Arbutus Biopharma Corporation (Nasdaq: ABUS), a Hepatitis B Virus
(HBV) therapeutic solutions company, today reports its fourth
quarter and year end 2019 financial results, confirms 2020
corporate objectives and provides pipeline update.
“Arbutus is focused on developing a portfolio of
medicines with different mechanisms of action that we believe could
provide a functional cure for people with chronic hepatitis B,”
said William Collier, Arbutus’ President and Chief Executive
Officer. “Our key objectives for 2020 are to complete and report
results from the Phase 1a/b clinical trial of AB-729, our
proprietary subcutaneous RNAi agent, and rapidly advance our
next-generation oral capsid inhibitor, AB-836, through IND-enabling
studies by year end.
Mr. Collier added, “We remain on track to announce preliminary
safety and efficacy results from multiple single-dose cohorts in
the Phase 1a/1b clinical trial for AB-729 later this month.”
Pipeline Update
AB-729
- AB-729 is an RNA interference (RNAi) therapeutic targeted to
hepatocytes using Arbutus’ novel covalently conjugated
N-acetylgalactosamine (GalNAc) delivery technology that enables
subcutaneous delivery. AB-729 inhibits viral replication and
reduces all HBV antigens, including hepatitis B surface antigen
(HBsAg), in preclinical models. Reducing HBsAg is thought to be a
key prerequisite to enable reawakening of a patient’s immune system
to respond to the virus.
- Arbutus is currently conducting a single- and multiple-dose
Phase 1a/1b clinical trial for AB-729 to determine the safety,
tolerability, pharmacokinetics, and pharmacodynamics of AB-729 in
healthy volunteers and in subjects with chronic hepatitis B (CHB)
infection.
- 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 later this month.
Additional single-dose data and preliminary multi-dose data are
expected in the second half of 2020.
AB-836
- AB-836 is an oral HBV capsid inhibitor. HBV core protein
assembles into a capsid structure, which is required for viral
replication. The current standard-of-care therapy for HBV,
primarily nucleoside analogues that work by inhibiting the viral
polymerase, significantly reduce virus replication, but not
completely. Capsid inhibitors inhibit replication by preventing the
assembly of functional viral capsids. They also have been shown to
inhibit the uncoating step of the viral life cycle thus reducing
the formation of new covalently closed circular DNA (cccDNA), the
viral reservoir which resides in the cell nucleus.
- In January 2020, Arbutus selected AB-836 as its next-generation
oral capsid inhibitor. AB-836 is a novel chemical series
differentiated from Arbutus’ previously discontinued capsid
inhibitor candidate, AB-506, and other competitor compounds in the
capsid inhibitor space. AB-836 has the potential for
increased potency and an enhanced resistance profile compared to
AB-506, our previous generation capsid inhibitor that was
discontinued in October 2019. Arbutus anticipates completing
IND-enabling studies by the end of 2020.
Early R&D Programs
- Arbutus continues a focused discovery effort on follow-on
compounds for its current HBV pipeline, including the development
of oral RNA-destabilizers that have shown compelling anti-viral
effects in multiple HBV preclinical models. Arbutus is now focused
on advancing a next-generation oral HBV specific RNA-destabilizer
with chemical scaffolds distinct from AB-452 through lead
optimization. Arbutus also has compounds in lead optimization
that are potentially capable of reawakening patients’ HBV-specific
immune response by inhibiting PD-L1.
Cash Position and 2020 Cash Guidance
- Arbutus ended the year with $90.8 million in cash,
cash equivalents and short-term investments which the Company
believes is sufficient to fund operations into mid-2021. Arbutus
expects to utilize between $54 to $58 million of cash and
investments to fund operations in 2020.
Financial Results
Cash, Cash Equivalents and
Investments
Arbutus had cash, cash equivalents and
short-term investments totaling $90.8 million as of
December 31, 2019, as compared to $124.6 million as of
December 31, 2018. The decreased cash balance was due
primarily to the $71.0 million used in operating activities during
the year ended December 31, 2019, partially offset by $18.5 million
in net proceeds from the sale of Arbutus’ portion of a royalty
entitlement on net sales of Alnylam Pharmaceuticals, Inc.’s
ONPATTROTM (Partisiran) in the third quarter of 2019 and $18.6
million of net proceeds from the issuance of shares under Arbutus’
ATM program. Included in the $71.0 million used in operating
activities is a $5.9 million payment in the third quarter of 2019
for an award rendered in an arbitration proceeding with the
University of British Columbia. Subsequent to year end,
Arbutus has received an additional $12.3 million of net proceeds
from the issuance of shares under Arbutus’ ATM program during the
first quarter of 2020 through March 4, 2020.
