Brandi Floberg - The Piacente Group Dr. Christopher Anzalone - President & Chief Executive Officer Joseph T. Kingsley – Interim Chief Financial Officer

Julia [Griese]

Welcome to the Arrowhead Research fiscal 2009 fourth quarter and year-end financial results conference call (Operator Instructions) I would now like to turn the conference over to Brandi Floberg. Please go ahead.

Thank you, operator. Good afternoon everyone, and thank you for joining us today to discuss Arrowhead’s financial results for fiscal 2009 fourth quarter and full year ended September 30, 2009. With us today from management are President and CEO, Dr. Christopher Anzalone and Interim Chief Financial Officer, Ted Kingsley. The management will provide a brief overview of the quarter and will then open the call up to your questions. Also on the call for participation in the Q&A session is John Currie R. Miller Adams from Unidym and Dr. Thomas Schluep, from Calando. : In addition, any statements that refer to projections of Arrowhead’s future financial performance, trends in businesses, or other characterizations of future events or circumstances 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 said, I would like to turn over the call to Dr. Chris Anzalone, President and CEO of the company. Chris? Dr. Christopher Anzalone: Thanks Brandi. Good afternoon everyone, and thank you for joining us on our call today. I believe we have accomplished a great deal during fiscal 2009 and recent months and I will address some of these accomplishments in the following categories: One, we secured additional capital to enable us to continue moving forward with our subsidiaries. Two, we made material advances in our subsidiaries and three, we completed streamlining our business model and cost reduction programs. Based on these achievements I believe Arrowhead as reached an important inflection point as it positions us well to drive significant shareholder value. During fiscal 2009 we secured over $3.7 million in license fees, product sales and grants. During that same period we raised $4.1 million in equity financing directly into Calando and Unidym. Only $2.76 million was raised in over-subscribed equity financing transactions directly into Arrowhead. Together this capital provided funds for our operations and enabled important progress from our lead subsidiary throughout the year. Last week after the end of fiscal 2009 we secured over $3.2 million of additional capital through a private placement in which we sold units consisting of shares and warrants at nearly $0.13 higher than our stock price was trading on the day the financing closed. I personally participated in this offering and have now invested a total of $500,000 into the company over the last two years. The current financing puts us on more solid footing to advance our strategic initiatives as we move through fiscal 2010. With our restructured operations and significantly lower cost structure we expect this financing to provide sufficient capital to cover operations through fiscal 2010. That said, we are pursuing exits, partnerships and spin outs as sources of additional capital to accelerate our development and enabled us to move into new opportunities. We believe the current financing enables us to significantly decrease the likelihood of such liquidity events. In addition, as our technical and market progress become increasingly evident in the coming months it may make sense to strengthen our negotiating position with potential partners by further shoring up our balance sheet via the capital markets at terms that are attractive. I believe we are in a reasonably strong position now of not having to raise any new capital in the near term but rather are only doing so if it clearly promotes and near-term value creation or liquidity event opportunities. Let us now turn to the performance of our subsidiaries. Our primary focus has been on our two most mature subsidiaries, Calando Pharmaceuticals and Unidym. Looking back at fiscal 2009 Calando made great progress cutting its costs while attaining upside potential. We executed a partnership with Cerulean Pharma for the non-RNAI side of the business. This included a Cyclosert delivery system and drug candidate IT101. We received $2.4 million in upfront payments with potential future revenues up to $2.75 million in addition to milestone payments as IT101 progresses through the clinic and up to $30 million in sales in milestone payments should IT101 be approved by the FDA plus royalty on net sales. As a delivery platform, the Cyclosert has the potential to generate a large number of new drugs in addition to IT101. The agreement provides Calando with payments for each new compound that Cerulean brings to market with the Cyclosert platform. These payments include $3 million in development milestones, up to $15 million sales milestones plus royalties on net sales for each new drug candidate. With the Cerulean deal done, Calando focused its resources on continuing its RNAI clinical program with the ultimate goal of selling or partnering the platform. Because this is an area of intense interest within the pharmaceutical industry and because of our position as a leader in the field of SIRNA delivery we believe this is an extremely efficient use of capital that has the potential to create significant shareholder value. We believe we have reached a pivotal point in Calando’s SIRNA clinical trials and this is critical when evaluating its near-term value and proximity to liquidity events. As a reminder, this is a phase I ascending dose trial whereby three patients receive a given dose of drug candidate Calaa-01 and if there are no serious drug related toxicities, three new patients receive a higher dose and so on. We have seen no significant drug related side effects and we are now very deep into the trial. Of course the primary end point of the Phase I trial relate to safety