Adam Cutler – Senior Vice President, Corporate Affairs Mark J. Murray – President and CEO Bruce Cousins – EVP and CFO Michael J. Sofia - Chief Scientific Officer William T. Symonds - Chief Development Officer.

David Martin – Bloom Burton & Company Matthew Kumar - Unidentified Analyst – William Blair.

Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Corporation Conference Call. Currently at this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. Also as a reminder, this conference call is being recorded.

I would now like to turn the call over to your host to Adam Cutler. Sir you may begin..

Good afternoon and thank you for joining us as we review our first quarter 2017 financial results and provide a corporate update. Speaking on today's call are Dr. Mark Murray, Arbutus's CEO; Will Symonds, Arbutus's Chief Development Officer; Dr. Mike Sofia, Arbutus's Chief Scientific Officer; and Bruce Cousins, Arbutus’s CFO.

Mark will provide some opening comments, Bill will review the status of our clinical programs, Mike will provide an update on our research pipeline, Bruce will provide summary comments on our first quarter financial results and then Mark will provide some closing comments.

I'd like to remind everyone that certain statements made on today's call constitute forward-looking statements under applicable securities laws.

Forward-looking statements discussed in this conference call include but are not limited to our clinical plans for ARB-1467, ARB-1740, and AB-423 along with our potential efficacy and the timing of reported results, plans for our pre-clinical assets, and expected revenues from our current and potential licensing agreements.

All these statements involve certain assumptions, risks, and uncertainties that are beyond our control and can cause our actual results to differ materially. A description of these risks can be found in our latest disclosure documents and recent press releases.

In addition, Arbutus does not undertake any obligation to update any forward-looking statements made during this call. This call is being webcast live, and the archive will be available on our website at www.arbutusbio.com following today's call. At the end of the prepared comments, we'll open up the call up for your questions.

I’ll now turn the call over to Mark..

Thanks Adam and thank you to everyone who is joining us on the call and webcast today. I will keep my opening comments very brief and turn the call over to my colleagues for a view of our clinical programs and our research pipeline. Arbutus is focused on a therapeutic solution to chronic HBV, a large global unmet medical need.

To that end we are developing a portfolio of drugs acting against key hepatitis B disease targets both viral and host. We believe that each of the drugs in our pipeline will provide improvements to the standard of care currently available to patients by driving higher cure rates with a finite dosing regimen.

Our RNAi therapeutics represented by product candidates, ARB-1467 and ARB-1740 target and reduce multiple viral elements including HBV DNA, cccDNA, core protein and e-antigen and s-antigen. When used with nukes ARB-1467 substantially reduces HBV s-antigen levels in patient's blood.

Our next step is to use ARB-1467 or ARB-1740 in combination with a nuke and an immune modulator which we believe has the potential to result in sustained HBV DNA and s-antigen lost in patients. This is consistent with the recommended endpoints described in the recently issued EASL hepatitis B treatment guidelines.

Achieving this in a significant portion of patients would put our latest therapeutic agent on a potential approval pathway. We believe that a successful treatment regimen involving ARB-1467 or ARB-1740 must significantly reduce viral DNA and s-antigen and provoke a reawakening of the host immune response.

This may also require an immunomodulatory component for at least some patients. We plan to evaluate that later this year as Bill will describe in his remarks. While there are not yet FDA guidelines for development of a finite duration curative HBV treatment regimen, the agency is involved in dialogue with HBV experts and industry representatives.

My colleague Bill Symonds is playing a key role in this dialogue including serving as the Industry Chair of the HBV Forum and serving on the Advisory Panel for the AASLD EASL HBV treatment endpoint workshop.

In the meantime there seems to be a building consensus among opinion leaders that a functional cure is defined as durable loss of both hepatitis B DNA in each hepatitis B s-antigen. Now I will turn the call over to Bill to review the status and upcoming plans for the development pipeline.

Bill?.

Thanks Mark. We now have three HBV product candidates in active clinical trials RNAi agents, ARB-1467, and ARB-1740 which are both an ongoing clinical trial conducted in patients with chronic HBV infection and our core protein/capsid inhibitor AB-423 which is in an ongoing healthy volunteer study.

