On August 5, 2019 Arbutus Biopharma Corporation (Nasdaq: ABUS), an industry-leading Hepatitis B Virus (HBV) therapeutic solutions company, reported its second quarter 2019 financial results and provides a corporate update (Press release, Arbutus Biopharma, AUG 5, 2019, View Source [SID1234538127]).
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"I am excited to join Arbutus at this important inflection point as we look to advance our two lead compounds, AB-506 and AB-729, through Phase1a/1b clinical trials," said William Collier, Arbutus’ President and Chief Executive Officer. "Provided these compounds progress as expected, we anticipate moving into a combination proof-of-concept Phase 2 clinical trial in subjects with chronic hepatitis B in the second half of 2020. We believe a combination regimen that includes several different mechanisms of action will be required to improve upon the existing standard-of-care in HBV."
Recent Clinical Accomplishments and Key Corporate Accomplishments
New President & Chief Executive Officer
William H. Collier was appointed President and Chief Executive Officer of Arbutus and a member of the Board of Directors effective June 24th. Mr. Collier’s appointment filled the vacancy created by the retirement of Mark J. Murray, Ph.D., as Arbutus’ President and Chief Executive Officer, which was effective June 23rd. Mr. Collier has over 30 years of experience as a senior executive in the pharmaceutical industry and previously served as President and General Manager, North America at ViiV Healthcare. At ViiV, he oversaw the industry-leading launches of several new treatments for HIV. Prior to joining ViiV in 2009, Mr. Collier held multiple senior leadership roles at GlaxoSmithKline. Earlier in his career he led the launches of new treatments for herpes and bacterial infections. Mr. Collier received his BSc in Mathematics and Management Sciences from the University of Manchester Institute of Science & Technology, UK, and served on The President’s Advisory Council on HIV/AIDS from 2014 to 2017.
AB-506
In July 2019, Arbutus announced preliminary results from a Phase 1a/1b clinical trial demonstrating that AB-506 is a potent oral capsid inhibitor. These preliminary Phase 1a/1b results support the Company’s confidence in its potential to significantly contribute to the inhibition of HBV replication in a curative combination regimen.
Arbutus expects that safety and efficacy data from this portion of the Phase 1a/1b trial, as well as results from a planned Phase 1 28-day clinical trial in healthy subjects, will be submitted to an appropriate scientific meeting later this year.
Arbutus is planning on dosing additional cohorts and final results of this Phase 1a/1b trial, which are expected in the first half of 2020, will inform next steps toward the combination proof-of-concept Phase 2 clinical trial in subjects with chronic hepatitis B.
AB-729
In July 2019, the Company initiated the healthy subject portion of a single and multiple dose Phase 1a/1b clinical trial for AB-729, a subcutaneously delivered RNAi agent which has been shown in preclinical models to span all HBV transcripts, reduce all viral antigens, including hepatitis B surface antigen (HBsAg) expression, and inhibit HBV replication. In this trial, which will investigate the safety, tolerability, pharmacokinetics, and pharmacodynamics of AB-729 in healthy subjects and subjects with chronic hepatitis B infection, AB-729 will be dosed monthly.
Preliminary safety and efficacy data from both healthy subjects and several single dose cohorts of subjects with chronic hepatitis B infection are expected in the first quarter of 2020.
Early R&D Programs
Arbutus continues a focused discovery effort on follow-on compounds for its current HBV pipeline, including its HBV RNA destabilizer, AB-452, as well as efforts to identify compounds potentially capable of reawakening HBV patients’ immune response such as PD-L1 blockers and HBV-specific targets such as HBV cccDNA.
ONPATTRO Royalty Entitlement
Arbutus has a royalty entitlement on global net sales of ONPATTRO (Patisiran) for the lipid nanoparticle delivery (LNP) technology licensed by Arbutus to Alnylam Pharmaceuticals, Inc. (Alnylam) for this product. ONPATTRO is an RNAi therapeutic for the treatment of hereditary ATTR (hATTR) amyloidosis that has been approved by the FDA and the EMA. In July 2019, Arbutus sold this royalty entitlement to OMERS, the defined benefit pension plan for municipal employees based in the Province of Ontario, Canada, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this royalty entitlement until it has received $30 million in royalties, at which point 100% of this royalty entitlement will revert to Arbutus.
In addition to the royalty entitlement from the Alnylam LNP license agreement, Arbutus is also entitled to a second, lower royalty entitlement on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics. The royalty entitlement from Acuitas has been retained by Arbutus and is not part of the royalty entitlement sale to OMERS.
Financial Results
Cash, Cash Equivalents and Investments
Arbutus had cash, cash equivalents and short-term investments totaling $95.3 million as of June 30, 2019, as compared to $124.6 million as of December 31, 2018. The decreased cash balance was due primarily to $34.1 million of cash used in operating activities for the six months ended June 30, 2019, partially offset by $4.7 million of net proceeds from the issuance of shares under its ATM program. In July 2019, the Company received $20 million in gross proceeds from the sale of a portion of its royalty entitlement on net sales of ONPATTRO. The Company believes its cash and investments balance is sufficient to fund operations into the second half of 2020.
Operating Expenses
Research and development expenses were $12.8 million in Q2 2019 compared to $16.3 million in Q2 2018. Research and development expenses in 2019 included costs associated with the Company’s Phase 1a/1b clinical trial for its lead capsid inhibitor (AB-506), pre-clinical studies for its RNAi agent (AB-729), and characterization activities for its HBV RNA Destabilizer (AB-452). The decrease in research and development expenses was due primarily to higher costs in 2018 for AB-452, including drug product manufacturing, and expenses in 2018 associated with the Phase 2 clinical trial for AB-1467, partially offset by increased spending in 2019 for the Phase 1a/1b clinical trial for AB-506 and pre-clinical studies for AB-729. General and administrative expenses were $8.2 million in Q2 2019 compared to $3.8 million in Q2 2018. The increase in general and administrative expenses was due primarily to our former President and Chief Executive Officer’s departure from the Company in June 2019. In accordance with the terms of his legacy employment agreement, he received $2.3 million in cash severance and the Company recognized $2.2 million of non-cash stock-based compensation expense for accelerated vesting of his stock options.
Equity investment loss
As of June 30, 2019, the Company owned approximately 40% of the common equity of Genevant Sciences Ltd. (Genevant), a company launched with Roivant Sciences Ltd. in April 2018. Arbutus recorded a loss of $3.3 million in Q2 2019 for its proportionate share of Genevant’s net loss. In Q2 2018, Arbutus recognized a non-cash gain of $24.9 million in connection with the equity interest received by Arbutus upon Genevant’s formation. Financial results of Genevant are recorded on a one-quarter lag basis.
Net Income (Loss)
Net income (loss) attributable to common shares for Q2 2019 was a net loss of $26.1 million ($0.46 basic and diluted loss per common share) as compared to net income of $0.6 million ($0.01 basic and diluted income per common share) for Q2 2018. Net income (loss) attributable to common shares included $2.8 million of non-cash expense in Q2 2019 and $2.5 million in Q2 2018 for the accrual of coupon on the Company’s convertible preferred shares. Net income in Q2 2018 included a non-cash gain of $24.9 million in connection with the equity interest received by Arbutus upon Genevant’s formation.
Outstanding Shares
The Company had approximately 56.9 million common shares issued and outstanding as of June 30, 2019. In addition, the Company had approximately 8.9 million options outstanding and 1.164 million convertible preferred shares outstanding, which (including the annual 8.75% coupon) will be mandatorily convertible into approximately 23 million common shares on October 18, 2021. Assuming the outstanding options and convertible preferred shares were fully converted, the Company would have had approximately 89 million common shares outstanding as of June 30, 2019.
Conference Call Today
Arbutus will hold a conference call and webcast today, Monday, August 5, 2019 at 8:45 AM Eastern 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 (866) 393-1607 or (914) 495-8556 and reference conference ID 2098024.
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 (855) 859-2056 or (404) 537-3406, and reference conference ID 2098024.