ARROWHEAD PHARMACEUTICALS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

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Company Description

Unless otherwise noted, (1) the term "Arrowhead" refers to Arrowhead
Pharmaceuticals, Inc., a Delaware corporation, (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"), and Arrowhead Australia Pty Ltd ("Arrowhead Australia"), (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.

Overview

Arrowhead Pharmaceuticals, Inc. develops medicines that treat intractable
diseases by silencing the genes that cause them. Using a broad portfolio of RNA
chemistries and efficient modes of delivery, Arrowhead 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. Arrowhead's RNAi-based therapeutics leverage this natural
pathway of gene silencing. The Company's pipeline includes ARO-APOC3 for
hypertriglyceridemia, ARO-ANG3 for dyslipidemia, ARO-HSD for liver disease,
ARO-ENaC for cystic fibrosis, ARO-HIF2 for renal cell carcinoma, ARO-DUX4 for
facioscapulohumeral muscular dystrophy, ARO-LUNG2 for chronic obstructive
pulmonary disorder, ARO-COV for the coronavirus that causes COVID-19 and other
possible future pulmonary-borne pathogens and ARO-C3 for complement mediated
diseases. ARO-XDH is being developed for uncontrolled gout under a collaboration
agreement with Horizon Therapeutics Ireland DAC ("Horizon"). ARO-JNJ2 and
ARO-JNJ3 are being developed for undisclosed liver-expressed targets under a
collaboration agreement with Janssen Pharmaceuticals, Inc.
("Janssen"). JNJ-75220795 (ARO-JNJ1) is being developed by Janssen as a
potential treatment for patients with non-alcoholic steatohepatitis
(NASH). ARO-AAT for liver disease associated with alpha-1 antitrypsin deficiency
("AATD") was out-licensed to Takeda Pharmaceuticals U.S.A., Inc. ("Takeda") in
October 2020. JNJ-3989 (formerly referred to as ARO-HBV) for chronic hepatitis B
virus was out-licensed to Janssen in October 2018. Olpasiran (formerly referred
to as AMG 890 or ARO-LPA) for cardiovascular disease was out-licensed to Amgen
Inc. ("Amgen") in 2016.

During fiscal year 2021, the Company continued to develop its pipeline and
partnered candidates. The Company announced positive interim clinical data on
(i) AROAAT2002, an open-label Phase 2 clinical study of ARO-AAT, the Company's
second-generation investigational RNAi therapeutic being co-developed with
Takeda as a treatment for the rare genetic liver disease associated with AATD,
(ii) AROHSD1001, a Phase 1/2 clinical study of ARO-HSD, the Company's
investigational RNAi therapeutic being developed as a treatment for patients
with alcohol-related and nonalcohol related liver diseases, such as nonalcoholic
steatohepatitis (NASH), and (iii) AROHIF21001, a Phase 1b dose-finding clinical
study of ARO-HIF2, the Company's investigational RNAi therapeutic being
developed as a treatment for patients with clear cell renal cell carcinoma. The
Company also presented preclinical data on the development of ARO-DUX4, the
Company's investigational RNAi therapeutic being developed as a treatment for
patients with facioscapulohumeral muscular dystrophy (FSHD), at the
28th Annual FSHD Society International Research Congress. The Company hosted a
key opinion leader webinar on its cardiometabolic candidates, ARO-APOC3 and
ARO-ANG3, and presented positive clinical data from the Phase 1/2 clinical
studies of ARO-APOC3 and ARO-ANG3 at the American Heart Association Scientific
Sessions 2020. The Company filed two Investigational New Drug Applications with
the United States Food and Drug Administration (the "FDA") to begin a Phase 2b
clinical study of ARO-APOC3 in patients with severe hypertriglyceridemia and a
Phase 2b clinical study of ARO-ANG3 in patients with mixed dyslipidemia, and
initiated these two Phase 2b clinical studies in the third quarter of fiscal
year 2021. The Company also filed for regulatory clearance to begin a Phase 1/2a
study of ARO-C3 for treatment of complement mediated diseases. In July 2021, the
Company voluntarily paused AROENaC1001, a Phase 1/2 clinical study of ARO-ENaC,
the Company's investigational RNAi therapeutic being developed as a treatment
for patients with cystic fibrosis, after receiving a preliminary update from an
ongoing chronic toxicology study in rats that contained unexpected signals of
local lung inflammation. New screening, enrollment and any further dosing of
investigational ARO-ENaC have been paused pending additional data from ongoing
nonclinical toxicology studies. The Company announced two collaborations during
fiscal year 2021: a collaboration with Takeda to co-develop and co-commercialize
ARO-AAT for alpha-1 antitrypsin-associated liver disease and a collaboration
with Horizon to develop ARO-XDH, an investigational RNAi therapeutic for
uncontrolled gout. In July 2021, the Company received Breakthrough Therapy
designation from the FDA for ARO-AAT, which is a process designed to expedite
the development and review of drugs that are intended to treat a serious
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.

The Company's partnered candidates under its collaboration agreements also
continued to progress. Janssen began dosing patients in a Phase 2b triple
combination study called REEF-1, designed to enroll up to 450 patients with
chronic hepatitis B infection. The Company is currently performing discovery,
optimization and preclinical research and development for JNJ-75220795
(ARO-JNJ1), ARO-JNJ2 and ARO-JNJ3 for Janssen as part of the Company's Research
Collaboration and Option Agreement with Janssen (the "Janssen Collaboration
Agreement"), and Janssen has began dosing patients in its Phase 1 clinical trial
for JNJ-75220795 (ARO-JNJ1). Amgen has initiated a Phase 2 clinical trial for
Olpasiran (previously referred to as AMG 890 or ARO-LPA). The Company entered
into two licensing deals during fiscal 2021: i) an Exclusive License and
Co-Funding Agreement (the "Takeda License Agreement") with Takeda for ARO-AAT,
and ii) a Collaboration and License Agreement (the "Horizon License Agreement")
with

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Horizon Therapeutics Ireland DAC ("Horizon") for ARO-XDH. ARO-AAT is currently
in Phase 2 clinical trials and ARO-XDH is in discovery-stage. During fiscal year
2021, the Company earned $340.0 million in upfront payments from its
collaboration agreements, and $20.0 million in option and milestone payments. In
total, the Company remains eligible for $5.3 billion in developmental,
regulatory and sales milestones, in various royalties on net sales.

