What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-05 · 100 added, 55 removed, 384 unchanged (29% of the section changed)

4 unchanged sentences

Dollars, except share and per share amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

6 unchanged sentences

(December 31, 2020:

Investments in marketable securities, non-current 42,906 —

Right of use asset 2,225 2,405

33 unchanged sentences

Dollars, except share and per share amounts)

Three Months Ended March 31,

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

2021 2020 2021 2020

Collaborations and licenses $ 1,185 $ 825 $ 2,339 $ 1,660

12 unchanged sentences

Interest expense ( 763 ) ( 1,099 ) ( 1,535 ) ( 2,140 )

Foreign exchange gain (loss) 28 ( 18 )

Foreign exchange (loss) gain ( 13 ) ( 47 ) 15 ( 65 )

Total other loss ( 745 ) ( 946 ) ( 1,450 ) ( 1,660 )

9 unchanged sentences

Comprehensive income (loss)

Unrealized gain on available-for-sale securities $ 3 $ 251

Unrealized (loss) gain on available-for-sale securities $ ( 31 ) $ 122 $ ( 28 ) $ 130

Comprehensive loss $ ( 19,418 ) $ ( 13,965 ) $ ( 35,796 ) $ ( 27,818 )

16 unchanged sentences

Balance March 31, 2021 1,164,000 $ 152,620 96,245,371 $ 1,013,118 $ 62,133 $ ( 1,065,554 ) $ ( 48,168 ) $ 114,149

Accretion of accumulated dividends on Preferred Shares — 3,266 — — — ( 3,266 ) — —

Stock-based compensation — — — — 1,758 — — 1,758

Certain fair value adjustments to liability stock option awards — — — — 51 — — 51

Issuance of common shares pursuant to the Open Market Sale Agreement — — 1,450,145 4,274 — — — 4,274

Issuance of common shares pursuant to exercise of options — — 4,500 24 ( 9 ) — — 15

Unrealized loss on available-for-sale securities — — — — — — ( 31 ) ( 31 )

Net loss — — — — — ( 19,387 ) — ( 19,387 )

Balance June 30, 2021 1,164,000 $ 155,886 97,700,016 $ 1,017,416 $ 63,933 $ ( 1,088,207 ) $ ( 48,199 ) $ 100,829

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

9 unchanged sentences

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

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 Sale 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.

2 unchanged sentences

(In thousands of U.S.

Three Months Ended March 31,

Six Months Ended June 30,

OPERATING ACTIVITIES

18 unchanged sentences

Acquisition of property and equipment ( 731 ) ( 66 )

Net cash provided (used) by investing activities 18,221 ( 2,401 )

Net cash (used) provided by investing activities ( 20,526 ) 20,970

FINANCING ACTIVITIES

4 unchanged sentences

Effect of foreign exchange rate changes on cash and cash equivalents ( 44 ) ( 56 )

Increase (decrease) in cash and cash equivalents 27,170 ( 5,383 )

(Decrease) increase in cash and cash equivalents ( 21,297 ) 14,100

Cash and cash equivalents, beginning of period 52,251 31,799

9 unchanged sentences

Description of the Business

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.

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

The Company is advancing multiple product candidates with distinct mechanisms of action that it believes have the potential to provide a new curative regimen for chronic HBV infection.

1 unchanged sentence

The Company’s two lead product candidates are AB-729, the Company’s proprietary subcutaneously-delivered RNA interference (“RNAi”) product candidate that suppresses HBsAg expression, and AB-836, the Company’s proprietary next-generation oral capsid inhibitor that suppresses HBV DNA replication.

AB-729 is currently in an ongoing Phase 1a/1b clinical trial and a Phase 2 clinical trial in collaboration with Assembly Biosciences, Inc.

AB-729 is currently in an ongoing Phase 1a/1b clinical trial and a Phase 2a proof-of-concept clinical trial in collaboration with Assembly Biosciences, Inc.

(“Assembly”).

The Company initiated a Phase 1a/1b clinical trial for AB-836 in the first quarter of 2021 with initial data expected in the second half of 2021.

At March 31, 2021, the Company had an aggregate of $ 132.0 million in cash, cash equivalents and investments in marketable securities.

The Company is also evaluating AB-729 in combination with other agents with potentially complementary mechanisms of action in multiple Phase 2a proof-of-concept clinical trials.

Additionally, the Company is enrolling subjects in a Phase 1a/1b clinical trial for AB-836 with initial data expected in the second half of 2021.

