What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-02 · 133 added, 109 removed, 367 unchanged (40% 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, 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.

REFERENCES TO ARBUTUS BIOPHARMA CORPORATION

Throughout this Quarterly Report on Form 10-Q (Form 10-Q), the “Company,” “Arbutus,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Arbutus Biopharma Corporation and its consolidated subsidiaries, and “our board of directors” refers to the board of directors of Arbutus Biopharma Corporation.

Throughout this Quarterly Report on Form 10-Q (Form 10-Q), the “Company,” “Arbutus,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Arbutus Biopharma Corporation and its consolidated subsidiary, and “our board of directors” refers to the board of directors of Arbutus Biopharma Corporation.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

• the 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 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 $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,

• our expectation of a net cash burn between $63 million and $67 million in 2024;

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

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

Forward-looking statements appear primarily in the sections of this Form 10-Q entitled “Part I, Item 1-Financial

Statements (Unaudited),” and “Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements appear primarily in the sections of this Form 10-Q entitled “Part I, Item 1-Financial Statements (Unaudited),” and “Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based upon current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially and adversely from those expressed or implied by such statements.

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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 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.

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop novel therapeutics 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.

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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 three Phase 2a combination clinical trials.

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

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

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.

We continue to protect and defend our intellectual property, which is the subject of our ongoing lawsuits against Moderna and Pfizer/BioNTech for their use of our patented lipid nanoparticle (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.

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

On August 5, 2024, we and Genevant Sciences Ltd.

(Genevant), along with Moderna, filed a Stipulation to Extend Time (the Stipulation) with the court requesting an amended case schedule to accommodate certain outstanding discovery from Moderna and third parties, as specified in the Stipulation, which would move the start of the trial from April 21, 2025 to September 24, 2025, subject to the court’s availability.

The Stipulation, and the new deadlines set forth therein, are subject to the approval of the court.

A conference to discuss the Stipulation has been scheduled by the court for August 15, 2024.

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

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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.

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

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.

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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.

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

Upon successful completion of our AB-101-001 clinical trial, we may 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.

We believe 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.

• Imdusiran in combination with Peg-IFNα-2a and ongoing standard-of-care NA therapy in patients with cHBV infection (IM-PROVE I).

Preliminary data reported from this IM-PROVE I trial suggest that the addition of Peg-IFNα-2a to imdusiran treatment was generally safe, well-tolerated and, in some patients, resulted in undetectable HBsAg at end-of-treatment and sustained HBsAg loss 24 weeks after completing imdusiran and Peg-IFNα-2a treatment.

Preliminary data reported from this IM-PROVE II clinical trial showed that dosing with imdusiran and then VTP-300 achieved statistical significance in lowering HBsAg levels after the end of the treatment period.

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.

On July 29, 2024, our Board of Directors took action, effective August 1, 2024, to streamline the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101, and therefore ceased all discovery efforts and discontinued our IM-PROVE III clinical trial.

In taking these steps to streamline the organization, we are implementing a 40% reduction in our workforce, primarily affecting the discovery and general and administrative functions.

As a result, we will incur a one-time restructuring charge in the third quarter of 2024 of approximately $3.0 million to $4.0 million, which includes approximately $2.9 million of cash severance and continued benefits payments, a non-cash impairment charge for laboratory equipment of approximately $0.5 million and approximately $0.2 million to $0.4 million of cash payments to vendors for close-out activities in connection with the cessation of discovery efforts and the discontinuation of our IM-PROVE III clinical trial.

With these organizational changes and our ongoing cost management efforts, we now expect our current cash, cash equivalents and investments in marketable securities will be sufficient to fund our operations into the fourth quarter of 2026.

Our Product Candidates

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.

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

RNAi therapeutic (imdusiran, AB-729)

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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)

IM-PROVE I Phase 2a proof-of-concept clinical trial to evaluate imdusiran in combination with Peg-IFNα-2a

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.

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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 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.

After 24-weeks of dosing with imdusiran (60mg every 8 weeks), patients were 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 remain on NA therapy for the initial 24-week follow-up period, and then discontinue NA treatment, provided they meet protocol-defined stopping criteria.

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

At the European Association for the Study of the Liver (EASL) Congress in June 2024, we presented data from this clinical trial that suggests that the addition of Peg-IFNα-2a to imdusiran treatment was generally safe, well-tolerated and, in some patients, resulted in undetectable HBsAg at end-of-treatment and sustained HBsAg loss 24 weeks after completing imdusiran and Peg-IFNα-2a treatment.

Select key data from this Phase 2a clinical trial include:

• 33% of patients in Cohort A1 who received 48 weeks of imdusiran combined with a short course of Peg-IFNα-2a (24 weeks) with their ongoing NA therapy achieved undetectable HBsAg at the end-of-treatment (EOT) that was maintained in 100% of these patients 24 weeks after completing imdusiran and Peg-IFNα-2a treatment.

• Undetectable HBsAg was achieved in 67% of patients with HBsAg less than 1,000 IU/mL at baseline in Cohort A1.

• A total of six patients who received 24 weeks of Peg-IFNα-2a (n=4 Cohort A1;

n=2 Cohort A2) seroconverted, with HBsAg loss accompanied by high titers of anti-HBsAg antibodies.

All six of these patients have stopped NA therapy, with two of those patients reaching 12 weeks off all therapy with sustained undetectable levels of HBsAg and HBV DNA.

The remaining four patients are at various timepoints less than 12 weeks off therapy with undetectable levels of HBsAg and HBV DNA.

These data from the IM-PROVE I trial suggest that the combination of imdusiran and 24 weeks of Peg-IFNα-2a was generally safe and well-tolerated.

There were no serious adverse events related to imdusiran or Peg-IFNα-2a, and no adverse events leading to discontinuation.

The most common imdusiran-related treatment emergent adverse events (TEAEs) were transient ALT elevations and injection site bruising.

The Peg-IFNα-2a-related TEAEs were consistent with the known safety profile of Peg-IFNα-2a.

IM-PROVE II Phase 2a proof-of-concept clinical trial to evaluate imdusiran in combination with Barinthus’ VTP-300

Through a clinical collaboration agreement with Barinthus that we entered into in July 2021, we have completed enrollment in IM-PROVE II, 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.

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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.

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

After week 24, treatment with imdusiran was stopped.

Patients continued only on NA therapy and were randomized to receive VTP-300 or placebo at week 26 and week 30.

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

Preliminary data were presented at the EASL Congress in June 2024 from 38 of 40 patients in the IM-PROVE II clinical trial that were on stable NA therapy throughout the treatment period, received imdusiran (60mg every 8 weeks) for 24 weeks and were then randomized to receive either VTP-300 (treatment arm) or placebo at Weeks 26 and 30.

The data showed that at 24-weeks post treatment with imdusiran and VTP-300, statistical significance (p<0.05) was achieved in HBsAg levels between the treatment arm (n=5) and placebo (n=6).

In addition, more patients maintained HBsAg thresholds of <100 IU/mL and <10 IU/mL when administered VTP-300 versus placebo.

Treatment with imdusiran and VTP-300 was generally safe and well-tolerated.

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

Additionally, we amended the IM-PROVE II clinical trial 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.

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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.

The IM-PROVE II 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 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.

IM-PROVE III Phase 2a proof-of-concept clinical trial to evaluate imdusiran in combination with durvalumab

We have terminated our Phase 2a clinical trial evaluating the safety, tolerability and antiviral activity of imdusiran and NA therapy in combination with intermittent low doses of durvalumab, an approved anti-PD-L1 monoclonal antibody, in patients with cHBV infection (IM-PROVE III) prior to dosing any participants.

This decision was based on a prioritization of resources and the projected availability of clinical data from this trial.

Oral PD-L1 Inhibitor (AB-101)

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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.

Preclinical data 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 infected patients.

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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.

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

Subsequent to its approval in New Zealand, our CTA for this Phase 1 clinical trial with AB-101 was approved in several additional countries outside of the U.S.

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

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

Both parties also have entered into a supply agreement and related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of 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.

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

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

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

In 2012, we entered into a license agreement with Alnylam that entitles Alnylam to develop and commercialize products with our LNP delivery technology.

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

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

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

From the inception of the royalty sale through June 30, 2024, an aggregate of $23.8 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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In April 2018, we entered into an agreement with Roivant Sciences Ltd.

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

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

(Roivant), our largest shareholder, to launch Genevant, a company focused on a broad range of RNA-based therapeutics enabled by our LNP and ligand conjugate delivery technologies.

We licensed rights to our LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the Genevant License).

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

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.

As of June 30, 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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We responded to Moderna and Merck’s reply on April 5, 2024.

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

Oral proceedings were held on June 6, 2024, and the Opposition Division upheld the ‘254 Patent but declined our and Genevant’s request to broaden certain claims in the ‘254 Patent.

We have not received any indication from Moderna and Merck if they plan to appeal the decision, and Genevant and we are currently evaluating whether to appeal the Opposition Division’s decision not to allow Genevant and us to broaden our claims under the ‘254 Patent.

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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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.

On August 5, 2024, we and Genevant, along with Moderna, filed the Stipulation with the court requesting an amended case schedule to accommodate certain outstanding discovery from Moderna and third parties, as specified in the Stipulation, which would move the start of the trial from April 21, 2025 to September 24, 2025, subject to the court’s availability.

The Stipulation, and the new deadlines set forth therein, are subject to the approval of the court.

A conference to discuss the Stipulation has been scheduled by the court for August 15, 2024.

Patent Infringement Litigation vs.

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

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

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

Acuitas filed its amended complaint on September 6, 2022.

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

Acuitas filed its opposition

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

On May 20, 2024, the court granted our and Genevant’s motion to dismiss, so we believe this matter is now concluded.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in thousands)

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Net loss $ (19,796) $ (17,094) $ (37,671) $ (33,433)

Revenues are summarized in the following table:

Three Months Ended March 31,

Revenues are summarized in the following tables:

Three Months Ended June 30,

2024 % of Total 2023 % of Total

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Total revenue $ 1,726 100 % $ 4,651 100 %

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

Six Months Ended June 30,

2024 % of Total 2023 % of Total

(in thousands, except percentages)

Revenue from collaborations and licenses

Royalties from sales of ONPATTRO $ 1,337 41 % $ 2,266 20 %

Qilu Pharmaceutical Co., Ltd.

757 23 % 7,128 63 %

Non-cash royalty revenue

Royalties from sales of ONPATTRO 1,164 36 % 1,944 17 %

Total revenue $ 3,258 100 % $ 11,338 100 %

Total revenue decreased $2.9 million and $8.1 million for the three and six months ended June 30, 2024, respectively, compared to the same periods 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;

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Operating expenses

Operating expenses are summarized in the following table:

Three Months Ended March 31,

Operating expenses are summarized in the following tables:

Three Months Ended June 30,

2024 % of Total 2023 % of Total

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Total operating expenses $ 23,309 100 % $ 23,036 100 %

Six Months Ended June 30,

2024 % of Total 2023 % of Total

(in thousands, except percentages)

Research and development $ 30,954 70 % $ 35,967 76 %

General and administrative 12,859 29 % 11,532 24 %

Change in fair value of contingent consideration 391 1 % (363) (1) %

Total operating expenses $ 44,204 100 % $ 47,136 100 %

Research and development

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

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.

Research and development expenses decreased $2.1 million and $5.0 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

The decreases were due primarily to the discontinuation of our coronavirus and AB-161 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.

In connection with our cessation of all discovery efforts in August 2024, we expect our research expenses to be reduced in future periods.

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

General and administrative

General and administrative expenses decreased $0.2 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.

General and administrative expenses increased $1.6 million and $1.3 million for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023, due primarily to higher litigation costs, partially offset by a decrease in compensation-related expenses.

Change in fair value of contingent consideration

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(in thousands)

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Interest expense (34) (171) (78) (369)

Foreign exchange gain (13) 4

Foreign exchange (loss)/gain (8) 1 (21) 5

Total other income $ 1,787 $ 1,291 $ 3,275 $ 2,365

Interest income

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.

The increase in interest income for the three and six months ended June 30, 2024 compared to the same periods 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 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.

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

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Effect of foreign exchange rate changes on cash and cash equivalents (21) 3

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

Increase/(decrease) in cash and cash equivalents 36,503 (3,579)

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 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.

For the six months ended June 30, 2024, $33.8 million of cash was used in operating activities compared to $46.9 million used in operating activities for the six months ended June 30, 2023, a change of $13.1 million.

The change was due primarily to a decrease in research and development expenses and the timing of payments to vendors.

For the six months ended June 30, 2024, net cash provided by investing activities was $21.5 million, resulting primarily from maturities of investments in marketable securities of $79.6 million, partially offset by additional investments in marketable securities of $58.0 million.

For the six months ended June 30, 2023, net cash provided by investing activities was $18.1 million, which resulted primarily from maturities of investments in marketable securities of $68.5 million, partially offset by additional investments in marketable securities of $49.4 million.

For the six months ended June 30, 2024, net cash provided by financing activities was $48.8 million, which was primarily related to $44.1 million in proceeds from sales of common shares under the Sale Agreement.

For the six months ended June 30, 2023, net cash provided by financing activities was $25.2 million, which included $24.6 million in proceeds from sales of common shares under the Sale Agreement.

Sources of Liquidity

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.

As of June 30, 2024, we had cash, cash equivalents and investments in marketable securities of $148.5 million.

We had no outstanding debt as of June 30, 2024.

Open Market Sale Agreement

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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.

prospectus supplement was fully utilized during 2020.

This prospectus supplement was fully utilized during 2020.

On August 7, 2020, we filed a prospectus supplement with the SEC (the August 2020 Prospectus Supplement) 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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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.

During the six months ended June 30, 2024, we issued 16,499,999 common shares pursuant to the Sale Agreement resulting in net proceeds of approximately $44.1 million.

For the six months ended June 30, 2023, we issued 9,214,168 common shares pursuant to the Sale Agreement, resulting in net proceeds of approximately $24.6 million.

As of June 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 March 31, 2024, we have recorded an aggregate of $23.3 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through June 30, 2024, we have recorded an aggregate of $23.8 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 $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.

We believe that our $148.5 million of cash, cash equivalents and investments in marketable securities as of June 30, 2024 will be sufficient to fund our operations for at least the next twelve months and into the fourth quarter of 2026.

We expect a net cash burn between $63 million and $67 million in 2024.

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

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• 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 preclinical and clinical findings;

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

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

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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.

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.

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

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

We may need to obtain funds through arrangements with collaborators or others that may require us to relinquish most or all of our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise seek if we were better funded.

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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