What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 146 added, 99 removed, 385 unchanged (39% 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, 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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• 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.

• the possibility that our 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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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.

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

In HBV, we are developing an RNA interference (“RNAi”) therapeutic, an oral capsid inhibitor, an oral PD-L1 inhibitor, and an oral RNA destabilizer to potentially identify a combination regimen with the aim of providing 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.

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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.

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 three 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.

In addition, when AB-729 and NA therapy were discontinued in the first five patients who met stopping criteria and consented, there was no evidence of virologic or clinical relapse in at least 8-24 weeks of follow-up, which may lead to a functional cure.

We anticipate presenting additional long-term off-treatment follow-up data from AB-729-001 at a medical conference later this year.

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”).

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.

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

Preliminary data from HBV patients have shown that AB-836 has robust antiviral activity, however, due to unexpected alanine transaminase (“ALT”) increases seen in some patients on the last day of dosing, we plan to conduct an additional Phase 1 trial in healthy volunteers to determine whether or not these ALT elevations are beneficial or could be the result of liver toxicity.

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.

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• 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.

• We are currently enrolling patients with cHBV in a Phase 2a proof-of-concept clinical trial (“AB-729-001”) 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.

(“Assembly”), enrollment is complete and dosing is continuing 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.

In July 2022, Assembly announced its plans to discontinue development of VBR.

Despite this, in consultation with Assembly Biosciences, we plan to continue dosing patients in the Phase 2a proof-of-concept clinical trial in order to fully and accurately assess the results.

Preliminary data from the trial is expected in the second half of 2022.

• Through our collaboration with Vaccitech plc (“Vaccitech”), we are enrolling patients 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.

We see an opportunity to pursue a potential combination therapy to achieve better patient treatment outcomes and use in prophylactic settings.

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

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

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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.

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

Dosing of patients in Part 3 has been completed and we are continuing to follow these patients for one year.

A total of 41 patients were dosed with AB-729 during Parts 2 and 3 of this Phase 1a/1b clinical trial.

In June 2022, we presented a poster at the 2022 European Association for the Study of the Liver (EASL) International Liver Congress™ (ILC) highlighting the most recent data from Part 3 of AB-729-001.

The new clinical data for AB-729 continues to support its development as a potential cornerstone agent for the treatment of cHBV infection.

The mean HBsAg for the five patients at baseline was 2887 IU/mL (range 1392-6765) compared to 69 IU/mL (range 4.58-150.1) at the last visit after discontinuing all treatment.

As of the date of the poster presentation at the 2022 EASL ILC, all five patients remained off all treatment, and all had HBsAg levels below pre-baseline levels.

None of the patients had met clinical or virologic relapse criteria.

There were no adverse events (AEs) reported, no ALT elevations observed, and HBV DNA levels remained either less than the LLOQ (lower limit of quantification) or had transiently risen and subsequently decreased without intervention.

Repeat dosing of 60 mg and 90 mg of AB-729 resulted in robust mean declines in HBsAg in HBeAg positive/negative and HBV DNA positive/negative patients 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.

The reported data for patients from Cohorts E, F, G, I and J showed:

• 76% (26 of 34) patients had HBsAg <100 IU/mL at some point during the trial and 50% (16 out of 32) of patients maintained HBsAg levels below 100 IU/mL 24 weeks after their last AB-729 dose;

• Most patients had a robust decline in HBsAg that was maintained well after cessation of AB-729 treatment, mean log change from baseline to 24 weeks post last dose was approximately -1.5 log 10 across cohorts;

• Repeat dosing of AB-729 continues to be generally safe and well-tolerated with only transient Grade 1 or 2 ALT elevations;

• AB-729 continues to result in HBV-specific T-cell immune restoration and decrease of exhausted T-cells.

The reported data for patients from Cohort K, which included HBeAg positive patients only, showed:

• All seven patients reached HBsAg levels <100 IU/ml during AB-729 treatment or follow-up;

• Two patients reached HBsAg levels <LLOQ at one or more visits;

• The mean (SE) log10 change from baseline in HBeAg at end of treatment was -0.94(0.25) IU/mL.

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

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.

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)

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Collaboration with Assembly

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.

Through a clinical collaboration agreement with Assembly that we entered into in August 2020, Assembly is evaluating AB-729 in combination with its 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.

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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.

Assembly has completed enrollment in the clinical trial.

In July 2022, Assembly announced its plans to discontinue development of VBR.

Despite this, in consultation with Assembly Biosciences, we plan to continue dosing patients in the Phase 2a proof-of-concept clinical trial in order to fully and accurately assess the results.

Preliminary data from the trial is expected in the second half of 2022.

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.

Through a clinical collaboration agreement with Vaccitech that we entered into in July 2021, we are enrolling 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.