At June 30, 2021, the Company had an aggregate of $ 121.3 million in cash, cash equivalents and investments in marketable securities.

The Company believes that these cash resources will be sufficient to fund its operations through the third quarter of 2022.

9 unchanged sentences

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.

Additional measures that have had, and will likely continue to have, a major impact on clinical development, at least in the near-term, include shortages and delays in the supply chain, as well as prohibitions in certain countries on enrolling subjects in new clinical trials.

Future disruptions related to the COVID-19 pandemic could negatively impact the Company’s plans and timelines for the remainder of 2021 and beyond, including enrolling and monitoring subjects in its clinical trials.

Additional measures that have had, and will likely continue to have, a major impact on clinical development, at least in the near-term, include shortages and delays in the supply chain, and prohibitions in certain countries on enrolling subjects in new clinical trials.

While the Company has 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 materially impact the Company’s plans and timelines in the future.

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, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 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, 2021, the Company’s results of operations for the three months ended March 31, 2021 and the Company’s cash flows for the three months ended March 31, 2021.

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, 2021 and 2020, the Company’s results of operations for the three and six months ended June 30, 2021 and 2020, and the Company’s cash flows for the six months ended June 30, 2021 and 2020.

Such adjustments are of a normal recurring nature.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results for the full year.

The results of operations for the three and six months ended June 30, 2021 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, 2020, except as described below under Recent Accounting Pronouncements.

10 unchanged sentences

Diluted net loss attributable to common shareholders per share does not differ from basic net loss attributable to common shareholders per share since the effect of the Company’s stock options and convertible preferred stock was anti-dilutive.

During the three months ended March 31, 2021 and 2020, potential common shares of 35.0 million and 30.4 million, respectively, consisting of the “if-converted” number of Preferred Shares and outstanding stock options, were excluded from the calculation of net loss per share because their inclusion would be anti-dilutive.

During the six months ended June 30, 2021 and 2020, potential common shares of 35.4 million and 31.3 million, respectively, consisting of the “if-converted” number of Preferred Shares and outstanding stock options, were excluded from the calculation of net loss per share because their inclusion would be anti-dilutive.

Revenue recognition

5 unchanged sentences

and (v) recognize revenue when or as a performance obligation is satisfied.

The Company generates revenue primarily through collaboration agreements and license agreements.

The Company generates revenue through certain collaboration agreements and license agreements.

Such agreements may require the Company to deliver various rights and/or services, including intellectual property rights or licenses and research and development services.

29 unchanged sentences

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments.

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 $ 3.6 million as of March 31, 2021 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, 2021.

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, the time to complete the program development, and overall biotech indices.

The Company determined the fair value of the contingent consideration was $ 4.2 million as of June 30, 2021 and the increase of $ 0.8 million from December 31, 2020 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, 2021.

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

The Company assessed the sensitivity of the fair value measurement to changes in these unobservable inputs, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

The Company assessed the sensitivity of the fair value measurement to changes in these

unobservable inputs, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

The following tables present 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:

Level 1 Level 2 Level 3 Total

As of March 31, 2021 (in thousands)

As of June 30, 2021 (in thousands)

Cash and cash equivalents $ 30,954 $ — $ — $ 30,954

Short-term investments 47,425 — — 47,425

Long-term investments 42,906 — — 42,906

Total 121,285 — — 121,285

Liability-classified options — — 198 198

Liability-classified stock options — — 132 132

Contingent consideration — — 4,249 4,249

5 unchanged sentences

Total 123,268 — — 123,268

Liability-classified stock option awards — — 250 250

Liability-classified stock options — — 250 250

Contingent consideration — — 3,426 3,426

Total $ — $ — $ 3,676 $ 3,676

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

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

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, 2021 $ 250 $ — $ ( 52 ) $ 198

Three Months Ended March 31, 2020 $ 253 $ ( 9 ) $ ( 186 ) $ 58

Six Months Ended June 30, 2021 $ 250 $ — $ ( 118 ) $ 132

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

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

1 unchanged sentence

(in thousands)

Three Months Ended March 31, 2021 $ 3,426 $ 129 $ 3,555

Three Months Ended March 31, 2020 $ 2,953 $ 112 $ 3,065

Six Months Ended June 30, 2021 $ 3,426 $ 823 $ 4,249

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

Investments in marketable securities

2 unchanged sentences

Gross Unrealized Loss (1)

As of March 31, 2021 (in thousands)

As of June 30, 2021 (in thousands)

