What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 178 added, 188 removed, 319 unchanged (53% of the section changed)

4 unchanged sentences

Dollars, except share and per share amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets:

13 unchanged sentences

Accounts payable and accrued liabilities $ 8,715 $ 10,838

Deferred license revenue, current 23,255 —

Lease liability, current 439 383

1 unchanged sentence

Liability related to sale of future royalties 15,439 16,296

Deferred license revenue, non-current 15,585 —

Contingent consideration 5,499 5,298

2 unchanged sentences

Stockholders’ equity

Preferred shares

unlimited number without par value

Issued and outstanding:

1,164,000 (December 31, 2020:

160,973 149,408

Common shares

3 unchanged sentences

144,987,736 )

1,298,212 1,286,636

Additional paid-in capital 67,151 65,485

9 unchanged sentences

Dollars, except share and per share amounts)

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

2021 2020 2021 2020

Three Months Ended March 31,

Collaborations and licenses $ 11,218 $ 1,154

4 unchanged sentences

General and administrative 4,892 3,878

Depreciation 447 490 1,326 1,491

Change in fair value of contingent consideration 201 129

Site consolidation — — — 64

Total operating expenses 23,555 17,789

4 unchanged sentences

Foreign exchange (loss) gain — 28

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

Total other loss ( 347 ) ( 705 )

Loss before income taxes ( 11,321 ) ( 16,381 )

Income tax expense ( 4,444 ) —

Net loss $ ( 15,765 ) $ ( 16,381 )

6 unchanged sentences

Basic and diluted 148,428,326 93,434,378

Comprehensive income (loss)

Comprehensive (loss) income

Unrealized (loss) gain on available-for-sale securities $ ( 1,071 ) $ 3

Currency translation adjustments — 44 — 44

Comprehensive loss $ ( 16,836 ) $ ( 16,378 )

4 unchanged sentences

Dollars, except share and per share amounts)

Convertible Preferred Shares Common Shares

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

Common Shares

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

Balance December 31, 2021 144,987,736 $ 1,286,636 $ 65,485 $ ( 1,134,347 ) $ ( 48,335 ) $ 169,439

Accretion of accumulated dividends on Preferred Shares — 3,212 — — — ( 3,212 ) — —

Stock-based compensation — — 1,736 — — 1,736

3 unchanged sentences

Issuance of common shares pursuant to ESPP 86,501 317 ( 81 ) — — 236

Unrealized gain on available-for-sale securities — — — — — — 3 3

Net loss — — — — — ( 16,381 ) — ( 16,381 )

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

Issuance of common shares pursuant to Share Purchase Agreement 3,579,952 10,973 — — — 10,973

Unrealized loss on available-for-sale securities — — — — ( 1,071 ) ( 1,071 )

Net loss — — — ( 15,765 ) — ( 15,765 )

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

Balance March 31, 2022 148,728,237 $ 1,298,212 $ 67,151 $ ( 1,150,112 ) $ ( 49,406 ) $ 165,845

See accompanying notes to the condensed consolidated financial statements.

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Issuance of common shares pursuant to exercise of options — — 65,952 335 ( 127 ) — — 208

Issuance of common shares pursuant to ESPP — — 104,917 425 ( 178 ) — — 247

Unrealized gain on available-for-sale securities — — — — — — 3 3

1 unchanged sentence

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 — 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

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.

Nine Months Ended September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES

5 unchanged sentences

Change in fair value of contingent consideration 201 129

Net equity investment loss — 2,544

Non-cash royalty revenue ( 1,363 ) ( 959 )

5 unchanged sentences

Accounts payable and accrued liabilities ( 2,102 ) ( 2,796 )

Restructuring accrual — ( 137 )

Deferred license revenue 38,840 —

Other liabilities ( 75 ) ( 116 )

Net cash used in operating activities ( 47,926 ) ( 36,428 )

Net cash provided by (used in) operating activities 20,619 ( 17,881 )

INVESTING ACTIVITIES

1 unchanged sentence

Disposition of investments 2,000 20,350

Investment in Genevant — ( 2,500 )

Acquisition of property and equipment ( 75 ) ( 99 )

1 unchanged sentence

FINANCING ACTIVITIES

Issuance of common shares pursuant to Share Purchase Agreement 10,973 —

Issuance of common shares pursuant to the Open Market Sale agreement 268 26,419

3 unchanged sentences

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

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

(Decrease) Increase in cash and cash equivalents ( 27,952 ) 27,170

Cash and cash equivalents, beginning of period 109,282 52,251

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 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.

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 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 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.

Arbutus Biopharma Corporation (“Arbutus” or the “Company”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop novel therapeutics that target specific viral diseases.

The Company’s current focus areas include Hepatitis B virus (“HBV”) and coronaviruses, including SARS-CoV-2.

In HBV, the Company is developing an RNA interference (“RNAi”) therapeutic, oral capsid inhibitor, oral PD-L1 inhibitor, and oral RNA destabilizer that it intends to combine to provide a functional cure for patients with chronic HBV infection (“cHBV”) by suppressing viral replication, reducing surface antigen and reawakening the immune system.

The Company believes its lead compound, AB-729, is the only RNAi therapeutic with evidence of immune re-awakening, and is currently being evaluated in multiple phase 2 clinical trials.

The Company has an ongoing drug discovery and development program directed to identifying novel, orally active agents for treating coronaviruses, including SARS-CoV-2.

The Company is also exploring oncology applications for its internal PD-L1 portfolio.

At March 31, 2022, the Company had an aggregate of $ 221.8 million in cash, cash equivalents and investments in marketable securities.

The Company had no outstanding debt as of March 31, 2022.

The Company believes it has sufficient cash resources to fund its operations for at least the next 12 months.

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

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COVID-19 Impact

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

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 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 patients 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.

The COVID-19 pandemic has resulted in and will likely continue to result in significant disruptions to businesses.

Measures implemented around the world in attempts to slow the spread of COVID-19 have had, and will likely continue to have, a major impact on clinical development, at least in the near-term, including shortages and delays in the supply chain and prohibitions in certain countries on enrolling patients in new clinical trials.

While the Company has been able to progress with its 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

Basis of presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial statements and, accordingly, do not include all disclosures required for annual financial statements.

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 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.

Basis of presentation and principles of consolidation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial statements and accordingly, do not include all disclosures required for annual financial statements.

These statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

These unaudited condensed consolidated financial statements include the accounts of Arbutus Biopharma Corporation and its one wholly-owned subsidiary, Arbutus Biopharma, Inc., and reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of March 31, 2022 and December 31, 2021, the Company’s results of operations for the three months ended March 31, 2022 and 2021, and the Company’s cash flows for the three months ended March 31, 2022 and 2021.

Such adjustments are of a normal recurring nature.

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.

The results of operations for the three months ended March 31, 2022 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, 2021, except as described below under Recent Accounting Pronouncements.

Principles of consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its one wholly-owned subsidiary, Arbutus Biopharma Inc.

(“Arbutus Inc.”).

All intercompany transactions and balances have been eliminated.

All intercompany balances and transactions have been eliminated.

Certain prior year amounts have been reclassified to conform to the current year presentation.

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 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 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

Accounting Standards Codification 606, Revenue From Contracts with Customers (“ASC 606”) requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model:

Diluted net loss attributable to common shareholders per share does not differ from basic net loss attributable to common shareholders per share for the three months ended March 31, 2022 and 2021, since the effect of including potential common shares would be anti-dilutive.

For the three months ended March 31, 2022, potential common shares of 15.7 million pertaining to outstanding stock options were excluded from the calculation of net loss attributable to common shareholders per share.

