What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-05 · 163 added, 78 removed, 310 unchanged (44% 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, 2020 and our unaudited condensed consolidated financial statements for the three months ended March 31, 2021.

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

6 unchanged sentences

• our strategy, future operations, pre-clinical research, pre-clinical studies, clinical trials, prospects and the plans of management;

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

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

• 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”);

11 unchanged sentences

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

• our expectation for additional data from ongoing cohorts of the Phase 1a/1b trial of AB-729 to be available in the second quarter of 2021 (other than initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects, which are expected in the second half of 2021);

• our expectation for additional data from ongoing cohorts of the Phase 1a/1b trial of AB-729 to be available in the second half of 2021 (including initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects);

• 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 intention to initiate two Phase 2 clinical trials with AB-729, some with one or more approved or investigational agents, in the second half of 2021;

• our expectations regarding the anticipated trial design, timing, number of patients and dosing of our Phase 2 clinical trial of Assembly Biosciences, Inc.’s (“Assembly”) investigational HBV core inhibitor candidate, also known as a capsid inhibitor, vebicorvir, in combination with our proprietary GalNAc delivered RNAi therapeutic candidate, AB-729, and standard-of-care nucleos(t)ide reverse transcriptase inhibitor (NrtI) therapy for the treatment of patients with chronic HBV infection;

• our expectations regarding the anticipated trial design, timing, number of patients and dosing of our Phase 2a clinical trial of Assembly Biosciences, Inc.’s (“Assembly”) investigational HBV core inhibitor candidate, also known as a capsid inhibitor, vebicorvir, in combination with our proprietary GalNAc delivered RNAi therapeutic candidate, AB-729, and standard-of-care nucleos(t)ide reverse transcriptase inhibitor (NrtI) therapy for the treatment of patients with chronic HBV infection;

• our expectation to undertake a larger Phase 2b clinical trial to evaluate AB-729 in collaboration with Vaccitech plc (“Vaccitech”);

• our expectation to initiate two Phase 2a proof-of-concept clinical trials of AB-729 with Peg-IFNα-2a and Antios Therapeutics, Inc.’s (“Antios”) ATI-2173 in the second half of 2021;

• our expectation to file a Clinical Trial Application (CTA) for a Phase 2a proof-of-concept clinical trial of AB-729 with Vaccitech’s VTP-300 in the second half of 2021 and to initiate the clinical trial in early 2022;

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

7 unchanged sentences

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”) to result in the rapid screening of one of the largest small molecule libraries against M pro and the potential for us to progress related inhibitors to clinical candidates;

• the potential for our collaboration with X-Chem, Inc.

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”) to result in the rapid screening of one of the largest small molecule libraries against Mpro and the potential for us to progress related inhibitors to clinical candidates;

• payments from the Gritstone Oncology, Inc.

18 unchanged sentences

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

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

We are advancing multiple product candidates with distinct mechanisms of action and we believe the combination of two or more of these product candidates has the potential to provide a new curative regimen for chronic HBV infection.

6 unchanged sentences

Our two lead product candidates are AB-729, our proprietary subcutaneously-delivered RNAi product candidate that suppresses HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV, and AB-836, our 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.(“Assembly”).

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”).

We have announced positive preliminary results in the Phase 1a/1b clinical trial from several single and multi-dose cohorts of subjects with chronic HBV infection, which have demonstrated that treatment with AB-729 resulted in meaningful declines in HBsAg while being well tolerated with no serious adverse events noted after both single and repeat dosing.

We expect to provide additional data from ongoing cohorts of this Phase 1a/1b clinical trial in the second quarter of 2021, except for initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects, which are expected in the second half of 2021.

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

We expect to provide additional data from ongoing cohorts of this Phase 1a/1b clinical trial in the second half of 2021, including initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects.

We are enrolling subjects in a Phase 1a/1b clinical trial for AB-836 with initial data from healthy volunteers and HBV subjects anticipated in the second half of 2021.

AB-836 is from a novel chemical series differentiated from competitor compounds and has the potential to provide increased efficacy and an enhanced resistance profile.

2 unchanged sentences

We believe that our proprietary product candidates AB-729 and AB-836, along with existing approved therapies, may be combined into our first combination therapy for people with chronic HBV infection.

