceutical products as well as their potential implications for the healthcare system. Those elements of pharmaceutical products are compared with other treatment options available on the market. The outcome of HTA regarding specific pharmaceutical products will often influence the pricing and reimbursement status granted to pharmaceutical products by the regulatory authorities of individual EU member states. A negative HTA of one of our products by a leading and recognized HTA body could not only undermine our ability to obtain reimbursement for such product in the EU member state in which such negative assessment was issued, but also in other EU member states. For example, EU member states that have not yet developed HTA mechanisms could rely to some extent on the HTA performed in other countries with a developed HTA framework, when adopting decisions concerning the pricing and reimbursement of a specific pharmaceutical product.
Regulation (EU) 2021/2282 on health technology assessment (“HTAR”) entered into force on January 11, 2022 and applies from January 12, 2025 onwards, with joint clinical assessments phased in by product category: new medicines for the treatment of cancer and advanced therapy medicinal products from January 12, 2025, orphan medicinal products from January 13, 2028 and all other new medicines authorized through the centralized procedure from January 13, 2030. HTAR intends to boost EU level cooperation among EU member states in assessing health technologies, including new pharmaceutical products, and to provide the basis for cooperation at the EU level for joint clinical assessments in these areas. Under HTAR, EU member states will be able to use common HTA tools, methodologies and procedures across the EU, working together in four main areas: the joint clinical assessment of the innovative health technologies with the most potential impact for patients; joint scientific consultations whereby developers can seek advice from HTA authorities; identification of emerging health technologies to identify promising technologies early; and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement. The European Commission has stated that the role of the HTA regulation is not to influence pricing and reimbursement decisions in the individual EU member states, but there can be no assurance that the HTA regulation will not have effects on pricing and reimbursement decisions.
To obtain reimbursement or pricing approval in some countries, including the EU member states, we may be required to conduct studies that compare the cost-effectiveness of our product candidates to other therapies that are considered the local standard of care. There can be no assurance that any country will allow favorable pricing, reimbursement and market access conditions for any of our products, or that it will be feasible to conduct additional cost-effectiveness studies, if required.
23
In certain EU member states, pharmaceutical products designated as orphan pharmaceutical products may be exempted or waived from having to provide certain clinical, cost-effectiveness and other economic data in connection with their filings for pricing/reimbursement approval.
Regulation (EU) 2025/2645 on compulsory licensing for crisis management, which entered into force in January 2026, permits the European Commission, as a measure of last resort following the activation of an EU crisis or emergency mode, to grant an EU-wide, non-exclusive and time-limited compulsory license for crisis-relevant products, including medicinal products, subject to reasonable remuneration of the rights holder.
Data Privacy and Security Laws
There are numerous U.S. federal, state, and local laws and regulations, as well as foreign legislation, in particular in the EU and UK, which regulate personal information, including how that information may be used, processed, and disclosed. These regulations also cover sensitive personal information, including medical and health information, and impose requirements on entities that handle such information to implement certain privacy and security measures. We and/or our partners may be subject to these laws.
In the United States, at the federal level, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH Act”), and the regulations promulgated thereunder, impose data privacy, security and data breach reporting obligations with respect to protected health information (“PHI”) on covered entities—which include health plans, healthcare clearinghouses and certain healthcare providers—and business associates—which include persons or entities that perform certain functions or activities that involve the use or disclosure of PHI on behalf of, or in connection with providing a service for, a covered entity.
There are also a number of U.S. state comprehensive privacy laws, such as the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (together, the “CCPA”), that govern the privacy and security of personal information in certain circumstances. The CCPA applies to personal information of consumers (which is defined to include business representatives and employees) who are California residents, imposes obligations on certain businesses that do business in California, including to provide specific disclosures in privacy notices, and affords rights to California residents in relation to their personal information. Regulations under the CCPA that took effect on January 1, 2026 also impose risk assessment, automated decision-making technology and annual cybersecurity audit requirements on certain covered businesses, with compliance deadlines that phase in through 2030. Health information falls under the CCPA’s definition of personal information where it identifies, relates to, describes, is reasonably capable of being associated with or could reasonably be linked, directly or indirectly, with a particular consumer or household and is considered “sensitive personal information,” which is offered greater protection. However, the CCPA, like other U.S. state comprehensive privacy laws, does not apply to PHI, and most other U.S. state laws exempt covered entities and business associates altogether. Some of these laws and regulations impose different, and in certain instances, more stringent requirements than HIPAA. Failing to comply with these laws and regulations can result in significant civil and/or criminal penalties, as well as, in some cases, exposure to private litigation, all of which can result in financial and reputational risks.
The processing of personal data, including health-related personal data, in the EEA is mainly governed by the provisions of the European General Data Protection Regulation (EU) 2016/679 (“GDPR”), and by data protection related national laws, which supplement, interpret, and in some cases go beyond the GDPR. In the UK, the processing of personal data is mainly governed by the GDPR as incorporated into UK law pursuant to the European Union (Withdrawal) Act 2018 (the “UK GDPR”). The GDPR and UK GDPR impose specific responsibility and liability in relation to personal data that we process, particularly when we act as a controller.
The GDPR and UK GDPR impose a number of strict obligations and restrictions on the ability to process personal data of individuals in the EEA, including health data from clinical trials and adverse event reporting. The GDPR and UK GDPR also include requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals prior to processing their personal data (including health data), data breach notification obligations to the national data protection authorities and obligations relating to the security and confidentiality of the personal data. EEA countries may also impose additional requirements in relation to processing of health, genetic and biometric data through their national legislation.
Failure to comply with the requirements of the GDPR or UK GDPR and the related national data protection laws of the EEA countries may result in significant monetary fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company – whichever is greater. In addition, violations of national laws can trigger additional administrative penalties and investigations, corrective orders, temporary or definitive bans and, in some jurisdictions, a number of criminal offenses (punishable by capped or uncapped fines) for organizations and in certain cases their directors and officers as well as civil liability claims from individuals whose personal data was processed. Data
24
protection authorities from the different EEA countries may still implement certain variations, enforce the GDPR and national data protection laws differently, and introduce additional national regulations and guidelines, which adds to the complexity of processing personal data in the EEA. Guidance developed at both EEA level and at the national level in individual EEA countries concerning implementation and compliance practices is often updated or otherwise revised.
There is, moreover, a growing trend towards required public disclosure of clinical trial data in the EU which adds to the complexity of obligations relating to processing health data from clinical trials. Such public disclosure obligations are provided in the EU Clinical Trials Regulation, EMA disclosure initiatives and voluntary commitments by industry. Failing to comply with these obligations could lead to government enforcement actions and significant penalties against us, harm to our reputation, and adversely impact our business and operating results. The uncertainty regarding the interplay between different regulatory frameworks, such as the Clinical Trials Regulation and the GDPR, further adds to the complexity that we face with regard to data protection regulation.
The GDPR also imposes specific restrictions on the transfer of personal data to countries outside of the EEA that are not considered by the European Commission to provide an adequate level of data protection, and appropriate safeguards are required to enable such transfers. Among the appropriate safeguards that can be used, the data exporter may use the standard contractual clauses (“SCCs”). In addition, when relying on SCCs, the data exporters are required to conduct a transfer risk assessment to verify if anything in the law and/or practices of the third country may impinge on the effectiveness of the SCCs in the context of the transfer at stake and, if so, to identify and adopt supplementary measures that are necessary to ensure compliance with the EU level of protection of personal data. Where no supplementary measure is suitable, the data exporter should avoid, suspend or terminate the transfer. On July 10, 2023, the European Commission adopted its adequacy decision for the EU-US Data Privacy Framework. On the basis of this adequacy decision, personal data can flow from the EEA to US companies participating in the Data Privacy Framework. In September 2025, the General Court of the EU dismissed a challenge to the adequacy decision for the EU-US Data Privacy Framework; an appeal to the Court of Justice of the European Union remains pending, and an adverse ruling could require companies to rely on alternative transfer mechanisms, which may themselves be affected, since they depend on the same assessment of the US government access to personal data. With regard to the transfer of data from the EEA to the UK, based on the European Commission’s adequacy decision of June 28, 2021, personal data may flow freely from the EEA to the UK. On December 19, 2025, the European Commission adopted new adequacy decisions for the UK, which are valid until December 27, 2031, subject to periodic review. With respect to transfers from the UK to other countries, these transfers are also subject to specific transfer rules under the UK regime. These UK international transfer rules broadly mirror the EU GDPR rules. The UK Data (Use and Access) Act 2025, the principal data protection provisions of which took effect in February 2026, amended the UK GDPR in certain respects, including by introducing a “data protection test” for international transfers. Transfers from the UK that are not covered by an adequacy decision rely on the UK’s international data transfer agreement or the UK addendum to the EU SCCs, rather than the EU SCCs themselves. With regard to the transfer of data from the UK to the US, the UK government has adopted an adequacy decision for the UK Extension to the EU-US Data Privacy Framework, the UK-US Data Bridge, which came into force on October 12, 2023.
Promotional Activities
In the EU, interactions between pharmaceutical companies and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct both at EU level and in the individual EU member states. The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of pharmaceutical products is prohibited in the EU. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of the EU member states. Violation of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain EU member states must be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, their regulatory professional organization, and/or the competent authorities of the individual EU member states. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the individual EU member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
While the UK has left the EU, as mentioned above, it should be noted that the UK still has the strictest anti-bribery regime in Europe, the UK Bribery Act 2010. The Act is applicable English law and continues to apply to any company incorporated in or “carrying on business” in the UK, irrespective of where in the world the alleged bribery activity occurs.
25
Other Legislation Regarding Marketing, Authorization and Pricing of Pharmaceutical Products in the European Union
Other core legislation relating to the marketing, authorization and pricing of pharmaceutical products in the EU exists as regulations and directives, while the implementing acts and guidelines based on these may vary in each EU member state. In addition, the respective national provisions of the member states, as well as self-committed codes of the pharmaceutical industry, must be observed.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of products will depend, in part, on the extent to which products will be adequately covered and reimbursed by third-party payers, including government health programs such as, in the United States, Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payer will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the product once coverage is approved. Third-party payers may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. A payer’s decision to provide coverage for a drug product does not necessarily imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on our investment in product development.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products has resulted in several congressional inquiries, proposed legislation, and other policy developments designed to, among other things, bring more transparency to product pricing. Third-party payers are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. If these third-party payers do not consider a product to be cost effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, risk sharing, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, in 2022, the U.S. government passed the Inflation Reduction Act (“IRA”), which authorizes the U.S. Department of Health and Human Services (“HHS”) to negotiate prices of certain drugs with participating manufacturers in federal healthcare programs. In 2025, an executive order issued by the White House directed the HHS to implement a “Most Favored Nation” (“MFN”) drug pricing policy. Since September 2025, the administration has entered into agreements with various pharmaceutical manufacturers under which, among other things, the manufacturers agreed to provide MFN pricing to state Medicaid programs and to launch new medicines in the United States at prices no higher than those in other developed countries. In December 2025, the CMS proposed the Guarding U.S. Medicare Against Rising Drug Costs (“GUARD”) model, a mandatory Medicare Part D payment model, that would require manufacturers of certain single-source drugs with significant Part D spending to pay rebates with reference to international pricing benchmarks. The GUARD model has not been finalized. Although REDEMPLO does not currently meet the proposed Part D spending threshold for inclusion in the GUARD model, as proposed, it could become subject to the GUARD model in the future if sales grow. In October 2026, the CMS finalized the Global Benchmark for Efficient Drug Pricing (“GLOBE”) model, a similar model for Medicare Part B beginning in 2027. The GLOBE model is the subject of pending litigation and the GUARD model, if finalized, may be challenged on similar grounds, and bills to codify MFN pricing have been introduced in Congress. Adoption of these and other controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals. As a result, the marketability of any product which receives regulatory approval for commercial sale may suffer if the government and third-party payers fail to provide adequate coverage and reimbursement.
In addition, an increasing emphasis on managed care in the United States has increased and will continue to increase the pressure on drug pricing. Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time. In particular, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’
26
share of sales to federal health care programs. Even if favorable coverage and reimbursement status is attained for one or more products that receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
In the EU, pricing and reimbursement schemes vary widely between member states. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some member states may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the EU provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU member states may approve a specific price for a drug product or they may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements for any of our products.
Healthcare Laws and Regulations
Healthcare providers, physicians and third-party payers play important roles in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with healthcare providers, physicians, third-party payers and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which the Company markets, sells and distributes products for which it obtains marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
•the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing any remuneration (in cash or in kind), directly or indirectly, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any item, facility or service for which payment may be made in whole or in part under a federal healthcare program such as Medicare and Medicaid;
•the federal Foreign Corrupt Practices Act prohibits, among other things, U.S. corporations and persons acting on their behalf from offering, promising, authorizing or making payments to any foreign government official (including certain healthcare professionals in many countries), political party, or political candidate in an attempt to obtain or retain business or otherwise seek preferential treatment abroad;
•the federal False Claims Act, which may be enforced by the U.S. Department of Justice or private whistleblowers who bring civil actions (qui tam actions) on behalf of the federal government, imposes per-violation civil penalties, as well as liability for treble damages and for attorneys’ fees and costs, on individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, making a false statement material to a false or fraudulent claim, or improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government;
•the U.S. Department of Health and Human Services’ Civil Monetary Penalty authorities, which imposes administrative sanctions for, among other things, presenting or causing to be presented false claims for government payment and providing remuneration to government health program beneficiaries to influence them to order or receive healthcare items or services;
•Federal government price reporting laws, which require us to accurately and timely calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products. Violations of these laws may, in certain circumstances, result in civil monetary penalties and/or violations of the False Claims Act;
•Federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;
•HIPAA, as amended by the HITECH Act and its implementing regulations, also imposes criminal and civil liability and penalties on those who violate requirements, including mandatory contractual terms, intended to safeguard the privacy, security, transmission and use of individually identifiable health information;
•the federal health care fraud statute imposes criminal liability for, among other conduct, executing a scheme to defraud any healthcare benefit program, and the federal false statements statute relating to healthcare matters imposes criminal liability for knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
27
•the federal Physician Payment Sunshine Act requires manufacturers of drugs (among other products) to report to the Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services information related to payments and other transfers of value to various healthcare professionals including physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals, as well as physician ownership and investment interests in the reporting manufacturers;
•similar state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply (e.g., in the EU, where the implementation of EU-wide regulations as well as independent national legislation may vary for each EU member state) to sales or marketing arrangements and claims involving healthcare items or services reimbursed by nongovernmental third-party payers, including private insurers; and
•certain state laws require pharmaceutical companies to comply with voluntary compliance guidelines promulgated by a pharmaceutical industry association and relevant compliance guidance issued by the U.S. Department of Health and Human Services Office of Inspector General; bar drug manufacturers from offering or providing certain types of payments or gifts to physicians and other health care providers; and/or require disclosure of gifts or payments to physicians and other healthcare providers.
Various state and foreign laws also govern the privacy and security of health information in some circumstances; many of these laws differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
E.Facilities and Resources
The Company’s principal executive offices are located in Pasadena, California. The Company also has research and development facilities in Madison, Wisconsin and San Diego, California, and a manufacturing facility in Verona, Wisconsin.
Research and Development Facilities
The Company operates research laboratory facilities in San Diego, California and Madison, Wisconsin, where its pre-clinical research and development activities, including the discovery and early development of RNAi therapeutics, take place. A summary is provided below:
•State-of-the-art laboratories with supporting office space that comprise more than 251,000 total square feet;
•Cell culture laboratories;
•Animal efficacy models for numerous diseases, including cardio metabolic, viral, liver, skeletal muscle, ocular, central nervous system (CNS), metabolic, renal, obesity and lung diseases;
•Animal safety screening and assessment;
•Clinical pathology laboratories and in-house histopathology and pathology evaluation capabilities;
•Integrated in-house expertise in clinical biomarker assay development and analytical evaluation;
•Advanced Artificial Intelligence-leveraged data science capabilities dedicated to analyzing human genetics databases for target discovery and validation;
•Drug metabolism and pharmacokinetics (DMPK), bioanalytical, biodistribution, and clearance assessment and methodology capabilities;
•Primate colony housed at the Wisconsin National Primate Research Center, an affiliate of the University of Wisconsin, and at other contract research organizations (CROs).
•Pharmacodynamic method development and analysis and translational biomarker development capabilities;
•Conventional and confocal microscopy, flow cytometry, Luminex platform, qRT-PCR and clinical chemistry analytics; and
•Oligonucleotide, peptide, antibody, and small molecule discovery, synthesis, production, and analytics capabilities (for example, HPLC, NMR, and LCMS).
GMP Manufacturing and Related Development Laboratory Facility
The Company has a GMP manufacturing facility in Verona, Wisconsin that includes related laboratories and office space to support chemistry, manufacturing, and controls (CMC) and quality activities. A summary is provided below:
28
•State-of-the-art, custom-designed GMP oligonucleotide manufacturing facility with related support laboratories for process development and analytical development, comprising approximately 300,000 total square feet;
•Full analytical chemistry capabilities including method development and validation, transfer of methods, and support of in-process and final product analysis;
•Drug product formulation development capabilities;
•In-house capabilities to release GMP drug substance and finished drug product;
•Multiple equipment scales for oligonucleotide manufacturing with maximum capacity to manufacture hundreds of kilograms of GMP drug substance annually; and
•Drug substance manufacturing capabilities to produce and release GMP material (API) and capabilities to release finished drug product pending ongoing commissioning, qualification, and validation (CQV) activities, allowing for the manufacture of GMP drug substance at the facility.
F.Human Capital Management
As of September 30, 2026, the Company employed 1,059 full-time employees based in the United States. In addition, the Company employs 2 full-time employees in Switzerland and 1 full-time employee in New Zealand.
In fiscal year 2026, the Company continued to expand its workforce, including increasing commercial and medical affairs roles to support commercialization, increasing in-house manufacturing capacity, and enhancing expertise and throughput in clinical and preclinical research and development. The Company continually evaluates the business need and opportunity and balances in-house expertise and capacity with outsourced expertise and capacity. Currently, the Company outsources substantial clinical trial work to clinical research organizations and certain drug manufacturing to contract manufacturers.
Drug development is a complex endeavor which requires deep expertise and experience across a broad array of disciplines. Pharmaceutical companies both large and small compete for a limited number of qualified applicants to fill specialized positions. To attract qualified applicants, the Company offers a total compensation package consisting of base salary and cash target bonus targeting the 50th to 75th percentile of market, and offers a comprehensive benefit package and equity compensation to every employee. Bonus opportunity and equity compensation increase as a percentage of total compensation based on level of responsibility. Actual bonus payout is based on performance.
A significant portion of the Company’s employees have obtained advanced degrees in their professions. The Company supports its employees’ further development with individualized development plans, mentoring, coaching, group training, conference attendance and financial support including tuition reimbursement and student loan debt repayment assistance.
Inclusion
The Company is dedicated to fostering a welcoming, healthy and equitable environment where all employees can thrive and contribute to its mission of delivering safe and effective medicine to patients in need. Ongoing efforts include programs and processes that promote awareness of inclusion and belonging, such as anti-bias training and employee engagement initiatives.
G.Investor Information
The Company’s website address is http://www.arrowheadpharma.com. The Company’s website address is not intended to function as a hyperlink and the information contained on its website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K. The Company’s reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to such periodic reports and Proxy Statements, are accessible through its website, free of charge, as soon as reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the SEC. These SEC reports can be accessed through the “Investors” section of the Company’s website.
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding the Company and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.
29
ITEM 1A.RISK FACTORS
The Company’s business involves various risks and uncertainties in addition to the normal risks of business, some of which are discussed in this section. It should be noted that the Company’s business may be adversely affected by general economic conditions and other factors beyond the Company’s control. In addition, other risks and uncertainties not presently known or that the Company currently believes to be immaterial may also adversely affect the Company’s business. Some of the factors, events, and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events, or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events or contingencies that could materially and adversely affect us in the future. Any such risks or uncertainties, or any of the following risks or uncertainties, that develop into actual events could result in a material and adverse effect on the Company’s business, financial condition, results of operations, or liquidity.
The information discussed below should be considered carefully with the other information contained in this Annual Report on Form 10-K and the other documents and materials filed by the Company with the SEC, as well as news releases and other information publicly disseminated by the Company from time to time.
Risk Factors Summary
Risks Related to Our Discovery, Development, and Commercialization of Medicines
•Our prospects substantially depend on the commercial success of REDEMPLO and success of our clinical-stage product candidates. If we and our licensees are unable to successfully commercialize REDEMPLO or obtain approval for and commercialize these product candidates, our business could be materially harmed.
•Our product candidates are in clinical development, which is a lengthy and expensive process with uncertain outcomes and the potential for substantial delays.
•Our clinical trials may not yield successful results, may reveal significant adverse events, toxicities or other side effects, or may not be predictive of future clinical trial results, any of which could prevent, delay or limit the scope of regulatory approval and commercialization.
•We face potential product liability exposure, and successful claims against us could result in substantial liability and limit the commercialization of REDEMPLO or any other approved product candidate.
•Our commercialization, collaborative and other arrangements may give rise to disputes over contract terms and the ownership or protection of our intellectual property, which may adversely affect the commercial success of our product candidates.
•The actions of, and fluctuations in buying or distribution patterns by, specialty distributors and specialty pharmacies could adversely affect our ability to sell or market products profitably and our revenues, financial condition, or results of operations.
Risks Related to Regulatory Review and Approval of Our Product Candidates
•A Fast Track or Breakthrough Therapy product designation, or the entry into a program that seeks to provide priority review such as the Split Real Time Application Review (STAR) pilot program or the use of a priority review voucher, may not lead to a faster development or regulatory review or approval process.
•We and our licensees conduct clinical trials for product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.
•Even if we obtain FDA approval for products in the United States, we may never obtain approval to commercialize those product candidates outside of the United States.
•If the FDA or comparable foreign regulatory authorities approve generic versions of REDEMPLO, or generic or biosimilar versions of any other potential products that receive marketing approval, or such authorities do not grant REDEMPLO appropriate periods of data or market exclusivity before approving a generic version, the sales of REDEMPLO could be adversely affected.
•Failure to comply with regulatory requirements or unanticipated problems with our products may result in various adverse actions such as suspension or withdrawal of products, closure of a facility or substantial penalties or fines.
•Pharmaceutical and biological product marketing is subject to substantial regulation, and any failure by us or our commercial and collaborative partners to comply can adversely affect our business.
Risks Related to Our Intellectual Property
•Our ability to protect, maintain, and enforce our intellectual property through patents and other proprietary rights is uncertain, exposing us to the possible loss of competitive advantage.
•We are party to technology license agreements that require us to satisfy obligations to keep them effective and termination of these agreements could seriously and adversely affect our technology and business.
•We may be and have been subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our potential products.
Risks Related to Our Business Model
30
•Our product candidates are in various stages of development and we currently have only one approved product and limited history upon which to evaluate our business and prospects.
•We may need to establish additional relationships with strategic and development partners to fully develop our product candidates and commercialize any approved products.
•Our ability to generate milestone and royalty payments under our current and potential future licensing and collaboration agreements is substantially controlled by our partners.
•We will need to achieve commercial acceptance and adequate coverage and reimbursement of REDEMPLO and our other product candidates to generate revenues and achieve profitability.
•If the market opportunities for REDEMPLO, or any other approved product candidates, are smaller than we expect, it could materially and adversely affect our financial condition and results of operations.
•We have limited manufacturing capability and rely on third parties to manufacture certain of our clinical supplies and our commercial products and to conduct our clinical trials, and if they fail to meet their obligations, the development and commercialization of our products could be adversely affected.
•We rely, and expect to increasingly rely, on third parties located outside the United States, including in China, and the BIOSECURE Act, tariffs and other trade restrictions could disrupt our supply chain.
•We may have difficulty expanding our operations successfully as we evolve our pipeline and expand our commercial operations.
•Because we use biological, hazardous, and radioactive materials, our failure to comply with laws regulating the protection of the environment and health and human safety could adversely affect our business.
•Our relationships with healthcare providers, physicians, and third-party payers, and our reporting of information in connection with the Medicaid Drug Rebate Program and other governmental pricing programs, are subject to applicable anti-kickback, fraud and abuse, and other healthcare laws, and violations could expose us to criminal sanctions, civil penalties, contractual damages, and reputational harm.
Risks Related to Our Financial Condition
•We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
•We will require substantial additional funds to complete our research and development activities.
•The terms of our financing agreement with Sixth Street Lending Partners and our indebtedness could adversely affect our operations and limit our ability to plan for or respond to changes in our business, and if we are unable to comply with restrictions in our financing agreement, the repayment of our indebtedness could be accelerated.
•Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.
•Our ability to utilize net operating loss carryforwards and other tax benefits may be limited.
•We may be unable to raise the funds necessary to repurchase the 0.00% Convertible Senior Notes due 2032 for cash following a fundamental change or to pay any cash amounts due upon maturity or conversion of the notes.
Risks Related to Investment and Securities
•Our common stock price has fluctuated significantly over the last several years and may continue to do so in the future, without regard to our results of operations and prospects.
Economic and Industry Risks
•The healthcare system is under significant financial pressure to reduce costs, which could reduce payment and reimbursement rates for drugs.
•Evolving regulatory standards make it difficult to accurately predict the likelihood of marketing approval even when clinical trials meet their endpoints.
Risks Related to Our Discovery, Development, and Commercialization of Medicines
Our near-term prospects depend substantially on the commercial success of REDEMPLO, and a significant portion of our value is tied to a single product.
REDEMPLO is our only approved product, and the sNDA we submitted for plozasiran in severe hypertriglyceridemia covers the same molecule. Our ability to generate meaningful product revenue in the near term therefore depends on REDEMPLO. That in turn depends on obtaining approval of the planned supplemental indication on the timeline and terms we expect, on the rate at which physicians adopt REDEMPLO in familial chylomicronemia syndrome and, if approved, in severe hypertriglyceridemia, on obtaining and maintaining adequate coverage and reimbursement in the United States and in the jurisdictions in which we elect to launch, on building and operating a commercial organization of sufficient scale, and on the performance of the third parties on which we rely for manufacturing and distribution. None of our other product candidates is approved for sale. Our most advanced wholly owned candidate other than plozasiran is zodasiran, whose Phase 3 trial we do not expect to complete until mid-2027, and
31
our other late-stage programs are controlled by our licensees, from which we would receive milestone and royalty (or profit sharing) payments rather than product revenue. If REDEMPLO does not achieve or sustain commercial acceptance, if the planned supplemental indication is not approved or is approved later or on narrower terms than we expect, or if pricing, reimbursement or competition limits the revenue we are able to realize, our business, financial condition, results of operations and the market price of our common stock would be materially and adversely affected.
Our prospects substantially depend on the success of our clinical-stage product candidates. If we and our licensees are unable to obtain approval for and commercialize these product candidates, our business could be materially harmed.
Our future success is substantially dependent on the ability of the Company and our licensees to timely complete clinical trials and obtain marketing approval for, and then successfully commercialize our clinical-stage product candidates. We are not permitted to market or promote our product candidates before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.
The success of developing and commercializing our product candidates will depend on several factors, including the following:
•obtaining positive data that supports demonstration of efficacy, safety and tolerability profiles and durability of effect for our product candidates that are satisfactory to the FDA or any comparable foreign regulatory authority for marketing approval;
•successful inspections by FDA or any comparable foreign regulatory authority of our manufacturing facilities and clinical trial sites, including as part of the review process for marketing approval;
•successful and timely enrollment of appropriate patients for the indications included in our current and future clinical trials;
•potential variability of patient outcomes;
•the extent of any required post-marketing approval commitments, potentially including post-marketing clinical trials or other studies, to applicable regulatory authorities;
•the establishment of and maintenance of sufficient internal manufacturing capabilities;
•the maintenance of existing or the establishment of new supply arrangements with third-party drug product suppliers and manufacturers for clinical development and, if approved, commercialization of our product candidates;
•the maintenance of existing or the establishment of new scaled production arrangements with third-party manufacturers to obtain finished products that are appropriately packaged for sale;
•obtaining and maintaining patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally;
•protecting our rights in our intellectual property portfolio;
•establishing sales, marketing and distribution capabilities and the successful launch of commercial sales of our product candidates if and when approved for marketing, whether alone or in collaboration with others;
•a continued acceptable safety profile following any marketing approval;
•commercial acceptance by patients, the medical community and third-party payers; and
•our ability to compete with other therapies.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any collaborator or licensee. For development programs that are licensed to third parties, we generally do not have control over the design or conduct of clinical trials and will not have discretion over marketing decisions. If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize any product candidates from our lead programs, which would materially harm our business. If we do not receive marketing approvals for such product candidates, we may not be able to continue our operations.
There are substantial risks inherent in attempting to commercialize our new drugs, and, as a result, we may not be able to successfully develop additional products for commercial use.
Scientific research and development requires significant amounts of capital and even approved drug candidates take a long time to reach commercial viability if it can be achieved at all. During the research and development process, we may experience technological barriers that we may be unable to overcome. Because we use platform technology to develop drug candidates, toxicology signals that may emerge in the course of testing of one particular candidate may apply broadly across our drug candidate platform. Further, certain underlying premises in our development programs are not proven and
32
many of the drug targets that we are pursuing have not yet been validated clinically. For instance, ARO-RAGE has demonstrated the ability to reduce the expression of RAGE in the lung; however, it has not been established that this will have an anti-inflammatory effect sufficient for a meaningful clinical benefit in patients with inflammatory lung disease. Further, it is also unknown at this time what may be required to gain adequate coverage and reimbursement by either commercial or government payers. With respect to fazirsiran, it is also unknown at this time what changes in the liver may be required to gain regulatory approval and/or adequate coverage and reimbursement for a drug that reduces the production of mutant alpha-1 antitrypsin in the liver. Similar uncertainties and risks exist that are specific to each of our development programs. If we are unable to successfully develop commercial products, we will be unable to generate revenue or build a sustainable or profitable business.
Our product candidates are in clinical development, which is a lengthy and expensive process with uncertain outcomes and the potential for substantial delays. There can be no assurance that our product candidates will obtain regulatory approval, which is necessary before they can be commercialized.
The sale of human therapeutic products in the United States and foreign jurisdictions is subject to extensive and time-consuming regulatory approval which requires, among other things:
•controlled research and human clinical testing;
•establishment of the safety and efficacy of the product;
•government review and approval of a submission containing manufacturing, preclinical and clinical data; and
•adherence to cGMP regulations during production and storage.
The clinical-stage product candidates we currently have under development will require significant development, preclinical and clinical testing and investment of significant funds to gain regulatory approval before they can be approved for commercialization. The results of our research and human clinical testing of our products may not meet regulatory requirements. Some of our product candidates, if approved, may require the completion of post-marketing studies. There can be no assurance that any of our clinical-stage product candidates will be further developed and approved. The process of completing clinical testing and obtaining required approvals takes several years and requires the use of substantial resources. Further, there can be no assurance that product candidates will be shown to be safe and effective in clinical trials or receive applicable regulatory approvals. If we fail to obtain regulatory approvals for any or all of our products, we will not be able to market such product and our operations may be adversely affected.
Our clinical trials may not yield successful results for the product candidates that we may identify and pursue for their intended uses, which would prevent, delay or limit the scope of regulatory approval and commercialization.
We must demonstrate our product candidates’ safety and efficacy in humans for each target indication through extensive clinical testing. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of any products, including the following:
•the results of preclinical studies may be inconclusive, or they may not be indicative of results that will be obtained in human clinical trials;
•safety and efficacy results attained in early human clinical trials may not be indicative of results that are obtained in later clinical trials;
•after reviewing test results, we may abandon projects that we might previously have believed to be promising;
•we or our regulators may suspend or terminate clinical trials because the participating subjects or patients are being exposed to unacceptable health risks; and
•our product candidates may not have the desired effects or may include undesirable side effects or other characteristics that preclude regulatory approval or limit their commercial use if approved.
We cannot be certain that current clinical trials or any future clinical trials, whether conducted by us or our licensees, will be successful. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have a material adverse effect on our business, financial condition and results of operation. Success in clinical trials in a particular indication does not ensure that a product candidate will be successful in other indications. Similarly, approval of a product candidate in a particular indication does not ensure that the product candidate will be successful in other indications. For instance, although REDEMPLO’s Phase 3 SHASTA-3 and SHASTA-4 trials for patients with sHTG were successful in achieving their primary endpoints and all multiplicity-controlled key secondary endpoints, there can be no guarantee that global regulatory authorities will approve REDEMPLO for that indication, even if they had previously approved REDEMPLO for FCS. Moreover, results acceptable to support approval in one jurisdiction may be deemed inadequate by another regulatory authority to support regulatory approval in that other jurisdiction. To the extent that the results of the trials are not satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing
33
application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for a product candidate, the terms of such approval may limit the scope and use of the specific product candidate, which may also limit its commercial potential.
Our clinical trials may reveal significant adverse events, toxicities or other side effects and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.
In order to obtain marketing approval for any of our product candidates, we must demonstrate the safety and efficacy of the product candidate for the relevant clinical indication or indications through preclinical studies and clinical trials as well as additional supporting data. As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events (“AEs”) associated with the use of our products or product candidates. If our product candidates are associated with undesirable side effects in preclinical studies or clinical trials, or have unexpected characteristics, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
If further significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, the EMA, other applicable regulatory authorities or an institutional review board may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage studies have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the drug from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability relative to other therapies. Any of these developments could materially harm our business, financial condition and prospects.
Clinical trials of REDEMPLO or our product candidates may not uncover all possible adverse events that patients may experience.
Clinical trials are conducted in representative samples of the potential patient population, which may have significant variability. By design, clinical trials are based on a limited number of subjects and are of limited duration of exposure to the product, to determine whether the product candidate demonstrates the substantial evidence of efficacy and safety necessary to obtain regulatory approval. As with the results of any statistical sampling, we cannot be sure that all side effects of REDEMPLO or our product candidates may be uncovered. It may be the case that only with a significantly larger number of patients exposed to REDEMPLO or the product candidate for a longer duration may a more complete safety profile be identified. Further, even larger clinical trials may not identify rare significant AEs, and the duration of such studies may not be sufficient to identify when those events may occur. Other products have been approved by the regulatory authorities for which safety concerns have been uncovered following approval. Such safety concerns have led to labeling changes, restrictions on distribution through use of a REMS, or withdrawal of products from the market, and any of our product candidates may be subject to similar risks.
Although to date our current product candidates have generally evidenced an acceptable safety profile in clinical trials, patients treated with REDEMPLO or any of our product candidates, if approved, may experience previously unreported adverse reactions or minor incidences of adverse reactions may manifest with greater frequency in subsequent larger trials, and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates. If toxicities, adverse events or any other safety problems occur or are identified after our products reach the market, we may make the decision or be required by regulatory authorities to conduct additional clinical safety trials, amend the labeling of our products or add additional warnings to the labeling, recall our products, or even withdraw approval for our products.
Topline data may not accurately reflect the complete results of a particular study or trial.
We may publicly disclose topline or interim data from time to time, which is based on a preliminary analysis of then-available efficacy and safety data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with
34
caution until the final data are available. Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimations, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate or drug and the Company in general. In addition, the information we may publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the topline data that we report differ from a future analysis of results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospects or financial condition may be harmed.
Results of earlier studies or clinical trials may not be predictive of future clinical trial results, and initial studies or clinical trials may not establish an adequate safety or efficacy profile for our product candidates to justify proceeding to advanced clinical trials or an application for regulatory approval.
The results of nonclinical and preclinical studies and clinical trials may not be predictive of the results of later-stage clinical trials, and interim results of clinical trials do not necessarily predict final results. The results of preclinical studies and clinical trials in one set of patients or disease indications, or from preclinical studies or clinical trials that we did not lead, may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. In addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through nonclinical studies and initial clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, or after achieving positive results in pivotal trials, and we cannot be certain that we will not face similar setbacks. Even if early-stage clinical trials are successful, we may need to conduct additional clinical trials of our product candidates in additional patient populations or under different treatment conditions before we are able to seek approvals from the FDA and regulatory authorities outside the United States to market and sell these product candidates. Our failure to obtain marketing approval for our product candidates for commercially viable indications, or at all, would substantially harm our business, prospects, financial condition and results of operations.
It may take us longer than we project to complete clinical trials, and we may not be able to complete them at all.
Although for planning purposes we project the commencement, continuation and completion of our clinical trials, a number of factors, including scheduling conflicts with participating clinicians and clinical institutions, and difficulties in identifying or enrolling patients who meet trial eligibility criteria, may cause significant delays. Enrollment of clinical trials may be particularly difficult in orphan diseases or limited-sized patient populations. The FDA or other regulatory bodies may require additional, longer or broader clinical trials to establish safety and effectiveness, notwithstanding guidance the Company may have received from those bodies during clinical trial planning and execution. Further, the cost for conducting clinical trials is significant and if our cash resources become limited we may not be able to commence, continue and/or complete our clinical trials. We may not commence or complete clinical trials involving any of our product candidates as projected or may not conduct them successfully.
We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability from REDEMPLO, or any other approved product candidate, and may have to limit its commercialization.
The use of our product candidates in clinical trials and the sale of REDEMPLO, or any other products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by clinical trial participants, consumers, healthcare providers, pharmaceutical companies, or others selling our products. If we cannot successfully defend ourselves against these claims, we may incur substantial liabilities. Regardless of merit or eventual outcomes of such claims, product liability claims may result in:
•decreased demand for our product candidates;
•impairment of our business reputation;
•withdrawal of clinical trial participants;
•costs of litigation;
35
•substantial monetary awards to patients or other claimants; and
•loss of revenues.
Our insurance coverage may not be sufficient to reimburse us for all expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.
The successful commercialization of REDEMPLO, or any other approved product candidates, will depend in part on the extent to which government authorities and health insurers establish adequate reimbursement levels and pricing policies.
