What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 100 added, 77 removed, 407 unchanged (30% of the section changed)

4 unchanged sentences

Dollars, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets:

13 unchanged sentences

Accounts payable and accrued liabilities $ 9,727 $ 9,151

Liability-classified options 132 250

Lease liability, current 386 390

26 unchanged sentences

Dollars, except share and per share amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

14 unchanged sentences

Foreign exchange (loss) gain ( 15 ) ( 19 ) — ( 84 )

Equity investment loss — ( 2,545 ) — ( 2,545 )

Total other loss ( 750 ) ( 3,538 ) ( 2,200 ) ( 5,198 )

10 unchanged sentences

Unrealized (loss) gain on available-for-sale securities $ ( 31 ) $ ( 72 ) $ ( 16 ) $ 58

Currency translation adjustments — 44 — 44

Comprehensive loss $ ( 19,189 ) $ ( 18,783 ) $ ( 54,942 ) $ ( 46,601 )

24 unchanged sentences

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

Accretion of accumulated dividends on Preferred Shares — 5,087 — — — ( 5,087 ) — —

Stock-based compensation — — — — 1,549 — — 1,549

Certain fair value adjustments to liability stock option awards — — — — ( 44 ) — — ( 44 )

Issuance of common shares pursuant to the Open Market Sale Agreement — — 11,869,217 44,736 — — — 44,736

Issuance of common shares pursuant to exercise of options — — 604,264 3,166 ( 1,164 ) — — 2,002

Issuance of common shares pursuant to ESPP — — 91,418 392 ( 178 ) — — 214

Unrealized gain on available-for-sale securities — — — — — — 12 12

Net loss — — — — — ( 19,158 ) — ( 19,158 )

Balance September 30, 2021 1,164,000 $ 160,973 110,264,915 $ 1,065,710 $ 64,096 $ ( 1,112,452 ) $ ( 48,187 ) $ 130,140

See accompanying notes to the condensed consolidated financial statements.

22 unchanged sentences

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

Accretion of accumulated dividends on Preferred Shares — 3,027 — — — ( 3,027 ) — —

Stock-based compensation — — — — 1,658 — — 1,658

Certain fair value adjustments to liability stock option awards — — — — ( 137 ) — — ( 137 )

Issuance of common shares pursuant to the Open Market Sale Agreement — — 13,258 48,760 — — — 48,760

Issuance of common shares pursuant to exercise of options — — 104 543 ( 207 ) — — 336

Unrealized gain on available-for-sale securities — — — — — — ( 72 ) ( 72 )

Currency translation adjustments — — — — — — 44 44

Net loss — — — — — ( 18,755 ) — ( 18,755 )

Balance September 30, 2020 1,164,000 $ 146,285 84,618,575 $ 965,369 $ 59,614 $ ( 1,025,796 ) $ ( 48,127 ) $ 97,345

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(In thousands of U.S.

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

5 unchanged sentences

Change in fair value of contingent consideration 1,679 348

Net equity investment loss — 2,544

Non-cash royalty revenue ( 3,963 ) ( 2,041 )

5 unchanged sentences

Accounts payable and accrued liabilities 585 ( 147 )

Restructuring accrual — ( 137 )

Other liabilities ( 243 ) ( 285 )

3 unchanged sentences

Disposition of investments 50,350 66,548

Investment in Genevant — ( 2,500 )

Acquisition of property and equipment ( 751 ) ( 77 )

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

Net cash (used in) provided by investing activities ( 4,557 ) 35,067

FINANCING ACTIVITIES

4 unchanged sentences

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

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

Increase in cash and cash equivalents 25,632 65,119

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 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.

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

Arbutus Biopharma Corporation (the “Company” or “Arbutus”) is a clinical-stage biopharmaceutical company primarily focused on discovering, developing and commercializing a broad portfolio of wholly-owned assets with different modes of action to provide a cure for people with chronic hepatitis B virus (HBV) infection.

The Company is advancing multiple product candidates with distinct mechanisms of action that suppress viral replication, reduce surface antigen and reawaken the immune system.

Arbutus believes this three-prong approach is key to transforming the treatment and developing a potential cure for chronic HBV infection.

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

In addition, Arbutus has an ongoing drug discovery and development program directed to identifying orally active agents for treating coronaviruses (including COVID-19).

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.

2 unchanged sentences

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.

Additionally, the Company is enrolling healthy subjects and HBV patients in a Phase 1a/1b clinical trial for AB-836 with initial data expected in the fourth quarter of 2021.

At September 30, 2021, the Company had an aggregate of $ 151.9 million in cash, cash equivalents and investments in marketable securities.

The Company believes that these cash resources will be sufficient to fund its operations into the second quarter of 2023.

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

3 unchanged sentences

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

This virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to nearly every country in the world.

This virus has been declared a pandemic by the World Health Organization and has spread to nearly every country in the world.

The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society.

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

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

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

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

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.

