Arrowhead CEO Provides Update on Company Strategy and Operations

PASADENA, Calif.--(Business Wire)--
Arrowhead Research Corporation`s (NASDAQ: ARWR) President and Chief Executive
Officer today issued the following letter to the Company`s shareholders:

Dear Arrowhead Shareholders:

It has now been almost three months since our last earnings call, and I wanted
to provide our shareholders with a broad strategic and operational update.
Following this letter will be individual updates of specific subsidiaries over
the next several weeks. We are proud of what we have achieved, where our
businesses are right now, and are optimistic about our near- and long-term
prospects. I look forward to describing some of this optimism and providing some
context to it.

When I joined Arrowhead, I found a company with valuable assets, a powerful
business model, and quality management. These are the factors that attracted me
to the company and those that I was committed to building on.

Since then, we have made considerable progress and I believe Arrowhead is now at
an inflection point based on four primary factors that have the potential to
drive significant shareholder value: (1) Unidym is on the brink of breaking into
some of its target markets; (2) Calando is at an advanced point in its siRNA
clinical trial and we are seeing some exciting results; (3) our restructuring is
largely complete and we are now a more flexible and cost efficient company; and
(4) 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.

Arrowhead

A key challenge when I arrived at Arrowhead nearly 2 years ago was continuing to
secure appropriate capital because the model was necessarily capital intensive:
we were building relatively young, pre-revenue companies around potentially
disruptive technologies. Unfortunately, the capital markets soon changed. They
seemed to become less interested in seeking long term yield and increasingly
focused on eliminating risk. The markets became less hospitable to small cap
companies that were capital intensive, pre-revenue, and considered to be high
risk. This is the storm in which we have been operating and that has sunk a
great many otherwise promising companies. I am quite proud indeed that we have
survived this market dislocation and believe that, from a structural standpoint,
we are actually stronger now. Some confront difficult times by shuttering
operations in an attempt to outlast them, and this sort of passive strategy did
not make sense to us. We were certainly focused on short-term survival, but we
were also committed to fundamentally changing the way we do business in order to
create a stronger, more flexible institution capable of building long-term
shareholder value.

A crisis, though painful, can be an opportunity to do important things that may
otherwise be difficult. This has been our approach to protect and then build
shareholder value. Of course, we have worked extremely hard to make sure we
could survive the market downturn, but we have also worked to restructure our
businesses, decrease our costs and increase our focus. A decrease in available
capital can help a company become better operationally by requiring it to do
more with less and increase its overall capital efficiency. The challenge is to
do this without sacrificing strategic opportunities. We believe we have done
very well in this balance. We have cut our burn rate significantly, focused our
resources on nearer-term revenue and growth opportunities, and retained
long-term upside potential. Our recurring burn rate has been slashed by
approximately 67% from its high a year ago, we believe Calando and Unidym are at
significant inflection points, and our less mature subsidiaries provide
longer-term growth potential in a cost-effective way.

In addition to these important steps, last month we held a Special Meeting of
Stockholders. We would like to thank everyone for their participation, and I am
pleased to report that all proposed measures were passed. Among the measures was
the grant of authority to our Board of Directors to effect a reverse split of
our common stock. Granting the Board this authority was intended solely as an
insurance policy: we currently have no plans to implement a reverse split. As
you may know, on September 15, 2009, we received a notice of non-compliance from
NASDAQ based on the bid price of Arrowhead`s common stock. We believe that we
have ample time for organic growth to drive an increase in our stock price and
ensure continued NASDAQ listing. While we have confidence that developments
within our businesses will provide these catalysts, we felt it prudent to have
the authority to implement a reverse split, if necessary, to maintain our NASDAQ
listing.

I will now briefly describe and summarize the current status of each of our
subsidiaries:

Unidym

In 2005 Arrowhead sought to consolidate the fragmented carbon nanotube, or CNT,
market by licensing key intellectual property and acquiring companies to create
a dominant player in the use of CNTs for electronics. We believe we have
achieved this by licensing foundational patents from universities and research
institutions and through the acquisition of three leading CNT companies.
However, acquiring the key intellectual property, know-how, and manufacturing
capabilities to address down stream markets are not by themselves sufficient for
a sustainable business. Unidym has needed to "push" its technology into
potential end markets by establishing partnerships and developing working
prototypes.

Unidym is focused on penetrating the display and solar cell industries as
initial target markets. A key material used in these industries is indium tin
oxide, or ITO. We have seen broad acceptance for the need to replace ITO in
these industries, and we believe that Unidym`s CNT materials are a highly
attractive replacement. Total addressable markets within these industries alone
have been estimated at $2.5 billion, and are forecast to become greater than
$3.5 billion by 2012.

We have been focused on this for quite some time now and have made literally
dozens of working prototypes in touch panel, E-Paper, and LCD devices. We have
joint development agreements with the two largest LCD manufacturers in the
world, are sampling prototypes with some of the largest touch panel manufactures
in the world, and are working with a large Japanese company on thin film solar
cells. We plan to break into the touch panel market first and are pushing to
achieve our goal of capturing revenue by the end of calendar 2009. We believe
that this will not only be a significant event for Unidym, but also an important
step forward for the display industry. To our knowledge, all large-scale
commercial touch screen devices rely on ITO, notwithstanding the widespread
desire to integrate an effective replacement. Therefore, 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. Although we expect
initial revenue contribution from sales into the touch panel markets to be
modest, we are optimistic that penetration rates will rise as other touch panel
manufacturers see a viable alternative in Unidym`s CNT products.

This is a very attractive market to us. If Unidym prices its material at parity
with ITO or even at a slight discount, we believe we will be able to generate
highly attractive margins. Therefore, we are optimistic that we will be
positioned to drive considerable value growth. Going forward, we believe that we
may have favorable pricing power because we expect our product lines to provide
significant advantages over ITO including: 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.

Because Unidym`s technology may be applied to a wide variety of products across
multiple markets, the display industry is by no means our only long-term target.
After we begin to penetrate this market, we plan to accelerate our work in the
use of films for such applications as solid-state lighting, smart windows and
energy storage. For now, we have focused our resources on commercializing
printable transparent conductive films and are also expanding efforts to license
our patent portfolio for different applications of fullerenes and carbon
nanotubes.

From an operational standpoint, Unidym has also made great strides controlling
its costs and establishing a scalable and cost effective supply chain. Today, we
have successfully reduced Unidym`s burn rate by four times, compared to the
third quarter of fiscal 2008, and we have accomplished this without
significantly adversely affecting time to initial target markets. It is now a
far more nimble company and I am impressed with the progress Unidym has made.

Calando Pharmaceuticals

Calando is our other lead subsidiary that we are focusing on for near-term value
growth. Like Unidym, we have worked very hard to contain Calando`s costs while
retaining upside potential. We believe we have done that.

Calando is a clinical stage drug delivery company that had developed two drug
delivery platforms: one for delivering traditional small molecule drugs; and one
for delivering siRNA, or short interfering RNA molecules. Running two clinical
programs is an expensive endeavor, and given the extreme softness of the capital
markets we determined that the best course of action was to focus our resources
on a single program and partner the other. We chose to continue development of
the siRNA delivery program and partner the small molecule delivery program along
with its associated drug candidate IT-101. We have ceased all pipeline R&D
activities and are allocating resources only to our remaining siRNA clinical
program. We believe that focusing resources solely on the clinic is an extremely
efficient use of capital and will enable us to move most rapidly and
cost-effectively to an attractive partnership or sale, assuming continued
positive clinical results.

RNAi, or RNA interference, is a process through which target genes may be turned
down or "quieted," and it may be accomplished with siRNA molecules. RNAi is a
potentially revolutionary new way of treating diverse disease classes; however,
the lack of a proven method of delivering siRNA in humans has held the new field
back. In fact, many view the systemic delivery of siRNA as the "Holy Grail" of
RNAi therapeutics. We have always believed that the first company to demonstrate
effective systemic delivery of siRNA and resulting RNAi in humans has the
potential to create significant shareholder value. It has always been Calando`s
goal to be that company, and we continue to believe that we are well positioned
to achieve this.

We believe that Calando was the first company to initiate a clinical trial using
siRNA against cancer and the first to use a delivery vehicle for the systemic
delivery of siRNA in humans. Because we are at the leading edge of a field of
intense interest to large pharmaceutical companies, Calando has focused its
resources on continuing its siRNA clinical program with the ultimate goal of
selling or partnering the platform. We are very pleased with the progress of the
Phase I clinical trial using CALAA-01, Calando`s first siRNA therapeutic
candidate. CALAA-01, and therefore Calando`s proprietary siRNA delivery platform
RONDEL, has been very well tolerated by patients thus far. The Phase I is an
ascending-dose trial whereby three patients receive a given dose of CALAA-01 and
if there are no serious drug-related toxicities, three new patients will receive
a higher dose, and so on. Importantly, we have seen no significant drug-related
toxicities and we believe we have entered the dose range where we could expect
clinical activity. We have some very exciting data from the clinical trial that
support our confidence that CALAA-01 and the broader RONDEL platform have
significant value and may be attractive acquisition targets.

Tego, Agonn, Nanotope, and Leonardo Biosystems

In addition to our two more mature, primary subsidiaries we have: two wholly
owned subsidiaries, Tego Biosciences and Agonn Systems; and two minority-owned
holdings, Nanotope and Leonardo Biosystems.

Tego has broad intellectual property relating to modified fullerenes for use in
diagnostics, therapeutic, imaging, and other biopharmaceutical-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. For instance, there has been encouraging animal data
generated using certain modified fullerenes to treat models for Alzheimer`s
Disease and Macular Degeneration. In addition, there has been notable interest
in using modified fullerenes as next generation contrast agents for MRI.
However, because Arrowhead has been committed to drastically decreasing its burn
rate and focusing resources on nearer-term opportunities, we moved Tego into a
licensing model and ceased most ongoing expenses associated with it. Because of
the breadth of the portfolio, we are optimistic that we will be able to realize
value from Tego without incurring significant ongoing costs.

Like Tego, Agonn is a virtual company with no operations and minimal capital
requirements. Given our experience with Unidym, we identified an opportunity in
energy storage using CNTs. We sought to build IP and know-how surrounding the
use of CNTs in supercapacitors, a class of energy storage devices that enable
the rapid charge and discharge of energy. We continue to believe in the large
supercapacitor markets and the potential for CNT technology to positively impact
new device engineering; however, this has not been a major focus for us as we
have sought to restructure Arrowhead, cut our burn, and focus on nearer-term
opportunities.

Nanotope and Leonardo Biosystems are both minority Arrowhead holdings; however,
we see compelling opportunities for both companies and intend to explore
opportunities to increase our equity positions. With very little current
investment, Arrowhead`s downside exposure is limited to amounts already
invested, but it has upside potential as the companies grow.

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: 1) reverse paralysis by regenerating spinal cord
tissue after injury; 2) accelerate wound healing; 3) regenerate bone; and 4)
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 the market.
Therefore, Nanotope is able to keep its 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 cancer drug delivery company built around the work of Dr. Mauro
Ferrari. It was built on the philosophy that drug delivery will be far more
efficient if multiple vehicles are used, each customized to get through specific
biological barriers. The result is a Russian doll approach (a doll-within a
doll) whereby a primary vehicle is designed to get specifically to tumor
vasculature. Once there, smaller secondary vehicles (embedded within the primary
vehicle) are released to specifically target the tumor cells themselves and
deliver therapeutics. Importantly, the delivery system is therapeutic-agnostic,
hence 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.

While I am not satisfied with our current stock price, I am pleased with what
our businesses have achieved over the past 12 plus months, particularly given
the recent market. We are focused on enabling Unidym and Calando to provide the
near-term value growth we expect and to continue moving forward with our other
subsidiaries. In addition, after a year-long suspension of efforts instituted to
preserve capital, we have begun exploring new opportunities that could be built
once developments at Unidym or Calando allow such growth. Thank you for your
ongoing support and interest, and I look forward to providing updates on
progress at our subsidiaries in the coming weeks.

Sincerely,
Christopher Anzalone

About Arrowhead Research Corporation

Arrowhead Research Corporation (www.arrowheadresearch.com) (NASDAQ: ARWR) is a
nanotechnology company commercializing new technologies in the areas of life
sciences, electronics, and energy. Arrowhead is seeking to build value for
shareholders through the progress of majority owned subsidiaries. Currently,
Arrowhead has four subsidiaries commercializing nanotech products and
applications and minority investments in two privately held nanobiotech
companies.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:

This news release contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based upon our current expectations and speak only as
of the date hereof. Our actual results may differ materially and adversely from
those expressed in any forward-looking statements as a result of various factors
and uncertainties, including the future success of our scientific studies, our
ability to successfully develop products, rapid technological change in our
markets, changes in demand for our future products, legislative, regulatory and
competitive developments, the financial resources available to us, and general
economic conditions. For example, there can be no assurance that Arrowhead or
its subsidiaries will be able to sustain operations for expected periods, that
we will be able to achieve or sustain targeted levels of expense reductions or
that any of these entities will be successful in obtaining additional funding
needed to sustain operations.Arrowhead Research Corporation's most recent Annual
Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q discuss some
of the important risk factors that may affect our business, results of
operations and financial condition. We disclaim any intent to revise or update
publicly any forward-looking statements for any reason.

Investor Relations Contact:
The Piacente Group, Inc.
Brandi Floberg, 212-481-2050
arrowres@tpg-ir.com

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