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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-07 · 179 added, 198 removed, 297 unchanged (56% 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, 2022 and our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023.

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, 2023 and our unaudited condensed consolidated financial statements for the three months ended March 31, 2024.

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

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

• 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”);

• 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;

• the potential of our product candidates to improve upon the standard of care and contribute to a functional curative combination treatment regimen;

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• our expectations regarding current patent disputes and litigation;

• our expectation of a net cash burn between $90 million and $95 million in 2023, excluding any proceeds from our Open Market Sale Agreement;

• our belief that we have sufficient cash resources to fund our operations into the first quarter of 2026,

• our expectation of a net cash burn between $63 million and $67 million in 2024, excluding any proceeds from our Open Market Sale Agreement SM with Jefferies LLC dated December 20, 2018, as amended;

• our belief that we have sufficient cash resources to fund our operations through the second quarter of 2026,

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

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The foregoing cautionary statements are intended to qualify all forward-looking statements wherever they may appear in this Form 10-Q.

For all forward-looking statements, we claim protection of the safe harbor for the forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

This Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions.

For all forward-looking statements, we claim protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.

This Form 10-Q also contains estimates, projections and other information concerning our industry, our business, the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions.

Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.

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

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop a functional cure for patients with chronic hepatitis B virus (“cHBV”).

We believe the key to success in developing a functional cure involves suppressing HBV DNA, reducing surface antigen and boosting HBV-specific immune responses.

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.

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

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

Additionally, we have identified compounds in our internal PD-L1 portfolio that could be used in oncology indications.

The core elements of our strategy include:

• Developing a broad portfolio of compounds that target cHBV.

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

We believe that a combination of compounds that can suppress HBV DNA replication and hepatitis B surface antigen (“HBsAg”) expression as well as boost patients’ HBV-specific immune response could 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.

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.

Imdusiran 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 imdusiran 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 imdusiran increased HBV-specific immune responses and, in a small number of patients who discontinued both imdusiran and nucleos(t)ide analogue (“NA”) therapy, a sustained reduction in HBsAg and HBV DNA persisted after stopping imdusiran.

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

We continue to protect and defend our intellectual property, which is the subject of our on-going lawsuits against Moderna and Pfizer/BioNTech for their use of our patented LNP technology in their COVID-19 vaccines.

With respect to the Moderna lawsuit, the claim construction hearing occurred on February 8, 2024.

On April 3, 2024, the Court provided its claim construction ruling, in which it construed the disputed claim terms and agreed with Arbutus’ position on most of the disputed claim terms.

Fact discovery is on-going and next steps include expert reports and depositions.

A trial date has been set for April 21, 2025, and is subject to change.

The lawsuit against Pfizer/BioNTech is ongoing and a date for a claim construction hearing has not been set.

The two core elements of our strategy are:

1) developing a portfolio of compounds that target HBV;

and 2) combining therapeutic product candidates with complementary mechanisms of action to develop a functional cure for people with cHBV infection.

We believe that a combination of compounds that can suppress HBV DNA replication and HBsAg expression as well as boost patients’ HBV-specific immune response could address the most important elements to achieving a functional cure.

Functional cure is defined as undetectable HBV DNA and HBsAg levels six months after discontinuation of all treatment.

We are developing imdusiran as a cornerstone in a combination therapy that also includes antivirals and immunologics.

We believe that a combination therapy delivered over a finite treatment period that results in a significant increase in the functional cure rate (i.e., a cure rate of at least 20%) would be a meaningful advancement for patients with cHBV infection.

Our HBV product pipeline includes the following:

• Imdusiran is our proprietary, conjugated GalNAc, 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 ongoing 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.

In July 2023, the New Zealand Medicine Safety Authority (“Medsafe”) approved our CTA application for a Phase 1 clinical trial in New Zealand for AB-101.

We recently dosed the first subject in our Phase 1a/1b clinical trial for AB-101.

Additionally, we have identified compounds in our internal PD-L1 portfolio that could be used in oncology indications.

• 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, imdusiran and AB-101, may provide our first proprietary combination therapy for patients with cHBV.

In-line with our strategy to position imdusiran as a potential cornerstone therapeutic in future HBV combination regimens with compounds from our proprietary HBV portfolio or with other agents with potentially complementary mechanisms of action, we are currently evaluating imdusiran in combination with other agents as follows:

• Imdusiran 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 this clinical trial suggests that the addition of Peg-IFNα-2a to imdusiran treatment was generally well tolerated and appears to result in continued HBsAg declines in some patients.

• Imdusiran in combination with Barinthus Biotherapeutics plc’s (“Barinthus Bio”), formerly Vaccitech plc, VTP-300, an HBV antigen specific immunotherapy, and NA therapy for the treatment of patients with cHBV in a Phase 2a proof-of-concept clinical trial (“AB-729-202”).

We are dosing patients in an additional treatment arm of this clinical trial that includes an approved PD-1 monoclonal antibody inhibitor, nivolumab (Opdivo®).

AB-101 is currently in a Phase 1a/1b clinical trial (AB-101-001) evaluating the safety, tolerability, pharmacokinetics (PK), and pharmacodynamics (PD) of single- and multiple-ascending oral doses in healthy subjects and patients with cHBV infection.

Part 1 of this clinical trial enrolled four sequential cohorts of eight healthy subjects each (6 active:

2 placebo) receiving a single dose of AB-101 at increasing dose levels up to 25 mg.

The data showed that AB-101 was well-tolerated with evidence of dose-dependent receptor occupancy.

In the 25mg cohort, all five evaluable subjects showed evidence of receptor occupancy between 50-100%.

We have moved into Part 2 of this clinical trial which evaluates multiple-ascending doses of AB-101 in healthy subjects and we expect to report this preliminary data in the second half of 2024.

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.

We are currently conducting three Phase 2a clinical trials combining imdusiran with other agents.

Upon successful completion of our AB-101-001 clinical trial, we intend to initiate a Phase 2 clinical trial combining imdusiran, AB-101 and nucleos(t)ide analogue (NA) therapy in patients with cHBV infection.

The intent of these trials is to initially lower HBsAg levels with imdusiran and then administer a complementary agent, in this case an immune modulator or a therapeutic vaccine, to further lower HBsAg levels and promote anti-HBV immunity.

that if we can lower HBsAg and promote immunity, we may achieve and sustain undetectable HBV DNA and HBsAg levels, potentially leading to a functional cure.

Our imdusiran development program includes the following Phase 2a clinical trials:

• Imdusiran in combination with Peg-IFNα-2a and ongoing standard-of-care NA therapy in patients with cHBV infection (AB-729-201).

Preliminary data reported from this clinical trial suggest that the addition of Peg-IFNα-2a to imdusiran treatment was generally well-tolerated and appears to result in continued HBsAg declines in some patients.

• Imdusiran in combination with VTP-300, Barinthus Biotherapeutics plc’s (Barinthus and formerly Vaccitech plc), HBV antigen specific immunotherapy, and ongoing standard-of-care NA therapy in patients with cHBV infection (AB-729-202).

Preliminary data reported from this clinical trial showed that dosing with imdusiran and then VTP-300 provided a meaningful reduction of HBsAg levels that are maintained well below baseline.

We are also dosing patients in an additional cohort of this clinical trial that, in addition to imdusiran and VTP-300, includes up to two low doses of nivolumab (Opdivo®), an approved PD-1 monoclonal antibody inhibitor.

Preliminary end-of-treatment data from this additional cohort are expected in the second half of 2024.

• Imdusiran in combination with durvalumab, an approved anti-PD-L1 monoclonal antibody, and ongoing standard-of-care NA therapy in patients with cHBV infection (AB-729-203).

Screening has been initiated in this Phase 2a clinical trial.

Insights gained from this clinical trial and the amended portion of the AB-729-202 clinical trial with nivolumab may inform dosing for a planned Phase 2 clinical trial combining imdusiran and AB-101.

Our Product Candidates

Our product pipeline consists of the following programs:

Our pipeline consists of two product candidates that are designed to suppress HBV DNA, reduce HBsAg and/or boost HBV-specific immune responses, as follows:

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

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

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

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

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

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

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

Imdusiran reduces all HBV antigens and inhibits viral replication.

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 imdusiran 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 imdusiran in healthy subjects and in patients with cHBV, respectively.

Data showed that a 60mg or 90mg single dose of imdusiran 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 imdusiran 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 imdusiran 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 imdusiran.

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

In this trial, imdusiran 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 imdusiran, 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 imdusiran’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 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 imdusiran.

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

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

The efficacy and safety data for imdusiran, 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 imdusiran as a potential cornerstone therapeutic in future HBV combination regimens, we are evaluating imdusiran 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.

Data from our Phase 1a/1b clinical trial evaluating single and multiple doses of imdusiran in healthy subjects and patients with cHBV (AB-729-001) showed that repeat dosing of 60mg and 90mg of imdusiran at different dosing intervals was well-tolerated and resulted in robust and comparable HBsAg declines and supported our view that 60mg every 8 weeks was an appropriate dose to move forward in our Phase 2a clinical trials.

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

We have completed enrollment in a randomized, open label, multicenter Phase 2a proof-of-concept clinical trial investigating the safety and antiviral activity of imdusiran 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 imdusiran (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 imdusiran.

We have completed enrollment in a randomized, open label, multicenter Phase 2a proof-of-concept clinical trial investigating the safety and antiviral activity of imdusiran in combination with short courses of Peg-IFNα-2a and ongoing NA therapy in 43 stably NA-suppressed, HBeAg negative, non-cirrhotic patients with cHBV infection.

The primary objective of this trial is to initially lower HBsAg levels with imdusiran and then administer Peg-IFNα-2a as an immunomodulator to promote anti-HBV immune reawakening.

We believe that if we can lower HBsAg and promote immune reawakening, we may achieve and sustain undetectable HBV DNA and HBsAg levels, potentially leading to a functional cure.

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

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 protocol-defined stopping criteria.

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

At the EASL Congress in June 2023, we presented preliminary data from this clinical trial that suggests that the addition of Peg-IFNα-2a to imdusiran treatment was generally well tolerated and appears to result in continued HBsAg declines in some patients.

The mean HBsAg decline from baseline during the lead-in phase was -1.6 log 10 at week 24 of treatment which is comparable to what was previously seen in other clinical trials with imdusiran.

Four patients reached HBsAg below the lower limit of quantitation (LLOQ) during Peg-IFNα-2a treatment.

We are continuing to follow these patients and expect to provide updates from this clinical trial in 2024.

Collaboration with Barinthus (AB-729-202)

Through a clinical collaboration agreement with Barinthus, formerly Vaccitech, that we entered into in July 2021, we have completed enrollment in AB-729-202, a Phase 2a proof-of-concept clinical trial evaluating the safety, antiviral activity and immunogenicity of Barinthus’ VTP-300, an HBV antigen specific immunotherapy, administered after imdusiran in NA-suppressed patients with cHBV.

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

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

At week 24, treatment with imdusiran will stop.

Patients will continue only their NA therapy and will be randomized to receive VTP-300 or placebo at week 26, week 30 and at week 38 (if protocol-defined eligibility is met).

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

Preliminary data from patients who received the combination of imdusiran, NA therapy and VTP-300 will be presented as a late-breaking poster presentation at AASLD in the fourth quarter of 2023.

We 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 imdusiran (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.

In June 2023, we announced that the first patient received their first dose of imdusiran in this additional arm.

Preliminary data from this additional treatment arm are expected in 2024.

At the European Association for the Study of the Liver (EASL) Congress in June 2023, we presented preliminary data from this clinical trial that suggests that the addition of Peg-IFNα-2a to imdusiran treatment was generally safe, well-tolerated and resulted in continued HBsAg declines in some patients.

The mean HBsAg decline from baseline during the imdusiran lead-in phase was -1.6 log10 at week 24 of treatment which is comparable to what was previously seen in other clinical trials with imdusiran.

Four patients reached HBsAg below the lower limit of quantitation (LLOQ) for at least one timepoint during Peg-IFNα-2a treatment.

We expect to provide end-of-treatment data for this clinical trial at the EASL Congress in June 2024.

Phase 2a proof-of-concept clinical trial to evaluate imdusiran in combination with Barinthus’ VTP-300 (AB-729-202)

Through a clinical collaboration agreement with Barinthus that we entered into in July 2021, we have completed enrollment in AB-729-202, a Phase 2a proof-of-concept clinical trial evaluating the safety, antiviral activity and immunogenicity of Barinthus’ VTP-300, an HBV antigen specific immunotherapy, administered after imdusiran in patients with cHBV infection.

The initial trial design enrolled 40 NA-suppressed, HBeAg negative or positive, non-cirrhotic cHBV infected patients.

The primary objective of this trial is to initially lower HBsAg levels with imdusiran and then administer VTP-300 as an immunomodulator to promote anti-HBV immune reawakening.

We believe that if we can lower HBsAg and promote immune reawakening, we may achieve and sustain undetectable HBV DNA and HBsAg levels, potentially leading to a functional cure.

All patients will receive imdusiran (60mg every 8 weeks, 4 doses) plus NA therapy for 24 weeks.

After week 24, treatment with imdusiran will stop.

Patients will continue only on NA therapy and will be randomized to receive VTP-300 or placebo at week 26 and week 30.

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

Preliminary data from this clinical trial were presented at the AASLD Liver Meeting in November 2023 and included a subset of patients that received the two-dose VTP-300 regimen (28/40 patients) and available follow-up data to week 48 (12/40 patients) and showed the following:

• Robust reductions of HBsAg were seen during the imdusiran treatment period (-1.86 log 10 mean reduction from baseline after 24 weeks of treatment).

This decline in HBsAg is comparable to the declines seen with imdusiran in other clinical trials conducted to date.

• 97% of the imdusiran treated patients (33/34) had HBsAg <100 IU/mL at the time of the first VTP-300/placebo dose.

One patient reached <LLOQ with 24 weeks of imdusiran plus NA therapy alone.

• VTP-300 treatment appears to contribute to the maintenance of low HBsAg levels in the early post-treatment period, as the mean HBsAg levels in the placebo group begin to increase starting ~12 weeks after the last dose of imdusiran.

• All VTP-300 treated patients have maintained HBsAg <100 IU/mL through week 48, 60% have maintained HBsAg <10 IU/mL, and all have qualified to stop NA therapy.

• The preliminary safety data from this trial demonstrate that imdusiran and VTP-300 were both safe and well-tolerated.

There were no serious adverse events, Grade 3 or 4 adverse events or treatment discontinuations.

End-of-treatment data from this portion of the clinical trial are expected to be reported at the EASL Congress in June 2024.

Additionally, we amended the AB-729-202 protocol to include another cohort that will receive imdusiran, VTP-300 and low dose nivolumab (Opdivo ® ), an approved PD-1 inhibitor.

In this additional cohort, patients will receive imdusiran (60mg every 8 weeks, 4 doses) plus NA therapy for 24 weeks, followed by administration of VTP-300 plus up to two low doses of nivolumab while remaining on NA therapy.

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

Preliminary end-of-treatment data from this additional cohort are expected in the second half of 2024.

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

We and Barinthus 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.

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

Phase 2a proof-of-concept clinical trial to evaluate imdusiran in combination with durvalumab (AB-729-203)

We have initiated a Phase 2a clinical trial evaluating the safety, tolerability and antiviral activity of intermittent low doses of durvalumab, an approved anti-PD-L1 monoclonal antibody, in combination with imdusiran and ongoing standard-of-care NA therapy in patients with cHBV infection (AB-729-203).

We are currently screening patients for this clinical trial that will enroll 30 patients in three separate cohorts where all patients will receive 60mg of imdusiran every 8 weeks for 48 weeks and 2 doses of 1.5 mg/kg of durvalumab given via IV infusion at two pre-specified times during the imdusiran treatment period that will differ by cohort.

After completion of treatment, all patients will be assessed for potential discontinuation of NA therapy and followed for at least 24 to 48 weeks.

Insights gained from this clinical trial and the amended portion of the AB-729-202 clinical trial with nivolumab may inform dosing for a planned Phase 2 clinical trial combining imdusiran and AB-101.

Oral PD-L1 Inhibitor (AB-101)

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

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

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

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

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

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

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

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

AB-101 is differentiated from monoclonal antibody checkpoint inhibitors such as durvalumab (anti-PD-L1) and nivolumab (anti-PD-1) because it is liver centric, has a much shorter duration of effect which may provide dosing and safety advantages, and has a novel mechanism of action as it binds to PD-L1 on the surface of cells causing dimerization and internalization of the PD-L1 protein followed by degradation within hours.

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

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

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

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

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

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

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

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

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

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

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

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

We believe AB-101, when used in

combination with imdusiran or 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 had been placed on clinical hold.

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We thus decided to pursue other regulatory pathways outside of the US while evaluating our path forward with the FDA.

Based on the communications from the FDA, 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.

In July 2023, Medsafe approved our CTA application for a Phase 1 clinical trial in New Zealand for AB-101, and we believe the protocol approved by Medsafe adequately addresses the clinical trial design and safety monitoring issues raised by the FDA.

We included the clinical hold letter from the FDA as part of our CTA application with New Zealand.

We have dosed our first group of healthy subjects in our Phase 1a/1b clinical trial for AB-101 (AB-101-001).

The AB-101-001 clinical trial is designed to investigate the safety, tolerability, pharmacokinetics (PK), and pharmacodynamics (PD) of single and multiple oral doses of AB-101 for up to 28 days in healthy subjects and patients with cHBV.

The trial will be conducted in three parts starting with single ascending doses in healthy subjects, followed by multiple ascending doses in healthy subjects and culminating with multiple doses in patients with cHBV.

In July 2023, the New Zealand Medicine Safety Authority (Medsafe) approved our clinical trial application (CTA) for a Phase 1 clinical trial in New Zealand for AB-101, and we believe the protocol approved by Medsafe adequately addresses the clinical trial design and safety monitoring issues raised by the FDA.

We included the clinical hold letter from the FDA as part of our CTA application with Medsafe.

Phase 1a/1b clinical trial to evaluate safety, tolerability and PK/PD of AB-101 (AB-101-001)

We are currently dosing healthy subjects in our Phase 1a/1b clinical trial for AB-101 (AB-101-001).

The AB-101-001 clinical trial is designed to investigate the safety, tolerability and PK/PD of single and multiple-ascending oral doses of AB-101 for up to 28 days in healthy subjects and patients with cHBV infection.

Safety and PK/PD assessments will be performed prior to dose escalation in all parts of the clinical trial.

Initial data from part one of the clinical trial are expected in the first half of 2024.

Additionally, we have identified compounds in our internal PD-L1 portfolio that could also be used in oncology indication.

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

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

The data is published in the Journal of Clinical Oncology.

Oral HBV RNA Destabilizer (AB-161)

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

AB-161, our oral small molecule RNA destabilizer, was specifically designed to target the liver.

We had conducted extensive non-clinical safety evaluations with AB-161 that provided 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.

During the third quarter of 2023, we discontinued development of AB-161 due to a pre-clinical male reproductive toxicity finding.

Our Phase 1 clinical trial with single doses of AB-161 in healthy subjects (AB-161-001) was terminated and there were no safety issues reported in the healthy subjects.

Coronavirus Program

Our efforts to identify and develop new antiviral small molecules to treat COVID-19 and future coronavirus outbreaks were focused on two essential targets critical for replication across all coronaviruses – nsp5 protease and nsp12 polymerase.

We were exploring whether a combination therapy of our nsp5 protease Mpro candidate, AB-343, and an nsp12 viral polymerase inhibitor could potentially achieve better patient treatment outcomes.

During the third quarter of 2023, we discontinued our efforts to identify and develop a coronavirus combination therapy due to an unfavorable pharmacokinetic (PK) profile noted in the IND-enabling studies for AB-343.

We also terminated our discovery research and license agreement with X-Chem, Inc.

and Proteros biostructures GmbH, which was focused on the discovery of novel inhibitors targeting the SARS-CoV-2 nsp5 main protease (“Mpro”).

Part 1 of this clinical trial enrolled four sequential cohorts of eight healthy subjects each (6 active:

2 placebo) receiving a single dose of AB-101 at increasing dose levels up to 25 mg.

The data showed that AB-101 was well-tolerated with evidence of dose-dependent receptor occupancy.

In the 25mg cohort, all five evaluable subjects showed evidence of receptor occupancy between 50-100%.

We have moved into Part 2 of this clinical trial which evaluates multiple-ascending doses of AB-101 in healthy subjects and we expect to report this preliminary data in the second half of 2024.

Other Collaborations, Royalty Entitlements and Intellectual Property Litigation

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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.

This royalty interest was sold to the Ontario Municipal

Employees Retirement System (“OMERS”), effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees.

This royalty interest was sold to the Ontario Municipal Employees Retirement System (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 this royalty entitlement on future global net sales of ONPATTRO will revert to us.

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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, 2023, an aggregate of $21.5 million of royalties have been earned by OMERS.

From the inception of the royalty sale through March 31, 2024, an aggregate of $23.3 million of royalties have been earned 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.

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

As of September 30, 2023, 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, 2024, 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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The Supreme Court granted certiorari in US v.

Athrex on October 13, 2020 (i.e.

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

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

Until the Supreme Court rendered its opinion in US v.

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The Supreme Court decided on the US v.

Athrex case on June 21, 2021, following which the Federal Circuit reinstated the appeal

sua sponte, requiring the parties to brief how the case should proceed in light of the Supreme Court’s opinion or for the Appellant to waive the challenge.

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

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

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We and Moderna informed the Board of Appeals that we would not object to a remittance of the matter without a hearing to the Opposition Division of the EPO.

The hearing in this matter before the Board of Appeals has subsequently been cancelled and has been resubmitted to the Opposition Division (i.e.

lower board) of the EPO.

The hearing in this matter before the Board of Appeals was subsequently cancelled and resubmitted to the Opposition Division (i.e., lower board) of the EPO.

On October 31, 2023, the Opposition Division issued a summons for oral proceedings and provided its preliminary and non-binding opinion on the subject matter to be discussed at the hearing.

On November 3, 2023, we responded to the summons and on January 15, 2024, Moderna and Merck filed their reply to the written opinion of the Opposition Division, as well as to our written submission of November 3, 2023.

We responded to Moderna and Merck’s reply on April 5, 2024.

Oral proceedings are presently scheduled to be held on June 6, 2024.

While we are the patent holder, the ‘127 Patent, the ‘254 Patent, the other patents in our LNP portfolio have been licensed to Genevant and are included in the rights licensed by us to Genevant under the Genevant License.

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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.

On June 9, 2023, the Court granted the parties’ request to extend the time for claim construction briefing and set the claim construction hearing for February 7, 2024.

Document and written discovery in the action is currently ongoing.

On June 9, 2023, the Court granted the parties’ request to extend the time for claim construction briefing.

The claim construction hearing was held on February 8, 2024.

On April 3, 2024, the Court issued its opinion regarding the claims construction.

The Court agreed with both of our positions regarding the Composition of Total Lipid (‘069) Patent that:

(i) the claimed molar percentage (mol.

%) ranges can be met by any particle and is not limited to “finished” particles that are not subjected to further process steps;

and (ii) that the claimed mol.

% ranges include standard variation based on the number of significant figures recited in the claim.

The Court also agreed with our position regarding the Cationic Lipid with Protonatable Tertiary Amine (‘378) Patent that there is no limitation as to the mol.

% of the claimed cationic lipid.

Regarding the Encapsulation of mRNA (‘651) Patent, the Court held that “wherein at least 70% / at least 80% / about 90% of the mRNA in the formulation is fully encapsulated in the lipid vesicles” means “wherein at least 70% / at least 80% / about 90% of the mRNA is fully, as distinct from partially, contained inside the lipid vesicles”.

Fact discovery is ongoing and next steps include expert reports and depositions.

A trial date has been set for April 21, 2025 and is subject to change.

Patent Infringement Litigation vs.

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We and Genevant filed our answer to these counterclaims on August 14, 2023.

A scheduling conference was held on August 28, 2023 and the Court

issued a Letter Order on September 7, 2023 setting dates up to but not including the date for a claim construction hearing.

A scheduling conference was held on August 28, 2023 and the Court issued a Letter Order on September 7, 2023 setting dates up to but not including the date for a claim construction hearing.

Scheduling of the claim construction hearing and subsequent case dates, including the date for trial, will be set at a later time that is yet to be determined.

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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 filed our reply brief on November 16, 2022 at which point the motion was fully briefed.

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 at which point the motion was fully briefed.

A status conference for the action was set for August 9, 2023, however on August 4, 2023, Acuitas voluntarily dismissed its complaint in the Southern District of New York and refiled a virtually identical complaint in the District Court of New Jersey (D.

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On September 15, 2023, we and Genevant filed a letter with the Court seeking a premotion conference for a motion to dismiss and subsequently filed our and Genevant’s motion to dismiss on October 13, 2023.

A hearing is scheduled for November 20, 2023.

Acuitas filed its opposition on November 1, 2023 and we and Genevant filed our reply on November 16, 2023.

Acuitas filed a request to commence discovery on November 18, 2023, to which we and Genevant responded on November 20, 2023.

A ruling on the motion to dismiss, which is expected to be decided on the papers, has not yet issued.

Discovery has not yet commenced in this action.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in thousands)

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Loss from operations (19,363) (17,413)

Other income (loss) 1,454 244 3,819 (186)

Loss before income taxes (20,104) (17,567) (53,537) (43,080)

Income tax expense — — — (4,444)

Other income 1,488 1,074

Net loss $ (17,875) $ (16,339)

Revenues are summarized in the following table:

Three Months Ended September 30,

2023 % of Total 2022 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Royalties from sales of ONPATTRO $ 714 15 % $ 1,256 21 %

Qilu Pharmaceutical Co., Ltd.

3,221 69 % 2,352 40 %

Other milestone and royalty payments — — % — — %

Non-cash royalty revenue

Royalties from sales of ONPATTRO 723 16 % 2,344 39 %

Total revenue $ 4,658 100 % $ 5,952 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

2024 % of Total 2023 % of Total

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244 16 % 4,104 61 %

Other milestone and royalty payments — — % 35 — %

Non-cash royalty revenue

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Total revenue $ 1,532 100 % $ 6,687 100 %

Total revenue decreased $1.3 million and $16.8 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

Royalty revenue from Alnylam’s sales of ONPATTRO decreased for both comparative periods due to lower ONPATTRO sales and for the nine months ended, there was also 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.

Total revenue decreased $5.2 million for the three months ended March 31, 2024 compared to the same period in 2023, due primarily to:

i) 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;

and ii) a decrease in license royalty revenue from Alnylam and Acuitas due to lower sales of ONPATTRO in 2024 compared to 2023.

Operating expenses

Operating expenses are summarized in the following table:

Three Months Ended September 30,

2023 % of Total 2022 % of Total

(in thousands, except percentages)

Research and development $ 20,169 77 % $ 20,055 84 %

General and administrative 5,842 22 % 3,493 15 %

Change in fair value of contingent consideration 205 1 % 215 1 %

Total operating expenses $ 26,216 100 % $ 23,763 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

2024 % of Total 2023 % of Total

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

Research and development expenses increased $0.1 million and decreased $5.3 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The decrease for the nine months ended September 2023 compared to the same period in 2022 was due primarily to a decrease in drug supply manufacturing costs for imdusiran and a decrease related to 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 our AB-101 Phase 1a/1b clinical trial.

During the third quarter of 2023, we discontinued development of AB-161 due to a pre-clinical male reproductive toxicity finding, including terminating our AB-161-001 Phase 1a/1b clinical trial.

Also during the third quarter of 2023, we discontinued our efforts to identify and develop a coronavirus combination therapy due to an unfavorable pharmacokinetic (PK) profile noted in the IND-enabling studies for AB-343.

On November 6, 2023, we reduced our workforce by 24% primarily affecting our research function.

As a result, we will incur a one-time restructuring charge of approximately $1.1 million that will be recorded in the fourth quarter of 2023.

We have maintained a group of research scientists as we remain committed to continuing discovery research in HBV.

Research and development expenses decreased $2.9 million for the three months ended March 31, 2024 compared to the same period in 2023.

The decrease was due primarily to the discontinuation of our AB-161 and coronavirus programs in September 2023 as part of our efforts to focus our pipeline on our lead HBV product candidates, partially offset by an increase in clinical expenses for our AB-101 Phase 1a/1b clinical trial and our multiple imdusiran Phase 2a clinical trials.

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

General and administrative

General and administrative expenses increased $2.3 million and $3.8 million for the three and nine months ended September 30, 2023 respectively, as compared to the same periods in 2022, due primarily to legal fees in support of our ongoing lawsuits against Moderna and Pfizer/BioNTech, a severance payment to our former General Counsel in the third quarter of 2023 and an increase in non-cash stock-based compensation expense.

General and administrative expenses decreased $0.2 million for the three months ended March 31, 2024 as compared to the same period in 2023, due primarily to a decrease in stock-based compensation expense.

Change in fair value of contingent consideration

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As imdusiran 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)

Other income (loss)

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in thousands)

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Interest expense (44) (198)

Foreign exchange (gain) loss 6 (21) 11 (18)

Total other income (loss) $ 1,454 $ 244 $ 3,819 $ (186)

Foreign exchange gain (13) 4

Total other income $ 1,488 $ 1,074

Interest income

The increase in interest income for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was due primarily to higher interest earned on our cash and investment balances due to a general increase in market interest rates.

The increase in interest income for the three months ended March 31, 2024 compared to the same period in 2023 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, 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.

Interest expense for the three months ended March 31, 2024 and 2023 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.

We did not recognize any income tax expense during the nine months ended September 30, 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 cash used in operating activities (19,295) (27,301)

Net cash provided by (used in) investing activities 28,548 (87,624)

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

Net cash provided by investing activities 11,694 16,678

Issuance of common shares pursuant to the Open Market Sale Agreement 21,765 19,862

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Effect of foreign exchange rate changes on cash and cash equivalents (13) 4

Decrease in cash and cash equivalents (13,245) (85,278)

Increase in cash and cash equivalents 16,816 9,798

Cash and cash equivalents, beginning of period 26,285 30,776

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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, 2023, $68.6 million of cash was used in operating activities compared to $18.4 million used in operating activities for the nine months ended September 30, 2022, a change of $50.3 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.

These cash inflows from Qilu for the nine months ended September 30, 2022 were offset by $62.4 million of cash used in operations.

For the nine months ended September 30, 2023, net cash provided by investing activities was $28.5 million, resulting primarily from maturities of investments in marketable securities of $86.0 million, partially offset by additional investments in marketable securities of $56.5 million.

For the nine months ended September 30, 2022, net cash used in investing activities was $87.6 million, which consisted 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, 2023, net cash provided by financing activities was $26.8 million, which was primarily related to $26.0 million in proceeds from sales of common shares under the Sale Agreement.

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 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, as well as $9.2 million in proceeds from sales of common shares under the Sale Agreement.

For the three months ended March 31, 2024, $19.3 million of cash was used in operating activities compared to $27.3 million used in operating activities for the three months ended March 31, 2023, a change of $8.0 million.

The change was due primarily to a decrease in research and development expenses.

For the three months ended March 31, 2024, net cash provided by investing activities was $11.7 million, resulting primarily from maturities of investments in marketable securities of $37.2 million, partially offset by additional investments in marketable securities of $25.4 million.

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

For the three months ended March 31, 2024, net cash provided by financing activities was $24.4 million, which was primarily related to $21.8 million in proceeds from sales of common shares under the Sale Agreement.

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

Sources of Liquidity

As of September 30, 2023, we had cash, cash equivalents and investments in marketable securities of $144.7 million.

We had no outstanding debt as of September 30, 2023.

As of March 31, 2024, we had cash, cash equivalents and investments in marketable securities of $137.9 million.

We had no outstanding debt as of March 31, 2024.

Open Market Sale Agreement

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

We have an Open Market Sale Agreement SM with Jefferies dated December 20, 2018, as amended by Amendment No.

1, dated December 20, 2019, Amendment No.

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

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

333-235674) and accompanying base prospectus, 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.

On December 23, 2019, we filed a shelf registration statement on Form S-3 with 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 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.

prospectus supplement was fully utilized during 2020.

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.

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On August 28, 2020, we filed a shelf registration statement on Form S-3 with the SEC (File No.

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

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.

The October 2020 Registration Statement expired in October 2023 with $29.3 million that was not utilized under the October 2021 Prospectus Supplement.

333-248467) and accompanying base prospectus, declared effective by the SEC on October 22, 2020 (the October 2020 Registration Statement), for the offer and sale of up to $200 million of our securities.

On March 4, 2021, we filed a prospectus supplement with the SEC 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, which we fully utilized during 2021.

On October 8, 2021, we filed a prospectus supplement with the SEC 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, 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.

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 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:

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

During the nine months ended September 30, 2023, we issued 9,848,090 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $26.0 million.

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

As of September 30, 2023, there was approximately $104.3 million available in aggregate under the October 2021 Prospectus Supplement and March 2022 Prospectus Supplement.

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 three months ended March 31, 2024, we issued 8,666,077 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $21.8 million.

For the three months ended March 31, 2023, we issued 3,901,765 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $9.2 million.

During April 2024, we issued an additional 7,833,922 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $22.4 million.

As of April 30, 2024, there was approximately $25.4 million available under the March 2022 Prospectus Supplement.

Royalty Entitlements

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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 September 30, 2023, we have recorded an aggregate of $21.5 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through March 31, 2024, we have recorded an aggregate of $23.3 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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Cash requirements

We believe that our $144.7 million of cash, cash equivalents and investments in marketable securities as of September 30, 2023 will be sufficient to fund our operations into the first quarter of 2026.

We believe that our $137.9 million of cash, cash equivalents and investments in marketable securities as of March 31, 2024 plus the additional $22.4 million of proceeds received under our Sale Agreement during April 2024 will be sufficient to fund our operations for at least the next twelve months and through the second quarter of 2026.

We expect a net cash burn between $63 million and $67 million in 2024, excluding any proceeds from our Sale Agreement.

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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