Tiffany Tolmie - Manager, Investor Relations Mark Murray - Chief Executive Officer Mike Sofia - Chief Scientific Officer Bill Symonds - Chief Development Officer Koert VandenEnden - Interim CFO.

Katherine Xu - William Blair Michael Yee - Jefferies David Martin - Bloom Burton Lisa Bayko - JMP Securities Madhu Kumar - B. Riley FBR.

Good day, ladies and gentlemen, and welcome to the Arbutus Biopharma Fourth Quarter and Year-End 2017 Financial Results and Corporate Update. At this time all participants are in a listen only mode. Later we'll conduct a question-and-answer session and instruction will follow at that time. As a reminder, this conference is being recorded.

I would now like to hand the floor over to Tiffany Tolmie, Manager of Investor Relations. Please go ahead..

Thank you and good afternoon. And thank you for joining us as we review our 2017 year-end financial results and provide a corporate update. Speaking on today's call are Dr. Mark Murray, Arbutus' CEO; Dr. Mike Sofia, Arbutus' Chief Scientific Officer; Dr. Bill Symonds, Arbutus' Chief Development Officer; and, Koert VandenEnden, Arbutus' Interim CFO.

Mark will provide some opening comments. Mike will provide an update on our two new exciting agents, plans and for the clinic this year.

Bill will provide an update on the things [ph] to be initiated ARB-1467 combination study, Koert will review our 2017 year-end financial result and then Mark will finish with a closing summary and outlook on the year ahead.

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, developing our delivery technologies with Roivant Sciences, expected benefit for consolidating our operations in Warminster, Pennsylvania, our clinical plans for ARB-1467 and AB-423 along with their potential efficacy and timing of reported results, plans for our preclinical assets such as AB-506 and AB-452, our expected cash run rate and expected revenues from our current and potential licensing agreements.

All of 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 conference call is being webcast live, and the archive will be made 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 for questions.

I will now turn the call over to Mark..

Thank you Tiffany, and thank all of you for joining us today on the call and webcast. I will provide a brief recap of last year’s achievements and outline our corporate objectives for 2018. First, I’d like to spend a few minutes expanding on some significant recent developments in our business.

We began the year from a strong financial position after closing a $116 million financing with our strategic partner Roivant Sciences. With over $200 million in cash to start the year, we are well capitalized to fund our current development plans well beyond 2019.

On February 13, we entered an exclusive negotiation period with Roivant to negotiate on an exclusive basis the terms and conditions of a proposal to jointly develop Arbutus’s nucleic acid delivery platform based on our lipid Nanoparticle and GalNAc technologies, through a new company that would jointly own, manage and develop these technologies.

Arbutus will retain its petition royalty entitlements as well as the continued right to these technologies for all applications in HBV. This is a complicated transaction involving technology, intellectual property, people and facilities.

We’ve made considerable progress, but we need a little more time to complete the agreements needed, so we have triggered the 30-day extension period contemplated in the original exclusivity agreement.

Last year, our LNP technology achieved a major clinical validation after the successful completion of Alnylam Phase 3 trial for its patisiran product, which is enabled by our LNP technology. Alnylam has since completed regulatory filings required for approval of patisiran which could result in regulatory approval in the second half of this year.

Arbutus is owed a low-to-mid single digit royalties tiered based on global sales of patisiran and we could receive its – our first royalty payments late this year. The Company anticipates that this royalty could provide meaningful runway extending capital to fund our HBV development programs.

Recently we announced a settlement of litigation initiated by Acuitas in October 2016. The settlement terminates Acuitas’s right to use or further sublicense any of our LNP technology.

This is a major milestone which establishes Arbutus as the owner and only source of this industry-leading technology platform with the ability to develop a full range of applications. We also recently announced our plan to consolidate our HBV, R&D activities and our business operations around our new research site in Warminster, Pennsylvania.

Our objective is to improve operational and financial efficiencies as we continue to focus on a mission to cure HBV. As we transfer activities to Warminster, and reduce our overhead, we will look for opportunities to leverage Roivant’s infrastructure and human capital to expedite more efficient advancement of our HBV assets.

