Dr. Christopher Anzalone - President and Chief Executive Officer Dr. James Hamilton - Vice President, and CEO, Calando Pharmaceuticals, Inc. Paul McDonnel - Chief Financial Officer Sean Olson - Vice President of Business Development, Unidym

Bill Boutin - Indusino Capital Management

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Arrowhead Research fourth quarter and fiscal year ’08 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Sanjay Hurry, Investor Relations Counsel.

Good afternoon everyone, and thank you for joining us to discuss Arrowhead’s financial results for the fiscal year ended September 30, 2008. With us today from management are President and Chief Executive Officer, Dr. Chris Anzalone; Dr. James Hamilton, Vice President of Medical Technologies at Arrowhead and CEO of its Calando subsidiary; Paul McDonnel, Arrowhead’s Chief Financial Officer, and Sean Olson, Vice President of Business Development at the Unidym subsidiary. Comments made during today’s call may contain certain forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. All statements other than statements of historical fact including without limitation those with respect to Arrowhead’s goals, plans, and strategies are forward-looking statements. Without limiting the generality of the foregoing words such as may, will, expect, believe, anticipate, intend, could, estimate, or continue or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of Arrowhead’s future financial performance, trends in its businesses, or other characterizations of future events and also consensus are forward-looking statements. Forward-looking statements represent managements’ current expectations and are inherently uncertain. You should also refer to the discussions under ‘Risk Factors’ in Arrowhead’s annual report on Form 10-K and the company’s quarterly reports on Form 10-Q for additional matters to be considered in this regard. Thus, actual results may differ materially. Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today’s call. With that, I would like to turn over the call to Dr. Chris Anzalone, President and Chief Executive Officer Dr. Christopher Anzalone: Good afternoon everyone, and thank you for attending our inaugural earnings conference call. I will begin today’s call with a brief overview of Arrowhead followed by a review of our performance for the fiscal year. I will then turn to fiscal 2009 and provide you with a look-ahead as to our expectations for the new fiscal year. For those of you who are new to the Arrowhead story, we are a nanotechnology holding company that seeks to commercialize potentially disruptive technologies to our majority-owned subsidiaries. We create these subsidiaries around university-derived technologies as well as to rolling up existing companies. Our model is extremely operational and we are not passive investors. Rather we actively control our subsidiaries by centralizing key management responsibilities at the Arrowhead level. We believe this provides our subsidiaries with seasoned management and enables each to accelerate development and manage costs. Ultimately, we believe this is a capital efficient model that enables Arrowhead as an enterprise to operate more efficiently and effectively than a cluster of independent companies. Our subsidiaries are built to drive value back to Arrowhead in three primary ways. One, as mature operating units with earnings growth consolidated at the parent; two, as acquisition targets by other companies with proceeds flowing back to Arrowhead; and three, as IPO candidates providing tradable stock in our proceeds from sale of such stock back to Arrowhead. We currently have four subsidiaries and two minority interests in the energy, healthcare, and electronics industries. Calando Pharmaceuticals, Unidym, Agonn Systems, and Tego Biosciences are all majority-owned subsidiaries. We currently own less than a majority of Nanotope Incorporated and Leonardo Biosystems; however, it is our attention to gain controlling interests in those companies over time as we have additional capital to deploy. Calando and Unidym are our most mature subsidiaries and of these we believe that Calando may be the closest to a liquidity event. So our goal for fiscal 2008 was twofold; first, it was to move existing subsidiaries closer to commercialization while also establishing new subsidiaries around potentially transformational technologies. Second, we made a big push to increase our efficiency as an enterprise by expanding our capabilities at the Arrowhead level and consolidating more of our subsidiaries’ responsibilities at the parent. We started this initiative a year ago and its importance has grown as equity markets have degraded and capital preservation became paramount. Now the CEOs of all of our subsidiaries of the minority interest are senior managers within Arrowhead. We believe we are now better able to control cost and maximize the efficiency of our operations than at any time since we had operation of subsidiaries. Fiscal 2008 also saw the monetization of a subsidiary. We achieved a liquidity event with the sale of Aonex Technologies to AmberWave Systems for an earn-out of up to $7.95 million plus back-end royalty payments. Partnering out Aonex was a more cost effective way of getting that technology to market while simultaneously generating returns for Arrowhead. 