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Item 2. Management’s Discussion and Analysis

2020-08-07 compared with 2020-05-11 · 125 added, 60 removed, 258 unchanged (42% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis by our management of our financial position and results of operations in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2019 and our unaudited condensed consolidated financial statements for the three months ended March 31, 2020 .

Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and are presented in U.S.

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• the potential impact of the COVID-19 pandemic on our business;

• our expectations regarding the technology that we licensed to Genevant Sciences Lt.

(“Genevant”);

• the discovery, development and commercialization of a curative combination regimen for chronic hepatitis B infection, a disease of the liver caused by the hepatitis B virus (“HBV”);

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• expanding our HBV drug candidate pipeline through internal development, acquisitions and in-licenses;

our expectation for AB-729 for additional results for the 12 week portion of the 60 mg single-dose cohort to be available in the second quarter of 2020

our expectation for AB-729 for preliminary results from a single-dose 90 mg cohort and a multi-dose 60 mg cohort Phase 1a/1b trial to be available in the second half of 2020;

• our expectation for AB-729 for preliminary results from a single-dose 90 mg cohort and multi-dose 60 mg cohorts in our Phase 1a/1b trial to be available in the second half of 2020;

• our expectation for AB-729 for preliminary results from a 90 mg single-dose cohort in HBV DNA positive subjects to be available in the second half of 2020;

• our expectation that AB-729 could be combined with our lead capsid inhibitor candidate, AB-836, and approved NAs, in our first combination therapy for HBV patients;

• our expectations regarding the dose interval for the planned AB-729 90 mg multi-dose cohorts;

• the potential for an oral HBsAg-reducing agent and potential all-oral combination therapy;

• our objective to complete IND/CTA-enabling studies for AB-836 by the end of 2020;

the potential for AB-836 to be low-dose with a wide therapeutic window and to address known capsid resistant variants T33N and 1105T;

• the potential for AB-836 to be low-dose regimen with a wide therapeutic window and to address known capsid resistant variants T33N and 1105T;

• the potential for AB-836 to have increased potency and an enhanced resistance profile, compared to our previous capsid inhibitor candidate, AB-506;

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• our expectation to pursue development of a next generation oral HBV RNA-destabilizer;

payments from our licensed agreement with Gritstone Oncology, Inc.;

• our expectations regarding our ability to develop a potential COVID-19 therapy;

• payments from our license agreement with Gritstone Oncology, Inc.;

• the expected return from strategic alliances, licensing agreements, and research collaborations;

• statements with respect to revenue and expense fluctuation and guidance;

having sufficient cash resources to fund our operations into mid-2021;

• having sufficient cash resources to fund our operations through mid-2022;

• obtaining funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, collaborative arrangements with pharmaceutical companies, other non-dilutive commercial arrangements and government grants and contracts;

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Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

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

We are 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.

Hepatitis B is a potentially life-threatening liver infection caused by HBV.

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Our focus is on developing new HBV treatment regimens with finite treatment durations and higher cure rates.

We define a cure as a functional cure where HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression are reduced to undetectable levels and sustained six months after a finite duration of therapy.

We define a cure as a functional cure where HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression are reduced to undetectable levels and this level of expression is sustained six months after a finite duration of therapy.

Our HBV product pipeline includes RNA interference (“RNAi”) therapeutics, oral capsid inhibitors, oral compounds that inhibit PD-L1 and oral HBV RNA destabilizers.

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• advancing a curative combination regimen through clinical development, regulatory approval and commercial launch.

Additionally, we have initiated an internal research program to identify new small molecule antiviral medicines to treat COVID-19 and future coronavirus outbreaks.

Our product candidates are first evaluated in Phase 1 clinical trials as a monotherapy or in combination with other currently-marketed therapies to assess patient safety and antiviral activity.

We are currently conducting a Phase 1a/1b clinical trial and performing pre-clinical and investigational new drug (“IND”)-enabling studies for our product candidates.

We are currently conducting a Phase 1a/1b clinical trial and performing pre-clinical and investigational new drug (“IND”)-enabling studies for our HBV product candidates.

Results from our Phase 1 clinical trials and other studies will inform the design of future Phase 2 and Phase 3 clinical trials that will evaluate a combination of our therapeutic agents in a potentially curative combination regimen.

