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Item 1. Business

2023-03-02 compared with 2022-03-03 · 319 added, 266 removed, 436 unchanged (57% of the section changed)

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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, 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.

To address HBV, we are developing an RNA interference (“RNAi”) therapeutic, 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.

AB-729 is currently being evaluated in multiple phase 2 clinical trials.

We also have an ongoing drug discovery and development program directed to identifying novel, orally active agents for treating coronaviruses, including SARS-CoV-2, where we have nominated a compound and have begun IND-enabling pre-clinical studies.

In addition, we are also exploring oncology applications for our internal PD-L1 portfolio.

The core elements of our strategy include:

• 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 and three Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action.

Preliminary data from the Phase 1a/1b clinical trial 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 our Phase 1a/1b clinical trial 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 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.

We expect to announce additional data from this clinical trial 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 lead optimization with the anticipation of completing investigational new drug (“IND”)-enabling studies in the second half of 2022.

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

We believe that a combination of compounds that can suppress HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression as well as reawaken patients’ HBV-specific immune response would 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 discontinuation of all treatment, with or without quantifiable anti-HBsAg antibodies.

AB-729 is our proprietary subcutaneously-delivered RNAi therapeutic product candidate that suppresses all HBV antigens, including HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV.

AB-729 is currently in two Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action and we are also continuing to follow subjects from our Phase 1a/1b clinical trial (“AB-729-001”).

Preliminary data from AB-729-001 has shown that treatment with AB-729 provided robust and comparable HBsAg declines regardless of dose, dosing interval or patient characteristics and was generally safe and well-tolerated after completing dosing in 41 subjects.

Preliminary data also suggests that treatment with AB-729 increased HBV-specific immune responses and, in a small number of subjects who discontinued both AB-729 and nucleos(t)ide analogue (“NA”) therapy, a sustained reduction in HBsAg and HBV DNA persisted after stopping AB-729.

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

AB-101 is our oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1.

Preclinical data in an HBV mouse model was presented at the 2022 AASLD Liver Meeting showing that combination treatment with AB-101 and an HBV-targeting GalNAc-siRNA agent resulted in activation and increased frequency of HBV-specific T-cells and greater anti-HBsAg antibody production.

This favorable preclinical profile supports further development of AB-101 as a therapeutic modality for cHBV treatment and we anticipate initiating a Phase 1 healthy subject clinical trial with AB-101 in the first half of 2023.

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 lead optimization with the anticipation of completing IND-enabling studies in the second half of 2022.

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

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.

We recently presented preclinical data at the Discovery on Target Conference showing that AB-161 reduced HBV RNA and

HBsAg in multiple preclinical models, with favorable liver centricity and lack of observed peripheral neuropathy.

We anticipate initiating a Phase 1 healthy subject clinical trial with AB-161 in the first half of 2023.

• 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.

We believe that our proprietary product candidates AB-729, AB-101 and AB-161 may provide our first proprietary combination therapy for patients 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”), patients with cHBV are being enrolled 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.

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 is complete 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.

With the majority of patients in this cohort enrolled in Ukraine, which is currently in a state of war, they may be lost to follow-up before completing the clinical trial.

Therefore, we and Antios may report limited data on a reduced number of patients from this clinical trial.

• Through our collaboration with Vaccitech plc (“Vaccitech”), we anticipate initiating in the first half of 2022 a Phase 2a clinical trial 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.

We filed a Clinical Trial Application (CTA) in the fourth quarter of 2021 and anticipate initiating the clinical trial in the first half of 2022.

• AB-729 in combination with ongoing standard-of-care NA therapy and short courses of Peg-IFNα-2a in subjects with cHBV in a Phase 2a proof-of-concept clinical trial (“AB-729-201”).

Preliminary data from the lead-in phase of this clinical trial further validated AB-729’s potential to reduce HBsAg in cHBV patients.

• AB-729 in combination with Vaccitech plc’s (“Vaccitech”) VTP-300, a proprietary T-cell stimulating antigen-specific immunotherapeutic, and NA therapy for the treatment of subjects with cHBV in a Phase 2a proof-of-concept clinical trial (“AB-729-202”).

We recently amended the clinical trial to include an additional arm with an approved PD-1 monoclonal antibody inhibitor, nivolumab (Opdivo ® ).

• 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 (nucleos(t)ide).

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.

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

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 nsp5 viral protease (“M pro ”) and the nsp12 viral polymerase.

• In the fourth quarter of 2022, we nominated AB-343 as our lead coronavirus drug candidate that inhibits the SARS-CoV-2 M pro , a validated target for the treatment of COVID-19 and potential future coronavirus outbreaks.

In our pre-clinical research conducted to date, AB-343 has shown pan-coronavirus antiviral activity, no reduction in potency against known SARS-CoV-2 variants, robust activity against SARS-CoV-2 M pro resistant strains, and a favorable drug-drug interaction profile with no need for ritonavir boosting.

We are advancing AB-343 into IND-enabling studies.

We are also continuing lead optimization activities for an nsp12 viral polymerase, which could potentially be combined with AB-343 to achieve better patient treatment outcomes and for use in prophylactic settings.

Background on HBV

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Current treatments and their limitations

Today’s current treatment options for cHBV include pegylated interferon-α regimens (“Peg-IFNα”) and NAs.

Today’s current treatment options for cHBV include pegylated interferon-α regimens (“Peg-IFNα”) and NA therapies.

Peg-IFNα, a synthetic version of a substance produced by the body to fight infection, is administered by injection and has numerous side effects including flu-like symptoms and depression.

NAs are oral antiviral medications which, when taken chronically, reduce HBV virus replication and inflammation and significantly reduce HBV DNA in the blood.

Oral NAs have become the standard-of-care for HBV treatment, mainly due to their ability to drive viral load to undetectable levels in the serum of patients, their easy single pill once-a-day dosing and favorable safety profile.

NA therapies are oral antiviral medications which, when taken chronically, reduce HBV virus replication and inflammation and significantly reduce HBV DNA in the blood.

therapies have become the standard-of-care for HBV treatment, mainly due to their ability to drive viral load to undetectable levels in the serum of patients, their single pill once-a-day dosing and favorable safety profile.

However, in most cases, once Peg-IFNα and NA therapies are stopped, virus replication resumes and liver inflammation and fibrosis may still progress.

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With such low cure rates, most patients with cHBV are required to take NA therapy daily for the rest of their lives.

HBV Lifecycle and Key Points for Intervention

The viral lifecycle of HBV is shown below.

