On May 4, 2016 Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) reported financial results for the three months ended March 31, 2016, and provided an operating forecast and program updates (Press release, Ligand, MAY 4, 2016, View Source [SID:1234511889]).

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Financial highlights for the first quarter of 2016 include:

First quarter total revenues were $29.6 million, including royalty revenues of $14.4 million.
First quarter adjusted EPS was $0.97 and GAAP EPS was $0.30.
A description of adjusted calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table titled "Adjusted Financial Measures."

"The year is off to a strong start with product approvals and launches from our partners, positive data from multiple programs and robust quarterly growth in revenues. We closed two acquisitions recently, including a major acquisition in the first quarter that will contribute significantly to our portfolio of fully funded programs and financial performance. In addition, we completed multiple new licensing agreements, including those with our recently acquired OmniAb technology," said John Higgins, Chief Executive Officer of Ligand. "We look forward to total revenues growing by approximately 60% in 2016, and to the approval and launch of up to five of our partnered products during the year."

First Quarter 2016 Financial Results

Total revenues for the first quarter of 2016 were $29.6 million, compared with $14.6 million for the same period in 2015. Royalty revenues were $14.4 million, compared with $10.3 million for the same period in 2015 primarily due to higher royalties from Promacta and Kyprolis. Material sales were $5.3 million, compared with $3.7 million for the same period in 2015 due to timing of Captisol purchases for use in clinical trials and commercial products. License and milestone revenues were $9.9 million, compared with $0.6 million for the same period in 2015 due primarily to the timing of milestones and upfront license fees earned, and the acquisition of Open Monoclonal Technology, Inc. ("OMT").

Cost of goods sold was $1.0 million for the first quarter of 2016, compared with $1.1 million for the same period in 2015 due to the timing and mix of Captisol sales. Amortization of intangibles was $2.5 million for the first quarter of 2016, compared with $0.6 million for the same period in 2015 due to additional amortization of intangibles related to the acquisition of OMT. Research and development expense was $4.0 million, compared with $3.4 million for the same period of 2015 as a result of timing of spending on internal development programs. General and administrative expense for the first quarter of 2016 was $6.8 million, compared with $6.0 million for the same period in 2015 due to costs associated with the OMT acquisition and non-cash stock-based compensation expense.

Net income for the first quarter of 2016 was $6.6 million, or $0.30 per diluted share, compared with net income for the first quarter of 2015 of $0.8 million, or $0.04 per diluted share. Adjusted net income for the first quarter of 2016 was $21.0 million, or $0.97 per diluted share, compared with adjusted net income for the first quarter of 2015 of $6.9 million, or $0.33 per diluted share.

As of March 31, 2016, Ligand had cash, cash equivalents and short-term investments of $113.2 million.

2016 Financial Forecast

Including the effects of the synthetic royalty acquisition from CorMatrix, Ligand now expects 2016 total revenues to be between $115 million and $119 million. This guidance assumes approximately $1 million of revenue from the CorMatrix assets in 2016. Ligand’s cash operating expenses are not expected to change due to this transaction. In 2016, adjusted EPS is projected to be in the range of $3.41 to $3.46, which includes approximately $0.04 of incremental EPS contribution from the acquisition.

For 2017, Ligand expects total revenues to exceed $160 million with adjusted EPS of more than $5.03. This guidance assumes approximately $2 million of revenue from the CorMatrix assets in 2017, and approximately $0.08 of incremental EPS contribution from the acquisition.

The adjusted earnings per diluted share guidance does not include changes in contingent liabilities, mark-to-market adjustment for amounts owed to licensors, non-cash stock-based compensation expense, non-cash debt-related costs, pro-rata non-cash net losses of Viking Therapeutics, non-cash amortization of acquired intangibles, non-cash tax expense and unissued shares relating to the Senior Convertible Note.