The recognition of revenues for these collaboration agreements is discussed in more detail in Note 2 Notes to the consolidated financial statements in Part IV, section 15. Appendices and tables to the financial statements.

Arrowhead operates laboratory facilities in Madison, Wisconsin and San diego, california, where the Company’s research and development activities take place, including the development of RNAi therapies. The main management offices of the Company are located at Pasadena, California.

Arrowhead has focused its resources on therapeutics that exclusively utilize the
Company's Targeted RNAi Molecule (TRiMTM) platform technology. Therapeutics
built on the TRiMTM platform have demonstrated high levels of pharmacologic
activity in multiple animal models spanning several therapeutic areas. TRiMTM
enabled therapeutics offer several potential advantages over prior generation
and competing technologies, including: simplified manufacturing and reduced
costs; multiple routes of administration including subcutaneous injection and
inhaled administration; the ability to target multiple tissue types including
liver, lung, muscle and tumors; and the potential for improved safety and
reduced risk of intracellular buildup, because there are less metabolites from
smaller, simpler molecules.

The Company continues to develop other clinical candidates for future clinical
trials. Clinical candidates are tested internally and through GLP toxicology
studies at outside laboratories. Drug materials for such studies and clinical
trials are either contracted to third-party manufacturers or manufactured
internally. 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, relating to the
preparation for and administration of clinical trials, are referred to as
"candidate costs." If the clinical candidates progress through human testing,
candidate costs will increase.

The Company is actively monitoring the ongoing COVID-19 pandemic. The financial
results for the years ended September 30, 2021 and 2020 were not significantly
impacted by COVID-19. Operationally, the Company experienced delays in its
earlier stage programs due to a shortage in non-human primates, which are
critical for the Company's preclinical programs. Additionally, the Company
experienced delays in enrollment in its clinical trials. The Company's
operations at its research and development facilities in Madison, Wisconsin and
San Diego, California, and its corporate headquarters in Pasadena, California
have continued to operate with limited impact, other than for enhanced safety
measures, including work from home policies, and intermittent lab supply
shortages. However, the Company cannot predict the impact the progression of
COVID-19 will have on future financial and operational results due to a variety
of factors, including the ability of the Company's clinical sites to continue to
enroll subjects, the ability of the Company's suppliers to continue to operate,
the continued good health and safety of the Company's employees and the length
and severity of the COVID-19 pandemic.

Net loss was $140.8 million for the year ended September 30, 2021 as compared to
net loss of $84.6 million for the year ended September 30, 2020 and net income
of $68.0 million for the year ended September 30, 2019. Net loss per share -
diluted was $1.36 for the year ended September 30, 2021 as compared to net loss
per share-diluted of $0.84 for the year ended September 30, 2020 and net income
per share-diluted of $0.69 for the year ended September 30, 2019. An increase in
research and development and general and administrative expenses, partially
offset by an increase in revenue due to the Takeda collaboration, were the
drivers of the increase in net loss and net loss per share for the year ended
September 30, 2021, as discussed further below.

The Company has strengthened its liquidity and financial position through
upfront and milestone payments received under its collaboration agreements, as
well as equity financings. Under the terms of the Company's agreements with
Janssen taken together, the Company has received $175.0 million as an upfront
payment, $75.0 million in the form of an equity investment by JJDC in Arrowhead
Common Stock and four milestone payments totaling $70.0 million. Under the terms
of the Company's agreements with Amgen, the Company has received $35.0 million
in upfront payments, $21.5 million in the form of an equity investment by Amgen
in the Company's Common Stock and $30.0 million in milestone payments. The
Company's October 2020 licensing agreement with Takeda resulted in a $300.0
million upfront payment, and the Company's June 2021 licensing agreement with
Horizon resulted in a $40 million upfront payment, each of which was collected
during fiscal year 2021. The Company had $184.4 million of cash and cash
equivalents, $126.7 million of marketable securities, $56.6 million in
short-term investments, $245.6 million of long-term investments and $710.1
million of total assets as of September 30, 2021, as compared to $143.6 million
of cash and cash equivalents, $85.0 million of marketable securities, $86.9
million in short-term investments, $137.5 million of long-term investments and
$522.5 million of total assets as of September 30, 2020, respectively. Based
upon the Company's current cash and investment resources and operating plan, the
Company expects to have sufficient liquidity to fund operations for at least the
next twelve months.

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Critical accounting conventions and estimates

Management makes certain judgments and uses certain estimates and assumptions
when applying accounting principles generally accepted in the United States
("GAAP") in the preparation of our Consolidated Financial Statements. We
evaluate our estimates and judgments on an ongoing basis and base our estimates
on historical experience and on assumptions that we believe to be reasonable
under the circumstances. Our experience and assumptions form the basis for our
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may vary from what we
anticipate and different assumptions or estimates about the future could change
our reported results. We believe the following accounting policies are the most
critical to us, in that they require our most difficult, subjective or complex
judgments in the preparation of our consolidated financial statements. For
further information, see Note 1, Organization and Significant Accounting
Policies, to our Consolidated Financial Statements, which outlines our
application of significant accounting policies.

Investments-The Company may invest excess cash balances in short-term and
long-term marketable debt and equity securities. Investments may consist of
certificates of deposit, money market accounts, government-sponsored enterprise
securities, corporate bonds and/or commercial paper. The Company accounts for
its investment in marketable securities in accordance with Financial Accounting
Standards Board ("FASB") ASC 320, Investments - Debt and Equity Securities and
ASC 321, Investments in Equity Securities. ASC 320-Investments-Debt and Equity
Securities requires debt securities to be classified into three categories:

Held-to-maturity debt securities that the entity intends and has the ability to hold to maturity are carried at amortized cost.

Trading Securities-Debt securities that are bought and held primarily for the
purpose of selling in the near term are reported at fair value, with unrealized
gains and losses included in earnings.

