Arbutus Biopharma Corp 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Ernst & Young, LLP, Independent Registered Public Accounting Firm - PCAOB ID: 42 75 Consolidated Balance Sheets at December 31, 202 4 and 202 3 77 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 202 4 and 202 3 78 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 202 4 and 202 3 79 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 4 and 202 3 80 Notes to Consolidated Financial Statements 81 74 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Arbutus Biopharma Corporation Opinion on the Financial Statements 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. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. 75 Valuation of contingent consideration liability Description of the Matter As discussed in Note 10 to the consolidated financial statements, the Company’s contingent consideration liability, which consists of sales-based milestones and royalties, resulting from the acquisition of Enantigen in 2014, is remeasured to its estimated fair value each reporting period. As of December 31, 2024, the contingent consideration liability was $10.2 million. 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 payments, 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. How We Addressed the Matter in Our Audit To test the estimated fair value of the contingent consideration liability, we performed audit procedures that included, among others, assessing the terms of the arrangement, evaluating the methodology used, and testing the significant assumptions discussed above used by the Company in its analysis. 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 evaluating the valuation methodology and the discount rate. /s/ Ernst & Young LLP We have served as the Company's auditor since 2019. Philadelphia, Pennsylvania March 27, 2025 76 ARBUTUS BIOPHARMA CORPORATION Consolidated Balance Sheets (Expressed in thousands of US Dollars, except share and per share amounts) December 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 36,330 $ 26,285 Investments in marketable securities, current 86,293 99,718 Accounts receivable 2,409 1,776 Prepaid expenses and other current assets 2,284 4,248 Total current assets 127,316 132,027 Property and equipment, net of accumulated depreciation 3,309 4,674 Investments in marketable securities, non-current — 6,284 Right of use asset 1,048 1,416 Other non-current assets 34 — Total assets $ 131,707 $ 144,401 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 7,564 $ 10,271 Deferred license revenue, current 7,571 11,791 Lease liability, current 483 425 Total current liabilities 15,618 22,487 Liability related to sale of future royalties 4,829 6,953 Deferred license revenue, non-current 2,863 — Contingent consideration 10,225 7,600 Lease liability, non-current 806 1,343 Total liabilities 34,341 38,383 Stockholders’ equity Common shares Authorized: unlimited number without par value Issued and outstanding: 189,963,492 and 169,867,414 as of December 31, 2024 and 2023, respectively. 1,410,025 1,349,821 Additional paid-in capital 82,048 81,270 Deficit ( 1,346,572 ) ( 1,276,652 ) Accumulated other comprehensive loss ( 48,135 ) ( 48,421 ) Total stockholders' equity 97,366 106,018 Total liabilities and stockholders' equity $ 131,707 $ 144,401 See accompanying notes to the consolidated financial statements. 77 ARBUTUS BIOPHARMA CORPORATION Consolidated Statements of Operations and Comprehensive Loss (Expressed in thousands of US Dollars, except share and per share amounts) Year ended December 31, 2024 2023 Revenue Collaborations and licenses $ 3,919 $ 14,274 Non-cash royalty revenue 2,252 3,867 Total revenue 6,171 18,141 Operating expenses Research and development 54,037 73,700 General and administrative 22,108 22,475 Change in fair value of contingent consideration 2,625 69 Restructuring costs 3,720 — Total operating expenses 82,490 96,244 Loss from operations ( 76,319 ) ( 78,103 ) Other income Interest income 6,585 5,688 Interest expense ( 137 ) ( 459 ) Foreign exchange (loss) / gain ( 49 ) 25 Total other income 6,399 5,254 Loss before income taxes ( 69,920 ) ( 72,849 ) Income tax expense — — Net loss $ ( 69,920 ) $ ( 72,849 ) Loss per share Basic and diluted $ ( 0.38 ) $ ( 0.44 ) Weighted average number of common shares Basic and diluted 185,608,874 165,960,379 Comprehensive loss Unrealized gain on available-for-sale securities $ 286 $ 2,067 Comprehensive loss $ ( 69,634 ) $ ( 70,782 ) See accompanying notes to the consolidated financial statements. 78 ARBUTUS BIOPHARMA CORPORATION Consolidated Statement of Stockholders’ Equity (Expressed in thousands of US Dollars, except share and per share amounts) Common Shares Number of shares Share capital Additional paid-in capital Deficit Accumulated other comprehensive loss Total stockholders' equity Balance at December 31, 2022 157,455,363 $ 1,318,737 $ 72,406 $ ( 1,203,803 ) $ ( 50,488 ) $ 136,852 Stock-based compensation — — 9,301 — — 9,301 Issuance of common shares pursuant to the Open Market Sales Agreement 12,020,257 29,852 — — — 29,852 Issuance of common shares pursuant to exercise of ESPP 290,438 774 ( 239 ) — — 535 Issuance of common shares pursuant to exercise of stock options 101,356 458 ( 198 ) — — 260 Unrealized gain on available-for-sale securities — — — — 2,067 2,067 Net loss — — — ( 72,849 ) — ( 72,849 ) Balance at December 31, 2023 169,867,414 $ 1,349,821 $ 81,270 $ ( 1,276,652 ) $ ( 48,421 ) $ 106,018 Stock-based compensation — — 8,986 — — 8,986 Issuance of common shares pursuant to the Open Market Sales Agreement 16,499,999 44,123 — — — 44,123 Issuance of common shares pursuant to exercise of ESPP 227,333 536 ( 140 ) — — 396 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 Net loss — — — ( 69,920 ) — ( 69,920 ) Balance at December 31, 2024 189,963,492 $ 1,410,025 $ 82,048 $ ( 1,346,572 ) $ ( 48,135 ) $ 97,366 See accompanying notes to the consolidated financial statements. 