Cash equivalents

1 unchanged sentence

Total $ 13,406 $ — $ — $ 13,406

Investments in marketable securities

Investments in marketable short-term securities

US government agency bonds $ 2,043 $ — $ — $ 2,043

2 unchanged sentences

Total $ 47,419 $ 6 $ — $ 47,425

Investments in marketable long-term securities

US government agency bonds $ 12,281 $ — $ ( 7 ) $ 12,274

US treasury bills $ — $ — $ — $ —

US government bonds $ 30,644 $ — $ ( 12 ) $ 30,632

Total $ 42,925 $ — $ ( 19 ) $ 42,906

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

6 unchanged sentences

Total $ 15,703 $ — $ — $ 15,703

Investments in marketable securities

Investments in marketable short-term securities

US government agency bonds $ 11,550 $ 7 $ — $ 11,557

3 unchanged sentences

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

The contractual term to maturity of the $ 52.5 million of marketable securities held by the Company as of March 31, 2021 is less than one year.

As of December 31, 2020, the Company’s $ 71.0 million of marketable securities also had contractual maturities of less than one year.

There were no realized gains or losses for the three months ended March 31, 2021 or 2020.

The contractual term to maturity of the $ 47.4 million of short-term marketable securities held by the Company as of June 30, 2021 is less than one year.

As of June 30, 2021, the Company held $ 42.9 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2020, the Company’s $ 71.0 million of marketable securities had contractual maturities of less than one year.

There were no realized gains or losses for the three and six months ended June 30, 2021 or 2020.

Investment in Genevant

16 unchanged sentences

The Company’s entitlement to receive future royalties or sublicensing revenue under the Genevant License was not impacted by the recapitalization.

As of March 31, 2021, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 16 % of the common equity of Genevant.

As of June 30, 2021, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 16 % of the common equity of Genevant.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of the following:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands)

14 unchanged sentences

The discount, as well as $ 1.5 million of transaction costs, will be amortized as interest expense based on the projected balance of the liability as of the beginning of each period.

As of March 31, 2021, the Company estimated an effective annual interest rate of approximately 16 %.

Over the course of the Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in the timing of

forecasted royalty revenue.

As of June 30, 2021, the Company estimated an effective annual interest rate of approximately 16 %.

Over the course of the Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in the timing of forecasted royalty revenue.

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.

1 unchanged sentence

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

From the inception of the royalty sale through March 31, 2021, the Company has recorded an aggregate of $ 6.0 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through June 30, 2021, the Company has recorded an aggregate of $ 7.2 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.

The table below shows the activity related to the net liability for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

The table below shows the activity related to the net liability for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

(in thousands)

22 unchanged sentences

The contingent consideration is a financial liability and 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 $ 3.6 million as of March 31, 2021.

The fair value of the contingent consideration was $ 4.2 million as of June 30, 2021.

Collaborations, contracts and licensing agreements

Revenue contracts are described in detail in the Overview section of Part II, Item 8, “Financial Statements and Supplementary Data” in the Company’s 2020 Form 10-K.

Vaccitech plc

In July 2021, the Company entered into a clinical collaboration agreement with Vaccitech plc (“Vaccitech”) to evaluate the safety, pharmacokinetics, immunogenicity, and antiviral activity of AB-729 followed by Vaccitech’s proprietary immunotherapeutic, VTP-300, in nucleos(t)ide reverse transcriptase inhibitor-suppressed subjects with chronic HBV infection (“CHB”).

The Phase 2a clinical trial will be managed by Arbutus, subject to oversight by a joint development committee comprised of representatives from Arbutus and Vaccitech.

Arbutus and Vaccitech retain full rights to their respective product candidates and will split all costs associated with the clinical trial.

Pursuant to the agreement, the parties intend to undertake a larger Phase 2b clinical trial depending on the results of the initial Phase 2a clinical trial.

The collaboration with Vaccitech is within the scope of the collaborative arrangements guidance and reimbursements and cost-sharing proceeds will be reflected as reductions of research and development expense when realized in the Company’s condensed consolidated statements of operations.

Antios Therapeutics, Inc.

In June 2021, the Company entered into a clinical collaboration agreement with Antios Therapeutics, Inc.

(“Antios”) to evaluate a triple combination of AB-729, Antios’ proprietary active site polymerase inhibitor nucleotide (ASPIN), ATI-2173, and Viread (tenofovir disoproxil fumarate), for the treatment of subjects with chronic HBV infection.

Antios will be responsible for the costs of adding this single cohort to its ongoing Phase 2a ANTT201 clinical trial.

