Business Overview and History

Arbutus Biopharma Corporation (NASDAQ:ABUS) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop novel therapies with the goal of providing a functional cure for patients with chronic hepatitis B virus (cHBV) infection. The company's pipeline of internally developed, proprietary compounds includes an RNAi therapeutic, imdusiran AB-729, and an oral PD-L1 inhibitor, AB-101.

Arbutus Biopharma Corporation was founded in 2007 and is headquartered in Warminster, Pennsylvania. The company's origins trace back to Inex Pharmaceuticals, which was founded in 1992 and developed the lipid nanoparticle (LNP) delivery technology that forms the foundation of Arbutus' pipeline. In 2007, Inex Pharmaceuticals underwent a restructuring and emerged as Tekmira Pharmaceuticals, which later merged with Arbutus Biopharma in 2015 to form the current entity, Arbutus Biopharma Corporation.

In 2012, Arbutus entered into a license agreement with Alnylam Pharmaceuticals, granting Alnylam the right to develop and commercialize products using Arbutus' LNP delivery technology. This partnership led to the development of ONPATTRO, which received FDA and EMA approval in 2018, marking the first approved application of Arbutus' proprietary LNP platform.

The company expanded its portfolio in 2014 through the acquisition of Enantigen Therapeutics, Inc. This acquisition could potentially result in additional payments of up to $102.5 million in sales performance milestones related to the commercialization of Arbutus' first HBV treatment product.

In 2018, Arbutus formed a strategic partnership with Roivant Sciences Ltd. to launch Genevant, a company focused on developing RNA-based therapeutics using Arbutus' LNP and ligand conjugate delivery technologies. As part of this agreement, Arbutus licensed rights to its delivery platforms to Genevant for RNA-based applications outside of HBV, with certain exceptions for previously licensed rights.

The following year, Arbutus sold a portion of its royalty interest on future global net sales of ONPATTRO to the Ontario Municipal Employees Retirement System (OMERS) for $20 million in gross proceeds. This arrangement allows OMERS to retain the entitlement until it receives $30 million in royalties, after which the full royalty entitlement will revert back to Arbutus.

Throughout its history, Arbutus has faced various legal challenges and patent disputes, including a petition filed by Moderna Therapeutics, Inc. in 2018 requesting an Inter Partes Review of an Arbutus patent. The company has also been involved in patent opposition proceedings in Europe against Moderna and Merck, highlighting the ongoing challenges in protecting its intellectual property portfolio.

Current Focus and Clinical Trials

Arbutus' primary focus is on developing a functional cure for chronic hepatitis B, a global health challenge affecting over 250 million people worldwide. The company has two main product segments: the RNAi Therapeutic Segment and the Oral PD-L1 Inhibitor Segment.

In the RNAi Therapeutic Segment, Arbutus' lead candidate, imdusiran, is a subcutaneously delivered RNAi therapeutic designed to reduce hepatitis B surface antigen (HBsAg) expression, a key prerequisite for enabling the reawakening of a patient's immune system to respond to the virus. Imdusiran uses Arbutus' proprietary covalently conjugated GalNAc delivery technology and is currently being evaluated in two Phase 2a clinical trials, IM-PROVE I and IM-PROVE II, in combination with various immunomodulatory agents.

In the IM-PROVE I trial, the combination of imdusiran and a short course of pegylated interferon-alpha (Peg-IFNα-2a) demonstrated promising results, with 33% of patients in the Cohort A1 group achieving HBsAg loss at the end of treatment that was sustained 24 weeks later. Notably, 67% of patients with baseline HBsAg levels below 1,000 IU/mL in this cohort maintained HBsAg loss, which is one of the highest rates reported for this patient population.

The IM-PROVE II trial is evaluating the combination of imdusiran and Barinthus Biotherapeutics' HBV-specific immunotherapy, VTP-300. Preliminary data showed that imdusiran was able to lower HBsAg levels to below 100 IU/mL prior to VTP-300 administration in 95% of patients. Additionally, more patients maintained HBsAg thresholds of less than 100 or 10 IU/mL in the VTP-300 treatment arm compared to placebo.

Arbutus has also expanded the IM-PROVE II trial to include a cohort that evaluates the combination of imdusiran, VTP-300, and low-dose nivolumab, an approved PD-1 monoclonal antibody inhibitor. The company believes that the addition of nivolumab may further boost the host immune response.

