Arbutus Biopharma Corporation (Nasdaq: ABUS), a Hepatitis B Virus
(HBV) therapeutic solutions company, today reports its third
quarter 2019 financial results and provides a corporate update.
“We remain committed to our mission of
developing a portfolio of assets with differing mechanisms of
action that we believe will form the basis for a functional cure of
chronic Hepatitis B", said William Collier, Arbutus’ President and
Chief Executive Officer. "Our current efforts are focused on
completing the Phase 1a/b clinical trial of AB-729, rapidly
selecting a next-generation capsid inhibitor for IND-enabling
studies to replace our recently discontinued AB-506, evaluating our
oral RNA destabilizer, AB-452, as well as next-generation compounds
in this class, and research on compounds that inhibit PD-L1.”
Recent Corporate Updates
AB-729
- In July 2019, the Company initiated a single and multiple dose
Phase 1a/1b clinical trial for AB-729, a subcutaneously delivered
RNAi agent which has been shown in preclinical models to span all
HBV transcripts, reduce all viral antigens, including hepatitis B
surface antigen (HBsAg) expression, and inhibit HBV
replication. In this trial, which is designed to investigate
the safety, tolerability, pharmacokinetics, and pharmacodynamics of
AB-729 in healthy volunteers and in subjects with chronic hepatitis
B (CHB) infection, AB-729 will be dosed monthly.
- Preliminary safety data in single-dose cohorts of healthy
subjects and safety and efficacy data in single-dose cohorts of
subjects with CHB infection are expected in the first quarter of
2020.
Capsid Inhibitors
- In October 2019, Arbutus announced its decision to discontinue
the clinical development of AB-506, an oral capsid inhibitor, in
Phase 1a/1b clinical development for the treatment of CHB due to
safety observations in a Phase 1a 28-day clinical trial in healthy
volunteers. Arbutus intends to present results from the
AB-506 Phase 1a/1b clinical trial program at the American
Association for the Study of Liver Diseases meeting later this
month.
- Arbutus is evaluating a number of oral next-generation capsid
inhibitor compounds with chemical scaffolding different from AB-506
that the Company believes have the potential to contribute to the
inhibition of HBV replication as part of a combination regimen. The
Company’s objective is to select one of several lead compounds for
IND-enabling studies in December of this year.
AB 452
- Arbutus remains committed to the development of oral
RNA-destabilizers that have shown compelling anti-viral effects in
multiple HBV preclinical models. AB-452, Arbutus’ lead oral
RNA-destabilizer is being evaluated in a repeat 90-day preclinical
safety study in two species before making a go/no-go decision. We
expect that the results of this study will allow us to make that
decision early in 2020. The Company is also continuing to
advance back-up compounds with chemical scaffolding different from
that of AB-452.
Early R&D Programs
- Arbutus continues a focused discovery effort on follow-on
compounds for its current HBV pipeline, including efforts to
identify compounds potentially capable of reawakening patients’
HBV-specific immune response by inhibiting PD-L1.
New Appointment to Arbutus’ Board of
Directors
- Andrew Cheng, M.D., Ph.D., was appointed to the Arbutus Board
of Directors. Previously, Dr. Cheng spent nearly two decades
at Gilead Sciences, Inc., where he most recently served as
Chief Medical Officer and Executive Vice President. Dr. Cheng
is currently President and Chief Executive Officer of Akero
Therapeutics (Nasdaq: AKRO).
Cash Position and Cash
Guidance
- The Company had approximately $90.1 million in cash and cash
equivalents as of September 30, 2019. The
discontinuation of the AB-506 development program is anticipated to
reduce cash burn in the short term and the Company believes its
existing cash and cash equivalents balance is sufficient to fund
operations into early 2021.
