Arbutus Biopharma Corporation — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts are in U.S. dollars. Arbutus is a clinical-stage biopharmaceutical company focused primarily on chronic hepatitis B (HBV), with an additional coronavirus drug-discovery program.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $2.3m | $1.5m | $4.4m | $3.0m |
| Operating expenses | $21.0m | $14.7m | $38.8m | $29.3m |
| Operating loss | $18.6m | $13.1m | $34.3m | $26.3m |
| Net loss | $19.4m | $14.1m | $35.8m | $27.9m |
| Net loss attributable to common shares | $22.7m | $17.1m | $42.2m | $33.9m |
| Basic and diluted loss per share | $0.23 | $0.25 | $0.44 | $0.49 |
- Revenue was principally collaboration and license revenue, including Acuitas royalties, and non-cash royalty revenue tied to ONPATTRO sales. Management attributed the increase to growth in ONPATTRO sales.
- Research and development expense was $15.4m in Q2 and $28.8m for the half-year, up from $10.5m and $20.9m, respectively. The increase reflected clinical development and discovery activity, including Assembly collaboration and coronavirus research.
- At June 30, cash, cash equivalents and marketable securities totaled $121.3m, versus $123.3m at December 31, 2020. Total assets were $135.4m and stockholders’ equity was $100.8m.
- Six-month operating cash use was $31.9m, compared with $24.3m in 2020. Investing activities used $20.5m, while financing activities provided $31.2m, primarily from common-share sales.
- The company reported no outstanding debt. It had an $19.0m liability related to the sale of future royalties, $4.2m of contingent consideration, and $2.8m of lease liabilities at June 30.
Material changes and developments
- For the first half, operating expenses rose $9.5m year over year, while revenue rose $1.4m. The net loss increased $7.8m; loss per share narrowed, reflecting a higher weighted-average share count.
- Arbutus issued 7.85m common shares under its Open Market Sale Agreement during the first half, raising approximately $30.7m net. Common shares outstanding increased from 89.7m at year-end to 97.7m at June 30.
- R&D was the largest expense category. General and administrative expense also increased, primarily due to stock-based compensation and professional fees. Contingent-consideration fair-value expense increased to $0.8m for the half-year from $0.2m.
- In June, Arbutus entered a clinical collaboration with Antios for an HBV combination trial. Subsequent to quarter-end, it entered a collaboration with Vaccitech and received FDA authorization to proceed with an AB-729 combination trial with Peg-IFNα-2a.
Outlook, risks and contingencies
- Management expected available cash resources to fund operations through the third quarter of 2022, based on expected 2021 net cash burn of $70m–$75m. The company noted that further substantial funding will be needed for pipeline development.
- Management expected additional AB-729 Phase 1a/1b data and initial AB-836 Phase 1a/1b data in the second half of 2021. It expected the AB-729/Peg-IFNα-2a and AB-729/Antios Phase 2a trials to begin in the second half of 2021; the Vaccitech trial was expected to begin in early 2022, subject to regulatory steps.
- COVID-19 could disrupt clinical-trial enrollment, travel, supply chains and development timelines; the company said future effects were uncertain. Clinical and regulatory outcomes, financing access, competition, manufacturing and intellectual-property matters are additional risks.
- UBC’s earlier arbitration matter was resolved after payment of awards. A separate UBC arbitration alleges $2.0m plus interest is due in connection with the OMERS royalty sale; Arbutus disputes the claim and planned to contest it, with hearings scheduled for April 2022.
- Patent challenges involving Moderna and European oppositions involving Moderna and Merck remained pending. The filing reported no material change in risk factors from the 2020 Form 10-K.
- Series A preferred shares accrue an 8.75% annual compounded return and were subject to mandatory conversion on October 18, 2021, subject to stated exceptions. Based on June 30 shares, conversion would have represented approximately 23m common shares and about 32% ownership for Roivant; related lockup and standstill periods were also due to expire that date.
Key facts for investors to verify
- Whether cash burn tracks the $70m–$75m 2021 expectation and whether the stated runway remains adequate.
- Clinical data, enrollment, safety and timing for AB-729 and AB-836, and progress of the planned combination trials.
- Further ATM share issuance, dilution, and the effect of preferred-share conversion and expiration of Roivant’s standstill.
- ONPATTRO royalty trends, OMERS recovery progress and potential reversion of the sold royalty interest.
- Developments in the UBC arbitration and the pending patent challenges, and any resulting financial or intellectual-property impact.