Now onto our HBV mission, last year, we completed a series of cohorts in HBV patients with our lead RNA interference agent ARB-1467. In these studies, we were able to demonstrate significant stepwise additive reductions in surface antigen levels in patients with repeat dosing of ARB-1467.

Importantly, several patients in these studies reach very low absolute surface antigen levels after three months of biweekly dosing. This year, we are undertaking a study of ARB-1467 in combination with standard of care tenofovir, and peg interferon. Bill Simmons will describe the study later in the call.

Last year, our first-generation capsid inhibitor AB-423 completed Phase 1 single ascending and multi-ascending dose studies in healthy volunteers and demonstrated itself to be safe and well tolerated.

We have also been rapidly advancing a far superior next-generation capsid inhibitor referred to as AB-506 towards clinical development, which Mike will describe shortly. Apart from advancing our capsid inhibitor program, this year we are also advancing our novel and unique HBV RNA destabilizer agent.

This is a small molecule that facilitates degradation of all HBV viral RNAs resulting in reduced protein levels. I will now turn the call over to Mike to describe these programs for you.

Mike?.

Thanks Mark. We’ve assembled a robust portfolio consisting of multiple HBV assets, complementary mechanisms of action that interfere [ph] at different points in the bar’s lifecycle to impede bar [ph] replication and antigen production and re-awaken the host to do [Indiscernible].

Our strategy is to improve treatment options for HBV patients with drug combinations including our proprietary agents, each of which has the potential to improve standard-of-care contribute to a curative combination regimen. We consider capsid inhibitors to be an important element of a curative combination regimen for HBV.

While current standard of care new therapy reduces HBV DNA level in patients, there is still substantial virus replication in the liver and continued production of large amounts of viral antigens. Capsid inhibitors are direct acting antivirals that have a dual mechanism action that impacts the HBV lifecycle.

They inhibit pregenomic RNA encapsidation and they also block capsid out the disassembly which inhibits cccDNA synthesis. Tradition of a caps inhibitor can contribute to further reducing or eliminating HBV replication in the liver. There is already clinical proof of concept data that show capsid inhibitors reduce HBV DNA in patients.

The capsid inhibitor space is competitive. Late last year, a new benchmark of roughly 3 log reduction in HBV DNA after 28 days of treatment was set. Based on internal modeling, evaluating the likely drug level required to achieve a corresponding decrease in HBV viral log we believe our AB-506 can meet or exceed this level of viral load reduction.

The low [Indiscernible] intrinsic potency and promising pharmacokinetic properties of AB-506 suggest the competitive profile. In order to prioritize our use of resources, we intend to continue rapidly advancing AB-506 into clinical testing before proceeding with additional clinical evaluation of AB-423.

We anticipate completing IND or CTA enabling study and completing a regulatory filing for AB-506 by mid-year. Results of additional preclinical studies including AB-506 drug combinations with agents acting via mechanism of actions will be presented throughout 2018 at various scientific conferences.

This year, we will also advance the clinic AB-452, a novel orally available small molecule HBV RNA destabilize with a broad genotype cover. This is a very potent molecule which mediates degradation of all age HBV RNA and thus all viral antigen, closely inhibiting all stages of the bar lifecycle including HBV S-antigen.

AB-452 also shows synergistic effect when combined with our RNAi agents in vitro. AB-452 has ideal characteristics for inclusion in a combination regimen with potential for once daily oral dosing. We expect to file IND or CTA on this molecule by midyear to enable a Phase 1 study in healthy volunteers.

At Arbutus, we believe that a key complement of any curative regimen will be agents that drive S-antigen to low levels in patients. Therefore we have made a commitment to S-antigen reduction in our pipeline.

I’ve just reviewed AB-452 which reduces S-antigen and Bill will talk about our current clinical study with ARB-1467designed to reach S-antigen loss. In addition to these programs, we have also developed a GalNAc RNAi conjugate technology that we are applying to HBV.

This Arbutus proprietary technology will enable subcutaneous administration of an RNAi therapeutic t hat targets S-antigen and all other HBV antigen. This GalNAc HBV agent who complement our small molecule agent with more convenient dose administration than ARB-1467.

