Ladies and gentlemen, thank you for standing by, and welcome to Arbutus Biopharma Corporation Four Quarter and Year End 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pam Murphy. Thank you. Please go ahead, madam..

Good morning and thank you for joining the Arbutus Biopharma fourth quarter 2020 conference call and webcast. On the call today are Bill Collier, President and Chief Executive Officer; Dr. Gaston Picchio, Chief Development Officer; Dr. Michael Sofia, Chief Scientific Officer; and Dave Hastings, Chief Financial Officer.

Bill will begin with a summary of recent accomplishments and upcoming events, and a review of Arbutus' 2021 corporate objectives, followed by Gaston, Mike Sofia, and Dave Hastings, who will provide clinical drug discovery and financial updates, respectively. Please note, Gaston will be using a few clinical slides, which can be viewed on the webcast.

After the speakers, we'll then open up the call for Q&A.

Before we begin, we'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding expectations, timelines and clinical results for Arbutus' proprietary HBV pipeline and COVID-19 preclinical research efforts, the company's 2021 objectives, and its expected cash use and cash runway.

These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ, including those described in our most recent annual report on 10-K, quarterly report on Form 10-Question, and other periodic reports filed with the SEC. I would now like to turn the call over to Bill.

Bill?.

Thank you, Pam, and good morning, everybody. Thank you for joining us today.

As I approach my two-year anniversary with Arbutus, I'd like to use the next few minutes to summarize the progress that we have made, and why I believe that Arbutus is well-positioned to execute on our mission to develop a cure for people with chronic hepatitis B, as well as advance, as well as advance new proprietary therapies to treat coronaviruses.

First of all, and then as Gaston Picchio will describe in more detail, our lead product, AB-729, a subcutaneously delivered RNAi agent, has demonstrated the potential to be a cornerstone drug in future HBV combination regimens. We reported, in 2020, a significant body of compelling safety and efficacy data from an ongoing Phase 1a/1b clinical trial.

And this data strongly supports our plans to initiate two Phase 2 trials for 729, in combination with one or more approved or investigational agents in the second-half of 2021.

In addition, Arbutus and Assembly have initiated screening of our proof-of-concept Phase 2 clinical trial combining 729 with Assembly Biosciences' capsid inhibitor, vebicorvir, and a nucleos(t)ide reverse transcriptase inhibitor. Secondly, we've completed the IND/CTA-enabling studies for AB-836, our next-generation oral capsid inhibitor..

Thanks, Bill, and good morning, everyone. Today, I will focus my time on describing our current perspectives on AB-729, and our 2021 plans and objectives as it relates to our lead clinical asset.

As part of my discussion today, I will refer to a few slides that are available as part of our webcast, and can also be found in our current corporate presentation, located on the Arbutus Web site. First, let me reiterate Bill's confidence in the growing clinical data that has already emerged from our ongoing Phase 1a/1b clinical trial for AB-729.

Now, you can see in the first slide, the design our Phase 1a/1b single and multiple dose clinical trial, and the current status of the cohorts that have been completed and reported on. And these are in dark red and dark blue.

Notably, this represents a significant dataset, and allow us to beginning to put in perspective the potential of this drug, which I will address momentarily.

We expect to report additional data from the ongoing cohorts from this trial in the first-half of 2021, except for the 90-milligram every 12-week cohort, which is expected in the second-half of 2021.

In the next slide, number six, you can see that a single dose of AB-729 provided impressive and comparable mean S-antigen declines at week 12 across all three doses, namely 60, 90, and 180 milligrams..

Thanks, Gaston, and good morning, everybody. I want to briefly review our drug discovery objectives and strategies as we progress on the HBV and coronavirus research fronts. As you know, we are focused on developing propriety combination regimens that have the power to functionally cure people with HBV.

We have progressed compounds into development that target two critical pieces of our strategy, stopping viral replication and reduce S-antigen levels. The other part of our strategy envisions addressing the immune component of the disease. To that end, we believe our oral PD-L1 program has the potential to reawaken the immune system in HBV patients.