Financial Results
Cash, Cash Equivalents and
Investments
Arbutus had cash, cash equivalents and
short-term investments totaling $90.1 million as of
September 30, 2019, as compared to $124.6 million as of
December 31, 2018. The decreased cash balance was due
primarily to the $57.7 million used in operating activities during
the first nine months of 2019, partially offset by $18.5 million in
net proceeds from the sale of a portion of its royalty entitlement
on net sales of ONPATTRO in the third quarter of 2019 and $4.7
million of net proceeds from the issuance of shares under its ATM
program. Included in the $57.7 million used in operating
activities is a $5.9 million payment for the award rendered in the
arbitration proceeding with the University of British Columbia in
the third quarter of 2019.
Net Loss
Net loss attributable to common shares for the
third quarter of 2019, including non-cash charges of $43.8 million
related to the impairment of an in-process research and development
("IPR&D") intangible asset and $22.5 million for the impairment
of goodwill described further below, was $85.3 million ($1.50 basic
and diluted loss per common share) as compared to $27.1 million
($0.49 basic and diluted loss per common share) for the third
quarter of 2018. Net loss attributable to common shares also
included non-cash expense for the accrual of coupon on the
Company’s convertible preferred shares of $2.8 million in the third
quarter of 2019 and $2.6 million in the third quarter of 2018, as
well as non-cash expense for a proportionate share of Genevant’s
net losses of $3.5 million in the third quarter of 2019 and
$2.8 million in the third quarter of 2018.
ONPATTRO Royalty
Entitlement
Arbutus has a royalty entitlement on global net
sales of ONPATTRO™ (Patisiran) for the lipid nanoparticle delivery
(LNP) technology licensed by Arbutus to Alnylam
Pharmaceuticals, Inc. (Alnylam) for this product. ONPATTRO is
an RNAi therapeutic for the treatment of hereditary ATTR (hATTR)
amyloidosis that has been approved by the U.S. Food and Drug
Administration and the European Medical Agency. In July
2019, Arbutus sold this royalty entitlement to OCM IP Healthcare
Portfolio LP, an affiliate of the Ontario Municipal Employees
Retirement System (collectively, OMERS), effective as
of January 1, 2019, for $20 million in gross
proceeds before advisory fees. OMERS will retain this royalty
entitlement until it has received $30 million in
royalties, at which point 100% of this royalty entitlement will
revert to Arbutus. OMERS has assumed the risk of collecting
up to $30 million of future royalty payments from Alnylam and
Arbutus is not obligated to reimburse OMERS if they fail to collect
any such future royalties. Arbutus recognized the $20
million of gross proceeds from this transaction as a
liability, net of transaction costs. The Company is amortizing the
liability to non-cash interest expense and will continue to
recognize the royalty revenue that Alnylam pays to OMERS
as non-cash royalty revenue.
In addition to the royalty entitlement from the
Alnylam LNP license agreement, Arbutus is also receiving a second,
lower royalty entitlement on global net sales of ONPATTRO
originating from a settlement agreement and subsequent license
agreement with Acuitas Therapeutics. The royalty entitlement from
Acuitas has been retained by Arbutus and is not part of the royalty
entitlement sale to OMERS.
Operating Expenses
Research and development expenses were $17.7
million in the third quarter of 2019 compared to $16.6 million in
the third quarter of 2018. Research and development expenses
in the third quarter of 2019 included costs associated with the
Company’s Phase 1a/1b clinical trial for its RNAi agent (AB-729),
costs associated with the Company’s Phase 1a/1b clinical trial for
its oral capsid inhibitor (AB-506) that was discontinued in October
2019, and toxicology studies for its HBV RNA Destabilizer
(AB-452). The increase in research and development expenses
was due primarily to increased spending in 2019 for the two Phase
1a/1b clinical trials for AB-729 and AB-506. General and
administrative expenses were $3.3 million in the third quarter of
2019 compared to $2.6 million in the third quarter of 2018.
The increase in general and administrative expenses was due
primarily to increased stock compensation expense and an increase
in insurance premiums.
In the third quarter of 2019, the Company also
recorded a charge of $6.5 million related to an arbitration award
from the Company's arbitration with the University of British
Columbia.
