Arbutus Biopharma Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial amounts are in U.S. dollars. Arbutus is a clinical-stage biopharmaceutical company developing therapies primarily for chronic hepatitis B (HBV), with a separate coronavirus drug-discovery program. Revenue is primarily collaboration, license and royalty revenue, not product sales.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $3.34 million | $1.52 million | $7.78 million | $4.53 million |
| Research and development expense | $16.30 million | $12.07 million | $45.07 million | $32.95 million |
| Total operating expenses | $21.75 million | $16.74 million | $60.51 million | $46.03 million |
| Operating loss | $18.41 million | $15.22 million | $52.73 million | $41.51 million |
| Net loss | $19.16 million | $18.76 million | $54.93 million | $46.70 million |
| Net loss attributable to common shares | $24.25 million | $21.78 million | $66.49 million | $55.70 million |
| Loss per common share, basic and diluted | $0.24 | $0.27 | $0.68 | $0.77 |
| Cash used in operating activities | Not separately provided | Not separately provided | $47.93 million | $36.43 million |
Revenue rose 119% for Q3 and 72% for the first nine months year over year, mainly as ONPATTRO-related royalties from Alnylam and Acuitas increased. Q3 revenue included $1.86 million of non-cash royalty revenue; nine-month revenue included $3.96 million. R&D spending increased with clinical development, the Assembly collaboration and internal coronavirus research. The company remained loss-making; gross margin is not a meaningful disclosed measure for this clinical-stage business.
Financial position and liquidity
- Cash, cash equivalents and marketable securities totaled $151.94 million at September 30, 2021, versus $123.27 million at December 31, 2020. Cash and cash equivalents alone were $77.88 million.
- Working capital was $116.42 million, based on current assets of $126.54 million and current liabilities of $10.11 million.
- The company reported no outstanding debt. It had a $17.88 million liability related to the sale of future royalties, $5.11 million of contingent consideration and $2.74 million of lease liabilities.
- Operating cash use was $47.93 million for the first nine months, compared with $36.43 million a year earlier. Financing provided $78.12 million, mainly from common-share sales under its at-the-market agreement; investing used $4.56 million.
- Management said available cash resources were expected to fund operations into Q2 2023. The filing also stated an expected 2021 net cash burn of $70–$75 million.
Material changes and notable events
- Operating expenses increased 30% in Q3 and 31% over the nine-month period. The contingent-consideration fair-value expense was $1.68 million for the nine months, reflecting increased assumed probability of success as AB-729 advanced.
- Common shares outstanding increased from 89.68 million at December 31, 2020 to 110.26 million at September 30, 2021, primarily due to issuance under the share-sale agreement. The company raised $75.43 million net through that agreement during the first nine months.
- On October 18, 2021, after quarter-end, 1.164 million preferred shares converted into 22.83 million common shares. Roivant then owned approximately 29% of common shares. The filing reported 135.27 million common shares outstanding as of November 2, 2021.
- The company reported $38.6 million remaining under its March 2021 share-offering supplement at quarter-end and filed a further $75 million prospectus supplement on October 8, 2021.
Outlook, pipeline and risks
- AB-729, the lead RNAi candidate, was in Phase 1a/1b and Phase 2a studies. Management cited preliminary evidence of sustained HBsAg reductions and tolerability, and was pursuing combination studies with Peg-IFN, Assembly, Vaccitech and Antios. Initial Assembly trial data were expected in 2022; Vaccitech trial initiation was anticipated in early 2022.
- AB-836, an oral capsid inhibitor, was in Phase 1a/1b, with initial data expected in Q4 2021. The company was also conducting IND-enabling work for an oral PD-L1 program and lead optimization for oral HBV RNA destabilizers.
- Coronavirus discovery efforts targeted viral polymerase and protease; the company said it was progressing lead candidates toward nomination. These programs and clinical timelines remain subject to development uncertainty.
- Management warned that clinical-trial enrollment, supply-chain delays and other effects of COVID-19 could affect development plans. Future funding needs depend on trial results, costs, collaborations, regulatory decisions and access to capital; additional financing may be needed, and its availability or terms are not assured.
- UBC has a pending arbitration alleging $2.0 million plus interest is due in connection with the ONPATTRO royalty sale. Arbutus disputes the claim; hearings were scheduled to begin April 25, 2022. A separate earlier UBC arbitration was fully resolved.
- Patent challenges involving Moderna and European oppositions involving Moderna and Merck remained ongoing. The filing reported no material changes to the risk factors from the 2020 Form 10-K.
Important facts for investors to verify
- Whether AB-729 and AB-836 clinical data, including expected readouts and trial-start timelines, support management’s development assumptions.
- Actual quarterly cash burn and whether the stated runway into Q2 2023 remains achievable as R&D spending continues.
- The extent of future share issuance and dilution, including the preferred-share conversion and use of the expanded at-the-market capacity.
- ONPATTRO sales and royalty collections, the balance and terms of the OMERS royalty liability, and the timing of any reversion of the sold royalty interest.
- Outcomes and potential financial or intellectual-property effects of the UBC arbitration and patent proceedings.