Additionally, through our collaboration with Assembly, we have initiated a Phase 2 proof-of-concept clinical trial with a triple combination of AB-729, our RNAi product candidate, Assembly’s lead HBV core inhibitor (capsid inhibitor) product candidate, vebicorvir (“VBR”), and nucleos(t)ide analog (“NA”) therapy for the treatment of people with chronic HBV infection.

We also intend to initiate two Phase 2 proof-of-concept clinical trials with AB-729 in combination with one or more approved or investigational agents in the second half of 2021 with dosing of AB-729 as infrequently as every 8 or 12 weeks.

To advance our efforts to position AB-729 as a potential cornerstone therapeutic in future HBV combination regimens, we have entered into several clinical collaborations to evaluate AB-729 in combination with other agents with potentially complementary mechanisms of action:

• Through our collaboration with Assembly, we are enrolling subjects in a Phase 2a proof-of-concept clinical trial with a triple combination of AB-729, our RNAi product candidate, Assembly’s lead HBV core inhibitor (capsid inhibitor) product candidate, vebicorvir (“VBR”), and nucleos(t)ide analog (“NA”) therapy for the treatment of people with chronic HBV infection.

• In July 2021, Arbutus received authorization from the U.S.

Food and Drug Administration to proceed with its Investigational New Drug (IND) application for AB-729 in a Phase 2a proof-of-concept clinical trial to evaluate AB-729 in combination with ongoing NA therapy and short courses of Peg-IFNα-2a in subjects with

chronic HBV infection.

This Phase 2a proof-of-concept clinical trial is expected to initiate in the second half of 2021.

• In July 2021, we entered into a clinical collaboration with Vaccitech to evaluate a triple combination of AB-729 with Vaccitech’s proprietary immunotherapeutic, VTP-300, and standard-of-care NA therapy for the treatment of subjects with chronic HBV infection.

We expect to file a Clinical Trial Application (CTA) in the second half of 2021 and initiate the clinical trial in early 2022.

• In June 2021, we entered into a clinical collaboration with 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.

This Phase 2a proof-of-concept clinical trial is expected to initiate in the second half of 2021.

• Advancement of an internal research program focused on identifying new small molecule antiviral medicines to treat COVID-19 and future coronavirus outbreaks.

7 unchanged sentences

Our HBV product pipeline consists of the following programs:

Our two lead product candidates are AB-729 and AB-836, which are both currently in ongoing Phase 1a/1b clinical trials.

Additionally, through our collaboration with Assembly, we have initiated a Phase 2 proof-of-concept clinical trial with AB-729, VBR, and an NA.

In parallel, we are in lead optimization with oral compounds for our PD-L1 program and next-generation HBV RNA destabilizer program.

At this time, our coronavirus research program is focused on the discovery and development of new molecular entities that address specific viral targets including the nsp12 viral polymerase and the nsp5 viral protease.

We continue to explore expansion of our HBV pipeline through internal discovery and development activities and through potential strategic alliances.

12 unchanged sentences

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

Upon completion of six months of dosing, so far, all subjects in the 60 mg dose every 4 weeks and 60 mg dose every 8 weeks cohorts have elected the option to reconsent and receive an additional six months of dosing for a total of 48 weeks.

Upon completion of six months of dosing, all subjects in the 60 mg dose every 4 weeks and 60 mg dose every 8 weeks cohorts elected the option to reconsent and receive an additional six months of dosing for a total of 48 weeks.

Part 1 of the trial, which dosed healthy volunteers, was completed and supported advancing doses ranging from 60 mg to 180 mg into Part 2.

We expect Part 2, which dosed subjects with chronic HBV infection with single doses of AB-729, to complete its 48 weeks of follow-up period in the second quarter of 2021.

Part 2 of the trial, which dosed subjects with chronic HBV infection with single doses of AB-729, completed its 48 weeks of follow-up period in the second quarter of 2021.

Additionally, several cohorts in Part 3 have received multiple doses of AB-729.

Results to date demonstrate that treatment of AB-729 has been safe and well tolerated.