and dose range of the drug candidates. While we have not yet finished the trial we are seeing that Calaa-01 is very well tolerated and we continue to search for the maximum tolerated dose (MTD). Importantly, at the current dose range we are beginning to see some very encouraging clinical activity and we believe we still may be significantly below the MTD. A manuscript describing some of this data has been prepared for possible publication in a peer review and scientific journal. We have little control over the timing of such publication but will update you when we can. I continue to be extremely excited about the results and believe that our data set will ultimately bolster the value of Calando’s drug candidates in a proprietary RNAi delivery system. I think it is important to look at Calando’s value in these two ways as being derived both from Calaa-01 as a specific drug candidate and from RONDEL as a broader, flexible siRNA delivery system. It is our hope that positive clinical data will suggest that Calaa-01 may ultimately be a valuable drug and that Calaa-01 is also a proven concept that demonstrates the value of RONDEL for delivering virtually any other oncology related siRNA sequence. With respect to the former, large pharmaceutical companies have repeatedly demonstrated a willingness to pay high prices to acquire the rights to effective oncology drugs. With respect to the latter we believe that Calando’s greatest value will be derived from its flexibility as a sequence agnostic siRNA delivery vehicle. Our goal is to partner Calaa-01 and RONDEL in one or multiple transactions in such a way that Arrowhead will experience a liquidity event and have long-term upside potential as RONDEL derived their piece approach to market. Four key factors relating to our ability to monetize Calando existed a year ago and still remain. They are; One, systemic delivery of siRNA continues to be viewed as the holy grail of RNAi therapeutics. Two, there is no technology that has yet been widely accepted as a solution to the delivery problem in humans. Three, to the best of our knowledge Calando was the first company to initiate a clinical trial using siRNA against cancer. Four, to the best of our knowledge Calando was the first to use a delivery vehicle for the systemic delivery of siRNA. What has changed is our clinical data set. We believe that the combination of an unmet need in a potentially large new class of therapeutics, our early entrance into the field and new clinical data demonstrates the power of our technology and together represents an attractive opportunity to partner or sell Calando. In preparation for our future activity with Calando, we have enhanced Calando’s leadership with the addition of Dr. Mostafa Analoui and Dr. Bruce Given to the company’s board of directors. We welcome Mostafa and Bruce to the team and expect their deep clinical and extensive pharma experience will be invaluable assets as we move to monetize Calando. Now onto Unidym. I am proud to announce that Unidym successfully met its goal of beginning sales of production scaled film into the commercial touch panel market. Let me be clear that this does not yet mean the gadgets you buy this holiday season at your local retailer will have our materials in them but it marks a significant milestone for both our company and the industry. It points to the likelihood of early adoption of new replacement technologies in the electronic displays market. In line with our expectations, initial revenue from film sales to touch panel manufacturers is very small at this stage. However, we are optimistic our penetration rates will rise as touch panel manufacturers see a viable alternative to Unidym’s CNT film products. To our knowledge the overwhelming majority of large scale commercial touch screen devices currently rely on indium tin-oxide (ITO). However, we are finding among customers a widespread interest in the integration of an effective replacement. Based on this we expect the first company to offer a scalable and cost competitive replacement has the potential to create substantial value. It has been our goal to be that company and with our initial entry into this market we are now closer than ever to achieving our goal. Unidym’s initial value proposition for its CNT materials relies heavily on price concerns and availability of ITO. However, going forward we believe we may have favorable pricing flexibility because we expect our product line to provide significant advantages over ITO including improved touch screen life, decreased cost of ownership, increased manufacturing throughput, decreased environmental impact, better supply security and enhanced design options such as the ability to make flexible screens and seamlessly integrate LCD and touch panel into singular devices. As we have said in the past, our initial targets for CNT’s are in the touch panel, LCD and solar cell markets. To this end, we have made continued progress to set the stage for future revenue streams for the Unidym CNT materials. In the last several months we have secured key joint development agreements with leading LCD manufacturers to continue our progress in this field. In December we extended our joint development agreement with Samsung Electronics for our third year. This agreement continues our collaboration with Samsung to integrate CNT materials as a transparent conductive layer in display devices. Samsung Electronics has used Unidym’s thin material to demonstrate what we believe is the world’s first flexible solution printable 14.3 inch color electrophoretic display (EPD). EPD’s are currently being used in products such as Amazon’s Kindle Electronic Book device. EPD’s represent a next generation of displays with inherent advantages over traditional plat panels due to their low power consumption and bright light readability. We believe that CNT could play a crucial role in the development