Arbutus Biopharma Corporation
Annual Report 2024

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K   ☒   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2024  or  ☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from            to Commission File Number: 001-34949  Arbutus Biopharma Corporation (Exact Name of Registrant as Specified in Its Charter) British Columbia, Canada 98-0597776 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 701 Veterans Circle Warminster PA 18974 (Address of Principal Executive Offices) 267-469-0914  (Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common shares, without par value ABUS The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company ☐ ☐ ☒ ☒ ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x As of June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $454,399,613 (based on the closing price of $3.09 per share as reported on the Nasdaq Global Select Market as of that date). As of March 25, 2025, the registrant had 191,480,188 common shares, without par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for its 2025 Annual Meeting of Shareholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission no later than 120 days after the registrant’s fiscal year ended December 31, 2024, are incorporated by reference into Part III of this Form 10-K. 2 ARBUTUS BIOPHARMA CORPORATION   TABLE OF CONTENTS     Page Cautionary Note Regarding Forward-looking Statements 4 Risk Factors Summary 6 PART I 8 Item 1. Business 8 Item 1A. Risk Factors 34 Item 1B. Unresolved Staff Comments 57 Item 1C. Cybersecurity 57 Item 2. Properties 58 Item 3. Legal Proceedings 58 Item 4. Mine Safety Disclosures 61       PART II 62 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 Item 6. Reserved 62 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 63 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 73 Item 8. Financial Statements and Supplementary Data 74 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 102 Item 9A. Controls and Procedures 102 Item 9B. Other Information 103 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 104       PART III 105 Item 10. Directors, Executive Officers and Corporate Governance 105 Item 11. Executive Compensation 105 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 105 Item 13. Certain Relationships and Related Transactions, and Director Independence 105 Item 14. Principal Accountant Fees and Services 105       PART IV 106 Item 15. Exhibits and Financial Statement Schedules 106 Item 16. Form 10-K Summary 109 3 Cautionary Note Regarding Forward-looking Statements This Annual Report on Form 10-K (Form 10-K) contains “forward-looking statements” or “forward-looking information” within the meaning of applicable United States and Canadian securities laws (we collectively refer to these items as “forward-looking statements”). Forward-looking statements are generally identifiable by use of the words “believes,” “may,” “plans,” “will,” “anticipates,” “intends,” “budgets,” “could,” “estimates,” “expects,” “forecasts,” “projects” and similar expressions that are not based on historical fact or that are predictions of or indicate future events and trends, and the negative of such expressions. Forward-looking statements in this Form 10-K, including the documents incorporated by reference, include statements about, among other things: • our strategy, future operations, preclinical studies, clinical trials, and prospects; • our beliefs, plans and expectations regarding our patent infringement lawsuits against Moderna and Pfizer/BioNTech; • the expected plans of our new management team and Board of Directors with respect to the review of our pipeline and development plans for our hepatitis B programs; • the potential for our product candidates to achieve their desired or anticipated outcomes; • the expected cost, timing and results of our clinical development plans and clinical trials, including our clinical collaborations with third parties; • the development and commercialization of a curative combination regimen for chronic hepatitis B infection, a disease of the liver caused by the hepatitis B virus; • the potential of our product candidates to improve upon the standard of care and contribute to a functional curative combination treatment regimen; • obtaining necessary regulatory approvals; • obtaining adequate financing through a combination of financing activities and operations; • the expected returns and benefits from strategic alliances, licensing agreements, and development collaborations with third parties, and the timing thereof; • our expectations regarding our technology licensed to third parties, and the timing thereof; • our anticipated revenue and expense fluctuation and guidance; • our expectations regarding the timing of announcing data from our ongoing clinical trials; • our expectations regarding our net cash burn; and • our expectation for how long we can fund our operations with our existing cash resources, as well as other statements relating to our future operations, financial performance or financial condition, prospects or other future events. Forward-looking statements appear primarily in the sections of this Form 10-K entitled “Item 1-Business,” “Item 1A-Risk Factors,” “Item 7-Quantitative and Qualitative Disclosures About Market Risk,” and “Item 8-Financial Statements and Supplementary Data.” Forward-looking statements are based upon current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially and adversely from those expressed or implied by such statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-K and in particular the risks and uncertainties discussed under “Item 1A-Risk Factors” of this Form 10-K. As a result, you should not place undue reliance on forward-looking statements. Additionally, the forward-looking statements contained in this Form 10-K represent our views only as of the date of this Form 10-K (or any earlier date indicated in such statement). While we may update certain forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if new information becomes available in the future. However, you are advised to consult any further disclosures we make on related subjects in the periodic and current reports that we file with the Securities and Exchange Commission. The foregoing cautionary statements are intended to qualify all forward-looking statements wherever they may appear in this Form 10-K, including any documents incorporated by reference therein. For all forward-looking statements, we claim protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. This Form 10-K also contains estimates, projections and other information concerning our industry, our business, the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain 4 medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. 