- AB-506, a second-generation capsid inhibitor,
advanced to HBV patient portion of Phase 1a/1b clinical trial
Arbutus Biopharma Corporation (Nasdaq: ABUS), an industry-leading
Hepatitis B Virus (HBV) therapeutic solutions company, today
reports its 2018 third quarter financial results and provides a
corporate update.
“Arbutus is committed to developing a cure for
chronic Hepatitis B by employing a combination of therapeutic
agents, acting in concert,” said Dr. Mark J Murray, President and
Chief Executive Officer of Arbutus. “We are currently focused on
the combination AB-506, our second-generation capsid inhibitor
designed to block HBV DNA replication and AB-729, our
second-generation RNAi agent designed to reduce HBsAg.”
Dr. Murray added, “We believe a combination of
these two agents, with their distinct antiviral mechanisms,
combined with an approved nucleoside, has the potential to offer
HBV patients a more effective, durable and finite treatment
regimen.”
Recent Updates and Upcoming Clinical
Milestones
- Phase 1a/1b clinical trial of AB-506, Arbutus’ second
generation oral capsid inhibitor, successfully progressed through
healthy volunteers into the 28 day HBV patient phase.
Top-line results of the phase 1a/1b clinical trial are expected in
the second quarter of 2019. AB-506 is designed to inhibit HBV DNA
replication with a mode of action complementary to nucleoside
analogues. AB-506 is also designed to inhibit the formation of new
cccDNA, the viral structure which resides in the cell nucleus.
- The company is actively developing orally delivered
RNA-destabilizers that have shown compelling anti-viral effects in
multiple preclinical models. Based on recent nonclinical safety
findings with our lead RNA-destabilizer, AB-452, we have delayed
the planned initiation of a Phase 1a/1b clinical trial to devote
additional time to further characterize the compound before
potentially initiating clinical trials. While further
characterizing these recent AB-452 observations, we are advancing
backup compounds.
- Arbutus is developing a second-generation RNAi agent, AB-729, a
subcutaneously-administered GalNAc conjugate, targeting HBV
replication and HBsAg antigen production. In preclinical models
AB-729 exhibits potent and durable reductions in HBsAg. This agent
is expected to enter clinical trials in Q2 2019 and may
subsequently be combined with AB-506.
- ARB-1467, one of our early LNP delivered, intravenous
administered, RNAi agents targeting HBV, is currently in a 30-week
trial in HBV patients, in combination with tenofovir and
PEG-IFN. To date, six HBV patients have enrolled and been
treated. Two of these patients have met the predetermined criteria
to proceed into the PEG-IFN treatment phase of the trial. The
results from this proof-of-concept trial suggest that this regimen
has the potential to drive HBsAg levels to undetectable in some
patients thus confirming our hypothesis that a combination of
multiple mechanisms will be required to improve clinical outcomes
for HBV patients. While the trial remains open to enrollment, the
Company does not plan to advance this program beyond this trial. We
intend to present results from this trial in a future scientific
meeting.
- Dr. Gaston Picchio, formerly Janssen’s Infectious Diseases
& Vaccines VP Hepatitis Disease Area Leader, has joined as
Arbutus’ Chief Development Officer and adds antiviral drug
development expertise.
- James Meyers and Myrtle Potter were appointed to the Arbutus
Board of Directors, replacing Herbert Conrad and Dr. William
Symonds. Dr. Symonds remains with Arbutus as Chairman of its
Clinical Advisory Board.
ONPATTRO Royalty
Entitlement
ONPATTRO is an RNAi therapeutic that has been
developed for the treatment of hereditary ATTR (hATTR) amyloidosis,
and has been approved by the FDA and the EMA. Arbutus has a royalty
entitlement on global sales of ONPATTRO for the LNP technology
licensed by Arbutus to Alnylam for this product.
Financial Results
Cash, Cash Equivalents and
Investments
As of September 30, 2018, Arbutus had cash, cash
equivalents and short-term investments totaling $142.0 million, as
compared to $139.0 million in cash and cash equivalents, short-term
investments, and restricted investments at December 31, 2017.
