Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals' Fiscal 2016 Third Quarter Financial Results Conference Call. [Operator Instructions] I will now hand the conference call over to Patrick O'Brien, General Counsel for Arrowhead. Please go ahead, Patrick.

Thanks, Tamra, Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2016 third quarter ended June 30, 2016. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter; Dr. Bruce Given, our Chief Operating Officer and Head of R&D who will discuss our clinical programs; and Ken Myszkowski, our Chief Financial Officer who will give a review of the financials. We will then open up the call to your questions. Before we begin I'd like to remind you that 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. These include, but are not limited to, statements regarding the anticipated safety and/or efficacy of ARC-520, ARC-521, ARC-AAT, ARC-F12, ARC-LTA, ARC- HIF2 and our other programs, as well as anticipated timing for study enrollment and completion, and the potential for regulatory and commercial success. They represent management's current expectations and are inherently uncertain. Thus actual results may differ materially. Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today's call. You should 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. With that said, I'd like to turn the call over to Dr. Christopher Anzalone, President and CEO of the company. Chris?

Thanks Patrick. Good afternoon, everyone. And thank you for joining us today. Patrick is still in for Vince, whose wife Hillary apparently is making a habit of giving birth on the days of our quarterly conference calls. So welcome to the world Nicholas and Tino Anzalone. I'd like to start with our announcement today that we raised $45 million of equity capital. With did this with the small and targeted syndicate of high quality biotech focused institutions. This financing was oversubscribed and priced at market. I think these are important considerations particularly in the current capital markets. And we are proud we've been able to execute the transaction and appreciative of the trust these institutions have in Arrowhead. With any equity financing there is balance we hope to strike between accessing the capital we need to build value by moving our programs forward, and limiting dilution in order to maximize shareholder return. We stopped at $45 million because it strikes that balance. We wanted to strengthen our balance sheet now and increase our runaway to each potential inflection points while we work on certain preclinical business development opportunities. Let's take a look at both sides of that equation and start with milestones we can reach with the current and new capital. In addition to $45 million of capital, we'll get us into third calendar quarter of 2017. Between now and then we expect to reach a number of milestones including but not limited to the following. Single dose patient data with ARC-521, multiple dose patient data with ARC-521, readouts on some of the phase 2 ARC-520 studies, collaborations with additional therapeutic agents in MONARCH, single dose healthy volunteer ARC-AAT data, single dose patient ARC-AAT data, complete enrollment of the first ARC-AAT Phase 2 study and nomination of an additional clinical…

Thank you, Chris. Good afternoon, everyone. Being responsible for R&D, it is rewarding to see us continue to execute on our goals across our groups. As Chris mentioned, during the quarter we initiated a Phase 1/2 study of ARC-521, our second clinical candidate against chronic HBV. Before I give an update on our later stage programs, I want to talk for a moment about the innovative design for this first-in-man study that we think will get us to multiple dose data in patients very rapidly. It is both the single ascending dose study in healthy volunteers and a multiple ascending dose study in chronic HBV patients. Up to 36 normal healthy volunteers will enroll sequentially into a total of six escalating dose levels randomized to receive a single dose of ARC-521 or placebo. Once the day 8 safety assessments is completed in the third dose cohort in healthy volunteers the patient portion of the study begins in parallel with continued up titration in healthy volunteers. Up to 24 Hepatitis B e-antigen negative chronic HBV patients will enroll sequentially into planned total of three dose levels, each to receive three monthly doses of open label ARC-521. The primary outcome measures are safety and tolerability pharmacokinetics and change in viral antigens and HBV DNA. Based on our experience with ARC-520 from all of our studies, we are comfortable that we can dose escalate rapidly. Remember, that ARC-521 is built in the same underlying DPC delivery technologies ARC-520. So we think we have a good idea of what to expect from the standpoint of tolerability dosing and activity. I am pleased to report that we've already completed dosing in the first two volunteer cohorts with ARC-521. And everything is going smoothly so far. We expect to begin cohort 3 in healthy volunteers this…

Thank you Bruce, and good afternoon, everyone. As we reported today, our net loss for the three months ended June 30, 2016, was $19.4 million, or $0.32 per share, based on 60 million weighted average shares outstanding. This compares with a net loss of $15.9 million, or $0.27 per share, based on 59.5 million weighted average shares outstanding for the three months ended June 30, 2015. Total operating expenses for the three months ended June 30, 2016 were $19.4 million, compared to $16.1 million for the three months ended June 30, 2015. The increase in operating expenses compared to the year-ago period is primarily due to higher research and development costs much of which is related to our new clinical candidate ARC-521 as we prepare to enter clinical trials. Net cash used in operating activities for the nine months ended June 30, 2016 was $54.2 million as compared to $53.7 million during the nine months ended June 30, 2015, a change of $0.5 million. Turning to our balance sheet, at June 30, 2016, including $1 million in investments, our cash and investments balance was $44.6 million, a decrease of $16.8 million as compared to March 31, 2016. As we announced this morning, we raised $45 million in additional equity capital further strengthening our balance sheet. Our common shares outstanding at June 30, 2016 were 60.4 million, which increased from 60 million at March 31, 2016, due to the issuance of shares from exercise of warrants. Also at June 30, 2016, there were 15,652 shares of preferred stock outstanding. These preferred shares are convertible into 2.7 million shares of common stock. Common shares outstanding including the conversion of our preferred shares would be 63.1 million. With that brief overview, I'll now turn the call back to Chris.

Thanks Ken. We feel good about where we are at the company. Our clinical programs are advancing quickly and all three have the potential for groundbreaking readouts over the next 12 to 18 months. Beyond our clinical programs, we have three extremely interesting publicly announced pre clinical candidates in ARC-LPA, ARC-HIF2 and ARC-F12 that represent large opportunities on their own but also an expansion of our broad RNAi technology platforms. We have now systems capable of potent gene knockdown after IV administration and subcutaneous administration as well as pretty typical extra hepatic system that have been shown to illicit high levels of target knockdown in tumor models. We continue to carefully build out our discovery and development capabilities in such a way that we may create additional internal clinical programs and work with partners to develop programs they may take forward for commercialization. We believe that creating a mix of partnered and internal programs enables us to operate with balanced capital needs and with a greater diversification of risk. Ultimately, this is a way to more fully monetize our platforms and maximize shareholder return. We are building a great company that develops innovative medicines for intractable diseases using industry leading technology. We think all of these positions us very well for growth in the short term as well as the long term. I'd now like to turn the call over to the operator. Operator?

[Operator Instructions] And our first question comes from the line of Carmen Augustine from Jefferies. Your line is now open.

Hi. Thanks for taking the question. I was wondering if you could give us any more color on what kind of quality you would be looking for in a pre clinical partner. And if discussions continue to be ongoing for a clinical collaboration in HBV?

Thanks very much, --. So for preclinical discovery stage collaboration, we are really looking for a strong partner with a target that looks interesting to us. If it's kind of the target coming from them, if we are talking about one of our targets we are certainly interested in speaking with people about some of our earlier stage discovery activities. So we are really doing those on a case by case basis. Regarding clinical collaborations, that are a much -- it's a much higher bar for us. And I'll tell you why. We think that we are building an awful lot of value with our clinical programs. And while we are certainly happy to talk to companies about partnering these either geographically or worldwide. We take that very seriously and we view that as potentially strategically dilutive and so should those partnerships happen we take it very, very close view at what the upside is for our shareholders. And so really right now we are more interested in discovery stage collaborations.

Okay, thanks. And then one more if I could. Could you talk a little bit about the rationale for adding HDV co-infection patients to the MONARCH trial?

Well, yes, sure. So HDV co-infection is a major public health issue in certain parts of the world. It would be an orphan drug in the US. I guess tactically it is an orphan drug in Europe even but it's a big problem for instance in Germany and some of the Eastern European countries. And a thing about HBV is it requires the presence of an HDV co-infection because it uses the surface antigen to encapsulate the delta virus. So you have to have co-infection for delta to exist, it's important because it is much more aggressive than HBV; these patients rapidly develop cirrhosis and liver failure. So it's a very nasty co-infection. So one of the interesting question is can you do anything for delta? NUC actually are not helpful at all in delta. The only currently treatment is interferon and it doesn't do a very good job. So there is a lot of interest in the Hepatitis B world for can you do something about delta. So we thought it was worth putting in a cohort and see if we could help. These cohorts in MONARCH are small, 10 to 12 patients, so it's -- we have fairly low active patient energy from our perspective to ask questions like the delta question because it's fairly straightforward thing for us to do.

Thank you. And our next question comes from the line of Michael Yee with RBC Capital Market. Your line is now open

Hi, guys, thanks. Good afternoon and congratulation on progress in your financing. On Hepatitis B with ARC-520 can you just clarify couple of things? One is do you expect that there is sort of near term announcements on actually 520 or 521 or just to clarify you are pretty much in execution block and tackling mode and just sort of enrolling and it's really all about 2017. And then on AAT I know you that you suggested there are some data coming up in a medical conference. Can you clarify what would be looking for there? This is just safety and knockdown in healthy is correct. What are we looking for there? And following that in the Phase 2 that you are starting up what is exactly the primary end point on the biopsies? Is there specific markers you are looking for? What's exactly primary endpoint? Thanks so much.