5 Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results. For more information, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2024. Risks Related to Our Business, Our Financial Results and Need for Additional Capital • We are involved in multiple patent infringement lawsuits in multiple jurisdictions to protect and assert our intellectual property rights against large, well-capitalized companies, which requires that we continue to expend substantial resources, and we may not be successful in these proceedings. • We are in the early stages of our development, and there is a limited amount of information about us upon which you can evaluate our product candidates. • We may require substantial additional capital to fund our operations. Additional funds may be dilutive to shareholders or impose operational restrictions. Further, if additional capital is not available, we may need to delay, limit or eliminate our development and commercialization programs and modify our business strategy. • We have incurred losses in nearly every year since our inception and we anticipate that we will not achieve profits for the foreseeable future. To date, we have had no product revenues. Risks Related to Development, Clinical Testing, Regulatory Approval, Marketing, and Coverage and Reimbursement of our Product Candidates • Our product candidates are in early stages of development and must go through clinical trials, which are very expensive, time-consuming and difficult to design and implement. The outcomes of clinical trials are uncertain. • Preclinical studies and preliminary and interim data from clinical trials of our product candidates are not necessarily predictive of the results or success of ongoing or later clinical trials of our product candidates. • Because we have limited resources, we may decide to pursue a particular product candidate and fail to advance product candidates that later demonstrate a greater chance of clinical and commercial success. • Several of our current clinical trials are being conducted outside the United States, and the FDA may not accept data from trials conducted in locations outside the United States. • We cannot guarantee how long it will take regulatory agencies to review our applications for product candidates. • Disruptions at the FDA, including due to a reduction in the FDA’s workforce and/or inadequate funding for the FDA, could prevent the FDA from performing normal functions on which our business relies, which could negatively impact our business. • If a particular product candidate causes undesirable side effects, then we may be unable to receive regulatory approval of or commercialize such product candidate. • We may find it difficult to enroll patients in our clinical trials, which could hinder such clinical trials. • It may take considerable time and expense to resolve the clinical hold that has been placed on our IND application of AB-101 by the FDA, and no assurance can be given that the FDA will remove the clinical hold, in which case our business and financial prospects may be adversely affected. • Current and planned clinical trials may be impacted as a result of the military action by Russia in Ukraine. • Even if our product candidates obtain regulatory approval, they will remain subject to ongoing regulatory requirements. • We face significant competition from other biotechnology and pharmaceutical companies targeting HBV. • We are largely dependent on the future commercial success of our HBV product candidates. • We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits. • Coverage and adequate reimbursement may not be available for our product candidates, which could make it difficult for us to sell our products profitably. • We are subject to United States and Canadian healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages and reputational harm. • If we participate in the Medicaid Drug Rebate Program and other governmental pricing programs, failure to comply with obligations under these programs could result in additional reimbursement requirements, penalties, sanctions and 6 fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. • Failure to comply with the United States Foreign Corrupt Practices Act, and potentially other similar global laws could subject us to penalties and other adverse consequences. Risks Related to Our Dependence on Third Parties • We depend on our license agreement with Alnylam Pharmaceuticals, Inc. for the commercialization of ONPATTRO™ (Patisiran). • We expect to depend in part on our licensing agreements for a significant portion of our revenues for the foreseeable future and to develop, conduct clinical trials with, obtain regulatory approvals for, and manufacture, market and sell some of our product candidates. If these licensing agreements are unsuccessful, or anticipated milestone or royalty payments are not received, our business could be materially adversely affected. • We depend on Qilu Pharmaceutical Co., Ltd. for the development and commercialization of imdusiran in China, Hong Kong, Macau and Taiwan. • If conflicts arise between our collaboration or licensing partners and us, our collaboration or licensing partners may act in their best interest and not in our best interest, which could adversely affect our business. • We rely on third parties to conduct our clinical trials, and if they fail to fulfill their obligations, our development plans may be adversely affected. • We rely exclusively on third parties to formulate and manufacture our product candidates, which exposes us to risks that may delay or hinder development, regulatory approval and commercialization of our products. Risks Related to Our Intellectual Property • Other entities may assert patent rights that prevent us from developing or commercializing our products. • Certain of our patents and patent applications have been challenged and found to be invalid, and additional challenges may occur in the future, which could adversely affect our business. • We have incurred, and may in the future continue to incur, substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may not be successful in one or more of these lawsuits or proceedings, any of which could have a material adverse effect on our business, financial condition and results of operations and could cause the market value of our common shares to decline. • Confidentiality agreements with employees and others, including collaborators, may not adequately prevent disclosure of trade secrets and other proprietary information. Risks Related to the Ownership of our Common Shares • The concentration of common share ownership will likely limit the ability of the other shareholders to influence