Arbutus Biopharma Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Arbutus is a clinical-stage biopharmaceutical company focused on hepatitis B and coronavirus therapeutics. Financial amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 or comparison |
|---|---|---|
| Revenue | $6.7 million | $12.6 million; down $5.9 million, or 47% |
| Operating expenses | $24.1 million | $23.6 million |
| Operating loss | $17.4 million | $11.0 million |
| Net loss | $16.3 million; $0.10 per share | $15.8 million; $0.11 per share |
| Operating cash flow | $(27.3) million | $20.6 million provided |
| Cash, cash equivalents and marketable securities | $178.5 million at March 31 | $184.3 million at December 31, 2022 |
Revenue comprised $4.1 million from Qilu, $1.4 million of Acuitas ONPATTRO royalties and $1.2 million of non-cash royalty revenue related to royalties allocated to OMERS. No gross margin is presented; the filing reports operating expenses and operating loss. Interest income was $1.3 million, compared with $0.2 million a year earlier. Interest expense was $0.2 million. There was no income tax expense in Q1 2023; the prior-year quarter included $4.4 million of tax expense related to Qilu withholding taxes.
At quarter-end, current assets were $152.9 million and current liabilities were $25.2 million. Total liabilities were $47.3 million, including a $9.4 million liability related to the sale of future royalties; the company reported no outstanding debt. Cash and cash equivalents alone were $40.6 million. Cash rose $9.8 million during the quarter, supported by $19.9 million of net proceeds from share sales under the at-the-market program and $16.7 million of net investment maturities and purchases.
Changes versus the prior-year quarter
- Revenue declined mainly because less Qilu license revenue was recognized as the company progressed through its manufacturing and technology-transfer obligations, and ONPATTRO royalty revenue decreased.
- Operating expenses were broadly stable: lower spending on the discontinued AB-836 trial was largely offset by higher coronavirus and other early-stage program costs. General and administrative expense rose $0.7 million.
- Operating cash flow shifted from $20.6 million provided to $27.3 million used. The comparison reflects the Qilu upfront payment and related equity investment received in January 2022, as well as timing of accruals and payments.
- Net loss increased modestly despite the absence of the prior-year tax expense, reflecting the lower revenue and higher operating loss.
Outlook, programs and material developments
- Management expects net cash burn of $90 million to $95 million in 2023 and believes available cash, cash equivalents and investments will fund operations into the first quarter of 2025. These are estimates and depend on development costs, revenues, partnerships and financing availability.
- AB-729 is being evaluated in multiple Phase 2 trials for chronic hepatitis B. The company expected preliminary data from its Peg-IFN combination trial in Q2 2023 and from its Vaccitech collaboration in the second half of 2023.
- The first healthy subject was dosed in the Phase 1 trial of AB-161; initial single-ascending-dose data was expected in the second half of 2023.
- In April 2023, after quarter-end, the FDA verbally notified the company that the AB-101 investigational new drug application was on clinical hold. No patients had been dosed. The company no longer expected initial Phase 1 data in the second half of 2023 and warned the hold may take time and expense to resolve, or may not be lifted.
- AB-343 was in IND-enabling studies; the company expected to initiate a Phase 1 trial in the second half of 2023. It also planned to nominate an nsp12 coronavirus candidate and begin IND-enabling work.
- Qilu’s agreement includes up to $245 million in milestone payments, net of withholding taxes, and tiered double-digit royalties; milestones are contingent and not assured. At March 31, $18.4 million of net deferred license revenue remained.
- Arbutus and Genevant filed a patent-infringement damages action against Pfizer and BioNTech on April 4, 2023. The existing Moderna action also seeks damages, not an injunction. Separately, on April 11, 2023, the Federal Circuit affirmed the finding that all claims of Arbutus’s ’127 patent were invalid. Outcomes and potential financial effects of the cases are uncertain.
Key investor verification points
- Confirm actual cash burn, financing activity and runway against management’s $90–$95 million 2023 burn estimate and first-quarter 2025 runway statement.
- Track AB-101’s written FDA hold letter, the company’s response, and whether or when the hold is lifted.
- Review clinical data and timelines for AB-729, AB-161 and AB-343, including whether planned trials and readouts proceed as expected.
- Assess the pace of Qilu technology transfer and milestone progress, and changes in collaboration revenue recognized from deferred revenue.
- Monitor dilution: Arbutus issued 7.4 million shares through its ATM in Q1 for $19.9 million net, and reported approximately $110.7 million remaining available under the cited prospectus supplements.
- Follow the Moderna, Pfizer/BioNTech and Acuitas disputes and patent proceedings; the filing does not provide a clear estimate of any potential recovery or loss.