At the EASL conference last month in Amsterdam we presented data showing that ARB-1740 when administered as three monthly 0.4 milligrams per kilogram doses lead to significant additive stepwise reductions in serum hepatitis B surface antigen regardless of e-antigen status.

In the third quarter we expect to announce initial results for Cohorts 4 which is currently evaluating bi-weekly 0.4 milligrams per kilogram doses of ARB-1467 over three months in nuke suppressed HBe antigen negative patients.

Based on our results from Cohorts 1 to 3, we would expect Cohorts 4 to yield even greater reductions in s-antigen than we are seeing in these initial cohorts.

In addition Cohorts 4 has an extension phase which enables patients to pre-define response criteria to continue with up to an additional nine monthly doses of ARB-1467 for a total treatment duration of one year.

Cohorts 4 and the extension will provide the opportunity for ARB-1467 treatment to drive serum hepatitis B surface antigen to very low if not undetectable levels potentially resulting in a reawakening of the host immune response in some patients.

This cohort represents a potential opportunity to evaluate the addition of another agent such as an immune modulator to increase the rate of sustained s-antigen in HBV DNA loss in these patients.

Beyond Cohorts 4 we are planning additional studies to start this year designed to evaluate administration of ARB-1467 with nucleot(s)ide and a limited course of interferon.

This will allow us to further explore the potential of a ARB-1467 and to evaluate the importance of immune stimulation in patients who have achieved low HBV DNA and s-antigen levels.

With this study we are striving to increase the rate of patients achieving sustained, undetectable levels of HBV DNA and s-antigen beyond what is achieved with the current standard of care.

In the second half of this year we will also have the results from the multi-dosing study in chronic hepatitis B patients with ARB-1740, our next generation RNAi agent. This study will enable a cross study comparison of this potency with ARB-1467, which will inform the decision to choose between these two candidates for further clinical development.

The next antiviral agent in our pipeline is AB-423, a core protein/capsid assembly inhibitor with a dual mechanism of action including both inhibition of new cccDNA formation and inhibition of DNA replication. This compound began a single and multiple dose study in healthy volunteers in the first quarter of this year.

We expect to complete the healthy volunteer study and begin a multi-dosing study of AB-423 in HBV patients in the second half of the year. Following initial studies AB-423 in patients with chronic HBV infection, we plan to evaluate its utility in combination with ARB-1467 or ARB-1740 nucleot(s)ide and possibly interferon early next year.

Importantly we have already shown In vivo combination studies that AB-423 is complementary to our RNAi agents nucleot(s)ide and interferon. I will now turn the call over to Mike to discuss our research pipeline. .

Thanks Bill, we have several active research programs to identify new direct acting antiviral agents and immunomodulatory agents for the treatment of chronic HBV infection.

Today I will discuss two programs from which we intend to nominate clinical candidates this year, our second generation core protein/capsid inhibitor program and our small molecule s-antigen inhibitor. As Bill described our first core protein/capsid inhibitor AB-423 is currently in the clinic.

We expect AB-423 to be competitive with other companies core protein/capsid inhibitors that are in the clinic but we think there is room further improvement. We've already identified several second generation compounds of novel chemical classes that are 5 to 10 times more potent than AB-423 and have superior preclinical [ph] levels.

We expect to nominate one of these compounds for iDNA 1 [ph] study this year. Our small molecule s-antigen inhibitor program has generated highly potent compounds which not only reduce s-antigen but also reduce other viral antigen.

While this is not an RNAi agent the two results in reduction of several HBV [indiscernible] with a single orally delivered drug. This program from which we expect to nominate clinical candidate this year could provide an orally delivered agent that leads to direct reduction of s-antigen as well as other viral products.

As both of these programs progress we will look for opportunities to present preclinical data at medical or scientific meetings later this year or early next year. I would like now to turn the call over to Bruce. .

Thanks Mike. I will touch on the financial highlights now for the first quarter of 2017. Arbutus's net loss for Q1 2017 was $18.6 million or $0.34 per share as compared to 15.9 million or $0.31 per share in Q1 2016. In Q1 2017, we recorded revenues of $200,000 versus revenues of $600,000 in Q1 of 2016.

As previously announced in March of this year we entered into an agreement with Alexion to use Arbutus's LNP technology in a single rare disease program.