First Quarter 2016 and Recent Business Highlights

Recent Acquisitions

Today Ligand announced the acquisition of economic rights to multiple programs owned by CorMatrix. Ligand will pay $17.5 million and in return will receive a portion of revenue (synthetic royalty) from CorMatrix’s existing marketed products and will have the right to receive future synthetic royalties from potential future products. CorMatrix’s products are medical devices that are designed to permit the development and regrowth of human tissue. This transaction will be immediately accretive to Ligand and represents Ligand’s entry into the field of medical devices.
In January 2016, Ligand acquired OMT, Inc. and its OmniAb platform for consideration valued at the time of the acquisition at approximately $178 million. OmniAb license agreements existing at the time of acquisition initially added 16 shots on goal, with the potential for additional compounds to be generated from these partnerships. Partners at the time of acquisition included Amgen, Celgene, Genmab, Janssen, Merck KGaA, Pfizer, Seattle Genetics, Five Prime, Symphogen and various other biotechnology and pharmaceutical companies.
Portfolio Program Progress

Promacta/ Revolade

The European Commission approved Revolade (eltrombopag), a Novartis product, for the treatment of pediatric (age 1 and above) chronic immune (idiopathic) thrombocytopenic purpura (ITP) patients who are refractory to other treatments (e.g., corticosteroids, immunoglobulins). The approval includes the use of tablets as well as a new oral suspension formulation of Revolade, which is designed for younger children who may not be able to swallow tablets.
Kyprolis (carfilzomib), an Amgen Product Utilizing Captisol

On January 21, 2016, Amgen announced that FDA approved Kyprolis (carfilzomib) in combination with dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy. The FDA also approved Kyprolis as a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy, converting to full approval the initial accelerated approval Kyprolis received in July 2012 as a single agent.
On January 28, 2016, Amgen announced Health Canada approval of Kyprolis (carfilzomib) in combination with lenalidomide and dexamethasone for the treatment of patients with relapsed multiple myeloma who have received one to three lines of therapy.
Additional Pipeline and Partner Developments

Spectrum Pharmaceuticals received FDA approval of EVOMELA (melphalan) for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma, and for the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.
Spectrum Pharmaceuticals announced that the FDA granted seven years of Orphan Drug Exclusivity for EVOMELA for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma.
Duavive received EU pricing and was launched in Italy by Merck Sharp & Dohme, under license from Pfizer.
Alvogen Inc. received approval from the FDA for Captisol-enabled IV voriconazole.
Zydus Cadila announced the launch of Vivitra, a biosimilar of trastuzumab, in India. Ligand gained rights to royalties on sales of Vivitra in the March 2013 Selexis royalty acquisition.
Lundbeck announced the FDA accepted the resubmission of the NDA for IV carbamazepine. An action letter is anticipated before the end of 2016.
Retrophin announced completion of enrollment in the Phase 2 DUET study of Sparsentan for the treatment of focal segmental glomerulosclerosis (FSGS). The DUET study exceeded its enrollment target of 100 patients, and top-line results are expected in the third quarter of 2016.
Sage Therapeutics presented data that expanded scientific, clinical and burden-of-illness data for SAGE-547 at the 68th American Academy of Neurology Annual Meeting.
Coherus BioSciences and Baxalta announced that CHS-0214, a proposed biosimilar of Enbrel (etanercept) to which Ligand gained royalty rights in the March 2013 Selexis royalty acquisition, met its primary endpoint in a confirmatory, double-blind, randomized, controlled, two-part clinical study. This ongoing study is evaluating the efficacy and safety of CHS-0214 compared with Enbrel in patients with moderate-to-severe rheumatoid arthritis that is inadequately controlled with methotrexate.
Viking Therapeutics highlighted positive data from a Phase 1b trial of VK2809 (TR Beta) in subjects with mild hypercholesterolemia at the 65th Annual Scientific Session and Expo of the American College of Cardiology.
Merrimack Pharmaceuticals presented data on MM-302, MM-141 and MM-151 at the 2016 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting.
Opthea Limited announced that the primary objective of safety in the dose-escalation phase of its ongoing first-in-human clinical trial of OPT-302, a novel VEGF-C/D ‘Trap’ therapy for wet age-related macular degeneration, had been met.
Marinus Pharmaceuticals announced that the FDA granted Orphan Drug designation for ganaxolone IV for the treatment of status epilepticus. A Phase 1 clinical trial evaluating the safety, tolerability and pharmacokinetics of ganaxolone IV is expected to initiate in the first half of 2016.
Marinus Pharmaceuticals presented preclinical data of ganaxolone IV, which showed robust activity in the model. The data were presented during an oral and poster presentations at the 68th American Academy of Neurology Annual Meeting.
AVEO Oncology announced granting CANbridge Life Sciences worldwide rights, excluding the United States, Canada and Mexico, to AV-203, AVEO’s clinical-stage ErbB3 (HER3) inhibitory antibody candidate.
The journal Nature published an article highlighting the efficacy of Gilead’s GS-5734 against the Ebola virus in rhesus monkeys.
New Licensing Deals