In the Oral PD-L1 Inhibitor Segment, Arbutus is developing AB-101, an oral small-molecule PD-L1 inhibitor, which the company believes could play a role in reawakening the immune system and potentially contribute to a functional cure regimen for cHBV patients. AB-101 is designed to allow for controlled checkpoint blockade while minimizing the systemic safety issues typically seen with antibody checkpoint inhibitor therapies. It is currently in a Phase 1a/1b clinical trial to evaluate its safety, tolerability, pharmacokinetics, and pharmacodynamics in healthy subjects and patients with chronic HBV infection.

Financials and Liquidity

As of September 30, 2024, Arbutus reported cash, cash equivalents, and investments in marketable securities of approximately $131 million, including $31.85 million in cash. The company expects a net cash burn between $63 million and $67 million in 2024 and believes its current cash resources are sufficient to fund operations into the fourth quarter of 2026.

During the first half of 2024, Arbutus received approximately $44 million in net proceeds from the issuance of common shares under its at-the-market offering program. The company did not issue any additional shares under this program in the third quarter of 2024.

For the three months ended September 30, 2024, Arbutus reported total revenue of $1.34 million and a net loss of $19.72 million. For the nine months ended September 30, 2024, total revenue was $4.60 million, down from $16.00 million in the same period of the prior year. The decrease was primarily due to lower license revenue recognized from the company's collaboration with Qilu Pharmaceutical and lower royalty revenue from sales of Alnylam's ONPATTRO.

Net loss for the nine-month period was $57.39 million, compared to a net loss of $53.54 million in the prior-year period. The increase in net loss was primarily attributable to a $3.62 million restructuring charge incurred in the third quarter of 2024, as the company ceased all discovery efforts and discontinued its IM-PROVE III clinical trial to focus on advancing the clinical development of imdusiran and AB-101.

Operating cash flow for the most recent quarter was -$20,975,188, while free cash flow was -$20,879,868. The company's current ratio and quick ratio both stand at 7.02, indicating a strong short-term liquidity position.

Litigation Updates

Arbutus continues to protect and defend its intellectual property through ongoing litigation against Moderna Therapeutics and Pfizer/BioNTech. In the Moderna case, the trial date is now scheduled for September 24, 2025, subject to the court's availability. The claim construction hearing in the Pfizer/BioNTech lawsuit has been set for December 18, 2024.

Additionally, Acuitas Therapeutics filed a declaratory judgment lawsuit against Arbutus and Genevant, which was voluntarily dismissed by Acuitas in the Southern District of New York and refiled in the District Court of New Jersey. Arbutus and Genevant have filed a motion to dismiss this lawsuit.

Risks and Outlook

Arbutus faces several risks in its pursuit of a functional cure for chronic hepatitis B, including the potential for clinical trial failures, regulatory hurdles, and competition from other novel therapies in development. The company also relies on its intellectual property portfolio, which is the subject of ongoing litigation, to protect its core technologies.

Despite these risks, Arbutus remains committed to advancing its pipeline and believes its combination approach, which aims to suppress HBV DNA, reduce HBsAg, and boost the immune system, could lead to a meaningful functional cure rate for cHBV patients. The company's upcoming data readouts from the IM-PROVE trials and the continued progression of AB-101 will be key milestones to watch in the coming year.

Arbutus plans to report additional follow-up data from the IM-PROVE I trial at the upcoming AASLD meeting, as well as preliminary end-of-treatment data from the nivolumab arm of the IM-PROVE II trial. The company also expects to report preliminary data from HBV patients dosed with AB-101 in the first half of 2025.

Conclusion

Arbutus Biopharma is a clinical-stage biopharmaceutical company focused on developing a functional cure for chronic hepatitis B, a significant global health challenge. The company's lead candidate, imdusiran, has shown promising results in combination with various immunomodulatory agents, and the addition of its oral PD-L1 inhibitor, AB-101, could further enhance the potential of Arbutus' approach. With a strong intellectual property portfolio, a solid financial position, and a clear focus on its core mission, Arbutus is well-positioned to continue advancing its pipeline and potentially transforming the treatment landscape for patients with chronic hepatitis B.