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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-09 · 206 added, 269 removed, 274 unchanged (63% of the section changed)

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

You should read the following discussion and analysis by our management of our financial position and results of operations in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2021 and our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022.

You should read the following discussion and analysis by our management of our financial position and results of operations in conjunction with our audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2022 and our unaudited condensed consolidated financial statements for the three months ended March 31, 2023.

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

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Forward-looking statements in this Form 10-Q, including the documents incorporated by reference, include statements about, among other things:

• our strategy, future operations, pre-clinical research, pre-clinical studies, clinical trials, prospects and the plans of management;

• our strategy, future operations, preclinical research, preclinical studies, clinical trials, prospects and the plans of management;

• the potential for our product candidates to achieve their desired or anticipated outcomes;

• the expected cost, timing and results of our clinical development plans and clinical trials, including our clinical collaborations with third parties;

• the potential impact of the COVID-19 pandemic on our business and clinical trials;

• the discovery, development and commercialization of a curative combination regimen for chronic hepatitis B infection, a disease of the liver caused by the hepatitis B virus (“HBV”);

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• our expectation of a net cash burn between $90 million and $95 million in 2023;

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

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

• our belief that we have sufficient cash resources to fund our operations into the first quarter of 2025,

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

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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, an oral PD-L1 inhibitor, and an oral RNA destabilizer to potentially identify a combination regimen with the aim of providing a functional cure for patients with chronic HBV infection (“cHBV”) by suppressing viral replication, reducing surface antigen and reawakening the immune system.

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

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, AB-729, an oral PD-L1 inhibitor, AB-101, and an oral RNA destabilizer, AB-161, 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.

In addition, a Phase 1 clinical trial with AB-161 was recently initiated.

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 preclinical studies.

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

The core elements of our strategy include:

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

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

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

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

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

At the American Association for the Study of Liver Diseases (“AASLD”) Liver Meeting held in November 2022 (the “2022 AASLD Liver Meeting”), we presented additional off-treatment data from Part 3 of the AB-729-001 Phase 1a/1b clinical trial, which included nine patients who had completed 12 to 44 weeks of follow-up after discontinuing their nucleos(t)ide analogue (“NA”) therapy.

Protocol-defined criteria to restart NA therapy was not met by any patient and there was no evidence of clinical or biochemical relapse.

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

Eight patients remain off NA therapy and are continuing to be followed for an additional two years to monitor for sustained viral response and potential functional cure.

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

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 investigational new drug (“IND”)-enabling studies that are anticipated to be completed in the fourth quarter of 2022.

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 patients 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 patients.

Preliminary data also suggests that treatment with AB-729 increased HBV-specific immune responses and, in a small number of patients 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-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.

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

At the Global Hepatitis Summit in April 2023, we presented preclinical data showing that AB-161 provides robust anti-HBV activity, including suppression of HBV RNA and HBsAg production in vitro and in vivo .

We recently dosed the first healthy subject in our single-ascending Phase 1 clinical trial with AB-161.

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.

In April 2023, we received verbal communication from the U.S.

Food and Drug Administration (“FDA”) that the AB-101 Investigational New Drug (“IND”) application has been placed on clinical hold.

For purposes of clarity, the Phase 1 clinical trial had not been initiated and we had not dosed any patients with AB-101.

The FDA indicated they will provide an official clinical hold letter to us within thirty days of the verbal communication.

Based on this communication, we no longer intend to report initial data from the single-ascending

dose portion of a Phase 1 clinical trial in the second half of 2023.

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

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

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 are conducting the remaining IND-enabling studies, which are anticipated to be completed in the fourth quarter of 2022.

• 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-101 and AB-161, along with existing approved therapies, may provide our first proprietary combination therapy for patients with cHBV.

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:

• Enrollment is ongoing in a Phase 2a proof-of-concept clinical trial (“AB-729-201”) to evaluate AB-729 in combination with ongoing standard-of-care NA therapy and short courses of Peg-IFNα-2a in patients with cHBV, with preliminary data anticipated in the fourth quarter of 2022.

• Through our collaboration with Assembly BioSciences, Inc.

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

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

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

Preliminary data from sixty-five patients in this clinical trial was presented as a poster presentation at the 2022 AASLD Liver Meeting and showed that adding VBR to AB-729 and NA therapy did not result in greater on-treatment improvements in markers of active HBV infection as compared to AB-729 and NA therapy alone.

The addition of VBR did not negatively impact the reduction of HBsAg in the triple combination arm.

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

Patients are continuing to be followed.

• Through our collaboration with Vaccitech plc (“Vaccitech”), we are enrolling patients in a Phase 2a clinical trial (“AB-729-202”) to evaluate a triple combination of AB-729 with Vaccitech’s VTP-300, a proprietary T cell stimulating therapeutic vaccine, and NA therapy for the treatment of patients with cHBV.

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:

• AB-729 in combination with ongoing standard-of-care NA therapy and short courses of Peg-IFNα-2a in patients 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 HBV antigen-specific immunotherapeutic, and NA therapy for the treatment of patients 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.

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

Through our collaboration with X-Chem, Inc.

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

We expect to nominate a candidate that inhibits Mpro in the fourth quarter of 2022 and advance that compound 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 (“Mpro”) 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 Mpro, a validated target for the treatment of COVID-19 and potential future coronavirus outbreaks.

At the 36 th International Conference on Antiviral Research in March 2023, we presented preclinical data that demonstrated the antiviral potency, selectivity and favorable pharmacokinetic profile of AB-343, which supports the further development of AB-343 as a potential ritonavir-free oral treatment for COVID-19 and other human coronaviruses.

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.

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 (nsp12).

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.

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

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

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

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

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

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

At the 2022 AASLD Liver Meeting, we presented additional off-treatment data from Part 3 of the AB-729-001 Phase 1a/1b 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 and 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.

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 log 10 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 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 log 10 to 2.35 log 10 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.

At the Global Hepatitis Summit in April 2023, we reported in an oral presentation additional off-treatment data from these nine patients who had stopped all treatments.

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

no ALT elevation or safety signals were observed.

Eight patients remain off NA therapy and are continuing to be followed for an additional two years to monitor for sustained viral response and potential functional cure.

There were no adverse events (“AEs”) reported and no ALT elevations observed.

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

Another patient met the protocol-defined HBV DNA criteria to restart NA therapy without evidence of any ALT flare.

The seven remaining patients continue to maintain low HBV DNA levels off all therapy, and HBsAg levels remain below baseline (-0.8 to -1.6 log 10 ) up to one and a half years after the last dose of AB-729.

There were no adverse events reported and no ALT flares were observed in the clinical trial.

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

Data presented earlier this year at the 2022 European Association for the Study of the Liver (EASL) International Liver Congress™ (ILC) showed that repeat dosing of 60 mg and 90 mg of AB-729 resulted in robust mean declines in HBsAg in

HBeAg positive/negative and HBV DNA positive/negative patients that were sustained up to 48 weeks, with no statistically significant differences observed to date between the 60 mg and 90 mg dose and/or dosing intervals.

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

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

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

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

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

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

• All patients had HBsAg levels <100 IU/mL during AB-729 treatment or follow-up with two patients reaching HBsAg below levels of quantification on multiple visits;

• All seven patients had residual detectable HBeAg and therefore did not meet the protocol-defined discontinuation criteria for their NA therapy;

• One patient reached HBeAg less than lower levels of quantification intermittently;

• No safety events were noted during the follow-up period.

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

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

To advance our efforts to position AB-729 as a potential cornerstone therapeutic in future HBV combination regimens, we are evaluating AB-729 in two 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 are evaluating AB-729-201 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 up to 40 stably NA-suppressed, HBeAg negative, non-cirrhotic patients with cHBV.

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.

Enrollment is ongoing in this clinical trial and we anticipate preliminary data in the fourth quarter of 2022.

Collaboration with Assembly

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

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

Both parties share in the costs of the collaboration.

Assembly has completed enrollment in the clinical trial.

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

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

Preliminary data from this clinical trial were presented as a poster presentation at the 2022 AASLD Liver Meeting.

The preliminary data indicate that adding VBR to AB-729 and NA therapy does not result in greater on-treatment improvements in markers of active HBV infection as compared to AB-729 and NA therapy alone.

The addition of VBR did not negatively impact the reduction of HBsAg in the triple combination arm.

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

Patients are continuing to be followed.

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.

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 capacity 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 log 10 , comparable to the decline observed at the same timepoint in the Phase 1b clinical trial AB-729-001 (1.56 log 10 ), while continuing to exhibit a generally safe and well-tolerated profile.

We anticipate providing preliminary data from patients who have received the combination of AB-729, NA therapy and Peg-IFNα-2a in the second quarter 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 therapeutic vaccine, administered after AB-729 in NA-suppressed patients with cHBV.

Through a clinical collaboration agreement with Vaccitech that we entered into in July 2021, we are enrolling patients in AB-729-202, a Phase 2a proof-of-concept clinical trial evaluating the safety, antiviral activity and immunogenicity of Vaccitech’s VTP-300, a proprietary T-cell stimulating HBV 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.

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

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

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

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 the combination of 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®).

In this additional arm, twenty 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 amended arm in the second quarter of 2023.

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 and Vaccitech retain full rights to our respective product candidates and will split

all costs associated with the clinical trial.

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

Collaboration with Antios

We have terminated our clinical collaboration agreement with Antios Therapeutics, Inc.

(“Antios”) that we entered into in June 2021.

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

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

We were responsible for the manufacture and supply of AB-729.

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

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

Antios recently terminated this clinical trial.

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.

Oral capsid inhibitors (also known as core protein inhibitors), 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.

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

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

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

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

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

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

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

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

Based on these ALT findings, an additional arm was added to the AB-836-001 clinical trial to evaluate the safety of dosing AB-836 for a longer period of time to help determine if the previously seen ALT elevations were beneficial or were instead the result of liver toxicity.

In this healthy volunteer arm, two subjects dosed with AB-836 experienced low grade ALT elevations after more than 20 days of dosing, causing us to stop dosing.

Based on these additional safety findings, we decided to discontinue clinical development of AB-836.

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.

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 dosed the first healthy subject in our Phase 1 clinical trial with AB-161, with initial single-ascending dose data expected in the second half of 2023.

Oral PD-L1 Inhibitor (AB-101)

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

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

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.

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

We anticipate completing IND-enabling studies for AB-101 in the fourth quarter of 2022.

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.

In April 2023, we received verbal communication from the FDA that the AB-101 IND application has been placed on clinical hold.

For purposes of clarity, the Phase 1 clinical trial had not been initiated and we had not dosed any patients with AB-101.

The FDA indicated they will provide an official clinical hold letter to us within thirty days of the verbal communication.

Based on this communication, we no longer intend to report initial data from the single-ascending dose portion of a Phase 1 clinical trial 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.

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 are conducting the remaining IND-enabling studies, which are anticipated to be completed in the fourth quarter of 2022.

COVID-19 Research Efforts

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

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

Coronavirus Program

Given our scientific team’s proven expertise in discovering, developing and commercializing new antiviral therapies, in 2020 we initiated a drug discovery effort for treating COVID-19, pan-coronaviruses and potential future outbreaks.

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

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

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

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

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

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

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

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.

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

Oral Mpro Inhibitor (AB-343)

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

We are currently conducting IND-enabling studies with AB-343, and on completion, we expect to initiate a Phase 1 clinical trial 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 and Proteros to focus on the discovery of novel inhibitors targeting the SARS-CoV-2 nsp5 main protease (M pro ).

In March 2021, we entered into a discovery research and license agreement, as amended, with X-Chem, Inc.

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

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 collaboration allows for the rapid screening of one of the largest small molecule libraries against Mpro (an essential protein required for the virus to replicate itself) and the use of state-of-the-art structure guided methods to rapidly optimize Mpro inhibitors to 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 fourth quarter of 2022 and advance into IND-enabling studies.

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

COVID-19 Impact

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

Qilu Pharmaceutical Co., Ltd.

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

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

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

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

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

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

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 at a purchase price of USD $4.19 per share, which was a 15% premium on the thirty-day average closing price of our common shares as of the close of trading on December 10, 2021 (the “Share Transaction”).

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

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

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

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.

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

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

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

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

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

From the inception of the royalty sale through September 30, 2022, an aggregate of $16.5 million of royalties have been collected by OMERS.

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

From the inception of the royalty sale through March 31, 2023, an aggregate of $20.0 million of royalties have been earned by OMERS.

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

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

As of September 30, 2022, we owned approximately 16% of the common equity of Genevant and the carrying value of our investment in Genevant was zero.

As of March 31, 2023, we owned approximately 16% of the common equity of Genevant and the carrying value of our investment in Genevant was zero.

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

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We filed a response to Moderna’s petitions on June 14, 2018.

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

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

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

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

A 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.

On November 13, 2019, we and Moderna both appealed the decision.

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.

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”).

The PTAB instituted Inter Partes Review of the ‘069 Patent and, on July 23, 2020, issued a decision upholding all claims as valid.

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, we filed our responsive brief on May 11, 2021, and Moderna filed its reply brief on July 1, 2021.

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

Court of Appeals for the Federal Circuit.

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

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

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

On April 11, 2023, the Federal Circuit rendered its opinion, affirming the PTAB’s finding that all claims of the ‘127 Patent are invalid by reason of anticipation.

Moderna and Merck European Oppositions

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

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

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

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

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

On April 18, 2023, we and Genevant withdrew our auxiliary request, however, the original (main) request remains in the action.

The date for the oral proceedings has not been set.

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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.

We and Genevant filed our Answer to Moderna’s Counterclaims on December 21, 2022.

On February 14, 2023, the U.S.

Department 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 were to submit letters regarding the impact of the Governments’ Statement of Interest on the scheduling of the matter.

On March 10, 2023, the Court reaffirmed its denial of Moderna’s motion to dismiss.

On March 16, 2023, the Court held a Rule 16 scheduling conference, and on March 21, 2023, the Court issued a scheduling order in the matter without setting a trial date.

Patent Infringement Litigation vs.

Pfizer and BioNTech

On April 4, 2023, we and Genevant filed a lawsuit in the U.S.

District Court for the District of New Jersey against Pfizer Inc.

(“Pfizer”) and BioNTech SE (“BioNTech”) seeking damages for infringement of U.S.

and 11,318,098 in the manufacture and sale of any COVID-19 mRNA-LNP vaccines.

The patents relate to nucleic acid-lipid particles and their composition, manufacture, delivery and methods of use.

The lawsuit does not seek an injunction or otherwise seek to impede the sale, manufacture or distribution of any COVID-19 mRNA-LNP vaccines.

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

Acuitas Declaratory Judgment Lawsuit

On March 18, 2022, Acuitas Therapeutics Inc.

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

On March 18, 2022, Acuitas filed a lawsuit against us and Genevant in the U.S.

District Court for 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.

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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 intend to file our reply brief on November 16, 2022.

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.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

This management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(in thousands)

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Loss from operations (17,413) (10,974)

Other loss 244 (750) (186) (2,200)

Other income (loss) 1,074 (347)

Loss before income taxes (16,339) (11,321)

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Net loss $ (16,339) $ (15,765)

Dividend accretion of convertible preferred shares — (5,087) — (11,565)

Net loss attributable to common shares $ (17,567) $ (24,245) $ (47,524) $ (66,491)

Revenues are summarized in the following table:

Three Months Ended September 30,

2022 % of Total 2021 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 1,256 21 % $ 1,425 43 %

Qilu Pharmaceutical Co., Ltd.

2,352 40 % — — %

Other milestone and royalty payments — — % 55 2 %

Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

2,344 39 % 1,860 56 %

Total revenue $ 5,952 100 % $ 3,340 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

2023 % of Total 2022 % of Total

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Revenue from collaborations and licenses

Acuitas Therapeutics, Inc.

$ 4,339 13 % $ 3,683 47 %

Royalties from sales of ONPATTRO $ 1,405 21 % $ 1,534 12 %

Qilu Pharmaceutical Co., Ltd.

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Non-cash royalty revenue

Alnylam Pharmaceuticals, Inc.

5,393 16 % 3,963 51 %

Royalties from sales of ONPATTRO 1,178 18 % 1,363 11 %

Total revenue $ 6,687 100 % $ 12,581 100 %

Total revenue increased $2.6 million and $25.0 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily due to license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to the technology transfer and licensing agreement with Qilu, which closed in January 2022, as well as an increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Total revenue decreased $5.9 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to a decrease in license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to the technology transfer and licensing agreement with Qilu, which closed in January 2022, as well as a decrease in license royalty revenue from Alnylam and Acuitas due to a decrease in Alnylam’s sales of ONPATTRO.

Operating expenses

Operating expenses are summarized in the following table:

Three Months Ended September 30,

2022 % of Total 2021 % of Total

(in thousands, except percentages)

Research and development $ 20,055 84 % $ 16,709 77 %

General and administrative 3,493 15 % 4,183 19 %

Change in fair value of contingent consideration 215 1 % 856 4 %

Total operating expenses $ 23,763 100 % $ 21,748 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

2023 % of Total 2022 % of Total

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Research and development

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

Research and development expenses increased $3.3 million and $15.2 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

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

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

Research and development expenses decreased $0.2 million for the three months ended March 31, 2023, compared to the same period in 2022.

The decrease was due primarily to a decrease in expenses for our AB-836 Phase 1a/1b clinical trial, which was discontinued in the fourth quarter of 2022, partially offset by an increase in expenses for our coronavirus program and other early-stage development programs.

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

General and administrative

General and administrative expenses decreased $0.7 million for the three months ended September 30, 2022 as compared to the same period in 2021 due primarily to an award of $0.5 million during the third quarter of 2022 from the arbitrator in the UBC matter for reimbursement of costs and attorneys’ fees.

General and administrative expenses increased $1.0 million for the nine months ended September 30, 2022 as compared to the same period in 2021, due primarily to increases in employee compensation costs and non-cash stock-based compensation expense.

General and administrative expenses increased $0.7 million for the three months ended March 31, 2023 as compared to the same period in 2022 due primarily to increases in employee compensation costs and non-cash stock-based compensation expense.

Change in fair value of contingent consideration

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

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

Other income (loss)

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

Other loss (income)

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(in thousands)

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Interest expense (198) (506)

Foreign exchange loss (21) (15) (18) —

Total other loss $ 244 $ (750) $ (186) $ (2,200)

Total other income (loss) $ 1,074 $ (347)

Interest income

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

The increase in interest income for the three months ended March 31, 2023 compared to the same period in 2022 was due primarily to higher interest earned on our cash and investment balances due to a general increase in market interest rates.

Interest expense

Interest expense for both the three and nine months ended September 30, 2022 and 2021 consisted primarily of non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

The decreases are related to the declining balance of the unamortized discount and issuance costs.

Foreign exchange gains

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

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

Interest expense for both the three months ended March 31, 2023 and 2022 consisted primarily of non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

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

Income tax expense

During the nine months ended September 30, 2022, we recognized income tax expense of $4.4 million for withholding taxes paid to the Chinese taxing authority by Qilu on our behalf in connection with the upfront license fee Qilu paid us.

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

We did not recognize any income tax expense during the three months ended March 31, 2023.

LIQUIDITY AND CAPITAL RESOURCES

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Net change in operating items (8,230) (4,098)

Net cash used in operating activities (18,366) (47,926)

Net cash used in investing activities (87,624) (4,557)

Net cash (used in) provided by operating activities (27,301) 20,619

Net cash provided by (used in) investing activities 16,678 (60,056)

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

Issuance of common shares pursuant to the Open Market Sale Agreement 19,862 268

Cash provided by other financing activities 555 244

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Effect of foreign exchange rate changes on cash and cash equivalents 4 —

(Decrease)/increase in cash and cash equivalents (85,278) 25,632

Increase (decrease) in cash and cash equivalents 9,798 (27,952)

Cash and cash equivalents, beginning of period 30,776 109,282

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

For the nine months ended September 30, 2022, $18.4 million of cash was used in operating activities compared to $47.9 million used in operating activities for the nine months ended September 30, 2021, a decrease of $29.6 million.

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

These cash inflows were offset by $62.4 million of cash used in operations.

For the nine months ended September 30, 2022, net cash used in investing activities was $87.6 million, consisting primarily of additional investments in marketable securities of $117.3 million, partially offset by maturities of investments in marketable securities of $30.0 million.

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

For the nine months ended September 30, 2022, net cash provided by financing activities was $20.7 million, which included $11.0 million for the fair value of the shares purchased by Qilu as part of their $15.0 million equity investment, of which the remaining $4.0 million was a premium paid by Qilu on the equity investment and was allocated to deferred revenue.

Also contributing to net cash provided by financing activities was $9.2 million in proceeds from sales of common shares under the Sale Agreement.

For the nine months ended September 30, 2021, net cash provided by financing activities was $78.1 million, which was primarily driven by $75.4 million in proceeds from sales of common shares under the Sale Agreement.

For the three months ended March 31, 2023, $27.3 million of cash was used in operating activities compared to $20.6 million provided by operating activities for the three months ended March 31, 2022, a change of $47.9 million.

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

Also contributing to the change was timing of accruals and payments.

For the three months ended March 31, 2023, net cash provided by investing activities was $16.7 million, resulting primarily from maturities of investments in marketable securities of $37.0 million, partially offset by additional investments in marketable securities of $20.2 million.

For the three months ended March 31, 2022, net cash used in investing activities was $60.1 million, which consisted primarily of additional investments in marketable securities of $62.0 million.

For the three months ended March 31, 2023, net cash provided by financing activities was $20.4 million, which was primarily related to $19.9 million in proceeds from sales of common shares under the Sale Agreement.

For the three months ended March 31, 2022, net cash provided by financing activities was $11.5 million, which included $11.0 million for the fair value of the shares purchased by Qilu as part of their $15.0 million equity investment in us, of which the remaining $4.0 million was a premium paid by Qilu on the equity investment and was allocated to deferred revenue.

Sources of Liquidity

As of September 30, 2022, we had cash, cash equivalents and investments in marketable securities of $190.2 million.

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

As of March 31, 2023, we had cash, cash equivalents and investments in marketable securities of $178.5 million.

We had no outstanding debt as of March 31, 2023.

Open Market Sale Agreement

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

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

The January 2020 Registration Statement also contained a prospectus supplement in connection with the offering of up to $50.0 million of our common shares pursuant to the Sale Agreement.

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

The January 2020 Registration Statement also contained a prospectus supplement for an offering of up to $50.0 million of our common shares pursuant to the Sale Agreement.

This prospectus supplement was fully utilized during 2020.

On August 7, 2020, we filed a prospectus supplement with the SEC (the “August 2020 Prospectus Supplement”) in connection with the offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the January 2020 Registration Statement.

On August 7, 2020, we filed a prospectus supplement with the SEC (the “August 2020 Prospectus Supplement”) for an offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the January 2020 Registration Statement.

The August 2020 Prospectus Supplement was fully utilized during 2020.

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

On March 4, 2021, we filed a prospectus supplement with the SEC (the “March 2021 Prospectus Supplement”) in connection with the offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

We fully utilized the March 2021 Prospectus Supplement during 2021.

On March 4, 2021, we filed a prospectus supplement with the SEC for an offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement, which we fully utilized during 2021.

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

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

333-260782) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the “November 2021 Registration Statement”), for the offer and sale of up to $250.0 million of our securities.

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

333-260782) and accompanying base prospectus, which was declared effective by the SEC on November 18, 2021 (the “November 2021 Registration Statement”), for the offer and sale of up to $250.0 million of our securities.

On March 3, 2022, we filed a prospectus supplement with the SEC (the “March 2022 Prospectus Supplement”) for the offer and sale of up to an additional $100.0 million of our common shares pursuant to the Sale Agreement under:

(i) the January 2020 Registration Statement;

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and (iii) the November 2021 Registration Statement.

During the nine months ended September 30, 2022, we issued 3,901,765 common shares pursuant to the Sale Agreement, as amended, resulting in net proceeds of approximately $9.2 million.

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

As of September 30, 2022, there was approximately $142.6 million available in aggregate under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

During the three months ended March 31, 2023, we issued 7,423,622 common shares pursuant to the Sale Agreement, as amended, resulting in net proceeds of approximately $19.9 million.

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

As of March 31, 2023, there was approximately $110.7 million available in aggregate under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

Royalty Entitlements

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

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

In July 2019, we sold a portion of this royalty interest to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees.

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

From the inception of the royalty sale through December 31, 2022, we have recorded an aggregate of $18.9 million of non-cash royalty revenue for royalties earned by OMERS.

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

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

In December 2021, we entered into a technology transfer and licensing agreement with Qilu pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, which is non-exclusive as to development and manufacturing and exclusive with respect to commercialization of AB-729, including pharmaceutical products that include AB-729, for the treatment or prevention of hepatitis B in the Territory.

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

In December 2021, we entered into a technology transfer and exclusive licensing agreement with Qilu pursuant to which we granted Qilu an exclusive (with certain exceptions), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize AB-729 for the treatment or prevention of cHBV in the Territory.

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment in us of $15.0 million, both received in January 2022, and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones.

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

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

Cash requirements

We believe that our $190.2 million of cash, cash equivalents and investments in marketable securities as of September 30, 2022 will be sufficient to fund our operations into the second quarter of 2024 based on our expectation of a net cash burn between $90 million and $95 million in 2022.

We believe that our $178.5 million of cash, cash equivalents and investments in marketable securities as of March 31, 2023 will be sufficient to fund our operations into the first quarter of 2025.

We expect a net cash burn between $90 million and $95 million in 2023.

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

In particular, our funding needs may vary depending on a number of factors including:

• the effects of the COVID-19 pandemic on our business, the medical community and the global economy;

• revenue earned from our legacy collaborative partnerships and licensing agreements, including potential royalty payments from Alnylam’s ONPATTRO;

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

• delays in the development of our product candidates due to pre-clinical and clinical findings;

• delays in the development of our product candidates due to preclinical and clinical findings;

• our decisions to in-license or acquire additional products, product candidates or technology for development;

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

Further, the continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future.

If adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our research or development programs or reduce expenses associated with our non-core activities.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis