Arbutus Biopharma(ABUS) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Arbutus Biopharma reported a $23.3 million net loss for Q1 2019, with total assets decreasing to $209.2 million and cash increasing to $84.0 million Condensed Consolidated Balance Sheets Total assets decreased to $209.2 million as of March 31, 2019, driven by reduced short-term investments, with equity at $181.2 million Condensed Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $83,969 | $36,942 | | Short-term investments | $26,621 | $87,675 | | Total current assets | $112,486 | $129,229 | | Total assets | $209,216 | $227,905 | | Liabilities & Equity | | | | Total current liabilities | $8,823 | $11,239 | | Total liabilities | $28,007 | $27,671 | | Total stockholders' equity | $181,209 | $200,234 | | Total liabilities and stockholders' equity | $209,216 | $227,905 | Condensed Consolidated Statements of Operations Revenue decreased to $0.7 million in Q1 2019, resulting in a $23.3 million net loss, primarily due to an equity investment loss Statement of Operations Summary (in thousands of U.S. dollars, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Revenue | $679 | $1,436 | | Research, development, collaborations and contracts | $14,712 | $13,949 | | General and administrative | $4,412 | $3,669 | | Site consolidation | $117 | $1,621 | | Total expenses | $19,750 | $19,841 | | Loss from operations | $(19,071) | $(18,405) | | Equity investment (loss) | $(4,651) | — | | Net loss | $(23,251) | $(17,429) | | Net loss attributable to common shares | $(25,966) | $(19,765) | | Basic and diluted net loss per share | $(0.47) | $(0.36) | Condensed Consolidated Statements of Cash Flow Net cash used in operations was $16.6 million, with investing activities providing $61.0 million, increasing cash to $84.0 million Cash Flow Summary (in thousands of U.S. dollars) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(16,580) | $(19,967) | | Net cash provided by (used in) investing activities | $61,033 | $(75,666) | | Net cash provided by financing activities | $2,536 | $54,367 | | Increase (Decrease) in cash and cash equivalents | $47,027 | $(41,831) | | Cash and cash equivalents, end of period | $83,969 | $12,461 | Notes to Condensed Consolidated Financial Statements Notes detail the company's HBV cure focus, ASC 842 adoption, a $4.7 million equity loss from Genevant, and ongoing UBC arbitration - The company is a biopharmaceutical business focused on discovering, developing, and commercializing a cure for chronic hepatitis B (HBV) Its pipeline includes AB-506 (oral capsid inhibitor), AB-729 (RNAi therapeutic), and AB-452 (oral RNA destabilizer)[16] - The company adopted the new lease accounting standard, ASC 842, on January 1, 2019, resulting in the recognition of right-of-use assets of approximately $3.2 million and lease liabilities of $4.1 million[31] - The company holds a 40% equity interest in Genevant and recorded an equity investment loss of $4.7 million for its proportionate share of Genevant's net loss for the three months ended March 31, 2019[41] - The company is in an ongoing arbitration with the University of British Columbia (UBC), which is seeking $10.9 million in alleged unpaid royalties The company has not recorded an estimate of possible loss due to uncertainty[64][65] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the HBV cure strategy, pipeline candidates, $0.7 million revenue, $23.3 million net loss, and $110.6 million liquidity Overview Arbutus focuses on developing a curative combination regimen for chronic HBV, with key pipeline candidates AB-506, AB-729, and AB-452 - The company's primary objective is to develop a cure for chronic HBV by developing a pipeline of proprietary therapeutic agents targeting HBV replication, HBsAg expression, and immune reactivation[86][89] - Key clinical programs include AB-506 (capsid inhibitor), AB-729 (GalNAc RNAi), and AB-452 (HBV RNA destabilizer)[93][97][103][108] - The company anticipates initiating combination clinical trials with AB-506 and AB-729, along with an approved NA, in 2020[96] - A regulatory authority requested the completion of ongoing toxicology studies for AB-729 before commencing its Phase 1a/1b clinical trial, causing a delay to the planned Q2 2019 start[105] Results of Operations Q1 2019 revenue decreased to $0.7 million, R&D expenses increased, and a $4.7 million equity investment loss resulted in a total other loss Comparison of Operating Results (in thousands of U.S. dollars) | Line Item | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total revenue | $679 | $1,436 | | Research and development | $14,712 | $13,949 | | General and administrative | $4,412 | $3,669 | | Site consolidation | $117 | $1,621 | | Loss from operations | $(19,071) | $(18,405) | | Total other income (loss) | $(4,180) | $976 | - The decrease in revenue was due to 2018 including revenue from a license agreement with Gritstone, while 2019 revenue primarily consists of royalties from Alnylam's Onpattro™[121] - The shift to a significant 'Other loss' was driven by a $4.7 million equity investment loss from the company's 40% ownership in Genevant, accounted for on a one-quarter lag basis[132] Liquidity and Capital Resources As of March 31, 2019, liquidity totaled $110.6 million, sufficient to fund operations into 2020, with $16.6 million used in operations - The company held $84.0 million in cash and cash equivalents and $26.6 million in short-term investments, for a total of $110.6 million as of March 31, 2019[139] - Management believes current cash resources are sufficient to fund operations into 2020[144] - In Q1 2019, the company issued 614,401 common shares under its Open Market Sale Agreement, generating gross proceeds of approximately $2.7 million[140] - Net cash used in operating activities decreased to $16.6 million in Q1 2019 from $20.0 million in Q1 2018[136] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk disclosures have occurred since the 2018 Annual Report on Form 10-K - There have been no material changes in market risk disclosures since the 2018 Form 10-K[147] Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2019, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[148] - No material changes to the company's internal control over financial reporting occurred during the three months ended March 31, 2019[149] PART II. OTHER INFORMATION Legal Proceedings Legal matters, detailed in Note 11, include an ongoing arbitration with UBC regarding $10.9 million in alleged unpaid royalties - Information regarding legal matters is detailed in Note 11, which discusses the ongoing arbitration with the University of British Columbia[151][64] Risk Factors No material changes to risk factors have occurred since the company's 2018 Annual Report on Form 10-K - No material changes in risk factors have occurred since the company's 2018 Annual Report on Form 10-K[152] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes standard exhibits such as officer certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL financial data[155]