Net Loss
Net loss attributable to common shares for the
year ended December 31, 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 $164.9
million ($2.89 basic and diluted loss per common share) as compared
to $67.2 million ($1.21 basic and diluted loss per common share) in
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 $11.1 million in 2019 and $10.1
million in 2018, as well as non-cash equity losses associated with
our investment in Genevant Sciences Ltd.’s (“Genevant”) of $22.5
million in 2019 and non-cash equity gains of $19.3 million in
2018. Genevant is a company launched with Roivant
Sciences Ltd., Arbutus largest shareholder, in April 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 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
Medicines 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 $57.6
million for the year ended December 31, 2019 compared to $57.9
million in 2018. Research and development expenses for the
year ended December 31, 2019 included costs associated with the
Company’s Phase 1a/1b clinical trial for its RNAi agent (AB-729),
Phase 1a/1b clinical trial for its oral capsid inhibitor (AB-506),
which was discontinued in October 2019, and toxicology studies for
its HBV RNA Destabilizer (AB-452), which was discontinued in
February 2020. General and administrative expenses were $17.7
million in 2019 compared to $16.0 million in 2018. The
increase in general and administrative expenses was due primarily
to severance related to our former President and Chief Executive
Officer’s departure from the Company in June 2019, partially
offset by a decrease in professional fees. In accordance with the
terms of his legacy employment agreement, our former President and
Chief Executive Officer received $2.3 million in cash
severance and the Company recognized $1.1 million of
non-cash stock-based compensation expense for accelerated vesting
of his stock options.
Additionally, the Company recorded a charge of
$6.3 million in 2019 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 cccDNA program. During the
year ended December 31, 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. 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. The Company assessed changes in circumstances 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 during the year, 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, during the third quarter
of 2019, the Company recorded a $22.5 million non-cash impairment
expense to reduce the carrying value of its goodwill asset to
zero.
Outstanding Shares
The Company had 64,780,314 common shares issued
and outstanding as of December 31, 2019. In addition, the
Company had approximately 8.6 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 thousands, except share and
per share data)
|
Year Ended December 31, |
|
2019 |
|
2018 |
Revenue |
|
|
|
Revenue from collaborations and licenses |
$ |
4,355 |
|
|
$ |
5,945 |
|
Non-cash revenue |
1,656 |
|
|
— |
|
Total
revenue |
6,011 |
|
|
5,945 |
|
Operating
expenses |
|
|
|
Research and development |
57,601 |
|
|
57,934 |
|
General and administrative |
17,727 |
|
|
16,002 |
|
Depreciation |
2,028 |
|
|
2,181 |
|
Site consolidation |
156 |
|
|
4,797 |
|
Impairment of intangible assets |
43,836 |
|
|
14,811 |
|
Impairment of goodwill |
22,471 |
|
|
— |
|
Arbitration |
6,266 |
|
|
— |
|
Loss from
operations |
(144,074 |
) |
|
(89,780 |
) |
Other income
(loss) |
|
|
|
Interest income |
2,111 |
|
|
3,047 |
|
Interest expense |
(2,108 |
) |
|
(226 |
) |
Equity investment gains (losses) |
(22,522 |
) |
|
19,322 |
|
Increase in fair value of contingent consideration |
173 |
|
|
7,298 |
|
Foreign exchange gains (losses) |
41 |
|
|
(1,003 |
) |
Total other income
(loss) |
(22,305 |
) |
|
28,438 |
|
Income tax benefit |
12,656 |
|
|
4,282 |
|
Net loss
(1) |
$ |
(153,723 |
) |
|
$ |
(57,060 |
) |
Dividend accretion of convertible preferred shares |
(11,149 |
