What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-27 compared with 2024-03-05 · 142 added, 139 removed, 627 unchanged (31% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arbutus Biopharma Corporation (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Arbutus Biopharma Corporation (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

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Auditing the valuation of the contingent consideration liability was complex and highly judgmental due to the significant estimation required in determining the fair value.

In particular, the fair value estimate was sensitive to significant assumptions such as the probability of successfully commercializing a treatment for the hepatitis B virus, the timing of future revenues related to commercial sales, and the discount rate.

These assumptions are affected by expectations about future industry, regulatory, market or economic conditions and are forward-looking and inherently uncertain.

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We also compared the significant assumptions to current industry, market and economic trends to corroborate the Company’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the contingent consideration liability that would result from changes in the significant assumptions.

We also involved our valuation specialists to assist us in testing the discount rate.

We also involved our valuation specialists to assist us in evaluating the valuation methodology and the discount rate.

/s/ Ernst & Young LLP

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Change in fair value of contingent consideration 2,625 69

Restructuring costs 3,720 —

Total operating expenses 82,490 96,244

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Comprehensive loss

Unrealized gain/(loss) on available-for-sale securities $ 2,067 $ ( 2,153 )

Unrealized gain on available-for-sale securities $ 286 $ 2,067

Comprehensive loss $ ( 69,634 ) $ ( 70,782 )

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Stock-based compensation — — 9,301 — — 9,301

Certain fair value adjustments to liability stock option awards — — 26 — — 26

Issuance of common shares pursuant to the Open Market Sales Agreement 12,020,257 29,852 — — — 29,852

1 unchanged sentence

Issuance of common shares pursuant to exercise of stock options 101,356 458 ( 198 ) — — 260

Issuance of common shares pursuant to Share Purchase Agreement 3,579,952 10,973 — — — 10,973

Unrealized loss on available-for-sale securities — — — — ( 2,153 ) ( 2,153 )

Unrealized gain on available-for-sale securities — — — — 2,067 2,067

Net loss — — — ( 72,849 ) — ( 72,849 )

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Issuance of common shares pursuant to exercise of stock options 2,958,264 14,355 ( 6,878 ) — — 7,477

Issuance of common shares upon settlement of RSUs 410,482 1,190 ( 1,190 ) —

Unrealized gain on available-for-sale securities — — — — 286 286

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Depreciation 1,380 1,404

Loss on impairment of lab equipment 167 —

Gain on sale of property and equipment — ( 20 )

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Accounts payable and accrued liabilities ( 2,707 ) ( 5,758 )

Deferred license revenue ( 10,664 ) 22,455

Change in deferred license revenue ( 1,357 ) ( 10,664 )

Other liabilities ( 430 ) ( 444 )

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Acquisition of property and equipment ( 182 ) ( 1,008 )

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

Net cash provided by investing activities 22,948 50,773

FINANCING ACTIVITIES

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

Issuance of common shares pursuant to the Open Market Sale Agreement 44,123 29,852

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Effect of foreign exchange rate changes on cash and cash equivalents ( 49 ) 25

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

Increase / (decrease) in cash and cash equivalents $ 10,045 $ ( 4,491 )

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

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Description of the Business

Arbutus Biopharma Corporation (“Arbutus” or the “Company”) 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.

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

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

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

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

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

Arbutus Biopharma Corporation (“Arbutus” or the “Company”) is a clinical-stage biopharmaceutical company focused on infectious disease.

The Company is currently developing imdusiran (AB-729), its proprietary, conjugated GalNAc, subcutaneously-delivered RNAi therapeutic, and AB-101, its proprietary oral PD-L1 inhibitor, for the treatment of chronic hepatitis B (cHBV).

Through its ownership stake in and its license to Genevant Sciences, Ltd (Genevant), the Company is also focused on maximizing opportunity for its in-house developed Lipid Nanoparticle (LNP) delivery technology.

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

(Moderna) and against Pfizer Inc.

and BioNTech SE (collectively, Pfizer/BioNTech) for their use of the Company’s patented lipid nanoparticle (LNP) delivery technology in their COVID-19 mRNA-LNP vaccines.

With respect to the Moderna lawsuit in the United States, a trial date has been set for September 24, 2025.

On March 3, 2025, the Company announced that, along with Genevant, it filed five international lawsuits against Moderna in connection with their use of the Company’s LNP technology in their COVID-19 mRNA-LNP and RSV vaccines.

With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred in December 2024.

The court is expected to provide its ruling on the claim construction and issue a further scheduling order, including the date for trial, in 2025.

At December 31, 2024, the Company had an aggregate of $ 122.6 million in cash, cash equivalents and investments in marketable securities.

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The Company believes it has sufficient cash, cash equivalents and investments in marketable securities to fund its operations for at least the next 12 months.

The success of the Company is dependent on obtaining the necessary regulatory approvals to bring its products to market and achieve profitable operations.

The Company’s research and development activities and the commercialization of its products are dependent on its ability to successfully complete these activities and to obtain adequate financing through a combination of financing activities and operations.

It is not possible to predict either the outcome of the Company’s existing or future research and development programs or the Company’s ability to continue to fund these programs in the future.

The success of the Company is dependent on obtaining the necessary regulatory approvals to bring one or more of its product candidates to market and achieve profitable operations.

The Company’s development activities and the commercialization of its products are dependent on its ability to successfully complete these activities and to obtain adequate financing through a combination of financing activities and operations.

It is not possible to predict either the outcome of the Company’s existing or future development programs or the Company’s ability to continue to fund these programs in the future.

Significant accounting policies

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All intercompany balances and transactions have been eliminated.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of estimates

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Actual results could significantly differ from those estimates.

Significant estimates in the accompanying consolidated financial statements impact contingent consideration, stock-based compensation, clinical trial accruals and the sale of future royalties liability.

Significant estimates in the accompanying consolidated financial statements impact contingent consideration.

Cash and cash equivalents

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As of December 31, 2024, the recorded value of the Company’s investments in marketable securities was deemed to be recoverable in all respects.

All investments are governed by the Company’s Investment Policy approved by the Company’s board of directors.

All investments are governed by the Company’s Investment Policy approved by the Company’s Board of Directors (the Board).

Foreign currency translation and functional currency conversion

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If such a review should indicate that the carrying amount of long-lived assets is not recoverable, then such assets are written down to their fair values.

Substantially all of the Company’s premises, property and equipment are located in the United States.

Revenue from collaborations and licenses

The Company generates revenue primarily through collaboration agreements and license agreements.

Such agreements may require the Company to deliver various rights and/or services, including intellectual property rights or licenses and research, development and manufacturing services.

Under such agreements, the Company is generally eligible to receive non-refundable upfront payments, funding for research, development and manufacturing services, milestone payments, and royalties.

Such agreements may require the Company to deliver various rights and/or services, including intellectual property rights and licenses or development and manufacturing services.

Under such agreements, the Company is generally eligible to receive non-refundable upfront payments, funding for development and manufacturing services, milestone payments, and royalties.

The Company’s collaboration agreements fall under the scope of Accounting Standards Codification (ASC) Topic 808, Collaborative Arrangements (ASC 808), when both parties are active participants in the arrangement and are exposed to significant risks and rewards.

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For the year ended December 31, 2024, potential common shares of 16.9 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 15.5 million outstanding stock options were excluded from the calculation for the year ended December 31, 2022.

A total of approximately 20.4 million outstanding stock options and unvested restricted stock units were excluded from the calculation for the year ended December 31, 2023.

See note 12 and note 13 for more information about the Company’s common shares.

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Expense is recognized over the period the employee contributes to the plan through payroll deductions.

Segment information

As of December 31, 2023, the Company viewed its operations and managed its business as one operating segment consistent with how its chief operating decision-maker, the Chief Executive Officer, makes decisions regarding resource allocation and assessing performance.

Substantially all of the Company’s premises, property and equipment are located in the United States.

Comprehensive loss

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Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments (ASC 326), which changes how entities account for credit losses on financial assets and other instruments that are not measured at fair value through net income, including available-for-sale debt securities.

The Company implemented the guidance as of January 1, 2023 and there was not a material impact on its results of operations or financial position.

In November 2023, the FASB issued ASU No.

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ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

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 amendments in this ASU should be applied on a retrospective basis to all periods presented.

The Company has implemented this guidance as of December 31, 2024.

See note 14 for further details.

In December 2023, the FASB issued ASU No.

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The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments.

To determine the fair value of the contingent consideration (note 10), the Company uses a probability weighted assessment that considers the likelihood of successfully commercializing a treatment for cHBV, the timing of future revenues related to commercial sales, and a probability adjusted discount rate that reflects the early stage nature of the development program, time to complete the program development, and overall biotech indices.

The Company determined that the fair value of the contingent consideration was $ 7.6 million as of December 31, 2023 and the increase of $ 0.1 million has been recorded within operating expenses in the statement of operations and comprehensive loss for the year ended December 31, 2023.

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

To determine the fair value of the contingent consideration related to a stock purchase agreement with Enantigen Therapeutics, Inc.’s (Enantigen) selling shareholders (note 10), the Company uses a probability weighted assessment that considers the likelihood of successfully commercializing a treatment for cHBV, the timing of future revenues related to commercial sales, and a probability adjusted discount rate that reflects the early stage nature of the development program, time to complete the program development, and overall biotech indices.

The following table presents information about inputs used in measuring the fair value of the contingent consideration:

As of December 31, 2024

Timing of milestone payments 2032 - 2035

Payment (in $000s) $ 102,500

Discount rate 9.9 % - 10.5 %

Probability of success 25 %

Fair value of contingent consideration (in $000s) $ 10,225

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

The Company assessed the sensitivity of the fair value measurement to changes in these unobservable inputs and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

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Investments in marketable securities, current — 86,293 — 86,293

Investments in marketable securities, non-current — 6,284 — 6,284

Total $ 36,330 $ 86,293 $ — $ 122,623

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Investments in marketable short-term securities

US government agency bonds $ 17,918 $ — $ ( 44 ) $ 17,874

US corporate bonds 30,776 27 ( 6 ) 30,797

Yankee bonds 2,000 — ( 17 ) 1,983

US government bonds 9,001 — ( 26 ) 8,975

Total $ 99,964 $ 30 $ ( 276 ) $ 99,718

Investments in marketable long-term securities

US corporate bonds $ 6,273 $ 18 $ ( 7 ) $ 6,284

US treasury bills 55,467 29 — 55,496

Total $ 86,243 $ 56 $ ( 6 ) $ 86,293

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US corporate bonds 71,045 30 $ ( 189 ) $ 70,886

US treasury bills 8,483 — $ ( 16 ) 8,467

Yankee bonds 2,000 — $ ( 17 ) 1,983

US government bonds 9,001 — ( 26 ) 8,975

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Investments in marketable long-term securities

US government agency bonds $ 3,724 $ — $ ( 130 ) $ 3,594

US corporate bonds 6,273 18 ( 7 ) 6,284

US government bonds 8,972 — ( 300 ) 8,672

Total $ 6,273 $ 18 $ ( 7 ) $ 6,284

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The contractual maturity of the $ 86.3 million of short-term marketable securities held by the Company as of December 31, 2024 is less than one year.

As of December 31, 2023, the Company held $ 6.3 million of long-term marketable securities with contractual maturities of more than one year, but less than five years.

As of December 31, 2024, the Company did not hold any long-term marketable securities.

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.

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

Accrued interest receivable on investments in marketable securities of $ 0.6 million at both December 31, 2023 and December 31, 2022 is included in prepaid expenses and other current assets.

The Company had realized gains on investments of less than $ 0.1 million and zero for the years ended December 31, 2023 and 2022, respectively.

Accrued interest receivable on investments in marketable securities was $ 0.3 million and $ 0.6 million at December 31, 2024 and 2023, respectively, and is included in prepaid expenses and other current assets.

The Company had realized gains on investments of less than $ 0.1 million for both of the years ended December 31, 2024 and 2023 .

Investment in Genevant

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

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

The Company licensed rights to its 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).

(Genevant), a company focused on nucleic acid- and gene editing-based therapeutics enabled by the Company’s LNP and ligand conjugate delivery technologies.

The Company licensed rights to its LNP and ligand conjugate delivery platforms to Genevant outside of HBV, except to the extent certain rights had already been licensed to other third parties (the Genevant License).

The Company retained all rights to its LNP and conjugate delivery platforms for HBV.

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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 December 31, 2023, 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 December 31, 2024 and 2023, the carrying value of the Company’s investment in Genevant was zero and the Company owned approximately 16 % of the common equity of Genevant.

The Company had one operating lease for its office and laboratory space as of December 31, 2024.

The Company’s corporate headquarters is located at 701 Veterans Circle, Warminster, Pennsylvania.

The lease expires on April 30, 2027, and the Company has the option of extending the lease for two further five-year terms.

The Company also previously leased office space located at 626 Jacksonville Road, Warminster, Pennsylvania under a lease that terminated on August 31, 2022.

The Company accounts for its leases under ASC 842, Leases .

The lease expires on April 30, 2027, and the Company has the option of extending the lease for two additional five-year terms.

The Company accounts for its lease under ASC 842, Leases .

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

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Operating lease right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term.

The leases do not provide an implicit rate so in determining the present

value of lease payments, the Company utilized its incremental borrowing rate for the applicable lease, which was 9.0 % for the 701 Veterans Circle lease and 7.6 % for the 626 Jacksonville Road lease.

The lease does not provide an implicit rate so in determining the present

value of lease payments, the Company utilized its incremental borrowing rate for the lease, which was 9.0 %.

The Company recognizes lease expense on a straight-line basis over the remaining lease term.

During the years ended December 31, 2023 and 2022, the Company incurred total operating lease expenses of $ 0.6 million and $ 0.7 million, respectively, which included lease expenses associated with fixed lease payments of $ 0.5 million and $ 0.6 million, respectively, and variable payments associated with common area maintenance and similar expenses were $ 0.1 million in both years.

During the years ended December 31, 2024 and 2023, the Company incurred total operating lease expenses of $ 0.7 million and $ 0.6 million, respectively, which included lease expenses associated with fixed lease payments of $ 0.5 million in both years, and variable payments associated with common area maintenance and similar expenses of $ 0.2 million in both years.

Weighted average remaining lease term and discount rate were as follows:

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The Company did not include options to extend its lease terms as part of its ROU asset and lease liabilities.

Supplemental cash flow information related to the Company’s operating leases was as follows:

Supplemental cash flow information related to the Company’s operating lease was as follows:

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities $ 616 $ 598

Future minimum lease payments under operating leases that have remaining terms as of December 31, 2023 are as follows:

Future minimum lease payments under the Company’s operating lease as of December 31, 2024 are as follows:

As of December 31, 2024

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Professional fee accruals 1,164 815

Other accrued liabilities — 6

Total $ 7,564 $ 10,271

In connection with the Company’s decision in September 2023 to focus its pipeline on its HBV clinical stage compounds and discontinue certain research programs, the Company took steps to streamline the organization and reduced its workforce by 24 % in November 2023, primarily affecting the research function.

As a result, the Company incurred a one-time restructuring charge of approximately $ 1.1 million in the fourth quarter 2023, of which $ 0.2 million was accrued and included in payroll accruals as of December 31, 2023.

On July 29, 2024, the Board 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 recorded a one-time restructuring charge of $ 3.7 million in the third quarter of 2024, of which there was less than $ 0.1 million in medical benefit costs accrued as of December 31, 2024.

Sale of future royalties

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Stock Purchase Agreement with Enantigen

In October 2014, Arbutus Inc., the Company’s wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen Therapeutics, Inc.

(Enantigen) pursuant to a stock purchase agreement.

The amount paid to Enantigen’s selling shareholders could be up to an additional $ 102.5 million in sales performance milestones in connection with the sale of the first commercialized product by Arbutus for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $ 1.0 million that, if paid, would be offset against Arbutus’ milestone payment obligations.

Certain other

development milestones related to the acquisition were tied to programs which are no longer under development by Arbutus, and therefore the contingency related to those development milestones is zero .

In October 2014, Arbutus Inc., the Company’s wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen pursuant to a stock purchase agreement.

paid, would be offset against Arbutus’ milestone payment obligations.

Certain other development milestones related to the acquisition were tied to programs which are no longer under development by Arbutus, and therefore the contingency related to those development milestones is zero .

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 statement of operations and comprehensive loss (note 3).

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Qilu Pharmaceuticals Co, Ltd.

In December 2021, the Company entered into a technology transfer and exclusive licensing agreement (the License Agreement) with Qilu, pursuant to which the Company granted Qilu an exclusive (except as to certain retained rights), sublicensable, royalty-bearing license, under certain intellectual property owned by the Company, to develop, manufacture and commercialize imdusiran, including pharmaceutical products that include imdusiran, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the Territory).

In partial consideration for the rights granted by the Company, Qilu paid the Company a one-time upfront cash payment of $ 40.0 million on January 5, 2022 and agreed to pay the Company milestone payments totaling up to $ 245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones (the Milestone Payments).

In partial consideration for the rights granted by the Company, Qilu paid the Company a one-time upfront cash payment of $ 40.0 million on January 5, 2022 and agreed to pay the Company up to $ 245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones (the Milestone Payments).

Qilu paid $ 4.4 million of withholding taxes to the Chinese taxing authority on the Company’s behalf, related to the upfront cash payment.

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

In addition, Qilu also agreed to pay the Company double digit royalties into the low twenties percent based upon annual net sales of imdusiran in Greater China and Taiwan.

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

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

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

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

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

A joint development committee has been established between the Company 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 the Company will manufacture or have manufactured and supply Qilu with all quantities of imdusiran necessary for Qilu to develop and commercialize in the Territory until the Company has 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, the Company 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 the Company’s common shares, without par value (the Common Shares), at a purchase price of USD $ 4.19 per share, which was a 15 % premium on the thirty-day average closing price of the Common Shares as of the close of trading on December 10, 2021 (the Share Transaction).

Both parties also have entered into a supply agreement and related quality agreement pursuant to which the Company will manufacture or have manufactured and supply Qilu with all quantities of imdusiran necessary for Qilu to develop and commercialize in Greater China and Taiwan until the Company has 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 Greater China and Taiwan.

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

The Company received $ 15.0 million of gross proceeds from the Share Transaction on January 6, 2022.

The Common Shares sold to the Investor in the Share Transaction represented approximately 2.5 % of the Common Shares outstanding immediately prior to the execution of the Share Purchase Agreement.

The common shares sold to the Investor in the Share Transaction represented approximately 2.5 % of the Company’s common shares outstanding immediately prior to the execution of the Share Purchase Agreement.

The License Agreement falls under the scope of ASC 808 as both parties are active participants in the arrangement and are exposed to significant risks and rewards.

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The Company recognized $ 1.4 million of revenue based on labor hours expended by the Company on its Manufacturing Obligations during the twelve months ended December 31, 2024, and $ 10.7 million during the twelve months ended December 31, 2023.

As of December 31, 2023, the balance of the deferred license revenue was $ 11.8 million.

As of December 31, 2024, the balance of the deferred license revenue was $ 10.4 million, of which $ 7.6 million was classified as a current liability and $ 2.9 million was classified as a non-current liability.

The $ 4.4 million of withholding taxes paid by Qilu on behalf of the Company was recorded as income tax expense during the twelve months ended December 31, 2022.

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 $ 0.1 million of related amortization expense for the twelve months ended December 31, 2023.

The Company recognized less than $ 0.1 million of related amortization expense for the twelve months ended December 31, 2024.

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.

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The Company and Assembly shared in the costs of the collaboration.

The Company incurred $ 1.3 million and $ 2.8 million of costs related to the collaboration during the years ended December 31, 2023 and 2022, respectively, and reflected those costs in research and development in the statements of operations and comprehensive loss.

Except to the extent necessary to carry out Assembly’s responsibilities with respect to the collaboration trial, the Company has not provided any license grant to Assembly for use of the Company’s imdusiran compound.

The Company did not incur any costs related to the collaboration in 2024, and incurred $ 1.3 million of costs related to the collaboration during 2023.

Such costs were reflected in research and development in the statements of operations and comprehensive loss.

Except to the extent necessary to carry out Assembly’s responsibilities with respect to the collaboration trial, the Company has not provided any license grant to Assembly for use of imdusiran.

Barinthus Biotherapeutics plc

In July 2021, the Company entered into a clinical collaboration agreement with Barinthus Biotherapeutics plc (Barinthus), formerly Vaccitech plc, to evaluate imdusiran followed by Barinthus’ VTP-300, an HBV antigen specific immunotherapy, and ongoing nucleos(t)ide analogue therapy in patients with cHBV infection.

Recently, the clinical trial was amended and is now dosing patients in an additional treatment arm that includes an approved PD-1 monoclonal antibody inhibitor, nivolumab (Opdivo ® ).

In July 2021, the Company entered into a clinical collaboration agreement with Barinthus Biotherapeutics plc (Barinthus) to evaluate imdusiran followed by Barinthus’ VTP-300, an HBV antigen specific immunotherapy, and ongoing nucleos(t)ide analogue therapy in patients with cHBV infection.

Subsequently, the clinical trial was amended to include an additional treatment arm with an approved PD-1 monoclonal antibody inhibitor, nivolumab (Opdivo ® ).

The Company is responsible for managing this Phase 2a proof-of-concept clinical trial, subject to oversight by a joint development committee comprised of representatives from the Company and Barinthus.

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 $ 1.8 million and $ 0.8 million of costs related to the collaboration, net of Barinthus’s 50 % share, during the years ended December 31, 2023 and 2022, respectively, and reflected those net costs in research and development in the statements of operations and comprehensive loss.

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

Pursuant to the agreement, the parties could have undertaken a larger Phase 2b clinical trial depending on the results of the initial Phase 2a clinical trial.

However, in January 2025, Barinthus announced a shift in its strategic business focus that included postponing further development of VTP-300 after the completion of their ongoing VTP-300 clinical trials.

The parties do not intend to undertake a larger Phase 2b with this combination treatment regimen.

The Company incurred $ 2.1 million and $ 1.8 million of costs related to the collaboration, net of Barinthus’s 50 % share, during the years ended December 31, 2024 and 2023, respectively, which are classified as research and development in the statements of operations and comprehensive loss.

Royalty Entitlements

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As a result of the Company’s agreement with Genevant (see note 5 for details), from April 11, 2018 going forward, Genevant is entitled to 50 % of the revenues earned by the Company from Gritstone.

Gritstone filed for Chapter 11 bankruptcy protection in October 2024, which resulted in Seattle Project Corp.

purchasing most of the assets of Gritstone, including the rights under this license agreement.

There was no change to the Company’s rights under this license agreement as a result of the bankruptcy and sale of assets.

The Company is the agent in this arrangement and records revenue on a net basis.

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Qilu Pharmaceutical Co., Ltd.

10,666 26,015

Other milestone and royalty payments — 35

Non-cash royalty revenue

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Open Market Sale Agreement

The Company has an Open Market Sale Agreement with Jefferies LLC (Jefferies) dated December 20, 2018, as amended by Amendment No.

Effective March 26, 2025, the Company terminated its Open Market Sale Agreement with Jefferies LLC (Jefferies) dated December 20, 2018, as amended by Amendment No.

1, dated December 20, 2019, Amendment No.

2, dated August 7, 2020 and Amendment No.

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

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

333-235674) and accompanying base prospectus, which was declared effective by the SEC on January 10, 2020 (the January 2020 Registration Statement), for the offer and sale of up to $ 150.0 million of the Company’s securities.

The January 2020 Registration Statement also contained a prospectus supplement in connection with the offering of up to $ 50.0 million of the Company’s common shares pursuant to the Sale Agreement.

This prospectus supplement was fully utilized during 2020.

On August 7, 2020, the Company filed a prospectus supplement with the SEC (the August 2020 Prospectus Supplement) in connection with the offering of up to an additional $ 75.0 million of its common shares pursuant to the Sale Agreement under the January 2020 Registration Statement.

The August 2020 Prospectus Supplement was fully utilized during 2020.

The January 2020 Registration Statement expired in January 2023.

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

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

On March 4, 2021, the Company filed a

prospectus supplement with the SEC (the March 2021 Prospectus Supplement) in connection with the offering of up to an additional $ 75.0 million of its common shares pursuant to the Sale Agreement under October 2020 Registration Statement.

The March 2021 Prospectus Supplement was fully utilized during 2021.

On October 8, 2021, the Company filed a prospectus supplement with the SEC (the October 2021 Prospectus Supplement) in connection with the offering of up to an additional $ 75.0 million of its common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

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

On November 4, 2021, the Company filed a shelf registration statement on Form S-3 with the SEC (File No.

333-260782) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the November 2021 Registration Statement), for the offer and sale of up to $ 250.0 million of the Company’s securities.

On March 3, 2022, the Company filed a prospectus supplement with the SEC (the March 2022 Prospectus Supplement) in connection with the offering of up to an additional $ 100.0 million of its common shares pursuant to the Sale Agreement under:

(i) the January 2020 Registration Statement;

(ii) the October 2020 Registration Statement;

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

3, dated March 4, 2021 (as amended, the Sale Agreement), under which the Company could issue and sell common shares, from time to time.

Previously, on November 6, 2024, the Company filed:

i) a shelf registration statement on Form S-3 with the SEC (File No.

333-283038) with an accompanying base prospectus, declared effective by the SEC on December 5, 2024 (the December 2024 Registration Statement), for the offer and sale of up to $ 300.0 million of the Company’s securities;

and ii) a prospectus supplement with the SEC in connection with the offering of up to $ 100.0 million of the Company’s common shares pursuant to the Sale Agreement under the December 2024 Registration Statement (the December 2024 Prospectus Supplement).

The Company did not utilize any of the December 2024 Prospectus Supplement pursuant to the Sale Agreement prior to the termination of the Sale Agreement.

During the years ended December 31, 2024 and 2023, the Company issued 16,499,999 and 12,020,257 common shares, respectively, under the Sale Agreement, resulting in net proceeds of approximately $ 44.1 million and $ 29.9 million, respectively.

As of December 31, 2023, there was approximately $ 70.9 million remaining available under the March 2022 Prospectus Supplement, pursuant to the November 2021 Registration Statement.

Stock-based compensation

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The 2011 Plan expired in June 2021.

Under the 2016 Plan, the Company’s board of directors may grant options, and other types of awards, to employees, directors and consultants of the Company.

The exercise price of the options is determined by the Company’s board of directors but will be at least equal to the closing market price of the common shares on the date of grant and the term may not exceed 10 years.

Under the 2016 Plan, the Board may grant options, and other types of awards, to employees, directors and consultants of the Company.

The exercise price of the options is determined by the Board but will be at least equal to the closing market price of the common shares on the date of grant and the term may not exceed 10 years.

Options granted generally vest over four years for employees and for directors’ initial grants, and immediately for directors’ annual grants.

In June 2019, the Company provided an inducement grant of 1,112,000 options to its newly hired Chief Executive Officer.

These options were awarded in a separate plan as non-qualified awards and are governed by the substantially the same terms as the 2016 Plan.

In July 2023, the Company provided an inducement grant of 500,000 options to its newly hired General Counsel and Chief Compliance Officer and are governed by substantially the same terms as the 2016 Plan.

These options were awarded in a separate plan as non-qualified awards and were governed by the substantially the same terms as the 2016 Plan.

As of December 31, 2024, there were no options outstanding under this separate plan, as all options under this plan were exercised during 2024.

In July 2023, the Company provided an inducement grant of 500,000 options in connection with the hiring of its General Counsel and Chief Compliance Officer, which is governed by substantially the same terms as the 2016 Plan.

Hereafter, information on options governed by the 2016 Plan, the 2011 Plan and the 2023 and 2019 inducement grants (the Arbutus Plans) is presented on a consolidated basis as the terms of the plans are similar.

Information on the OnCore Option Plan is presented separately.

Stock options under the Arbutus Plans

The following table summarizes activity related to the Company’s equity-classified stock options, including its performance options, for the year ended December 31, 2023:

Stock Options Outstanding Vested Stock Options Non-Vested Stock Options

Number Weighted-Average Exercise Price Number Number Weighted-Average Grant-Date Fair Value

The following table summarizes activity related to the Company’s equity-classified stock options for the year ended December 31, 2024:

Number Weighted-Average Exercise Price

Balance as of December 31, 2023 19,064,165 $ 3.47

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Options forfeited, canceled or expired ( 4,897,814 ) $ 3.02

Options vested — $ — 3,500,403 ( 3,500,403 ) $ 2.33

Balance as of December 31, 2024 15,451,687 $ 3.37

The intrinsic value of options exercised under the Arbutus Plans during 2023 and 2022 are less than $ 0.1 million and $ 0.1 million, respectively.

The following table summarizes additional information related to the Company’s equity-classified stock options, including its performance options, as of December 31, 2023:

The intrinsic value of options exercised under the Arbutus Plans during 2024 and 2023 are $ 1.4 million and less than $ 0.1 million, respectively.

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2024 and 2023 was $ 1.87 and $ 2.15 , respectively.

The following table summarizes additional information related to the Company’s equity-classified stock options as of December 31, 2024:

As of December 31, 2024

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Expected average option term 5.6 years 5.6 years

Expected volatility 97.1 % 97.0 %

Expected volatility (historical) 92.0 % 97.1 %

Expected dividends — % — %

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Stock options under the other plans

As of December 31, 2023, the Company also has 20,000 liability option awards outstanding with a weighted average exercise price of $ 12.10 and 80,600 stock option awards outstanding under the OnCore Option Plan with a weighted average exercise price of $ 0.56 .

Restricted Stock Units under the Arbutus Plans

As of December 31, 2024, the Company had no liability option awards outstanding and no stock option awards outstanding under the OnCore Option Plan, as the last of these stock option awards expired or were fully exercised, respectively, during 2024.

Restricted Stock Units under the 2016 Plan

The following table summarizes activity related to the Company’s restricted stock units, for the year ended December 31, 2024:

Restricted Stock Units Outstanding Vested Restricted Stock Units Non-Vested Restricted Stock Units

Number Weighted-Average Grant-Date Fair Value Number Number Weighted-Average Grant-Date Fair Value

Number Weighted-Average Grant-Date Fair Value

Balance as of December 31, 2023 1,231,450 $ 2.90

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Restricted stock units forfeited, canceled or expired ( 644,032 ) $ 2.65

Restricted stock units vested — $ — — — $ —

Balance as of December 31, 2024 1,493,136 $ 2.57

The restricted stock units vest over three years in equal annual installments beginning one year from the grant date.

The weighted average grant-date fair value of restricted stock units granted during the years ended December 31, 2024 and 2023 was $ 2.40 and $ 2.90 , respectively.

Employee Stock Purchase Plan

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Stock-based compensation expense

Total stock-based compensation expense was comprised of vesting of options and restricted stock units awarded to employees under the Arbutus and OnCore Plans calculated in accordance with the fair value method as described above and amortization of compensation cost related to the ESPP.

Total stock-based compensation expense was comprised of the vesting of options and restricted stock units awarded to employees under the Arbutus and OnCore Plans calculated in accordance with the fair value method as described above and amortization of compensation cost related to the ESPP.

The Company recognizes forfeitures as they occur, and the effects of forfeitures are reflected in stock-based compensation expense.

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Total $ 8,986 $ 9,301

At December 31, 2023, there remained $ 10.6 million and $ 1.9 million of unrecognized compensation expense related to unvested equity employee stock options and restricted stock units, respectively, to be recognized as expense over a weighted-average periods of approximately 2.3 years and 2.1 years, respectively.

At December 31, 2024, there remained $ 8.4 million and $ 2.4 million of unrecognized compensation expense related to unvested equity employee stock options and restricted stock units, respectively, to be recognized as expense over weighted-average periods of approximately 2.2 years and 1.8 years, respectively.

For each of the years ended December 31, 2024 and 2023, the Company had zero performance-based stock compensation expense.

Segment Reporting

The Company has one reportable segment.

The Company’s chief operating decision maker is the Chief Executive Officer and President.

The accounting policies of the single segment are the same as those described in the summary of significant accounting policies.

The chief operating decision maker assesses performance for the single segment and decides how to allocate resources based on net loss that also is reported on the statement of operations and comprehensive loss as consolidated net loss.

The chief operating decision maker uses net loss to monitor budget versus actual results and to evaluate the overall cash burn of the business.

Year ended December 31,

(in thousands)

Revenue $ 6,171 $ 18,141

Research and development employee expense, lab supplies and overhead 26,613 34,637

Imdusiran IM-PROVE I, II & III clinical trials expense 15,735 11,859

AB-101-001 Phase 1a/1b clinical trial expense 10,196 14,789

Coronavirus early research expense — 9,036

Other early research and development programs expense 1,493 3,379

General and administrative expense 22,108 22,475

Restructuring expense 3,720 —

Other segment expense (1) 2,811 503

Interest income 6,585 5,688

Segment net loss $ ( 69,920 ) $ ( 72,849 )

Adjustments and reconciling items $ — $ —

Consolidated net loss $ (69,920) $ (72,849)

(1) Other segment expense includes the change in the fair value of contingent consideration, non-cash interest expenses and foreign currency exchange gains and losses.

The Company is subject to taxation and files income tax returns in Canadian federal and provincial, United States federal and several state jurisdictions.

In December 2022, the United States Internal Revenue service completed its examination of the Company’s federal tax return for 2018.

In May 2022, The Canada Revenue Agency completed its examination of the Company’s Canadian tax returns for 2018 and 2019, with no adjustments proposed.

Income tax expense varies from the amounts that would be computed by applying the combined Canadian federal and provincial income tax rate of 27 % (2023 - 27 %) to the loss before income taxes as shown in the following tables:

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Income tax expense $ — $ —

As of December 31, 2023, the Company had investment tax credits available to reduce Canadian federal income taxes of $ 7.1 million, versus $ 7.2 million as of December 31, 2022, which expire between 2031 and 2037, and provincial income taxes of $ 2.0 million as of both December 31, 2023 and 2022, which expire between 2024 and 2027.

The Company had investment tax credits available to reduce Canadian federal income taxes of $ 7.1 million as of both December 31, 2024 and 2023, which expire between 2031 and 2037, and provincial income taxes of $ 2.0 million as of both December 31, 2024 and 2023, which expire between 2024 and 2027.

The investment tax credits are accounted for under a flow-through method.

In addition, the Company had research and development credits of $ 8.3 million as of December 31, 2024, and $ 7.3 million as of December 31, 2023, which expire between 2031 and 2038 and which can be used to reduce future taxable income in the United States.

As of December 31, 2023, the Company had scientific research and experimental development expenditures of $ 61.9 million available for indefinite carry-forward, versus $ 62.2 million as of December 31, 2022.

The Company also had net operating

losses of $ 148.1 million as of both December 31, 2023 and 2022, which are due to expire between 2035 and 2038 and which can be used to offset future taxable income in Canada.

The Company had scientific research and experimental development expenditures of $ 61.9 million available for indefinite carry-forward as of both December 31, 2024 and 2023.

The Company also had net operating losses of $ 150.8 million and $ 148.1 million as of December 31, 2024 and 2023, respectively, which are due to expire between 2035 and 2038 and which can be used to offset future taxable income in Canada.

As of December 31, 2024 and 2023, the Company had $ 11.7 million of net operating losses due to expire in 2035 which can be used to offset future taxable income in the United States.

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As of December 31, 2024, the Company had $ 260.0 million of net operating losses subject to an indefinite carryforward period which can be used to offset future taxable income in the United States.

Future use of a portion of the United States loss carryforwards are subject to limitations under Internal Revenue Code Section 382.

As a result of ownership changes occurring on October 1, 2014 and March 4, 2015, the Company’s ability to use these losses may be limited.

As a result of ownership changes occurring on October 1, 2014 and March 4, 2015, the Company’s ability to use these losses may be limited under Internal Revenue Code Section 382.

Losses incurred to date may be further limited if a subsequent change in control occurs.

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Net deferred tax assets (liabilities) $ — $ —

Subsequent events

In March 2025, the Board took action to reduce the Company’s workforce by 57 % resulting in a total workforce after reductions of 19 employees.

The Board also decided to exit the Company’s corporate headquarters in Warminster, PA and to discontinue in-house scientific research.

In connection with these actions, the Company expects to incur a one-time restructuring charge in the first quarter of 2025 of approximately $ 11 million to $ 13 million for cash severance and benefits and non-cash stock compensation expense and impairment charges.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data