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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 258 added, 228 removed, 226 unchanged (68% of the section changed)

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

You should read the following discussion and analysis by our management of our financial position and results of operations in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2020 and our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021.

You should read the following discussion and analysis by our management of our financial position and results of operations in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2021 and our unaudited condensed consolidated financial statements for the three months ended March 31, 2022.

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

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• the potential for us to discover and/or develop new molecular entities for treating coronaviruses, including COVID-19;

• the expected return and benefits from strategic alliances, licensing agreements, and research collaborations with third parties;

• the expected timing of returns and benefits from strategic alliances, licensing agreements, and research collaborations with third parties;

• our expectations regarding our technology licensed to third parties;

• the expected returns and benefits from strategic alliances, licensing agreements, and research collaborations with third parties, and the timing thereof;

• our expectations regarding our technology licensed to third parties, and the timing thereof;

• our anticipated revenue and expense fluctuation and guidance;

• our expectations regarding the timing of announcing data from our ongoing clinical trials;

• our expectations regarding current patent disputes and litigation;

• our expectation of a net cash burn between $90 million and $95 million in 2022;

• our belief that we have sufficient cash resources to fund our operations into the second quarter of 2024;

• the possibility that our and our collaboration partner’s clinical development plans could be further delayed or suspended as a result of the military action by Russia in Ukraine.

as well as other statements relating to our future operations, financial performance or financial condition, prospects or other future events.

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Forward-looking statements are based upon current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially and adversely from those expressed or implied by such statements.

Factors that could cause or contribute to such differences include, but are not limited

to, those discussed in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”), and in particular the risks and uncertainties discussed under “Item 1A-Risk Factors” of this Form 10-Q and the Form 10-K.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”), and in particular the risks and uncertainties discussed under “Item 1A-Risk Factors” of this Form 10-Q and the Form 10-K.

As a result, you should not place undue reliance on forward-looking statements.

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

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

We are advancing multiple product candidates with distinct mechanisms of action that are designed to suppress viral replication, reduce surface antigen and reawaken the immune system.

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

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

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

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

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

In HBV, we are developing an RNA interference (“RNAi”) therapeutic, oral capsid inhibitor, oral PD-L1 inhibitor, and oral RNA destabilizer that we intend 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.

We believe our 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.

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

We are also exploring oncology applications for our internal PD-L1 portfolio.

The core elements of our strategy include:

• Developing a broad portfolio of proprietary therapeutic product candidates that target multiple elements of the HBV viral lifecycle.

Our HBV product pipeline includes RNA interference (“RNAi”) therapeutics, oral capsid inhibitors, oral HBV RNA destabilizer compounds and oral compounds that inhibit PD-L1 with the intention of reawakening patients’ HBV-specific immune response.

We believe that suppressing HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression as well as reawakening patients’ HBV-specific immune response are the most important elements to achieving a functional cure.

We define a functional cure as unquantifiable plasma HBV DNA and HBsAg levels greater than six months after end of therapy with or without quantifiable anti-HBsAg antibodies.

Our two lead product candidates are AB-729, our proprietary subcutaneously-delivered RNAi product candidate that suppresses HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV, and AB-836, our proprietary next-generation oral capsid inhibitor that suppresses HBV DNA replication.

AB-729 is currently in an ongoing Phase 1a/1b clinical trial and two Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action.

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

We are conducting a Phase 1a/1b clinical trial for AB-836 with initial data from healthy subjects and HBV patients anticipated in the fourth quarter of 2021.

• Developing a broad portfolio of compounds that target cHBV.

Our HBV product pipeline includes a subcutaneously-delivered RNAi therapeutic, an oral capsid inhibitor, an oral HBV RNA destabilizer compound and an oral PD-L1 inhibitor.

We believe that by combining these compounds to suppress HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression as well as reawaken patients’ HBV-specific immune response, we can address the most important elements to achieving a functional cure.

We define a functional cure as unquantifiable plasma HBV DNA and HBsAg levels more than six months after treatment with or without quantifiable anti-HBsAg antibodies.

AB-729, our proprietary subcutaneously-delivered RNAi therapeutic product candidate that suppresses HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV, is currently in one ongoing Phase 1a/1b clinical trial (“AB-729-001”) and two Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action.

Preliminary data from AB-729-001 has shown that treatment with AB-729 resulted in meaningful declines in HBsAg while being well tolerated with no serious adverse events (SAEs) noted after both single and repeat dosing.

Preliminary data also suggests that long-term suppression of HBsAg with AB-729 results in increased HBV-specific immune response.

We anticipate presenting long-term on- and off-treatment follow-up data from AB-729-001 at a medical conference in 2022.

AB-836, our proprietary next-generation oral capsid inhibitor that suppresses HBV DNA replication, is currently in an ongoing Phase 1a/1b clinical trial (“AB-836-001”) where preliminary data from healthy subjects and HBV patients have shown that AB-836 is generally safe and well-tolerated with robust antiviral activity.

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

Additionally, we have commenced IND-enabling studies for our PD-L1 program.

We believe this compound has the potential to reawaken patients’ HBV-specific immune response.

In addition, we are in advanced lead optimization with next-generation oral HBV RNA destabilizer compounds that are designed to destabilize and ultimately degrade HBV RNAs resulting in the reduction of HBsAg.

• Creating combinations of therapeutic product candidates with complementary mechanisms of action designed to provide a functional cure for people with chronic HBV infection.

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

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

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

Assembly is conducting this clinical trial and expecting initial data in 2022.

