Arbutus Biopharma Corp. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Amounts are in U.S. dollars unless noted. Arbutus is a clinical-stage biopharmaceutical company focused primarily on hepatitis B (HBV), with coronavirus and oncology research programs.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $6.0 million | $3.3 million | $32.8 million | $7.8 million |
| Operating expenses | $23.8 million | $21.7 million | $75.7 million | $60.5 million |
| Loss from operations | $17.8 million | $18.4 million | $42.9 million | $52.7 million |
| Net loss | $17.6 million | $19.2 million | $47.5 million | $54.9 million |
| Net loss per common share, diluted | $0.12 | $0.24 | $0.32 | $0.68 |
| Cash used in operating activities | Not presented for quarter | Not presented for quarter | $18.4 million | $47.9 million |
- Revenue drivers: Qilu license and technology-transfer revenue was $23.0 million for the first nine months, including $2.4 million in Q3. Acuitas royalties and non-cash ONPATTRO royalty revenue also contributed. Revenue growth primarily reflects Qilu performance-obligation progress and higher ONPATTRO-related royalties.
- Expenses and losses: R&D expense rose 7% in Q3 and 33% for the nine-month period, mainly from AB-729 Phase 2a trials and early-stage programs AB-101 and AB-161. Revenue remains below operating costs; the company reported operating and net losses.
- Liquidity: Cash, cash equivalents and marketable securities totaled $190.2 million at September 30, 2022, versus $191.0 million at December 31, 2021. Cash and cash equivalents alone fell to $24.0 million from $109.3 million as funds were shifted into marketable securities. Current assets were $141.1 million and current liabilities $27.5 million.
- Debt and other liabilities: The company reported no outstanding debt. It had a $12.3 million liability related to the sale of future ONPATTRO royalties, $25.5 million of net deferred license revenue, and $5.9 million of contingent consideration.
Material changes versus prior comparable periods
- Nine-month revenue increased $25.0 million year over year, principally due to Qilu license revenue; Qilu accounted for 70% of reported revenue.
- Nine-month operating expenses increased $15.2 million, primarily from higher R&D spending. Operating and net losses nevertheless narrowed, aided by increased revenue and higher interest income.
- Operating cash use declined by $29.6 million year over year. The company attributed the change principally to Qilu cash receipts; it also disclosed $62.4 million of cash used in operations before the effects of those inflows and related working-capital items.
- Qilu paid a $40.0 million upfront fee and made a $15.0 million equity investment in January 2022. The agreement also provides for up to $245.0 million in milestone payments and tiered double-digit royalties, subject to achievement and other terms.
- Common shares outstanding increased to 152.7 million at September 30, 2022 from 145.0 million at year-end 2021. ATM share sales generated $9.2 million of net proceeds in the first nine months, compared with $75.4 million in the prior-year period.
Outlook, program updates and risks
- Management estimated net cash burn of $90–$95 million for 2022 and said available cash, cash equivalents and investments were expected to fund operations into Q2 2024. This is an estimate, not a guarantee; future development requires substantial additional funding.
- Management anticipated preliminary AB-729-201 data and completion of IND-enabling work for AB-101 and AB-161 in Q4 2022, and expected to nominate a coronavirus Mpro candidate in Q4 2022. These are forward-looking targets.
- AB-729 remains the lead HBV program and was being evaluated in multiple Phase 2 trials. The company described preliminary clinical findings as supporting further development; efficacy and safety remain subject to ongoing trials.
- Arbutus discontinued clinical development of AB-836 after ALT elevations in additional dosing studies. Assembly announced it would discontinue vebicorvir (VBR); Arbutus continued follow-up of the combination trial. Antios terminated its trial and Arbutus ended that collaboration after Ukraine-based patients were lost to follow-up.
- The invasion of Ukraine disrupted trials and may delay or increase the cost of ongoing and planned clinical development. COVID-19-related supply-chain or enrollment disruptions also remained possible.
- Patent disputes remain material uncertainties. Arbutus and Genevant are pursuing patent-infringement damages from Moderna; Acuitas filed a declaratory-judgment action challenging patents related to the Pfizer/BioNTech vaccine. The filing does not quantify any potential recovery or liability. The separate UBC royalty arbitration was resolved in Arbutus’s favor, with a $0.5 million cost reimbursement received in October 2022.
- Qilu-related withholding taxes of $4.4 million were recorded as income-tax expense for the nine-month period. The $0.5 million UBC cost reimbursement was awarded in September and received after quarter-end.
Key facts for investors to verify
- Whether actual cash burn and R&D spending remain consistent with management’s $90–$95 million 2022 estimate and Q2 2024 runway outlook.
- Progress, safety findings and data timing for AB-729 trials, and completion of AB-101 and AB-161 IND-enabling work.
- Qilu technology-transfer progress, revenue recognition, milestone achievement and the remaining deferred license balance.
- Cash generation from ONPATTRO-related royalties and the terms and timing under which the royalty sold to OMERS could revert to Arbutus.
- Clinical and financial effects of the Ukraine disruption, discontinuation of AB-836 and VBR, and termination of the Antios collaboration.
- Developments in the Moderna and Acuitas patent litigation, including any decisions affecting patent validity, infringement or potential recoveries.
- Future share issuance and dilution under the ATM facility; approximately $142.6 million remained available under specified prospectus supplements at September 30, 2022.