Arbutus Biopharma Corp (ABUS)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company focused on infectious disease. We are currently developing imdusiran (AB-729), our proprietary, conjugated GalNAc, subcutaneously-delivered RNAi therapeutic, and AB-101, our proprietary oral PD-L1 inhibitor, for the treatment of chronic hepatitis B (cHBV). Through our ownership stake in and our license to Genevant Sciences, Ltd (Genevant), we are also focused on maximizing opportunity for our in-house developed Lipid Nanoparticle (LNP) delivery technology.

We continue to protect and defend our intellectual property, which is the subject of our ongoing lawsuits against Moderna Therapeutics, Inc. (Moderna) and against Pfizer Inc. and BioNTech SE (collectively, Pfizer/BioNTech) for their use of our patented LNP delivery technology in their COVID-19 mRNA-LNP vaccines. With respect to the Moderna lawsuit in the United States, a trial date has been set for September 24, 2025. On March 3, 2025, we announced that, along with Genevant, we have filed five international lawsuits against Moderna in connection with their use of our LNP technology in their COVID-19 mRNA-LNP and RSV vaccines. With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred in December 2024. The court is expected to provide its ruling on the claim construction and issue a further scheduling order, including the date for trial, in 2025.

During 2024, we streamlined the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101, and therefore ceased all discovery efforts, discontinued our IM-PROVE III clinical trial and reduced our workforce by 40%. In the first quarter of 2025, we announced the appointment of five new members of our Board of Directors (our Board) to replace all of the former directors, as well as the appointment of a new President, Chief Executive Officer and Chairperson of our Board and a new Chief Financial Officer. Additionally, our Board took action to reduce our workforce by an additional 57% resulting in a total workforce after reductions of 19 employees. Our Board also decided to exit our corporate headquarters in Warminster, PA and to discontinue in-house scientific research. In connection with these actions, we expect to incur a one-time restructuring charge in the first quarter of 2025 of approximately $11 million to $13 million.

With these organizational changes and our ongoing cost management efforts, we expect to significantly reduce our net cash burn in 2025 when compared to 2024. Our new Board and management team are reviewing our pipeline and development plans for our hepatitis B programs. To assist with this review, we are currently retaining experts in virology, hepatitis B, and in the clinical development and approval of antiviral treatments. We expect to provide a further update once our review is complete.

Our strategy is focused on maximizing opportunities for our cHBV development programs and our in-house developed LNP delivery technology.

LNP delivery technology

On February 28, 2022 and April 4, 2023, we filed patent infringement lawsuits in the United States against Moderna and Pfizer/BioNTech, respectively, seeking compensation for their unlicensed use of our patented technologies in their COVID-19 mRNA-LNP vaccines. It is well established in the scientific literature that the most significant technological hurdle to developing and deploying medicines using mRNA is engineering a safe and effective way to deliver the mRNA to human cells. Scientists at Arbutus and Genevant have spent years developing and refining LNP delivery technology, which has been licensed for various applications to many different third parties. Our and Genevant’s LNP technology relies on microscopic particles built from four carefully selected types of fat-like molecules to shelter and protect RNA molecules. With this technology, the RNA can travel through the human body to a target cell and through the target cell’s membrane before releasing the RNA. Without this crucial delivery technology, the RNA would quickly degrade in the body and be ineffective. We remain committed to taking all legal actions necessary to defend and protect our intellectual property.

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With respect to the Moderna lawsuit, the claim construction hearing occurred on February 8, 2024. On April 3, 2024, the court provided its claim construction ruling in which it construed the disputed claim terms and agreed with our position on most of the disputed claim terms. A trial date for the Moderna lawsuit in the United States has been set for September 24, 2025. On March 3, 2025, we announced that, along with Genevant, we have filed five international lawsuits against Moderna in connection with their use of our LNP technology in their COVID-19 mRNA-LNP and RSV vaccines. With respect to the Pfizer/BioNTech lawsuit, the claim construction hearing occurred in December 2024. The court is expected to provide its ruling on the claim construction and issue a further scheduling order, including the date for trial, in 2025.

cHBV programs

Our current HBV strategy is to develop a functional cure for patients with cHBV infection with imdusiran as a potential cornerstone in a combination therapy. We believe that a combination of compounds that can suppress hepatitis B virus deoxyribonucleic acid (HBV DNA) replication and hepatitis B surface antigen (HBsAg) expression as well as boost patients’ HBV-specific immune response could address the most important elements to achieving a functional cure. Functional cure is defined as sustained HBsAg loss and HBV DNA less than the lower limit of quantification 24 weeks off treatment, with or without anti-hepatitis B surface antibodies (anti-HBs). By providing a functional cure for patients with cHBV, we aim to prevent complications of disease progression, to decrease HBV burden by minimizing patient stigma and address the need for finite and more efficacious HBV treatments that further improve long-term outcomes and reduce associated healthcare costs.

Our product pipeline consists of the following programs:

Over 250 patients with cHBV infection have been dosed with imdusiran in our Phase 1 and Phase 2a clinical trials. Data from our IM-PROVE I Phase 2a clinical trial showed that six doses of imdusiran and 24 weeks of pegylated interferon alfa-2α (IFN), a standard-of-care immunomodulator, added to ongoing nucleoside analogue (NA) therapy led to a functional cure rate of 50% (3/6) in HBeAg-negative patients with baseline HBsAg levels less than 1000 IU/mL, and an overall functional cure rate of 25% (3/12). Those patients that achieved a functional cure also seroconverted with high anti-HB levels. These data from the IM-PROVE I trial suggest that the combination of imdusiran, 24 weeks of IFN and ongoing NA therapy was generally safe and well-tolerated. We are reviewing our pipeline and development plans for our hepatitis B programs.

AB-101 is our proprietary oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1. AB-101 is currently in a Phase 1a/1b clinical trial (AB-101-001) evaluating the safety, tolerability, pharmacokinetics, and pharmacodynamics of single- and multiple-ascending oral doses in healthy subjects and patients with cHBV infection. Parts 1 and 2 of this clinical trial enrolled sequential cohorts of healthy subjects receiving single and multiple doses, respectively, of AB-101 at increasing dose levels. The data showed that AB-101 was generally well-tolerated with evidence of dose-dependent receptor occupancy. We have moved into Part 3 of this clinical trial which evaluates repeat doses of AB-101 for 28 days in patients with cHBV. Next steps for AB-101 will be determined after we complete our review of our pipeline and development plans for our hepatitis B programs.

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Collaborations and Royalty Entitlements

Qilu Pharmaceutical Co., Ltd. (Qilu)

In December 2021, we entered into a technology transfer and license agreement (the License Agreement) with Qilu, pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, which is non-exclusive as to development and manufacturing and exclusive with respect to commercialization of imdusiran, including pharmaceutical products that include imdusiran, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (Greater China and Taiwan).

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double-digit royalties into the low twenties percent based upon annual net sales of imdusiran in Greater China and Taiwan. The royalties are payable on a product-by-product and region-by-region basis, subject to certain limitations.

Qilu is responsible for all costs related to developing, obtaining regulatory approval for, and commercializing imdusiran for the treatment or prevention of hepatitis B in Greater China and Taiwan. Qilu is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one imdusiran product candidate in Greater China and Taiwan. A joint development committee has been established between us and Qilu to coordinate and review the development, manufacturing and commercialization plans. Both parties also have entered into a supply agreement and related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of imdusiran necessary for Qilu to develop and commercialize in Greater China and Taiwan until we have completed manufacturing technology transfer to Qilu and Qilu has received all approvals required for it or its designated contract manufacturing organization to manufacture imdusiran in Greater China and Taiwan.

Concurrent with the execution of the License Agreement, we entered into a Share Purchase Agreement (the Share Purchase Agreement) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the Investor), pursuant to which the Investor purchased 3,579,952 of our common shares at a purchase price of USD $4.19 per share, which was a 15% premium on the thirty-day average closing price of our common shares as of the close of trading on December 10, 2021 (the Share Transaction). We received $15.0 million of gross proceeds from the Share Transaction on January 6, 2022. The common shares sold to the Investor in the Share Transaction represented approximately 2.5% of our common shares outstanding immediately prior to the execution of the Share Purchase Agreement.

Alnylam Pharmaceuticals, Inc. and Acuitas Therapeutics, Inc

We have a royalty entitlement on ONPATTRO® (Patisiran) (ONPATTRO), a drug developed by Alnylam Pharmaceuticals, Inc. (Alnylam) under a license agreement with us that incorporates our lipid nanoparticle delivery (LNP) technology. In July 2019, we received $20 million in gross proceeds before advisory fees from the sale of this royalty interest to Ontario Municipal Employees Retirement System (OMERS), effective as of January 1, 2019. The royalty interest will revert back to us after OMERS receives $30 million in royalty payments from Alnylam. We also have rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc. (Acuitas). The royalty entitlement from Acuitas has been retained by us and was not part of the royalty entitlement sale to OMERS.

Genevant Sciences, Ltd.

As of December 31, 2024, we owned approximately 16% of the common equity of Genevant Sciences Ltd. (Genevant), a company we launched with Roivant Sciences, Ltd. and to which we licensed rights to our lipid nanoparticle (LNP) and ligand conjugate delivery platforms outside of HBV, except to the extent certain rights had already been licensed to other third parties (the Genevant License). We retained all rights to our LNP and conjugate delivery platforms for HBV. Under the Genevant License, as amended, if a third-party sublicensee of intellectual property licensed by Genevant from us commercializes a

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sublicensed product, we become entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if less, tiered low single-digit royalties on net sales of the sublicensed product. The specified percentage is 20% in the case of a mere sublicense (i.e., naked sublicense) by Genevant without additional contribution and 14% in the case of a bona fide collaboration with Genevant.

Additionally, if Genevant receives proceeds from an action for infringement by any third parties of our intellectual property licensed to Genevant, we would be entitled to receive, after deduction of litigation costs, 20% of the proceeds received by Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

Refer to “Item 1. Business.” and Note 11 of the Consolidated Financial Statements for a discussion of our clinical collaborations and other royalty entitlements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting for our contingent consideration is a significant accounting policy that we believe is critical in fully understanding and evaluating our financial results. This accounting policy requires us to make certain estimates and assumptions. We believe that the estimates and assumptions upon which we rely are reasonable, based upon information available to us at the time that these estimates and assumptions are made.  Actual results may differ from our estimates. Our critical accounting estimates affect the calculation of our net income or loss.