Efficacy results to date suggest that:

• Single doses of 60 mg, 90 mg and 180 mg resulted in comparable mean HBsAg declines at week 12 followed by a sustained plateau phase (-0.99 log10 IU/mL vs -1.23 log10 IU/mL, vs -1.10 log10 IU/mL, respectively)

• Repeat dosing using the 60 mg dose every 4 weeks resulted in a continuous and robust mean HBsAg decline at week 16 (-1.44 log10 IU/mL, N=7) and continued through week 24 (-1.84 log10 IU/mL, N=7)

• Repeat dosing using the 60 mg dose every 8 weeks resulted in comparable mean HBsAg declines relative to the 60 mg dose every 4 weeks at week 16 (-1.39 log10 IU/mL vs -1.44 log10 IU/mL, p<0.7, respectively)

Single doses of 60 mg, 90 mg and 180 mg resulted in comparable mean HBsAg declines at week 12 (-0.99 log10 IU/mL vs -1.23 log10 IU/mL, vs -1.10 log10 IU/mL, respectively) followed by a sustained plateau phase.

In HBV DNA positive HBV subjects, a single 90 mg dose resulted in robust mean declines in HBsAg (-1.02 log10 IU/mL) and HBV DNA (-1.53 log10 IU/mL) at week 12, as well as decreases in HBV RNA and core-related antigen.

1 unchanged sentence

These findings support complete target engagement by AB-729.

We expect to provide additional data from ongoing cohorts of the Phase 1a/1b clinical trial in the second quarter of 2021, including additional data from the 60 mg multi-dose cohort (4 week and 8 week dosing intervals) and initial data from the 90 mg multi-dose cohort (8 week dosing interval).

We expect initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects to be available in the second half of 2021.

Additionally, we intend to advance AB-729 into two Phase 2 proof-of-concept combination clinical trials with one or more approved or investigational agents in the second half of 2021 with dosing of AB-729 as infrequently as every 8 or 12 weeks.

In June 2021, we presented three posters and a late breaker oral presentation at the 2021 EASL conference highlighting the most recent data from the multi-dose cohorts of this clinical trial.

Repeat dosing of AB-729 resulted in a robust mean HBsAg decline followed by a sustained plateau phase.

Repeat dosing using the 60 mg dose every 8 weeks resulted in comparable mean HBsAg declines relative to the 60 mg dose every 4 weeks.

Repeat dosing using the 90 mg dose every 8 weeks resulted in comparable mean HBsAg declines relative to the 60 mg dose every 8 weeks.

Additionally, based on 3/5 evaluable subjects, long term dosing of AB-729 demonstrated increased HBV specific immune responses, providing support for combination therapy including immunomodulatory agents.

Mean (range) change in HBsAg with repeat dosing of AB-729:

Visit Cohort E

AB-729 60 mg Q4W Cohort F

AB-729 60 mg Q8W Cohort I

AB-729 90 mg Q8W p value between Cohorts

Week 16 ‘ -1.44

(-0.71 to -1.95)

(-1.61 to -1.08)

(-0.89 to -2.44)

Week 24 ‘ -1.84

(-0.99 to -2.31)

(-1.24 to -2.01)

(-1.22 to -2.46)

Week 32 ‘ -1.84

(-0.94 to -2.36)

(-1.37 to -2.15)

Week 40 ‘ -1.84

(-0.88 to -2.47)

(-1.40 to -2.14)

Week 44 ‘ -1.81*

(-0.93 to -2.43)

(-1.32 to -2.34) [N=6]

Week 48 ‘ -1.89*

(-0.91 to -2.44)

ⱡ subjects switched to AB-729 60 mg Q12W after Week 20 dose

* Data updated since EASL ILC TM presentation

We expect to provide additional data from the ongoing cohorts of this Phase 1a/1b clinical trial in the second half of 2021, including initial data from the 90 mg every 12-week dosing interval cohort in HBV DNA negative subjects and initial data from the 90 mg every 8-week dosing interval cohort in HBV DNA positive subjects.

The efficacy and safety data for AB-729, derived from up to one year of dosing, support our view that 60 mg every 8 weeks is an appropriate dose to move forward in our upcoming Phase 2a clinical trials.

To advance our efforts to position AB-729 as a potential cornerstone therapeutic in future HBV combination regimens, we are evaluating AB-729 in several Phase 2a proof-of-concept combination clinical trials with other agents with potentially complementary mechanisms of action, including Peg-IFNα-2a and several investigational agents via clinical collaborations with other companies as described below.