2008 also saw a measured expansion into a new subsidiary and the acquisition of equity interests in two companies. We formed Agonn Systems Corporation to develop and commercialize nanotechnology based energy storage devices and acquired minority equity stakes in Nanotope and Leonardo Biosystems. The management team was expanded as part of our strategy to further consolidate management functions at the Arrowhead level and to provide our subsidiaries with a more complete base of operations. I joined Arrowhead in December 2007 as President and CEO of the company. Dr. James Hamilton was appointed Vice President of Medical Technologies. Shortly after his hire he assumed the role of CEO, Calando. Dr. Mark Tilley was appointed Vice President of Advanced Materials and was just appointed CEO of Unidym, Dr. Thomas Haag was brought into be Chief Patent Officer. Each brings unique skill sets that enabled a more effective and efficient management of our subsidiaries. To help guide our scientific strategy we established a high-level advisory team of world-class nanoscientists. This team is led by Dr. Mauro Ferrari, one of the world’s most renowned nanocancer scientists, Dr. Chad Mirkin, one of the most accomplished nanochemists in the world, and Nobel laureate Dr. Lee Hartwell. We believe this team gives us unique access and insights into next-generation technologies. Now, I would like to take you through an update of each of our subsidiaries. First, Calando. Calando was our most mature biopharmaceutical subsidiary and we believe that the progress it demonstrated through 2008 positions it well for a potential near-term liquidity event. Earlier in the year we significantly streamlined operations by merging Insert Therapeutics and Calando Pharmaceuticals. We focused resources almost exclusively on its clinical programs, cut its non-clinical burn rate, and absorbed management of the company into Arrowhead with the appointment of Dr. James Hamilton as Calando’s CEO. At our annual shareholders’ meeting in March I set forth a series of targets for each subsidiary. I will go through the Calando goals right now. First, we forecast filing an IND to begin clinical trials on our first siRNA therapeutic, CALAA-01, in March. We achieved this and dosed our first patient in June. We believe that this was the first use of siRNA for oncology in humans. We are now well into dose escalation and this trial is progressing quickly and without complications. Second, we forecast filing with the FDA to move into phase II clinical trials with IT-101, our lead small molecule candidate, in April. We met this goal and currently have nine sites up and running for this trial. Third, we forecast executing a partnership for an investigator-led phase II trial with IT-101 in May. We missed this goal by about a week and entered into a partnership with City of Hope Cancer Center in June. We also announced our goal of entering into a partnership for a second investigator-led trial with IT-101 and have since decided not to pursue this in order to preserve focus. The final two goals we expressed were to enter into an industry partnership in November and to file a new IND in December. With respect to the former, we have not entered into any definitive agreements. We have begun a process that could lead to a partnership or sale. With respect to the new IND filing, we have decided not to move forward on any new clinical programs until we execute some type of liquidity event. Underscoring the prospects of Calando’s technology is the fact that we recently raised $2.7 million into it. This is intended to help provide a runway to a possible liquidity event. We believe that the maturity of Calando’s technology, the intense interest in solving the problem of systemically delivering RNAi therapeutics, and our compelling clinical results, make now the right time to explore a sale of Calando. We will of course update you as this process progresses. Turning to Unidym, we believe that its broad role of strategy which included a 2008 acquisition of Nanoconduction Incorporated has created a very powerful player indeed in high-value carbon nanotubes with a deep patent portfolio, and we have started to monetize this position in the electronics industry not by simply selling bulk materials, but rather by reaching down the value chain and selling higher-margin products. Our nearest-term focus has been on carbon nanotube-enabled conductive films to replace indium tin oxide in touch screens and LCDs. We made great strides in these markets in 2008 from both technology and business development standpoints. Multiple companies have made dozens of prototype devices with our materials and we demonstrated the first CNT-enabled active matrix LCD and the first active matrix electrophoretic display or e-paper in collaboration with Silicon Display Technology and Samsung Electronics respectively. Given the potential advantages of our materials and the rapid technological advances we saw in 2008 we had expected to book revenue from the sale of our materials to touch screen manufacturers by the end of the calendar year. Unfortunately, it appears that we will not achieve this because the sharp economic downturn is causing companies with whom we have been in discussions to slow down their procurement process and scaling up to production volumes has taken longer than we have expected. This procurement slowdown, the capital constraint environments, and the effective closing of the IPO window have led us to retour of Unidym. To conserve