3 HBV Product Candidates in the Clinic in
1Q17Cash Runway into Late 2018Company to Host a Corporate Update
Conference Call Today at 2:00 PM ET
Arbutus Biopharma Corporation (Nasdaq:ABUS), an industry-leading
Hepatitis B Virus (HBV) therapeutic solutions company, today
announced its 2016 financial results and provided a corporate
update.
“Arbutus made significant progress in 2016,
including demonstrating significant HBsAg reduction in the Phase II
trial of ARB-1467,” said Dr. Mark J. Murray, Arbutus’ President and
CEO. “We are excited to build on this progress in 2017 with three
HBV product candidates in clinical development by the end of 1Q17,
continued productivity from our research effort, and additional
studies to explore the full potential of ARB-1467 and combining
RNAi agents with standard of care in HBV patients.”
Recent Highlights and
Developments
- ARB-1467 Phase II Cohort 3 in HBeAg+ patients completed dosing
in 4Q16, with all patients receiving all three monthly doses of
ARB-1467. Data will be presented at EASL.
- ARB-1467 Phase II Cohort 4, evaluating bi-weekly dosing, began
dosing in 1Q17. Data will be available in 2H17.
- ARB-1740 Phase II MAD study began dosing HBV patients in 1Q17.
Data will be available in 2H17.
- Licensing transaction completed with Alexion Pharmaceuticals,
Inc. to access Arbutus' lipid nanoparticle (LNP) delivery
technology for use in a single mRNA product candidate. Arbutus will
receive upfront and potential milestone payments of over $80
million plus royalties.
- Pre-trial injunction granted against Acuitas, preventing
Acuitas from sublicensing Arbutus’ LNP technology.
Upcoming Milestones
- 1Q17: Initiate AB-423 (HBV capsid assembly inhibitor) healthy
volunteer clinical study
- 1H17: Presentation of full data from ARB-1467 Phase II cohorts
1-3
- Mid-2017: Phase III results expected for Alnylam’s Patisiran
(Arbutus to receive royalties on sales)
- 2H17: ARB-1467 Phase II Cohort 4 clinical study results
- 2H17: ARB-1740 multi-dosing patient study results
Financial Results
Cash, Cash Equivalents and
Investments
As at December 31, 2016, Arbutus had cash, cash
equivalents and restricted investments of $143.2 million, as
compared to cash, cash equivalents and short and long-term
investments of $191.4 million at December 31, 2015.
On December 27, 2016, the Company secured a
$12.0 million loan in support of the build out of newly leased
laboratory and office space in Warminster, Pennsylvania. This
amount is included in the Company’s cash position.
Net loss
For the year ended December 31, 2016, net loss
was $384.1 million ($7.24 per common share) as compared to a net
loss of $61.1 million ($1.34 per common share) for 2015. The
increase in net loss was primarily due to a $286.3 million
impairment of intangible assets and goodwill, net of deferred
taxes.
Non-GAAP Net Loss
The non-GAAP net loss for 2016 was $65.8 million
($1.24 loss per common share) as compared to a non-GAAP net loss of
$21.6 million ($0.48 loss per common share) for 2015. The non-GAAP
net loss has been adjusted to exclude:
- a non-cash compensation expense of $32.0 million included in
expenses in connection to certain share repurchase provisions
related to the merger with Arbutus Inc., described below;
- a non-cash net impairment charge related to intangible assets
of $148.2 million ($253.2 million less deferred taxes of $105.0
million), described below; and,
- a non-cash impairment charge related to goodwill of $138.1
million, described below.
Revenue
Revenue was $1.5 million for 2016 as compared to
$24.9 million in 2015.
The revenue generating collaborations with
Monsanto and the U.S. Department of Defense were effectively
terminated towards the end of 2015. The Dicerna license and
collaboration was terminated in November 2016.
At the current time Arbutus does not have any
significant revenue generating collaborations but does have ongoing
license agreements with Alnylam and Spectrum.
Research, Development, Collaborations and Contracts
Expenses
Research, development, collaborations and
contracts expenses were $61.3 million in 2016 as compared to $51.5
million in 2015.
R&D expenses increased during 2016 as
compared to 2015 as Arbutus increased its spending on the Company’s
HBV programs to continue to advance them through the clinic in 2016
when the Company initiated Phase 2 clinical trials for ARB-1467 and
prepared to advance AB-423 and ARB-1740 into the clinic. Arbutus
also continues to incur incremental costs related to an increase in
activities for research and preclinical HBV programs, focusing on
advancing the development of candidates to support future clinical
combination studies.
