Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), concluded that, as of December 31, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (b) such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013).
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on our evaluation under the framework in COSO 2013, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.
Changes in Internal Control over Financial Reporting
There have not been changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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Item 9B. Other Information
Trading Plans
During the three months ended December 31, 2024, none of our directors or officers adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.
Chief Financial Officer Transition
On March 25, 2025, our Board appointed Tuan Nguyen as our Chief Financial Officer, effective as of March 28, 2025.
Mr. Nguyen, age 49, has almost two decades of experience in biopharma working on small molecules and AAV gene therapies. Most recently, from March 2022 to March 2025, he served as Chief Financial Officer of Kinevant Sciences, a clinical-stage biopharmaceutical company dedicated to treating rare inflammatory and autoimmune diseases. Prior to this, from May 2020 to March 2022, he was Vice President of Finance at Adverum Biotechnologies, a clinical-stage company that aims to establish gene therapy as a new standard of care for highly prevalent ocular diseases. Prior to that he held various senior finance leadership roles at Intarcia Therapeutics, FibroGen, and UCB. He has helped raise over $2 billion in dilutive and non dilutive capital. Mr. Nguyen earned his MBA with dual concentration in Finance and Entrepreneurship, Innovation, & Change from Emory University.
In connection with his appointment as our Chief Financial Officer, on March 25, 2025, we , through Arbutus Biopharma, Inc., our wholly-owned subsidiary (our Subsidiary), entered into an employment agreement with Mr. Nguyen (the Nguyen Employment Agreement), pursuant to which he will receive an annual base salary of $475,000 and will be eligible to receive a discretionary annual performance bonus, with a target annual value equal to 40% of his annual base salary. Mr. Nguyen will also receive an initial option grant of 750,000 common shares under the 2016 Plan. During his employment, Mr. Nguyen will be eligible to participate in our employee benefit plans and programs. In connection with the commencement of his employment, Mr. Nguyen will be required to enter into our standard Non-Disclosure, Invention Assignment and Restrictive Covenant Agreement.
In addition, in the event Mr. Nguyen’s employment is terminated without “cause” or Mr. Nguyen resigns for “good reason” (each as defined in the Nguyen Employment Agreement), then, subject to Mr. Nguyen’s timely execution and non-revocation of a release of claims and continued compliance with applicable restrictive covenants, Mr. Nguyen will be entitled to receive (i) continued payment of his base salary for six months following the date of his termination, payable in accordance with customary payroll procedures and (ii) monthly reimbursement of COBRA premiums (less active employee rates) for six months following the date of his termination (or, if earlier, until the date Mr. Nguyen becomes eligible for coverage under a subsequent employer’s group health insurance plan).
The foregoing description of the Nguyen Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the Nguyen Employment Agreement, a copy of which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the three months ending March 31, 2025.
There are no arrangements or understandings between Mr. Nguyen and any other persons pursuant to which Mr. Nguyen was selected to be Chief Financial Officer. There are no family relationships between Mr. Nguyen and any of our directors or executive officers, and Mr. Nguyen has no direct or indirect interest in any transaction or proposed transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Mr. Nguyen succeeds David C. Hastings, who will cease serving as our Chief Financial Officer effective as of the end of the day on March 27, 2025. Mr. Hastings was terminated from the Company without cause.
Chief Medical Officer Termination and Consulting Agreement
Karen Sims, M.D., Ph.D., our former Chief Medical Officer, was terminated without cause, effective as of March 25, 2025.
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General Counsel and Chief Compliance Officer Termination
J. Christopher Naftzger, our former General Counsel and Chief Compliance Officer, was terminated without cause, effective as of March 25, 2025.
Michael J. McElhaugh Separation Agreement
On March 25, 2025, we, through our Subsidiary, entered into a Separation Agreement and General Release (the Separation Agreement) with Michael J. McElhaugh, our former President and Chief Executive Officer, which sets forth the terms of Mr. McElhaugh’s separation from the Company. In addition to what Mr. McElhaugh is entitled to pursuant to the terms of his existing employment agreement, as amended, pursuant to the terms of, and subject to compliance with, the Separation Agreement, the post-termination exercise period of any vested options to purchase our common shares held by Mr. McElhaugh as of the date of his termination will be extended from the current term of such options as set forth in the applicable award agreement (the McElhaugh Current Term) to the earlier of: (i) the McElhaugh Current Term; and (ii) February 23, 2026.
The foregoing description of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the Separation Agreement, a copy of which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the three months ending March 31, 2025.
Corporate Restructuring
On March 25, 2025, our Board committed to a course of action to (i) reduce our workforce by 57%, resulting in a total workforce after reductions of 19 employees, (ii) exit our corporate headquarters in Warminster, PA, and (iii) discontinue in-house scientific research. The determination to proceed with these actions was made as a result of our Board’s determination and plan to restructure our organization to optimize overall business performance.
In connection with these actions, we expect to incur a one-time restructuring charge in the first quarter of 2025 of approximately $11 million to $13 million, consisting of: (i) $5.9 million to $6.3 million of employee severance and benefits cash expenditures; (ii) $1.5 million to $2.2 million of non-cash stock-based compensation expenses for employee equity award modifications; and (iii), in connection with the decision to exit our corporate headquarters, (a) $3.9 million to $4.2 million of non-cash impairment charges for laboratory equipment, leasehold improvements and our right-of-use asset and (b) $0.3 million to $0.4 million of cash lease-related operating expenses. Substantially all of the termination severance payments and other employee benefits costs are expected to be paid during the second quarter of 2025, with the remainder to be paid in the second half of 2025.
Termination of Open Market Sale Agreement
On March 25, 2025, we provided notice of our termination, effective March 26, 2025, of that certain Open Market Sale Agreement, dated December 20, 2018, as amended (the Sale Agreement), with Jefferies LLC as placement agent (the Placement Agent). Pursuant to the terms of the Sale Agreement, we could offer for sale to the public our common shares from time to time in “at the market” offerings through the Placement Agent. We are not subject to any termination penalties related to the termination of the Sale Agreement. Following such termination, we may not offer or sell any additional shares of our common stock under the Sale Agreement or any related prospectus or prospectus supplement.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated herein by reference to our Proxy Statement for the 2025 Annual General Meeting of the Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
We have adopted a code of business conduct for directors, officers and employees (the Code of Conduct), which is available on our website at http://investor.arbutusbio.com/corporate-governance-0 and also at www.sedar.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of this Code of Conduct by posting such information on the website address and location specified above.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to our Proxy Statement for the 2025 Annual General Meeting of the Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to our Proxy Statement for the 2025 Annual General Meeting of the Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to our Proxy Statement for the 2025 Annual General Meeting of the Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to our Proxy Statement for the 2025 Annual General Meeting of the Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
Exhibit Description
2.1 Agreement and Plan of Merger and Reorganization, dated January 11, 2015, by and among Tekmira Pharmaceuticals Corporation, TKM Acquisition Corporation and OnCore Biopharma, Inc. (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K/A, filed with the SEC on January 26, 2015).
3.1 Notice of Articles and Articles of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 16, 2018).
3.2 Amendment to Articles of the Company (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed with the SEC on November 7, 2018).
4.1** Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1**# Form of Arbutus Biopharma Corporation Indemnity Agreement.
10.2† License Agreement between the University of British Columbia and Inex Pharmaceuticals Corporation executed on July 30, 2001 (incorporated herein by reference to Exhibit 4.17 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010, filed with the SEC on June 3, 2011).
10.3† Amendment Agreement between the University of British Columbia and Inex Pharmaceuticals Corporation dated July 11, 2006 (incorporated herein by reference to Exhibit 4.18 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010, filed with the SEC on June 3, 2011).
10.4† Second Amendment Agreement between the University of British Columbia and Inex Pharmaceuticals Corporation dated January 8, 2007 (incorporated herein by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010, filed with the SEC on June 3, 2011).
10.5† Consent Agreement of the University of British Columbia to Inex/Alnylam Sublicense Agreement dated January 8, 2007 (incorporated herein by reference to Exhibit 4.20 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010, filed with the SEC on June 3, 2011).
10.6†
Settlement Agreement and General Release, by and among Tekmira Pharmaceuticals Corporation, Protiva Biotherapeutics Inc., Alnylam Pharmaceuticals, Inc., and AlCana Technologies, Inc., dated November 12, 2012 (incorporated herein by reference to Exhibit 4.26 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed with the SEC on March 27, 2013).
10.7†
Cross-License Agreement by and among Alnylam Pharmaceuticals, Inc., Tekmira Pharmaceuticals Corporation and Protiva Biotherapeutics Inc., dated November 12, 2012 (incorporated herein by reference to Exhibit 4.27 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed with the SEC on March 27, 2013).
10.8†
Stock Purchase Agreement by and among OnCore Biopharma, Inc. and each of the stockholders of Enantigen Therapeutics, Inc., dated as of October 1, 2014 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 6, 2015).
10.9#
Amended 2011 Omnibus Share Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the SEC on August 4, 2016).
10.10†
Lease Agreement between the Company and ARE-PA Region No. 7, LLC dated August 9, 2016 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed with the SEC on November 3, 2016).
10.11†
First Amendment to Lease Agreement between Arbutus Biopharma, Inc. and ARE-PA Region No. 7, LLC dated October 7, 2016 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed with the SEC on November 3, 2016).
106
10.12 Subordination, Non-Disturbance and Attornment Agreement by and among, the Company, Univest Bank and Trust Co., and Veterans Circle Group, LLC dated December 12, 2023 (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024).
10.13
Master Contribution And Share Subscription Agreement, by and between the Company, Genevant Sciences Ltd. and Roivant Sciences LTD. (incorporated herein by reference Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed with the SEC on May 4, 2018).
10.14#
Executive Employment Agreement, dated June 11, 2018, by and between the Company and David Hastings (incorporated herein by reference to Exhibit 10.52 of the Registrant’s Annual Report on Form 10-K for the year end December 31, 2018, filed with the SEC on March 7, 2019).
10.15#
Executive Employment Agreement, dated July 10, 2015, by and between the Company and Michael McElhaugh, as amended by the First Amendment to Executive Employment Agreement, dated April 20, 2016, the Second Amendment to Executive Employment Agreement, dated December 11, 2018, the Third Amendment to the Executive Employment Agreement, dated November 1, 2022, and the Fourth Amendment to the Executive Employment Agreement, dated January 1, 2024 (incorporated herein by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024).
10.16†
Purchase and Sale Agreement, dated July 2, 2019, by and between the Company and OCM IP Healthcare Portfolio LP (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 5, 2019).
10.17#
Arbutus Biopharma Corporation 2020 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 1, 2020).
10.18#
Form of Arbutus Biopharma Corporation Option Agreement (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 5, 2019).
10.19†
Cross License Agreement, dated April 11, 2018, by and between the Company and Genevant Sciences Ltd. (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 7, 2020).
10.20†
First Amendment to Cross License Agreement, dated June 27, 2018, by and among the Company, Genevant Sciences Ltd and Genevant Sciences GmbH. (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 7, 2020).
10.21†
Second Amendment to Cross License Agreement, dated June 27, 2018, by and among the Company, Genevant Sciences Ltd. and Genevant Sciences GmbH. (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 7, 2020).
10.22†
License Agreement, dated December 9, 2021, by and between the Company and Genevant Sciences GmbH (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 10, 2021).
10.23†
Technology Transfer and Exclusive License Agreement, dated December 13, 2021, by and between the Company and Qilu Pharmaceutical Co., Ltd. (incorporated herein by reference to Exhibit 10.41 to the Registrant’s Quarterly Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 3, 2022).
10.24#
Form of Arbutus Biopharma Corporation Restricted Stock Unit Agreement. (incorporated herein by reference to Exhibit 10.41 of the Registrant’s Annual Report on Form 10-K for the year end December 31, 2022, filed with the SEC on March 2, 2023).
10.25#
Executive Employment Agreement, dated effective as of July 10, 2023, between Arbutus Biopharma, Inc. and Karen Sims, MD, PhD (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 3, 2023).
10.26#
Executive Employment Agreement, dated effective as of July 10, 2023, between Arbutus Biopharma, Inc. and J. Christopher Naftzger (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 3, 2023).
107
10.27#
Option Agreement, dated July 10, 2023, by and between Arbutus Biopharma Corporation and J. Christopher Naftzger (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 3, 2023).
10.28#
Arbutus Biopharma Corporation 2016 Omnibus Share and Incentive Plan, as supplemented and amended (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 24, 2024) .
10.29#
Executive Employment Agreement, dated effective as of July 11, 2015, between OnCore Biopharma, Inc. and Michael J. Sofia (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with the SEC on August 7, 2015).
10.30#
First Amendment to Executive Employment Agreement, dated October 11, 2024, by and between Michael J. Sofia and Arbutus Biopharma, Inc. (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 11 , 2024).
19** Insider Trading Policy .
21.1** List of Subsidiaries.
23.1** Consent of Ernst and Young LLP, an Independent Registered Public Accounting Firm.
31.1** Certification of President and Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2** Certification of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .
32.1** Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97 Arbutus Biopharma Corporation Incentive Compensation Recovery Policy (incorporated herein by reference to Exhibit 97 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024).
101.INS** XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
104** Cover Page Interactive Data File (formatted as Inline XBRL and Contained in Exhibit 101).
** Filed or furnished herewith, as applicable
† Certain confidential portions of the agreement were omitted by means of marking such portions with brackets (due to the registrant customarily and actually treating such information as private or confidential and such omitted information not being material) pursuant to Item 601 of Regulation S-K promulgated by the SEC. Arbutus agrees to supplementally furnish a copy of any confidential portions to the SEC upon request.
# Management Contract or Compensatory Arrangement.
Financial Statements
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See Index to Consolidated Financial Statements under Item 8 of Part II.
Financial Statement Schedules
None.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 27, 2025.
ARBUTUS BIOPHARMA CORPORATION
By: /s/ Lindsay Androski
Lindsay Androski
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 27, 2025.
Signatures Capacity in Which Signed
/s/ Lindsay Androski President, Chief Executive Officer and Director (Chairperson)
Lindsay Androski (Principal Executive Officer)
/s/ David C. Hastings Chief Financial Officer
David C. Hastings (Principal Financial Officer and Principal Accounting Officer)
/s/ Robert Alan Beardsley Director
Robert Alan Beardsley
/s/ Joseph Bishop Director
Joseph Bishop
/s/ Matthew Gline Director
Matthew Gline
/s/ Anuj Hasija Director
Anuj Hasija
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