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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

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.

We have terminated our 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 was responsible for conducting this clinical trial and for the costs of adding this single cohort to its existing clinical trial.

We were 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 did not provide any license grant to Antios for use of AB-729.

A 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.

Antios recently terminated this clinical trial and we may report partial data on this cohort.

Oral Capsid Inhibitor (AB-836)

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

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.

We enrolled 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.

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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.

Part 3, which is still on-going, has completed enrollment in HBV DNA positive cHBV patients who are HBeAg positive or negative and received either 50 mg, 100 mg or 200 mg of AB-836 or placebo once daily for 28 days.

In June 2022, we presented a poster at the 2022 EASL ILC highlighting the most recent data from Part 3 of AB-836-001 showing that the 100mg and 200mg doses of AB-836 provided potent inhibition of HBV replication with mean declines in HBV DNA at Day 28 of 3.04 and 3.55 log 10 IU/mL, respectively.

From a safety standpoint, there were no deaths or SAEs observed.

Two HBeAg positive patients in the 100mg dose cohort had transient Grade 3 ALT elevations that resolved with continued dosing and were not considered treatment emergent adverse events (TEAEs).

Two patients in the 200mg cohort had Grade 3 and Grade 4 ALT elevations on the last day of dosing (Day 28) that returned to baseline during follow up, which were reported as TEAEs.

The Grade 3 and Grade 4 ALT elevations seen in the 200 mg cohort were accompanied by serum IP-10 increases, an exploratory and hence not a definitive cytokine biomarker, which we had previously observed to be associated with potential liver toxicity in the capsid inhibitor space.

All patients with ALT elevations were asymptomatic and none had changes in bilirubin or met drug-induced liver injury (DILI) criteria.

There were no other clinically significant lab abnormalities, ECG or vital sign changes observed.

Based on these ALT findings, we plan to conduct an additional Phase 1 trial in healthy volunteers to determine whether or not these ALT elevations are beneficial or could be the result of liver toxicity, before continuing to dose cHBV patients.

We will provide an update with respect to the status and timing of this clinical trial in the second half of 2022.

Oral PD-L1 Inhibitor (AB-101)

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

In June 2022, we presented a poster at the 2022 EASL ILC highlighting data from a study that was designed to assess the preclinical activity of AB-101 and the compound’s ability to reinvigorate patient HBV-specific T-cells.

Studies were conducted

using a transgenic MC38 tumor mouse model and peripheral blood mononuclear cells (PBMCs) from cHBV patients.

The data presented showed that once daily oral administration of AB-101 resulted in profound tumor reduction that was associated with T-cell activation.

In addition, AB-101 activates and reinvigorates HBV-specific T-cells in vitro .

This favorable preclinical profile supports further development of AB-101 as a therapeutic modality for cHBV treatment.

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.

Preclinical data was selected for publication at the American Society of Clinical Oncology (ASCO) Annual Meeting in June 2022 showing that our oral small-molecule PD-L1 inhibitors in development, which possess a novel mechanism of action, have the ability to mediate T-cell activation in primary human immune cells.

The anti-tumor efficacy seen in vivo was comparable to anti-PD-L1 antibodies.

The data is published in the Journal of Clinical Oncology.

Oral HBV RNA Destabilizer (AB-161)

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

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.

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.

We see an opportunity to pursue a potential combination therapy to achieve better patient treatment outcomes and use in prophylactic settings.

Collaboration with X-Chem, Inc.

and Proteros biostructures GmbH

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

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

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

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

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

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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.

We 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.

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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 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.

From the inception of the royalty sale through June 30, 2022, an aggregate of $14.2

million of royalties have been collected by OMERS.

We also have rights to a second royalty interest ranging from 0.75% to 1.125% on global net sales of ONPATTRO, with 0.75% applying to sales greater than $500 million, originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc.

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

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

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.

As of June 30, 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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On September 12, 2018, the Patent Trial and Appeal Board (the “PTAB”) rendered its decision to institute Inter Partes Review of both the ‘127 Patent and the ‘435 Patent.

The status of these patents, which collectively represent only a fraction of Arbutus’ extensive LNP patent portfolio, is as follows:

The status of these patents, which collectively represent only a fraction of our extensive LNP patent portfolio, is as follows:

With respect to the ‘127 Patent, the PTAB held all claims as invalid on September 10, 2019, by reason of anticipatory prior art.

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Athrex case on June 21, 2021, following which the Federal Circuit reinstated the appeal sua sponte, requiring the parties to brief how the case should proceed in light of the Supreme Court’s opinion or for the Appellant to waive the challenge.

Arbutus elected to waive the challenge and proceed with the appeal at the Federal Circuit.

We elected to waive the challenge and proceed with the appeal at the Federal Circuit.

The opening brief was filed on October 25, 2021.

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

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

No hearing date has been set for this matter.

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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.

On May 6, 2022, Moderna filed a partial motion to dismiss the claims “relating to Moderna’s sale and provision of COVID-19 vaccine doses to the U.S.

Government.” The motion is now fully briefed.

No oral argument date has been set and no case schedule is yet in place.

Acuitas Declaratory Judgment Lawsuit

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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.

On June 24, 2022, Arbutus and Genevant sought a pre-motion conference concerning their anticipated motion to dismiss all of Acuitas’ claims due to lack of subject matter jurisdiction.

The request for a pre-motion conference was granted, but the case was subsequently re-assigned to a new judge who has not yet set a new pre-motion conference date.

No case schedule is yet in place.

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 March 31,

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

2022 2021 2022 2021

(in thousands)

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Revenues are summarized in the following table:

Three Months Ended March 31,

Three Months Ended June 30,

2022 % of Total 2021 % of Total

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Total revenue $ 14,241 100 % $ 2,329 100 %

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.

Six Months Ended June 30,

2022 % of Total 2021 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 3,084 11 % $ 2,258 51 %

Qilu Pharmaceutical Co., Ltd.

20,655 77 % — — %

Other milestone and royalty payments 35 — % 81 2 %

Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

3,048 11 % 2,103 47 %

Total revenue $ 26,822 100 % $ 4,442 100 %

Total revenue increased $11.9 million and $22.4 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, primarily due to license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to the technology transfer and licensing agreement with Qilu, which closed 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 March 31,

Three Months Ended June 30,

2022 % of Total 2021 % of Total

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Total operating expenses $ 28,350 100 % $ 20,971 100 %

Six Months Ended June 30,

2022 % of Total 2021 % of Total

(in thousands, except percentages)

Research and development $ 41,404 80 % $ 29,581 76 %

General and administrative 10,092 19 % 8,356 22 %

Change in fair value of contingent consideration 409 1 % 823 2 %

Total operating expenses $ 51,905 100 % $ 38,760 100 %

Research and development

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

Research and development expenses increased $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.

Research and development expenses increased $7.1 million and $11.8 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

The increase was due primarily to an increase in expenses for 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 $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.

General and administrative expenses increased $0.7 million and $1.7 million for the three and six months ended June 30, 2022, respectively, as compared to the same periods 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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The components of our other income (loss) are summarized in the following table:

Three Months Ended March 31,

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

2022 2021 2022 2021

(in thousands)

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Interest expense (482) (763) (988) (1,535)

Foreign exchange gains — 28

Foreign exchange (loss) gain 3 (13) 3 15

Total other loss $ (83) $ (745) $ (430) $ (1,450)

Interest income

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.

The increase in interest income for the three and six months ended June 30, 2022 compared to the same periods in 2021 was due primarily to higher interest earned on higher average cash and investment balances.

Interest expense

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.

Interest expense for both the three and six months ended June 30, 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.

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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.

During the six months ended June 30, 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Net cash provided by (used in) operating activities 326 (31,890)

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

Net cash used in investing activities (73,886) (20,526)

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

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

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

Decrease in cash and cash equivalents (61,962) (21,297)

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 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.

For the six months ended June 30, 2022, $0.3 million of cash was provided by operating activities compared to $31.9 million used in operating activities for the six months ended June 30, 2021, an increase of $32.2 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 $43.7 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.

For the six months ended June 30, 2022, net cash used in investing activities was $73.9 million, consisting primarily of additional investments in marketable securities of $84.6 million, partially offset by maturities of investments in marketable securities of $11.0 million.

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

For the six months ended June 30, 2022, net cash provided by financing activities was $11.6 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.

For the six months ended June 30, 2021, net cash provided by financing activities was $31.2 million, which was primarily driven by $30.7 million in proceeds from sales of common shares under our Open Market Sale Agreement, as amended.

Sources of Liquidity

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.

As of June 30, 2022, we had cash, cash equivalents and investments in marketable securities of $200.6 million.

We had no outstanding debt as of June 30, 2022.

Open Market Sale Agreement

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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.

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.

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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.

During the six months ended June 30, 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 six months ended June 30, 2021, we issued 6,395,780 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $26.4 million.

As of June 30, 2022, there was approximately $152.0 million available in aggregate under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

Royalty Entitlements

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

OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties.

OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and we are not obligated to reimburse OMERS if they fail to collect any such future royalties.

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

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Cash requirements

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.

We believe that our $200.6 million of cash, cash equivalents and investments in marketable securities as of June 30, 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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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our quantitative and qualitative disclosures about market risk from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

The information under this item is not required to be provided by smaller reporting companies.

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