Impairment of IPR&D Intangible
Assets and Goodwill
The Company has historically carried IPR&D
and goodwill from its acquisition of technologies and business
combination as assets. All acquired IPR&D intangible
assets relate to the Company's covalently closed circular DNA
("cccDNA") program. During the three months ended September
30, 2019, the Company recorded a $43.8 million non-cash impairment
expense to reduce the carrying value of its IPR&D intangible
assets to zero as of September 30, 2019. The Company also
recognized a corresponding income tax benefit of $12.7 million
related to the decrease in its deferred tax liability associated
with the IPR&D intangible assets. The impairment was due
to an indefinite delay in further development of the Company's
cccDNA program while the Company focuses on its other development
programs.
Goodwill represents the excess of purchase price
over the value assigned to the net tangible and identifiable
intangible assets in connection with the business combination that
formed Arbutus. For the third quarter of 2019, the Company
assessed the changes in circumstances that occurred during the
quarter to determine if it was more likely than not that the fair
value of the Company was below its carrying amount. Due to a
sustained decrease in the Company's share price in recent months,
the Company's market capitalization was reduced below the book
value of its net assets and the Company concluded that its fair
value was below its carrying amount by an amount in excess of the
carrying value of the goodwill. As a result, the Company
recorded a $22.5 million non-cash impairment expense to reduce the
carrying value of its goodwill asset to zero as of September 30,
2019.
Equity Investment Loss in Genevant
As of September 30, 2019, the Company owned
approximately 40% of the common equity of Genevant Sciences Ltd.
(Genevant), a company launched with Roivant Sciences Ltd. in
April 2018. Arbutus recorded a loss of $3.5
million in the third quarter of 2019 for its proportionate
share of Genevant’s net loss. Financial results of Genevant
are recorded on a one-quarter lag basis.
Outstanding Shares
The Company had 56,850,172 common shares issued
and outstanding as of September 30, 2019. In addition, the
Company had approximately 9.1 million stock options outstanding and
1.164 million convertible preferred shares outstanding, which
(including the annual 8.75% coupon) will be mandatorily convertible
into approximately 23 million common shares on October 18,
2021.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF LOSS(in millions, except share and
per share data)
|
Three Months
Ended September 30, |
|
Nine Months
Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Total revenue |
$ |
3.1 |
|
|
$ |
1.6 |
|
|
$ |
4.4 |
|
|
$ |
4.3 |
|
Operating expenses |
|
|
|
|
|
|
|
Research and development |
17.7 |
|
|
16.6 |
|
|
45.2 |
|
|
46.9 |
|
General and administrative |
3.3 |
|
|
2.6 |
|
|
15.9 |
|
|
10.1 |
|
Depreciation |
0.5 |
|
|
0.5 |
|
|
1.5 |
|
|
1.7 |
|
Site consolidation |
0.2 |
|
|
(0.5 |
) |
|
— |
|
|
3.7 |
|
Impairment of intangible assets |
43.8 |
|
|
14.8 |
|
|
43.8 |
|
|
14.8 |
|
Impairment of goodwill |
22.5 |
|
|
— |
|
|
22.5 |
|
|
— |
|
Arbitration settlement |
6.5 |
|
|
— |
|
|
6.5 |
|
|
— |
|
Loss from operations |
$ |
(91.4 |
) |
|
$ |
(32.4 |
) |
|
$ |
(131.0 |
) |
|
$ |
(72.9 |
) |
Other income (loss) |
|
|
|
|
|
|
|
Interest income (expense), net |
(0.6 |
) |
|
0.7 |
|
|
0.6 |
|
|
2.2 |
|
Foreign exchange gain (loss) |
— |
|
|
0.1 |
|
|
0.1 |
|
|
(0.8 |
) |
Gain on investment |
— |
|
|
— |
|
|
— |
|
|
24.9 |
|
Equity investment loss |
