What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 143 added, 106 removed, 354 unchanged (41% of the section changed)

4 unchanged sentences

Dollars, except share and per share amounts)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Current assets:

8 unchanged sentences

Other non-current assets 173 293

Total assets $ 97,625 $ 105,535

Liabilities and stockholders’ equity

13 unchanged sentences

1,164,000 (December 31, 2019:

143,258 137,285

Common shares

2 unchanged sentences

71,256,579 (December 31, 2019:

916,066 898,535

Additional paid-in capital 58,300 55,246

Deficit ( 1,004,014 ) ( 970,093 )

Accumulated other comprehensive loss ( 48,099 ) ( 48,229 )

Total stockholders ’ equity

65,511 72,744

Total liabilities and stockholders’ equity $ 97,625 $ 105,535

4 unchanged sentences

Dollars, except share and per share amounts)

Three Months Ended March 31,

Revenue from collaborations and licenses

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Collaborations and licenses $ 825 $ 398 $ 1,660 $ 814

Non-cash royalty revenue 689 255 1,345 $ 518

3 unchanged sentences

General and administrative 3,566 8,189 7,119 12,601

Depreciation and amortization 501 505 1,001 1,014

Change in fair value of contingent consideration 116 130 228 255

5 unchanged sentences

Interest expense ( 1,099 ) ( 2 ) ( 2,140 ) ( 14 )

Foreign exchange (losses) / gains

Net equity investment loss

Foreign exchange gain (loss) ( 47 ) 60 ( 65 ) 68

Equity investment loss — ( 3,334 ) — ( 7,985 )

Total other loss ( 946 ) ( 2,670 ) ( 1,660 ) ( 6,725 )

1 unchanged sentence

Income tax benefit — — — —

Net loss ( 14,087 ) ( 23,315 ) ( 27,948 ) ( 46,566 )

Items applicable to preferred shares:

1 unchanged sentence

Net loss attributable to common shares $ ( 17,082 ) $ ( 26,077 ) $ ( 33,921 ) $ ( 52,043 )

Net loss per common share

Loss per share

Basic and diluted $ ( 0.25 ) $ ( 0.46 ) $ ( 0.49 ) $ ( 0.92 )

10 unchanged sentences

Dollars, except share and per share amounts)

Convertible Preferred Shares

Common Shares

Number of Shares

Share Capital

Number of Shares

Share Capital

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Convertible Preferred Shares Common Shares

Number of Shares Share Capital Number of Shares Share Capital Additional Paid-In Capital Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity

Balance December 31, 2019 1,164,000 $ 137,285 64,780,314 $ 898,535 $ 55,246 $ ( 970,093 ) $ ( 48,229 ) $ 72,744

1 unchanged sentence

Stock-based compensation — — — — 1,460 — — 1,460

Certain fair value adjustments to liability s tock option awards

Certain fair value adjustments to liability stock option awards — — — — 180 — — 180

Issuance of common shares pursuant to the Open Market Sales Agreement — — 4,147,081 12,315 — — — 12,315

1 unchanged sentence

Unrealized gain on available-for-sale securities — — — — — — 252 252

Net loss — — — — — ( 13,861 ) — ( 13,861 )

Balance March 31, 2020 1,164,000 $ 140,263 68,961,395 $ 911,099 $ 56,803 $ ( 986,932 ) $ ( 47,977 ) $ 73,256

Convertible Preferred Shares

Common Shares

Number of Shares

Share Capital

Number of Shares

Share Capital

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Accretion of accumulated dividends on Preferred Shares — 2,995 — — — ( 2,995 ) — —

Stock-based compensation — — — — 1,597 — — 1,597

Certain fair value adjustments to liability stock option awards — — — — ( 92 ) — — ( 92 )

Issuance of common shares pursuant to the Open Market Sales Agreement — — 2,291,184 5,045 — — — 5,045

Issuance of common shares pursuant to exercise of options — — 4,000 ( 78 ) ( 8 ) — — ( 86 )

Unrealized gain on available-for-sale securities — — — — — — ( 122 ) ( 122 )

Net loss — — — — — ( 14,087 ) — ( 14,087 )

Balance June 30, 2020 1,164,000 $ 143,258 71,256,579 $ 916,066 $ 58,300 $ ( 1,004,014 ) $ ( 48,099 ) $ 65,511

See accompanying notes to the condensed consolidated financial statements.

ARBUTUS BIOPHARMA CORPORATION

Condensed Consolidated Statement of Stockholders’ Equity

(In thousands of U.S.

Dollars, except share and per share amounts)

Convertible Preferred Shares Common Shares

Number of Shares Share Capital Number of Shares Share Capital Additional Paid-In Capital Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity

Balance December 31, 2018 1,164,000 126,136 55,518,800 $ 879,405 $ 48,084 $ ( 805,221 ) $ ( 48,170 ) $ 200,234

5 unchanged sentences

Currency translation adjustment — — — — — — ( 22 ) ( 22 )

Net loss — — — — — ( 23,251 ) — ( 23,251 )

Balance March 31, 2019 1,164,000 $ 128,851 56,255,804 $ 882,143 $ 49,594 $ ( 831,187 ) $ ( 48,192 ) $ 181,209

Accretion of accumulated dividends on Preferred Shares — 2,762 — — — ( 2,762 ) — —

Stock-based compensation — — — — 3,915 — — 3,915

Certain fair value adjustments to liability stock option awards — — — — 230 — — 230

Issuance of common shares pursuant to the Open Market Sales Agreement — — 593,689 2,477 — — — 2,477

Issuance of common shares pursuant to exercise of options — — 679 3 ( 1 ) — — 2

Currency translation adjustment — — — — — — ( 52 ) ( 52 )

Net loss — — — — — ( 23,315 ) — ( 23,315 )

Balance June 30, 2019 1,164,000 $ 131,613 56,850,172 $ 884,623 $ 53,738 $ ( 857,264 ) $ ( 48,244 ) $ 164,466

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(In thousands of U.S.

Three Months Ended March 31,

Six Months Ended June 30,

OPERATING ACTIVITIES

Items not involving cash:

Net loss $ ( 27,948 ) $ ( 46,566 )

Non-cash items:

Depreciation 1,001 1,014

Gain on sale of property and equipment — ( 11 )

2 unchanged sentences

Change in fair value of contingent consideration 228 255

Net equity investment gain (loss)

Net equity investment loss — 7,985

Non-cash royalty revenue ( 1,345 ) ( 518 )

12 unchanged sentences

Acquisition of property and equipment ( 66 ) ( 271 )

Net cash provided by / (used in) investing activities

Net cash provided by investing activities 20,970 71,005

FINANCING ACTIVITIES

3 unchanged sentences

Effect of foreign exchange rate changes on cash and cash equivalents ( 56 ) 95

Increase / (decrease) in cash and cash equivalents

Increase in cash and cash equivalents 14,100 41,930

Cash and cash equivalents, beginning of period 31,799 36,942

8 unchanged sentences

Nature of business and future operations

Arbutus Biopharma Corporation (the “Company” or “Arbutus”) is a clinical-stage biopharmaceutical company dedicated to discovering, developing and commercializing a cure for people with chronic hepatitis B virus (“HBV”) infection.

Arbutus Biopharma Corporation (the “Company” or “Arbutus”) is a clinical-stage biopharmaceutical company primarily focused on developing a cure for people with chronic hepatitis B virus (“HBV”) infection.

The Company is advancing multiple drug product candidates that may be combined into a potentially curative regimen for chronic HBV infection.

Arbutus has also initiated a drug discovery and development effort for treating coronaviruses, including COVID-19.

The Company’s pipeline includes:

AB-729, a subcutaneously-delivered RNA interference (“RNAi”) product candidate currently in a Phase 1a/1b clinical trial with preliminary results announced in March 2020.

Additional Week 12 single-dose results for the 60 mg dose cohort are expected in the second quarter of 2020.

Results from a single-dose 90 mg cohort and a multi-dose 60 mg cohort are expected in the second half of 2020;

AB-836, a next-generation capsid inhibitor product candidate currently advancing through IND-enabling studies;

• AB-729, a subcutaneously-delivered RNA interference (“RNAi”) product candidate currently in a Phase 1a/1b clinical trial.

Preliminary positive safety data in single-dose cohorts of healthy subjects and safety and efficacy data in the 60 mg and 180 mg single-dose cohorts in subjects with chronic HBV infection were reported in March 2020.

Additional follow-on week 12 data for the 60 mg single-dose cohort were reported in May 2020.

The Company is dosing two 60 mg multi-dose cohorts of subjects with chronic HBV infection with dosing intervals of every four and eight weeks, respectively.

The Company is also dosing subjects in a 90 mg single-dose cohort and has initiated an additional AB-729 90 mg single-dose cohort in HBV positive subjects.

Results from all of these cohorts are expected in the second half of 2020.

Additionally, the Company intends to initiate two 90 mg multi-dose cohorts in the second half of 2020.

As the Company awaits data from the 90 mg single-dose cohorts, the Company anticipates that the dose interval for the planned 90 mg multi-dose cohorts will be every eight and twelve weeks, respectively;

• AB-836, a next-generation capsid inhibitor product candidate currently advancing through IND-enabling studies, which the Company expects to be completed by the end of 2020;

• other compounds early in the development process, including oral compounds that inhibit PD-L1 and next-generation oral HBV RNA destabilizers.

The success of the Company is dependent on obtaining the necessary regulatory approvals to bring its products to market and achieving profitable operations.

The Company’s research and development activities and commercialization of its products are dependent on its ability to successfully complete these activities and to obtain adequate financing through a combination of financing activities and operations.

It is not possible to predict either the outcome of the Company’s existing or future research and development programs or the Company’s ability to continue to fund these programs in the future.

The Company’s research and development activities and commercialization of its products are dependent on its ability to successfully obtain adequate financing through a combination of financing activities and operations.

The success of the Company is dependent on progressing its pipeline and subsequently obtaining the necessary regulatory approvals to bring its products to market and achieving profitable operations.

It is not possible to predict either the outcome of the Company’s existing or future research and development programs or the Company’s ability to continue to fund these programs in the future, nor to predict whether it will be successful in obtaining the necessary regulatory approvals to bring its products to market.

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) was identified in Wuhan, China.

2 unchanged sentences

The pandemic has resulted in and will likely continue to result in significant disruptions to businesses.

A number of countries and other jurisdictions around the world have implemented extreme measures to try and slow the spread of the virus.

A number of countries and other jurisdictions around the world have implemented extreme measures in an attempt to slow the spread of the virus.

These measures include the closing of businesses and requiring people to stay in their homes, the latter of which raises uncertainty regarding the ability to travel to hospitals in order to participate in clinical trials.

1 unchanged sentence

Despite the challenges of COVID-19, we have not had to alter our objectives for 2020.

However, future disruptions related to the COVID-19 pandemic could negatively impact our plans and timelines, including enrolling and monitoring subjects in the trial.

However, future disruptions related to the COVID-19 pandemic could negatively impact our plans and timelines, including enrolling and monitoring subjects in our clinical trials.

While Arbutus’ core mission is to find a cure for hepatitis B, the magnitude of the coronavirus pandemic is undeniable.

6 unchanged sentences

These targets are essential viral proteins which Arbutus has experience in targeting.

The establishment of the COVID-19 effort does not impact the Company’s belief that its cash, cash equivalents and investments as of March 31, 2020 are sufficient to fund its operations into the middle of 2021.

The establishment of the COVID-19 effort does not materially impact the Company’s cash guidance for 2020 of $54 million to $58 million.

Significant accounting policies

2 unchanged sentences

These statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of March 31, 2020 and the Company’s results of operations and cash flows for the three months ended March 31, 2020 and 2019 .

The results of operations for the three months ended March 31, 2020 and 2019 are not necessarily indicative of the results for the full year.

These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of June 30, 2020, the Company’s results of operations for the three and six months ended June 30, 2020 and the Company’s cash flows for the six months ended June 30, 2020.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the full year.

These unaudited condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2019, except as described below under Recent Accounting Pronouncements.

9 unchanged sentences

The calculation of diluted net loss attributable to common shareholders per share does not differ from the calculation of basic net loss attributable to common shareholders per share, as the effect of the Company’s dilutive potential common shares was anti-dilutive.

During the three months ended March 31, 2020 and 2019 , potential common shares of 30.4 million and 26.0 million , respectively, consisting of the “if-converted” number of Preferred Shares and outstanding stock options, were excluded from the calculation of diluted net loss per common share because their inclusion would be anti-dilutive.

