Business Overview and History
Arbutus Biopharma Corporation (NASDAQ:ABUS) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop a functional cure for people 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 was founded in 2007 and is headquartered in Warminster, Pennsylvania. The company initially focused on developing its lipid nanoparticle (LNP) delivery technology platform, which has been crucial for the advancement of nucleic acid-based drugs, including small interfering RNA (siRNA), messenger RNA (mRNA), and gene editing systems. In 2012, Arbutus entered into a license agreement with Alnylam Pharmaceuticals that entitled Alnylam to develop and commercialize products with Arbutus' LNP technology. This partnership led to the approval and launch of Alnylam's ONPATTRO in 2018, which utilizes Arbutus' LNP delivery system.
A significant turning point for Arbutus came in 2014 when it acquired Enantigen Therapeutics. This acquisition brought in a portfolio of hepatitis B virus (HBV) assets, including an HBV RNA interference (RNAi) therapeutic that later became known as imdusiran (AB-729). This marked a shift in the company's focus towards developing a functional cure for chronic HBV infection.
Throughout its history, Arbutus has faced challenges, including ongoing patent disputes with companies like Moderna and Pfizer/BioNTech over the use of its LNP technology in COVID-19 vaccines. The company has also had to navigate the complexities of clinical development, with its HBV pipeline facing setbacks and delays. Despite these obstacles, Arbutus has remained committed to its mission of developing a functional cure for cHBV, a disease that affects over 250 million people worldwide.
In recent years, Arbutus has expanded its pipeline and formed strategic collaborations to advance its technology and product candidates. In 2021, the company entered into a licensing agreement with Qilu Pharmaceutical for the development and commercialization of imdusiran in China, Hong Kong, Macau, and Taiwan. The company has also collaborated with Barinthus Biotherapeutics (formerly Vaccitech) to evaluate imdusiran in combination with Barinthus' HBV-specific immunotherapy, VTP-300, in a Phase 2a clinical trial.
Arbutus' current focus is on advancing its pipeline of HBV-targeted therapeutics, with the goal of developing a functional cure for this disease. The company's lead candidate, imdusiran, is a subcutaneously-delivered RNAi therapeutic that has demonstrated the ability to significantly reduce hepatitis B surface antigen (HBsAg) levels in clinical trials. Arbutus is also developing AB-101, an oral PD-L1 inhibitor, which has the potential to reawaken patients' HBV-specific immune response when used in combination with imdusiran.
Financial Overview
Arbutus reported total revenue of $4.60 million for the nine months ended September 30, 2024, down from $16.00 million in the same period of the prior year. The decrease was primarily due to a decline in license revenue recognized from the company's collaboration with Qilu Pharmaceutical and lower royalty revenue from Alnylam's ONPATTRO sales.
Net loss for the nine months ended September 30, 2024, was $57.39 million, compared to a net loss of $53.54 million in the same period of 2023. Arbutus ended the third quarter of 2024 with $131 million in cash, cash equivalents, and investments in marketable securities, providing a runway into the fourth quarter of 2026.
The company's research and development expenses decreased by $10.91 million for the nine months ended September 30, 2024, compared to the same period in 2023, due primarily to the discontinuation of the company's coronavirus and AB-161 programs in September 2023. Arbutus expects its research expenses to continue to be reduced in future periods as it focuses its pipeline on the lead HBV product candidates.
For the most recent fiscal year (2023), Arbutus reported revenue of $18.14 million, a net loss of $72.85 million, operating cash flow of -$85.94 million, and free cash flow of -$86.94 million. In the most recent quarter (Q3 2024), the company reported revenue of $1.34 million, representing a year-over-year decline of 71.2%, and a net loss of $19.72 million.
Liquidity
Arbutus ended the third quarter of 2024 with $131 million in cash, cash equivalents, and investments in marketable securities. This provides the company with a financial runway into the fourth quarter of 2026, allowing it to continue advancing its clinical programs and operations.
The company's debt-to-equity ratio stands at 0.014, indicating a low level of debt relative to equity. As of September 30, 2024, Arbutus had $31.85 million in cash and cash equivalents. The company's current ratio and quick ratio are both 7.02, suggesting strong short-term liquidity.
During the first half of 2024, Arbutus received approximately $44 million of net proceeds from the issuance of common shares under its at-the-market offering program. However, the company did not issue any common shares under this program in the third quarter of 2024.
Operational Highlights and Upcoming Milestones
In 2024, Arbutus made significant progress in advancing its HBV pipeline. The company reported promising data from its IM-PROVE I and IM-PROVE II Phase 2a clinical trials evaluating imdusiran in combination with various immune modulators.
Data from the IM-PROVE I trial showed that the combination of imdusiran and a short course of pegylated interferon-alpha (Peg-IFNα-2a) was generally safe and well-tolerated. In the cohort that received 6 doses of imdusiran and 24 weeks of Peg-IFNα-2a, 33% of patients achieved sustained hepatitis B surface antigen (HBsAg) loss at 24 weeks post-treatment. This is one of the highest reported rates of HBsAg loss in this patient population.
The IM-PROVE II trial evaluated imdusiran in combination with Barinthus Biotherapeutics' HBV-specific immunotherapy, VTP-300. Preliminary data showed that patients who received imdusiran and VTP-300 achieved statistically significant improvements in mean HBsAg levels compared to placebo at 24 weeks post-treatment. Arbutus has also expanded this trial to include a cohort that combines imdusiran, VTP-300, and low-dose nivolumab, an approved PD-1 inhibitor, with the goal of further boosting the immune response.
Arbutus plans to present additional data from these imdusiran clinical trials at the upcoming AASLD - The Liver Meeting® 2024 in November. The company is also advancing its oral PD-L1 inhibitor, AB-101, which is currently in a Phase 1a/1b clinical trial. Preliminary data from the multiple-ascending dose portion of the study in healthy subjects showed that AB-101 was generally well-tolerated with evidence of dose-dependent receptor occupancy.
Looking ahead, Arbutus expects to initiate a Phase 2b clinical trial for imdusiran in the first half of 2025, after achieving a meaningful functional cure rate in cHBV patients treated with imdusiran and interferon. The company believes that if it can lower HBsAg and promote immune reawakening, it may achieve sustained HBsAg loss and HBV DNA below the lower limit of quantification, potentially leading to a functional cure.
Intellectual Property and Litigation
Arbutus has an extensive intellectual property portfolio related to its LNP technology, which is the subject of ongoing litigation against Moderna, Inc. and Pfizer Inc./BioNTech SE. In February 2022, Arbutus and its subsidiary Genevant Sciences filed a lawsuit against Moderna, seeking damages for the alleged infringement of several Arbutus patents in the manufacture and sale of Moderna's COVID-19 vaccine, MRNA-1273.
The claim construction hearing in the Moderna case was held in February 2024, and the court issued its ruling in April 2024, agreeing with Arbutus' position on most of the disputed claim terms. The trial in this matter is currently scheduled for September 24, 2025, subject to the court's availability.
Arbutus and Genevant also filed a lawsuit against Pfizer and BioNTech in April 2023, alleging the infringement of several Arbutus patents in the manufacture and sale of their COVID-19 mRNA-LNP vaccines. The claim construction hearing in this case is scheduled for December 18, 2024.
Risks and Challenges
Arbutus faces several risks and challenges in its pursuit of a functional cure for chronic hepatitis B. The development of novel therapeutics is inherently risky, and the company's clinical trials may not yield the desired results or achieve regulatory approval. Additionally, the competitive landscape in the HBV market is evolving, with other companies also working on combination therapies.
The company's intellectual property litigation against Moderna, Pfizer, and BioNTech involves significant legal costs and the potential for unfavorable outcomes. The success of Arbutus' business is also dependent on its ability to secure additional financing, either through collaborations, licensing agreements, or other sources, to support its ongoing research and development activities.
Industry Trends and Market Outlook
The chronic hepatitis B virus (cHBV) market is expected to grow significantly in the coming years, driven by the increasing prevalence of chronic HBV infections globally and the need for more effective treatment options. This growth trend presents opportunities for companies like Arbutus that are developing innovative therapies for cHBV.
Guidance and Future Outlook
Arbutus expects its 2024 cash burn to range from $63 million to $67 million. The company has stated that its current cash runway is sufficient to fund its operations into the fourth quarter of 2026, providing a solid financial foundation for advancing its clinical programs.
Conclusion
Arbutus Biopharma is making notable progress in its quest to develop a functional cure for chronic hepatitis B. The company's pipeline of innovative HBV-targeted therapies, led by imdusiran and AB-101, holds promise in addressing the unmet medical needs of the millions of people affected by this disease. With a strong intellectual property portfolio, a clear strategic focus, and a solid financial position, Arbutus is well-positioned to continue advancing its clinical programs and potentially transforming the HBV treatment landscape. The company's ongoing clinical trials and upcoming data presentations at major scientific conferences will be crucial in determining the future trajectory of its HBV pipeline and its potential impact on the global cHBV market.