Arrowhead Research Corp (ARWR) SEC Quarterly Report (10-Q) for Q2 2018

Large accelerated

Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38042

ARROWHEAD PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		46-0408024
(State of incorporation)		(I.R.S. Employer Identification No.)

225 S. Lake Avenue, Suite 1050

Pasadena, California 91101

(626) 304-3400

(Address and telephone number of principal executive offices)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant's common stock outstanding as of August 6, 2018 was 88,023,149.

	Page(s)
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)	1

Consolidated Balance Sheets	1

Consolidated Statements of Operations and Comprehensive Loss	2

Consolidated Statement of Stockholders' Equity	3

Consolidated Statements of Cash Flows	4

Notes to Consolidated Financial Statements	5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27

ITEM 4. CONTROLS AND PROCEDURES	27

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	28

ITEM 1A. RISK FACTORS	28

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	28

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	28

ITEM 4. MINE SAFETY DISCLOSURES	28

ITEM 5. OTHER INFORMATION	28

ITEM 6. EXHIBITS	29

SIGNATURE	30

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Arrowhead Pharmaceuticals, Inc.

Consolidated Balance Sheets

	(unaudited)
	June 30, 2018			September 30, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	27,995,386		$	24,838,567
Accounts receivable		14,975			67,797
Prepaid expenses		1,095,977			867,363
Other current assets		279,049			1,359,638
Short term investments		32,484,708			40,769,539
TOTAL CURRENT ASSETS		61,870,095			67,902,904
Long term investments		17,672,658			-
Property and equipment, net		14,029,239			15,513,019
Intangible assets, net		19,189,117			20,464,439
Other assets		141,918			141,918
TOTAL ASSETS	$	112,903,027		$	104,022,280
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,165,731		$	4,076,514
Accrued expenses		2,163,533			4,564,507
Accrued payroll and benefits		1,147,780			3,399,679
Deferred rent		440,580			440,580
Deferred revenue		943,200			5,269,741
Derivative liabilities		-			695,114
Note Payable		219,889			208,506
Other current liabilities		46,407			46,407
TOTAL CURRENT LIABILITIES		7,127,120			18,701,048
LONG-TERM LIABILITIES
Deferred rent, net of current portion		1,657,899			1,929,052
Note Payable, net of current portion		2,158,649			2,325,018
Other non-current liabilities		200,000			200,000
TOTAL LONG-TERM LIABILITIES		4,016,548			4,454,070
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Arrowhead Pharmaceuticals, Inc. stockholders' equity:
Common stock, $0.001 par value; 145,000,000 shares authorized; 87,854,651 and 74,785,426 shares issued and outstanding as of June 30, 2018 and September 30, 2017, respectively		180,224			167,155
Additional paid-in capital		578,642,206			514,037,301
Accumulated other comprehensive income (loss)		(3,338	)		33,232
Accumulated deficit		(476,504,545	)		(432,815,338	)
Total Arrowhead Pharmaceuticals, Inc. stockholders' equity		102,314,547			81,422,350
Noncontrolling interest		(555,188	)		(555,188	)
TOTAL STOCKHOLDERS' EQUITY		101,759,359			80,867,162
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	112,903,027		$	104,022,280

The accompanying notes are an integral part of these unaudited consolidated financial statements.