During the six months ended June 30, 2020 and 2019, potential common shares of 31.3 million and 27.5 million, respectively, consisting of the “if-converted” number of Preferred Shares and outstanding stock options, were excluded from the calculation of diluted net loss per common share because their inclusion would be anti-dilutive.

Revenue recognition

10 unchanged sentences

The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices.

The estimated stand-alone selling price of each deliverable reflects the Company’s best estimate of what the selling price would be if the deliverable was regularly sold on

a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The estimated stand-alone selling price of each deliverable reflects the Company’s best estimate of what the selling price would be if the deliverable was regularly sold on a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services.

26 unchanged sentences

To determine the fair value of the contingent consideration (note 8), the Company uses a probability weighted assessment of the likelihood the milestones would be met and the estimated timing of such payments, and then the potential contingent payments were discounted to their present value using a probability adjusted discount rate that reflects the early stage nature of the development program, time to complete the program development, and overall biotech indices.

The Company determined the fair value of the

contingent consideration was $3.1 million as of March 31, 2020 and the increase of $0.1 million has been recorded as a component of total operating expenses in the statement of operations and comprehensive loss for the three months ended March 31, 2020 .

The Company determined the fair value of the contingent consideration was $ 3.2 million as of June 30, 2020 and the increase of $ 0.2 million has been recorded as a component of total operating expenses in the statement of operations and comprehensive loss for the six months ended June 30, 2020.

The assumptions used in the discounted cash flow model are level 3 inputs as defined above.

1 unchanged sentence

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair value:

As of March 31, 2020

(in thousands)

Level 1 Level 2 Level 3 Total

As of June 30, 2020 (in thousands)

Cash and cash equivalents $ 45,899 $ — $ — $ 45,899

1 unchanged sentence

Long-term investments 1,600 — — 1,600

Total 83,988 — — 83,988

Liability-classified options — — 150 150

Contingent consideration — — 3,181 3,181

As of December 31, 2019

(in thousands)

Total $ — $ — $ 3,331 $ 3,331

Level 1 Level 2 Level 3 Total

As of December 31, 2019 (in thousands)

Cash and cash equivalents $ 31,799 $ — $ — $ 31,799

Short-term investments 59,035 — — 59,035

Total 90,834 — — 90,834

Liability-classified stock option awards — — 253 253

Contingent consideration — — 2,953 2,953

Total $ — $ — $ 3,206 $ 3,206

The following table presents the changes in fair value of the Company’s liability-classified stock option awards:

Liability at beginning of the period

Fair value of liability-classified options exercised in the period

Increase (decrease) in fair value of liability

Liability at end of the period

Liability at beginning of the period Fair value of liability-classified options exercised in the period Increase (decrease) in fair value of liability Liability at end of the period

(in thousands)

Three months ended March 31, 2019

Three months ended March 31, 2020

Six Months Ended June 30, 2020 $ 253 $ — $ ( 103 ) $ 150

Six Months Ended June 30, 2019 $ 479 $ — $ ( 338 ) $ 141

The following table presents the changes in fair value of the Company’s contingent consideration:

Liability at beginning of the period

Increase (decrease) in fair value of liability

Liability at end of the period

Liability at beginning of the period Increase (decrease) in fair value of liability Liability at end of the period

(in thousands)

Three months ended March 31, 2019

Three months ended March 31, 2020

Six Months Ended June 30, 2020 $ 2,953 $ 228 $ 3,181

Six Months Ended June 30, 2019 $ 3,126 $ 255 $ 3,381

Investments in marketable securities

Investments in marketable securities consisted of the following:

Amortized Cost

Gross Unrealized Gain (1)

Amortized Cost Gross Unrealized Gain (1)

Gross Unrealized Loss (1)

As of March 31, 2020

(in thousands)

As of June 30, 2020 (in thousands)

Cash equivalents

2 unchanged sentences

US treasury bills — — — —

Total $ 28,606 $ — $ — $ 28,606

Investments in marketable securities

2 unchanged sentences

US government bonds 18,108 72 — 18,180

Total $ 37,959 $ 130 $ — $ 38,089

(1) Gross unrealized gain (loss) is pre-tax and is reported in other comprehensive loss.