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All subjects continued their nucleos(t)ide antiviral therapy throughout the trial.

Part 2 may also include dosing of AB-729 in HBV DNA positive chronic hepatitis B subjects.

In Part 3, chronic hepatitis B subjects, HBV DNA negative first and HBV DNA positive later, will receive multiple doses of AB-729 for up to six months.

Part 2 will also include dosing of AB-729 in HBV DNA positive chronic hepatitis B subjects.

• In Part 3, chronic hepatitis B subjects, HBV DNA negative first and HBV DNA positive later, will receive multiple doses of AB-729 for up to six months at four and eight week dosing intervals.

In March 2020, we announced positive preliminary results in the three cohorts of healthy subjects, all of whom received a single subcutaneous injection of AB-729 with no serious adverse events (“SAEs”) observed and most adverse events (“AEs”) were mild and considered unrelated to AB-729.

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There were no other clinically relevant abnormalities in laboratory tests, ECGs, or vital signs.

In March 2020, we also announced positive preliminary results in two cohorts (60 mg and 180 mg dose groups) of chronic hepatitis B subjects.

In March 2020, we also announced positive preliminary results in two cohorts (60 mg and 180 mg dose groups) of chronic hepatitis B subjects and, in May 2020, we announced additional Week 12 follow-up data on the 60 mg cohort.

All chronic hepatitis B subjects were on nucleos(t)ide antiviral therapy and received a single subcutaneous injection of AB-729.

The Day 29 mean log10 (SE) HBsAg decline was -0.24 (0.13) for the 60 mg single-dose cohort and -0.81 (0.38) for the 180 mg single-dose cohort.

In the 60 mg cohort, the maximum Day 29 decline was -0.62 log10.

Subjects in the 60 mg cohort will continue to be followed for up to twelve weeks post-dose.

The Week 12 mean log10 (SE) HBsAg decline was -0.98 (0.22) for the 180 mg single-dose cohort.

Additionally, after a single 180 mg dose, HBsAg levels continued to decline well beyond Week 12 three out of four subjects, suggesting that AB-729 has the potential to be dosed less frequently than every four weeks.

Mean HBsAg changes from baseline:

60 mg Single-Dose Cohort (N=6)

180 mg Single-Dose Cohort (N=4)

Day 29 mean log10 IU/mL

(Standard Error of the Mean)

Week 12 (day 84) mean log10 IU/mL (Standard Error of the Mean)

The Week 12 mean log10 (SE) HBsAg decline for the 60 mg single-dose cohort was equivalent to the 180 mg single-dose cohort.

AB-729 dosed at either 60 mg or 180 mg in chronic hepatitis B subjects was generally safe and well tolerated and there were no SAEs.

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Notably, this subject experienced an unrelated gastroenteritis and self-medicated.

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.

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

We are also dosing subjects in a 90 mg single-dose cohort and we have 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, we intend to initiate two 90 mg multi-dose cohorts in the second half of 2020.

As we await data from the 90 mg single-dose cohorts, we anticipate that the dose interval for the planned 90 mg multi-dose cohorts will be every eight and twelve weeks, respectively.

While we have been able to progress with our clinical and pre-clinical activities to date, it is not possible to predict if the COVID-19 pandemic will negatively impact our plans and timelines, including enrolling and monitoring subjects in the trial.

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By inhibiting assembly of functional viral capsids, the ability of HBV to replicate is impaired.

Capsid inhibitor molecules also inhibit the uncoating step of the viral life cycle and thus reduce the formation of cccDNA, the viral reservoir which resides in the cell nucleus, and is believed to play a role in viral persistence.

Our oral capsid inhibitor discovery effort generated promising next-generation compounds, which led to the nomination of AB-836 in January 2020.

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Immune Reawakening

We are in lead optimization with oral compounds potentially capable of reawakening patients’ HBV-specific immune response by inhibiting PD-L1.

We are in lead optimization with oral compounds which are potentially capable of reawakening patients’ HBV-specific immune response by inhibiting PD-L1.

These compounds complement our pipeline of agents and could potentially be an important part of a combination therapy for the treatment of HBV.

