Executive Summary / Key Takeaways

• Arbutus Biopharma is strategically focused on developing a functional cure for chronic Hepatitis B (cHBV) through combination therapies, leveraging its proprietary RNAi therapeutic, imdusiran, and oral PD-L1 inhibitor, AB-101.
• Recent clinical data from Phase 2a trials (IM-PROVE I and IM-PROVE II) demonstrated promising functional cure rates with imdusiran-based combinations, including 50% in a subset of IM-PROVE I patients and 25% in a subset of IM-PROVE II patients, supporting plans for a Phase 2b trial.
• The company is actively pursuing significant value through patent infringement litigation against Moderna (MRNA) and Pfizer/BioNTech (PFE)(BNTX) for the unlicensed use of its lipid nanoparticle (LNP) technology in mRNA vaccines, with key trial dates and rulings anticipated.
• Significant organizational streamlining in late 2024 and early 2025, including workforce reductions and exiting facilities, has reduced operating expenses and is expected to significantly lower net cash burn in 2025 compared to 2024.
• With $112.7 million in cash, cash equivalents, and investments as of March 31, 2025, the company believes it has sufficient resources to fund operations for at least the next 12 months, supporting the advancement of its clinical pipeline and litigation efforts.

Arbutus Biopharma: Pursuing a Functional Cure and Protecting Foundational Technology

Arbutus Biopharma Corporation is a clinical-stage biopharmaceutical company intently focused on addressing the significant global health challenge of chronic Hepatitis B (cHBV) infection. Affecting over 250 million people worldwide, cHBV carries a high risk of progression to liver cirrhosis and hepatocellular carcinoma, with current standard-of-care treatments like nucleos(t)ide analogues (NAs) and interferon achieving functional cure in less than 5% of patients. Arbutus has set an ambitious goal to develop a combination treatment regimen capable of achieving a functional cure rate of at least 20%, aiming to prevent disease progression, reduce patient stigma, and offer finite, more effective treatment options.

The company's strategic approach centers on a three-pronged attack against the Hepatitis B virus: suppressing HBV DNA, reducing hepatitis B surface antigen (HBsAg), and boosting the patient's HBV-specific immune response. This strategy is underpinned by two proprietary clinical assets: imdusiran (AB-729), an RNA interference (RNAi) therapeutic, and AB-101, an oral PD-L1 inhibitor.

A foundational strength for Arbutus lies in its lipid nanoparticle (LNP) delivery technology. Developed over years with significant effort and expense, this technology is crucial for safely and effectively delivering RNA molecules to target cells. Arbutus has historically leveraged this technology through licensing agreements, notably with Alnylam Pharmaceuticals (ALNY), which utilized the LNP platform in ONPATTRO, the first approved product incorporating Arbutus's LNP technology. This generated tiered royalties for Arbutus. The company also co-founded Genevant Sciences, licensing LNP rights for non-HBV applications while retaining all HBV rights. This LNP technology remains a key asset, not only for its potential role in future drug delivery but also as the subject of significant ongoing patent infringement litigation.

Imdusiran, the company's lead HBV candidate, is a proprietary, GalNAc-conjugated RNAi therapeutic delivered subcutaneously. It is designed to suppress all HBV antigens, including HBsAg, which is considered a critical step in enabling the reawakening of the patient's immune system. Imdusiran is differentiated by its highly efficient liver-targeted uptake via GalNAc conjugation, a unique nucleotide sequence targeting all HBV transcripts, specific chemical modifications to reduce off-target effects, and the potential for lower dose and less frequent administration compared to other RNAi therapeutics. Clinical data to date from over 250 patients in Phase 1 and 2a trials have shown imdusiran provides meaningful reductions in HBsAg and HBV DNA and has demonstrated immune activation properties.

Complementing imdusiran is AB-101, an oral small-molecule PD-L1 inhibitor. This candidate is designed to reawaken HBV-specific immune responses by inhibiting the PD-L1 checkpoint pathway. AB-101 stands apart from monoclonal antibody checkpoint inhibitors like durvalumab or nivolumab due to its liver-centric nature, aiming to minimize systemic exposure and potential immune-related adverse events. Preclinical models suggest a much shorter duration of effect, offering potential dosing and safety advantages. Its novel mechanism involves binding to PD-L1 on cell surfaces, causing dimerization, internalization, and degradation of the protein, with rapid reconstitution of PD-L1 function upon drug clearance.

In the competitive landscape, Arbutus operates alongside larger pharmaceutical companies with established antiviral portfolios, such as Gilead Sciences (GILD), Merck & Co. (MRK), and AbbVie (ABBV). These companies possess significant scale, diversified revenue streams, and extensive global reach, giving them substantial market share in existing HBV treatments. While these larger players often focus on optimizing existing therapies and broad market dominance, Arbutus positions itself as an innovator focused specifically on the functional cure of HBV through novel mechanisms and combination approaches. Arbutus's technological edge, particularly its LNP platform and the differentiated properties of imdusiran and AB-101, represents its primary competitive moat, offering potential advantages in efficacy, safety, and dosing frequency compared to current standards or competitors' approaches. However, Arbutus's smaller scale and R&D-intensive focus inherently lead to negative margins and higher relative operating costs compared to the profitability and operational efficiency of its larger rivals.

Arbutus's recent financial performance reflects its stage as a clinical-stage biotech company undergoing significant strategic realignment. For the three months ended March 31, 2025, the company reported a net loss of $24.53 million, an increase from the $17.88 million net loss in the same period of 2024. This increase was primarily driven by a one-time restructuring charge of $12.4 million incurred in the first quarter of 2025 and an increase in litigation-related legal fees. Total revenue saw a modest increase to $1.76 million in Q1 2025 from $1.53 million in Q1 2024. This was primarily due to increased license revenue recognized from the collaboration agreement with Qilu Pharmaceutical ($812 thousand in Q1 2025 vs. $244 thousand in Q1 2024), related to progress on technology transfer obligations. This increase was partially offset by a decrease in non-cash royalty revenue from Alnylam/Acuitas on ONPATTRO sales ($448 thousand in Q1 2025 vs. $593 thousand in Q1 2024), reflecting lower sales of the product in the recent period.

Operating expenses saw a notable shift. Research and development expenses decreased significantly to $8.96 million in Q1 2025 from $15.40 million in Q1 2024. This reduction is a direct result of strategic decisions made in the latter half of 2024 to cease discovery efforts, discontinue the IM-PROVE III clinical trial, and implement workforce reductions to streamline the organization and focus on advancing imdusiran and AB-101. General and administrative expenses increased to $5.83 million in Q1 2025 from $5.31 million in Q1 2024, primarily driven by higher legal fees associated with the ongoing patent litigation, partially offset by lower employee compensation costs. The change in the fair value of contingent consideration, related to the Enantigen acquisition, also increased slightly to $299 thousand, reflecting the closer proximity of development programs to potential sales-based milestone triggers.

A significant operational event impacting the first quarter of 2025 financials was the comprehensive organizational streamlining. Following a 40% workforce reduction in the third quarter of 2024, the company implemented an additional 57% workforce reduction in March 2025, resulting in a total workforce of 19 employees. Concurrently, the company decided to exit its corporate headquarters and discontinue in-house scientific research. These actions led to the $12.4 million one-time restructuring charge in Q1 2025, which included severance costs, equity award modifications, and asset impairment charges. These measures are intended to significantly reduce the company's net cash burn in 2025 compared to 2024 and strengthen its ability to fund anticipated later-stage clinical trials.