Ligand announced a worldwide license agreement with Emergent BioSolutions that allows Emergent to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand announced a worldwide license agreement with Tizona Therapeutics that allows Tizona to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive annual access payments, fees on patent filings, milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand announced a worldwide license agreement with ABBA Therapeutics that allows ABBA to use the OmniAb platform to discover fully human mono- and bispecific antibodies. Ligand is eligible to receive milestone payments and royalties on future net sales of any antibodies discovered under the license.
Ligand entered into a Clinical Use Agreement with XTL Biopharmaceuticals to supply Captisol for use in the formulation of its lead drug, hCDR1, for the treatment of systemic lupus erythematosus. Under the terms of the agreement, Ligand is eligible to receive milestones and revenue from clinical Captisol sales.
Internal Glucagon Receptor Antagonist (GRA) Program

Ligand scientists gave an oral presentation on GRA at ENDO 2016 and presented a poster at the Levine-Riggs Diabetes Research Symposium, which highlighted data from the Phase 1b trial demonstrating that GRA significantly reduced fasting and post-prandial glucose in subjects with type 2 diabetes.
Adjusted Financial Measures

The adjusted financial measures discussed above and in the tables below for the three months ended March 31, 2016 and 2015 exclude stock-based compensation expense, non-cash debt-related costs, non-cash tax expense, changes in contingent liabilities, non-cash amortization of acquired intangibles, non-cash pro-rata net losses of Viking Therapeutics, fair value adjustments to Viking Therapeutics convertible note receivable, mark-to-market adjustment for amounts owed to licensors and unissued shares relating to the Senior Convertible Note.

Management has presented net income, net income per share, income from continuing operations and income from continuing operations per share in accordance with GAAP and on an adjusted basis. Ligand believes the presentation of adjusted financial measures provides useful supplementary information to investors and reflects amounts that are more closely aligned with the cash profits for the period as the items that are excluded from adjusted net income are all non-cash items. Ligand uses these adjusted financial measures in connection with its own budgeting and financial planning. These adjusted financial measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP.

On May 04, 2016 Endocyte, Inc. (NASDAQ:ECYT), a leader in developing targeted small molecule drug conjugates (SMDCs) and companion imaging agents for personalized therapy, reported financial results for the first quarter ending March 31, 2016, and provided a clinical update (Press release, Endocyte, MAY 4, 2016, View Source [SID:1234511887]).

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"We continue to be pleased with the progress of our two lead, clinical-stage assets, EC1456 and EC1169, in Phase 1 dose escalation studies. Both drugs are very well-tolerated and show evidence of anti-tumor activity. Maximum tolerated dose has not yet been reached with either drug," said Ron Ellis, Endocyte’s president and chief executive officer. "We look forward to providing more detailed updates on both of these dose escalation trials at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) annual meeting in June."