79 ARBUTUS BIOPHARMA CORPORATION Consolidated Statements of Cash Flows (Expressed in thousands of US Dollars, except share and per share amounts) Year ended December 31, 2024 2023 OPERATING ACTIVITIES Net loss $ ( 69,920 ) $ ( 72,849 ) Non-cash items: Depreciation 1,380 1,404 Loss on impairment of lab equipment 167 — Gain on sale of property and equipment — ( 20 ) Stock-based compensation expense 8,986 9,301 Change in fair value of contingent consideration 2,625 69 Non-cash royalty revenue ( 2,251 ) ( 3,867 ) Non-cash interest expense 127 455 Net accretion and amortization of investments in marketable securities ( 3,135 ) ( 2,196 ) Net change in operating items: Accounts receivable ( 633 ) ( 424 ) Prepaid expenses and other assets 2,298 ( 943 ) Accounts payable and accrued liabilities ( 2,707 ) ( 5,758 ) Change in deferred license revenue ( 1,357 ) ( 10,664 ) Other liabilities ( 430 ) ( 444 ) Net cash used in operating activities ( 64,850 ) ( 85,936 ) INVESTING ACTIVITIES Purchase of investments in marketable securities ( 141,509 ) ( 80,509 ) Disposition of investments in marketable securities 164,639 132,270 Proceeds from sale of property and equipment — 20 Acquisition of property and equipment ( 182 ) ( 1,008 ) Net cash provided by investing activities 22,948 50,773 FINANCING ACTIVITIES Issuance of common shares pursuant to the Open Market Sale Agreement 44,123 29,852 Issuance of common shares pursuant to exercise of stock options 7,477 260 Issuance of common shares pursuant to exercise of ESPP 396 535 Net cash provided by financing activities 51,996 30,647 Effect of foreign exchange rate changes on cash and cash equivalents ( 49 ) 25 Increase / (decrease) in cash and cash equivalents $ 10,045 $ ( 4,491 ) Cash and cash equivalents, beginning of period $ 26,285 $ 30,776 Cash and cash equivalents, end of period $ 36,330 $ 26,285 See accompanying notes to the consolidated financial statements. 80 ARBUTUS BIOPHARMA CORPORATION Notes to Consolidated Financial Statements (Tabular amounts in thousands of US Dollars, except share and per share amounts) 1. Organization Description of the Business 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. Liquidity At December 31, 2024, the Company had an aggregate of $ 122.6 million in cash, cash equivalents and investments in marketable securities. The Company had no outstanding debt as of December 31, 2024. 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 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. 2. Significant accounting policies Basis of presentation and principles of consolidation These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of Arbutus Biopharma Corporation and its one wholly-owned subsidiary, Arbutus Biopharma, Inc. All intercompany balances and transactions have been eliminated. Use of estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses and contingent liabilities as of the end or during the reporting period. Actual results could significantly differ from those estimates. Significant estimates in the accompanying consolidated financial statements impact contingent consideration. 81 Cash and cash equivalents Cash and cash equivalents are all highly liquid instruments with an original maturity of three months or less when purchased. Cash equivalents are recorded at cost plus accrued interest. The carrying value of these cash equivalents approximates their fair value. Investments in marketable securities The Company’s short-term investments consist of marketable securities that have original maturities exceeding three months and remaining maturities of less than one year. The Company classifies investments with remaining maturities of one year or longer as non-current. These investments are accounted for as available-for-sale securities and are reported at fair value, with unrealized gains and losses reported in other comprehensive loss until their disposition. Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method, and are recorded as a component of other income or loss. The Company reviews its available-for-sale securities at each period end to determine if they remain available-for-sale based on the Company’s current intent and ability to sell the security if it is required to do so. Declines in value judged to be other-than-temporary are included in interest expense in the Company’s statements of operations and comprehensive loss. 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 (the Board). Foreign currency translation and functional currency conversion The Company’s functional currency is the United States dollar. M onetary assets and liabilities denominated in foreign currencies are translated into United States dollars using exchange rates in effect at the balance sheet date. Opening balances related to non-monetary assets and liabilities are based on prior period translated amounts, and non-monetary assets and non-monetary liabilities are translated at the approximate exchange rate prevailing at the date of the transaction. Revenue and expense transactions are translated at the approximate exchange rate in effect at the time of the transaction. Foreign exchange gains and losses are included in the statement of operations and comprehensive loss as foreign exchange gains or losses. Investment in Genevant Arbutus accounts for its interest in Genevant as equity securities without readily determinable fair values. 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 similar Genevant securities. As of December 31, 2024, Arbutus owned approximately 16 % of the common equity of Genevant and the carrying value of Arbutus’ investment in Genevant was zero . See note 5 for more information. Property and equipment Property and equipment is recorded at cost less impairment losses and accumulated depreciation. The Company records depreciation using the straight-line method over the estimated useful lives of the capital assets as follows: Useful Life (Years) Laboratory equipment 5 Computer and office equipment 2 to 5 Furniture and fixtures 5 Leasehold improvements are depreciated over their estimated useful lives but in no case longer than the lease term, except where lease renewal is reasonably assured. 82 Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. 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 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. For certain arrangements under the scope of ASC 808, the Company analogizes to ASC Topic 606, Revenue from Contracts with Customers (ASC 606), for some aspects, including for the delivery of a good or service (i.e., a unit of account). ASC 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as a performance obligation is satisfied. In contracts where the Company has more than one performance obligation to provide its customer with goods or services, each performance obligation is evaluated to determine whether it is distinct based on whether: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available; and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices. The estimated stand-alone selling price of each deliverable reflects the Company’s best estimate of what the selling price would be if the deliverable was regularly sold on a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available. The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services. Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur. Leases The Company accounts for its lease under ASC 842, Leases , which generally requires the recognition of operating and financing lease liabilities with corresponding right-of-use assets on the balance sheet. See note 6 for more information. Research and development costs Research and development costs include compensation and benefits for research and development employees, an allocation of overhead expenses and costs associated with materials and supplies used in clinical trials and research and development, outside contracted services including clinical and preclinical study costs, legal, regulatory compliance and fees paid to consultants or outside parties for research and development activities performed on the Company’s behalf. Such costs are charged to expense in the period in which they are incurred. 83 Research and development costs that are paid in advance of performance or receipt are recorded as prepaid expense and are amortized over the period that the services are performed. Net loss per share Net loss per share is calculated based on the weighted average number of common shares outstanding. Diluted net loss per share does not differ from basic net loss per share for the years ended December 31, 2024 and 2023, since the effect of including potential common shares would be anti-dilutive. 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 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. Deferred income taxes Income taxes are accounted for using the asset and liability method of accounting. Deferred income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases and for loss carry-forwards. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax laws or rates is included in earnings in the period that includes the enactment date. When realization of deferred income tax assets does not meet the more-likely-than-not criterion for recognition, a valuation allowance is provided. Stock-based compensation The Company measures and recognizes compensation expense for all share-based compensation arrangements based on estimated fair values. The Company uses the Black-Scholes option valuation model to estimate the fair value of stock options at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of stock options. For those assumptions, the Company uses historical data and other information to estimate the expected price volatility and risk-free interest rate for all awards. The expected life of stock options granted are estimated to be five years for employees and six years for directors and executives, based on the Company’s historical experience. Assumptions on the dividend yield are based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The restricted stock units granted by the Company are measured at the grant-date price of the Company’s common shares. Expense is recognized over the vesting period for all awards and commences at the grant date for time-based awards. Forfeitures are recognized as they occur. For the Company’s Employee Stock Purchase Plan, the fair value of the right to acquire stock at a discounted price under the plan is calculated using the Black-Scholes valuation model. Expense is recognized over the period the employee contributes to the plan through payroll deductions. Comprehensive loss Comprehensive loss is comprised of net loss and adjustments for the change in unrealized gains and losses on investments in available-for-sale marketable securities. The Company includes comprehensive loss and its components in the consolidated statements of operations and comprehensive loss, net of tax effects if any. 84 Concentrations of Credit Risk Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents and marketable securities. The Company holds these investments in highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Recent accounting pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASC 2023-07), which requires disclosure of significant segment expenses and other segment items on an annual and interim basis under ASC 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. 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. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves income tax disclosures by requiring: (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The ASU indicates that all entities will apply the guidance prospectively with an option for retroactive application to each period presented in the financial statements. The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures. 3. Fair value measurements The Company measures certain financial instruments and other items at fair value. To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows: • Level 1 inputs are quoted market prices for identical instruments available in active markets. The Company’s cash and cash equivalents are measured using Level 1 inputs. • Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. If the asset or liability has a contractual term, the input must be observable for substantially the full term. An example includes quoted market prices for similar assets or liabilities in active markets. The Company’s investments in marketable securities are measured using Level 2 inputs. • Level 3 inputs are unobservable inputs for the asset or liability and will reflect management’s assumptions about market assumptions that would be used to price the asset or liability. The Company’s liability-classified options and contingent consideration are measured using Level 3 inputs. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. 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. 85 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. The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair value: Level 1 Level 2 Level 3 Total As of December 31, 2024 (in thousands) Assets Cash and cash equivalents $ 36,330 $ — $ — $ 36,330 Investments in marketable securities, current — 86,293 — 86,293 Total $ 36,330 $ 86,293 $ — $ 122,623 Liabilities Contingent consideration — — 10,225 10,225 Total $ — $ — $ 10,225 $ 10,225 Level 1 Level 2 Level 3 Total As of December 31, 2023 (in thousands) Assets Cash and cash equivalents $ 26,285 $ — $ — $ 26,285 Investments in marketable securities, current — 99,718 — 99,718 Investments in marketable securities, non-current — 6,284 — 6,284 Total $ 26,285 $ 106,002 $ — $ 132,287 Liabilities Contingent consideration — — 7,600 7,600 Total $ — $ — $ 7,600 $ 7,600 86 The following table presents the changes in fair value of the Company’s contingent consideration: Liability at beginning of the period Increase in fair value of liability Liability at end of the period (in thousands) Year ended December 31, 2024 $ 7,600 $ 2,625 $ 10,225 Year ended December 31, 2023 $ 7,531 $ 69 $ 7,600 4. Investments in marketable securities Investments in marketable securities and cash equivalents consisted of the following: Amortized Cost Gross Unrealized Gain (1) Gross Unrealized Loss (1) Fair Value As of December 31, 2024 (in thousands) Cash equivalents Money market fund $ 29,533 $ — $ — $ 29,533 Total $ 29,533 $ — $ — $ 29,533 Investments in marketable short-term securities US corporate bonds 30,776 27 ( 6 ) 30,797 US treasury bills 55,467 29 — 55,496 Total $ 86,243 $ 56 $ ( 6 ) $ 86,293 (1) Gross unrealized gain (loss) is pre-tax and is reported in accumulated other comprehensive loss. Amortized Cost Gross Unrealized Gain (1) Gross Unrealized Loss (1) Fair Value As of December 31, 2023 (in thousands) Cash equivalents Money market fund $ 18,029 $ — $ — $ 18,029 Total $ 18,029 $ — $ — $ 18,029 Investments in marketable short-term securities US government agency bonds $ 17,918 $ — $ ( 44 ) $ 17,874 US corporate bonds 71,045 30 $ ( 189 ) $ 70,886 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 Total $ 6,273 $ 18 $ ( 7 ) $ 6,284 (1) Gross unrealized gain (loss) is pre-tax and is reported in accumulated other comprehensive loss. 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, 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. 87 At December 31, 2024 and December 31, 2023, the Company had 6 and 27 , respectively, available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses. Unrealized losses on the Company’s investments in debt securities have not been recognized into income as the issuers’ bonds are of high credit quality and the decline in fair value is largely due to market conditions and/or changes in interest rates. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity. 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 . 5. Investment in Genevant In April 2018, the Company entered into an agreement with Roivant Sciences Ltd. (Roivant), its largest shareholder, to launch Genevant Sciences Ltd. (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. Under the Genevant License, as amended, if a third-party sublicensee of intellectual property licensed by Genevant from the Company commercializes a sublicensed product, the Company becomes entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if less, tiered low single-digit royalties on net sales of the sublicensed product. 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 the Company’s intellectual property licensed to Genevant, the Company 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). The Company accounts for its interest in Genevant as equity securities without readily determinable fair values. 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, 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. 6. Leases 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 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. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term. The lease does not provide an implicit rate so in determining the present 88 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, 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: As of December 31, 2024 Weighted-average remaining lease term (years) 2.3 Weighted average discount rate 9.0 % 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 lease was as follows: 2024 2023 (in thousands) Cash paid for amounts included in the measurement of lease liabilities $ 616 $ 598 Future minimum lease payments under the Company’s operating lease as of December 31, 2024 are as follows: As of December 31, 2024 (in thousands) 2025 $ 634 2026 654 2027 134 2028 — 2029 — Thereafter — Total lease payments $ 1,422 Less: interest ( 133 ) Present value of lease payments $ 1,289 89 7. Property and equipment The Company’s property and equipment balances as of the years ended December 31, 2024 and 2023 are as follows: Cost Accumulated depreciation Net book value December 31, 2024 (in thousands) Lab equipment $ 7,238 $ ( 6,105 ) $ 1,133 Leasehold improvements 8,590 ( 6,489 ) 2,101 Computer hardware and software 477 ( 402 ) 75 $ 16,305 $ ( 12,996 ) $ 3,309 Cost Accumulated depreciation Net book value December 31, 2023 (in thousands) Lab equipment $ 7,593 $ ( 5,892 ) $ 1,701 Leasehold improvements 8,590 ( 5,618 ) 2,972 Computer hardware and software 391 ( 390 ) 1 $ 16,574 $ ( 11,900 ) $ 4,674 Depreciation expense for the years ended December 31, 2024 and 2023 was $ 1.4 million for both years. 8. Accounts payable and accrued liabilities Accounts payable and accrued liabilities are comprised of the following: December 31, 2024 December 31, 2023 (in thousands) Trade accounts payable $ 2,316 $ 3,223 Payroll accruals 3,393 3,349 Research and development accruals 691 2,884 Professional fee accruals 1,164 815 Total $ 7,564 $ 10,271 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. 9. Sale of future royalties On July 2, 2019, the Company entered into a Purchase and Sale Agreement (the Agreement) with the Ontario Municipal Employees Retirement System (OMERS), pursuant to which the Company sold to OMERS part of its royalty interest on future global net sales of ONPATTRO ® (Patisiran) (ONPATTRO), an RNA interference therapeutic currently being sold by Alnylam Pharmaceuticals, Inc. (Alnylam). 90 ONPATTRO utilizes Arbutus’s LNP technology, which was licensed to Alnylam pursuant to the Cross-License Agreement, dated November 12, 2012, by and between the Company and Alnylam (the LNP License Agreement). Under the terms of the LNP License Agreement, the Company is entitled to tiered royalty payments on global net sales of ONPATTRO ranging from 1.00 % to 2.33 % after offsets, with the highest tier applicable to annual net sales above $ 500 million. This royalty interest was sold to OMERS, effective as of January 1, 2019, for $ 20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $ 30 million in royalties, at which point 100 % of such royalty interest on future global net sales of ONPATTRO will revert to the Company. OMERS has assumed the risk of collecting up to $ 30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties. The $ 30 million in royalties to be paid to OMERS is accounted for as a liability, with the difference between the liability and the gross proceeds received accounted for as a discount. The discount, as well as $ 1.5 million of transaction costs, will be amortized as interest expense based on the projected balance of the liability as of the beginning of each period. As of December 31, 2024, the Company estimated an effective annual interest rate of approximately 2.2 %. Over the course of the Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in the timing of forecasted royalty revenue. On a quarterly basis, the Company will reassess the expected timing of the royalty revenue, recalculate the amortization and effective interest rate and adjust the accounting prospectively as needed. The Company recognizes non-cash royalty revenue related to the sales of ONPATTRO during the term of the Agreement. As royalties are remitted to OMERS from Alnylam, the balance of the recognized liability is effectively repaid over the life of the Agreement. From the inception of the royalty sale through December 31, 2024, an aggregate of $ 25.0 million of royalties have been collected by OMERS. There are a number of factors that could materially affect the amount and timing of royalty payments from Alnylam, none of which are within the Company’s control. During the year ended December 31, 2024, the Company recognized non-cash royalty revenue of $ 2.3 million and $ 0.1 million of related non-cash interest expense. During the year ended December 31, 2023, the Company recognized non-cash royalty revenue of $ 3.9 million and related non-cash interest expense of $ 0.5 million. The table below shows the activity related to the net liability for the years ended December 31, 2024 and December 31, 2023: Twelve Months Ended December 31, 2024 2023 (in thousands) Net liability related to sale of future royalties - beginning balance $ 6,953 $ 10,365 Non-cash royalty revenue ( 2,251 ) ( 3,867 ) Non-cash interest expense 127 455 Net liability related to sale of future royalties - ending balance $ 4,829 $ 6,953 In addition to the royalty from the LNP License Agreement, the Company is also receiving 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 Therapeutics, Inc. (Acuitas). The royalty from Acuitas has been retained by the Company and was not part of the royalty sale to OMERS. 10. Contingencies and commitments Stock Purchase Agreement with Enantigen 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. 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 91 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). The fair value of the contingent consideration was $ 10.2 million as of December 31, 2024. 11. Collaborations and royalty entitlements Collaborations 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 (Greater China and Taiwan). 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 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 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 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 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. While this arrangement is in the scope of ASC 808, the Company analogizes to ASC 606 for some aspects of this arrangement, including for the delivery of a good or service (i.e., a unit of account). In accordance with the guidance, the Company identified the following commitments under the arrangement: (i) rights to develop, use, sell, have sold, offer for sale and import any product comprised of Licensed Product (the Qilu License); and (ii) drug supply 92 obligations and manufacturing technology transfer (the Manufacturing Obligations). The Company determined that these two commitments are not distinct performance obligations for purposes of recognizing revenue as the manufacturing process is highly specialized and Qilu would not be able to benefit from the Qilu License without the Company’s involvement in the manufacturing activities until the transfer of the manufacturing know-how is complete. As such, the Company will combine these commitments into one performance obligation to which the transaction price will be allocated to and will recognize this transaction price associated with the bundled performance obligation over time using an inputs method based on labor hours expended by the Company on its Manufacturing Obligations. The Company determined the initial transaction price of the combined performance obligation to be $ 50.4 million, which includes the $ 40.0 million upfront fee, $ 4.4 million of withholding taxes paid by Qilu on behalf of the Company and the premium paid for the Share Transaction of $ 4.1 million. The Company determined the Milestone Payments to be variable consideration subject to constraint at inception. At the end of each subsequent reporting period, the Company will reevaluate the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. The following table outlines the transaction price and the changes to the related liability balance: Transaction Price Cumulative Collaboration Revenue Recognized Deferred License Revenue (in thousands) Combined performance obligation $ 50,445 $ 38,038 $ 12,407 Less contract asset $ ( 1,973 ) Total deferred license revenue $ 10,434 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, 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 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. Such changes will result in a change to the amount of collaboration revenue recognized and deferred revenue. Assembly Biosciences, Inc. In August 2020, the Company entered into a clinical collaboration agreement with Assembly Biosciences, Inc. (Assembly) to evaluate imdusiran in combination with Assembly’s first-generation HBV core inhibitor (capsid inhibitor) candidate vebicorvir (VBR) and standard-of-care NA therapy for the treatment of patients with HBV infection. Assembly has completed enrollment in the clinical trial. In July 2022, Assembly announced its plan to discontinue development of VBR. Despite this, in consultation with Assembly, the Company continued dosing patients in this Phase 2a proof-of-concept clinical trial in order to fully and accurately assess the results. Preliminary data from 65 patients indicated that adding VBR to imdusiran and NA therapy does not positively or negatively impact the reduction of HBsAg compared to imdusiran and NA therapy alone. Accordingly, the Company and Assembly mutually agreed to discontinue the clinical trial following completion of the final, on- 93 treatment visit at week 48. The Company and Assembly shared in the costs of the collaboration. 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) 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 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 Alnylam Pharmaceuticals, Inc. and Acuitas Therapeutics, Inc. The Company has two royalty entitlements to Alnylam’s global net sales of ONPATTRO. In 2012, the Company entered into a license agreement with Alnylam Pharmaceuticals, Inc. (Alnylam) that entitles Alnylam to develop and commercialize products with the Company’s LNP technology. Alnylam’s ONPATTRO, which represents the first approved application of the Company’s LNP technology, was launched by Alnylam in 2018. Under the terms of this license agreement, the Company is entitled to tiered royalty payments on global net sales of ONPATTRO ranging from 1.00 % - 2.33 % after offsets, with the highest tier applicable to annual net sales above $ 500 million. This royalty interest was sold to OMERS, effective as of January 1, 2019, for $ 20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $ 30 million in royalties, at which point 100 % of this royalty entitlement on future global net sales of ONPATTRO will revert back to the Company. OMERS has assumed the risk of collecting up to $ 30.0 million of future royalty payments from Alnylam and the Company is not obligated to reimburse OMERS if they fail to collect any such future royalties. If this royalty entitlement reverts to the Company, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part. From the inception of the royalty sale through December 31, 2024, an aggregate of $ 25.0 million of royalties have been earned by OMERS. See note 9 for further details. The Company also has 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 Therapeutics, Inc. (Acuitas). This royalty entitlement from Acuitas has been retained by the Company and was not part of the royalty entitlement sale to OMERS. 94 Gritstone Oncology, Inc. On October 16, 2017, the Company entered into a license agreement with Gritstone that granted them worldwide access to its portfolio of proprietary and clinically validated LNP technology and associated intellectual property to deliver Gritstone’s self-replicating, non-mRNA, RNA-based neoantigen immunotherapy products. Gritstone paid the Company an upfront payment, and will make payments for achievement of development, regulatory, and commercial milestones and royalties. 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. Milestone payments that are not within the control of the Company or the licensee, such as those that require regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company did not receive any payments from Gritstone during the years ended December 31, 2024 or 2023. Revenues from the Company’s royalty entitlements are summarized in the following table: Year ended December 31, 2024 2023 (in thousands) Revenue from collaborations and licenses Royalties from sales of Onpattro $ 2,562 $ 3,608 Qilu Pharmaceutical Co., Ltd. 1,357 10,666 Non-cash royalty revenue Royalties from sales of Onpattro 2,252 3,867 Total revenue $ 6,171 $ 18,141 12. Shareholders’ equity Authorized share capital The Company’s authorized share capital consists of an unlimited number of common shares and preferred shares, without par value, and 1,164,000 Series A participating convertible preferred shares, without par value. Open Market Sale Agreement 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 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. 95 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. 13. Stock-based compensation Awards outstanding and available for issuance During the year ended December 31, 2024, the Company had stock options outstanding under the following plans (collectively, the Plans): the 2016 Omnibus Share and Incentive Plan (the 2016 Plan), the 2011 Omnibus Share Compensation Plan (the 2011 Plan); the 2023 and 2019 inducement grants; and the OnCore Option Plan. During the year ended December 31, 2024, the Company had restricted stock units outstanding under the 2016 Plan. As of December 31, 2024, the aggregate number of shares authorized for awards under all Plans was 41,790,202 . As of December 31, 2024, the Company had 15,451,687 options and 1,493,136 restricted stock units outstanding and 16,674,175 awards available for issuance under the Plans. The Company issues new common shares of stock to settle options exercised. The 2011 Plan expired in June 2021. 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 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. 96 Stock options under the Arbutus Plans 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 Options granted 4,163,000 $ 2.50 Options exercised ( 2,877,664 ) $ 2.58 Options forfeited, canceled or expired ( 4,897,814 ) $ 3.02 Balance as of December 31, 2024 15,451,687 $ 3.37 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 Options outstanding and expected to vest Number of stock options outstanding 15,451,687 Weighted-average exercise price $ 3.37 Intrinsic value (in $000s) $ 6,182 Weighted-average term remaining 6.7 years Vested stock options Number of vested stock options 10,777,302 Weighted-average exercise price $ 3.70 Intrinsic value (in $000s) $ 3,033 Weighted-average term remaining 5.9 years The assumptions used in the Black-Scholes option-pricing for grants made during the years ended December 31, 2024 and 2023 are as follows: December 31, 2024 December 31, 2023 Expected average option term 5.6 years 5.6 years Expected volatility (historical) 92.0 % 97.1 % Expected dividends — % — % Risk-free interest rate 3.84 % 3.57 % The Company considers all available information when estimating the fair value of its stock option grants. 97 Stock options under the other 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: Number Weighted-Average Grant-Date Fair Value Balance as of December 31, 2023 1,231,450 $ 2.90 Restricted stock units granted 1,316,200 $ 2.40 Restricted stock units vested ( 410,482 ) $ 2.90 Restricted stock units forfeited, canceled or expired ( 644,032 ) $ 2.65 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 In May 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the ESPP) which became effective on May 28, 2020. A total of 1,500,000 common shares were reserved for issuance under the ESPP. Company employees contribute funds via payroll deductions, which are used to buy Company common shares at a discount of up to 15 % based on the lower of the price at the start of the offering period and at the end of the relevant purchase period within such offering period. The initial offering period under the ESPP was September 1, 2020 through August 31, 2021 with purchase dates set on February 26, 2021 and August 31, 2021, with subsequent offering periods beginning on September 1 and ending on August 31. The Company issued 227,333 and 290,438 shares under its ESPP for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there were 614,668 shares remaining for issuance under the ESPP. For both of the years ended December 31, 2024 and 2023, the Company recognized $ 0.1 million of stock-based compensation expense related to the ESPP. The fair value of the right to acquire stock at a discounted price under the ESPP is calculated using the Black-Scholes valuation model and recorded as stock-based compensation. Expense is recognized over the period the employee contributes to the plan through payroll deductions. Stock-based compensation expense 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. Stock-based compensation has been recorded in the consolidated statement of operations and comprehensive loss as follows: 98 Year Ended December 31, 2024 2023 (in thousands) Research and development $ 3,647 $ 3,684 General and administrative 5,339 5,617 Total $ 8,986 $ 9,301 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. 14. 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, 2024 2023 (in thousands) Revenue $ 6,171 $ 18,141 Less: 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 Add: 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. 15. Income taxes 99 The Company is subject to taxation and files income tax returns in Canadian federal and provincial, United States federal and several state jurisdictions. 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: Year ended December 31, 2024 2023 (in thousands) Computed taxes (benefits) at Canadian federal and provincial tax rates $ ( 18,888 ) $ ( 19,668 ) Withholding taxes — — Other 2,319 ( 2,108 ) Permanent and other differences 515 198 Federal R&D credit ( 1,122 ) ( 1,741 ) Foreign tax credit applied — — Federal and Provincial ITCs applied — ( 179 ) Change in valuation allowance 11,748 18,425 Difference due to income taxed at foreign rates 4,101 5,260 Stock-based compensation 1,327 ( 187 ) Income tax expense $ — $ — 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. 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. United States net operating loss carryforwards arising in 2019 and future periods have an indefinite carryforward period. 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. 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. The Company generated $ 1.6 million of pre-tax domestic income and $ 68.4 million in pre-tax foreign losses, respectively, for the year ended December 31, 2024. The Company generated $ 14.8 million of pre-tax domestic income and $ 87.7 million in pre-tax foreign losses, respectively, for the year ended December 31, 2023. The Company used accumulated domestic net operating losses to offset the taxable income in both years. As required by the 2017 Tax Cuts and Jobs Act and effective in 2022, the deferred tax asset as of December 31, 2024 and 2023 included $ 33.7 million and $ 27.3 million, respectively, related to the mandatory capitalization and amortization of research and development expenses. 100 Significant components of the Company’s deferred tax assets and liabilities are shown below: As of December 31, 2024 2023 (in thousands) Deferred tax assets (liabilities): Operating loss carryforwards $ 96,075 $ 89,090 Canadian research and development deductions 16,700 16,726 Book amortization in excess of tax ( 232 ) ( 451 ) Revenue recognized for tax purposes in excess of revenue recognized for accounting purposes 1,296 1,878 Tax value in excess of accounting value in lease inducements 51 74 Deferred revenue 2,817 3,184 Canadian Federal investment tax credits 5,147 5,147 Canadian Provincial investment tax credits 1,953 1,953 Equity method investment 3,375 3,375 U.S. Federal research and development credits 8,310 7,254 Deductible stock options 4,037 6,058 U.S. research and experimental expenditures capitalization 33,707 27,265 Accrued interest payable 1,796 1,722 Amortization 256 322 Other 138 114 Total deferred tax assets $ 175,426 $ 163,711 Valuation allowance ( 175,426 ) ( 163,711 ) Net deferred tax assets (liabilities) $ — $ — 16. 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. 101 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.