PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) For the three months ended March 31, 2025, Arbutus Biopharma reported a net loss of $24.5 million, an increase from the $17.9 million net loss in the same period of 2024, primarily driven by a $12.4 million restructuring charge Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $117.0 million, a decrease from $131.7 million at December 31, 2024, mainly due to reduced marketable securities and property and equipment, while total liabilities increased to $37.9 million from $34.3 million, and total stockholders' equity decreased to $79.2 million from $97.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $37,076 | $36,330 | | Investments in marketable securities, current | $75,631 | $86,293 | | Total current assets | $116,808 | $127,316 | | Total assets | $117,010 | $131,707 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $19,431 | $15,618 | | Total liabilities | $37,853 | $34,341 | | Total stockholders' equity | $79,157 | $97,366 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the first quarter of 2025, the company reported a net loss of $24.5 million, or ($0.13) per share, compared to a net loss of $17.9 million, or ($0.10) per share, for the same period in 2024, primarily due to a one-time restructuring charge of $12.4 million, partially offset by a $6.4 million decrease in R&D expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Revenue | $1,764 | $1,532 | | Research and development | $8,959 | $15,403 | | General and administrative | $5,832 | $5,312 | | Restructuring | $12,373 | $0 | | Total operating expenses | $27,463 | $20,895 | | Loss from operations | ($25,699) | ($19,363) | | Net loss | ($24,526) | ($17,875) | | Loss per share (basic and diluted) | ($0.13) | ($0.10) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities for the first quarter of 2025 was $13.4 million, a decrease from $19.3 million in the prior-year period, reflecting cost-saving measures, while net cash provided by investing activities was $11.3 million, mainly from net dispositions of marketable securities, and net cash from financing activities was $2.8 million, primarily from stock option exercises Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,391) | ($19,295) | | Net cash provided by investing activities | $11,349 | $11,694 | | Net cash provided by financing activities | $2,784 | $24,430 | | Increase in cash and cash equivalents | $746 | $16,816 | | Cash and cash equivalents, end of period | $37,076 | $43,101 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business focus on infectious diseases, particularly cHBV with imdusiran and AB-101, and its ongoing patent litigation against Moderna and Pfizer/BioNTech, along with key accounting policies, revenue recognition, fair value measurements, and details of the March 2025 restructuring, with the company believing its cash resources of $112.7 million are sufficient for at least the next 12 months - The company is a clinical-stage biopharmaceutical firm focused on developing treatments for chronic hepatitis B (cHBV), specifically imdusiran (AB-729) and AB-10122 - Arbutus is engaged in ongoing patent infringement lawsuits against Moderna and Pfizer/BioNTech concerning its lipid nanoparticle (LNP) delivery technology used in their COVID-19 vaccines. A trial date against Moderna in the U.S. is set for September 29, 202523 - In March 2025, the company implemented a significant restructuring, reducing its workforce by 57% to 19 employees, exiting its corporate headquarters, and discontinuing in-house research, resulting in a one-time charge of $12.4 million4981 - The company believes its cash, cash equivalents, and marketable securities of $112.7 million as of March 31, 2025, are sufficient to fund operations for at least the next 12 months24 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic focus on its cHBV pipeline (imdusiran and AB-101) and the monetization of its LNP technology through patent litigation, with a major restructuring in Q1 2025, including a 57% workforce reduction, expected to significantly lower the net cash burn, while net loss for Q1 2025 increased to $24.5 million due to restructuring costs, though R&D spending decreased, and the company ended the quarter with $112.7 million in cash and investments, deemed sufficient for at least the next year Overview and Strategy Arbutus is a clinical-stage biopharma company focused on developing a functional cure for chronic hepatitis B (cHBV) with its candidates imdusiran and AB-101, with a key part of its strategy involving defending and monetizing its lipid nanoparticle (LNP) delivery technology through patent infringement lawsuits against Moderna and Pfizer/BioNTech, and following significant restructuring, the company aims to reduce its cash burn while advancing its clinical programs - The company's strategy focuses on maximizing opportunities for its cHBV development programs and its LNP delivery technology96 - Arbutus has filed patent infringement lawsuits against Moderna and Pfizer/BioNTech for unlicensed use of its LNP technology in their COVID-19 vaccines. The U.S. trial against Moderna is scheduled for September 29, 2025949798 - The company's cHBV strategy aims to develop a functional cure using imdusiran as a cornerstone therapy in combination with other agents to suppress HBsAg and boost immune response99 - Recent restructuring actions, including a 57% workforce reduction in Q1 2025, are expected to significantly reduce net cash burn in 2025 compared to 202495 Our Product Candidates The company's pipeline features two main cHBV candidates: imdusiran (AB-729), an RNAi therapeutic, and AB-101, an oral PD-L1 inhibitor, with imdusiran showing meaningful HBsAg reduction and leading to functional cures in eight patients in combination therapies, and AB-101 demonstrating good tolerability and high receptor occupancy in its Phase 1a/1b trial - Imdusiran (RNAi therapeutic) has achieved functional cure in 8 cHBV patients to date in combination therapies103 - The IM-PROVE I trial (imdusiran + IFN) showed a 50% (3/6) functional cure rate in patients with baseline HBsAg <1000 IU/mL104115 - The IM-PROVE II trial (imdusiran + VTP-300 + nivolumab) showed a 25% (2/8) functional cure rate in patients with baseline HBsAg <1000 IU/mL104 - AB-101 (oral PD-L1 inhibitor) is in a Phase 1a/1b trial and has shown to be well-tolerated with evidence of high receptor occupancy in healthy subjects and cHBV patients103120121 Other Collaborations, Royalty Entitlements and Intellectual Property Litigation Arbutus has a licensing agreement with Qilu for imdusiran in Greater China, which included a $40 million upfront payment and potential for $245 million in milestones plus royalties, and receives two royalty streams on Alnylam's ONPATTRO sales, one of which was partially sold to OMERS and is close to reverting back to Arbutus, while its LNP platform was licensed to Genevant, entitling Arbutus to sublicensing revenues and a share of litigation proceeds, with detailed updates on the patent infringement lawsuits against Moderna and Pfizer/BioNTech in the U.S. and internationally - Collaboration with Qilu for imdusiran in Greater China includes up to $245 million in milestones and double-digit royalties123 - The company has two royalty entitlements on Alnylam's ONPATTRO. A portion sold to OMERS for $20 million is expected to revert to Arbutus after OMERS receives $30 million in royalties ($25.3 million earned as of March 31, 2025)126 - Arbutus and Genevant filed five international lawsuits against Moderna in March 2025, targeting infringing activities in 30 countries and seeking monetary relief and injunctions135 - In the U.S. lawsuit against Pfizer/BioNTech, the claim construction hearing occurred in December 2024, with a court ruling and trial schedule expected in 2025137 Results of Operations For Q1 2025, total revenue increased to $1.8 million from $1.5 million in Q1 2024, driven by higher revenue from the Qilu collaboration, while total operating expenses rose to $27.5 million from $20.9 million, primarily due to a $12.4 million restructuring charge, partially offset by a $6.4 million decrease in R&D expenses, and general and administrative expenses saw a slight increase of $0.5 million due to higher legal fees Revenue Comparison (in thousands) | Revenue Source | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Royalties from sales of ONPATTRO | $504 | $695 | | Qilu Pharmaceutical Co., Ltd. | $812 | $244 | | Non-cash royalty revenue (ONPATTRO) | $448 | $593 | | Total revenue | $1,764 | $1,532 | Operating Expenses Comparison (in thousands) | Expense Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Research and development | $8,959 | $15,403 | | General and administrative | $5,832 | $5,312 | | Restructuring | $12,373 | $0 | | Total operating expenses | $27,463 | $20,895 | - R&D expenses decreased by $6.4 million YoY due to ceasing discovery efforts, discontinuing the IM-PROVE III trial, and workforce reductions151 - A one-time restructuring charge of $12.4 million was incurred in Q1 2025, related to workforce reduction, facility exit, and asset impairments155 Liquidity and Capital Resources As of March 31, 2025, the company had $112.7 million in cash, cash equivalents, and marketable securities with no outstanding debt, with net cash used in operations decreasing to $13.4 million in Q1 2025 from $19.3 million in Q1 2024, reflecting cost-saving initiatives, and the company terminated its Open Market Sale Agreement in March 2025, having raised no funds through it in Q1 2025, compared to $21.8 million in Q1 2024, while management believes current cash is sufficient to fund operations for at least the next year but notes that substantial additional funds will be required for future development - The company had cash, cash equivalents, and investments of $112.7 million as of March 31, 2025, with no debt164 - Net cash used in operating activities decreased by $5.9 million YoY, from $19.3 million in Q1 2024 to $13.4 million in Q1 2025161 - The Open Market Sale Agreement with Jefferies was terminated on March 26, 2025. No shares were sold under this agreement in Q1 2025165166 - Future funding needs are substantial and depend on litigation costs, clinical development progress, and potential partnership revenue169 Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this information is not required to be provided as it qualifies as a smaller reporting company - As a smaller reporting company, Arbutus is not required to provide disclosures about market risk173 Controls and Procedures Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures as of March 31, 2025, and concluded that these controls were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level174 - No changes in internal control over financial reporting occurred during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, these controls175 PART II. OTHER INFORMATION Legal Proceedings This section details the company's significant ongoing patent litigation, with Arbutus and its partner Genevant suing Moderna and Pfizer/BioNTech in the U.S. for infringing on LNP technology patents with their COVID-19 vaccines, and the U.S. trial against Moderna set for September 2025, while five new international lawsuits were filed against Moderna across 30 countries in March 2025, and the company is also involved in European patent opposition proceedings with Moderna and Merck - U.S. lawsuit against Moderna: Trial is scheduled for September 29, 2025. The court's claim construction ruling in April 2024 was largely favorable to Arbutus's positions177 - International lawsuits against Moderna: In March 2025, Arbutus and Genevant filed five lawsuits in Canada, Japan, Switzerland, and the Unified Patent Court, targeting Moderna's COVID-19 and RSV vaccines in 30 countries178 - U.S. lawsuit against Pfizer/BioNTech: A claim construction hearing was held in December 2024, with a ruling and trial schedule expected in 2025. Fact discovery is ongoing180 - European Patent Oppositions: The company is engaged in ongoing opposition and appeal proceedings with Moderna and Merck regarding European patents EP 2279254 and EP 4 241 767181182 Risk Factors The company reports that there have been no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes in risk factors were reported since the last Annual Report on Form 10-K184 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None185 Other Information During the first quarter of 2025, the company's Chief Financial Officer, Tuan Nguyen, entered into a Rule 10b5-1 trading arrangement, which provides for the automatic sale of common shares upon the vesting of restricted stock units (RSUs) to cover applicable tax withholding obligations - On March 28, 2025, CFO Tuan Nguyen entered into a Rule 10b5-1 trading plan to automatically sell shares to cover tax obligations upon the vesting of RSUs188 Exhibits This section provides an index of the exhibits filed with the Form 10-Q, including employment and separation agreements, certifications by the CEO and CFO, and the XBRL data files - The Exhibit Index lists various legal documents and certifications filed with the report, including new executive employment agreements and separation agreements190
Arbutus Biopharma(ABUS) - 2025 Q1 - Quarterly Report