We recently nominated a candidate to proceed to IND or CTA enabling study and anticipate advancing this product as quickly as possible. I would now like to turn the call over to Bill..

Thanks Mike. I will provide an overview of our current clinical study of ARB-1467. I will remind you that ARB-1467 facilitates potent knockdown of all the viral protein, especially S-antigen. Last year, we studied ARB-1467 in a series of Phase 2 multi-dose cohorts in virally suppressed patients.

In this study we learned several things, which we are incorporating in our current clinical study with ARB-1467. The goal of this study is to drive hepatitis B surface antigen and hepatitis B virus DNA levels as low as possible and potentially achieve undetectable levels of these that are sustained up treatment.

This triple combination study is the first of its kind for an RNAi agent in HBV patients.

The 30-week trial will enroll 20 E-antigen negative treatment naïve patients who will receive biweekly doses of ARB-1467 at 0.4 milligram per kilogram along with daily tenofovir followed by the addition of weekly pegylated interferon to maximize S-antigen reductions and allow for evaluation of the effects on the immune response in patients who have achieved low HBV DNA and hepatitis B surface.

Patients who meet predefined treatment criteria week six will qualify for the addition of weekly interferon treatment for the remaining 24 weeks, while non-responders at this time point will discontinue all medications. The study will conclude with a 24-week post treatment follow up period to evaluate up treatment response.

Interim on-treatment results from this study are expected in the second half of 2018, followed by final results in 2019. We believe that this regimen has the potential to significantly drive towards S-antigen loss, which, if durable, could pave the way for later-stage studies and a potential approval pathway for ARB-1467.

Also these data’s will help inform the design of future combination studies with other agents with from our pipeline. I would now like to turn the call over to Koert..

Thanks, Bill. I’ll review the financial highlights for the fourth quarter of 2017. So first, I’ll touch on the income statements. Arbutus' net loss for Q4 2017 was $35.9 million or $0.65 per share as compared to $218.7 million, or a loss of $4.05 per share in Q4 of 2016.

The Q4 loss in 2017 was largely impacted by non-cash items including an impairment of intangible assets of $40.8 million which was offset by a deferred tax benefit of $24.3 million. The deferred tax benefit relates to the intangible asset impairment and the impact of a reduced tax rate resulting from U.S. tax reform.

In Q4, 2017 we recorded revenues of $2.5 million versus a reversal of revenue of $200,000 in Q4 2016. Revenues recognized were primarily related to the ongoing license agreement with Gritstone oncology and related services performing.

Now turning to expenses, total research development collaborations and contract expense was steady at $17.8 million compared to $17.2 million in Q4 of the year prior, as we continue to invest in developing a clinical asset and in our preclinical pipeline, as described by Dr. Murray, Sofia, and Symonds earlier on this call.

G&A expenses have decreased to $3.6 million compared to $4.7 million in Q4, 2016. This decrease was largely a result of the exploration. In Q3, 2017 of repurchase rights on shares issued us consideration and a 2015 merger, which historically resulted in non-cash stock-based compensation charges.

Other income increased from a loss of $1.4 million in Q4, 2016 to a flat net figure is nil in Q4, 2017. Other income includes foreign-currency income or loss, net interest income and non-cash changes in fair value of contingent consideration.

Finally, I’ll discuss our cash position and runway which we have strengthened and extended substantially around the end of 2017 with the completion of $116.4 million strategic investments by Roivant Sciences. During the fourth quarter, we closed the first tranche of this financing for gross proceeds of $50 million.

This largely offsets our 2017 operating cash burn. As a result, we had year-end aggregate cash and investments balance of $139 million at the end of 2017, compared to $143.2 million at the end of 2016. Following shareholder approval in January 2018, we closed the second tranche of Roivant’s investment for additional cash proceeds of $66.4 million.

On a pro forma basis, including the second tranche proceeds, we started 2018 with a cash balance of $205 million. With the close of the investment from Roivant and efficiencies from our side consolidation, we expect our current cash balance to fund the company well beyond 2019.

The potential benefit of our future royalty entitlements from Alnylam has the potential to further extend our cash run rate. With that summary, I’ll turn the call back over to Mark..

