On March 7, 2019 Arbutus Biopharma Corporation (Nasdaq: ABUS), an industry-leading Hepatitis B Virus (HBV) therapeutic solutions company, reported its fourth quarter and year-end 2018 financial results and provides a description of recent clinical accomplishments and key 2019 corporate objectives (Press release, Arbutus Biopharma, MAR 7, 2019, View Source [SID1234534131]).
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"Arbutus is committed to developing a cure for chronic Hepatitis B which we maintain can be best achieved by employing a combination of therapeutic agents with distinct, yet complementary mechanisms of action," said Dr. Mark J. Murray, President and Chief Executive Officer of Arbutus. "With multiple clinical trial initiations and data readouts expected throughout the year, 2019 promises to be an eventful and important year for Arbutus as we make progress toward our first novel combination regimen."
Recent Clinical Accomplishments and Key 2019 Objectives
AB-506
In a Phase 1a/1b clinical trial, AB-506, Arbutus’ oral capsid inhibitor, successfully progressed through the healthy volunteer portion and is now being evaluated in HBV patients in the 28-day multiple dose Phase 1b portion of the trial. Top-line results of this Phase 1a/1b clinical trial are expected late in the second quarter of 2019.
A Phase 2 dose-finding and long-term safety trial of AB-506 in combination with an approved nucleoside analogue (NA) is expected to be initiated late in the second half of the year to support AB-506 use in future combination trials.
AB-506 inhibits HBV capsid assembly which inhibits HBV replication, a mode of action complementary to NAs; its use in patients is expected to reduce the levels of HBV DNA in the blood.
AB-729
AB-729 is currently completing IND-enabling studies and is expected to begin a Phase 1a/1b clinical trial in the second quarter of 2019 and progress into HBV patients in the second half of the year. AB-729 is an RNAi agent which blocks HBsAg expression and can be administered subcutaneously and we anticipate will be dosed monthly.
A Phase 2 clinical trial combining AB-729, AB-506 and an approved NA is expected to initiate in the first half of 2020.
AB-452 and RNA Destabilizer Program
Arbutus is developing oral RNA-destabilizers that have shown compelling anti-viral effects in multiple preclinical models. As a result of a nonclinical safety finding with our lead RNA-destabilizer, AB-452, we are conducting a series of in vitro and in vivo studies to further characterize the compound, its mechanism of action and pharmacokinetic profile before deciding to initiate clinical trials. A go/no go decision is expected in the second half of the 2019.
In parallel, the Company is also advancing a number of follow on compounds with distinct chemical scaffolds into the lead optimization stage.
Dr. Michael J. Sofia, Arbutus’ Chief Scientific Officer, stated, "We believe our RNA destabilizer program is amongst the most advanced programs of its kind in the HBV space and we remain confident that this mechanism represents a very relevant and important therapeutic target; success here could be very meaningful for patients and for Arbutus."
ARB-1467
The Company has discontinued development of ARB-1467. Results from the ARB-1467 clinical trials confirmed the potential therapeutic value of an RNAi agent and informed the development of our next-generation RNAi agent, AB-729.
Early R&D Programs
The Company continues a robust discovery effort focused on back-up compounds for its current pipeline as well as discovery efforts focused on reawakening HBV patient’s immune response and on novel HBV-specific targets. These programs include orally available compounds targeting PD-L1 and HBV cccDNA.
Cash Position and 2019 Cash Guidance
The Company ended the year with approximately $125 million in cash, cash equivalents and short-term investments which we believe is sufficient to fund operations into 2020. The Company expects to use approximately $70 to $75 million in cash in 2019.
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. The Company began recognizing royalty income in 2018. The royalty rate is tiered, based on product sales, and in the low to mid-single digits.
Financial Results
Cash, Cash Equivalents and Investments
As of December 31, 2018, Arbutus had cash, cash equivalents and short-term investments totaling $124.6 million, as compared to $139.0 million in cash and cash equivalents, short-term investments, and restricted investments at December 31, 2017.
Net Loss
For the year ended December 31, 2018, net loss attributable to common shares was $67.2 million ($1.21 basic and diluted loss per common share) as compared to $85.3 million ($1.56 basic and diluted loss per common share) for 2017.
Revenue
Revenue was $5.9 million in 2018 compared to $10.7 million in 2017. The decrease was related primarily to a $7.5 million non-recurring, upfront payment in 2017 from Alexion Pharmaceuticals, Inc. Revenue in 2018 includes $4.3 million pursuant to our license agreement with Gritstone Oncology, Inc.
Research and Development
Research and development expenses were $57.9 million, including $2.7 million of non-cash stock based compensation in 2018 compared to $62.7 million in 2017, including $9.2 million of non-cash stock based compensation. Excluding the decrease in non-cash stock based compensation expense, which was due to the expiry of certain share repurchase rights in 2017, R&D expenses in 2018 have increased as Arbutus’ pipeline expands and advances into the clinic.
General and Administrative
General and administrative expenses were $16.0 million in 2018, including $3.3 million of non-cash stock based compensation compared to $16.1 million in 2017, including $5.9 million of non-cash stock based compensation.
Site Consolidation
Site consolidation expenses were $4.8 million in 2018.
In the first half of 2018, Arbutus substantially completed a site consolidation and organizational restructuring to better align its HBV business in Warminster, PA, by reducing the Company’s global workforce and closing its facility in Burnaby, Canada. We expect related total cash expenditures will be approximately $5.6 million upon completion, of which approximately $4.8 million has been incurred to date.
Impairment of intangible assets
In 2018, the Company recorded a $14.8 million ($10.5 million net of tax benefit) non-cash expense for the impairment of intangible assets related to the indefinite deferral of further development of its AB-423 capsid inhibitor program, due to the successful progression of its AB-506 capsid inhibitor program.
Decrease in fair value of contingent consideration
In 2018 the Company recorded a non-cash decrease in contingent consideration of $7.3 million compared to a $1.4 million increase in 2017.
The decrease in 2018 was due primarily 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
The Company recorded a gain of $24.9 million on its initial investment in Genevant, a jointly owned company with Roivant Sciences Ltd., and equity losses of $5.6 million for its proportionate share of the Genevant’s net loss. Financial results of Genevant are recorded on a one-quarter lag basis. The Company currently owns approximately 40% of the common equity of Genevant as of December 31, 2018.
Outstanding Shares
The Company had 55.5 million common shares issued and outstanding at December 31, 2018. In addition, the Company had 6.8 million options outstanding and 1.164 million 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 84.9 million common shares outstanding at December 31, 2018.
Conference Call Today
Arbutus will hold a conference call and webcast today, Thursday, March 7, 2019 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 1942769.
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 ID1942769.