Endocyte recently announced promising data at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) annual meeting, highlighting its preclinical work in the area of immuno-oncology. In collaboration with Purdue University, the company announced a novel approach that makes possible the engineering of a single universal chimeric antigen receptor (CAR) T cell that can be targeted to multiple receptors on cancer cells through the use of unique, small molecule, bispecific adaptors. This approach has the potential to address major challenges faced by other CAR T cell technologies, by improving the management of safety, having a mechanism to address tumor heterogeneity, and lowering the cost of therapy.

Also at AACR (Free AACR Whitepaper), Endocyte announced data reflecting the promise of synergistic activity of its SMDCs in combination with immune modulating therapies. The combination of EC1456 with an anti-PD1 antibody demonstrated curative activity in models expressing PD-L1. It was further demonstrated that treated animals developed an immune response when tumors were re-introduced months after the cessation of therapy.

"These new developments, along with our new lead development candidate in oncology, which deploys a dual mechanism of cytotoxic tumor cell killing plus activity against tumor associated macrophages, demonstrates the range of applications of our SMDC platform," added Ron Ellis. "The ability to target receptors with high specificity and deeply penetrate the tumor microenvironment uniquely positions SMDCs to be effective not only as targeted cytotoxic agents, but also by engaging the immune system to participate in the fight against disease. We look forward to a deeper discussion of the data and the science behind these approaches at a research event later this year."

Upcoming Expected Milestones

Phase 1 dose escalation updates on EC1456 and EC1169 at ASCO (Free ASCO Whitepaper) annual meeting in June 2016
EC1456 single agent efficacy data (tumor response) in non-small cell lung cancer before year-end 2016
EC1169 single agent efficacy data in prostate cancer in late 2016 or 2017
Updates on plans for earlier stage programs

First Quarter 2016 Financial Results

Endocyte reported a net loss of $10.2 million, or $0.24 per basic and diluted share, for the first quarter of 2016, compared to a net loss of $10.9 million, or $0.26 per basic and diluted share, for the same period in 2015.

Research and development expenses were $6.5 million for the first quarter of 2016, compared to $6.6 million for the same period in 2015. The slight decrease was primarily attributable to a decrease in expenses related to the TARGET trial which is now complete and a decrease in discovery research expenses, which were partially offset by an increase in expenses relating to the EC1169 dose escalation trial as well as an increase in compensation expenses, primarily for noncash stock compensation.

General and administrative expenses were $3.8 million for the first quarter of 2016, compared to $4.4 million for the same period in 2015. The decrease in expenses was primarily attributable to a reduction in legal and professional fees in the first quarter of 2016 as compared to the same period in 2015, which was partially offset by an increase in compensation expenses, primarily for noncash stock compensation.

Cash, cash equivalents and investments were $163.3 million at March 31, 2016, compared to $196.8 million at March 31, 2015, and $173.6 million at December 31, 2015.

Financial Expectations

The Company reiterated guidance that it expects its cash balance at the end of 2016 to be between $125 and $130 million.

On May 4, 2016 Delcath Systems, Inc. (NASDAQ: DCTH), a specialty pharmaceutical and medical device company focused on oncology with an emphasis on the treatment of primary and metastatic liver cancers, reported financial results for the three months ended March 31, 2016 (Press release, Delcath Systems, MAY 4, 2016, View Source;p=RssLanding&cat=news&id=2164855 [SID:1234511886]).