Highly functional HBV specific T cells within our immune system are believed to be required for long-term HBV viral resolution. However, HBV specific T cells become functionally defective and greatly reduced in the frequency during chronic HBV infection.

One approach to boost HBV specific T cells is to target the PD-L1/PD-1 axis to release the brakes in the immune system and lead to removal of infected hepatocytes. We are in lead optimization with oral compounds which are potentially capable of reawakening patients the HBV specific immune response by inhibiting PD-L1 interactions.

In addition, we believe that an all oral proprietary combination of agents remains an objective for us. We continue to optimize HBV RNA destabilizers that are small molecule orally available agents that cause the destabilization and ultimate degradation of HBV RNAs.

Currently, we're advancing several promising next generation oral HBV RNA destabilizers through lead optimization and candidate selection. Finally, we believe it's important to leverage our neurology expertise in the battle against coronaviruses.

Our effort is focused on the discovery and development of new molecular entities that address specific viral targets, including the nsp12 viral polymerase and the nsp5 viral protease. These targets are essential viral proteins, which has the potential for delivering Pan-Coronavirus therapies in which Arbutus has experienced in targeting.

As all of you know, predicting hard and fast timelines in drug discovery is not possible. Therefore, we're not yet giving specific guidance regarding when we will nominate kinase in these three areas. That said, we have a capable and experienced drug discovery team and I look forward to updating you on our progress throughout the year.

With that, I'll turn the call over to Dave.

Dave?.

Thanks, Mike. Good morning everybody. R&D in cash, cash equivalents and short-term investments was approximately $123 million as of December 31 2020, compared to approximately $91 million as of December 31 2019. Our cash used from operations for the year-ended December 31 2020 was approximately $51 million.

We made $2.5 million equity investment in Genevant in July. These cash outflows were offset by approximately $86 million of net proceeds from the issuance of common shares under the Arbutus ATM program. Additionally, thus far during the first quarter of 2021, we have received $24 million of net proceeds from our ATM program.

We expect a net cash burn of between $70 million and $75 million in 2021 and therefore we believe our cash runway now extends through the third quarter of 2022.

Finally, as a reminder, Arbutus owns approximately 16% of the common equity of Genevant Sciences, a company, Arbutus launch with Roivant Sciences and to which Arbutus has exclusive rights to its LMP delivery technologies for RNA based applications outside of HBV.

We're entitled to receive tiered low single digit royalties on interest sales of Genevant products covered by the licensed patents.

If Genevant sublicenses the intellectual property licensed by us to Genevant we're entitled to receive upon the commercialization of a product developed by such sublicense, a lesser of 20% of the revenue received by Genevant for such sub-licensing, and tiered low royalties on product sales by the sub-licensee.

So with that, Bill, I'll turn the call back to you..

All right, thank you, Dave, and to Gaston and Mike.

And I think at this point, Operator, can you please open up the lines for questions and answers, please?.

And your first question comes from Ed Arce with H.C. Wainwright..

Great. Good morning, and thanks for taking my questions. Congrats on the productive year. A couple of questions for me, you mentioned with 729, two trials that you're intending to start, I think you said in the second-half of the year, sort of combination trials. I'm wondering if you could give us a little more detail on the intended design with those.

In particular, have you chosen one or more doses perhaps the 60 or 90 milligram, have you, at least in one of those committed to a dosing interval? I know that you're very interested in going with once every 12 weeks. And any other sort of details around the trail designs there would be helpful. Thank you..

Thank you for the question, Ed. Just a couple of comments, and then I'll let Gaston answer with any additional detail. I mean I think what we're trying to communicate today is our confidence in 729 going forward, where in total, we will kickoff three Phase 2 studies this year.

The first one, obviously, being the Assembly study, which has initiated, we did that press release last week. And then today, we're talking about an additional two Phase 2 combination studies.

