Arrowhead Research Corporation

Arrowhead Research Corporation is a nanotechnology holding company that seeks to monetize disruptive technologies through its majority-owned subsidiaries.  We create these subsidiaries around university-derived technologies as well as through rolling up existing companies. 

Both strategies, often used together for a single subsidiary, spring from the efficiency of leverage.  Building companies around university-developed technology leverages government-funded research and deep scientific expertise, while rolling up companies to create a single entity leverages capital investments and product development time that precede Arrowhead’s involvement. 

Arrowhead is highly active in the operation of its subsidiaries, providing initial management, operational support, business development and financing.  Even after subsidiaries mature, Arrowhead continues to centralize key management responsibilities at the parent in order to increase capital efficiency and decrease time to market.  This centralization is intended to provide our subsidiaries with significant competitive advantages and enable the entire enterprise to operate more efficiently.  Our model is not to have small equity positions in 30 portfolio companies at one time, but rather to have large controlling interests in a smaller number of subsidiaries that we actively manage.  This strategy is designed to ultimately drive value back to Arrowhead from the subsidiaries in three primary ways: (i) as mature operating units with earnings growth consolidated at the parent; (ii) as liquidity events upon their sale to another company; and (iii) as liquidity events and/or the realization of tradable stock upon IPO.

Arrowhead currently has six subsidiaries in the energy, healthcare, and electronics industries.  Calando Pharmaceuticals, Unidym, Agonn Systems, and Tego Biosciences are all majority-owned subsidiaries.  Arrowhead currently owns less than a majority of Nanotope and Leonardo Biosystems, however it is Arrowhead’s intention to gain controlling interest in those companies by the end of 2009.

Business Model

Arrowhead is a nanotechnology company commercializing new technologies in the areas of life sciences, electronics, and energy. Arrowhead’s mission is to build shareholder value through the identification, development and commercialization of nanotechnology-related products and applications. The Company works closely with universities to source early stage deals and to generate rights to intellectual property covering promising new nanotechnologies. Arrowhead takes a portfolio approach by operating multiple subsidiaries, each pursuing a different nanotechnology opportunity. Currently, Arrowhead operates five majority-owned subsidiaries commercializing nanotech products and applications and funds a number of development efforts in leading university labs in exchange for the exclusive right to license the technology.

Majority-owned Subsidiaries

Arrowhead owns majority interest in its subsidiaries, securing substantial participation in any success. Each subsidiary is staffed with its own technical and business team that focuses on its specific technology and markets while Arrowhead provides accounting, financial, strategic, and administrative services. The Company’s five majority-owned subsidiaries are commercializing a variety of nanotech products and applications, including anti-cancer drugs, RNAi therapeutics, carbon-based electronics and compound semiconductor materials. In the near term, Arrowhead expects to add to its portfolio through selective acquisition and formation of new companies.

Sponsored Research

In exchange for the exclusive right to license the technology developed in sponsored laboratories, Arrowhead and its subsidiaries have sponsored research at some of the most highly-regarded academic institutions in the country, including the California Institute of Technology (Caltech), Stanford University, Duke University and the University of Florida, in critical areas such as stem cell research, carbon electronics and molecular diagnostics. By funding university research, Arrowhead has the ability to evaluate the probability of technical success at low research cost.   Moreover, the cultivation of relationships in the academic community provides an additional window into other promising technologies.

The Arrowhead Edge

This approach is structured to give Arrowhead a competitive edge in commercializing nanotechnologies:

Discrimination: Arrowhead's management and scientific advisers can identify opportunities with the most near term market potential while acquiring intellectual property rights to technologies with more long-term potential.

Financial efficiency: Arrowhead can obtain rights to valuable intellectual property without having to pay for all of the overhead costs associated with R&D.  The operational resources at the corporate office avoid the duplicate infrastructure at each subsidiary.

Knowledge synergy: Arrowhead, its subsidiaries and sponsored scientists can leverage technology, know-how and intellectual property generated by others within the Arrowhead family of companies or developed in sponsored research projects.

Access to capital: As a public company, we can access the public markets for the purpose of raising capital and provide meaningful incentives in the form of stock options to attract the most talented managers and scientists.

Focus: By offering financial, administrative, corporate and strategic resources to our subsidiary companies, each individual management team can maintain focus on specific technologies and specific markets, increasing the likelihood of successful technological development and commercialization.

Flexibility: Arrowhead maintains a great deal of flexibility in financing different research and commercial projects.

Diversification: Ultimately, this strategy is designed so that Arrowhead will have a stake in a variety of different nanoscale materials, devices, and systems that could impact diverse markets. As such, the Company is positioned to capture significant revenue streams from the general trend toward miniaturization in coming years.