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Highlights for the first quarter of 2016 and recent weeks include:

Initiation of patient enrollment in the global Phase 3 FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma (the FOCUS trial), which is being conducted under a Special Protocol Assessment (SPA) agreement with the U.S. Food and Drug Administration (FDA) to support marketing approval in the U.S.
Addition of two prestigious U.S. cancer centers as FOCUS trial clinical sites
Activation of Hacettepe University Clinic in Ankara, Turkey as the first CHEMOSAT commercial treatment center outside of the European Union
Initiation of hospital negotiations for definition of ZE reimbursement levels in Germany
Completion of more than 300 treatments with CHEMOSAT since the second generation of the system was launched
"We began 2016 with strong momentum in our clinical development program, kicking off the year with the acceptance of a SPA agreement with the FDA for initiation of our FOCUS Phase 3 trial," said Jennifer K. Simpson, Ph.D., MSN, CRNP, President and Chief Executive Office of Delcath. "We are delighted that three leading U.S. cancer centers are now open and several others have committed to participate in the FOCUS trial and we look forward to opening additional trial sites in both the U.S. and Europe over the course of 2016. We made further progress with our Phase 2 trial for hepatocellular carcinoma (HCC) and intrahepatic cholangiocarcinoma (ICC) and expect to report interim data on the ICC cohort mid-year.

"We also continued to make steady progress commercializing CHEMOSAT in Europe. In February hospitals in Germany began negotiations to determine coverage levels for CHEMOSAT under the ZE national reimbursement mechanism. We anticipate coverage levels to be defined in mid-to-late 2016, which we believe will enhance growth in procedure volumes in Germany beginning late this year and provide important validation for reimbursement appeals in other markets in Europe.

"In April we announced our first expansion into markets outside of the European Union with the activation of Hacettepe University Clinic in Ankara, Turkey. Hacettepe is a well-regarded cancer treatment center in Turkey, and we believe it will serve as an excellent hub for CHEMOSAT treatments in the entire region.

"We look forward to executing our strategic plan throughout the remainder of the year, which includes multiple presentations and publications of data in support of CHEMOSAT as a treatment for metastatic liver cancers," concluded Dr. Simpson.

First Quarter Financial Results

Total revenue for the first quarter of 2016 was $0.4 million. Selling, general and administrative expenses for the first quarter of 2016 were $2.4 million, an improvement of $0.6 million or 20% from $3.0 million reported for the same period in 2016, primarily attributable to a reduction in severance accruals related to workforce and lease restructurings. Research and development expenses increased to $1.3 million for the 2016 first quarter from $1.0 million for the same period in 2015, primarily due to increased investment in clinical development initiatives.

Total operating expenses for the first quarter of 2016 decreased to $3.7 million from $4.0 million for the same period in 2015. This reflects an increase in clinical development initiatives, partially offset by a reduction in severance and compensation-related expenses following significant workforce and lease restructurings, as well as a reduction in facility expenses.

The Company recorded a net loss for the three months ended March 31, 2016 of $1.8 million, a decrease of $1.7 million or 49% from a net loss of $3.5 million for the same period in 2015. This decrease in net loss is primarily due to a $1.3 million change in the fair value of the warrant liability, a non-cash item and a $0.3 million reduction in operating expenses.

Balance Sheet Highlights

As of March 31, 2016, Delcath had cash and cash equivalents of $9.5 million, compared with $12.6 million as of December 31, 2015. During the first quarter of 2016, the Company used $3.8 million in cash to fund its operating activities. Delcath believes it has sufficient capital to fund its operating activities through the third quarter of 2016.

Insufficient tissue oxygenation, or hypoxia, contributes to tumor aggressiveness and has a profound impact on clinical outcomes in cancer patients. At decreased oxygen tensions, hypoxia-inducible factors (HIFs) 1 and 2 are stabilized and mediate a hypoxic response, primarily by acting as transcription factors. HIFs exert differential effects on tumor growth and affect important cancer hallmarks including cell proliferation, apoptosis, differentiation, vascularization/angiogenesis, genetic instability, tumor metabolism, tumor immune responses, and invasion and metastasis. As a consequence, HIFs mediate resistance to chemo- and radiotherapy and are associated with poor prognosis in cancer patients. Intriguingly, perivascular tumor cells can also express HIF-2α, thereby forming a "pseudohypoxic" phenotype that further contributes to tumor aggressiveness. Therefore, therapeutic targeting of HIFs in cancer has the potential to improve treatment efficacy. Different strategies to target hypoxic cancer cells and/or HIFs include hypoxia-activated prodrugs and inhibition of HIF dimerization, mRNA or protein expression, DNA binding capacity, and transcriptional activity. Here we review the functions of HIFs in the progression and treatment of malignant solid tumors. We also highlight how HIFs may be targeted to improve the management of patients with therapy-resistant and metastatic cancer.
Copyright © 2016. Published by Elsevier Inc.