We've not released too much detail about those at this stage, but I think you can see that by kicking off three Phase 2 studies we clearly feel very confident about 729 moving forward. And with that, let me hand it over to Gaston..

Yes, thanks, Bill, and thanks Ed for the question. So, as Bill explained, we haven't released the details at this point of what those two additional Phase 2 studies may look like.

So, but obviously we are exploring potential combinations with both investigational and other approved agents, and obviously try to exceed the number of drugs there to -- by two. So we were looking at three or more drugs in those studies.

In terms of the dosing schedule, as you may already know, we are confident enough, based on the data that we presented towards the end of last year, to use the every eight weeks in the Phase 2 in collaboration with Assembly.

So, I'll just reiterate what was included in the press release announced recently by Assembly on the start of the screening of the study. That the dosing will be, AB-729 will include the 60 milligram dose every eight weeks.

So we're waiting, obviously, for the results of the other cohorts, especially the every 12 weeks, to decide whether it may be also worth exploring a dosing frequency of every 12. But that's -- that data is pending..

Great, that's helpful.

And then just one other question for me, just to remind us for this year, are you expecting to release any new data or results from any ongoing studies?.

Yes. So, this is Bill. And I will refer everyone to the last slide in our corporate deck, which was refreshed and updated it on our Web site, went up this morning. But there, we list out we expect to deliver this year.

So we're taking about additional data from the 60 milligram multi-dose cohorts every four and every eight weeks in the first-half, additional data from the 90 milligram multi-dose eight-week cohort in the first-half, the 90 milligram 12-week data in the second-half.

We also expect to have some 90 milligram multi-dose eight-week dosing interval in HBV DNA positive subjects in the first-half. I've already mentioned the two Phase 2 clinical studies we hope to kickoff in the second-half.

And then, as we already mentioned on this call, we expect to kickoff the 836 Phase 1a/1b clinical study in the first-half of the year..

Great, thank you, Bill. Sounds like you have your hands full this year with a lot of clinical activity..

We do..

Thanks. Thank you, guys, for the questions..

Right.

Operator, do we have additional questions?.

Your next question comes from Brian Skorney with Baird..

Hey, good morning, everyone. Thank you for taking my questions. I guess more of a big picture long-term question on 729. I mean we have a pretty good idea in terms of early data, the impact that RNAi interference targeting can have on some of the biomarkers.

But as we kind of think about the long-term development plan, what sort of data would you be looking to achieve on a biomarker basis to challenge patients to complete antiviral therapy withdrawal? And I mean what sort of stopping criteria do you think are reasonable to use?.

A good question, thank you very much.

May be Mike and Gaston, Gaston first perhaps to answer that one? I mean -- and we're talking hypothetically here, because we have no plans at the moment to get into this, but Gaston?.

Yes. Thank you, Brian. In terms of -- let me just go to the -- summarize what we've seen with RNAi so far. So I think RNAis have been shown to, obviously, lower S-antigen, also HBV RNA correlated antigen, E antigen. And I think we probably have one of the most robust data showing that 729 can also reduce HBV DNA in a very robust and rapid way.

So the big question, I think, obviously, is going to be should we continue treating and wait until S-antigen becomes undetectable or can we, before stop, considering stopping patients or could we stop patients earlier and see whether the immune system has sufficiently reawakened to continue to job, and clear all S-antigen, and obviously infect the parasites, and so forth.

And that's a question obviously that I don't think anyone has answers so far.

What is clear, based on the Assembly study, is that stopping patients with undetectable HBV RNA and HBV DNA, even with a more sensitive assay was not sufficient to achieve functional cure, defined as loss of S-antigen six months after end of therapy, so that they saw relapse very quickly.

So, in that sense, obviously that that study did not include an RNAi agent. And lower S-antigen may favorably impact the immune system in such a way that upon stopping therapy things may look a little bit different.

But, really, this is all speculation because nobody has stopped all therapies in RNAi subjects and see, after a long dosing period of at least a year, in combination with other agents, and see what happens. So, we may be in a position to do that later this year in some of our cohorts, and see what the turnout is.

But I can't give you a definitive answer what's going to happen. But certainly that's one of the most important questions in the field right now..

Right, thank you..

And, Gaston, do you want to just briefly mention, because on our corporate deck, on our slides, we do show how many subjects get below either a hundred or 10 international units per ml for surface antigen.

Do you just want to comment on those numbers?.

Yes, so, yes, that's a great point. As you know, in some countries, in Asia especially, there is a tendency for subjects who have been on therapy for some number of years, either S-antigen drops below a hundred to actually stop the NUC and follow them very closely.

And in some occasions, the subjects who achieve less than a hundred, which is a threshold that is used, I would say, clinically most frequently, they tend to seroconvert. So lose S-antigen and some of then even develop anti S-antibodies, which is the definition of functional cure.

So, in our studies, we have pretty much so far, the vast majority, like six out of seven, have reached less than a hundred in cohort E. And even a couple of them have reached less than 10. So, the big question is, in the setting of one year of duration of therapy, is that going to be sufficient.

So these are questions that, obviously, we're trying to decide whether achieving S-antigen below those thresholds which have shown in other instances to be clinically relevant, would they be equally relevant towards functional cure when using RNAi agents, in this case AB-729. So this is still evolving.

We are evolving our thinking and trying to decide what would be the best approach to stopping therapy in patients who have received at least one year of AB-729 combination with the. But those are some encouraging pieces of information, that a large proportion of these subjects have already crossed that 100 IU per ml threshold..

Great, thank you..

Your next question comes from Mayank Mamtani with B. Riley..

Thanks, team, for taking my question, and congrats on the progress. So, maybe on the same line of thinking, on the triple therapy, just two things stood out to me, that you are doing an open label study and also the number of subjects, 60 -- just looking at other trials, look different. So, I'm just curious how you think about data disclosures here.

And again, the off-treatment cure rate, that's specifically your program, but also like as we look externally there are different approaches. There's the approach, there's the immunomodulator approach.

Can you comment, like just at a high level what's your perspective on one versus the other, your confidence level? And just given like the challenging off-treatment cure rates we've seen so far?.

Yes, thank you for the question. I think you started just by making reference to the clinical collaboration with Assembly. And you correctly pointed out, that that's a Phase 2 study with 60 virologically suppressed subjects with HBV.

And essentially it's -- is comparing the triple, 729, plus vebicorvir, plus a NUC versus 729, plus a NUC versus vebicorvir plus a NUC. The only thing that we have communicated with our partners, Assembly, on that is that the study has started, and that was the press release last week.

We've not indicated when we will have data available from that study, although it is an open-label study, so we will be able to track progress as we go.

As to the second part of your question, perhaps, Gaston, I can throw that to you?.

Yes. And so, hi, Mayank, it's difficult to say because, to be absolutely honest, we're not sure what the details of other studies are. I mean, I can just reiterate what our study in collaboration with Assembly's is going to be looking at.

So, basically, we're looking at e antigen negative subjects who have been suppressed for at least six months in -- with NUC therapy. And they're going to be enrolling into -- randomized into three different arms. So, obviously, there are two arms with function as controls.

And there's a third arm, which is the exciting arm, which is the combination of the three agents. So, as to exactly the differences with other studies that may be looking at similar but not identical approaches, I can't really comment because I don't know the details behind -- there are more details than what you can find in clinical trials or goals.

So, I think it's always important, I mean at least based on my experience, that despite the fact that there is a reiteration of mechanisms of action, I think, at least I've learned over the years that it's always important to see what different assets within a class can provide.

So, I wouldn't discount the fact that we're testing tree drugs that other companies may be testing as less exciting, because I think we've seen some interesting data coming out of 729, and also vebicorvir has been well-established in further suppressing HBV DNA and pgRNA.

So, the combination of those three in the population that we selected may play out differently than in other regimens. So, I think we have to wait for the results, and make sure..