of next generation displays as they are cost effective and carry superior properties compared with ITO. We also entered into a new joint development agreement with a major LCD manufacturer for CNT in glass based LCDs. Our products are well suited for incorporation into glass based LCDs as they offer a lower cost of materials and definition, increased yield and elimination of the acid patterning process associated with ITO. In addition to the value creation we see from commercializing the Unidym CNTs, we have also focused our efforts on licensing opportunities with our extensive patent portfolio. To this end, Unidym recently signed a licensing agreement with Nano-C, a leading developer of nano constructed carbon materials. Through this agreement we have granted Nano-C an exclusive license to certain fullerene patents for use in the development of the growing thin film solar industry. We believe they are well positioned to help us extract significant value from this intellectual property. We are in the process of completing other similar license agreements. Unidym continues to work closely with its collaboration customers to break into our target markets. Our partners include industry leading companies such as Samsung Electronics and Tokyo Electron. We are delighted to maintain these distinguished relationships as these companies have broad reach into Asia where the bulk of display manufacturing takes place. We also believe these partnerships provide third-party affirmation of Unidym’s product lines. Because Unidym’s technology may be applied to a wide variety of products across multiple markets, the display and solar industries are by no means our only long-term targets. After we begin to penetrate these industries we plan to accelerate our work in the use of films for applications including solid state lighting, smart windows and energy storage. For now our resources are focused on commercializing principle transparent conductor films and licensing opportunities. To capture the value of Unidym’s products we have strategically increased our stake in Unidym and now own almost 80% of this subsidiary. In addition to Calando a Unidym our mature subsidiaries, we have two wholly owned subsidiaries; Tego Biosciences and Agonn Systems and two minority owned holdings, Nanotope and Leonardo Bio Systems. Tego has broad intellectual property relating to modified fullerenes for use in diagnostics, therapeutics, imaging and other bio-pharmaceutical related applications. We believe that Tego’s patent portfolio is potentially quite valuable and its proprietary technology can be used to develop a large number of different products. In line with our strategy to realize value from our subsidiaries while limiting ongoing costs, Tego has adopted a licensing model and we have ceased most ongoing expenses associated with this. Tego has executed an exclusive license with the Bronx Project to develop and commercialize carboxylated fullerenes for development in neurodegenerative fields, multiple sclerosis, brain trauma and schizophrenia. We signed this agreement in July for $100,000 in up-front fees, $2.35 million in milestone payments plus royalties as well as 5% of the proceeds if the Bronx Project itself is sold to a third-party. We have also been working on additional partnerships and expect to complete a deal in the coming months. Like Tego, Agonn is a virtual company with no operations and minimal capital requirements. While we see an opportunity for Agonn with its IP and know-how surrounding the use of CNTs in super capacitors, a class of energy storage license, it has not been a major focus for us as we have sought to restructure areas, cut our [inaudible] and focus on nearer term opportunities. Nanotope and Leonardo Bio Systems are both minority Arrowhead holdings. However, we see compelling opportunities for both companies and expect to enter commercial partnerships in 2010. Nanotope is a regenerative medicine company that leverages a core platform technology to regenerate diverse tissue types. In multiple animal models it has demonstrated the ability to: One, reverse paralysis by regenerating spinal cord tissue after injury. Two, accelerate wound healing. Three, regenerate bone. Four, regenerate cartilage. Most recently it has generated exciting new data in a rodent Parkinson’s Disease model. Nanotope’s business model is to develop product candidates through proof of concept in animals and then source appropriate partners to bring them through clinical trials and to market. We expect that we will enter a commercialization corporate partnership over the next several months. Again, this allows us to keep Nanotope’s burn rate low, avoid the expenses associated with clinical trials and maximize the chances of widespread adoption of approved products by working with best in class companies for its target markets. Leonardo is a Texas based cancer drug delivery company built around the work of Dr. Mauro Ferrari. It was built on the concept that drug delivery would be far more efficient if multiple vehicles are used; each customized to get through specific biological barriers. Importantly, the delivery system is therapeutic agnostic as it can be used for multiple classes of drugs and a virtually infinite number of different products. Leonardo has a very low burn rate because it works closely with Dr. Ferrari’s laboratory, one of the best funded drug delivery groups in the world, to advance the technology. We are very excited about Leonardo and its potential to create value. We have been working closely with the state of Texas over the past year and are optimistic that Leonardo will receive funding from the Texas Emerging Technology Fund over the next few months. While we are focused on our current projects we believe this is an attractive time to source new technologies and start new projects. Given where Calando and Unidym are in their development