Contingent Consideration

In connection with the acquisition of Enantigen Therapeutics, Inc. (Enantigen) in October 2014, we have obligations to make potential future payments of up to $102.5 million upon the achievement of certain commercial milestones. The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV infection. These potential contingent payments are recorded as a liability and remeasured to fair value as of each reporting date.  In assessing the fair value of the liability, significant judgments are required to be made by management to estimate the probability of program success, the timing and extent of future product sales, appropriate discount rates, and other estimates and assumptions that could materially affect the determination of fair value.

In order to estimate the probability of program success, we evaluate the status and progress of our clinical trials with our lead product candidate, imdusiran, in comparison to actual historical success rates for other clinical trials. We update our assumptions related to probability of success as imdusiran advances through clinical trials. For the timing and extent of future product sales, we also consider the status and progress of imdusiran, future revenue forecasts and other macroeconomic indicators that forecast market conditions. The discount rate at which we calculate the present value of our potential future liability is based on consideration of market-comparative data, market-based discount rates, and company-specific risk premiums.

As assumptions related to the probability of program success and timing and amount of potential future product sales are highly uncertain due to the unpredictable nature of product development, we assessed the sensitivity of the fair value measurement to changes in assumptions, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

Revenue from collaborations and licenses

We generate revenue primarily through collaboration agreements and license agreements. Such agreements may require us to deliver various rights and/or services, including intellectual property rights or licenses and development and manufacturing services. Under such agreements, we are generally eligible to receive non-refundable upfront payments, funding for development and manufacturing services, milestone payments, and royalties.

Our collaboration agreements fall under the scope of ASC Topic 808, Collaborative Arrangements, (ASC 808) when both parties are active participants in the arrangement and are exposed to significant risks and rewards. For certain arrangements

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under the scope of ASC 808, we analogize to ASC 606 for some aspects, including for the delivery of a good or service (i.e., a unit of account).

ASC 606, Revenue From Contracts with Customers (ASC 606) requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as a performance obligation is satisfied.

In contracts where we have more than one performance obligation to provide its customer with goods or services, each performance obligation is evaluated to determine whether it is distinct based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices. The estimated stand-alone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services. Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required.

For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligation and recognize revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling price of identified performance obligations, and estimating the progress towards satisfaction of performance obligations.

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RESULTS OF OPERATIONS

The following summarizes our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023:

For the fiscal year ended December 31, 2024, our net loss attributable to common shares was $69.9 million, or a loss of $0.38 per basic and diluted common share, as compared to a net loss of $72.8 million, or a loss of $0.44 per basic and diluted common share, for the year ended December 31, 2023.

Revenue

Revenue for the years ended December 31, 2024 and 2023 is summarized in the following table:

Revenue consists mainly of license revenue and royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue decreased $12.0 million for the year ended December 31, 2024 compared to 2023, due primarily to: i) a $9.3 million decrease in revenue recognition of the upfront license fee we received from Qilu in 2022 as less effort was required from us in 2024 compared to 2023 to support Qilu’s progress towards achieving their own imdusiran manufacturing capability; and ii) a $2.7 million decrease in license royalty revenue from Alnylam and Acuitas due to lower sales of Alnylam’s ONPATTRO in 2024 compared to 2023 primarily due to Alnylam’s next generation RNAi product AMVUTTRA (vutrisiran) cannibalizing sales of ONPATTRO. We anticipate that the license royalty revenue from Alnylam and Acuitas will continue to decrease due to such cannibalization of sales of ONPATTRO.

The royalty interest for ONPATTRO from Alnylam was sold to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert back to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and we are not obligated to reimburse OMERS if they fail to collect any such future royalties. During the term of this agreement, we recognize non-cash royalty revenue related

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to the sales of ONPATTRO. From the inception of the royalty sale through December 31, 2024, we have recorded an aggregate of $25.0 million of non-cash royalty revenue for royalties earned by OMERS. The royalty interest for ONPATTRO from Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties. Revenue contracts are described in more detail in “Item 1. Business.”

Operating expenses

Operating expenses for the years ended December 31, 2024 and 2023 are summarized in the following table:

Research and development

Research and development expenses consist primarily of personnel expenses, fees paid to clinical research organizations and contract manufacturers, consumables and materials, consulting, and other third-party expenses to support our clinical development activities, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses decreased $19.7 million in 2024 compared to 2023 due primarily to: i) a decrease in clinical expenses related to the discontinuation of our coronavirus and AB-161 programs during the fourth quarter of 2023; ii) a decrease in research activities and preclinical study costs for AB-101 which is now in a Phase 1a/1b clinical trial; and iii) cost savings from our decision in August 2024 to streamline the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101, which included ceasing all discovery efforts, discontinuing our IM-PROVE III clinical trial and reducing our workforce by 40%.

A significant portion of our research and development expenses are not tracked by project, as they benefit multiple projects or our overall technology platform.

General and administrative

General and administrative expenses decreased $0.4 million in 2024 compared to 2023, due primarily to decreases in employee compensation-related expenses, partially offset by an increase in litigation-related legal fees.

Change in fair value of contingent consideration

In October 2014, Arbutus Inc., our wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen pursuant to a stock purchase agreement. The amount paid to Enantigen’s selling shareholders could be up to an additional $102.5 million in sales performance milestones in connection with the sale of the first commercialized product by us for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $1.0 million.

In general, increases in the fair value of the contingent consideration are related to the progress of our programs as they get closer to triggering these contingent payments. The change in the fair value of our Contingent Consideration is driven by fair value adjustments for the passage of time, the discount rate, the progression of our programs through clinical trials and our assessment of the probability, timing and extent of future product sales, resulting in an increase of $2.6 million and $0.1 million, in 2024 and 2023, respectively. The increase in the fair value of the contingent consideration in 2024 was due primarily

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to an increase in our assessment of the probability of success of future product sales based on the positive clinical data we reported in November 2024 from our IM-PROVE I clinical trial with imdusiran, IFN and NA therapy.

Restructuring

Effective August 1, 2024, we ceased all discovery efforts and discontinued our IM-PROVE III clinical trial to streamline the organization to focus our efforts on advancing the clinical development of imdusiran and AB-101. In taking these steps, we implemented a 40% reduction in our workforce, primarily affecting the discovery and general and administrative functions. As a result, we incurred a one-time restructuring charge in the third quarter of 2024 of approximately $3.7 million, which includes approximately $2.9 million of cash severance and continued benefits payments, a non-cash impairment charge for laboratory equipment of approximately $0.2 million and approximately $0.6 million of cash payments to vendors for close-out activities in connection with the cessation of discovery efforts and the discontinuation of our IM-PROVE III clinical trial.

Other income (losses)

Other income (losses) for the years ended December 31, 2024 and 2023 are summarized in the following table:

Interest income

Interest income increased $0.9 million in 2024 compared to 2023 due primarily to a general increase in market interest rates related to our investments in marketable securities.

Interest expense

Interest expense decreased $0.3 million in 2024 compared to 2023 due primarily to a decrease in the non-cash amortization of the discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

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LIQUIDITY AND CAPITAL RESOURCES

Since our incorporation, we have financed our operations through the sales of equity, debt, revenues from development collaborations and licenses with corporate partners, a royalty monetization, interest income on funds available for investment, and government contracts, grants and tax credits.

As of December 31, 2024, we had total cash, cash equivalents and investments in marketable securities of $122.6 million, of which $36.3 million was cash and cash equivalents and $86.3 million was investments in marketable securities. We had no outstanding debt as of December 31, 2024.

Sources of Liquidity

Sale Agreement

Effective March 26, 2025, we terminated our Open Market Sale AgreementSM with Jefferies dated December 20, 2018, as amended by Amendment No. 1, dated December 20, 2019, Amendment No. 2, dated August 7, 2020 and Amendment No. 3, dated March 4, 2021 (as amended, the Sale Agreement), under which we could offer and sell common shares, from time to time.

Previously, on November 6, 2024, we had filed: i) a shelf registration statement on Form S-3 with the SEC (File No. 333-283038) with an accompanying base prospectus, declared effective by the SEC on December 5, 2024 (the December 2024 Registration Statement), for the offer and sale of up to $300.0 million of our securities; and ii) a prospectus supplement with the SEC in connection with the offering of up to $100.0 million of our common shares pursuant to the Sale Agreement under the December 2024 Registration Statement (the December 2024 Prospectus Supplement). We did not utilize any of the December 2024 prospectus supplement pursuant to the Sale Agreement prior to the termination of the Sale Agreement.

During the years ended December 31, 2024 and 2023, we issued 16,499,999 and 12,020,257 common shares, respectively, under the Sale Agreement resulting in net proceeds of approximately $44.1 million and $29.9 million, respectively.

Royalty Entitlements

Additionally, we have a royalty entitlement on ONPATTRO, a drug developed by Alnylam that incorporates our LNP technology and was approved by the FDA and the EMA during the third quarter of 2018 and was launched by Alnylam immediately upon approval in the United States. In July 2019, we sold a portion of this royalty interest to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties. From the inception of the royalty sale through December 31, 2024, we have recorded an aggregate of $25.0 million of non-cash royalty revenue for royalties earned by OMERS. If this royalty entitlement reverts to us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part. In addition to the royalty from the Alnylam LNP license agreement, we are also receiving a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas. The royalty from Acuitas has been retained by us and was not part of the royalty sale to OMERS.

In December 2021, we entered into a technology transfer and exclusive licensing agreement with Qilu pursuant to which we granted Qilu an exclusive (with certain exceptions), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize imdusiran for the treatment or prevention of cHBV infection in Greater China and Taiwan. In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment of $15.0 million, both received in January 2022, and agreed to pay us up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and

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commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of imdusiran in Greater China and Taiwan.