Thanks, Koert. We closed with an excellent fourth quarter while starting this year off from a solid financial position to advance our HBV pipeline. In conclusion today, I would like to highlight a few key points that I believe will continue to drive value for Arbutus and its shareholders in the coming year.

Our LNP licensee Alnylam has projected regulatory approval for its patisiran product by the second half of 2018, which could result in Arbutus receiving royalty payments this year. We are initiating our first combination study of ARB-1467 tenofovir and pegylated interferon.

We’ll share interim on treatment data from this study in the second half of the year. And by mid-2018 we plan to complete regulatory filings of our novel HBV DNA HBV RNA destabilize, AB-452 and the next-generation capsid inhibitor AB-506 to enable the start of Phase 1 studies in human volunteers this year.

Overall, it was another outstanding year for Arbutus. And we look forward to you joining us for another pivotal year in 2018 and beyond. Thank you. Operator, please open the lines for questions..

Thank you. [Operator Instructions] And we do have a question from the line of Katherine Xu with William Blair..

Hi. Good afternoon.

I’m just wondering with regards to 452 of how potent it is? So from the data that you had so far, Mike, how does the potent [ph] be compared to 1467, and how does that compared to GalNAc candidate that you have?.

Well, I will say that 452 is very potent molecule. I think we’ve reported its about 1.9 nanomolar EC50 in all cell lines that we look at inhibition of HBV S-antigen production. We see a very strong inhibition of S-antigen production in HBV animal models greater than one log reduction in these models. It's hard to compare the two technologies.

They work very differently. But I think as we said, one of the things we believe is that these molecules can work synergistically together to get maximal reduction in S-antigen overall and we certainly have seen that in preclinical models. So, it is a very potent molecule of AB-452. Relating to our GalNAc, we’ve not disclosed any data. We’ll not yet.

And I think we will actually be disclosing some date in some upcoming scientific meeting, but safe to say, its again very potent agent..

Great. And then with regard to the combination 1467 plus new class interferon, what kind of data do you intend to generate that you think would be the hurdle on to need to getting to Phase 3. And then from previous monotherapy or on the new couple of study, it seems like the L28CC [ph] patients were the responders.

Do you still expect that in this triple combo?.

So, I think Katherine, in terms of what we expect in this study. It’s a study involving 20 patients in this pilot study we’re looking for the effects on the immune system.

Of course we’re doing a lot of different testing to see what happens to the immune system and how it re-waken if possible as we drive S-antigen down – S-antigen levels down lower and lower. A good outcome of course would be to see patients who had sustained S-antigen loss after coming off therapy. We’ll see what happens.

We definitely expect to see S-antigen reduction over time which should be accelerated by the addition of interferon and as we see some other molecular out there in the past. So at this point in time we’re open to different possibilities that what the data tells us as we generated.

And then in terms of our second question, could you remind me what your second question was?.

The L28CC..

Yes, so again we will be evaluating that again in this study that was of course a small group of patients in the first trial, it something we’re intrigue by and something I think scientifically can make some sense. So we’ll be looking at that further in this trial..

Thanks..

Thank you. And our next question comes from the line of Keane McCain with [Indiscernible].

Yes. Two questions. First, what your best guess at this point if you file IND or CTA for 452 and 506.

When we might see first interim data from those studies?.

So, we plan to file for 506 a regulatory filing before the end of the first half of this year going to healthy volunteers to do SAD/MAD and then we anticipated in going into HBV patients study by the end of this year and we should have some data certainly in the first half of next year on that molecule.

For 452, again regulatory filing by mid this year, so sometime probably in the first half of next year, we should see related data in HBV infected patients..

Hey, great.

And then maybe for Mark, with the settlement with Acuitas can you remind us what primary improvements we’ve made to LNP hope that cut-off date in that agreement 2010?.

Well, I think, Keith, we’ve continued to work on different lipids and different features of the platform. And in addition to that we’ve continue to generate more issued patents over the last couple of years.

So, and our focus in the last couple of years has been really to sort of adapt the technology from RNA interference triggers to larger messenger RNA like structures. That’s has been kind of that generate – the direction of our work for the last couple of years..

Okay. Very good. Thanks for that..

Thank you. Our next question comes from the line of Michael Yee with Jefferies..

Hey, guys. Good afternoon. Congrats on all the progress so far. Two questions. One is on the combination study of 1467, can you tell me what defines “responder” and then how you’re thinking about the interim results, you sort of alluded you be looking at the lot of things, but what the fine success for an interim.

Is that zero convergent, like what are you looking for there and what would have for an interim? And then the second question is on you capsid inhibitor program, just wanted to confirm, if 43 was actually going to go in to Hep B patients or is that just totally on pause.

I would figure you just want to at least get some efficacy there and be able to compare it as you think about developing 506? Thanks..

Hi, Mike. It’s Bill Symonds.

So as far as the combination study, the interim results, what we’re talking about there is basically results from that first six week period which leads to the responder, the non-responder time point where we decided someone goes on to receive interferon or not, to be considered to have responder you basically -- a patient would have to demonstrate a certain level of reduction in hepatitis B surface antigen and also be below a certain threshold.

So they got to get below a certain number and then they also have to demonstrate the ability to drop their S-antigen. So that would be the definition of someone who is a responder.

And then in terms of what we’d expect to see there in terms of the interim results in the fall, you probably be seeing hepatitis B surface antigen and HBV DNA levels would be the two main things we will looking at there.

And again, you know it depends where the patient start of course, but you can imagine patients will be starting with logs of either of those parameters. So, in six-week time period, I wouldn’t expect to see S-antigen loss at that in time, but over the 30-weeks I think that’s where you can think about seeing these much, much lower levels..

So just to be clear, I mean, at the end of 24 weeks, you could see people who have complete reductions of S-antigen, DNA and potential share of conversion, could you not?.

You could, you could, yes, I mean, if you recall from the Phase 2 study we run at last year that that we had patients after the 12-week training period who had absolute level of hepatitis B surface antigen very low, well below 100 actually in quite a number of those patients.

So that’s what gives us the thinking that when we just add a little bit more to that regimen with something such as interferon and given them an additional boost to try and push patients like that even lower is the concept of that..

Okay. And then you just remove the -- okay..

So, yes, so everything will then stop at 30-week and we’ll look for off treatment continued sustaining of the initial response..

Okay. Then on capsid..

With respect to the capsid, I think as Mike alluded to earlier, we believe that we have proof-of-concept in humans already and we’ve made very rapid progress in getting 506 to clinical ready essentially on top of 452, and we just think it’s a better use of our cap sort of – I’m sorry, 423, we just think it’s a better use of our capital to move 506 forward and then make a comparison between the two of them..

But to be clear you don’t have DNA and RNA reductions in patients, correct, in 423?.

Correct..

Yes.

When we want to see that or you just feel like no need to just go to 506?.

I think we believe that 506 is going to be superior, number one, and we feel that we in the field pretty much knows what these capsid molecules are going do of certain potencies. So we don’t think it’s necessary to do that to make the comparison..

Okay. Got it. Thanks..

Okay..

Thank you. And our next question comes from the line of David Martin with Bloom Burton..

Hi. This is Antonio [ph] on line for Dave. So my question is….

I’m sorry I didn’t get your name?.

Hi. Antonio, on line for Dave..

Good afternoon..

Good afternoon.

So my first question is related to the design of the Phase 2 combo study and I’m just wondering what the rationale is for only testing peg interferon in ARB responder as suppose to all patients which would enable you to see whether ARB response based more functional cures other entrance of efficacy?.

Sure. I’d be happy to answer that. So basically the concept is that we want to drive the S-antigen level down first because there is a lot of data out there showing that patients who start interferon therapy with hepatitis B would lower surface antigen levels typically below a 1000 tend to have a higher probability of achieving S-antigen loss.

So we’re basically using ARB-1467 to drive S-antigen down to get them the interferon a better shot at working. So basically creating a group of patients who are more likely to respond and that we think is the best way to think about how to use interferon in combination with the 1467 at this point in time.

With the patients who don't respond as well to 1467 in initial six weeks we don't feel it's really worth, we putting that patient into a trial with interferon at that point in time if they haven't had an initial response to ARB-1457 and the nuc [ph]..