A total of approximately 35.0 million outstanding stock options and if-converted Series A participating convertible preferred shares (“Preferred Shares”) were excluded from the calculation for the three months ended March 31, 2021.

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

Prior to that date, the Company followed the two-class method when computing net loss attributable to common shareholders per share as the Preferred Shares met the definition of participating securities.

The Preferred Shares entitled the holders to participate in dividends but did not require the holders to participate in losses of the Company.

Accordingly, net losses attributable to holders of the Company’s common shares were not allocated to holders of the Preferred Shares.

Revenue from collaborations and licenses

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.

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

The Company’s collaboration agreements fall under the scope of Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements (“ASC 808”) when both parties are active participants in the arrangement and are exposed to significant risks and rewards.

For certain arrangements under the scope of ASC 808, the Company analogizes to ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for some aspects, including for the delivery of a good or service (i.e., a unit of account).

ASC 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model:

(i) identify contract(s) with a customer;

3 unchanged sentences

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

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.

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

5 unchanged sentences

Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

Deferred Revenue

When consideration is received or is unconditionally due from a customer, collaborator or licensee prior to the Company completing its performance obligation to the customer, collaborator or licensee under the terms of a contract, deferred revenue is recorded.

Deferred revenue expected to be recognized as revenue within the 12 months following the balance sheet date is classified as a current liability.

Deferred revenue not expected to be recognized as revenue within the 12 months following the balance sheet date is classified as a long-term liability.

In accordance with ASC Topic 210-20, Balance Sheet - Offsetting the Company’s deferred revenue is offset by a contract asset as further discussed in Note 9.

Segment information

1 unchanged sentence

Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments (ASC 326).

The guidance is effective for the Company beginning January 1, 2023 and it changes how entities account for credit losses on financial assets and other instruments that are not measured at fair value through net income, including available-for-sale debt securities.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

The Company has reviewed all recently issued standards and has determined that such standards will not have a material impact on the Company’s financial statements or do not otherwise apply to the Company’s operations.

Fair value measurements

13 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 $ 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 Company determined the fair value of the contingent consideration was $ 5.5 million as of March 31, 2022 and the increase of $ 0.2 million from December 31, 2021 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, 2022.

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

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Level 1 Level 2 Level 3 Total

As of September 30, 2021 (in thousands)

As of March 31, 2022 (in thousands)

Cash and cash equivalents $ 81,330 $ — $ — $ 81,330

Short-term investments 43,520 — — 43,520

Long-term investments 30,534 — — 30,534

Investments in marketable securities, current — 84,147 — 84,147

Investments in marketable securities, non-current — 56,318 — 56,318

Total $ 81,330 $ 140,465 $ — $ 221,795

5 unchanged sentences

Cash and cash equivalents $ 109,282 $ — $ — $ 109,282

Short-term investments 71,017 — — 71,017

Investments in marketable securities, current — 46,035 — 46,035

Investments in marketable securities, non-current — $ 35,688 — $ 35,688

Total $ 109,282 $ 81,723 $ — $ 191,005

3 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 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 Decrease in fair value of liability Liability at end of the period

(in thousands)

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

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

Three Months Ended March 31, 2022 $ 26 $ — $ ( 21 ) $ 5

Three Months Ended March 31, 2021 $ 250 $ — $ ( 52 ) $ 198

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

1 unchanged sentence

(in thousands)

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

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

Three Months Ended March 31, 2022 $ 5,298 $ 201 $ 5,499

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

Investments in marketable securities

2 unchanged sentences

Gross Unrealized Loss (1)

As of September 30, 2021 (in thousands)

As of March 31, 2022 (in thousands)