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These targets are essential viral proteins which we have experience in targeting.

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

We are actively screening multiple new oral molecular entities.

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

Royalty Entitlements

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This royalty entitlement from Acuitas has been retained by us and was not part of the royalty entitlement sale to OMERS.

Genevant Sciences, Ltd.

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

(“Roivant”), our largest shareholder, to launch 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.

We licensed exclusive rights to our 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.

We retained all rights to our LNP and conjugate delivery platforms for HBV.

We are 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 us to Genevant, we 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 our investment in Genevant was zero and we 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.

We are gratified by the recent decision of the PTAB, upholding the validity of one of the patents protecting our LNP technology that we have licensed to Genevant.

This decision reinforces our 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.

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

Following the recapitalization, we own 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.

We have a non-voting observer seat on Genevant’s Board of Directors.

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

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

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The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of

assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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The following summarizes the results of our operations for the periods shown:

Three Months Ended March 31,

(in thousands except per share amounts)

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

2020 2019 2020 2019

(in thousands)

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

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Other income (loss) (946) (2,670) (1,660) (6,725)

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

Dividend accretion of convertible preferred shares (2,995) (2,762) (5,973) (5,477)

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

Revenues are summarized in the following table:

Three Months Ended March 31,

Revenues are summarized in the following tables:

Three Months Ended June 30,

2020 % of Total 2019 % of Total

(in thousands, except percentages)

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Acuitas Therapeutics, Inc.

$ 761 50 % $ 288 44 %

Other milestone and royalty payments 63 4 % 110 17 %

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Alnylam Pharmaceuticals, Inc.

690 46 % 255 39 %

Total revenue $ 1,514 100 % $ 653 100 %

Six Months Ended June 30,

2020 % of Total 2019 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 1,514 50 % $ 645 48 %

Other milestone and royalty payments 146 5 % 169 13 %

Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

1,345 45 % 518 39 %

Total revenue $ 3,005 100 % $ 1,332 100 %

Revenue contracts are addressed in detail in the Overview section of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Form 10-K.

Revenue increased $0.8 million for the three months ended March 31, 2020 , as compared to the same period in 2019 , due primarily to an increase in royalties from the growth of Alnylam’s sales of Onpattro TM .

Revenue for the three months ended March 31, 2020 and 2019 consisted primarily of royalties on net sales of Alnylam's Onpattro TM and royalties on net sales of Acrotech Biopharma LLC’s Marqibo ® (formerly Spectrum Pharmaceuticals, Inc.).

Revenue increased $0.9 million and $1.7 million for the three and six months ended June 30, 2020, respectively, as compared to the same periods in 2019, due primarily to an increase in royalties from the growth of Alnylam’s sales of ONPATTRO.

Operating expenses

Operating expenses are summarized in the following tables:

Three Months Ended March 31,

Three Months Ended June 30,

2020 % of Total 2019 % of Total

(in thousands, except percentages)

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General and administrative 3,566 24 % 8,189 38 %

Depreciation 501 3 % 505 2 %

Change in fair value of contingent consideration 116 1 % 130 1 %

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Total operating expenses $ 14,655 100 % $ 21,298 100 %

Six Months Ended June 30,

2020 % of Total 2019 % of Total

(in thousands, except percentages)

Research and development $ 20,881 71 % $ 27,452 67 %

General and administrative 7,119 24 % 12,601 31 %

Depreciation 1,001 3 % 1,014 2 %

Change in fair value of contingent consideration 228 1 % 255 1 %

Site consolidation 64 — % (149) — %

Total operating expenses $ 29,293 100 % $ 41,173 100 %

Research and development

Research and development expenses consist primarily of clinical and pre-clinical trial expenses, personnel expenses, consulting and third party expenses, consumables and materials, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses decreased $4.3 million for the three months ended March 31, 2020 , as compared to the same period in 2019 .

The decrease in research and development expenses for the three months ended March 31, 2020 versus 2019 was due primarily to the decision in October 2019 to discontinue development of AB-506, our prior generation capsid inhibitor product candidate, as well as higher spend on AB-729 during the first quarter of 2019 for preclinical studies and drug product supply in preparation for the Phase 1a/1b clinical trial which commenced in the second quarter of 2019.