3 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 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.

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 September 30, 2021 and December 31, 2020, the Company’s results of operations for the three and nine months ended September 30, 2021 and 2020, and the Company’s cash flows for the nine months ended September 30, 2021 and 2020.

Such adjustments are of a normal recurring nature.

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.

The results of operations for the three and nine months ended September 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.

5 unchanged sentences

Net loss attributable to common shareholders per share

The Company follows the two-class method when computing net loss attributable to common shareholders per share as the Company has issued Series A participating convertible preferred shares (“Preferred Shares”), as further described in note 10.

The Company’s Preferred Shares are participating securities, as they entitle the holders to participate in dividends.

However, the Company’s Preferred Shares do not require the holders to participate in losses of the Company and accordingly, if the Company reports a net loss attributable to holders of the Company’s common shares, net losses are not allocated to holders of the Preferred Shares.

The Company follows the two-class method when computing net loss attributable to common shareholders per share as the Company had issued Series A participating convertible preferred shares (“Preferred Shares”), as further described in note 10.

The Company’s Preferred Shares were participating securities, as they entitled the holders to participate in dividends.

However, the Company’s Preferred Shares did not require the holders to participate in losses of the Company and accordingly, if the Company reports a net loss attributable to holders of the Company’s common shares, net losses are not allocated to holders of the Preferred Shares.

Net loss attributable to common shareholders per share is calculated based on the weighted average number of common shares outstanding.

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 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.

During the nine months ended September 30, 2021 and 2020, potential common shares of 34.3 million and 31.6 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.

On October 18, 2021, the Preferred Shares were converted into 22,833,922 common shares.

As a result of the conversion, the Company will no longer utilize the two-class method when computing net loss per share.

Revenue recognition

8 unchanged sentences

Under such agreements, the Company is generally eligible to receive non-refundable upfront payments, funding for research and development services, milestone payments and royalties.

In contracts where the Company has more than one performance obligation to provide its customer with goods or services, each performance obligation is evaluated to determine whether it is distinct based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract.

separately identifiable from other promises in the contract.

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

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

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

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

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

24 unchanged sentences

To determine the fair value of the contingent consideration (note 8), the Company uses a probability weighted assessment of the likelihood the milestones would be met and the estimated timing of such payments, and then the potential contingent payments were discounted to their present value using a probability adjusted discount rate that reflects the early stage nature of the development program, 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 Company determined the fair value of the contingent consideration was $ 5.1 million as of September 30, 2021 and the increase of $ 1.7 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 nine months ended September 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 June 30, 2021 (in thousands)

As of September 30, 2021 (in thousands)

Cash and cash equivalents $ 77,883 $ — $ — $ 77,883

14 unchanged sentences

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

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

(in thousands)

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

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

Nine Months Ended September 30, 2021 $ 250 $ ( 96 ) $ ( 117 ) $ 37

Nine Months Ended September 30, 2020 $ 253 $ — $ 64 $ 317

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

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

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

(in thousands)

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

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

Nine Months Ended September 30, 2021 $ 3,426 $ 1,679 $ 5,105

Nine Months Ended September 30, 2020 $ 2,953 $ 348 $ 3,301

Investments in marketable securities

2 unchanged sentences

Gross Unrealized Loss (1)

As of June 30, 2021 (in thousands)

As of September 30, 2021 (in thousands)

Cash equivalents

25 unchanged sentences

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

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.

The contractual term to maturity of the $ 43.5 million of short-term marketable securities held by the Company as of September 30, 2021 is less than one year.

As of September 30, 2021, the Company held $ 30.5 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 short-term marketable securities had contractual maturities of less than one year.

There were no realized gains or losses for the three and nine months ended September 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 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.

As of September 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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands)

3 unchanged sentences

Payroll accruals 2,612 3,566

Liability options 37 250

Other accrued liabilities 3 9

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

As of September 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.

2 unchanged sentences

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 June 30, 2021, the Company has recorded an aggregate of $ 7.2 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through September 30, 2021, the Company has recorded an aggregate of $ 9.0 million of non-cash royalty revenue for royalties earned by OMERS.

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

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,

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

Nine Months Ended September 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 $ 4.2 million as of June 30, 2021.

The fair value of the contingent consideration was $ 5.1 million as of September 30, 2021.

Collaborations, contracts and licensing agreements

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”).

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 VTP-300, a proprietary T cell stimulating therapeutic vaccine, in nucleos(t)ide reverse transcriptase inhibitor-suppressed patients 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.

4 unchanged sentences

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.

2 unchanged sentences

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.

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

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.

The Company incurred $ 0.9 million and $ 2.1 million of costs related to the collaboration during the three and nine months ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

10 unchanged sentences

Open Market Sale Agreement

The Company has an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) dated December 20, 2018, as amended on December 20, 2019 (the “2019 Amended Sale Agreement”), under which it 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”).

In July 2020, the Company fully utilized the remaining availability under the 2019 Amended Sale Agreement.

In August 2020, the Company entered into an amendment to the 2019 Amended Sale Agreement (as amended, the “2020 Amended Sale Agreement”) with Jefferies, whereby the Company may issue and sell common shares, from time to time, for an aggregate sales price of up to $ 75 million, under the 2019 Shelf Registration Statement.

On August 7, 2020, the Company filed a prospectus supplement with the SEC (the “August 2020 Prospectus Supplement”) under the 2019 Shelf Registration Statement in connection with the offering of up to an additional $ 75 million of its common shares pursuant to the 2020 Amended Sale Agreement.

The Company filed a new shelf registration statement on Form S-3 (File No.

333-248467) with the SEC on August 28, 2020 (the “2020 Shelf Registration Statement”).

On March 4, 2021, the Company entered into an amendment to the 2020 Amended Sale Agreement with Jefferies to reflect that the Company may issue and sell additional common shares from time to time without a cap on the aggregate sales price (as amended, the “2021 Amended Sale Agreement”).

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 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.

The Company has an Open Market Sale Agreement with Jefferies LLC (“Jefferies”) dated December 20, 2018, as amended by Amendment No.

1, dated December 20, 2019, Amendment No.

2, dated August 7, 2020 and Amendment No.

3, dated March 4, 2021 (as amended, the “Sale Agreement”), under which it may issue and sell common shares, from time to time, under a shelf registration statement on Form S-3 (File No.

333-248467), filed with the SEC on August 28, 2020 (the “Registration Statement”).

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 Sale Agreement under the Registration Statement.

During the three and nine months ended September 30, 2021, the Company issued 11,869,217 and 19,715,142 common shares, respectively, pursuant to the Sale Agreement, resulting in net proceeds of approximately $ 44.7 million and $ 75.4 million, respectively.

For the three and nine months ended September 30, 2020, the Company issued 13,258,096 and 19,696,361 common shares, respectively, pursuant to the Sale Agreement, resulting in net proceeds of approximately $ 48.8 million and $ 66.1 million, respectively.

As of September 30, 2021, there was approximately $ 38.6 million remaining available under the March 2021 Prospectus Supplement.

On October 8, 2021, the Company filed a prospectus supplement with the SEC (the “October 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 under the Registration Statement.

Stock-based compensation

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

7 unchanged sentences

Series A Preferred Shares

On October 2, 2017, the Company announced that it entered into a subscription agreement with Roivant for the sale of Preferred Shares to Roivant for gross proceeds of $ 116.4 million.

The Preferred Shares are non-voting and are convertible into common shares at a conversion price of $ 7.13 per share (which represents a 15 % premium to the closing price of $ 6.20 per share).

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 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.

Roivant has also agreed to a four year standstill whereby Roivant will not acquire greater than 49.99 % of the Company’s common shares or securities convertible into common shares.

Both the lockup and standstill periods expire on October 18, 2021.

Following the expiration of the standstill period, Roivant will no longer be contractually prohibited from acquiring control of the Company.

The initial investment of $ 50.0 million closed on October 16, 2017, and the remaining amount of $ 66.4 million closed on January 12, 2018 following regulatory and shareholder approvals.

The Company records the Preferred Shares wholly as equity with no bifurcation of the conversion feature from the host contract, given that the Preferred Shares cannot be cash settled and the redemption features are within the Company’s control, which include a fixed conversion ratio with predetermined timing and proceeds.

The Company accrues for the 8.75 % per annum compounding coupon at each reporting period end date as an increase to preferred share capital, and an increase to deficit (see statement of stockholders’ equity).

In October 2017, the Company entered into a subscription agreement with Roivant for the sale of Preferred Shares to Roivant for gross proceeds of $ 116.4 million.

The Preferred Shares were non-voting and were convertible into common shares at a conversion price of $ 7.13 per share (which represents a 15 % premium to the closing price of $ 6.20 per share).

The purchase price for the Preferred Shares plus an amount equal to 8.75 % per annum, compounded annually, was subject to mandatory conversion into 22,833,922 common shares on October 18, 2021.

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

Roivant also agreed to a four year standstill whereby Roivant would not acquire greater than 49.99 % of the Company’s common shares or securities convertible into common shares.

On October 18, 2021, the Preferred Shares were converted into 22,833,922 common shares and both the lockup and standstill periods expired.

Following the conversion, Roivant owns approximately 29 % of the Company’s outstanding common shares.

The Company recorded the Preferred Shares wholly as equity with no bifurcation of the conversion feature from the host contract, given that the Preferred Shares could not be cash settled and the redemption features were within the Company’s control, which included a fixed conversion ratio with predetermined timing and proceeds.

The Company accrued for the 8.75 % per annum compounding coupon at each reporting period end date as an increase to preferred share capital, and an increase to deficit (see statement of stockholders’ equity).

Related party transactions

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

During the three and nine months ended September 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