Amortized Cost

Gross Unrealized Gain (1)

Amortized Cost Gross Unrealized Gain (1)

Gross Unrealized Loss (1)

As of December 31, 2019

(in thousands)

As of December 31, 2019 (in thousands)

Cash equivalents

2 unchanged sentences

US treasury bills 1,499 — — 1,499

Total $ 7,116 $ — $ — $ 7,116

Investments in marketable securities

2 unchanged sentences

US government bonds 23,246 — ( 2 ) 23,244

Total $ 59,035 $ 4 $ ( 4 ) $ 59,035

(1) Gross unrealized gain (loss) is pre-tax and is reported in other comprehensive loss.

The contractual term to maturity of the $58.5 million of short-term marketable securities held by the Company as of March 31, 2020 is less than one year .

As of March 31, 2020 , the Company held $3.2 million of long-term marketable securities with contractual maturities of more than one year , but less than five years .

The contractual term to maturity of the $ 36.5 million of short-term marketable securities held by the Company as of June 30, 2020 is less than one year.

As of June 30, 2020, the Company held $ 1.6 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2019, the Company’s $ 59.0 million of marketable securities had contractual maturities of less than one year.

There were no realized gains or losses for the three months ended March 31, 2020 or 2019 .

There were no realized gains or losses for the three and six months ended June 30, 2020 or 2019.

Equity method investment

In April 2018, the Company entered into an agreement with Roivant Sciences Ltd.

In April 2018, Arbutus entered into an agreement with Roivant Sciences Ltd.

(“Roivant”), its largest shareholder, to launch Genevant Sciences Ltd.

(“Genevant”), a company focused on the discovery, development, and commercialization of a broad range of RNA-based therapeutics enabled by the Company’s lipid nanoparticle (“LNP”) and ligand conjugate delivery technologies.

The Company licensed exclusive rights to its LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV.

The Company retained all rights to its LNP and conjugate delivery platforms for HBV.

As of March 31, 2020, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 40% of the common equity of Genevant.

Genevant has issued convertible debt securities to other investors.

If those securities are converted to common shares, the Company’s ownership interest in Genevant may be significantly diluted.

(“Genevant”), a company focused on the discovery, development, and commercialization of a broad range of RNA-based therapeutics enabled by Arbutus’ lipid nanoparticle (“LNP”) and ligand conjugate delivery technologies.

Arbutus licensed exclusive rights to its LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties.

Arbutus retained all rights to its LNP and conjugate delivery platforms for HBV.

Arbutus is entitled to receive tiered low single-digit royalties on future sales of Genevant products covered by the licensed patents.

If Genevant sub-licenses the intellectual property licensed by Arbutus to Genevant, Arbutus would receive upon the commercialization of a product developed by such sub-licensee the lesser of (i) twenty percent of the revenue received by Genevant for such sublicensing and (ii) tiered low single-digit royalties on product sales by the sublicensee.

As of June 30, 2020, the carrying value of Arbutus’ investment in Genevant was zero and Arbutus owned approximately 40 % of the common equity of Genevant.

On July 23, 2020, the United States Patent and Trademark Office before the Patent Trial and Appeal Board ("PTAB") announced their decision in Moderna Therapeutics, Inc.'s challenge of the validity of U.S.

Patent 8,058,069 ("the '069 Patent").

In this decision, the PTAB determined no challenged claims were unpatentable.

While Arbutus is the patent holder, this patent has been licensed to Genevant.

The '069 Patent was included in this license agreement between Genevant and Arbutus.

Arbutus is gratified by the recent decision of the Patent Trademark and Appeals Board, upholding the validity of one of the patents protecting its LNP technology that was licensed to Genevant.

This decision reinforces Arbutus’ continuing belief in the potential of this technology.

On July 31, 2020, Roivant recapitalized Genevant through an equity investment and conversion of previously issued convertible debt securities held by Roivant.

Arbutus participated in the recapitalization of Genevant with an equity investment of $ 2.5 million.

Following the recapitalization, Arbutus owns approximately 16 % of the common equity of Genevant.

In connection with the recapitalization, the three parties entered into an Amended and Restated Shareholders Agreement that provides Roivant with substantial control of Genevant.

Arbutus has a non-voting observer seat on Genevant’s Board of Directors.