) |
|
(10,091 |
) |
Net loss attributable
to common shares |
$ |
(164,872 |
) |
|
$ |
(67,151 |
) |
Net loss per common share |
|
|
|
Basic and diluted |
$ |
(2.89 |
) |
|
$ |
(1.21 |
) |
Weighted average number of
common shares |
|
|
|
Basic and diluted |
57,093,454 |
|
|
55,304,083 |
|
(1) Net loss for the year ended
December 31, 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 year ended December 31, 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 thousands)
|
December 31, 2019 |
|
December 31, 2018 |
Cash and cash equivalents |
$ |
31,799 |
|
|
$ |
36,942 |
|
Investments in marketable
securities |
59,035 |
|
|
87,675 |
|
Accounts receivable and other
current assets |
2,994 |
|
|
4,612 |
|
Total current assets |
93,828 |
|
|
129,229 |
|
Investment in Genevant |
— |
|
|
22,224 |
|
Property and equipment, net of
accumulated depreciation |
8,676 |
|
|
10,145 |
|
Right of use asset |
2,738 |
|
|
— |
|
Intangible assets |
— |
|
|
43,836 |
|
Goodwill |
— |
|
|
22,471 |
|
Other non-current assets |
293 |
|
|
— |
|
Total assets |
$ |
105,535 |
|
|
$ |
227,905 |
|
Accounts payable and accrued
liabilities |
$ |
7,098 |
|
|
$ |
9,429 |
|
Site consolidation accrual |
137 |
|
|
1,331 |
|
Liability-classified options |
253 |
|
|
479 |
|
Lease liability, current |
340 |
|
|
— |
|
Total current liabilities |
7,828 |
|
|
11,239 |
|
Liability related to sale of
future royalties |
18,992 |
|
|
— |
|
Deferred rent and inducements,
non-current |
— |
|
|
645 |
|
Contingent consideration |
2,953 |
|
|
3,126 |
|
Lease liability, non-current |
3,018 |
|
|
— |
|
Deferred tax liability |
— |
|
|
12,661 |
|
Total stockholders' equity |
72,744 |
|
|
200,234 |
|
Total liabilities and stockholders' equity |
$ |
105,535 |
|
|
$ |
227,905 |
|
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW(in thousands)
|
Year ended
December 31, |
|
2019 |
|
2018 |
Net loss for the period |
$ |
(153,723 |
) |
|
$ |
(57,060 |
) |
Deferred income tax benefit |
(12,661 |
) |
|
(4,282 |
) |
Impairment of intangible assets
and goodwill |
66,307 |
|
|
14,811 |
|
Net equity investment loss
(gain) |
22,522 |
|
|
(19,557 |
) |
Other non-cash items |
8,774 |
|
|
2,497 |
|
Changes in working capital |
(2,225 |
) |
|
(4,275 |
) |
Net cash used in operating activities |
(71,006 |
) |
|
(67,866 |
) |
Net cash provided by (used in) investing
activities |
28,338 |
|
|
(4,127 |
) |
Net cash provided by financing activities |
37,457 |
|
|
55,646 |
|
Effect of foreign exchange
rate changes on cash and cash equivalents |
68 |
|
|
(1,003 |
) |
Decrease in cash and cash equivalents |
$ |
(5,143 |
) |
|
$ |
(17,350 |
) |
Cash and cash equivalents,
beginning of period |
36,942 |
|
|
54,292 |
|
Cash and cash equivalents, end of period |
$ |
31,799 |
|
|
$ |
36,942 |
|
Short-term investments |
59,035 |
|
|
87,675 |
|
Total cash, cash equivalents and short-term investments,
end of period |
$ |
90,834 |
|
|
$ |
124,617 |
|
Conference Call Today
Arbutus will hold a conference call and webcast
today, Thursday, March 5, 2020 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 5084457.
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 5084457.
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 with additional preliminary
data available in the second half of 2020; our expectation to
complete IND-enabling studies for AB-836 by the end of 2020; our
expectation to advance a next-generation oral HBV specific
RNA-destabilizer into lead optimization; the sufficiency of our
cash and cash equivalents to extend into mid-2021; our expectation
to use approximately $54 to $58 million of cash and investments to
fund operations in 2020; 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 MediaWilliam H. CollierPresident
and CEOPhone: 604-419-3200Email: ir@arbutusbio.com
Pam MurphyInvestor Relations ConsultantPhone: 604-419-3200Email:
ir@arbutusbio.com
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