Okay. That’s helpful. And then just my second question is related to your GalNAc program.

What gives you confidence in the safety of your delivery and that you won't run into some of the other issues that I have seen with earlier visions of GalNAc?.

Well, I mean we do a sort of pretty extensive preclinical safety assessment and this modules been in multiple animal models and so forth, so we know at this point that it’s a very safe and certainly effective in animal model agents.

So I think we’re very comfortable with the safety profile of this molecule at this point in time and feel ready to move forward..

All right. Thank you..

And our next question comes from the line of Lisa Bayko with JMP Securities..

Hi. Just a follow-up to Mike question, you said a certain level of S-antigen loss and I think DNA reduction would constitute response.

What levels are you talking about, are those defined?.

We haven’t disclose that publicly, but basically we want patients to be below at certain threshold level of hepatitis B surface antigen and it was also a reduction in the same surface antigen, not DNA.

So you have to demonstrate the ability to drop S-antigen in the presence of 1467 and then get below a certain threshold to denote a patient who is a responder..

Okay. And responders different getting toward the functional care? Or is that….

Correct..

Okay..

This is just identifying people who are getting S-antigen level down below a certain level to where we think interferon has a better shot at being more effective and there is quite a bit of literature on that out there..

Okay. Okay. And then as you think about your RNA to stable in new capsid inhibitor and starting to formulate kind of what – where those will be place.

I mean, do you have all the pieces in place to kind of get off do you think interferon or how do those kind of fit into the overall profile or is it that you would potentially lose your RNAi, I’m just trying to figure out how those kind of fit into the overall vision of getting to that functional care?.

Well, Lisa, this is Mark. I think – obviously I think we’ve said for long time that we believe you’re going to need to do multiple things here. First of all cripple the virus and then activate or allow the patient’s immune system to reactivate.

So, I think what things like 506 and 452 represent are small molecule possibilities to address the viral elements that we have up to been using RNA interference to address. So I think our near term focus or medium term focus here is to use those agents alone in combination to see if we can drive down HBV DNA and S-antigen to very low levels.

And then we will have to consider the immune reactivation portion of it and how that works. And we may learn something very important from the study that Bill has described about that..

Okay. Thanks..

Thank you. And our next question comes from the line of Madhu Kumar from B. Riley FBR..

Hey, good morning, guys. Thanks for taking my questions.

So, in your discussing with experts about this Phase 2 combination study, what is a sufficient amount of S-antigen reduction to as you discussed earlier kind of be predictive of interferon, is really half log, one log or what visibility do have we think the interference [ph] about what is sufficient to serve S-antigen question in this kind of short term dosing?.

Sure. I think there’s a quite a bit of data that’s been published over the years really looking at correlations between starting S-antigen levels in population of patients and then starting interferon and what the outcome is.

And I think they consistently show that lower levels of S-antigen start with typically some studies use to cut off of 1000, I have seen 750, 500 etcetera, but typically below a 1000 where patients who start at that point in time have a better likelihood of actually achieving S-antigen loss.

There’s a quite a bit of data out of a number of different investigated sites in Asia for instance that show this. So that’s kind of part of the thinking around the design of this study is to really you can use 1467 to drive S-antigen down and then start the interferon after a period of time..

So, there’s an absolute reduction not a relative reduction to the patient's baseline surface antigen level?.

Yes.

So the patient has to demonstrate both, so I mean, because depending where the patient start they have to have say they have to have at least three logs of S-antigen when they come and some patients could have up to six or seven logs, so you've either got a show -- you have to show that you can drop S-antigen by coming down a certain number of logs and then you got to get below that cut off as level, so, it kind of accounts for both of those situations there.

We want to make sure people are responsive..

Okay. That’s all my questions. Thank you..

Thank you. [Operator Instructions]. And that concludes our question and answer session for today. I’d like to turn the call back over to Tiffany Tolmie for any closing comments..

Thank you, operator. We appreciate your participation on the call today and we look forward to sharing updates on our progress with you in the months ahead. This concludes our call today. Thank you everyone..

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. And this does conclude the program and you may now disconnect. Everyone have a great day..