(3.5 |
) |
|
(2.8 |
) |
|
(11.5 |
) |
|
(2.8 |
) |
Change in fair value of contingent consideration |
0.3 |
|
|
5.6 |
|
|
0.1 |
|
|
6.3 |
|
Total other income (loss) |
$ |
(3.8 |
) |
|
$ |
3.6 |
|
|
$ |
(10.7 |
) |
|
$ |
29.8 |
|
Income tax benefit |
12.7 |
|
|
4.3 |
|
|
12.7 |
|
|
4.3 |
|
Net loss
(1) |
$ |
(82.5 |
) |
|
$ |
(24.5 |
) |
|
$ |
(129.0 |
) |
|
$ |
(38.8 |
) |
Accrual of coupon on
convertible preferred shares |
(2.8 |
) |
|
(2.6 |
) |
|
(8.3 |
) |
|
(7.5 |
) |
Net loss attributable to
common shareholders |
$ |
(85.3 |
) |
|
$ |
(27.1 |
) |
|
$ |
(137.3 |
) |
|
$ |
(46.3 |
) |
Loss per share |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(1.50 |
) |
|
$ |
(0.49 |
) |
|
$ |
(2.43 |
) |
|
$ |
(0.84 |
) |
Weighted average number of
common shares |
|
|
|
|
|
|
|
Basic and diluted |
56,850,172 |
|
|
55,421,504 |
|
|
56,469,358 |
|
|
55,241,284 |
|
(1) Net loss for the
three and nine months ended September 30, 2019 included $66.3
million of non-cash expenses related to the impairments of an
IPR&D intangible asset and goodwill, partially offset by a
corresponding income tax benefit of $12.7 million related to the
decrease in a deferred tax liability associated with the IPR&D
intangible asset. Net loss for the three and nine months ended
September 30, 2018 included $14.8 million of non-cash expense
related to the impairment of an IPR&D intangible asset,
partially offset by a corresponding income tax benefit of $4.3
million related to the decrease in a deferred tax liability
associated with the IPR&D intangible asset.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS(in millions)
|
September 30, 2019 |
|
December 31, 2018 |
Cash and cash equivalents |
$ |
90.1 |
|
|
$ |
36.9 |
|
Short-term investments |
— |
|
|
87.7 |
|
Accounts receivable and other
current assets |
4.2 |
|
|
4.6 |
|
Current assets |
94.3 |
|
|
129.2 |
|
Investment in Genevant |
11.0 |
|
|
22.2 |
|
Property and equipment, net |
9.2 |
|
|
10.2 |
|
Right of use asset |
2.8 |
|
|
— |
|
Intangible assets |
— |
|
|
43.8 |
|
Goodwill |
— |
|
|
22.5 |
|
Total assets |
$ |
117.3 |
|
|
$ |
227.9 |
|
Accounts payable and
accrued liabilities |
$ |
8.2 |
|
|
$ |
9.5 |
|
Site consolidation accrual |
0.2 |
|
|
1.3 |
|
Liability-classified options |
0.1 |
|
|
0.5 |
|
Lease liability, current |
0.3 |
|
|
— |
|
Current liabilities |
8.8 |
|
|
11.3 |
|
Liability related to sale of
future royalties |
18.7 |
|
|
— |
|
Deferred rent and inducements,
non-current |
— |
|
|
0.6 |
|
Contingent consideration |
3.0 |
|
|
3.1 |
|
Lease liability, non-current |
3.1 |
|
|
— |
|
Deferred tax liability |
— |
|
|
12.7 |
|
Total stockholders' equity |
83.7 |
|
|
200.2 |
|
Total liabilities and stockholders' equity |
$ |
117.3 |
|
|
$ |
227.9 |
|
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW(in millions)
|
Three Months
Ended September 30, |
|
Nine Months
Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net loss for the period |
$ |
(82.5 |
) |
|
$ |
(24.5 |
) |
|
$ |
(129.0 |
) |
|
$ |
(38.8 |
) |
Impairment of intangible
assets and goodwill |
66.3 |
|
|
14.8 |
|
|
66.3 |
|
|
14.8 |
|
Deferred income tax
benefit |
(12.7 |
) |
|
(4.3 |
) |
|
(12.7 |
) |
|
(4.3 |
) |
Gain on investment |
— |
|
|
— |
|
|
— |
|
|
(24.9 |
) |
Equity investment
loss |
3.5 |
|
|
2.8 |
|
|
11.5 |
|
|
2.8 |
|
Other non-cash items |
1.8 |
|
|
(3.4 |
) |
|
8.3 |
|
|
2.0 |
|
Changes in working
capital |
0.1 |
|
|
1.4 |
|
|
(2.1 |
) |
|
(2.4 |
) |
Net cash used in operating
activities |
(23.5 |
) |
|
(13.2 |
) |
|
(57.7 |
) |
|
(50.8 |
) |
Net cash provided by (used) in
investing activities |
16.2 |
|
|
24.4 |
|
|