Under terms of this agreement we have received $7.5 million upfront and are due further milestone payments of up to $75 million in a single-digit royalty on future sales as well as reimbursement for certain services being provided. In Q1 we recorded $100,000 of the initial license fee and minimal service fee revenue.

We anticipate recognizing the balance of this deferred revenue over the service period not to exceed 34 months. Turning now to expenses, total research, development, collaborations, and contract expenses increased to $13.9 million from $13.1 million in Q1 the year prior.

As we deepened our investment in our two drug candidates in Phase II our one drug candidate in Phase I of development as well as our multiple research programs focused on HBV.

G&A expenses decreased from 7.3 million in Q1 2016 to 4.3 million in Q1 2017 primarily due to a decrease in non-cash equity compensation expense for share repurchase rights as a result of the departure of two of the four former Arbutus Biopharma, Inc. founders in June 2016.

Other income decreased from 4.1 million in Q1 2016 to a loss of $300,000 in Q1 2017. The most significant item in other income is foreign currency gains and losses on investment holdings denominated in Canadian dollars. Foreign currency gains decreased by approximately 2.2 million from Q1 2016 to Q1 2017.

At the end of Q1 we had a total cash and investments balance of $123 million compared to $143 million at the end of 2016.

Our Q1 operating cash burn was $12.5 million in addition to which we use 4.3 million in net working capital changes and 3.4 million for capital expenditures related to our new Warminster, Pennsylvania facility that we moved into in April.

After the end of Q1 we received payment of 7.5 million from Alexion under the licensing agreement which will improve upon our second quarter cash position. We continued to believe that our cash position provides sufficient run rate to fund the company into late 2018.

In addition to the upcoming Arbutus pipeline milestones that Mark will review in a moment, we expect to see progress from existing LNP license orders Alnylam and Alexion as well as the potential for more LNP transactions in 2017 which could provide further runway extension for the company. I'd now like to turn the call back over the Mark. .

Thanks Bruce. Before we go to Q&A I'd like to review a few key expected pipeline milestones for Arbutus in 2017. ARB-1467 Cohort 4 data will be available in the third quarter which will show how much s-antigen reduction can be achieved by bi-weekly dosing with this agent.

Multi-dosing results for ARB-1740 in HBV patients will be available in the second half which will enable a comparison of ARB-1740 potency relative to ARB-1467. Completion of the capsid inhibitor AB-423 healthy volunteer study and advancement of AB-423 into multi-dosing patients study will occur in the second half.

And initiation of a new study in the second half to evaluate longer-term dosing of ARB-1467 in combination with nukes and interferon to drive a sustained production of s-antigen HBV DNA to undetectable levels. Operator, please open the lines for questions. .

Thank you sir. [Operator Instructions]. Our first question comes from David Martin of Bloom Burton. Your question sir. .

Hi guys, thanks for taking my questions.

The first from me, 423 Phase II trial were roughly in patients treated with nukes and if that is the case I guess their HBV levels will be low, so what will be the endpoints that you are looking for?.

Bill do you want to take that one. .

Sure, yes. The final design of that study is still under discussion but I could definitely see the potential to do that study in patient where you could actually look at DNA. That is a very important marker for capsid or core assembly inhibitor. .

Okay, the second question your oral s-antigen inhibitor, what's the mechanism for that, how is that working?.

Mike, you want to touch on that. .

Well, we believe it's working by acting as a small molecule RNAi agent. So basically knocking down a message of the viral antigens either the s, core, or x. .

But it's not a nucleic acid, it is a….

It is not a nucleic acid, it is a small molecule agent. .

Okay, last question from me, the legal agreement you have against Acuitas, they can't sublicense LNP going forward but what about any existing sublicenses that the agreements set already?.

So David, so as you know there's an injunction in place which essentially freezes the situation. So if Acuitas has an existing sublicense that remains in existence until this matter is resolved, the trial of Acuitas is not allowed to do anything new or additional or to provide Arbutus technology to anybody else. .

Okay, and what's the timeline on the trial. .

I believe we expect this to be early in 2018. But it's -- I don't think it's completely nailed down yet. .

Okay, thank you. .

