Arbutus Biopharma CorpABUS
Arbutus Biopharma Corp Fair Value Disclosure
Fair value measurements
The Company measures certain financial instruments and other items at fair value.
To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:
•Level 1 inputs are quoted market prices for identical instruments available in active markets. The Company’s cash and cash equivalents are measured using Level 1 inputs.
•Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. If the asset or liability has a contractual term, the input must be observable for substantially the full term. An example includes quoted market prices for similar assets or liabilities in active markets. The Company’s investments in marketable securities are measured using Level 2 inputs.
•Level 3 inputs are unobservable inputs for the asset or liability and will reflect management’s assumptions about market assumptions that would be used to price the asset or liability. The Company’s liability-classified options and contingent consideration are measured using Level 3 inputs.
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments.
To determine the fair value of the contingent consideration related to a stock purchase agreement with Enantigen Therapeutics, Inc.’s (Enantigen) selling shareholders (Note 10), the Company uses a probability weighted assessment that considers the likelihood of successfully commercializing a treatment for cHBV, the timing of future revenues related to commercial sales, and a probability adjusted discount rate that reflects the early stage nature of the development program, time to complete the program development, and overall biotech indices.
The following table presents information about inputs used in measuring the fair value of the contingent consideration:
| As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||
| Timing of milestone payments | 2035 | - | 2038 | 2032 | - | 2035 | |||||||||||||||||
| Payment (in $000s) | $102,500 | $102,500 | |||||||||||||||||||||
| Discount rate | 10.1 | % | - | 10.4% | 9.9 | % | - | 10.5% | |||||||||||||||
| Probability of success | 25% | 25% | |||||||||||||||||||||
| Fair value of contingent consideration (in $000s) | $8,395 | $10,225 | |||||||||||||||||||||
These assumptions used in the discounted cash flow model are level 3 inputs as defined above. The Company assessed the sensitivity of the fair value measurement to changes in these unobservable inputs and determined that changes within a reasonable range would not result in a materially different assessment of fair value.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair value:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| As of December 31, 2025 | (in thousands) | ||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 18,008 | $ | — | $ | — | $ | 18,008 | |||||||||||||||
| Investments in marketable securities, current | — | 73,463 | — | 73,463 | |||||||||||||||||||
| Total | $ | 18,008 | $ | 73,463 | $ | — | $ | 91,471 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Contingent consideration | — | — | 8,395 | 8,395 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 8,395 | $ | 8,395 | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| As of December 31, 2024 | (in thousands) | ||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 36,330 | $ | — | $ | — | $ | 36,330 | |||||||||||||||
| Investments in marketable securities, current | — | 86,293 | — | 86,293 | |||||||||||||||||||
| Total | $ | 36,330 | $ | 86,293 | $ | — | $ | 122,623 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Contingent consideration | — | — | 10,225 | 10,225 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 10,225 | $ | 10,225 | |||||||||||||||
The following table presents the changes in fair value of the Company’s contingent consideration:
| Liability at beginning of the period | Increase in fair value of liability | Liability at end of the period | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Year ended December 31, 2025 | $ | 10,225 | $ | (1,830) | $ | 8,395 | |||||||||||
| Year ended December 31, 2024 | $ | 7,600 | $ | 2,625 | $ | 10,225 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 23, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 2, 2023 | |
| 2021 | Mar 3, 2022 | |
| 2020 | Mar 4, 2021 | |
| 2019 | Mar 5, 2020 | |
| 2018 | Mar 7, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.