Arbutus Biopharma Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ARBUTUS BIOPHARMA CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (In thousands of U.S. Dollars, except share amounts) June 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 37,412 $ 36,330 Investments in marketable securities, current 60,676 86,293 Accounts receivable 1,025 2,409 Prepaid expenses and other current assets 4,006 2,284 Total current assets 103,119 127,316 Property and equipment, net of accumulated depreciation and impairment of $ 13,315 (December 31, 2024: $ 12,996 ) 148 3,309 Right of use asset — 1,048 Other non-current assets — 34 Total assets $ 103,267 $ 131,707 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued liabilities $ 4,508 $ 7,564 Deferred license revenue, current — 7,571 Lease liability, current 514 483 Total current liabilities 5,022 15,618 Liability related to sale of future royalties 3,910 4,829 Deferred license revenue, non-current — 2,863 Contingent consideration 10,784 10,225 Lease liability, non-current 575 806 Total liabilities 20,291 34,341 Stockholders’ equity Common shares Authorized: unlimited number without par value Issued and outstanding: 191,641,511 (December 31, 2024: 189,963,492 ) 1,417,110 1,410,025 Additional paid-in capital 82,628 82,048 Deficit ( 1,368,575 ) ( 1,346,572 ) Accumulated other comprehensive loss ( 48,187 ) ( 48,135 ) Total stockholders’ equity 82,976 97,366 Total liabilities and stockholders’ equity $ 103,267 $ 131,707 See accompanying notes to the condensed consolidated financial statements. 1 ARBUTUS BIOPHARMA CORPORATION Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (In thousands of U.S. Dollars, except share and per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue Collaborations and licenses $ 10,213 $ 1,155 $ 11,529 $ 2,094 Non-cash royalty revenue 526 571 974 1,164 Total Revenue 10,739 1,726 12,503 3,258 Operating expenses Research and development 5,498 15,551 14,457 30,954 General and administrative 3,328 7,547 9,160 12,859 Change in fair value of contingent consideration 260 211 559 391 Restructuring costs 165 — 12,538 — Total operating expenses 9,251 23,309 36,714 44,204 Gain (loss) from operations 1,488 ( 21,583 ) ( 24,211 ) ( 40,946 ) Other income Interest income 1,042 1,829 2,239 3,374 Interest expense ( 28 ) ( 34 ) ( 56 ) ( 78 ) Foreign exchange gain (loss) 21 ( 8 ) 25 ( 21 ) Total other income 1,035 1,787 2,208 3,275 Net income (loss) $ 2,523 $ ( 19,796 ) $ ( 22,003 ) $ ( 37,671 ) Net income (loss) per common share Basic $ 0.01 $ ( 0.11 ) $ ( 0.12 ) $ ( 0.21 ) Diluted $ 0.01 $ ( 0.11 ) $ ( 0.12 ) $ ( 0.21 ) Weighted average number of common shares Basic 191,551,282 188,041,489 191,130,631 181,842,519 Diluted 192,399,733 188,041,489 191,130,631 181,842,519 Comprehensive income (loss) Unrealized (loss) gain on available-for-sale securities $ ( 21 ) $ 63 $ ( 52 ) $ 113 Comprehensive income (loss) $ 2,502 $ ( 19,733 ) $ ( 22,055 ) $ ( 37,558 ) See accompanying notes to the condensed consolidated financial statements. 2 ARBUTUS BIOPHARMA CORPORATION Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands of U.S. Dollars, except share amounts) Common Shares Number of Shares Share Capital Additional Paid-In Capital Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Balance December 31, 2024 189,963,492 $ 1,410,025 $ 82,048 $ ( 1,346,572 ) $ ( 48,135 ) $ 97,366 Stock-based compensation expense — — 3,564 — — 3,564 Issuance of common shares pursuant to exercise of options 892,857 4,616 ( 1,963 ) — — 2,653 Issuance of common shares pursuant to ESPP 44,541 173 ( 42 ) — — 131 Issuance of common shares upon vesting of RSUs 580,584 1,518 ( 1,518 ) — — — Unrealized loss on available-for-sale securities — — — — ( 31 ) ( 31 ) Net loss — — — ( 24,526 ) — ( 24,526 ) Balance March 31, 2025 191,481,474 $ 1,416,332 $ 82,089 $ ( 1,371,098 ) $ ( 48,166 ) $ 79,157 Stock-based compensation expense — — 864 — — 864 Issuance of common shares pursuant to exercise of options 160,037 778 ( 325 ) — — 453 Unrealized loss on available-for-sale securities — — — — ( 21 ) ( 21 ) Net income — — — 2,523 — 2,523 Balance June 30, 2025 191,641,511 $ 1,417,110 $ 82,628 $ ( 1,368,575 ) $ ( 48,187 ) $ 82,976 See accompanying notes to the condensed consolidated financial statements. 3 ARBUTUS BIOPHARMA CORPORATION Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands of U.S. Dollars, except share amounts) Common Shares Number of Shares Share Capital Additional Paid-In Capital Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Balance December 31, 2023 169,867,414 $ 1,349,821 $ 81,270 $ ( 1,276,652 ) $ ( 48,421 ) $ 106,018 Stock-based compensation expense — — 2,014 — — 2,014 Issuance of common shares pursuant to the Open Market Sale Agreement 8,666,077 21,765 — — — 21,765 Issuance of common shares pursuant to exercise of options 1,126,691 4,268 ( 1,814 ) — — 2,454 Issuance of common shares pursuant to ESPP 121,563 271 ( 60 ) — — 211 Issuance of common shares upon vesting of RSUs 410,482 1,190 ( 1,190 ) — — — Unrealized gain on available-for-sale securities — — — — 50 50 Net loss — — — ( 17,875 ) — ( 17,875 ) Balance March 31, 2024 180,192,227 $ 1,377,315 $ 80,220 $ ( 1,294,527 ) $ ( 48,371 ) $ 114,637 Stock-based compensation expense — — 3,180 — — 3,180 Issuance of common shares pursuant to the Open Market Sale Agreement 7,833,922 22,359 — — — 22,359 Issuance of common shares pursuant to exercise of options 712,895 3,660 ( 1,649 ) — — 2,011 Unrealized gain on available-for-sale securities — — — — 63 63 Net loss — — — ( 19,796 ) — ( 19,796 ) Balance June 30, 2024 188,739,044 $ 1,403,334 $ 81,751 $ ( 1,314,323 ) $ ( 48,308 ) $ 122,454 See accompanying notes to the condensed consolidated financial statements. 4 ARBUTUS BIOPHARMA CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands of U.S. Dollars) Six Months Ended June 30, 2025 2024 OPERATING ACTIVITIES Net loss $ ( 22,003 ) $ ( 37,671 ) Non-cash items: Depreciation 341 711 Loss on impairment of leasehold improvements and lab equipment 2,811 — Stock-based compensation expense 4,428 5,194 Change in fair value of contingent consideration 559 391 Non-cash royalty revenue ( 974 ) ( 1,164 ) Non-cash interest expense 55 70 Net accretion and amortization of investments in marketable securities ( 1,386 ) ( 1,229 ) Net change in operating items: Accounts receivable 1,384 9 Prepaid expenses and other assets ( 640 ) ( 40 ) Accounts payable and accrued liabilities ( 3,056 ) 837 Change in deferred license revenue ( 10,434 ) ( 757 ) Other liabilities ( 225 ) ( 150 ) Net cash used in operating activities ( 29,140 ) ( 33,799 ) INVESTING ACTIVITIES Purchase of investments in marketable securities ( 63,214 ) ( 57,982 ) Proceeds from sale of property and equipment 9 — Disposition of investments in marketable securities 90,165 79,601 Acquisition of property and equipment — ( 96 ) Net cash provided by investing activities 26,960 21,523 FINANCING ACTIVITIES Issuance of common shares pursuant to the Open Market Sale Agreement — 44,124 Issuance of common shares pursuant to exercise of stock options 3,106 4,465 Issuance of common shares pursuant to ESPP 131 211 Net cash provided by financing activities 3,237 48,800 Effect of foreign exchange rate changes on cash and cash equivalents 25 ( 21 ) Increase in cash and cash equivalents 1,082 36,503 Cash and cash equivalents, beginning of period 36,330 26,285 Cash and cash equivalents, end of period $ 37,412 $ 62,788 See accompanying notes to the condensed consolidated financial statements. 5 ARBUTUS BIOPHARMA CORPORATION Notes to Condensed Consolidated Financial Statements (Tabular amounts in thousands of U.S. Dollars, except share and per share amounts) 1. Nature of business and future operations 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, GalNAc-conjugated, subcutaneously-delivered ribonucleic acid interference (RNAi) therapeutic, and AB-101, its proprietary oral PD-L1 inhibitor, for the treatment of chronic hepatitis B (cHBV). 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 messenger ribonucleic acid interference (mRNA)-LNP vaccines. With respect to the Moderna lawsuit in the United States, the summary judgment phase of the case began in July 2025 and a trial date has been set for March 2026. In March 2025, the Company, along with Genevant Sciences GmbH and/or its affiliates (collectively, Genevant), filed five international lawsuits against Moderna in connection with the use of the Company’s LNP technology in Moderna’s COVID-19 mRNA-LNP vaccines and, in the Unified Patent Court, also other Moderna products that use the same LNP technology, including Moderna’s respiratory syncytial virus (RSV) vaccines. The first major hearings in the international lawsuits are expected in the first half of calendar year 2026. With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred in December 2024, and fact discovery is ongoing. The court has not provided guidance for the timing of its ruling in the claim construction hearing, which could potentially come in 2025. Liquidity At June 30, 2025, the Company had an aggregate of $ 98.1 million in cash, cash equivalents and investments in marketable securities. The Company had no outstanding debt as of June 30, 2025. The Company believes it has sufficient cash resources to fund its operations for at least the next 12 months. 2. Significant accounting policies Basis of presentation and principles of consolidation These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial statements and accordingly, do not include all disclosures required for annual financial statements. These statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. These unaudited condensed consolidated financial statements include the accounts of Arbutus Biopharma Corporation and its one wholly-owned subsidiary, Arbutus Biopharma, Inc., and reflect, in the opinion of management, all adjustments and reclassifications necessary to fairly present the Company’s financial position as of June 30, 2025 and December 31, 2024, the Company’s results of operations for the three and six months ended June 30, 2025 and 2024, and the Company’s cash flows for the six months ended June 30, 2025 and 2024. Such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2024, except as described below under the section entitled “Recent Accounting Pronouncements.” All intercompany balances and transactions have been eliminated. 6 Net income (loss) per share Net income (loss) per share is calculated based on the weighted average number of common shares outstanding. Diluted net income (loss) per share is calculated using the treasury stock method and reflects the effect of all potentially dilutive securities (outstanding stock options and restricted stock units). The number of weighted average shares used in the calculation of net income per share for the three months ended June 30, 2025 was as follows: Three Months Ended June 30, 2025 Weighted average shares: Basic shares 191,551,282 Potentially dilutive shares from equity-based compensation plans 848,451 Diluted shares 192,399,733 Diluted net loss per share does not differ from basic net loss per share for the six months ended June 30, 2025 or the three and six months ended June 30, 2024 since the effect of including potential common shares would be anti-dilutive as the Company was in a net loss position. Total antidilutive securities that were excluded from the computation of diluted weighted-average shares outstanding were as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Outstanding stock options and restricted stock units 14,348,427 21,539,688 16,086,902 20,446,983 Revenue from collaborations and licenses The Company generates revenue through certain collaboration agreements and license agreements. Such agreements may require the Company to deliver various rights and/or services, including intellectual property rights or licenses and research and development services. Under such agreements, the Company is generally eligible to receive non-refundable upfront payments, funding for research and development 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. Deferred Revenue 7 When consideration is received or is unconditionally due from a customer, collaborator or licensee prior to the Company completing its performance obligation to the customer, collaborator or licensee under the terms of a contract, deferred revenue is recorded. Deferred revenue expected to be recognized as revenue within the 12 months following the balance sheet date is classified as a current liability. Deferred revenue not expected to be recognized as revenue within the 12 months following the balance sheet date is classified as a long-term liability. In accordance with ASC Topic 210-20, Balance Sheet - Offsetting (ASC 210-20) the Company’s deferred revenue is offset by a contract asset as further discussed in Note 9. Recent accounting pronouncements In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (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 yet determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures. The Company has reviewed all other recently issued standards and has determined that such standards will not have a material impact on the Company’s financial statements or do not otherwise apply to the Company’s operations. 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 maximize the use of observable inputs and minimize 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. • 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. • 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. 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. To determine the fair value of the contingent consideration (Note 8), the Company uses a probability weighted assessment of the likelihood the milestones would be met and the estimated timing of such payments, and then the potential contingent payments are discounted to their present value using a probability adjusted discount rate that reflects the early stage nature of the development program, the time to complete the program development, and overall biotech indices. The Company determined the fair value of the contingent consideration was $ 10.8 million as of June 30, 2025 and the increase of $ 0.6 million from December 31, 2024 has been recorded as a component of total operating expenses in the condensed consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2025. The assumptions used in the discounted cash flow model are level 3 inputs as defined above. There were no changes in the assumptions as of June 30, 2025 compared to December 31, 2024. The Company assessed the sensitivity of the fair value measurement to changes in these 8 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 June 30, 2025 (in thousands) Assets Cash and cash equivalents $ 37,412 $ — $ — $ 37,412 Investments in marketable securities, current — 60,676 — 60,676 Total $ 37,412 $ 60,676 $ — $ 98,088 Liabilities Contingent consideration $ — $ — $ 10,784 $ 10,784 Total $ — $ — $ 10,784 $ 10,784 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 The following table presents the changes in fair value of the Company’s contingent consideration: Liability at beginning of the period Change in fair value of liability Liability at end of the period (in thousands) Six Months Ended June 30, 2025 $ 10,225 $ 559 $ 10,784 Six Months Ended June 30, 2024 $ 7,600 $ 391 $ 7,991 See Note 4 for additional information regarding the fair value of the Company’s investments in marketable securities. 9 4. Investments in marketable securities Investments in marketable securities consisted of the following: Amortized Cost Gross Unrealized Gain (1) Gross Unrealized Loss (1) Fair Value As of June 30, 2025 (in thousands) Cash equivalents Money market funds $ 30,400 $ — $ — $ 30,400 Total $ 30,400 $ — $ — $ 30,400 Investments in marketable short-term securities US corporate bonds $ 11,300 $ 9 $ — $ 11,309 US treasury bills 47,128 — ( 10 ) 47,118 US government bonds 2,250 — ( 1 ) 2,249 Total $ 60,678 $ 9 $ ( 11 ) $ 60,676 (1) Gross unrealized gain (loss) is pre-tax and is reported in accumulated other comprehensive income (loss). Amortized Cost Gross Unrealized Gain (1) Gross Unrealized Loss (1) Fair Value As of December 31, 2024 (in thousands) Cash equivalents Money market funds $ 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 income (loss). The contractual term to maturity of the $ 60.7 million of short-term marketable securities held by the Company as of June 30, 2025 is less than one year. As of June 30, 2025, the Company held no long-term marketable securities. As of December 31, 2024, the Company’s $ 86.3 million of short-term marketable securities had contractual maturities of less than one year, while the Company held no long-term marketable securities. At June 30, 2025 and December 31, 2024, the Company had 20 and 6 , 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 of $ 0.1 million and $ 0.3 million at June 30, 2025 and December 31, 2024, respectively, is included in prepaid expenses and other current assets. The Company had zero realized gains for the three and six months ended June 30, 2025 and less than $ 0.1 million realized gains for both the three and six months ended June 30, 2024. See Note 3 for additional information regarding the fair value of the Company’s investments in marketable securities. 10 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., a company focused on a broad range of ribonucleic acid (RNA)-based therapeutics enabled by the Company’s LNP and ligand conjugate delivery technologies. The Company licensed rights to its LNP and ligand conjugate delivery platforms to Genevant for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the Genevant License). 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). Notwithstanding the preceding, in March 2025, Genevant and the Company agreed that the Company be entitled to any award of damages in (or any proceeds of settlement of) certain pending patent litigation against Moderna and certain affiliates that specifically accuses Moderna of infringement related to Moderna’s vaccine for RSV known as mRESVIA ™ , and that, in the event there is no such specific allocation to mRESVIA in such award or settlement, the parties will discuss an appropriate allocation in good faith. 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 June 30, 2025, 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. Accounts payable and accrued liabilities Accounts payable and accrued liabilities are comprised of the following: June 30, 2025 December 31, 2024 (in thousands) Trade accounts payable $ 1,321 $ 2,316 Research and development accruals 1,092 691 Professional fee accruals 352 1,164 Payroll accruals 975 3,393 Restructuring liabilities 768 — Total accounts payable and accrued liabilities $ 4,508 $ 7,564 In March 2025, the Company’s Board of Directors (the Board) took action to reduce the Company’s workforce by 57 %. The Board also decided to exit the Company’s corporate headquarters in Warminster, Pennsylvania and to discontinue in-house scientific research. As a result, the Company recorded a one-time restructuring charge of $ 12.4 million in the first quarter of 2025, of which there was $ 0.4 million in severance and benefit costs and $ 0.3 million of lease-related operation expenses accrued as of June 30, 2025. 7. 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). ONPATTRO utilizes the Company’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 11 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 the Company is not obligated to reimburse OMERS if it fails 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 June 30, 2025, the Company estimated an effective annual interest rate of approximately 2.5 %. 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 June 30, 2025, the Company has recorded an aggregate of $ 25.9 million of non-cash royalty revenue for royalties earned by OMERS. There are a number of factors that could materially affect the amount and timing of royalty payments from Alnylam, none of which are within the Company’s control. During the six months ended June 30, 2025, the Company recognized non-cash royalty revenue of $ 1.0 million and related non-cash interest expense of less than $ 0.1 million. During the six months ended June 30, 2024, the Company recognized non-cash royalty revenue of $ 1.2 million and related non-cash interest expense of less than $ 0.1 million. The table below shows the activity related to the net liability for the six months ended June 30, 2025 and 2024: Six Months Ended June 30, 2025 2024 (in thousands) Net liability related to sale of future royalties - beginning balance $ 4,829 $ 6,953 Non-cash royalty revenue ( 974 ) ( 1,164 ) Non-cash interest expense 55 70 Net liability related to sale of future royalties - ending balance $ 3,910 $ 5,859 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. 8. Contingencies and commitments Stock Purchase Agreement with Enantigen In October 2014, Arbutus Biopharma, Inc., the Company’s wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen Therapeutics, Inc. (Enantigen) pursuant to a stock purchase agreement. The amount paid to Enantigen’s selling shareholders could be up to an additional $ 102.5 million in sales performance milestones in connection with the sale of the first commercialized product by the Company for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $ 1.0 million that, if paid, would be offset against the Company’s milestone payment obligations. Certain other development milestones related to the acquisition were tied to programs which are no longer under development by the Company, 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 condensed consolidated statements of operations and comprehensive income (loss) (see Note 3). 12 The fair value of the contingent consideration was $ 10.8 million as of June 30, 2025. 9. Collaborations, contracts and licensing agreements Collaborations Qilu Pharmaceutical Co., Ltd. In December 2021, the Company entered into a technology transfer and licensing agreement (the Qilu License Agreement) with Qilu Pharmaceutical Co., Ltd. (Qilu), pursuant to which the Company granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by the Company, which was non-exclusive as to development and manufacturing and exclusive with respect to commercialization of 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, net of withholding taxes, on January 5, 2022, and agreed to pay the Company up to $ 245.0 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. 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 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 were payable on a product-by-product and region-by-region basis, subject to certain limitations. Qilu was 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 was 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 was established between the Company and Qilu to coordinate and review the development, manufacturing and commercialization plans. Both parties also entered into a supply agreement and related quality agreement pursuant to which the Company would manufacture and supply Qilu with all quantities of imdusiran necessary for Qilu to develop and commercialize in Greater China and Taiwan until the Company completed its manufacturing technology transfer to Qilu and Qilu 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 Qilu 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 common shares as of the close of trading on December 10, 2021 (the Share Transaction). The Company received $ 15.0 million of gross proceeds from the Share Transaction on January 6, 2022. The common shares sold to the Investor in the Share Transaction represented approximately 2.5 % of the common shares outstanding immediately prior to the execution of the Share Purchase Agreement. In June 2025, the Company and Qilu mutually agreed to conclude the strategic partnership and terminated the Qilu License Agreement and related agreements, and the Company now once again holds global rights for imdusiran. As no obligations remain under the Qilu License Agreement, the Company recognized all previously deferred revenue of $9.6 million in the second quarter of 2025. For the period of time the Qilu License Agreement was effective, it fell under the scope of ASC 808 as both parties were active participants in the arrangement and were exposed to significant risks and rewards. While this arrangement was in the scope of ASC 808, the Company analogized 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 (as defined in the Qilu License Agreement) (the Qilu License) and (ii) drug supply obligations and manufacturing technology transfer (the Manufacturing Obligations). The Company determined that these two commitments were 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 Agreement without the Company’s involvement in the manufacturing activities until the transfer of the manufacturing know-how was complete. As such, the Company combined these commitments into one performance obligation to which the transaction price was allocated and recognized this transaction price associated with the 13 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 included 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 reevaluated the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, adjusted its estimate of the overall transaction price. Any such adjustments were recorded on a cumulative catch-up basis, which 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 $ 50,445 $ — Less contract asset — Total deferred license revenue $ — Due to the conclusion of the strategic partnership with Qilu, the Company recognized the remainder of the $ 9.6 million of deferred revenue during the three months ended June 30, 2025. The Company also recognized $ 0.5 million of revenue based on labor hours expended by the Company on its Manufacturing Obligations during the six months ended June 30, 2025. The Company recognized $ 0.5 million and $ 0.8 million during the three and six months ended June 30, 2024, respectively, related to labor hours expended. The Company incurred $ 0.6 million of incremental costs in obtaining the Qilu License Agreement, which was capitalized in other current assets and other assets and amortized as a component of general and administrative expense commensurate with the recognition of the combined performance obligation. During the three months ended June 30, 2025, the Company recognized the $0.1 million remaining amortization expense, for a total amortization expense for the six months ended June 30, 2025 of $0.2 million. The Company recognized amortization expense of less than $ 0.1 million for both the three and six months ended June 30, 2024. Until the conclusion of the strategic partnership with Qilu, the Company reevaluated the transaction price and the total estimated labor hours expected to be incurred to satisfy the performance obligations and adjusted the deferred revenue at the end of each reporting period, which resulted in changes to the amount of collaboration revenue recognized and deferred revenue. Barinthus Biotherapeutics plc In July 2021, the Company entered into a clinical collaboration agreement with Barinthus Biotherapeutics plc (Barinthus), formerly Vaccitech plc, to evaluate imdusiran followed by Barinthus’ VTP-300, an HBV immunotherapy, and ongoing nucleos(t)ide analogue therapy in patients with cHBV. This clinical trial was amended to include a treatment arm with the addition of an approved PD-1 monoclonal antibody inhibitor, nivolumab (Opdivo ® ). The Company is responsible for managing this Phase 2a proof-of-concept clinical trial, subject to oversight by a joint development committee comprised of representatives from the Company and Barinthus. The Company and Barinthus retain full rights to their respective product candidates and will split all costs associated with the clinical trial. The Company incurred $ 0.3 million and $0.6 million of expenses, net of Barinthus’s 50% share, during the three and six months ended June 30, 2025, respectively, and $ 0.5 million and $1.0 million during the three and six months ended June 30, 2024, respectively, and reflected those costs in research and development in the condensed consolidated statements of operations and comprehensive income (loss). 14 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 the LNP License Agreement with Alnylam that entitles Alnylam to develop and commercialize products with the Company’s LNP technology. Alnylam launched ONPATTRO, the first approved application of the Company’s LNP technology, 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 million of future royalty payments from Alnylam, and the Company is not obligated to reimburse OMERS if it fails 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 June 30, 2025, an aggregate of $ 25.9 million of royalties have been earned by OMERS. The Company also is receiving a second royalty interest of 0.75 % to 1.125 % on global net sales of ONPATTRO, with 0.75 % applying to sales greater than $ 500 million, originating from a settlement agreement and subsequent license agreement with Acuitas. This royalty entitlement from Acuitas has been retained by the Company and was not part of the royalty entitlement sale to OMERS. Revenues are summarized in the following table: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (in thousands) (in thousands) Revenue from collaborations and licenses Acuitas Therapeutics, Inc. $ 591 $ 642 $ 1,095 $ 1,337 Qilu Pharmaceutical Co., Ltd. 9,622 513 10,434 757 Non-cash royalty revenue Alnylam Pharmaceuticals, Inc. 526 571 974 1,164 Total revenue $ 10,739 $ 1,726 $ 12,503 $ 3,258 10. 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 (the Sale Agreement), under which the Company could offer and sell common shares, from time to time. Prior to the termination of the Sale Agreement, the Company did not issue any common shares pursuant to the Sale Agreement during the six months ended June 30, 2025. During the three and six months ended June 30, 2024, the Company issued 7,833,922 and 16,499,999 common shares pursuant to the Sale Agreement, respectively, resulting in net proceeds of $ 22.4 million and $ 44.1 million, respectively. 15 Stock-based compensation The table below summarizes information about the Company’s stock-based compensation for the three and six months ended June 30, 2025 and 2024 and the expense recognized in the condensed consolidated statements of operations: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (in thousands, except share and per share data) Stock options Options granted during period 762,400 424,200 4,706,122 4,163,000 Weighted average exercise price $ 3.34 $ 3.27 $ 3.32 $ 2.49 Restricted stock units (RSUs) Restricted stock units granted during period — — 901,900 1,316,200 Grant date fair value $ — $ — $ 3.29 $ 2.40 Stock compensation expense Research and development $ 374 $ 1,119 $ 929 $ 2,160 General and administrative 390 2,061 1,128 3,034 Total stock compensation expense $ 764 $ 3,180 $ 2,057 $ 5,194 11. 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 condensed and consolidated statements of operations and comprehensive income (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. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (in thousands) Revenue $ 10,739 $ 1,726 $ 12,503 $ 3,258 Less: Research and development employee expense, lab supplies and overhead 2,297 6,908 6,733 14,008 Imdusiran IM-PROVE I, II & III clinical trials expense 1,405 4,010 3,789 9,399 AB-101-001 Phase 1a/1b clinical trial expense 1,738 3,186 3,637 5,996 Other early research and development programs expense 58 1,447 298 1,551 General and administrative expense 3,328 7,547 9,160 12,859 Restructuring expense 165 — 12,538 — Other segment expense (1) 267 253 590 490 Add: Interest income 1,042 1,829 2,239 3,374 Segment net income (loss) $ 2,523 $ ( 19,796 ) $ ( 22,003 ) $ ( 37,671 ) Adjustments and reconciling items — — — — Consolidated net income (loss) $ 2,523 $ (19,796) $ (22,003) $ (37,671) (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. 16 12. Restructuring In March 2025, the Board took action to reduce the Company’s workforce by 57 %. The Board also decided to exit the Company’s corporate headquarters in Warminster, Pennsylvania and to discontinue in-house scientific research. In connection with these actions, the Company incurred a one-time restructuring charge in the first quarter of 2025 of $ 12.4 million and $ 0.2 million in the second quarter of 2025, which includes approximately $ 6.1 million of cash severance and continued benefits paid, $ 2.3 million of non-cash expense related to the modification of equity awards, non-cash impairment charges for leasehold improvements and laboratory equipment of $ 1.9 million and $ 0.9 million, respectively, $ 0.9 million related to impairment of the right-of-use asset associated with the lease of the Company’s corporate headquarters and a $ 0.4 million accrual of lease-related operating expenses. As of June 30, 2025, there was $ 0.4 million of accrued restructuring costs for severance payments and a $ 0.3 million accrual of lease-related operating expenses included in accounts payable and accrued liabilities. 13. Related Party Transaction On August 5, 2025, the Company entered into an agreement with Keith Manchester, M.D. for consulting services regarding the Company’s development strategy and its hepatitis B programs. Dr. Manchester served as a member of the Board until February 24, 2025 and is considered a related person due to his service on the Board during the current fiscal year. In connection with this agreement, the Company granted an option to purchase 400,000 common shares to Dr. Manchester, with 5/48ths vesting immediately and the remainder vesting monthly. Vesting of all unvested shares may be accelerated if certain performance conditions are achieved, at the discretion of the Board. The grant date fair value of the award was calculated using the Black-Scholes option valuation model, and expense will be recognized over the expected service period. The Company will accelerate recognition of any unrecognized expense if and when it becomes probable that the performance conditions will be satisfied. 17