What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-08 · 108 added, 96 removed, 404 unchanged (34% 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 and six months ended June 30, 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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While we may update certain forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if new information becomes available in the future.

However, you are advised to consult any further disclosures we make on related subjects in the periodic and current reports that we file with the Securities and Exchange Commission.

However, you are advised to consult any further disclosures we make on related subjects in the periodic and current reports that we file with the Securities and Exchange Commission (the SEC).

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

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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 ongoing lawsuits against Moderna and Pfizer/BioNTech for their use of our patented lipid nanoparticle (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 Therapeutics, Inc.

(Moderna) and Pfizer Inc.

and BioNTech SE (collectively, 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.

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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.

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.

(Genevant), along with Moderna, filed a Stipulation to Extend Time (the Stipulation) 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.

Our strategy is to advance our therapeutic product candidates with complementary mechanisms of action into late-stage clinical trials with the goal of developing 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.

Functional cure is defined as sustained HBsAg loss and HBV DNA less than the lower limit of quantification (<LLOQ) 24 weeks off treatment, with or without anti-HBsAg antibodies.

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

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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.

Parts 1 and 2 of this clinical trial enrolled sequential cohorts of healthy subjects receiving single and multiple doses, respectively, of AB-101 at increasing dose levels.

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

We have moved into Part 3 of this clinical trial which evaluates repeat dosing of AB-101 in patients with cHBV, and we expect to report preliminary data in the first half of 2025.

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 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.

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.

anti-HBV immunity.

We believe that if we can lower HBsAg and promote immunity, we may achieve sustained HBsAg loss and HBV DNA <LLOQ, 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 (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 I trial suggest that the addition of a short course of Peg-IFNα-2a to imdusiran treatment was generally safe, well-tolerated and, in some patients, resulted in HBsAg loss at end-of-treatment and sustained HBsAg loss 24 weeks after completing imdusiran and Peg-IFNα-2a treatment.

We intend to present additional follow-up data as a late-breaker poster presentation at the upcoming AASLD - The Liver Meeting in November 2024.

• 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 (IM-PROVE II).

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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.

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.

We intend to present preliminary end-of-treatment data from this additional cohort as a poster presentation at the upcoming AASLD - The Liver Meeting in November 2024.

On July 29, 2024, our Board of Directors approved a plan, 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 implemented a 40% reduction in our workforce, primarily affecting the discovery and general and administrative functions.

As a result, we incurred a one-time restructuring charge in the third quarter of 2024 of approximately $3.6 million, which includes approximately $2.9 million of cash severance and continued benefits payments, a non-cash impairment charge for laboratory equipment of approximately $0.2 million and approximately $0.5 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 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

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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 infection.

We are developing an RNAi therapeutic that is 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.

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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.

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.

IM-PROVE I Phase 2a proof-of-concept clinical trial evaluating 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 a short course 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 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.

We believe that if we can lower HBsAg and promote immune reawakening, we may achieve sustained HBsAg loss and HBV DNA <LLOQ, potentially leading to a functional cure.

After 24-weeks of dosing with imdusiran (60mg every 8 weeks, 4 doses), patients were randomized into one of four arms to receive a short course of Peg-IFNα-2a plus ongoing NA therapy for either 12 or 24 weeks, with or without an additional two doses of imdusiran.

After completion of the assigned Peg-IFNα-2a treatment period, all patients remained on NA therapy for the initial 24-week follow-up period, and then discontinued NA treatment, provided they met protocol-defined stopping criteria.

Patients who stopped NA therapy entered 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 HBsAg loss 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 that was presented at EASL 2024 include:

• 33% of patients in Cohort A1 who received 48 weeks of imdusiran (60mg every 8 weeks, 6 doses) combined with 24 weeks of Peg-IFNα-2a and their ongoing NA therapy achieved HBsAg loss at the end-of-treatment (EOT) that was maintained in 100% of these patients 24 weeks after completing imdusiran and Peg-IFNα-2a treatment.

• HBsAg loss was achieved and maintained 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.

n=2 Cohort A2) seroconverted with HBsAg loss.

At the time the data was reported, all six of these patients had stopped NA therapy, with two of those patients reaching 12 weeks off all therapy with sustained undetectable HBV DNA levels and HBsAg loss.

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

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.

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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

We intend to present additional follow-up data as a late-breaker poster presentation at the upcoming AASLD - The Liver Meeting in November 2024.

IM-PROVE II Phase 2a proof-of-concept clinical trial evaluating 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.

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.

The primary objective of this trial was 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 sustained HBsAg loss and HBV DNA <LLOQ, potentially leading to a functional cure.

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

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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.

At week 48, all patients were evaluated for eligibility to discontinue NA therapy and are 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, 4 doses) over 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).

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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.

Additionally, we amended the IM-PROVE II clinical trial protocol to include another cohort that received imdusiran, VTP-300 and low dose nivolumab (Opdivo ® ), an approved PD-1 inhibitor.

In this additional cohort, patients received 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.

We intend to present preliminary end-of-treatment data from this additional cohort as a poster presentation at the upcoming AASLD - The Liver Meeting in November 2024.

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.

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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).

We are currently dosing study subject 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.

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 infection.

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

The trial consists of 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 infection.

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

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.

2 placebo) receiving a single dose of AB-101 at increasing dose levels.

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.

Part 2 of this clinical trial has enrolled to date two sequential cohorts of ten healthy subjects each receiving 10 mg or 25 mg of AB-101 (8 active:

2 placebo) daily for seven days.

AB-101 was generally well-tolerated after repeat dosing with evidence of dose-dependent receptor occupancy.

In the 25mg cohort, all subjects showed evidence of receptor occupancy, with seven of the eight subjects demonstrating receptor occupancy greater than 70% during the seven-day dosing period.

We have moved into Part 3 of this clinical trial which evaluates repeat dosing of AB-101 for 28 days in patients with cHBV and we expect to report preliminary data in the first half of 2025.

Other Collaborations, Royalty Entitlements and Intellectual Property Litigation

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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.

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.

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

Concurrent with the execution of the License Agreement, we entered into a Share Purchase Agreement (the Share Purchase Agreement) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the Investor), pursuant to which the Investor purchased 3,579,952 of our common shares 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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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 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.

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

Additionally, if Genevant receives proceeds from an action for infringement by any third parties of our intellectual property licensed to Genevant, we would be entitled to receive, after deduction of litigation costs, 20% of the proceeds received by Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

In July 2020, Roivant recapitalized Genevant through an equity investment and conversion of previously issued convertible debt securities held by Roivant.

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

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.

As of September 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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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.

Both parties have given notice of their intent to appeal the Opposition Division’s decision, and the deadline for filing for their respective grounds for appeal is November 25, 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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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”.

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.

On August 5, 2024, we and Genevant, along with Moderna, filed the Stipulation 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.

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.

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.

A scheduling conference was held on August 28, 2023 and the court issued a Letter Order on September 7, 2023 setting certain court dates.

Subsequently, the claim construction hearing was scheduled for December 18, 2024.

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

Document and written discovery in the action is ongoing.

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On June 24, 2022, we and Genevant sought a pre-motion conference concerning our anticipated motion to dismiss all of Acuitas’ claims due to lack of subject matter jurisdiction.

The request for a pre-motion conference was granted, but the case was subsequently re-assigned to a new judge who entered an order directing:

The request for a pre-motion conference was

granted, but the case was subsequently re-assigned to a new judge who entered an order directing:

(i) Acuitas to inform the court whether it intended to file an amended complaint;

(ii) that Acuitas must file any amended complaint 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.

and (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.

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

Please refer to Note 2 to our condensed consolidated financial statements included in “Part I, Item 1-Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.

Please refer to Note 2 to our condensed consolidated financial statements included in “Part I, Item 1-Financial Statements (Unaudited)” of this Form 10-Q for a description of recent accounting pronouncements applicable to our business.

RESULTS OF OPERATIONS

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

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

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

2024 2023 2024 2023

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Revenues are summarized in the following tables:

Three Months Ended June 30,

Three Months Ended September 30,

2024 % of Total 2023 % of Total

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Total revenue $ 1,339 100 % $ 4,658 100 %

Six Months Ended June 30,

Nine Months Ended September 30,

2024 % of Total 2023 % of Total

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Total revenue $ 4,597 100 % $ 15,996 100 %

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:

Total revenue decreased $3.3 million and $11.4 million for the three and nine months ended September 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 are summarized in the following tables:

Three Months Ended June 30,

Three Months Ended September 30,

2024 % of Total 2023 % of Total

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Change in fair value of contingent consideration 344 2 % 205 1 %

Restructuring 3,625 16 % — — %

Total operating expenses $ 22,779 100 % $ 26,216 100 %

Six Months Ended June 30,

Nine Months Ended September 30,

2024 % of Total 2023 % of Total

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Change in fair value of contingent consideration 735 1 % (158) — %

Restructuring 3,625 5 % — — %

Total operating expenses $ 66,983 100 % $ 73,352 100 %

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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 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.

Research and development expenses decreased $5.9 million and $10.9 million for the three and nine months ended September 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, along with related headcount reductions, as part of our efforts to focus our pipeline on our lead HBV product candidates.

In connection with our cessation of all discovery efforts in August 2024, we expect our research expenses to continue 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 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.

General and administrative expenses decreased $1.3 million for the three months ended September 30, 2024, as compared to the same period in 2023, due primarily to decreased employee compensation-related expenses associated with a reduction in headcount in connection with the prioritization of our HBV pipeline in September 2023.

Total general and administrative expenses remained substantially similar for the nine months ended September 30, 2024 compared to the same period in 2023, with higher litigation-related legal fees offset by a reduction in employee compensation-related expenses and insurance premiums.

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.

Restructuring

During the three months ended September 30, 2024, we ceased all discovery efforts and discontinued our IM-PROVE III clinical trial to streamline the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101.

In taking these steps, we implemented a 40% reduction in our workforce, primarily affecting the discovery and general and administrative functions.

Other income (loss)

The components of our other income (loss) 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

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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

Interest income

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.

The increase in interest income for the three and nine months ended September 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.

We anticipate a decrease in interest income in immediate future periods due to lower interest earned on our cash and investment balances due to a general decrease in market interest rates.

Interest expense

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.

Interest expense for the three and nine months ended September 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:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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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 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.

For the nine months ended September 30, 2024, $54.5 million of cash was used in operating activities compared to $68.6 million used in operating activities for the nine months ended September 30, 2023, a change of $14.1 million.

The change was due primarily to a decrease in research and development expenses related to our HBV pipeline prioritization in September 2023 and the timing of payments to vendors.

For the nine months ended September 30, 2024, net cash provided by investing activities was $9.5 million, resulting primarily from maturities of investments in marketable securities of $108.0 million, partially offset by additional investments in marketable securities of $98.3 million.

For the nine months ended September 30, 2023, net cash provided by investing activities was $28.5 million, which resulted 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, 2024, net cash provided by financing activities was $50.6 million, which was primarily related to $44.1 million in proceeds from sales of common shares under the Sale Agreement and $6.1 million in proceeds from the issuance of common shares pursuant to the exercise of stock options.

For the nine months ended September 30, 2023, net cash provided by financing activities was $26.8 million, which included $26.0 million in proceeds from sales of common shares under the Sale Agreement.

Sources of Liquidity

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.

As of September 30, 2024, we had cash, cash equivalents and investments in marketable securities of $130.8 million.

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

Open Market Sale Agreement

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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.

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.

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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 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.

During the nine months ended September 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 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.

As of September 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 June 30, 2024, we have 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, we have recorded an aggregate of $24.4 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 $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 believe that our $130.8 million of cash, cash equivalents and investments in marketable securities as of September 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.

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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