Cash requirements

With the organizational changes announced during the first quarter of 2025, and our ongoing cost management efforts, we expect to significantly reduce our net cash burn in 2025 when compared to 2024. In the future and subject to the completion of our review of our pipeline and development plans for our hepatitis B programs, substantial additional funds would be required to continue with the active development of our pipeline products and technologies. In particular, our funding needs may vary depending on a number of factors including:

•the results of the review of our pipeline and development plans for our hepatitis B programs;

•costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including our ongoing patent infringement matters against Moderna and Pfizer/BioNTech;

•revenue earned from our legacy collaborative partnerships and licensing agreements, including potential royalty payments from Alnylam’s ONPATTRO;

•revenue earned from ongoing collaborative partnerships, including milestone and royalty payments;

•the potential requirement to make milestone payments related to our legacy agreements;

•the extent to which we continue the development of our product candidates, add new product candidates to our pipeline, or form collaborative relationships or licensing arrangements to advance our product candidates;

•delays in the development of our product candidates due to preclinical and clinical findings;

•our decisions to in-license or acquire additional products, product candidates or technology for development;

•our ability to attract and retain development or commercialization partners, and their effectiveness in carrying out the development and ultimate commercialization of one or more of our product candidates;

•whether batches of product candidates that we manufacture fail to meet specifications resulting in clinical trial delays and investigational and remanufacturing costs;

•the decisions, and the timing of decisions, made by health regulatory agencies regarding our technology and product candidates; and

•competing products, product candidates and technological and market developments.

We may seek funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, potential monetization transactions, collaborative or licensing arrangements with pharmaceutical companies and government grants and contracts. If we seek additional funding, there can be no assurance that funding will be available at all or on acceptable terms to maintain and advance our business.

If we decide to seek funding and such adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our development programs or reduce expenses associated with our non-core activities. We may need to obtain funds through arrangements with collaborators or others that may require us to relinquish most or all of our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise seek if we were better funded. Insufficient financing may also mean failing to prosecute our patents or relinquishing rights to some of our technologies that we would otherwise develop or commercialize.

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Cash Flows

The following table summarizes our cash flow activities for the periods indicated:

Net cash used in operating activities in 2024 decreased $21.1 million compared to 2023 due primarily to a decrease in research and development expenses related to our HBV pipeline prioritization and the timing of payments to vendors.

Net cash provided by investing activities in 2024 decreased $27.8 million compared to 2023, due primarily to the timing of acquisitions and maturities of investments in marketable securities.

Net cash provided by financing activities in 2024 increased $21.3 million compared to 2023 due primarily to a $14.2 million increase in proceeds from sales of common shares under the Sale Agreement and an increase in proceeds from employee stock option exercises.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that we adopt as of the specified effective date. Please refer to note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to identify and develop novel therapeutics with distinct mechanisms of action, which can potentially be combined to provide a functional cure for patients with chronic hepatitis B virus (cHBV) infection. We believe the key to success in developing a functional cure involves suppressing hepatitis B virus deoxyribonucleic acid (HBV DNA), reducing hepatitis B surface antigen (HBsAg) and boosting HBV-specific immune responses. Our pipeline of internally developed, proprietary compounds includes an RNAi therapeutic, imdusiran (AB-729), and an oral PD-L1 inhibitor, AB-101. Imdusiran has generated meaningful clinical data demonstrating an impact on both surface antigen reduction and reawakening of the HBV-specific immune response. Imdusiran is currently in two Phase 2a combination clinical trials. AB-101 is currently being evaluated in a Phase 1a/1b clinical trial.

Our product pipeline consists of the following programs:

Our strategy is to position imdusiran as a potential cornerstone therapeutic in combination with AB-101 or other agents with potentially complementary mechanisms of action. When our AB-101-001 clinical trial is completed, assuming success, we intend to initiate a Phase 2 clinical trial combining imdusiran, AB-101 and NA therapy in patients with cHBV infection. We are also conducting two Phase 2a clinical trials combining imdusiran with other agents.

Imdusiran is our proprietary subcutaneously-delivered RNAi therapeutic product candidate that suppresses all HBV antigens, including HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV. Over 170 patients with cHBV infection have been dosed with imdusiran in our Phase 1 and Phase 2a clinical trials. Clinical data generated thus far has shown imdusiran to be generally safe and well-tolerated, while also providing meaningful reductions in HBsAg and HBV DNA.

AB-101 is our oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1. Preclinical data in an HBV mouse model that was presented at the 2022 AASLD Liver Meeting showed that combination treatment with AB-101 and an HBV-targeting GalNAc-siRNA agent resulted in activation and increased frequency of HBV-specific T-cells and greater anti-HBsAg antibody production.

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Collaborations and Royalty Entitlements

Qilu Pharmaceutical Co., Ltd. (Qilu)

In December 2021, we entered into a technology transfer and license agreement (the License Agreement) with Qilu, pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, which is non-exclusive as to development and manufacturing and exclusive with respect to commercialization of imdusiran, including pharmaceutical products that include imdusiran, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the Territory).

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of imdusiran in the Territory. The royalties are payable on a product-by-product and region-by-region basis, subject to certain limitations.

Qilu is responsible for all costs related to developing, obtaining regulatory approval for, and commercializing imdusiran for the treatment or prevention of hepatitis B in the Territory. Qilu is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one imdusiran product candidate in the Territory. A joint development committee has been established between us and Qilu to coordinate and review the development, manufacturing and commercialization plans. Both parties also have entered into a supply agreement and related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of imdusiran necessary for Qilu to develop and commercialize in the Territory until we have completed manufacturing technology transfer to Qilu and Qilu has received all approvals required for it or its designated contract manufacturing organization to manufacture imdusiran in the Territory.

Concurrent with the execution of the License Agreement, we entered into a Share Purchase Agreement (the Share Purchase Agreement) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the Investor), pursuant to which the Investor purchased 3,579,952 of our common shares, without par value (the Common Shares), at a purchase price of USD $4.19 per share, which was a 15% premium on the thirty-day average closing price of the Common Shares as of the close of trading on December 10, 2021 (the Share Transaction). We received $15.0 million of gross proceeds from the Share Transaction on January 6, 2022. The Common Shares sold to the Investor in the Share Transaction represented approximately 2.5% of the Common Shares outstanding immediately prior to the execution of the Share Purchase Agreement.

Alnylam Pharmaceuticals, Inc. and Acuitas Therapeutics, Inc

We have a royalty entitlement on ONPATTRO® (Patisiran) (ONPATTRO), a drug developed by Alnylam Pharmaceuticals, Inc. (Alnylam) under a license agreement with us that incorporates our lipid nanoparticle delivery (LNP) technology. In July 2019, we received $20 million in gross proceeds before advisory fees from the sale of this royalty interest to Ontario Municipal Employees Retirement System (OMERS), effective as of January 1, 2019. The royalty interest will revert back to us after OMERS receives $30 million in royalty payments from Alnylam. We also have rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc. (Acuitas). The royalty entitlement from Acuitas has been retained by us and was not part of the royalty entitlement sale to OMERS.

Genevant Sciences, Ltd.

As of December 31, 2023, we owned approximately 16% of the common equity of Genevant Sciences Ltd. (Genevant), a company we launched with Roivant Sciences, Ltd. and to which we licensed rights to our lipid nanoparticle (LNP) and ligand conjugate delivery platforms for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the Genevant License). We retained all rights to our LNP and conjugate delivery platforms for HBV. Under the Genevant License, as amended, if a third party sublicensee of intellectual property licensed by Genevant from us commercializes a sublicensed product, we become entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if

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less, tiered low single-digit royalties on net sales of the sublicensed product. The specified percentage is 20% in the case of a mere sublicense (i.e., naked sublicense) by Genevant without additional contribution and 14% in the case of a bona fide collaboration with Genevant.

Additionally, if Genevant receives proceeds from an action for infringement by any third parties of our intellectual property licensed to Genevant, we would be entitled to receive, after deduction of litigation costs, 20% of the proceeds received by Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

Refer to “Item 1. Business.” and Note 9 of the Consolidated Financial Statements for a discussion of our clinical collaborations and other royalty entitlements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting for our contingent consideration is a significant accounting policy that we believe is critical in fully understanding and evaluating our financial results. This accounting policy requires us to make certain estimates and assumptions. We believe that the estimates and assumptions upon which we rely are reasonable, based upon information available to us at the time that these estimates and assumptions are made.  Actual results may differ from our estimates. Our critical accounting estimates affect the calculation of our net income or loss.

Contingent Consideration

In connection with the acquisition of Enantigen Therapeutics, Inc. (Enantigen) in October 2014, we have obligations to make potential future payments of up to $102.5 million upon the achievement of certain commercial milestones. The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV infection. These potential contingent payments are recorded as a liability and remeasured to fair value as of each reporting date.  In assessing the fair value of the liability, significant judgments are required to be made by management to estimate the probability of program success, the timing and extent of future product sales, appropriate discount rates, and other estimates and assumptions that could materially affect the determination of fair value.

In order to estimate the probability of program success, we evaluate the status and progress of our clinical trials with our lead product candidate, imdusiran, in comparison to actual historical success rates for other clinical trials. We update our assumptions related to probability of success as imdusiran advances through clinical trials. For the timing and extent of future product sales, we also consider the status and progress of imdusiran, future revenue forecasts and other macroeconomic indicators that forecast market conditions. The discount rate at which we calculate the present value of our potential future liability is based on consideration of market-comparative data, market-based discount rates, and company-specific risk premiums.

As assumptions related to the probability of program success and timing and amount of potential future product sales are highly uncertain due to the unpredictable nature of product development, we assessed the sensitivity of the fair value measurement to changes in assumptions, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

Revenue from collaborations and licenses

We generate revenue primarily through collaboration agreements and license agreements. Such agreements may require us to deliver various rights and/or services, including intellectual property rights or licenses and research, development and manufacturing services. Under such agreements, we are generally eligible to receive non-refundable upfront payments, funding for research, development and manufacturing services, milestone payments, and royalties.

Our collaboration agreements fall under the scope of ASC Topic 808, Collaborative Arrangements, (ASC 808) when both parties are active participants in the arrangement and are exposed to significant risks and rewards. For certain arrangements under the scope of ASC 808, we analogize to ASC 606 for some aspects, including for the delivery of a good or service (i.e., a unit of account).

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ASC 606, Revenue From Contracts with Customers (ASC 606) requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as a performance obligation is satisfied.

In contracts where we have more than one performance obligation to provide its customer with goods or services, each performance obligation is evaluated to determine whether it is distinct based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices. The estimated stand-alone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services. Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required.

For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligation and recognize revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling price of identified performance obligations, and estimating the progress towards satisfaction of performance obligations.