R&D compensation expense increased in 2016
as compared to 2015 due to an increase in the number of employees
in support of the Company’s expanded portfolio of product
candidates. In addition, in the year ended December 31, 2016, the
Company incurred a total of $32.0 million of non-cash compensation
expense related to the expiry of repurchase rights on shares issued
as part of the consideration paid for the merger with Arbutus Inc.
of which $6.0 million has been included as part of research,
development, collaborations and contracts expense, and $26.0
million included as part of general and administrative expense.
General and Administrative
General and administrative expenses were $39.4
million in 2016 as compared to $26.4 million in 2015.
General and administrative expenses increased in
2016 compared to 2015 due largely to a non-cash compensation
expense of $26.0 million incurred in 2016 related to the expiry of
repurchase rights on shares issued as part of consideration paid
for the merger with Arbutus Inc. compared to $11.9 million in 2015.
In Q2 2016, the Company incurred an acceleration of incremental
non-cash compensation expense due to the expiration of repurchase
rights triggered by the departure of two of the four Arbutus Inc.
founders.
Impairment of Intangible Assets and
Goodwill
For the year ended December 31, 2016, Arbutus
recorded a total intangible asset impairment charge of $148.2
million (net of deferred taxes of $105.0 million) and a goodwill
impairment charge of $138.1 million. The impairment charge on
goodwill and intangible assets did not impact the Company’s
liquidity, operating cash flows, or cash runway.
In 2Q16, Arbutus recorded an impairment charge
of $91.5 million (net of deferred taxes of $64.8 million) on
intangible assets for the discontinuance of the ARB-1598 program in
the Immune Modulator drug class as well as a delay of the cccDNA
Sterilizer program. In 4Q16, Arbutus completed its annual
impairment analysis and recorded a further impairment charge of
$56.7 million (net of deferred taxes of $40.2 million) due to a
change in management’s estimate of the cost of capital used in the
Company’s valuation models to assess the carrying value of goodwill
and intangible assets. The change in cost of capital reflects the
sustained discrepancy between the Company’s market capitalization
and the estimated fair value of its intangible assets. No other
changes in assumptions were introduced in the valuation models and
the fundamentals of the underlying development programs remain
unchanged.
For the year ended December 31, 2015, Arbutus
recorded an impairment charge of $22.8 million (net of deferred
taxes of $16.2 million) based on the Company’s decision to
discontinue the cyclophilin inhibitors program, OCB-030.
The goodwill impairment charge also results from
the change in cost of capital estimate in the Company’s valuation
models. The remaining goodwill balance is due to the
application of deferred taxes in the goodwill impairment
calculation, following the complex requirements of the accounting
standard in this area.
Other Income (Losses)
On January 1, 2016, the Company’s functional
currency changed from the Canadian dollar to the U.S. dollar based
on an analysis of changes in the primary economic environment in
which Arbutus operate. The Company will continue to incur
substantial expenses and hold cash and investment balances in
Canadian dollars, and as such, will remain subject to risks
associated with foreign currency fluctuations. For the year ended
December 31, 2016, Arbutus recorded a foreign exchange gain of $1.1
million, which is primarily an unrealized gain related to an
appreciation in the value of the Company’s Canadian dollar funds
from the previous period, when translated to the Company’s
functional currency of U.S. dollars. In 2015, Arbutus recorded a
foreign exchange gain of $21.8 million due to the appreciation in
value of U.S. dollar funds from the prior period.
On March 4, 2016, Monsanto exercised its option
to acquire 100% of the outstanding shares of the Company’s
wholly-owned subsidiary, Protiva Agricultural Development Company.
The Company received an exercise fee of $1.0 million.
The aggregate decrease in fair value of the
Company’s common share purchase warrants was $0.5 million in 2016
as compared to a decrease in the fair value of common share
purchase warrants outstanding of $3.3 million in 2015. Generally, a
decrease in the Company’s share price from the previous reporting
date results in a decrease in the fair value of the Company’s
warrant liability and vice versa.