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, has the potential to improve upon the standard of care and potentially lead to a functional cure.

NAs work by inhibiting HBV DNA polymerase activity and suppressing HBV replication.

However, NAs functionally cure only a small percentage of patients and typically require chronic dosing to maintain their benefits, which can be challenging for patients.

Capsid inhibitor (AB-836):

this orally-delivered product candidate has the potential to inhibit HBV replication by preventing the assembly of functional viral capsids.

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

The current standard-of-care therapy for HBV, primarily NAs that work by inhibiting the viral polymerase, significantly reduces virus replication, but not completely.

Capsid inhibitors inhibit replication by

destabilizing core particle assembly or disassembly.

Capsid inhibitors also have been shown to inhibit the uncoating step of the viral life cycle thus reducing the formation of new covalently closed circular DNA ("cccDNA"), the viral reservoir which resides in the cell nucleus and which is believed to play a role in viral persistence.

RNAi (AB-729):

this subcutaneously-delivered RNAi therapeutic product candidate targeted to hepatocytes uses our novel covalently conjugated N-acetylgalactosamine (“GalNAc”) subcutaneous delivery technology.

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

Reducing HBsAg is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to the virus.

Oral HBV RNA destabilizer (AB-161):

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.

These small molecule orally active agents cause the destabilization and ultimate degradation of HBV RNAs.

These agents result in the reduction of HBsAg and other viral proteins in both whole cell systems and animal models.

They have the potential to selectively impact HBV versus other RNA or DNA viruses and demonstrate pangenotypic characteristics.

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

Beyond addressing the key points of intervention described above, PD-L1 inhibitors could potentially be an important part of a combination therapy for the treatment of cHBV 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 cHBV.

Our PD-L1 inhibitor product candidate, AB-101, is being developed to potentially boost HBV-specific T cells by preventing PD-L1 proteins from attaching to and inhibiting the HBV-specific T cells.

Background on Coronaviruses

Coronaviruses are a large family of viruses that range from the common cold to more severe diseases such as severe acute respiratory syndrome (SARS), Middle East respiratory syndrome (MERS), and coronavirus disease 2019 (COVID-19).

COVID-19 is defined as an illness caused by SARS-CoV-2 and was first identified in Wuhan, China in December 2019.

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.

COVID-19 has caused approximately 7.2 million deaths globally according to an analysis by the Institute for Health Metrics and Evaluation (IHME).

COVID-19 spreads when an infected person breathes out droplets and very small particles that contain the virus.

The CDC has recommended vaccinations, wearing masks, and social distancing to protect individuals from acquiring and transmitting COVID-19.

Since its inception in December 2019, variant strains of COVID-19 have evolved and continue to impact the number of cases and deaths associated with this pandemic.

It is well-accepted that in addition to the availability of vaccines, effective and safe therapies are needed to successfully combat the COVID-19 pandemic and any future coronavirus outbreaks.

As we strive to identify and develop new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks, we have focused our research efforts on two essential targets critical for replication across all coronaviruses – nsp5 protease and nsp12 polymerase.

Current treatments and their limitations

Today’s current treatment options for COVID-19 include multiple vaccines, anti-viral drugs and antibodies to prevent or treat the disease.

Despite the high efficacy of the COVID-19 vaccines, it is estimated that more than 25% of the world’s population remains unvaccinated against COVID-19.

Today’s anti-viral treatments have certain limitations, including a short time frame to begin treatment, potential drug-drug interactions due to ritonavir boosting and frequently occurring side effects.

Patients continue to be hospitalized and die from COVID-19.

In addition to the availability of vaccines and other treatments, new effective and safe therapies are needed to successfully combat the COVID-19 pandemic and any future coronavirus outbreaks.

Our Product Candidates

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 (NA).

Our product pipeline includes multiple product candidates that target various steps in the HBV viral lifecycle and pan-coronavirus compounds that target essential viral targets for replication.

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)

RNAi therapeutics represent a recent significant advancement in drug development.

RNAi therapeutic (AB-729)

RNAi therapeutics represent a significant advancement in drug development.

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

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

AB-729 is a subcutaneously-delivered RNAi therapeutic targeted to hepatocytes using our proprietary covalently conjugated GalNAc delivery technology.

AB-729 is a subcutaneously-delivered RNAi single-trigger therapeutic targeted to hepatocytes using our proprietary covalently conjugated GalNAc delivery technology.

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

Our three-part Phase 1a/1b clinical trial was 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 cHBV with single doses 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 this clinical trial.

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, support our view that 60 mg every 8 weeks is 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 three 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 FDA to proceed with our Investigational New Drug (IND) application for AB-729 in a randomized, open label, multicenter Phase 2a 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 anticipate preliminary data from this 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 VBR and standard-of-care NA therapy for the treatment of patients with cHBV.

Patients are being enrolled in a randomized, multi-center, open-label Phase 2a proof-of-concept clinical trial 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 the clinical trial to enroll approximately 60 virologically-suppressed patients with HBeAg negative cHBV in the first cohort of the 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.

Both parties will share in the costs of the collaboration.

Assembly is conducting 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

In July 2021, we entered into a clinical collaboration agreement with 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 cHBV.

We expect to enroll 40 NA-suppressed, HBeAg negative or positive, non-cirrhotic cHBV 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 NA therapy only.

Patients are expected to be followed for up to 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.

Phase 1a/1b single- and multiple-dose clinical trial (AB-729-001)

In this three-part clinical trial, we investigated the safety, tolerability, pharmacokinetics, and pharmacodynamics of single- and multi-doses of AB-729 in healthy subjects and in cHBV patients with the goal of identifying the most appropriate doses and dosing intervals to take forward into Phase 2 clinical development.

The first two parts evaluated single ascending doses of AB-729 in healthy subjects and in patients with cHBV, respectively.

Data showed that a 60mg or 90mg single dose of AB-729 results in robust HBsAg and HBV DNA declines in HBV DNA positive patients.

Part 3 of the trial dosed HBV DNA negative/positive patients with 60mg or 90mg 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.

Data from Part 3 of the AB-729-001 clinical trial was presented at the 2022 European Association for the Study of the Liver (EASL) International Liver Congress™ (ILC) in June 2022 and showed that repeat dosing of 60mg and 90mg of AB-729 in 41 patients resulted in robust and comparable HBsAg declines in HBeAg positive/negative and HBV DNA positive/negative patients at week 48 (1.89 to 2.15 log10 decline in HBsAg).

Fifty percent of the patients (16 out of 32) maintained HBsAg levels below 100 IU/mL 24 weeks after their last dose of AB-729.

Patients treated with AB-729 experienced an increase in HBV-specific T-cells activation and a decrease in exhausted T-cells.

In this trial, AB-729 was generally safe and well-tolerated.

At the AASLD Liver Meeting in November 2022, we presented additional data from Part 3 of the AB-729-001 clinical trial, which included nine patients who had had previously completed 48 weeks of treatment with AB-729, and 24 weeks later met protocol-defined criteria to also stop NA therapy.

These nine patients had completed 12 to 44 weeks of follow-up after discontinuing their NA therapy.

None had met the protocol-defined criteria to restart NA therapy and there was no evidence of clinical or biochemical relapse.

HBsAg levels remained at 1.05 log10 to 2.35 log10 below pre-trial levels in all nine patients.

Three patients experienced transient HBV DNA elevations that spontaneously resolved without intervention, which further supports AB-729’s potential for immunological control.

One patient restarted NA therapy at the investigator’s request after the week 20 visit;

no alanine transaminase (“ALT”) elevation or safety signals were observed.

There were no adverse events (“AEs”) reported and no ALT flares were observed in the clinical trial.

Recently, one of the eight remaining patients met the protocol-defined HBV DNA criteria to restart NA therapy without evidence of any ALT flare.

We are continuing to follow the seven patients who remain off NA therapy and anticipate reporting additional off-treatment data in the first half of 2023.

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

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, some 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)

We have completed enrollment in 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 43 stably NA-suppressed, HBeAg negative, non-cirrhotic patients with cHBV.

After 24-weeks of dosing with AB-729 (60mg every 8 weeks), patients are randomized into one of four arms to receive ongoing NA therapy plus Peg-IFNα-2a for either 12 or 24 weeks, with or without additional doses of AB-729.

Patients who stop NA therapy will enter an intensive follow-up period for 48 weeks.

Preliminary data from the lead-in phase of the trial further validated AB-729’s potential to reduce HBsAg.

For the first 15 patients who reached week 16 of treatment and received two doses of AB-729 plus NA therapy, the mean HBsAg decline was 1.51 log10, comparable to the decline observed at the same timepoint in the Phase 1b clinical trial AB-729-001 (1.56 log10), while continuing to exhibit a generally safe and well-tolerated profile.

We anticipate providing preliminary data from patients who have received doses of Peg-IFNα-2a in the first half of 2023.

Collaboration with Vaccitech (AB-729-202)

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 antigen-specific immunotherapeutic, administered after AB-729 in NA-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 at Week 26, Week 30 and at Week 38 (if protocol-defined eligibility is met).

At week 48, all patients will be evaluated for eligibility to discontinue NA therapy and will be followed for an additional 24-48 weeks.

We anticipate providing preliminary data from patients who received AB-729, NA therapy and VTP-300 in the second half of 2023.

We recently amended the AB-729-202 protocol to include an additional arm with an approved PD-1 inhibitor, nivolumab (Opdivo®).

Upon regulatory approval of the amendment, 20 patients will receive AB-729 (60mg every 8 weeks) plus NA therapy for 24 weeks, followed by administration of VTP-300 plus a low dose of nivolumab in conjunction with the booster dose(s) only while remaining on their NA therapy.

At week 48, all patients will be evaluated for eligibility to discontinue NA therapy, and will be followed for an additional 24-48 weeks.

We anticipate dosing the first patient in this arm in the first half of 2023, subject to regulatory approval.

This clinical trial is being 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 initiating 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

In June 2021, we entered into a clinical collaboration agreement 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), a nucleos(t)ide reverse transcriptase inhibitor which is currently approved by the FDA, for the treatment of patients with cHBV.

The safety, pharmacokinetics, immunogenicity, and antiviral activity of the combination of ATI-2173, AB-729 and Viread is being evaluated in a single cohort in the ongoing Antios Phase 2a ANTT201 clinical trial.

Antios is responsible for conducting this clinical trial.

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

Arbutus is 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.

This cohort has completed enrollment.

With the majority of patients in this cohort enrolled in Ukraine, which is currently in a state of war, they may be lost to follow-up before completing the clinical trial.

Therefore, we and Antios may report limited data on a reduced number of patients from this clinical trial.

Oral Capsid Inhibitor (AB-836)

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

The current commercially available therapies (NAs or Peg-IFN) significantly reduce HBV DNA levels in the serum, but HBV replication continues in the liver, thereby enabling HBV infection to persist.

More effective therapies for patients require new agents which will further block viral replication.

We are developing capsid inhibitors (also known as core protein inhibitors) as oral therapeutics which, in combination with NAs, could further reduce HBV replication.

By inhibiting assembly of functional viral capsids, the ability of HBV to replicate is impaired.

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.

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 are enrolling patients in a double-blind, randomized, placebo-controlled Phase 1a/1b clinical trial 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.

Collaboration with Assembly

Through a clinical collaboration agreement with Assembly that we entered into in August 2020, Assembly conducted a clinical trial evaluating AB-729 in combination with its first-generation HBV core inhibitor (capsid inhibitor) candidate VBR and standard-of-care NA therapy for the treatment of cHBV in HBeAg negative 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 (n=32) compared to the dual combinations of VBR with an NA (n=16) and AB-729 with an NA (n=17).

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

At week 48, all patients were to be evaluated for eligibility to discontinue NA therapy.

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

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

Assembly completed enrollment in the clinical trial and preliminary data were presented at the 2022 AASLD Liver

Meeting, which indicated that adding VBR to AB-729 and NA therapy does not positively or negatively impact the reduction of HBsAg compared to AB-729 and NA therapy alone.

Accordingly, we have mutually agreed to discontinue the clinical trial following completion of the final, on-treatment visit at week 48.

All regimens were generally safe and well-tolerated in this trial.

Both parties shared in the costs of the collaboration.

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.

Oral PD-L1 Inhibitor (AB-101)

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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 attaching to and inhibiting the HBV-specific T cells.

AB-101 is an oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1.

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

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.

Immune checkpoints such as PD-1/PD-L1 play an important role in the induction and maintenance of immune tolerance and in T-cell activation.

AB-101 is our oral PD-L1 inhibitor candidate that we believe will allow for controlled checkpoint blockade while minimizing the systemic safety issues typically seen with checkpoint antibody therapies.

Preclinical data generated thus far indicates that AB-101 mediates activation and reinvigoration of HBV-specific T-cells from cHBV patients.

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.

Additionally, preclinical data in an HBV mouse model was presented at the 2022 AASLD Liver Meeting showing that monotherapy with AB-101 reduced PD-L1 in liver immune cells, confirming liver target engagement of the compound.

Combination treatment with AB-101 and an HBV-targeting GalNAc-siRNA agent resulted in activation and increased frequency of HBV-specific T-cells and greater anti-HBsAg antibody production.

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

We believe AB-101, when used in combination with other approved and investigational agents, could potentially lead to a functional cure in HBV chronically infected patients.

We anticipate initiating a Phase 1 healthy subject clinical trial with AB-101 in the first half of 2023 with data from the single-ascending dose portion of the clinical trial expected in the second half of 2023.

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)

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

These agents result in the reduction of HBsAg and other viral proteins in both whole cell systems and animal models.

They have the potential to selectively impact HBV versus other RNA or DNA viruses and demonstrate pangenotypic characteristics.

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

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

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

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

COVID-19 Research Efforts

Mechanistically, RNA destabilizers target the host proteins PAPD5/7, which are involved in regulating the stability of HBV RNA transcripts.

In doing so, RNA destabilizers lead to the selective degradation of HBV RNAs, thus reducing HBsAg levels and inhibiting viral replication.

To provide a proprietary all-oral treatment regimen for patients with cHBV, we believe inclusion of a small molecule RNA destabilizer is key.

HBV RNA destabilizers have the potential to complement or replace subcutaneously delivered RNAi agents, such as AB-729.

AB-161 is our next-generation oral small molecule RNA destabilizer specifically designed to target the liver.

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 recently presented preclinical data at the 2022 Discovery on Target Conference showing that AB-161 reduced HBV RNA and HBsAg in multiple preclinical models, with favorable liver centricity and lack of observed peripheral neuropathy.

We anticipate initiating a Phase 1 healthy subject clinical trial with AB-161 in the first half of 2023 with single-ascending dose data expected in the second half of 2023.

Coronavirus Program

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

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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.

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 and Proteros

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 ).

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

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

Oral M pro Inhibitor (AB-343)

AB-343 is our lead coronavirus drug candidate that inhibits M pro .

We anticipate completing IND-enabling studies and initiating a Phase 1 clinical trial with AB-343 in the second half of 2023.

We also intend to nominate a nsp12 clinical candidate and initiate IND-enabling studies in the second half of 2023.

An nsp12 viral polymerase could potentially be combined with AB-343 to achieve better patient treatment outcomes and for 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, as amended, with X-Chem, Inc.

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

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

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 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.

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

Through this collaboration, we 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.

COVID-19 Impact

The COVID-19 virus, first identified in December 2019, 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 Collaborations and Royalty Entitlements

Collaboration with Qilu Pharmaceuticals

In December 2021, we entered into a technology transfer and exclusive license agreement (the “License Agreement”) with Qilu, pursuant to which we granted Qilu an exclusive (except as to certain retained rights), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize 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”).

Other Collaborations, Royalty Entitlements and Intellectual Property Litigation

Collaboration with Qilu Pharmaceutical Co., Ltd.

In December 2021, we entered into a technology transfer and license agreement (the “License 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 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.

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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 will be established between us and Qilu to coordinate and review the development, manufacturing and commercialization plans.

Both parties also agreed to negotiate in good faith the terms and conditions of 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 manufacturer by Qilu, or its designated contract manufacturing organization, by the National Medical Products Administration in China for AB-729.

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 Qilu has received all approvals required for it or its designated contract manufacturing organization to manufacture AB-729 in the Territory.

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”).

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Alnylam Pharmaceuticals, Inc.

and Acuitas Therapeutics, Inc.

(“Alnylam”) and Acuitas Therapeutics, Inc.

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

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From the inception of the royalty sale through December 31, 2022, an aggregate of $18.9 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.

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.

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

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

(“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”).

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The Supreme Court granted certiorari in US v.

Athrex on October 13, 2020 (i.e., agreed to review the decision appealed from a lower court).

Athrex on October 13, 2020 (i.e.

agreed to review the decision appealed from a lower court).

Until the Supreme Court rendered its opinion in US v.

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

The opening brief was filed on December 15, 2021.

Moderna’s responsive brief was due on February 24, 2022 and Arbutus’ reply brief is due by March 17, 2022.

No hearing date has been set for this matter.

The opening brief was filed on October 25, 2021.

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

An oral hearing for this matter was held on November 4, 2022.

With respect to the ‘435 Patent, the PTAB rendered its decision on September 11, 2019, holding certain claims invalid and upholding other claims as valid.

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Moderna filed its opening brief on May 4, 2020 and we provided our opening and responsive brief on July 27, 2020.

Moderna subsequently filed

its reply and responsive brief on October 5, 2020, and we filed our reply brief on November 9, 2020.

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

Court of Appeals for the Federal Circuit.

Moderna subsequently filed its reply and responsive brief on October 5, 2020, and we filed our reply brief on November 9, 2020.

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.

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.

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

The decision in the ‘435 appeal was rendered final by mandate on January 25, 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 responses to the appeals on September 18, 2020.

On March 22, 2022, Moderna filed further written submissions to which Arbutus and Genevant responded in August 2022.

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 lawsuit against Moderna

In February 2022, Arbutus and Genevant filed a lawsuit in the U.S.

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.

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

We do not seek an injunction or otherwise seek to impede the sale, manufacture or distribution of MRNA-1273.

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.

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.” On November 2, 2022, the Court issued an Order denying Moderna’s motion.

On November 30, 2022, Moderna filed its Answer to the Complaint and Counterclaims.

Arbutus and Genevant filed their Answer to Moderna’s Counterclaims on December 21, 2022.

On February 14, 2023, the U.S.

of Justice filed a Statement of Interest in the action.

On February 16, 2023, the Court held an Initial Pretrial Conference after which it issued an Order, dated February 16, 2023, ordering that within 14 days of the issuance of the Order, the parties and the U.S.

Government are to submit letters regarding the impact of the Governments’ Statement of Interest on the scheduling of the matter.

Acuitas Declaratory Judgment Lawsuit

On March 18, 2022, 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.

On June 24, 2022, we and Genevant sought a pre-motion conference concerning our 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 entered an order directing:

(i) Acuitas to inform the court whether it intended to file an amended complaint;

(ii) that Acuitas must file any amended complaint by a certain date;

and (iii) that if Acuitas did not file an amended complaint, we and Genevant must file our motion to dismiss by a certain date.

Acuitas filed its amended complaint on September 6, 2022.

On October 4, 2022, we and Genevant filed our motion to dismiss the Acuitas action for lack of subject matter jurisdiction based on the lack of a case or controversy.

Acuitas filed its opposition to the motion to dismiss on November 1, 2022 and we and Genevant filed our reply brief on November 16, 2022.

The motion is now fully briefed.

No case schedule is yet in place.

Potential Additional Payments Related to the Acquisition of Enantigen Therapeutics, Inc.

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AB-729 2038 2038

AB-836 2039 2039

Human Capital

We are committed to an inclusive culture that values equality, opportunity, and respect.

We seek to secure and develop top talent with a diversity of thought, experiences and backgrounds.

Among the initiatives that Arbutus has introduced to promote and support diversity and inclusion, in addition to requiring mandatory annual training in unconscious bias and anti-harassment, is the formation of a diversity and inclusion committee, broadening the geographical reach of recruitment efforts, and addition of Juneteenth as a corporate holiday.

Arbutus is also involved with local charities serving underserved communities in the Philadelphia area.

Drug development is a complex endeavor that requires deep expertise and attracting and retaining qualified employees for specialized biopharmaceutical positions is very competitive.

Our compensation programs are designed to attract and retain top talent.

We offer every employee a total compensation package consisting of base salary, cash target bonus targeting the 50th to 75th percentile of market based on geography and company size, a comprehensive benefit package and equity compensation for every employee.

Bonus opportunity and equity compensation generally increase as a percentage of total compensation based on level of responsibility.

Actual bonus payout is based on company and individual performance.

We also provide eligible employees the opportunity to participate in our employee stock purchase plan, employee rewards and recognition program, our wellness programs and company-hosted charitable events.

We aim to allow our employees to maintain a work/life balance and find time to give back to the communities in which we work and live, all while striving to achieve company objectives and demonstrating our Arbutus values.

Arbutus also has a number of initiatives designed to reduce its environmental footprint, including the transition to the use of all LED lighting and timed parking lot lights, a building automation system that allows for controlling and scheduling of occupied/unoccupied space temperatures, repurposing substantially all shipping boxes and other packing material and donation of unused consumables to small start-up labs or local hospitals, among many other energy-saving initiatives.

We are invested in the development of our employees, including performance management and mentorship programs.

In 2021, we experienced our lowest turnover in the previous six years, while many other companies experienced their highest in the midst of a historically competitive job market.

Given our financial resources and our track record, we continue to be successful in filling vacated positions and in supporting our expanding pipeline of research programs and product candidates.

We supplement our in-house expertise with outsourced capabilities when it would be cost prohibitive to build our own in-house capabilities.

For example, we outsource a substantial portion of our clinical trial work to clinical research organizations and a majority of our drug manufacturing to contract manufacturers.

Our in-house clinical development and manufacturing teams implement our development strategies and oversee the activities of our outside vendors.

At December 31, 2021, we had 87 employees (85 full-time and 2 part-time), 65 of whom were engaged in research and development, including three medical doctors, 34 individuals with Doctors of Philosophy (PhDs) degrees, and 14 scientists with Master of Science degrees.

Substantially all of our employees are based out of our corporate headquarters in Warminster, PA.

Employee Composition

As of December 31, 2022, we had 98 employees (96 full-time and 2 part-time), 76 of whom were engaged in research and development, including three medical doctors, 35 individuals with Doctors of Philosophy (PhDs) degrees, and another 10 individuals with Master of Science degrees.

Our workforce is 49% female and 31% of our employees holding a position of vice president or higher are female.

None of our employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced any work stoppages.

We believe that relations with our employees are good.

During the COVID-19 pandemic, approximately half of our employees have continued to work at our facilities, where we have adopted health screening, implemented social distancing and personal protective equipment requirements, enhanced cleaning and sanitation procedures, mandated the COVID-19 vaccine and booster for all onsite employees (with 100% compliance), and modified workspaces to reduce the potential for disease transmission.

Our employees who do not require access to our facility to perform their work have been working from home during the pandemic.

The change in protocols and working arrangements have not had a significant impact on productivity.

We supplement our in-house expertise with outsourced capabilities when it would be cost prohibitive to build our own in-house capabilities.

For example, we outsource a substantial portion of our clinical trial work to clinical research organizations and a majority of our drug manufacturing is out-sourced to contract manufacturers.

Our in-house clinical development and manufacturing teams implement our development strategies and oversee the activities of our outside vendors.

Employee Oversight, Training and Development

We are invested in the professional development of our employees.

In order to promote long-term retention and to maximize the potential of our employees, we provide individualized performance management programs.

We also offer needs-based supplemental training to our employees.

In order to monitor employee satisfaction and as well to identify ways in which employee satisfaction and engagement can be improved, we also survey our employees on a regular basis, reporting the results of the surveys to management and to our board of directors.

In 2022, we experienced our lowest employee turnover in the previous seven years, while many other companies experienced their highest in the midst of an historically competitive job market.

Given our financial resources and our track record, we were able to hire 17 new employees in 2022 to support our expanding pipeline of research programs and product candidates.

Compensation and Benefits

Drug development is a complex endeavor that requires deep expertise and attracting and retaining qualified employees for specialized biopharmaceutical positions.

Our compensation programs are designed to attract and retain top talent.

We offer every employee a total compensation package consisting of base salary, cash target bonus targeting the 50th to 75th percentile of market based on company size and industry, a comprehensive benefit package, including medical, dental and vision health care coverage, a 401(k) plan with an employer match, tax-advantaged savings accounts and equity compensation for every employee, which includes stock options and restricted stock units.

We also provide eligible employees the opportunity to participate in our employee stock purchase plan and our employee rewards and recognition programs.

In addition, we provide our employees with wellness programs and we offer mental health support to our employees and dependents.

Work-life Balance

We aim to ensure our employees maintain a work-life balance by offering 25 paid days of time-off, 12 days of paid holidays, and we shut down in the last week of December.

We provide paid parental leave to both birth and adoptive parents.

In addition, we allow our employees to have a flexible work schedule and, to the extent possible, depending on the nature of the work, remote and hybrid work arrangements.

We believe our focus on total rewards and work-life balance contributed to our having been named one of Philadelphia Business Journal’s Best Places to Work in 2022, a prestigious award that is based on employee survey results.

Environmental, Social and Governance

Environmental

We are a pre-commercial company of less than one hundred employees, engaged in research and development.

Manufacturing activities to support these activities is almost entirely outsourced and biohazardous and chemical waste disposal is handled by

third party vendors.

Although our environmental footprint is subsequently small, we regularly review and evaluate our energy use to identify ways in which we can maximize efficiencies and minimize waste.

The culture at Arbutus reflects our commitment to our employees, to our community, and to making a meaningful contribution to world health.

We are active in community outreach and participate in many local charities serving underserved communities in the Philadelphia area, including partnering with Life Sciences Cares Philadelphia.

Safety in the Workplace

We strive to provide a productive and safe working environment for our employees.

To protect the health and safety of our employees, we have a Health and Safety Committee, officially certified by the PA Department of Labor and Industry - Bureau of Workers Compensation, which is committed to the principles of leadership, responsibility, prevention, and compliance.

We follow all recognized Environmental Health and Safety standards and management systems.

We have also established an Occupational Health and Safety policy and related standard operating procedures, all of which are used to train our employees in the proper procedures for the workplace.

We also solicit employee and contractor recommendations to improve on the safety of our working conditions.

Diversity, Equity and Inclusion

Our commitment to diversity and inclusion is demonstrated by our placement of ultimate responsibility for diversity, equity and inclusion with our board of directors, informed by the recommendations of management and the board’s Nominating and Governance Committee.

Our Code of Business Conduct (the “Code of Conduct”) prohibits discrimination and harassment of any kind, including discrimination or harassment based on age, race, ethnicity, religion, gender, sexual preference and disability.

In addition to our anti-harassment and human rights policies, we also require mandatory annual training in unconscious bias and anti-harassment.

Some of the diversity and inclusion initiatives at Arbutus include the formation of a Diversity and Inclusion Committee comprised of Arbutus employees and the broadening of the geographical reach of our recruitment efforts.

We also celebrate Juneteenth as a corporate holiday.

Our Contribution to World Health

We are dedicated to meaningfully contributing to world health.

We are pursuing the mission of finding a cure for Hepatitis B viral infections, an unmet medical need affecting over 290 million people worldwide, and we are working to develop a treatment for coronaviruses, including COVID-19.

As stated in our Code of Conduct, we are committed to complying with all applicable laws, rules and regulations not just in the United States and Canada, but in all the countries in which we operate.

In addition to mandating training on our Code of Conduct on an annual basis, we also provide annual training on insider trading, anti-bribery and anti-corruption, among other topics.

In addition, we require our suppliers’ agreement to comply with anti-bribery and anti-fraud provisions, and to comply with all applicable laws.

All vendors also receive our Code of Conduct at the time of their engagement with us.

We comply with all applicable regulations in conducting clinical trials, including FDA ethical regulations, the Declaration of Helsinki and the International Conference on Harmonisation - good Clinical Practices (ICH-GCP).

We face a broad range of current and potential competitors, from established global pharmaceutical companies with significant resources, to research-stage companies.

In addition, we face competition from academic and research institutions and government agencies for the discovery, development and commercialization of novel therapeutics to treat HBV and coronavirus.

Many of our competitors, either alone or with their collaborative partners, have significantly greater financial, product development, technical, manufacturing, sales, and marketing resources than we do.

In addition, many of our direct competitors are large pharmaceutical companies with internal research and development departments that have significantly greater experience in testing product candidates, obtaining FDA and other regulatory approvals of product candidates, and achieving widespread market acceptance for those products.

In addition, many of our direct competitors are large pharmaceutical companies with internal research and development departments that have significantly

greater experience in testing product candidates, obtaining FDA and other regulatory approvals of product candidates, and achieving widespread market acceptance for those products.

As a significant unmet medical need exists for HBV, there are several large and small pharmaceutical companies focused on delivering singular or combinations of therapeutics for the treatment of HBV.

These companies include, but are not limited to, Johnson & Johnson, Roche, Vir Biotechnology, GlaxoSmithKline, Gilead Sciences, Assembly, Enanta Pharmaceuticals, Aligos Therapeutics, Antios and Vaccitech.

These companies are developing products such as capsid inhibitors, RNAi agents, immune modulators, surface antigen inhibitors, and gene editing agents.

These companies include, but are not limited to, Johnson & Johnson, Roche, Vir Biotechnology, GlaxoSmithKline, Gilead Sciences, Assembly, Enanta Pharmaceuticals, Aligos Therapeutics and Vaccitech.

These companies are developing products such as antisense oligonucleotides, capsid inhibitors, RNAi therapeutics, immune modulators and surface antigen inhibitors.

These product candidates are in various stages of pre-clinical and clinical development.

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We believe that our ability to compete depends, in part, upon our ability to develop products, successfully complete the clinical trials and regulatory approval processes, and effectively market any approved products.

Further, we need to attract and retain

qualified personnel, obtain patent protection or otherwise develop proprietary product candidates or processes, and secure sufficient capital resources for the substantial time period between the discovery of lead compounds and their commercial sales, if any.

Further, we need to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary product candidates or processes, and secure sufficient capital resources for the substantial time period between the discovery of lead compounds and their commercial sales, if any.

Manufacturing

We currently rely on third-party manufacturers to supply drug substance and drug products, including AB-729 and AB-836, for our ongoing and anticipated clinical trials and non-clinical studies.

We currently rely on third-party manufacturers to supply drug substance and drug products, including AB-729, AB-101, AB-161 and AB-343, for our ongoing and anticipated clinical trials and non-clinical studies.

We currently have no plans to establish any large-scale internal manufacturing facilities for our product candidates.

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That deadline can be extended under certain circumstances, including by the FDA’s requests for additional information.

The targeted action date can also be shortened to 6 months of the 60-day filing date, or 8 months

after NDA submission for product candidates that are granted priority review designation because they are intended to treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs.

The targeted action date can also be shortened to 6 months of the 60-day filing date, or 8 months after NDA submission for product candidates that are granted priority review designation because they are intended to treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs.

The FDA has other programs to expedite development and review of product candidates that address serious or life-threatening conditions.

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To qualify for review under the Accelerated Approval pathway, a product candidate must treat a serious condition, provide a meaningful advantage over available therapies, and demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on an intermediate clinical endpoint.

On December 29, 2022, Congress enacted the Consolidated Appropriations Act of 2023, which included several changes to the Accelerated Approval pathway within the Food and Drug Omnibus Reform Act (“FDORA”).

Under FDORA, the FDA must specify the conditions for any post-approval studies before granting an Accelerated Approval.

FDORA gives the agency significant flexibility in setting forth such conditions, which may include enrollment targets, study protocol and milestones—including the target date of study completion.

The FDA may also require, as appropriate, that certain post-approval studies be underway prior to Accelerated Approval or within a specified time from the date of approval.

Accelerated Approval sponsors are required to report progress every six months on required post-approval trials.

Breakthrough Therapy designation, which is available for product candidates under development for serious or life-threatening conditions and where preliminary clinical evidence shows that the product candidate may have substantial improvement on at least one clinically significant endpoint over available therapies, means that a product candidate will be eligible for all of the benefits of Fast Track designation, as well as more intensive guidance from the FDA on an efficient drug development program and a commitment from the agency to involve senior FDA managers in such guidance.

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Post-approval modifications to a drug product, such as changes in indications, labeling or manufacturing processes or facilities, may require development and submission of additional information or data in a new or supplemental NDA, which would also require prior FDA approval.

The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) establishes two abbreviated approval pathways for product candidates that are in some way follow-on versions of already approved branded

NDA products:

(i) generic versions of the approved reference listed drug (“RLD”), which may be approved under an abbreviated new drug application (“ANDA”) by showing that the generic product is the “same as” the approved product in key respects;

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An EUA is not a long-term alternative to obtaining FDA approval, licensure, or clearance for a product.

FDA may revoke an EUA for a variety of reasons, including where it is determined that the underlying health emergency no longer exists or warrants such authorization, so it is not possible to predict how long an EUA may remain in place.

The FDA may revoke an EUA for a variety of reasons, including where it is determined that the underlying health emergency no longer exists or warrants such authorization, so it is not possible to predict how long an EUA may remain in place.

Post-Approval Regulation

Once approved, drug products are subject to continuing extensive regulation by the FDA.

Once approved, drug products are subject to continuing extensive regulation by the FDA, including ongoing monitoring for safety information, maintaining appropriate registrations and licenses, and hosting periodic inspections.

If ongoing regulatory requirements are not met, or if safety problems occur after a product reaches market, the FDA may take actions to change the conditions under which the product is marketed, such as requiring labeling modifications, restricting distribution, or even withdrawing approval.

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The FDA inspects equipment, facilities and manufacturing processes before approval and conducts periodic re-inspections after approval.

If, after receiving approval, a company makes a material change in manufacturing equipment, location, or process (all of which are, to some degree, incorporated in the NDA), additional regulatory review and approval may be required.

If, after receiving

approval, a company makes a material change in manufacturing equipment, location, or process (all of which are, to some degree, incorporated in the NDA), additional regulatory review and approval may be required.

Failure to comply with applicable GMP requirements or the conditions of the product’s approval may lead the FDA to take enforcement actions, such as issuing a warning letter, or to seek sanctions, including fines, civil penalties, injunctions, suspension of manufacturing operations, imposition of operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution.

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This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products.

New Legislation .

New legislation is passed periodically in Congress, or at the state level, that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA.

Further, the FDA revises its regulations and guidance in light of new legislation in ways that may affect our business or product candidates.

It is impossible to predict whether other changes to legislation, regulation, or guidance will be enacted, or what the impact of such changes, if any, may be.

Other Requirements .

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Fraud and Abuse Laws.

At such time as we market, sell and distribute any products for which we obtain marketing approval, it is possible that our business activities could be subject to scrutiny and enforcement under one or more federal or state health care fraud and abuse laws and regulations, which could affect our ability to operate our business.

These restrictions under applicable federal and state health care fraud and abuse laws and regulations that may affect our ability to operate include:

• The federal Anti-Kickback Law, which prohibits, among other things, knowingly or willingly offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any health care items or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid.

federal Anti-Kickback Law, which prohibits, among other things, knowingly or willingly offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any health care items or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid.

This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers and formulary managers on the other.

Liability may be established under the federal Anti-Kickback Law

without proving actual knowledge of the statute or specific intent to violate it.

In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Law constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Although there are a number of statutory exemptions and regulatory safe harbors to the federal Anti-Kickback Law protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor, or for which no exception or safe harbor is available, may be subject to scrutiny.

• The federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government.

Liability may be established under the U.S.

federal Anti-Kickback Law without proving actual knowledge of the statute or specific intent to violate it.

In addition, the government may assert that a claim including items or services resulting from a violation of the U.S.

federal Anti-Kickback Law constitutes a false or fraudulent claim for purposes of the U.S.

federal civil False Claims Act.

Although there are a number of statutory exemptions and regulatory safe harbors to the U.S.

federal Anti-Kickback Law protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor, or for which no exception or safe harbor is available, may be subject to scrutiny.

federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to

pay money to the federal government.

Actions under the False Claims Act may be brought by the United States Attorney General or as a qui tam action by a private individual (a whistleblower) in the name of the government and the individual, and the whistleblower may share in any monetary recovery.

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state laws and local ordinances that require identification or licensing of sales representatives.

• The federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, which requires manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services (“CMS”) information related to direct or indirect payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held in the company by physicians and their immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided (starting in 2021) to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, which requires manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services (“CMS”) information related to direct or indirect payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held in the company by physicians and their immediate family members.

As of 2022, applicable manufacturers are also required to report information regarding payments and transfers of value provided (starting in 2021) to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

• The federal Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties or international organizations with the intent to obtain or retain business or seek a business advantage.

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In addition, if we successfully commercialize our product candidates, we may obtain patient health information from healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacy and security requirements under HIPAA.

Although we are not directly subject to HIPAA other than potentially with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we, or our affiliates or our agents knowingly obtain, use or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Although we are not directly subject to HIPAA other than potentially with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we, or our affiliates or our agents knowingly receive individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

The Federal Trade Commission (“FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.

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In California, the CCPA establishes certain requirements for data use and sharing transparency and provides California residents certain rights concerning the use, disclosure, and retention of their personal information.

The CCPA and its

implementing regulations have already been amended multiple times since their enactment.

The CCPA and its implementing regulations have already been amended multiple times since their enactment.

In November 2020, California voters approved the California Privacy Rights Act (“CPRA”) ballot initiative which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (“CPPA”).

The amendments introduced by the CPRA go into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA.

The amendments introduced by the CPRA went into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or statutory or actual damages.

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Similarly, there are a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations or limitations in areas affecting our business.

For example, other states, including Virginia, Colorado, Utah, and Connecticut have enacted privacy laws similar to the CCPA that impose new obligations or limitations in

areas affecting our business and we continue to assess the impact of these state legislations on our business as additional information and guidance becomes available.

These laws and regulations are evolving and subject to interpretation, and may impose limitations on our activities or otherwise adversely affect our business.

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These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions may lead to unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices.

With regard to transfer of personal data, the GDPR restricts the ability of companies to transfer personal data from the European Economic Area to the United States and other countries, which may adversely affect our ability to transfer personal data or otherwise may cause us to incur significant costs to come into compliance with applicable data transfer impact assessments and implementation of legal data transfer mechanisms.

One mechanism previously relied upon by companies for such transfers was the EU-U.S.

Privacy Shield Framework (the “Privacy Shield”).

However, in July 2020, the European Court of Justice ruled the Privacy Shield to be an invalid data transfer mechanism and confirmed that the European Commission’s Standard Contractual Clauses (the “Model Clauses”) remain valid and in June 2021, the European Commission published updated versions of the Model Clauses, which must be incorporated into new and existing agreements within prescribed timeframes in order to continue to lawfully transfer personal data outside of the European Union.

As a result, companies may no longer rely on the Privacy Shield as a basis on which to transfer personal data from the European Union to the United States.

U.S.-based companies are permitted to rely on other authorized means and procedures to transfer personal data provided by the GDPR.

The Model Clauses may also come under increased scrutiny as a result of the European Court of Justice’s judgement in July 2020, though they remain the most common authorized procedure to transfer personal data out of the European Union.

On December, 13 2022, the European Commission adopted a draft adequacy decision for the EU-U.S.

Data Privacy Framework.

The draft decision concludes that the United States ensures an adequate level of protection for personal data transferred from the European Union to the United States.

The draft adequacy decision text will also have to be approved by a committee composed of representatives of the European Union Member States and the European Parliament can exercise its right of scrutiny.

After this process, the European Commission is then expected to adopt the final adequacy decision, which will allow data to flow freely from the European Union to the United States.

After one year from the notification date of the adequacy decision to the Member States and subsequently at least every four years, the European Commission will carry out a new evaluation and could conclude that an adequate level of protection is no longer ensured and decide to suspend, amend or repeal the adequacy decision, or limit its scope.

Coverage and Reimbursement

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In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.

periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.

Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates even if our product candidates obtain marketing approval.

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A primary trend in the United States healthcare industry and elsewhere is cost containment.

Government healthcare programs and other third-party payors are increasingly challenging the prices charged for medical products and services and examining

the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

Government healthcare programs and other third-party payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.

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Under the Medicaid Drug Rebate Program, we would be required to pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and under Part B of the Medicare program.

Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B.

Rebates owed by manufacturers under the Medicaid Drug Rebate Program are currently capped at 100 percent of average manufacturer price, but, effective January 1, 2024, this cap will be lifted, which could adversely affect our rebate liability.

Medicaid and Medicare Part B.

The 340B program requires participating manufacturers to agree to charge statutorily-defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs.

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Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount.

Further, starting in January 2023, the Inflation Reduction Act of 2022 (“IRA”) establishes a Medicare Part B inflation rebate scheme, under which, generally speaking, manufacturers will owe rebates if the average sales price of a Part B drug increases faster than the pace of inflation.

Failure to timely pay a Part B inflation rebate is subject to a civil monetary penalty.

Medicare Part D generally provides coverage to enrolled Medicare patients for self-administered drugs ( i.e.

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The prescription drug plans negotiate pricing with manufacturers and pharmacies, and may condition formulary placement on the availability of manufacturer discounts.

In addition, manufacturers are required to provide a 70% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries are in the coverage gap phase of the Part D benefit design.

In addition, under the coverage gap discount program, manufacturers are required to provide a 70% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries are in the coverage gap phase of the Part D benefit design.

Civil monetary penalties could be due if a manufacturer were to fail to offer discounts under the coverage gap discount program.

The IRA sunsets the coverage gap discount program starting in 2025 and replaces it with a new manufacturer discount program.

Failure to pay a discount under this new program will be subject to a civil monetary penalty.

In addition, starting in October 2022, the IRA established a Medicare Part D inflation rebate scheme, under which, generally speaking, manufacturers will owe additional rebates if the average manufacturer price of a Part D drug increases faster than the pace of inflation.

Failure to timely pay a Part D inflation rebate is subject to a civil monetary penalty.

The IRA also creates a drug price negotiation program under which the prices for Medicare units of certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price starting in 2026.

Failure to comply with requirements under the drug price negotiation program is subject to an excise tax and/or a civil monetary penalty.

This or any other legislative change could impact the market conditions for our product candidates.

In addition, in order to be eligible to have its products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by the Department of Veterans Affairs (the “VA”), Department of Defense (“DoD”), Public Health Service, and Coast Guard (the “Big Four agencies”) and certain federal grantees, a manufacturer also must participate in the VA Federal Supply Schedule (“FSS”) pricing program, established by Section 603 of the Veterans Health Care Act of 1992 (the “VHCA”).

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Additional legislative changes, regulatory changes, and judicial challenges related to the Affordable Care Act remain possible.

It is unclear how efforts modify or invalidate the Affordable Care Act or its implementing regulations, or portions

thereof, will affect our business.

It is unclear how efforts to modify or invalidate the Affordable Care Act or its implementing regulations, or portions thereof, will affect our business.

Any such changes could decrease the number of individuals with health coverage.

It is possible that the Affordable Care Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to successfully commercialize our product candidates, if approved.

It is possible that the Affordable Care Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures, including those that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to successfully commercialize our product candidates, if approved.

In addition, other legislative changes have been proposed since the Affordable Care Act was enacted.

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The Joint Select Committee did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reductions.

In concert with subsequent legislation, this has resulted in aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through 2030 (with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, due to the COVID-19 pandemic).

The law provides for 1% Medicare sequestration in the second quarter of 2022 and allows the full 2% sequestration thereafter until 2030.

To offset the temporary suspension during the COVID-19 pandemic, in 2030, the sequestration will be 2.25% for the first half of the year, and 3% in the second half of the year.

In concert with subsequent legislation, this has resulted in aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through 2031.

Sequestration is currently set at 2% and will increase to 2.25% for the first half of fiscal year 2030, to 3% for the second half of fiscal year 2030, and to 4% for the remainder of the sequestration period that lasts through the first six months of fiscal year 2031.

As long as these cuts remain in effect, they could adversely impact payment for any of our products that are reimbursed under Medicare, once commercialized.

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What changed 10-K

Item 1. Business