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RESULTS OF OPERATIONS

The following summarizes our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022:

For the fiscal year ended December 31, 2023, our net loss attributable to common shares was $72.8 million, or a loss of $0.44 per basic and diluted common share, as compared to a net loss of $69.5 million, or a loss of $0.46 per basic and diluted common share, for the year ended December 31, 2022.

Revenue

Revenue for the years ended December 31, 2023 and 2022 is summarized in the following table:

Revenue consists mainly of license revenue and royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue decreased $20.9 million for the year ended December 31, 2023 compared to 2022, due primarily to: i) a $15.3 million decrease in license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to our technology transfer and licensing agreement with Qilu; and ii) a $5.5 million decrease in license royalty revenue from Alnylam and Acuitas due to lower sales of Alnylam’s ONPATTRO in 2023 compared to 2022.

The royalty interest for ONPATTRO from Alnylam was sold to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert back to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and we are not obligated to reimburse OMERS if they fail to collect any such future royalties. During the term of this agreement, we recognize non-cash royalty revenue related to the sales of ONPATTRO. From the inception of the royalty sale through December 31, 2023, we have recorded an aggregate of $22.7 million of non-cash royalty revenue for royalties earned by OMERS. The royalty interest for ONPATTRO from

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Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties. Revenue contracts are described in more detail in “Item 1. Business.”

Operating expenses

Operating expenses for the years ended December 31, 2023 and 2022 are summarized in the following table:

Research and development

Research and development expenses consist primarily of personnel expenses, fees paid to clinical research organizations and contract manufacturers, consumables and materials, consulting, and other third party expenses to support our clinical and preclinical activities, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses decreased $10.7 million in 2023 compared to 2022 due primarily to a decrease in manufacturing expenses associated with supplying drug for our clinical trials and a decrease in clinical expenses due to the discontinuation of our AB-836 program in 2022. These decreases were partially offset by an increase in clinical expenses for our AB-101 Phase 1a/1b clinical trial.

A significant portion of our research and development expenses are not tracked by project, as they benefit multiple projects or our overall technology platform.

General and administrative

General and administrative expenses increased $4.6 million in 2023 compared to 2022, due primarily to increased legal fees, non-cash stock-based compensation expense and employee compensation costs.

Change in fair value of contingent consideration

In October 2014, Arbutus Inc., our wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen pursuant to a stock purchase agreement. The amount paid to Enantigen’s selling shareholders could be up to an additional $102.5 million in sales performance milestones in connection with the sale of the first commercialized product by us for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $1.0 million.

In general, increases in the fair value of the contingent consideration are related to the progress of our programs as they get closer to triggering these contingent payments. In 2023 and 2022, the fair value of our contingent consideration liability increased $0.1 million and $2.2 million, respectively, related to fair value adjustments for the passage of time, the progression of our programs through clinical trials and our assessment of the probability, timing and extent of future product sales.

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Other income (losses)

Other income (losses) for the years ended December 31, 2023 and 2022 are summarized in the following table:

Interest income

Interest income increased $3.5 million in 2023 compared to 2022 due primarily to a general increase in market interest rates related to our investments in marketable securities.

Interest expense

Interest expense decreased $1.3 million in 2023 compared to 2022 due primarily to a decrease in the non-cash amortization of the discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Income tax expense

Income tax expense for the years ended December 31, 2023 and 2022 is summarized in the following table:

We recognized income tax expense of $4.4 million during 2022 for withholding taxes paid to the Chinese taxing authority by Qilu on our behalf in connection with the upfront license fee Qilu paid us. There was no corresponding income tax expense during 2023.

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LIQUIDITY AND CAPITAL RESOURCES

Since our incorporation, we have financed our operations through the sales of equity, debt, revenues from research and development collaborations and licenses with corporate partners, a royalty monetization, interest income on funds available for investment, and government contracts, grants and tax credits.

As of December 31, 2023, we had total cash, cash equivalents and investments in marketable securities of $132.3 million, of which $26.3 million was cash and cash equivalents and $106.0 million was investments in marketable securities. We had no outstanding debt as of December 31, 2023.

Sources of Liquidity

Sale Agreement

We have an Open Market Sale AgreementSM with Jefferies dated December 20, 2018, as amended by Amendment No. 1, dated December 20, 2019, Amendment No. 2, dated August 7, 2020 and Amendment No. 3, dated March 4, 2021 (as amended, the Sale Agreement), under which we may offer and sell common shares, from time to time.

On December 23, 2019, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-235674) and accompanying base prospectus, declared effective by the SEC on January 10, 2020 (the January 2020 Registration Statement), for the offer and sale of up to $150 million of our securities.

On August 28, 2020, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on October 22, 2020 (the October 2020 Registration Statement), for the offer and sale of up to $200 million of our securities. On March 4, 2021, we filed a prospectus supplement with the SEC in connection with the offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement, which we fully utilized during 2021. On October 8, 2021, we filed a prospectus supplement with the SEC for the offer and sale of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

On November 4, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the November 2021 Registration Statement), for the offer and sale of up to $250 million of our securities.

On March 3, 2022, we filed a prospectus supplement with the SEC (the March 2022 Prospectus Supplement) for the offer and sale of up to an additional $100.0 million of our common shares pursuant to the Sale Agreement under: (i) the January 2020 Registration Statement; (ii) the October 2020 Registration Statement; and (iii) the November 2021 Registration Statement, of which only the November 2021 Registration Statement remains active.

In October 2023, the October 2020 Registration Statement expired with $29.3 million that was not utilized under the October 2021 Prospectus Supplement, leaving $75.0 million remaining available under the March 2022 Prospectus Supplement pursuant to the November 2021 Registration Statement.

During the years ended December 31, 2023 and 2022, we issued 12,020,257 and 8,645,426 common shares, respectively, under the Sale Agreement resulting in net proceeds of approximately $29.9 million and $20.3 million, respectively. As of December 31, 2023, we had an aggregate of $70.9 million remaining available under the March 2022 Prospectus Supplement.

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Royalty Entitlements

Additionally, we have a royalty entitlement on ONPATTRO, a drug developed by Alnylam that incorporates our LNP technology and was approved by the FDA and the EMA during the third quarter of 2018 and was launched by Alnylam immediately upon approval in the United States. In July 2019, we sold a portion of this royalty interest to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties. From the inception of the royalty sale through December 31, 2023, we have recorded an aggregate of $22.7 million of non-cash royalty revenue for royalties earned by OMERS. If this royalty entitlement reverts to us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part. In addition to the royalty from the Alnylam LNP license agreement, we are also receiving a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas. The royalty from Acuitas has been retained by us and was not part of the royalty sale to OMERS.

In December 2021, we entered into a technology transfer and exclusive licensing agreement with Qilu pursuant to which we granted Qilu an exclusive (with certain exceptions), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize imdusiran for the treatment or prevention of cHBV infection in the Territory. In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment of $15.0 million, both received in January 2022, and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of imdusiran in the Territory.

Cash requirements

We believe that our $132.3 million of cash, cash equivalents and investments in marketable securities as of December 31, 2023 will be sufficient to fund our operations into the first quarter of 2026 based on our expectation of a net cash burn between $63.0 million and $67.0 million in 2024. In the future, substantial additional funds will be required to continue with the active development of our pipeline products and technologies. In particular, our funding needs may vary depending on a number of factors including:

•revenue earned from our legacy collaborative partnerships and licensing agreements, including potential royalty payments from Alnylam’s ONPATTRO;

•revenue earned from ongoing collaborative partnerships, including milestone and royalty payments;

•the potential requirement to make milestone payments related to our legacy agreements;

•the extent to which we continue the development of our product candidates, add new product candidates to our pipeline, or form collaborative relationships or licensing arrangements to advance our product candidates;

•delays in the development of our product candidates due to preclinical and clinical findings;

•our decisions to in-license or acquire additional products, product candidates or technology for development;

•our ability to attract and retain development or commercialization partners, and their effectiveness in carrying out the development and ultimate commercialization of one or more of our product candidates;

•whether batches of product candidates that we manufacture fail to meet specifications resulting in clinical trial delays and investigational and remanufacturing costs;

•the decisions, and the timing of decisions, made by health regulatory agencies regarding our technology and product candidates;

•competing products, product candidates and technological and market developments; and

•costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including

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litigation and arbitration arising in the course of our business activities.

We intend to seek funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, potential monetization transactions, collaborative or licensing arrangements with pharmaceutical companies and government grants and contracts. There can be no assurance that funding will be available at all or on acceptable terms to permit further development of our research and development programs.

If adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our research or development programs or reduce expenses associated with our non-core activities. We may need to obtain funds through arrangements with collaborators or others that may require us to relinquish most or all of our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise seek if we were better funded. Insufficient financing may also mean failing to prosecute our patents or relinquishing rights to some of our technologies that we would otherwise develop or commercialize.

Cash Flows

The following table summarizes our cash flow activities for the periods indicated:

Net cash used in operating activities in 2023 increased $50.6 million compared to 2022 due primarily to the upfront cash payment of $40.0 million received from Qilu in January 2022 in connection with the License Agreement and a $4.0 million premium paid by Qilu as part of their $15.0 million equity investment. These cash inflows were offset by $79.4 million of cash used in operations in 2022. Cash used in operations in 2023 was $85.9 million and there were no material transactional cash inflows in 2023.

Net cash provided by investing activities in 2023 was $50.8 million compared to net cash used in investing activities of $74.9 million in 2022, due primarily to the timing of acquisitions and maturities of investments in marketable securities.

Net cash provided by financing activities in 2023 decreased $1.2 million compared to 2022. Cash provided by financing activities in 2023 consisted primarily of $29.9 million of proceeds from sales of common shares under the Sale Agreement.

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Cash provided by financing activities in 2022 consisted primarily of $20.3 million of proceeds from sales of common shares under the Sale Agreement and $11.0 million for the fair value of shares purchased by Qilu as part of their $15.0 million equity investment, of which the remaining $4.0 million was a premium paid by Qilu on the equity investment and was allocated to deferred revenue.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that we adopt as of the specified effective date. Please refer to note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.