Arbutus’ entitlement to receive future royalties or sublicensing revenue from Genevant was not impacted by the recapitalization.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of the following:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

(in thousands)

5 unchanged sentences

Other accrued liabilities 6 144

Total accounts payable and accrued liabilities $ 5,813 $ 7,235

Sale of future royalties

9 unchanged sentences

On a quarterly basis, the Company will reassess the expected timing of the royalty revenue, recalculate the amortization and effective interest rate and adjust the accounting prospectively as needed.

As of March 31, 2020 , the effective annual interest rate was approximately 22% .

As of June 30, 2020, the effective annual interest rate was approximately 22 %.

The Company will recognize non-cash royalty revenue related to the sales of ONPATTRO during the term of the Agreement.

As royalties are remitted to OMERS from Alnylam, the balance of the recognized liability will be effectively repaid over the life of the Agreement.

From the inception of the royalty sale through March 31, 2020 , the Company has recorded an aggregate of $2.5 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through June 30, 2020, the Company has recorded an aggregate of $ 3.0 million of non-cash royalty revenue for royalties earned by OMERS.

There are a number of factors that could materially affect the amount and timing of royalty payments from Alnylam, none of which are within the Company’s control.

During the three months ended March 31, 2020 , the Company recognized non-cash royalty revenue of $0.7 million and $1.0 million of related non-cash interest expense.

During the three and six months ended June 30, 2020, the Company recognized non-cash royalty revenue of $ 0.7 million and $ 1.3 million, respectively, and $ 1.1 million and $ 2.1 million of related non-cash interest expense, respectively.

The table below shows the activity related to the net liability for 2020:

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

(in thousands)

13 unchanged sentences

In addition, until a cumulative amount equal to the funding actually received under the agreement has been paid to TPC, the Company agreed to pay 2.5 % royalties on any royalties the Company receives on sales of Acrotech Biopharma LLC’s Marqibo® (formerly Spectrum Pharmaceuticals, Inc.).

For the three months ended March 31, 2020 and 2019 , the Company earned royalties on Marqibo sales in the amounts of $83 thousand and $41 thousand , respectively.

For the six months ended June 30, 2020 and 2019, the Company earned royalties on Marqibo sales in the amounts of $ 0.1 million and $ 0.1 million, respectively.

The resulting royalties payable by the Company to TPC were not material in either period.

The cumulative amount paid or accrued up to March 31, 2020 was less than $0.1 million , resulting in the contingent amount due to TPC being $2.7 million ( C$3.7 million ).

The cumulative amount paid or accrued up to June 30, 2020 was less than $ 0.1 million, resulting in the contingent amount due to TPC being $ 2.7 million (C$ 3.7 million).

Arbitration with the University of British Columbia

14 unchanged sentences

An award for costs and attorneys’ fees is still to be determined.

The Company has accrued $0.4 million for an estimate of a potential award for costs and attorneys’ fees as of March 31, 2020 .

The Company has accrued $ 0.4 million for an estimate of a potential award for costs and attorneys’ fees as of June 30, 2020.

Stock Purchase Agreement with Enantigen

8 unchanged sentences

for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $ 1.0 million that, if paid, would be offset against Arbutus Inc.’s milestone payment obligations.

The contingent consideration for this acquisition is a financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statements of operations and comprehensive loss (see note 3).

The fair value of the contingent consideration was $3.1 million as of March 31, 2020 .

The contingent consideration for this acquisition is a financial liability, which is measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statements of operations and comprehensive loss (see note 3).

The fair value of the contingent consideration was $ 3.2 million as of June 30, 2020.

Collaborations, contracts and licensing agreements

3 unchanged sentences

The Company has two royalty entitlements to Alnylam’s global net sales of ONPATTRO.

In 2012, the Company entered into a license agreement with Alnylam that entitles Alnylam to develop and commercialize products with the Company’s LNP technology.

In 2012, the Company entered into a license agreement with Alnylam that entitles Alnylam to develop and commercialize certain identified products with the Company’s LNP technology.

During the third quarter of 2018, Alnylam’s ONPATTRO, which utilizes the Company’s LNP technology, was approved by the U.S.

