Why Arbutus Biopharma stock dipped to 11-year low?

Arbutus Biopharma Corporation (NASDAQ: ABUS) stock plunged to an 11-year low of $1.31 on Monday due to considerable downside risk and unsatisfactory second-quarter earnings results. Investors expect the volatility to stay till year-end as key data are due to its lead candidate to eliminate HBV surface antigen expression in patients chronically infected with the Hepatitis B virus.

The company has not begun to market or generate revenues from the commercialization of any of its product candidates. The company plans to continue to concentrate its internal research and development efforts primarily on the discovery and development of product candidates targeting chronic HBV in order to ultimately develop a cure for the disease.

Even if the company is able to develop compounds that address one or more of the key factors in the HBV life cycle (eg HBV replication, hepatitis B surface antigen, or HBsAg, expression and immune reactivation), targeting these key factors has not been proven to cure HBV.

Arbutus now conducts two phases 1a/1b clinical trials and several pre-clinical and investigational new drug-enabling studies to evaluate proprietary HBV therapeutic agents alone, together with SOC therapies and in combination with each other. The company expects to use the results to adaptively design future clinical trials to test the safety, efficacy, and duration of potential combination therapies.

Given the biology of HBV, the company believes combination therapies are the key to more effective HBV treatment and a potential cure. Also, the company believes the development of effective combination therapy can be accelerated when multiple components are controlled by a single company. Therefore, the company’s R&D pipeline includes multiple drug candidates that target various steps in the viral lifecycle.

Arbutus Biopharma’s principal sources of liquidity are cash, cash equivalents and short-term investments of $95.3 million as of June 30, 2019. This is lower than $124.6 million as of December 31, 2018. The company believes that its existing cash and cash equivalents will be sufficient to fund its operations into 2020 but changing circumstances could cause to consume capital faster than anticipated.

Read: Guess? Q2 earnings preview

For the active development of pipeline product candidates and technologies, the company is likely to seek for considerable additional funds within the next several years. Also, the company will incur significant R&D expenses due to the investment in drug development, which is highly speculative as it entails substantial upfront capital expenditures and significant risk.

Arbutus expects to continue incurring significant expenses and increasing operating losses for the foreseeable future. The company’s ability to generate revenue and achieve profitability depends on its ability to successfully complete the development of manufacturing and commercialization of its product candidates.

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