Available-for-sale debt securities that are not classified as held-to-maturity or trading securities are recognized at fair value, with unrealized gains or losses excluded from earnings and presented as a separate component of equity.

The Company classifies its investments in marketable debt securities based on
the facts and circumstances present at the time of purchase of the securities.
During the years ended September 30, 2021, 2020 and 2019, all of the Company's
debt securities were classified as held-to-maturity.

Held-to-maturity investments are measured and recorded at amortized cost on the
Company's Consolidated Balance Sheet. Discounts and premiums to par value of the
debt securities are amortized to interest income/expense over the term of the
security. No gains or losses on investment securities are realized until they
are sold or a decline in fair value is determined to be other-than-temporary.

The Company invests in shares of mutual funds that invest in marketable debt
securities such as U.S. government bonds, U.S. government agency bonds,
corporate bonds, and other asset backed debt securities. The Company accounts
for these securities using the guidance from FASB ASC 321, Investments-Equity
Securities. These securities are recorded on the Company's Consolidated Balance
Sheet as "marketable securities" and recorded at fair value. All unrealized
gains/losses associated with these securities are recorded in the Company's
Consolidated Statement of Operations and Comprehensive Income (Loss).

Intangible Assets Subject to Amortization-Intangible assets subject to
amortization include certain patents and license agreements. Intangible assets
subject to amortization are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of these assets may not be
recoverable and are also reviewed annually to determine whether any impairment
is necessary.

Contingent Consideration-The consideration for the Company's acquisitions may
include future payments that are contingent upon the occurrence of a particular
event. For example, milestone payments might be based on the achievement of
various regulatory approvals or future sales milestones, and royalty payments
might be based on drug product sales levels. The Company records a contingent
consideration obligation for such contingent payments at fair value on the
acquisition date. The Company estimates the fair value of contingent
consideration obligations through valuation models designed to estimate the
probability of such contingent payments based on various assumptions and
incorporating estimated success rates. Estimated payments are discounted using
present value techniques to arrive at an estimated fair value at the balance
sheet date. Changes in the fair value of the contingent consideration
obligations are recognized within the Company's Consolidated Statements of
Operations and Comprehensive Income (Loss). Changes in the fair value of the
contingent consideration obligations can result from changes to one or multiple
inputs, including adjustments to the discount rates, changes in the amount or
timing of expected expenditures associated with product development, changes in
the amount or timing of cash flows from products upon commercialization, changes
in the assumed achievement or timing of any development milestones, changes in
the probability of certain clinical events and changes in the assumed
probability associated with regulatory approval. These fair value measurements
are based on significant inputs not observable in the market. Substantial
judgment is employed in determining the appropriateness of these assumptions as
of the acquisition date and for each subsequent period. Accordingly, changes in
assumptions could have a material impact on the amount of contingent
consideration expense the Company

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records during a given period. The Company determined that the fair value of its contingent consideration obligation was $ 0 To September 30, 2021 and September 30, 2020.

Revenue Recognition- On October 1, 2018, the Company adopted FASB Topic 606 -
Revenue for Contracts from Customers which amended revenue recognition
principles and provides a single, comprehensive set of criteria for revenue
recognition within and across all industries. The Company's adoption of the
revenue standard did not have a material impact on its Consolidated Financial
Statements. The Company has not yet achieved commercial sales of its drug
candidates to date, however, the new standard is applicable to the Company's
ongoing licensing and collaboration agreements, including those with Amgen,
Janssen, Takeda and Horizon, and the analysis of the impact of this guidance on
those agreements is discussed further in Note 2 of Notes to Consolidated
Financial Statements of Part IV, Item 15. Exhibits and Financial Statement
Schedules.

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 the Company determines are within the scope of the revenue
standard, the Company performs the following five steps: (i) identify the
contract; (ii) identify the performance obligations; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as) the Company
satisfies a performance obligation. At contract inception, the Company assesses
whether the goods or services promised within each contract are distinct and,
therefore, represent a separate performance obligation, or whether they are not
distinct and are combined with other goods and services until a distinct bundle
is identified. The Company then determines the transaction price, which
typically includes upfront payments and any variable consideration that the
Company determines is probable to not cause a significant reversal in the amount
of cumulative revenue recognized when the uncertainty associated with the
variable consideration is resolved. The Company then allocates the transaction
price to each performance obligation and recognizes the associated revenue when
(or as) each performance obligation is satisfied.

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

Typically, the Company's collaboration agreements entitle it to additional
payments upon the achievement of milestones or royalties on sales. The
milestones are generally categorized into three types: development milestones,
generally based on the initiation of toxicity studies or clinical trials;
regulatory milestones, generally based on the submission, filing or approval of
regulatory applications such as a Clinical Trial Application ("CTA") or a New
Drug Application ("NDA") in the United States; and sales-based milestones,
generally based on meeting specific thresholds of sales in certain geographic
areas. The Company evaluates whether it is probable that the consideration
associated with each milestone or royalty will not be subject to a significant
reversal in the cumulative amount of revenue recognized. Amounts that meet this
threshold are included in the transaction price using the most likely amount
method, whereas amounts that do not meet this threshold are excluded from the
transaction price until they meet this threshold. At the end of each subsequent
reporting period, the Company re-evaluates the probability of a significant
reversal of the cumulative revenue recognized for our 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 our 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 pre-clinical program. Milestones
or royalties achieved after the Company's performance obligations have been
completed are recognized as revenue in the period the milestone or royalty was
achieved. If a milestone payment is achieved during the performance period, the
milestone payment would be recognized as revenue to the extent performance had
been completed at that point, and the remaining balance would be recorded as
deferred revenue.

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

The revenue standard requires the Company to allocate the arrangement
consideration on a relative standalone selling price basis for each performance
obligation after determining the transaction price of the contract and
identifying the performance obligations to which that amount should be
allocated. The relative standalone selling price is defined in the new 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

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the Company sold the same performance bond separately is not available, the Company estimates the standalone sale price of each performance bond. Key assumptions in determining the stand-alone selling price may include expected revenues, development times, personnel expense reimbursement rates, 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 either the
proportional performance method or on a straight-line basis if efforts will be
expended evenly over time. Labor hours, costs incurred or patient visits in
clinical trials are typically used as the measure of performance. Significant
management judgment is required in determining the level of effort required
under an arrangement and the period over which the Company is expected to
complete its performance obligations. If the Company determines that the
performance obligation is satisfied over time, any upfront payment received is
initially recorded as deferred revenue on the Company's Consolidated Balance
Sheets.