7 unchanged sentences

Revenues are summarized in the following table:

Three Months Ended March 31,

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(in thousands) (in thousands)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 761 $ 288 $ 1,514 $ 645

Other milestone and royalty payments 63 110 146 169

1 unchanged sentence

Alnylam Pharmaceuticals, Inc.

690 255 1,345 518

Total revenue $ 1,514 $ 653 $ 3,005 1,332

2 unchanged sentences

In December 2018, the Company entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”) (the “Sale Agreement”), under which it could issue and sell common shares, from time to time, for an aggregate sales price of up to $ 50.0 million.

For the three months ended March 31, 2019 , the Company issued 614,401 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $2.7 million .

For the three and six months ended June 30, 2019, the Company issued 593,689 and 1,208,090 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $ 2.5 million and $ 5.2 million, respectively.

In December 2019, the Company entered into an amendment to the Sale Agreement with Jefferies (the “Amended Sale Agreement”) in connection with the filing of a new shelf registration statement on Form S-3 (File No.

1 unchanged sentence

The amendment revised the original Sale Agreement to reflect that the Company may sell its common shares, without par value, from time to time, for an aggregate sales price of up to $ 50.0 million, under the New Shelf Registration Statement.

During the three months ended March 31, 2020 , the Company issued 4,147,081 common shares pursuant to the Sale Agreement and the Amended Sale Agreement, resulting in net proceeds of approximately $12.3 million .

As of March 31, 2020 , the Company had approximately $42.7 million remaining available under the Amended Sale Agreement.

During the three and six months ended June 30, 2020, the Company issued 2,291,184 and 6,438,265 common shares pursuant to the Sale Agreement and the Amended Sale Agreement, resulting in net proceeds of approximately $ 5.0 million and $ 17.4 million, respectively.

During July 2020, Arbutus fully utilized the remaining availability under the Amended Sale Agreement resulting in an additional $ 36.5 million of net proceeds from the issuance of 9,548,780 common shares.

Stock-based compensation

The table below summarizes information about the Company’s stock based compensation for the three months ended March 31, 2020 and 2019 and the expense recognized in the condensed consolidated statements of operations:

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

The table below summarizes information about the Company’s stock based compensation for the three and six months ended June 30, 2020 and 2019 and the expense recognized in the condensed consolidated statements of operations:

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

(in thousands, except share and per share data)

8 unchanged sentences

The conversion price is $ 7.13 per share, which will result in the Preferred Shares being converted into approximately 23 million common shares.

After conversion of the Preferred Shares into common shares, based on the number of common shares outstanding as of March 31, 2020 , Roivant would hold approximately 42% of the Company’s common shares.

After conversion of the Preferred Shares into common shares, based on the number of common shares outstanding as of June 30, 2020, Roivant will hold approximately 41 % of the Company’s common shares.

Roivant agreed to a four year lock-up period for this investment and its existing holdings in the Company.

6 unchanged sentences

These services were billed at agreed hourly rates and were reflective of market rates for such services.

The total cost of these services for the three months ended March 31, 2019 was $33 thousand , which was included in the Condensed Consolidated Statement of Operations under research and development.

The total cost of these services during 2019 was less than $ 0.1 million, which was included in the Condensed Consolidated Statement of Operations under research and development.

There were no such costs incurred during 2020.

Conversely, Genevant purchased certain administrative and transitional services from the Company totaling $19 thousand and $164 thousand for the three months ended March 31, 2020 and 2019, respectively, which were netted against research and development expenses in the condensed consolidated statements of operations.

Conversely, Genevant purchased certain administrative and transitional services from the Company totaling $ 19.3 thousand and $ 38.5 thousand for the three and six months ended June 30, 2020, respectively.

The total income from these services was $ 73 thousand and $ 189 thousand for the three and six months ended June 30, 2019, which were netted against research and development expenses in the condensed consolidated statements of operations.

In addition, during 2019 Genevant had a sublease for 17,900 square feet in the Company’s Burnaby facility.

Sublease income from Genevant was $0.1 million for the three months ended March 31, 2019 , and was netted against site consolidation costs and lease liability.

Sublease income from Genevant was $ 62 thousand and $ 124 thousand for the three and six months ended June 30, 2019, and was netted against site consolidation costs and lease liability.

The Company’s Burnaby facility lease and the corresponding sublease to Genevant expired on July 31, 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements