What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-05 compared with 2023-03-02 · 64 added, 78 removed, 186 unchanged (43% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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.

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to identify and develop novel therapeutics with distinct mechanisms of action, which can potentially be combined to provide a functional cure for patients with chronic hepatitis B virus (cHBV) infection.

We believe the key to success in developing a functional cure involves suppressing hepatitis B virus deoxyribonucleic acid (HBV DNA), reducing hepatitis B surface antigen (HBsAg) and boosting HBV-specific immune responses.

Our pipeline of internally developed, proprietary compounds includes an RNAi therapeutic, imdusiran (AB-729), and an oral PD-L1 inhibitor, AB-101.

Imdusiran has generated meaningful clinical data demonstrating an impact on both surface antigen reduction and reawakening of the HBV-specific immune response.

Imdusiran is currently in two Phase 2a combination clinical trials.

AB-101 is currently being evaluated in a Phase 1a/1b clinical trial.

Our product pipeline consists of the following programs:

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

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

Our strategy is to position imdusiran as a potential cornerstone therapeutic in combination with AB-101 or other agents with potentially complementary mechanisms of action.

When our AB-101-001 clinical trial is completed, assuming success, we intend to initiate a Phase 2 clinical trial combining imdusiran, AB-101 and NA therapy in patients with cHBV infection.

We are also conducting two Phase 2a clinical trials combining imdusiran with other agents.

Imdusiran 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.

Over 170 patients with cHBV infection have been dosed with imdusiran in our Phase 1 and Phase 2a clinical trials.

Clinical data generated thus far has shown imdusiran to be generally safe and well-tolerated, while also providing meaningful reductions in HBsAg and HBV DNA.

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.

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 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.

AB-343 is our lead candidate that inhibits the SARS-CoV-2 nsp5 M pro .

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.

COVID-19 Impact

We continue to monitor the effects of COVID-19, which has caused significant disruptions around the world.

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.

Preclinical data in an HBV mouse model that was presented at the 2022 AASLD Liver Meeting showed 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.

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, 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 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 imdusiran, including pharmaceutical products that include imdusiran, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the Territory).

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones.

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

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

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

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

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

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

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

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

Both parties also have entered into a supply agreement and related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of AB-729 necessary for Qilu to develop and commercialize in the Territory until we have completed manufacturing technology transfer to Qilu and Qilu has received all approvals required for it or its designated contract manufacturing organization to manufacture AB-729 in the Territory.

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

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

less, tiered low single-digit royalties on net sales of the sublicensed product.

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

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting for our contingent consideration and our License Agreement with Qilu are significant accounting policies that we believe are critical in fully understanding and evaluating our financial results.

These accounting policies require us to make certain estimates and assumptions.

The accounting for our contingent consideration is a significant accounting policy that we believe is critical in fully understanding and evaluating our financial results.

This accounting policy requires us to make certain estimates and assumptions.

We believe that the estimates and assumptions upon which we rely are reasonable, based upon information available to us at the time that these estimates and assumptions are made.

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(Enantigen) in October 2014, we have obligations to make potential future payments of up to $102.5 million upon the achievement of certain commercial milestones.

The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV.

The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV infection.

These potential contingent payments are recorded as a liability and remeasured to fair value as of each reporting date.

In assessing the fair value of the liability, significant judgments are required to be made by management to estimate the probability of program success, the timing and extent of future product sales, appropriate discount rates, and other estimates and assumptions that could materially affect the determination of fair value.

In order to estimate the probability of program success, we evaluate the status and progress of our clinical trials with our lead product candidate, AB-729, in comparison to actual historical success rates for other clinical trials.

We update our assumptions related to probability of success as AB-729 advances through clinical trials.

For the timing and extent of future product sales, we also consider the status and progress of AB-729, future revenue forecasts and other macroeconomic indicators that forecast market conditions.

In order to estimate the probability of program success, we evaluate the status and progress of our clinical trials with our lead product candidate, imdusiran, in comparison to actual historical success rates for other clinical trials.

We update our assumptions related to probability of success as imdusiran advances through clinical trials.

For the timing and extent of future product sales, we also consider the status and progress of imdusiran, future revenue forecasts and other macroeconomic indicators that forecast market conditions.

The discount rate at which we calculate the present value of our potential future liability is based on consideration of market-comparative data, market-based discount rates, and company-specific risk premiums.

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The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices.

The estimated stand-alone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a

stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The estimated stand-alone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services.

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Loss from operations (78,103) (65,456)

Other income (loss) 444 (2,725)

Other income 5,254 444

Loss before income taxes (72,849) (65,012)

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Net loss $ (72,849) $ (69,456)

Dividend accretion of convertible preferred shares — (12,139)

Net loss attributable to common shares $ (69,456) $ (88,386)

For the fiscal year ended December 31, 2023, our net loss attributable to common shares was $72.8 million, or a loss of $0.44 per basic and diluted common share, as compared to a net loss of $69.5 million, or a loss of $0.46 per basic and diluted common share, for the year ended December 31, 2022.

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Total revenue $ 18,141 100 % $ 39,019 100 %

Revenue consists mainly of royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue increased $28.0 million for the year ended December 31, 2022 compared to 2021, due primarily to $26.0 million in license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to our technology transfer and licensing agreement with Qilu, which closed in January 2022, as well as a $2.2 million increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

Revenue consists mainly of license revenue and royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue decreased $20.9 million for the year ended December 31, 2023 compared to 2022, due primarily to:

i) a $15.3 million decrease in license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to our technology transfer and licensing agreement with Qilu;

and ii) a $5.5 million decrease in license royalty revenue from Alnylam and Acuitas due to lower sales of Alnylam’s ONPATTRO in 2023 compared to 2022.

The royalty interest for ONPATTRO from Alnylam was sold to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees.

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During the term of this agreement, we recognize non-cash royalty revenue related to the sales of ONPATTRO.

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.

The royalty interest for ONPATTRO from Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties.

From the inception of the royalty sale through December 31, 2023, we have recorded an aggregate of $22.7 million of non-cash royalty revenue for royalties earned by OMERS.

The royalty interest for ONPATTRO from

Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties.

Revenue contracts are described in more detail in “Item 1.

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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 $18.9 million in 2022 compared to 2021 due primarily to an increase in expenses for our ongoing AB-729 Phase 2a clinical trials, an increase in expenses for our early-stage development programs, including AB-101 and AB-161, and an increase in compensation costs due to hiring several new employees for our research and development team in early 2022, partially offset by a decrease in expenses for our AB-836 Phase 1a/1b clinical trial, which we discontinued during the fourth quarter of 2022.

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 $10.7 million in 2023 compared to 2022 due primarily to a decrease in manufacturing expenses associated with supplying drug for our clinical trials and a decrease in clinical expenses due to the discontinuation of our AB-836 program in 2022.

These decreases were partially offset by an increase in clinical expenses for our AB-101 Phase 1a/1b clinical trial.

A significant portion of our research and development expenses are not tracked by project, as they benefit multiple projects or our overall technology platform.

General and administrative

General and administrative expenses increased $0.7 million in 2022 compared to 2021, due primarily to increases in employee compensation costs and non-cash stock-based compensation expense.

General and administrative expenses increased $4.6 million in 2023 compared to 2022, due primarily to increased legal fees, non-cash stock-based compensation expense and employee compensation costs.

Change in fair value of contingent consideration

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In general, increases in the fair value of the contingent consideration are related to the progress of our programs as they get closer to triggering these contingent payments.

In 2022 and 2021, the fair value of our contingent consideration liability increased $2.2 million and $1.9 million, respectively, related to fair value adjustments for the passage of time and the progression of our programs through clinical trials and our assessment of the probability of commercialization.

In 2023 and 2022, the fair value of our contingent consideration liability increased $0.1 million and $2.2 million, respectively, related to fair value adjustments for the passage of time, the progression of our programs through clinical trials and our assessment of the probability, timing and extent of future product sales.

Other income (losses)

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Foreign exchange (loss) gain 25 — % (22) (5) %

Total other income (loss) $ 444 100 % $ (2,725) 100 %

Total other income $ 5,254 99 % $ 444 100 %

Interest income

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Interest expense

Interest expense decreased $1.1 million in 2022 compared to 2021 due primarily to a decrease in the 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.

Dividend accretion of convertible preferred shares

Dividend accretion of convertible preferred shares decreased to zero in 2022 compared to $12.1 million in 2021.

The dividend accretion on the convertible preferred shares previously held by Roivant was equal to 8.75% per annum, compounded annually.

All convertible preferred shares mandatorily converted into 22,833,922 common shares on October 18, 2021.

Interest expense decreased $1.3 million in 2023 compared to 2022 due primarily to a decrease in the non-cash amortization of the discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Income tax expense

Income tax expense for the years ended December 31, 2022 and 2021 are summarized in the following table:

Income tax expense for the years ended December 31, 2023 and 2022 is summarized in the following table:

Year ended December 31,

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We recognized income tax expense of $4.4 million during 2022 for withholding taxes paid to the Chinese taxing authority by Qilu on our behalf in connection with the upfront license fee Qilu paid us.

There was no corresponding income tax expense during 2023.

LIQUIDITY AND CAPITAL RESOURCES

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

As of December 31, 2022, we had cash and cash equivalents of $30.8 million and investments in marketable securities of $153.5 million, totaling $184.3 million.

As of December 31, 2023, we had total cash, cash equivalents and investments in marketable securities of $132.3 million, of which $26.3 million was cash and cash equivalents and $106.0 million was investments in marketable securities.

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

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(ii) the October 2020 Registration Statement;

and (iii) the November 2021 Registration Statement.

and (iii) the November 2021 Registration Statement, of which only the November 2021 Registration Statement remains active.

In October 2023, the October 2020 Registration Statement expired with $29.3 million that was not utilized under the October 2021 Prospectus Supplement, leaving $75.0 million remaining available under the March 2022 Prospectus Supplement pursuant to the November 2021 Registration Statement.

During the years ended December 31, 2023 and 2022, we issued 12,020,257 and 8,645,426 common shares, respectively, under the Sale Agreement resulting in net proceeds of approximately $29.9 million and $20.3 million, respectively.

As of December 31, 2022, we had an aggregate of $131.1 million remaining available under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

As of December 31, 2023, we had an aggregate of $70.9 million remaining available under 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.

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.

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.

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

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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 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 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 imdusiran for the treatment or prevention of cHBV infection 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 $15.0 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.

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

Cash requirements

We believe that our $184.3 million of cash, cash equivalents and investments in marketable securities as of December 31, 2022 will be sufficient to fund our operations into the fourth quarter of 2024 based on our expectation of a net cash burn between $95.0 million and $100.0 million in 2023.

We believe that our $132.3 million of cash, cash equivalents and investments in marketable securities as of December 31, 2023 will be sufficient to fund our operations into the first quarter of 2026 based on our expectation of a net cash burn between $63.0 million and $67.0 million in 2024.

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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• competing products, product candidates and technological and market developments;

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

• costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including

litigation and arbitration arising in the course of our business activities.

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

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 COVID-19 pandemic 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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Net cash used in operating activities $ (85,936) $ (35,356)

Net cash used in investing activities (74,942) (12,678)

Net cash provided by/(used in) investing activities 50,773 (74,942)

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

Issuance of common shares pursuant to exercise of ESPP 395 461

Net cash provided by other financing activities 20,446 136,775

Issuance of common shares pursuant to the Open Market Sale Agreement 29,852 20,324

Other financing activities 795 517

Net cash provided by financing activities 30,647 31,814

Effect of foreign exchange rate changes on cash and cash equivalents 25 (22)

(Decrease) increase in cash and cash equivalents $ (78,506) $ 57,031

Decrease in cash and cash equivalents $ (4,491) $ (78,506)

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

Cash and cash equivalents, end of period $ 26,285 $ 30,776

Net cash used in operating activities in 2022 decreased $32.2 million compared to 2021 due primarily to a January 2022 upfront cash payment of $40.0 million from Qilu in connection with the License Agreement and a $4.0 million premium paid by Qilu as part of their $15.0 million equity investment.

These cash inflows were offset by $79.4 million of cash used in operations.

Net cash used in investing activities in 2022 increased by $62.3 million compared to 2021 due primarily to the timing of acquisitions and maturities of investments in marketable securities.

Net cash used in operating activities in 2023 increased $50.6 million compared to 2022 due primarily to the upfront cash payment of $40.0 million received from Qilu in January 2022 in connection with the License Agreement and a $4.0 million premium paid by Qilu as part of their $15.0 million equity investment.

These cash inflows were offset by $79.4 million of cash used in operations in 2022.

Cash used in operations in 2023 was $85.9 million and there were no material transactional cash inflows in 2023.

Net cash provided by investing activities in 2023 was $50.8 million compared to net cash used in investing activities of $74.9 million in 2022, due primarily to the timing of acquisitions and maturities of investments in marketable securities.

Net cash provided by financing activities in 2023 decreased $1.2 million compared to 2022.

Cash provided by financing activities in 2023 consisted primarily of $29.9 million of proceeds from sales of common shares under the Sale Agreement.

Cash provided by financing activities in 2022 consisted primarily of $20.3 million of proceeds from sales of common shares under the Sale Agreement and $11.0 million for the fair value of 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.

provided by financing activities in 2021 consisted primarily of $134.7 million of proceeds from sales of common shares under the Sale Agreement.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that we adopt as of the specified effective date.

Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Please refer to note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.

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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-K

Item 7. Management’s Discussion and Analysis