Arrowhead CEO Comments on $4.5M Alliance Between Unidym and Samsung Electronics

Arrowhead Research Corporation's ARWR President and Chief Executive Officer today issued the following open letter to the Company's shareholders:

Dear Shareholders:

Yesterday Unidym announced that it has entered into intellectual property cooperation and license agreements with Samsung Electronics Co., Ltd., and I wanted to provide our shareholders with a brief overview of how this event fits into our overall business strategy. These are important agreements that will help Unidym grow its business, and they represent the accomplishment of two more goals Arrowhead articulated for 2010: establishment of a new partnership for Unidym and movement toward Unidym becoming financially independent.

Under the agreements, Unidym non-exclusively licensed and transferred certain patent rights to Samsung, including patent rights for manufacture and use of carbon nanotubes (CNTs) in electronic products. An intellectual property cooperation agreement includes provisions for Samsung to underwrite and support Unidym licensing and enforcement of these patents against third parties. A business cooperation agreement includes provisions for Unidym to supply CNTs to Samsung, as well as an initial prepaid purchase order. The agreements preserve rights for Unidym's current and future business needs and the needs of current and future licensees.

This deal couples the strength of Samsung in the electronics markets and the power of Unidym's intellectual property for CNT manufacturing and applications. Unidym has been working with Samsung for several years to develop next generation CNT-based displays, and we are pleased that this relationship is moving into a new phase.

These agreements fit squarely into Arrowhead's plans for Unidym. As we have said in the past, we see considerable value in Unidym, but it no longer fits within Arrowhead's long-term strategic roadmap. We believe our shareholders are best served by an Arrowhead that becomes a focused nanomedicine company, so our goal has been to build Unidym's business and adoption of its technology such that it may become financially independent of Arrowhead and ultimately be acquired. We view these agreements as important steps toward these goals.

• They provide a moderate non-dilutive net cash infusion, enabling Unidym to repay Arrowhead nearly $1 million of intercompany debt and providing Unidym with operating capital. This enables Arrowhead to allocate extra capital to its nanomedicine initiatives.
• They provide Samsung with a clear path through Unidym's large patent estate and, therefore, the ability to bring products to market. We view this as an important opportunity with a potential customer. Should Samsung need to source high quality CNT materials for such products, Unidym hopes to leverage its deep experience in this area to compete as a potential supplier.
• Samsung is an innovator in electronics, and we hope it will open new markets and customers for Unidym. Should other companies move to incorporate CNTs into electronic devices, Unidym would be well positioned to sell licenses to it patents and supply CNT materials in these markets.
• The patent enforcement alliance enhances Unidym's ability to protect its patent estate from infringement, improving Unidym's ability to execute high quality licenses and supply agreements.

With this alliance complete, we hope that Unidym will further develop the relationship it has built with Samsung over the years. We see this as a strong validation of Unidym's broad platform and indicative of a growing interest in developing potentially market-changing CNT-based products. Beyond Samsung, we view this as a step toward expanding Unidym's customer base and strengthening Unidym's position with new customers and partners. Finally, this alliance has immediate value as a source of capital for Unidym beyond Arrowhead. We believe that these factors ultimately drive value for our shareholders by easing Arrowhead's near term capital requirements and making Unidym a more attractive acquisition target.