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

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

We have dosed the first patient in this Phase 2a proof-of-concept clinical trial.

• In July 2021, we entered into a clinical collaboration with Vaccitech to evaluate a triple combination of AB-729 with Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, and standard-of-care NA therapy for the treatment of patients with chronic HBV infection.

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

• In June 2021, we entered into a clinical collaboration with Antios to evaluate a triple combination of AB-729, Antios’ proprietary active site polymerase inhibitor nucleotide (ASPIN), ATI-2173, and Viread (tenofovir disoproxil fumarate), for the treatment of patients with chronic HBV infection.

We expect that the additional cohort with AB-729 will be added to Antios’ ongoing phase 2 clinical trial in the fourth quarter of 2021.

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

We expect to announce additional data from AB-836-001 in the first half of 2022.

AB-101, our oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1, is advancing through IND-enabling studies that are anticipated to be completed in the second half of 2022.

We are also exploring potential oncology applications for our internal PD-L1 portfolio.

AB-161, our next-generation oral HBV specific RNA destabilizer, is advancing through IND-enabling studies that are anticipated to be completed in the second half of 2022.

We have conducted extensive non-clinical safety evaluations with AB-161 that gives us confidence in this molecule’s ability to circumvent the peripheral neuropathy findings seen in non-clinical safety studies with our first-generation oral RNA destabilizer, AB-452.

• Combining therapeutic product candidates with complementary mechanisms of action to find a functional cure for people with cHBV.

We believe that our proprietary product candidates AB-729, AB-836, AB-101 and AB-161, along with existing approved therapies, may provide our first proprietary combination therapy for people with cHBV.

In-line with our strategy to position AB-729 as a potential cornerstone therapeutic in future HBV combination regimens, and to help guide future development of combination therapies of AB-729 with other compounds from our proprietary HBV portfolio, we are evaluating AB-729 in combination with other agents with potentially complementary mechanisms of action, including the following:

• We are currently enrolling patients with cHBV in a Phase 2a proof-of-concept clinical trial to evaluate AB-729 in combination with ongoing standard-of-care nucleos(t)ide analogues (“NA”) therapy and short courses of Peg-IFNα-2a, with preliminary data anticipated in the second half of 2022.

• Through our collaboration with Assembly BioSciences, Inc.

(“Assembly”), enrollment is complete in a Phase 2a proof-of-concept clinical trial evaluating a triple combination of AB-729, Assembly’s lead HBV core inhibitor (capsid inhibitor) product candidate, vebicorvir (“VBR”), and NA therapy in patients with cHBV.

Assembly is conducting this clinical trial and expects preliminary data in the second half of 2022.

• Through our collaboration with Antios Therapeutics, Inc.

(“Antios”), enrollment was completed in a cohort of patients in Antios’ ongoing Phase 2a proof-of-concept clinical trial evaluating a triple combination of AB-729, Antios’ proprietary Active Site Polymerase Inhibitor Nucleotide (ASPIN), ATI-2173, and Viread (tenofovir disoproxil fumarate), a nucleos(t)ide reverse transcriptase inhibitor.

However, the majority of patients in this cohort were enrolled in Ukraine, which is currently in a state of war, and as a result these patients have been lost to follow-up before completing the clinical trial.

Therefore, we and Antios do not expect to report data on this cohort.

• Through our collaboration with Vaccitech plc (“Vaccitech”), we filed a Clinical Trial Application (CTA) in the fourth quarter of 2021 and anticipate starting to enroll patients in the first half of 2022, in a Phase 2a clinical trial (“AB-729-202”) to evaluate a triple combination of AB-729 with Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, and NA therapy for the treatment of patients with cHBV.

• Advancing small molecule antiviral product candidates to treat COVID-19 and future coronavirus outbreaks.

This program is focused on the discovery and development of new molecular entities for treating coronaviruses (including COVID-19) that address specific viral targets including the nsp12 viral polymerase and the nsp5 viral protease.

Our collaboration with X-Chem, Inc.

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”) 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 use state-of-the-art structure guided methods to rapidly optimize M pro inhibitors.

We are progressing lead candidates to nomination.

Through our collaboration with X-Chem, Inc.

(“X-Chem”) and Proteros biostructures GmbH (“Proteros”), we have identified and obtained a worldwide exclusive license to several molecules that inhibit the SARS-CoV-2 nsp5 main protease (“Mpro”), a validated target for the treatment of COVID-19 and potential future coronavirus outbreaks.

We expect to nominate a candidate that inhibits Mpro in the first half of 2022 and advance into IND-enabling studies in the second half of 2022.

We are also continuing lead optimization activities for an nsp12 viral polymerase candidate.

Our Product Candidates

Given the biology of HBV, we believe combination therapies are the key to more effective HBV treatment and a potential functional cure.

Our product pipeline includes multiple product candidates that target various steps in the viral lifecycle.

We believe each of these mechanisms, when administered for a finite duration in combination with existing approved therapies, have the potential to improve upon the standard of care and potentially lead to a functional cure.

Our HBV product pipeline consists of the following programs:

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

Our product pipeline includes multiple product candidates that target various steps in the HBV viral lifecycle and pan-coronavirus compounds that target essential enzymes for replication, the viral protease (Mpro) and polymerase (nsp12).

Our product pipeline consists of the following programs:

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

GalNAc RNAi (AB-729)

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RNAi therapeutics utilize a natural pathway within cells to silence genes by eliminating the disease-causing proteins that they code for.

We are developing RNAi therapeutics that are designed to reduce HBsAg expression and other HBV antigens in people chronically infected with HBV.

We are developing RNAi therapeutics that are designed to reduce HBsAg expression and other HBV antigens in people with cHBV.

Reducing HBsAg is widely believed to be a key prerequisite to enable a patient’s immune system to reawaken and respond against the virus.

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AB-729 reduces all HBV antigens and inhibits viral replication.

We are conducting a three-part Phase 1a/1b clinical trial designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of single- and multi-dose AB-729 in healthy subjects and in chronic HBV patients and to determine the most appropriate doses and dosing intervals to take forward into Phase 2 clinical development.

AB-729-001 is our three-part clinical trial designed to investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of single- and multi-dose AB-729 in healthy subjects and in cHBV patients and to determine the most appropriate doses and dosing intervals to take forward into Phase 2 clinical development.

Part 1 of the trial dosed healthy subjects, and upon completion, supported advancing doses ranging from 60 mg to 180 mg into Part 2.

Part 2 of the trial dosed patients with chronic HBV infection with single doses of AB-729, with all cohorts completing 48 weeks of follow-up in the second quarter of 2021.

Part 3 of the trial is dosing HBV DNA negative and positive patients with multiple doses of AB-729 for 4, 8 or twelve weeks, and is on-going.

Clinical data reported to date show that single and multi-doses of 60mg and 90mg of AB-729 are generally safe and well tolerated up to 48 weeks of dosing.

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

Repeat dosing of 60mg and 90mg of AB-729 resulted in comparable HBsAg decline profiles with a plateau in response observed around week 20, regardless of dose or dosing interval.

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

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

Visit Cohort E

AB-729 60 mg Q4W Cohort F

AB-729 60 mg Q8W Cohort I

AB-729 90 mg Q8W p value between Cohorts

Week 16 ‘ -1.44

(-0.71 to -1.95)

(-1.61 to -1.08)

(-0.89 to -2.44)

Week 24 ‘ -1.84

(-0.99 to -2.31)

(-1.24 to -2.01)

(-1.22 to -2.46)

Week 32 ‘ -1.84

(-0.94 to -2.36)

(-1.37 to -2.15)

Week 40 ‘ -1.84

(-0.88 to -2.47)

(-1.40 to -2.14)

Week 44 ‘ -1.81*

(-0.93 to -2.43)

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

Week 48 ‘ -1.89*

(-0.91 to -2.44)

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

* Data updated since EASL ILC TM presentation

Additional data from the ongoing cohorts in part 3 of this AB-729 Phase 1a/1b clinical trial will be presented in a poster session at The American Association for the Study of Liver Diseases (AASLD) – The Liver Meeting ® 2021 – The Digital Experience, taking place from November 12-15, 2021.

Key findings from the abstract include:

• AB-729 repeat dosing is generally safe and well tolerated.

• Robust mean declines in HBsAg were sustained with repeat dosing of AB-729, with no meaningful differences observed to date between doses (60 mg or 90 mg) and/or dosing intervals (every 4, 8 or 12 weeks).

• HBsAg suppression at levels <100 IU/mL is maintained in some patients up to 20 weeks following the last dose of AB-729.

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

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

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

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

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

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

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

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

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

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

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

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

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

Part 2 of the trial dosed patients with cHBV with single doses (60, 90 and 180 mg) of AB-729, and upon completion, showed that single doses of AB-729 result in comparable mean HBsAg declines at week 12 followed by a sustained plateau phase.

Part 3 of the trial is on-going and dosing HBV DNA negative and positive patients with multiple doses of AB-729 every 4, 8 or twelve weeks.

In November 2021, we presented a late breaker poster presentation at the 2021 AASLD liver meeting highlighting the most recent data from Part 3 of AB-729-001.

Repeat dosing of 60 mg and 90 mg of AB-729 resulted in robust mean declines (ranging from 1.8-2.0 log10 at week 40) in HBsAg that were sustained up to 48 weeks, with no statistically significant differences observed to date between the 60 mg and 90 mg dose and/or dosing intervals.

Data from the poster presentation also included long-term follow-up data for patients in cohort E (60 mg every four weeks) and cohort F (60 mg every eight weeks) who had been off AB-729 treatment for six months.

Suppression of HBsAg to levels <100 IU/mL were maintained up to 24 weeks off-treatment in 3 of 7 patients in cohort E and 1 of 3 patients with available data in cohort F.

Patients who remain below this clinically relevant threshold for six months after stopping AB-729 treatment could consider discontinuing their NA therapy to assess the potential for functional cure.

We anticipate presenting additional long-term on- and off-treatment follow-up data from Part 3 of this clinical trial at a medical conference in 2022.

Repeat dosing of both the 60 mg and 90 mg doses of AB-729 continues to be generally safe and well-tolerated.

There were no treatment-related SAEs or discontinuations.

The most common treatment emergent adverse events (“AEs”) were injection site-related, of which all were grade one and did not appear to be dose or interval dependent.

Alanine transaminase (“ALT”) and Aspatate transaminase (“AST”) elevations were asymptomatic and not considered AEs by the study investigators.

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

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

Phase 2a proof-of-concept clinical trial to evaluate AB-729 in combination with Peg-IFNα-2a (AB-729-201)

Following FDA authorization in July 2021 to proceed with our Investigational New Drug (IND) application, we initiated AB-729-201, a randomized, open label, multicenter Phase 2a proof-of-concept clinical trial investigating the safety and antiviral activity of AB-729 in combination with ongoing NA therapy and short courses of Peg-IFNα-2a in patients with cHBV.