Clinical development of the core HBV assets continues to advance. Recent data from the imdusiran combination trials have provided encouraging signals. At the AASLD Liver Meeting in November 2024, data from the IM-PROVE I Phase 2a trial, evaluating imdusiran with interferon and NA therapy, showed a 50% functional cure rate in HBeAg-negative patients with baseline HBsAg levels less than 1000 IU/mL in Cohort A1, and an overall functional cure rate of 25% in that cohort. Data presented at the EASL Congress in May 2025 from the IM-PROVE II Phase 2a trial, evaluating imdusiran with Barinthus (BRTX)'s VTP-300, NA therapy, and low dose nivolumab, showed a 25% functional cure rate in patients with baseline HBsAg less than 1000 IU/mL in the nivolumab-containing cohort. To date, eight patients across imdusiran combination trials have achieved functional cure off all treatment, including two who did not receive interferon. These data support the company's belief in imdusiran as a cornerstone therapy and inform the design of future studies. While the collaboration with Barinthus on VTP-300 will not proceed to a larger Phase 2b trial due to Barinthus's strategic shift, the data generated provides valuable insights into combination approaches.

The AB-101 program is progressing through its Phase 1a/1b clinical trial (AB-101-101). Parts 1 and 2, evaluating single and multiple ascending doses in healthy subjects, showed AB-101 was generally well-tolerated with evidence of high PD-L1 receptor occupancy, indicating target engagement. Part 3, evaluating multiple doses in cHBV patients, is ongoing, with preliminary data presented at EASL in May 2025 showing the 10mg dose was well-tolerated with similar receptor occupancy to healthy subjects. Preliminary data from cHBV patients in Part 3 is expected in the first half of 2025. The ultimate goal for AB-101 is to combine it with imdusiran to potentially enhance immune responses and achieve functional cure.

Strategically, Arbutus plans to advance imdusiran into a Phase 2b clinical trial, likely combining it with interferon and NA therapy based on the promising functional cure data from IM-PROVE I. The company's LNP intellectual property remains a key strategic pillar, with significant value potentially tied to the ongoing patent infringement lawsuits. The U.S. lawsuit against Moderna is scheduled for trial on September 29, 2025. The U.S. lawsuit against Pfizer/BioNTech had its claim construction hearing in December 2024, with the court's ruling and a scheduling order expected in 2025. Furthermore, in March 2025, Arbutus and Genevant initiated five international lawsuits against Moderna across 30 countries, seeking monetary relief and injunctions related to the use of their LNP technology in Moderna's COVID-19 and RSV vaccines. These legal efforts represent a critical path to potentially unlocking significant value, independent of pipeline success.

Financially, as of March 31, 2025, Arbutus held $112.7 million in cash, cash equivalents, and investments. Net cash used in operating activities decreased to $13.39 million for the three months ended March 31, 2025, compared to $19.30 million in the same period of 2024, reflecting the impact of streamlining efforts. The company's Open Market Sale Agreement was terminated in March 2025. Management expects the organizational changes and cost management to significantly reduce net cash burn in 2025 compared to 2024 and believes existing cash resources are sufficient to fund operations for at least the next 12 months.

Key risks for investors include the inherent uncertainties of clinical trials, the potential need for additional funding depending on the scope and success of future trials and litigation outcomes, the unpredictability of patent litigation, and competitive pressures from larger pharmaceutical companies. The success of the planned Phase 2b trial for imdusiran and the ability to successfully combine it with AB-101 are critical for the pipeline's future. The outcomes of the patent litigation against Moderna and Pfizer/BioNTech represent a potentially significant, albeit uncertain, source of future value.

Conclusion

Arbutus Biopharma is at a pivotal juncture, strategically focused on leveraging its proprietary assets and intellectual property to drive value. The core investment narrative is centered on the potential for imdusiran-based combination therapies to achieve a functional cure for chronic Hepatitis B, supported by recent clinical data showing promising functional cure rates in specific patient subsets. The planned initiation of a Phase 2b trial for imdusiran marks a significant step forward for the pipeline. Concurrently, the company is actively pursuing substantial potential value through its LNP patent litigation against major pharmaceutical players, with key legal milestones approaching.

While the company faces typical biotech risks related to clinical development and funding, recent streamlining efforts have improved its financial runway and reduced cash burn, providing resources to advance its key programs and litigation. Investors should closely monitor the progress and data readouts from the imdusiran and AB-101 clinical trials, the outcomes of the high-stakes patent litigation, and the company's cash management as it seeks to translate its scientific expertise and intellectual property into tangible value.