Arbutus Biopharma(ABUS) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Arbutus Biopharma Corporation's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :----------------------------------- | :--------------------------- | :----------------------------- | | Total Current Assets | $99,583 | $129,229 | | Total Assets | $192,570 | $227,905 | | Total Current Liabilities | $8,799 | $11,239 | | Total Liabilities | $28,104 | $27,671 | | Total Stockholders' Equity | $164,466 | $200,234 | - Total current assets decreased from $129.2 million at December 31, 2018, to $99.6 million at June 30, 2019, primarily due to a reduction in short-term investments[5] - Total stockholders' equity decreased from $200.2 million at December 31, 2018, to $164.5 million at June 30, 2019[5] Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $653 | $1,244 | $1,332 | $2,680 | | Total Expenses | $21,168 | $23,290 | $40,918 | $43,131 | | Loss from operations | $(20,515) | $(22,046) | $(39,586) | $(40,451) | | Net (loss) income | $(23,315) | $3,091 | $(46,566) | $(14,338) | | Net (loss) income attributable to common shares | $(26,077) | $550 | $(52,043) | $(19,215) | | Basic EPS | $(0.46) | $0.01 | $(0.92) | $(0.35) | | Diluted EPS | $(0.46) | $0.01 | $(0.92) | $(0.35) | - Revenue decreased by $0.6 million for the three months ended June 30, 2019, and by $1.3 million for the six months ended June 30, 2019, compared to the same periods in 2018[7] - The company reported a net loss of $23.3 million for the three months ended June 30, 2019, compared to a net income of $3.1 million in the prior year period, and a net loss of $46.6 million for the six months ended June 30, 2019, compared to a net loss of $14.3 million in the prior year period[7] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's net income or loss and other comprehensive income or loss components | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(23,315) | $3,091 | $(46,566) | $(14,338) | | Other comprehensive loss: Share of other comprehensive loss of equity method investment | $(52) | — | $(74) | — | | Comprehensive income (loss) | $(23,367) | $3,091 | $(46,640) | $(14,338) | - Comprehensive loss for the three months ended June 30, 2019, was $23.4 million, compared to comprehensive income of $3.1 million for the same period in 2018[9] Condensed Consolidated Statement of Stockholders' Equity This section details changes in the company's stockholders' equity, including net loss, stock-based compensation, and share issuances | Metric (in thousands) | December 31, 2018 | June 30, 2019 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $200,234 | $164,466 | | Common Shares Outstanding | 55,518,800 | 56,850,172 | | Net Loss (Six months ended June 30, 2019) | N/A | $(46,566) | | Stock-based compensation (Six months ended June 30, 2019) | N/A | $5,580 | | Issuance of common shares (Six months ended June 30, 2019) | N/A | $4,725 | - Total stockholders' equity decreased by $35.8 million from December 31, 2018, to June 30, 2019, primarily due to a net loss of $46.6 million, partially offset by stock-based compensation and common share issuances[10][11] - The number of common shares outstanding increased from 55,518,800 at December 31, 2018, to 56,850,172 at June 30, 2019, due to issuances from the Open Market Sale Agreement and option exercises[10][11] Condensed Consolidated Statements of Cash Flow This section reports the cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(17,605) | $(17,622) | $(34,185) | $(37,589) | | Net cash provided by (used in) investing activities | $9,972 | $14,980 | $71,005 | $(60,686) | | Net cash provided by financing activities | $2,479 | $735 | $5,015 | $55,102 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(5,097) | $(2,268) | $41,930 | $(44,099) | | Cash, cash equivalents, and restricted cash, end of period | $78,872 | $10,193 | $78,872 | $10,193 | - Net cash used in operating activities decreased slightly to $34.2 million for the six months ended June 30, 2019, from $37.6 million in the prior year, primarily due to lower site consolidation cash outflows[14][146] - Investing activities provided $71.0 million in cash for the six months ended June 30, 2019, a significant increase from a $60.7 million use in the prior year, mainly due to the disposition of short-term investments[14][147] - Financing activities provided $5.0 million in cash for the six months ended June 30, 2019, primarily from common share sales, compared to $55.1 million in the prior year which included proceeds from preferred share financing[14][148] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the financial statements, covering business, accounting policies, fair value, equity, assets, liabilities, leases, and key events 1. Nature of business and future operations This note describes Arbutus Biopharma's focus on developing a cure for chronic hepatitis B infection and its future operational