Certain judgments affect the application of the Company's revenue recognition
policy. For example, the Company records short-term and long-term deferred
revenue based on its best estimate of when such revenue will be recognized.
Short-term deferred revenue consists of amounts that are expected to be
recognized as revenue in the next 12 months, and long-term deferred revenue
consists of amounts that the Company does not expect will be recognized in the
next 12 months. This estimate is based on the Company's current operating plan
and, if the Company's operating plan should change in the future, the Company
may recognize a different amount of deferred revenue over the next 12-month
period.

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 FASB Topic
808-Collaborative Arrangements. For collaborative arrangements that contain
multiple elements, the Company determines which units of account are deemed to
be within the scope of Topic 808 and which units of account are more reflective
of a vendor-customer relationship, and therefore are within the scope of Topic
606. For units of account that are accounted for pursuant to Topic 808, an
appropriate recognition method is determined and applied consistently, either by
analogy to appropriate accounting literature or by applying a reasonable
accounting policy election. For collaborative arrangements that are within the
scope of Topic 808, the Company evaluates the income statement classification
for presentation of amounts due to or owed from other participants associated
with multiple units of account in a collaborative arrangement based on the
nature of each activity. Payments or reimbursements that are the result of a
collaborative relationship instead of a customer relationship, such as
co-development and co-commercialization activities, are recorded as increases or
decreases to Research and Development Expense or General and Administrative
Expense, as appropriate.

Research and Development-Costs and expenses that can be clearly identified as
research and development are charged to expense as incurred in accordance with
FASB ASC 730-10. Included in research and development costs are operating costs,
facilities, supplies, external services, clinical trial and manufacturing costs,
overhead directly related to the Company's research and development operations,
and costs to acquire technology licenses.

Stock-Based Compensation-The Company accounts for share-based compensation
arrangements in accordance with FASB ASC 718, which requires the measurement and
recognition of compensation expense for all share-based payment awards to be
based on estimated fair values. The Company uses the Black-Scholes option
valuation model to estimate the fair value of its stock options at the date of
grant. The Black-Scholes option valuation model requires the input of subjective
assumptions to calculate the value of stock options. For restricted stock units,
the value of the award is based on the Company's stock price at the grant
date. For performance-based restricted stock unit awards, the value of the award
is based on the Company's stock price at the grant date, with consideration
given to the probability of the performance condition being achieved. The
Company uses historical data and other information to estimate the expected
price volatility for stock option awards and the expected forfeiture rate for
all awards. Expense is recognized over the vesting period for all awards and
commences at the grant date for time-based awards and upon the Company's
determination that the achievement of such performance conditions is probable
for performance-based awards. This determination requires significant judgment
by management.

Income Taxes-The Company accounts for income taxes under the liability method,
which requires the recognition of deferred income tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income taxes
are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amount expected to be realized. The provision for income
taxes, if any, represents the tax payable for the period and the change in
deferred income tax assets and liabilities during the period.

Leases-The Company determines whether a contract is, or contains, a lease at
inception. The Company classifies each of its leases as operating or financing
considering factors such as the length of the lease term, the present value of
the lease payments, the

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nature of the asset being leased, and the potential for ownership of the asset
to transfer during the lease term. Leases with terms greater than one-year are
recognized on the Consolidated Balance Sheets as Right-of-use assets and Lease
liabilities and are measured at the present value of the fixed payments due over
the expected lease term minus the present value of any incentives, rebates or
abatements expected to be received from the lessor. Options to extend a lease
are typically excluded from the expected lease term as the exercise of the
option is typically not reasonably certain. The interest rate implicit in lease
contracts is typically not readily determinable. As such, the Company utilizes
the appropriate incremental borrowing rate, which is the rate incurred to borrow
on a collateralized basis an amount equal to the lease payments over a similar
term and in a similar economic environment. The Company records expense to
recognize fixed lease payments on a straight-line basis over the expected lease
term. Costs determined to be variable and not based on an index or rate are not
included in the measurement of the lease liability and are expensed as incurred.

Results of operations

The following data summarizes our results of operations for the following
periods indicated:



                                                  Years ended September 30,
                                           2021                 2020            2019
                                          (in thousands, except per share amounts)
Revenues                              $       138,287       $      87,992     $ 168,796
Operating Income (loss)               $      (149,036 )     $     (93,159 )   $  61,191
Net Income (loss)                     $      (140,848 )     $     (84,553 )   $  67,975
Net Income (Loss) per share-Diluted   $         (1.36 )     $       (0.84 )   $    0.69





The increase in revenue for the year ended September 30, 2021 compared to the
year ended September 30, 2020 was driven by the timing of the recognition of the
$300 million initial transaction price associated with our agreement with Takeda
as we achieved progress toward completing our performance obligation. The
increase in Net Losses during the year ended September 30, 2021 compared to year
ended September 30, 2020 was driven by increases in research and development and
general and administrative expenses as our pipeline of clinical candidates has
continued to increase.

Revenue

Total revenue for the years ended September 30, 2021, 2020, and 2019 was $138.3
million, $88.0 million and $168.8 million, respectively. Revenue in the current
period is primarily related to the recognition of $90.8 million of revenue
associated with the Takeda License Agreement, recognition of $20.2 million
related to the $252.7 million initial transaction price associated with our
agreements with Janssen and JJDC, recognition of $6.7 million of revenue
associated with the Horizon License Agreement and $20.0 million in option and
milestone payments from Janssen for JNJ-75220795 (ARO-JNJ1).

Amgen Inc.

