Arrowhead launches new company, Ablaris to commercialize novel weight loss technology

Arrowhead Research Corporation (NASDAQ: ARWR) ("Arrowhead" or the "Company") today announced that it has executed an exclusive world-wide license on technology developed by Drs. Wadih Arap and Renata Pasqualini at MD Anderson Cancer Center for use in weight loss and obesity-related metabolic conditions, and that it has launched a new company, Ablaris Therapeutics Inc., to commercialize this platform. Development of the technology is relatively advanced, and management expects that an initial drug candidate will be in the clinic in 2011. Under the license agreement, Ablaris is not responsible for any direct costs associated with preparing for an initial Phase 1 clinical trial or running the trial.

“The technology that Ablaris is developing takes a completely different approach to weight loss”

Ablaris has secured commitments for more than $3 million of outside capital to cover the upfront license payments and to launch operations. Arrowhead plans to invest an additional $500,000 in the new company. After the financing, Arrowhead will own approximately 55% of Ablaris, control the Board of Directors, and operate the subsidiary. This represents the accomplishment of three more goals the Company set for achievement by year's end: specifically, Arrowhead completed a license with MD Anderson for the anti-obesity technology; Arrowhead started a new nanomedicine subsidiary; and founders of Ablaris have worked closely with the FDA to move the technology toward the clinic.

"This is a very big opportunity for us and it combines all the components we look for when building a subsidiary," said Arrowhead President and CEO Dr. Chris Anzalone. "First, it addresses a large underserved market with world-class science at an advanced stage of development that is expected to move rapidly into the clinic. Second, it is based on platform technology rather than a single compound, providing Ablaris with multiple shots on goal and the ability to generate follow-on products. Third, it is extraordinarily capital efficient with Ablaris avoiding the direct costs associated with preparing for and running the initial Phase 1 clinical trial. Fourth, Ablaris has attracted sufficient outside capital to cover upfront license payments and initial operating expenses such that Arrowhead may conserve its capital. Finally, Ablaris fits well within our broader strategy as a nanomedicine company. I am very excited about working with Drs. Arap and Pasqualini on this exciting technology and compelling market opportunity."

Healthcare costs attributable to obesity have been estimated to be as high as $147 billion per year in the U.S. alone, and this has been forecast to grow to $344 billion by 2018. This is clearly a large and growing unmet medical need, as it has been over a decade since the FDA has approved a new weight loss drug. For this reason, Arrowhead has been keenly interested in the obesity market but also cautious about finding a platform that could deliver a balance of high efficacy and low side effects that would be acceptable by the FDA.

The Ablaris technology is designed to specifically kill blood vessels feeding white fat tissue, and substantial data have been generated in rodents and three different species of non-human primates. This platform is broad and could lead to a large number of potential compounds, hence Ablaris is expected to have great flexibility in follow-on drug candidates. The compounds are administered via simple subcutaneous injection and have led to the destruction and absorption of fat, or adipose tissue, in study animals. Importantly, the primary mode of action is believed to be at the site of the fat tissue rather the central nervous system. Many obesity drug candidates have targeted the brain and, therefore, have had difficult regulatory paths due to the complexity of altering brain chemistry and off target effects. Data using Ablaris's lead candidate have already been reported in well-respected, peer-reviewed scientific journals and further publications are expected throughout 2011. Reports have shown significant and rapid reductions in body weight in the form of reduced body fat. For instance, published data include reports that obese study animals lost nearly one-third of their body weight after one month of daily subcutaneous injections. Weight loss was due to a combination of destruction of fat and a decrease in appetite and resulting food intake. It is believed that the latter is caused by natural chemical interactions between the diminishing fat and the central nervous system rather than a direct action of the compound on the brain.

"The technology that Ablaris is developing takes a completely different approach to weight loss," said noted obesity expert Dr. Randy Seeley, Professor of Medicine at the University of Cincinnati and Executive Director of the Cincinnati Diabetes and Obesity Center. "This technology limits the blood vessels that support adipose tissue. In my research lab, we have validated that this approach results in profound weight loss in several pre-clinical models. Moreover, the weight loss was due to animals eating less. Consequently, this unique approach produces appetite suppression but does so by acting at adipose tissue rather than by acting directly on the brain."

While positive animal data do not ensure positive and safe results in humans, the Ablaris technology has generated over 6 years of animal data across 5 species and multiple different and independent laboratories. Drs. Arap and Pasqualini and their team have had substantial interactions with the FDA, and management believes that in 2011 patients will begin receiving the Ablaris lead compound in a Phase I clinical trial. The expensive and time consuming process of manufacturing and packaging sufficient quantities of drug candidate for a Phase I clinical trial has been completed and Ablaris is not responsible for these costs. FDA required pre-clinical toxicity studies are nearly complete and Ablaris will not assume any of these costs. The initial Phase 1 clinical trial has been planned and the site has been secured. Importantly, Ablaris is not responsible for any of the direct costs associated with this trial. With these significant costs already covered, Ablaris plans to allocate the outside capital it raised to cover upfront costs of the license agreement and initial development of follow-on drug candidates.

Management will discuss Ablaris during Arrowhead's year-end conference call on Wed December 22^nd. In addition, the Ablaris website will be launched in January and management looks forward to providing updates in the new year.