We are currently enrolling up to 40 stably NA-suppressed, HBeAg negative, non-cirrhotic cHBV patients.

After 24-weeks of dosing with AB-729 (60 mg every 8 weeks), patients will be randomized into one of four groups to receive either AB-729 plus NA therapy plus Peg-IFNα-2a or NA therapy plus Peg-IFNα-2a for either 24 or 12 weeks.

After completion of the assigned Peg-IFNα-2a treatment period, all patients will remain on NA therapy for the initial 24-week follow-up period, and will then discontinue NA treatment, provided they meet certain stopping criteria.

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

We have dosed the first patient in this Phase 2a proof-of-concept clinical trial.

We anticipate preliminary data from the AB-729-201 clinical trial in the second half of 2022.

Collaboration with Assembly

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

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

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

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

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

Assembly is conducting this clinical trial and expecting initial data in 2022.

Under the terms of the collaboration, we and Assembly may also add additional cohorts in the future to evaluate other patient populations and/or combinations.

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

Collaboration with Vaccitech plc

In July 2021, we entered into a clinical collaboration agreement with Vaccitech plc (“Vaccitech”) to evaluate the safety, pharmacokinetics, immunogenicity, and antiviral activity of AB-729 followed by Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, in NrtI-suppressed patients with CHB.

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

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

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

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

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

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

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

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

Through a clinical collaboration agreement with Assembly that we entered into in August 2020, Assembly is evaluating AB-729 in combination with its lead HBV core inhibitor (capsid inhibitor) candidate VBR and standard-of-care NA therapy for the treatment of patients with cHBV.

The randomized, multi-center, open-label Phase 2a proof-of-concept clinical trial was designed to evaluate the safety, pharmacokinetics, and antiviral activity of the triple combination of AB-729, VBR, and an NA compared to the double combinations of VBR with an NA and AB-729 with an NA.

The clinical trial was designed to enroll approximately 60 virologically-suppressed patients with HBeAg negative cHBV in the first cohort of the trial.

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

Both parties will share in the costs of the collaboration.

Assembly has completed enrollment in the clinical trial and anticipates preliminary data in the second half of 2022.

Under the terms of the collaboration, both parties may also add additional cohorts in the future to evaluate other patient populations and/or combinations.

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

Collaboration with Vaccitech (AB-729-202)

Through a clinical collaboration agreement with Vaccitech that we entered into in July 2021, we are preparing to enroll patients in AB-729-202, a Phase 2a proof-of-concept clinical trial evaluating the safety, antiviral activity and immunogenicity of Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, administered after AB-729 in NrtI-suppressed patients with cHBV.

The trial is designed to enroll 40 NA-suppressed, HBeAg negative or positive, non-cirrhotic cHBV patients.

All patients will receive AB-729 (60mg every 8 weeks) plus NA therapy for 24 weeks.

At week 24, treatment with AB-729 will stop.

Patients will continue only their NA therapy and will be randomized to receive VTP-300 or placebo for an additional 24 weeks.

At week 48, all patients will be evaluated for eligibility to either discontinue or remain on NA therapy.

This clinical trial will be managed by us, subject to oversight by a joint development committee comprised of representatives from both companies.

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

We filed a CTA in the fourth quarter of 2021 and anticipate starting to enroll patients in the clinical trial in the first half of 2022.

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

Collaboration with Antios Therapeutics, Inc.

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

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

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

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

This cohort is expected to initiate in the fourth quarter of 2021.

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

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

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

Oral Capsid Inhibitors (AB-836)

Collaboration with Antios

Through a clinical collaboration agreement with Antios that we entered into in June 2021, Antios completed enrollment in a single cohort of its ongoing Antios Phase 2a ANTT201 clinical trial evaluating its proprietary Active Site Polymerase Inhibitor Nucleotide (ASPIN), ATI-2173, in combination with AB-729 and Viread (tenofovir disoproxil fumarate), a nucleos(t)ide reverse transcriptase inhibitor which is currently approved by the FDA, for the treatment of patients with cHBV.

Antios is responsible for conducting this clinical trial and for the costs of adding this single cohort to its ongoing clinical trial.

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

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

However, the majority of patients in this cohort were enrolled in Ukraine, which is currently in a state of war, and as a result these patients were lost to follow-up before completing the clinical trial.

Therefore, we and Antios do not expect to report data on this cohort.

Oral Capsid Inhibitor (AB-836)

HBV core protein assembles into a capsid structure, which is required for viral replication.

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

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

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

AB-836 is a capsid inhibitor from a novel chemical series differentiated from competitor compounds with the potential for increased efficacy and an enhanced resistance profile.

AB-836 leverages a novel binding site within the core protein dimer-dimer interface, has shown to be active against NA resistant variants and has the potential to address certain known capsid resistant variants.

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

We completed CTA/IND-enabling studies for AB-836 in the fourth quarter of 2020 and initiated a double-blind, randomized, placebo-controlled, single and multiple dose Phase 1a/1b clinical trial evaluating the safety, tolerability, and pharmacokinetics and pharmacodynamics of AB-836 in the first quarter of 2021, with initial data from healthy subjects and HBV patients expected in the fourth quarter of 2021.

Oral PD-L1 Inhibitors

PD-L1 inhibitors complement our pipeline of agents and could potentially be an important part of a combination therapy for the treatment of HBV.