Cash equivalents

8 unchanged sentences

US government agency bonds $ 12,311 $ — $ ( 213 ) $ 12,098

US treasury bills — — — —

US government bonds 44,677 — ( 457 ) 44,220

6 unchanged sentences

US government money market fund $ 62,836 $ — $ — $ 62,836

US treasury bills 2,000 — — 2,000

Total $ 62,836 $ — $ — $ 62,836

2 unchanged sentences

US treasury bills 37,968 — ( 53 ) 37,915

US government bonds 37,463 6 ( 1 ) 37,468

Total $ 46,099 $ — $ ( 64 ) $ 46,035

Investments in marketable long-term securities

US government agency bonds $ 13,068 $ — $ ( 29 ) $ 13,039

US treasury bills $ 22,707 $ — $ ( 58 ) $ 22,649

Total $ 35,775 $ — $ ( 87 ) $ 35,688

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

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.

The contractual term to maturity of the $ 84.1 million of short-term marketable securities held by the Company as of March 31, 2022 is less than one year.

As of March 31, 2022, the Company held $ 56.3 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2021, the Company’s $ 46.0 million of short-term marketable securities had contractual maturities of less than one year, while the Company’s $ 35.7 million of long-term marketable securities had maturities of more than one year, but less than five years.

There were no realized gains or losses for the three months ended March 31, 2022 or 2021.

Investment in Genevant

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

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

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

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

In addition, the Company participated in the recapitalization of Genevant with an investment of $ 2.5 million.

The Company determined that this $ 2.5 million additional investment in Genevant represented the funding of prior losses and accordingly, the Company recorded the amount as an equity investment loss on the Condensed Consolidated Statements of Operations and Comprehensive Loss in 2020.

Following the recapitalization, the Company owned approximately 16 % of the common equity of Genevant.

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

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

Due to the Company’s loss of significant influence with respect to Genevant as a result of the recapitalization, the Company discontinued the use of the equity method of accounting for its interest in Genevant.

Following the recapitalization, the Company accounts for its interest in Genevant as equity securities without readily determinable fair values.

Under the Genevant License, as amended, if a third party sublicensee of intellectual property licensed by Genevant from the Company commercializes a sublicensed product, the Company becomes entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if less, tiered low single-digit royalties on net sales of the sublicensed product.

The specified percentage is 20 % in the case of a mere sublicense (i.e., naked sublicense) by Genevant without additional contribution and 14 % in the case of a bona fide collaboration with Genevant.

Additionally, if Genevant receives proceeds from an action for infringement by any third parties of the Company’s intellectual property licensed to Genevant, the Company would be entitled to receive, after deduction of litigation costs, 20 % of the proceeds received by Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

The Company accounts for its interest in Genevant as equity securities without readily determinable fair values.

Accordingly, an estimate of the fair value of the securities is based on the original cost less previously recognized equity method losses, less impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or a similar Genevant securities.

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

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.

As of March 31, 2022, 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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in thousands)

3 unchanged sentences

Payroll accruals 1,438 4,279

Liability options 37 250

Other accrued liabilities 11 31

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

As of March 31, 2022, 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.

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

From the inception of the royalty sale through March 31, 2022, the Company has recorded an aggregate of $ 12.5 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 nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

During the three months ended March 31, 2022, the Company recognized non-cash royalty revenue of $ 1.4 million and non-cash interest expense of $ 0.5 million.

During the three months ended March 31, 2021, the Company recognized non-cash royalty revenue of $ 1.0 million and related non-cash interest expense of $ 0.8 million.

The table below shows the activity related to the net liability for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands)

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The Company has granted sublicenses under the UBC license to certain third parties, including Alnylam.

In November 2014, UBC filed a demand for arbitration against the Company which alleged entitlement to unpaid royalties.

In August 2019, the arbitrator issued his decision for the second phase of the arbitration, awarding UBC $ 5.9 million, which included interest of approximately $ 2.6 million.

The Company paid the $ 5.9 million award to UBC in September 2019 and paid an additional $ 0.2 million award for costs and attorneys’ fees in March 2021, and this matter is now fully resolved.