The increased cash balance was the result of $66.4 million of gross
proceeds received in Q1 2018 from the second tranche of Series A
participating convertible preferred shares (“Preferred Shares”)
issued to Roivant, offset by the repayment of a $12.6 million
promissory note to Wells Fargo and cash used in operations.
Net Loss
For Q3 2018, net loss attributable to common
shares was $27.0 million ($0.49 basic and diluted loss per common
share) as compared to $11.6 million ($0.21 basic and diluted loss
per common share) for Q3 2017. The Company recorded a non-cash
expense for the impairment of intangible assets of $14.8 million
($10.5 million net of tax benefit) in Q3 2018 for the indefinite
deferral of further development of its AB-423 program, due to the
successful progression of its AB-506 program.
Revenue
Revenue was $1.6 million in Q3 2018 as compared
to $6.9 million in Q3 2017.
In October 2017, Arbutus entered into a license
agreement with Gritstone that entitles Gritstone to research,
develop, manufacture and commercialize products with the Company’s
LNP technology in exchange for an upfront license payment and
potential future milestone and royalty payments. In
April 2018, as part of the license agreement for Arbutus’ delivery
technologies, Genevant gained the right to receive 50% of future
revenues from Gritstone. As Genevant is now the principal provider
of services to Gritstone, the Company is now recording revenues
from Gritstone on a net basis. Arbutus received a
milestone payment from Gritstone of $2.5 million, of which Arbutus
recorded its share, $1.25 million, as revenue in Q3 of 2018.
The $6.9 million in revenue in Q3 2017 was
primarily related to the release of deferred revenue from an
Alexion up-front payment. Upon review of its portfolio in July
2017, Alexion decided to discontinue development of mRNA
therapeutics and therefore the LNP license with Arbutus.
Research, Development, Collaborations
and Contracts Expenses
Research, development, collaborations and
contracts expenses increased to $16.6 million in Q3 2018 from $15.5
million in Q3 2017. Program R&D expenses have increased as
Arbutus’ pipeline expands and advances into the clinic. In the
first half of 2018 the Company initiated a Phase I clinical trial
in healthy volunteers for AB-506 (capsid inhibitor) and has
progressed this trial into HBV patients in Q4 2018. Given the
progression of AB-506, the Company decided to indefinitely defer
additional clinical evaluation of AB-423 in favor of focusing on
the next generation capsid agent. In Q3 2018, Arbutus continued to
incur costs related to its clinical programs including
IND/CTA-enabling work and CTA regulatory filings for AB-452 (HBV
RNA Destabilizer), pre-IND/CTA work on AB-729 (GalNAc-RNAi), as
well as the ongoing clinical trial of ARB-1467 in combination with
nucs and interferon. In addition, Arbutus continues to incur
research costs related to discovery and pre-clinical programs.
General and Administrative
General and administrative expenses were $2.6
million in Q3 2018, as compared to $3.7 million in Q3 2017. General
and administrative expenses decreased in Q3 2018 compared to Q3
2017 due primarily to a decrease in non-cash compensation expense
related to the expiry in Q3 2017 of repurchase rights connected
with certain common shares issued as part of the total
consideration for the acquisition of Arbutus Inc.
Decrease in fair value of contingent
consideration
Contingent consideration is a liability assumed
by the Company from its acquisition of Enantigen in October 2014.
Under the stock purchase agreement, Arbutus Inc. agreed to pay
certain amounts to Enantigen’s selling stockholders upon the
achievement of certain triggering events related to Enantigen’s two
programs in pre-clinical development related to HBV therapies. In
Q3 2018 the Company recorded a non-cash decrease in this contingent
consideration of $5.8 million. This was primarily due to the
Company’s decision to indefinitely defer clinical development of
AB-423 thereby reducing the probability of achieving future
development milestones, as well as a recalibration in the expected
timing of future sales milestones, resulting in a reduction in the
estimated fair value of the liability.
Equity investment loss
On April 11, 2018, the Company entered into an
agreement with Roivant Sciences ("Roivant") to launch Genevant
Sciences ("Genevant"), a jointly-owned company focused on the
discovery, development, and commercialization of a broad range of
RNA-based therapeutics enabled by Arbutus' proprietary lipid
nanoparticle ("LNP") and ligand conjugate delivery technologies.
The Company determined that since the agreement stipulates that
significant decisions relating to the management of Genevant must
be shared between the Principal Shareholders (being the Company and
Roivant), the Company does not control Genevant but does exercise
significant influence over it and, will therefore, account for its
investment in Genevant using the equity method. On April 11,
2018, the Company and Roivant each received a 50% ownership
interest in Genevant. As a result of the subsequent
investment in Genevant completed in June 2018 by Roivant and other
parties, the Company owned approximately 40% of the common equity
of Genevant as of September 30, 2018.
The Company's proportionate share of the
Genevant’s loss was $2.8 million in Q3 2018. Financial results of
Genevant are recorded on a one-quarter lag basis.
Outstanding Shares
The Company had 55.5 million common shares
issued and outstanding at September 30, 2018. In addition, the
Company had 6.7 million options outstanding and 1.164 million
Series A participating convertible preferred shares outstanding,
which (including the annual 8.75% coupon) will be mandatorily
convertible into 22.6 million common shares on October 18, 2021.
Assuming the outstanding options and convertible preferred shares
were fully converted, the Company would have had 84.8 million
common shares outstanding at September 30, 2018.
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(in
millions) |
|
|
|
|
|
|
|
September 30, |
December 31, |
|
2018 |
2017 |
|
|
|
Cash and cash
equivalents |
$ |
21.9 |
|
$ |
54.3 |
Short-term
investments |
120.1 |
|
72.1 |
Accounts
receivable |
0.5 |
|
0.4 |
Other current
assets |
1.5 |
|
2.6 |
Restricted
investments |
— |
|
12.6 |
Investment in
Genevant |
24.7 |
|
— |
Property and equipment,
net |
10.4 |
|
12.2 |
Intangible assets |
43.8 |
|
58.6 |
Goodwill |
22.5 |
|
24.4 |
Total assets |
$ |
245.4 |
|
$ |
237.2 |
Accounts payable and
accrued liabilities |
8.5 |
|
10.7 |
Total deferred
revenue |
0.6 |
|
2.7 |
Liability-classified
options |
2.7 |
|
1.2 |
Loan payable |
— |
|
12.0 |
Site consolidation
accrual |
0.7 |
|
— |
Deferred lease
inducements, net of current portion |
0.7 |
|
0.7 |
Contingent
consideration |
4.2 |
|
10.5 |
Deferred tax
liability |
12.7 |
|
16.9 |
Total
stockholders’ equity |
215.3 |
|
182.5 |
Total liabilities and stockholders’ equity |
$ |
245.4 |
|
$ |
237.2 |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOW(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
Net loss for the
period |
$ |
(24.5 |
) |
|
$ |
(11.6 |
) |
|
$ |
(38.8 |
) |
|
$ |
(48.5 |
) |
Net cash
used in operating activities |
(13.2 |
) |
|
(15.7 |
) |
|
(50.8 |
) |
|
(38.3 |
) |
Net cash
provided by (used in) investing activities |
24.4 |
|
|
5.3 |
|
|
(48.9 |
) |
|
27.1 |
|
Net cash
provided by financing activities |
0.4 |
|
|
0.1 |
|
|
55.5 |
|
|
0.4 |
|
Effect of foreign exchange rate changes on cash & cash
equivalents |