we are beginning to slowly shift our posture from defensive towards becoming more opportunistic. As such, we are beginning to explore some exciting new prospects in the nano biotech space. We continue to keep a close eye on costs and this transition will not accelerate appreciably until we have better visibility into possible future liquidity events and extra available capital. However, this is an important step that we believe will enhance our portfolio and create additional shareholder value. We look forward to updating you on this front as new agreements come to fruition. Lastly, and by no means less important, I am pleased to report we have completed our ongoing restructuring measures. Our aggressive cost cutting initiatives we began over a year ago continue to pay off as evidenced by our 45% reduction in net cash used in operations for fiscal 2009 compared with the prior fiscal year. We are now operating at a run rate of approximately $580,000 per month and are a far more efficient and flexible company. Amid our aggressive cost cutting initiatives and increased focus on near-term revenue, we have retained the means to capitalize on longer-term growth opportunities which is paramount to our future success. With that I would like to turn the call over to our Interim Chief Financial Officer, Ted Kingsley, to provide details of our financial results for the quarter. Ted? Joseph T. Kingsley: Thank you Chris. As we reported earlier today, on a consolidated basis, Arrowhead finished fiscal 2009 with a net loss of $22.3 million compared to a loss of $27.1 million in the prior year, a 28.8% decrease in loss. The reduction in spending across the board resulted in the fourth quarter loss of $3.5 million and we expect this trend to continue in fiscal 2010. On a consolidated basis, net cash used in operating activities during the year totaled $15.3 million compared to $27.6 million in the prior year. Cash as of the end of the year 2009 totaled approximately $2 million compared to $10.1 million at the end of the prior fiscal year. However, the cash position has been supplemented by the financing of $3.2 million which we announced last week. Revenues increased to $3.8 million in fiscal 2009 compared to $1.3 million in the prior year. This increase is primarily attributable to $2.4 million received through the licensing of the IT101 platform to a third party. During the year, the company had consolidated operating expenses of $23.5 million compared to $36.3 million in the prior year, a decrease of 35.3%. Operating expenses for fiscal 2009 included approximately $6 million in non-cash items. The non-cash items were as follows: $2.7 million of non-cash stock based compensation expense; $2.3 million in non-cash charges to purchase in process R&D related to the issuance of Arrowhead stock to acquire additional interest in Unidym and $1 million in non-cash depreciation charges. Operating expenses for the fourth quarter of fiscal 2009 were $3.7 million compared to operating expenses of $11.5 million in the fourth quarter of 2008, a decrease of almost 68%. This decrease in operating expenses is attributable to the consolidated facilities across the organization as well as reductions in headcount and other cost saving actions and is expected to continue into fiscal 2010. I will now turn the call over to Chris for concluding remarks. Dr. Christopher Anzalone: Thanks Ted. As I outlined earlier, we have reached a critical stage in our development and have laid a solid foundation for 2010 and beyond. Our near-term goals for 2010 will be focused on three core initiatives; First, we plan to enroll new patients in Calando’s clinical trial and believe that if our initial data set holds it will generate important implications for the future of RNAi therapeutics. We believe that as the trial proceeds we will be well positioned to monetize Calando’s delivery system and drug candidates through partnering, licensing or M&A activities. Second, we will continue to work to gain market traction with Unidym’s CNT in the large touch panel and LCD markets where we see considerable opportunities to drive value and growth. We have made exceptional progress on this front as evidenced by our initial market introduction as well as our continued and new partnerships with leading LCD manufacturers. Third, we will begin looking to other opportunities beyond Unidym and Calando by moving forward with our earlier stage companies; Nanotope and Leonardo. In addition we have begun exploring new opportunities. After a long suspension of efforts instituted to preserve capital we are prepared to keep a keen eye out for new projects that will drive our near-term value. We remain focused on keeping our costs low but as our bandwidth increases and additional capital becomes available we are excited about the prospects of building and acquiring new nano tech companies. We have high quality core competency here and view this as a uniquely attractive time to do new deals. Disruptions in the capital markets have caused a bulging in the supply of relatively late stage technologies that have yet to be commercialized. We see multiple opportunities to acquire later stage technologies for less capital than at any time in recent history. If we are able to capitalize on this it potentially means less time to market, less time to a liquidity event and lower capital consumption. We are extremely excited about our progress in 2009 and our prospects as we move into 2010. We believe we have some very valuable assets that are maturing well and we look forward to begin monetizing them. As we look ahead we are delighted by our near and longer-term prospects and believe we are well positioned to drive increasing value for our company and our shareholders. With that I would like to wish you all a wonderful and peaceful holiday season and a very happy New Year. I will now open the call to questions.