For the period ended December 31, 2016, Arbutus
performed an evaluation of the fair value of the contingent
consideration using the probability weighted assessment of
likelihood of milestone payments and determined the fair value of
the contingent consideration has increased by $1.6 million to $9.1
million from $7.5 million as at December 31, 2015.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS (in millions) |
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
|
|
|
|
Cash and cash
equivalents |
$ |
23.4 |
|
|
$ |
166.8 |
|
|
Short-term
investments |
|
107.1 |
|
|
|
14.5 |
|
|
Accounts
receivable |
|
0.3 |
|
|
|
1.0 |
|
|
Other current
assets |
|
1.8 |
|
|
|
1.6 |
|
|
Restricted
investment |
|
12.6 |
|
|
|
- |
|
|
Long-term
investments |
|
- |
|
|
|
10.1 |
|
|
Property and equipment,
net |
|
6.9 |
|
|
|
3.2 |
|
|
Intangible assets |
|
99.4 |
|
|
|
352.6 |
|
|
Goodwill |
|
24.4 |
|
|
|
162.5 |
|
|
Total assets |
$ |
275.9 |
|
|
$ |
712.3 |
|
|
Accounts payable and
accrued liabilities |
|
9.9 |
|
|
|
8.8 |
|
|
Total deferred
revenue |
|
- |
|
|
|
1.1 |
|
|
Warrant liability |
|
0.1 |
|
|
|
0.9 |
|
|
Liability-classified
options |
|
0.6 |
|
|
|
- |
|
|
Loan payable |
|
12.0 |
|
|
|
- |
|
|
Contingent
consideration |
|
9.1 |
|
|
|
7.5 |
|
|
Deferred tax
liability |
|
41.2 |
|
|
|
146.3 |
|
|
Total
stockholders’ equity |
|
203.0 |
|
|
|
547.7 |
|
|
Total liabilities and stockholders’ equity |
$ |
275.9 |
|
|
$ |
712.3 |
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS (in millions) |
|
|
|
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
Total
revenue |
$ |
1.5 |
|
|
$ |
24.9 |
|
Operating expenses |
|
|
|
|
|
|
|
Research,
development, collaborations and contracts |
|
61.3 |
|
|
|
51.5 |
|
General
and administrative |
|
39.4 |
|
|
|
26.4 |
|
Depreciation of property and equipment |
|
1.1 |
|
|
|
0.6 |
|
Acquisition costs |
|
- |
|
|
|
9.7 |
|
Impairment of intangible assets |
|
253.2 |
|
|
|
39.0 |
|
Impairment of goodwill |
|
138.1 |
|
|
|
- |
|
Loss from operations |
|
(491.6 |
) |
|
|
(102.3 |
) |
Other income
(losses) |
|
2.5 |
|
|
|
25.0 |
|
Income
tax benefit |
|
105.0 |
|
|
|
16.2 |
|
Net loss |
|
(384.1 |
) |
|
|
(61.1 |
) |
Cumulative translation adjustment |
|
- |
|
|
|
(27.5 |
) |
Comprehensive loss |
|
(384.1 |
) |
|
|
(88.6 |
) |
UNAUDITED GAAP TO NON-GAAP RECONCILIATION: NET
LOSS AND NET LOSS PER SHARE (in millions, except share
amounts) |
|
|
|
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
GAAP net
loss |
$ |
(384.1) |
|
|
$ |
(61.1) |
|
Adjustments: |
|
|
|
|
|
|
|
Compensation expense of expiring repurchase provision rights |
|
32.0 |
|
|
|
16.7 |
|
Impairment on intangible assets |
|
253.2 |
|
|
|
39.0 |
|
Impairment on goodwill |
|
138.1 |
|
|
|
|
|
Income tax benefit |
|
(105.0 |
) |
|
|
(16.2 |
) |
Non-GAAP net loss |
|
(65.8 |
) |
|
|
(21.6 |
) |
|
|
|
|
|
|
|
|
GAAP basic and diluted
net loss per common share |
|
(7.24 |
) |
|
|
(1.34 |
) |
Non-GAAP basic and
diluted net loss per common share |
|
(1.24 |
) |
|
|
(0.48 |
) |
Use of Non-GAAP Financial
Measures
The Company’s consolidated financial statements
are prepared in accordance with generally accepted accounting
principles in the United States (U.S. GAAP) on a basis consistent
for all periods presented. In addition to the results reported in
accordance with U.S. GAAP, the Company provides additional measures
that are considered “non-GAAP” financial measures under applicable
SEC rules. These non-GAAP financial measures should not be viewed
in isolation or as a substitute for GAAP net loss and basic and
diluted net loss per common share.
The company evaluates items on an individual
basis, and considers both the quantitative and qualitative aspects
of the item, including (i) its size and nature, (ii) whether or not
it relates to the Company’s ongoing business operations, and (iii)
whether or not the Company expects it to occur as part of its
normal business on a regular basis. In the year ended December 31,
2016, the Company’s non-GAAP net loss and non-GAAP net loss per
common share excludes the compensation expense related to the
expiration of repurchase provision rights connected with certain
common shares issued as part of total consideration for the
acquisition of Arbutus Inc., as well as the impairment of goodwill
and intangible assets (net of tax benefit). The Company believes
that the exclusion of these items provides management and investors
with supplemental measures of performance that better reflect the
underlying economics of the Company’s business. In addition, the
Company believes the exclusion of these items is important in
comparing current results with prior period results and
understanding projected operating performance.
Conference Call Today
Arbutus will hold a conference call and webcast
today, March 21, 2017, at 11:00 AM Pacific Time (2:00 PM Eastern
Time) to provide a corporate update. A live webcast of the call can
be accessed through the Investor section of Arbutus' website at
www.arbutusbio.com. Or, alternatively, to access the conference
call, please dial 1-914-495-8556 or 1-866-393-1607.
An archived webcast will be available on the
Arbutus website after the event. Alternatively, you may access a
replay of the conference call by calling 1-404-537-3406 or
1-855-859-2056 and referencing conference ID 91422751.
About Arbutus
Arbutus Biopharma Corporation is a
biopharmaceutical company dedicated to discovering, developing and
commercializing a cure for patients suffering from chronic HBV
infection. Arbutus is headquartered in Vancouver, BC, and has
facilities in Doylestown, PA. For more information, visit
www.arbutusbio.com.
Forward-Looking Statements and
Information
This press release contains forward-looking
statements within the meaning of the Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and forward looking information within the meaning of Canadian
securities laws (collectively, “forward-looking statements”).
Forward-looking statements in this press release include statements
about three HBV product candidates in clinical development by the
end of 1Q17; continued productivity from our research effort;
additional studies to explore the full potential of ARB-1467 and
combining RNAi agents with standard of care in HBV patients;
presenting data from ARB-1467 Phase II Cohort 3 at EASL; the
availability of data on the ARB-1467 Phase II Cohort 4 in 2H17; the
availability of data on the ARB-1740 Phase II MAD study in 2H17;
receiving upfront and potential milestone payments of over $80
million plus royalties from Alexion; initiating a AB-423 (HBV
capsid assembly inhibitor) healthy volunteer clinical study in
1Q17; presenting full data from ARB-1467 Phase II cohorts 1-3 in
1H17; Phase III results and potential royalties expected for
Alnylam’s Patisiran in mid-2017; ARB-1467 Phase II Cohort 4
clinical study results in 2H17; ARB-1740 multi-dosing patient study
results in 2H17; advancing the development of candidates to support
future clinical combination studies; continuing to incur
substantial expenses and hold cash and investment balances in
Canadian dollars; remediating the identified material weakness in
internal control over financial reporting in a timely manner; and
discovering, developing and commercializing a cure for patients
suffering from chronic HBV infection.
With respect to the forward-looking statements
contained in this press release, Arbutus has made numerous
assumptions regarding, among other things: the effectiveness and
timeliness of preclinical and clinical trials, and the usefulness
of the data; the continued demand for Arbutus’ assets; and the
stability of economic and market conditions. While Arbutus
considers these assumptions to be reasonable, these assumptions are
inherently subject to significant business, economic, competitive,
market and social uncertainties and contingencies.
Additionally, there are known and unknown risk
factors which could cause Arbutus' actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements contained herein. Known risk factors
include, among others: anticipated pre-clinical and clinical trials
may be more costly or take longer to complete than anticipated, and
may never be initiated or completed, or may not generate results
that warrant future development of the tested drug candidate;
Arbutus may not receive anticipated milestone payments or royalties
from Alexion; Arbutus may not be able to remediate the material
weakness in internal control over financial reporting in a timely
manner; Arbutus may not receive the necessary regulatory approvals
for the clinical development of Arbutus' products; economic and
market conditions may worsen; foreign currencies may fluctuate; and
market shifts may require a change in strategic focus.
A more complete discussion of the risks and
uncertainties facing Arbutus appears in Arbutus' Annual Report on
Form 10-K and Arbutus' continuous disclosure filings, which are
available at www.sedar.com and at www.sec.gov. All
forward-looking statements herein are qualified in their entirety
by this cautionary statement, and Arbutus disclaims any obligation
to revise or update any such forward-looking statements or to
publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future
results, events or developments, except as required by law.
Contact Information
Investors
Adam Cutler
Senior Vice President, Corporate Affairs
Phone: 604-419-3200
Email: acutler@arbutusbio.com
Media
David Schull
Russo Partners
Phone: 858.717.2310
Email: david.schull@russopartnersllc.com
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