On September 28, 2016, the Company entered into two collaboration and license
agreements and a common stock purchase agreement with Amgen. Under the Second
Collaboration and License Agreement or Olpasiran Agreement, Amgen has received a
worldwide, exclusive license to Arrowhead'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 other
collaboration and license agreement (the "First Collaboration and License
Agreement" or the "ARO-AMG1 Agreement"), Amgen received an option to a
worldwide, exclusive license for ARO-AMG1, an RNAi therapy for an undisclosed
genetically validated cardiovascular target. In both agreements, Amgen is wholly
responsible for clinical development and commercialization. Under the terms of
the agreements taken together, the Company has received $35.0 million in upfront
payments, $21.5 million in the form of an equity investment by Amgen in the
Company's Common Stock, and $30.0 million in milestone payments, and may receive
up to an additional $400.0 million in remaining development, regulatory and
sales milestone payments. The Company is further eligible to receive up to low
double-digit royalties for sales of products under the Olpasiran Agreement. In
July 2019, Amgen informed the Company that it would not be exercising its option
for an exclusive license for ARO-AMG1, and as such, there will be no further
milestone or royalty payments under the ARO-AMG1 Agreement.

The Company has evaluated these agreements in accordance with FASB Topics 808 -
Collaboration Arrangements and 606 - Revenue for Contracts from Customers. The
Company has substantially completed its performance obligations under the
Olpasiran Agreement and the ARO-AMG1 Agreement. Future milestones and royalties
achieved will be recognized in their entirety when earned. In July 2020, Amgen
initiated a Phase 2 clinical study for Olpasiran, which resulted in a $20
million milestone payment to the Company. During the years ended September 30,
2021, 2020 and 2019, the Company recognized $0, $20.1 million and $0.3 million
of Revenue associated with its agreements with Amgen, respectively. As of
September 30, 2021, there were $0 in contract assets

                                       55

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recorded as accounts receivable and $ 0 contract liabilities recognized as current deferred revenue on the Company’s consolidated balance sheets.

Janssen Pharmaceuticals, Inc.

On October 3, 2018, the Company entered into the Janssen License Agreement and
the Janssen Collaboration Agreement with Janssen, part of the Janssen
Pharmaceutical Companies of Johnson & Johnson. The Company also entered into a
stock purchase agreement with JJDC ("JJDC Stock Purchase Agreement"). Under the
Janssen License Agreement, Janssen has received a worldwide, exclusive license
to the Company's JNJ-3989 (ARO-HBV) program, the Company's third-generation
subcutaneously administered RNAi therapeutic candidate being developed as a
potential therapy for patients with chronic hepatitis B virus infection. Beyond
the Company's Phase 1/2 study of JNJ-3989 (ARO-HBV), which the Company is
responsible for completing, Janssen is wholly responsible for clinical
development and commercialization of JNJ-3989. Under the Janssen Collaboration
Agreement, Janssen will be able to select three new targets against which
Arrowhead will develop clinical candidates. These candidates are subject to
certain restrictions and do not include candidates that already were in the
Company's pipeline. The Company will perform discovery, optimization and
preclinical research and development, entirely funded by Janssen, which on its
own or in combination with Janssen development work, is sufficient to allow the
filing of a U.S. Investigational New Drug Application or equivalent, at which
time Janssen will have the option to take an exclusive license. If the option is
exercised, Janssen will be wholly responsible for clinical development and
commercialization of each optioned candidate. Under the terms of the agreements
taken together, the Company has received $175.0 million as an upfront payment,
$75.0 million in the form of an equity investment by JJDC in Arrowhead Common
Stock under the JJDC Stock Purchase Agreement, and milestone and option payments
totaling $70.0 million, and may receive up to $1.6 billion in development and
sales milestones payments for the Janssen License Agreement, and up to $1.9
billion in development and sales milestone payments for the three additional
targets covered under the Janssen Collaboration Agreement. The Company is
further eligible to receive tiered royalties on product sales up to mid-teens
under the Janssen License Agreement and up to low teens under the Janssen
Collaboration Agreement.

The Company has evaluated these agreements in accordance with FASB Topics 808 -
Collaboration Arrangements and 606 - Revenue for Contracts from Customers. At
the inception of these agreements, the Company identified one distinct
performance obligation. Regarding the Janssen License Agreement, the Company
determined that the key deliverables included the license and certain R&D
services including the Company's responsibility to complete the Phase 1/2 study
of JNJ-3989 (ARO-HBV) and the Company's responsibility to ensure certain
manufacturing of JNJ-3989 (ARO-HBV) drug product is completed and delivered to
Janssen (the "Janssen R&D Services"). Due to the specialized and unique nature
of these Janssen R&D Services and their direct relationship with the license,
the Company determined that these deliverables represent one distinct bundle
and, thus, one performance obligation. The Company also determined that
Janssen's option to require the Company to develop up to three new targets is
not a material right and, thus, not a performance obligation at the onset of the
agreement. The consideration for this option is accounted for separately.

The Company determined the transaction price totaled approximately $252.7
million, which includes the upfront payment, the premium paid by JJDC for its
equity investment in the Company, two $25.0 million milestone payments related
to JNJ-3989 (ARO-HBV), and estimated payments for reimbursable Janssen R&D
Services to be performed. The Company has allocated the total $252.7 million
initial transaction price to its one distinct performance obligation for the
JNJ-3989 (ARO-HBV) license and the associated Janssen R&D Services. The Company
has recognized this transaction price in its entirety as of September 30, 2021
as the performance obligation had been substantially completed. Future
milestones and royalties achieved will be recognized in their entirety when
earned. During the years ended September 30, 2021, 2020 and 2019, the Company
recognized approximately $20.2 million, $65.0 million, and $167.5 million of
revenue associated with this performance obligation, respectively. As of
September 30, 2021, there were $0.1 million in contract assets recorded as
accounts receivable, and $0 of contract liabilities recorded as current deferred
revenue on the Company's Consolidated Balance Sheets.