Research and development expenses decreased $2.3 million and $6.6 million for the three and six months ended June 30, 2020, respectively, as compared to the same periods in 2019.

The decrease was due primarily to the October 2019 decision to discontinue development of AB-506, our prior generation capsid inhibitor product candidate, as well as higher spend on AB-729 during 2019 for preclinical studies and drug product supply in preparation for the Phase 1a/1b clinical trial which commenced in the second quarter of 2019.

These decreases for the three and six months ended June 30, 2020 were partially offset by higher spend related to AB-836, our next generation capsid inhibitor.

A significant portion of our research and development expenses are not tracked by project as they benefit multiple projects or our technology platform and because our most-advanced programs are not yet in late-stage clinical development.

General and administrative

General and administrative expenses decreased $0.9 million for the three months ended March 31, 2020 , as compared to the same period in 2019 , due primarily to lower legal fees and non-cash stock based compensation expense.

General and administrative expenses decreased $4.6 million and $5.5 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to our former President and Chief Executive Officer's departure from the company in June 2019 and a decrease in legal fees primarily associated with the arbitration case with the University of British Columbia that was settled in September 2019.

In accordance with the terms of his legacy employment agreement, our former President and Chief Executive Officer received $2.3 million of cash severance, which was paid in July 2019, and we recognized $1.1 million of non-cash stock-based compensation expense for accelerated vesting of his stock options.

Change in fair value of contingent consideration

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In general, as time passes and assuming no changes to the assumptions related to the contingency, the fair value of the contingent consideration increases as the progress of our programs get closer to triggering contingent payments.

There were no changes to the assumptions related to the contingency in 2020.

Site consolidation

As of March 31, 2020 , we have recognized substantially all of the expense related to our site consolidation.

As of June 30, 2020, we have recognized all of the expense related to our site consolidation.

Other income (loss)

Other income (loss) is summarized in the following table:

Three Months Ended March 31,

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

2020 2019 2020 2019

(in thousands)

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Interest income

The $0.3 million decrease in interest income for the three months ended March 31, 2020 , compared to the same period in 2019 was due primarily to lower average cash and investment balances.

The decreases in interest income for the three and six months ended June 30, 2020, compared to the same periods in 2019 were due primarily to lower average cash and investment balances and a general decline in market interest rates.

Interest expense

Interest expense for the three months ended March 31, 2020 consisted primarily of non-cash amortization of the liability related to the sale of future royalties, which occurred in July 2019.

Interest expense for the three and six months ended June 30, 2020 consisted primarily of non-cash amortization of the liability related to the sale of future royalties, which occurred in July 2019.

Foreign exchange gains (losses)

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Gain on investment and equity investment losses

In the second quarter of 2018, together with Roivant, we launched Genevant Sciences Ltd.

In the second quarter of 2018, together with Roivant Science Ltd.

(“Roivant”), we launched Genevant Sciences Ltd.

(“Genevant”), a company focused on the discovery, development, and commercialization of a broad range of RNA-based therapeutics enabled by our LNP Delivery Technologies.

We account for our 40% ownership interest in Genevant using the equity method of accounting.

As of March 31, 2020, the carrying value of our investment in Genevant was zero and we did not record equity losses during the three months ended March 31, 2020.

For the three months ended March 31, 2019 , we recorded $4.7 million of equity investment losses, reflecting our proportionate share of Genevant’s net results on a one-quarter lag basis.

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.

As of June 30, 2020, the carrying value of our investment in Genevant was zero and we did not record equity losses during the three and six months ended June 30, 2020.

For the three and six months ended June 30, 2019, we recorded $3.3 million and $8.0 million of equity investment losses, reflecting our proportionate share of Genevant’s net results on a one-quarter lag basis.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flow activities for the periods indicated:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Items not involving cash:

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

Non-cash items 5,114 13,936

Net change in operating items (1,420) (1,555)

Net cash used in operating activities (24,254) (34,185)

Net cash provided by / (used in) investing activities

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

Net cash provided by financing activities 17,440 5,015

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

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Since our incorporation, we have financed our operations through the sales of equity, debt, revenues from research and development collaborations and licenses with corporate partners, royalty monetization, interest income on funds available for investment, and government contracts, grants and tax credits.