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On May 04, 2016 Arbutus Biopharma Corporation (Nasdaq:ABUS), an industry-leading Hepatitis B Virus (HBV) therapeutic solutions company, reported its first quarter 2016 unaudited financial results and provided a corporate update (Press release, Arbutus Biopharma, MAY 4, 2016, View Source [SID:1234511926]).

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"We are focused on advancing the development of our candidates to support clinical combination studies in 2017. In addition, we continue to grow our HBV pipeline through new product innovation and partnerships," said Dr. Mark J. Murray, Arbutus’ President and CEO. "HBV remains a significant global unmet medical need and market opportunity, and we believe our combination approach is the key to a cure. We are funded into late 2018, allowing us to execute our development plans with the aim of generating meaningful data."

Recent Highlights

Ongoing Phase II study of ARB-1467 evaluating at least two doses of ARB-1467 (0.2 mg/kg and 0.4 mg/kg) in HBV infected patients.
Progress in developing a proprietary GalNAc conjugate technology to enable subcutaneous delivery of an RNAi therapeutic targeting hepatitis B surface antigen and/or other HBV targets.
Licensing and research collaboration agreement with the Saint Louis University Liver Center to develop Ribonuclease H (RNaseH) inhibitors and further expand Arbutus’ HBV pipeline.
Preclinical combination data presented at EASL 2016 showing additive to synergistic activity when combining AB-423 (core protein/capsid assembly inhibitor) with entecavir.
Preclinical combination data presented at other scientific conferences in April 2016 showing:

ARB-1467 (RNAi), AB-423 (core protein/capsid assembly inhibitor), and ARB-199 (cccDNA formation inhibitor) are potent and selective inhibitors of their respective targets;
Additive or synergistic activity (and no antagonism) when combining these candidates with "nuc" standard of care; and
Additive activity when combining ARB-1467 with AB-423.
Upcoming Milestones

2016: Preclinical data release on multiple pipeline programs, including results from preclinical combination studies of proprietary pipeline candidates
3Q16: Single dose HBsAg reduction data from the ARB-1467 (RNAi) Phase II trial in HBV-infected patients
4Q16: HBsAg reduction data from the multiple dose portion of the Phase II trial testing ARB-1467 in HBV-infected patients
2H16: Initiate clinical immune biomarker study for TLR9 agonist ARB-1598 in chronically infected HBV patients
2H16: File IND (or equivalent) for cccDNA formation inhibitor
2H16: File IND (or equivalent) for core protein/capsid assembly inhibitor
2H16: File IND (or equivalent) for ARB-1740 (RNAi)
2H16: Phase II results for TKM-PLK1 in HCC
2017: Initiate clinical combination studies with two or more proprietary product candidates
Financial Results

On January 1, 2016, Arbutus’ functional currency changed from the Canadian dollar to the U.S. dollar based on the analysis of changes in the primary economic environment in which the Company operates. The change in functional currency is accounted for prospectively from January 1, 2016 and financial statements prior to and including the year-ended December 31, 2015 will not be restated for the change in functional currency.

Cash, Cash Equivalents and Investments

As at March 31, 2016, Arbutus had cash and cash equivalents of $144.8 million and short-term and long-term investments of $37.9 million for an aggregate of $182.7 million, as compared to cash, cash equivalents and short-term investments of $191.4 million at December 31, 2015.