[Operator Instructions]. Our next question comes from Matthew Kumar of Sherdyne [ph]. Question please. .

Yeah thank you, sorry, thank you for taking my questions.

So I'm just curious what is your feeling of the consensus about the level of s-antigen suppression and the predictability of s-antigen suppression that leads to long-term s-antigen loss, I really feel that is kind of somewhat nascent but it would be interesting to hear your perspective from being on these development committees, where the field is really headed thinking s-antigen in terms of both level and also duration that's really predictive of eventual clearance of the virus?.

Bill, would you like to comment on that. .

Sure, yeah, I think there's been a large amount of data generated over the really decades now with existing therapies if you look at the data with nukes, you look at the data with interferon. I think that out of the totality of that clearly no one's really figured out what the hallmark signature is of the patient who is definitely going to clear.

But I think that things have been learned over time especially with interferon where the lower a patient's s-antigen is when they start therapy with interferon the better shot they have at actually clearing s-antigen for an extended period of time.

So I think definitely baseline s-antigen levels are important below a 1000 or perhaps even below 100 are probably very meaningful there. The data remains to be seen though as we talk about these newer therapeutics coming out that that's really the same situation and can we apply that thing less.

And I think there's also of course differences across genotypes in terms of response to interferon in terms of clearing s-antigen. And then with the -- there was actually a paper by Eddie Marshall [ph] about a year ago where they looked at the dynamics of it and it changes over time.

And a number of recent publications even at EASL looked at baseline parameters. So I think we can look at those datasets for the learning but we are in the process now of generating this data for ourselves with our own compounds and seeing what we can figure out in the near-term from our Phase II program. .

Okay, great.

And kind of a follow up, what parameter are you looking at when thinking about potency for 1740 versus 1467 like is it just deeper s-antigen knock down, can you expand a bit on what you're thinking about in terms of what is necessary to pick one versus the other moving forward?.

So, I think we're looking for potency in patients. So for -- by that we mean simply for a given amount of administered agents what is the difference in s-antigen knock down that we observe. .

Okay, so s-antigen is a suppression that's really the driver?.

Well that's the principal marker that we can see and in patients. So that's the tool we have to most readily make the decision. .

Okay, thanks very much. .

Thank you. Our next question comes from Katherine Xu of William Blair. .

Hi, this is Audrey on for Katherine, thanks for taking my question.

I was wondering if you will be presenting multiple doses or dosing cohorts from 1740 or will we be seeing it kind of rolling out in the same manner that 1467 showed us?.

Sorry, no we will wait until we have the whole data set and then present that. .

And are you using therapeutic [ph] indication with this?.

In some of the cohorts at certain levels we are not and in other cohorts or high levels we are. .

Alright, thank you. .

Thank you, our next question comes from David Martin of Bloom Burton. .

Hi, just had a follow-up question.

Bill, with the increased potency of 1740 do you expect that transcripts will be equally effective if you have stronger suppression of s-antigen, maybe a stronger reduction of overall the transcripts?.

David, so this is Mark here. I think it's very difficult to answer that question. I think that would require sort of a comprehensive pre-clinical evaluation which I'm sure we have done but I don't have the data at my fingertips.

The principal thing that we're going to be looking at in patients is s-antigen and we really expect the rest of the -- we expect to affect all of the other transcripts as well. I don't think we would be expecting any sort of differential degradation of one relative to another. .

Okay, and well 1467 or 1740 be tested even in nuke naïve patients in the existing trials that are running as planned?.

Bill you want to comment on that. .

Sure, yeah, so in 1740 for instance the first cohort is actually in non-treated patients that are non-nuke suppressed. Some of them or the majority are actually nuke naive but you could have been treated a long time ago and had a washout period and then come in. So we are touching that population in the 1740 study. .

And in the Cohorts of that study or just escalating dose cohorts?.

Yes. .

Okay, thank you. .

Thank you. I show no further questions in the queue at this time. I would like to turn the call over back to Adam Cutler. Sir, you may continue. .

Thank you operator. We appreciate everyone's participation in the call today and look forward to sharing updates on our progress with you in the months ahead. This concludes our call today. Thank you very much. .

Thank you ladies and gentlemen for attending today's conference. This concludes the program. You may all disconnect, good day..