Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Arbutus Biopharma Corp (1447028) 10-K published on Mar 05, 2020 at 4:19 pm
Reporting Period: Dec 30, 2019
Certain early work on LNP delivery systems and related inventions was undertaken at the University of British Columbia (“UBC”), as well as by us that was subsequently assigned to UBC. These inventions are licensed to us by UBC under a license agreement, initially entered in 1998 as amended in 2001, 2006 and 2007. We have granted sublicenses under the UBC license to certain third parties, including Alnylam. UBC subsequently filed a demand for arbitration against us for allegedly unpaid royalties associated with certain of said sublicenses, including the Alnylam sublicense. In the third quarter 2019, the arbitrator issued his decision for the second phase of the arbitration, awarding UBC $5.9 million, which includes interest of approximately $2.6 million. We paid the $5.9 million award to UBC in the third quarter of 2019. The arbitrator also held that the third phase of the arbitration, which would address patent validity, should we choose to pursue a third phase, would not provide a defense to the award. An award for costs and attorneys’ fees is still to be determined. In December 2019, the arbitrator subsequently issued an interim decision concerning costs and attorneys’ fees, holding that each party is to bear their own costs and attorneys’ fees with the single exception of an award to UBC for reasonable costs and attorneys’ fees incurred in defending against our counterclaim. The total of said costs and attorneys’ fees is still to be determined. Please refer to “Item 3. Legal Proceedings” for additional information.
In California, the CCPA took effect on January 1, 2020. The CCPA establishes certain requirements for data use and sharing transparency and creates new data privacy rights for consumers. These laws and regulations are evolving and subject to interpretation, and may impose limitations on our activities or otherwise adversely affect our business. Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our business. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services and research activities. These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions may lead to unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices.
We face risks related to health epidemics and outbreaks, including the coronavirus, which could significantly disrupt our preclinical studies and clinical trials.
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. The duration and the geographic impact of the business disruption and related financial impact resulting from the coronavirus cannot be reasonably estimated at this time and our business could be adversely impacted by the effects. We are currently conducting clinical trials in Moldova, Thailand, South Korea, Hong Kong, Australia and New Zealand. Enrollment of patients in these clinical trials and future clinical trials in these regions may be delayed due to the outbreak of COVID-19. In addition, we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs. We also rely on third party suppliers and contract manufacturers to produce the drug product we utilize in our clinical trials, and the outbreak may cause delays in delivery of APIs and drug product. As a result, the expected timeline for data readouts of our preclinical studies and clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our business.
The Company’s short-term investments consist of marketable securities that have original maturities exceeding three months and remaining maturities of less than one year. These investments are accounted for as available-for-sale securities and are reported at fair value, with unrealized gains and losses reported in other comprehensive loss, until their disposition. Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method, and are recorded as a component of other income or loss. The Company reviews its available-for-sale securities at each period end to determine if they remain available-for-sale based on the Company’s current intent and ability to sell the security if it is required to do so. Declines in value judged to be other-than-temporary are included in interest income or expense in the Company’s statements of operations and comprehensive loss. As of December 31, 2019, the recorded value of the Company’s investments in marketable securities was deemed to be recoverable in all respects.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which removes, adds and modifies certain disclosure requirements for fair value measurements in Topic 820. The Company will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the valuation processes of Level 3 fair value measurements. However, the Company will be required to additionally disclose the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted average of assumptions used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments relating to additional disclosure requirements will be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments will be applied retrospectively to all periods presented upon their effective date. The Company is permitted to early adopt either the entire ASU or only the provisions that eliminate or modify the requirements. The Company evaluated the impact of this pronouncement and concluded that the guidance does not have a material impact on its financial position and results of operations.