capital we are focusing solely on core functions from a product development perspective and are leveraging partnerships to reduce cash burn. For instance, we are looking to partner out the bulk materials production part of our business and we are in discussions with large film coating companies to help with large-scale manufacturing and distribution of our film products. Unidym is emerging as a leaner company and in fact is in the process of decreasing its burn rate by greater than 60%. We believe we can do this without sacrificing speed to market by leveraging partnerships we have been cultivating for some time. This refocused strategy is also intended to move us toward different exit opportunities. The IPO window is closed and we expect that once it opens again there will be a significant number of companies competing to get out. Therefore, we have focused our attention away from preparing Unidym to go public and toward establishing the types of partnerships in business lines that will encourage Unidym’s acquisition. This type of exit strategy enables us to further scale back management and back office costs because Unidym would not require its own independent management and financing. Therefore, Arrowhead has absorbed Unidym’s management. We have appointed Dr. Mark Tilley, Arrowhead’s Vice President of Advanced Materials as Unidym’s CEO. We would like to thank Art Swift for his service at Unidym. Allow me to go over the 2008 targets that I laid out for Unidym at Arrowhead’s annual shareholders’ meeting. First, we forecast a Life Sciences spinout from Unidym in March and we achieved that with the creation of (N-Science) Incorporated. We targeted a JDA for thin-film solar cells in March and reached that with a deal with Nippon Kayaku. We forecast sampling near-production quality materials for touch panel by April and accomplished that with multiple companies. We targeted a JDA for OLEDs in the July to September timeframe, but decided to push that back to remain focused on near-term markets. Similarly, we targeted a license deal for CNT or carbon nanotube-enhanced carbon fibers in the September/October timeframe, and a printed electronics JDA in the October/November timeframe, but we pushed that back as well in order to focus on near-term priorities. Finally, we targeted a new JDA with an LCD supplier in the September/October timeframe and in August we announced a renewed JDA with Samsung Electronics. We continue to move forward on LCD and touch screen opportunities while establishing partnership deals in production and ultimately distribution. We brought in over $9 million of outside capital in Unidym during fiscal 2008 much of which was from strong strategic investors such as Tokyo Electronic Ventures and Entegris Incorporated. Since September 30th, the end of our fiscal year, we brought in an additional $2.7 million of capital to help fund operations and decrease Unidym’s dependence on Arrowhead for meeting these cash requirements. Turning now to Tego. With this subsidiary, we believe we have a very strong IP position in modified fullerenes which have a number of applications including for use in therapeutics and as MRI contrast agents, as a potential gatekeeper to the use of key fullerene patents, we believe it to be a better use of our capital to focus on partnering with companies that will invest in developing end products out of this base technology than building products ourselves. We have therefore revised Tego’s business model to that of a licensing company and believe that we are in an excellent position to extract a lot of value from this asset for a small amount of capital. As a result of the revision, we have decreased our cash burn to virtually zero in this company. Finally, with regard to Agonn, our newest subsidiary, we are leveraging our nanotechnology core competency to target niche opportunities within the high-growth energy markets, and specifically, we are targeting next-generation ultra capacitors which we believe will be carbon nanotube based. Ultra capacitors may play a critical role in the hybrid electric vehicle market and the market for non-traditional energy production. Agonn is currently focused on rolling up the key intellectual property in a bid to control the carbon nanotube based ultra capacitor space. As you can see, we have been focused on more fully consolidating management of our subsidiaries at the Arrowhead level, squeezing greater efficiencies out of our model, and conserving cash while continuing commercialization progress. As I mentioned, all the CEOs of our subsidiaries and minority interests are now senior managers at the Arrowhead level. In addition to raising capital directly into the subsidiaries we have also raised new funds for Arrowhead. We believe this to be evident of the promise of nanotechnology and Arrowhead’s leading position in the field. Turning to our financial performance for the year ending September 30th 2008, Arrowhead is reporting revenues of $1.3 million compared to $1.2 million in fiscal 2007. GAAP consolidated net loss declined to $25.8 million or $0.66 per share for fiscal 2008 compared with a loss of $29.9 million or $0.83 per share in fiscal 2007. Cash burn for fiscal 2008 was $27.6 million. Cash and cash equivalents totaled $10.1 million as of September 30, 2008, compared with $24.1 million for the fiscal year ending September 30, 2007. On November 21, 2008, we announced that we had redirected $1.7 million from wholly owned subsidiary, Tego, back into Arrowhead. Furthermore, as I mentioned earlier, the company raised a total of $2.7 million directly into majority-owned subsidiary, Unidym, from existing strategic investor, Tokyo Electron Ventures, and from the sale of certain non-core assets, and we also raise $2.7 million into majority-owned Calando. Turning now to fiscal 2009, we don’t anticipate any major changes to the strategy employed in 2008. In brief, we’re going to take what we did in 2008 and continue it into 2009. Further emphasis will be placed on our capital-efficient model. We intend to continue to make our operations more efficient by spending money slowly and extracting more value from our existing assets. We also believe that Calando may experience some type of liquidity event in 2009 given our clinical results and the interest in siRNA delivery. Such an event could take many forms including broad license agreements, partnerships, or a complete sale. The rate structure will be one that is intended to return capital to Arrowhead which in turn may be deployed to enable us to further fund existing commercialization programs at our other subsidiaries and establish new ones. With Unidym, our streamlined efforts should be evident through 2009 in the form of significantly lower cash burn. We still anticipate the LCD and touch screen opportunities to be near term ones. Turning to Agonn, we anticipate transitioning it from a virtual company to an operating entity in fiscal 2009. As part of this we will likely raise outside capital to start producing prototype ultra capacitors for the hybrid electric vehicle and non-traditional alternative energy markets. Tego, as I mentioned before, will seek to generate revenues by licensing its patents to companies for modified fullerene therapeutics and MRI contrast agents enabling them to build their products. Finally, with regard to Nanotope and Leonardo, to remind you, we own a minority ownership in each. We intend to increase our equity positions over time if they continue to perform and add capital as available. We believe both are potentially revolutionary applications of nanotechnology. Leonardo could greatly improve the efficacy of cancer therapies by increasing targeting efficiency. Nanotope is focused on regenerative medicine, that is to say, the ability to regenerate tissues rather than simply replacing them. Nanotope is focused on several exciting areas including spinal cord regeneration. In conclusion, we believe Arrowhead’s two most mature subsidiaries, Calando and Unidym, provide real near-term value to our shareholders and that our developing subsidiaries and minority interests provide significant long-term upside potential. The steps taken to better consolidate management of our subsidiaries at the Arrowhead level are intended to create a leaner, more efficient enterprise that is capable of addressing large market opportunities while accepting the boundaries of these capital constraint times. We believe this model coupled with the team we have assembled and the financing avenues available to us as a publicly treated entity afford us the opportunity to take a leadership role in the field and in the minds of investors. Once again, I would like to thank you all for joining us on our inaugural earnings call. Before opening the call to questions, I have with me Dr. James Hamilton, Vice President of Medical Technologies of Arrowhead and CEO Calando; Paul McDonnel, Arrowhead’s CFO, and Sean Olson, Vice President of Business Development at Unidym who all will be available to take questions as well. I apologize that Dr. Mark Tilley, Arrowhead’s Vice President of Advanced Materials and Unidym’s new CEO is not available. He is currently on Unidym business. Operator, I would like to open the call for questions.

(Operator Instructions). We do have a question from Bill Boutin with Indusino Capital Management. Bill Boutin - Indusino Capital Management: Just a couple of quick questions. First one is on the balance sheet. Given that you raised money in Arrowhead itself and you have been cutting back and streamlining, where does the run rate go from here now per quarter and how long do you think you can last with the $10.1 million that you have on the balance sheet at the end of September as well as what is in the subsidiaries? Dr. Christopher Anzalone: That’s a good question. There are actually a number of options on the table for us, for bringing in additional capital. As you mentioned, we have brought in capital directly into Calando and Unidym, our two most mature subsidiaries, and therefore our biggest consumers of capital, and as we continue to do that that will allow us to decrease the pressure on Arrowhead’s balance sheet. We could enter into funded JDAs, for instance, with Unidym we could enter into partnerships; with Calando, we could see a liquidity event with Calando, we could see a liquidity event with Tego. Anyway, there’s a whole host of options to bring in additional capital and we are pursuing most of those right now. We think it is reasonable to expect that a number of those will bear fruit and provide us with additional capital. However, we do have a plan to continue operations through fiscal 2009 even into fiscal 2010 with the capital we have on the books. So, the worst-case scenario, if none of those options pan out, we’re still able to continue operations and to continue the subsidiaries’ running. Bill Boutin - Indusino Capital Management: And then, I noticed when you raised money into Calando, according to the AK filing, it was actually done as a loan; what percent of the company will Arrowhead own assuming a sale if that is converted to stock? Dr. Christopher Anzalone: Right. We have approximately 67% ownership in Calando right now. The reason that we structured that as debt is that we believe that we are near a liquidity event and we thought that it was the cleanest way to bring in that additional capital that will provide that run rate to a liquidity event. So, we own roughly two-thirds of the company. Bill Boutin - Indusino Capital Management: Okay. And then regarding a liquidity event of Calando, what’s the big determining factor for a sale? Dr. Christopher Anzalone: There are a number of ways that that can happen and we are open to discussing most of those. It can be structured as an allowed sale where an acquirer will take Cyclosert as well as RONDEL platforms; Cyclosert of course is our platform that we use for delivering small molecule drugs, RONDEL is the platform that we use for delivering RNAi therapeutics. So it could be a straight sale. It could also be structured potentially as a license agreement and may be that there are some companies that value the siRNA piece of the company, the RONDEL piece of the company more highly than the Cyclosert piece of the company, and so we are certainly open to discussing a large license agreement to cover either of the platforms. So, it just goes down to the negotiations with potential acquirers. We think that we have brought this technology to a point where it is time to start having those discussions. We are in phase II clinical trials now on the small molecule side and we are fairly far along in the phase I clinical trial for the siRNA piece. Bill Boutin - Indusino Capital Management: Okay. And on the small molecule side, you said that the IT-101 phase I was complete and that data would be available in 2009. So, that would be sometime in the first half Q1? Dr. James Hamilton: Yes. That data will likely be presented in abstract form and then as a publication in the second quarter of 2009. Bill Boutin - Indusino Capital Management: Okay. And then, I have been speaking with various analysts who cover stocks such as Alnylam, RXi, and a handful of other guys who believe that it is kind of negative on this base thinking that it’s only going to be good for the lab and drug discovery, and at least, when I speak to them, they talk about systemic delivery and how it doesn’t work. Could you guys talk about what’s unique about yours, if there is a simple way to do that, and how you differentiate from traditional liposomal or whatever other people are doing? Dr. Christopher Anzalone: I will hand it over to Dr. Hamilton, but I will say one thing briefly; there is a lot of talk about RNAi and siRNA having only value in the lab and only limited therapeutic value because of this problem with systemic delivery. We think that we are extraordinarily well positioned because we believe we are the only company that is now actively delivering siRNA systemically. We are the only company, we believe, that is using siRNA for oncology to the extent that we see positive results in this clinical trial. We think that we are in a fairly powerful position to enable these other companies to extract value from this potentially revolutionary new field of RNAi. I will hand it over to Dr. Hamilton to talk about the specifics. Dr. James Hamilton: As you probably know, attempts have been made using liposomes for quite some time to deliver oligonucleotides, DNA plasmids, or antisense therapeutics, and traditionally, these attempts have not worked. Where we see the advantage of the RONDEL system over liposomes is several fold. A lot of the liposomes that folks are trying to use may have some issues with hepatotoxicity. They tend to accumulate in the liver, if not the entire dose, virtually the entire dose may accumulate in the liver versus accumulate in the tumour tissues. This is not the case with the RONDEL system. There are issues with loading efficiency, and by loading efficiency I mean siRNA one can get into the liposome versus into our system, there are well documented issues with immunogenicity of liposomal drugs, problems with multiple dosing and effects of clearing antibodies on liposomal drugs, and there are also issues that are questionable with regards to internalization of liposomes, getting the liposomes into the cell and getting the payload inside of the liposomes into the cell. These are all, of the four issues that I mentioned, are all things that we think that we have made a lot of progress towards overcoming. Bill Boutin - Indusino Capital Management: Okay. That was helpful. I have no further questions.

Gentlemen, we have no further audio questions at this time. I would like to turn the conference back over to management for any closing statements. Dr. Christopher Anzalone: Thank you very much for listening in on our inaugural call, and we look forward to speaking with you again in a quarter.

Ladies and gentlemen, this does conclude the Arrowhead Research fourth quarter and fiscal year ’08 earnings conference call. If you would like to listen to a replay of today’s conference, please dial 800-405-2236 or 303-590-3000 with the pass code 11123372. ACT would like to thank you for your participation, and you may now disconnect.