We are enrolling patients in a double-blind, randomized, placebo-controlled Phase 1a/1b clinical trial (“AB-836-001”) designed to evaluate the safety, tolerability, pharmacokinetics and antiviral activity of single and multiple doses of AB-836 in healthy subjects and patients with cHBV.

The trial consists of three parts.

Part 1 evaluated alternating single doses of AB-836 or placebo ranging from 10 mg to 175 mg in a fasted or fed state in healthy subjects.

Part 2 evaluated multiple ascending doses of 50 mg, 100 mg or 150 mg of AB-836 or placebo once daily for 10 days in healthy subjects.

Part 3, which is still on-going, is currently randomizing HBV DNA positive cHBV patients who are HBeAg positive or negative to receive either 50 mg, 100 mg or 200 mg of AB-836 or placebo once daily for 28 days.

In December 2021, we announced preliminary data from this trial.

In Parts 1 and 2, a total of 47 healthy subjects were enrolled and dosed.

There were no deaths or SAEs observed.

One healthy subject that received 50 mg once daily discontinued after treatment on day 13 due to an AE of agitation.

All but three AEs were mild (Grade 2 headache, agitation and bronchitis), and only one was assessed as related to AB-836 (Grade 1 rash).

There were no clinically significant abnormalities in clinical laboratory tests, ECGs, vital signs or physical exams noted.

In Part 3, 16 cHBV patients had been dosed thus far, with enrollment continuing.

Among those who received 100 mg once daily for the full 28 days (n=4), robust antiviral activity was observed at Day 28 of treatment with a mean (SE) log10 change from baseline of -3.1 (0.5).

There have been no deaths or AEs.

One cHBV patient that received 100 mg of AB-836 had a transient increase in ALT from baseline Grade 1 to Grade 3 at a single visit that resolved with continued dosing and had no associated symptoms.

There were no clinically significant abnormalities in ECGs, vital signs or physical exams noted.

We are continuing to enroll and dose cHBV patients in Part 3 of this clinical trial and we anticipate reporting additional data in the first half of 2022.

Oral PD-L1 Inhibitor (AB-101)

PD-L1 inhibitors complement our pipeline of agents and could potentially be an important part of a combination therapy for the treatment of HBV by reawakening the immune system.

Highly functional HBV-specific T cells within our immune system are believed to be required for long-term HBV viral resolution.

However, HBV-specific T cells become functionally defective, and greatly reduced in their frequency during chronic HBV infection.

One approach to boost HBV-specific T cells is to prevent PD-L1 proteins from attaching to and inhibiting the HBV-specific T cells.

Oral PD-L1 compounds have the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1 and we recently commenced IND enabling studies for our PD-L1 program.

Oral HBV RNA Destabilizers

However, HBV-specific T cells become functionally defective, and greatly reduced in their frequency during cHBV.

One approach to boost HBV-specific T cells is to prevent PD-L1 proteins from binding to PD-1 and thus inhibiting the HBV-specific immune function of T cells.

AB-101 is our oral PD-L1 inhibitor, which we believe has the potential to reawaken patients’ HBV-specific immune response.

We anticipate completing IND-enabling studies for AB-101 in the second half of 2022.

We are also exploring potential oncology applications for our internal PD-L1 portfolio.

Oral HBV RNA Destabilizer (AB-161)

HBV RNA destabilizers are small molecule orally available agents that cause the destabilization and ultimate degradation of HBV RNAs.

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

We are in advanced lead optimization with next-generation oral HBV RNA-destabilizers.

AB-161 is our next-generation oral HBV specific RNA destabilizer.

We have conducted extensive non-clinical safety evaluations with AB-161 that provide confidence in this molecule’s ability to circumvent the peripheral neuropathy findings seen in non-clinical safety studies with our first-generation oral RNA destabilizer, AB-452.

We anticipate completing IND-enabling studies for AB-161 in the second half of 2022.

COVID-19 Research Efforts

While our core mission is to find a cure for HBV, the magnitude of the coronavirus pandemic is undeniable.

Given our proven expertise in the discovery of new antiviral therapies, we initiated a drug discovery effort for treating coronaviruses, including COVID-19, in 2020.

To that end, we have assembled an internal team of expert scientists under the direction of our Chief

Scientific Officer, Dr.

Given our science team’s proven expertise in the discovery of new antiviral therapies, in 2020 we initiated a drug discovery effort for treating coronaviruses, including COVID-19.

To that end, we have assembled an internal team of expert scientists under the direction of our Chief Scientific Officer, Dr.

Michael Sofia, to identify novel small molecule therapies to treat COVID-19 and future coronavirus outbreaks.

Sofia, who was awarded the Lasker-DeBakey Award for his discovery of sofosbuvir, brings extensive antiviral drug discovery experience to this new program.

We are also a member of the COVID R&D consortium to address the SARS-CoV-2 pandemic and any future coronavirus outbreaks.

At this time, our COVID-19 research program is focused on the discovery and development of new molecular entities that address specific viral targets including the nsp12 viral polymerase and the nsp5 viral protease.

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

We are progressing lead candidates to nomination.

Our COVID-19 research program is focused on the

discovery and development of new molecular entities that address specific viral targets including the nsp12 viral polymerase and the nsp5 viral protease.

These targets are essential viral proteins which our science team has experience in targeting.

Collaboration with X-Chem, Inc.

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

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

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

The collaboration 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 we could potentially progress to clinical candidates.

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

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

Through this collaboration, we have 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.

We expect to nominate an M pro product candidate in the first half of 2022 and advance into IND-enabling studies in the second half of 2022.

We are also continuing lead optimization activities for an Nsp12 viral polymerase candidate.

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.

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 we have been able to progress with our clinical and pre-clinical activities to date, it is not possible to predict if the COVID-19 pandemic will materially impact our plans and timelines in the future.

Other Royalty Entitlements and Collaborations

Other Collaborations and Royalty Entitlements

Qilu Pharmaceutical Co., Ltd.

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

(“Qilu”), pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, 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 us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones.

Qilu also agreed to pay us 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 us 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 we 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 we have completed manufacturing technology transfer to Qilu and approval of a product manufactured by Qilu, or its designated contract manufacturing organization, by National Medical Products Administration in China for AB-729.

Concurrent with the execution of the License Agreement, we 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 our 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”).

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.

Alnylam Pharmaceuticals, Inc.

and Acuitas Therapeutics, Inc.

We have two royalty entitlements to Alnylam Pharmaceutical Inc.’s (“Alnylam”) global net sales of ONPATTRO.

We have two royalty entitlements to Alnylam’s global net sales of ONPATTRO.

In 2012, we entered into a license agreement with Alnylam that entitles Alnylam to develop and commercialize products with our lipid nanoparticle (“LNP”) delivery technology.

Alnylam’s ONPATTRO, which represents the first approved application of our 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’s ONPATTRO, which represents the first approved application of our LNP technology, was approved by the United States 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.

Under the terms of this license agreement, we are 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 us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part.

From the inception of the royalty sale through September 30, 2021, an aggregate of $9.0 million of royalties have been collected by OMERS.

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

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

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

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

We licensed exclusive rights to our LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the “Genevant License”).

(“Genevant”), a company focused on a broad range of RNA-based therapeutics enabled by our LNP and ligand conjugate delivery technologies.

We licensed rights to our LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the “Genevant License”).

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

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

If Genevant sub-licenses the intellectual property licensed by us to Genevant, we are 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.

Under the Genevant License, as amended, if a third party sublicensee of intellectual property licensed by Genevant from us commercializes a sublicensed product, we become 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 our intellectual property licensed to Genevant, we 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).

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

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

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

As of March 31, 2022, we owned approximately 16% of the common equity of Genevant and the carrying value of our investment in Genevant was zero.

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

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On February 21, 2018 and March 5, 2018, Moderna Therapeutics, Inc.

(“Moderna”) filed petitions requesting the United States Patent and Trademark Office to institute an Inter Partes Review of Arbutus United States Patents 9,404,127 (the “’127 Patent”) and 9,364,435 (the “’435 Patent”).

(“Moderna”) filed petitions requesting the United States Patent and Trademark Office to institute an Inter Partes Review of Arbutus United States Patents 9,404,127 (the “’127 Patent”)

and 9,364,435 (the “’435 Patent”).

In its petitions, Moderna sought to invalidate all claims of each patent based on Moderna’s allegation that the claims are anticipated and/or obvious.

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The opening brief was filed on October 25, 2021.

Moderna’s responsive brief is due by January 3, 2022.

Moderna’s responsive brief was filed on February 24, 2022 and Arbutus’ reply brief was filed on April 26, 2022.

No hearing date has been set for this matter.

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An oral hearing on the ‘435 Patent was held on October 7, 2021.

On December 1, 2021, the Federal Circuit issued its opinion, leaving intact the PTAB’s holding regarding the validity of certain claims in the ‘435 patent and the invalidity of other claims in the ‘435 patent.

The decision in the ‘435 appeal was rendered final by mandate on January 25, 2022.

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

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

Moderna filed its opening brief in that appeal on February 23, 2021, Arbutus filed its responsive brief on May 11, 2021, and Moderna filed its reply brief on July 1, 2021.

An oral hearing on the ‘069 Patent was

held on October 7, 2021.

Moderna filed its opening brief in that appeal on February 23, 2021, we filed our responsive brief on May 11, 2021, and Moderna filed its reply brief on July 1, 2021.

An oral hearing on the ‘069 Patent was held on October 7, 2021, in a joint hearing with the hearing regarding the ‘435 patent, before the U.S.

Court of Appeals for the Federal Circuit.

On December 1, 2021, the Federal Circuit also issued its ruling with respect to the ‘069 patent, affirming the PTAB’s finding that all claims were valid.

The Federal Circuit’s decision in the ‘069 appeal was rendered final by mandate on January 10, 2022.

Moderna and Merck European Oppositions

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Merck filed its notice of appeal on February 24, 2020 and Moderna on February 27, 2020.

We filed our response on September 18, 2020.

Both Merck and Moderna perfected their appeals by filing Grounds of Appeal on April 30, 2020.

We filed our response to the appeals on September 18, 2020.

On March 22, 2022, Moderna filed further written submissions.

The date for the oral proceedings has not been set.

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

Patent Infringement Litigation vs.

On February 28, 2022, we and Genevant filed a lawsuit in the U.S.

District Court for the District of Delaware against Moderna, Inc.

and a Moderna affiliate seeking damages for infringement of U.S.

8,058,069, 8,492,359, 8,822,668, 9,364,435, 9,504,651, and 11,141,378 in the manufacture and sale of MRNA-1273, Moderna’s vaccine for COVID-19.

The patents relate to nucleic acid-lipid particles and lipid vesicles, as well as compositions and methods for their use.

The lawsuit does not seek an injunction or otherwise seek to impede the sale, manufacture or distribution of MRNA-1273.

However, we seek fair compensation for Moderna’s use of our patented technology that was developed with great effort and at great expense, without which Moderna’s COVID-19 vaccine would not have been successful.

Moderna has until May 6, 2022 to move, answer or otherwise respond to the complaint.

Acuitas Declaratory Judgment Lawsuit

On March 18, 2022, Acuitas Therapeutics Inc.

(“Acuitas”) filed a lawsuit against us and Genevant in the Southern District of New York, asking the court to enter declaratory judgment that Arbutus patent Nos.

8,058,069, 8,492,359, 8,822,668, 9,006,417, 9,364,435, 9,404,127, 9,504,651, 9,518,272, and 11,141,378 do not infringe Pfizer and BioNTech’s COVID-19 vaccine, COMIRNATY, which uses an mRNA lipid provided, under license, by Acuitas.

Acuitas also seeks a declaration that each of the listed patents is invalid.

We have until June 24, 2022 to move, answer or otherwise respond to the complaint.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

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

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

2021 2020 2021 2020

Three Months Ended March 31,

(in thousands)

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Loss from operations (10,974) (15,676)

Other income (loss) (750) (3,538) (2,200) (5,198)

Other loss (347) (705)

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

Income tax expense (4,444) —

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

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Revenues are summarized in the following table:

Three Months Ended September 30,

Three Months Ended March 31,

2022 % of Total 2021 % of Total

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$ 1,534 12 % $ 1,095 52 %

Other milestone and royalty payments 55 2 % 54 4 %

Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

1,860 56 % 695 46 %

Total revenue $ 3,340 100 % $ 1,523 100 %

Nine Months Ended September 30,

2021 % of Total 2020 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

Qilu Pharmaceutical Co., Ltd.

9,632 77 % — — %

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Total revenue $ 12,581 100 % $ 2,113 100 %

Total revenue increased $1.8 million and $3.3 million, respectively, for the three and nine months ended September 30, 2021 compared to the same periods in 2020, primarily due to an increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Total revenue increased $10.5 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to license revenue recognized related to our progress against the satisfaction of our performance obligations with respect to the technology transfer and licensing agreement with Qilu in January 2022, as well as an increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Operating expenses

Operating expenses are summarized in the following table:

Three Months Ended September 30,

2021 % of Total 2020 % of Total

(in thousands, except percentages)

Research and development $ 16,299 75 % $ 12,065 72 %

General and administrative 4,146 19 % 4,065 24 %

Depreciation 447 2 % 490 3 %

Change in fair value of contingent consideration 856 4 % 120 1 %

Total operating expenses $ 21,748 100 % $ 16,740 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

2022 % of Total 2021 % of Total

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General and administrative 4,892 21 % 3,878 22 %

Depreciation 1,326 2 % 1,491 3 %

Change in fair value of contingent consideration 201 1 % 129 1 %

Site consolidation — — % 64 — %

Total operating expenses $ 23,555 100 % $ 17,789 100 %

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

Research and development expenses increased $4.2 million and $12.1 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

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

Research and development expenses increased $4.7 million for the three months ended March 31, 2022 compared to the same period in 2021.

The increase was due primarily to an increase in expenses for our ongoing AB-836-001 clinical trial, an increase in expenses related to our ongoing AB-729 Phase 2a clinical trials, including our collaborations with Assembly and Vaccitech, and an increase in expenses for our early-stage development programs, including AB-101 and AB-161.

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

General and administrative

General and administrative expenses increased $0.1 million for the three months ended September 30, 2021 as compared to the same period in 2020.

General and administrative expenses increased $1.3 million for the nine months ended September 30, 2021 as compared to the same period in 2020, due primarily to increases in non-cash stock-based compensation expense, professional fees and insurance.

General and administrative expenses increased $1.0 million for the three months ended March 31, 2022 as compared to the same period in 2021, due primarily to increases in employee compensation costs, professional fees, and non-cash stock based compensation expense.

Change in fair value of contingent consideration

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in October 2014.

In general, as time passes and assuming no changes to the assumptions related to the contingency, the fair value of the contingent consideration increases as the progress of our programs get closer to triggering contingent payments based on certain sales milestones of our first commercial product for chronic HBV.

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

Site consolidation

The final portion of expenses associated with our site consolidation and organizational restructuring of our business in Warminster, PA, which was substantially completed in 2018, was fully recognized in 2020.

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

Other income (loss)

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

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

2021 2020 2021 2020

The components of our other income (loss) are summarized in the following table:

Three Months Ended March 31,

(in thousands)

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Interest expense (506) (772)

Foreign exchange (losses) / gains (15) (19) — (84)

Foreign exchange gains — 28

Total other loss $ (347) $ (705)

Interest income

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

The increase in interest income for the three months ended March 31, 2022 compared to the same period in 2021 was due primarily to higher interest earned on higher average cash and investment balances.

Interest expense

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

Foreign exchange gains (losses)

Interest expense for both the three months ended March 31, 2022 and 2021 consisted primarily of non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

The decrease is related to the declining balance of the unamortized discount and issuance costs.

Foreign exchange gains

In connection with our site consolidation to Warminster, PA, our Canadian dollar-denominated expenses and cash balances have decreased significantly now that a majority of our business transactions are based in the United States.

We continue to incur expenses and hold some cash balances in Canadian dollars, and as such, we will remain subject to risks associated with foreign currency fluctuations.