Okay. Why don't I start with AAT first, Michael, so and thank you by the way. We are pretty about the offering as well, that was -- it is in a pretty difficult market so that was really nice. So as far as AAT goes what will have in this year will be certainly the core safety and tolerability, we will have a very good understanding of the knockdown, a dose related knockdown, depth and duration by dose in volunteers and in patients which we obviously already know a lot of that which is why we are able to select our doses for the biopsy study with a pretty high degree of confidence. So that data I think would just be a really nice picture of exactly what our compound does from a profile perspective. It will also probably answer a question that's out there in the community of just how much AAT is made and deliver relative to what's made outside deliver. Because I think we'll have pretty good confidence since we have [end as almost escape] that whatever we produce is probably multi log knockdown in the liver at least that would be our hypothesis going into the biopsy study. Now in the biopsy study, so this is seven months of dosing, so given that the primary things we are looking at in the biopsies or the things that we know we should expect to change. So we will look at monomer content so basically really how much AAT is being produced from expression of the AAT gene by looking at the monomer content. And that we would expect to see really suppressed to an extremely high degree and that's kind of the first and most important thing. We wanted to know we shutdown the gene basically completely. Then we will look at polymer content and that could be really interesting because we -- no one knows if you shut down monomer how long it takes for the liver to clear polymer. And so understanding if we shut down monomer and seeing how much polymer change we get over seven months is going to help us I think get a pretty good idea at for instance what's the feasibility of getting rid of globules and if you are going to get rid of globules what kind of time might that take. So this is could be really important data for the field. And then there are other things that you see in AAT livers inflammation, fibrosis et cetera, seven months fields are little short to show changes in some of those things. But that will certainly look for them. So we have a large number of things we want to look at Michael but the most sensitive marker we think is going to be monomer content followed by polymer content. I hope that's helpful.

Okay. Thanks and now I am happy.

Sure. And Michael also regarding your questions on data readouts for 521 and 520. First as a formal alignment I can't over estimate the importance of blocking and tackling. So I think that the rest of 2016 is a lot of blocking and tackling. We are enrolling I think reasonably quickly in both those. I think 521 is designed to get two readouts quite quickly. We expect as I mentioned to start to readout 521 single and multiple dose in the beginning of 2017. For 520 it's harder as we've said -- as we've talked about in the past, it's harder to know when we will have data there. We talked about some time points on this call where we expect some of these studies to be over. And so definitely we expect data in 2017. And prior to that we just have sort of have to wait and see. As you know, we've some open label studies and so we have some possibility of data there but that just hard to predict at this point.

[Operator Instructions] And our next question comes from the line of Elemer Piros with Cantor Fitzgerald. Your line is now open.

Yes, good afternoon. Hello, Chris and Bruce. Just a couple of details on the AATD trial. I think previously you disclosed that in part A and B you have 50 individuals both healthy and diseased patients. In part B how many patients have you enrolled?

Yes, so - hello, Elemer, it is good to hear your voice and let me go ahead and give you a little bit of detail there. So we will biopsy all the patients at baseline. What we are learning from the studies that are been done in the US where there is a cross sectional biopsy going on in AATD patients, a small percentage maybe about 10% or so might not have any globules. And if we are going to biopsy patients we are going to treat everybody because for sure they have monomer even if they don't have globules and they probably have polymer as well. So the way we wrote the protocol is that we will have at least four patients in each of those two cohorts that have globules at baseline. So that mean that a minimum will have eight patients for at the lower dose for the higher dose, but if we wind up picking up a patient or two that don't have globules, those would go on top. So you might wind up 9 or 10 patients in that setting.

Okay. And somewhat different question. What percent of eligible patients continue on the expansion studies with 520?

It's a good question but I've learned many years ago never to give any sort of enrollment blow by blow detail. So I am afraid you are going to have wait for that data so when we report 2007.

What I meant is in aggregate in the multiple expansion study just roughly how many -- what percent you like to continue?

Yes. I just don't feel like I should divulge that data at this point, Elemer. I understood your question I am just demurring from giving you an answer.

Thank you. And I am showing now further questions at this time. I'd like to the turn the conference back over to management for any final remarks.

Okay. Thanks everyone for listening to the call today. And we look forward to talking to you soon.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.