Non-GAAP Net Loss

The non-GAAP net loss for Q1 2016 was $9.9 million ($0.19 loss per common share). The non-GAAP net loss for the three-months ended March 31, 2016 excludes the aggregate of $6.0 million non-cash compensation expense included in research, development, collaborations and contracts expenses, and general and administrative expenses in connection to certain share repurchase provisions and arising from the merger with Arbutus Inc. (see below).

Net loss

For Q1 2016, net loss was $15.9 million ($0.31 basic and diluted loss per common share) as compared to a net loss of $12.0 million ($0.40 basic and diluted loss per common share) for Q1 2015.

Revenue

Revenue was $0.6 million for Q1 2016 as compared to $4.7 million for Q1 2015.

Under the Monsanto contract, Arbutus earned revenue from research and collaboration activities, as well as license fees related to Monsanto’s use of the Company’s delivery technology and related intellectual property in agriculture. Research activities under the arrangement ended in Q4 2015, and in March 2016, Monsanto exercised its option to acquire 100% of the outstanding shares of the Company’s wholly-owned subsidiary, Protiva Agricultural Development Company ("PADCo"). The Company received an exercise fee of $1.0 million, which has been recorded as other income in Q1 2016.

Under the DoD contract to develop TKM-Ebola, Arbutus was being reimbursed for costs incurred, including an allocation of overheads, and was being paid an incentive fee. In Q4 2015, Arbutus received formal notification from the DoD terminating the contract, subject to the completion of certain post-termination obligations. Arbutus has not recorded any revenue from the DoD in Q1 2016.

In November 2014, Arbutus entered into a collaboration with Dicerna for the use of its technology to develop, manufacture, and commercialize products related to the treatment of PH1. Arbutus recorded $0.2 million in licensing revenue in Q1 2016, which relates to the earned portion of the upfront payment of $2.5 million for the use of its technology. Arbutus also recorded $0.1 million in collaboration revenue in Q1 2016, which relates services provided to, Dicerna.

Under a licensing and collaboration arrangements with Alnylam and Acuitas, the Company earns licensing fee revenue from Acuitas as well as further potential development and commercial milestones from Alnylam for the use of its LNP technology. Arbutus recorded $0.3 million in licensing revenue in Q1 2016.

Research, Development, Collaborations and Contracts Expenses

Research, development, collaborations and contracts expenses were $13.1 million in Q1 2016 as compared to $10.6 million in Q1 2015.

R&D expenses increased during Q1 2016 as compared to Q1 2015 as Arbutus increased spending on ARB-1467, for which Phase I clinical trials were initiated in 2015. Arbutus also incurred incremental costs related to an increase in activities for preclinical HBV programs acquired from the merger with Arbutus Inc.

R&D compensation expense increased in Q1 2016 as compared to Q1 2015 due to an increase in the number of employees in support of the Company’s expanded portfolio of product candidates and from the merger with Arbutus Inc. As a result of the expiry of share repurchase rights included in the consideration paid for Arbutus Inc., as compared to Q1 2015, the Company recorded $4.8 million of incremental non-cash compensation expense, of which $1.2 million has been included as part of research, development, collaborations and contracts expense, and $3.6 million included as part of general and administrative expense.

General and Administrative

General and administrative expenses were $7.2 million in Q1 2016 as compared to $2.7 million in Q1 2015.

The increase in general and administrative expenses was largely due to an increase in compensation expense linked to an increase in employee base and incremental corporate expenses to support the growth of the Company following the completion of the merger with Arbutus Inc. This includes incremental non-cash compensation expense of $3.6 million related to the expiry of repurchase rights on shares issued as part of consideration paid for the merger with Arbutus Inc. (see above).

Acquisition Costs

In Q1 2015, the Company incurred $9.3 million in costs related to the merger with Arbutus Inc., which was completed on March 4, 2015.