Income Tax Expense

During the three months ended March 31, 2022, we recognized income tax expense of $4.4 million for withholding taxes paid to the Chinese taxing authority by Qilu on our behalf in connection with the upfront license fee Qilu paid us.

LIQUIDITY AND CAPITAL RESOURCES

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Non-cash items 1,642 2,222

Change in deferred license revenue 38,840 —

Net change in operating items (4,098) (3,722)

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

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

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

Net cash (used in) provided by investing activities (60,056) 18,221

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

Cash provided by other financing activities 512 26,874

Net cash provided by financing activities 11,485 26,874

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

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

For the nine months ended September 30, 2021, $47.9 million of cash was used in operating activities compared to $36.4 million for the nine months ended September 30, 2020, an increase of $11.5 million.

The increase was due primarily to a $12.1 million increase in research and development expenses due to higher expenses for our clinical development and discovery programs, including activities under our collaboration with Assembly and internal research efforts to treat COVID-19 and future coronavirus outbreaks, both of which initiated in mid-2020.

For the nine months ended September 30, 2021, net cash used in investing activities was $4.6 million, consisting primarily of additional investments in marketable securities of $54.2 million, partially offset by maturities of investments in marketable securities of $50.4 million.

For the nine months ended September 30, 2020, net cash provided by investing activities was $35.1 million consisting of maturities of $66.5 million and purchases of investments in marketable securities of $28.9 million.

For the nine months ended September 30, 2021 and 2020, net cash provided by financing activities was $78.1 million and $66.5 million, respectively, due primarily to proceeds from sales of common shares under our Open Market Sale Agreement, as amended, with Jefferies LLC (“Jefferies”).

For the three months ended March 31, 2022, $20.6 million of cash was provided by operating activities compared to $17.9 million used in operating activities for the three months ended March 31, 2021, an increase of $38.5 million.

The increase was due primarily to a January 2022 upfront cash payment of $40.0 million from Qilu and a $4.0 million premium paid by Qilu as part of their $15.0 million equity investment.

These cash inflows were partially offset by $23.4 million of cash used in operations.

For the three months ended March 31, 2022, net cash used in investing activities was $60.1 million, consisting primarily of additional investments in marketable securities of $62.0 million, partially offset by maturities of investments in marketable securities of $2.0 million.

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

For the three months ended March 31, 2022, net cash provided by financing activities was $11.5 million, which included $11.0 million for the fair value of the shares purchased by Qilu as part of their $15.0 million equity investment.

The remaining $4.0 million was a premium paid by Qilu on the equity investment and was allocated to deferred revenue.

For the three months ended March 31, 2021, net cash provided by financing activities was $26.9 million, which was primarily driven by $26.4 million in proceeds from sales of common shares under our Open Market Sale Agreement, as amended.

Sources of Liquidity

As of September 30, 2021, we had cash, cash equivalents and investments in marketable securities of $151.9 million.

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

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

As of March 31, 2022, we had cash, cash equivalents and investments in marketable securities of $221.8 million.

We had no outstanding debt as of March 31, 2022.

Open Market Sale Agreement

We have an Open Market Sale Agreement SM 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 we 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, we 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 our common shares pursuant to the Sale Agreement under the Registration Statement.

During the nine months ended September 30, 2021, we issued 19,715,142 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $75.4 million.

For the nine months ended September 30, 2020, we issued 19,696,361 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $66.1 million.

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

On October 8, 2021, we 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 our common shares pursuant to the Sale Agreement under the Registration Statement.

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

On December 23, 2019, we 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, 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 our securities.

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

This prospectus supplement was fully utilized during 2020.

On August 7, 2020, we 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 our 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, we 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 our securities.

We fully utilized the March 2021 Prospectus Supplement during 2021.

On October 8, 2021, we filed a prospectus supplement with the SEC (the “October 2021 Prospectus Supplement”) for the offer and sale of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

On November 4, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No.

333-248467) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the “November 2021 Registration Statement”), for the offer and sale of up to $250.0 million of our securities.

On March 3, 2022, we 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 our 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, we issued 69,048 common shares pursuant to the Sale Agreement, as amended, resulting in net proceeds of approximately $0.3 million.

For the three months ended March 31, 2021, we 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 available in aggregate under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

Royalty Entitlements

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

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

In December 2021, we entered into a technology transfer and licensing agreement with Qilu pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, 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 the Territory.

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment of $15 million, both received in January 2022, and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones.

Qilu also agreed to pay us 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.

Cash requirements

At September 30, 2021, we held an aggregate of $151.9 million in cash, cash equivalents and investments in marketable securities.

We believe that our cash resources as of September 30, 2021 will be sufficient to fund our operations into the second quarter of 2023.

We believe that our $221.8 million of cash, cash equivalents and investments in marketable securities as of March 31, 2022 will be sufficient to fund our operations into the second quarter of 2024 based on our expectation of a net cash burn between $90 million and $95 million in 2022.

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

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• revenue earned from ongoing collaborative partnerships, including milestone and royalty payments;

• the potential requirement to make milestone payments related to our legacy agreements;

• the extent to which we continue the development of our product candidates, add new product candidates to our pipeline, or form collaborative relationships or licensing arrangements to advance our product candidates;

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• costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including litigation and arbitration arising in the course of our business activities.

We intend to seek funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, potential monetization transactions, collaborative or licensing arrangements with pharmaceutical companies, government grants and contracts and other strategic transactions and funding opportunities.

There can be no assurance that funding will be available at all or on acceptable terms to permit further development of our research and development programs.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis