Arbutus Biopharma Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report; separate Q4 results are not provided in the filing text. Financial amounts below are in U.S. dollars.
Business context
Arbutus is a clinical-stage biopharmaceutical company focused on hepatitis B (HBV) therapeutics and discovery-stage coronavirus treatments. Its HBV strategy is to develop combination therapies intended to achieve a functional cure. The lead candidate, AB-729, was being studied in Phase 1 and multiple Phase 2a trials. AB-836 was in a Phase 1a/1b trial; AB-101 and AB-161 remained in lead optimization. The company had no product sales.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $11.0 million | $6.9 million |
| Operating expenses | $84.5 million | $64.7 million |
| Loss from operations | $73.5 million | $57.8 million |
| Net loss | $76.2 million | $63.7 million |
| Net loss attributable to common shares | $88.4 million; $0.83 per share | $75.9 million; $1.00 per share |
| Net cash used in operating activities | $67.5 million | $51.4 million |
| Net cash provided by financing activities | $137.2 million | $86.7 million |
- Revenue rose by $4.1 million, primarily from higher ONPATTRO-related royalties. FY2021 revenue included $6.1 million of non-cash royalty revenue from Alnylam and $4.7 million of Acuitas royalties; there were no product-sales revenues.
- Research and development expense increased $16.2 million to $65.5 million, reflecting expanded AB-729 and AB-836 trials and spending on early-stage programs. General and administrative expense increased $2.3 million to $17.1 million.
- Cash and cash equivalents were $109.3 million, with marketable securities of $81.7 million, for total cash and investments of $191.0 million at year-end. Current assets were $160.7 million and current liabilities $11.2 million. The company reported no outstanding debt.
- Total liabilities were $35.0 million, including a $16.3 million liability related to the sale of future royalties and $5.3 million of contingent consideration.
- Financing included $134.7 million net proceeds from common-share sales under the at-the-market program. Common shares outstanding increased from 89.7 million to 145.0 million during 2021. Roivant’s preferred shares converted into 22.8 million common shares in October 2021.
Material changes and notable items
- Operating cash use increased $16.1 million year over year as clinical and discovery spending grew. The net loss widened, while loss per common share narrowed from $1.00 to $0.83, reflecting a larger weighted-average share count.
- In December 2021, Arbutus licensed AB-729 development and commercialization rights in China, Hong Kong, Macau and Taiwan to Qilu. The agreement provides a $40 million upfront payment, up to $245 million in milestones and tiered royalties described as double-digit, reaching the low twenties percent. The $40 million payment and $15 million related equity investment were received in January 2022, after year-end.
- The company sold shares to Qilu’s affiliate at $4.19 per share, a stated 15% premium to the preceding 30-day average; the $15 million gross proceeds were also received in January 2022.
- FY2021 included a $1.9 million increase in the fair value of contingent consideration tied to the Enantigen acquisition. This liability depends on uncertain HBV development and commercialization assumptions.
- Ernst & Young issued an unqualified opinion on the financial statements. The auditor identified valuation of the contingent consideration liability as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not express an opinion on internal control.
Outlook, risks and contingencies
- Management estimated 2022 net cash burn of $90–$95 million and expected year-end 2021 cash and investments, plus the $55 million received from Qilu in January 2022, to fund operations into the second quarter of 2024. This is a forecast, not a guarantee; management noted that spending or circumstances could change.
- Management expected additional AB-729 follow-up and combination-trial data in 2022, additional AB-836 data in the first half of 2022, and IND-enabling work for AB-101 and AB-161 in the second half of 2022. These are forward-looking timelines, subject to clinical, regulatory, enrollment and funding risks.
- Russia’s invasion of Ukraine disrupted or could disrupt trials involving patients and sites there. The company warned that patients may be lost to follow-up and that limited data may result from the Antios collaboration cohort.
- Other key risks include early-stage clinical uncertainty, reliance on third-party manufacturers and collaborators, competition, future financing needs and potential shareholder dilution. The company had an accumulated deficit of approximately $1.1 billion and did not expect near-term profitability.
- In February 2022, Arbutus and Genevant sued Moderna for patent infringement related to the manufacture and sale of its COVID-19 vaccine, seeking damages but not an injunction. Separately, UBC alleged that $2.0 million plus interest was due in connection with the ONPATTRO royalty sale; Arbutus disputed the claim, with arbitration hearings scheduled for April 2022. The company stated that ordinary-course legal matters were not expected to have a material adverse effect, but outcomes remain uncertain.
- The ONPATTRO royalty interest sold to OMERS will revert to Arbutus only after OMERS receives $30 million; $11.2 million had been earned by OMERS through December 31, 2021. Arbutus retains a separate, lower Acuitas royalty interest.
Important facts for investors to verify
- Whether clinical-trial results, enrollment and timelines support the expected development of AB-729 and AB-836, including the impact of Ukraine-related disruptions.
- Whether the $191.0 million year-end liquidity, Qilu proceeds and projected cash burn support management’s stated runway into Q2 2024.
- The distinction between cash and non-cash royalty revenue, the timing of any OMERS royalty reversion, and the conditions attached to Qilu milestones and royalties.
- Potential dilution from share issuance, outstanding options and future financing; also consider Roivant’s approximately 27% ownership following the preferred-share conversion.
- Developments and potential financial impact of the Moderna patent lawsuit, UBC arbitration, and the Enantigen contingent-consideration liability.