87.2 |
|
|
(48.9 |
) |
Net cash provided by financing
activities |
18.5 |
|
|
0.4 |
|
|
23.6 |
|
|
55.5 |
|
Effect of foreign exchange
rate changes on cash and cash equivalents |
— |
|
|
0.1 |
|
|
0.1 |
|
|
(0.8 |
) |
Net increase
(decrease) in cash and cash equivalents |
$ |
11.2 |
|
|
$ |
11.7 |
|
|
$ |
53.2 |
|
|
$ |
(45.0 |
) |
Cash and cash equivalents,
beginning of period |
78.9 |
|
|
10.2 |
|
|
36.9 |
|
|
66.9 |
|
Cash and cash
equivalents, end of period |
$ |
90.1 |
|
|
$ |
21.9 |
|
|
$ |
90.1 |
|
|
$ |
21.9 |
|
Short-term
investments |
— |
|
|
120.1 |
|
|
— |
|
|
120.1 |
|
Total cash, cash
equivalents and short-term investments, end of period |
$ |
90.1 |
|
|
$ |
142.0 |
|
|
$ |
90.1 |
|
|
$ |
142.0 |
|
Conference Call Today
Arbutus will hold a conference call and webcast
today, Wednesday, November 6, 2019 at 8:45 AM Eastern Time to
provide a corporate update. You can access a live webcast of the
call through the Investors section of Arbutus' website at
www.arbutusbio.com. Alternatively, you can dial (866) 393-1607 or
(914) 495-8556 and reference conference ID 7279188.
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 (855) 859-2056 or (404)
537-3406, and reference conference ID 7279188.
About Arbutus
Arbutus Biopharma Corporation is a publicly
traded (Nasdaq: ABUS) biopharmaceutical company dedicated to
discovering, developing and commercializing a cure for patients
suffering from chronic Hepatitis B infection. Arbutus is developing
multiple drug candidates, each of which have the potential to
improve upon the standard of care and contribute to a curative
combination regimen. 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 our expectation that certain preliminary safety and efficacy
data from the Phase 1a/1b clinical trial for AB-729 will be
available in the first quarter of 2020; our intention to present
results from the AB-506 Phase 1a/1b clinical trial at the AASLD
meeting later this month; our objective to select one of several
lead capsid inhibitor compounds for IND-enabling studies in
December of this year; our expectation that the results from our
AB-452 study will allow us to make a go/no-go decision early in
2020; our expectations regarding the initiation, timing and
completion of preclinical studies and clinical trials; the
sufficiency of our cash and cash equivalents to extend into early
2021; and the potential for our drug candidates to improve upon the
standard of care and contribute to a curative combination regimen
for chronic HBV.
With respect to the forward-looking statements
contained in this press release, Arbutus has made numerous
assumptions regarding, among other things: the timely receipt of
expected payments; the effectiveness and timeliness of preclinical
and clinical trials, and the usefulness of the data; the timeliness
of regulatory approvals; 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 studies 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; changes in Arbutus’ strategy regarding its product
candidates and clinical development activities; Arbutus may not
receive the necessary regulatory approvals for the clinical
development of Arbutus' products; economic and market conditions
may worsen; 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, Arbutus’ Quarterly Reports on Form 10-Q and Arbutus'
continuous and periodic 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 and Media
William H. CollierPresident and CEOPhone: 604-419-3200Email:
ir@arbutusbio.com
Pam MurphyInvestor Relations ConsultantPhone: 604-419-3200Email:
ir@arbutusbio.com
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