The Company has begun to conduct its discovery, optimization and preclinical
research and development of JNJ-75220795 (ARO-JNJ1), ARO-JNJ2 and ARO-JNJ3 under
the Janssen Collaboration Agreement. All costs and labor hours spent by the
Company will be entirely funded by Janssen.  During the years ended September
30, 2021, 2020 and 2019, the Company recognized $0.5 million, $2.9 million and
$1.0 million of revenue associated with these efforts, respectively. In May
2021, Janssen exercised its option right for for JNJ-75220795 (ARO-JNJ1), which
resulted in a $10.0 million milestone payment to the Company, and in September
2021, Janssen dosed its fifth patient in its phase 1 clinical trial for
JNJ-75220795 (ARO-JNJ1), which resulted in a $10.0 million milestone payment to
the Company. Each of these milestone payments was recognized entirely during the
year ended September 30, 2021. As of September 30, 2021, there were $10.0
million of contract assets recorded as accounts receivable and $0 of contract
liabilities recorded as current deferred revenue on the Company's Consolidated
Balance Sheets. The $10.0 million milestone payment for the dosing of the fifth
patient in its Phase 1 clinical trial for JNJ-75220795 (ARO-JNJ1) was received
in October 2021.

                                       56

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Takeda Pharmaceuticals USA, Inc.

On October 7, 2020, the Company entered into the Takeda License Agreement with
Takeda. Under the Takeda License Agreement, Takeda and the Company will
co-develop the Company's ARO-AAT program, 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, ARO-AAT, if approved, will be co-commercialized under
a 50/50 profit sharing structure. Outside the United States, Takeda will lead
the global commercialization strategy and will receive an exclusive license to
commercialize ARO-AAT, while the Company will be eligible to receive tiered
royalties of 20% to 25% on net sales. In January 2021, the Company received
$300.0 million as an upfront payment and is eligible to receive potential
development, regulatory and commercial milestones of up to $740.0 million.

The Company has evaluated the Takeda License Agreement in accordance with FASB
Topics 808 - Collaborative Arrangements and 606 - Revenue for Contracts from
Customers. At the inception of the Takeda License Agreement, the Company
identified one distinct performance obligation. The Company determined that the
key deliverables included the license and certain R&D services, including the
Company's responsibilities to complete the initial portion of the SEQUOIA study,
to complete the ongoing Phase 2 AROAAT2002 study and to ensure certain
manufacturing of ARO-AAT 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 represented one distinct bundle and, thus,
one performance obligation. Beyond the Takeda R&D Services, which are the
responsibility of the Company, Takeda will be responsible for managing future
clinical development and commercialization outside the United States. Within the
United States, the Company will also participate in co-development and
co-commercialization efforts and will co-fund these efforts with Takeda as part
of the 50/50 profit sharing structure within the United States. The Company
considers the collaborative activities, including the co-development and
co-commercialization, to be a separate unit of account within Topic 808, and as
such, these co-funding amounts will be recorded as Research and Development
Expenses or General and Administrative Expenses, as appropriate.

The Company determined the initial transaction price totaled $300.0 million,
including the upfront payment. The Company has excluded any future estimated
milestones or royalties from this transaction price to date. The Company has
allocated the total $300.0 million initial transaction price to its one distinct
performance obligation for the ARO-AAT license and the associated Takeda R&D
Services. Revenue will be recognized using a proportional performance method
(based on actual patient visits completed versus total estimated visits
completed for the ongoing SEQUOIA and AROAAT2002 clinical studies). Revenue for
the years ended September 30, 2021, 2020 and 2019 was $90.8 million, $0 and $0,
respectively. As of September 30, 2021, there were $0 in contract assets
recorded as accounts receivable, $84.4 million in contract liabilities recorded
as deferred revenue, $124.8 million in contract liabilities recorded as deferred
revenue, net of the current portion, and $3.1 million in contract liabilities
recorded as accrued expenses. The $3.1 million in accrued expenses was primarily
driven by co-development and co-commercialization activities.



Horizon Therapeutics Ireland DAC

On June 18, 2021, the Company entered into the Horizon License Agreement with
Horizon. Under the Horizon License Agreement, Horizon received a worldwide
exclusive license for ARO-XDH, a previously undisclosed discovery-stage
investigational RNAi therapeutic being developed by the Company as a potential
treatment for people with uncontrolled gout. The Company will conduct all
activities through the preclinical stages of development of ARO-XDH, and Horizon
will be wholly responsible for clinical development and commercialization of
ARO-XDH. In July 2021, the Company received $40 million as an upfront payment
and is eligible to receive up to $660 million in potential development,
regulatory and sales milestones. The Company is also eligible to receive
royalties in the low- to mid-teens range on net product sales.

The Company has evaluated the Horizon License Agreement in accordance with FASB
Topics 808 - Collaborative Arrangements and 606 - Revenue for Contracts from
Customers. At the inception of the Horizon License Agreement, the Company
identified one distinct performance obligation. The Company determined that the
key deliverables included the license and certain R&D services including the
Company's responsibilities to conduct all activities through the preclinical
stages of development of ARO-XDH (the "Horizon R&D Services"). Due to the
specialized and unique nature of these Horizon R&D Services and their direct
relationship with the license, the Company determined that these deliverables
represented one distinct bundle and, thus, one performance obligation. Beyond
the Horizon R&D Services, which are the responsibility of the Company, Horizon
will be responsible for managing future clinical development and
commercialization of ARO-XDH.

The Company determined the initial transaction price totaled $40.0 million,
including the upfront payment. The Company has excluded any future estimated
milestones or royalties from this transaction price to date. The Company will
allocate the total $40.0 million initial transaction price to its one distinct
performance obligation for the ARO-XDH license and the associated Horizon R&D
Services. Revenue will be recognized on a straight-line basis over the estimated
timeframe for completing the Horizon R&D Services. The Company determined that
the straight-line basis was appropriate as its efforts will be expended evenly
over the course of completing its performance obligation. Revenue for the years
ended September 30, 2021, 2020 and 2019, was $6.7 million, $0 and $0,
respectively. As of September 30, 2021, there were $0.1 million in contract
assets recorded as accounts receivable, $26.7 million in contract liabilities
recorded as deferred revenue and $6.7 million in contract liabilities recorded
as deferred revenue, net of the current portion.

                                       57

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Operating Expenses

The analysis below details the operating expenses and discusses the expenditures
of the Company within the major expense categories. Certain reclassifications
have been made to prior-period operating expense categories to conform to the
current period presentation. For purposes of comparison, the amounts for the
years ended September 30, 2021 and 2020 are shown in the tables below.

Research and development costs

R&D expenses are related to the Company's research and development discovery
efforts and related candidate costs, which are comprised primarily of outsourced
costs related to the manufacturing of clinical supplies, toxicity/efficacy
studies and clinical trial expenses. Internal costs primarily relate to
discovery operations at our research facilities in Madison, Wisconsin and San
Diego, California, including facility costs and laboratory-related expenses.
Salaries and stock compensation expense consist of salary, bonuses, payroll
taxes and related benefits and stock compensation for our R&D
personnel. Depreciation and amortization expense relates to depreciation on lab
equipment and leasehold improvements at our research facilities. We do not
separately track R&D expenses by individual research and development projects,
or by individual drug candidates. The Company operates in a cross-functional
manner across projects and does not separately allocate facilities-related
costs, candidate costs, discovery costs, compensation expenses, depreciation and
amortization expenses, and other expenses related to research and development
activities. The following table provides details of research and development
expenses for the periods indicated:

(table below in thousands)



                              Twelve                        Twelve
                              Months          % of          Months          % of
                               Ended         Expense         Ended         Expense          Increase (Decrease)
                             September                     September
                             30, 2021       Category       30, 2020       Category           $                %
Salaries                    $    40,179            19 %   $    26,300            20 %   $     13,879             53 %
Facilities related                7,694             4 %         4,136             3 %          3,558             86 %
Candidate costs                  92,628            45 %        60,638            47 %         31,990             53 %
R&D discovery costs              32,734            16 %        16,192            13 %         16,542            102 %
Total research and
development expense,
excluding non-cash
expense                     $   173,235            84 %   $   107,266            83 %   $     65,969             62 %
Stock compensation               25,742            12 %        16,277            13 %          9,465             58 %
Depreciation/amortization         7,365             4 %         5,332             4 %          2,033             38 %
Total research and
development expense         $   206,342           100 %   $   128,875           100 %   $     77,467             60 %




Salaries expense increased by $13,879,000 from $26,300,000 during the year ended
September 30, 2020 to $40,179,000 during the current period. This increase is
primarily due to an increase in R&D headcount that has occurred as the Company
has expanded its pipeline of candidates. We anticipate this expense to continue
to increase as we continue to expand our pipeline of candidates and increase
headcount to support our discovery efforts to identify new drug candidates.

Facilities-related expense increased by $3,558,000 from $4,136,000 during the
year ended September 30, 2020 to $7,694,000 during the current period. This
category includes rental costs for our research and development facilities in
Madison, Wisconsin and San Diego, California. This increase is primarily due to
the commencement of our sublease in San Diego, California in April 2020, the
expansion of our Madison facility and increased repairs and maintenance expense
on equipment. We anticipate this expense to increase in the future due to our
plans to continue to increase our manufacturing capabilities and discovery
efforts.

Candidate costs increased by $31,990,000 from $60,638,000 during the year ended
September 30, 2020 to $92,628,000 during the current period. This increase is
primarily due to the progression of our pipeline of candidates into and through
clinical trials, which results in higher outsourced clinical trial, toxicity
study and manufacturing costs. We anticipate these expenses to continue to
increase as our pipeline of candidates grows and progresses to later phase
clinical trials.

R&D discovery costs increased by $16,542,000 from $16,192,000 during the year
ended September 30, 2020 to $32,734,000 in the current period. This increase is
primarily due to the growth of our discovery efforts, including the addition of
our research facility in San Diego. We anticipate this expense to continue to
increase as we increase headcount to support our discovery efforts to identify
new drug candidates.

                                       58
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Stock compensation expense, a non-cash expense, increased by $9,465,000 from
$16,277,000 during the year ended September 30, 2020 to $25,742,000 during the
current period. Stock compensation expense is based upon the valuation of stock
options and restricted stock units granted to employees, directors and certain
consultants. Many variables affect the amount expensed, including the Company's
stock price on the date of the grant, as well as other assumptions. The increase
in the expense in the current period is primarily due to the increased headcount
discussed above and a mix of higher grant date fair values of awards amortizing
during the current period due to the Company's stock price at the time of the
grants. We generally expect future stock compensation expense to increase as our
headcount continues to increase to support our clinical pipeline.

The depreciation charge, a non-cash charge, increased by
$ 2,033,000 of $ 5,332,000 during the year ended September 30, 2020 To
$ 7,365,000 during the current period. Most of the depreciation charge is related to the depreciation of laboratory equipment and to leasehold improvements to our Madison and San Diego research facilities.

General and administrative expenses

The following table provides details of our general and administrative expenses
for the periods indicated:

(table below in thousands)



                                Twelve                         Twelve
                                Months          % of           Months          % of
                                Ended          Expense         Ended          Expense          Increase (Decrease)
                              September                      September
                               30, 2021       Category        30, 2020       Category            $                %
Salaries                     $     13,681            17 %   $     11,781            23 %   $       1,900             16 %

Professional / outdoor

services                           10,148            13 %          7,342            14 %           2,806             38 %
Facilities related                  2,344             3 %          2,203             5 %             141              6 %
Other G&A                           2,976             3 %          3,233             6 %            (257 )           -8 %
Total general &
administrative expense,
excluding non-cash expense   $     29,149            36 %   $     24,559            48 %   $       4,590             19 %
Stock compensation                 50,931            63 %         27,106            52 %          23,825             88 %
Depreciation/amortization             901             1 %            611             1 %             290             47 %
Total general &
administrative expense       $     80,981           100 %   $     52,276           100 %   $      28,705             55 %




Salaries expense increased by $1,900,000 from $11,781,000 during the year ended
September 30, 2020 to $13,681,000 during the current period. The increase is
primarily driven by annual merit increases, performance bonuses and increased
headcount needed to support our growing clinical pipeline. We anticipate this
expense to continue to increase as our pipeline expands.