(Operator Instructions) The first question comes from the line of Julia [Griese] – No Company Listed. Julia [Griese] – No Company Listed: I am really excited about some of the things that you outlined in today’s call. I was looking for a bit more detail if you can help me on some of the cash burn question. Obviously you reduced the burn quite a bit. Can you give us some insight as to what you would expect it to be either in the coming quarter or what it was in the past quarter? Joseph T. Kingsley: Our run rate is now approximately $580,000 per month. This is really the result of a fairly long process of cost cutting and we frankly don’t expect it to go down much lower than that. So about $580,000 per month is what we expect. Julia [Griese] – No Company Listed: So that should be a pretty stable number including any additional opportunities? Joseph T. Kingsley: Yes. That is correct. Julia [Griese] – No Company Listed: You mentioned the Calando clinical results and something about a manuscript that was prepared but isn’t currently published but it has been submitted. Is there anything regarding the data that is currently available? Dr. Christopher Anzalone: There is not much I can tell you on that. We have prepared a manuscript as I mentioned describing some of the data. We are very excited about it and we will have to wait and see when it gets published. Julia [Griese] – No Company Listed: The technology with the siRNA and the RONDEL delivery are there other larger pharma companies in that space right now that are currently either trying to replicate or do something very similar to what the RONDEL platform does that you could talk to sort of for a competitive landscape? Dr. Christopher Anzalone: Good question. The way I look at these types of questions is if there are no competitors in the field you are likely in the wrong field. You are likely chasing a problem that doesn’t exist. We have a lot of competitors. This problem of systemic delivery of siRNA for RNAi is a nagging one. There are many academic labs that are working on this problem. Virtually every large pharmaceutical company and maybe every large pharmaceutical company has an active program in this and a well funded program in this because this RNAi field is potentially a revolutionary new field and it is generally thought the one thing holding us back is the effective systemic delivery of these [plasma] molecules. So there is a number of folks trying to solve this problem. We view ourselves as a leader in the field. As I mentioned, we believe we are the first one to use siRNA against cancer in humans. We are the first ones we believe to systemically deliver siRNA with a delivery vehicle, so we are the first mover we believe in this field. With this new data that is starting to come out and we hope will be published shortly I think we will be able to demonstrate that the technology is indeed quite powerful. Julia [Griese] – No Company Listed: Given you just completed an offering on the 11th can you update us on what the total share count is currently? Joseph T. Kingsley: It is approximately 57 million. Julia [Griese] – No Company Listed: Is that fully diluted or is that basic? Joseph T. Kingsley: No, that is basic. Julia [Griese] – No Company Listed: Do you have a sense on what the fully diluted number might be? Joseph T. Kingsley: I don’t. I can’t give you something I’m not absolutely sure about.

At this time I am showing no further questions in the queue. I would like to turn the call back over to management for closing remarks. Dr. Christopher Anzalone: I think that is it. I wish everyone a happy holiday season.

Ladies and gentlemen this concludes the Arrowhead Research Corporation’s fiscal 2009 fourth quarter and year-end financial results conference. We would like to thank you for your participation. You may now disconnect.