Item 7. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop novel therapeutics that target specific viral diseases. Our current focus areas include Hepatitis B virus (“HBV”), SARS-CoV-2, and other coronaviruses. To address HBV, we are developing an RNA interference (“RNAi”) therapeutic, an oral PD-L1 inhibitor, and an oral RNA destabilizer to potentially identify a combination regimen with the aim of providing a functional cure for patients with chronic HBV infection (“cHBV”) by suppressing viral replication, reducing surface antigen and reawakening the immune system. We believe our lead compound, AB-729, is the only RNAi therapeutic with evidence of immune re-awakening. AB-729 is currently being evaluated in multiple phase 2 clinical trials. We also have an ongoing drug discovery and development program directed to identifying novel, orally active agents for treating coronaviruses, including SARS-CoV-2, where we have nominated a compound and have begun IND-enabling pre-clinical studies. In addition, we are also exploring oncology applications for our internal PD-L1 portfolio.

Our product pipeline consists of the following programs:

AB-729, our proprietary subcutaneously-delivered RNAi therapeutic product candidate that suppresses HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV, is currently in two Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action and we are continuing to follow patients from our Phase 1a/1b clinical trial (“AB-729-001”). Preliminary data from AB-729-001 has shown that treatment with AB-729 resulted in meaningful declines in HBsAg while being well tolerated with no serious adverse events (SAEs) noted after both single and repeat dosing. Preliminary data also suggests that long-term suppression of HBsAg with AB-729 results in increased HBV-specific immune response. The clinical data for AB-729 continues to support its development as a potential cornerstone agent for the treatment of cHBV infection.

AB-101 is our oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1. Preclinical data in an HBV mouse model was presented at the 2022 AASLD Liver Meeting showing that combination treatment with AB-101 and an HBV-targeting GalNAc-siRNA agent resulted in activation and increased frequency of HBV-specific T-cells and greater anti-HBsAg antibody production. This favorable preclinical profile supports further development of AB-101 as a therapeutic modality for cHBV treatment. We are also exploring potential oncology applications for our internal PD-L1 portfolio.

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AB-161 is our next-generation oral HBV specific RNA destabilizer. We have conducted extensive non-clinical safety evaluations with AB-161 that gives us confidence in this molecule’s ability to circumvent the peripheral neuropathy findings seen in non-clinical safety studies with our first-generation oral RNA destabilizer, AB-452. We recently presented preclinical data at the Discovery on Target Conference showing that AB-161 reduced HBV RNA and HBsAg in multiple preclinical models, with favorable liver centricity and lack of observed peripheral neuropathy.

AB-343 is our lead candidate that inhibits the SARS-CoV-2 nsp5 Mpro. We also intend to nominate a nsp12 clinical candidate and initiate IND-enabling studies in the second half of 2023. An nsp12 viral polymerase could potentially be combined with AB-343 to achieve better patient treatment outcomes and for use in prophylactic settings.

COVID-19 Impact

We continue to monitor the effects of COVID-19, which has caused significant disruptions around the world. Measures implemented around the world in attempts to slow the spread of COVID-19 have had, and will likely continue to have, a major impact on clinical development, at least in the near-term, including shortages and delays in the supply chain, and prohibitions in certain countries on enrolling patients in new clinical trials. While we have been able to progress with our clinical and pre-clinical activities to date, it is not possible to predict if the COVID-19 pandemic will materially impact our plans and timelines in the future.

Collaborations and Royalty Entitlements

Qilu Pharmaceutical Co., Ltd. (“Qilu”)

In December 2021, we entered into a technology transfer and license agreement (the “License Agreement”) with Qilu, pursuant to which we granted Qilu a sublicensable, royalty-bearing license, under certain intellectual property owned by us, which is non-exclusive as to development and manufacturing and exclusive with respect to commercialization of AB-729, including pharmaceutical products that include AB-729, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the “Territory”).

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of AB-729 in the Territory. The royalties are payable on a product-by-product and region-by-region basis, subject to certain limitations.

Qilu is responsible for all costs related to developing, obtaining regulatory approval for, and commercializing AB-729 for the treatment or prevention of hepatitis B in the Territory. Qilu is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one AB-729 product candidate in the Territory. A joint development committee has been established between us and Qilu to coordinate and review the development, manufacturing and commercialization plans. Both parties also have entered into a supply agreement and related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of AB-729 necessary for Qilu to develop and commercialize in the Territory until we have completed manufacturing technology transfer to Qilu and Qilu has received all approvals required for it or its designated contract manufacturing organization to manufacture AB-729 in the Territory.

Concurrent with the execution of the License Agreement, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the “Investor”), pursuant to which the Investor purchased 3,579,952 of our common shares, without par value (the “Common Shares”), at a purchase price of USD $4.19 per share, which was a 15% premium on the thirty-day average closing price of the Common Shares as of the close of trading on December 10, 2021 (the “Share Transaction”). We received $15.0 million of gross proceeds from the Share Transaction on January 6, 2022. The Common Shares sold to the Investor in the Share Transaction represented approximately 2.5% of the Common Shares outstanding immediately prior to the execution of the Share Purchase Agreement.

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Alnylam Pharmaceuticals, Inc. and Acuitas Therapeutics, Inc

We have a royalty entitlement on ONPATTRO® (Patisiran) (“ONPATTRO”), a drug developed by Alnylam Pharmaceuticals, Inc. (“Alnylam”) under a license agreement with us that incorporates our lipid nanoparticle delivery (“LNP”) technology. In July 2019, we received $20 million in gross proceeds before advisory fees from the sale of this royalty interest to Ontario Municipal Employees Retirement System (“OMERS”), effective as of January 1, 2019. The royalty interest will revert back to us after OMERS receives $30 million in royalty payments from Alnylam. We also have rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc. (“Acuitas”). The royalty entitlement from Acuitas has been retained by us and was not part of the royalty entitlement sale to OMERS.

Genevant Sciences, Ltd.

As of December 31, 2022, we owned approximately 16% of the common equity of Genevant Sciences Ltd. (“Genevant”), a company we launched with Roivant Sciences, Ltd. and to which we licensed rights to our lipid nanoparticle ("LNP") and ligand conjugate delivery platforms for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the “Genevant License”). We retained all rights to our LNP and conjugate delivery platforms for HBV. Under the Genevant License, as amended, if a third party sublicensee of intellectual property licensed by Genevant from us commercializes a sublicensed product, we become entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if less, tiered low single-digit royalties on net sales of the sublicensed product. The specified percentage is 20% in the case of a mere sublicense (i.e., naked sublicense) by Genevant without additional contribution and 14% in the case of a bona fide collaboration with Genevant.

Additionally, if Genevant receives proceeds from an action for infringement by any third parties of our intellectual property licensed to Genevant, we would be entitled to receive, after deduction of litigation costs, 20% of the proceeds received by Genevant or, if less, tiered low single-digit royalties on net sales of the infringing product (inclusive of the proceeds from litigation or settlement, which would be treated as net sales).

Refer to “Item 1. Business.” and Note 9 of the Consolidated Financial Statements for a discussion of our clinical collaborations and other royalty entitlements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting for our contingent consideration and our License Agreement with Qilu are significant accounting policies that we believe are critical in fully understanding and evaluating our financial results. These accounting policies require us to make certain estimates and assumptions. We believe that the estimates and assumptions upon which we rely are reasonable, based upon information available to us at the time that these estimates and assumptions are made.  Actual results may differ from our estimates. Our critical accounting estimates affect the calculation of our net income or loss.

Contingent Consideration

In connection with the acquisition of Enantigen Therapeutics, Inc. (“Enantigen”) in October 2014, we have obligations to make potential future payments of up to $102.5 million upon the achievement of certain commercial milestones. The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV. These potential contingent payments are recorded as a liability and remeasured to fair value as of each reporting date.  In assessing the fair value of the liability, significant judgments are required to be made by management to estimate the probability of program success, the timing and extent of future product sales, appropriate discount rates, and other estimates and assumptions that could materially affect the determination of fair value.

In order to estimate the probability of program success, we evaluate the status and progress of our clinical trials with our lead product candidate, AB-729, in comparison to actual historical success rates for other clinical trials. We update our assumptions related to probability of success as AB-729 advances through clinical trials. For the timing and extent of future product sales, we also consider the status and progress of AB-729, future revenue forecasts and other macroeconomic indicators that forecast market conditions. The discount rate at which we calculate the present value of our potential future liability is based on consideration of market-comparative data, market-based discount rates, and company-specific risk premiums.

As assumptions related to the probability of program success and timing and amount of potential future product sales are highly uncertain due to the unpredictable nature of product development, we assessed the sensitivity of the fair value measurement to changes in assumptions, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

Revenue from collaborations and licenses

We generate revenue primarily through collaboration agreements and license agreements. Such agreements may require us to deliver various rights and/or services, including intellectual property rights or licenses and research, development and manufacturing services. Under such agreements, we are generally eligible to receive non-refundable upfront payments, funding for research, development and manufacturing services, milestone payments, and royalties.

Our collaboration agreements fall under the scope of ASC Topic 808, Collaborative Arrangements, (“ASC 808”) when both parties are active participants in the arrangement and are exposed to significant risks and rewards. For certain arrangements under the scope of ASC 808, we analogize to ASC 606 for some aspects, including for the delivery of a good or service (i.e., a unit of account).

ASC 606, Revenue From Contracts with Customers (“ASC 606”) requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers under a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as a performance obligation is satisfied.

In contracts where we have more than one performance obligation to provide its customer with goods or services, each performance obligation is evaluated to determine whether it is distinct based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the contract is then allocated between the distinct performance obligations based on their respective relative stand-alone selling prices. The estimated stand-alone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a

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stand-alone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to the customer for the related goods or services. Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required.

For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligation and recognize revenue by measuring the progress towards complete satisfaction of the performance obligation using an input measure.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling price of identified performance obligations, and estimating the progress towards satisfaction of performance obligations.

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RESULTS OF OPERATIONS

The following summarizes our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021:

For the fiscal year ended December 31, 2022, our net loss attributable to common shares was $69.5 million, or a loss of $0.46 per basic and diluted common share, as compared to a net loss of $88.4 million, or a loss of $0.83 per basic and diluted common share, for the year ended December 31, 2021.

Revenue

Revenue for the years ended December 31, 2022 and 2021 is summarized in the following table:

Revenue consists mainly of royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue increased $28.0 million for the year ended December 31, 2022 compared to 2021, due primarily to $26.0 million in license revenue recognized related to our progress towards the satisfaction of our performance obligations with respect to our technology transfer and licensing agreement with Qilu, which closed in January 2022, as well as a $2.2 million increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

The royalty interest for ONPATTRO from Alnylam was sold to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert back to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and we are not obligated to reimburse OMERS if they fail to collect any such future royalties. During the term of this agreement, we recognize non-cash royalty revenue related to the sales of ONPATTRO. From the inception of the royalty sale through December 31, 2022, we have recorded an aggregate

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of $18.9 million of non-cash royalty revenue for royalties earned by OMERS. The royalty interest for ONPATTRO from Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties. Revenue contracts are described in more detail in “Item 1. Business.”

Operating expenses

Operating expenses for the years ended December 31, 2022 and 2021 are summarized in the following table:

Research and development

Research and development expenses consist primarily of personnel expenses, fees paid to clinical research organizations and contract manufacturers, consumables and materials, consulting, and other third party expenses to support our clinical and pre-clinical activities, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses increased $18.9 million in 2022 compared to 2021 due primarily to an increase in expenses for our ongoing AB-729 Phase 2a clinical trials, an increase in expenses for our early-stage development programs, including AB-101 and AB-161, and an increase in compensation costs due to hiring several new employees for our research and development team in early 2022, partially offset by a decrease in expenses for our AB-836 Phase 1a/1b clinical trial, which we discontinued during the fourth quarter of 2022.

A significant portion of our research and development expenses are not tracked by project, as they benefit multiple projects or our overall technology platform.

General and administrative

General and administrative expenses increased $0.7 million in 2022 compared to 2021, due primarily to increases in employee compensation costs and non-cash stock-based compensation expense.

Change in fair value of contingent consideration

In October 2014, Arbutus Inc., our wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen pursuant to a stock purchase agreement. The amount paid to Enantigen’s selling shareholders could be up to an additional $102.5 million in sales performance milestones in connection with the sale of the first commercialized product by us for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $1.0 million.

In general, increases in the fair value of the contingent consideration are related to the progress of our programs as they get closer to triggering these contingent payments. In 2022 and 2021, the fair value of our contingent consideration liability increased $2.2 million and $1.9 million, respectively, related to fair value adjustments for the passage of time and the progression of our programs through clinical trials and our assessment of the probability of commercialization.

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Other income (losses)

Other income (losses) for the years ended December 31, 2022 and 2021 are summarized in the following table:

Interest income

Interest income increased $2.1 million in 2022 compared to 2021 due primarily to a general increase in market interest rates related to our investments in marketable securities.

Interest expense

Interest expense decreased $1.1 million in 2022 compared to 2021 due primarily to a decrease in the non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Dividend accretion of convertible preferred shares

Dividend accretion of convertible preferred shares decreased to zero in 2022 compared to $12.1 million in 2021. The dividend accretion on the convertible preferred shares previously held by Roivant was equal to 8.75% per annum, compounded annually. All convertible preferred shares mandatorily converted into 22,833,922 common shares on October 18, 2021.

Income tax expense

Income tax expense for the years ended December 31, 2022 and 2021 are summarized in the following table:

We recognized income tax expense of $4.4 million during 2022 for withholding taxes paid to the Chinese taxing authority by Qilu on our behalf in connection with the upfront license fee Qilu paid us.

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LIQUIDITY AND CAPITAL RESOURCES

Since our incorporation, we have financed our operations through the sales of equity, debt, revenues from research and development collaborations and licenses with corporate partners, a royalty monetization, interest income on funds available for investment, and government contracts, grants and tax credits.

As of December 31, 2022, we had cash and cash equivalents of $30.8 million and investments in marketable securities of $153.5 million, totaling $184.3 million. We had no outstanding debt as of December 31, 2022.

Sources of Liquidity

Sale Agreement

We have an Open Market Sale AgreementSM with Jefferies dated December 20, 2018, as amended by Amendment No. 1, dated December 20, 2019, Amendment No. 2, dated August 7, 2020 and Amendment No. 3, dated March 4, 2021 (as amended, the “Sale Agreement”), under which we may offer and sell common shares, from time to time.

On December 23, 2019, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-235674) and accompanying base prospectus, declared effective by the SEC on January 10, 2020 (the “January 2020 Registration Statement”), for the offer and sale of up to $150 million of our securities.

On August 28, 2020, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on October 22, 2020 (the “October 2020 Registration Statement”), for the offer and sale of up to $200 million of our securities. On March 4, 2021, we filed a prospectus supplement with the SEC in connection with the offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement, which we fully utilized during 2021. On October 8, 2021, we filed a prospectus supplement with the SEC for the offer and sale of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

On November 4, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the “November 2021 Registration Statement”), for the offer and sale of up to $250 million of our securities.

On March 3, 2022, we filed a prospectus supplement with the SEC (the “March 2022 Prospectus Supplement”) for the offer and sale of up to an additional $100.0 million of our common shares pursuant to the Sale Agreement under: (i) the January 2020 Registration Statement; (ii) the October 2020 Registration Statement; and (iii) the November 2021 Registration Statement.

During the years ended December 31, 2022 and 2021, we issued 8,645,426 and 31,571,036 common shares, respectively, under the Sale Agreement resulting in net proceeds of approximately $20.3 million and $134.7 million, respectively. As of December 31, 2022, we had an aggregate of $131.1 million remaining available under the October 2021 Prospectus Supplement and the March 2022 Prospectus Supplement.

Royalty Entitlements

Additionally, we have a royalty entitlement on ONPATTRO, a drug developed by Alnylam that incorporates our LNP technology and was approved by the FDA and the EMA during the third quarter of 2018 and was launched by Alnylam immediately upon approval in the United States. In July 2019, we sold a portion of this royalty interest to OMERS, effective as

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of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties. From the inception of the royalty sale through December 31, 2022, we have recorded an aggregate of $18.9 million of non-cash royalty revenue for royalties earned by OMERS. If this royalty entitlement reverts to us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part. In addition to the royalty from the Alnylam LNP license agreement, we are also receiving a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas. The royalty from Acuitas has been retained by us and was not part of the royalty sale to OMERS.

In December 2021, we entered into a technology transfer and exclusive licensing agreement with Qilu pursuant to which we granted Qilu an exclusive (with certain exceptions), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize AB-729 for the treatment or prevention of cHBV in the Territory. In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment of $15.0 million, both received in January 2022, and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of AB-729 in the Territory.

Cash requirements

We believe that our $184.3 million of cash, cash equivalents and investments in marketable securities as of December 31, 2022 will be sufficient to fund our operations into the fourth quarter of 2024 based on our expectation of a net cash burn between $95.0 million and $100.0 million in 2023. In the future, substantial additional funds will be required to continue with the active development of our pipeline products and technologies. In particular, our funding needs may vary depending on a number of factors including:

•the effects of the COVID-19 pandemic on our business, the medical community and the global economy;

•revenue earned from our legacy collaborative partnerships and licensing agreements, including potential royalty payments from Alnylam’s ONPATTRO;

•revenue earned from ongoing collaborative partnerships, including milestone and royalty payments;

•the potential requirement to make milestone payments related to our legacy agreements;

•the extent to which we continue the development of our product candidates, add new product candidates to our pipeline, or form collaborative relationships or licensing arrangements to advance our product candidates;

•delays in the development of our product candidates due to pre-clinical and clinical findings;

•our decisions to in-license or acquire additional products, product candidates or technology for development;

•our ability to attract and retain development or commercialization partners, and their effectiveness in carrying out the development and ultimate commercialization of one or more of our product candidates;

•whether batches of product candidates that we manufacture fail to meet specifications resulting in clinical trial delays and investigational and remanufacturing costs;

•the decisions, and the timing of decisions, made by health regulatory agencies regarding our technology and product candidates;

•competing products, product candidates and technological and market developments; and

•costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including litigation and arbitration arising in the course of our business activities.

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We intend to seek funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, potential monetization transactions, collaborative or licensing arrangements with pharmaceutical companies and government grants and contracts. There can be no assurance that funding will be available at all or on acceptable terms to permit further development of our research and development programs. Further, the COVID-19 pandemic has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future.

If adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our research or development programs or reduce expenses associated with our non-core activities. We may need to obtain funds through arrangements with collaborators or others that may require us to relinquish most or all of our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise seek if we were better funded. Insufficient financing may also mean failing to prosecute our patents or relinquishing rights to some of our technologies that we would otherwise develop or commercialize.

Cash Flows

The following table summarizes our cash flow activities for the periods indicated:

Net cash used in operating activities in 2022 decreased $32.2 million compared to 2021 due primarily to a January 2022 upfront cash payment of $40.0 million from Qilu in connection with the License Agreement and a $4.0 million premium paid by Qilu as part of their $15.0 million equity investment. These cash inflows were offset by $79.4 million of cash used in operations.

Net cash used in investing activities in 2022 increased by $62.3 million compared to 2021 due primarily to the timing of acquisitions and maturities of investments in marketable securities.

Net cash provided by financing activities in 2022 decreased $105.4 million compared to 2021. Cash provided by financing activities in 2022 consisted primarily of $20.3 million of proceeds from sales of common shares under the Sale Agreement and $11.0 million for the fair value of shares purchased by Qilu as part of their $15.0 million equity investment, of which the remaining $4.0 million was a premium paid by Qilu on the equity investment and was allocated to deferred revenue. Cash

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provided by financing activities in 2021 consisted primarily of $134.7 million of proceeds from sales of common shares under the Sale Agreement.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Please refer to note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Arbutus Biopharma Corporation (“Arbutus”, the “Company”, “we”, “us”, and “our”) is a clinical-stage biopharmaceutical company leveraging its extensive virology expertise to develop novel therapeutics that target specific viral diseases. Our current focus areas include Hepatitis B virus (“HBV”), SARS-CoV-2 and other coronaviruses. In HBV, we are developing an RNA interference (“RNAi”) therapeutic, oral capsid inhibitor, oral PD-L1 inhibitor, and oral RNA destabilizer that we intend to combine to provide a functional cure for patients with chronic HBV infection (“cHBV”) by suppressing viral replication, reducing surface antigen and reawakening the immune system. We believe our lead compound, AB-729, is the only RNAi therapeutic with evidence of immune re-awakening, and is currently being evaluated in multiple phase 2 clinical trials. We have an ongoing drug discovery and development program directed to identifying novel, orally active agents for treating coronaviruses (including SARS-CoV-2). We are also exploring oncology applications for our internal PD-L1 portfolio.

Our product pipeline consists of the following programs:

AB-729, our proprietary subcutaneously-delivered RNAi therapeutic product candidate that suppresses HBsAg expression, which is thought to be a key prerequisite to enable reawakening of a patient’s immune system to respond to HBV, is currently in one ongoing Phase 1a/1b clinical trial and three Phase 2a proof-of-concept clinical trials in combination with other agents with potentially complementary mechanisms of action. Preliminary data from the Phase 1a/1b clinical trial has shown that treatment with AB-729 resulted in meaningful declines in HBsAg while being well tolerated with no serious adverse events (“SAEs”) noted after both single and repeat dosing. Preliminary data also suggests that long-term suppression of HBsAg with AB-729 results in increased HBV-specific immune response.

AB-836, our proprietary next-generation oral capsid inhibitor that suppresses HBV DNA replication, is currently in an ongoing Phase 1a/1b clinical trial where preliminary data from healthy subjects and HBV patients have shown that AB-836 is generally safe and well-tolerated with robust antiviral activity. AB-836 is from a novel chemical series differentiated from competitor compounds and has the potential to provide increased efficacy and an enhanced resistance profile.

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AB-101, our oral PD-L1 inhibitor that has the potential to reawaken patients’ HBV-specific immune response by inhibiting PD-L1, is advancing through lead optimization. We are also exploring potential oncology applications for our internal PD-L1 portfolio.

AB-161, our next-generation oral HBV specific RNA destabilizer, is advancing through lead optimization. We have conducted extensive non-clinical safety evaluations with AB-161 that gives us confidence in this molecule’s ability to circumvent the peripheral neuropathy findings seen in non-clinical safety studies with our first-generation oral RNA destabilizer, AB-452.

Our coronavirus program is focused on the discovery and development of new molecular entities for treating coronaviruses (including COVID-19) that address specific viral targets including the nsp12 viral polymerase and the nsp5 viral protease (nucleos(t)ide).

COVID-19 Impact

We continue to monitor the effects of COVID-19, which has caused significant disruptions around the world. A number of countries and other jurisdictions around the world have implemented extreme measures in attempts to slow the spread of the virus. These measures include the closing of businesses and requiring people to stay in their homes, the latter of which raises uncertainty regarding the ability to travel to hospitals in order to participate in clinical trials. Additional measures that have had, and will likely continue to have, a major impact on clinical development, at least in the near-term, include shortages and delays in the supply chain, and prohibitions in certain countries on enrolling patients in new clinical trials. While we have been able to progress with our clinical and pre-clinical activities to date, it is not possible to predict if the COVID-19 pandemic will materially impact our plans and timelines in the future.

Collaborations and Royalty Entitlements

Qilu Pharmaceutical Co, Ltd.

In December 2021, we entered into a technology transfer and exclusive license agreement (the “License Agreement”) with Qilu Pharmaceuticals Co., Ltd. (“Qilu”), pursuant to which we granted Qilu an exclusive (except as to certain retained rights), sublicensable, royalty-bearing license, under certain intellectual property owned by us, to develop, manufacture and commercialize AB-729, including pharmaceutical products that include AB-729, for the treatment or prevention of hepatitis B in China, Hong Kong, Macau and Taiwan (the “Territory”).

In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million on January 5, 2022 and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of AB-729 in the Territory. The royalties are payable on a product-by-product and region-by-region basis, subject to certain limitations.

Qilu is responsible for all costs related to developing, obtaining regulatory approval for, and commercializing AB-729 for the treatment or prevention of hepatitis B in the Territory. Qilu is required to use commercially reasonable efforts to develop, seek

regulatory approval for, and commercialize at least one AB-729 product candidate in the Territory. A joint development committee will be established between us and Qilu to coordinate and review the development, manufacturing and commercialization plans. Both parties also agreed to negotiate in good faith the terms and conditions of a supply agreement and

related quality agreement pursuant to which we will manufacture or have manufactured and supply Qilu with all quantities of AB-729 necessary for Qilu to develop and commercialize in the Territory until we have completed manufacturing technology transfer to Qilu and approval of a product manufactured by Qilu, or its designated contract manufacturing organization, by National Medical Products Administration in China for AB-729.

Concurrent with the execution of the License Agreement, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Anchor Life Limited, a company established pursuant to the applicable laws and regulations of Hong Kong and an affiliate of Qilu (the “Investor”), pursuant to which the Investor purchased 3,579,952 of our common shares, without par value (the “Common Shares”), at a purchase price of USD $4.19 per share, which was a 15% premium on the thirty-day average closing price of the Common Shares as of the close of trading on December 10, 2021 (the “Share Transaction”). We

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received $15.0 million of gross proceeds from the Share Transaction on January 6, 2022. The Common Shares sold to the Investor in the Share Transaction represented approximately 2.5% of the Common Shares outstanding immediately prior to the execution of the Share Purchase Agreement.

Alnylam Pharmaceuticals, Inc. and Acuitas Therapeutics, Inc

We have a royalty entitlement on ONPATTRO® (Patisiran) (“ONPATTRO”), a drug developed by Alnylam Pharmaceuticals, Inc. (“Alnylam”) under a license agreement with us that incorporates our lipid nanoparticle delivery (“LNP”) technology. In July 2019, we received $20 million in gross proceeds before advisory fees from the sale of this royalty interest to Ontario Municipal Employees Retirement System (“OMERS”), effective as of January 1, 2019. The royalty interest will revert back to us after OMERS receives $30 million in royalty payments from Alnylam. We also have rights to a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas Therapeutics, Inc. (“Acuitas”). The royalty entitlement from Acuitas has been retained by us and was not part of the royalty entitlement sale to OMERS.

Genevant Sciences, Ltd.

As of December 31, 2021, we owned approximately 16% of the common equity of Genevant Sciences Ltd. (“Genevant”), a company we launched with Roivant Sciences, Ltd. and to which we licensed rights to our lipid nanoparticle ("LNP") and ligand conjugate delivery platforms for RNA-based applications outside of HBV, except to the extent certain rights had already been licensed to other third parties (the “Genevant License”). We retained all rights to our LNP and conjugate delivery platforms for HBV. Under the Genevant License, as amended, if a third party sublicensee of intellectual property licensed by Genevant from us commercializes a sublicensed product, we become entitled to receive a specified percentage of certain revenue that may be received by Genevant for such sublicense, including royalties, commercial milestones and other sales-related revenue, or, if less, tiered low single-digit royalties on net sales of the sublicensed product. The specified percentage is 20% in the case of a mere sublicense (i.e., naked sublicense) by Genevant without additional contribution and 14% in the case of a bona fide collaboration with Genevant.

Refer to “Item 1. Business.” and Note 9 of the Consolidated Financial Statements for a discussion of our clinical collaborations and other royalty entitlements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Contingent Consideration

The significant accounting policy that we believe to be most critical in fully understanding and evaluating our financial results relates to our contingent consideration. This accounting policy requires us to make certain estimates and assumptions. We believe that the estimates and assumptions upon which we rely are reasonable, based upon information available to us at the time that these estimates and assumptions are made.  Actual results may differ from our estimates. Our critical accounting estimates affect the calculation of our net income or loss.

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In connection with the acquisition of Enantigen Therapeutics, Inc. (“Enantigen”) in October 2014, we have obligations to make potential future payments of up to $102.5 million upon the achievement of certain commercial milestones. The sales milestones are tied to the first commercial sales by us of a product indicated for the treatment of cHBV. These potential contingent payments are recorded as a liability and remeasured to fair value as of each reporting date.  In assessing the fair value of the liability, significant judgments are required to be made by management to estimate the probability of program success, the timing and extent of future product sales, appropriate discount rates, and other estimates and assumptions that could materially affect the determination of fair value.

In order to estimate the probability of program success, we evaluate the status and progress of our relevant programs and consider statistics and probabilities related to other relevant programs’ success rates. As our relevant programs have advanced in clinical trials, we updated our assumptions related to probability of success in 2021. For the timing and extent of future product sales, we also consider the status and progress of our relevant programs, future forecasts and other macroeconomic indicators that forecast market conditions. The discount rate at which we calculate the present value of our potential future liability, is based on consideration of market-comparative data, market-based discount rates, and company-specific risk premiums.

As assumptions related to the probability of program success and timing and amount of potential future product sales are highly uncertain due to the unpredictable nature of product development, we assessed the sensitivity of the fair value measurement to changes in assumptions, and determined that changes within a reasonable range would not result in a materially different assessment of fair value.

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RESULTS OF OPERATIONS

The following summarizes our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020:

For the fiscal year ended December 31, 2021, our net loss attributable to common shares was $88.4 million, or a loss of $0.83 per basic and diluted common share, as compared to a net loss of $75.9 million, or a loss of $1.00 per basic and diluted common share, for the year ended December 31, 2020.

Revenue

Revenue for the years ended December 31, 2021 and 2020 is summarized in the following table:

Revenue consists mainly of royalties received from other companies for sales of products that utilize our licensed technologies.

Total revenue increased $4.1 million for the year ended December 31, 2021 compared to 2020, due to a $4.1 million increase in license royalty revenue from Alnylam and Acuitas due to the growth of Alnylam’s sales of ONPATTRO.

The royalty interest for ONPATTRO from Alnylam was sold to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert back to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and we are not obligated to reimburse OMERS if they fail to collect any such future royalties. During the term of this agreement, we recognize non-cash royalty revenue related to the sales of ONPATTRO. From the inception of the royalty sale through December 31, 2021, the Company has recorded an aggregate of $11.2 million of non-cash royalty revenue for royalties earned by OMERS. The royalty interest for ONPATTRO from Acuitas was not part of the royalty sale to OMERS and we have retained the rights to receive those royalties. Revenue contracts are described in more detail in “Item 1. Business.”

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Operating expenses

Operating expenses for the years ended December 31, 2021 and 2020 are summarized in the following table:

Research and development

Research and development expenses consist primarily of personnel expenses, fees paid to clinical research organizations and contract manufacturers, consumables and materials, consulting, and other third party expenses to support our clinical and pre-clinical activities, as well as a portion of stock-based compensation and general overhead costs.

Research and development expenses increased $16.2 million in 2021 compared to 2020 due primarily to an increase in expenses related to our ongoing AB-729 clinical trials, including our collaboration with Assembly, an increase in expenses for our ongoing AB-836 Phase 1a/1b clinical trial, and an increase in expenses for our early stage development programs, including our coronavirus program, AB-101 and AB-161.

A significant portion of our research and development expenses are not tracked by project, as they benefit multiple projects or our overall technology platform.

General and administrative

General and administrative expenses increased $2.3 million in 2021 compared to 2020, due primarily to an increase in employee compensation costs, stock-based compensation expense, insurance premiums and professional fees.

Change in fair value of contingent consideration

In October 2014, Arbutus Inc., our wholly-owned subsidiary, acquired all of the outstanding shares of Enantigen pursuant to a stock purchase agreement. The amount paid to Enantigen’s selling shareholders could be up to an additional $102.5 million in sales performance milestones in connection with the sale of the first commercialized product by us for the treatment of HBV, regardless of whether such product is based upon assets acquired under this agreement, and a low single-digit royalty on net sales of such first commercialized HBV product, up to a maximum royalty payment of $1.0 million.

In general, increases in the fair value of the contingent consideration are related to the progress of our programs as they get closer to triggering these contingent payments. In 2021, the fair value of our contingent consideration liability increased $1.9 million, primarily related to the progression of our programs through clinical trials and our assessment of the probability of commercialization. In 2020, the fair value of our contingent consideration liability increased by $0.5 million, primarily related to the passage of time.

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Site consolidation charges

In February 2018, we announced a site consolidation and organizational restructuring to better align our HBV business in Warminster, PA, including closing our Burnaby, Canada facility. Most of the employee-related site consolidation expenses were expensed ratably over the period that employees provided services, which was substantially completed in 2018. Total site consolidation expenses were $5.0 million, which was fully recognized as of December 31, 2020.

Other income (losses)

Other income (losses) for the years ended December 31, 2021 and 2020 are summarized in the following table:

Interest income

Interest income decreased $0.6 million in 2021 compared to 2020 due primarily to a general decline in market interest rates.

Interest expense

Interest expense decreased $1.2 million in 2021 compared to 2020 due primarily to a decrease in the non-cash amortization of discount and issuance costs related to the sale of a portion of our ONPATTRO royalty interest to OMERS in July 2019.

Equity investment loss

In July 2020, we participated in the recapitalization of Genevant, led by Roivant, with an equity investment of $2.5 million. We determined that this $2.5 million additional investment in Genevant was funding prior losses and recorded the amount as an equity investment loss in 2020. Due to our loss of significant influence with respect to Genevant as a result of the recapitalization, we discontinued the use of equity method accounting for our interest in Genevant in 2020. Following the recapitalization, we account for our interest in Genevant as equity securities without readily determinable fair values. Accordingly, an estimate of the fair value of the securities is based on the original cost less previously recognized equity method losses, less impairments, plus or minus changes resulting from future observable price changes in orderly transactions for identical or similar Genevant securities. As of December 31, 2021, the carrying value of our investment in Genevant was zero and we owned approximately 16% of the common equity of Genevant.

Foreign exchange gains (losses)

In connection with our site consolidation to Warminster, PA, our Canadian dollar-denominated expenses and cash balances have decreased significantly now that a majority of our business transactions are based in the United States. We continue to incur expenses and hold some cash balances in Canadian dollars, and as such, we will remain subject to risks associated with foreign currency fluctuations. During the year ended December 31, 2021, we recorded foreign exchange gains of less than $0.1 million. During the year ended December 31, 2020, we recorded foreign exchange losses of $0.1 million.

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LIQUIDITY AND CAPITAL RESOURCES

Since our incorporation, we have financed our operations through the sales of equity, debt, revenues from research and development collaborations and licenses with corporate partners, a royalty monetization, interest income on funds available for investment, and government contracts, grants and tax credits.

As of December 31, 2021, we had cash and cash equivalents of $109.3 million and investments in marketable securities of $81.7 million, totaling $191.0 million. In January 2022, we received a $40 million upfront payment and a $15 million equity investment from Qilu as part of a technology transfer and exclusive licensing agreement to develop and commercialize AB-729 in the Territory. We had no outstanding debt as of December 31, 2021.

Sources of Liquidity

Sale Agreement

We have an Open Market Sale AgreementSM with Jefferies dated December 20, 2018, as amended by Amendment No. 1, dated December 20, 2019, Amendment No. 2, dated August 7, 2020 and Amendment No. 3, dated March 4, 2021 (as amended, the “Sale Agreement”), under which we may offer and sell common shares, from time to time.

On December 23, 2019, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-235674) and accompanying base prospectus, declared effective by the SEC on January 10, 2020 (the “January 2020 Registration Statement”), for the offer and sale of up to $150 million of our securities.

On August 28, 2020, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on October 22, 2020 (the “October 2020 Registration Statement”), for the offer and sale of up to $200 million of our securities. On March 4, 2021, we filed a prospectus supplement with the SEC in connection with the offering of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement, which we fully utilized during 2021. On October 8, 2021, we filed a prospectus supplement with the SEC (the “October 2021 Prospectus Supplement”) for the offer and sale of up to an additional $75.0 million of our common shares pursuant to the Sale Agreement under the October 2020 Registration Statement.

On November 4, 2021, we filed a shelf registration statement on Form S-3 with the SEC (File No. 333-248467) and accompanying base prospectus, declared effective by the SEC on November 18, 2021 (the “November 2021 Registration Statement”), for the offer and sale of up to $250 million of our securities.

During the years ended December 31, 2021 and 2020, we issued 31,571,036 and 24,728,368 common shares, respectively, under the Sale Agreement, as amended, resulting in net proceeds of approximately $134.7 million and $86.3 million, respectively.

Royalty Entitlements

Additionally, we have a royalty entitlement on ONPATTRO, a drug developed by Alnylam that incorporates our LNP technology and was approved by the FDA and the EMA during the third quarter of 2018 and was launched by Alnylam immediately upon approval in the United States. In July 2019, we sold a portion of this royalty interest to OMERS, effective as of January 1, 2019, for $20 million in gross proceeds before advisory fees. OMERS will retain this entitlement until it has received $30 million in royalties, at which point 100% of such royalty interest on future global net sales of ONPATTRO will revert to us. OMERS has assumed the risk of collecting up to $30 million of future royalty payments from Alnylam and Arbutus is not obligated to reimburse OMERS if they fail to collect any such future royalties. If this royalty entitlement reverts to us, it has the potential to provide an active royalty stream or to be otherwise monetized again in full or in part. In addition to the royalty from the Alnylam LNP license agreement, we are also receiving a second, lower royalty interest on global net sales of ONPATTRO originating from a settlement agreement and subsequent license agreement with Acuitas. The royalty from Acuitas has been retained by us and was not part of the royalty sale to OMERS.

In December 2021, we entered into a technology transfer and exclusive licensing agreement with Qilu pursuant to which we granted Qilu an exclusive (with certain exceptions), sublicensable, royalty-bearing license, under certain intellectual property

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owned by us, to develop, manufacture and commercialize AB-729 for the treatment or prevention of hepatitis B in the Territory. In partial consideration for the rights granted by us, Qilu paid us a one-time upfront cash payment of $40 million and made an equity investment of $15.0 million, both received in January 2022, and agreed to pay us milestone payments totaling up to $245 million, net of withholding taxes, upon the achievement of certain technology transfer, development, regulatory and commercialization milestones. Qilu also agreed to pay us double digit royalties into the low twenties percent based upon annual net sales of AB-729 in the Territory.

Cash requirements

We believe that our $191.0 million of cash and investments in marketable securities as of December 31, 2021, plus $55.0 million of gross proceeds received in January 2022 from Qilu as part of our technology transfer and licensing agreement, will be sufficient to fund our operations into the second quarter of 2024 based on our expectation of a net cash burn between $90.0 million and $95.0 million in 2022. In the future, substantial additional funds will be required to continue with the active development of our pipeline products and technologies. In particular, our funding needs may vary depending on a number of factors including:

•the effects of the COVID-19 pandemic on our business, the medical community and the global economy;

•revenue earned from our legacy collaborative partnerships and licensing agreements, including potential royalty payments from Alnylam’s ONPATTRO;

•revenue earned from ongoing collaborative partnerships, including milestone and royalty payments;

•the potential requirement to make milestone payments related to our legacy agreements;

•the extent to which we continue the development of our product candidates, add new product candidates to our pipeline, or form collaborative relationships or licensing arrangements to advance our product candidates;

•delays in the development of our product candidates due to pre-clinical and clinical findings;

•our decisions to in-license or acquire additional products, product candidates or technology for development;

•our ability to attract and retain development or commercialization partners, and their effectiveness in carrying out the development and ultimate commercialization of one or more of our product candidates;

•whether batches of product candidates that we manufacture fail to meet specifications resulting in clinical trial delays and investigational and remanufacturing costs;

•the decisions, and the timing of decisions, made by health regulatory agencies regarding our technology and product candidates;

•competing products, product candidates and technological and market developments; and

•costs associated with prosecuting and enforcing our patent claims and other intellectual property rights, including litigation and arbitration arising in the course of our business activities.

We intend to seek funding to maintain and advance our business from a variety of sources including public or private equity or debt financing, potential monetization transactions, collaborative or licensing arrangements with pharmaceutical companies and government grants and contracts. There can be no assurance that funding will be available at all or on acceptable terms to permit further development of our research and development programs. Further, the continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future.

If adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our research or development programs or reduce expenses associated with our non-core activities. We may need to obtain funds through arrangements with collaborators or others that may require us to relinquish most or all of our rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise seek if we were better funded. Insufficient financing may also mean failing to prosecute our patents or relinquishing rights to some of our technologies that we would otherwise develop or commercialize.

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Cash Flows

The following table summarizes our cash flow activities for the periods indicated:

Net cash used in operating activities in 2021 increased $16.1 million compared to 2020 due primarily to an increase in research and development payments of approximately $18.2 million, which was due primarily to an increase in research and development expenses for our clinical development and discovery programs.

Net cash used in investing activities in 2021 decreased by $2.2 million compared to 2020 due primarily to the timing of maturities and acquisitions of investments in marketable securities.

Net cash from financing activities in 2021 increased $50.5 million compared to 2020. Cash provided by financing activities in 2021 consisted primarily of $134.7 million of proceeds from sales of common shares under the Sale Agreement, as amended. Cash provided by financing activities in 2020 consisted primarily of $86.3 million of proceeds from sales of common shares under the Sale Agreement, as amended.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Please refer to note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.