Professional/outside services include legal, accounting, consulting, patent
expenses, business insurance expenses and other outside services retained by the
Company. Professional/outside services expense increased by $2,806,000 from
$7,342,000 during the year ended September 30, 2020 to $10,148,000 during the
current period. The increase is primarily related to an increase in consulting
expenses in the current period.

Facilities-related expense increased by $141,000 from $2,203,000 during the year
ended September 30, 2020 to $2,344,000 during the current period. This category
primarily includes rental costs for our corporate headquarters in Pasadena,
California. The increase was due to the additional space leased for our
corporate headquarters to accommodate the increase in headcount.

Other G&A expense decreased by $257,000 from $3,233,000 during the year ended
September 30, 2020 to $2,976,000 during the current period. This category
consists primarily of travel, communication and technology, office expenses, and
franchise and property tax expenses. We anticipate this expense to increase in
the future as our headcount increases in order to support our growing pipeline.

Stock compensation expense, a non-cash expense, increased by $23,825,000 from
$27,106,000 during the year ended September 30, 2020 to $50,931,000 during the
current period. The increase is due to certain performance-based stock awards
being deemed probable of being achieved in the current period. Stock
compensation expense is based upon the valuation of stock options and restricted
stock units granted to employees, directors and certain consultants. Many
variables affect the amount expensed, including the Company's stock price on the
date of the grant, as well as other assumptions. We generally expect future
stock compensation expense to increase as our headcount continues to increase to
support our clinical pipeline.

Depreciation and amortization expense, a noncash expense, increased by $290,000
from $611,000 during the year ended September 30, 2020 to $901,000 during the
current period. The increase is primarily related to amortization of leasehold
improvements for our corporate headquarters.

                                       59

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Other income / expenses

Other income/expense was income of $8.6 million during the year ended September
30, 2020 compared to income of $8.2 million during the current period. Other
income/expense primarily consists of interest income. The change in interest
income between the year ended September 30, 2021 and 2020 is primarily due to
the amounts invested in and the interest rates earned on our bond portfolio.

Liquidity and capital resources

Arrowhead has historically financed its operations through the sale of its
equity securities and revenue from its collaboration agreements. Research and
development activities have required significant capital investment since the
Company's inception and are expected to continue to require significant cash
expenditure in the future, particularly as the Company's pipeline of drug
candidates and its headcount have expanded significantly. Additionally,
significant capital investment will be required as the Company's pipeline
matures into later stage clinical trials, as well as with the Company's plans to
increase its internal manufacturing capabilities and discovery efforts.

At September 30, 2021, the Company had cash on hand of approximately $184.4
million as compared to $143.6 million at September 30, 2020. Cash invested in
short-term fixed income securities and marketable securities was $183.4 million
at September 30, 2021, compared to $171.9 million at September 30, 2020. Cash
invested in long-term fixed income securities was $245.6 million at September
30, 2021, compared to $137.5 million at September 30, 2020. The Company also
entered into an Open Market Sale Agreement (the "ATM" agreement), pursuant to
which the Company may, from time to time, sell up to $250,000,000 in shares of
the Company's common stock through Jefferies LLC. As of the year ended September
30, 2021, no shares have been issued under the ATM agreement. The Company
believes its current financial resources are sufficient to fund its operations
through at least the next twelve months.

A summary of cash flows for the years ended September 30, 2021, 2020, and 2019
as follows:



                                                    Years ended September 30,
                                              2021             2020            2019
                                                          (in thousands)
Cash Flow from:
Operating Activities                       $   171,224     $    (95,391 )   $   173,035
Investing Activities                          (141,678 )       (240,778 )       (47,746 )
Financing Activities                            11,305          257,948          66,382
Net Increase (decrease) in cash and cash
equivalents                                     40,851          (78,221 )   

191 671

Cash and cash equivalents at beginning
of period                                      143,583          221,804     

30 133

Cash and cash equivalents at end of
period                                     $   184,434     $    143,583     $   221,804






During the year ended September 30, 2021, the Company generated $171.2 million
in cash from operating activities, which was primarily related to the Takeda
license agreement's $300 million upfront payment, partially offset by the
ongoing expenses of the Company's research and development programs and general
and administrative expenses. Cash used in investing activities was $141.7
million, which was primarily related to the purchase of investments of $240.7
million and purchase of property and equipment of $23.6 million, partially
offset by maturities of fixed-income securities of $122.6 million. Cash provided
by financing activities of $11.3 million was due to cash received from stock
option exercises.



During the year ended September 30, 2020, the Company used $95.4 million in cash
from operating activities, which was primarily related to the ongoing expenses
of the Company's research and development programs and general and
administrative expenses. Cash used in investing activities was $240.8 million,
which was primarily related to the purchase of investments of $279.0 million and
purchase of property and equipment of $12.0 million, partially offset by
maturities of fixed-income securities of $50.1 million. Cash provided by
financing activities of $257.9 million was driven by the securities financing in
December 2019, which generated $250.5 million in net cash proceeds, as well as
$7.5 million in cash received from stock option exercises.

During the year ended September 30, 2019, the Company generated $173.0 million
in cash from operating activities, which was primarily related to the $175.0
million upfront payment and the two $25.0 million milestone payments received
from Janssen, and the premium JJDC paid on the Company's common stock during the
period. These inflows were partially offset by approximately $66.5 million of
cash used for the ongoing expenses of the Company's research and development
programs and general and administrative expenses. Cash used in investing
activities was $47.7 million, which was primarily related to purchases of
fixed-income investments of $90.3 million partially offset by maturities of
fixed-income investments of $54.5 million. Cash provided by financing activities
of $66.4 million was driven by the equity investment the Company received from
JJDC during the period.

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Contractual obligations

For information related to our future commitments for our facility related
obligaitons, see Notes 8 and 14 of Notes to Consolidated Financial Statements of
Part IV, Item 15. Exhibits and Financial Statement Schedules. For information
related to our future commitments relating to our collaboration and licensing
agreements, see Notes 2 and 8 of Notes to Consolidated Financial Statements of
Part IV, Item 15. Exhibits and Financial Statement Schedules. Commitments
related to our clinical, manufacturing and business operation related agreements
are $214.9 million as of the year ended September 30, 2021, however these
agreements are cancelable.

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