Sales of REDEMPLO, or any other approved drug candidate, will depend in part on the availability of coverage and reimbursement from third-party payers such as government insurance programs, including Medicare and Medicaid, private health insurers, health maintenance organizations and other health care related organizations, who are increasingly challenging the price of medical products and services. Accordingly, coverage and reimbursement may be uncertain. Adoption of any drug by the medical community may be limited if third-party payers will not offer adequate coverage. Additionally, significant uncertainty exists as to the reimbursement status or amount of newly-approved drugs. Cost control initiatives may decrease coverage and payment levels for any drug and, in turn, the price that we will be able to charge and/or the volume of our sales. We are unable to predict all changes to the coverage or reimbursement methodologies that will be applied by private or government payers. Any denial of private or government payer coverage or inadequate reimbursement could harm our business and reduce our revenue. With respect to our partnered product candidates, we will be reliant on that partner to secure coverage and obtain reimbursement from government and private payers for the drug, if approved, and any failure of that partner to establish adequate coverage and reimbursement could have a negative impact on our revenues and profitability.
In addition, both the federal and state governments in the United States and foreign governments continue to propose and pass new legislation, regulations, and policies affecting coverage and reimbursement rates, which are designed to contain or reduce the cost of health care. Further federal and state proposals and healthcare reforms are likely, which could limit the prices that can be charged for the product candidates that we develop and may further limit our commercial opportunity. For example, the IRA includes several measures intended to lower the cost of prescription drugs, including patients’ overall out-of-pocket costs, and related healthcare reforms, including limits on price increases and subjecting an increasing number of drugs to Medicare price negotiations with the Centers for Medicare & Medicaid Services (“CMS”). In addition, an executive order issued by the White House on May 12, 2025, directs the Department of Health and Human Services (the “HHS”) to implement a “Most Favored Nation” drug pricing policy intended to align U.S. prescription drug prices with those paid in other developed countries. The administration has since entered into pricing arrangements with certain pharmaceutical manufacturers and has continued to demonstrate a strong interest in Most Favored Nation regulatory and policy proposals. Between November 2025 and September 2026, the CMS announced a voluntary “most-favored-nation” model for Medicaid, and a mandatory Medicare Part B model that uses international reference prices in calculating manufacturer rebates, and the CMS has proposed a similar model for Medicare Part D (although it remains uncertain whether that model will be finalized or follow the Part B model’s approach). See also “The healthcare system is under significant financial pressure to reduce costs, which could reduce payment and reimbursement rates for drugs.” And the One Big Beautiful Bill Act (the “OBBBA”) enacted in July 2025 imposes new restrictions on funding for government health care programs and on individual eligibility for coverage under those programs, which may lead to lower reimbursements for drugs covered by those programs. Likewise, individual states have increasingly enacted laws and regulations designed to control pharmaceutical pricing, including through price transparency requirements, prescription drug affordability boards and upper payment limits. We cannot be sure whether additional legislation or rulemaking related to these developments will be issued or enacted, or what impact, if any, such changes will have on the profitability of any of our drug candidates, if approved for commercial use, in the future. There also may be future changes unrelated to these that result in reductions in potential coverage and reimbursement levels for our product candidates, if approved and commercialized, and we cannot predict the scope of any future changes or the impact that those changes would have on our operations.
If future reimbursement for approved product candidates, if any, is substantially less than we project, or rebate obligations associated with them are substantially greater than we expect, our future net revenue and profitability could be materially diminished.
We may not enjoy the market exclusivity benefits of our orphan drug designations.
Although we may obtain orphan designations in the treatment of certain diseases our products are intended to treat, the designation may not be applicable to any particular product we might get approved and that product may not be the first product to receive approval for that indication. Under the Orphan Drug Act, the first approved product with an orphan
36
designation receives market exclusivity, which prohibits the FDA from approving the “same” drug for the same indication. The FDA has stated that drugs can be the “same” even when they are not identical but has not provided guidance with respect to how it will determine “sameness” for RNAi drugs. It is possible that another RNAi drug could be approved for the treatment of a disease that one of our orphan products is intended to treat before our product is approved, which means that we may not obtain orphan drug exclusivity and could also potentially be blocked from approval until the first product’s orphan drug exclusivity period expires or we demonstrate, if we can, that our product is superior. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved and granted orphan drug exclusivity, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. In addition, a designated Orphan Drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the disease for which it received orphan designation. In February 2026, Congress amended the Orphan Drug Act to provide that orphan drug exclusivity extends only to the same approved use or indication within the designated rare disease or condition, which narrows the protection afforded by orphan exclusivity relative to the broader scope that certain courts had recognized. Further, orphan drug exclusivity can be lost if the FDA later determines that the request for designation was materially defective or if the applicant is unable to assure the availability of sufficient quantities of the drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan Drug designation neither shortens the development time nor regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
Our success depends on the attraction and retention of senior management and scientists with relevant expertise.
Our future success depends to a significant extent on the continued services of our key employees, including our senior scientific, technical and managerial personnel. We do not maintain key person life insurance for any of our executives and we do not maintain employment agreements with many senior employees. Competition for qualified employees in the pharmaceutical industry is high, and our ability to execute our strategy will depend in part on our ability to continue to attract and retain qualified scientists, management and other employees. This will depend in part on our ability to create and maintain a desirable workplace culture, which may be impacted by employee preferences for remote working. In addition, the market for qualified employees in the pharmaceutical industry is experiencing labor shortages and inflationary pressures are causing salaries and wages to increase, all of which exacerbates these competitive dynamics. If we are unable to find, hire and retain qualified individuals, we will have difficulty implementing our business plan in a timely manner, or at all.
Our commercialization, collaborative and other arrangements may give rise to disputes over contract terms and the ownership or protection of our intellectual property, which may adversely affect the commercial success of our product candidates.
Commercialization and collaborative relationships are generally complex and can give rise to disputes regarding the relative rights, obligations and revenues of the parties, including the ownership of intellectual property and associated rights and obligations, especially when the applicable collaborative provisions have not been fully negotiated and documented. Such disputes have arisen in the past from time to time and, if they arise again could delay collaborative research, development or commercialization of potential product candidates, and can lead to lengthy, expensive litigation or arbitration. The terms of such arrangements may also limit or preclude us from commercializing products or technologies developed pursuant to such collaborations. Additionally, the commercialization or collaborative partners under these arrangements might breach the terms of their respective agreements or fail to maintain, protect or prevent infringement of the licensed patents or our other intellectual property rights by third parties. Any failure by our commercialization or collaborative partners to abide by the terms of their respective agreements with us (including their failure to accurately calculate, report or pay any royalties payable to either us or a third party or their failure to repay, in full or in part, either any outstanding receivables or any other amounts for which we are entitled to reimbursement) may adversely affect our results of operations.
Our commercialization or collaborative arrangements do not necessarily restrict our commercialization or collaborative partners from competing with us or restrict their ability to market or sell competitive products. Our current and any future commercialization or collaborative partners may pursue existing or other development-stage products or alternative technologies in preference to those being commercialized or developed in collaboration with us.
The actions of specialty distributors and specialty pharmacies could affect our ability to sell or market products profitably. Fluctuations in buying or distribution patterns by such specialty distributors and specialty pharmacies could adversely affect our revenues, financial condition, or results of operations.
We currently rely on a specialty pharmacy and expect to rely on a specialty distributor for a considerable portion of our sales for REDEMPLO. The financial failure of any of our distributors or pharmacies could adversely affect our revenues, financial condition or results of operations. Our revenues, financial condition or results of operations may also be
37
affected by fluctuations in their buying or distribution patterns. These fluctuations may result from seasonality, pricing, wholesaler inventory objectives, or other factors.
Risks Related to Regulatory Review and Approval of Our Product Candidates
Breakthrough Therapy designation for fazirsiran and other of our current or future product candidates may not lead to a faster development or review process.
We have been granted a Breakthrough Therapy designation for fazirsiran in the United States for the treatment of liver disease associated with AATD and for plozasiran in the United States for the treatment of sHTG, and we may seek Breakthrough Therapy designation for other current or future product candidates. Breakthrough Therapy designation is intended to facilitate the development and expedite the review of new therapies to treat serious conditions with unmet medical needs by providing sponsors with the opportunity for frequent interactions and additional drug development guidance with the FDA and its senior managers. Breakthrough Therapy designation applies to the combination of the product candidate and the specific indication for which it is being studied. Product candidates that receive Breakthrough Therapy designation may receive more frequent interactions with the FDA regarding the product candidate’s development plan and clinical trials and may be eligible for the FDA’s Rolling Review.
Despite receiving Breakthrough Therapy designation, fazirsiran or other product candidates may not actually benefit from faster clinical development or regulatory review or approval any sooner than other product candidates that do not have such designation, or at all. For example, although we received Breakthrough Therapy designation for REDEMPLO in the United States for the treatment of FCS, REDEMPLO was ultimately reviewed on a standard timeline. Furthermore, such a designation does not increase the likelihood that fazirsiran or other product candidates will receive marketing approval in the United States. The FDA may also rescind Breakthrough Therapy designation if it determines that fazirsiran or other product candidates no longer meet the relevant criteria.
A Fast Track product designation may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
We have received a Fast Track product designation for fazirsiran in the United States for the treatment of liver disease associated with AATD, and we may seek Fast Track designation for other of our current or future product candidates. The Fast Track designation is a program offered by the FDA designed to facilitate drug development and to expedite the review of new drugs that are intended to treat serious or life-threatening conditions. Compounds selected must demonstrate the potential to address unmet medical needs. The FDA’s Fast Track designation allows for close and frequent interaction with the FDA. A designated Fast Track drug may also be considered for priority review with a shortened review time, rolling submission, and accelerated approval if applicable.
A Fast Track designation does not, however, guarantee FDA approval or expedited approval of any application for the product candidate. The receipt of such a designation for a product candidate may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate marketing approval by the FDA. For example, although we received Fast Track designation for REDEMPLO in the United States for the treatment of FCS, REDEMPLO was ultimately reviewed on a standard timeline. In addition, the FDA may later decide that the products no longer meet the designation conditions.
We may seek priority review designation for one or more of our product candidates, but we might not receive such designation, and even if we do, such designation may not lead to faster development or regulatory review or approval process.
If the FDA determines that a product candidate offers a treatment for a serious condition and, if approved, the product would provide a significant improvement in safety or effectiveness, the FDA may designate the product candidate for priority review. A priority review designation means that the goal for the FDA to review an application is six months from the filing date, rather than the standard review period of ten months. We may request priority review for our product candidates. The FDA has broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation does not necessarily mean a faster development or regulatory review or approval process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or at all.
In October 2026, the FDA granted plozasiran entry into its Split Real Time Application Review (STAR) pilot program in connection with our sNDA in severe hypertriglyceridemia. STAR is a limited pilot program established under the FDA’s user-fee commitments, rather than a statutory designation, under which the FDA begins reviewing data upon receipt of a first submission and the review goal period begins only upon receipt of a second, completing submission. A
38
supplement must qualify for priority review in order to participate and the FDA has stated that acceptance into STAR does not guarantee expedited review or an approval. If we do not deliver the second submission within the period the program contemplates, if our supplement requires information that would call for inspection of a foreign manufacturing site, or if the FDA otherwise determines that our supplement no longer meets the program’s criteria, we would lose the benefit of the program. In July 2026, we also agreed to acquire a rare pediatric disease priority review voucher for $215.0 million, which entitles the holder to priority review of an application that would not otherwise qualify. Because our sNDA for plozasiran in sHTG is expected to receive priority review through the STAR pilot program, we may hold the voucher for use with a future application or seek to sell it; however, we may not have a suitable application for which to use the voucher, the market for and value of priority review vouchers may decline, and legislative or regulatory changes could limit the use or transferability of vouchers, in which case we may not realize the value of our investment in the voucher. Neither the use of a voucher nor participation in the STAR pilot program increases the likelihood that an application will be approved.
We deliver REDEMPLO, and intend to deliver some of our product candidates, via drug delivery devices that will have their own regulatory, development, supply and other risks.
We deliver REDEMPLO, and intend to deliver some of our product candidates, via drug delivery devices, such as an autoinjector, syringe, or nebulizer. There may be unforeseen technical complications related to the development activities required to bring such a product to market, including container compatibility and/or dose volume requirements. If our product candidates are intended to be used with drug delivery devices, we expect to utilize drug delivery devices authorized for marketing under clearances or approvals held by third parties. Our product candidates may not be approved or may be substantially delayed in receiving approval if the devices do not gain and/or maintain their own regulatory approvals or clearances. Where approval of the drug product and device is sought under a single application, the increased complexity of the review process may delay approval. In addition, some drug delivery devices are provided by single-source unaffiliated third-party companies. We may be dependent on the sustained cooperation and effort of those third-party companies both to supply the devices and, in some cases, to conduct the studies required for approval or other regulatory clearance of the devices. Even if approval is obtained for our products, we may also be dependent on those third-party companies continuing to maintain such approvals or clearances, if required, for their drug delivery devices once they have been received. Failure of third-party companies to supply the devices, to successfully complete studies on the devices in a timely manner, or to obtain or maintain required approvals or clearances of the devices could result in increased development costs, delays in or failure to obtain regulatory approval and delays in product candidates reaching the market or in gaining approval or clearance for expanded labels for new indications.
We and our licensees conduct clinical trials for product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.
We and our licensees currently conduct clinical trials outside the United States. The acceptance by the FDA or comparable foreign regulatory authority of study data from clinical trials conducted outside the United States or another jurisdiction may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. Most of our clinical trials involve study subjects outside of the United States, including most of our Phase 1 clinical trials (which often enroll study subjects in Australia and New Zealand), and our Phase 3 clinical trials of plozasiran and zodasiran, for which we have enrolled and plan to enroll cohorts outside the United States. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in product candidates that we may develop not receiving approval or clearance for commercialization in the applicable jurisdiction.
Even if we obtain FDA approval for products in the United States, we may never obtain approval to commercialize those product candidates outside of the United States, which would limit our ability to realize their full market potential.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and effectiveness, and the chemistry, manufacturing and controls for the product. Clinical trials conducted in one country may not be accepted by regulatory authorities in other
39
countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes and requirements vary among countries and can involve additional product testing and validation and additional or different administrative review periods from those in the United States, including additional preclinical studies or clinical trials. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval before a product can be marketed in that jurisdiction, even after establishing safety and efficacy in a clinical setting; even then, the available reimbursement terms for a product may not be commercially viable to support a product launch in such jurisdiction.
Seeking foreign regulatory approval could result in difficulties and costs and require additional nonclinical studies or clinical trials which could be costly and time-consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our product candidates in those countries. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approval in international markets is delayed or the available reimbursement terms for a product do not support a product launch in a particular jurisdiction, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.
If the FDA or comparable foreign regulatory authorities approve generic versions of REDEMPLO, or generic or biosimilar versions of any other potential products that receive marketing approval, or such authorities do not grant REDEMPLO appropriate periods of data or market exclusivity before approving a generic version, the sales of REDEMPLO could be adversely affected.
Once an NDA is approved, the drug covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations.” Manufacturers may seek marketing approval of generic versions of reference-listed drugs through submission of ANDAs in the United States. Generic drugs may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic drugs are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference-listed drug is typically lost to the generic drug.
The FDA may not approve an ANDA or a 505(b)(2) NDA for a generic drug until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The FDCA provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another version of such product candidate where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing product candidate. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for product candidates containing the original active agent for other conditions of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Manufacturers may seek to launch generic drugs following the expiration of the marketing exclusivity period, even if we still have patent protection for such drugs.
Similarly, if any of our product candidates that are regulated as biologics is licensed, the Biologics Price Competition and Innovation Act of 2009 provides a 12-year period of reference product exclusivity before the FDA may license a biosimilar or interchangeable product, although the FDA may accept a biosimilar application after four years. The scope and duration of reference product exclusivity, and the circumstances in which a biosimilar may be deemed interchangeable with, and therefore substitutable for, a reference product, remain subject to interpretation and potential legislative change, and biosimilar competition following the expiration of exclusivity could significantly reduce the sales of any such product.
Competition that REDEMPLO, or any other potential product candidates, may face from generic drugs or biosimilars could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those products. Our future revenues, profitability and cash flows could also be materially and adversely affected and our ability to obtain a return on the investments we have made in REDEMPLO or other product candidates may be substantially limited if REDEMPLO, or any other potential products, product candidates, are not afforded the appropriate periods of non-patent exclusivity.
40
Failure to comply with regulatory requirements or unanticipated problems with our products may result in various adverse actions such as the suspension or withdrawal of one or more of our products, closure of a facility or enforcement of substantial penalties or fines.
Regulatory agencies subject any marketed product(s), such as REDEMPLO, and the facilities where they are manufactured to continual review and periodic inspection. If previously unknown problems with a product, manufacturing and laboratory facilities or regulatory requirements are discovered, such as AEs of unanticipated severity or frequency, problems with a manufacturing process or laboratory facility, or failure to comply with applicable regulatory approval requirements, a regulatory agency may impose restrictions or penalties on that product or on us. Such restrictions or penalties may include, among other things:
•restrictions on the marketing or manufacturing of the product, the withdrawal of the product from the market or product recalls;
•warning, untitled, or it has come to our attention letters, or holds on clinical trials;
•refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals;
•product seizure or detention, or refusal to permit the import or export of our product candidates; and
•closure of the facility, enforcement of substantial fines, injunctions, or the imposition of civil or criminal penalties.
Pharmaceutical and biological product marketing is subject to substantial regulation in the U.S. and any failure by us or our commercial and collaborative partners to comply with applicable statutes or regulations can adversely affect our business.
Any marketing activities associated with REDEMPLO, or any other product candidates approved for commercialization, will be subject to numerous federal and state laws governing the marketing and promotion of pharmaceutical and biological products. The FDA regulates post-approval promotional labeling and advertising to ensure that they conform to statutory and regulatory requirements. In July 2026, the FDA announced its intent to revise its regulations governing direct-to-consumer prescription drug advertising, which, if adopted, would require such advertising to include full risk information and could significantly increase the cost of, limit, or effectively preclude our use of broadcast advertising, which could adversely affect product sales. In addition to FDA restrictions, the marketing of prescription drugs is subject to laws and regulations prohibiting fraud and abuse under government healthcare programs. Similarly, many states have similar statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, and, in some states, such statutes or regulations apply regardless of the payer. In addition, government authorities may also seek to hold us responsible for any failure of our commercialization or collaborative partners to comply with applicable statutes or regulations. If we, or our commercial or collaborative partners, fail to comply with applicable FDA regulations or other laws or regulations relating to the marketing of REDEMPLO, or any other approved product candidates, we could be subject to criminal prosecution, civil penalties, seizure of products, injunctions and exclusion of our product candidates from reimbursement under government programs, as well as other regulatory or investigatory actions against our future product candidates, our commercial or collaborative partners or us. See also “Our operations, including our relationships with healthcare providers, physicians and third-party payers, and our reporting of information in connection with the Medicaid Drug Rebate Program and other governmental pricing programs, are subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations, which, in the event of a violation, exposes us to liability for criminal sanctions, civil penalties, and contractual damages, and reputational harm and diminished profits and future earnings.”
Risks Related to Our Intellectual Property
Our ability to protect our intellectual property through patents and other proprietary rights is uncertain, exposing us to the possible loss of competitive advantage.
Our commercial success depends in large part on our ability to obtain, maintain, enforce and defend patent protection for REDEMPLO, our product candidates and our TRiM platform and other proprietary technologies. We own a substantial portfolio of issued patents and pending patent applications covering our RNAi triggers, targeting and delivery technologies and product candidates, and we also in-license certain patents from third parties. Certain of our patents may not be granted or may not contain claims of the necessary breadth because, for example, prior patents or publications exist. Further, even if these patents are granted, they may be difficult to enforce. Thus, the patents held by or licensed to us may not afford us any meaningful competitive advantage. Additionally, the full term of patent protection for which the Company may be eligible may be shortened or lost if the Company is unable to or fails to pay required maintenance, annuity, or renewal fees, or if we are unable to obtain patent term extensions, patent term adjustments, or other similar
41
provisions to extend patent life, and this could allow competitors to enter the market sooner and materially and adversely impact our business, financial condition, and results of operation.
Even if ultimately successful in obtaining patent protection, efforts to enforce our patent rights could be expensive, distracting for management, cause our patents to be invalidated or held unenforceable, and thus frustrate commercialization of products. Even if patents are issued and are enforceable, others may develop similar, superior or parallel technologies to any technology developed by us and not infringe on our patents. Our future success may also require that we develop or acquire rights to new or complementary technologies, and we may not be able to secure the technologies we desire when competing against other companies or investors with greater financial, scientific and commercial resources. Further, researchers sponsored by us may file patent applications that we may need to license, and such patent applications may not be available for licensing or may not be economically feasible to license. Additionally, our technology may be accused of infringing and may ultimately prove to infringe upon patents or rights owned by others. See also “We may be and have been subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our potential products.” In addition, the laws of some foreign countries in which we do business, including through our joint ventures, do not protect intellectual property rights to the same extent or in the same manner as the laws of the United States. Moreover, if we or our licensors fail to maintain the patents and patent applications covering our product candidates or technologies, we may not be able to use such patents and patent applications or stop a competitor from marketing products that are the same as or similar to our product candidates. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to adequately protect our owned intellectual property or derive sufficient value from our licensed or owned intellectual property, the value of your investment may decline.
Changes in patent laws, and in their interpretation or administration, may diminish the value of our patents or our ability to enforce them. For example, U.S. courts have applied heightened enablement and written description requirements to broad genus claims, which may limit the scope of the claims we are able to obtain or sustain. In addition, the USPTO has significantly changed its practices for instituting inter partes review and post-grant review proceedings, including through expanded discretionary denial, and has proposed rules that would further restrict these proceedings. These changes may make it more difficult or costly for us to challenge third-party patents, and the availability and scope of these proceedings remain subject to change. Patent offices and courts outside the United States apply differing standards, and there is no uniform worldwide policy governing the scope of claims granted in pharmaceutical or biotechnology patents.
We are party to technology license agreements with third parties that require us to satisfy obligations to keep them effective and, if these agreements are terminated, our technology and our business could be seriously and adversely affected.
We are party to license agreements that allow us to incorporate third-party proprietary technologies into our drug products under development or our manufacturing processes. These license agreements require us under certain circumstances to pay royalties and satisfy other conditions. If we fail to satisfy our obligations under these agreements, the terms of the licenses may be materially modified, such as by rendering currently exclusive licenses non-exclusive, or may give our licensors the right to terminate their respective agreement with us, which could limit our ability to implement our current business plan and harm our business and financial condition.
We may be and have been subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our potential products.
Because the intellectual property landscape in the fields in which we participate is rapidly evolving and interdisciplinary, it is difficult to conclusively assess our freedom to operate without infringing on third-party rights. We are aware of third-party patents that, if found to be valid and enforceable, could be asserted against our products or product candidates. For example, as the Company previously reported in Form 8-K filed on September 12, 2025, Ionis Pharmaceuticals, Inc. (“Ionis”) filed a complaint for patent infringement against the Company in the United States District Court for the Central District of California alleging patent infringement of United States Patent No. 9,593,333 (“the ’333 patent”) (the “Ionis Claim”) and seeking damages. If the Ionis Claim or any potential future claim by another party is successful, we may be required to pay substantial damages, be forced to modify or abandon commercialization plans for any affected drug product and/or product candidates and/or seek a license from the patent holder. In addition, the Ionis Claim and any future patent infringement claims brought against us, whether or not successful, may cause us to incur significant expenses and divert the attention of our management and key personnel from other business concerns. These could negatively affect our results of operations and prospects. If our products or product candidates are found to infringe third-party intellectual property rights, we may also be required to indemnify our collaborators, licensees and other business partners for related claims and losses, or to obtain licenses, which may not be available on commercially reasonable terms.
42
We license patent rights from third-party owners and we rely on such owners to obtain, maintain and enforce the patents underlying such licenses.
We are a party to a number of licenses that give us rights to third-party intellectual property that is necessary or useful for our business. We also expect to enter into additional licenses to third-party intellectual property in the future.
Our success may depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications to which we are licensed. Even if patents are issued in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.
Our technology licensed from various third parties may be subject to retained rights.
Our licensors often retain certain rights under their agreements with us, including the right to use the underlying technology for noncommercial academic and research use, to publish general scientific findings from research related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology. It is difficult to monitor whether our licensors limit their use of the technology to these uses, and we could incur substantial expenses to enforce our rights to our licensed technology in the event of misuse.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our collaborators, employees, consultants, outside scientific collaborators and sponsored researchers, and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, while we undertake efforts to protect our trade secrets and other confidential information from disclosure, others may independently discover trade secrets and proprietary information, and in such cases, we may not be able to assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using our trade secrets is challenging and the outcome is unpredictable. In addition, courts outside of the U.S. may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing, prosecuting and defending patents covering our current and any future product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we or our licensors have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing. Issued patents may be challenged by third parties in the courts or patent offices in various countries throughout the world. Invalidation proceedings may result in patent claims being narrowed, invalidated or held unenforceable. In Europe, our patents may be subject to the jurisdiction of the Unified Patent Court, where a single proceeding could result in the revocation of a European patent across all participating countries. Uncertainties regarding the outcome of such proceedings, as well as any resulting losses of patent protection, could harm our business.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Some countries do not enforce patents related to medical treatments, or limit enforceability in the case of a public emergency. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Geopolitical events and related government actions, such as measures adopted in Russia permitting the unlicensed use of patents held by owners from certain countries, may impair our ability to obtain, maintain and enforce intellectual property protection in affected jurisdictions.
43
Risks Related to Our Business Model
Our business model assumes we will generate revenue by, among other activities, marketing or out-licensing the products we develop. Our product candidates are in various stages of development and we currently have only one approved product. Accordingly, there is a limited amount of information about us upon which you can evaluate our business and prospects.
We have not begun to generate material revenues from the commercialization of REDEMPLO or any other product candidates. As such, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. For example, to execute our business plan, we will need to successfully:
•execute product development activities using technologies that have not yet generated material revenues;
•build, maintain, and protect a strong intellectual property portfolio;
•demonstrate safety and efficacy of our product candidates in multiple human clinical studies;
•receive FDA approval and approval from similar foreign regulatory bodies;
•gain market acceptance for the development and commercialization of any drugs we develop;
•ensure our products are reimbursed by commercial and/or government payers at a rate that permits commercial viability;
•develop and maintain successful strategic relationships with suppliers, distributors, and commercial licensing partners;
•manage our spending and cash requirements as our expenses will increase in the near term if we add programs and additional preclinical and clinical trials; and
•effectively market any products for which we obtain marketing approval.
If we are unsuccessful in accomplishing these objectives, we may not be able to develop products, raise capital, expand our business or continue our operations.
We may need to establish additional relationships with strategic and development partners to fully develop our product candidates and market any approved products.
Over the past several years we have entered into license and collaboration agreements with Takeda, Amgen, GSK, Sarepta, Visirna, Sanofi, Novartis and Madrigal. Our business strategy includes securing additional collaborations with other pharmaceutical and biotech companies to support the development of our RNAi therapeutics and other product candidates. We do not possess all of the financial and development resources necessary to develop and commercialize all of the products that may result from our technologies. Unless we expand our own product development capacity and enhance our own internal marketing capability, we may need to make arrangements with other strategic partners to develop and commercialize any product candidates that may be approved. We may not be able to attract such partners, and even if we are able to enter into such partnerships, the terms may be less favorable than anticipated. Further, entering into partnership agreements may limit our commercialization options and/or require us to share revenues and profits with our partners. If we do not find appropriate partners, or if our existing arrangements or future agreements are not successful, our ability to develop and commercialize products could be adversely affected. Even if we are able to find collaborative partners, the overall success of the development and commercialization of product candidates in those programs will depend largely on the efforts of other parties and will be beyond our control, particularly as partnered programs progress and our licensees may elect to assume greater control over these programs. In addition, in the event we pursue our commercialization strategy through collaboration or licenses to third parties, there are a variety of technical, business and legal risks, including:
•we may not be able to control the amount and timing of resources that our collaborators may be willing or able to devote to the development or commercialization of our product candidates or to their marketing and distribution; and
•disputes may arise between us and our collaborators that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts our management’s resources.
The occurrence of any of the above events or other related events could impair our ability to generate revenues and harm our business and financial condition.
44
Our ability to generate milestone and royalty payments under our current and potential future licensing and collaboration agreements is substantially controlled by our partners, and as such, we will likely need other sources of financing to continue to develop our internal product candidates.
Under our licensing and collaboration agreements with Amgen, Takeda, GSK, Sarepta, Visirna, Sanofi, Novartis and Madrigal, our partners substantially control clinical development and commercialization for all of the candidates covered under those agreements in their relevant territories. To the extent that (i) our partners’ interests in advancing these candidates or targets change, (ii) unforeseen scientific issues with the candidates arise, or (iii) the pace at which our partners move the candidates through clinical trials toward commercialization slows, our ability to collect milestones and royalties may be significantly diminished. This would further cause us to rely upon other sources of financing to continue to develop our other internal product candidates.
We will need to achieve commercial acceptance and adequate coverage and reimbursement of REDEMPLO and our other product candidates to generate revenues and achieve profitability.
The degree to which the medical community and consumers will adopt and therefore prescribe REDEMPLO or any other product we develop is uncertain. The rate and degree of market acceptance of our products will depend on a number of factors, including the establishment and demonstration in the medical community of the clinical efficacy and safety of our products, their potential advantage over alternative treatments, and the costs to patients and third-party payers, including commercial insurance companies and government health care programs. Recent efforts in the United States and abroad to reduce overall healthcare spending, including recent efforts by the U.S. government to lower drug prices through executive action such as MFN pricing, have put significant pressure on the coverage and price of prescription drugs and certain companies have been publicly criticized for the relatively high cost of their therapies. These pressures may place pressure on us to offer price concessions to third party payers to obtain favorable coverage or to otherwise sell any approved drugs at a lower price than we or analysts may anticipate or may result in lower levels of reimbursement and coverage from third parties.
Moreover, we have not yet generated any significant revenue from product sales. Our ability to generate significant revenue and achieve profitability depends on our ability, alone or with potential strategic collaboration partners, to complete the development of and obtain the regulatory and marketing approvals necessary to commercialize our product candidates and introduce products that will be accepted by the medical community. The commercial success of REDEMPLO or any of our product candidates, if approved, will depend on many factors, including, but not limited to:
•the availability of coverage and adequate and timely reimbursement from managed care plans, private insurers, government payers (such as Medicare and Medicaid and similar foreign authorities) and other third-party payers for our products;
•patients’ ability and willingness to pay out-of-pocket for our products in the absence of coverage and/or adequate reimbursement from third-party payers;
•patient and prescriber demand for our products;
•the overall health benefits and cost savings that patients derive from REDEMPLO;
•our ability to establish and enforce intellectual property rights in and to our products; and
•our ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims.
We cannot predict whether significant commercial market acceptance for REDEMPLO or any of our products, if approved, will ever develop, and we cannot reliably estimate the projected size of any such potential market. Our revenue growth and achievement of consistent profitability will depend substantially on our ability to introduce products that will be accepted by the medical community. If we are unable to cost-effectively achieve acceptance of our technology among the medical establishment and patients, or if the associated products do not achieve wide market acceptance, our business will be materially and adversely affected. For example, if the market opportunity for REDEMPLO or any other approved product is smaller than we expect, including because the potentially addressable patient population is limited or new patients become increasingly difficult to identify or access, we may never become or remain profitable or generate sufficient revenue growth to sustain our business, even if we obtain significant market share.
We rely on outside sources for various components and processes for our products.
We rely on third parties for various components and processes for REDEMPLO and our product candidates. We may not be able to achieve multiple sourcing because there may be no acceptable second source, other companies may choose not to work with us, or the component or process sought may be so new that a second source does not exist or does not exist on acceptable terms. For instance, drug substance, drug product and injection devices for REDEMPLO are each currently sourced from a single, third-party manufacturer, and many of our pulmonary product candidates are administered
45
using a proprietary delivery device which is currently sourced from a single manufacturer. There may be a disruption or delay in the performance of our third-party contractors, suppliers or collaborators which is beyond our control. If such third parties are unable to satisfy their commitments to us, the development of our products would be adversely affected. Therefore, it is possible that our development plans will have to be slowed down or stopped completely at times due to our inability to obtain required raw materials, components, and outsourced processes at an acceptable cost, if at all, or to get a timely response from vendors, particularly as a result of labor market and global supply chain constraints.
We have limited manufacturing capability and must rely on third-party manufacturers to manufacture our clinical supplies and commercial products, if and when approved, and if they fail to meet their obligations, the development and commercialization of our products could be adversely affected.
Although we have developed our own internal manufacturing capabilities which allow us to manufacture oligonucleotide drug substance for our clinical product candidates, we do not currently have internal manufacturing capabilities beyond such clinical-stage oligonucleotide drug substance. We rely, and expect to continue to rely, on third-party manufacturers for the production of REDEMPLO and certain of our drug product candidates for clinical trials and commercialization. We may choose to utilize third-party manufacturers to produce some or all of our development candidates, even if we have internal manufacturing capabilities to do so. Further, we have not developed the ability to manufacture drug product ourselves, nor have we developed the capabilities to manufacture biologics. If we were to experience an unexpected loss or interruption of supply for REDEMPLO or any of our product candidates, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience disruptions in our commercial sales or delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials. Further, our product candidates are composed of multiple components and require specific formulations for which scale-up and manufacturing could be difficult. For certain products, we have limited experience in such scale-up and manufacturing which may require us to depend on a limited number of third parties, who may not be able to deliver in a timely manner, or at all. In order to develop products, apply for regulatory approvals, and commercialize our products, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities. There are a limited number of manufacturers that supply synthetic oligonucleotides or have experience in manufacturing antibody-oligonucleotide conjugates. There are risks inherent in pharmaceutical manufacturing that could affect the ability of our contract manufacturers to meet our delivery time requirements or provide adequate amounts of material to meet our needs. Included in these risks are synthesis and purification failures and contamination during the manufacturing process, which could result in unusable product and cause delays in our development process, as well as additional expense to us.
Additionally, as more of our product candidates become approved for commercial sale, we will need to establish either internal or third-party manufacturing and analytical capacity. For example, we entered into third-party agreements for the manufacturing of REDEMPLO for drug substance and drug product, in connection with its commercial launch in 2025. Further, some manufacturing partners may require us to fund capital improvements, perhaps on behalf of third parties, to support the scale-up of manufacturing and related activities. We may not be able to establish scaled manufacturing capacity for an approved product in a timely or economic manner, if at all. If we or our third-party manufacturers are unable to provide commercial quantities of such an approved product, we will have to successfully transfer manufacturing technology to a different or additional manufacturer. Engaging a new manufacturer for such an approved product could require us to conduct comparative studies or utilize other means to determine bioequivalence of the new and prior manufacturers’ products, which could delay or prevent our ability to commercialize such an approved product. If we or any of these manufacturers is unable or unwilling to increase its manufacturing capacity or if we are unable to establish alternative arrangements on a timely basis or on acceptable terms, the development and commercialization of such an approved product may be delayed or there may be a shortage in supply. Any inability to manufacture our product candidates or future approved drugs in sufficient quantities when needed would seriously harm our business. While we are exploring alternative suppliers for certain critical materials, some of which are sole sourced, there can be no assurance that our efforts will be successful. Accordingly, there is a risk that supplies of our products and product candidates may be significantly delayed by, or may become unavailable as a result of manufacturing, equipment, process, regulatory or business-related issues affecting such manufacturer.
Manufacturers of drug substance and drug product for our approved products (including us, if we choose to internally manufacture) must comply with cGMP requirements relating to methods, facilities and controls used in the manufacturing, processing and packaging of the product, which are intended to ensure that drug products are safe and that they consistently meet applicable requirements and specifications. These requirements include quality control, quality assurance, and the maintenance of records and documentation. These manufacturers (including us, if we choose to internally manufacture) may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. These requirements are enforced by the FDA and other health authorities through periodic announced and unannounced inspections of manufacturing facilities. A failure to comply with these requirements or to provide adequate and timely corrective actions in response to deficiencies identified in an inspection may result in
46
enforcement action, including warning letters, fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, import refusal, plant shutdown, or the delay, withholding, or withdrawal of product approval. If the safety of any quantities supplied is compromised due to a manufacturer’s failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products, which would seriously harm our business.
We rely, and expect to increasingly rely, on third-party manufacturers and suppliers located outside the United States, including in China, and the BIOSECURE Act, tariffs and other trade restrictions could disrupt our supply chain, increase our costs or require us to change manufacturers.
Although drug substance and drug product for REDEMPLO are currently manufactured in the United States, certain raw materials and precursor chemicals used in the manufacture of our products and product candidates are sourced from suppliers located in China, and certain delivery devices that we may implement for our products are manufactured abroad, such as autoinjector devices that we currently source from Taiwan. In addition, we plan to use contract development and manufacturing organizations (“CDMOs”) located in China as a manufacturer or back-up supplier of our product candidates for certain global markets for certain programs. The BIOSECURE Act, enacted in December 2025 as part of the National Defense Authorization Act for Fiscal Year 2026, will prohibit federal agencies from procuring biotechnology equipment or services from “biotechnology companies of concern” and from entering into contracts with, or providing grants or loans to, entities that use such equipment or services in the performance of federal contracts. The Office of Management and Budget is required to publish an initial list of biotechnology companies of concern by December 2026, and the prohibitions are expected to take effect following the issuance of OMB guidance and implementing regulations, subject to transition periods for existing contracts.
If any of our CDMOs or suppliers is designated as a biotechnology company of concern, or if we or our collaborators otherwise determine to cease working with suppliers located in China as a result of legislative, regulatory, reputational or commercial pressures, we could be required to transfer manufacturing to alternative suppliers, which would be costly and time-consuming, could require additional regulatory approvals or comparability studies and could delay our development programs or interrupt commercial supply. In addition, tariffs imposed by the United States on imports from China and other countries, including the tariffs of up to 100% on imports of patented pharmaceutical products and their ingredients imposed under Section 232 of the Trade Expansion Act of 1962 beginning in 2026, retaliatory measures adopted by other countries, export controls on technology, equipment and data, and heightened FDA scrutiny of foreign manufacturing facilities and of clinical data generated in China, could increase our costs, disrupt our supply chain or delay our clinical programs. We have not entered into an MFN pricing agreement with the current presidential administration of the type that has entitled certain manufacturers to relief from pharmaceutical tariffs. Although we maintain safety stock of certain critical raw materials, we may not be able to qualify alternative suppliers before our inventory is exhausted.
We rely on third parties to conduct our clinical trials, and if they fail to fulfill their obligations, the development of our products may be adversely affected.
We rely on independent clinical investigators, contract research organizations (CROs) and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our clinical trials. We contract with certain third-parties to provide certain services, including site selection, enrollment, monitoring and data management services. We rely on these parties to carry out our clinical trials in compliance with GCP and other relevant requirements. Although we depend heavily on these parties, we do not control them and therefore we cannot be assured that these third parties will adequately perform all of their contractual obligations to us. If our third-party service providers cannot adequately and timely fulfill their obligations to us, or if the quality and accuracy of our clinical trial data is compromised due to failure by such third parties to adhere to our protocols, GCP, or other regulatory requirements or if such third parties otherwise fail to meet deadlines or quality requirements, our development plans may be delayed or terminated. Further, if clinical study results are compromised, then we may need to repeat the affected studies, which could result in significant additional costs and delays to us.
We face competition from various entities including large pharmaceutical companies, small biotech companies, private companies, and research institutions.
Many of our competitors have greater financial resources and may have more experience in research and development, manufacturing, managing clinical trials, commercialization and/or regulatory compliance than we do. Our competitors may compete with us for lead clinical trial investigators, clinical trial site locations and patient enrollment. These competitors may also compete with us in recruiting scientific and management personnel. With respect to REDEMPLO, we compete with TRYNGOLZA (olezarsen), which is marketed by Ionis Pharmaceuticals, Inc. In addition, because our investigational products are in various stages of preclinical and clinical development, along with many of the competing products, and given unpredictability inherent in drug development, it is difficult to predict which third party may be our most direct competitor, and on what factors that competition may be focused. Moreover, we also face increased
47
competition from other companies that are using artificial intelligence, some of whom may be able to more quickly and effectively identify and develop novel product candidates compared to us and our business partners, which could impair our ability to compete effectively and have a material adverse effect on our business, results of operations or financial condition.
We may have difficulty expanding our operations successfully as we evolve our pipeline and expand our commercial operations.
Our future financial performance and our ability to commercialize products and compete effectively will depend, in part, on our ability to effectively manage future growth. We expect that as we increase the number of product candidates we are developing we will also need to expand our operations. This expected growth may place a strain on our administrative and operational infrastructure and information technology systems. As product candidates we develop enter and advance through clinical trials, we will need to expand our development, regulatory, manufacturing, marketing, sales, and customer support capabilities or contract with other organizations to provide these capabilities for us. We have established a sales, customer support, and marketing infrastructure for REDEMPLO and certain of our product candidates, and although we have hired individuals with significant experience in the sales, customer support, marketing, and distribution of pharmaceutical products, the Company does not have prior experience in commercialization of a product. To achieve commercial success for REDEMPLO or any approved product for which we retain sales and marketing rights, we must continue to develop a sales and marketing organization or outsource these functions to third parties. If we or our collaborators are unable to establish sales, marketing, customer support, and distribution capabilities or successfully enter into or maintain agreements with third parties to market and sell our products, we may not be successful in commercializing our products. Further, as our operations expand due to our development progress, we expect that we will need to manage additional relationships with various collaborators, suppliers, and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, information technology and management controls, reporting systems and procedures. We may not be able to effectively manage the expansion of our operations or implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.
Our business and operations could suffer in the event of a cybersecurity incident or other information technology system failures.
Our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, ransomware and other cyber-attacks, human error, natural disasters, terrorism, war, and telecommunication and electrical failures. Such events could cause interruption of our operations and loss of intellectual property. For example, the loss of preclinical trial data or data from completed or ongoing clinical trials for our product candidates could result in delays in our regulatory filings and development efforts and significantly increase our costs. Further, cybersecurity breaches or other cybersecurity incidents may allow hackers access to our preclinical compounds, strategies, discoveries, trade secrets, and/or other confidential information. Additionally, sensitive data could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, vendors’ or partners’ use of generative AI technologies. To the extent that any disruption or cybersecurity incident were to result in a loss of or damage to our data, or inappropriate disclosure of confidential, proprietary or private information, we could incur liability or regulatory penalties, including under laws and regulations governing the protection of protected health information and other personal data, we could be subject to litigation (including class-action claims), we could lose valuable trade secret rights, the development of our product candidates could be delayed, and we could suffer reputational damage and damage to key business relationships. The risk of a cybersecurity incident or other information technology disruption, particularly through cyber-attacks, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We, and certain of the third parties on which we depend to operate our business, have experienced cybersecurity attacks in the past, which to date have not had a material impact on our operations or development programs; however, there is no assurance that such impacts will not be material in the future.
Because we use biological materials, hazardous materials, chemicals and radioactive compounds, if we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
Our research, development and manufacturing activities involve the use of potentially harmful biological materials as well as materials, chemicals and various radioactive compounds that could be hazardous to human health and safety or the environment. We store most of these materials and various wastes resulting from their use at our facilities in Madison, Wisconsin, Verona, Wisconsin, and San Diego, California pending ultimate use and disposal. We cannot completely eliminate the risk of contamination, which could cause interruption to our research and development and manufacturing efforts, injury to our employees and others, environmental damage, and liabilities under federal, state and local law. In such an event, we may be held liable for any resulting damages, and any liability could exceed our resources. Although we carry
48
insurance in amounts and types that we consider commercially reasonable, we do not have insurance coverage for losses relating to an interruption of our research, development or manufacturing efforts caused by contamination, and the coverage or coverage limits of our insurance policies may not be adequate. If our losses exceed our insurance coverage, our financial condition would be affected.
Securities litigation claims may result in financial losses or harm our reputation and may divert management resources.
When the market price of a stock is volatile, holders of that stock have often initiated securities class action litigation against the company that issued the stock. We cannot predict with certainty the eventual outcome of such litigation, arbitration or third-party inquiry. We may not be successful in defending ourselves or asserting our rights in current or future lawsuits, investigations, or claims that have been or may be brought against us and, as a result, our business could be materially harmed. These lawsuits, arbitrations, investigations or claims may result in large judgments or settlements against us, any of which could have a negative effect on our financial performance and business. Additionally, lawsuits, arbitrations and investigations can be expensive to defend, whether or not the lawsuit, arbitration or investigation has merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in running our business.
Our operations, including our relationships with healthcare providers, physicians and third-party payers, and our reporting of information in connection with the Medicaid Drug Rebate Program and other governmental pricing programs, are subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations, which, in the event of a violation, exposes us to liability for criminal sanctions, civil penalties, and contractual damages, and reputational harm and diminished profits and future earnings.
Our operations, including any arrangements that we enter into with healthcare providers, physicians, and third-party payers, including government healthcare programs and payers, are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such laws and regulations, including applicable U.S. federal and state healthcare laws and regulations such as the federal Anti-Kickback Statute, the False Claims Act, the Health Insurance Portability and Accountability Act of 1996, and the Foreign Corrupt Practices Act, as well as similar foreign laws and regulations, may constrain our operation and the business or financial arrangements through which we can market, sell and distribute any product candidates for which we obtain marketing approval.
Efforts to confirm that our business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. In addition, in order for our products to be eligible for coverage under certain government health care programs, we must enter into agreements with the government and provide complex pricing calculations that, in turn, may influence government reimbursement rates and pricing under programs such as Section 340B of the Public Health Service Act. The laws governing these programs and pricing calculations are complex, and subject to evolving interpretation by agencies and courts and changing enforcement priorities. Further legal or regulatory developments related to these programs could impact the scope of the programs and our related obligations and, in turn, our revenue.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may become subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, and compliance and reporting obligations that could adversely affect our revenues, financial condition or results of operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
49
Risks Related to Our Financial Condition
We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
We have incurred net losses since our inception and we expect that our operating losses will continue for the foreseeable future as we continue our drug development efforts and commercialize REDEMPLO and, if approved, our other product candidates. To achieve profitability, we must, either directly or through licensing and/or partnering relationships, meet certain milestones, successfully develop and obtain regulatory approval for drug candidates and effectively manufacture, market and sell any drugs we successfully develop. Even if we successfully commercialize REDEMPLO and any other product candidates that receive regulatory approval, we may not be able to realize revenues at a level that would allow us to achieve or sustain profitability. Accordingly, we may never generate significant revenue and, even if we do generate significant revenue, we may never achieve consistent profitability.
We will require substantial additional funds to complete our research and development activities.
Our business currently does not generate the cash that is necessary to finance our operations. Subject to the success of the research and development programs of the Company and our partners, and potential licensing or partnering transactions, we may need to raise additional capital to:
•fund research and development infrastructure and activities relating to the development of our product candidates, including preclinical and clinical trials and manufacturing to support these efforts;
•fund a commercialization infrastructure and activities related to the sale, marketing, customer support, and distribution of REDEMPLO and our other drug products;
•fund our selling, general and administrative infrastructure and activities;
•pursue business development opportunities for our technologies;
•add to and protect our intellectual property; and
•retain our management and technical staff.
Our future capital needs depend on many factors, including:
•the scope, duration, and expenditures associated with our research and development, including the progression of our clinical trials, with late-stage trials generally requiring greater capital than early-stage trials;
•regulatory requirements for our clinical trials;
•the extent to which our research and development and clinical efforts are successful;
•expenditures to build out or contract for sales, marketing and distribution capabilities;
•the outcome of potential partnering or licensing transactions, if any, and the extent to which our business development efforts result in the acquisition of new programs or technologies;
•competing technological developments;
•our intellectual property positions, if any, in our products; and
•the regulatory approval process and regulatory standards for our product candidates.
We will need to raise additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements in the future to continue our operations. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it very difficult for us to seek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities, further dilution to our stockholders will result, which may substantially dilute the value of investment. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants that could limit our flexibility in conducting future business activities and, in the event of insolvency, would be paid before holders of equity securities receive any distribution of corporate assets. In order to raise additional funds through partnerships, joint ventures or licensing arrangements, we may be required to relinquish rights to our technologies or product candidates or grant licenses on terms that are not favorable to us. If adequate funds are not available, we may have to further delay, reduce or eliminate one or more of our planned activities. These actions may reduce the market price of our common stock.
The terms of our financing agreement with Sixth Street Lending Partners and our indebtedness could adversely affect our operations and limit our ability to plan for or respond to changes in our business. If we are unable to comply with restrictions in the financing agreement, the repayment of our indebtedness could be accelerated.
50
On November 2, 2026, we entered into an amended and restated financing agreement with Sixth Street Lending Partners and the lenders party thereto (the “Financing Agreement”), under which we borrowed $400.0 million in senior secured term loans (the “Credit Facility”) and used cash on hand to repay in full the term loans outstanding under the original financing agreement, including accrued interest previously paid in kind and the related multiple-of-invested-capital payment, for an aggregate payoff amount of $404.4 million. The Credit Facility matures on November 2, 2031, bears interest, at our election, at an annual rate equal to three-month Term Secured Overnight Financing Rate (“SOFR”) (subject to a 1.00% floor) plus 5.50% or a base rate (subject to a 2.00% floor) plus 4.50%, payable quarterly in cash, and does not amortize prior to maturity. As of September 30, 2026, after giving effect to the refinancing, we had $400.0 million of indebtedness outstanding under the Financing Agreement and $700.0 million aggregate principal amount of our 0.00% Convertible Senior Notes due 2032 outstanding.
Because the loans under the Credit Facility bear interest at a variable rate, increases in prevailing interest rates will increase our interest expense and reduce the cash available to us for other purposes. In addition, prepayment of the loans before the forty-second month following the closing of the refinancing is subject to a make-whole or other prepayment premium, which may make it more costly for us to refinance or prepay the Credit Facility if we wish to do so, including in connection with a change of control or a strategic transaction.
The Financing Agreement contains several negative covenants that, subject to certain exceptions, restrict indebtedness, liens, investments (including acquisitions), fundamental changes, asset sales and licensing transactions, dividends and share repurchases, modifications to and terminations of material agreements, payment of subordinated indebtedness, transactions with affiliates and other matters customarily restricted in such agreements. Among other requirements of the Financing Agreement, we and our subsidiary guarantors must maintain unrestricted cash and cash equivalents in deposit and securities accounts in the United States subject to the lenders’ first-priority security interest of at least $125.0 million at all times. These and other terms in the Financing Agreement could restrict our ability to grow our business or enter into transactions that we believe would be beneficial to our business.
Our indebtedness could affect our business in the following ways, among other things: make it more difficult for us to satisfy our contractual and commercial commitments; require us to use a substantial portion of our cash to pay interest and, at maturity, principal, which would reduce funds available for working capital, capital expenditures and other general corporate purposes; limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments or general corporate purposes; heighten our vulnerability to downturns in our business, our industry or in the general economy; place us at a disadvantage compared to those of our competitors that may have proportionately less debt; limit management’s discretion in operating our business; and limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate or the general economy. In addition, the Financing Agreement restricts our ability to incur additional indebtedness, including by limiting the aggregate principal amount of convertible indebtedness we may have outstanding at any time to the greater of $1.1 billion and 10.0% of our market capitalization, and in no event more than $2.5 billion (inclusive of our outstanding 0.00% Convertible Senior Notes due 2032). These restrictions could limit our ability to raise additional capital when needed or on favorable terms and reduce our financial flexibility in the future.
Our obligations under the Financing Agreement are secured by substantially all of our assets and those of our subsidiary guarantor, including our intellectual property. If we fail to comply with the covenants in the Financing Agreement or another event of default occurs, including upon a change of control, the lenders could declare all amounts outstanding under the Credit Facility to be immediately due and payable, together with any applicable prepayment premium, and could foreclose on the collateral securing the loans. Our business may not generate cash flows from operations in the future that are sufficient to service our debt and support our growth strategies. In addition, our ability to generate sufficient cash flows to meet our debt obligations depends upon several factors, such as the ability of the Company and our licensees to timely complete clinical trials and obtain marketing approval for our clinical-stage product candidates, to successfully commercialize REDEMPLO and our clinical-stage product candidates, and our future performance, which is subject to financial, business, and other impacts on our operations, many of which are beyond our control. If we are unable to generate sufficient cash flows, we may be required to adopt one or more alternatives, such as obtaining additional equity capital on terms that may be onerous or highly dilutive, selling assets, or restructuring debt. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
51
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.
Our quarterly and annual operating results have fluctuated and may continue to fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. From time to time, we may enter into license or collaboration agreements or strategic partnerships with other companies that include development funding and significant upfront and milestone payments and/or royalties. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next.
In addition, we measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly.
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following:
•our ability to successfully commercialize REDEMPLO or any of our product candidates, if approved;
•the timing and cost of, and level of investment in, research and development activities relating to our current and any future product candidates, which will change from time to time;
•our ability to enroll patients in clinical trials and the timing of enrollment;
•the cost of manufacturing our current and any future product candidates, which may vary depending on FDA guidelines and requirements, the quantity of production and the terms of our agreements with manufacturers and other suppliers;
•expenditures that we will or may incur to acquire or develop additional product candidates and technologies;
•the timing and outcomes of clinical trials for product candidates;
•the need to conduct unanticipated clinical trials or trials that are larger or more complex than anticipated;
•competition from existing and potential future products that compete with REDEMPLO or any of our product candidates, and changes in the competitive landscape of our industry, including consolidation among our competitors or partners;
•any delays in regulatory review or approval of any of our product candidates;
•the level of demand for REDEMPLO or any of our product candidates, if approved, which may fluctuate significantly and be difficult to predict;
•the risk/benefit profile, cost and reimbursement policies with respect to REDEMPLO or any of our product candidates, if approved, and existing and potential future products that compete with our products;
•our ability to commercialize any of our products inside and outside of the United States, either independently or working with third parties;
•our ability to establish and maintain collaborations, licensing or other arrangements;
•our ability to adequately support future growth;
•potential unforeseen business disruptions that increase our costs or expenses;
•future accounting pronouncements or changes in our accounting policies; and
•the changing and volatile global economic environment.
The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.
52
The investment of our cash, cash equivalents and fixed income securities is subject to risks which may cause losses and affect the liquidity of these investments.
At September 30, 2026, we had $1,193.0 million in cash, cash equivalents, restricted cash and available-for-sale securities. Our investments may also include commercial paper, securities issued by the U.S. government obligations, and money market funds meeting the criteria of our investment policy, which is focused on the preservation of our capital. These investments are subject to general credit, liquidity, and market and interest rate risks, particularly in the current economic environment. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our consolidated financial statements. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity and financial condition.
Our ability to utilize net operating loss carryforwards and other tax benefits may be limited.
We have historically incurred net losses. Under the Internal Revenue Code of 1986, as amended (the “Code”), a corporation is generally allowed a deduction for net operating losses (NOLs) carried forward from a prior taxable year. Under that provision, we can carry forward our NOLs to offset our future taxable income, if any, until such NOLs are used or expire. As a result of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) and legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”), NOLs arising before January 1, 2018, and NOLs arising after January 1, 2018, are subject to different rules. Under the CARES Act and 2017 Tax Act, federal NOLs incurred in 2018, 2019 and 2020 can generally be carried back five years, carried forward indefinitely and can offset 100% of future taxable income for tax years before January 1, 2021 and up to 80% of future taxable income for tax years after December 31, 2020. Any NOLs arising on or after January 1, 2021, cannot be carried back, but can generally be carried forward indefinitely and can offset up to 80% of future taxable income. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. These NOL carryforwards could expire unused before offsetting potential future income tax liabilities.
In addition, under Sections 382 and 383 of the Code and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percent change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. It is possible that we have experienced an ownership change limitation. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.
If an ownership change occurs and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
We could be subject to additional tax liabilities.
We are subject to U.S. federal, state, and local taxes in the United States and other countries. Significant judgment is required in evaluating our tax positions. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. For instance, the One Big Beautiful Bill Act, enacted in 2025, permits the expensing of certain research and development expenditures in the U.S. incurred in tax years beginning in 2025, while amortization over fifteen years continues to be required for foreign-based expenditures. We continue to monitor new tax legislation or other developments since significant changes in tax legislation, or in the interpretation of existing legislation, could materially and adversely affect our financial condition and operating results.
Additionally, we may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value-added taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period for which a determination is made.
Our business is subject to changing regulations for corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.
Each year we are required to evaluate our internal controls systems in order to allow management to report on and our Independent Registered Public Accounting Firm to attest to, our internal controls as required by Section 404 of the
53
Sarbanes-Oxley Act. As a result, we continue to incur additional expenses and divert our management’s time to comply with these regulations. In addition, if we cannot continue to comply with the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC, the Public Company Accounting Oversight Board or The Nasdaq Global Select Market. Any such action could adversely affect our financial results and the market price of our common stock.
We may be unable to raise the funds necessary to repurchase the 0.00% Convertible Senior Notes due 2032 (the “Notes”) for cash following a fundamental change or to pay any cash amounts due upon maturity or conversion of the Notes, and our other indebtedness limits our ability to repurchase the Notes or to pay any cash amounts due upon their maturity or conversion.
In January 2026, we issued $700.0 million aggregate principal amount of the Notes. Noteholders may, subject to a limited exception, require us to repurchase their Notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. As of September 30, 2026, none of the conditions permitting holders to convert the Notes had been met, and $700.0 million aggregate principal amount of the Notes remained outstanding. See Note 16 — Convertible Notes of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.” Upon maturity of the Notes, we must pay their principal amount and accrued and unpaid special interest, if any, in cash, unless they have been previously repurchased, redeemed or converted. In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Notes or pay any cash amounts due upon their maturity or conversion. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the Notes or to pay any cash amounts due upon their maturity or conversion. For example, the Credit Facility restricts us from paying cash amounts on the Notes in connection with their conversion (other than cash in lieu of any fractional share of our common stock due upon conversion of the Notes) or in connection with our requirement to offer to repurchase the Notes following a fundamental change. Our failure to repurchase Notes or to pay any cash amounts due upon their maturity or conversion when required will constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Notes.
We are subject to counterparty risk with respect to the capped call transactions in connection with the issuance of the Notes (the “Capped Calls”), and the Capped Calls may not operate as planned.
In connection with the issuance of the Notes, we entered into the Capped Calls with certain financial institutions. The Capped Calls have an initial strike price corresponding to the initial conversion price of the Notes and an initial cap price of $119.33 per share, subject to adjustment under the terms of the Capped Call confirmations. The Capped Calls are intended to reduce or offset potential dilution to our common stock upon conversion of the Notes, with such reduction or offset subject to the applicable cap price. The Capped Calls cover, subject to anti‑dilution adjustments, the number of shares of our common stock underlying the Notes. The option counterparties are, or are affiliates of, financial institutions, and we will be subject to the risk that they might default under the Capped Calls. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, then we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of any option counterparty.
In addition, the Capped Calls are complex, and they may not operate as planned. For example, the terms of the Capped Calls may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Calls.
Because the Notes will not bear regular interest, holders of the Notes may not earn a return on their investment in the Notes.
The Notes will not bear regular interest, and the principal amount of the Notes will not accrete. Although special interest will accrue on the Notes in certain circumstances, the Notes may mature or be redeemed by us without the accrual or payment of any interest. Accordingly, holders of the Notes may not earn any return on their investment in the Notes
54
unless they resell them at a price that exceeds the price at which they purchased the Notes or they realize a gain in connection with the conversion of their Notes. Holders of the Notes may not be able to resell their Notes at favorable prices, and the trading price of our common stock may never exceed the conversion price of the Notes. As a result, their investment in the Notes may not earn any return at all and may result in losses.
Risks Related to Investment and Securities
Our Board of Directors has the authority to issue shares of “blank check” preferred stock, which may make an acquisition of the Company by another company more difficult.
We have adopted and may in the future adopt certain measures that may have the effect of delaying, deferring or preventing a takeover or other change in control of the Company that a holder of our common stock might consider in its best interest. For example, our Board of Directors, without further action by our stockholders, currently has the authority to issue up to 5,000,000 shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares (“blank check” preferred). Such preferred stock may have rights, including economic rights, senior to our common stock. These factors could also reduce the price that certain investors might be willing to pay for shares of our common stock and result in the market price being lower than it would be without these provisions.
We do not intend to declare cash dividends on our common stock.
We will not distribute cash to our stockholders unless and until we can develop sufficient funds from operations to meet our ongoing needs and implement our business plan. The time frame for that is unpredictable and investors should not expect dividends in the near future, if at all.
If securities or industry analysts do not publish research reports about our business or if they make adverse recommendations regarding an investment in our stock, our stock price and trading volume may decline.
The trading market for our common stock can be influenced by the research and reports that industry or securities analysts publish about our business. Investors have many investment opportunities and may limit their investments to companies that receive greater coverage from analysts. If additional industry or securities analysts do not commence coverage of the Company, the trading price of our stock could be negatively impacted. If one or more of the analysts downgrade our stock or comment negatively on our prospects, our stock price may decline. If one or more of these analysts cease to cover our industry or us or fail to publish reports about the Company regularly, our common stock could lose visibility in the financial markets, which could also cause our stock price or trading volume to decline. Further, incorrect judgments, estimates or assumptions made by research analysts may adversely affect our stock price, particularly if subsequent performance falls below the levels that were projected by the research analyst(s), even if we did not set or endorse such expectations. Any of these events could cause further volatility in our stock price and could result in substantial declines in the value of our stock.
Our common stock price has fluctuated significantly over the last several years and may continue to do so in the future, without regard to our results of operations and prospects.
The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. Consequently, we expect that the market price of our common stock will continue to fluctuate significantly. We may not generate substantial revenue from the sale of our products for several years. In the absence of product revenue as a measure of our operating performance, we anticipate that investors and market analysts will assess our performance by considering factors such as:
•announcements of developments related to our business;
•our ability to enter into or extend investigation phase, development phase, commercialization phase and other agreements with new and/or existing partners;
•announcements regarding the status of any or all of our collaborations or products, including clinical trial results;
•market perception and/or investor sentiment regarding our technology;
•the success of competitive products or technologies;
•announcements of actions taken by regulatory authorities, such as the FDA;
•announcements regarding developments in the RNAi, antisense technologies, gene editing technologies or biotechnology fields in general;
•announcements regarding clinical trial results with our products or competitors’ products;
•market perception and/or announcements regarding other companies developing products in the field of biotechnology generally or specifically RNAi;
55
•the issuance of competitive patents or disallowance or loss of our patent rights;
•the addition or departure of key executives; and
•variations in our operating results.
We will not have control over many of these factors but expect that they may influence our stock price. As a result, our stock price may be volatile and such volatility could result in the loss of all or part of your investment.
Stockholder equity interest may be substantially diluted in any additional equity issuances.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share confidential, proprietary, and sensitive information, including personal information, business data, trade secrets, intellectual property, information we collect about trial participants in connection with clinical trials, sensitive third-party data, business plans, transaction information, and financial information.
These activities may subject us to numerous data privacy and security obligations governing the collection, use, disclosure, protection, and other processing of personal data, such as various laws, regulations, guidance, industry standards, external and internal data privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
In the United States, there are both state and federal data privacy and security laws, including data breach notification laws, data privacy laws (including biometric privacy laws and wiretapping laws), consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH Act”), and the regulations promulgated thereunder. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (together, the “CCPA”), applies to personal information of consumers, including business representatives and employees, who are California residents, and requires businesses to provide specific disclosures in their privacy notices and affords certain rights to California residents with respect to their personal information. Regulations under the CCPA that took effect on January 1, 2026 impose risk assessment, automated decision-making technology and cybersecurity audit requirements on certain covered businesses, with compliance deadlines that phase in through 2030. However, the CCPA does not apply to protected health information that is subject to HIPAA/HITECH. The CCPA provides for substantial civil penalties and allows private litigants affected by certain data breaches to recover significant statutory damages. Approximately twenty other states have enacted comprehensive privacy laws, with varying effective dates, although these laws generally exempt entities and/or protected health information subject to HIPAA/HITECH. In addition, state health information privacy laws, such as California’s Confidentiality of Medical Information Act, Washington’s My Health My Data Act and the Nevada Consumer Health Data Privacy Law, govern the privacy and security of health-related information, specifically, may apply even when HIPAA/HITECH does not and impose additional requirements.
Outside the United States there are additional laws, regulations, and industry standards governing data privacy and security. For example, in the EEA, the General Data Protection Regulation (“GDPR”) and, in the UK, the GDPR as incorporated into UK law pursuant to the European Union (Withdrawal) Act 2018 (the “UK GDPR”) impose strict requirements for processing personal data, including health-related data which is subject to specific requirements. Under the GDPR and UK GDPR, companies may face administrative fines of up to 20 million Euros or 4% of total worldwide annual revenue, whichever is greater, as well as claims from individuals who suffered damages as a result of an infringement. In addition, the GDPR and UK GDPR impose specific restrictions, including on the transfer of personal data to countries outside of the EEA and UK that are not considered to provide an adequate level of data protection. Although various transfer mechanisms are available, such as the EEA and UK standard contractual clauses, these mechanisms are subject to further requirements, including the conduct of transfer risk/impact assessments and where necessary, the adoption of supplementary measures. Companies that transfer personal data out of the EEA and UK remain subject to
56
potential scrutiny from regulators, individuals and associations. In the EEA, companies must also comply with national data protection laws, which supplement, interpret, and in some cases go beyond the GDPR or other EEA-level requirements, including with respect to health-related data. Data protection authorities across member states may enforce data protection laws differently, and introduce additional national regulations and guidelines, which adds to the complexity of processing personal data in the EEA. Guidance developed at both EEA level and at the national level in each member state concerning implementation and compliance practices is often updated or otherwise revised. Violations of national laws can trigger administrative investigations, corrective orders, temporary or definitive bans on processing, and, in some jurisdictions, criminal penalties.
Additionally, our use of artificial intelligence may be subject to existing and evolving laws and regulations regarding the use of artificial intelligence, including as they relate to controlling for data bias and antidiscrimination and the use of automated decision-making technology in employment and other significant decisions. In this regard, Europe has also passed the AI Act (Regulation (EU) 2024/1689) – which entered into force on August 1, 2024 – laying down harmonized rules on the development, placing on the market and use of artificial intelligence systems in the EU. The AI Act applies in stages, with certain obligations already applicable and others, including the requirements applicable to "high-risk" AI systems, deferred to 2027 and 2028 pursuant to an amending regulation adopted in July 2026. Non-compliance may result in significant fines. To the extent the AI Act applies to AI systems that we develop or deploy, compliance may increase our costs, restrict the introduction of AI-enabled products and features in Europe, or otherwise affect our business.
In addition, EU cybersecurity legislation, including the NIS2 Directive and the Cyber Resilience Act, is expanding cybersecurity, incident-reporting and product security requirements, with certain obligations under the Cyber Resilience Act applicable since September 2026. To the extent these regimes apply to our products or services, or to our customers, we may incur additional compliance costs and be subject to additional reporting obligations and contractual security requirements.
Preparing for and complying with these obligations requires us to devote resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government regulatory enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Economic and Industry Risks
Unfavorable global economic conditions, whether brought about by material global crises, health epidemics, military conflicts or war, geopolitical and tariffs or other trade disputes or other factors, may adversely affect our business and financial results.
Our business is sensitive to global economic conditions, which can be adversely affected by epidemics and other public health crises (such as the COVID-19 pandemic), political and military conflict, tariffs or other trade restrictions or the threat of such actions and retaliatory actions, and other international disputes, significant natural disasters (including as a result of climate change) or other events that disrupt macroeconomic conditions. Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other trade restrictions or the threat of such actions and retaliatory actions, changes to fiscal and monetary policy or government budget dynamics (particularly in the pharmaceutical and biotech areas), tighter credit, higher interest rates, volatility in financial markets, high unemployment, labor availability constraints, currency fluctuations and other challenges in the global economy have in the past adversely affected, and may in the future adversely affect, us and our business partners and suppliers.
Trade policies and geopolitical disputes (including as a result of China-Taiwan relations) and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially and adversely affect our business, particularly if these measures occur in regions where we source components or raw materials. For example, tensions between the United States and China have led to a series of tariffs being imposed by the United States on imports from mainland China, as well as other business restrictions. In response to tariffs, countries have implemented retaliatory tariffs on U.S. goods. In February 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act does not authorize the imposition of tariffs, and the Trump administration has since reimposed tariffs under other statutory authorities. Separately in April 2026, following an investigation under Section 232 of the Trade
57
Expansion Act of 1962, the Trump administration issued a proclamation imposing tariffs of up to 100% on imports of patented pharmaceutical products and their active ingredients and key starting materials, which took effect for most importers in September 2026, subject to reduced rates for certain trading partners, exemptions for manufacturers that have entered into MFN pricing agreements with the Trump administration and are investing in U.S. manufacturing, and exemptions for certain categories of products, including orphan drugs. There is substantial uncertainty as to the scope and application of such tariffs, including whether and how they would apply to active pharmaceutical ingredients or bulk drug products that are intended for use in clinical trials, and, more generally, about the duration of existing tariffs, implementation of announced tariffs, litigation challenging tariffs and whether additional tariffs or other retaliatory measures may be imposed, modified or suspended. Tariffs increase the costs of the components and raw materials we source. Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, that could adversely impact the Company’s operations and supply chain. These geopolitical risks could also adversely affect Visirna. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets.
Further, military conflicts or wars (such as the ongoing conflicts between Russia and Ukraine and in the Middle East) can cause exacerbated volatility and disruptions to various aspects of the global economy. The uncertain nature, magnitude, and duration of hostilities stemming from such conflicts, including the potential effects of sanctions and counter-sanctions, or retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business and operations, such as worldwide supply chain issues. Additionally, the ongoing conflict between Russia and Ukraine has impacted our business decisions with respect to potential clinical trial sites in Europe. For example, a number of our clinical trial sites we had previously planned to use in Russia, Ukraine, and Belarus were shut down and we had to seek alternatives in other geographies. It is not possible to predict the short and long-term implications of military conflicts or wars or geopolitical tensions which could include further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.
Additionally, our operations and facilities, as well as operations of our suppliers and manufacturers, may be located in areas that are prone to earthquakes, wildfires and other natural disasters. Such operations and facilities are also subject to the risk of interruption by drought, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks, labor disputes, public health crises, and other events beyond the Company’s control. Global climate change is resulting in certain types of natural disasters occurring more frequently or with more intense effects. Such events can create delays or interruptions to the Company’s development efforts and inefficiencies in the Company’s supply and manufacturing chain. Significant delays in our development efforts could materially impact our ability to obtain regulatory approval and to commercialize our products. Any insurance we maintain against damage to our property and the disruption of our business due to disaster may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. Further, because the Company relies on single or limited sources for the supply and manufacture of many critical components, a business interruption affecting such sources would exacerbate any negative consequences to the Company.
Any future public health crises may affect our operations and those of third parties on which we rely, including our business partners and suppliers. We may in the future experience:
•delays in receiving authorization from regulatory authorities to initiate any planned clinical trials, inspections, reviews and approvals of products;
•delays or difficulties enrolling patients in our clinical trials;
•delays in or disruptions to the conduct of preclinical programs and clinical trials;
•constraints on the movement of products and supplies through the supply chain, which can disrupt our ability to conduct clinical trials and develop our products;
•price increases in raw materials and capital equipment, as well as increasing price competition in our markets;
•adverse impacts on our workforce and/or key employees; and
•increased risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations.
58
The healthcare system is under significant financial pressure to reduce costs, which could reduce payment and reimbursement rates for drugs.
Throughout the world and particularly in the United States, the healthcare system is under significant financial pressure to reduce costs. The price of pharmaceuticals has been a topic of considerable public discussion that could lead to price controls or other price-limiting strategies by payers that have the effect of lowering payment and reimbursement rates for drugs or otherwise making the commercialization of pharmaceuticals less profitable. Many federal and state legislatures have considered, and adopted, healthcare policies intended to curb rising healthcare costs, such as the Inflation Reduction Act of 2022. These cost-containment measures may include, among other measures: requirements for pharmaceutical companies to negotiate prescription drug prices with government healthcare programs; controls on government-funded reimbursement for drugs; new or increased requirements to pay prescription drug rebates to government healthcare programs, including if drug prices increase at a higher rate than inflation; controls on healthcare providers; challenges to or limits on the pricing of drugs, including pricing controls or limits or prohibitions on reimbursement for specific products through other means; requirements to try less expensive products or generics before a more expensive branded product; and public funding for cost effectiveness research, which may be used by government and private third-party payers to make coverage and payment decisions. In addition, in May 2025, the Trump administration issued an executive order entitled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” which, among other things, directs the HHS and other agencies to communicate MFN price targets to pharmaceutical manufacturers to bring prices for U.S. patients in line with comparably developed nations and to facilitate direct-to-consumer purchasing programs. The Trump administration has continued to pursue policy and regulatory MFN strategies and has since announced MFN pricing agreements with a number of pharmaceutical manufacturers. The CMS has also finalized the Global Benchmark for Efficient Drug Pricing (GLOBE) Model, a mandatory model scheduled to go into effect on January 1, 2027 that uses international reference prices in calculating manufacturer rebates. A separate CMS Part D proposed rule – the Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model – remains pending but, as proposed, would apply a similar international benchmark to Medicare Part D inflation rebates. It remains unclear whether GUARD will be finalized and, if so, whether it will follow GLOBE’s approach. The CMS has separately launched the voluntary GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model, which benchmarks Medicaid supplemental rebates on relevant drugs off of MFN pricing metrics. We continue to evaluate the potential impact of these models on our business. It is currently unclear how such measures may ultimately affect our business. Because MFN pricing proposals measure U.S. prices against prices paid in other developed countries, the price at which a product is launched outside the United States may affect the price we are able to realize in the United States. As a result, we may determine not to launch REDEMPLO or a future product in a jurisdiction in which we had previously expected to launch, or to delay such a launch, because of business considerations related to U.S. pricing, and any such determination would reduce or defer revenue we would otherwise expect to receive from that jurisdiction. The prices of competing products can impact pricing of our products in the United States. If a competing product, such as TRYNGOLZA, is sold in other developed countries at prices substantially below U.S. prices, including by a licensee or distributor whose pricing decisions the competitor does not control, those prices could be used by the HHS, CMS or other government authorities under MFN policies, or by payers in negotiating coverage and rebates, as a benchmark for products in the same class, including REDEMPLO, resulting in pressure on our U.S. pricing even if we do not have any sales in those countries. Further, there can be no assurance that the current administration or future administrations will not pursue different or additional measures that could impact drug pricing in the U.S. Political, economic and regulatory developments may further complicate developments in healthcare systems and pharmaceutical drug pricing. These developments could, for example, impact our potential licensing agreements as commercial and collaborative partners may also consider the impact of these pressures on their licensing strategies. Relatedly, any reduction in reimbursement from Medicare and other government programs pursuant to such MFN or other reforms may result in a similar reduction in payments from private payers.
Price control measures outside the United States may compound these effects. The EU’s Pharma Package, if adopted in its agreed form, would permit an individual member state to require a marketing authorization holder to submit a pricing and reimbursement application to that member state and to supply the product in that member state. If the EU marketing authorization holder does not make the product available in the respective member state within three years of the request, the member state could disapply the market protection for that product, including any extension of orphan market exclusivity.
Additionally, Germany has enacted legislation that extends its price moratorium, which limits the ability to increase prices, through December 31, 2030, makes price-volume terms mandatory in reimbursement amount agreements and permits statutory health insurers to conduct exclusive cross-molecule tenders in specified therapeutic classes. Further, from January 1, 2027, Germany will impose an additional 8.5% manufacturer rebate on patent-protected medicines, subject to limited exemptions, including one for new medicines.
59
Any new laws or regulations that have the effect of imposing additional costs or regulatory burden on pharmaceutical manufacturers, or otherwise negatively affect the industry, could adversely affect our ability to successfully commercialize our product candidates. The implementation of any price controls, caps on prescription drugs or price transparency requirements could adversely affect our business, operating results and financial condition.
Evolving regulatory standards, including as a result of changes in government leadership, make it difficult to accurately predict the likelihood of marketing approval even when clinical trials meet their endpoints.
Regulatory standards are promulgated by various government entities and are subject to change based on factors such as scientific developments, public perceptions of risk, and political forces. Because clinical trials often take years to complete, it is sometimes possible for standards that exist during the conception and initiation of a clinical trial to change before the clinical trial is completed or reviewed by government regulators. For example, we may initiate clinical trials that are designed to show benefits on relatively short-term endpoints, but ultimately be required to show benefits in longer-term outcome studies. While some government entities have safeguards intended to ensure standards agreed upon by sponsors and regulators at the outset of a clinical trial are applied during regulatory review processes, those safeguards generally permit regulators to apply more rigorous standards where regulators believe doing so is necessary. As such, there can be no assurance that regulatory standards that are appropriate at the outset of a clinical trial program will not become more rigorous during the regulatory approval process and could potentially result in a delayed approval or denial of marketing authorization.
In addition, the FDA, EMA and other regulatory authorities may change their policies, issue additional regulations or revise existing regulations, or take other actions, including as a result of changes in leadership at the FDA and other federal agencies under the current U.S. administration, which may prevent or delay approval of our future products under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing authorizations we may have obtained. In June 2024, the Supreme Court overruled the Chevron doctrine, which had given deference to regulatory agencies’ statutory interpretations of ambiguous regulations in litigation against federal government agencies, such as the FDA. The overruling of the Chevron doctrine may significantly increase the number of challenges brought by companies and other stakeholders against federal agencies such as the FDA and its longstanding decisions and policies, including the FDA’s statutory interpretations of market exclusivities and the “substantial evidence” requirements for drug approvals, which could undermine the FDA’s authority, lead to uncertainties in the industry, and disrupt the FDA’s normal operations, any of which could delay the FDA’s review of our regulatory submissions. We cannot predict the full impact of this decision, future judicial challenges brought against the FDA, or the nature or extent of government regulation that may arise from future legislation or administrative action.
Further, under the new leadership at the HHS under the current administration, agency reorganization, mass layoffs due to the reduction in force initiative and other measures implemented by the Department of Government Efficiency have impacted the normal operations of the FDA as well as other federal agencies. FDA may lack adequate staff and resources to meet current review, approval, and inspection schedules, which could delay our anticipated timelines and may have a material impact on the industry and our clinical development plans. For example, average review times at the FDA have fluctuated in recent years as a result. Our business depends upon the ability of the FDA to accept and review our potential regulatory filings. If a prolonged government shutdown occurs or if a significant number of federal employees are laid off or leave federal agencies, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our ability to advance clinical development of our product candidates. In addition, the FDA’s authority to collect prescription drug fees expires on September 30, 2027, and if Congress does not reauthorize the program on time, or reauthorizes it with changes to fees, review goals, or other FDA authorities, the FDA’s ability to review our marketing applications on a timely basis could be impaired.
In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. In January 2025, an executive order entitled “Unleashing Prosperity Through Deregulation” was issued which calls for at least 10 existing regulations to be repealed whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation. Recent developments at the FDA include guidance and regulations intended to reduce, refine, and replace animal testing, the Rare Disease Framework Initiative program to facilitate approval of drugs to treat rare diseases, and the implementation of the Commissioner’s National Priority Voucher program for companies supporting certain U.S. national health priorities and interests. To the extent our competitors are selected for this voucher pilot program, or are otherwise able to participate in any of these initiatives intended to accelerate drug development and application review, and obtain faster approval than us, our competitive position may be harmed. FDA has also increased its scrutiny of foreign drug manufacturing facilities and other contractors based in China, especially with respect to the transfer of biological materials, genetic data, and other sensitive data of American patients to parties located in China. The FDA has published complete
60
response letters, including letters for applications that have not been approved, and has indicated that it intends to continue and expand this practice. As a result, any complete response letter we receive could be made public. Although the FDA redacts certain confidential commercial and trade secret information, a published letter could reveal information about our clinical data, manufacturing or regulatory strategy, and its contents, or any perceived inconsistency between the letter and our prior public statements, could harm our reputation and competitive position, expose us to securities litigation, and adversely affect the market price of our common stock. It is unclear how our industry and our clinical programs will be impacted by policies and regulations implemented under the current administration and FDA leadership, or other executive orders. There is significant uncertainty in the industry and how federal agencies like the FDA will continue to change in the coming years under the current administration, including with respect to possible confirmation of a new FDA commissioner. To the extent the agency reorganization and other agency changes lead to disruptions in FDA’s operations, our correspondence and regulatory review processes with the FDA may be materially delayed.
ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
The Company maintains a cybersecurity program, with direct oversight from senior management and the Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”), to manage information, data, and technology security. The cybersecurity program is informed in part by the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) and is designed to help identify, assess, and manage cybersecurity risks relevant to the Company’s business. The Company’s cybersecurity program has been developed in light of the nature of the Company’s business, resource availability, requirements from stakeholders, and industry trends. The Company has formed an internal cross-functional Technology Risk Management Committee comprised of representative leaders from various aspects of the Company’s business to broadly implement its cybersecurity program.
The Company’s cybersecurity program prioritizes vulnerability management, risk reduction, detection, and prevention to help protect against material risks from cybersecurity threats to its information systems. The Company periodically conducts internal and third-party cybersecurity risk assessments and penetration tests and incorporates relevant findings and recommendations into its overall cybersecurity strategy, as appropriate. Through these assessments, the Company develops targeted strategies intended to address the most significant cybersecurity risks.
The Company’s cybersecurity program emphasizes defense, rapid detection, and remediation of cybersecurity threats and incidents, including the use of various security tools and systems based on defense-in-depth and zero-trust principles that are intended to meet control requirements. The cybersecurity program also encompasses crisis incident response guidelines that detail the processes for the detection, response, mitigation, and remediation of cybersecurity incidents, in order to support the effective management of, response to, communication during, and recovery from any such incidents.
A key element of the Company’s strategy is fostering training and awareness through annual cybersecurity training and role-based phishing tests for employees and certain third parties having access to the Company’s information systems. The Company also utilizes a third-party cybersecurity operations monitoring center to help identify threats and incidents to the Company’s servers and computers. The Company’s cybersecurity program includes specific requirements and guidelines for the information security team relating to the Company's computer emergency response preparedness, intrusion response preparedness, and incident response preparedness.
When a potential cybersecurity threat or incident is identified, our processes require that the Vice President of Information Security be promptly notified of the incident, who then is to conduct an initial investigation to determine the probability and potential of the threat or incident to have a material impact on key business systems and processes. If there is a reasonable possibility for a material impact to the Company’s business or information systems, the cybersecurity program requires that the Technology Risk Management Committee be promptly notified, which then assigns a risk level to the threat or incident. All threats and incidents identified as high-risk are promptly escalated to Company leadership and the legal department, who, in collaboration with the Company's Information Security department, are tasked with activating and implementing a high-risk information security incident mitigation and response plan, which details the roles, responsibilities, and strategies to respond. Our cybersecurity program also requires that high-risk cybersecurity incidents or threats be reported to the Company’s Materiality Committee and the Audit Committee within 24 hours of their designation as high-risk by the Technology Risk Management Committee.
61
Technology Risk Management Committee and tracked by the Audit Committee as part of our overall risk management process.
The Company has also established a management-level Technology Risk Management Committee, which includes leaders from finance, legal, operations, quality & compliance, and information systems & informatics, who are responsible for overseeing the execution of high-risk incident response and mitigation plans. This committee actively reviews technology strategies, physical and cybersecurity threat assessment, and emerging issues and related initiatives. It is also responsible for evaluating the materiality of information for SEC filings and, as required or as otherwise appropriate, coordinates with the Company’s Materiality Committee to support timely disclosure of relevant information.
ITEM 2.PROPERTIES
The following table summarizes the Company’s leased facilities as of November 5, 2026.
| Approximate Square Footage | Primary Use | Lease Expiration | Remaining Lease Term (year) | ||||||||||||||||||||
| Pasadena, California | 98,000 | Corporate Headquarters | December 2034 | 8.1 | |||||||||||||||||||
| Madison, Wisconsin | 116,000 | Research Facility | September 2031 | 4.9 | |||||||||||||||||||
| San Diego, California | 144,000 | Research and Office Facility | April 2038 | 11.5 | |||||||||||||||||||
The Company owns land in the Verona Technology Park in Verona, Wisconsin, which has been developed into an approximately 160,000 square foot drug manufacturing facility and an approximately 140,000 square foot laboratory and office facility that supports the Company’s manufacturing process development and analytical activities.
ITEM 3.LEGAL PROCEEDINGS
Legal Proceedings are set forth in the Company’s financial statement schedules in Part IV, Item 15 of this Annual Report on Form 10-K and are incorporated herein by reference. See Note 7 — Commitments and Contingencies of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
62
PART II
ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Shares of the Company’s common stock are traded on The Nasdaq Global Select Market under the symbol “ARWR.” There were 81 holders of record of the Company’s common stock as of November 5, 2026.
Dividends
The Company has never paid dividends on its common stock and does not anticipate that it will do so in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Repurchases of Equity Securities
None.
Performance Graph
The following performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing. The graph compares the cumulative 5-year total return to stockholders on the Company’s common stock relative to the cumulative total returns of the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The Company selected the Nasdaq Biotechnology Index because it believes the index reflects the market conditions within the industry in which the Company primarily operates. The comparison of total return on investment, defined as the change in year-end stock price plus reinvested dividends, for each of the periods assumes that $100 was invested on September 30, 2021 in each of the Company’s common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index, with investment weighted on the basis of market capitalization.
63
The comparisons in the following graph are based on historical data and are not intended to forecast the possible future performance of the Company’s common stock.
| $100 investment in stock or index | Ticker | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | |||||||||||||||||||||||||||||||||||||
| Arrowhead Pharmaceuticals, Inc. | ARWR | $ | 100.00 | $ | 52.94 | $ | 43.04 | $ | 31.03 | $ | 55.25 | $ | 104.84 | |||||||||||||||||||||||||||||||
| NASDAQ Biotechnology Index | ^NBI | $ | 100.00 | $ | 74.09 | $ | 77.75 | $ | 93.76 | $ | 95.96 | $ | 139.91 | |||||||||||||||||||||||||||||||
| NASDAQ Composite Index | ^IXIC | $ | 100.00 | $ | 73.19 | $ | 91.49 | $ | 125.89 | $ | 156.83 | $ | 185.91 | |||||||||||||||||||||||||||||||
ITEM 6. RESERVED
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a commercial-stage pharmaceutical company developing medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and modes of delivery, the Company’s therapies trigger the RNA interference (RNAi) mechanism to induce rapid, deep and durable knockdown of target genes. RNAi is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics seek to leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.
The Company believes that TRiM enabled therapeutics offer several potential advantages over prior generations and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung, skeletal muscle, central nervous system (CNS), adipose tissue, ocular, and cardiomyocytes; and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules.
The Company's products:
64
•REDEMPLO® is indicated as an adjunct to diet to reduce triglycerides in adults with Familial Chylomicronemia Syndrome (FCS) and has received regulatory approvals in the United States, European Union, Canada, Australia, China and the United Kingdom. REDEMPLO is out-licensed to Sanofi in Greater China.
The following table presents select programs from the Company’s pipeline:
| Therapeutic Area | Name | Stage | Product Rights | ||||||||
| Cardiometabolic | plozasiran | Phase 3 | Arrowhead(1) | ||||||||
| zodasiran | Phase 3 | Arrowhead | |||||||||
| olpasiran | Phase 3 | Amgen | |||||||||
| GSK4532990 | Phase 2b | GSK | |||||||||
| ARO-DIMER-PA | Phase 1/2a | Arrowhead | |||||||||
| ARO-PNPLA3 | Phase 1 | Madrigal | |||||||||
| ARO-INHBE | Phase 1/2a | Arrowhead | |||||||||
| ARO-ALK7 | Phase 1/2a | Arrowhead | |||||||||
| Pulmonary | ARO-RAGE | Phase 2 | Arrowhead | ||||||||
| SRP-1002 (ARO-MMP7) | Phase 1/2a | Sarepta | |||||||||
| Liver | fazirsiran | Phase 3 | Takeda and Arrowhead | ||||||||
daplusiran/tomligisiran | Phase 2 | GSK | |||||||||
| Neuromuscular | SRP-1001 (ARO-DUX4) | Phase 1/2a | Sarepta | ||||||||
| SRP-1003 (ARO-DM1) | Phase 1/2a | Sarepta | |||||||||
| SRP-1004 (ARO-ATXN2) | Phase 1/2a | Sarepta | |||||||||
| SRP-1005 (ARO-HTT) | Phase 1 | Sarepta | |||||||||
| ARO-MAPT | Phase 1/2a | Arrowhead | |||||||||
| ARO-SNCA | Pre-clinical | Novartis | |||||||||
| Other | ARO-C3 | Phase 1/2a | Arrowhead | ||||||||
| ARO-CFB | Phase 1/2a | Arrowhead | |||||||||
(1) Greater China rights are out-licensed to Sanofi.
The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California.
The Company continues to develop other clinical candidates for future clinical trials. Clinical candidates are tested internally and through Good Laboratory Practice (GLP) toxicology studies at outside laboratories. Drug materials for such studies, clinical trials, and commercial products are either manufactured internally or contracted to third-party manufacturers. The Company engages third-party contract research organizations (CROs) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, including toxicology/efficacy testing and manufacturing costs, as well as the preparation for and administration of clinical trials, are referred to as “candidate costs.” As clinical candidates progress through clinical development, candidate costs will increase.
2026 Business Highlights
During fiscal year 2026 and up to the Form 10-K filing date, the Company experienced a transformative year, highlighted by the following key events. The following items are not all-inclusive and are meant to be read in conjunction with the entirety of management’s discussion and analysis, the Company’s Consolidated Financial Statements and notes thereto, and all other items contained within this Annual Report on Form 10-K.
Key REDEMPLO Commercial Events
•On November 18, 2025, the FDA approved the Company's New Drug Application (NDA) for REDEMPLO injection for FCS. This approval was supported by clinical data from the Phase 3 PALISADE study, a randomized, double-blind, placebo-controlled trial in adults with clinically diagnosed or genetically confirmed FCS. The PALISADE study met its primary endpoint and all multiplicity-controlled key secondary endpoints, including demonstrating significant reductions in triglycerides and APOC3. In PALISADE, 25 mg
65
REDEMPLO achieved deep and durable reductions in triglycerides, with a median change from baseline of -80% versus -17% in the pooled placebo group, and a lower numerical incidence of acute pancreatitis compared with placebo.
•On December 2, 2025, the Company announced that the FDA had granted Breakthrough Therapy designation to investigational plozasiran as an adjunct to diet to reduce triglyceride (TG) levels in adults with severe hypertriglyceridemia (sHTG) (TG levels greater than or equal to 500 mg/dL).
•During fiscal 2026, the Company continued to expand global regulatory approval and commercial availability of REDEMPLO for the treatment of adults with FCS:
◦On January 5, 2026, the Company announced that Health Canada had issued a Notice of Compliance (NOC) authorizing REDEMPLO as an adjunct to diet to reduce triglycerides in adults with FCS for whom standard triglyceride lowering therapies have been inadequate. REDEMPLO is the first and only Health Canada-approved siRNA medicine to be studied in patients with genetically confirmed and clinically diagnosed FCS. The Health Canada approval is based on positive results from the Phase 3 PALISADE study where REDEMPLO significantly reduced triglycerides from baseline and lowered the numerical incidence of acute pancreatitis compared to placebo.
◦On January 7, 2026, the Company announced that the Chinese National Medical Products Administration (NMPA) had approved REDEMPLO for the reduction of triglyceride levels in adult patients with FCS. REDEMPLO will be marketed in Greater China by Sanofi under an agreement between Sanofi and Arrowhead.
◦On May 1, 2026, the Company announced that the Australian Therapeutic Goods Administration (TGA) approved REDEMPLO as an adjunct to diet to reduce triglyceride levels for adult patients with FCS in Australia.
◦On June 22, 2026, the Company announced that the European Commission (EC) formally granted marketing authorization for REDEMPLO, a small interfering RNA (siRNA) medicine, as an adjunct to diet to reduce triglyceride levels in adult patients with FCS. REDEMPLO is the first and only siRNA medicine authorized by the EC for adults with FCS, diagnosed either by the presence of clinical criteria or genetic testing.
◦On August 17, 2026, the Company announced that REDEMPLO became available as a new treatment option to reduce triglyceride levels for adult patients with FCS in Germany, following the EC’s marketing authorization in June 2026, with REDEMPLO listed in the Lauer-Taxe® database and thus able to be prescribed, dispensed and reimbursed.
◦Subsequent to our fiscal year end, on October 19, 2026, the Medicines and Healthcare products Regulatory Agency (MHRA) provided marketing authorization for REDEMPLO in the United Kingdom.
•On October 7, 2026, the Company announced that the FDA had granted plozasiran entry in the Split Real Time Application Review (STAR) pilot program in connection with Arrowhead’s upcoming supplemental new drug application (sNDA) for sHTG.
◦The FDA STAR pilot program aims to shorten the time from the date of a complete sNDA submission to the action date for certain supplemental indications for already-approved drugs. To be granted entry in the STAR program, FDA must determine that clinical evidence from adequate and well-controlled investigation(s) indicates that the drug may demonstrate substantial improvement on a clinically relevant endpoint(s) over available therapies.
◦Once accepted into the STAR program, a supplemental application qualifies for a 6-month Priority Review compared to a 10-month standard review. In addition, FDA will generally target an “expedited review” for efficacy supplements in the STAR program, meaning an action at least 1 month before the Priority Review goal date is possible. The use of a Priority Review Voucher (PRV) is not necessary for
66
programs that are granted entry in the STAR program, so Arrowhead retains the PRV previously purchased in September 2026.
◦The Company has submitted an sNDA to the U.S. FDA and is currently preparing for a potential U.S. launch in sHTG in the second quarter of 2027, pending successful regulatory filing, review, and approval, and plans to seek regulatory approval with additional global regulatory authorities thereafter.
•On October 27, 2026, the Company announced that adults in England and Wales who live with FCS will have access to a newly licensed new treatment option available on the NHS to reduce extremely high levels of triglycerides in their bloodstreams, if the response to diet and conventional triglyceride lowering therapies has been inadequate.
◦REDEMPLO® has received Marketing Authorization from The Medicines and Healthcare products Regulatory Agency (MHRA) as an adjunct to diet to reduce triglyceride levels in adult patients with FCS, diagnosed via genetic testing or clinical criteria.
◦Following this marketing authorization, National Institute for Health and Care Excellence (NICE) issued Technology Appraisal guidance recommending funding for the NHS in England and Wales to use it as a treatment option to treat genetically confirmed FCS in adults if the response to diet and conventional triglyceride lowering therapies has been inadequate, in accordance with a commercial arrangement.
•Key Research & Development Events
•On December 8, 2025, the Company initiated and dosed the first subjects in a Phase 1/2a clinical trial of ARO-MAPT, the Company's investigational RNAi therapeutic being developed as a potential treatment for tauopathies including Alzheimer's disease, a progressive neurodegenerative disease characterized by cognitive and functional decline.
•On January 6, 2026, the Company announced interim results from two Phase 1/2a clinical trials of ARO-INHBE and ARO-ALK7, the Company's investigational RNAi therapeutics being developed as potential treatments for obesity and metabolic dysfunction-associated steatohepatitis (MASH), showing for patients enrolled in the study that:
◦ARO-INHBE in combination with tirzepatide, a GLP-1/GIP receptor co-agonist, nearly doubled weight loss at week 16 and roughly tripled reductions in visceral fat, total fat, and liver fat versus tirzepatide alone in obese patients with type 2 diabetes mellitus at those same endpoints at week 12;
◦ARO-ALK7, the first RNAi-therapeutic to show adipocyte gene target silencing in a clinical trial, achieved dose dependent reductions in adipose ALK7 messenger RNA (mRNA) with a mean reduction of -88% at the 200 mg dose at week 8 with a maximum reduction of -94%; and
◦ARO-INHBE monotherapy at 200mg or greater reduced liver fat content (LFC) by 44% compared to placebo in subjects with obesity and baseline liver fat content greater than 8%.
•On January 27, 2026, the Company initiated and dosed the first subjects in a Phase 1/2a clinical trial of ARO-DIMER-PA, the Company's investigational RNAi therapeutic being developed as a potential treatment for atherosclerotic cardiovascular disease (ASCVD) due to mixed hyperlipidemia.
◦ARO-DIMER-PA is designed to silence expression of both proprotein convertase subtilisin kexin 9 (PCSK9) and apolipoprotein C3 (APOC3) genes.
◦This represents an important step forward for the field of RNAi therapeutics, as it is the first clinical candidate to target two genes simultaneously in one molecule, enabled by Arrowhead's innovative and proprietary Targeted RNAi Molecule (TRiM™) platform.
•On March 28, 2026, the Company presented new long-term efficacy and safety data for plozasiran across a spectrum of hypertriglyceridemia at the American College of Cardiology's 75th Annual Scientific Session and Expo.
67
◦Patients with severe hypertriglyceridemia (sHTG) achieved an 83% median reduction in triglycerides (TG), with 96% of patients achieving TG levels below 500 mg/dL, a threshold associated with increased risk of acute pancreatitis.
◦No adjudicated acute pancreatitis events occurred in any patient receiving plozasiran during the 2-year Phase 2b Open-Label Expansion (OLE) Study.
◦Favorable and durable improvements in atherogenic lipoproteins, including remnant cholesterol, non-high-density lipoprotein (HDL) cholesterol, and Apolipoprotein B (ApoB), were observed, with a safety profile consistent with earlier trials.
•On May 26, 2026, the Company presented new positive clinical data for plozasiran supporting its use in patients with moderate-to-severe renal impairment or moderate hepatic impairment without the need for dose adjustment, and a case report suggesting that preconception exposure to plozasiran may be associated with sustained lowering of fasting triglyceride (TG) levels through the term of a pregnancy. The data were presented in two oral presentations at the 94th European Atherosclerosis Society (EAS) Congress.
•On May 27, 2026, the Company presented interim results from a Phase 1/2a clinical trial of ARO-INHBE, the Company's investigational RNA interference (RNAi) therapeutic being developed as a potential treatment for obesity and metabolic dysfunction-associated steatohepatitis (MASH). The data presented at the European Association for the Study of the Liver Congress (EASL 2026) demonstrate that ARO-INHBE treatment led to clinically meaningful reductions in liver fat as a monotherapy and in combination with low-dose tirzepatide, a GLP-1/GIP receptor co-agonist, in adults with obesity.
•On July 22, 2026, the Company announced topline results for the global Phase 3 SHASTA-3 and SHASTA-4 clinical studies of plozasiran in patients with severe hypertriglyceridemia (sHTG). Subsequently on August 30, 2026, the Company announced that it presented results during a Hot Line Late-Breaking Science session at the European Society of Cardiology (ESC) Congress 2026 in Munich, Germany. The presentation included key results that we believe support future regulatory filings to potentially expand its uses in sHTG, including:
◦Plozasiran reduced triglycerides (TG) by 79% and 81% versus placebo in SHASTA-3 and SHASTA-4 across the broad sHTG population. More than 90% of plozasiran-treated patients achieved triglycerides below thresholds for AP risk, 500 mg/dL at Month 12, and more than half achieved triglycerides below 150 mg/dL.
◦Plozasiran reduced cumulative acute pancreatitis (AP) events by 78% versus placebo in patients with TG above 500 mg/dL, with or without a prior history of AP. Greater absolute benefit of AP risk reduction was observed in patients at higher risk. In the highest-risk subgroup, patients with TG above 880 mg/dL and a prior history of AP, there was a 100% reduction in events versus placebo.
◦Plozasiran demonstrated a favorable safety and tolerability profile, with overall treatment-emergent adverse events similar between plozasiran and placebo groups.
•On July 27, 2026, the Company announced that it had completed enrollment in the global Phase 3 YOSEMITE clinical trial of zodasiran, the Company's investigational RNAi therapeutic being developed as a potential treatment for homozygous familial hypercholesterolemia (HoFH), a rare genetic condition that leads to severely elevated low-density lipoprotein cholesterol (LDL-C) and early-onset cardiovascular disease.
◦The Company anticipates that YOSEMITE will be completed in mid-2027 and, pending successful clinical results, intends to seek regulatory approval in multiple geographies thereafter.
◦The YOSEMITE Phase 3 study was initially designed to enroll 60 participants; however, strong global HoFH patient and physician interest led to an increased total of 70 patients enrolled.
68
•On September 15, 2026, the Company announced interim topline data from a Phase 1/2a clinical trial of ARO-DIMER-PA, the Company’s first investigational RNA interference (RNAi) therapeutic dimer being developed as a potential treatment for atherosclerotic cardiovascular disease (ASCVD) due to mixed hyperlipidemia.
◦With these interim topline results, Arrowhead’s innovative and proprietary TRiM platform has achieved clinical validation of its ability to target and silence two genes simultaneously in one molecule.
◦In participants with mixed hyperlipidemia, ARO-DIMER-PA single doses achieved dose-dependent mean maximal reductions in serum PCSK9 of 72% and APOC3 of 88%.
◦Silencing of both the PCSK9 and APOC3 genes led to favorable changes in lipids and lipoproteins including the following mean maximal reductions: LDL-C reduction of 54%, Triglyceride (TG) reduction of 73%, Non-high density lipoprotein (non-HDL) cholesterol reduction of 61%, Apolipoprotein B (ApoB) reduction of 50%.
•On October 14, 2026, the Company announced interim results from an ongoing Phase 1/2a study of ARO-MAPT, the Company’s investigational RNA interference (RNAi) therapeutic being developed as a potential treatment for Alzheimer’s disease and other tauopathies. These results represent the first successful clinical validation of a platform to deliver siRNA across the blood-brain barrier and achieve substantial target gene knockdown in the brain.
◦In healthy volunteers, subcutaneous administration of ARO-MAPT achieved deep and durable reductions in cerebrospinal fluid (CSF) total tau, with a mean reduction of up to 73% at Day 105 and a maximum reduction of 85%.
◦ARO-MAPT was generally well tolerated. Most treatment-emergent adverse events (TEAEs) were Grade 1 or mild.
•On November 4, 2026, the New England Journal of Medicine published SHASTA-3 and SHASTA-4 results of Plozasiran in adults with severe hypertriglyceridemia. The two identically designed, double-blind, placebo-controlled studies enrolled 757 patients, randomized 2:1 to Plozasiran or placebo.
◦Both studies met their primary endpoint, with median triglyceride reductions of 79% and 81% from baseline at month 12 (placebo-adjusted reductions of 45 and 47 percentage points). In a pooled analysis, acute pancreatitis occurred at a rate of 1 per 100 patient-years with Plozasiran versus 5 per 100 patient-years with placebo.
Key Corporate Events
•On August 29, 2025, the Company entered into 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, and for other additional collaboration targets that will utilize Arrowhead's proprietary TRiM platform. Upon closing in October 2025, the Company received $200.0 million as an upfront payment and is eligible to receive up to $2.0 billion in potential milestone payments plus royalties on commercial sales.
•On November 20, 2025, the Company earned a $200.0 million milestone payment from Sarepta. The milestone was earned when Arrowhead achieved the second development milestone event in a Phase 1/2 clinical study of ARO-DM1, also called SRP-1003, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1), the most common adult-onset muscular dystrophy. The second milestone event included the achievement of a patient enrollment target, drug safety committee review and subsequent authorization to dose escalate and proceed, and completion of day 105 study visit by at least one patient in the clinical trial.
69
•On January 8, 2026, the Company completed upsized offerings of 0.00% convertible senior notes, common stock, and pre-funded warrants with gross proceeds of $930.0 million, which strengthened the Company's balance sheet.
•On May 5, 2026, the Company announced an exclusive worldwide license agreement with Madrigal Pharmaceuticals for ARO-PNPLA3, Arrowhead's clinical stage RNA interference (RNAi) therapeutic designed to reduce liver expression of patatin-like phospholipase domain containing 3 (PNPLA3) as a potential treatment for patients with metabolic dysfunction-associated steatohepatitis (MASH).
◦Under the terms of the agreement, Madrigal made a $25 million upfront payment to Arrowhead. Arrowhead is also eligible to receive development, regulatory, and sales milestone payments of up to $975 million. Arrowhead is further eligible to receive tiered royalties on commercial sales ranging from high-single digits to the mid-teens.
◦In a Phase 1 single-ascending dose clinical study, ARO-PNPLA3 achieved encouraging results, including a dose-dependent mean reduction in liver fat of up to 40% in patients homozygous for the I148M mutation, no apparent treatment emergent increases in triglycerides or LDL-cholesterol, and a positive safety and tolerability profile at all doses studied.
•On July 31, 2026, the Company entered into an asset purchase agreement pursuant to which the Company agreed to purchase a rare pediatric disease PRV issued by the FDA for aggregate consideration of $215.0 million upon closing. A PRV entitles its holder to priority review of a single new drug application or biologics license application, which is designed to shorten the FDA's target review period, and may be sold or transferred to another party.
RESULTS OF OPERATIONS
The following data summarizes the Company’s results of operations for the following periods indicated:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Revenue | $ | 450,817 | $ | 829,448 | $ | 3,551 | ||||||||||||||
| Operating (loss) income | $ | (707,171) | $ | 98,346 | $ | (601,080) | ||||||||||||||
| Net loss attributable to Arrowhead | $ | (724,206) | $ | (1,631) | $ | (599,493) | ||||||||||||||
| Net loss per diluted share attributable to Arrowhead | $ | (5.11) | $ | (0.01) | $ | (5.00) | ||||||||||||||
Year Ended September 30, 2026 Compared to Year Ended September 30, 2025
Revenue
Total revenue for the year ended September 30, 2026 decreased by $378.6 million, from the same period of 2025. The change was primarily driven by a decrease in revenue recognition associated with the Sarepta and Sanofi collaboration and license agreements, and partially offset by an increase in revenue recognition associated with the Novartis and Madrigal collaboration and license agreements, as well as an increase in product revenue from REDEMPLO sales.
70
The following table summarizes the Company's revenue by source:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Product revenue, net | $ | 6,603 | $ | — | $ | — | ||||||||||||||
| Total product revenue, net | 6,603 | — | — | |||||||||||||||||
| Collaboration and license revenue | ||||||||||||||||||||
| Sarepta | 316,886 | 696,803 | — | |||||||||||||||||
| Novartis | 89,010 | — | — | |||||||||||||||||
| Sanofi | 13,318 | 130,000 | — | |||||||||||||||||
| Madrigal | 25,000 | — | — | |||||||||||||||||
| GSK | — | 2,645 | 2,685 | |||||||||||||||||
| Takeda | — | — | 866 | |||||||||||||||||
| Total collaboration and license revenue | 444,214 | 829,448 | 3,551 | |||||||||||||||||
| Total Revenue | $ | 450,817 | $ | 829,448 | $ | 3,551 | ||||||||||||||
After receiving regulatory approval for REDEMPLO in the United States in November 2025, the Company launched the product and began recognizing product revenue. During fiscal 2026, REDEMPLO was also approved in the European Union, Canada, Australia and China, as well as in the United Kingdom in October 2026, after the fiscal year-end. Rights to REDEMPLO in Greater China are held by Sanofi under a license from the Company. Majority of our product revenue for fiscal 2026 was generated in the United States.
The Company evaluates each collaboration and license agreement in accordance with FASB Topic 808–Collaborative Arrangements and Topic 606 –Revenue from Contracts with Customers. See Note 2 — Revenue Recognition of the Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
Sarepta: On November 25, 2024, the Company entered into the Sarepta Collaboration Agreement for the development and commercialization of multiple clinical and preclinical programs in rare, genetic diseases of the muscle, central nervous system, and lungs and a Stock Purchase Agreement with Sarepta. On December 16, 2025, the Company entered into the Sarepta Clinical Supply Agreement, whereby the Company is responsible for manufacturing and supplying certain materials to Sarepta for specified activities. During the year ended September 30, 2026 and 2025, the Company recorded $316.9 million and $696.8 million, respectively in revenue with Sarepta. The decrease of $379.9 million was primarily driven by the recognition in fiscal 2025 of revenue associated with the transfer of the initial licenses, partially offset by development milestones achieved and continued progress on research and development activities during fiscal 2026, as well as revenue recognized under the Clinical Supply Agreement entered into in December 2025.
Novartis: On August 29, 2025, the Company entered into the Novartis Collaboration Agreement with Novartis for the development and commercialization of multiple preclinical programs in rare, genetic diseases of the central nervous system. During the year ended September 30, 2026, the Company recorded $89.0 million in revenue under this agreement, consisting of $87.1 million related to the upfront payment and $1.9 million related to the reimbursement of research and development costs.
Visirna and Sanofi: On August 1, 2025, Visirna HK, a wholly owned subsidiary of Visirna Therapeutics, Inc., a majority owned subsidiary of the Company, entered into an Asset Purchase Agreement with Sanofi, pursuant to which Visirna HK sold all of its assets and rights in REDEMPLO to Sanofi, which included an assignment of Visirna HK’s rights (as successor by assignment from Visirna) to develop and commercialize REDEMPLO in Greater China pursuant to that certain License Agreement by and between the Company and Visirna entered into on April 25, 2022 (the “Visirna License Agreement”). During the years ended September 30, 2026 and 2025, the Company recorded $13.3 million and $130.0 million, respectively, of revenue with Visirna and Sanofi. The $116.7 million decrease was primarily driven by revenue recognized in fiscal 2025 associated with the upfront consideration and transfer of the initial license, partially offset by a development milestone payment and transition services performed by Visirna for Sanofi during fiscal 2026.
Madrigal: On May 4, 2026, the Company entered into the Madrigal Licensing Agreement with Madrigal. Under the terms of the agreement, Madrigal received an exclusive global license to develop, manufacture, and commercialize ARO-PNPLA3, a clinical stage program. During the year ended September 30, 2026, the Company recorded $25.0 million in revenue associated with this transaction.
71
Operating Expenses
The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories.
Cost of Product Revenue
Cost of product revenue for the year ended September 30, 2026 was $1.8 million compared to $0 for the year ended September 30, 2025. Cost of product revenue consists primarily of third-party manufacturing, distribution, and overhead costs. Because a portion of the costs to manufacture the REDEMPLO sold to date was incurred prior to the FDA approval and expensed as research and development expenses, those costs are not fully reflected in the cost of product revenue for fiscal year 2026. We expect to use the remaining pre-commercialization inventory for product sales in the near term until depleted, after which our product gross margin is anticipated to decrease modestly.
Research and Development (R&D) Expenses
Research and development expenses consist of candidate costs, discovery costs, salaries, facilities-related costs, stock-based compensation, and depreciation and amortization. Candidate costs are costs incurred to advance certain drug candidates through preclinical and clinical development. They consist primarily of outsourced costs related to the manufacturing of clinical supplies, toxicity and efficacy studies, and clinical trial expenses. Discovery costs are costs incurred for research activities to identify and evaluate potential new drug candidates before a certain candidate has been selected for development, and consist primarily of laboratory-related expenses. Salaries consist of compensation and related benefits for research and development personnel. Facilities-related costs consist primarily of costs associated with the Company’s research facilities in California and Wisconsin, where its internal research and development activities, primarily discovery operations, are conducted. Stock-based compensation and depreciation and amortization are non-cash expenses and are presented separately in the table below. The Company operates in a cross-functional manner across its programs and therefore does not separately track development costs nor allocate research and development expenses to individual programs (including individual drug candidates).
The following table provides details of research and development expenses for the periods indicated:
| (in thousands) | Year Ended September 30, 2026 | % of Expense Category | Year Ended September 30, 2025 | % of Expense Category | Increase (Decrease) | ||||||||||||||||||||||||||||||
| $ | % | ||||||||||||||||||||||||||||||||||
| Candidate costs | $ | 443,216 | 60 | % | $ | 347,571 | 57 | % | $ | 95,645 | 28 | % | |||||||||||||||||||||||
| Discovery costs | 78,842 | 11 | % | 66,788 | 11 | % | 12,054 | 18 | % | ||||||||||||||||||||||||||
| Salaries | 130,234 | 18 | % | 109,085 | 18 | % | 21,149 | 19 | % | ||||||||||||||||||||||||||
| Facilities related | 31,068 | 4 | % | 29,233 | 5 | % | 1,835 | 6 | % | ||||||||||||||||||||||||||
| Total research and development expense, excluding non-cash expense | $ | 683,360 | 93 | % | $ | 552,677 | 91 | % | $ | 130,683 | 24 | % | |||||||||||||||||||||||
| Stock compensation | 31,242 | 4 | % | 32,582 | 5 | % | (1,340) | (4) | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 24,542 | 3 | % | 21,900 | 4 | % | 2,642 | 12 | % | ||||||||||||||||||||||||||
| Total research and development expense | $ | 739,144 | 100 | % | $ | 607,159 | 100 | % | $ | 131,985 | 22 | % | |||||||||||||||||||||||
Candidate costs increased $95.6 million, or 28%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher manufacturing costs and outsourced clinical trial costs.
Discovery costs increased $12.1 million, or 18%, for the year ended September 30, 2026 compared to the same period of 2025. This increase was primarily driven by increased R&D discovery activity associated with ongoing discovery efforts and expansion into novel therapeutic areas and tissue types.
Salaries consist of salary, bonuses, payroll taxes, and related benefits for the Company’s R&D personnel. Salaries expense increased $21.1 million, or 19%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily due to an increase in headcount as the Company has expanded its pipeline of candidates and worked to prepare for the manufacture of commercial material at the Verona facility, as well as annual salary increases.
Facilities-related expense includes lease costs for the Company’s research and development facilities in San Diego, California and Madison, Wisconsin. These expenses increased $1.8 million, or 6%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily due to increased rental costs, repair and maintenance charges, and utilities to support manufacturing operations.
72
Stock compensation expense, a non-cash expense, is primarily based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date. Stock compensation expense decreased $1.3 million, or 4%, for the year ended September 30, 2026 compared to the same period of 2025. The decrease was primarily driven by stock options award expense incurred in the second fiscal quarter 2025 related to Visirna, our variable interest entity, that did not repeat in 2026.
Depreciation and amortization expense, a non-cash expense, relates to depreciation on buildings, lab equipment and leasehold improvements. Depreciation and amortization expense increased $2.6 million, or 12%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily attributable to the increase in manufacturing equipment placed in service following the completion of certification, qualification and validation to support manufacturing operations.
Selling, General and Administrative Expenses
The following table provides details of selling, general and administrative expenses for the periods indicated:
| (in thousands) | Year Ended September 30, 2026 | % of Expense Category | Year Ended September 30, 2025 | % of Expense Category | Increase (Decrease) | ||||||||||||||||||||||||||||||
| $ | % | ||||||||||||||||||||||||||||||||||
| Salaries | $ | 62,536 | 31 | % | $ | 31,916 | 26 | % | $ | 30,620 | 96 | % | |||||||||||||||||||||||
| Professional, outside services, and other | 92,584 | 46 | % | 53,589 | 42 | % | 38,995 | 73 | % | ||||||||||||||||||||||||||
| Facilities related | 8,115 | 4 | % | 5,625 | 5 | % | 2,490 | 44 | % | ||||||||||||||||||||||||||
| Total selling, general and administrative expense, excluding non-cash expense | $ | 163,235 | 81 | % | $ | 91,130 | 73 | % | $ | 72,105 | 79 | % | |||||||||||||||||||||||
| Stock compensation | 36,904 | 18 | % | 30,785 | 25 | % | 6,119 | 20 | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 1,906 | 1 | % | 2,028 | 2 | % | (122) | (6) | % | ||||||||||||||||||||||||||
| Total selling, general and administrative expenses | $ | 202,045 | 100 | % | $ | 123,943 | 100 | % | $ | 78,102 | 63 | % | |||||||||||||||||||||||
Salaries expense increased $30.6 million, or 96%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was driven by higher headcount required to support the Company's commercialization of REDEMPLO, as well as annual salary increases.
Professional, outside services, and other expenses include costs related to commercial activities, legal, consulting, patent filings, business insurance, other external services, as well as travel, communication, and technology expenses. These expenses increased $39.0 million, or 73%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was mainly due to commercialization expense associated with the Company's launch of REDEMPLO, including costs for marketing and commercial launch support.
Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California. These expenses increased $2.5 million, or 44%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily driven by higher staff amenities expenses driven by higher headcount, as well as higher rental costs associated with the April 2026 amendment to the Pasadena corporate headquarters lease, which added office space.
Stock compensation expense, a non-cash expense, is primarily based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date. These expenses increased $6.1 million, or 20%, for the year ended September 30, 2026 compared to the same period of 2025. The increase was primarily due to recognition of compensation expense related to performance-based restricted stock unit awards following the achievement of a pre-specified performance milestone, as well as new grants issued to new employees.
Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters.
Acquired Priority Review Voucher (“PRV”) Expenses
On July 31, 2026, the Company entered into an asset purchase agreement pursuant to which the Company agreed to purchase a rare pediatric disease priority review voucher (“PRV”) issued by the U.S. Food and Drug Administration (the “FDA”) for aggregate consideration of $215.0 million upon closing. A PRV entitles its holder to priority review of a single new drug application or biologics license application, which is designed to shorten the FDA's target review period, and may be
73
sold or transferred to another party. The transaction closed on September 14, 2026, and the Company funded the purchase price from existing cash, cash equivalents and investments.
Prior to the closing of the acquisition, the Company notified the FDA of its intent to use the PRV in connection with its Supplemental New Drug Application (“sNDA”) for plozasiran to seek approval for the treatment of patients with severe hypertriglyceridemia. As the PRV was intended to fast-track the Company’s own drug candidate, in accordance with ASC 730, Research and Development, the $215.0 million purchase price was expensed at closing and presented as a separate line item within operating expenses in the consolidated statements of operations and comprehensive (loss) income during the year ended September 30, 2026.
On October 7, 2026, subsequent to the end of the fiscal year, the Company announced that the FDA has granted plozasiran entry into its Split Real Time Application Review (“STAR”) pilot program in connection with the Company’s planned sNDA for sHTG. Supplemental applications accepted into the STAR program qualify for a six-month priority review, so a PRV is not needed for that application. The Company therefore withdrew its notice of intent to use the PRV for the plozasiran sNDA. This subsequent development does not affect the amount previously expensed. The Company continues to hold the PRV and may use it for a future application or sell it to a third party.
Other Income (Expense)
Other income (expense), net consists primarily of interest income, interest expense, losses on the Company’s equity method investment in Bisirna, and the gain on Visirna’s sale of IPR&D assets. Other income (expense), net improved by $30.1 million for the year ended September 30, 2026 compared to the same period of 2025. The improvement was primarily due to interest income earned on the Company's available-for-sale securities and gain on Visirna's sale of IPR&D assets, partially offset by non-cash interest on liability related to the sale of future royalties and loss on equity method investment.
Net (Loss) Income
Net loss attributable to Arrowhead Pharmaceuticals, Inc. was $724.2 million for the year ended September 30, 2026 compared to a net loss attributable to Arrowhead Pharmaceuticals, Inc. of $1.6 million for the year ended September 30, 2025. Diluted net loss per share was $5.11 for the year ended September 30, 2026 compared to diluted net loss per share of $0.01 for the year ended September 30, 2025. The increase in net loss attributable to Arrowhead Pharmaceuticals, Inc. for the year ended September 30, 2026 compared to the same period of 2025 was primarily due to expense related to the acquired priority review voucher, lower collaboration and license revenue, higher selling, general and administrative expenses primarily associated with commercialization activities, and higher research and development expenses driven by the expansion of the Company’s pipeline and the progression of programs through clinical trials. These increases were partially offset by lower total other expense, and lower income tax expense.
Income Tax (Benefit) Expense
Income tax benefit was $6.8 million for the year ended September 30, 2026, compared to an income tax expense of $21.4 million for the same period in 2025. The fiscal 2026 income tax benefit was primarily due to the favorable resolution of prior year tax estimates, which were finalized upon filing of the fiscal 2025 tax return. The fiscal 2025 income tax expense was primarily due to taxable income generated from the Sarepta Collaboration Agreement and Visirna’s sale of its assets and rights in investigational plozasiran to Sanofi.
Non-controlling Interest
Net income attributable to non-controlling interest was $7.1 million for the year ended September 30, 2026, compared to $31.7 million for the same period of 2025. The decrease of $24.7 million was primarily due to lower net income at Visirna, which recognized revenue of $31.6 million and net income of $14.5 million in fiscal 2026, compared to revenue of $130.0 million and net income of $94.1 million in fiscal 2025. Visirna’s fiscal 2025 results included $130.0 million of revenue from the upfront payment received from Sanofi upon closing of the Asset Purchase Agreement.
Year Ended September 30, 2025 Compared to Year Ended September 30, 2024
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Form 10-K for the year ended September 30, 2025 for a discussion of changes in its results of operations from the year ended September 30, 2025 to the year ended September 30, 2024.
74
LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of financing have been through the sale of its equity securities, credit facility, cash receipts from its licensing and collaboration agreements, and the sale of certain future royalties and issuance of convertible debt. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure as the Company’s pipeline continues to expand and matures into later stage clinical trials, including commercialization efforts. For further information on the Company’s capital needs, see the section titled “Risks Related to Our Financial Condition” in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
The Company’s cash, cash equivalents and restricted cash was $62.7 million as of September 30, 2026 compared to $226.5 million as of September 30, 2025. Cash invested in available-for-sale securities was $1,130.2 million as of September 30, 2026 compared to $692.8 million as of September 30, 2025.
The following presents the significant transactions affecting the Company’s liquidity during the periods presented, including payments received under its collaboration and license agreements, proceeds from equity offerings and the issuance of convertible notes, and dividends paid by Visirna, a consolidated variable interest entity.
On November 25, 2024, the Company entered into a licensing and collaboration agreement with Sarepta. Upon closing, the Company received $325.0 million for the purchase of 11,926,301 shares of common stock, at a price per share of $27.25, and received $500.0 million as an upfront payment on February 14, 2025. During the fourth quarter of fiscal 2025, a $100.0 million milestone payment from Sarepta was triggered, when the Company reached the first of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1). The Company received $53.2 million of Arrowhead common stock and $50.0 million cash from Sarepta to satisfy the milestone payment. During the second quarter of fiscal 2026, the Company received $200.0 million of the second DM1 milestone payment and a $50.0 million payment for the first installment of the annual fee. The Company is eligible to receive the second installment of the annual fee of up to $50.0 million over the 12 months from September 30, 2026.
On August 29, 2025, the Company entered into a licensing and collaboration agreement with Novartis. Upon closing in October 2025, the Company received $200.0 million as an upfront payment.
On December 10, 2025, the Company entered into the Amended and Restated Open Market Sale Agreement with Jefferies LLC, acting as sales agent and/or principal, which amended and restated the Company’s prior open market sale agreement in its entirety. Pursuant to the Amended and Restated Open Market Sale Agreement, the Company may, from time to time, sell shares of the Company’s common stock through Jefferies LLC in an at-the-market offering, up to the maximum program amount permitted under the Company’s effective shelf registration statement. As of September 30, 2026, the Company had sold approximately 1,056,000 shares of common stock under the Amended and Restated Sale Agreement, generating gross proceeds of $76.1 million and net proceeds of $74.1 million, after deducting commissions and offering costs.
On January 7, 2026, the Company entered into an underwriting agreement with Jefferies and J.P. Morgan for the 2026 Offering of: (i) 2,015,505 shares of common stock with $0.001 par value per share, at a public offering price of $64.50 per share, and (ii) pre‑funded warrants to purchase 1,550,387 shares of common stock, at a public offering price of $64.499, which represents the per share public offering price for the common stock less the $0.001 per share exercise price for each pre-funded warrant. The 2026 Offering closed on January 9, 2026, generating gross proceeds of $230.0 million and net proceeds of $216.6 million after deducting the underwriting discounts and commissions and other offering expenses.
On January 7, 2026, the Company issued $700.0 million aggregate principal amount of 0.00% Notes due January 15, 2032. This transaction closed on January 12, 2026, generating gross proceeds of $700.0 million and net proceeds of $681.3 million.
During the first quarter of fiscal 2026, Visirna declared a cash dividend of $100.0 million to its shareholders. In fiscal 2026, Visirna paid cash dividends totaling $96.9 million, consisting of $56.4 million paid to the Company and $40.5 million paid to the Company’s noncontrolling shareholders.
On May 4, 2026, the Company entered into a licensing agreement with Madrigal. Upon closing in June 2026, the Company received $25.0 million as an upfront payment.
Based upon the Company's current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund its operations through at least the next twelve months from the date of the issuance of these consolidated financial statements.
75
The following table presents a summary of cash flows:
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Cash Flow from: | |||||||||||||||||
| Operating activities | $ | (271,949) | $ | 179,552 | $ | (462,851) | |||||||||||
| Investing activities | (670,480) | (129,294) | (420,072) | ||||||||||||||
| Financing activities | 776,816 | 74,006 | 870,520 | ||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (165,613) | $ | 124,264 | $ | (12,403) | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 62,735 | $ | 226,548 | $ | 102,685 | |||||||||||
During the year ended September 30, 2026, cash flow used in operating activities was $271.9 million, which was primarily due to an increase in ongoing expenses related to the Company’s research and development programs and selling, general and administrative expenses, partially offset by $200.0 million of cash received as part of the Novartis agreement, $200.0 million of the second DM1 milestone payment, $50.0 million payment for the first installment of the annual fee received as part of the Sarepta agreement, and $25.0 million of cash received as part of the Madrigal agreement. Cash used in investing activities amounted to $670.5 million, which was primarily attributable to purchases of available-for-sale securities of $1,138.7 million, purchase of the priority review voucher of $215.0 million and capital expenditures of $12.0 million, partially offset by proceeds from maturities of available-for-sale securities of $368.5 million and sales of available-for-sale securities of $326.8 million. Cash provided by financing activities of $776.8 million was primarily due to $681.3 million net proceeds from the issuance of convertible notes, $116.6 million in net proceeds from a follow-on common stock offering, $100.0 million proceeds from issuance of pre-funded warrants, $74.1 million in net proceeds from the issuance of common stock under the Company's at-the-market equity offering program, and $14.7 million proceeds from the exercise of stock options, partially offset by partial repayment of the credit facility (inclusive of MOIC Payments) of $118.0 million, purchase of the Capped Calls of $47.9 million, and dividends paid to noncontrolling shareholders of $40.5 million (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”).
During the year ended September 30, 2025, cash flow provided by operating activities was $179.6 million, which was primarily due to $500.0 million upfront payment and $50.0 million milestone payment received as part of the Sarepta agreement, partially offset by the ongoing expenses related to the Company’s research and development programs and selling, general and administrative expenses. Cash used in investing activities amounted to $129.3 million, primarily attributable to purchases of available-for-sale securities of $796.3 million and capital expenditures of $22.7 million, partially offset by proceeds from sales and maturities of available-for-sale securities of $689.6 million. Cash provided by financing activities of $74.0 million was related to cash received from the issuance of common stock in the Sarepta agreement, sales of pre-funded warrants, and exercises of stock options, partially offset by $201.6 million repayments of the Credit Facility.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Form 10-K for the year ended September 30, 2025 for a discussion of cash flows from the year ended September 30, 2024.
CRITICAL ACCOUNTING ESTIMATES
Management makes certain judgments and uses certain estimates and assumptions when applying U.S. generally accepted accounting principles (“GAAP”) in the preparation of the Company’s Consolidated Financial Statements. On an ongoing basis, the Company evaluates its estimates, judgments and assumptions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expense. Actual results may vary from what the Company anticipates and different assumptions or estimates about the future could change its reported results. The Company believes the following accounting policies are the most critical to it, in that they require its most difficult, subjective or complex judgments in the preparation of the Company’s Consolidated Financial Statements. For further information, see Note 1, Organization and Significant Accounting Policies of the Notes to the Company’s Consolidated Financial Statements in Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
Revenue Recognition for licensing and collaboration agreements—The Company has adopted Financial Accounting Standards Board (“FASB”) Topic 606 – Revenue from Contracts with Customers. This standard is applicable to the
76
Company's licensing and collaboration agreements. This is discussed further in Note 2, Revenue Recognition of the Notes to the Company’s Consolidated Financial Statements in Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified. The Company then determines the transaction price, which typically includes upfront payments and any variable consideration that it determines is probable to not cause a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is resolved. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.
The Company's collaboration and license agreements may include promises such as licenses to intellectual property, research and development services, participation on joint steering committees, manufacturing or supply of clinical material, and rights to future technology or know-how. Determining whether a license is distinct from the other promises in an arrangement requires significant judgment, including an assessment of whether the customer can benefit from the license without the Company's research and development services and whether those services significantly modify or customize the licensed intellectual property. Options to acquire additional goods or services are evaluated to determine whether they represent a material right and, therefore, a separate performance obligation.
The transaction price typically includes upfront payments and variable consideration in the form of milestone payments and royalties. Milestones are generally categorized into three types: development milestones, generally based on the initiation of toxicity studies or clinical trials; regulatory milestones, generally based on the submission, filing or approval of regulatory applications such as an NDA in the United States; and sales-based milestones, generally based on meeting specified sales thresholds in certain geographic areas. The Company estimates the consideration associated with each development and regulatory milestone using the most likely amount method and includes that amount in the transaction price only to the extent it is probable that a significant reversal in the cumulative amount of revenue recognized will not occur. Sales-based milestones and royalties are subject to the sales-based royalty exception and are recognized at the later of when the subsequent sale occurs or when the related performance obligation has been satisfied (or partially satisfied). The Company re-evaluates the transaction price assessment at the end of each reporting period and, if necessary, adjusts its estimate of the transaction price. Such adjustments are recorded on a cumulative catch-up basis and affect revenue and net income in the Company's consolidated statements of operations and comprehensive (loss) income.
The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised good or service separately to a customer. When observable standalone transactions are not available, the Company estimates the standalone selling price of each performance obligation. Estimates for license performance obligations are generally developed using a discounted cash flow model and include forecasted revenues and costs over the estimated commercial life of the product candidate, the estimated timing of key development and regulatory events (including clinical trial initiation and completion, regulatory submission, and potential approval and commercial launch), the probability of technical and regulatory success at each stage, and a risk-adjusted discount rate. Estimates for research and development and other service-related performance obligations generally include the expected costs of satisfying the performance obligation at market rates.
The timing of revenue recognition depends on the nature of each performance obligation. A distinct license is typically satisfied at a point in time, upon delivery of the license and the resulting ability of the customer to use and benefit from it. A combined performance obligation that includes research and development services is typically satisfied over time. For performance obligations satisfied over time, the Company measures progress using an input method, typically based on costs incurred relative to total estimated costs to satisfy the performance obligation. The Company reassesses the measure of progress each reporting period, with any change accounted for as a change in estimate on a cumulative catch-up basis. Significant management judgment is required in determining the level of effort or cost required to satisfy the performance obligations under an arrangement, including the identification of costs that depict progress toward satisfaction. Consideration received, or unconditionally due, in advance of the satisfaction of a performance obligation is recorded as contract liability, presented as deferred revenue, and is recognized as revenue as that performance obligation is satisfied. A contract asset is recorded when the Company satisfies a performance obligation before the right to the related consideration becomes unconditional. When the right to consideration becomes unconditional, the amount is reclassified to accounts receivable.
Collaborative Arrangements— The Company assesses whether its collaborative arrangements involve joint operating activities performed by parties that are both active participants and exposed to significant risks and rewards, and therefore fall within the scope of FASB Topic 808—Collaborative Arrangements. For arrangements within the scope of ASC 808, the Company evaluates the income statement classification for presentation of amounts due to or owed from other participants associated with multiple units of account in a collaborative arrangement based on the nature of each activity.
77
Payments and reimbursements arising from a collaborative relationship rather than a customer relationship, such as co-development and co-commercialization activities, are recorded as increases or decreases to research and development expense or selling, general and administrative expense, as appropriate.
Clinical Accruals—The Company accrues liabilities for products received or services incurred, particularly for ongoing clinical trials, where service providers have not yet billed or where billing terms do not align with the timing of the work performed as of the period-end. These costs mainly include fees paid to third-party clinical management or clinical research organization (CRO), laboratory analysis, investigator fees, as well as pass-through costs incurred by CROs on the Company's behalf. Accrual estimates may be based on vendor communications to obtain pending invoices and/or estimates for services performed during the period. In some cases, these estimates require significant judgment, drawing on an understanding of research and development programs, services provided during the period, prior experience, and, where applicable, the expected duration of third-party contracts. Actual costs upon settlement may differ significantly from the accrued amounts in the Company’s consolidated financial statements, though historical estimates have not differed materially from actual costs.
Liability Related to the Sale of Future Royalties—Based on its evaluation of the agreement terms, the Company classifies the liability related to the sale of future royalties as debt financing. The Company records the obligations at their carrying value using the effective interest method. In order to amortize the sale of future royalties, the Company utilizes the prospective method to estimate the future royalties to be paid by the Company to the counterparty over the life of the arrangement. Under the prospective method, a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize non-cash interest expense for the remaining periods. The Company periodically assesses the amount and the timing of expected royalty payments using a combination of internal projections and forecasts from external sources. The estimates of future net product sales (and resulting royalty payments) are based on key assumptions including population, penetration, probability of success and sales price, among others. To the extent such payments are greater or less than the Company’s initial estimates or the timing of such payments is different than its original estimates, the Company will prospectively adjust the amortization of the royalty financing obligations and the effective interest rate.
Contractual Obligations
Based on the Company’s current operating plan, it believes that cash, cash equivalents and short-term available-for-sale securities as of September 30, 2026 will be sufficient to satisfy its near-term capital and operating needs. Recent and expected working and other capital requirements include the items described below.
•Amounts related to future lease payments for operating lease obligations at September 30, 2026 totaled $188.8 million, with $6.1 million expected to be paid within the next 12 months. See Note 9 of Notes to the Company’s Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
•A secured term loan facility of $500.0 million, which includes $400.0 million funded on the closing date with an additional $100.0 million at the Company’s option during the seven-year term of the agreement. The Company expects to make $40.0 million of prepayments on the facility within the next 12 months in addition to the $118.0 million prepayment made in fiscal 2026. See Note 15 of Notes to the Company’s Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
•In January 2026, the Company issued $700.0 million aggregate principal amount of 0.00% Convertible Notes due January 15, 2032. The convertible notes do not bear regular interest, and the full principal amount will be due at maturity unless the convertible notes are earlier converted, redeemed, or repurchased. Upon conversion, the Company may elect to settle the convertible notes in cash, shares of its common stock, or a combination thereof. Holders may require the Company to repurchase the convertible notes for cash upon the occurrence of a fundamental change. As of September 30, 2026, none of the conditions permitting holders to convert the convertible notes had been met. See Note 16 of Notes to the Company’s Consolidated Financial Statements of Part IV, “Item 15. Exhibits and Financial Statement Schedules.”
•Commitments related to the Company’s clinical, manufacturing and business operations related agreements totaled $803.4 million as of September 30, 2026. Certain of these agreements may be cancelled by the Company, generally subject to payment for services performed or costs incurred through the date of cancellation.
78
•The Company has not entered into, nor does it currently have, any off-balance sheet arrangements (as defined under SEC rules).
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk exposures primarily due to its investing activities. The primary market risk exposure is change in interest rates. Adverse changes to rates may occur due to changes in the liquidity of a market or to changes in market perceptions of creditworthiness and risk tolerance.
The Company’s investment criteria are governed by its Investment Policy. The Company primarily invests its excess cash in securities of reputable financial institutions, corporations, and US government agencies with strong credit ratings. As of September 30, 2026, the Company's investment portfolio had a fair value of $1,130.2 million, consisting of U.S. government and agency securities, commercial notes, corporate debt securities and money market instruments with a weighted-average maturity of approximately 14.9 months. Due to the relatively short-term nature of the available-for-sale securities that the Company holds, a hypothetical 100 basis point increase in interest rates as of September 30, 2026 would have resulted in a decrease in the fair value of the Company's available-for-sale securities portfolio of approximately $13.9 million. This analysis was based on a portfolio interest rate sensitivity analysis to measure the potential loss in fair value resulting from a hypothetical parallel shift in interest rates. The Company does not believe that a change of this magnitude during any of the periods presented would have had a material impact on the Company’s available-for-sale securities portfolio as of September 30, 2026.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in Item 15 of this Annual Report on Form 10-K.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2026.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its Consolidated Financial Statements for external purposes in accordance with GAAP.
This process includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
79
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that controls may become inadequate because either conditions change or the degree of compliance with policies or procedures may deteriorate.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2026. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2026.
KPMG LLP, the independent registered public accounting firm that audited the Consolidated Financial Statements included in this 2026 Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2026, which is included herein.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company regularly evaluates its controls and procedures and makes improvements in the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.
ITEM 9B.OTHER INFORMATION
(a) Change in Fiscal Year End
On November 9, 2026, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31, effective as of January 1, 2027. As a result of this change, the Company expects to file a transition report on Form 10-Q covering the three-month transition period from October 1, 2026 through December 31, 2026.
(b) Trading Plans
During the fiscal quarter ended September 30, 2026, the following directors and officers (as defined in Exchange Act Rule 16a-1(f)) adopted certain trading plans intended to satisfy Rule 10b5-1(c):
•On August 11, 2026 , James Hamilton , our Chief Medical Officer, Head of R&D , adopted a trading plan intended to satisfy Rule 10b5-1(c) under the Exchange Act to sell the total number of shares of our common stock sufficient to cover costs and fees and to satisfy applicable withholding taxes in connection with the vesting of 77,500 restricted stock units through January 21, 2028 , subject to certain conditions.
•On August 12, 2026 , James Hamilton , our Chief Medical Officer, Head of R&D , adopted a trading plan intended to satisfy Rule 10b5-1(c) under the Exchange Act to sell up to 22,458 shares of our common stock through December 31, 2027 , subject to certain conditions.
•On September 8, 2026 , Michael Perry , a member of our Board of Directors , adopted a trading plan intended to satisfy Rule 10b5-1(c) under the Exchange Act to sell up to 3,206 shares of our common stock through December 24, 2026 , subject to certain conditions.
ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
80
PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information called for by this Item is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3) to Form 10-K.
ITEM 11.EXECUTIVE COMPENSATION
The information called for by this Item is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3) to Form 10-K.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information called for by this Item is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3) to Form 10-K.
ITEM 13.CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information called for by this Item is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3) to Form 10-K.
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information called for by this Item is expected to be included in an amendment to this Annual Report on Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year covered by this Annual Report in accordance with General Instruction G(3) to Form 10-K.
PART IV
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Annual Report on Form 10-K:
(1)Financial Statements.
See Index to Financial Statements and Schedule on page F-1.
(2)Financial Statement Schedules.
See Index to Financial Statements and Schedule on page F-1. All other schedules are omitted as the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or notes thereto.
(3)Exhibits.
The following exhibits are filed (or incorporated by reference herein) as part of this Annual Report on Form 10-K:
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 3.1 | Amended and Restated Certificate of Incorporation | Current Report on Form 8-K as Exhibit 3.3 | April 6, 2016 | |||||||||||||||||
81
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 3.2 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Arrowhead Pharmaceuticals, Inc. | Quarterly Report on Form 10-Q, as Exhibit 3.2 | May 2, 2023 | |||||||||||||||||
| 3.3 | Second Amended and Restated Bylaws | Quarterly Report on Form 10-Q, as Exhibit 3.3 | February 5, 2026 | |||||||||||||||||
| 4.1 | Form of Common Stock Certificate of Arrowhead Pharmaceuticals, Inc. | Current Report on Form 8-K, as Exhibit 4.1 | April 6, 2016 | |||||||||||||||||
| 4.2 | Form of Indenture | Registration Statement on Form S-3, as Exhibit 4.2 | December 11, 2025 | |||||||||||||||||
| 4.3 | Rights Agreement dated as of March 21, 2017, between the Company and Computershare Trust Company, N.A., as rights agent, which includes as Exhibit B the Form of Rights Certificate | Current Report on Form 8-K, as Exhibit 4.1 | March 23, 2017 | |||||||||||||||||
| 4.4 | Description of Registrant’s Securities | Annual Report on Form 10-K, as Exhibit 4.4 | November 25, 2019 | |||||||||||||||||
| 4.5 | Registration Rights Agreement by and between Arrowhead Pharmaceuticals, Inc. and Johnson & Johnson Innovation-JJDC, Inc., dated October 3, 2018 | Quarterly Report on Form 10-Q, as Exhibit 10.4 | February 7, 2019 | |||||||||||||||||
| 4.6 | Form of Registration Rights Agreement by and between Company and Avoro Life Sciences Fund LLC | Annual Report on Form 10-K, as Exhibit 4.7 | November 26, 2024 | |||||||||||||||||
| 4.7 | Form of Pre-Funded Warrant for Avoro Life Sciences Fund LLC | Annual Report on Form 10-K, as Exhibit 4.8 | November 26, 2024 | |||||||||||||||||
| 4.8 | Form of Pre-Funded Warrant | Current Report on Form 8-K, as Exhibit 4.1 | January 9, 2026 | |||||||||||||||||
| 4.9 | Indenture, dated as of January 12, 2026, between Arrowhead Pharmaceuticals, Inc. and U.S. Bank Trust Company, National Association, as trustee | Current Report on Form 8-K, as Exhibit 4.1 | January 12, 2026 | |||||||||||||||||
| 4.10 | First Supplemental Indenture, dated as of January 12, 2026, between Arrowhead Pharmaceuticals, Inc. and U.S. Bank Trust Company, National Association, as Trustee | Current Report on Form 8-K, as Exhibit 4.2 | January 12, 2026 | |||||||||||||||||
| 4.11 | Form of certificate representing the 0.00% Convertible Senior Notes due 2032 | Current Report on Form 8-K, as Exhibit 4.3 | January 12, 2026 | |||||||||||||||||
| 10.1** | Arrowhead Research Corporation 2013 Incentive Plan | Schedule 14C, as Annex A | December 20, 2013 | |||||||||||||||||
| 10.2** | Form of Stock Option Agreement for use with the 2013 Incentive Plan | Current Report on Form 8-K, as Exhibit 10.1 | February 12, 2014 | |||||||||||||||||
| 10.3** | Form of Restricted Stock Unit Agreement for use with the 2013 Incentive Plan | Current Report on Form 8-K, as Exhibit 10.2 | February 12, 2014 | |||||||||||||||||
| 10.4** | Arrowhead Pharmaceuticals, Inc. Amended and Restated 2021 Incentive Plan | Quarterly Report on Form 10-Q, as Exhibit 10.1 | August 4, 2026 | |||||||||||||||||
| 10.5** | Form of RSU Agreement for Officers and Certain Other Employees (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan- Inducement Award) | Registration Statement on Form S-8, as Exhibit 99.1 | December 22, 2021 | |||||||||||||||||
| 10.6** | Form of RSU Agreement for Officers and Certain Other Employees (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan) | Registration Statement on Form S-8, as Exhibit 99.1 | February 28, 2024 | |||||||||||||||||
| 10.7** | Form of RSU Agreement for Employees (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan - Inducement Award) | Registration Statement on Form S-8, as Exhibit 99.2 | December 22, 2021 | |||||||||||||||||
| 10.8** | Form of RSU Agreement for Employees (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan) | Registration Statement on Form S-8, as Exhibit 99.2 | February 28, 2024 | |||||||||||||||||
82
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 10.9** | Form of Stock Option Grant (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan- Inducement Award) | Registration Statement on Form S-8, as Exhibit 99.3 | December 22, 2021 | |||||||||||||||||
| 10.10** | Form of Stock Option Grant (Arrowhead Pharmaceuticals, Inc. 2021 Incentive Plan) | Annual Report on Form 10-K, as Exhibit 10.11 | November 29, 2023 | |||||||||||||||||
| 10.11** | Executive Incentive Plan, adopted December 12, 2006 | Annual Report on Form 10-K, as Exhibit 10.11 | December 14, 2006 | |||||||||||||||||
| 10.12** | Arrowhead Pharmaceuticals, Inc. Amended and Restated Inducement Plan | Quarterly Report on Form 10-Q, as Exhibit 10.2 | August 4, 2026 | |||||||||||||||||
| 10.13** | Employment Agreement between Arrowhead and Dr. Christopher Anzalone, dated June 11, 2008 | Current Report on Form 8-K, as Exhibit 10.1 | June 13, 2008 | |||||||||||||||||
| 10.14** | Amendment to Employment Agreement between Arrowhead and Dr. Christopher Anzalone, effective May 12, 2009 | Annual Report on Form 10-K, as Exhibit 10.8 | December 22, 2009 | |||||||||||||||||
| 10.15† | Collaboration Agreement by and among Alnylam Pharmaceuticals, Inc. and F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc., dated October 29, 2009 | Annual Report on Form 10-K, as Exhibit 10.36 | December 20, 2011 | |||||||||||||||||
| 10.16† | Non-Exclusive License Agreement between Arrowhead Research Corporation and Roche entities, dated October 21, 2011 | Annual Report on Form 10-K, as Exhibit 10.33 | December 20, 2011 | |||||||||||||||||
| 10.17† | License Agreement by and between Alnylam Pharmaceuticals, Inc., Arrowhead Research Corporation and Arrowhead Madison, Inc. | Quarterly Report on Form 10-Q, as Exhibit 10.1 | August 12, 2014 | |||||||||||||||||
| 10.18† | Second Collaboration and Licensing Agreement between Arrowhead Pharmaceuticals, Inc. and Amgen Inc., dated September 28, 2016 | Annual Report on Form 10-K, as Exhibit 10.19 | December 14, 2016 | |||||||||||||||||
| 10.19 | Common Stock Purchase Agreement between the Company and Amgen Inc., dated September 28, 2016 | Amendment No. 1 to the Registration Statement on Form S-3, as Exhibit 10.1 | November 25, 2016 | |||||||||||||||||
| 10.20† | License Agreement by and between Arrowhead Pharmaceuticals, Inc. and Janssen Pharmaceuticals, Inc., dated October 3, 2018 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | February 7, 2019 | |||||||||||||||||
| 10.21† | Amendment No. 1 to License Agreement by and between Arrowhead Pharmaceuticals, Inc. and Janssen Pharmaceuticals, Inc., dated December 18, 2018 | Annual Report on Form 10-K, as Exhibit 10.19 | November 25, 2019 | |||||||||||||||||
| 10.22† | Amendment No. 2 to License Agreement by and between Arrowhead Pharmaceuticals, Inc. and Janssen Pharmaceuticals, Inc., dated February 4, 2019 | Annual Report on Form 10-K, as Exhibit 10.20 | November 25, 2019 | |||||||||||||||||
| 10.23† | Amended and Restated License Agreement by and between Arrowhead Pharmaceuticals, Inc. and GlaxoSmithKline Intellectual Property (No. 3) Limited, dated December 11, 2023 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | August 8, 2024 | |||||||||||||||||
| 10.24 | Stock Purchase Agreement by and between Johnson & Johnson Innovation-JJDC, Inc. and Arrowhead Pharmaceuticals, Inc., dated October 3, 2018 | Quarterly Report on Form 10-Q, as Exhibit 10.3 | February 7, 2019 | |||||||||||||||||
| 10.25† | Exclusive License and Co-Funding Agreement by and between Arrowhead Pharmaceuticals, Inc. and Takeda Pharmaceuticals U.S.A., Inc., dated October 7, 2020† | Quarterly Report on Form 10-Q, as Exhibit 10.1 | February 4, 2021 | |||||||||||||||||
| 10.26 | First Amendment to Exclusive License and Co-Funding Agreement by and between Arrowhead Pharmaceuticals, Inc. and Takeda Pharmaceuticals U.S.A., Inc. dated March 15, 2022 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | May 10, 2022 | |||||||||||||||||
| 10.27† | License Agreement by and between Arrowhead Pharmaceuticals, Inc. and Madrigal Pharmaceuticals, Inc., dated May 4, 2026 | Quarterly Report on Form 10-Q, as Exhibit 10.3 | August 4, 2026 | |||||||||||||||||
83
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 10.28 | Collaboration and License Agreement by and between Arrowhead Pharmaceuticals, Inc. and Glaxosmithkline Intellectual Property, dated November 22, 2021 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | February 2, 2022 | |||||||||||||||||
| 10.29 | Royalty Purchase Agreement, dated as of November 9, 2022, by and between Arrowhead Pharmaceuticals, Inc. and Royalty Pharma Investments 2019 ICAV | Quarterly Report on Form 10-Q, as Exhibit 10.1 | February 6, 2023 | |||||||||||||||||
| 10.30 | Lease Agreement between University Research Park, Incorporated and Arrowhead Madison, Inc., dated January 8, 2016 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | February 9. 2016 | |||||||||||||||||
| 10.31 | Amendment No. 1 to Lease Agreement between Arrowhead Madison, Inc. and University Research Park, Incorporated, dated October 22, 2018 | Annual Report on Form 10-K, as Exhibit 10.23 | November 23, 2020 | |||||||||||||||||
| 10.32 | Amendment No. 2 to Lease Agreement between Arrowhead Madison, Inc. and University Research Park, Incorporated, dated January 10, 2019 | Annual Report on Form 10-K, as Exhibit 10.24 | November 23, 2020 | |||||||||||||||||
| 10.33 | Amendment No. 3 to Lease Agreement between Arrowhead Madison, Inc. and University Research Park, Incorporated, dated January 11, 2019 | Annual Report on Form 10-K, as Exhibit 10.25 | November 23, 2020 | |||||||||||||||||
| 10.34 | Amendment No. 4 to Lease Agreement between Arrowhead Madison, Inc. and University Research Park, Incorporated, dated September 19, 2019 | Annual Report on Form 10-K, as Exhibit 10.26 | November 23, 2020 | |||||||||||||||||
| 10.35 | Amendment No. 5 to Lease Agreement between Arrowhead Madison, Inc. and University Research Park, Incorporated, dated May 14, 2020 | Annual Report on Form 10-K, as Exhibit 10.27 | November 23, 2020 | |||||||||||||||||
| 10.36 | Amendment No. 6 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated November 23, 2020 | Quarterly Report on Form 10-Q, as Exhibit 10.3 | February 4, 2021 | |||||||||||||||||
| 10.37 | Amendment No. 7 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated December 9, 2020 | Quarterly Report on Form 10-Q, as Exhibit 10.4 | February 4, 2021 | |||||||||||||||||
| 10.38* | Amendment No. 8 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated August 26, 2022 | |||||||||||||||||||
| 10.39* | Amendment No. 9 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated April 3, 2023 | |||||||||||||||||||
| 10.40* | Amendment No. 10 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated June 28, 2023 | |||||||||||||||||||
| 10.41* | Amendment No. 11 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated September 13, 2024 | |||||||||||||||||||
| 10.42 | Amendment No. 12 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated June 11, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.6 | August 7, 2025 | |||||||||||||||||
| 10.43* | Amendment No. 13 to Lease Agreement by and between Arrowhead Madison, Inc. and University Research Park, dated August 10, 2026 | |||||||||||||||||||
| 10.44 | Office Lease by and between 177 Colorado Owner LLC and Arrowhead Pharmaceuticals, Inc., dated April 17, 2019 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | August 5, 2019 | |||||||||||||||||
| 10.45 | First Amendment to Office Lease by and between Arrowhead Pharmaceuticals, Inc. and 177 Colorado Owner LLC., dated October 23, 2020 | Quarterly Report on Form 10-Q, as Exhibit 10.2 | February 4, 2021 | |||||||||||||||||
| 10.46* | Second Amendment to Office Lease by and between Arrowhead Pharmaceuticals, Inc. and 177 Colorado Owner LLC., dated April 12, 2023 | |||||||||||||||||||
| 10.47 | Third Amendment to Office Lease by and between Arrowhead Pharmaceuticals, Inc. and 177 Colorado Owner LLC., dated April 27, 2026 | Quarterly Report on Form 10-Q, as Exhibit 10.4 | August 4, 2026 | |||||||||||||||||
84
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 10.48 | Lease Agreement by and between Arrowhead Pharmaceuticals, Inc. and ARE-SD Region No. 72, LLC, dated November 19, 2021 | Quarterly Report on Form 10-Q, as Exhibit 10.2 | February 2, 2022 | |||||||||||||||||
| 10.49 | First Amendment to Lease Agreement by and between Arrowhead Pharmaceuticals, Inc. and ARE-SD Region No. 72, LLC, dated September 26, 2023 | Annual Report on Form 10-K, as Exhibit 10.39 | November 29, 2023 | |||||||||||||||||
| 10.50 | Amended and Restated Open Market Sale Agreement, dated as of December 10, 2025, by and between Arrowhead Pharmaceuticals, Inc. and Jefferies LLC | Registration Statement on Form S-3, as Exhibit 1.2 | December 11, 2025 | |||||||||||||||||
10.51† | Financing Agreement by and between Company and Sixth Street Lending Partners, dated August 7, 2024 | Annual Report on Form 10-K, as Exhibit 10.47 | November 26, 2024 | |||||||||||||||||
10.52† | First Amendment to Financing Agreement by and between Company and Sixth Street Lending Partners, dated November 26, 2024 | Quarterly Report on Form 10-Q, as Exhibit 10.4 | February 10, 2025 | |||||||||||||||||
10.53† | Amendment No. 2 to Financing Agreement between Arrowhead Pharmaceuticals, Inc. and Sixth Street Lending Partners dated August 13, 2025 | Quarterly Report on Form 10-Q, as Exhibit 4.1 | February 5, 2026 | |||||||||||||||||
10.54† | Exclusive License and Collaboration Agreement by and between the Company and Sarepta Therapeutics, Inc., dated November 25, 2024 | Quarterly Report on Form 10-Q, as Exhibit 10.3 | February 10, 2025 | |||||||||||||||||
10.55† | Exclusive License and Collaboration Agreement by and between Arrowhead Pharmaceuticals, Inc. and Novartis Pharma AG, dated August 29, 2025 | Annual Report on Form 10-K, as Exhibit 10.52 | November 25, 2025 | |||||||||||||||||
10.56*† | Commercial Manufacturing and Supply Agreement by and between Arrowhead Pharmaceuticals, Inc. and Agilent Technologies, Inc. | |||||||||||||||||||
10.57*† | Amendment No. 1 to the Commercial Manufacturing and Supply Agreement by and between Arrowhead Pharmaceuticals, Inc. and Agilent Technologies, Inc. | |||||||||||||||||||
| 10.58 | Form of Confirmation for Capped Call Transactions | Current Report on Form 8-K, as Exhibit 10.1 | January 12, 2026 | |||||||||||||||||
| 10.59 | Severance and Change of Control Agreement by and between Company and Christopher Anzalone, dated May 9, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.1 | May 12, 2025 | |||||||||||||||||
| 10.60 | Severance and Change of Control Agreement by and between Company and Daniel Apel, dated May 8, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.2 | May 12, 2025 | |||||||||||||||||
| 10.61 | Severance and Change of Control Agreement by and between Company and Patrick O'Brien, dated May 9, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.3 | May 12, 2025 | |||||||||||||||||
| 10.62 | Severance and Change of Control Agreement by and between Company and James Hamilton, dated May 8, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.4 | May 12, 2025 | |||||||||||||||||
| 10.63 | CFO Retirement Letter by and between Company and Ken Myszkowski, dated May 9, 2025 | Quarterly Report on Form 10-Q, as Exhibit 10.5 | May 12, 2025 | |||||||||||||||||
10.64*† | Asset Purchase Agreement by and among Arrowhead Pharmaceuticals, Inc. and [***] | |||||||||||||||||||
| 19.1 | Annual Report on Form 10-K, as Exhibit 19.1 | November 26, 2024 | ||||||||||||||||||
| 21.1* | List of Subsidiaries | |||||||||||||||||||
| 23.1* | Consent of Independent Registered Public Accounting Firm | |||||||||||||||||||
| 24.1* | Power of Attorney (included on the signature page of this report) | |||||||||||||||||||
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||
| 32.1*** | Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||
85
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit Number | Description | Form | Date | |||||||||||||||||
| 32.2*** | Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||
97** | Arrowhead Pharmaceuticals, Inc. Compensation Recoupment (Clawback) Policy, dated November 20, 2023 | Annual Report on Form 10-K, as Exhibit 97 | November 29, 2023 | |||||||||||||||||
| 101.INS* | Inline XBRL Taxonomy Extension Instance Document | |||||||||||||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||
| 104* | The cover page from the Company’s Annual Report on Form 10-K for the year ended September 30, 2026, formatted in Inline XBRL (included as Exhibit 101) | |||||||||||||||||||
* Filed herewith
** Indicates compensation plan, contract or arrangement.
*** Furnished herewith
† Certain portions of this exhibit were redacted by means of marking such portions with asterisks because the identified portions are (i) not material and (ii) treated as private or confidential by the Company.
ITEM 16.FORM 10-K SUMMARY
None.
86
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 12, 2026
| ARROWHEAD PHARMACEUTICALS, INC. | ||||||||
| By: | /s/ Christopher Anzalone | |||||||
| Christopher Anzalone | ||||||||
| Chief Executive Officer | ||||||||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christopher Anzalone and Daniel Apel, and each of them, as true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign in any and all capacities (including, without limitation, the capacities listed below), this Annual Report on Form 10-K, any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and anything necessary to be done to enable the registrant to comply with the provisions of the Securities Exchange Act and all the requirements of the Securities and Exchange Commission, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute, or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||||||||||||
| /s/ Christopher Anzalone | Chief Executive Officer, President and Director, Chairman of the Board of Directors (Principal Executive Officer) | November 12, 2026 | ||||||||||||
| Christopher Anzalone | ||||||||||||||
| /s/ Daniel Apel | Chief Financial Officer (Principal Financial and Accounting Officer) | November 12, 2026 | ||||||||||||
| Daniel Apel | ||||||||||||||
| /s/ Matt Cohen | Director | November 12, 2026 | ||||||||||||
| Matt Cohen | ||||||||||||||
| /s/ Mauro Ferrari | Director | November 12, 2026 | ||||||||||||
| Mauro Ferrari | ||||||||||||||
| /s/ Hongbo Lu | Director | November 12, 2026 | ||||||||||||
| Hongbo Lu | ||||||||||||||
| /s/ Adeoye Olukotun | Director | November 12, 2026 | ||||||||||||
| Adeoye Olukotun | ||||||||||||||
| /s/ Michael S. Perry | Director | November 12, 2026 | ||||||||||||
| Michael S. Perry | ||||||||||||||
| /s/ Victoria Vakiener | Director | November 12, 2026 | ||||||||||||
| Victoria Vakiener | ||||||||||||||
| /s/ William Waddill | Director | November 12, 2026 | ||||||||||||
| William Waddill | ||||||||||||||
87
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Reports of Independent Registered Public Accounting Firm (PCAOB ID: | F-2 | ||||
Consolidated Balance Sheets as of September 30, 2026 and 2025 | F-5 | ||||
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended September 30, 2026, 2025 and 2024 | F-6 | ||||
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2026, 2025 and 2024 | F-7 | ||||
Consolidated Statements of Cash Flows for the years ended September 30, 2026, 2025 and 2024 | F-8 | ||||
Notes to Consolidated Financial Statements | F-10 | ||||
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Arrowhead Pharmaceuticals, Inc.:
Arrowhead Pharmaceuticals, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Arrowhead Pharmaceuticals, Inc. and subsidiaries (the Company) as of September 30, 2026 and 2025, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2026, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2026 and 2025, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2026, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 12, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over valuation of future royalty sales liability
As discussed in Note 14 to the consolidated financial statements, the Company records the obligations under the Royalty Pharma Agreement with Royalty Pharma Investments (RPI) at carrying value using the effective interest method. The Company amortizes the sale of future royalties utilizing the prospective method to estimate future royalties to be paid by the Company to RPI over the life of the arrangement. The Company periodically assesses the amount and timing of expected royalty payments using a combination of internal projections and forecasts from external sources. To the extent such payments differ from the Company’s initial estimates, the Company will prospectively adjust the amortization of the royalty obligation and the effective interest rate. The estimate of the carrying value of the liability related to the sale of future royalties is derived from the estimate of future sales of olpasiran and the probability of success assumption. The estimate of future sales of olpasiran is based on key assumptions such as patient population, market penetration, olpasiran sales price, and the comparable guideline drug. The liability related to the sale of future royalties was $400,378 thousand as of September 30, 2026.
We identified the evaluation of the sufficiency of audit evidence over the determination of the carrying value of the liability related to the sale of future royalties as a critical audit matter. Subjective auditor judgment was required to evaluate the
F-2
sufficiency of audit evidence obtained because of the level of audit effort associated with evaluating the carrying value of the liability related to the sale of future royalties.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the evaluation of the carrying value of the liability related to the sale of future royalties. We evaluated the design and tested the operating effectiveness of certain internal controls related to management’s valuation process, including the determination of the key assumptions into the carrying value of the liability related to the sale of future royalties as described above. We assessed the patient population and market penetration assumptions by comparing to independently sourced external market and industry data. We performed sensitivity analyses over the estimated olpasiran sales price and probability of success using independently sourced external market and industry data and evaluated the impact of changes in those assumptions on the carrying value of the liability related to the sale of future royalties. We assessed the reasonableness of the comparable guideline drug by evaluating against drugs similar to olpasiran in the marketplace. We evaluated the sufficiency of audit evidence obtained by assessing the cumulative results of the audit procedures performed and potential bias in the accounting estimate, including the appropriateness of the nature and extent of such evidence.
/s/KPMG LLP
We have served as the Company’s auditor since 2024.
November 12, 2026
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Arrowhead Pharmaceuticals, Inc.:
Arrowhead Pharmaceuticals, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Arrowhead Pharmaceuticals, Inc. and subsidiaries' (the Company) internal control over financial reporting as of September 30, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2026 and 2025, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2026, and the related notes (collectively, the consolidated financial statements), and our report dated November 12, 2026 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
F-3
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/KPMG LLP
San Diego, California
November 12, 2026
F-4
Arrowhead Pharmaceuticals, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
| Cash at variable interest entity | |||||||||||
| Accounts receivable | |||||||||||
| Available-for-sale securities, at fair value | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Accrued payroll and benefits | |||||||||||
| Lease liabilities | |||||||||||
| Deferred revenue | |||||||||||
| Credit facility | |||||||||||
| Other liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Lease liabilities, net of current portion | |||||||||||
| Deferred revenue, net of current portion | |||||||||||
| Liability related to the sale of future royalties | |||||||||||
| Credit facility, net of current portion | |||||||||||
| Convertible notes, net | |||||||||||
| Total long-term liabilities | |||||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Noncontrolling interest and stockholders' equity: | |||||||||||
Common stock, $ Authorized | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
| Accumulated deficit | ( | ( | |||||||||
Treasury stock; at cost; | ( | ( | |||||||||
| Stockholders' equity | |||||||||||
| Noncontrolling interest | |||||||||||
| Total noncontrolling interest and stockholders' equity | |||||||||||
| Total Liabilities, Noncontrolling Interest and Stockholders' Equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(in thousands, except per share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Revenue: | |||||||||||||||||
| Product revenue, net | |||||||||||||||||
| Collaboration and license revenue | |||||||||||||||||
| Total revenue | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Cost of product revenue | |||||||||||||||||
| Research and development | |||||||||||||||||
| Selling, general and administrative | |||||||||||||||||
| Acquired Priority Review Voucher | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Operating (loss) income | ( | ( | |||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | |||||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||
| Loss on equity method investment | ( | ||||||||||||||||
| Gain on Visirna's sale of IPR&D assets | |||||||||||||||||
| Other, net | ( | ||||||||||||||||
| Total other expense | ( | ( | ( | ||||||||||||||
| (Loss) income before income tax (benefit) expense and noncontrolling interest | ( | ( | |||||||||||||||
| Income tax (benefit) expense | ( | ( | |||||||||||||||
| Net (loss) income including noncontrolling interest | $ | ( | $ | $ | ( | ||||||||||||
| Net income (loss) attributable to noncontrolling interest, net of tax | ( | ||||||||||||||||
| Net loss attributable to Arrowhead Pharmaceuticals, Inc. | $ | ( | $ | ( | $ | ( | |||||||||||
| Net loss per share attributable to Arrowhead Pharmaceuticals, Inc.: | |||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | |||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | |||||||||||
| Weighted-average shares used in calculating | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
| Comprehensive (loss) income: | |||||||||||||||||
| Net (loss) income including noncontrolling interest | ( | ( | |||||||||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||
| Unrealized (losses) gains on available-for-sale securities, net | ( | ||||||||||||||||
| Foreign currency translation adjustments | ( | ||||||||||||||||
| Total other comprehensive (loss) income | ( | ||||||||||||||||
| Comprehensive (loss) income | ( | ( | |||||||||||||||
| Comprehensive income (loss) attributed to noncontrolling interest | ( | ||||||||||||||||
| Comprehensive (loss) income attributable to Arrowhead Pharmaceuticals, Inc. | $ | ( | $ | $ | ( | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
| Common Stock | Amount ($) | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Common Stock in Treasury | Treasury Amount ($) | Non- controlling Interest | Totals | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock - restricted stock units vesting | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net of offering costs | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized (losses) gains on available-for-sale securities, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Amount ($) | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Common Stock in Treasury | Treasury Amount ($) | Non- controlling Interest | Totals | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock - restricted stock units vesting | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock - repurchase | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of pre-funded warrants | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized (losses) gains on available-for-sale securities, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Amount ($) | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Common Stock in Treasury | Treasury Amount ($) | Non- controlling Interest | Totals | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock - restricted stock units vesting | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under at-the-market offering, net of issuance costs | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in follow-on offering, net of issuance costs | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of pre-funded warrants | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of Capped Calls related to the 2026 Convertible Notes | — | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized (losses) gains on available-for-sale securities, net | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Change in ownership interest in consolidated VIE | — | — | ( | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared to noncontrolling shareholders | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to NCI related to Visirna IPR&D asset sale | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Arrowhead Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | ||||||||||||
| Adjustments to reconcile net (loss) income to net cash flow from operating activities: | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Accretion of available-for-sale securities premiums/discounts | ( | ( | ( | ||||||||||||||
| Amortization of convertible notes issuance costs | |||||||||||||||||
| Realized loss (gain) on investments | |||||||||||||||||
| Non-cash interest expense on liability related to the sale of future royalties | |||||||||||||||||
| Non-cash interest expense on credit facility | |||||||||||||||||
| Non-cash gain on treasury stock received | ( | ||||||||||||||||
| Gain on dilution of equity method investment | ( | ||||||||||||||||
| Loss on equity method investment | |||||||||||||||||
| Gain on Visirna's sale of IPR&D assets | ( | ||||||||||||||||
| Non-cash transfer of property and equipment to affiliate | |||||||||||||||||
| Acquired priority review voucher | |||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ( | |||||||||||||||
| Inventory | ( | ||||||||||||||||
| Prepaid expenses and other current assets | ( | ( | ( | ||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued expenses | |||||||||||||||||
| Deferred revenue | ( | ||||||||||||||||
| Operating lease, net | ( | ( | |||||||||||||||
| Other | ( | ( | |||||||||||||||
| Net cash (used in) provided by operating activities | ( | ( | |||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
| Purchases of property, plant and equipment | ( | ( | ( | ||||||||||||||
| Purchase of priority review voucher | ( | ||||||||||||||||
| Purchases of available-for-sale securities | ( | ( | ( | ||||||||||||||
| Proceeds from sales of available-for-sale securities | |||||||||||||||||
| Proceeds from maturities of available-for-sale securities | |||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
F-8
| Year Ended September 30, | |||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
| Proceeds from the exercises of stock options | |||||||||||||||||
| Proceeds from the issuance of warrants | |||||||||||||||||
| Proceeds from issuance of convertible notes | |||||||||||||||||
| Payment of debt issuance costs | ( | ( | ( | ||||||||||||||
| Purchase of capped calls | ( | ||||||||||||||||
| Proceeds from issuance of common stock related to ATM offering | |||||||||||||||||
| Payments of issuance costs of common stock related to ATM offering | ( | ||||||||||||||||
| Proceeds from issuance of common stock to Sarepta | |||||||||||||||||
| Proceeds from the issuance of common stock, related to follow-on offering | |||||||||||||||||
| Payments of issuance costs of common stock related to follow-on offering | ( | ( | |||||||||||||||
| Proceeds from credit facility | |||||||||||||||||
| Repayments of credit facility | ( | ( | |||||||||||||||
| (Payments on) proceeds from Visirna credit agreement | ( | ||||||||||||||||
| Proceeds from the sale of future royalties | |||||||||||||||||
| Dividends paid by variable interest entity to noncontrolling shareholders | ( | ||||||||||||||||
| Net cash provided by financing activities | |||||||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ( | |||||||||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | ( | ||||||||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||||||||||||
| BEGINNING OF PERIOD | |||||||||||||||||
| END OF PERIOD | $ | $ | $ | ||||||||||||||
| Supplemental disclosure of cash flows: | |||||||||||||||||
| Interest paid | $ | $ | ( | $ | |||||||||||||
| Income taxes (paid) refund | $ | ( | $ | $ | ( | ||||||||||||
| Common stock repurchased in settlement of accounts receivable. | $ | $ | $ | ||||||||||||||
| Supplemental disclosure of non-cash investing activities: | |||||||||||||||||
| Capital expenditures included in accrued expenses | $ | $ | $ | ||||||||||||||
| ROU assets obtained in exchange for new lease liabilities | $ | $ | $ | ||||||||||||||
F-9
Arrowhead Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
General
Arrowhead Pharmaceuticals, Inc. and its subsidiaries (referred to herein collectively as the “Company”) are primarily engaged in developing medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and efficient modes of delivery, the Company’s therapies trigger the RNA interference mechanism to induce rapid, deep and durable knockdown of target genes. RNA interference (“RNAi”) is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. The Company’s RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.
Approved Products
REDEMPLO® (plozasiran) is approved by the U.S. Food and Drug Administration (“FDA”) as an adjunct to diet to reduce triglycerides for adults with Familial Chylomicronemia Syndrome (“FCS”). REDEMPLO is also approved by the European Commission, Chinese National Medical Products Administration (“NMPA”), Health Canada, Australian Therapeutic Goods Administration (TGA), and the United Kingdom's Medicines and Healthcare products Regulatory Agency ("MHRA") for the same indication.
REDEMPLO is a small interfering RNA (“siRNA”) therapeutic designed to suppress the production of apolipoprotein C-III (APOC3), a protein produced in the liver that raises triglyceride levels by slowing their breakdown and clearance. By targeting the APOC3 gene with sustained silencing, REDEMPLO delivers significant reductions in triglyceride levels. REDEMPLO is the first and only FDA-approved siRNA treatment studied in both genetically confirmed and clinically diagnosed patients living with FCS.
Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of Arrowhead Pharmaceuticals, Inc. and its subsidiaries (wholly-owned subsidiaries and a variable interest entity for which the Company is the primary beneficiary). Wholly-owned subsidiaries refer to Arrowhead Madison, Inc., Arrowhead Australia Pty Ltd., Arrowhead Pharmaceuticals Australia Pty Ltd., Arrowhead Pharmaceuticals Ireland Limited, Arrowhead Pharmaceuticals NZ Limited, Arrowhead Pharmaceuticals Switzerland GmbH, and Arrowhead Pharmaceuticals Canada Inc. The Company’s variable interest entity is Visirna Therapeutics, Inc. (“Visirna”). For subsidiaries in which the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interests retained in such entity by the respective noncontrolling party.
The Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated.
The Company operates as a single segment as the chief operating decision maker, or CODM, reviews operating results on an aggregate basis and manages the operations as a single operating segment. Refer to Note 18, Segment Information, for further details on the segment information.
Liquidity
The Company’s primary sources of financing have been through the sale of its equity securities, credit facility, revenue from its licensing and collaboration agreements, the sale of certain future royalties and issuance of convertible debt. Research and development activities have required significant investment since the Company’s inception and are expected to continue to require significant cash expenditure in the future, particularly as the Company’s pipeline of drug candidates and its headcount have both expanded. Additionally, significant investment will be required as a growing commercial-stage Company and as the Company’s pipeline matures into later stage clinical trials.
As of September 30, 2026, the Company had $62.7 million in cash, cash equivalents and restricted cash ($4.2 million in restricted cash) and $1,130.2 million in available-for-sale securities to fund operations.
In total, the Company is eligible to receive up to $16.2 billion in additional development, regulatory and sales milestone payments based on programs that have been partnered, and may receive various royalties on net sales from its licensing and collaboration agreements, subject to the terms and conditions of those agreements.
F-10
Summary of Significant Accounting Policies
Use of Estimates
Cash, cash equivalents and restricted cash
There was $4.2 million and $1.9 million restricted cash at September 30, 2026 and 2025, respectively, that is primarily held as collateral associated with letters of credit for the Company’s facility leases.
Investments
The Company classified all of its investments in debt securities as available-for-sale and as current assets as they represent the investment of funds available for current operations as of September 30, 2026 and 2025. The available-for-sale securities may consist of investment-grade interest bearing instruments, primarily corporate debt securities, U.S. government and agency securities, commercial notes, certificates of deposit, and municipal securities, which are accounted for at fair value. Dividends from these funds were automatically re-invested. Changes in fair values are reported as unrealized gains or losses and are recorded in the Company’s consolidated statement of operations and comprehensive (loss) income. Accrued interest receivable on available-for-sale securities is included in investments on the Company’s consolidated balance sheets.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk primarily consist of cash, and cash equivalents, and available-for-sale securities. As of September 30, 2026 and 2025, the Company’s available-for-sale securities were primarily invested in money market instruments, U.S. government and agency securities, commercial notes, corporate debt securities, term deposits and certificates of deposit through highly rated financial institutions. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity. The Company also maintains several bank accounts at two financial institutions for its operations. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per institution.
In addition, Visirna maintains several deposit and term accounts in mainland China and Hong Kong. Cash balances are held with various local and international financial institutions, which are subject to their respective jurisdictional deposit insurance programs. The Deposit Insurance Fund Management Corporation in China provides coverage of up to RMB 500,000 per depositor per institution, and the Hong Kong Deposit Protection Scheme provides protection of up to HKD 800,000 per depositor per bank.
Inventory
Inventory is stated at the lower of cost or net realizable value under the first-in-first-out method ("FIFO"). Inventory costs include raw material, labor, and allocation of manufacturing overhead based on normal capacity; abnormal costs, such as idle capacity or excess spoilage, are expensed as incurred. Prior to regulatory approval, the Company
F-11
capitalizes inventory only when approval and subsequent commercialization are considered probable and future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the asset life or lease term. Construction in progress reflects amounts incurred for construction or improvements of property, plant and equipment that have not been placed in service. Upon disposition, the cost and accumulated depreciation of assets retired or sold are removed from the respective asset category, and any gain or loss is recognized in the Company’s consolidated statement of operations and comprehensive (loss) income.
The estimated useful lives of property, plant and equipment are as follows (in years):
| Estimated Useful Lives | |||||
Buildings | |||||
| Research equipment | |||||
Manufacturing equipment | |||||
| Furniture | |||||
| Computers and software | |||||
| Leasehold improvements | Shorter of asset life or lease term | ||||
Intangible Assets Subject to Amortization
Intangible assets subject to amortization include certain patents and license agreements. The Company evaluates intangible assets for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount of intangible assets may exceed their implied fair values. No
Leases
The Company determines whether a contract is, or contains, a lease at inception. All of the Company’s leases are classified as operating leases. Leases with terms greater than one-year are recognized on the Company’s consolidated balance sheets as right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities that represent its obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the expected lease term. As of September 30, 2026 and 2025, the Company is not reasonably certain that it will exercise renewal options for any lease facilities. Therefore, these options are not included in the right-of-use assets and liabilities.
Equity method investment
The Company accounts for investments over which it has significant influence but not control under the equity method. The investment is initially recorded at cost and subsequently adjusted for the Company’s proportionate share of the investee’s net income or loss and is included in other assets in the accompanying consolidated balance sheets. The Company presents income or losses from equity investments as loss on equity method investment on the consolidated statements of operations and comprehensive (loss) income. If the share of losses exceeds the carrying value of the
F-12
Clinical Accruals
The Company accrues liabilities for products received or services incurred, particularly for ongoing clinical trials, where service providers have not yet billed or where billing terms do not align with the timing of the work performed as of the period-end. These costs mainly include third-party clinical management or clinical research organization (CRO), laboratory analysis, and investigator fees. Accrual estimates may be based on vendor communications to obtain pending invoices and/or estimates for services performed during the period. In some cases, these estimates require significant judgment, drawing on an understanding of research and development programs, services provided during the period, prior experience, and, where applicable, the expected duration of third-party contracts. Actual costs upon settlement may differ significantly from the accrued amounts in the Company’s consolidated financial statements, though historical estimates have not differed materially from actual costs.
Convertible debt
The Company accounts for its convertible debt instrument as a single unit of accounting, classified as a liability, as the conversion features do not require bifurcation as a derivative under ASC 815-15 and the convertible debt instrument was not issued at a substantial premium. The Company records debt issuance costs as contra-liabilities in the consolidated balance sheets at issuance, and amortizes them over the contractual term of the convertible debt instrument based on the effective interest method.
The balance of the convertible notes presented in the consolidated balance sheets represents the principal balance of the convertible debt instrument less the unamortized portion of the debt issuance costs.
As of September 30, 2026, the Company had outstanding convertible notes, which mature on January 15, 2032. Refer to Note 16, Convertible Notes, for further details.
Revenue Recognition
The revenue standard provides a five-step framework for recognizing revenue as control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that it determines are within the scope of the revenue standard, the Company performs the following five steps: (i) identify the contract; (ii) identify the performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.
Product Revenue
The Company sells REDEMPLO in the United States and recognizes product revenue when control of the product transfers to its customers, generally upon delivery. Product revenue is recorded net of estimated variable consideration, including government rebates, chargebacks, co-payment assistance and product returns (collectively, “Gross-to-Net Adjustments”). These estimates require significant judgment and are based on contractual terms, expected payer mix and utilization, and other relevant factors. Variable consideration is included in revenue only to the extent it is probable that a significant reversal will not occur, and the Company adjusts its estimates as actual experience or expectations change.
Collaboration and License Revenue
At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified. The Company then determines the transaction price, which typically includes upfront payments and any variable consideration that it determines is probable to not cause a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is resolved. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.
The Company recognizes the transaction price allocated to upfront license payments as revenue upon delivery of the license to the customer and resulting ability of the customer to use and benefit from the license, if the license is determined to be distinct from the other performance obligations identified in the contract. These other performance obligations are typically to perform research and development services for the customer, often times relating to the candidate that the customer is licensing. If the license is not considered to be distinct from other performance obligations, the Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is
F-13
satisfied at a point in time or over time. If the performance obligation is satisfied over time, the Company then determines the appropriate method of measuring progress for purposes of recognizing revenue from license payments. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition.
Typically, the Company’s collaboration agreements entitle it to additional payments upon the achievement of milestones or royalties on sales. The milestones are generally categorized into three types: development milestones, generally based on the initiation of toxicity studies or clinical trials; regulatory milestones, generally based on the submission, filing or approval of regulatory applications such as a New Drug Application (“NDA”) in the United States; and sales-based milestones, generally based on meeting specific thresholds of sales in certain geographic areas. The Company evaluates whether it is probable that the consideration associated with each milestone or royalty will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are excluded from the transaction price until they meet this threshold. At the end of each subsequent reporting period, the Company re-evaluates the probability of a significant reversal of the cumulative revenue recognized for its milestones and royalties, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income in the Company’s consolidated statements of operations and comprehensive income (loss). Typically, milestone payments and royalties are achieved after the Company’s performance obligations associated with the collaboration agreements have been completed and after the customer has assumed responsibility for the respective clinical or preclinical program. Milestones or royalties achieved after the Company’s performance obligations have been completed are recognized as revenue in the period the milestone or royalty was achieved. If a milestone payment is achieved during the performance period, the milestone payment would be recognized as revenue to the extent performance had been completed at that point, and the remaining balance would be recorded as deferred revenue.
The revenue standard requires the Company to assess whether a significant financing component exists in determining the transaction price. The Company performs this assessment at the onset of its licensing or collaboration agreements. Typically, a significant financing component does not exist because the customer is paying for a license or services in advance with an upfront payment. Additionally, future royalty payments are not substantially within the control of the Company or the customer.
Further, the revenue standard requires the Company to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated. The relative standalone selling price is defined in the revenue standard as the price at which an entity would sell a promised good or service separately to a customer. If other observable transactions in which the Company has sold the same performance obligation separately are not available, the Company estimates the standalone selling price of each performance obligation. Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
Whenever the Company determines that goods or services promised in a contract should be accounted for as a combined performance obligation over time, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue is recognized using the input method; labor hours, costs incurred or patient visits in clinical trials are typically used as the measure of performance. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations. If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on its consolidated balance sheets.
Certain judgments affect the application of the Company’s revenue recognition policy. For example, the Company records short-term (less than one year) and long-term (over one year) deferred revenue based on its best estimate of when such revenue will be recognized. This estimate is based on the Company’s current operating plan and, the Company may recognize a different amount of deferred revenue over the next 12-month period if its plan changes in the future.
Collaborative Arrangements
The Company analyzes its collaborative arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards, and therefore are within the scope of Financial Accounting Standards Board (“FASB”) Topic 808 - Collaborative Arrangements. For collaborative arrangements that contain multiple elements, the Company determines which units of account are deemed to be within the scope of Topic 808 and which units of account are more reflective of a vendor-customer relationship, and therefore are within the scope of Topic 606 - Revenue from Contracts with Customers. For units of account that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied
F-14
Cost of Product Revenue
Cost of product revenue consists primarily of third-party manufacturing costs, distribution costs and overhead costs associated with REDEMPLO. Cost of product revenue is recognized when the related product revenue is recognized.
The Company expenses costs to manufacture a product candidate as research and development expenses as incurred until regulatory approval and subsequent commercialization are considered probable. Upon regulatory approval, the Company begins capitalizing the related manufacturing costs as inventory. Product manufactured before approval whose costs were previously expensed is not recorded as inventory. When that product is sold, the related manufacturing costs are not included in cost of product revenue.
REDEMPLO received FDA approval in November 2025. A portion of the REDEMPLO sold during the year ended September 30, 2026 was manufactured using materials whose costs were expensed prior to approval, and accordingly, cost of product revenue for the period does not reflect the full cost of manufacturing the product sold.
Research and Development Expenses
Research and development costs are charged to expense as incurred. Included in research and development costs are operating costs, facilities, supplies, external services, clinical trial and manufacturing costs, overhead directly related to the Company’s research and development operations, costs to acquire technology licenses, and labor.
Acquired Priority Review Voucher
During the year ended September 30, 2026, the Company acquired a Priority Review Voucher (“PRV”) issued by the FDA in an asset acquisition for $215.0 million. Prior to the closing of the acquisition, the Company notified the FDA of its intent to utilize the PRV to obtain priority review of a specifically identified human drug application. As the PRV was intended to fast-track the Company’s own drug candidate, the PRV was expensed in full at the acquisition date per ASC 730, Research and Development. Given its size and nature, the cost is presented as a separate line item within operating expenses in the consolidated statements of operations and comprehensive (loss) income.
The Company’s accounting policy is to classify cash paid to acquire research and development assets within investing activities in the consolidated statements of cash flows, and the Company applied this policy to the PRV. Accordingly, the $215.0 million payment is presented as a cash outflow from investing activities. Because the cost was expensed and included in net loss, it is presented as a reconciling item in arriving at net cash used in operating activities.
On October 7, 2026, subsequent to the end of the fiscal year, the Company announced that the FDA has granted plozasiran entry into its Split Real Time Application Review (“STAR”) pilot program in connection with the Company’s planned sNDA for sHTG. Supplemental applications accepted into the STAR program qualify for a six-month priority review, so a PRV is not needed for that application. The Company therefore withdrew its notice of intent to use the PRV for the plozasiran sNDA. This subsequent development does not affect the amount previously expensed. The Company continues to hold the PRV and may use it for a future application or sell it to a third party.
Stock-Based Compensation
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Company’s assets and liabilities, and expected
F-15
benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The Company assesses the likelihood that its deferred tax assets will be realized and, to the extent management does not believe these assets are more likely than not to be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in earnings in the period that includes the enactment date.
Variable Interest Entity (“VIE”)
A VIE is an entity that, by design, either (i) lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) has equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE through its interest in the VIE.
On April 25, 2022, the Company entered into a license agreement with Visirna (Note 2) and consolidated Visirna’s financial statements in which the Company has a direct controlling financial interest based on the VIE model.
The Company considers all the facts and circumstances, including its role in establishing Visirna and its ongoing rights and responsibilities to assess whether the Company has the power to direct the activities of Visirna. In general, the parties that make the most significant decisions affecting a VIE and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.
The Company also considers all of its economic interests to assess whether the Company has the obligation to absorb losses of Visirna or the right to receive benefits from it that could potentially be significant to Visirna. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to Visirna. Factors considered in assessing the significance include: the design of Visirna, including its capitalization structure, subordination of interests, payment priority, and the reasons why the interests are held by the Company.
Net Loss per Share
Net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of stock options and restricted stock units outstanding.
Foreign Currency Translation Adjustments
Segment Information
F-16
Recent Accounting Pronouncements
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU allows companies to elect a practical expedient to assume that conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when estimating the expected credit losses of the asset. The ASU will become effective for the Company beginning October 1, 2026, and the Company is currently evaluating the impact on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, and in January 2025, issued ASU 2025-01, Clarifying the Effective Date for ASU 2024-03. These updates require entities to provide disaggregated disclosures of income statement expenses. The ASUs do not affect the expense captions presented on the face of the income statement but instead require the disaggregation of certain expense captions into specified categories within the footnotes to the financial statements. The ASUs will become effective for the Company beginning January 1, 2027, and the Company is currently evaluating the impact on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 will become effective for the Company beginning October 1, 2026, and the Company is currently evaluating the impact on its consolidated financial statements and related disclosures.
F-17
NOTE 2. REVENUE RECOGNITION
The following table summarizes the Company's revenue by source:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Product revenue, net | $ | $ | $ | |||||||||||||||||
| Total product revenue, net | ||||||||||||||||||||
| Collaboration and license revenue | ||||||||||||||||||||
| Sarepta | ||||||||||||||||||||
| Novartis | ||||||||||||||||||||
| Sanofi | ||||||||||||||||||||
| Madrigal | ||||||||||||||||||||
| GSK | ||||||||||||||||||||
| Takeda | ||||||||||||||||||||
| Total collaboration and license revenue | ||||||||||||||||||||
| Total Revenue | $ | $ | $ | |||||||||||||||||
Product Revenue
After receiving regulatory approval for REDEMPLO in the United States in November 2025, the Company launched the product and began recognizing product revenue. During fiscal 2026, REDEMPLO was also approved in the European Union, Canada, Australia and China, as well as in the United Kingdom in October 2026, after the fiscal year-end. Rights to REDEMPLO in Greater China are held by Sanofi under a license from the Company. Majority of our product revenue for fiscal 2026 was generated in the United States. As of September 30, 2026, accounts receivable related to product sales were $3.5 million.
Collaboration and License Agreements
The following table summarizes the balance of receivables, contract assets and contract liabilities related to the Company’s collaboration and license agreements, which, as of September 30, 2026, relate solely to the Company’s agreements with Sarepta, Novartis and Sanofi:
| September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Receivables included in accounts receivable | $ | $ | ||||||||||||
| Contract assets included in other current assets | $ | $ | ||||||||||||
| Contract liabilities included in deferred revenue, current | $ | $ | ||||||||||||
| Contract liabilities included in deferred revenue, non-current | $ | $ | ||||||||||||
Deferred revenue related to the Company's agreements with Sarepta and Novartis consisted of the following:
| Year Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
Balance at beginning of period | $ | $ | ||||||||||||
Deferred revenue additions | ||||||||||||||
Revenue recognized | ( | ( | ||||||||||||
| Balance at end of period | ||||||||||||||
| Plus contract assets included in other current assets | ||||||||||||||
Less deferred revenue, current | ( | ( | ||||||||||||
Deferred revenue, non-current | $ | $ | ||||||||||||
F-18
Sarepta Therapeutics, Inc.
On November 25, 2024, the Company entered into an Exclusive License and Collaboration Agreement (the “Sarepta Collaboration Agreement”) with Sarepta for the development and commercialization of multiple clinical and preclinical programs in rare, genetic diseases of the muscle, central nervous system, and lungs. The Company concurrently entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Sarepta (see Note 6).
Under the Sarepta Collaboration Agreement, Sarepta received an exclusive sublicensable worldwide license to SRP-1001 (formerly ARO-DUX4), SRP-1003 (formerly ARO-DM1), SRP-1002 (formerly ARO-MMP7), and SRP-1004 (formerly ARO-ATXN2) clinical stage programs (the “C1” programs). Sarepta also received an exclusive sublicensable worldwide license to the Company’s ARO-HTT, ARO-ATXN1, and ARO-ATXN3 preclinical stage programs (the “C2” programs). The Company will perform certain research and development activities for the C1 and C2 programs.
Further, Sarepta may select up to six gene targets for which the Company will perform discovery, optimization and preclinical development activities to identify RNAi compounds against each selected target (the “C3” programs). Upon target acceptance, Sarepta will receive an exclusive license to the Company’s intellectual property rights to exploit compounds directed to those targets and is wholly responsible for clinical development and commercialization of each compound after the Company delivers a Clinical Trial Application ready data package (a “CTA package”).
The Company identified 17 performance obligations under the Sarepta Collaboration Agreement. The four C1 licenses are distinct performance obligations from the four C1 research and development performance obligations since the customer can use and benefit from the licenses separately. The performance obligations for the licenses were satisfied in the second quarter of fiscal 2025 upon delivery and the research and development performance obligations will be satisfied as the work is performed. The remaining nine performance obligations include three C2 preclinical stage program licenses and research and development activities, and six C3 discovery target licenses and research and development activities. Each of the three C2 programs and the six C3 programs were determined to represent one performance obligation, as the customer cannot benefit from the use of the product license at the point of transfer until the specified research and development activities are performed. As such, each of the C2 and C3 product licenses and respective research and development work will be combined to form one performance obligation. For these nine performance obligations, revenue is recognized over time as the work is performed.
For performance obligations recognized over time, the estimated performance period over which revenue will be recognized is determined to be the period over which the Company estimates it will perform the research and development activities. The Company determined that the most appropriate method of measuring progress for these performance obligations is an input method based on research and development costs in the program budget. Accordingly, the Company has estimated the total cost required to complete its obligation and recognized an amount of revenue equal to the proportion of services performed, which is reassessed on an ongoing basis as the program progresses. In the period an agreement expires or is terminated, remaining deferred revenue, if any, is recognized as revenue.
Under the terms of the Sarepta Collaboration Agreement, the Company received an upfront payment of $500.0 million on February 14, 2025. In addition, on February 7, 2025, the Company received $325.0 million in the form of an equity investment under the Stock Purchase Agreement. Based upon the Company's share price on February 7, 2025, (the “Sarepta Closing Date”), the difference between the $325.0 million and the fair value of the shares on the Sarepta Closing Date resulted in a premium of $83.6 million. The premium is included as part of the total consideration of the Sarepta Collaboration Agreement for revenue recognition purposes. The Company is entitled to receive $250.0 million to be paid in annual installments of $50.0 million over the first five years of the agreement. The Company is also eligible to receive reimbursement of certain costs related to carrying out the research and development activities for the C1 programs. At contract inception, the transaction price was determined to be $904.9 million, consisting of fixed consideration of $833.6 million and estimated variable consideration of $71.2 million. The fixed consideration was allocated to all performance obligations based on their relative standalone selling price. The variable consideration was allocated entirely to the research and development performance obligations to which the reimbursed costs relate. During the fourth quarter of fiscal 2025, the Company earned the first ARO-DM1 development milestone payments of $100.0 million, of which $50.0 million was settled in cash and the remaining $50.0 million was settled through the repurchase of Company's common stock. In November 2025, the Company earned the second of two ARO-DM1 development milestone payments of $200.0 million, which was received in January 2026. In February 2026, the Company earned and received the first installment of the annual fee payment of $50.0 million.
The Company estimates the stand-alone selling price for each distinct performance obligation, which involves assumptions that may require significant judgment. The Company’s estimates of the stand-alone selling price for license-related performance obligations includes forecasted revenues and expenses, phase dates, probability of success, development timelines, and the discount rate. The estimates of the stand-alone selling price for research and development performance obligations generally include forecasting the expected costs of satisfying a performance obligation at market rates. The Company identified a discount based on the difference between the aggregate stand-alone selling price and the
F-19
transaction price for accounting revenue recognition purposes. The Company allocated the discount proportionally to each of the performance obligations based upon their standalone selling price.
For each of the 13 programs, the Company is eligible to receive regulatory milestone payments between $110.0 million and $180.0 million per program. Variable consideration associated with the milestones that may be achieved will be allocated to the performance obligation to which it is determined to be related, which will be the respective programs to which the milestones relate. The Company will recognize the regulatory milestones as revenue in the periods the underlying milestone events are achieved as achievement of the milestone events are highly susceptible to factors outside of the entity's influence and therefore there is a possibility that the milestone event will not be achieved.
The Company is also eligible to receive sales milestone payments between $500.0 million and $700.0 million per program as well as tiered royalties on net sales of licensed products of up to the low double digits, subject to the terms and conditions of the Sarepta Collaboration Agreement. The Company has applied the sales-based scope exception to the sales milestones and the royalty-based payments.
The Sarepta Collaboration Agreement commenced in February 2025 and may be terminated by either party in the event of a material breach as defined therein. In addition, Sarepta may voluntarily terminate the Sarepta Collaboration Agreement with 30 days' written notice to the Company if terminated prior to any regulatory approval of a licensed product. Unless earlier terminated, the Sarepta Collaboration Agreement expires on a product-by-product and country-by-country basis, upon the date of expiration of the relevant royalty term for such product in such country.
In August 2025, the Company repurchased 2,660,989 shares of its common stock from Sarepta in connection with the $100.0 million DM1 first development milestone under the Sarepta Collaboration Agreement. The repurchase satisfied $50.0 million of the milestone payment through delivery of the Company’s common stock, with the remaining $50.0 million settled in cash. The shares were recorded as treasury stock at their fair value of $53.2 million, resulting in a $3.2 million gain on settlement. The repurchased shares are presented as a reduction to total stockholders’ equity in accordance with ASC 505-30.
In December 2025, pursuant to the Sarepta Collaboration Agreement, the Company entered into a clinical supply agreement with Sarepta (the “Sarepta Clinical Supply Agreement”, and, together with the Sarepta Collaboration Agreement, the “Sarepta Agreements”), whereby the Company is responsible for manufacturing and supplying certain materials to Sarepta for specified activities.
During the second quarter of fiscal 2026, Sarepta exercised its contractual step‑in right under the Sarepta Collaboration Agreement with respect to certain C1 programs, pursuant to which Sarepta will assume responsibility for ongoing clinical trials for such programs on mutually agreed transition dates. Sarepta’s exercise of the step‑in right represents a contract modification under ASC 606, as it reduces both the scope of the Company’s remaining obligations and the amount of variable consideration related to reimbursable research and development costs for the affected C1 programs. The Company evaluated the modification and determined that the remaining research and development activities to be performed after the modification are not distinct from those performed prior to the modification and, accordingly, the modification is accounted for as part of the original performance obligation through a cumulative catch‑up adjustment. The scope of the modification, including the associated transition terms, was finalized during the third quarter of fiscal 2026, and the Company recorded the related cumulative catch‑up adjustment to revenue in that period, consistent with the timing of finalization. The cumulative catch-up adjustment was not material to the consolidated financial statements. The contract modification did not impact revenue previously recognized related to the four C1 licenses, which were delivered as distinct performance obligations.
For the years ended September 30, 2026 and 2025, the Company recorded $312.1 million and $696.8 million in revenue under the Sarepta Collaboration Agreement, respectively. For the years ended September 30, 2026 and 2025, the Company recorded $4.8 million and $0.0 million in revenue under the Sarepta Clinical Supply Agreement, respectively.
As of September 30, 2026 and 2025, the Company held $6.1 million and $6.8 million in accounts receivable relating to the Sarepta Agreements, respectively. As of September 30, 2026 and 2025, the Company held $22.2 million and $0.0 million in contract assets, relating to the Sarepta Agreements, respectively. Revenue recognized over time before the Company has an unconditional right to consideration is recorded as a contract asset included in other current assets in the consolidated balance sheets. When the Company’s right to consideration becomes unconditional, the balance is reclassified to accounts receivable in the consolidated balance sheets. The recognition of the remaining revenue for the performance obligations is dependent upon the time it takes to complete the respective research and development activities and in consideration of the timing of the selection of the rest of the targets within the C3 programs.
Novartis Pharma AG
F-20
On August 29, 2025, the Company entered into an Exclusive License and Collaboration Agreement (the “Novartis Collaboration Agreement”) with Novartis for the development and commercialization of multiple preclinical programs in rare, genetic diseases of the central nervous system.
Under the Novartis Collaboration Agreement, Novartis received an exclusive sublicensable worldwide license to the Company’s ARO-SNCA preclinical stage program. The Company will perform certain research and development activities for the program.
Further, Novartis has selected additional gene targets (“Collaboration Target”) for which the Company has accepted and will perform discovery, optimization and preclinical development activities to identify RNAi compounds against each selected target. Novartis has received an exclusive license to the Company’s intellectual property rights to exploit compounds directed to those targets (the “CT” programs) and is wholly responsible for clinical development and commercialization of each compound after the Company delivers a CTA package.
The Company identified multiple performance obligations under the Novartis Collaboration Agreement. They include the ARO-SNCA preclinical stage program licenses and research and development activities, and CT programs licenses and research and development activities. Each of the programs were determined to represent one performance obligation, as the customer cannot benefit from the use of the product license at the point of transfer until the specified research and development activities are performed. As such, each of the product licenses and respective research and development work will be combined to form one performance obligation. For these performance obligations, revenue is recognized over time as the work is performed.
For performance obligations recognized over time, the estimated performance period over which revenue will be recognized is determined to be the period over which the Company estimates it will perform the research and development activities. The Company determined that the most appropriate method of measuring progress for these performance obligations is an input method based on research and development costs in the program budget. Accordingly, the Company has estimated the total cost required to complete its obligation and recognized an amount of revenue equal to the proportion of services performed, which is reassessed on an ongoing basis as the program progresses. In the period an agreement expires or is terminated, remaining deferred revenue, if any, is recognized as revenue.
Under the terms of the Novartis Collaboration Agreement, the Company received an upfront payment of $200.0 million on October 23, 2025. The fixed consideration of $200.0 million and an estimated variable consideration of $32.0 million for a total of $232.0 million were allocated to all performance obligations based on their relative standalone selling price. Standalone selling prices for the product licenses were determined using an adjusted market-based approach through the net present value of the expected future cash flows for each program. The standalone selling prices for the research and development work were determined based on an expected cost plus margin approach. The Company is also eligible to receive research milestone payments of up to $30.0 million and reimbursement of certain costs related to carrying out the research, development and manufacturing activities for the programs.
The Company estimates the stand-alone selling price for each distinct performance obligation, which involves assumptions that may require significant judgment. The Company’s estimates of the stand-alone selling price for license-related performance obligations includes forecasted revenues, phase dates, probability of success, development timelines, and the discount rate. The estimates of the stand-alone selling price for research and development performance obligations generally include forecasting the expected costs of satisfying a performance obligation at market rates. The Company identified a premium based on the difference between the aggregate stand-alone selling price and the transaction price for accounting revenue recognition purposes. The Company allocated the premium proportionally to each of the performance obligations based upon their standalone selling price.
Further, for each of the programs, the Company is eligible to receive regulatory milestone payments between $175.0 million and $245.0 million per program. Variable consideration associated with the milestones that may be achieved will be allocated to the performance obligation to which it is determined to be related, which will be the respective programs to which the milestones relate. The Company will recognize the regulatory milestones as revenue in the periods the underlying milestone events are achieved as achievement of the milestone events are highly susceptible to factors outside of the entity's influence and therefore there is a possibility that the milestone event will not be achieved.
The Company is also eligible to receive sales milestone payments between $285.0 million and $370.0 million per program as well as tiered royalties on net sales of licensed products of up to the low double digits, subject to the terms and conditions of the Novartis Collaboration Agreement. The Company has applied the sales-based scope exception to the sales milestones and the royalty-based payments.
The Novartis Collaboration Agreement commenced in October 2025 and may be terminated by either party in the event of a material breach as defined therein. In addition, Novartis may voluntarily terminate the Novartis Collaboration Agreement with 30 days' written notice to the Company if terminated prior to any regulatory approval of a licensed product, or with 180 days' written notice to the Company if terminated after any regulatory approval of a licensed product.
F-21
Unless earlier terminated, the Novartis Collaboration Agreement expires on a product-by-product and country-by-country basis, upon the date of expiration of the relevant royalty term for such product in such country.
For the year ended September 30, 2026, the Company recorded $89.0 million in revenue from Novartis, consisting of $87.1 million related to the upfront payment and $1.9 million related to the reimbursement of research and development costs. As of September 30, 2026, the Company held $91.6 million in current deferred revenue and $21.3 million in non-current deferred revenue, related to the Novartis Collaboration Agreement. The recognition of the remaining revenue for the performance obligations is dependent upon the time it takes to complete the respective research and development activities.
Visirna Therapeutics Inc. (“Visirna”) and Genzyme Corporation (“Sanofi”)
On August 1, 2025, Visirna Therapeutics HK Limited (“Visirna HK”), a wholly owned subsidiary of Visirna Therapeutics Inc., a majority owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Genzyme Corporation (“Sanofi”), a wholly owned subsidiary of Sanofi S.A., pursuant to which Visirna HK sold all of its assets and rights in investigational plozasiran to Sanofi, which included an assignment of Visirna HK’s rights (as successor by assignment from Visirna) to develop and commercialize investigational plozasiran in Greater China pursuant to that certain License Agreement by and between the Company and Visirna dated April 25, 2022 (the “Visirna License Agreement”).
In connection with the Asset Purchase Agreement, the Company consented to the partial assignment of the Visirna License Agreement by Visirna HK to Sanofi (as so assigned, the “Sanofi License Agreement”), amongst other agreements between the Company and Visirna, effective as of the closing of the Asset Purchase Agreement. This agreement was not deemed a legal sale of intellectual property from the consolidated perspective of the Company. After giving effect to the Asset Purchase Agreement, Visirna HK retains rights to develop and commercialize in Greater China other cardiometabolic drugs licensed to it pursuant to the Visirna License Agreement.
Upon closing of the Asset Purchase Agreement, Visirna received an upfront payment of $130.0 million from Sanofi. In the second quarter of fiscal 2026, Visirna received a $10.0 million milestone payment as a result of the NMPA’s approval of REDEMPLO (plozasiran) for the reduction of triglyceride levels in adult patients with FCS. Visirna is eligible to receive further development milestone payments of up to $255.0 million upon approval of plozasiran across various indications in mainland China.
Visirna identified the licenses as defined in the agreement as the performance obligations under the Asset Purchase Agreement. The performance obligations for the licenses were satisfied in the fourth quarter of fiscal 2025 upon delivery. The fixed consideration of $130.0 million was allocated to the performance obligations. The Company recognizes approval milestones as revenue in the periods the underlying milestone events are achieved as achievement of the milestone events are highly susceptible to factors outside of the entity's influence and therefore there is a possibility that the milestone events will not be achieved. The Company has also applied the sales-based scope exception to the royalty-based payments.
Under the Sanofi License Agreement, Sanofi has the option to purchase clinical and commercial product supply from the Company. In addition, the Company is eligible to receive royalties from Sanofi on net commercial product sales in Greater China under the Sanofi License Agreement. For the years ended September 30, 2026 and 2025, the Company recorded $13.3 million and $130.0 million in revenue, respectively, under the Sanofi License Agreement. As of September 30, 2026 and 2025, the Company held $0.2 million and $0.0 million, respectively, in accounts receivable under the Sanofi License Agreement. The Sanofi License Agreement may be terminated by either party in the event of a material breach as defined therein. Unless earlier terminated, the Sanofi License Agreement expires on a product-by-product basis, upon the date of expiration of the relevant royalty term for such product in Greater China.
Madrigal Pharmaceuticals, Inc. (“Madrigal”)
On May 4, 2026, the Company entered into a Licensing Agreement with Madrigal (the “Madrigal License Agreement”), under which Madrigal received an exclusive global license to develop, manufacture, and commercialize ARO-PNPLA3, a clinical stage program.
Under the terms of the Madrigal License Agreement, the Company received an upfront payment of $25.0 million on June 2, 2026. The Company is eligible to receive up to $975.0 million in development, regulatory, and sales milestone
F-22
payments, and further eligible to receive tiered royalties on commercial sales ranging from high-single digits to the mid-teens.
The Company identified a single performance obligation comprising the combined license, know-how and technology transfer, which was satisfied upon delivery in the third quarter of fiscal 2026. The fixed consideration of $25 million was fully allocated to this performance obligation and recognized in the third quarter of fiscal 2026.
There were no
GlaxoSmithKline Intellectual Property (No. 3) Limited (“GSK”)
GSK-HBV Agreement
On December 11, 2023, the Company entered into an Amended and Restated License Agreement with GSK (the “GSK-HBV Agreement”) pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989), the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection.
Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the amended GSK-HBV Agreement. Further, GSK dosed the fifth patient in a Phase 2 trial in December 2024, triggering a $2.5 million milestone payment to the Company which was paid in the second quarter of fiscal 2025. The Company is eligible to receive up to $830.0 million in development and sales milestone payments under the GSK-HBV Agreement.
There were no
GSK-HSD License Agreement
On November 22, 2021, GSK and the Company entered into an Exclusive License Agreement (the “GSK-HSD License Agreement”). Under the GSK-HSD License Agreement, GSK has received an exclusive license for GSK-4532990 (formerly ARO-HSD). The exclusive license is worldwide with the exception of greater China. GSK is wholly responsible for all clinical development and commercialization of GSK-4532990 in its territory.
The Company has completed its performance obligation related to the upfront payment under the GSK-HSD License Agreement, and accordingly the $120.0 million upfront payment was fully recognized in the year ended September 30, 2022. Further, GSK dosed the first patient in a Phase 2b trial in March 2023 and paid a $30.0 million milestone payment to the Company in the third quarter of fiscal 2023.
The Company is eligible for an additional payment of $100.0 million upon achieving the first patient dosed in a Phase 3 trial. Furthermore, should the Phase 3 trial read out positively, and the potential new medicine receives regulatory approval in major markets, the deal provides for commercial milestone payments to the Company of up to $190.0 million at first commercial sale, and up to $590.0 million in sales-related milestone payments. The Company is further eligible to receive tiered royalties on net product sales in a range of mid-teens to twenty percent.
There were no
Takeda Pharmaceutical Company Limited (“Takeda”)
In October 2020, Takeda and the Company entered into an Exclusive License and Co-Funding Agreement (the “Takeda License Agreement”). Under the Takeda License Agreement, Takeda and the Company will co-develop the Company’s fazirsiran program (formerly TAK-999 and ARO-AAT), the Company’s second-generation subcutaneously administered RNAi therapeutic candidate being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency. Within the United States, fazirsiran, if approved, will be co-commercialized under a 50/50 profit sharing structure. Outside the United States, Takeda received an exclusive license to commercialize fazirsiran and will lead the global commercialization strategy, while the Company will be eligible to receive tiered royalties of 20 % to 25 % on net sales.
The Company determined that the key deliverables included the license and certain research and development services including the Company’s responsibilities to complete the initial portion of the SEQUOIA study, to complete the ongoing Phase 2 AROAAT2002 study, and to ensure certain manufacturing of fazirsiran drug product is completed and delivered to Takeda (the “Takeda R&D Services”). Due to the specialized and unique nature of these Takeda R&D Services and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and, thus, one performance obligation. Takeda is responsible for managing clinical development and commercialization outside the United States. Within the United States, the Company and Takeda are responsible in the co-development and co-commercialization efforts. The Company considers the collaborative activities, including the co-development and co-commercialization, to be a separate unit of account within Topic 808, and as such, these co-funding
F-23
amounts are recorded as research and development expenses or selling, general and administrative expenses, as appropriate.
Under the terms of the Takeda License Agreement, the Company received $300.0 million as an upfront payment in January 2021 and an additional $40.0 million upon Takeda’s initiation of a Phase 3 REDWOOD clinical study of fazirsiran in March 2023, and is eligible to receive up to $527.5 million in additional potential development, regulatory and commercial milestones.
The Company allocated the total $300.0 million initial transaction price to its one distinct performance obligation for the fazirsiran license and the associated Takeda R&D Services. The Company has substantially completed its performance obligation under the Takeda License Agreement by December 31, 2023. As such, all revenue has been fully recognized as of December 31, 2023. There were no further deferred revenue and contract liabilities as of September 30, 2026.
As of September 30, 2026, 2025, and 2024, the accrued expense balance is $41.0 million, $31.3 million, and $23.4 million, respectively, that is primarily driven by co-development and co-commercialization activities.
Amgen Inc. (“Amgen”)
In September 2016, Amgen and the Company entered into two collaboration and license agreements and a common stock purchase agreement. Under the Second Collaboration and License Agreement (the “Olpasiran Agreement”), Amgen received a worldwide, exclusive license to the Company’s novel RNAi olpasiran (previously referred to as AMG-890 or ARO-LPA) program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the Olpasiran Agreement, Amgen is wholly responsible for clinical development and commercialization.
The Company has substantially completed its performance obligations under the Olpasiran Agreement. There were no
In November 2022, Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) and the Company entered into a Royalty Purchase Agreement with Royalty Pharma (the “Royalty Pharma Agreement”). In consideration for the payments under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive up to an additional $485.0 million in remaining development, regulatory and sales milestone payments payable from Amgen and Royalty Pharma. See Note 14.
NOTE 3. BALANCE SHEET ACCOUNTS
Property, Plant and Equipment
The following table summarizes the Company’s major classes of property, plant and equipment:
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Land | $ | $ | |||||||||
| Buildings | |||||||||||
| Research equipment | |||||||||||
| Manufacturing equipment | |||||||||||
| Furniture | |||||||||||
| Computers and software | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Property, plant and equipment, gross | |||||||||||
| Less: Accumulated depreciation and amortization | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense for property, plant and equipment for the years ended September 30, 2026, 2025, and 2024 was $24.7 million, $22.2 million and $16.9 million, respectively.
F-24
Inventory
Inventory consisted of the following as of:
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventory | $ | $ | |||||||||
Accrued Expenses
Accrued expenses consisted of the following as of:
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Accrued research and development expenses | $ | $ | |||||||||
| Accrued research and development expenses; co-development | |||||||||||
| Accrued capital expenditures | |||||||||||
| Accrued income taxes | |||||||||||
| Other | |||||||||||
| Total accrued expenses | $ | $ | |||||||||
As of September 30, 2026, the Company’s accrued research and development expenses were primarily attributable to ongoing clinical trial operations, preclinical animal studies, and associated toxicology assessments. Research and development expenses related to co-development and co-commercialization activities per the Takeda License Agreement are reported as accrued research and development expenses; co-development in the table above (see Note 2).
F-25
NOTE 4. INVESTMENTS
The Company’s investments consisted of the following:
| As of September 30, 2026 | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Available-for-sale securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Commercial notes | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
| As of September 30, 2025 | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Available-for-sale debt securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | $ | $ | $ | |||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
| Commercial notes | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
The following table summarizes the contract maturity of the available-for-sale securities as of:
| September 30, 2026 | September 30, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Within one year | $ | $ | |||||||||
| After one to two years | |||||||||||
| After two to three years | |||||||||||
| Total | $ | $ | |||||||||
As of September 30, 2026 and 2025, no
F-26
NOTE 5. INTANGIBLE ASSETS
Intangible assets subject to amortization include patents and a license agreement capitalized as part of the Novartis RNAi asset acquisition in March 2015. The following table presents the components of intangible assets:
| Gross Carrying Amount | Accumulated Amortization | Impairment | Net Carrying Amount | Useful Lives | |||||||||||||||||||||||||
(in thousands) | (in years) | ||||||||||||||||||||||||||||
| As of September 30, 2026 | |||||||||||||||||||||||||||||
| Patents | $ | $ | $ | $ | |||||||||||||||||||||||||
| License | |||||||||||||||||||||||||||||
| Total intangible assets, net | $ | $ | $ | $ | |||||||||||||||||||||||||
| As of September 30, 2025 | |||||||||||||||||||||||||||||
| Patents | $ | $ | $ | $ | |||||||||||||||||||||||||
| License | |||||||||||||||||||||||||||||
| Total intangible assets, net | $ | $ | $ | $ | |||||||||||||||||||||||||
Intangible assets are reviewed annually for impairment and more frequently if potential impairment indicators exist. No impairment indicators were identified during fiscal 2026 and 2025.
Intangible assets with definite useful lives are amortized on a straight-line basis over their useful lives. Intangible assets amortization expense in each of fiscal 2026, 2025, and 2024 was $1.7
The following table presents the estimated future amortization expense related to intangible assets as of September 30, 2026:
| Amortization Expense | |||||||||||
| Year Ending September 30, | (in thousands) | ||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| 2030 | |||||||||||
| 2031 | |||||||||||
| 2032 and thereafter | |||||||||||
| Total | $ | ||||||||||
F-27
NOTE 6. STOCKHOLDERS’ EQUITY
The following table summarizes the Company’s shares of common stock and preferred stock:
| Shares | |||||||||||||||||
| Par Value | Authorized | Issued | Outstanding | ||||||||||||||
| (in thousands) | |||||||||||||||||
| As of September 30, 2026 | |||||||||||||||||
Common stock (1) | $ | ||||||||||||||||
| Preferred stock | $ | ||||||||||||||||
| As of September 30, 2025 | |||||||||||||||||
Common stock (1) | $ | ||||||||||||||||
| Preferred stock | $ | ||||||||||||||||
(1) Does not include shares of common stock into which the 2024 and 2026 Avoro Pre-Funded Warrants may be exercised.
As of September 30, 2026 and 2025, respectively, 20,006,319 and 9,851,400 shares of common stock were reserved for issuance upon exercise of options and vesting of restricted stock units granted or available for grant under the Company’s 2013 and 2021 Incentive Plans, as well as for other inducement grants made to new employees under Rule 5635(c)(4) of the Nasdaq Listing Rules.
On November 25, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an institutional and accredited investor for a private placement of pre-funded warrants to purchase shares of common stock with an exercise price of $0.001 per share (“2024 Avoro Pre-Funded Warrants”). Pursuant to the Securities Purchase Agreement, the Company sold pre-funded warrants to purchase up to 917,441 shares of common stock at a purchase price of $27.25 per pre-funded warrant, for an aggregate value of approximately $25.0 million. The outstanding 2024 Avoro Pre-Funded Warrants are exercisable at any time and do not have an expiration date.
On November 25, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an institutional and accredited investor for a private placement of pre-funded warrants to purchase shares of common stock with an exercise price of $
The Company concluded that the 2024 Avoro Pre-funded Warrants are both indexed to its own stock and meet all other conditions for equity classification. Accordingly, the Company has classified the 2024 Avoro Pre-funded Warrants as equity and recorded within additional paid-in capital. As of September 30, 2026, no shares underlying the 2024 Avoro Pre-Funded Warrants had been exercised.
In connection with the Sarepta Collaboration Agreement, on November 25, 2024, the Company entered into the Stock Purchase Agreement with an affiliate of Sarepta for a private placement of shares of common stock of the Company (the “Private Placement”). Pursuant to the Stock Purchase Agreement, the Company sold 11,926,301 shares of common stock, at a price per share of $27.25 , for an aggregate value of approximately $325.0 million. The Private Placement closed on February 7, 2025. On August 13, 2025, the Company subsequently entered into an agreement with Sarepta to repurchase 2,660,989 shares of common stock of the Company from Sarepta at a price per share of $18.79 for an aggregate value of approximately $50.0 million to partially satisfy the milestone payment of $100.0 million due from Sarepta (with the remaining $50.0 million settled in cash). The shares were recorded as treasury stock at their fair value of $53.2 million, resulting in a $3.2 million gain on settlement. As of the end of fiscal 2025, Sarepta no longer holds an equity position in the Company.
On December 2, 2022, the Company entered into an open market sale agreement (the “Open Market Sale Agreement”) with Jefferies LLC (“Jefferies”). On December 10, 2025, the Company entered into an Amended and Restated Open Market Sale Agreement (the “Amended and Restated Sale Agreement”) with Jefferies, which amended and restated the Open Market Sale Agreement in its entirety. Under the Amended and Restated Sale Agreement, the Company may, from time to time, sell up to $500.0 million in shares of the Company’s common stock through Jefferies, acting as the sales agent and/or principal, in an at-the-market offering (“ATM Offering”). The Amended and Restated Sale Agreement continues to provide for the sale, from time to time, of shares of the Company’s common stock up to the maximum program amount permitted under the Company’s shelf registration statement and subject to continued compliance with the terms of the Amended and Restated Sale Agreement, including the delivery of issuance notices, prospectus supplements, and periodically updated representations, warranties, and deliverables. The Company pays Jefferies a commission of up to 3.0 % of the aggregate gross proceeds received from all sales of the common stock under the ATM Offering. The Amended and Restated Sale Agreement may be terminated by either party upon written notice.
During the three months ended September 30, 2026, the Company did not sell any shares of common stock under the ATM Offering. During the fiscal year ended September 30, 2026, the Company sold approximately 1,056,000 shares of common stock under the ATM Offering, generating gross proceeds of $76.1 million and net proceeds of $74.1 million after deducting underwriting commissions and offering costs.
F-28
On January 7, 2026, the Company entered into an underwriting agreement with Jefferies and J.P. Morgan Securities, LLC (“J.P. Morgan”) for an underwritten public offering (the “2026 Offering”) of: (i) 2,015,505 shares of common stock with $0.001 par value per share, at a public offering price of $64.50 per share, and (ii) pre‑funded warrants (“2026 Avoro Pre-Funded Warrants”) to purchase 1,550,387 shares of common stock, at a public offering price of $64.499 per share, which represents the per share public offering price for the common stock less the $0.001 per share exercise price for each pre-funded warrant. The 2026 Offering closed on January 9, 2026, generating gross proceeds of $230 million and net proceeds of $216.6 million after deducting the underwriting discounts and commissions and other offering expenses. The Company concluded that the 2026 Avoro Pre-funded Warrants are both indexed to its own stock and meet all other conditions for equity classification. Accordingly, the Company has classified the 2026 Avoro Pre-funded Warrants as equity and recorded within additional paid-in capital. As of September 30, 2026, no shares underlying the 2026 Avoro Pre-Funded Warrants had been exercised.
On January 2, 2026, option holders of Visirna, the Company's consolidated variable interest entity, exercised 14,000,000 stock options. As a result, the Company’s ownership interest in Visirna decreased from 66.25 % to 56.38 %. Because the Company retained its controlling financial interest in Visirna, the change in ownership was accounted for as an equity transaction in accordance with ASC 810-10-45-22 through 45-24. The noncontrolling interest was increased by $3.1 million to reflect the change in ownership resulting from exercise of 14,000,000 stock options by Visirna option holders. The decrease of $3.1 million was recorded to additional paid‑in capital attributable to Arrowhead.
During fiscal 2026, Visirna declared a cash dividend of $100.0 million to its shareholders. In fiscal 2026, Visirna paid cash dividends totaling $96.9 million, consisting of $56.4 million paid to the Company and $40.5 million paid to the Company’s noncontrolling shareholders. The remaining $3.1 million of the declared dividend represents exercise prices paid by certain noncontrolling shareholders in connection with the exercise of their stock options, which were netted against the dividend otherwise payable to those shareholders. As of September 30, 2026, no dividends declared by Visirna remained payable.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases its laboratory and office space under non-cancelable operating lease agreements. See Note 9 for details on the Company's leases.
The Company has certain non-cancelable purchase obligations related to the manufacturing of drug substance and drug product. Under these agreements, as of September 30, 2026, the Company is obligated to pay up to an aggregate of $57.5 million.
Contingencies
From time to time, the Company may be subject to various claims and legal proceedings in the ordinary course of business. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were no
On September 11, 2025, Ionis Pharmaceuticals, Inc. (“Ionis”) filed a Complaint for Patent Infringement against the Company in the United States District Court for the Central District of California alleging patent infringement of U.S. Patent No. 9,593,333 (the ’333 patent) by the Company’s planned commercialization of investigational plozasiran and seeking damages. On October 1, 2026, Ionis filed a First Amended Complaint alleging that the Company’s commercialization of plozasiran infringes the ’333 patent and seeking damages. The Court has scheduled a trial date for July 11, 2028. The Company disputes the allegations of wrongdoing and intends to vigorously defend itself.
NOTE 8. EQUITY METHOD INVESTMENT
On January 15, 2026, the Company, through its consolidated variable interest entity, Visirna, entered into and closed an Asset Transfer Agreement (the “Asset Transfer Agreement”) with Bisirna, pursuant to which the Company received 26,500,000 ordinary shares and 6,625,000 Series A preferred shares in exchange for in‑process research and development (“IPR&D”) assets transferred from Visirna to Bisirna. As a result of the asset transfer, the Company recognized a gain of $19.0 million in other income in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended September 30, 2026.
The Company evaluated whether there was a basis difference between the carrying value and fair value of its proportionate share of Bisirna’s underlying net assets. As Bisirna was not deemed a business as defined in ASC 805,
F-29
Business Combinations, the Company immediately expensed the basis difference to the extent it related to acquired IPR&D assets.
In July 2026, Bisirna completed a $50.0 million Series A+ preferred stock financing with new investors, in which the Company did not participate. As a result, the Company's ownership interest in Bisirna decreased from approximately 25.3 % to approximately 19.3 %. As required when there is a change in facts or circumstances, the Company reassessed its ability to exercise significant influence during the year ended September 30, 2026. The Company concluded that it continues to have the ability to exercise significant influence over Bisirna's operating and financial policies, and therefore continues to account for its investment in Bisirna under the equity method. The Company accounted for Bisirna's share issuance as a deemed sale of a proportionate share of its investment and recognized a pre-tax dilution gain of approximately $7.6 million within equity-method income during the fourth fiscal quarter of 2026.
NOTE 9. LEASES
Pasadena, California: The Company leases office space located at 177 East Colorado Blvd. for its corporate headquarters from 177 Colorado Owner, LLC. In April 2026, the Company entered into a lease amendment (the “2026 Pasadena Lease Amendment”) to extend the lease term for its office located in Pasadena, California and to add additional office space, increasing the total leased office space from approximately 49,576 square feet to approximately 98,444 square feet. The 2026 Pasadena Lease Amendment commenced for a portion of the office space in May 2026 and for the remainder of the office space in the fourth fiscal quarter of 2026. The 2026 Pasadena Lease Amendment has a lease term of seven years and eight months and provides two consecutive options to renew for two terms of five years . The Company is not reasonably certain that it will exercise this option to renew and therefore it is not included in right-of-use assets and liabilities as of September 30, 2026.
The 2026 Pasadena Lease Amendment granted the Company the right to receive a tenant improvement allowance funded by the lessor for $9.1 million. The Company has further concluded that this tenant improvement allowance has no effects on the classification of the lease.
San Diego, California: The Company leases 144,000 square feet of office and research and development laboratory space located at 10102 Hoyt Park from ARE-SD Region No. 72, LLC, which lease expires on April 30, 2038. Pursuant to the lease, within twelve months of the expiration of the initial 15 -year term, the Company has the option to extend the lease for up to one additional ten-year term, with certain annual increases in base rent. The Company is not reasonably certain that it will exercise this option to renew and therefore it is not included in right-of-use assets and liabilities as of September 30, 2026.
The lease agreement, as amended, granted the Company the right to receive an Additional Tenant Improvement Allowance (“ATIA”) funded by the lessor. The Company received $30.8 million in ATIA, including a final payment of $3.1 million during the first quarter of fiscal 2024. As a result, the Company remeasured its lease liability and right-of-use assets to reflect these additional allowances and the related increased lease payments. The Company has further concluded that these ATIAs have no effects on the classification of the lease.
Madison, Wisconsin: The Company leases 110,956 square feet of space, which it increased from 107,000 square feet on June 30, 2025, located at 502 South Rosa Road for its office and laboratory facilities, which lease expires on September 30, 2031. The lease contains options to renew for two terms of five years . The Company is not reasonably certain that it will exercise this option and therefore it is not included in right-of-use assets and liabilities as of September 30, 2026.
In August 2026, the Company entered into a lease amendment (the "2026 Madison Lease Amendment") to expand the leased space to a total of 116,000 square feet, effective October 1, 2026. The expanded area has a lease expiration coterminous with the original lease agreement and expires on September 30, 2031.
F-30
The components of lease assets and liabilities along with their classification on the Company’s consolidated balance sheets were as follows:
| September 30, | |||||||||||||||||
| Lease Assets and Liabilities | Classification | 2026 | 2025 | ||||||||||||||
| (in thousands) | |||||||||||||||||
| Operating lease assets | Right-of-use assets | $ | $ | ||||||||||||||
| Current operating lease liabilities | Lease liabilities | ||||||||||||||||
| Non-current operating lease liabilities | Lease liabilities, net of current portion | ||||||||||||||||
| Year Ended September 30, | |||||||||||||||||||||||
| Lease Cost | Classification | 2026 | 2025 | 2024 | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Operating lease cost | Research and development | $ | $ | $ | |||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
Variable lease cost(1) | Research and development | ||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
(1) Variable lease cost is primarily related to operating expenses associated with the Company’s operating leases.
Short-term lease cost was not material for all periods presented.
The following table presents maturities of operating lease liabilities on an undiscounted basis as of September 30, 2026:
| Year | Amounts | ||||
| (in thousands) | |||||
| 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| 2032 and thereafter | |||||
| Total | $ | ||||
| Less imputed interest | ( | ||||
| Total operating lease liabilities | $ | ||||
Supplemental cash flow and other information related to leases was as follows:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | |||||||||||||||||
| As of September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Weighted-average remaining lease term in years | ||||||||||||||||||||
| Weighted-average discount rate | % | % | % | |||||||||||||||||
F-31
NOTE 10. STOCK-BASED COMPENSATION
The Company has three plans that provide for equity-based compensation.
Under the 2013 Incentive Plan (the “2013 Plan”), 1,527,975 shares are granted and outstanding, relating to stock options and restricted stock awards to employees and directors as of September 30, 2026.
Under the 2021 Incentive Plan (the “2021 Plan”), 18,500,000 shares (subject to certain adjustments) of the Company’s common stock are authorized for grants of stock options, stock appreciation rights, restricted and unrestricted stock, performance awards, cash awards and other awards convertible into or otherwise based on shares of the Company’s common stock. The maximum number of shares authorized under the 2021 Plan will be (i) reduced by any shares subject to awards made under the 2013 Plan after January 1, 2021, and (ii) increased by any shares subject to outstanding awards under the 2013 Plan as of January 1, 2021 that, after January 1, 2021, are canceled, expired, forfeited or otherwise not issued under such awards (other than as a result of being tendered or withheld to pay the exercise price or withholding taxes in connection with any such awards) or settled in cash. As of September 30, 2026, 7,963,404 shares have been granted under the 2021 Plan, and the total number of shares available for issuance was 11,424,908 shares, which includes 170,898 and 717,414 shares that were forfeited under the 2013 and 2021 Plans, respectively. This reflects an amendment and restatement of the 2021 Plan approved by the Company’s stockholders on March 19, 2026 to increase the total number of authorized shares by 10,500,000 shares and extend the term of the plan to January 21, 2036.
Under the Company’s Inducement Plan (the “Inducement Plan”), which was amended and restated in May 2026 to increase the total number of authorized shares and to extend the term of the plan to May 2036, 3,000,000 shares of the Company’s common stock are authorized for issuance pursuant to grants of stock options, stock appreciation rights, restricted and unrestricted stock, stock units (including restricted stock units), performance awards, cash awards, and other awards convertible into or otherwise based on shares of the Company’s common stock. Awards under the Inducement Plan may only be granted to new employees of the Company in accordance with the provisions of Rule 5635(c)(4) of the Nasdaq Listing Rules. As of September 30, 2026, 930,169 shares have been granted, net of forfeitures, under the Inducement Plan. The total number of shares remaining available for issuance was 2,069,831 shares.
In addition, prior to adoption of the Inducement Plan, the Company previously granted stand-alone inducement awards in the form of stock options and restricted stock units outside of the Company’s equity plans to new employees under Rule 5635(c)(4) of the Nasdaq Listing Rules. As of September 30, 2026, there were 304,025 and 10,975 shares underlying outstanding stand-alone inducement options and restricted stock units, respectively.
The following table presents a summary of awards outstanding attributable to Arrowhead Pharmaceuticals, Inc.:
| As of September 30, 2026 | ||||||||||||||||||||||||||
| 2013 Plan | 2021 Plan | Inducement Awards | Total | |||||||||||||||||||||||
| Granted and outstanding awards: | ||||||||||||||||||||||||||
| Options | ||||||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
The following table summarizes stock-based compensation expenses included in operating expenses attributable to Arrowhead Pharmaceuticals, Inc.:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Research and development | $ | $ | $ | |||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
F-32
Stock Option Awards
The following table presents a summary of the stock option activity for the year ended September 30, 2026:
| Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at September 30, 2025 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Cancelled or expired | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Outstanding at September 30, 2026 | $ | $ | |||||||||||||||||||||
| Exercisable at September 30, 2026 | $ | $ | |||||||||||||||||||||
The aggregate intrinsic values represent the amount by which the market price of the underlying stock exceeds the exercise price of the option. The total intrinsic value of the options exercised during the years ended September 30, 2026, 2025, and 2024 was $28.4 million, $6.4 million and $4.2 million, respectively.
Stock-based compensation expense related to stock options outstanding for the years ended September 30, 2026, 2025, and 2024 was $0 , $0.1 million and $2.8 million, respectively.
As of September 30, 2026, the pre-tax compensation expense for all outstanding unvested stock options is considered nominal.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. No
Visirna ESOP: Through September 30, 2026, Visirna, a subsidiary of the Company, granted an aggregate of 16,400,000 stock options to its employees from the Employee Stock Option Plan (the “Visirna ESOP”), which authorizes 20,000,000 shares for issuance. The Visirna ESOP is independently managed by Visirna, including the valuation process. For the years ended September 30, 2026, 2025 and 2024, stock-based compensation expense related to the Visirna ESOP was $0 , $8.5 million and $6.9 million, respectively.
Restricted Stock Units
Restricted Stock Units (“RSUs”), including market-based, time-based and performance-based awards, have been granted under the Company’s 2013 and 2021 Plans, the Inducement Plan, and as inducement awards granted outside of the Company’s equity-based compensation plans. At vesting, each outstanding RSU will be exchanged for one share of the Company’s common stock. RSU awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets.
The following table summarizes the activity of the Company’s RSUs:
| Number of RSUs | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| Outstanding at September 30, 2025 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Outstanding at September 30, 2026 | $ | ||||||||||
The fair value of RSUs was determined based on the closing price of the Company’s common stock on the grant date.
F-33
F-34
NOTE 11. FAIR VALUE MEASUREMENTS
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date using the exit price. Accordingly, when market observable data are not readily available, the Company’s own assumptions are used to reflect those that market participants would be presumed to use in pricing the asset or liability at the measurement date.
Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the level of judgment associated with inputs used to measure their fair values and the level of market price observability, as follows:
Level 1 Unadjusted quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs are other than quoted prices in active markets, which are based on the following:
• Quoted prices for similar assets or liabilities in active markets;
• Quoted prices for identical or similar assets or liabilities in non-active markets; or
• Either directly or indirectly observable inputs as of the reporting date.
Level 3 Pricing inputs are unobservable and significant to the overall fair value measurement, and the determination of fair value requires significant management judgment or estimation.
In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.
The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2, or from Level 2 to Level 3. The Company recognizes transfers between levels at either the actual date of the event or a change in circumstances that caused the transfer. At September 30, 2026 and 2025, the Company did not have any financial assets or financial liabilities based on Level 3 measurements.
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation techniques utilized by the Company:
F-35
| September 30, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Available-for-sale securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | $ | $ | $ | |||||||||||||||||||
| Commercial notes | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total available-for-sale securities | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market instruments | |||||||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Available-for-sale securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | $ | $ | $ | |||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
| Commercial notes | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total available-for-sale securities | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market instruments | |||||||||||||||||||||||
| Term deposits | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
Convertible Notes
The Company's Convertible Notes (see Note 16) are carried at amortized cost and are not measured at fair value on a recurring basis. As of September 30, 2026, the carrying value of the Convertible Notes was $683.5 million, and its estimated fair value was $720.1 million. We determine the fair value of the Convertible Notes based on quoted market prices for these notes, which are Level 2 measurements because the Convertible Notes do not trade regularly.
Credit Facility
The Company’s credit facility (see Note 15) is carried at amortized cost and is not measured at fair value on a recurring basis. As of September 30, 2026, the aggregate carrying amount of the current and noncurrent portions of the facility was $195.4 million, and its estimated fair value was approximately $409.4 million.
The estimated fair value was determined using an income approach based on the present value of expected cash flows associated with the facility’s contractual terms, including its scheduled repayments, paid-in-kind interest, multiple-on-invested-capital provisions and considering ongoing refinance negotiations as of September 30, 2026. Because the valuation included significant unobservable inputs, the estimated fair value was categorized within Level 3 of the fair value hierarchy.
F-36
NOTE 12. INCOME TAXES
Income Tax Provision (Benefit)
The components of the income (loss) before income tax expense and noncontrolling interest are as follows:
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
Domestic | $ | ( | $ | ( | $ | ( | |||||||||||
Foreign | ( | ||||||||||||||||
Total | $ | ( | $ | $ | ( | ||||||||||||
Income tax provision (benefit) consisted of the following components:
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | ( | $ | $ | |||||||||||||
| State | ( | ||||||||||||||||
| Foreign | ( | ||||||||||||||||
| Total current tax (benefit) provision | $ | ( | $ | $ | ( | ||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Total deferred tax | $ | $ | $ | ||||||||||||||
| Income tax (benefit) provision | $ | ( | $ | $ | ( | ||||||||||||
F-37
The following table presents the Company's effective income tax rate for the year ended September 30, 2026 which differs from the statutory federal income tax rate as follows:
| Year Ended September 30, 2026 | |||||||||||
| Amount | % of Pretax Income | ||||||||||
| $ | ( | % | |||||||||
| Effect of state and local income taxes, net of federal benefit | ( | % | |||||||||
| Effect of tax rates in foreign jurisdictions | |||||||||||
| Hong Kong | |||||||||||
| Change in valuation allowance | ( | % | |||||||||
| Intra-entity transfer of intellectual property | ( | % | |||||||||
| Other | ( | % | |||||||||
| Effect of tax rates in foreign jurisdictions, total | ( | % | |||||||||
| Effect of tax credits | |||||||||||
| Research and development credits | ( | % | |||||||||
| Effect of tax credits, total | ( | % | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income | ( | % | |||||||||
| Other | ( | % | |||||||||
| Effect of cross-border tax laws, total | ( | % | |||||||||
| Effect of changes in valuation allowance | ( | % | |||||||||
| Effect of nontaxable or nondeductible items | |||||||||||
| Windfall from exercised stock options | ( | % | |||||||||
| Other, net | ( | % | |||||||||
| Effect of nontaxable or nondeductible items, total | ( | % | |||||||||
| Effect of changes in unrecognized tax benefits | ( | % | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | |||||||||||
| Other reconciling items, net | |||||||||||
| Income tax provision (benefit) | $ | ( | % | ||||||||
The state jurisdiction that comprises greater than 50 percent of the state tax expense is California.
The following table presents a reconciliation of the tax expense based on the statutory rate to the Company’s actual tax expense in the consolidated statements of operations and comprehensive income (loss) for the years ended September 30, 2025 and 2024, prior to the adoption of ASU 2023-09. A notional 21% tax rate was applied as follows:
| Year Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| U.S. federal statutory income tax | % | % | ||||||||||||
| State income taxes, net of federal tax benefit | ( | % | % | |||||||||||
| Tax credits | ( | % | % | |||||||||||
| Permanent and other items | ( | % | % | |||||||||||
| Non-deductible compensation | % | ( | % | |||||||||||
| Foreign-derived intangible income deduction | ( | % | % | |||||||||||
| Other income | % | % | ||||||||||||
| Stock compensation | % | ( | % | |||||||||||
| Valuation allowance | % | ( | % | |||||||||||
| Effective income tax rate | % | % | ||||||||||||
F-38
Deferred Income Taxes
The following table presents the significant components of the Company’s net deferred tax assets and liabilities:
| Year Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating loss carryforwards | $ | $ | ||||||||||||
| Capitalized research and development | ||||||||||||||
| Tax credits | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Lease liabilities | ||||||||||||||
| Stock compensation | ||||||||||||||
| Unrealized gains | ||||||||||||||
| Accrued compensation | ||||||||||||||
| Intangible assets | ||||||||||||||
| Other | ||||||||||||||
| Total gross deferred tax assets | $ | $ | ||||||||||||
| Valuation allowance | $ | ( | $ | ( | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Fixed assets | $ | ( | $ | ( | ||||||||||
| Right-of-use assets | ( | ( | ||||||||||||
| Unrealized gains | ( | |||||||||||||
| Original Issue Discount | ( | ( | ||||||||||||
| Total gross deferred tax liability | $ | ( | $ | ( | ||||||||||
| Net deferred tax assets (liabilities) | $ | $ | ||||||||||||
A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2026. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation at September 30, 2026 and 2025, a valuation allowance of $736.7 million and $497.5 million, respectively, has been recorded.
As of September 30, 2026, the Company had accumulated federal, state, and foreign net operating loss (“NOL”) carryforwards of $635.4 million, $965.6 million and $60.1 million, respectively. Of the $635.4 million in federal NOL carryforwards, $20.6 million was generated before January 1, 2018, and is subject to a 20-year carryforward period (“pre-Tax Act losses”), with expiration beginning in 2031. Of the $965.6 million in state NOL carryforwards, $5.6 million can be carried forward indefinitely, while the remaining balance begins to expire in 2031. The Company also has foreign NOL carryforwards totaling $60.1 million, which begin to expire in 2027. Additionally, the Company has federal and state income tax credits of $110.2 million and $35.8 million, respectively. The federal credits begin to expire in 2042. Of the state income tax credits, $15.9 million begins to expire in 2030, while the remaining credits can be carried forward indefinitely.
Pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of an entity’s NOL and research and development credit carryforwards may be limited if there is a cumulative ownership change of greater than 50% within a three-year period. The annual limitation is determined based on the entity’s value immediately prior to the ownership change. Future ownership changes could further affect the limitation. If a limitation is applied, the related tax asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. To date, the Company has completed an analysis pursuant to Sections 382 and 383 through September 30, 2025. Ownership Changes may have occurred since then, and future changes could potentially limit the Company’s ability to utilize these attributes.
F-39
Income Taxes paid
The following table presents a summary of income taxes paid, net of refunds received, for the year ended September 30, 2026:
| Year Ended September 30, | |||||
| 2026 | |||||
| (in thousands) | |||||
| Federal | $ | ||||
| State | |||||
| Foreign | |||||
| Total income taxes paid, net | $ | ||||
Uncertainty in Income Taxes
The Company has adopted guidance issued by the FASB that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold of more-likely-than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more-likely-than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities.
The following table summarizes the Company’s gross unrecognized tax benefits:
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Beginning balance of unrecognized tax benefits | $ | $ | $ | ||||||||||||||
| Gross increase for prior period tax positions | |||||||||||||||||
| Gross decrease for prior period tax positions | |||||||||||||||||
| Gross increase for current period tax positions | |||||||||||||||||
| Lapse of statute of limitations | ( | ||||||||||||||||
| Ending balance of unrecognized tax benefits | $ | $ | $ | ||||||||||||||
If the unrecognized tax benefit as of September 30, 2026 is ultimately recognized, there would be no reduction in the Company’s income tax expense or effective tax rate, excluding the impact of U.S. Tax benefits netted against deferred taxes that are subject to a valuation allowance.
The Company is subject to taxation in the U.S. and various states along with other foreign countries. Due to the presence of NOL carryforwards, all the income tax years remain open for examination. The audit of the Company by the IRS for September 30, 2023 was closed during the year with no changes resulting from the audit. There are no other material audits in any other jurisdiction.
The Company analyzes undistributed earnings of each foreign subsidiary and has determined that no withholding taxes are applicable to earnings which are currently available for distribution. No additional deferred tax liability has been recorded as the parent entity would not be required to include the distribution into income under the current law.
The Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5. Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year that the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented
F-40
NOTE 13. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution retirement plan qualified under Section 401(k) of the Internal Revenue Code and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). All of the Company’s full-time employees are eligible to participate in this plan. Under the terms of the plan, an eligible employee may elect to contribute a portion of their salary on a pre-tax basis, subject to federal statutory limitations.
For the years ended September 30, 2026, 2025, and 2024, the Company recorded expenses for the matching contributions under this plan of $4.5 million, $3.9 million and $3.4 million, respectively.
The Company also provides certain employee benefit plans, including those which provide health and life insurance benefits to employees.
NOTE 14. LIABILITY RELATED TO THE SALE OF FUTURE ROYALTIES
In November 2022, the Company and Royalty Pharma entered into the Royalty Pharma Agreement, pursuant to which Royalty Pharma agreed to pay up to $410.0 million in cash to the Company in consideration for the Company’s future royalty interest in olpasiran, a siRNA originally developed by the Company and licensed to Amgen in September 2016 under the Olpasiran Agreement.
Pursuant to the Royalty Pharma Agreement, Royalty Pharma paid $250.0 million upfront and agreed to pay up to an additional $160.0 million in aggregate one-time milestone payments due if and when the following milestone events occur: (i) $50.0 million on completion of enrollment in the OCEAN Phase 3 clinical trial for olpasiran, (ii) $50.0 million upon receipt of FDA approval of olpasiran for an approved indication (reduction in the risk of myocardial infarction, urgent coronary revascularization, or coronary heart disease death in adults with established cardiovascular disease and elevated Lp(a), and (iii) $60.0 million upon Royalty Pharma’s receipt of at least $70.0 million of royalty payments under the Royalty Pharma Agreement in any single calendar year. During the third quarter of fiscal 2024, Amgen completed enrollment of the Phase 3 OCEAN(a) outcomes trial of olpasiran, which triggered a $50.0 million milestone payment that the Company received in the same quarter. As of September 30, 2026, up to $110.0 million of additional milestone payments remain payable in the future, contingent upon the achievement of the remaining regulatory and royalty-based milestones.
In consideration for the payment of the foregoing amounts under the Royalty Pharma Agreement, Royalty Pharma is entitled to receive all royalties otherwise payable by Amgen to the Company under the Olpasiran Agreement. The Company remains eligible to receive any milestone payments potentially payable by Amgen under the Olpasiran Agreement.
The Company has evaluated the terms of the Royalty Pharma Agreement and concluded, in accordance with the relevant accounting guidance, that the Company accounted for the transaction as debt and the funding of $250.0 million and $50.0 million from Royalty Pharma were recorded as liabilities related to the sale of future royalties on its consolidated balance sheets. The Company is not obligated to repay these funds received under the Royalty Pharma Agreement.
The Company records the obligations at their carrying value using the effective interest method. In order to amortize the sale of future royalties, the Company utilizes the prospective method to estimate the future royalties to be paid by the Company to the counterparty over the life of the arrangement. Under the prospective method, a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize non-cash interest expense for the remaining periods. The Company periodically assesses the amount and the timing of expected royalty payments using a combination of internal projections and forecasts from external sources. The estimates of future net product sales (and resulting royalty payments) are based on key assumptions including population, penetration, probability of success and sales price, among others. To the extent such payments are greater or less than the Company’s initial estimates or the timing of such payments is different than its original estimates, the Company will prospectively adjust the amortization of the royalty financing obligations and the effective interest rate. As of September 30, 2026, the estimated effective interest rate was 8.0 %.
The following table presents the activity with respect to the liability related to the sale of future royalties.
F-41
September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
Beginning carrying value | $ | $ | ||||||||||||
| Milestone payment received | ||||||||||||||
| Non-cash interest expense recognized | ||||||||||||||
Ending carrying value | $ | $ | ||||||||||||
NOTE 15. FINANCING AGREEMENT
On August 7, 2024 (the “Closing Date”), the Company entered into a Financing Agreement with the guarantors party thereto, the lenders party thereto (the “Lenders”), and Sixth Street Lending Partners (“Sixth Street”), as the administrative agent and collateral agent for the Lenders (the “Financing Agreement”). The Financing Agreement establishes a senior secured term loan facility of $500.0 million (the “Credit Facility”), consisting of $400.0 million funded on the Closing Date and an additional $100.0 million available at the Company’s option, subject to mutual agreement with Sixth Street. The loans under the Credit Facility bear interest at an annual rate of 15.0 %, which is paid in kind and added to the outstanding principal balance of the Credit Facility each period. The outstanding principal balance of this Credit Facility, including amounts representing accrued but unpaid interest previously paid in kind, is due and payable on August 7, 2031.
The Company is permitted to use the net proceeds for working capital, capital expenditures and general corporate purposes of the Company and its subsidiaries.
The Company will have the right to prepay loans under the Credit Facility at any time. The Company is required to partially repay loans under the Credit Facility with proceeds from certain asset sales, condemnation events and extraordinary receipts, subject, in some cases, to reinvestment rights. If the Company repays in full the aggregate principal outstanding under the Credit Facility and such payment in full occurs on or prior to August 7, 2028, the Company will be required to make an additional payment to the lenders under the Credit Facility on such date in an amount necessary for the lenders to achieve a two times multiple of invested capital (“MOIC”) of the aggregate principal amount funded on the Closing Date (the “MOIC Payment”). If such payment in full occurs after August 7, 2028, the Company will be required to make a payment to the lenders under the Credit Facility on such date in an amount necessary for the lenders to achieve the greater of the MOIC Payment and the present value of all interest payments that would have been payable from such date through the maturity date of the Credit Facility discounted at the Treasury Rate (as defined in the Financing Agreement) plus 0.5 %; provided that such payment amount in this instance will not exceed the amount necessary for the lenders to achieve a 2.5 times MOIC.
On November 26, 2024, the Company entered into an amendment to the Financing Agreement (the "Amendment") to modify, amongst other things, some of the prepayment terms of the loans under the Credit Facility, including, the prepayment terms related to the Sarepta Collaboration Agreement. The Amendment was effective on February 14, 2025, following the closing of the Sarepta Collaboration Agreement and receipt of the $500.0 million upfront payment from Sarepta. The Amendment added an additional prepayment clause that requires certain contractual prepayments of principal and MOIC payments throughout the life of the loans under the Credit Facility. Additionally, any prepayment will be split with 50 % of any such prepayment paying down the principal balance of the loans under the Credit Facility and the other 50 % being applied to prepay the MOIC Payment. In the event the prepayment amounts result in fees being prepaid in excess of the actual amounts required to be paid, the excess fees shall be reallocated and applied to reduce the amount of the principal balance upon repayment in full of the loans under the Credit Facility. As of September 30, 2026, the Company has paid $159.0 million in MOIC payments of which $33.3 million is expected to be applied to principal upon repayment in full. To date, the Company has paid $319.6 million of the loans under the Credit Facility.
The Amendment was accounted for as a debt modification under ASC 470-50, “Debt—Modifications and Extinguishments” since the Amendment did not result in substantially different terms. In connection with the Amendment, the Company did not incur significant third-party fees.
All obligations under the Financing Agreement are secured on a first-priority basis by security interests in substantially all assets of the Company and material subsidiaries of the Company, including its intellectual property, subject to certain exceptions, and are guaranteed by material subsidiaries of the Company, including foreign subsidiaries, subject to certain exceptions.
The Financing Agreement contains customary covenants, including, without limitation, a financial covenant to maintain liquidity qualified cash (unrestricted cash and cash equivalents held in U.S. accounts subject to the lenders’
F-42
security interest) of at least $150.0 million, and negative covenants that, subject to certain exceptions, restrict indebtedness, liens, investments (including acquisitions), fundamental changes, asset sales and licensing transactions, dividends, modifications to material agreements, payment of subordinated indebtedness, distributions from certain parties, and other matters customarily restricted in such agreements. As of September 30, 2026, the Company was in compliance with all covenants under the Financing Agreement. Pursuant to the terms of the Financing Agreement, the Company and its subsidiaries are not permitted to have an aggregate principal amount of convertible indebtedness outstanding at any one time in excess of the greater of $300.0 million and 10 % of the market capitalization of the Company (based on the closing price of the common stock of the Company on the trading date immediately prior to the incurrence of such indebtedness), but in no event greater than $700.0 million in the aggregate. The Company is subject to restrictions on sales and licensing transactions with respect to certain core intellectual property, subject to certain exceptions, including certain transactions related to areas outside the United States, United Kingdom, European Union, Japan and China.
The Financing Agreement contains certain embedded features that were identified and evaluated as not material to the consolidated financial statements.
On August 13, 2025, the Company entered into a second amendment to the Financing Agreement (the "Second Amendment") that permitted the share repurchase of the Company's common stock from Sarepta and required the Company to pay a nominal administrative fee.
The outstanding balance of the Credit Facility consisted of the following:
| September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Initial Term Loan | $ | $ | ||||||||||||
| Accumulated interest on the Initial Term Loan | ||||||||||||||
| Accumulated accretion of the MOIC Payment | ||||||||||||||
| Less: Unamortized debt issuance costs | ( | ( | ||||||||||||
| Less: Current portion of credit facility | ( | ( | ||||||||||||
| Less: Payments | ( | ( | ||||||||||||
| Credit facility, net of current portion | $ | $ | ||||||||||||
The following table sets forth total interest expense recognized related to the Credit Facility:
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Amortization of debt discount and issuance costs | $ | $ | $ | |||||||||||||||||
| Accretion of the MOIC Payment | ||||||||||||||||||||
| Contractual interest expense | ||||||||||||||||||||
| Total interest expense | $ | $ | $ | |||||||||||||||||
The amounts shown in the table below, related to the Credit Facility, represent the expected repayments of principal and accrued interest balance as of September 30, 2026 inclusive of scheduled mandatory prepayments that the Company is obligated to make to the Lenders during the indicated periods. The principal balance will increase from accrued paid in kind interest, and the table does not include MOIC prepayments beyond those contractually scheduled. Actual payments on current principal may vary from the amounts presented in the table.
| Year | Amounts | |||||||
| (in thousands) | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
F-43
On November 2, 2026, subsequent to the end of the fiscal year, the Company entered into an amendment and restatement of the Financing Agreement. See Note 19 for additional details.
In May 2025, Visirna entered into the Revolving Credit Agreement with Bank of Zhejiang. The maximum aggregate credit facility is 72.9 million Chinese Yuan ($10.3 million) bearing an annual interest rate of 4.1 %. The term of each loan is twelve months . As of September 30, 2026, this loan was fully paid off.
In May 2026, Visirna entered into a new one-year credit agreement with China ZheShang Bank. The maximum aggregate credit facility is 70.0 million Chinese Yuan ($10.0 million) with an annual interest rate of 3.5 %. As of September 30, 2026 the amount outstanding was 2.8 million Chinese Yuan ($0.4 million). The credit agreement also provides a line of credit with an annual interest rate of 2.5 %. As of September 30, 2026, the amount outstanding on the line of credit was 43.0 million Chinese Yuan ($6.4 million). All Visirna loans are classified as other current liabilities.
NOTE 16. CONVERTIBLE NOTES
In January 2026, the Company issued $700.0 million aggregate principal amount of 0.00 % Convertible Notes (the “Notes”) due January 15, 2032. The initial conversion rate is 11.4844 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $87.07 per share, subject to adjustment upon the occurrence of certain specified events. The Notes are convertible into an aggregate of approximately 8,039,080 shares of the Company’s common stock. The conversion rate is subject to adjustment, including in the case of conversions in connection with a make-whole fundamental change as defined in the indenture for the Notes or a redemption of the Notes.
The Notes are convertible at the option of the holders upon the occurrence of certain events prior to October 15, 2031, and thereafter at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Prior to October 15, 2031, holders may convert the Notes only upon the occurrence of one of the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending March 31, 2026, if the last reported sale price of the Company’s common stock exceeds 130 % of the conversion price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading‑day period ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five business days immediately following any ten consecutive trading‑day period in which the trading price per $1,000 principal amount of the Notes for each trading day of such ten consecutive trading-day period is less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on such trading day; (iii) upon the occurrence of certain specified corporate events or distributions on the common stock; or (iv) if the Company calls the Notes for redemption. Upon conversion, the Company may, at its election, settle the Notes in cash, shares of the Company’s common stock, or a combination thereof.
The Company may not redeem the Notes prior to January 16, 2029. On or after January 16, 2029 and on or before the 30 th scheduled trading day immediately preceding the maturity date, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company’s common stock exceeds 130 % of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, and (ii) the trading day immediately preceding such date. The redemption price will equal 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.
Upon the occurrence of a fundamental change, which includes certain change-of-control transactions, a delisting of the Company’s common stock, or a liquidation event, holders may require the Company to repurchase their Notes for cash at a price equal to 100 % of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The outstanding balance of the Notes consisted of the following:
| September 30, 2026 | September 30, 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Outstanding principal balance | $ | $ | ||||||||||||
| Less: Unamortized debt issuance costs | ( | |||||||||||||
| Convertible notes, net | $ | |||||||||||||
The following table sets forth total interest expense recognized related to the Notes:
F-44
| Year Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Amortization of debt issuance costs | $ | $ | ||||||||||||
| Total interest expense | $ | $ | ||||||||||||
Capped Call Transactions
In connection with the issuance of the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institutions. The Capped Calls have an initial strike price corresponding to the initial conversion price of the Notes and an initial cap price of $119.33 per share, subject to adjustment under the terms of the Capped Call confirmations. The Capped Calls are intended to reduce or offset potential dilution to the Company’s common stock upon conversion of the Notes, with such reduction or offset subject to the applicable cap price. The Capped Calls cover, subject to anti‑dilution adjustments, the number of shares of the Company’s common stock underlying the Notes.
The Capped Calls are separate transactions that are not part of the terms of the Notes and do not affect the rights of holders of the Notes. The Company paid $47.9 million in connection with the Capped Call transactions, which was recorded as a reduction to additional paid‑in capital in the consolidated balance sheets. As the Capped Calls meet the applicable equity classification criteria under ASC 815, Derivatives and Hedging, they are recorded within stockholders’ equity and are not subsequently remeasured to fair value.
F-45
NOTE 17. NET LOSS PER SHARE
The following table presents the computation of basic and diluted net loss per share for the years ended September 30, 2026, 2025 and 2024.
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Net loss attributable to Arrowhead Pharmaceuticals, Inc. | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Denominator: | ||||||||||||||||||||
Weighted-average basic shares outstanding (1) | ||||||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||||||
Weighted-average diluted shares outstanding (1) | ||||||||||||||||||||
| Basic net loss per share | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Diluted net loss per share | $ | ( | $ | ( | $ | ( | ||||||||||||||
(1) Include shares of common stock into which the 2024 and 2026 Avoro Pre-Funded Warrants may be exercised. See Note 6.
The following table sets forth the number of potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive.
| Year Ended September 30, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
| Options | ||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||
| If-converted common stock from convertible notes | ||||||||||||||||||||
| Total | ||||||||||||||||||||
F-46
NOTE 18. SEGMENT INFORMATION
The Company operates in a single segment dedicated to the discovery, development, manufacturing and commercialization of RNAi therapeutics. The Company's RNAi therapeutics are comprised of siRNAs that function upstream of conventional medicines by potently silencing mRNA that encode for proteins implicated in the cause or pathway of disease, thus preventing them from being made. Consistent with our operational structure, our Chief Executive Officer (“CEO”), as the CODM, manages and allocates resources on a consolidated basis at the global corporate level. Our global research and development and technical operations and quality organizations are responsible for the discovery, development, and supply of products. Commercial efforts that coordinate the marketing, sales and distribution of these products are organized by geographic region. All of these activities are supported by corporate staff functions. Managing and allocating resources at the corporate level enables our CEO to assess the overall level of resources available and how to best deploy these resources in line with our overarching long-term, corporate-wide strategic goals. The determination of a single segment is consistent with the consolidated financial information regularly reviewed by the CODM for the purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.
Consistent with our management reporting, results of our operations are reported on a consolidated basis for purposes of segment reporting. The CEO evaluates performance and decides how to allocate resources based on consolidated net (loss) income that is reported on the consolidated statements of operations and comprehensive (loss) income. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CEO uses consolidated net (loss) income to evaluate loss or income generated from the Company’s business activities in deciding how to allocate company resources (such as pursuing clinical development or entering a strategic collaboration), monitoring budget versus actual results, and establishing management’s compensation. The following table presents selected financial information with respect to the Company’s single reportable segment for years ended September 30, 2026, 2025, and 2024. Significant expense categories and amounts align with the information that is regularly provided to the CEO.
F-47
| Year Ended September 30, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Revenue: | |||||||||||||||||
| Product revenue, net | |||||||||||||||||
| Collaboration and license revenue | |||||||||||||||||
| Revenue | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Cost of product revenue | $ | $ | $ | ||||||||||||||
| Acquired Priority Review Voucher | $ | $ | $ | ||||||||||||||
| Research and development expenses | |||||||||||||||||
| Candidate costs | $ | $ | $ | ||||||||||||||
| Discovery costs | |||||||||||||||||
| Salaries | |||||||||||||||||
| Facilities related | |||||||||||||||||
| Total research and development expense, excluding non-cash expense | $ | $ | $ | ||||||||||||||
| Stock compensation | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total research and development expenses | $ | $ | $ | ||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||
| Salaries | $ | $ | $ | ||||||||||||||
| Professional, outside services, and other | |||||||||||||||||
| Facilities related | |||||||||||||||||
| Total selling, general and administrative expense, excluding non-cash expense | $ | $ | $ | ||||||||||||||
| Stock compensation | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total selling, general and administrative expenses | $ | $ | $ | ||||||||||||||
| Total operating expenses | |||||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | |||||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||
| Loss on equity method investment | ( | ||||||||||||||||
| Gain on Visirna's sale of IPR&D assets | |||||||||||||||||
| Other, net | ( | ||||||||||||||||
| Total other expense | $ | ( | $ | ( | $ | ( | |||||||||||
(Loss) income before income tax (benefit) expense and noncontrolling interest | ( | ( | |||||||||||||||
Income tax (benefit) expense | ( | ( | |||||||||||||||
| Net (loss) income including noncontrolling interest | ( | ( | |||||||||||||||
Net income (loss) attributable to noncontrolling interest, net of tax | ( | ||||||||||||||||
Net loss attributable to Arrowhead Pharmaceuticals, Inc. | ( | ( | ( | ||||||||||||||
F-48
NOTE 19. SUBSEQUENT EVENTS
Change in Fiscal Year End
On November 9, 2026, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31, effective as of January 1, 2027. As a result of this change, the Company expects to file a transition report on Form 10-Q covering the three-month transition period from October 1, 2026 through December 31, 2026.
Amended and Restated Financing Agreement
On November 2, 2026 (the “A&R Closing Date”), the Company and its subsidiary, Arrowhead Madison Inc., as guarantor, refinanced its senior secured term loans under the Existing Financing Agreement (defined below) by entering into an Amended and Restated Financing Agreement (the “A&R Financing Agreement”) with the lenders party thereto (the “Lenders”) and Sixth Street Lending Partners, as administrative agent and collateral agent for the Lenders (“Sixth Street”). The A&R Financing Agreement amends and restates in its entirety the Financing Agreement, dated as of August 7, 2024, among the Company, the guarantor party thereto, the lenders party thereto and Sixth Street, as amended on November 26, 2024 and August 13, 2025 (the “Existing Financing Agreement”).
The A&R Financing Agreement provides for a senior secured term loan facility in an aggregate principal amount of $400.0 million (the “Credit Facility”), which was fully funded on the A&R Closing Date. The Credit Facility matures on November 2, 2031 (the “Maturity Date”) and bears interest, at the Company’s election, at an annual rate equal to three-month Term SOFR (subject to a 1.00 % floor) plus 5.50 % or a base rate (subject to a 2.00 % floor) plus 4.50 %. Interest is payable quarterly in cash. On the Closing Date, the Company paid fees to the Lenders equal to 2.00 % of the principal amount of the Credit Facility. By comparison, the term loans under the Existing Financing Agreement bore interest at a fixed annual rate of 15.0 %, which was paid in kind and added to the outstanding principal balance each period, and were scheduled to mature on August 7, 2031.
On the A&R Closing Date, the Company used cash on hand to repay in full the term loans outstanding under the Existing Financing Agreement, which had an outstanding principal balance of approximately $363.8 million (including accrued interest previously paid in kind), together with all other amounts owing under the Existing Financing Agreement and the related fee letter, for an aggregate payoff amount of approximately $404.4 million. The payoff amount was accepted by the lenders under the Existing Financing Agreement in full satisfaction of all obligations thereunder, including the multiple-of-invested-capital (“MOIC”) payment that would otherwise have been payable upon repayment, and represents a discount of approximately $68 million from the 2.0 x MOIC payment that would have been owed to the lenders under the Existing Financing Agreement upon repayment in full on or prior to August 7, 2028.
The Company is permitted to use the net proceeds for working capital and general corporate purposes of the Company and its subsidiaries. The Credit Facility does not provide for scheduled amortization payments during the term, and all principal will be due on the Maturity Date.
The Company has the right to prepay loans under the Credit Facility at any time. Prepayments made on or before the eighteen-month anniversary of the A&R Closing Date are subject to a make-whole premium, and prepayments made during the following twelve months are subject to a premium of 2.00 % and prepayments made during the twelve months thereafter are subject to a prepayment premium of 1.00 %, with no premium thereafter. The Company is required to prepay loans under the Credit Facility with the proceeds of certain insurance and condemnation events in excess of a threshold, subject to reinvestment rights, and with the net proceeds of any indebtedness not permitted under the A&R Financing Agreement. Unlike the Existing Financing Agreement, the A&R Financing Agreement does not require the Company to prepay the Credit Facility with any portion of net sales of plozasiran or other products, royalties, milestones or other proceeds of licensing or partnering transactions, or proceeds of pipeline asset monetizations.
All obligations under the A&R Financing Agreement are secured on a first-priority basis, subject to certain exceptions, by security interests in substantially all assets of the Company and Arrowhead Madison Inc., including intellectual property, and are guaranteed by Arrowhead Madison Inc. The security documents entered into in connection with the Existing Financing Agreement continue in effect and secure the obligations under the A&R Financing Agreement.
The A&R Financing Agreement contains customary covenants, including, without limitation, a financial covenant requiring the Company and Arrowhead Madison Inc. to maintain unrestricted cash and cash equivalents in deposit and securities accounts in the United States subject to the Lenders’ first-priority security interest of at least $125.0 million at all times (reduced from the minimum of $150.0 million required under the Existing Financing Agreement), and negative covenants that, subject to certain exceptions, restrict indebtedness (including a basket permitting additional convertible
F-49
indebtedness of up to the greater of $1.1 billion and 10.0 % of the Company’s market capitalization, subject to an overall cap of $2.5 billion inclusive of the Company’s outstanding $700.0 million of 0.00 % Convertible Senior Notes due 2032, whereas under the Existing Financing Agreement the Company had no further capacity), liens, investments including acquisitions, fundamental changes, asset sales and licensing transactions (which, unlike the Existing Financing Agreement, expressly permits the Company, without the consent of the Lenders, to out-license REDEMPLO® (plozasiran) outside the United States and to sell any priority review voucher, and which provides the Company greater flexibility as to the structure of transactions involving its pipeline products), dividends and share repurchases, modifications to and terminations of material agreements, payment of subordinated indebtedness, transactions with affiliates and other matters customarily restricted in such agreements.
The A&R Financing Agreement also contains customary events of default after which loans under the Credit Facility may be due and payable immediately, including payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other indebtedness, judgments against the Company and its subsidiaries, change of control, and cessation of business.
In connection with the A&R Financing Agreement, the Company and Sixth Street entered into a Third Amended and Restated Fee Letter, which supersedes and replaces in its entirety the fee letter entered into in connection with the Existing Financing Agreement, including the MOIC and true-up payment provisions thereof.
F-50