0.1 |
|
|
1.3 |
|
|
(0.8 |
) |
|
2.6 |
|
Net (decrease)
increase in cash, cash equivalents and restricted
investments |
$ |
11.7 |
|
|
$ |
(9.0 |
) |
|
$ |
(45.0 |
) |
|
$ |
(8.2 |
) |
Cash, cash equivalents
and restricted investments, beginning of period |
10.2 |
|
|
24.2 |
|
|
66.9 |
|
|
23.4 |
|
Cash, cash equivalents and restricted investments, end of
period |
$ |
21.9 |
|
|
$ |
15.2 |
|
|
$ |
21.9 |
|
|
$ |
15.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
LOSS (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
Total
revenue |
$ |
1.6 |
|
|
$ |
6.9 |
|
|
|
$ |
4.3 |
|
|
$ |
8.2 |
|
Operating expenses |
|
|
|
|
|
Research,
development, collaborations and contracts |
16.6 |
|
|
15.5 |
|
|
|
46.9 |
|
|
44.9 |
|
General
and administrative |
2.6 |
|
|
3.7 |
|
|
|
10.1 |
|
|
12.6 |
|
Depreciation of property and equipment |
0.5 |
|
|
0.6 |
|
|
|
1.7 |
|
|
1.4 |
|
Site
consolidation |
(0.5 |
) |
|
— |
|
|
|
3.7 |
|
|
— |
|
Impairment of intangible assets |
14.8 |
|
|
— |
|
|
|
14.8 |
|
|
— |
|
Loss from operations |
(32.4 |
) |
|
(12.9 |
) |
|
|
(72.9 |
) |
|
(50.7 |
) |
Other income
(loss) |
|
|
|
|
|
|
|
|
Interest
income |
0.8 |
|
|
0.3 |
|
|
|
2.3 |
|
|
1.1 |
|
Interest
expense |
— |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
(0.2 |
) |
Foreign
exchange (loss) gain |
0.1 |
|
|
1.2 |
|
|
|
(0.7 |
) |
|
2.5 |
|
Gain on
investment |
— |
|
|
— |
|
|
|
24.9 |
|
|
— |
|
Equity
investment loss |
(2.8 |
) |
|
— |
|
|
|
(2.8 |
) |
|
— |
|
Increase
in fair value of warrant liability |
— |
|
|
— |
|
|
|
— |
|
|
(0.02 |
) |
Decrease (increase) in fair value of contingent consideration |
5.6 |
|
|
(0.2 |
) |
|
|
6.3 |
|
|
1.1 |
|
Total other income |
3.7 |
|
|
1.3 |
|
|
|
29.8 |
|
|
2.2 |
|
Income
tax benefit |
4.3 |
|
|
— |
|
|
|
4.3 |
|
|
— |
|
Net
loss |
$ |
(24.4 |
) |
|
$ |
(11.6 |
) |
|
|
$ |
(38.8 |
) |
|
$ |
(48.5 |
) |
Accrual of coupon on
convertible preferred shares |
|
(2.6 |
) |
|
|
— |
|
|
|
|
(7.4 |
) |
|
|
— |
|
Net loss
attributable to common shares |
$ |
(27.0 |
) |
|
$ |
(11.6 |
) |
|
|
$ |
(46.3 |
) |
|
$ |
(48.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call Today
Arbutus will hold a conference call and webcast
today, Wednesday, November 7, 2018 at 4:30 PM Eastern Time (1:30 PM
Pacific 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
1-866-393-1607 or 1-914-495-8556 and reference conference ID
2628189.
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 1-855-859-2056 or
1-404-537-3406, and reference conference ID 2628189.
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 expectations for AB-729 to enter the clinic in Q2 of 2019
and subsequently be combined with AB-506; the timing of expected
top-line results of the Phase 1a/1b clinical trial of AB-506 in Q2
of 2019; our expectations regarding the initiation, timing and
completion of preclinical studies and clinical trials; 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 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; 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 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
InvestorsMark J. MurrayPresident and CEOPhone:
604-419-3200Email: ir@arbutusbio.com
MediaPam Murphy Investor Relations Consultant
Phone: 604-419-3200 Email: ir@arbutusbio.com
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