On December 18, 2020, UBC delivered to the Company a notice of arbitration alleging that under the cross license between UBC and Arbutus, it is due royalties of $ 2.0 million plus interest arising from the Company’s sale to OMERS of part of its royalty interest on future global net sales of ONPATTRO, currently being sold by Alnylam.

Oral hearings for this matter are currently scheduled to begin on April 25, 2022.

Oral hearings for this matter were held on April 25-26, 2022.

The Company does not believe that any royalties are due to UBC and the Company intends to vigorously contest UBC’s allegation.

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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 $ 5.1 million as of September 30, 2021.

The fair value of the contingent consideration was $ 5.5 million as of March 31, 2022.

Collaborations, contracts and licensing agreements

Collaborations

Qilu Pharmaceutical Co., Ltd.

In December 2021, the Company entered into a technology transfer and licensing agreement (the “License Agreement”) with Qilu Pharmaceutical Co., Ltd.

(“Qilu”), pursuant to which the Company granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by the Company, which is non-exclusive as to development and manufacturing and exclusive with respect to commercialization of AB-729, including pharmaceutical products that include AB-729, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the “Territory”).

In partial consideration for the rights granted by the Company, Qilu paid the Company a one-time upfront cash payment of $ 40.0 million on January 5, 2022, and agreed to pay the Company milestone payments totaling up to $ 245.0 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones.

Qilu also paid $ 4.4 million of withholding taxes to the Chinese taxing authority on the Company’s behalf, related to the upfront cash payment.

In addition, Qilu agreed to pay the Company double digit royalties into the low twenties percent based upon annual net sales of AB-729 in the Territory.

The royalties are payable on a product-by-product and region-by-region basis, subject to certain limitations.

Qilu is responsible for all costs related to developing, obtaining regulatory approval for, and commercializing AB-729 for the treatment or prevention of hepatitis B in the Territory.

Qilu is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one AB-729 product candidate in the Territory.

A joint development committee has been established between the Company and Qilu to coordinate and review the development, manufacturing and commercialization plans.

Both parties also have entered into a supply agreement and related quality agreement pursuant to which the Company will manufacture or have manufactured and supply Qilu with all quantities of AB-729 necessary for Qilu to develop and commercialize in the Territory until the Company has completed manufacturing technology transfer to Qilu and approval of a product manufactured by Qilu, or its designated contract manufacturing organization, by the National Medical Products Administration in China for AB-729.

Concurrent with the execution of the License Agreement, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the “Investor”), pursuant to which the Investor purchased 3,579,952 of the Company’s common shares, without par value (the “Common Shares”), at a purchase price of USD $ 4.19 per share, which was a 15 % premium on the thirty-day average closing price of the Common Shares as of the close of trading on December 10, 2021 (the “Share Transaction”).

The Company received $ 15.0 million of gross proceeds from the Share Transaction on January 6, 2022.

The Common Shares sold to the Investor in the Share Transaction represented approximately 2.5 % of the Common Shares outstanding immediately prior to the execution of the Share Purchase Agreement.

The License Agreement falls under the scope of ASC 808 as both parties are active participants in the arrangement and are exposed to significant risks and rewards.

While this arrangement is in the scope of ASC 808, the Company analogizes to ASC 606 for some aspects of this arrangement, including for the delivery of a good or service (i.e., a unit of account).

In accordance

with the guidance, the Company identified the following commitments under the arrangement:

(i) rights to develop, use, sell, have sold, offer for sale and import any product comprised of Licensed Product (the “Qilu License”) and (ii) drug supply obligations and manufacturing technology transfer (the “Manufacturing Obligations”).

The Company determined that these two commitments are not distinct performance obligations for purposes of recognizing revenue as the manufacturing process is highly specialized and Qilu would not be able to benefit from the Qilu License without the Company’s involvement in the manufacturing activities until the transfer of the manufacturing know-how is complete.

As such, the Company will combine these commitments into one performance obligation to which the transaction price will be allocated to and will recognize this transaction price associated with the bundled performance obligation over time using an inputs method based on labor hours expended by the Company on its Manufacturing Obligations.

The Company determined the initial transaction price of the combined performance obligation to be $ 49.1 million, which includes the $ 40.0 million upfront fee, $ 4.4 million of withholding taxes paid by Qilu on behalf of the Company, the premium paid for the Share Transaction of $ 4.1 million, and $ 0.7 million associated with certain manufacturing costs expected to be reimbursed by Qilu.

The Company determined the Milestone Payments to be variable consideration subject to constraint at inception.

At the end of each subsequent reporting period, the Company will reevaluate the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price.

Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

The following table outlines the transaction price and the changes to the related asset and liability balances during the three months ended March 31, 2022:

Three Months Ended March 31, 2022

Transaction Price Cumulative Collaboration Revenue Recognized Deferred License Revenue

(in thousands)

Combined performance obligation $ 49,142 $ 9,632 $ 39,510

Less contract asset ( 670 )

Total deferred license revenue 38,840

Less current portion of deferred license revenue 23,255

Non-current deferred license revenue $ 15,585

As of March 31, 2022, the balance of the deferred license revenue was $ 39.5 million, which, in accordance with ASC 210-20, was partially offset by the contract asset associated with the manufacturing cost reimbursement of $ 0.7 million, resulting in a net deferred license revenue liability of $ 38.8 million.

The $ 4.4 million of withholding taxes paid by Qilu on behalf of the Company was recorded as income tax expense during the three months ended March 31, 2022.

The Company incurred $ 0.6 million of incremental costs in obtaining the Qilu License, which the Company capitalized in other current assets and other assets and will amortize as a component of general and administrative expense commensurate with the recognition of the combined performance obligation.

The Company reevaluates the transaction price and the total estimated labor hours expected to be incurred to satisfy the performance obligations and adjusts the deferred revenue at the end of each reporting period.

Such changes will result in a change to the amount of collaboration revenue recognized and deferred revenue.

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 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.

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 patients 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.

In July 2021, the Company entered into a clinical collaboration agreement with Vaccitech plc (“Vaccitech”) to evaluate AB-729 followed by Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, in nucleos(t)ide reverse transcriptase inhibitor (“NrtI”)-suppressed patients with cHBV.

The Company is responsible for managing this Phase 2a proof-of-concept clinical trial, subject to oversight by a joint development committee comprised of representatives from the Company and Vaccitech.

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

Assembly Biosciences, Inc.

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.

In August 2020, the Company entered into a clinical collaboration agreement with Assembly Biosciences, Inc.

(“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 patients with HBV infection.

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

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.

The Company incurred $ 0.6 million and $ 0.8 million of costs related to the collaboration during the three months ended March 31, 2022 and 2021, respectively, 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.

X-Chem and Proteros

In March 2021, the Company, X-Chem, Inc.

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”) entered into a discovery research and license agreement focused 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.

and Proteros biostructures GmbH

In March 2021, the Company entered into a discovery research and license agreement with X-Chem, Inc.

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”) to focus on the discovery of novel inhibitors targeting the SARS-CoV-2 nsp5 main protease (M pro ).

This collaboration brings together the Company’s 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 the Company could potentially progress to clinical candidates.

The collaboration allows 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 the Company 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.

Through this collaboration, the Company has identified and obtained a worldwide exclusive license to several molecules that inhibit M pro , a validated target for the treatment of COVID-19 and potential future coronavirus outbreaks.

The Company incurred $ 0.3 million and $ 0.9 million of costs related to the collaboration during the three months ended March 31, 2022 and 2021, respectively, and reflected those costs in research and development in the statements of operations and comprehensive loss.

Royalty Entitlements

Alnylam Pharmaceuticals, Inc.

and Acuitas Therapeutics, Inc.

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

The Company has two royalty entitlements to Alnylam Pharmaceuticals, Inc.’s (“Alnylam”) global net sales of ONPATTRO.

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

Alnylam’s ONPATTRO, which represents the first approved application of the Company’s LNP technology, was approved by the United States Food and Drug Administration (“FDA”) and the European Medicines Agency (“EMA”) during the third quarter of 2018 and was launched by Alnylam immediately upon approval in the United States.

Alnylam launched ONPATTRO, the first approved application of the Company’s LNP technology, in 2018.

Under the terms of this license agreement, the Company is entitled to tiered royalty payments on global net sales of ONPATTRO ranging from 1.00 % - 2.33 % after offsets, with the highest tier applicable to annual net sales above $ 500 million.

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

The Company also has rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas.

From the inception of the royalty sale through March 31, 2022, an aggregate of $ 12.5 million of royalties have been earned by OMERS.

The Company also has 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.

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

Revenues are summarized in the following table:

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

2021 2020 2021 2020

(in thousands) (in thousands)

Three Months Ended March 31,

(in thousands)

Revenue from collaborations and licenses

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$ 1,534 $ 1,095

Qilu Pharmaceutical Co., Ltd.

Other milestone and royalty payments 52 59

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Alnylam Pharmaceuticals, Inc.

1,860 695 3,963 2,041

Total revenue $ 12,581 $ 2,113

Stockholders’ equity

Shareholders’ equity

Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares and preferred shares, without par value, and 1,164,000 Series A participating convertible preferred shares, without par value.

Open Market Sale Agreement

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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.

3, dated March 4, 2021 (as amended, the “Sale Agreement”), under which it may issue and sell common shares, from time to time.

On December 23, 2019, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”) (File No.

333-235674) and accompanying base prospectus, which was declared effective by the SEC on January 10, 2020 (the “January 2020 Registration Statement”), for the offer and sale of up to $ 150.0 million of the Company’s securities.

The January 2020 Registration Statement also contained a prospectus supplement in connection with the offering of up to $ 75.0 million of the Company’s common shares pursuant to the Sale Agreement.

This prospectus supplement was fully utilized during 2020.

On August 7, 2020, the Company filed a prospectus supplement with the SEC (the “August 2020 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 January 2020 Registration Statement.

The August 2020 Prospectus Supplement was fully utilized during 2020.

On August 28, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC (File No.

333-248467) and accompanying base prospectus, which was declared effective by the SEC on October 22, 2020 (the “October 2020 Registration Statement”), for the offer and sale of up to $ 200.0 million of the Company’s securities.

The March 2021 Prospectus Supplement was fully utilized during 2021.

On March 3, 2022, the Company filed a prospectus supplement with the SEC (the “March 2022 Prospectus Supplement”) in connection with the offering of up to an additional $ 100.0 million of its common shares pursuant to the Sale Agreement under:

(i) the January 2020 Registration Statement;

(ii) the October 2020 Registration Statement;

and (iii) a shelf registration statement on Form S-3 (File No.

333-260782) that was declared effective by the SEC on November 18, 2021.

During the three months ended March 31, 2022 , the Company issued 69,048 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $ 0.3 million.

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

As of March 31, 2022, there was approximately $ 152.0 million remaining available in aggregate under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

Stock-based compensation

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

The table below summarizes information about the Company’s stock based compensation for the three months ended March 31, 2022 and 2021 and the expense recognized in the condensed consolidated statements of operations:

Three Months Ended March 31,

(in thousands, except share and per share data)

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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 Preferred Shares were non-voting and were convertible into common shares at a conversion price of $ 7.13 per share (which represented 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 common shares on October 18, 2021, at which time the Preferred Shares were converted into 22,833,922 common shares and both the lockup and standstill periods that Roivant had previously agreed to expired.

As of March 31, 2022, Roivant owned approximately 26 % 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.

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Related party transactions

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

During the three months ended March 31, 2022 and 2021, 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