Arbutus will be responsible for the manufacture and supply of AB-729.

Except to the extent necessary to carry out Antios’ responsibilities with respect to the collaboration trial, the Company has not provided any license grant to Antios for use of its AB-729 compound.

Assembly Biosciences, Inc.

In August 2020, the Company entered into a clinical collaboration agreement with Assembly to evaluate AB-729 in combination with Assembly’s lead HBV core inhibitor (capsid inhibitor) candidate vebicorvir (“VBR”) and standard-of-care NA therapy for the treatment of subjects with chronic HBV infection.

The Company and Assembly will share in the costs of the collaboration.

The Company incurred $ 0.8 million of costs related to the collaboration during the three months ended March 31, 2021 and reflected those costs in research and development in the statement of operations and comprehensive loss.

The Company and Assembly are sharing in the costs of the collaboration.

The Company incurred $ 0.4 million and $ 1.2 million of costs related to the collaboration during the three and six months ended June 30, 2021 and reflected those costs in research and development in the statement of operations and comprehensive loss.

Except to the extent necessary to carry out Assembly’s responsibilities with respect to the collaboration trial, the Company has not provided any license grant to Assembly for use of its AB-729 compound.

19 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,

2021 2020 2021 2020

(in thousands) (in thousands)

Revenue from collaborations and licenses

4 unchanged sentences

Alnylam Pharmaceuticals, Inc.

1,144 690 2,103 1,345

Total revenue $ 2,329 $ 1,514 $ 4,442 3,005

10 unchanged sentences

Also, on March 4, 2021, the Company filed a prospectus supplement with the SEC (the “March 2021 Prospectus Supplement”) in connection with the offering of up to an additional $ 75.0 million of its common shares pursuant to the 2021 Amended Sale Agreement under the 2020 Shelf Registration Statement.

During the three months ended March 31, 2021, the Company issued 6,395,780 common shares pursuant to the 2020 Amended Sale Agreement, resulting in net proceeds of approximately $ 26.4 million.

For the three months ended March 31, 2020, the Company issued 4,147,081 common shares pursuant to the 2019 Amended Sale Agreement, resulting in net proceeds of approximately $ 12.3 million.

As of March 31, 2021, there was approximately $ 14.2 million available under the August 2020 Prospectus Supplement and $ 75.0 million available under the March 2021 Prospectus Supplement.

During the three and six months ended June 30, 2021, the Company issued 1,450,145 and 7,845,925 common shares pursuant to the 2020 Amended Sale Agreement, resulting in net proceeds of approximately $ 4.3 million and $ 30.7 million, respectively.

For the three and six months ended June 30, 2020, the Company issued 2,291,184 and 6,438,265 common shares pursuant to the 2019 Amended Sale Agreement, resulting in net proceeds of approximately $ 5.0 million and $ 17.4 million, respectively.

As of June 30, 2021, there was approximately $ 9.8 million available under the August 2020 Prospectus Supplement and $ 75.0 million available under the March 2021 Prospectus Supplement.

Stock-based compensation

The table below summarizes information about the Company’s stock based compensation for the three months ended March 31, 2021 and 2020 and the expense recognized in the condensed consolidated statements of operations:

Three Months Ended March 31,

The table below summarizes information about the Company’s stock based compensation for the three and six months ended June 30, 2021 and 2020 and the expense recognized in the condensed consolidated statements of operations:

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

2021 2020 2021 2020

(in thousands, except share and per share data)

9 unchanged sentences

The purchase price for the Preferred Shares plus an amount equal to 8.75 % per annum, compounded annually, will be subject to mandatory conversion into approximately 23 million common shares on October 18, 2021 (subject to limited exceptions in the event of certain fundamental corporate transactions relating to the Company’s capital structure or assets, which would permit earlier conversion at Roivant’s option).

Assuming conversion of the Preferred Shares into common shares, based on the number of common shares outstanding on March 31, 2021 Roivant would hold 32 % of the Company’s common shares.

Assuming conversion of the Preferred Shares into common shares, based on the number of common shares outstanding on June 30, 2021 Roivant would hold 32 % of the Company’s common shares.

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

6 unchanged sentences

Related party transactions

During the three months ended March 31, 2021 and 2020, Genevant purchased certain administrative services from the Company.

During the three and six months ended June 30, 2021 and 2020, Genevant purchased certain administrative services from the Company.

Income from these services was less than $ 0.1 million in both periods and is netted against research and development expenses in the condensed consolidated statements of operations.

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