corporate matters. • We are incorporated in Canada, with our assets located both in Canada and the United States, with the result that it may be difficult for investors to enforce judgments obtained against us or some of our officers. • If we are deemed to be a “passive foreign investment company” for the current or any future taxable year, investors who are subject to United States federal taxation would likely suffer materially adverse United States federal income tax consequences. • Our articles and certain Canadian laws could delay or deter a change of control. General Risk Factors • Our success depends on our new management team and Board of Directors, which is conducting a review of our pipeline and development plans for our hepatitis B programs. • We could face liability from our controlled use of hazardous and radioactive materials. • Our business, reputation, and operations could suffer in the event of information technology system failures. • We may acquire other assets or businesses, or form strategic alliances or collaborations or make investments in other companies or technologies that could harm our business. 7 PART I Item 1. Business  Overview Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company focused on infectious disease. We are currently developing imdusiran (AB-729), our proprietary, conjugated GalNAc, subcutaneously-delivered RNAi therapeutic, and AB-101, our proprietary oral PD-L1 inhibitor, for the treatment of chronic hepatitis B (cHBV). Through our ownership stake in and our license to Genevant Sciences, Ltd (Genevant), we are also focused on maximizing opportunity for our in-house developed Lipid Nanoparticle (LNP) delivery technology.  We continue to protect and defend our intellectual property, which is the subject of our ongoing lawsuits against Moderna Therapeutics, Inc. (Moderna) and against Pfizer Inc. and BioNTech SE (collectively, Pfizer/BioNTech) for their use of our patented LNP delivery technology in their COVID-19 mRNA-LNP vaccines. With respect to the Moderna lawsuit in the United States, a trial date has been set for September 24, 2025. On March 3, 2025, we announced that, along with Genevant, we have filed five international lawsuits against Moderna in connection with their use of our LNP technology in their COVID-19 mRNA-LNP and RSV vaccines. With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred in December 2024. The court is expected to provide its ruling on the claim construction and issue a further scheduling order, including the date for trial, in 2025. During 2024, we streamlined the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101, and therefore ceased all discovery efforts, discontinued our IM- PROVE III clinical trial and reduced our workforce by 40%. In the first quarter of 2025, we announced the appointment of five new members of our Board of Directors (our Board) to replace all of the former directors, as well as the appointment of a new President, Chief Executive Officer and Chairperson of our Board and a new Chief Financial Officer. Additionally, our Board took action to reduce our workforce by an additional 57% resulting in a total workforce after reductions of 19 employees. Our Board also decided to exit our corporate headquarters in Warminster, PA and to discontinue in-house scientific research. In connection with these actions, we expect to incur a one-time restructuring charge in the first quarter of 2025 of approximately $11 million to $13 million. With these organizational changes and our ongoing cost management efforts, we expect to significantly reduce our net cash burn in 2025 when compared to 2024. Our new Board and management team are reviewing our pipeline and development plans for our hepatitis B programs. To assist with this review, we are currently retaining experts in virology, hepatitis B, and in the clinical development and approval of antiviral treatments. We expect to provide a further update once our review is complete. Strategy Our strategy is focused on maximizing opportunities for our cHBV development programs and our in-house developed LNP delivery technology. LNP delivery technology On February 28, 2022 and April 4, 2023, we filed patent infringement lawsuits in the United States against Moderna and Pfizer/BioNTech, respectively, seeking compensation for their unlicensed use of our patented technologies in their COVID-19 mRNA-LNP vaccines. It is well established in the scientific literature that the most significant technological hurdle to developing and deploying medicines using mRNA is engineering a safe and effective way to deliver the mRNA to human cells. Scientists at Arbutus and Genevant have spent years developing and refining LNP delivery technology, which has been licensed for various applications to many different third parties. Our and Genevant’s LNP technology relies on microscopic particles built from four carefully selected types of fat-like molecules to shelter and protect RNA molecules. With this technology, the RNA can travel through the human body to a target cell and through the target cell’s membrane before releasing the RNA. Without this crucial delivery technology, the RNA would quickly degrade in the body and be ineffective. We remain committed to taking all legal actions necessary to defend and protect our intellectual property. 8 With respect to the Moderna lawsuit, the claim construction hearing occurred on February 8, 2024. On April 3, 2024, the court provided its claim construction ruling in which it construed the disputed claim terms and agreed with our position on most of the disputed claim terms. A trial date for the Moderna lawsuit in the United States has been set for September 24, 2025. On March 3, 2025, we announced that, along with Genevant, we have filed five international lawsuits against Moderna in connection with their use of our LNP technology in their COVID-19 mRNA-LNP and RSV vaccines. With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred on December 18, 2024. The court is expected to provide its ruling on the claim construction and issue a further scheduling order, including the date for trial, in 2025. cHBV programs Our current HBV strategy is to develop a functional cure for patients with cHBV infection with imdusiran as a potential cornerstone in a combination therapy. We believe that a combination of compounds that can suppress hepatitis B virus deoxyribonucleic acid (HBV DNA) replication and HBsAg expression as well as boost patients’ HBV-specific immune response could address the most important elements to achieving a functional cure. Functional cure is defined as sustained HBsAg loss and HBV DNA less than the lower limit of quantification (

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