For the three months ended March 31, 2020 , $15.5 million of cash was used in operating activities compared to $16.6 million of cash used in the three months ended March 31, 2019 .

The decrease in net cash used in operating activities was due primarily to a reduction in expenses associated with our AB-506 development program that was discontinued in October 2019.

For the three months ended March 31, 2020 , net cash used in investing activities was $2.4 million as we purchased additional investments in marketable securities.

For the three months ended March 31, 2019 , net cash provided by investing activities was $61.0 million as certain short-term investments matured.

For the three months ended March 31, 2020 , net cash provided by financing activities was $12.5 million due primarily to proceeds from sales of common shares under our open market sale agreement, as amended, with Jefferies LLC (“Jefferies”).

For the three months ended March 31, 2019 , net cash provided by financing activities was $2.5 million due primarily to $2.2 million of proceeds from sales of common stock under such sales agreement.

For the six months ended June 30, 2020, $24.3 million of cash was used in operating activities compared to $34.2 million of cash used in the six months ended June 30, 2019.

The decrease in net cash used in operating activities was related primarily to lower research and development expenses from our decision in October 2019 to discontinue development of AB-506 as well as higher spend on AB-729 during 2019 for preclinical studies and drug product supply in preparation for the Phase 1a/1b clinical trial which commenced in the second quarter of 2019.

For the six months ended June 30, 2020, net cash provided by investing activities was $21.0 million as we purchased additional investments in marketable securities of $25.9 million, while $46.9 million of short-term investments matured.

For the six months ended June 30, 2019, net cash provided by investing activities was $71.0 million as certain short-term investments matured.

For the six months ended June 30, 2020, net cash provided by financing activities was $17.4 million due primarily to proceeds from sales of common shares under our open market sale agreement, as amended, with Jefferies LLC (“Jefferies”).

For the six months ended June 30, 2019, net cash provided by financing activities was $5.0 million due primarily to proceeds from sales of common stock under such sales agreement.

Sources of Liquidity

As of March 31, 2020 , we had cash, cash equivalents and investments of $88.1 million .

We had no outstanding debt at March 31, 2020 .

As of June 30, 2020, we had cash, cash equivalents and investments of $84.0 million.

We had no outstanding debt at June 30, 2020.

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

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The Amended Sale Agreement revised the original Sale Agreement to reflect that we may sell our common shares, from time to time, for an aggregate sales price of up to $50.0 million, under the New Shelf Registration Statement.

For the three months ended March 31, 2020 , we 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 , we had approximately $42.7 million remaining available under the Amended Sale Agreement.

For the six months ended June 30, 2020, we issued 6,438,265 common shares pursuant to the Sale Agreement and the Amended Sale Agreement, resulting in net proceeds of approximately $17.4 million.

During July 2020, we 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.

Additionally, we have a royalty entitlement on ONPATTRO, a drug developed by Alnylam that incorporates our LNP technology and was approved by the FDA and the EMA during the third quarter of 2018 and was launched immediately upon approval in the US.

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OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert to us.

OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect

any such future royalties.

OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties.

If this royalty entitlement reverts to us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part.

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The royalty from Acuitas has been retained by us and was not part of the royalty sale to OMERS.

In October 2017, we closed the sale of 500,000 Preferred Shares to Roivant for gross proceeds of $50.0 million.

In October 2017, we closed the sale of 500,000 Series A participating convertible preferred shares (the “Preferred Shares”) to Roivant for gross proceeds of $50.0 million.

A second tranche of 664,000 Preferred Shares for gross proceeds of $66.4 million closed in January 2018, following receipt of the approval of our shareholders.

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Cash requirements

At March 31, 2020 , we held an aggregate of $88.1 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of March 31, 2020 are sufficient to fund our operations into the middle of 2021.

At June 30, 2020, we held an aggregate of $84.0 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of June 30, 2020 plus the additional $36.5 million of proceeds received under our Amended Sale Agreement during July 2020 are sufficient to fund our operations into mid-2022.

In the future, substantial additional funds will be required to continue with the active development of our pipeline products and technologies.

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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 2. Management’s Discussion and Analysis