Arbutus Biopharma Corporation — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Financial amounts below are in U.S. dollars; statements are unaudited. Arbutus is a clinical-stage biopharmaceutical company developing treatments intended to achieve a functional cure for chronic hepatitis B (HBV).
Financial highlights
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $4.7 million | $6.0 million | $16.0 million | $32.8 million |
| Operating expenses | $26.2 million | $23.8 million | $73.4 million | $75.7 million |
| Operating loss | $21.6 million | $17.8 million | $57.4 million | $42.9 million |
| Net loss | $20.1 million | $17.6 million | $53.5 million | $47.5 million |
| Loss per share, basic and diluted | $0.12 | $0.12 | $0.32 | $0.32 |
| Net cash used in operating activities | Not presented for quarter | Not presented for quarter | $68.6 million | $18.4 million |
Q3 revenue fell about 22% year over year, while nine-month revenue fell about 51%. The nine-month decline primarily reflects lower Qilu license revenue as the company progressed through its technology-transfer obligations, as well as lower ONPATTRO-related royalties. Q3 operating expenses rose about 10%; nine-month expenses declined about 3%. Higher nine-month general and administrative costs, including legal fees and stock compensation, partly offset lower R&D spending.
At September 30, 2023, cash and cash equivalents were $17.5 million and marketable securities were $127.1 million, totaling $144.7 million. Total current assets were $141.6 million and current liabilities were $22.3 million. The company reported no outstanding debt. Total liabilities were $39.3 million and stockholders’ equity was $119.3 million. Cash and cash equivalents decreased $13.2 million from year-end 2022.
For the first nine months, investing activities provided $28.5 million, mainly from security maturities, and financing activities provided $26.8 million, primarily from $26.0 million in at-the-market share sales. Operating cash use was materially higher than in 2022, when Qilu upfront and equity-related receipts supported cash flow. The company issued 9.85 million shares under its sale agreement during the nine months; shares outstanding increased from 157.5 million at year-end 2022 to 167.7 million at September 30, 2023.
Gross margin is not presented as a separate measure in the filing. The company reported no income tax expense in the first nine months of 2023; the comparable 2022 period included $4.4 million of tax expense related to Qilu withholding taxes.
Business, pipeline and material developments
- Imdusiran (AB-729), an RNAi therapeutic, was in two Phase 2a combination trials. Management reported preliminary data suggesting continued HBsAg declines in some patients receiving imdusiran with pegylated interferon, and said it expected trial updates in 2024. Preliminary data from the Barinthus combination trial was expected in Q4 2023; data from its added nivolumab arm was expected in 2024.
- AB-101, an oral PD-L1 inhibitor, remained on FDA clinical hold following questions about preclinical data and trial design. New Zealand approved a Phase 1 trial, and the company reported dosing the first group of healthy subjects. Initial part-one data was expected in the first half of 2024. The filing cautions that FDA may require additional studies or may not accept results from the New Zealand trial.
- The company discontinued AB-161 in Q3 after a preclinical male reproductive toxicity finding and terminated its Phase 1 trial; it reported no safety issues in subjects who received single doses. It also ended its coronavirus combination-development effort and terminated the X-Chem/Proteros agreement after AB-343 showed an unfavorable pharmacokinetic profile in enabling studies.
- ONPATTRO royalties generated $3.0 million of collaboration and license revenue and $2.7 million of non-cash royalty revenue in the first nine months. OMERS had earned $21.5 million of the $30 million threshold after which the sold royalty interest is to revert to Arbutus; timing depends on future royalty receipts.
- On November 6, 2023, after quarter-end, Arbutus reduced its workforce by 24%, primarily in research, and expected a one-time $1.1 million restructuring charge in Q4. It said it would retain research scientists to continue HBV discovery work.
Outlook, risks and contingencies
Management said the $144.7 million of cash, cash equivalents and investments was sufficient to fund operations into Q1 2026, and projected 2023 net cash burn of $90 million to $95 million, excluding proceeds from the sale agreement. These are forward-looking estimates and depend on development costs, collaboration and royalty receipts, financing access, and other factors. The company stated that substantial additional funding will be required to advance its pipeline and that financing may not be available on acceptable terms.
Key uncertainties include clinical and regulatory outcomes, particularly the AB-101 FDA hold; clinical development and manufacturing risks; and patent litigation. Arbutus and Genevant are pursuing infringement-damages cases against Moderna and Pfizer/BioNTech; Acuitas has filed a related declaratory-judgment case in New Jersey. The Moderna claim-construction hearing was set for February 2024, while later dates in the other matters remained pending. The filing does not quantify potential litigation recoveries or losses. The company also carries $7.4 million of contingent consideration related to its Enantigen acquisition, tied principally to sales milestones for its first commercial HBV product.
Investor verification points
- Track cash burn against management’s $90–$95 million 2023 estimate and the stated Q1 2026 funding runway, including the effect of the workforce reduction.
- Verify progress and data timing for both imdusiran Phase 2a trials and the AB-101 Phase 1 program; assess whether FDA concerns affect U.S. development.
- Monitor Qilu revenue recognition and milestone progress, and ONPATTRO royalties, including the remaining distance to OMERS’s $30 million reversion threshold.
- Review continued ATM share issuance and dilution, alongside available financing capacity.
- Follow the Moderna, Pfizer/BioNTech and Acuitas proceedings; outcomes and any recoveries are uncertain and not quantified in the filing.