Collaboration with Assembly

In August 2020, we 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.

Under the terms of the agreement, this trial will be a randomized, multi-center, open-label Phase 2 proof-of-concept clinical trial that will evaluate the safety, pharmacokinetics, and antiviral activity of the triple combination of AB-729, VBR, and an NA compared to the double combinations of VBR with an NA and AB-729 with an NA.

We are currently enrolling subjects in a randomized, multi-center, open-label Phase 2a proof-of-concept clinical trial is evaluating the safety, pharmacokinetics, and antiviral activity of the triple combination of AB-729, VBR, and an NA compared to the double combinations of VBR with an NA and AB-729 with an NA.

We expect to enroll approximately 60 virologically-suppressed subjects with HBeAg negative chronic HBV infection in the first cohort of this trial.

Patients will be dosed for 48 weeks with AB-729 60 mg subcutaneously every 8 weeks and VBR 300 mg orally once daily, with a 48-week follow-up period.

We and Assembly recently initiated screening for this clinical trial.

We and Assembly will share in the costs of the collaboration.

1 unchanged sentence

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

Collaboration with Vaccitech plc

In July 2021, we 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 NrtI-suppressed subjects with CHB.

Pending regulatory approval, the trial is expected to enroll 40 NA-suppressed, Hepatitis B e-antigen negative or positive, non-cirrhotic CHB subjects.

Subjects are expected to receive AB-729 + NA for 24 weeks.

At Week 24, subjects will be randomized 1:1 to receive either NA + VTP-300 or NA + VTP-300 sham.

At Week 48, all subjects are expected to be evaluated for eligibility to either discontinue all treatments or remain on their NrtI only.

Subjects are expected to be followed for an additional 48 weeks.

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

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

We expect to file a CTA in the second half of 2021 and initiate the clinical trial in early 2022.

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.

Collaboration with Antios Therapeutics, Inc.

In June 2021, we 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.

ATI-2173, AB-729 and Viread will be evaluated in combination in a single cohort in the ongoing Antios Phase 2a ANTT201 clinical trial.

The multi-center, double-blinded, placebo-controlled, multiple‑dose cohort will evaluate the safety, pharmacokinetics, immunogenicity, and antiviral activity of the combination of ATI-2173, AB-729 and Viread.

This cohort is expected to initiate in the second half of 2021.

Antios will be responsible for the costs of adding this single cohort to its ongoing 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, we have not provided any license grant to Antios for use of our AB-729 compound.

Phase 2a proof-of-concept clinical trial to evaluate AB-729 in combination with Peg-IFNα-2a

In July 2021,we received authorization from the U.S.

Food and Drug Administration to proceed with our Investigational New Drug (IND) application for AB-729 in a Phase 2a proof-of-concept clinical trial to evaluate AB-729 in combination with ongoing NA therapy and short courses of Peg-IFNα-2a in subjects with chronic HBV infection.

This is a randomized, open label, multicenter Phase 2a trial investigating the safety and antiviral activity of AB-729 in combination with ongoing NA therapy and short courses of Peg-IFNα-2a in subjects with CHB.

Pending protocol finalization, the trial is expected to enroll 40 stably NA-suppressed, HBeAg negative, non-cirrhotic CHB subjects.

After a 24-week dosing period of AB-729 (60 mg SC every 8 weeks (Q8W)), subjects will be randomized into one of 4 groups:

AB-729 + NA + weekly Peg-IFNα-2a for 24 weeks (N = 12)

NA + weekly Peg-IFNα-2a for 24 weeks (N = 12)

AB-729 + NA + weekly Peg-IFNα-2a for 12 weeks (N = 8)

NA + weekly Peg-IFNα-2a for 12 weeks (N = 8)

After completion of the assigned Peg-IFNα-2a treatment period, all subjects will remain on NA therapy for the initial 24-week follow up period, and then will discontinue NA treatment if treatment stopping criteria are met.

If subjects stop NA therapy, they will enter an intensive follow-up period for 48 weeks.

This Phase 2a proof-of-concept clinical trial is expected to initiate in the second half of 2021.

Oral Capsid Inhibitors (AB-836)

9 unchanged sentences

AB-836 is anticipated to be combinable with other mechanisms of action and is also anticipated to be dosed once daily.

We completed CTA/IND-enabling studies for AB-836 in the fourth quarter of 2020 and 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.

Oral PD-L1 Inhibitors

9 unchanged sentences

HBV RNA destabilizers have demonstrated additive effects in combination with other anti-HBV mechanisms of action.

HBV RNA destabilizers have the potential to complement or replace subcutaneously delivered RNAi agents, such as AB-729, with an oral therapy in combination with a capsid inhibitor and an approved NA.

HBV RNA destabilizers have the potential to complement or replace subcutaneously delivered RNAi agents, such as

AB-729, with an oral therapy in combination with a capsid inhibitor and an approved NA.

We continue to advance next-generation oral HBV RNA-destabilizers through lead optimization.

9 unchanged sentences

We are actively screening multiple new oral molecular entities.

Collaboration with X-Chem, Inc.

and Proteros biostructures GmbH

In March 2021, we entered into a discovery research and license agreement with X-Chem and Proteros to focus on the discovery of novel inhibitors targeting the SARS-CoV-2 nsp5 main protease (M pro ).

The agreement is designed to accelerate the development of pan-coronavirus agents to treat COVID-19 and potential future coronavirus outbreaks.

This collaboration brings together our expertise in the discovery and development of antiviral agents with X-Chem’s industry leading DNA-encoded library (DEL) technology and Proteros’ protein sciences, biophysics and structural biology capabilities and provides important synergies to potentially identify safe and effective therapies against coronaviruses including SARS-CoV-2.

The collaboration is expected to allow for the rapid screening of one of the largest small molecule libraries against M pro (an essential protein required for the virus to replicate itself) and the use of state-of-the-art structure guided methods to rapidly optimize M pro inhibitors, which we could potentially progress to clinical candidates.

The agreement provides for payments by the Company to X-Chem and Proteros upon satisfaction of certain development, regulatory and commercial milestones, as well as royalties on sales.

COVID-19 Impact

5 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, and prohibitions in certain countries on enrolling subjects in new clinical trials.

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

Royalty Entitlements and Collaborations

Collaboration with Assembly

In August 2020, we entered into a clinical collaboration agreement with Assembly to evaluate AB-729 in a Phase 2 proof-of-concept clinical trial in combination with Assembly’s lead HBV core inhibitor (capsid inhibitor) candidate VBR and standard-of-care NA therapy for the treatment of patients with chronic HBV infection.

We and Assembly have initiated screening and will share in the costs of the collaboration.

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 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 materially impact our plans and timelines in the future.

Other Royalty Entitlements and Collaborations

Alnylam Pharmaceuticals, Inc.

5 unchanged sentences

This royalty interest was sold to the Ontario Municipal Employees Retirement System (“OMERS”), effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees.

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

OMERS will retain this entitlement until it has received $30 million in royalties,

at which point 100% of this royalty entitlement 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 we are 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.

From the inception of the royalty sale through March 31, 2021, an aggregate of $6.0 million of royalties have been collected by OMERS.

From the inception of the royalty sale through June 30, 2021, an aggregate of $7.2 million of royalties have been collected by OMERS.

We also have rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc.

12 unchanged sentences

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

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

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

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

20 unchanged sentences

On January 9, 2019, Moderna filed an additional petition requesting Inter Partes Review of Arbutus United States Patent 8,058,069 (the “’069 Patent”).

The PTAB instituted Inter Partes Review of the ‘069 Patent, upholding all claims as valid.

The PTAB instituted Inter Partes Review of the ‘069 Patent and, on July 23, 2020, issued a decision upholding all claims as valid.

On September 23, 2020, Moderna appealed the ‘069 Inter Partes Review decision to the Federal Circuit Court of Appeals.

Moderna filed its opening brief in that appeal on February 23, 2021, and our response brief is due on May 11, 2021.

Moderna filed its opening brief in that appeal on February 23, 2021, Arbutus filed its

responsive brief on May 11, 2021, and Moderna filed its reply brief on July 1, 2021.

A hearing date has not yet been set for this matter.

Moderna and Merck European Oppositions

7 unchanged sentences

While we are the patent holder, the ‘127 Patent, the ‘435 Patent, the ‘069 Patent and the ‘254 Patent have been licensed to Genevant and are included in the exclusive rights licensed by us to Genevant under the Genevant License.

Collaboration with X-Chem, Inc.

and Proteros biostructures GmbH

In March 2021, we entered into a discovery research and license agreement with X-Chem and Proteros to focus on the discovery of novel inhibitors targeting the SARS-CoV-2 nsp5 main protease (M pro ).

The agreement is designed to accelerate the development of pan-coronavirus agents to treat COVID-19 and potential future coronavirus outbreaks.

The agreement provides for payments by the Company to X-Chem and Proteros upon satisfaction of certain development, regulatory and commercial milestones, as well as royalties on sales.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

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

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.

8 unchanged sentences

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

Three Months Ended March 31,

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

2021 2020 2021 2020

(in thousands)

7 unchanged sentences

Revenues are summarized in the following table:

Three Months Ended March 31,

Three Months Ended June 30,

2021 % of Total 2020 % of Total

8 unchanged sentences

Total revenue $ 2,329 100 % $ 1,514 100 %

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 2020 Form 10-K.

Total revenue increased $0.6 million for the three months ended March 31, 2021 compared to the same period in 2020, primarily due to an increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Six Months Ended June 30,

2021 % of Total 2020 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 2,258 51 % $ 1,514 50 %

Other milestone and royalty payments 81 2 % 146 5 %

Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

2,103 47 % 1,345 45 %

Total revenue $ 4,442 100 % $ 3,005 100 %

Total revenue increased $0.8 million and $1.4 million for the three and six months ended June 30, 2021 compared to the same periods in 2020, primarily due to an increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Operating expenses

Operating expenses are summarized in the following table:

Three Months Ended March 31,

Three Months Ended June 30,

2021 % of Total 2020 % of Total

6 unchanged sentences

Total operating expenses $ 20,971 100 % $ 14,655 100 %

Six Months Ended June 30,

2021 % of Total 2020 % of Total

(in thousands, except percentages)

Research and development $ 28,766 74 % $ 20,881 71 %

General and administrative 8,292 21 % 7,119 24 %

Depreciation 879 2 % 1,001 3 %

Change in fair value of contingent consideration 823 2 % 228 1 %

Site consolidation — — % 64 — %

Total operating expenses $ 38,760 100 % $ 29,293 100 %

Research and development

Research and development expenses consist primarily of personnel expenses, fees paid to clinical research organizations and contract manufacturers, consumables and materials, consulting, and other third party expenses to support our clinical and pre-clinical activities, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses increased $3.0 million for the three months ended March 31, 2021 compared to the same period in 2020.

Research and development expenses increased $4.9 million and $7.9 million for the three and six months ended June 30, 2021, respectively, compared to the same periods in 2020.

The increase was due primarily to higher expenses for our clinical development and discovery programs, including activities under our collaboration with Assembly and internal research efforts to treat COVID-19 and future coronavirus outbreaks, both of which initiated in mid-2020.

1 unchanged sentence

General and administrative

General and administrative expenses increased $0.3 million for the three months ended March 31, 2021, as compared to the same period in 2020, due primarily to increased non-cash stock-based compensation expense.

General and administrative expenses increased $0.9 million and $1.2 million for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, due primarily to increases in non-cash stock-based compensation expense and professional fees.

Change in fair value of contingent consideration

1 unchanged sentence

in March 2015.

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 during the three months ended March 31, 2021.

As AB-729 continues to progress through Phase 2a proof-of-concept clinical trials, we increase our assumption regarding probability of success commensurate with the progression of the program, which increases the liability.

Site consolidation

2 unchanged sentences

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

Three Months Ended March 31,

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

2021 2020 2021 2020

(in thousands)

4 unchanged sentences

Interest income

The decrease in interest income for the three months ended March 31, 2021 compared to the same period in 2020 was due primarily to a general decline in market interest rates.

The decrease in interest income for the three and six months ended June 30, 2021 compared to the same period in 2020 was due primarily to a general decline in market interest rates.

Interest expense

Interest expense for the three months ended March 31, 2021 consisted primarily of non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Interest expense for the three and six months ended June 30, 2021 consisted primarily of non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Foreign exchange gains (losses)

3 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

6 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

1 unchanged sentence

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, 2021, $17.9 million of cash was used in operating activities compared to $15.5 million for the three months ended March 31, 2020, an increase of $2.4 million.

The increase was due primarily to a $3.0 million

increase in research and development expenses due to higher expenses for our clinical development and discovery programs, including activities under our collaboration with Assembly and internal research efforts to treat COVID-19 and future coronavirus outbreaks, both of which initiated in mid-2020.

For the three months ended March 31, 2021, net cash provided by investing activities was $18.2 million, consisting primarily of additional investments in marketable securities of $2.0 million, offset by maturities of investments in marketable securities of $20.4 million.

For the three months ended March 31, 2020, net cash used in investing activities was $2.4 million consisting of maturities of $22.0 million and purchases of investments in marketable securities of $24.4 million.

For the three months ended March 31, 2021 and 2020, net cash provided by financing activities was $26.9 million and $12.5 million, respectively, 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, 2021, $31.9 million of cash was used in operating activities compared to $24.3 million for the six months ended June 30, 2020, an increase of $7.6 million.

The increase was due primarily to a $7.1 million increase in research and development expenses due to higher expenses for our clinical development and discovery programs, including activities under our collaboration with Assembly and internal research efforts to treat COVID-19 and future coronavirus outbreaks, both of which initiated in mid-2020.

For the six months ended June 30, 2021, net cash used in investing activities was $20.5 million, consisting primarily of additional investments in marketable securities of $54.1 million, partially offset by maturities of investments in marketable securities of $34.4 million.

For the six months ended June 30, 2020, net cash provided by investing activities was $21.0 million consisting of maturities of $46.9 million and purchases of investments in marketable securities of $25.9 million.

For the six months ended June 30, 2021 and 2020, net cash provided by financing activities was $31.2 million and $17.4 million, respectively, due primarily to proceeds from sales of common shares under our Open Market Sale Agreement, as amended, with Jefferies LLC (“Jefferies”).

Sources of Liquidity

As of March 31, 2021, we had cash, cash equivalents and investments of $132.0 million.

We had no outstanding debt as of March 31, 2021.

We have an Open Market Sale Agreement (“Sales Agreement”) with Jefferies dated December 20, 2018, as amended on December 20, 2019 (the “2019 Amended Sale Agreement”), under which we may issue and sell common shares, from time to time, under a shelf registration statement on Form S-3 (File No.

As of June 30, 2021, we had cash, cash equivalents and investments of $121.3 million.

We had no outstanding debt as of June 30, 2021.

We have an Open Market Sale Agreement (“Sale Agreement”) with Jefferies dated December 20, 2018, as amended on December 20, 2019 (the “2019 Amended Sale Agreement”), under which we may issue and sell common shares, from time to time, under a shelf registration statement on Form S-3 (File No.

333-235674), filed with the SEC on December 23, 2019 (the “2019 Shelf Registration Statement”).

4 unchanged sentences

On March 4, 2021, we filed another 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 Sale Agreement, as amended, under the 2020 Shelf Registration Statement.

During the three months ended March 31, 2021, we 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, we 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 six months ended June 30, 2021, we issued 7,845,925 common shares pursuant to the 2020 Amended Sale Agreement, resulting in net proceeds of approximately $30.7 million.

For the six months ended June 30, 2020, we issued 6,438,265 common shares pursuant to the 2019 Amended Sale Agreement, resulting in net proceeds of approximately $17.4 million.

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.

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 by Alnylam immediately upon approval in the United States.

6 unchanged sentences

Cash requirements

At March 31, 2021, we held an aggregate of $132.0 million in cash, cash equivalents and investments.

We believe that our cash resources as of March 31, 2021 will be sufficient to fund our operations through the third quarter of 2022 based on our expectation of a net cash burn between $70 million and $75 million in 2021.

At June 30, 2021, we held an aggregate of $121.3 million in cash, cash equivalents and investments.

We believe that our cash resources as of June 30, 2021 will be sufficient to fund our operations through the third quarter of 2022 based on our expectation of a net cash burn between $70 million and $75 million in 2021.

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

22 unchanged sentences

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