Understood.

And just two more quick follow-ups, PD-L1 oral inhibitor, any color you could provide on time to IND? And just a high level, why this cannot be used in cancer, for example, maybe via partners, if you don't want to do oncology?.

Mike, do you want to take that one?.

Yes. Yes, hi, Mayank. So, look, we've made great progress in that program. And I am very excited and optimistic about achieving a clinical candidate nomination in the foreseeable future.

And as I said, from discovery, it's hard to give specific timelines, we want to make sure we bring forward the very best compounds that we're clearly doing all the relevant studies that need to be done and those need to be done before I think works.

We're comfortable saying we have the candidate that's going to go into the clinic and give any guidance there. On the cancer issue look, we're fully aware of the potential for an agent like a PD-L1 inhibitor in other therapeutic areas, specifically cancer.

And I think we'll look at all options on how to exploit these other areas in the future, but right now, we're really focused on Hepatitis B applications for these PD-L1 inhibitors..

Great, thank you for that color.

And lastly on the Genevant, Moderna litigation kicking-in just remind us, what's the next step there on the appeal to keep that decision that was in July last year? What should we watch out for next?.

Yes, let me tackle that one. And then Dave, you can chime in with any additional color as well. But you're referring back to the patent case that was announced last year where there was a challenge against one of our Arbutus patents, and was found in our favor.

And I think, as we've described at the time, and subsequently in our various listings, that patent is one of those that has been licensed out to Genevant which Dave described in his comments this morning. And so, unfortunately, it's really not possible for us at Arbutus to comment on what Genevant may or may not be doing.

Suffice to say that as part of that license out arrangement, we've got some very clear terms for any sub-licensing that Genevant may do, which is what Dave summarized in his comments. So I think that's about all that we can say, Dave, unless there's any other additional comments you can think of..

No, I think you covered it, Bill. Thanks..

Okay, great..

Thank you..

Your next question comes from Kelechi Chikere with Jefferies..

Good morning..

Good morning and thank you for taking my question. I guess in the set of two Phase 2 combo studies slated to start later this year.

Can I ask you to speculate on what are some investigational or approved agents you're thinking you could potentially do with 729? I think we're all aware of Interferon maybe something? What are some of the other agents you're thinking of? Any color there would be great, thank you..

Yes, good question. I mean I can say that, we want these three studies to be somewhat different, so that we're exploring different combinations going forward. I mean, clearly, we have not said today what those compounds are going to be? Or could be we've just said, either marketed or investigational.

And I think the best way to answer that is with reference to our overall hypothesis that we want to be able to suppress DNA, we want to be able to suppress surface antigen, and we want to be able to boost the immune system.

That's our model and our strategy here at Arbutus for the way we can try and construct a combination therapy to achieve this functional cure for Hepatitis B. I think that's about all we can say at the moment.

So Gaston, anything you want to add?.

No, thank you. I mean, I think, as you pointed out, that's how much we can say but again, just reiterate our thinking, which is the importance of first lowering as antigen to give the immune system using different approaches as Bill outlined to reawaken and continue the job of clearing the effect of Hepatitis.

As we really believe that that lowering of S-antigen is critical to achieve that goal of functional cure, and then intervene with other modalities after that is achieved. So keeping that in mind, I think you can imagine what we are with the different modalities that we're considering..

Got it. That's helpful. Thank you..

Your next question comes from Roy Buchanan with JMP Securities..

Hi, thanks for taking the question. Just a quick one, sorry if I missed this, but any additional details on RNA destabilization provide -- I mean are you targeting the HBV RNA itself? Are you targeting the host protein, any additional details? Thanks..

Mike?.

Hi, Mike Sofia. Hi, Roy. So, we've actually described pretty extensively some of the mechanistic features of how the molecules that we are working with work. Look, they do specifically target HBV RNA and they target it by a mechanism engages a host protein that's critical for stabilizing the HBV RNA poly(NYSE:A) tail.

And so, by inhibiting that host protein interaction with a complex associated with HBV RNA the PRE of HBV RNA, we are able to destabilize HBV RNA and lead to the degradation of poly(A) tail or truncating of the poly(A) tail that ultimately leads to degradation of HBV RNA. So, it is a HBV RNA targeting modality.

But it goes via a host protein that's critical for maintaining stability of HBV RNA..

Okay, great. Thank you..

Your next question comes from Keay Nakae with Chardan..

Yes, thanks.

So with the upcoming data from the 60 mg multi-dose at 8 week intervals and the 90 at 8 and 12 week intervals, can you just tee up for us how many doses you expect to report on in each of those cohorts?.

Yes. Gaston, maybe you can take that one. I don't want to be vague in the sense that we haven't released that in our guidance. But some of those cohorts have been ongoing for quite some time. I think we just need to make sure that we have an effective and a realistic timeframe to comment on.

So -- and by that all I mean is if you give something monthly, then within six months you've got six doses. But if you give something every 12 weeks within that same timeframe, you've got many fewer doses. So, we just want to make sure that we've got an appropriate number of doses to comment on..

Okay..

Gaston, anything else you want to add?.

Well, I mean -- let me just I mean articulate the question again. I mean how many doses we are planning to report for both the 60 mg every four and 60 every eight weeks as we pointed out in our guidance. So, without counting the doses, the goal will be to be able to report end of therapy for both. So, 48 weeks of treatment..

Okay. Yes, that's helpful because at some point you are making a decision of when enough is enough and you are reporting it. So, that's simply what we are looking for.

It's really helpful? Do you want to go before you report?.

That would be the goal to report end of therapy. And then obviously pending decision around -- as we were discussing earlier, pending decisions around who can and who cannot stop later on. Report on basically what happens off therapy in those that may qualify to stop.

And that will be the structure of let's say of the every cohort that we are doing right now in the Phase 1a/1b study, so, just to reiterate that, the study was originally meant to have a six months of duration in terms of dosing -- the different doses and dosing frequencies.

The study was amended in such a way that patients upon reaching the end of the six months can re-consent. If they decide and investigator decides towards continuation for additional six months, so that makes it basically a total of 48 weeks.

And then after that, a decision will have to be made regarding stopping -- either stopping completely all therapy or stopping just 729 and remaining on the NUC.

So, as all these cohorts mature and they progress, specifically to your question for cohort E and F being the 60 every 4 and 60 every 8, the next goal would be to able to report end of therapy..

Okay..

Is that helpful?.

Yes because you had pushed out the expected reporting of the 90 at 12 weeks, so just trying to understand what's behind that thinking..

Yes, okay. There's not so much I think we pushed that out. That was one of the legacy cohort starts. So, this has taken longer to go through.

Okay?.

Okay, thanks..

I'm showing no further questions at this time. I would now like to turn the conference back to Bill Collier..

Thank you very much and thank you all for your questions. Just to close out, I'll quickly review once again the key objectives for the company for 2021.

So as you've heard on this call, we've already initiated the Phase 2 combination clinical trials to evaluate 729 in combination with the Assembly Biosciences core or capsid inhibitor vebicorvir and a nucleoside reverse transcriptase inhibitor.

Secondly, we also expect to provide additional data from ongoing cohorts of the Phase 1a/1b clinical trial of 729 in the first-half of 2021. And as we also just mentioned, the 90 mg every 12 week cohort will actually be expected in the second-half of this year.

We are also excited and expect to initiate two Phase 2 combination clinical trials in HBV subjects including 729 with one or more approved or investigational agents. Again, that's slated for the second-half of 2021. And we also expect to initiate a Phase 1a/1b clinical trial of 836, our next-generation capsid inhibitor in the first-half of 2021.

So, would like to close out by thanking all of the staff at Arbutus, but importantly, this morning all of you for joining us today. And we look forward to sharing our progress throughout the coming year. So, thank you very much. And Operator, that concludes our call..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..