ARWR — Q3 2026 Financial Report Analysis

Overview

Arrowhead Pharmaceuticals reported revenue of $75.3 million for its fiscal third quarter of 2026 (the three months ended June 30, 2026; Arrowhead's fiscal year ends September 30), up from $27.8 million a year earlier. The quarter still ended in a net loss of $194.3 million, or $1.36 per share, wider than the $175.2 million ($1.26 per share) loss a year ago. Revenue nearly tripled, but almost all of it came from partners' licensing deals, not from selling medicine, and spending grew faster than that revenue in dollar terms.

Arrowhead makes RNAi drugs. RNAi (RNA interference) is a technology that switches off a specific disease-causing gene, so the harmful protein is never made, instead of blocking that protein after it is made. The company's first approved drug, REDEMPLO (plozasiran), lowers triglycerides (a type of blood fat) in adults with familial chylomicronemia syndrome (FCS), a rare genetic disorder. The FDA approved it on November 18, 2025, and it has since been approved in the EU, Canada, Australia and China. Sanofi holds the rights in Greater China.

At a glance

• $72.9 million of the $75.3 million in revenue (97%) came from partner agreements. That includes a one-time $25.0 million upfront payment from Madrigal, booked in full this quarter. The roughly $2.4 million left over is the only revenue not from a partner deal. The filing ties part of the revenue change to REDEMPLO sales but does not report the drug's sales on a separate line.
• Operating expenses rose 26.9% to $245.3 million. R&D was up 22.1% to $198.2 million as more drug candidates moved through clinical trials. Selling, general and administrative costs (SG&A) were up 52.3% to $47.1 million, driven by the REDEMPLO launch.
• $1.60 billion in cash and investments at June 30, up from $919.3 million at September 30, 2025. This came mainly from $930 million raised in January through convertible bonds, a share sale and pre-funded warrants, not from operations.

Results

Operating margin is shown as n/m (not meaningful). It is the share of revenue left after running the business, and when costs are more than three times revenue the percentage tells you little. Here the operating loss was 2.3 times revenue.

Where the revenue came from

Management says the revenue change "was primarily driven by revenue recognition associated with the Sarepta, Novartis, Madrigal and Sanofi collaboration and license agreements, and partially driven by commercial revenue from REDEMPLO." Two of those sources are new this year:

• Madrigal ($25.0M): On May 4, 2026, Arrowhead licensed ARO-PNPLA3, an early-stage drug for MASH (a liver disease linked to obesity), to Madrigal. The $25.0 million upfront payment was recognized in full when the deal closed in June. It will not repeat. Arrowhead can still earn up to $975 million in milestone payments, plus royalties from high-single digits to mid-teens percent of sales.
• Novartis ($20.2M): Novartis paid $200.0 million upfront in October 2025 for rights to several early-stage programs in rare brain diseases. Arrowhead books that money as revenue gradually, in line with the research work it performs. At June 30, $126.3 million of it was still unrecognized ($94.6M expected within 12 months, $31.7M later). In other words, the cash has already come in, and the revenue will keep appearing over the next several quarters.

Over nine months, revenue fell 27.9% to $413.0 million. The reason is timing: last year's figure included most of Sarepta's $500 million upfront payment and an $83.6 million premium Sarepta paid on its share purchase, both booked when the licenses were delivered in fiscal Q2 2025.

Where the money went

The biggest R&D line, "candidate costs" (outside spending on clinical trials, drug manufacturing and toxicology studies), rose 33% to $126.6 million. The filing attributes this to "the additional progression of the Company's pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial costs and manufacturing costs." R&D salaries rose 21% to $32.0 million, reflecting more staff and preparation for commercial manufacturing at the Verona, Wisconsin plant. Spending on early discovery research fell 13% to $18.3 million, which the filing attributes to timing.

SG&A rose $16.2 million. Salaries were up 77% to $14.1 million, from "higher headcount required to support the Company's commercialization of REDEMPLO." Professional and outside services rose 57% to $23.3 million, "mainly due to commercialization expense associated with the Company's launch of REDEMPLO, including costs for marketing and commercial launch support."

Arrowhead does not break out R&D spending by drug program. Its disclosures are by cost type only.

What the headline numbers hide

• The revenue jump comes from deal timing, not from a growing business. Take out Madrigal's one-time $25.0 million and quarterly revenue was $50.3 million. Of the $72.9 million in partner revenue, $46.6 million came from cash received in earlier quarters (Sarepta and Novartis payments that had been held as deferred revenue). The money that actually depends on patients buying medicine, REDEMPLO sales, is small: everything outside partner deals totalled about $2.4 million this quarter and $3.5 million over nine months.
• Cash burn is much higher than the operating cash flow line suggests. Over nine months, operating activities used $79.5 million of cash. That figure already includes about $475 million in partner payments: Novartis $200.0M, Sarepta's second DM1 milestone $200.0M, Sarepta's first annual fee $50.0M and Madrigal $25.0M. Remove those and the business used roughly $555 million in nine months, about $185 million a quarter.
• The share of the loss that belongs to Arrowhead was bigger than the consolidated loss. The consolidated net loss was $178.9 million. However, $15.4 million of income went to minority shareholders of Visirna, a majority-owned subsidiary that Arrowhead consolidates, so the loss attributable to Arrowhead's own shareholders was $194.3 million. A year ago, minority holders absorbed $3.4 million of the loss instead.
• The cash pile also comes with more debt. In January Arrowhead issued $700.0 million of 0% convertible notes due January 2032, recorded at $682.7 million. It also holds $181.4 million on its credit facility ($40.0M due within a year) after repaying $117.9 million, and a $392.5 million liability for future royalties it has already sold (up from $367.4M at September 30). That liability is paid out of royalties rather than cash, but its growth adds non-cash interest expense. Quarterly interest expense was $24.6 million, more than the $16.9 million earned on investments.
• Dilution: weighted-average shares rose 3.1% to 143.4 million because of the January share sale, pre-funded warrants and at-the-market share sales ($74.1 million net raised through June 30). More shares actually make the per-share loss look slightly smaller; at last year's share count it would have been about $1.40. The bigger cost of the new shares is that they shrink existing holders' stake in any future earnings.
• Future Sarepta reimbursements may be smaller. In fiscal Q2, Sarepta used its right to take over running certain clinical trials. Under the accounting rules, this reduces both Arrowhead's remaining work and the amount of reimbursable R&D cost it expects to recover.

Takeaway: On paper, revenue almost tripled. In practice, Arrowhead still pays for an R&D program of nearly $200 million a quarter mainly with partner payments and capital-market money: about $475 million from deals and $930 million in new financing over nine months. REDEMPLO adds only a few million dollars of sales so far. What matters now is whether plozasiran can move from a rare disease into the much larger severe-hypertriglyceridemia market.

Outlook and what to watch

• Plozasiran in severe hypertriglyceridemia (sHTG). sHTG is a much more common condition in which triglycerides reach 500 mg/dL or higher. After the quarter, Arrowhead reported topline results from the Phase 3 SHASTA-3 and SHASTA-4 trials. Both met their primary goal and every prespecified secondary goal, with median triglyceride reductions of 79% and 81%. Across the sHTG population, acute pancreatitis events fell 78% compared with placebo. The FDA had already granted Breakthrough Therapy designation for this use. Full data were scheduled for a late-breaking presentation at the ESC Congress on August 30, 2026. A filing to expand REDEMPLO's label is the most likely next step. The filing does not give a submission date.
• REDEMPLO launch economics. Launch costs are already in the SG&A line, which grew 52%. Revenue from the drug is still around $2 million a quarter. The next few quarters will show whether sales in FCS cover a meaningful part of that cost before any approval in sHTG.
• Partner milestones and fees. Sarepta's second $50.0 million annual-fee installment is due within 12 months of June 30, 2026. Arrowhead is also eligible for $100.0 million from GSK when GSK4532990 doses its first Phase 3 patient, up to $527.5 million from Takeda tied to fazirsiran (already in Phase 3), up to $2.0 billion from Novartis and up to $975 million from Madrigal. All are contingent, and timing is outside Arrowhead's control. Expect revenue to stay lumpy.
• Other pipeline milestones: enrollment in the Phase 3 YOSEMITE trial of zodasiran for HoFH (an inherited form of extremely high LDL cholesterol) is complete at 70 patients, with the study expected to finish in mid-2027. Early-stage obesity programs ARO-INHBE and ARO-ALK7 have shown interim data, including ARO-INHBE combined with tirzepatide nearly doubling weight loss at week 16 compared with tirzepatide alone.
• Runway: management says current cash and investments are sufficient to fund operations for at least the next twelve months, and gives no longer projection. At the pre-deal burn rate of roughly $185 million a quarter, $1.60 billion covers about two years before any new partner payments. That figure is our estimate, not company guidance.

The company does not give revenue or earnings guidance. Our read: fiscal Q4 revenue will depend mainly on how much of the remaining Novartis and Sarepta deferred revenue gets recognized, plus any new milestone payments. The figure that best tracks Arrowhead's own commercial progress is REDEMPLO sales, which are not yet reported separately.