Other Income (Losses)

On January 1, 2016, the Company’s functional currency changed from the Canadian dollar to the U.S. dollar based on an analysis of changes in the primary economic environment in which Arbutus operates. The Company expects to incur substantial expenses and hold cash and investment balances in Canadian dollars, and as such, will remain subject to risks associated with foreign currency fluctuations. During Q1 2016, Arbutus recorded a foreign exchange gain of $2.9 million which is primarily an unrealized gain related to an appreciation in the value of Canadian dollar funds from the previous period, when converted to the Company’s functional currency of U.S. dollars.

On March 4, 2016, Monsanto exercised its option to acquire 100% of the outstanding shares of Arbutus’s wholly-owned subsidiary, PADCo, as described above and paid an exercise fee of $1.0 million.

The aggregate decrease in fair value of the Company’s common share purchase warrants was $0.2 million in Q1 2016 as compared to an increase in the fair value of common share purchase warrants outstanding of $1.2 million in Q1 2015. The decrease is a result of a decrease in the Company’s share price from the previous reporting date, and vice versa.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)

March 31, December 31,
2016 2015

Cash and cash equivalents $ 144.8 $ 166.8
Short-term investments 27.8 14.5
Accounts receivable 0.4 1
Other current assets 1.9 1.6
Long-term investments 10.1 10.1
Property and equipment, net 3.2 3.2
Intangible assets 352.6 352.6
Goodwill 162.5 162.5
Total assets $ 703.3 $ 712.3
Accounts payable and accrued liabilities 7.7 8.8
Total deferred revenue 1 1.1
Warrant liability 0.7 0.9
Liability-classified options 1.8 -
Contingent consideration 7.7 7.5
Deferred tax liability 146.3 146.3
Total stockholders’ equity 538.1 547.7
Total liabilities and stockholders’ equity $ 703.3 $ 712.3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)

Three-months ended March 31,
2016 2015

Total revenue $ 0.6 $ 4.7
Operating expenses
Research, development, collaborations and contracts 13.2 10.6
General and administrative 7.2 2.7
Depreciation of property and equipment 0.2 0.1
Acquisition costs - 9.3
Loss from operations (20.0 ) (18.0 )
Other income 4.1 6.0
Net loss (15.9 ) (12.0 )
Cumulative translation adjustment - (9.2 )
Comprehensive loss $ (15.9 ) $ (21.2 )

UNAUDITED GAAP TO NON-GAAP RECONCILIATION:
NET LOSS AND NET LOSS PER SHARE
(in millions, except per share amounts)
Three-months ended March 31,
2016 2015

GAAP net loss $ (15.9 ) $ (12.0 )
Adjustment:
Compensation expense of expired repurchase provision rights 6.0 1.2
Non-GAAP net loss (9.9 ) (10.8 )

GAAP net loss per common share (0.31 ) (0.40 )
Non-GAAP net loss per common share (0.19 ) (0.36 )

Use of Non-GAAP Financial Measures

The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) on a basis consistent for all periods presented. In addition to the results reported in accordance with U.S. GAAP, the Company provides additional measures that are considered "non-GAAP" financial measures under applicable SEC rules. These non-GAAP financial measures should not be viewed in isolation or as a substitute for GAAP net loss and basic and diluted net loss per common share.

The company evaluates items on an individual basis, and considers both the quantitative and qualitative aspects of the item, including (i) its size and nature, (ii) whether or not it relates to the Company’s ongoing business operations, and (iii) whether or not the company expects it to occur as part of its normal business on a regular basis. In the three months ended March 31, 2016, the Company’s non-GAAP net loss and non-GAAP net loss per common share excludes the compensation expense related to the expiration of repurchase provision rights connected with certain common shares issued as part of total consideration for the acquisition of Arbutus Inc. The Company believes that the exclusion of these items provides management and investors with supplemental measures of performance that better reflect the underlying economics of the Company’s business. In addition, the Company believes the exclusion of these items is important in comparing current results with prior period results and understanding projected operating performance.