What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-08 · 76 added, 58 removed, 433 unchanged (24% of the section changed)

4 unchanged sentences

Dollars, except share amounts)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

37 unchanged sentences

Dollars, except share and per share amounts)

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

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

2024 2023 2024 2023

6 unchanged sentences

Change in fair value of contingent consideration 344 205 735 ( 158 )

Restructuring 3,625 — 3,625 —

Total operating expenses 22,779 26,216 66,983 73,352

2 unchanged sentences

Interest expense ( 29 ) ( 46 ) ( 107 ) ( 415 )

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

Foreign exchange gain/(loss) 5 6 ( 16 ) 11

Total other income 1,723 1,454 4,998 3,819

29 unchanged sentences

Balance June 30, 2024 188,739,044 $ 1,403,334 $ 81,751 $ ( 1,314,323 ) $ ( 48,308 ) $ 122,454

Stock-based compensation expense — — 2,160 — — 2,160

Issuance of common shares pursuant to exercise of options 593,321 3,996 ( 2,406 ) — — 1,590

Issuance of common shares pursuant to ESPP 105,770 265 ( 80 ) — — 185

Unrealized gain on available-for-sale securities — — — — 218 218

Net loss — — — ( 19,717 ) — ( 19,717 )

Balance September 30, 2024 189,438,135 $ 1,407,595 $ 81,425 $ ( 1,334,040 ) $ ( 48,090 ) $ 106,890

See accompanying notes to the condensed consolidated financial statements.

18 unchanged sentences

Balance June 30, 2023 166,922,739 $ 1,344,195 $ 77,202 $ ( 1,237,236 ) $ ( 49,468 ) $ 134,693

Stock-based compensation expense — — 2,483 — — 2,483

Issuance of common shares pursuant to the Open Market Sale Agreement 633,922 1,396 — — — 1,396

Issuance of common shares pursuant to ESPP 138,586 424 ( 139 ) — — 285

Unrealized loss on available-for-sale securities — — — — 584 584

Net loss — — — ( 20,104 ) — ( 20,104 )

Balance September 30, 2023 167,695,247 $ 1,346,015 $ 79,546 $ ( 1,257,340 ) $ ( 48,884 ) $ 119,337

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(In thousands of U.S.

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

2 unchanged sentences

Depreciation 1,047 1,045

Loss on impairment of lab equipment 167 —

Gain on sale of property and equipment — ( 20 )

Stock-based compensation expense 7,354 7,578

12 unchanged sentences

Purchase of investments in marketable securities ( 98,318 ) ( 56,490 )

Proceeds from sale of property and equipment — 20

Disposition of investments in marketable securities 107,951 86,026

4 unchanged sentences

Issuance of common shares pursuant to exercise of stock options 6,055 259

Issuance of common shares pursuant to exercise of ESPP 211 296

Issuance of common shares pursuant to ESPP 396 581

Net cash provided by financing activities 50,575 26,840

16 unchanged sentences

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

The Company continues to protect and defend its intellectual property, which is the subject of the Company’s ongoing lawsuits against Moderna and Pfizer/BioNTech for their use of the Company’s patented lipid nanoparticle (LNP) technology in their COVID-19 vaccines.

The Company continues to protect and defend its intellectual property, which is the subject of the Company’s ongoing lawsuits against Moderna Therapeutics, Inc.

(Moderna) and Pfizer Inc.

and BioNTech SE (collectively, Pfizer/BioNTech) for their use of the Company’s 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.

1 unchanged sentence

On August 5, 2024, the Company 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.

At June 30, 2024, the Company had an aggregate of $ 148.5 million in cash, cash equivalents and investments in marketable securities.

The Company had no outstanding debt as of June 30, 2024.

(Genevant), along with Moderna, filed a Stipulation to Extend Time with the court that requested an amended case schedule to accommodate certain outstanding discovery from Moderna and third parties.

The court approved the amended case schedule and the start of the trial was moved from April 21, 2025 to September 24, 2025, subject to the court’s availability.

The lawsuit against Pfizer/BioNTech is ongoing and a date for a claim construction hearing has been scheduled for December 18, 2024.

At September 30, 2024, the Company had an aggregate of $ 130.8 million in cash, cash equivalents and investments in marketable securities.

The Company had no outstanding debt as of September 30, 2024.

The Company believes it has sufficient cash resources to fund its operations for at least the next 12 months.

6 unchanged sentences

These statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

These unaudited condensed consolidated financial statements include the accounts of Arbutus Biopharma Corporation and its one wholly-owned subsidiary, Arbutus Biopharma, Inc., and reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of June 30, 2024 and December 31, 2023, the Company’s results of operations for the three and six months ended June 30, 2024 and 2023, and the Company’s cash flows for the six months ended June 30, 2024 and 2023.

These unaudited condensed consolidated financial statements include the accounts of Arbutus Biopharma Corporation and its one wholly-owned subsidiary, Arbutus Biopharma, Inc., and reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of September 30, 2024 and December 31, 2023, the Company’s results of operations for the three and nine months ended September 30, 2024 and 2023, and the Company’s cash flows for the nine months ended September 30, 2024 and 2023.

Such adjustments are of a normal recurring nature.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results for the full year.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for the full year.

These unaudited condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2023, except as described below under the section entitled “Recent Accounting Pronouncements.”

2 unchanged sentences

Net loss per share is calculated based on the weighted average number of common shares outstanding.

Diluted net loss per share does not differ from basic net loss per share for the three and six months ended June 30, 2024 and 2023, since the effect of including potential common shares would be anti-dilutive.

For the six months ended June 30, 2024, potential common shares of 20.5 million pertaining to outstanding stock options and unvested restricted stock units were excluded from the calculation of net loss per share.

A total of approximately 20.2 million outstanding stock options were excluded from the calculation for the six months ended June 30, 2023.

Diluted net loss per share does not differ from basic net loss per share for the three and nine months ended September 30, 2024 and 2023, since the effect of including potential common shares would be anti-dilutive.

For the nine months ended September 30, 2024, potential common shares of 18.7 million pertaining to outstanding stock options and unvested restricted stock units were excluded from the calculation of net loss per share.

A total of approximately 21.0 million outstanding stock options were excluded from the calculation for the nine months ended September 30, 2023.

Revenue from collaborations and licenses

14 unchanged sentences

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

Consideration associated with at-risk substantive performance milestones, including

sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.

Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.

Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

12 unchanged sentences

Early adoption is permitted and the amendments in this ASU should be applied on a retrospective basis to all periods presented.

The Company has not determined the impact ASU 2023-07 may have on the Company’s financial statement disclosures.

The Company has not yet determined the impact ASU 2023-07 may have on the Company’s financial statement disclosures.

In December 2023, the FASB issued ASU No.

6 unchanged sentences

The ASU indicates that all entities will apply the guidance prospectively with an option for retroactive application to each period presented in the financial statements.

The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures.

The Company has not yet determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures.

The Company has reviewed all other recently issued standards and has determined that such standards will not have a material impact on the Company’s financial statements or do not otherwise apply to the Company’s operations.

14 unchanged sentences

To determine the fair value of the contingent consideration (Note 8), the Company uses a probability weighted assessment of the likelihood the milestones would be met and the estimated timing of such payments, and then the potential contingent payments are discounted to their present value using a probability adjusted discount rate that reflects the early stage nature of the development program, the time to complete the program development, and overall biotech indices.

The Company determined the fair value of the contingent consideration was $ 8.0 million as of June 30, 2024 and the increase of $ 0.4 million from December 31, 2023 has been recorded as a component of total operating expenses in the statements of operations and comprehensive loss for the six months ended June 30, 2024.

The Company determined the fair value of the contingent consideration was $ 8.3 million as of September 30, 2024 and the increase of $ 0.7 million from December 31, 2023 has been recorded as a component of total operating expenses in the statements of operations and comprehensive loss for the nine months ended September 30, 2024.

The assumptions used in the discounted cash flow model are level 3 inputs as defined above.

2 unchanged sentences

Level 1 Level 2 Level 3 Total

As of June 30, 2024 (in thousands)

As of September 30, 2024 (in thousands)

Cash and cash equivalents $ 31,846 $ — $ — $ 31,846

15 unchanged sentences

(in thousands)

Six Months Ended June 30, 2024 $ 7,600 $ 391 $ 7,991

Six Months Ended June 30, 2023 $ 7,531 $ ( 363 ) $ 7,168

Nine Months Ended September 30, 2024 $ 7,600 $ 735 $ 8,335

Nine Months Ended September 30, 2023 $ 7,531 $ ( 158 ) $ 7,373

See Note 4 for additional information regarding the fair value of the Company’s investments in marketable securities.

3 unchanged sentences

Gross Unrealized Loss (1)

As of June 30, 2024 (in thousands)

As of September 30, 2024 (in thousands)

Cash equivalents

Money market $ 25,948 $ — $ — $ 25,948

US treasury bills $ 20,882 $ — $ — $ 20,882

Total $ 25,948 $ — $ — $ 25,948

2 unchanged sentences

US treasury bills 52,408 49 — 52,457

Yankee bonds 2,000 — ( 7 ) 1,993

Total $ 95,885 $ 72 $ ( 9 ) $ 95,948

19 unchanged sentences

(1) Gross unrealized gain (loss) is pre-tax and is reported in accumulated other comprehensive loss.

The contractual term to maturity of the $ 79.2 million of short-term marketable securities held by the Company as of June 30, 2024 is less than one year.

As of June 30, 2024, the Company held $ 6.5 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2023, the Company’s $ 99.7 million of short-term marketable securities had contractual maturities of less than one year, while the Company’s $ 6.3 million of long-term marketable securities had maturities of more than one year, but less than five years.

At June 30, 2024 and December 31, 2023, the Company had 28 and 37 , respectively, available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses.

The contractual term to maturity of the $ 95.9 million of short-term marketable securities held by the Company as of September 30, 2024 is less than one year.

As of September 30, 2024, the Company held $ 3.0 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2023, the Company’s

$ 99.7 million of short-term marketable securities had contractual maturities of less than one year, while the Company’s $ 6.3 million of long-term marketable securities had maturities of more than one year, but less than five years.

At September 30, 2024 and December 31, 2023, the Company had 7 and 27 , respectively, available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses.

Unrealized losses on the Company’s investments in debt securities have not been recognized into income as the issuers’ bonds are of high credit quality and the decline in fair value is largely due to market conditions and/or changes in interest rates.

2 unchanged sentences

The fair value is expected to recover as the bonds approach maturity.

Accrued interest receivable on investments in marketable securities of $ 0.3 million at both June 30, 2024 and December 31, 2023 is included in prepaid expenses and other current assets.

The Company had realized gains of less than $ 0.1 million for the three and six months ended June 30, 2024 and no realized gains or losses for the same periods in 2023.

Accrued interest receivable on investments in marketable securities of $ 0.3 million at both September 30, 2024 and December 31, 2023 is included in prepaid expenses and other current assets.

The Company had realized gains of less than $ 0.1 million for the three and nine months ended September 30, 2024 and zero and less than $ 0.1 million realized gains for same periods in 2023, respectively.

See Note 3 for additional information regarding the fair value of the Company’s investments in marketable securities.

9 unchanged sentences

Accordingly, an estimate of the fair value of the securities is based on the original cost less previously recognized equity method losses, less impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or a similar Genevant securities.

As of June 30, 2024, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 16 % of the common equity of Genevant.

As of September 30, 2024, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 16 % of the common equity of Genevant.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

3 unchanged sentences

Payroll accruals 2,588 3,349

Restructuring liabilities 565 —

Total accounts payable and accrued liabilities $ 7,544 $ 10,271

8 unchanged sentences

The discount, as well as $ 1.5 million of transaction costs, will be amortized as interest expense based on the projected balance of the liability as of the beginning of each period.

As of June 30, 2024, the Company estimated an effective annual interest rate of approximately 2.1 %.

As of September 30, 2024, the Company estimated an effective annual interest rate of approximately 2.0 %.

Over the course of the Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in the timing of forecasted royalty revenue.

2 unchanged sentences

As royalties are remitted to OMERS from Alnylam, the balance of the recognized liability is effectively repaid over the life of the Agreement.

From the inception of the royalty sale through June 30, 2024, the Company has recorded an aggregate of $ 23.8 million of non-cash royalty revenue for royalties earned by OMERS.

From the inception of the royalty sale through September 30, 2024, the Company has recorded an aggregate of $ 24.4 million of non-cash royalty revenue for royalties earned by OMERS.

There are a number of factors that could materially affect the amount and timing of royalty payments from Alnylam, none of which are within the Company’s control.

During the six months ended June 30, 2024, the Company recognized non-cash royalty revenue of $ 1.2 million and related non-cash interest expense of less than $ 0.1 million.

During the six months ended June 30, 2023, the Company recognized non-cash royalty revenue of $ 1.9 million and related non-cash interest expense of $ 0.4 million.

The table below shows the activity related to the net liability for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

During the nine months ended September 30, 2024, the Company recognized non-cash royalty revenue of $ 1.7 million and related non-cash interest expense of less than $ 0.1 million.

During the nine months ended September 30, 2023, the Company recognized non-cash royalty revenue of $ 2.7 million and related non-cash interest expense of $ 0.4 million.

The table below shows the activity related to the net liability for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(in thousands)

12 unchanged sentences

The contingent consideration is a financial liability and is measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statements of operations and comprehensive loss (see Note 3).

The fair value of the contingent consideration was $ 8.0 million as of June 30, 2024.

The fair value of the contingent consideration was $ 8.3 million as of September 30, 2024.

Collaborations, contracts and licensing agreements

31 unchanged sentences

Total deferred license revenue 10,911

The Company recognized $ 0.5 million and $ 0.8 million of revenue based on labor hours expended by the Company on its Manufacturing Obligations during the three and six months ended June 30, 2024, respectively, and $ 3.0 million and $ 7.1 million during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, the balance of the deferred license revenue was $ 13.0 million, which, in accordance with ASC 210-20, was partially offset by the contract asset associated with the manufacturing cost reimbursement of $ 2.0 million, resulting in a net deferred license revenue liability of $ 11.0 million.

The Company recognized $ 0.1 million and $ 0.9 million of revenue based on labor hours expended by the Company on its Manufacturing Obligations during the three and nine months ended September 30, 2024, respectively, and $ 3.2 million and $ 10.3 million during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, the balance of the deferred license revenue was $ 12.9 million, which, in accordance with ASC 210-20, was partially offset by the contract asset associated with the manufacturing cost reimbursement of $ 2.0 million, resulting in a net deferred license revenue liability of $ 10.9 million.

The Company incurred $ 0.6 million of incremental costs in obtaining the Qilu License, which the Company capitalized in other current assets and other assets and amortizes as a component of general and administrative expense commensurate with the recognition of the combined performance obligation.

The Company recognized amortization expense of less than $ 0.1 million for both the three and six months ended June 30, 2024 and amortization expense of less than $ 0.1 million for the three months ended June 30, 2023 and $ 0.1 million for the six months ended June 30, 2023.

The Company recognized amortization expense of less than $ 0.1 million for both the three and nine months ended September 30, 2024 and amortization expense of less than $ 0.1 million for the three months ended September 30, 2023 and $ 0.1 million for the nine months ended September 30, 2023.

The Company reevaluates the transaction price and the total estimated labor hours expected to be incurred to satisfy the performance obligations and adjusts the deferred revenue at the end of each reporting period.

5 unchanged sentences

The Company and Barinthus retain full rights to their respective product candidates and will split all costs associated with the clinical trial.

The Company incurred $ 0.5 million and $ 1.0 million of expenses, net of Barinthus’s 50% share, during the three and six months ended June 30, 2024, respectively, and $ 0.3 million and $ 0.8 million during the three and six months ended June 30, 2023 respectively, and reflected those costs in research and development in the statements of operations and comprehensive loss.

The Company incurred $ 0.5 million and $ 1.7 million of expenses, net of Barinthus’s 50% share, during the three and nine months ended September 30, 2024, respectively, and $ 0.7 million and $ 1.6 million during the three and nine months ended September 30, 2023 respectively, and reflected those costs in research and development in the statements of operations and comprehensive loss.

Royalty Entitlements

9 unchanged sentences

If this royalty entitlement reverts to the Company, 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 June 30, 2024, an aggregate of $ 23.8 million of royalties have been earned by OMERS.

From the inception of the royalty sale through September 30, 2024, an aggregate of $ 24.4 million of royalties have been earned by OMERS.

The Company also is receiving a second royalty interest of 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.

1 unchanged sentence

Revenues are summarized in the following table:

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

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

2024 2023 2024 2023

36 unchanged sentences

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

During the three and six months ended June 30, 2024, the Company issued 7,833,922 and 16,499,999 common shares pursuant to the Sale Agreement, respectively, resulting in net proceeds of approximately $ 22.4 million and $ 44.1 million, respectively.

During the three and six months ended June 30, 2023, the Company issued 1,790,546 and 9,214,168 common shares pursuant to the Sale Agreement, respectively, resulting in net proceeds of $ 4.7 million and $ 24.6 million, respectively.

As of June 30, 2024, there was approximately $ 25.4 million of common shares remaining available in aggregate under the March 2022 Prospectus Supplement, pursuant to the November 2021 Registration Statement.

During the three months ended September 30, 2024, the Company did not issue any common shares pursuant to the Sale Agreement.

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

During the three and nine months ended September 30, 2023, the Company issued 633,922 and 9,848,090 common shares pursuant to the Sale Agreement, respectively, resulting in net proceeds of $ 1.4 million and $ 26.0 million, respectively.

As of September 30, 2024, there was approximately $ 25.4 million of common shares remaining available in aggregate under the March 2022 Prospectus Supplement, pursuant to the November 2021 Registration Statement.

Stock-based compensation

The table below summarizes information about the Company’s stock-based compensation for the three and six months ended June 30, 2024 and 2023 and the expense recognized in the condensed consolidated statements of operations:

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

The table below summarizes information about the Company’s stock-based compensation for the three and nine months ended September 30, 2024 and 2023 and the expense recognized in the condensed consolidated statements of operations:

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

2024 2023 2024 2023

10 unchanged sentences

Total stock compensation expense $ 2,160 $ 2,483 $ 7,354 $ 7,578

Subsequent events

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

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

As a result, the Company 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 the IM-PROVE III clinical trial.

Restructuring

On July 29, 2024, the Company’s Board of Directors approved a plan, effective August 1, 2024, to streamline the organization to focus its efforts on advancing the clinical development of imdusiran and AB-101, and therefore ceased all discovery efforts and discontinued its IM-PROVE III clinical trial.

In taking these steps to streamline the organization, the Company implemented a 40 % reduction in its workforce, primarily affecting the discovery and general and administrative functions.

As a result, the Company incurred a one-time restructuring charge in the third quarter of 2024 of $ 3.6 million, which includes approximately $ 2.9 million of cash severance and continued benefits paid, a non-cash impairment charge for laboratory equipment of $ 0.2 million and $ 0.5 million of cash payments to vendors for close-out activities in connection with the cessation of discovery efforts and the discontinuation of the IM-PROVE III clinical trial.

As of September 30, 2024, there were $ 0.6 million of accrued restructuring costs for contract close-out activities and severance payments included in accounts payable and accrued liabilities.

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 1. Financial Statements