outlook - Arbutus Biopharma Corporation is a biopharmaceutical company focused on discovering, developing, and commercializing a cure for chronic hepatitis B infection (HBV)[15] - The company's pipeline includes AB-506 (oral capsid inhibitor in Phase 1a/1b), AB-729 (RNAi therapeutic in Phase 1a/1b), and AB-452 (oral HBV RNA destabilizer in pre-clinical testing)[15] - The company's success depends on regulatory approvals, achieving profitable operations, and securing adequate financing for research and development[16] 2. Significant accounting policies This note outlines the key accounting principles and methods used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial statements and should be read with the 2018 Form 10-K[17] - The company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019, using the modified retrospective approach, resulting in recording operating lease right-of-use assets and lease liabilities of approximately $3.2 million and $4.1 million, respectively[31] - The company follows the two-class method for EPS calculation due to participating convertible preferred shares, which do not participate in losses[19] 3. Fair value of financial instruments This note details the fair value measurements of financial instruments using a three-level hierarchy - The company measures certain financial instruments at fair value using a three-level hierarchy based on input observability[33][34][36] | Financial Instrument (in thousands) | Level 1 (June 30, 2019) | Level 3 (June 30, 2019) | Total (June 30, 2019) | | :---------------------------------- | :---------------------- | :---------------------- | :-------------------- | | Cash and cash equivalents | $78,872 | — | $78,872 | | Short-term investments | $16,410 | — | $16,410 | | Liability-classified options | — | $141 | $141 | | Contingent consideration | — | $3,381 | $3,381 | - Liability-classified options decreased from $479 thousand at December 31, 2018, to $141 thousand at June 30, 2019, while contingent consideration increased from $3,126 thousand to $3,381 thousand[37] 4. Equity method investment This note describes the company's equity investment in Genevant, a joint venture for RNA-based applications outside HBV - In April 2018, the company launched Genevant with Roivant Sciences Ltd., licensing its LNP and ligand conjugate delivery platforms for RNA-based applications outside of HBV[41] - As of June 30, 2019, Arbutus held approximately 40% equity interest in Genevant, with a carrying value of $14.4 million[43] - The company recorded equity investment losses of $3.3 million and $8.0 million for the three and six months ended June 30, 2019, respectively, representing its share of Genevant's net loss[43] 5. Intangible assets and goodwill This note details the company's intangible assets, including IPR&D and goodwill, and their impairment evaluations - Acquired in-process research and development (IPR&D) related to the cccDNA program is classified as indefinite-lived and not amortized[44] - Goodwill represents the excess of purchase price over the value of net tangible and identifiable intangible assets of Arbutus Inc.[44] - The company performs annual evaluations of intangible assets and goodwill for impairment, with no new indicators identified during the three and six months ended June 30, 2019[45] 6. Accounts payable and accrued liabilities This note provides a breakdown of the company's accounts payable and various accrued liabilities | Category (in thousands) | June 30, 2019 | December 31, 2018 | | :---------------------- | :------------ | :---------------- | | Trade accounts payable | $685 | $3,192 | | Research and development accruals | $2,528 | $2,716 | | Professional fee accruals | $566 | $871 | | Payroll accruals | $4,159 | $2,341 | | Other accrued liabilities | $2 | $309 | | Total | $7,940 | $9,429 | - Total accounts payable and accrued liabilities decreased from $9.4 million at December 31, 2018, to $7.9 million at June 30, 2019, primarily due to a decrease in trade accounts payable[46] - Payroll accruals significantly increased from $2.3 million to $4.2 million during the period[46] 7. Site consolidation This note details the expenses and progress related to the company's 2018 site consolidation and restructuring efforts - In 2018, the company completed a site consolidation and organizational restructuring, including a 35% workforce reduction and closure of its Burnaby facility[48] - Total estimated site consolidation expenses are $4.9 million, with $4.7 million incurred as of June 30, 2019[48] | Category (in thousands) | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :---------------------- | :----------------------------- | :----------------------------- | | Employee severance and relocation | $197 | $3,201 | | Facility and other expenses | $(346) | $1,001 | | Total site consolidation expenses | $(149) | $4,202 | 8. Leases This note explains the company's adoption of new lease accounting standards and its lease obligations - The company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019, recognizing operating lease right-of-use assets and lease liabilities[52] - As of June 30, 2019, the weighted average remaining lease term was 7.2 years, and the weighted average discount rate was 8.7%[54] | Lease Maturities (in thousands) | As of June 30, 2019 | | :------------------------------ | :------------------ | | July through December 2019 | $433 | | 2020 | $657 | | 2021 | $677 | | 2022 | $581 | | 2023 | $598 | | Thereafter | $2,038 | | Total Lease Payments | $4,984 | | Less: interest | $(1,345) | | Present value of lease payments | $3,639 | 9. Stockholders' equity and stock-based compensation This note details changes in stockholders' equity, including common share issuances and preferred share characteristics - Under an Open Market Sale Agreement, the company issued 593,689 common shares for $2.5 million gross proceeds in Q2 2019, and 1,208,090 common shares for $5.2 million gross proceeds in H1 2019[57] - The company has 1,164,000 Series A participating convertible preferred shares outstanding, convertible into approximately 23 million common shares by October 2021, which would give Roivant approximately 49% ownership[59] - An 8.75% per annum compounding coupon on preferred shares is accrued as an increase to preferred share capital and deficit[60] 10. Collaborations, contracts and licensing agreements This note outlines the company's revenue sources from royalties and services, and key licensing agreements - Revenue for the three and six months ended June 30, 2019, primarily consisted of royalties from Alnylam's ONPATTRO™ and Spectrum's Marqibo®, and services to Gritstone Oncology[64] - In July 2019, the company sold a portion of its ONPATTRO™ royalty entitlement to OMERS for $20 million gross proceeds, with the entitlement reverting after OMERS receives $30 million[63][77] - The company retains a separate, lower royalty interest on ONPATTRO™ from a settlement agreement with Acuitas Therapeutics[78] 11. Contingencies and commitments This note describes ongoing legal proceedings, contingent consideration, and other contractual commitments - The company is involved in an arbitration with the University of British Columbia (UBC) regarding alleged unpaid royalties, with UBC seeking $10.9 million plus interest[66] - The fair value of contingent consideration related to the Enantigen acquisition was $3.4 million as of June 30, 2019, with potential future payments up to $21.0 million for development/regulatory milestones and $102.5 million for sales performance milestones[70] - Under a new two-year master services agreement with Blumberg, the company will fund specific research activities, retaining exclusive rights to generated intellectual property[72] 12. Related Party Transactions This note details transactions with related parties, primarily Genevant Sciences, for services and sublease arrangements - The company purchased $33 thousand in research and development services from Genevant for the six months ended June 30, 2019[73] - Genevant purchased $0.2 million in administrative and transitional services from the company for the six months ended June 30, 2019[74] - Sublease income from Genevant for the Burnaby facility was $0.1 million for the six months ended June 30, 2019; the sublease expired on July 31, 2019[74] 13. Subsequent Events This note discloses significant events occurring after the reporting period, including a royalty interest sale - On July 2, 2019, the company sold a portion of its royalty interest on future global net sales of ONPATTRO™ to OMERS for $20 million in gross proceeds[76][77] - OMERS will retain this entitlement until it has received $30 million in royalties, after which 100% of the royalty interest will revert to the company[77] - The company retains a separate, lower royalty interest on ONPATTRO™ from Acuitas Therapeutics, which was not part of the sale to OMERS[78] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of the company's financial condition, results of operations, strategy, product pipeline, and liquidity CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This note advises readers that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements regarding strategy, future operations, clinical trials, regulatory approvals, financing, and product development[80] - These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially[82] - The company disclaims any obligation to update forward-looking statements, advising readers to consult further SEC disclosures[83] OVERVIEW This section provides an overview of Arbutus Biopharma's mission to cure chronic HBV and its diverse product pipeline - Arbutus Biopharma Corporation is dedicated to discovering, developing, and commercializing a cure for chronic hepatitis B infection (HBV), a global unmet medical need affecting approximately 257 million people[85] - The company is developing a diverse product pipeline of drug candidates with complementary mechanisms of action to achieve higher cure rates with finite treatment durations[86] - Additional assets, including royalty entitlement on ONPATTRO™ and a 40% equity interest in Genevant, are expected to provide significant non-dilutive capital[87] Strategy This section outlines the company's strategic objectives for developing HBV therapeutics, including clinical progression and combination therapies - The company's objective is to develop a cure for chronic HBV by developing proprietary therapeutic agents targeting HBV viral lifecycle elements and the host immune system[88] - Key focus areas include progressing clinical and pre-clinical candidates through Phase 1 and Phase 2 trials, identifying effective combination regimens for Phase 3, obtaining regulatory approval, and commercialization[89] - Results from current Phase 1a/1b clinical trials and pre-clinical studies will inform the adaptive design of future combination therapy trials[90] HBV Product Pipeline The company's HBV product pipeline includes multiple drug candidates like AB-506, AB-729, and AB-452, targeting viral lifecycle steps for combination therapies Agents for Combination Therapy This section discusses the rationale for combination therapies in HBV treatment and the company's approach - Current HBV treatments (Peg-IFNα and NAs) have low cure rates (<5%), highlighting the need for combination therapies[93] - The company believes its RNAi agent, AB-729, could be combined with its capsid inhibitor, AB-506, and approved NAs for a first combination therapy[95] - Combination clinical trials with AB-506, AB-729, and an approved NA are anticipated to begin in the second half of 2020[95] HBV Suppression (Capsid Inhibitors: AB-506 & AB-423) This section details the development and preliminary clinical results of capsid inhibitors AB-506 and AB-423 for HBV suppression - AB-506, an orally administered capsid inhibitor, is in a Phase 1a/1b clinical trial, showing improved potency and pharmacokinetics over first-generation AB-423 in pre-clinical studies[99][100] - Preliminary Phase 1a/1b results for AB-506 monotherapy indicated potent HBV DNA and RNA decreases (2.0-2.8 log and 2.4 log, respectively) at Day 28 in CHB subjects[101][102] - Four CHB subjects experienced Grade 4 ALT flares, with one showing notable declines in HBsAg and HBeAg, suggesting an immune-mediated response[102] HBsAg Reduction (RNAi Agents: AB-729) This section describes AB-729, a second-generation RNAi therapeutic designed to reduce HBsAg expression - AB-729 is a second-generation GalNAc RNAi therapeutic designed to reduce HBsAg expression, inhibit viral replication, and suppress all viral antigens, with anticipated monthly subcutaneous dosing[107] - Pre-clinical data showed robust HBsAg knockdown and more durable in vivo activity compared to earlier-generation siRNA agents[108] - The healthy subject portion of a Phase 1a/1b clinical trial for AB-729 was initiated in July 2019, with preliminary safety and efficacy data expected in Q1 2020[109] HBV RNA Destabilizer (AB-452) This section discusses AB-452, an HBV RNA destabilizer, its pre-clinical findings, and safety study status - AB-452, an orally administered HBV RNA destabilizer, has shown novel activity in pre-clinical studies by destabilizing HBV RNA, leading to RNA degradation and HBsAg reduction[111] - Nonclinical safety findings in October 2018 led to pausing clinical entry for AB-452; a repeat 90-day preclinical safety study in two species is underway, with a go/no-go decision expected in early 2020[113][115] - The company is also advancing back-up compounds with distinct chemical scaffolds into lead optimization[115] Research Programs This section outlines ongoing discovery efforts focused on checkpoint inhibition and cccDNA targeting for novel HBV therapies - Ongoing discovery efforts focus on checkpoint inhibition and cccDNA targeting to identify novel, orally administered small molecule drug candidates[116] - These programs aim to complement the existing pipeline and form an effective combination therapy for HBV treatment[116] Strategic Alliances and Licensing Agreements The company leverages strategic alliances and licensing agreements, including ONPATTRO™ royalties and an equity stake in Genevant Sciences, to fund its HBV pipeline ONPATTRO® (Patisiran/ALN-TTR02) This section details the company's royalty entitlement from Alnylam's ONPATTRO™ and its partial sale to OMERS - The company is entitled to tiered low to mid single-digit royalty payments on global net sales of Alnylam's ONPATTRO™, which utilizes its LNP technology[117][119] - In July 2019, a portion of this royalty interest was sold to OMERS for $20 million gross proceeds, with the entitlement reverting to the company after OMERS receives $30 million[118][119] - A second, lower royalty interest on ONPATTRO™ from Acuitas Therapeutics was retained by the company[120] Genevant Sciences This section describes Genevant Sciences, a joint venture with Roivant focused on RNA-based therapeutics outside HBV - Genevant, launched in April 2018 with Roivant Sciences, focuses on RNA-based therapeutics using the company's LNP and ligand conjugate delivery technologies for non-HBV applications[121] - Roivant contributed $37.5 million in seed capital to Genevant, and the company retains all rights to its Delivery Platforms for HBV[122] - As of June 30, 2019, the company held an approximate 40% equity interest in Genevant[122] CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS AND ESTIMATES This section highlights the critical accounting policies and significant judgments used in financial statement preparation - The preparation of financial statements requires estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses[124] - No significant changes in critical accounting policies and estimates were reported from the Annual Report on Form 10-K for the year ended December 31, 2018[124] RECENT ACCOUNTING PRONOUNCEMENTS This section discusses the impact of recently issued accounting standards on the company's financial reporting - The company believes that recently issued accounting standards not yet effective will not have a material impact on its financial position or results of operations upon adoption[125] - Further details on recent accounting pronouncements are provided in Note 2 to the condensed consolidated financial statements[126] RESULTS OF OPERATIONS The company experienced decreased revenue, lower R&D and site consolidation costs, increased G&A expenses due to executive departure, and reported a net loss Revenue This section analyzes the company's revenue performance for the reported periods, highlighting key drivers | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $653 | $1,244 | $1,332 | $2,680 | - Revenue decreased by $0.6 million and $1.3 million for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018[128] - Current period revenue primarily consisted of royalties from Alnylam's ONPATTRO™ and Spectrum's Marqibo®, and services to Gritstone, while prior year revenue included an upfront license fee from Gritstone[128] Expenses This section provides a detailed breakdown of the company's operating expenses, including R&D and G&A | Expense Category (in thousands) | Three months ended June 30, 2019 | % of Total (2019) | Three months ended June 30, 2018 | % of Total (2018) | | :------------------------------ | :------------------------------- | :---------------- | :------------------------------- | :---------------- | | Research and development | $12,740 | 60% | $16,356 | 70% |\ | General and administrative | $8,189 | 39% | $3,775 | 16% |\ | Depreciation and amortization | $505 | 2% | $578 | 2% |\ | Site consolidation | $(266) | (1)% | $2,581 | 11% |\ | Total operating expenses | $21,168 | | $23,290 | | | Expense Category (in thousands) | Six months ended June 30, 2019 | % of Total (2019) | Six months ended June 30, 2018 | % of Total (2018) | | :------------------------------ | :----------------------------- | :---------------- | :----------------------------- | :---------------- | | Research and development | $27,452 | 67% | $30,305 | 70% |\ | General and administrative | $12,601 | 31% | $7,444 | 17% |\ | Depreciation and amortization | $1,014 | 2% | $1,180 | 3% |\ | Site consolidation | $(149) | —% | $4,202 | 10% |\ | Total operating expenses | $40,918 | | $43,131 | | Research and development This section details the changes in research and development expenses, attributing them to specific program activities - Research and development expenses decreased by $3.6 million and $2.9 million for the three and six months ended June 30, 2019, respectively, compared to 2018[134] - The decrease was primarily due to higher costs in 2018 for AB-452 manufacturing and AB-1467 Phase 2 clinical trials, partially offset by increased spending in 2019 for AB-506 Phase 1a/1b and AB-729 pre-clinical studies[134] - Current R&D expenses included enrollment for AB-506 Phase 1a/1b, IND/CTA enabling studies for AB-729, and in vitro/in vivo studies for AB-452[134] General and administrative This section explains the increase in general and administrative expenses, primarily due to executive severance - General and administrative expenses increased by $4.4 million and $5.2 million for the three and six months ended June 30, 2019, respectively, compared to 2018[136] - The increase was primarily due to the former President and CEO's departure in June 2019, resulting in $2.3 million cash severance and $2.2 million non-cash stock-based compensation expense for accelerated vesting[136] Site consolidation This section reports on the progress and expenses related to the company's site consolidation efforts - Site consolidation expenses were substantially completed by June 30, 2018, with total expected expenses of approximately $4.9 million, of which $4.7 million incurred by June 30, 2019[139] - For the six months ended June 30, 2019, site consolidation expenses were a credit of $0.1 million, compared to an expense of $4.2 million in the prior year[132] Other income (loss) This section details other non-operating income and losses, including interest, foreign exchange, and equity investment impacts | Metric (in thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $606 | $805 | $1,206 | $1,563 | | Foreign exchange gain (loss) | $60 | $(359) | $68 | $(885) | | Gain on investment | — | $24,884 | — | $24,884 | | Equity investment losses | $(3,334) | — | $(7,985) | — | | Decrease (increase) in fair value of contingent consideration | $(130) | $(193) | $(255) | $655 | | Total other income (loss) | $(2,800) | $25,137 | $(6,980) | $26,113 | LIQUIDITY AND CAPITAL RESOURCES The company's liquidity is supported by cash, investments, equity sales, and royalty monetization, with current resources funding operations into H2 2020, but additional funding is required Sources of Liquidity This section identifies the primary sources of the company's liquidity, including cash, investments, and equity sales - As of June 30, 2019, the company had $78.9 million in cash and cash equivalents and $16.4 million in short-term investments, totaling $95.3 million[149] - In H1 2019, the company issued 1,208,090 common shares under an Open Market Sale Agreement, generating $5.2 million in gross proceeds[150] - The sale of a portion of ONPATTRO™ royalty interest to OMERS in July 2019 for $20 million gross proceeds is expected to provide significant non-dilutive capital[151] Cash requirements This section outlines the company's anticipated cash needs and the factors influencing future funding requirements - The company believes its cash, cash equivalents, and short-term investments as of June 30, 2019, combined with the $20 million from the OMERS royalty sale, will fund operations into the second half of 2020[153] - Substantial additional funds will be required for continued development of pipeline products and technologies[153] - Future funding needs depend on factors such as business development, revenue from partnerships, product candidate development, acquisition decisions, clinical trial delays, and intellectual property costs[154] OFF-BALANCE SHEET ARRANGEMENTS This section confirms the absence of material off-balance sheet arrangements impacting the company's financial position - The company does not have any off-balance sheet arrangements that are material to its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources[157] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the company's quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes in market risk disclosures from the Annual Report on Form 10-K for the year ended December 31, 2018[158] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control Evaluation of Disclosure Controls and Procedures This section details the evaluation and conclusion regarding the effectiveness of the company's disclosure controls - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2019[159] Changes in Internal Control over Financial Reporting This section reports on any material changes to the company's internal control over financial reporting - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the three months ended June 30, 2019[160] PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS Information regarding legal matters is incorporated by reference from Note 11, 'Contingencies and Commitments,' to the condensed consolidated financial statements - Legal proceedings information is detailed in Note 11, 'Contingencies and Commitments,' of the financial statements[162] ITEM 1A. RISK FACTORS There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 - No material changes in risk factors from the Annual Report on Form 10-K for the year ended December 31, 2018[163] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and use of proceeds[163] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the period - No defaults upon senior securities[163] ITEM 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[163] ITEM 5. OTHER INFORMATION The company reported no other information for the period - No other information to report[163] ITEM 6. EXHIBITS This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including articles of incorporation, governance agreements, and certifications - Exhibit 3.1: Notice of Articles and Articles of Arbutus Biopharma Corporation, as amended[164] - Exhibit 10.6: Purchase and Sale Agreement, dated July 2, 2019, by and between Arbutus Biopharma Corporation and OCM IP Healthcare Portfolio LP[170] - Exhibit 31.1 and 31.2: Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934[170]